-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IOn6U9123Fn3kxcRkEVbwfu48d6jXjZT9iH4wUlgF4w94Y08/sexgFG2EFz2JrNv svB2DP/dTAbSkt5oh1Ooaw== 0000950135-97-003329.txt : 19970812 0000950135-97-003329.hdr.sgml : 19970812 ACCESSION NUMBER: 0000950135-97-003329 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970628 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZOLL MEDICAL CORPORATION CENTRAL INDEX KEY: 0000887568 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 042711626 STATE OF INCORPORATION: MA FISCAL YEAR END: 0928 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20225 FILM NUMBER: 97655429 BUSINESS ADDRESS: STREET 1: 32 SECOND AVENUE CITY: BURLINGTON STATE: MA ZIP: 01803-4420 BUSINESS PHONE: 6172290020 MAIL ADDRESS: STREET 1: 32 SECOND AVENUE CITY: BURLINGTON STATE: MA ZIP: 01803-4420 10-Q 1 ZOLL MEDICAL CORPORATION FORM 10-Q (06/28/97) 1 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934. FOR THE THREE MONTH PERIOD FROM MARCH 30, 1997 TO JUNE 28, 1997. or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from _____to_____. Commission file number 0-20225 ZOLL MEDICAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2711626 - ---------------------------------------- ---------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification number) 32 SECOND AVENUE, BURLINGTON, MA 01803-4420 - ---------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) (617) 229-0020 ---------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE -------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock: Class Outstanding at August 7, 1997 Common Stock, $.02 par value 6,191,659 This document consists of 12 pages. -- 2 2 ZOLL MEDICAL CORPORATION INDEX Page No. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements: Condensed Consolidated Balance Sheets (unaudited) June 28, 1997 and September 28, 1996 3 Condensed Consolidated Income Statements (unaudited) Three Months Ended June 28, 1997 and June 29, 1996 4 Condensed Consolidated Income Statements (unaudited) Nine Months Ended June 28, 1997 and June 29, 1996 5 Condensed Consolidated Statements of Cash Flows (unaudited) Nine Months Ended June 28, 1997 and June 29, 1996 6 Notes to Condensed Consolidated Financial Statements (unaudited) 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 10 ITEM 2. Changes in Securities 10 ITEM 3. Defaults Upon Senior Securities 10 ITEM 4. Submission of Matters to a Vote of Security-Holders 10 ITEM 5. Other Information 10 ITEM 6. Exhibits and Reports on Form 8-K 10 Signatures 11 3 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ZOLL MEDICAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) (Unaudited)
JUNE 28, SEPTEMBER 28, 1997 1996 -------- ------------- ASSETS Current assets: Cash and cash equivalents $ 6,346 $ 4,962 Marketable securities 2,542 2,965 Accounts receivable, less allowance of $988 at June 28, 1997; $888 at September 28, 1996 12,109 16,271 Inventories: Raw materials 2,413 2,319 Work-in-process 1,746 1,951 Finished goods 6,006 3,096 ------- ------- 10,165 7,366 Prepaid expenses and other current assets 1,528 1,203 ------- ------- Total current assets 32,690 32,767 Property and equipment, at cost: Land and building 925 997 Machinery and equipment 9,486 8,313 Tooling 2,387 2,327 Furniture and fixtures 651 584 Leasehold improvements 785 710 ------- ------- 14,234 12,931 Less accumulated depreciation 7,207 6,141 Net property and equipment 7,027 6,790 Other assets, net 2,706 2,532 ------- ------- $42,423 $42,089 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,264 $ 2,832 Accrued expenses and other liabilities 5,407 4,671 Current maturities of long-term debt 110 114 ------- ------- Total current liabilities 7,781 7,617 Deferred income taxes 389 389 Long-term debt 580 661 Commitments and contingencies Stockholders' equity Preferred stock, $.01 par value, authorized 1,000 shares, none issued and outstanding Common stock, $.02 par value, authorized 19,000 shares, 6,191 and 6,174 issued and outstanding at June 28, 1997 and September 28, 1996, respectively 124 124 Capital in excess of par value 20,629 20,540 Retained earnings 12,920 12,758 ------- ------- Total stockholders' equity 33,673 33,422 ------- ------- $42,423 $42,089 ======= =======
See notes to unaudited condensed consolidated financial statements. 4 4 ZOLL MEDICAL CORPORATION CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts ) (Unaudited)
