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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-9042
MEDEX, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-4441680
(State of Incorporation) (I.R.S. Employer Identification No.)
3637 LACON ROAD, HILLIARD, OHIO 43026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 876-2413
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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 the past 90 days. Yes X No
As of September 23, 1996, 6,209,922 common shares were outstanding. The
aggregate market value of such common shares held by non-affiliates of the
Registrant (based upon actual last transaction price as reported by the NASDAQ
National Market System) was $82,415,361.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the 1996 Annual Report to Shareholders are incorporated by
reference in Parts II and IV of this Annual Report. The 1996 Annual Report
to Shareholders shall be deemed to have been "filed" only to the extent
portions thereof are expressly incorporated by reference.
(2) Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on November 13, 1996, are incorporated in Part III.
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PART I
ITEM 1. BUSINESS
GENERAL
Medex, Inc. and its subsidiaries, (the Company), designs, manufactures,
assembles, and markets a broad range of health care products for the diagnosis
and treatment of patients receiving care in hospitals, alternative health care
facilities and the home health care environment. The Company operates in one
principal industry segment providing critical care accessories and infusion
systems for medical and surgical applications.
Medex, Inc. was formed as an Ohio corporation in 1959 under the name W & J,
Inc., and adopted its present name in 1961. Medex, Inc. and its subsidiaries
carry on the Company's business in the United States and throughout the world.
The Company's domestic operations are located in the Columbus, Ohio and Atlanta,
Georgia metropolitan areas. During fiscal 1995 the Company closed its Denver,
Colorado facility and integrated its functions and product lines into its
Columbus and Atlanta operations. Medex Medical, Inc., carries on the Company's
manufacturing, sales and distribution business in the United Kingdom and certain
other European countries. Ashfield Medical Systems Limited, acquired in fiscal
1995, and also located in the United Kingdom, manufactures surgical drapes for
the European market. Medex Medical, GmbH, a German corporation, carries on sales
and distribution operations in Germany and other parts of continental Europe.
Medex Medical France, SARL, is a French subsidiary which carries on sales and
distribution operations in France and certain other European countries. In
addition, the Company maintains a Foreign Sales Corporation, Medex Exports,
Inc., situated in the United States Virgin Islands.
In July of 1996, the Company divested its WalkMed(R) ambulatory product line of
infusion pumps, related disposables and associated assets (see Note 9 of "Notes
to Consolidated Financial Statements"). Pursuant to separate Manufacturing and
Distribution Agreements, the Company will continue to manufacture the WalkMed
line for up to three years and will continue to distribute WalkMed Products
outside of North America for up to three years.
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PRODUCTS
The Company's products are used to diagnose and treat patients in all age
groups. Treatment areas for these procedures include intensive care units,
operating rooms, anesthesia suites, post-anesthesia recovery rooms, outpatient
surgical centers, cardiac catheterization laboratories, labor and delivery
facilities and emergency rooms. Home infusion therapy products are also utilized
in hospital outpatient care facilities, oncology clinics, pain management
clinics and in the home where patients are managed by professional home health
care agencies.
The Company's products are categorized into two classes of similar products:
critical care accessories and infusion systems.
The Company's critical care accessories product line offers a wide range of
precision products utilized in intravenous therapies such as fluid and drug
administration. Other products include blood pressure transducers used by
clinicians monitoring the cardiovascular system, specialty devices used in
cardiac catheterization procedures, intrauterine monitoring products used during
high risk labor and delivery situations and surgical drapes. Many of these
products can be used alone or as components assembled into kits. By offering
standard and custom configurations, the Company's critical care products can
address the specific needs of a customer.
The Company's infusion systems include a broad line of infusion pumps designed
to deliver prescribed doses of drugs and fluids to patients. These include
syringe pumps and large volume infusion pumps for bedside administration. A full
range of disposable product sets, providing the interface between pump and
patient, complete the system.
Included below is a representative sample of the products included in each of
these categories:
CRITICAL CARE ACCESSORIES
Stopcocks
- ---------
Stopcocks are specialized valves used as a component in the administration of
parenteral fluids or blood and provide a convenient means to administer drugs or
liquid anesthetics in conjunction with such fluids. Stopcocks provide multiple
flow paths for the selection and direction of fluids, drugs and anesthetics
depending upon the particular procedural requirements and the preference of the
user. The Company has been manufacturing stopcocks of various types since 1961,
and these items are sold both separately and as components in the Company's
assembled products. The Company manufactures one-way, three-way and four-way
stopcocks, which it markets under the name Guide-Flo(R). In addition to fluid
and drug administration, the growth of invasive pressure monitoring and cardiac
catheterization diagnostic procedures have resulted in a significant increase in
demand for stopcocks of various configurations and performance characteristics.
The Company manufactures a line (ULTRA) of stopcocks and other related
components which
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are composed of chemically resistant plastic materials to minimize cracking and
reactions with potent agents used in certain therapies.
Administration (Extension) Sets
- -------------------------------
An administration set is the apparatus by which fluid is delivered from a
container or a pump to the patient. In delivery from a container, these sets
consist of an entry spike, drip chamber, a length of tubing with a flow control
device and a catheter adapter. The entry spike is used to enter the fluid bottle
or bag, and the drip chamber, which is made of a clear plastic, provides a
reservoir of fluid. Fluid flows into the system one drop at a time, which can be
seen and counted, permitting calculation of the volume of fluid being
administered. This flow rate can be manually adjusted by external clamps when
gravity is used to create fluid flow.
