-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EbBtACL0KKGMUcXuDHwoMWDaEyftd0WxPCKgfvxYZdqmlu9rvfb7ExVcEbBbNw0r 76PpaxPkURjy7upjT6YTUg== 0000095676-95-000003.txt : 19950615 0000095676-95-000003.hdr.sgml : 19950615 ACCESSION NUMBER: 0000095676-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950314 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SURVIVAL TECHNOLOGY INC CENTRAL INDEX KEY: 0000095676 STANDARD INDUSTRIAL CLASSIFICATION: 3841 IRS NUMBER: 520898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05958 FILM NUMBER: 95520650 BUSINESS ADDRESS: STREET 1: 2275 RESEARCH BLVD STREET 2: STE 100 CITY: ROCKVILLE STATE: MD ZIP: 20850 BUSINESS PHONE: 3019261800 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended January 31, 1995 Commission file Number 0-5958 SURVIVAL TECHNOLOGY, INC. ------------------------- (Exact name of registrant as specified in its charter) Delaware 52-0898764 - - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2275 Research Blvd., Rockville, MD 20850 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (301) 926-1800 - - -------------------------------------------------- Registrant's telephone number, including area code 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, as of the latest practicable date. Class Outstanding as of February 28, 1995 - - --------------- ----------------------------------- Common Stock 3,086,538 Shares $.10 par value 2 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 Page No. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements (Unaudited) Consolidated Condensed Balance Sheets as of January 31, 1995 and July 31, 1994 ...... 3 Consolidated Condensed Statements of Income for the Three-Month Periods Ended January 31, 1995 and 1994................ 5 Consolidated Condensed Statements of Income for the Six-Month Periods Ended January 31, 1995 and 1994................ 6 Consolidated Condensed Statements of Cash Flows for the Six Months Ended January 31, 1995 and 1994............... 7 Notes to Consolidated Condensed Financial Statements ............................. 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................... 10 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders.......................... 15 ITEM 6. Exhibits and Reports on Form 8-K .......... 16 SIGNATURES ......................................... 17 3 SURVIVAL TECHNOLOGY, INC. CONSOLIDATED CONDENSED BALANCE SHEETS PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements
January 31, July 31, 1995 1994 (unaudited) (audited) ------------ ------------ ASSETS Current assets Cash $ 53,900 $ 65,000 Receivables 6,847,000 5,936,300 Inventories 4,120,700 2,795,300 Prepaid expenses and other assets 634,000 582,000 Deferred income taxes 848,100 848,100 ----------- ----------- Total current assets 12,503,700 10,226,700 ----------- ----------- Fixed assets 22,675,600 20,919,700 Less accumulated depreciation 9,507,900 9,027,000 ---------- ----------- 13,167,700 11,892,700 ----------- ----------- Patents and licenses at cost less amortization of $485,300 and $572,800 2,062,700 1,986,500 Other noncurrent assets 43,000 95,300 ----------- ----------- $27,777,100 $24,201,200 =========== ===========
4
SURVIVAL TECHNOLOGY, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (continued) January 31, July 31, 1995 1994 (unaudited) (audited) ------------- ------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Note payable to bank $ 4,692,500 $ 1,304,500 Note payable to Syntex 800,000 800,000 Current portion of long-term debt 387,800 358,900 Accounts payable 1,933,400 1,145,100 Other liabilities and accrued expenses 1,392,800 1,581,800 ----------- ----------- Total current liabilities 9,206,500 5,190,300 Note payable to Syntex 988,400 1,388,400 Other long-term debt 142,100 231,800 Other noncurrent liabilities 461,700 461,300 Deferred income taxes 1,239,400 1,239,400 ----------- ----------- Total liabilities 12,038,100 8,511,200 ----------- ----------- Shareholders' equity: Common stock, $.10 par value; 10,000,000 shares authorized; 3,085,400 and 3,085,400 shares issued and outstanding 308,500 308,500 Paid-in capital in excess of par value 5,072,700 5,072,700 Retained earnings 10,357,800 10,308,800 ----------- ----------- Total shareholders' equity 15,739,000 15,690,000 ----------- ----------- $27,777,100 $24,201,200 =========== =========== See Accompanying Notes to Consolidated Condensed Financial Statements.
