SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to section 13 or 15(d) of the Securities
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Exchange Act of 1934 for the quarterly period ended March 31, 1998 or
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Transition Report pursuant to section 13 or 15(d) of the Securities
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Exchange Act of 1934 for the transition period from to
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Commission File No. 000-16723
RESPIRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1304989
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1501 Ardmore Blvd.
Pittsburgh, Pennsylvania 15221
(Address of principal executive offices) (Zip Code)
(Registrant's Telephone Number, including area code) 412-731-2100
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 and (2) has been subject to such filing requirements for
at least the past 90 days. Yes X No .
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As of April 30, 1998, there were 32,519,496 shares of Common Stock of the
registrant outstanding.
INDEX
RESPIRONICS, INC.
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -- March 31, 1998 and June 30, 1997.
Consolidated statements of operations -- Three months ended March 31,
1998 and 1997 and nine months ended March 31, 1998 and 1997.
Consolidated statements of cash flows -- Nine months ended March 31,
1998 and 1997.
Notes to consolidated financial statements -- March 31, 1998.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
SIGNATURES
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CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
March 31 June 30
1998 1997
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ASSETS
CURRENT ASSETS
Cash and short-term investments $ 18,501,721 $ 18,630,657
Trade accounts receivable, less allowance for
doubtful accounts of $5,570,000 and $4,908,000 89,997,463 78,096,383
Inventories 56,140,804 56,008,256
Prepaid expenses and other 5,356,360 5,207,850
Deferred income tax benefits 6,751,897 6,795,897
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TOTAL CURRENT ASSETS 176,748,245 164,739,043
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment 90,411,825 78,382,241
Less allowances for depreciation
and amortization 45,089,361 36,287,759
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45,322,464 42,094,482
Funds held in trust for construction
of new facility 819,243 1,754,452
OTHER ASSETS 13,490,743 12,871,491
COST IN EXCESS OF NET ASSETS OF
BUSINESS ACQUIRED 69,722,944 73,356,458
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$306,103,639 $294,815,926
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See notes to consolidated financial statements.
March 31 June 30
1998 1997
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,582,280 $ 24,148,853
Accrued expenses and other 25,311,437 28,223,141
Current portion of long-term obligations 1,690,446 1,801,211
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TOTAL CURRENT LIABILITIES 52,584,163 54,173,205
LONG-TERM OBLIGATIONS 61,593,676 48,984,933
MINORITY INTEREST 569,261 604,072
COMMITMENTS
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; authorized
100,000,000 shares; issued and outstanding
32,424,900 shares at March 31, 1998 and
31,656,900 shares at June 30, 1997 324,249 316,569
Additional capital 99,714,257 92,838,205
Cumulative effect of foreign currency translations (1,616,986) (689,813)
Retained earnings 94,030,524 99,471,203
Treasury stock (1,095,505) (882,448)
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TOTAL SHAREHOLDERS' EQUITY 191,356,539 191,053,716
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$306,103,639 $294,815,926
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See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
Three months ended Nine months ended
March 31 March 31
1998 1997 1998 1997
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Net sales $80,127,507 $83,485,403 $266,349,507 $222,847,123
Cost of goods sold 41,899,865 43,145,839 136,006,865 115,548,909
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38,227,642 40,339,564 130,342,642 107,298,214
General and administrative expenses 9,653,659 8,326,652 27,826,466 21,640,623
Sales, marketing and commission expense 16,046,023 15,193,348 49,729,365 40,992,377
Research and development expense 4,815,363 4,533,630 15,126,363 12,657,418
Merger related costs 37,502,626 -0- 37,502,626 -0-
Costs associated with an unsolicited offer
to acquire Healthdyne Technologies, Inc. -0- 1,300,000 650,000 1,300,000
Interest expense 890,765 772,803 3,038,765 2,250,418
Other income (386,819) (409,032) (1,245,819) (2,096,128)
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68,521,617 29,717,401 132,627,766 76,744,708
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INCOME (LOSS) BEFORE INCOME TAXES (30,293,975) 10,622,163 (2,285,124) 30,553,506
Income taxes (benefit) (8,044,444) 4,249,183 3,157,555 12,230,506
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NET INCOME (LOSS) $(22,249,531) $ 6,372,980 $ (5,442,679) $ 18,323,000