Disposable administration sets are manufactured in standard and customized
configurations and may incorporate numerous additional components such as
stopcocks, continuous flush devices, or injection sites for intravenous drug
administration. The administration sets are designed to ensure clinical
flexibility, volumetric accuracy and sterility. The Company markets the
Micribore Extension Set which is used in neonatal applications requiring small
volumes of fluid to produce optimal flow to patients of fluids.
NU-SITE(R)
- ----------
NU-SITE introduced in fiscal 1995, is a needle-less injection system designed to
help prevent needlestick injuries to healthcare providers, and thereby reduce
associated risks of infectious disease. NU-SITE is adaptable to a large variety
of administration sets and accessories and is resistant to long-term exposure to
lipids and certain other plastic-interactive fluids.
Transtar(TM)
- ------------
The Transtar disposable pressure transducer is a device that senses hydraulic
pressure and converts it to an electrical signal that is transmitted to a
patient monitor. The monitor then processes and graphically displays this data.
NOVATRANS II(R)
- ---------------
NOVATRANS II is a reusable pressure transducer that delivers the cost efficiency
of a reusable unit while providing electrical safety and accuracy.
SimulCath(TM) and IUP Kits
- --------------------------
SimulCath is an intrauterine pressure monitoring system that accommodates the
implementation of amnioinfusion, a procedure designed to increase the efficiency
of labor as well as provide direct support to a fetus exhibiting signs of
distress. In this procedure, sterile saline is infused into the uterus to
directly relieve fetal distress by providing hydraulic support of the umbilical
cord and to increase the effect of labor contractions until
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delivery is accomplished. In addition, the Company manufactures and markets
intrauterine pressure monitoring kits. These completely preassembled kits are
designed to monitor the intensity of contractions during child birth and are
used in conjunction with SimulCath.
Secure(TM) Systems
- ------------------
The Secure System is a closed system arterial pressure monitoring kit whereby
blood samples can be withdrawn through a special access port that mitigates the
risk of accidental line contamination and patient infection. Another feature of
the Secure System is the shrouded needle which is mounted on a hypodermic
syringe, thereby reducing the clinician's risk of accidental needlestick injury.
The shrouded needle and syringe are used to access the arterial line for the
aseptic sampling of blood. The system design also allows the reinfusing of
blood/saline mixture to preserve the red blood cell mass of a critically ill
patient.
Kids Kit
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Kids Kit is a low volume pediatric version of the Secure pressure monitoring
system for adults. The Kids Kit provides a closed system which minimizes
contamination and infant blood loss as well as helping to prevent accidental
needlestick injuries to clinicians.
Continuous Flush Devices
- ------------------------
The continuous flush device is a component used in invasive cardiovascular
pressure monitoring systems. This device allows a small amount of saline
(typically 3-6 cc(s) per hour) to be infused through the catheter in order to
reduce the tendency of blood to clot in the catheter, which could distort or
eliminate the ability of the system to monitor pressure. The continuous flush
device also incorporates a valve that, when activated, will allow a large volume
of fluid to enter the system for purposes such as priming the initial set up or
for clearing the system of accumulated blood. The continuous flush devices
manufactured by the Company are used primarily as components in standard and
custom pressure monitoring kits assembled and marketed by the Company.
Pressure Infusor Cuffs
- ----------------------
Pressure infusor cuffs are designed to be placed around bags of fluid and
manually inflated with air to create and maintain a specific fluid pressure.
This pressure, in conjunction with the action of the continuous flush device,
permits controlled flow rates and fast flushing of the invasive pressure
monitoring systems. In addition, pressure infusor cuffs are used for rapid
infusion of blood and other fluids. The Company manufactures and markets two
infusor cuffs, C-Fusor(R) and Clear Cuff(R).
C-Fusor is made of clear polyurethane, which permits immediate assessment of the
fluid level in the bag from any angle. This materials stain resistance and
durability extends the useful life of the product. The closure system
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used in the C-Fusor provides secure closure and significantly simplifies fluid
bag setup and replacement.
The Clear Cuff pressure infusor complements the Company's C-Fusor reusable
pressure infusor. The Clear Cuff offers the flexibility of being disposable or
reusable as dictated by clinical considerations.
Angiography and Coronary Angioplasty Products
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Angiography is a diagnostic procedure used to evaluate the condition of major
blood vessels within a patients vascular system. Coronary angioplasty is a
therapeutic procedure that involves the utilization of a balloon catheter to
expand the inner diameter of a patients coronary arteries to improve blood flow.
The Company manufactures and markets a series of Hemostatic Y Connectors used to
facilitate the placement of specialty catheters for angiographic and angioplasty
procedures in the cardiac catheterization laboratory. In addition, the Company
markets the Matrix 250(TM) and the Matrix 550(TM) series of one-piece, hand-held
manifolds, the Encore II(TM) control syringe, high pressure injection tubing and
high pressure rotators which are used during angiography and angioplasty
procedures. During fiscal 1995 and fiscal 1996, the Company introduced Medflator
II to the European and United States markets respectively. This product, a new
analog version of the original digital product, is an inflation device used to
inflate balloon catheters during therapeutic or interventional procedures such
as angioplasty.