5 SURVIVAL TECHNOLOGY, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Three Months Ended January 31, ---------------------------- 1995 1994 ------------- ------------ Net sales $ 6,444,800 $ 6,289,200 Cost of sales 4,670,800 3,640,000 ------------ ----------- Gross profit 1,774,000 2,649,200 ------------ ----------- Selling, general & administrative expense 1,093,000 1,164,400 Research & development expense 258,100 307,900 Depreciation and amortization expense 344,700 386,700 ------------ ----------- 1,695,800 1,859,000 ------------ ----------- Operating income 78,200 790,200 ------------ ----------- Other (expense) income: Interest expense (87,700) (38,000) Other income 46,900 69,100 ------------ ----------- (40,800) 31,100 ------------ ----------- Income before income taxes 37,400 821,300 Provision for income taxes 13,400 320,300 ------------ ----------- Net income $ 24,000 $ 501,000 ============ =========== Per common share: Net income $ .01 $ .16 ===== ===== Average number of common shares outstanding 3,100,700 3,122,700 --------- --------- See Accompanying Notes to Consolidated Condensed Financial Statements.
6 SURVIVAL TECHNOLOGY, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)
Six Months Ended January 31, ----------------------------- 1995 1994 ------------- ------------ Net sales $ 11,412,100 $12,973,800 Cost of sales 7,887,000 7,707,200 ------------ ----------- Gross profit 3,525,100 5,266,600 ------------ ----------- Selling, general & administrative expense 2,087,400 2,278,600 Research & development expense 558,300 576,700 Depreciation and amortization expense 727,300 735,300 ------------ ----------- 3,373,000 3,590,600 ------------ ----------- Operating income 152,100 1,676,000 ------------ ----------- Other (expense) income: Interest expense (153,000) (64,000) Other income 78,600 77,400 ------------ ----------- (74,400) 13,400 ------------ ----------- Income before income taxes 77,700 1,689,400 Provision for income taxes 28,700 637,400 ------------ ----------- Net income $ 49,000 $ 1,052,000 ============ =========== Per common share: Net income $ .02 $ .34 ===== ===== Average number of common shares outstanding 3,100,100 3,116,100 --------- --------- See Accompanying Notes to Consolidated Condensed Financial Statements.
7 SURVIVAL TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended January 31, ------------------------- 1995 1994 ----------- ---------- Cash flows from operating activities: Net income $ 49,000 $1,052,000 Adjustments to reconcile net income to net cash used for operating activities Depreciation and amortization 727,300 735,300 Gain on fixed asset disposals (49,000) Deferred lease incentives (15,100) 8,400 Increase in receivables (910,700) (1,316,000) Increase in inventories (1,325,400) (89,100) Increase in prepaid expenses and other assets (69,700) (340,400) Increase in accounts payable 788,300 124,800 Decrease in other liabilities and accrued expenses (189,000) (131,300) --------- ---------- Net cash used for operating activities (945,300) (5,300) --------- ---------- Cash flows from investing activities: Purchases of fixed assets (1,880,400) (1,351,600) Purchases of patents and licenses (154,600) (100,100) Decrease in other noncurrent assets 41,600 (Increase) decrease in other noncurrent liabilities 400 (14,700) ---------- ---------- Net cash used for investing activities (1,993,000) (1,466,400) ---------- ----------
8 SURVIVAL TECHNOLOGY, INC. STATEMENTS OF CASH FLOWS (continued) (Unaudited)
Six Months Ended January 31, ----------------------- 1995 1994 ---------- ---------- Cash flows from financing activities: Proceeds on notes payable to bank $3,388,000 $1,130,600 Payment on note payable to Syntex (400,000) - Payment on long-term debt (60,800) (167,600) Increase in other noncurrent liabilities 250,000 Proceeds from issuance of common stock 3,800 ---------- ---------- Net cash provided by financing activities 2,927,200 1,216,800 ---------- ---------- Net decrease in cash $ (11,100) $ (254,900) ========== ========== Cash at beginning of period $ 65,000 $ 274,700 Cash at end of period 53,900 19,800 ---------- ---------- Net decrease in cash $ 11,100 $ 254,900 ========== ========== See Accompanying Notes to Consolidated Condensed Financial Statements.
