1
Exhibit 13
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SELECTED CONSOLIDATED
FINANCIAL DATA
Year Ended June 30 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
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Dollar amounts in millions,
except per-share data
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Net Sales $99.3 $95.2 $95.6 $92.3 $87.0 $65.5 $44.7 $36.7 $28.0 $ 23.2
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Net Income(1) 0.4 1.8 6.7 4.2 6.9 4.9 3.9 2.8 2.7 2.1
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Net Income Per Share:(1,2)
-------------------------------------------------------------------------------------------------------
Primary .06 .28 1.09 .69 1.15 .98 .86 .65 .63 .48
-------------------------------------------------------------------------------------------------------
Fully Diluted .06 .28 1.09 .69 1.14 .97 .83 .65 .63 .48
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Total Assets 92.3 90.5 89.1 84.7 81.3 55.1 35.3 28.8 25.7 21.0
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Long-Term Debt 3.0 3.5 4.0 4.6 4.9 8.4 1.3 1.8 2.3 1.5
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Cash Dividends 1.0 1.0 .9 .8 .7 .5 .4 .4 .3 .2
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Cash Dividends Per Share(2) .16 .16 .15 .14 .12 .10 .09 .08 .07 .05
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<FN>
1) 1994 amounts include income of $355,827, or $.06 per primary and fully
diluted share, representing the cumulative effect of a change in accounting
for income taxes.
2) Restated to reflect 10% and 5% stock dividends declared in February 1989
and 1988, respectively.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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RESULTS OF OPERATIONS
The following table shows the Company's results of operations as a percent of
net sales for the years indicated for certain items in the consolidated
statement of income. Dollar amounts in all the following tables are in
thousands.
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PERCENT OF NET SALES
Year Ended June 30 1996 1995 1994
------ ------ ------
Net sales 100.00% 100.00% 100.00%
Cost of goods sold 53.62 55.26 50.63
Discontinued items 1.69
------ ------ ------
Gross margin 44.69 44.74 49.37
Selling, research and administrative expenses 39.70 39.54 38.89
Restructuring expenses 3.06 2.77
------ ------ ------
Operating income 1.93 2.43 10.48
Other income (expense) (0.12) 0.57 0.49
------ ------ ------
Income before income taxes 1.81 3.00 10.97
Income taxes 1.43 1.15 4.30
------ ------ ------
Income before accounting change 0.38 1.85 6.67
Cumulative effect of change in accounting for income taxes .37
------ ------ ------
Net income 0.38% 1.85% 7.04%
====== ====== ======
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NET SALES
Year Ended June 30 1996 1995 1994
------- ------- -------
Net sales $99,297 $95,156 $95,578
Net sales for fiscal 1996 increased $4,141,000 or 4.4 percent from the previous
fiscal year. Net sales from domestic operations decreased $779,000 or 1.2
percent to $64,379,000 while sales from the Company's European operations
increased $4,920,000 or 16.4 percent to $34,918,000.
The decrease in domestic sales is primarily due to a decrease in infusion
systems of $949,000. This decrease was caused by a decline in large volume pump
products partially offset by increased syringe pump sales and ambulatory product
sales. The decreases in the large volume pump products are due to decreases in
both large volume pumps and large volume pump disposables.
The increase in sales from the Company's European operations is due to increases
in all areas. The most significant increases were in cath lab and pressure
monitoring products. Cath lab sales increased $3,040,000 primarily due to
increased sales of procedure packs. The increase in pressure monitoring products
of $606,000 is primarily due to the sales efforts continuing to be redirected
into this product line as a result of the procedure pack business being more
established. In addition, the increase in foreign currency exchange rates
accounted for $552,000 of the $4,920,000 increase in European sales.
Net sales for fiscal 1995 decreased $422,000 or .4 percent over the previous
fiscal year. Net sales from domestic operations decreased $8,522,000 or 12
percent to $65,158,000 while sales from the Company's European operations
increased $8,100,000 or 37 percent to $29,998,000.
The decrease in domestic sales in fiscal 1995 was due to decreases in critical
care accessories of $8,160,000 and infusion systems of $362,000. The decrease in
critical care accessories was primarily due to a decrease in bulk/OEM sales as
certain customers elected to produce various products in-house versus purchasing
them from the Company. The decrease in infusion systems was due to decreased
syringe pump sales offset by increased sales of large volume pump products.
The increase in sales from the Company's European operations was primarily due
to increased sales of cath lab and pressure monitoring products which increased
equally and due to the effect of increased foreign currency translation rates.
The increases in cath lab and pressure monitoring sales were primarily due to
the same factors noted above for fiscal 1996. The increase in foreign currency
exchange rates accounted for $2,815,000 of the $8,100,000 increase in sales.
3
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COST OF GOODS SOLD AND GROSS MARGIN
Year Ended June 30 1996 1995 1994
------- ------- -------
Cost of goods sold $53,242 $52,585 $48,390
Discontinued items 1,678
------- ------- -------
Total cost of goods sold $54,920 $52,585 $48,390
Gross margin $44,378 $42,571 $47,188
Gross margin as a percent of net sales for fiscal 1996 was flat compared to the
previous fiscal year. Domestic margins decreased .6 percentage points while the
Company's European margins increased .7 percentage points.