Kits and Procedure Packs
- ------------------------
The Company assembles many of the disposable products described above into
integrated systems (kits). These kits are available in standard configurations
or they may be custom designed to meet the specific requirements of an
individual customer. Standard and custom kits may include one or more of the
following products: intravenous administration sets; stopcocks; pressure tubing;
continuous flush devices; surgical drapes; and other products.
In Europe, the Company purchases various components from other manufacturers and
packages them with the Company's products to produce kits specifically for
sophisticated hospital procedures. Procedure packing lowers costs, increases
hospital throughput, and saves labor by eliminating the need for healthcare
providers to purchase parts individually and assemble them on site. Procedure
packing is a growing market in Europe and the Company has expanded its United
Kingdom facilities to access this growing market.
INFUSION SYSTEMS
Medfusion 2001 Syringe Pump
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The Company's leading pump product is the Medfusion Model 2001 syringe pump.
This product is capable of accepting all conventional hypodermic syringes
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which range from 1 through 60 cc in volume. This capability makes the pump very
useful for the intravenous and regional infusion of anesthetic agents in the
operating room as well as in neonatal intensive care units where low volume drug
infusions are required for premature infants.
Additionally, a syringe offers the lowest cost intravenous fluid container
available to the hospital pharmacist. The added labor costs of the pharmacist
prefilling a syringe with the exact amount of drug required by the patient,
labeling the syringe, and delivering it to the patients bedside for loading into
the syringe pump is offset by the overall cost savings of syringe pump use.
The 2001 syringe pump is microprocessor based and capable of automatically
recognizing the size and manufacturer of the syringe attached to it. The pumps
occlusion alarm is automatically varied in accordance with the syringe size in
use. If the drug infusion line or catheter becomes kinked or obstructed, the
pump is designed to automatically switch off and sound an alarm. The operational
programming of the pump is software prompted and easily taught to clinical
personnel.
Medfusion 2010 and 2010i Syringe Pumps
- --------------------------------------
The Medfusion Models 2010 and 2010i syringe pumps are designed specifically for
use by anesthesiologists in the operating room. These syringe pumps build upon
the electromechanical success of the 2001 syringe pump through utilization of
expandable system architecture.
Anesthesiologists frequently administer drugs according to mass units (i.e., the
number of milligrams or micrograms of drug per kilogram of patient body weight
per unit of time required for the anesthetic.) The 2010 syringe pump is capable
of making drug concentration calculations in mass units as well as tracking the
total mass units of drugs infused over a period of time.
Additionally, anesthesiologists frequently manually infuse preselected volumes
of drugs intravenously into patients over short intervals ("bolus infusions") to
achieve rapid sequential effects. The 2010 syringe pump is capable of
automatically delivering programmed boluses of drugs to patients over a
specified time interval and then reverting to a continuous infusion mode for the
duration of the procedure.
The 2010i syringe pump is an enhanced version of the 2010 syringe pump. The
2010i syringe pump stores hospital managed drug protocols in an on board
computer library, thereby greatly extending the utility and ease of use of the
2010 version anesthesia syringe pump.
EZ-1(TM)
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The EZ-1 is a large volume infusion pump used for administrating large fluid
volumes ranging from 0.1 ml per hour to 999.9 ml per hour. The EZ-1 pump uses a
specially calibrated pumping cassette as part of the disposable infusion
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set. The EZ-1, unlike syringe pumps, utilizes a broad range of dedicated
disposable infusion sets for different protocols.
KIDS(TM) Pump
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The Company's KIDS Pump was designed specifically for the neonatal and pediatric
markets and can be used for the administration of large, as well as small, fluid
volumes. The KIDS Pump, in tandem with the 2001 syringe pump, is capable of
delivering most neonatal pediatric fluid and drug administration protocols.
The KIDS Pump, like the EZ-1 large volume pump, utilizes a broad range of
dedicated disposable infusion sets for different clinical protocols. A special
calibrated pumping cassette is inserted into the KIDS Pump as an integral part
of the disposable infusion set. The calibration of the cassette delivers flow
rates ranging from 0.1 ml per hour to 999.9 ml per hour. The combined accuracies
and safety features of the 2001 syringe pump and the KIDS Pump address concerns
of neonatal and pediatric intensive care physicians and nurses. The KIDS Pump is
among the easiest pumps of its kind to operate and service and can be programmed
to prevent tampering.
Trilogy(TM)
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Trilogy, a three-channel large volume pediatric infusion pump, provides the
capabilities of three KIDS pumps in one housing of substantially less size and
weight; thus allowing the clinician more efficient use of bedside space.
The following table sets forth the percentage of consolidated net sales
contributed by each class of similar products for the last three fiscal years:
YEAR ENDED JUNE 30, 1996 1995 1994
- ------------------- ---- ---- ----
Critical Care Accessories 71% 69% 70%
Infusion Systems 29% 31% 30%
The Company's backlog orders believed to be firm, at June 30, 1996, were
approximately $11,792,000 as compared to approximately $9,733,000 as of the end
of the preceding fiscal year. It is expected that approximately 90% of these
orders will be filled during the current fiscal year.
