-----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, VchQWIw3xL4CQmT1T4MMpCzejpmpO8XyK3zjT6n75hDGaB/XSX/r8KSO5DnIzrLQ LO6zLxafXbxh7Hjt3LXsig== 0000950133-01-500152.txt : 20010308 0000950133-01-500152.hdr.sgml : 20010308 ACCESSION NUMBER: 0000950133-01-500152 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERIDIAN MEDICAL TECHNOLOGIES INC CENTRAL INDEX KEY: 0000095676 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 520898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05958 FILM NUMBER: 1562603 BUSINESS ADDRESS: STREET 1: 10240 OLD COLUMBIA RD STREET 2: STE 100 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103096830 MAIL ADDRESS: STREET 1: 10240 OLD COLUMBIA ROAD CITY: COLUMBIA STATE: DE ZIP: 21046- FORMER COMPANY: FORMER CONFORMED NAME: SURVIVAL TECHNOLOGY INC DATE OF NAME CHANGE: 19920703 10-Q 1 w46224e10-q.txt FORM 10-Q FOR THE QUARTERLY PERIOD EDNED 1/31/2001 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JANUARY 31, 2001 ---------------- [ ] 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: 0-5958 ------ MERIDIAN MEDICAL TECHNOLOGIES, INC. ----------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 52-0898764 - --------------------------------------- -------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 10240 OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046 - -------------------------------------------- -------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 410-309-6830 -------------------------- 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, 2001 - --------------------------------------- ----------------------------------- Common Stock, $.10 par value 3,040,642 Shares 2
MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q Page No. -------- PART I. FINANCIAL INFORMATION - ------------------------------ ITEM 1. Consolidated Financial Statements Consolidated Balance Sheets as of January 31, 2001 and July 31, 2000................................................................... 4 Consolidated Statements of Income for the Three and Six Months Ended January 31, 2001 and 2000 ............................................ 5 Consolidated Statements of Cash Flows for the Six Months Ended January 31, 2001 and 2000....................................................... 6 Notes to Consolidated Financial Statements............................................................. 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 8 ITEM 3 Quantitative and Qualitative Disclosures About Market Risk.............................................11 PART II. OTHER INFORMATION - -------------------------- ITEM 2. Changes in Securities and Use of Proceeds .............................................................11 ITEM 4. Submission of Matters to a Vote of Security Holders....................................................11 ITEM 6. Exhibits and Reports on Form 8-K.......................................................................11 SIGNATURES........................................................................................................13 EXHIBIT INDEX.....................................................................................................14
2 3 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q INTRODUCTION Meridian Medical Technologies, Inc. (hereinafter referred to as the "Company" or "MMT" or "Meridian") is a medical technology company operating in two segments: Pharmaceutical Systems and Cardiopulmonary Systems. Pharmaceutical Systems - The Pharmaceutical Systems segment consists of the Commercial Systems and Government Systems businesses, both of which utilize the Company's auto-injector technology. The principal source of Commercial Systems revenue currently is the EpiPen(R) family of auto-injectors, which are prescribed for severe allergic reactions and other causes of anaphylaxis. The Company expects, over the coming years, to realize significant revenue growth from new commercial applications of its auto-injector products. Additionally, revenue growth is anticipated from alliances that introduce new products in auto-injectors and other drug delivery devices. Current new therapies under development or in negotiations for delivery in auto-injectors include an anti-seizure drug for management of breakthrough seizures and a drug for hypoglycemia. Government Systems revenues are principally generated from auto-injector products and services marketed to the U.S. Department of Defense (DoD), and other federal, state, local, and foreign governments. Marketing efforts from this unit will focus on