THREE MONTHS ENDED ---------------------- June 28, June 29, 1997 1996 -------- -------- Net sales $12,434 $13,971 Cost of goods sold 5,100 6,089 ------- ------- Gross profit 7,334 7,882 Expenses: Selling and marketing 4,710 4,368 General administrative 1,179 1,102 Research and development 1,381 1,016 ------- ------- Total expenses 7,270 6,486 ------- ------- Income from operations 64 1,396 Investment income 113 83 Interest expense 15 25 ------- ------- Income before income taxes 162 1,454 Provision for income taxes 55 523 ------- ------- Net income $ 107 $ 931 ======= ======= Earnings per share $ 0.02 $ 0.15 ======= ======= Weighted average common shares and equivalent shares outstanding 6,224 6,318
See notes to unaudited condensed consolidated financial statements. 5 5 ZOLL MEDICAL CORPORATION CONDENSED CONSOLIDATED INCOME STATEMENTS (in thousands, except per share amounts ) (Unaudited)
NINE MONTHS ENDED ---------------------- June 28, June 29, 1997 1996 -------- -------- Net sales $40,654 $39,408 Cost of goods sold 17,462 17,103 ------- ------- Gross profit 23,192 22,305 Expenses: Selling and marketing 13,345 12,307 General administrative 4,975 3,492 Research and development 4,897 3,161 ------- ------- Total expenses 23,217 18,960 ------- ------- Income (loss) from operations (25) 3,345 Investment income 317 275 Interest expense 46 73 ------- ------- Income before income taxes 246 3,547 Provision for income taxes 84 1,277 ------- ------- Net income $ 162 $ 2,270 ======= ======= Earnings per share $ 0.03 $ 0.36 ======= ======= Weighted average common shares and equivalent shares outstanding 6,245 6,232
See notes to unaudited condensed consolidated financial statements. 6 6 ZOLL MEDICAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
NINE MONTHS ENDED ------------------ JUNE 28, JUNE 29, 1997 1996 -------- -------- OPERATING ACTIVITIES: Net income $ 162 $ 2,270 Charges not affecting cash: Depreciation and amortization 1,075 1,157 Accounts receivable allowances 75 35 Provision for warranty expense 211 64 Acquisition of assets from Westech Information Systems, Inc. 1,000 - Changes in assets and liabilities: Accounts receivable 4,087 502 Inventories (2,779) (1,688) Prepaid expenses and other current assets (334) 7 Accounts payable and accrued expenses (1,014) 1,313 ------- ------- Cash provided by operating activities 2,483 3,660 INVESTING ACTIVITIES: Additions to property and equipment (1,072) (1,370) Disposals of property and equipment - 214 Additions to marketable securities (2,152) (2,593) Redemption of marketable securities 2,575 1,466 Other assets 104 (25) Acquisition of assets from Westech Information Systems, Inc. (558) - Investment in Common Stock of Lifecor, Inc. - (2,000) ------- ------- Cash used for investing activities (1,103) (4,308) FINANCING ACTIVITIES: Exercise of stock options, including income tax benefit 89 419 Repayment of long-term debt (85) (76) ------- ------- Cash provided by financing activities 4 343 ------- ------- Net increase (decrease) in cash 1,384 (305) Cash and cash equivalents at beginning of year 4,962 5,595 ------- ------- Cash and cash equivalents at end of period $ 6,346 $ 5,290 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year: Income taxes $ 551 $ 1,171 Interest 47 73
See notes to unaudited condensed consolidated financial statements. 7 7 ZOLL MEDICAL CORPORATION NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 28, 1997 1. The Balance Sheet as of June 28, 1997, the Statements of Income for the three months and nine months ended June 28, 1997 and June 29, 1996, and the Statements of Cash Flows for the nine months ended June 28, 1997 and June 29, 1996 are unaudited, but in the opinion of management include all adjustments, consisting of normal recurring items, necessary for a fair presentation of results for these interim periods. The results for the interim periods are not necessarily indicative of results to be expected for the entire year. 2. On November 6, 1996 the Company purchased the assets of the mobile computing business of Westech Information Systems, Inc. for approximately $1,500,000 in cash, payable in three equal installments through September 1997. The purchase price was primarily attributable to software development and other intangible assets. Goodwill associated with the purchase will be amortized on a straight line basis over 15 years. In addition, the Company incurred a charge of approximately $1,000,000 during the quarter ending December 28, 1996 for the purchase of in process technology. 