RESEARCH AND DEVELOPMENT
The Company's research and development activities concentrate on the
investigation and development of new and improved products in the area of
critical care medicine. The Company's research and development expenditures for
the years ended June 30, 1996, 1995, and 1994 were approximately $3,018,000,
$3,147,000 and $3,299,000 respectively.
As a result of this activity, the Company has introduced invasive pressure
monitoring transducers, hospital and ambulatory infusion pumps, balloon
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inflation devices, various products for fluid and drug delivery and special
pressure monitoring systems for critically ill patients. The majority of the
research and development activities are performed by the Company's personnel.
The Company maintains separate research and development groups at its Ohio and
Georgia facilities whose scientific and engineering disciplines are specific to
the products manufactured at those locations.
SALES AND MARKETING
The Company currently markets more than 600 standard products as well as custom
products and bulk O.E.M. products in the United States, Canada and
internationally. Single patient use (disposable) products currently account for
approximately 75% of net sales.
The Company's domestic sales and marketing efforts are accomplished primarily by
a network of direct sales representatives and are supplemented in select
geographic areas by independent sales agents. These representatives work with
independent hospital supply dealers to whom the Company sells many of its
products. In addition, these representatives work with the dealers' sales force
at the hospital level to promote sales of the Company's products. The Company
also sells directly to hospitals, home health care companies, other alternate
site health care facilities, as well as other medical device manufacturers on an
original equipment basis.
Sales in the United Kingdom, continental Europe, and the Middle East are
conducted mainly by direct sales representatives of Medex Medical, Inc., Medex
Medical GmbH, Ashfield Medical Systems Limited and Medex Medical France SARL.
Sales to other international markets are conducted through dealers located in
the various countries. (See Note 8 of "Notes to Consolidated Financial
Statements".)
During fiscal 1995, the Company completed the reorganization of its domestic
sales force to centralize sales, customer service and marketing efforts between
Medex and its former subsidiaries, Medfusion, Inc. and Ivion Corporation, with
the goal of creating a single sales force to focus on the Company's entire line
of hospital products.
Increasingly, hospitals and other customers are relying upon third parties to
purchase supplies, manage inventories and distribute goods. The Company
recognizes the influence of these hospital group purchasing organizations, as
well as "stockless" and "just in time" programs with major distributors, and
continues to establish and pursue on-going relationships with these types of
organizations. In addition, the Company has invested significant resources to
improve customer ordering efficiency through the implementation of a centralized
order entry and billing system utilizing an electronic data interface system
that allows customers to directly place domestic product orders to a single
location, thereby reducing human error and speeding order turn around.
MAJOR CUSTOMERS
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During fiscal 1996, 1995 and 1994, Medex had sales to Owens & Minor, a domestic
distributor of its products, totaling approximately 11%, 12% and 11% of total
net sales, respectively, and sales of cath lab products to Cordis Europa
totaling approximately 12%, 8% and 1% of total net sales, respectively. Cordis
Europa was acquired by a large diversified healthcare Company during 1996.
While Management can not predict how the Cordis Europa acquisition will affect
Medex sales to that Company, Management believes fiscal 1997 sales to Cordis
Europa combined with the Company's own new cath lab sales will maintain overall
European cath lab sales at or slightly above 1996 levels.
MANUFACTURING OPERATIONS
The Company's manufacturing operations are undertaken at its facilities located
in Hilliard and Dublin, Ohio; Duluth, Georgia; Rossendale, England; and in
Cumbernauld, Scotland.
The Company utilizes sixty automated molding machines and an array of automated
assembly machines located at the Dublin facility to fabricate over 400 million
components annually for its operating entities. This produces manufacturing
efficiencies by avoiding duplication of technical manpower, support facilities,
and capital equipment at its other manufacturing operations. The disposable
components manufactured at the Dublin facility are transferred directly to the
Company's various assembly facilities where the final assembly of products is
undertaken according to Good Manufacturing Practice (GMP) standards set forth by
the United States Food and Drug Administration and/or standards as set forth by
similar agencies in foreign countries. The quality control, packaging, and
labeling of disposable products are completed at those locations. The Ohio
facilities utilize the Company's own sterilization operations located at the
Hilliard facility, while the other assembly facilities primarily rely upon
contracted sterilization services.
The design, manufacture, and servicing of infusion pumps and certain disposable
products are undertaken at the Company's Duluth facility.
The Company assembles and packages products including procedure packs for
distribution to Europe, Africa and the Middle East from Medex Medical's
facilities in Rossendale, England. Surgical drapes are manufactured at Ashfield
Medical Systems Limited's facility in Cumbernauld, Scotland for inclusion in the
Company's procedure packs and for sale to other manufacturers.
Quality control procedures include rigid specifications for the examination of
components, packaging materials and labels, and sterilization procedures.
Quality control tests performed at different stages in the manufacturing and
assembly processes are designed to assure that exacting standards for finished
goods and their component parts are met. Periodically, these efforts are audited
by a group of qualified employees and outside consultants to confirm that the
Company's actions fulfill regulatory requirements.
Certain components, such as extruded tubing, silicon chips, and
electromechanical subassemblies for infusion pumps, are purchased from outside
suppliers. Outside suppliers of medical components must adhere to the Company's
specifications, GMP's and/or standards as set forth by regulatory agencies in
foreign countries.
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RAW MATERIALS
Purchased raw materials used in the Company's production process are generally
available from a number of suppliers. The primary raw materials used include
thermoplastic resins, plastic tubing, electronic componentry, paper and plastic
packaging materials.