maintaining the Industrial Base Maintenance Contract with the U.S. Department of Defense, as well as expanding international markets and domestic preparedness applications. Cardiopulmonary Systems - The Cardiopulmonary Systems segment utilizes the Company's electrocardiology and telemedicine technologies. Telemedicine sales currently are the principal source of revenue. In fiscal 2000, the Company introduced its PRIME ECG(TM) electrocardiac mapping system in Europe after several years of development. Management believes that PRIME ECG has the potential to become the standard ECG system of the future and to generate significant revenues and profits for the Company. FORWARD LOOKING STATEMENTS This report and other written and oral statements made by the Company may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act with respect to financial performance and other financial and business matters. Forward-looking statements are typically identified by future or conditional verbs or similar expressions regarding events that have yet to occur. These forward-looking statements are based on the Company's current expectations and are subject to numerous assumptions, risks and uncertainties. The following factors, among others, could cause actual results to differ materially from forward-looking statements: economic and competitive conditions; capital availability or costs; fluctuations in demand for the Company's products; government procurement timing and policies; technological challenges associated with the development and manufacture of the Company's products; commercial acceptance of the Company's products; delays, costs and uncertainties associated with clinical testing and government approvals required to market new drugs and medical devices; availability and quality of raw materials; success and timing of cost reduction and quality enhancement programs; regulatory and contract compliance; relationships with significant customers; adequacy of product liability insurance; ability to obtain, timing and success of marketing representatives and strategic alliances; and adequacy of intellectual property protection. Meridian assumes no duty to update forward-looking statements. 3 4 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
January 31, July 31, Assets 2001 2000 ------ ------------ ----------- (unaudited) Current assets: Cash and cash equivalents $104 $79 Restricted cash 288 285 Receivables, less allowances of $455 and $524, respectively 7,556 7,229 Inventories 8,707 8,061 Deferred income taxes 1,937 1,937 Other current assets 919 1,218 -------- -------- Total current assets 19,511 18,809 -------- -------- Property, plant and equipment 23,907 23,261 Less - Accumulated depreciation (8,501) (7,466) -------- -------- Net property, plant and equipment 15,406 15,795 -------- -------- Deferred financing fees 605 691 Capitalized software costs, net 1,272 1,429 Excess of cost over net assets acquired, net 5,808 6,340 Other intangible assets, net 1,455 1,621 -------- -------- Total assets $44,057 $44,685 ======== ======== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable and other accrued liabilities $5,148 $8,062 Note payable to bank 3,394 1,743 Customer deposits 179 392 Current portion of long-term debt 1,000 1,026 -------- -------- Total current liabilities 9,721 11,223 -------- -------- Long-term debt - notes payable, net of discount 16,443 16,823 Deferred income taxes 1,765 1,765 Other non-current liabilities 837 783 -------- -------- Total liabilities 28,766 30,594 -------- -------- Shareholders' equity: Common stock (voting and non-voting) Par value $.10 per share; 18,000,000 shares authorized; 3,038,641 and 3,001,962 shares issued 304 300 Additional capital 32,644 32,345 Accumulated other comprehensive loss - cumulative translation adjustment (185) (154) Accumulated deficit (17,242) (18,152) Unearned stock option compensation (17) (35) Treasury stock, 30,176 shares at cost (213) (213) -------- -------- Total shareholders' equity 15,291 14,091 -------- -------- Total liabilities and shareholders' equity $44,057 $44,685 ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 4 5 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) ------------------------------------- (unaudited)