3. During the quarter ended December 28, 1996 the Company incurred a charge of approximately $1,300,000 to cover the litigation costs to defend itself in a shareholder class action lawsuit initiated in 1994. The Company believed that the unsubstantiated claims of the plaintiffs would allow the lawsuit to be settled without litigation. However, the Company had been and still is unable to reach a reasonable settlement with plaintiffs' attorneys. The Company believes it has meritorious defenses and therefore it will prevail in trial. As a result, the Company has accrued the estimated cost of such trial and related expenses. 4. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" (FAS 128) which is effective for financial statements for both interim and annual periods ending after December 15, 1997. FAS 128 will require the presentation of "basic" and "diluted" EPS. The Basic EPS calculation does not consider the potential effects of potentially dilutive securities. Basic and diluted EPS calculated in accordance with FAS 128 is not expected to differ significantly from EPS as currently reported. The information contained in the interim financial statements should be read in conjunction with the Company's audited financial statements, included in its Annual Report on Form 10-K for the year ended September 28, 1996 filed with the Securities and Exchange Commission. 8 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 28, 1997 -------------------------------- COMPARED TO THREE MONTHS ENDED JUNE 29, 1996 -------------------------------------------- The Company's net sales decreased to $12,434,000 for the three months ended June 28, 1997 from $13,971,000 for the three months ended June 29, 1996. The decrease was attributable to a 16% decrease in the domestic sales to hospital and pre-hospital markets, an 18% decrease in sales to the international markets, and a 14% increase in disposable electrode sales. Selling and marketing expenses increased as a percentage of sales to 38%. Selling and marketing expenses increased 8% to $4,710,000 from $4,368,000 due to increased payroll, commissions and travel related expenditures because of higher staffing levels and the acquisition of Westech Information Systems, Inc. General and administrative expenses increased as a percentage of sales to 10% from 8%. General and administrative expenses increased 7% to $1,179,000 from $1,102,000 due to increased payroll because of higher staffing levels and the acquisition of Westech Information Systems, Inc. This increase was partially offset by a decline in legal and consulting fees. Research and development expenses increased as a percentage of sales to 11% from 7%. Research and development expenses increased 36% to $1,381,000 from $1,016,000 due to increased staffing and non-recurring development expenses related to new product development and the acquisition of Westech Information Systems, Inc. NINE MONTHS ENDED JUNE 28, 1997 ------------------------------- COMPARED TO NINE MONTHS ENDED JUNE 29, 1996 ------------------------------------------- The Company's net sales increased to $40,654,000 for the nine months ended June 28, 1997 from $39,408,000 for the nine months ended June 29, 1996. The increase was attributable to a 6% increase in sales to the international markets, and an 11% increase in disposable electrode sales. Selling and marketing expenses increased as a percentage of sales to 33% from 31%. Selling and marketing expenses increased 8% to $13,345,000 from $12,307,000 due to increased payroll, commissions and travel related expenditures because of higher staffing levels and increased revenues and the acquisition of Westech Information Systems, Inc. General and administrative expenses increased as a percentage of sales to 12% from 9%. General and administrative expenses increased 43% to $4,975,000 from $3,492,000. Of this increase, $1,300,000 was related to the estimated cost of proceeding to trial in a class action shareholder lawsuit that was initiated in 1994; $463,000 was due to increased payroll related costs and travel expenditures because of higher staffing levels and the acquisition of Westech Information Systems, Inc.; and $100,000 was due to a contribution into the company's 401(k) plan. These amounts were offset by decreases in legal and insurance of $404,000. Research and development expenses increased as a percentage of sales to 12% from 8%. Research and development expenses increased 55% to $4,897,000 from $3,161,000. Of this increase, $1,000,000 is applicable to the value of in-process research and development acquired in the purchase of the assets from Westech Information Systems, Inc. and $534,000 is due to increased staffing and non-recurring expenses related to new product development and the acquisition of Westech Information