Due to increased worldwide demand, some users of polycarbonate resins
periodically have experienced shortages in supply and delays in delivery of such
resins. The Company uses polycarbonate in the manufacture of certain plastic
components. To date, the Company has been minimally impacted by such shortages
and delays. While the Company believes that an adequate supply will be available
in the near term, the cost of such material will likely continue to increase.
PATENTS AND TRADEMARKS
The Company possesses rights under a number of domestic and foreign patents and
trademarks relating to its products and business. While the Company considers
its trademarks important in the operation of its business and, in particular,
the name Medex, Inc.(R), the business of the Company is not dependent on any
trademark or on any single patent or group of patents.
As a condition of employment, many of the Company's employees involved in
research and development activities are required to sign an agreement to
maintain the confidentiality of Company secrets and to assign to the Company his
or her interest in any inventions conceived during the course of his or her
employment. The Company recognizes that such agreements are sometimes difficult
to enforce.
COMPETITION
There are a significant number of manufacturers that compete with the Company.
The principal methods of competition are price, service, scope of product line
and product quality. The Company is not presently a dominant factor in the
markets served by its critical care accessories and most of its competitors have
greater financial and other resources. Although the infusion pump market is
extremely competitive, the Company believes that it is a major factor among
those manufacturers who supply the children's hospital, neonatal and pediatric
marketplace.
GOVERNMENT REGULATIONS
The Company is subject, in the manufacture, clinical testing and marketing of
its products, to mandatory procedures and safety standards which are
administered by the United States Food and Drug Administration (FDA) and similar
agencies in foreign countries. The FDA regulates the Company as to the quality
and safety of its products and the practices by which they are manufactured and
sold. The FDA also regulates the introduction of new products, makes periodic
inspections of manufacturing processes to confirm
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that such processes meet FDA standards, and receives, investigates and resolves
any complaints against the Company. The Company believes that it is in
compliance with the FDA's Good Manufacturing Practice (GMP) standards.
Additionally, the Company's Rossendale, U.K. facility has received ISO 9002 (an
international standard for quality systems) certification and the Company is
currently pursuing ISO certification for its facilities in the United States.
FDA regulations require clearance by the agency, prior to marketing a new
product. The two principal processes for obtaining this clearance are known as
"510(k)" premarket notification and premarket approval ("PMA"). Historically,
the process of obtaining a 510(k) clearance typically has taken several months
and involves the submission of limited clinical data and supporting information.
However, in recent years this time period has been extended. The PMA process
typically will last more than a year and requires the submission of significant
quantities of clinical data and manufacturing information. Historically, the
Company's new products have fallen into the FDA's class of products which are
subject to the 510(k) process. The Company presently expects that any new
products it is contemplating will be subject to the 510(k) process.
The Company is subject to various international, federal, state and local
regulations relating to the maintenance of safe working conditions,
manufacturing practices, and the use and discharge of harmful or potentially
harmful substances. The Company believes that it is in compliance with all such
regulations applicable to its operations.
The Company is currently operating three gas sterilizers at its Hilliard, Ohio
plant which use a sterilant gas mixture of ethylene oxide and HCFC 124. These
sterilizers are operational with the Company's sterilant recovery system.
ENVIRONMENTAL
During the fiscal year ended June 30, 1996, the amounts incurred in compliance
with federal, state and local environmental laws and regulations did not have a
material effect upon the capital expenditures or earnings of the Company and the
Company does not anticipate that such compliance will have a material effect on
future capital expenditures or earnings.
The Comprehensive Environmental Response Compensation and Liability Act (CERCLA)
provides governmental agencies with authority to require clean up of hazardous
waste sites and release of hazardous substances into the environment. Liability
under this act is joint and several and can be applied retroactively. The
Company, along with over one hundred other companies, was previously identified
by the United States Environmental Protection Agency (EPA) as a potentially
responsible party (PRP) for the clean up of a contaminated waste disposal site
near Granville, Ohio. The Company along with approximately 80 other PRP's formed
a PRP Group in order to develop responsive actions in connection with the site.
The Company, along with the majority of the PRP group members, has entered into
an Administrative Order
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on Consent with the U.S. EPA and a clean up plan is currently being implemented
at the site. Current clean up estimates provided to the PRP Group are
approximately $8.5 million. However, because the Company's share allocation
within the PRP Group is de minimis, the Company, at this time, believes that its
liability for this matter will not have a materially adverse affect on its
results of operations or financial condition.
EMPLOYEES
The Company and its subsidiaries employ approximately 1,100 employees worldwide.
None of the Company's employees are currently employed under a union contract.
The Company believes it has a good relationship with its employees.
ITEM 2. PROPERTIES
The Company owns a complex of facilities totaling approximately 150,000 square
feet situated on approximately 11 acres of land located in Hilliard, Ohio. These
facilities contain the Company's executive offices, management information
systems, production, sterilization operations, quality control laboratories,
and general warehouse space.
The Company owns an approximately 100,000 square feet facility located on
approximately 23 acres of land in Dublin, Ohio. The facility is being used for
research and development, production, automation, tooling, quality control
laboratories, warehousing and administrative offices.
The Company owns an approximately 52,000 square feet production, research,
warehouse, and office facility situated on approximately 8 acres of land in
Duluth, Georgia.