============ =========== ============= ============
Basic earnings (loss) per share $ (0.69) $ 0.20 $ (0.17) $ 0.59
============ =========== ============= ============
Basic Shares Outstanding 32,417,850 31,419,431 31,933,484 31,210,162
============ =========== ============= ===========
Diluted earnings (loss) per share $ (0.69) $ 0.20 $ (0.17) $ 0.57
============ =========== ============= ============
Diluted Shares Outstanding 32,417,850 32,576,430 31,933,484 32,195,277
============ =========== ============= ============
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
Nine months ended
March 31
1998 1997
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OPERATING ACTIVITIES
Net income $ (5,442,679) $ 18,323,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,410,116 7,690,512
Provision for asset writeoffs 18,588,483 -0-
Changes in operating assets and liabilities:
Increase in accounts receivable (13,901,080) (9,294,206)
Increase in inventories and prepaid expenses (12,263,095) (3,411,542)
Increase in other assets (619,252) (2,442,007)
(Decrease) increase in accounts payable and accrued expenses (2,403,450) 5,690,016
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NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (4,630,957) 16,555,773
INVESTING ACTIVITIES
Purchase of property, plant and equipment (14,631,821) (8,243,606)
Acquisition of businesses, net of cash acquired -0- (59,575,137)
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NET CASH USED BY
INVESTING ACTIVITIES (14,631,821) (67,818,743)
FINANCING ACTIVITIES
Net increase (decrease) in borrowings 12,497,978 (913,286)
Issuance of common stock 6,883,732 2,454,699
Acquisition of treasury stock (213,057) (229,385)
Decrease in minority interest (34,811) (268,196)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 19,133,842 1,043,832
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DECREASE IN CASH AND
SHORT-TERM INVESTMENTS (128,936) (50,219,138)
Cash and short-term investments at beginning of period 18,630,657 67,546,699
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CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $ 18,501,721 $ 17,327,561
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See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
MARCH 31, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1998. For further information, refer to Note D to these
consolidated financial statements and to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended June 30, 1997.
NOTE B -- INVENTORIES
The composition of inventory is as follows:
March 31 June 30
1998 1997
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Raw materials $19,906,857 $24,712,760
Work-in-process 7,354,929 5,237,043
Finished goods 28,879,018 26,058,453
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$56,140,804 $56,008,256
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NOTE C -- CONTINGENCIES
As previously disclosed, the Company is party to actions filed in a federal
District Court in January 1995 and June 1996 in which a competitor alleges that
the Company's manufacture and sale in the United States of certain products
infringes four of the competitor's patents. In its response to these actions,
the Company has denied the allegations and has separately sought a declaratory
judgment that the claims under the patents are invalid or unenforceable and that
the Company does not infringe upon the patents. The January 1995 and June 1996
actions have been consolidated, and discovery is currently underway. The Court
has granted the Company's motion for summary judgment that the Company does not
infringe one of the competitor's patents. The Company believes that none of its
products infringe any
of the patents in question, in the event that any one or more of such patents
should be held to be valid, and it intends to vigorously defend this position.
NOTE D -- ACQUISITIONS
The Company merged a wholly-owned subsidiary with Healthdyne Technologies, Inc.
("Healthdyne") on February 11, 1998 in a stock for stock merger by issuing
approximately 12,000,000 shares of the Company's common stock in exchange for
the outstanding shares of Healthdyne. The merger was accounted for as a pooling
of interests. Accordingly, the consolidated financial statements include, for
all periods presented, the combined financial results and financial position of
the Company and Healthdyne. Healthdyne has since been renamed Respironics
Georgia, Inc.
As previously disclosed, the Company acquired LIFECARE International, Inc.
(since renamed Respironics Colorado, Inc.) on October 21, 1996 and Stimotron
Medizinische Gerate GmbH ("Stimotron") on February 26, 1997. Both transactions
were treated as purchases for financial accounting purposes, and accordingly the
Company's results of operations include the results of operations of Respironics
Colorado, Inc. and Stimotron since their acquisition dates. The operations of
LIFECARE International, Inc. and Stimotron were not material to the Company's
net income prior to the acquisitions and pro forma financial information has
therefore not been presented.