9 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS A. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of January 31, 1995 and July 31, 1994, the results of its operations for the three-month and six-month periods ended January 31, 1995 and 1994, and its cash flows for the six-month periods ended January 31, 1995 and 1994. The results of operations for the three-month and six-month periods ended January 31, 1995 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 1995. B. The significant accounting principles and practices followed by the Company are set forth in Note 1 of the Notes to Consolidated Financial Statements in the Survival Technology, Inc. Annual Report on Form 10-K for the year ended July 31, 1994. C. Inventories consisted of the following:
January 31, July 31, 1995 1994 ----------- ----------- Components and subassemblies $ 2,620,100 $ 1,739,200 Material, labor and overhead costs in process 809,400 438,700 Finished goods 933,600 895,200 ----------- ----------- 4,363,100 3,073,100 Inventory reserve (242,400) (277,800) ----------- ----------- Total $ 4,120,700 $ 2,795,300 =========== ===========
10 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Quarter and Six Months in Review - - ------------------------------------- The Company reported net income of $24,000 ($.01 per share) on sales of $6.4 million for the second quarter of fiscal 1995 compared with net income of $501,000 ($.16 per share) on sales of $6.3 million in the same period of fiscal 1994. Net income totalled $49,000 ($.02 per share) on sales of $11.4 million for the six months ended January 31, 1995 compared with net income of $1,052,000 ($.34 per share) on sales of $13 million during the six months ended January 31, 1994. While revenues generated during the current quarter were comparable with the same prior year quarter, the anticipated decline in revenues ($1.6 million or 12%) for the first six months of fiscal 1995 resulted from first quarter factors, including the previously reported shutdown of the company's St. Louis manufacturing facility during the first month of fiscal 1995. Operating income was adversely affected by declining gross margins. Gross margins decreased to 27% and 31% for the quarter and six month periods ended January 31, 1995 from 42% and 41%, respectively, in the corresponding prior year periods. This decline was attributable to sales of lower margin foreign military auto-injectors delivered during the current quarter coupled with lower revenues from commercial products and funded R&D activities in the current quarter and first six months of fiscal 1995. The Company's competitive bid for this foreign military contract anticipated a lower margin in pursuit of contract award to better position itself for additional future business. Sales from military products were $3.5 million in the current quarter and $5 million for the first six months of fiscal 1995 which represent increases over the same prior year periods of $1.4 million (67%) and $1.3 million (35%), respectively. These increases were primarily attributable to the previously mentioned sales of foreign military auto- injectors delivered during the current quarter. Commercial product and funded R&D revenues were $2.9 million and $6.4 million during the second quarter and first six months of fiscal 1995 compared with $4.2 million and 11 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) $9.3 million in the same prior year periods, which represents a 31% decrease for both periods. These declines in revenues were due mainly to lower CytoGuard sales coupled with the absence of revenues from the Medical Device Division which was sold in July 1994. As previously reported, the company anticipated a decline in revenues from its patented CytoGuard(R) Aerosol Protective Device due to a change in the distribution method from a single unit to multi-unit package by Bristol-Myers Squibb, STI's exclusive distributor for the CytoGuard. This decline in revenue was partially offset by EpiPen(R) auto-injector sales which increased $1.2 million (126%) in the current quarter and $768,400 (24%) in the first six months of fiscal 1995 when compared with the same prior year periods. Sales in second half of the year are expected to increase over 30% when compared with the first half of fiscal 1995. Operating margins are expected to return to historical levels of 35% to 40% based on stronger sales of commercial products and services. The company anticipates fiscal 1995 EpiPen sales to improve over prior year levels with expanded international marketing activities and the introduction of the new generation EpiPen, called the EpiE-ZPen(TM). This new injector has additional safety features and user convenience enhancements to better serve the consumer market, and will be positioned to expand epinephrine auto-injector