Systems, Inc. 9 9 LIQUIDITY AND CAPITAL RESOURCES The Company's cash and marketable securities at June 28, 1997 was $8,888,000 compared with $7,927,000 at September 28, 1996, an increase of $961,000. Cash provided by operating activities for the nine months ended June 28, 1997 was $1,177,000 less than the same period in 1996. This decrease was attributable to a decrease in net income and a reduction of accounts payable and accrued expenses. These declines were partially offset by a net reduction in accounts receivable of $3,585,000. The amount of cash required to fund investing activities decreased by $3,205,000 in the nine months ended June 28, 1997 compared to the same period in 1996. This decrease was due to a reduction in additions to short term investments and the investment in common stock of Lifecor, Inc. This was partially offset by the acquisition of assets of Westech Information Systems, Inc. during the quarter ended December 28, 1996. The amount of cash provided by financing activities decreased by $339,000 for the nine months ended June 28, 1997 compared to the same period in 1996 due to the decrease in the exercise of stock options. The Company maintains a line of credit with its bank. Under this working capital line, the Company may borrow up to $3,000,000 on a demand basis, subject to the level of qualifying accounts receivable and inventory. The line is secured by accounts receivable, inventory and general intangibles of the Company and bears interest at 3/4% above the bank's base rate. The company expects that the combination of the existing cash balances, funds generated from operations and borrowings under the existing line of credit will be adequate to meet its liquidity and capital requirements, including its purchase of assets from Westech Information Systems, Inc., for the foreseeable future. SAFE HARBOR STATEMENTS Except for the historical information contained herein, the matters set forth herein are forward looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in the forward looking statements. Such risks and uncertainties include, but are not limited to: product demand and market acceptance risks, the effect of economic conditions, results of pending or future litigation, the impact of competitive products and pricing, product development and commercialization, technological difficulties, the government regulatory environment, trade environment, capacity and supply constraints or difficulties, the results of financing efforts, actual purchases under agreements, and the effect of the company's accounting policies. 10 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings. In the course of normal operations the Company is involved in litigation arising from commercial disputes and claims of former employees which management believes will not have a material impact on the Company's financial position or its results of operations. In addition, the Company and certain present and former officers are defendants in a lawsuit regarding shareholder claims. In light of the inherent uncertainties of the litigation, it is not possible to predict with absolute certainty the likely outcome of the litigation. The Company expects that if the litigation is brought to trial, the cost of defense will be approximately $1,300,000 and has recorded such a charge for the quarter ended December 28, 1996. The Company believes it has meritorious defenses to the lawsuit and will prevail if the lawsuit is brought to trial. Item 2. Changes in Securities. Not Applicable. Item 3. Defaults Upon Senior Securities. Not Applicable. Item 4. Submission of Matters to a Vote of Security-Holders. Not Applicable. Item 5. Other Information. Not Applicable. Item 6. Exhibits and reports on Form 8-K (a) Exhibits Not Applicable. (b) Reports on Form 8-K. The registrant filed no reports on Form 8-K during the quarter ended June 28, 1997. 11 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on August 8, 1997. ZOLL MEDICAL CORPORATION (Registrant) Date: August 8, 1997 By: /s/ Rolf S. Stutz --------------------------------------------------- Rolf S. Stutz, Chairman and Chief Executive Officer (Principal Executive Officer) Date: August 8, 1997 By: /s/ William J. Knight --------------------------------------------------- William J. Knight, Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 9-MOS SEP-27-1997 SEP-29-1996 JUN-28-1997 1 6,346 2,542 12,109 988 10,165 32,690 14,234 7,207 42,423 7,781 580 0 0 124 33,549 42,423 40,654 40,654 17,462 17,462 23,217 75 47 246 84 162 0 0 0 162 .03 .03
-----END PRIVACY-ENHANCED MESSAGE-----