Medex Medical, Inc. owns and occupies an approximately 24,000 square feet
building located on approximately 2 acres of land in Rossendale, England. The
facility houses office, warehouse and production facilities for international
manufacturing and distribution operations. Additionally, the Company, during
fiscal 1996, exercised its option to purchase the fee interest in an
approximately 3 acre parcel of land. The Company had previously purchased a 999
year leasehold interest and the 69,000 square feet building situated thereon
which is adjacent to the above Rossendale facility. This facility is being
utilized for additional manufacturing, warehousing and office space principally
in connection with the Company's European procedure packing operations.
Ashfield Medical Systems Limited leases approximately 17,000 square feet of
production, warehousing and office space located in Cumbernauld, Scotland. The
Company during fiscal 1996 completed renovation of a portion of this facility to
provide a new "clean room" production area. The current term of the lease
extends until May 2017.
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Medex Medical GmbH leases a facility located in Ratingen, Germany containing
approximately 26,000 square feet of office, sales, marketing and warehouse
space. The lease on this facility expires in September 1997.
Medex Medical France, SARL leases a facility in Nantes, France containing
approximately 3,000 square feet of office, sales and warehousing space. The
lease term extends until January 1998 with an option to renew for an additional
3 year period.
The Company believes that its current facilities and ongoing expansions will be
suitable and adequate for its operations for the immediate future.
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ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning officers
of the Company:
NAME POSITION WITH THE COMPANY AGE
- ---- ------------------------- ---
C. Craig Waldbillig Chairman of the Board 70
and Director
Bradley P. Gould President, Chief Executive 42
Officer and Director
Terry L. Sanborn Senior Vice President, 53
Manufacturing and
Chief Operating Officer
Michael J. Barilla Senior Vice President and 45
Chief Financial Officer
Georg W. Landsberg Senior Vice President, 42
European Operations
Robert E. Boyd, Jr. Secretary, General Counsel 70
and Director
Kevin L. Barnett Vice President, Treasurer and 34
Corporate Controller
Alan M. Fermier Vice President, Human Resources & 43
Organizational Development
Clint R. Lawson Vice President, Corporate Quality 47
Assurance & Regulatory Affairs
David G. Musgrove Vice President, International & 52
O.E.M. Development
Nigel S. Perry Vice President of Operations, Europe 45
Julie A. Reichert Vice President, New Product 33
Development
Alan Upton Vice President, Finance & 49
Administration, Europe
C. Craig Waldbillig, a co-founder of the Company in 1959, was elected Chairman
of the Board in 1982. Mr. Waldbillig retired as Chief Executive Officer of the
Company in 1993. Mr. Waldbillig is also a director and
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Chairman of Medex Medical, Inc. and a director of Medex Exports, Inc. Mr.
Waldbillig serves as a director of Danninger Medical Technology, Inc.
Bradley P. Gould was elected Chief Executive Officer as of October 1995 and
appointed Director and elected President in May 1996. In 1993, he was elected
Senior Vice President, European Operations. Mr. Gould was first elected Vice
President in 1992. From 1991 until May of 1992, Mr. Gould was Director of
Sales/Marketing European Operations. Mr. Gould is also a Director of Medex
Medical, Inc. and Ashfield Medical Systems Limited; a Managing Director of Medex
Medical GmbH and Medex Medical France SARL; and a Director and President of
Medex Exports, Inc.
Terry L. Sanborn was elected Chief Operating Officer in May of 1993. Mr. Sanborn
has served as Senior Vice President of Manufacturing since May 1995. Mr. Sanborn
also served as Executive Vice President from May 1993 to 1995; Senior Vice
President, Corporate Operations from 1991 to 1993; and as a Vice President since
1979. Mr. Sanborn is also a Vice President of Medex Medical, Inc.
Michael J. Barilla was elected Senior Vice President and Chief Financial Officer
in August 1996. In October 1995 he was elected acting Chief Financial Officer.
Mr. Barilla was elected Vice President, Internal Auditing in fiscal 1995. From
1993 to 1995 he served as Senior Vice President, Corporate Operations and
Administration. He was first elected as Vice President in 1990 and previously
served as Corporate Controller. Mr. Barilla is also Chief Financial Officer,
Medex Exports, Inc. and Assistant Treasurer, Medex Medical, Inc.
Georg W. Landsberg was elected Senior Vice President, European Operations in
August 1996. Dr. Landsberg was first elected Vice President in 1994. From May
1992 to November 1994, he was Director, Sales & Marketing, European Operations.
Prior to May 1992 he served as Sales & Marketing Manager, Cardionova GmbH. Dr.
Landsberg is also a Director and President, Medex Medical, Inc.; a Director of
Ashfield Medical Systems Limited; and a Managing Director, Medex Medical GmbH
and Medex Medical France SARL.
Robert E. Boyd, Jr., was elected Secretary and General Counsel in 1960 and has
been a director since 1964. Mr. Boyd has been a practicing attorney for more
than 44 years. Mr. Boyd is also a Director and Secretary of Medex Medical, Inc.
and Medex Exports, Inc.
Kevin L. Barnett was elected Treasurer in November 1995 and had previously
become Vice President and Corporate Controller in 1994. From April of 1992 until
May of 1994 he was Assistant Treasurer of the Company. Prior to April of 1992,
Mr. Barnett was employed by Deloitte & Touche as Manager, Auditing Services. Mr.