use in U. S. and international markets. The company also expects increases in higher margin R&D revenues during the third and fourth quarters of fiscal 1995. Selling, general and administrative expenses ("SG&A") decreased $71,400 (6%) and $191,200 (8%) during the second quarter and first six months of the current fiscal year when compared with the same periods last year. These decreases were due to the absence of SG&A expenses related to the Medical Device Division (sold in July 1994) coupled with a lower fiscal 19985 profit sharing accrual in view of lower earnings. Research and development expenditures decreased $49,800 (16%) and $18,400 (3%) for the quarter and six months ended January 31, 1995 in line with the decrease in funded R&D activities mentioned above. The company remains focused on the development efforts related to its new 12 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) generation auto-injector products designed for outpatient/ in-home use. These products target infrequent injection of medication in acute episodes of disease as well as treatment of chronically ill patients. The company expects R&D expenses in fiscal 1995 to be comparable to fiscal 1994. Depreciation and amortization remained relatively constant decreasing $42,000 (11%) and $8,000 (1%) in the second quarter and first six months of fiscal 1995 compared with the corresponding prior year periods. The company continues to invest significantly in capital expenditures (see "Balance Sheet Review") and expects depreciation expense for the current fiscal year to increase over the prior fiscal year as more equipment is placed in service over the second half of fiscal 1995. Other expenses, net of other income, increased $71,900 in the current quarter and $87,800 in the first half of fiscal 1995 when compared with the same prior year periods. This resulted from increases in interest expense of $49,700 and $89,000 for the quarter and six months ended January 31, 1995 due to higher levels of bank borrowings as well as the re-initiation of interest payments on the outstanding note payable to Syntex Laboratories, Inc. ("see Liquidity and Capital Resources" following). Also contributing to the current quarter increase in other expenses was a gain on fixed asset disposal ($54,800) recognized in the second quarter last year. This gain was partially offset during the current quarter and completely offset in the first six months of fiscal 1995 by royalty income from sales of the company's former medical device products by Brunswick Biomedical Corporation, who acquired this business from STI in July 1994. Royalty income for the quarter and six month periods ended January 31, 1995 was $27,500 and $56,600, respectively. Liquidity and Capital Resources - - ------------------------------- In October 1994, the company renewed its $5 million line of credit agreement ("Agreement") with Merrill Lynch Business Financial Services Inc. ("MLBFS") through September 1995. Outstanding borrowings under the Agreement aggregated $4.7 million at January 31, 1995. The interest rate 13 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) is the 30-day commercial paper rate as published in the Wall Street Journal plus 265 basis points. The Agreement places a $5 million limit on capital expenditures in any one fiscal year. Capital expenditures for the six months ended January 31, 1995 aggregated $1.9 million. The Company relies on its line of credit facility to satisfy its working capital and capital expenditure requirements. In April 1991, the Company signed a Loan Agreement pursuant to which Syntex Laboratories, Inc. agreed to lend $5.4 million to the Company to finance working capital requirements and capital expenditures designed to increase the current production capacity of the Company's Cartrix (TM) syringe system. Effective January 1, 1993, the outstanding loan balance (approximately $2.2 million) had a moratorium on principal repayments and was non-interest bearing through June 30, 1994. Effective July 1, 1994, the outstanding loan balance began to bear interest at the same rate of interest the Company pays on its current commercial line of credit facility. Principal repayments resumed for the calendar quarter ended September 30, 1994 at the minimum of $200,000 per quarter reducing the outstanding loan balance to $1.8 million at January 31, 1995. The loan is subject to acceleration upon the occurrence of certain events. The Company will have significant capital needs over the next five years which cannot be funded by operations. Its manufacturing facility currently consists of eight separate buildings. The Company plans to consolidate operations by constructing a new facility connecting its sterile building with its component/finished goods warehouse and consolidating assembly and packaging