Three Months Ended Six Months Ended January 31, January 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net sales $14,022 $12,066 $27,007 $23,821 Cost of sales 8,085 7,296 15,932 14,363 -------- -------- -------- -------- Gross profit 5,937 4,770 11,075 9,458 Selling, general, and administrative expenses 2,601 1,969 4,568 3,852 Research and development expenses 719 716 1,502 1,233 Depreciation and amortization 877 924 1,748 1,730 -------- -------- -------- -------- 4,197 3,609 7,818 6,815 -------- -------- -------- -------- Operating income 1,740 1,161 3,257 2,643 Other (expense) income: Interest expense (732) (831) (1,433) (1,674) Other income (expense) (23) 9 (24) (49) -------- -------- -------- -------- (755) (822) (1,457) (1,723) -------- -------- -------- -------- Income before income taxes 985 339 1,800 920 Provision for income taxes 500 132 890 359 -------- -------- -------- -------- Net income $ 485 $ 207 $ 910 $ 561 ======== ======== ======== ======== Net income per share: Basic $ .16 $ .07 $ .30 $ .19 ======== ======== ======== ======== Diluted $ .14 $ .06 $ .26 $ .17 ======== ======== ======== ======== Weighted average shares: Basic 3,037 2,995 3,023 2,995 Diluted 3,520 3,228 3,568 3,209
The accompanying notes are an integral part of these consolidated financial statements. 5 6 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q MERIDIAN MEDICAL TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)
Six Months Ended January 31, 2001 2000 ---- ---- OPERATING ACTIVITIES: Net income $ 910 $ 561 Adjustments to reconcile net income to net cash (used for) provided by operating activities: Depreciation and amortization 1,748 1,730 Amortization of capitalized software costs 157 -- Amortization of notes payable discount and deferred financing fees 204 184 Changes in assets and liabilities Receivables (327) (783) Inventories (646) (2,316) Other current assets 299 96 Accounts payable and other liabilities (3,141) 1,717 Other 42 92 ------- ------- Net cash (used for) provided by operating activities (754) 1,281 INVESTING ACTIVITIES Purchase of fixed assets (646) (571) Increase in restricted cash (3) (4) ------- ------- Net cash used for investing activities (649) (575) FINANCING ACTIVITIES Net proceeds from line of credit 1,651 215 Payment on long-term debt (526) (670) Payment of deferred financing fees -- (20) Proceeds from issuance of common stock 303 -- ------- ------- Net cash provided by (used for) financing activities 1,428 (475) ------- ------- Net increase in cash 25 231 Cash and cash equivalents at beginning of period 79 227 ------- ------- Cash and cash equivalents at end of period $ 104 $ 458 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 6 7 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of January 31, 2001 and July 31, 2000, the results of its operations for the three-month and six-month periods ended January 31, 2001 and 2000, and its cash flows for the six-month periods ended January 31, 2001 and 2000. The results of operations for the three-month and six-month periods ended January 31, 2001 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2001. Certain prior period amounts have been reclassified to conform to current period presentation. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis and financial statements and notes thereto included in the Meridian Medical Technologies, Inc. 2000 Form 10-K filed with the Securities and Exchange Commission. 2. The Company considers all investments with a maturity of three months or less on their acquisition date to be cash equivalents. Restricted cash consists of cash pledged as collateral on an outstanding letter of credit supporting the working capital line of credit at the Company's Belfast subsidiary. 3. Inventories consisted of the following:
January 31, 2001 July 31, 2000 ---------------- ------------- Components and subassemblies $5,587 $4,673 Work in process 3,366 3,250 Finished goods 597 884 ------- ------- 9,550 8,807 Less: inventory valuation allowance (843) (746) ------- ------- $8,707 $8,061 ======= =======
4. A reconciliation of net income to comprehensive income is as follows:
Three Months Ended Six Months Ended January 31, January 31, 2001 2000 2001 2000 ---- ---- ---- ---- Net income $485 $207 $910 $561 Foreign exchange translation adjustment 7 27 (31) 44 ----- ----- ----- ----- Comprehensive income $492 $234 $879 $605 ===== ===== ===== =====
5. In accordance with Statement of Financial Accounting Standards No. 86, the Company began amortizing capitalized software costs relating to its PRIME ECG product during the third quarter of fiscal 2000, as it was available for sale. Amortization, which is being provided on a 5 year, straight-line basis, totaled $157,000 for the six months ended January 31, 2001, and is included in cost of sales. 7 8 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q 6. Segment information is as follows:
Three Months Ended Six Months Ended January 31, January 31, 2001 2000 2001 2000 ---- ---- ---- ---- Revenues: Pharmaceutical systems $13,476 $11,811 $26,001 $23,425 Cardiopulmonary systems 546 255 1,006 396 -------- -------- -------- -------- Total revenues $14,022 $12,066 $27,007 $23,821 ======== ======== ======== ======== Operating income (loss): Pharmaceutical systems $2,619 $1,906 $4,995 $4,046 Cardiopulmonary systems (879) (745) (1,738) (1,403) -------- -------- -------- -------- Total operating income $1,740 $1,161 $3,257 $2,643 ======== ======== ======== ========
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations THE QUARTER IN REVIEW MMT's net income was $485,000 ($0.16 basic and $0.14 diluted earnings per share) on sales of $14.0 million for the quarter ended January 31, 2001, the second quarter of fiscal 2001. This compares with net income of $207,000 ($0.07 basic and $0.06 diluted earnings per share) on sales of $12.1 million in the same period of fiscal 2000. This represents a 16.2% increase in revenues, a 134.3% increase in net income, and a 133.3% increase in diluted earnings per share from the same quarter of the prior year. On a year-to-date basis, MMT had net income of $910,000 ($0.30 basic and $0.26 diluted earnings per share) on sales of $27.0 million for the six months ended January 31, 2001. This compares with net income of $561,000 ($0.19 basic and $0.17 diluted earnings per share) on sales of $23.8 million in the same period of fiscal 2000. Weighted average diluted shares outstanding for the quarter and year-to-date were higher than the same periods of the prior year primarily due to the increased market price of the Company's stock. Revenues of MMT's two business segments and total gross profit for the three-month and six-month periods ended January 31, 2001 and 2000 are as follows:
Three Months Ended Six Months Ended January 31, January 31, ($ in thousands) 2001 2000 2001 2000 ---- ---- ---- ---- Pharmaceutical Systems: Commercial Systems $ 6,168 $ 4,800 $ 14,018 $ 10,923 Government Systems 7,308 7,011 11,983 12,502 ------- ------- ------- ------- Total Pharmaceutical Systems 13,476 11,811 26,001 23,425 Cardiopulmonary Systems 546 255 1,006 396 ------- ------- ------- ------- Total Revenues 14,022 12,066 27,007 23,821 ======= ======= ======= ======= Gross Profit $ 5,937 $ 4,770 $ 11,075 $ 9,458 ======= ======= ======= ======= Gross Profit % 42.3% 39.5% 41.0% 39.7% EBITDA (1) $ 2,673 $ 2,094 $ 5,138 $ 4,324 ======= ======= ======= =======
(1) EBITDA represents operating income plus or minus other income (expense) and plus depreciation and amortization. EBITDA is not a measure of performance or financial condition under generally accepted accounting principles, but is presented to provide additional information related to operating results. EBITDA should not be considered in isolation or as a substitute for other measures of financial performance or liquidity under generally accepted accounting principles. While EBITDA is frequently used as a measure of operations and the ability to meet debt service requirements, it is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation. 8 9 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q Commercial Systems revenue for the quarter ended January 31, 2001 was $6.2 million, $1.4 million higher than in the comparable prior year period. The 28.5% increase in revenue primarily resulted from higher unit sales of EpiPens in the current quarter compared to the same quarter in the prior year. On a year-to-date basis, Commercial Systems revenue was $14.0 million for the six months ended January 31, 2001, 28.3% higher than the same period of fiscal 2000. R&D revenue also increased to $998,000 and $1,715,000 for the three and six months ended January 31, 2001, compared to the $541,000 and $875,000 of revenues in the same periods of the prior year. This increase was due to the timing and number of projects, reflecting the variable nature of R&D revenue from period to period. Government Systems revenues were $7.3 million in the quarter ended January 31, 2001 compared to $7.0 million in the second quarter of fiscal 2000. Revenue for the six months ended January 31, 2001 was $12.0 million compared to $12.5 million for the same period of the prior year. Domestic Preparedness sales were $388,000 and $487,000 for the three and six months ended January 31, 2001, respectively, versus $84,000 and $108,000 for the three and six month periods ended January 31,2000. DoD and foreign government revenues