Barnett is also Assistant Treasurer, Medex Medical, Inc. and Treasurer, Medex
Exports, Inc.
Alan M. Fermier was elected Vice President, Human Resources & Organizational
Development in December 1995. Prior to joining the Company, Mr. Fermier was Vice
President, Human Resources and Administration for Cardiac Alliance, Inc.
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from 1993 to 1995 and from 1987 to 1993 he was Regional Director, Human
Resources for Tokos Medical Corporation.
Clint R. Lawson was elected Vice President in 1990 and is responsible for
quality assurance and regulatory affairs. Prior to 1990, he was Director of
Corporate Quality Control and Regulatory Affairs for the Company.
David G. Musgrove was elected Vice President in 1982 and is currently
responsible for international, O.E.M., and bulk sales development. Mr. Musgrove
is a Vice President of Medex Exports, Inc.
Nigel S. Perry was elected Vice President of Operations, Europe in May 1996.
From 1991 until 1996 he was Director of Operations, Medex Medical, Inc. Mr.
Perry is also a Director, Ashfield Medical Systems Limited and a Director and
Vice President, Medex Medical, Inc.
Julie A. Reichert was elected Vice President, New Product Development in
September 1996. Ms. Reichert was the Research & Development Manager, Hospital
Infusion Systems from May 1995 until her election. Prior to joining the Company,
she was employed by Ohmeda Monitoring Systems as Project Manager and Engineer.
Alan Upton was elected Vice President, Finance & Administration, Europe in May
1996. From 1992 until 1996, he was Director of Finance, Medex Medical, Inc. and
had previously been employed as an accountant at Medex Medical, Inc. from 1985
until 1992. Mr. Upton is also a Director and Treasurer, Medex Medical, Inc.; a
Director of Ashfield Medical Systems Limited; and a Managing Director of Medex
Medical GmbH and Medex Medical France SARL.
Officers are elected by the Board of Directors following the annual meeting and
serve until the next annual meeting or until their successors are named.
There are no family relationships between any director or executive officer and
any other director or executive officer of the Company.
There are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
There have been no events under any bankruptcy act, no original proceedings, and
no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to
"Market for the Registrant's Common Stock and Related Shareholder Matters"
appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
"Selected Consolidated Financial Data" appearing in Exhibit 13 of this Form 10-K
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated herein by reference to
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to the
financial statements and supplementary financial information appearing in
Exhibit 13 of this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth under the captions "Election
of Directors" in the Company's Proxy Statement for its annual meeting of
shareholders to be held on November 13, 1996, and is incorporated herein by
reference. The information with respect to "Executive Officers of the Company"
is contained at the end of Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption
"Compensation of Directors and Executive Officers" in the Company's Proxy
Statement for its annual meeting of shareholders to be held on November 13,
1996, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption "Beneficial
Ownership of the Company's Common Stock" in the Company's Proxy Statement for
its annual meeting of shareholders to be held on November 13, 1996, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption "Election
of Directors" in the Company's Proxy Statement for its annual meeting of
shareholders to be held on November 13, 1996, and is incorporated herein by
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. DOCUMENTS FILED AS A PART OF THIS REPORT.
1. FINANCIAL STATEMENTS
The consolidated financial statements as of June 30, 1996 and 1995 and for each
of the three years in the period ended June 30, 1996, together with the report
thereon of Deloitte & Touche LLP dated August 13, 1996, appearing in Exhibit 13
of this Form 10-K Annual Report are incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
Consolidated Statements of Income for the years ended June 30, 1996, 1995 and
1994.
Consolidated Balance Sheets at June 30, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995
and 1994.
Consolidated Statements of Shareholders' Equity for the years ended June 30,
1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. FINANCIAL STATEMENT SCHEDULES REQUIRED BY ITEMS 8 AND 14(D).
Included in Part IV of this report is the following additional financial data
which should be read in conjunction with the consolidated financial statements
in the 1996 Annual Report to Shareholders.
Independent Auditors' Report
Supplemental Consolidated Schedules for each of the three years ended June 30,
1996:
Schedule II - Valuation and Qualifying Accounts
Schedules not included above have been omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
3. EXHIBITS SEE INDEX TO EXHIBITS.
B. REPORTS ON FORM 8-K.
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No reports on Form 8-K were filed during the three months ended June 30, 1996.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MEDEX, INC.
Date: September 27, 1996 By: /s/ BRADLEY P. GOULD
_________________________
Bradley P. Gould
President,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ BRADLEY P. GOULD
_______________________ President, Chief September 27, 1996
Bradley P. Gould Executive Officer
and Director
/s/ MICHAEL J. BARILLA
_______________________ Senior Vice President September 27, 1996
Michael J. Barilla and Chief Financial
Officer (Principal
Accounting Officer)
/s/ ROBERT E. BOYD, JR.
_______________________ Secretary and Director September 27, 1996
Robert E. Boyd, Jr.
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/s/ JAMES L. GINTER
_____________________________ Director September 27, 1996
James L. Ginter
/s/ THOMAS A. HELMRATH, M.D.
_____________________________ Director September 26, 1996
Thomas A. Helmrath, M.D.