Domestic gross margins were negatively impacted 2.6 percentage points due to
discontinued items which represent the write off of inventory and other assets
related to items which will be discontinued or replaced. Excluding discontinued
items, domestic margins increased to 45.1 percent from the 43.1 percent reported
in the prior year. This increase in margin is due to a decrease in unfavorable
manufacturing variances.
European gross margins have increased to 49.2 percent from 48.5 percent
primarily due to the effect of lower per unit manufacturing costs associated
with increased volume from procedure packing. This increase was partially offset
by a change in product mix to include a larger percentage of procedure packs
which generally have a lower gross margin than the Company's other products.
Gross margin as a percent of net sales decreased in fiscal 1995 as compared to
fiscal 1994. This decrease was entirely due to a seven percentage point domestic
gross margin decrease as the European gross margins remained relatively
constant. The domestic margins decreased primarily due to significant
unfavorable manufacturing variances attributable to reduced production volumes
caused by lower sales. European margins remained flat due to lower per unit
manufacturing costs, due to the same reasons noted above, along with favorable
purchase price variances due to foreign currency fluctuations offset by changes
in product mix to include more procedure packs.
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OPERATING EXPENSES
Year Ended June 30 1996 1995 1994
------- ------- -------
Selling, research
and administrative $39,422 $37,622 $37,173
Restructuring expenses 3,038 2,635
------- ------- -------
Total operating expenses $42,460 $40,257 $37,173
Total operating expenses for fiscal 1996 increased over the previous year both
in total dollars and as a percent of net sales. The $2,203,000 increase in total
operating expenses is due to a $1,800,000 increase in selling, research and
administrative expenses and a $403,000 increase in restructuring expenses.
The increase in selling, research and administrative expenses is the result of a
$228,000 decrease in the domestic expenses offset by a $2,027,000 increase in
the European expenses.
The domestic expenses have decreased due to $1,168,000 and $129,000 decreases in
selling and research expenses which were partially offset by a $1,069,000
increase in administrative expenses. The decrease in selling expenses resulted
from a general reduction in expenses due to lower sales; additionally, selling
expenses decreased due to the elimination of sales positions and due to open
sales positions along with the related expenses for these positions.
Administrative expenses increased primarily due to costs associated with the
senior management changes announced in the second quarter of fiscal 1996.
The $2,027,000 increase in the European expenses for fiscal 1996 consists of a
$1,020,000 increase in selling expenses and a $1,007,000 increase in
administrative expenses. Selling expenses have increased due to increased
salaries and related items resulting from increased personnel and increased
commissions due to increased sales levels. As a percent of sales, selling
expenses decreased slightly to 23% in fiscal 1996 from 24% in fiscal 1995. The
increase in administrative expenses is primarily due to a full year of costs at
Ashfield Medical Systems which was acquired in the fourth quarter of fiscal 1995
and a general increase in expenses to support the increased level of sales.
Increased foreign currency exchange rates had the effect of increasing European
operating expenses by $219,000.
The restructuring expenses recorded in fiscal 1996 relate to costs incurred as
part of a "turnaround" program for the domestic operations and the final
expenses associated with closing the Denver facility. The "turnaround" program
was initiated during the third quarter of fiscal 1996 and is focused on a number
of efficiency and organizational measures, including "right sizing" the
organization, developing management tools to achieve consistent performance,
creating new programs to manage inventories, improving cost competitiveness, and
developing bench marking and "best of class" measures to track Company
performance.
Management estimates the "turnaround" program will realize the Company
approximately $4,000,000 to $5,000,000 in annualized savings while costing
$4,350,000 to implement. The savings associated with the plan are expected to be
primarily achieved by reducing salaried personnel in the manufacturing, sales
and administrative areas and by achieving greater manufacturing efficiencies.
The costs associated with the plan consist of $1,678,000 of write-offs of
discontinued items (see cost of goods sold) and $2,672,000 of consulting,
severances for terminated employees, outplacement and legal costs. As of June
30, 1996, $1,678,000 of discontinued items have been expensed along with
$1,148,000 of consulting, $605,000 of severances and $210,000 of legal and
outplacement expenses. The remaining costs of $709,000 are expected to be
recorded in the first quarter of fiscal 1997. Approximately 50 positions have
been eliminated at June 30, 1996. The annualized salaries and fringe benefits
associated with these positions total approximately $2,100,000. See Note 3 of
the "Notes to Consolidated Financial Statements" for further information.
4
Selling, research and administrative expenses for fiscal 1995 increased $450,000
over fiscal 1994 consisting of a $768,000 decrease in domestic expenses and a
$1,090,000 increase in European expenses. Domestic expenses decreased primarily
due to lower administrative expenses due to the elimination of personnel and
decreased bonuses resulting from lower domestic profit levels. Virtually all of
the increase in European expenses is attributable to the effects of increased
foreign currency exchange rates.