decreased due to the timing of procurements by those customers. Cardiopulmonary Systems revenues were $546,000 and $1.0 million for the three and six months ended January 31, 2001, respectively. This compares to $255,000 and $396,000 of revenue for the three and six-month periods ended January 31, 2000. This increase was due to stronger telemedicine sales during the quarter and first six months. The Company continued to invest in the development of its PRIME ECG sales and marketing network in Europe during the quarter. Additionally, the Company is continuing its ongoing multi-site clinical study of PRIME ECG, which is expected to be completed during the third quarter. Gross profits were $5.9 million or 42.3% of revenues during the second quarter of 2001, compared to $4.8 million or 39.5% for the same period of the prior year. For the first six months of fiscal 2001, gross profits were $11.1 million or 41.0% of revenues, compared to $9.5 million or 39.7% for the same period last year. The comparable gross profit percentage is a result of product price, cost, and sales mix. Operating costs were $4.2 million and $7.8 million for the three and six months ended January 31, 2001, respectively. This is compared to $3.6 million and $6.8 million incurred in the same periods of last year. Selling, general and administrative expenses (SG&A) were $632,000 and $716,000 higher than the same periods of the prior year primarily due to the Company's investment in the marketing infrastructure for the PRIME ECG, costs associated with the ongoing multi-site clinical trial, and initial expenses relating to the building of a sales and marketing infrastructure for specialty pharmaceuticals. Interest expense was $732,000 in the second quarter of fiscal 2001 and $1.4 million for the six months ended January 31, 2001. This represents a decrease from fiscal 2000 due to lower average debt balances, partially offset by higher interest rates. The provision for income taxes was $890,000 for the six months ended January 31, 2001, reflecting an estimated effective tax rate of 49% for the year. The tax provision incorporates estimated benefits from utilization of operating loss carryforwards, offset by permanent book to tax differences and losses from foreign subsidiaries. The Company takes no consolidated tax benefit from the foreign losses. U.S. pre-tax income, taxed at the statutory rate after permanent and temporary differences, is higher than the consolidated pre-tax income, which inflates the effective rate. 9 10 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q LIQUIDITY AND CAPITAL RESOURCES Total cash as of January 31, 2001 was $104,000, an increase of $25,000 from July 31, 2000. The Company used $753,000 in cash from operations in the first six months of fiscal 2001 attributable mostly to increased operating working capital requirements including higher accounts receivables and inventories, and lower accounts payable. Investing activities in the first half of fiscal 2001 used $649,000 of cash, mostly for capital additions. Financing activities generated $1.4 million, primarily from net borrowings on existing debt facilities and the sale of stock through stock option and warrant exercises. Availability under the working capital lines of credit was $3.3 million at January 31, 2001. Working capital at January 31, 2001 was $9.8 million, up from $7.6 million at July 31, 2000. The increase was primarily attributable to higher inventories ($646,000) and lower accounts payable and accrued expenses ($3.1 million), offset by higher notes payable to bank ($1.7 million). At January 31, 2001, accounts receivable were $7.6 million, representing 42 days-sales-outstanding, and inventories were $8.7 million representing a turn-over rate of 3.8 times per year. OUTLOOK The Company continues to anticipate that the core Pharmaceutical Systems segment of the business will have a strong overall year, which would result in double digit growth in profits before tax for the Company. Demand for EpiPen remains strong as evidenced by the product's sales performance in the first half of the fiscal year. The first and second quarters are historically the unit's lowest sales quarters due to the seasonality associated with EpiPen, sales of which historically have been highest in the spring and summer months. Overall, sales of EpiPen are expected to increase by approximately twenty percent as compared to sales in fiscal 2000. Government Systems' revenues for the remainder of fiscal 2001 are expected to be lower than for the first six months of