/s/ JOHN N. HOLSCHER
_____________________________ Director September 27, 1996
John N. Holscher
/s/ THOMAS M. JORDAN, JR.
_____________________________ Director September 27, 1996
Thomas M. Jordan, Jr.
/s/ JOHN B. JOYCE, JR.
_____________________________ Director September 27, 1996
John B. Joyce, Jr.
_____________________________ Director
J. David Martino, M.D.
/s/ C. CRAIG WALDBILLIG
_____________________________ Chairman of September 27, 1996
C. Craig Waldbillig the Board
and Director
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INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of
Medex, Inc.:
We have audited the consolidated financial statements of Medex, Inc. and
subsidiaries as of June 30, 1996 and 1995, and for each of the three years in
the period ended June 30, 1996, and have issued our report thereon dated August
13, 1996, which report includes an explanatory paragraph as to the change in the
method of accounting for income taxes; such financial statements and report are
included in your 1996 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Medex, Inc., listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 13, 1996
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MEDEX, INC. AND SUBSIDIARIES SCHEDULE II
Valuation and Qualifying Accounts and Reserves
for the Years Ended June 30, 1996, 1995 and 1994
- ---------------------------------------------------------------------------------------------------------------------------------
COLUMN C ADDITIONS
COLUMN A COLUMN B (1) (2) COLUMN D COLUMN E
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (A) END OF YEAR
Reserves Deducted From Asset to Which it Applies Allowance for doubtful accounts
of trade receivables:
Year Ended June 30, 1996 $714,000 $169,000 $120,000 $763,000
Year Ended June 30, 1995 $570,000 $367,000 $223,000 $714,000
Year Ended June 30, 1994 $548,000 $248,000 $226,000 $570,000
<FN>
(A) Amount represents uncollectible accounts written off and the effect of
changes in foreign currency exchange rates used to translate foreign
subsidiary amounts.
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MEDEX, INC
FORM 10-K
JUNE 30, 1996
INDEX TO EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation, incorporated herein by reference
to Exhibit 3(a) of the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1991.
3.2 Code of Regulations, incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for
fiscal year ended June 30, 1994.
3.3 Code of By-Laws, as amended.
4.1 The Company agrees to furnish to the Commission upon request
copies of instruments defining the rights of holders of
long-term debt which are not being filed as part of this
Report in reliance on Item 601(b)(4)(iii) because the total
amount of securities authorized under each such instrument
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis.
4.2 Rights Agreement, dated as of October 12, 1995, between Medex,
Inc. and Huntington National Bank, incorporated herein by
reference to Exhibit 1 of Registration Statement on Form 8-A
filed on October 23, 1995.
10.1 Medex, Inc. Administrative Incentive Stock Option Plan II, as
amended.
10.2 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan, incorporated herein by reference to Exhibit 10.3 of the
Company's Annual Report on Form 10-K for fiscal year ended
June 30, 1994.
10.3 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan II, incorporated herein by reference to Exhibit 10.3 of
the Company's Annual Report on Form 10-K for fiscal year ended
June 30, 1995.
10.4 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan III, incorporated herein by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1993.
10.5 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan IV.
10.6 Medex, Inc. 1994 Executive Stock Option Plan, as amended.
10.7 Medex, Inc. Key Employee Nonstatutory Stock Option Plan, as
amended.
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10.8 Forms of Director and Executive Officer Indemnification Agreements as
executed by all Directors and Bradley P. Gould, respectively.
10.9 Forms of Executive Split Dollar Insurance Benefit Plan Master Agreement
and Joinder Agreements available to executive officers and certain
management employees of the Company.
10.10 Form of Employment Agreement as executed by all executive officers of the
Company, except C. Craig Waldbillig, Robert E. Boyd, Jr., Georg W.
Landsberg, Nigel S. Perry, Julie A. Reichert, and Alan Upton.
10.11 Amendment to Employment Agreement between the Company and Bradley P.
Gould, dated November 1, 1995, incorporated herein by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995.
10.12 Executive Employment Agreement between the Company and Bradley P. Gould,
dated February 14, 1996, incorporated herein by reference to Exhibit 10 of
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.
10.13 Severance Agreement between the Company and Phillip D. Messinger, dated
March 27, 1996.
10.14 Separation Agreement between the Company and William J. Post, dated June
4, 1996.
10.15 Directors Retirement Plan, see Exhibit 3.3 hereto.
10.16 Description of Medex, Inc.'s Annual Incentive Compensation Program for
executive officers of the Company, incorporated herein by reference to
Exhibit 10.11 of the Company's Annual Report on Form 10-K for fiscal year
ended June 30, 1995.
10.17 Split Dollar Life Insurance Agreement between the Company and Craig
Waldbillig Trust, incorporated herein by reference to Exhibit 10.5 of the
Company's Annual Report on Form 10-K for fiscal year ended June 30, 1994.
11. Computation of earnings per share.
13. Annual Report to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of Experts and Counsel. (1) The consent of Deloitte & Touche LLP
to the incorporation by reference in Registration Statements No. 33-23787,
33-36739, 33-44859, 33-79854 and 33- 89964 on Form S-8 of their opinion
dated August 13, 1996, appearing and incorporated by reference in the
Annual Report on Form 10-K of Medex, Inc. for the year ended June 30,
1996.
27. Financial Data Schedule.
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