NOTE E -- EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share:
Three Months Three Months Nine Months Nine Months
Ended 3/31/98 Ended 3/31/97 Ended 3/31/98 Ended 3/31/97
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Numerator:
Net Income (Loss) $(22,249,531) $ 6,372,980 $(5,442,679) $18,323,000
Denominator:
Denominator for
basic earnings
per share -
weighted
average shares 32,417,850 31,419,431 31,933,484 31,210,162
Effect of Dilutive
Securities:
Stock Options -0- 1,156,999 -0- 985,115
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Denominator for
diluted earnings
per share -
adjusted weighted
average shares
and assumed
conversions 32,417,850 32,576,430 31,933,484 32,195,277
============= ============= ============= =============
Basic Earnings
(Loss) Per
Share $ (0.69) $ 0.20 $ (0.17) $ 0.59
============= ============= ============= =============
Diluted Earnings
(Loss) Per
Share $ (0.69) $ 0.20 $ (0.17) $ 0.57
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NOTE F -- MERGER RELATED COSTS
During the quarter ended March 31, 1998, the Company incurred $37,500,000 in
costs related to the merger with Healthdyne. The primary components of these
costs were direct expenses and related costs of the transaction ($11,000,000),
employment related costs ($7,500,000), and asset write downs to reflect
decisions made regarding product and operational standardization ($19,000,000).
Transaction, employment and other costs incurred but not yet paid have been
credited to accrued expense and asset write downs have been credited against the
applicable asset accounts. The Company expects to incur and record an additional
$2,500,000 in merger related costs in the quarter ended June 30, 1998.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES REFORM ACT OF 1995
The statements contained in this Quarterly Report on Form 10-Q, specifically
those contained in Item 2 "Management's Discussion and Analysis of Results of
Operations and Financial Condition", along with statements in other reports
filed with the Securities and Exchange Commission, external documents and oral
presentations which are not historical are "Forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21B of the Securities and Exchange Act of 1934, as amended. These
forward-looking statements represent the Company's present expectations or
beliefs concerning future events. The Company cautions that such statements are
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Results actually
achieved may differ materially from expected results included in these
statements. Those factors, which were discussed in detail in the Company's
Annual Report on Form 10-K for the year ended June 30, 1997, include the
following: foreign currency fluctuations, regulations and other factors
affecting operations and sales outside the United States including potential
future effects of the change in sovereignty of Hong Kong, customer consolidation
and concentration, increasing price competition and other competitive factors in
the sale of products, intellectual property and related litigation, FDA and
other government regulation, and third party reimbursement.
Item 2. Management's Discussion and Analysis of Result of Operations and
Financial Condition
The consolidated financial statements present, for all periods, the combined
financial results of the Company and Healthdyne Technologies, Inc. (since
renamed Respironics Georgia, Inc.) ("Healthdyne") which become a subsidiary of
the Company on February 11, 1998 pursuant to a merger that was accounted for as
a pooling of interests.
RESULTS OF OPERATIONS
Net sales for the quarter ended March 31, 1998 were $80,128,000 representing a
4% decrease over the $83,485,000 recorded for the quarter ended March 31, 1997.
Sales for the nine months ended March 31, 1998 were $266,350,000, an increase of
20% over the $222,847,000 recorded in the year earlier period. Sales for the
current quarter and nine month period ended March 31, 1998 include sales
generated by Respironics Colorado, Inc. ("Respironics Colorado"), which was
acquired by the Company in October 1996, and Stimotron Medizinische Gerate GmbH
("Stimotron"), which was acquired by the Company in February 1997. Both of these
acquisitions were treated as purchases for financial accounting purposes and,
accordingly, the Company's sales and results of operations include the sales and
results of operations of these entities since their acquisition dates. Excluding
the impact of these acquisitions, the Company's sales decreased by 4% in the
quarter to quarter comparison and increased by 14% in the year to date
comparison.