the year. The Company's new multi-chambered auto-injector is in the FDA approval process. The FDA has requested additional information that the Company is providing. While the Company fully expects the MA product will receive FDA approval, previously forecasted sales associated with this product are now planned for next fiscal year. Overall gross margins for the Pharmaceutical Systems group are expected to increase on a full-year basis due to forecasted revenue increases from higher margin Commercial Systems products. The Company will continue the early phase of developing its specialty pharmaceutical group during the second half of fiscal 2001. Focused on central nervous system (CNS) drugs, utilizing the Company's strong position in auto-injector technology, the Company intends to build the required sales and marketing infrastructure to support the initial product launch currently anticipated during fiscal 2002. The Cardiopulmonary Systems segment of the business is expected to continue to generate increased sales through its telemedicine products and through the sales of PRIME ECG. The Company currently anticipates filing for a 510(k) marketing approval with the FDA for PRIME ECG during the fourth quarter of fiscal 2001, subject to successful completion of ongoing clinical trials. The Company anticipates that initial sales of PRIME ECG in the United States could occur by the end of calendar 2001, subject to receipt of FDA approval. The Company anticipates sales of the product in Europe will increase during the course of the fiscal year. The Company expects to generate increased EBITDA during fiscal year 2001. The Company expects to invest substantial amounts in developing the market for PRIME ECG and expects to increase its expenditures in research and development focused on further applications for its auto-injector technology. Additionally, the Company expects to reduce its debt during the fiscal year through cash generated by operations and/or a placement of equity securities. 10 11 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q ITEM 3. Quantitative and Qualitative Disclosure About Market Risk The Company's earnings are affected by fluctuations in the value of the U.S. dollar, as compared to foreign currencies, as a result of transactions in foreign markets. At January 31, 2001, the result of a uniform 10% strengthening or weakening in the value of the dollar relative to the currencies in which the Company's transactions are denominated would have resulted in a $122,000 increase or decrease, respectively, in operating income for the six months ended January 31, 2001. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which change the dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors' services become more or less attractive. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. The Company is exposed to changes in interest rates as a result of its outstanding debt. Total short-term and long-term debt outstanding at January 31, 2001 was $20.8 million, consisting of $6.4 million in variable rate borrowing and $14.4 million in fixed rate borrowing. At this level of variable rate borrowing, a hypothetical 10% increase in interest rates would have decreased pre-tax earnings by approximately $29,000 for the six months ended January 31, 2001. At January 31, 2001, the fair value of the Company's fixed rate debt outstanding was estimated at $15.0 million. A hypothetical 10% change in interest rates would not result in a material change in the fair value of the Company's fixed rate debt. The Company does not currently utilize any derivative financial instruments related to its interest rate exposure. PART II - OTHER INFORMATION ITEM 2. Changes in Securities and Use of Proceeds During the quarter ended January 31, 2001, the Company issued an aggregate of 3,056 shares of its common stock upon the exercise of warrants at an exercise price of $11.00. The Company received aggregate proceeds of $33,616 from the warrant exercises. These shares were issued pursuant to an exemption by reason of Section 4(2) under the Securities Act of 1933. ITEM 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting of stockholders on January 11, 2001 (the "Annual Meeting"). A total of 2,954,585 shares of common stock were represented at the Annual Meeting in person or by proxy. The stockholders voted to reelect E. Andrews Grinstead, III as a director with 2,769,191 votes cast for the nominee and 185,394 votes withheld. James H. Miller, Robert G. Foster, Bruce M. Dresner and David L. Lougee remained in