operations. The construction of this new facility would result in the elimination of four manufacturing buildings and significantly reduce manufacturing costs. Many of the Company's aseptic filling, assembly and final packaging processes are labor intensive and in need of automation. Over the next three to four years, the Company plans to purchase high speed drug cartridge preparation and filling equipment as well as automated assembly and packaging equipment. This equipment will not only increase efficiency and capacity, but it will also result in less human contact with products during 14 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) the manufacturing process. Finally, as part of STI's new product development efforts, the Company must purchase high cavitation molds for its new automatic injection devices. The Company is in discussions with several financial institutions to identify intermediate to long-term financing alternatives to underwrite the capital expenditures needed to keep pace with its long-range business plan. The availability and timing of such financing cannot be reasonably predicted and could impact the extent and timing of such expenditures. Balance Sheet Review - - -------------------- Working capital at January 31, 1995 was $3.3 million which represents a $1.7 million (34%) decrease from the working capital at July 31, 1994 of $5 million. This decrease was the result of higher bank borrowings at the end of the current quarter. Receivables increased $910,700 (15%) due to January deliveries of foreign military auto-injectors which were subsequently liquidated in late February 1995. Inventories increased $1.3 million (47%) primarily in support of orders for the U.S. Department of Defense scheduled for delivery in the third and fourth quarters of fiscal 1995. Also contributing to this increased level of inventory was component purchases in anticipation of the EpiE-ZPen launch which is pending final approval by the Food and Drug Administration ("FDA"). Prepaid expenses and other current assets increased $52,000 (9%) due to the prepayment of annual FDA licensing fees which were partially offset by certain prepaid insurance policies nearing the end of their annual renewal periods. Notes payable increased $3 million (86%) as increased borrowings were needed to fund inventory purchases and capital expenditures. Accounts payable increased $788,300 (69%) in conjunction with increased levels of inventory discussed above. While other liabilities and accrued expenses decreased $189,000 (12%), other long-term debt, including the current portion, decreased $60,800 (10%) as the company continued to make payments on its non-interest bearing note payable to EM Industries, Inc. 15 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) as well as payments on capital lease obligations incurred to finance the company's fully integrated management information system. Capital expenditures totalled $1.9 million during the first six months of fiscal 1995 which consisted primarily of improvements designed to automate and validate current production processes at the company's St. Louis manufacturing facility. PART II - OTHER INFORMATION ITEM 4. Submission of matters to a vote of Security Holders. On January 5, 1995 at the Annual Meeting of Shareholders of the Company, the shareholders voted 2,825,463 shares (92%) electing a Board of five directors named in the Company's proxy statement dated December 9, 1994 who will serve until the next annual meeting of shareholders and ratified the selection by the Board of Directors of Price Waterhouse LLP as independent auditors of the Company for the current fiscal year. The following is a breakdown of how the shares were voted:
Votes For Withheld Dresner 2,815,883 9,580 Herzstein 2,816,163 9,300 Miller 2,816,163 9,300 Spero 2,815,722 9,741 Way 2,816,163 9,300 Against Abstain Price Waterhouse LLP 2,818,153 2,050 5,260 ITEM 6. Exhibits and Reports on Form 8-K: b. Reports on Form 8-K: As previously reported, the Registrant filed a Current Report on Form 8-K dated November 22, 1994. 17 SURVIVAL TECHNOLOGY, INC. FORM 10-Q For the Quarter ended January 31, 1995 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly cause this report to be signed on its behalf by the undersigned thereunto duly authorized. SURVIVAL TECHNOLOGY, INC. Registrant March 14, 1995 By: /S/James H. Miller - - -------------- ------------------------- Date James H. Miller President and Chief Executive Officer (Principal Executive Officer) March 14, 1995 By: /S/Jeffrey W. Church - - -------------- ------------------------- Date Jeffrey W. Church Sr. Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer)
[FISCAL-YEAR-END] Jul-31-1994 [PERIOD-START] Nov-01-1994 [PERIOD-END] Jan-31-1995 [PERIOD-TYPE] 6-MOS
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