The decrease in sales for the quarter to quarter comparison was due primarily to
a decrease in sales of the Company's non-invasive ventilatory support products.
This decrease resulted from uncertainty in the market concerning insurance
coverage guidelines for the use of these products principally in the home market
and corresponding reduction in purchases of these units by many of the Company's
dealer customers. The Healthcare Financing Administration ("HCFA") is currently
reviewing these coverage guidelines and the Company expects that such guidelines
will be published by the end of calendar year 1998. While non-invasive
ventilation therapy continues to gain wide acceptance in the clinical community
for both home and hospital use and offers unique clinical benefits to large,
accessible patient populations, the Company expects that its sales of non-
invasive ventilation units are likely to continue to be negatively impacted
until definitive guidelines are issued. The Company is also experiencing
challenges in its marketplace due to reductions in Medicare reimbursement for
oxygen therapy that were enacted in January 1998. The increase in sales for
the year to date comparison was due to increases in unit and dollar sales in
each of the Company's main product lines, most notably obstructive sleep apnea
therapy products and the non-invasive ventilatory support products described
above.
The Company's gross profit was 48% and 49% of net sales for the quarter and nine
months ended March 31, 1998, respectively, and 48% for both the quarter and nine
months ended March 31, 1997. For both the quarter and year to date comparison,
the impact of the sales decrease described above and the impact of reduced
average selling prices for certain of the Company's products, which had been
expected, was offset by manufacturing support costs increasing at rates less
than the rate of sales increase and by sales mix.
General and administrative expenses were $9,654,000 (12% of net sales) for the
quarter ended March 31, 1998 as compared to $8,327,000 (10% of net sales) for
the quarter ended March 31, 1997. General and administrative expenses were
$27,826,000 (10% of net sales) for the nine months ended March 31, 1998 as
compared to $21,641,000 (10% of net sales) for the year earlier period. The
increases in expenses for the quarter and year to date comparison were due
primarily to increased information systems costs, legal fees, allowances for
doubtful accounts, and other administrative expenses. The increases were also
due to costs incurred by the Company's Respironics Colorado and Stimotron
subsidiaries, which were acquired in October 1996 and February 1997,
respectively. In addition, amortization of the goodwill generated by these
acquisitions is included in general and administrative expenses.
Sales, marketing and commission expenses were $16,046,000 (20% of net sales) for
the quarter ended March 31, 1998 as compared to $15,193,000 (18% of net sales)
for the quarter ended March 31, 1997. Sales, marketing and commission expenses
were $49,729,000 (19% of net sales) for the nine months ended March 31, 1998 as
compared to $40,992,000 (18% of net sales) for the year earlier period. The
increases in expenses for the quarter and year to date comparison were due
primarily to increased costs for advertising, trade shows, and related marketing
communications activities, international sales and marketing activities, and
sales and
marketing management. The increases were also due to costs incurred
by the Company's Respironics Colorado and Stimotron subsidiaries, which were
acquired in October 1996 and February 1997, respectively. Respironics Colorado
has a network of 19 customer satisfaction centers throughout the United States,
a portion of the costs of which are included in sales, marketing and
commissions. In addition, because Stimotron serves as a distributor for the
Company in Germany, most of its operating expenses are included in sales,
marketing and commissions.
Research and development expenses were $4,815,000 (6% of net sales) for the
quarter ended March 31, 1998 as compared to $4,534,000 (5% of net sales) for the
quarter ended March 31, 1997. Research and development expenses were
$15,126,000 (6% of net sales) for the nine months ended March 31, 1998 as
compared to $12,657,000 (6% of net sales) for the year earlier period. The
increases in expenses for the quarter and year to date comparison were due to
continuing development work on a variety of new products in each of the
Company's major product lines. Specifically, significant development work was
conducted, and is continuing, on the Company's LX series of Great Performers
obstructive sleep apnea therapy products and the next generation versions of the
Company's non-invasive and invasive ventilation products. Additional
development work and clinical trials are being conducted in the Company's other
product areas.