office as continuing directors following the meeting. The stockholders voted to approve the Company's Employee Stock Purchase Plan with 2,006,377 votes cast for approval of the Employee Stock Purchase Plan, 30,149 votes against, and 13,807 abstentions or broker-nonvotes. The stockholders voted to approve the Company's 2000 Stock Incentive Plan with 1,411,825 votes cast for approval of the 2000 Stock Incentive Plan, 624,091 votes against, and 14,417 abstentions or broker-nonvotes. Finally, the stockholders voted to ratify the selection by the Board of Directors of Ernst & Young LLP as independent auditors of the Company for the fiscal year with 2,941,064 votes cast for ratification, 3,000 votes against, and 10,520 abstentions or broker-nonvotes. 11 12 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q ITEM 6. Exhibits and Reports on Form 8-K: (a) Exhibits Exhibit 4.4 Offer letter to change the terms of certain warrants expiring March 14, 2001. Filed herewith. Exhibit 10.41 Meridian Medical Technologies, Inc. 2000 Stock Incentive Plan. Incorporated by reference from Exhibit 4 to Registration Statement No. 333-54780 on Form S-8. * * - Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended January 31, 2001. 12 13 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q SIGNATURES Pursuant to the requirement 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. MERIDIAN MEDICAL TECHNOLOGIES, INC. ----------------------------------- Registrant March 7, 2001 By: /S/James H. Miller ------------- ------------------ Date James H. Miller President and Chief Executive Officer (Principal Executive Officer) March 7, 2001 By: /S/Dennis P. O'Brien ------------- -------------------- Date Dennis P. O'Brien Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 13 14 MERIDIAN MEDICAL TECHNOLOGIES, INC. FORM 10-Q EXHIBIT INDEX Exhibit No. Description of Exhibit 4.4 Offer letter to change the terms of certain warrants expiring March 14, 2001. Filed herewith. 10.41 Meridian Medical Technologies, Inc. 2000 Stock Incentive Plan. Incorporated by reference from Exhibit 4 to Registration Statement No. 333-54780 on Form S-8. * * - Management contract, compensatory plan or arrangement. 14 EX-4.4 2 w46224ex4-4.txt OFFER LETTER TO CHANGE THE TERMS 1 EXHIBIT 4.4 Offer letter to change the terms of certain warrants expiring March 14, 2001 January 31, 2001 Re: Warrants to Purchase Common Stock of Meridian Medical Technologies, Inc. Dear _____________: According to our records, you currently hold Warrant No. _____to purchase _____shares of our common stock (the "Common Stock") at an exercise price of $8.33, per share (the "Warrant"). Your Warrant expires on March 14, 2001. By its terms, your Warrant requires that you pay, by check or wire transfer, an amount equal to the exercise price of your Warrant multiplied by the number of shares then being purchased if you choose to exercise your Warrant (the "Purchase Price"). The Board of Directors has authorized a change in the terms of your Warrant that would allow you to pay the Purchase Price due upon exercise of your Warrant by surrendering the right to receive a portion of the shares of Common Stock to be purchased on exercise (the "Amendment"). This feature will only be available to you if you choose to accept the Amendment. The Amendment will modify Section 3 of your Warrant as well as the Notice of Exercise attached as Exhibit 1 to your Warrant. The revised Section 3 and Notice of Exercise will read as shown in the attached Exhibits A and B. All other terms and conditions of your Warrant will remain the same. We are not advising any Warrantholder with respect to the tax, financial reporting disclosures, or other consequences of the Amendment. Warrantholders are not to construe the contents of this notice or any prior or subsequent communications with the Company or any of its officers, directors, employees or representatives as legal or tax advice or as information necessarily applicable to a Warrantholder's particular financial situation. Each Warrantholder should make his, her or its own decision about whether to accepts the Amendment and should consult his, her or its own financial advisor, counsel and accountant as to tax and related matters concerning the Amendment. Furthermore, Warrantholders other than institutions should also consider the financial and reporting consequences of the Amendment. 2 January 31, 2001 Page 2 If you choose to accept the Amendment and the subsequent changes to your Warrant, please countersign this letter and return it to the Company to the attention of Tiffany Roebuck, Assistant Corporate Secretary. You may also return the documents to us by fax at (410) 309-1691. Please feel free to contact Mike McGuire at (410) 309-1459 if you have any questions with respect to the Amendment. Sincerely, James H. Miller Chairman, President Chief Executive Officer AGREED AND ACCEPTED: WARRANTHOLDER By: ____________________________ Name: ____________________________ Title: ____________________________ 3 EXHIBIT A (for financing warrants) AMENDMENT TO SECTION 3 3. Exercise of Warrant. (a) Method of Exercise; Payment. Subject to Section 1 hereof, the purchase right represented by this Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant (with the notice of exercise form attached hereto as Exhibit 1 duly executed) at the principal office of the Company and by the payment to the Company, by check or wire transfer, of an amount equal to the Warrant Price per share multiplied by the number of shares then being purchased; provided, however, that the Holder may exercise this Warrant in whole or in part by the surrender of this Warrant to the Company, with the notice of exercise marked to reflect "Net Issue Exercise" and specifying the number of shares of Common Stock to be purchased and upon such Net Issue Exercise, the Holder shall be entitled to pay the exercise price for Common Stock purchased hereunder by surrendering to the Company the right to receive a portion of the number of shares of Common Stock with respect to which this Warrant is then being exercised equal to the product obtained by multiplying such number of shares of Common Stock by a fraction, the numerator of which is the Warrant Price in effect on the date of such exercise and the denominator of which is the Current Market Price per share (as defined below) of the Common Stock on such date. For the purposes of this section, the Current Market Price per share of Common Stock as of the Date of Exercise shall be the last reported sales price regular way or, in case no such reported sale takes place on such date, the closing bid price regular way, in either case on the principal national securities exchange (including, for purposes hereof, the Nasdaq National Market) on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the highest reported bid price of the Common Stock as furnished by the National Association of Securities Dealers, Inc. though Nasdaq, or a similar organization if Nasdaq is no longer reporting such information. If on any such date the Common Stock is not listed or admitted to trading on any national securities exchange and is not quoted by Nasdaq or any similar organization, the fair value of a share of Common Stock on such date, as determined in good faith by the board of directors of the Company, whose determination shall be conclusive absent manifest error, shall be used. The Date of Exercise shall be the last trading day preceding the date on which the Company receives the notice of exercise and this Warrant at the Company's headquarters. (b) Issuance of Shares; Issuance of New Warrant. The Company agrees that the shares so purchased shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which this Warrant shall have been surrendered and payment made for such shares as aforesaid. In the event of any exercise of this Warrant, certificates for the shares of stock so purchased shall be delivered to the Holder within 15 days thereafter and, unless this Warrant has been fully exercised or expired, a new Warrant representing the portion of the shares, if any, with respect to which this Warrant shall not then have been exercised, shall also be issued to the Holder within such 15 day period. 4 EXHIBIT B NOTICE OF EXERCISE TO: MERIDIAN MEDICAL TECHNOLOGIES, INC. 1. The undersigned hereby elects to purchase ____ shares of Common Stock of MERIDIAN MEDICAL TECHNOLOGIES, INC. pursuant to the terms of the attached Warrant, and tenders herewith payment of the purchase price of such shares in full as provided by such Warrant. [ ] Check Box for Net Issue Exercise 2. Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below: --------------------- (Name) --------------------- --------------------- (Address) 3. THE UNDERSIGNED REPRESENTS THAT THE AFORESAID SHARES OF COMMON STOCK ARE BEING ACQUIRED FOR THE ACCOUNT OF THE UNDERSIGNED FOR INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, THE DISTRIBUTION THEREOF AND THAT THE UNDERSIGNED HAS NO PRESENT INTENTION OF DISTRIBUTING OR RESELLING SUCH SHARES. ---------------------------- Signature -----END PRIVACY-ENHANCED MESSAGE-----