During the quarter ended March 31, 1998, the Company incurred $37,500,000 in
costs related to the merger with Healthdyne. The primary components of these
costs were direct expenses of the transaction such as legal and investment
banking fees, severance and other employment related costs, and asset write
downs to reflect decisions made regarding product and operational
standardization. The Company expects to incur and record an additional
$2,500,000 in merger related costs in the quarter ended June 30, 1998.
During the nine months ended March 31, 1998 and the quarter and nine months
ended March 31, 1997 the Company incurred $650,000 and $1,300,000, respectively,
in costs related to an unsolicited offer by a third party to acquire Healthdyne.
The Company's effective income tax rate from operations (i.e., excluding the
impact of the merger costs described above) was 40% for all periods presented.
Because certain of the direct expenses of the merger transaction such as
investment banking and legal fees are not deductible for income tax purposes,
the Company did not receive the full tax benefit of these costs. Accordingly,
the income tax benefit recorded for the quarter ended March 31, 1998 represented
only 27% of the pre-tax loss reported, and for the nine months ended March 31,
1998, income tax expense was recorded even though a pre-tax loss was reported.
As a result of the factors described above, the Company's net loss was
($22,250,000) (28% of net sales) or $(0.69) per diluted share for the quarter
ended March 31, 1998 as compared to net income of $6,373,000 (8% of net sales)
or $0.20 per diluted share for the quarter ended March 31, 1997 and its net loss
was ($5,443,000) (2% of net sales) or $(0.17) per diluted share for the nine
months ended March 31, 1998 as compared to net income of $18,323,000 (8% of net
sales) or $0.57 per diluted share for the nine months ended March 31, 1997.
Excluding the impact of the merger costs and the costs associated with the
unsolicited offer to acquire Healthdyne, the Company's net income was $4,324,000
(5% of net sales) or $0.13 per diluted share for the quarter ended March 31,
1998 and $21,521,000 (8% of net sales) or $0.65 per diluted share for the nine
months ended March 31, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $118,602,000 at March 31, 1998 and
$110,566,000 at June 30, 1997. Net cash used by operating activities was
$4,631,000 for the nine months ended March 31, 1998 as compared to net cash
provided by operating activities of $16,556,000 for the nine months ended March
31, 1997. The net use of cash by operating activities for the current nine
month period as compared to net cash provided by operating activities in the
prior year period was due to lower earnings (including the impact of the cash
portion of the merger costs incurred) and increases in inventory and accounts
receivable.
Net cash used by investing activities was $14,632,000 for the nine months ended
March 31, 1998 as compared to $67,819,000 for the nine months ended March 31,
1997. Included in the prior year total is $49,865,000 used for the October 1996
acquisition of LIFECARE International, Inc. (since renamed Respironics Colorado,
Inc.) and $9,000,000 for the February 1997 acquisition of Stimotron. The
majority of the remaining cash used by investing activities for both periods
represented capital expenditures, including the purchase of production
equipment, computer and telecommunications equipment, and office equipment. The
funding for the investment activities in both periods was provided by positive
cash flows from financing activities, accumulated cash and short-term investment
balances, and for the prior year period, positive cash flows from operating
activities.
On February 11, 1998, the Company merged a wholly-owned subsidiary with
Healthdyne in a stock for stock merger. Under the terms of
the Agreement and Plan of Reorganization and related Agreement and Plan of
Merger, as amended, shareholders of Healthdyne received .9220 shares of the
Company's common stock for each Healthdyne share, resulting in the Company
issuing approximately 12,000,000 shares, valued at approximately $315,000,000
based on the closing price of the Company's common stock on February 11, 1998.
Additionally, options to acquire Healthdyne's common stock were assumed by the
Company and converted
into options to acquire approximately 1,360,000 shares of the Company's common
stock.
Healthdyne, since renamed Respironics Georgia, Inc., is headquartered in
Marietta, Georgia, and is a leading designer, manufacturer and marketer of
technologically advanced medical devices for use in the home and hospital as
well as for specialized clinical settings such as subacute facilities, neonatal
intensive care units, sleep laboratories, clinics and physician offices.
In May 1998, the Company finalized a $100,000,000 revolving credit facility
with a group of commercial banks. This credit facility was used to refinance
approximately $55,000,000 of the Company's long term debt, with the remaining
balance of the facility available for future borrowing. The revolving credit
facility permits borrowings and repayments until its maturity in May 2003. The
revolving credit facility is unsecured and contains certain financial covenants
with which the Company must comply. The Company is currently in compliance
with these covenants. The interest rate on the revolving credit facility is
based on a spread over the London Interbank Borrowing Rate ("LIBOR"). The
current resulting interest rate on amounts outstanding under the revolving
credit facility is approximately 6.10%.
The Company's management has begun a program to prepare the Company's computer
systems and related applications for the year 2000. The computer systems at
certain of the Company's facilities are already year 2000 compliant, and the
Company believes that a majority of its remaining year 2000 issues will be
addressed by the installation of an enterprise resource planning ("ERP")
software package known as SAP. The SAP system, which is year 2000 compliant and
will be used for the Company's primary business applications at its Pittsburgh,
Pennsylvania headquarters, its Murrysville, Pennsylvania manufacturing facility,
and its Customer Satisfaction Centers, is currently being installed. The total
cost of the SAP project is currently estimated at $6,100,000 with the majority
of this cost to be capitalized and charged to expense over the estimated useful
life of the SAP software and related hardware. Healthdyne uses an Oracle ERP
software package that is similar to SAP and is year 2000 compliant. Estimated
incremental costs to address other year 2000 issues for the remainder of
calendar year 1998 and calendar year 1999 are approximately $500,000.
The Company believes that projected positive cash flow from operating
activities, the availability of additional funds under its new revolving credit
facility, and its accumulated cash and short-term investments will be sufficient
to meet its current and presently anticipated future needs for the next twelve
months for operating activities, investing activities, and financing activities
(primarily consisting of payments on long-term debt).
PART 2 OTHER INFORMATION,
Item 1: Legal Proceedings
- ------- -----------------
As previously disclosed by Healthdyne, Invacare Corporation had commenced
litigation against Healthdyne and certain of its directors in a federal District
Court, attacking Healthdyne's Shareholder Rights Plan as well as the
constitutionality of certain "business combinations" and "fair price" provisions
of the Georgia Business Corporation Code. The parties jointly stipulated to a
dismissal of the underlying action in the United States District Court for the
Northern District of Georgia. The district court action was entered as
dismissed by the clerk of court on April 1, 1998. The Eleventh Circuit
dismissed the appeal on April 8, 1998.
Item 2: Change in Securities
- ------- --------------------
(a) Not applicable
(b) Not applicable
(c) Not applicable
Item 3: Defaults Upon Senior Securities
- ------- -------------------------------
(a) Not applicable
(b) Not applicable
Item 4: Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Company's Special Meeting of Shareholders was held on February 6, 1998. The
holders of 13,343,380 shares of the Company's stock (approximately 67% of the
outstanding shares) were present at the meeting in person or by proxy. The only
matter voted upon at the meeting was:
(i) the approval of the issuance of shares of the Company's common stock
pursuant to the Agreement and Plan of Reorganization and the related
Agreement and Plan of Merger, as amended, between the Company and
Healthdyne Technologies, Inc.
The results of voting were as follows:
(i) The issuance of shares of the Company's common stock was approved:
affirmative votes, 13,181,039 shares; negative votes, 119,749 shares; abstain,
42,592 shares.
Item 5: Other Information
- ------- -----------------
Not applicable
Item 6: Exhibits and Reports on Form 8-K
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(a) Exhibits
10.1 Credit Agreement by and among RESPIRONICS, INC., as the Borrower, THE
BANKS PARTY HERETO, as the Lenders hereunder, PNC BANK, NATIONAL
ASSOCIATION, as the Issuing Bank, PNC BANK, NATIONAL ASSOCIATION as the
Administrative Agent and the Syndication Agent and BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION as the Documentation Agent, Dated
as of May 8, 1998.
27.1 Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K
Not applicable
SIGNATURES
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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.
RESPIRONICS, INC.
Date: May 15, 1998 /s/ Daniel J. Bevevino
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Daniel J. Bevevino
Vice President, and Chief
Financial Officer and Principal
Accounting Officer
Signing on behalf of the
registrant and as Chief
Financial and Principal
Accounting Officer