The restructuring expenses recorded in fiscal 1995 relate to the Company's
decision to close its Denver operations and integrate all functions and product
lines into other Company locations. Management originally anticipated the plan
would cost approximately $3,200,000 to implement. The plan was completed in
fiscal 1996 at a total cost of $3,709,000. The excess cost of $509,000 is
primarily due to the costs to terminate the Denver lease being greater than
originally estimated.
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OTHER INCOME (EXPENSE)
Year Ended June 30 1996 1995 1994
---- ---- ----
Other income (expense) $(125) $539 $468
The decrease in other income of $664,000 in fiscal 1996 as compared to fiscal
1995 is primarily due to a reduction in foreign currency exchange gains. The
Company recorded a $272,000 foreign currency loss for fiscal 1996 versus a gain
of $312,000 for fiscal 1995. In addition, investment income decreased to
$188,000 in fiscal 1996 from $246,000 in fiscal 1995 due to lower investment
levels. Interest expense increased to $247,000 in fiscal 1996 from $177,000 in
fiscal 1995 due to a reduction in the amount of interest capitalized on
construction projects.
The increase in other income in fiscal 1995 as compared to fiscal 1994 is due to
an increase in foreign currency exchange gains and other miscellaneous items
partially offset by an increase in interest expense. The Company recorded a
foreign currency exchange gain of $312,000 in 1995 versus a $241,000 gain in
1994. This additional income was partially offset by an increase in interest
expense of $74,000 in fiscal 1995 over fiscal 1994. The increase in interest
expense is due to a reduction of interest capitalized related to construction
projects.
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INCOME TAXES
Year Ended June 30 1996 1995 1994
---- ---- ----
Income taxes $1,418 $1,097 $4,107
Income taxes for fiscal 1996, 1995 and 1994 were 79.1 percent, 38.5 percent and
39.2 percent of pre-tax income, respectively. The increase in the Company's
effective tax rate for fiscal 1996 as compared to the prior year is primarily
due to an increase in the loss from domestic operations which can not be used to
offset foreign income for tax purposes. The result is an increase in the
effective tax rate as the domestic loss and the foreign income are combined for
financial reporting purposes.
In fiscal 1995, the Company's effective tax rate decreased from fiscal 1994 due
to benefits received as the result of carry backs of excess foreign tax credits,
which had previously been reserved, partially offset by an increase in foreign
taxes, both in actual dollars and as a percent of total taxes, resulting from
increased foreign income in relation to total income.
In fiscal 1994, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect of adopting
SFAS No. 109 on the Company's consolidated financial statements was to increase
income by $356,000, which was reported separately as the cumulative effect of an
accounting change.
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LIQUIDITY AND CAPITAL RESOURCES
Net working capital at June 30, 1996, decreased $704,000 versus June 30, 1995.
The current ratio at June 30, 1996 was 3.61 to 1.00, compared to 4.32 to
1.00 at June 30, 1995. Property additions of $5,766,000 primarily relate to
the acquisition of machinery & equipment and dies & molds.
Management believes that currently available cash and investments, cash provided
from future operations and debt financing options will be sufficient to finance
expected future capital expenditures. Subsequent to June 30, 1996, the Company
borrowed $4,000,000 through the issuance of Industrial Revenue Bonds, sold its
WalkMed ambulatory pump product line for $3,200,000 and retired $682,000 of debt
that was outstanding. See Notes 4 and 9 to "Notes to Consolidated Financial
Statements" for further information.
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MANAGEMENT'S OUTLOOK
In fiscal 1997, Management anticipates the Company's European operations will
continue to post increases in sales and profits are expected to be in line with
fiscal 1996 barring any material unfavorable changes in foreign currency
exchange rates. The domestic operations are expected to post improved
performance over fiscal 1996. Sales are expected to show a modest increase;
however, they are expected to continue to be impacted by pricing pressures in
the market, especially in infusion systems. The Company plans to introduce two
new products in the second half of fiscal 1997. Profits are expected to improve,
as the savings associated with the "turnaround" program are experienced.
However, the domestic operations will continue to experience production related
variances which will affect the Company's performance. Once the "turnaround"
program is completed, the Company will continue to pursue opportunities,
including product line extensions through acquisitions and strategic alliances,
to strengthen the Company's product offering in strategic markets.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information, the matters discussed in this report are
forward-looking statements which involve risks and uncertainties, including but
not limited to: business conditions in the healthcare industry and the general
economy; competitive factors, including further consolidation in the healthcare
industry; regulatory requirements; new technologies and pricing pressures; and
management decisions to pursue new products or businesses which involve
additional costs, risks or capital expenditures.
5
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CONSOLIDATED STATEMENTS OF INCOME
For the years ended June 30 1996 1995 1994
----------- ----------- -----------
NET SALES $99,297,459 $95,156,058 $95,578,046
Cost of goods sold 53,241,708 52,584,765 48,390,400
Discontinued items (note 3) 1,677,957
----------- ----------- -----------
TOTAL COST OF GOODS SOLD 54,919,665 52,584,765 48,390,400
----------- ----------- -----------
GROSS MARGIN 44,377,794 42,571,293 47,187,646
----------- ----------- -----------
OPERATING EXPENSES:
Sales & marketing 21,835,904 21,983,891 21,682,624
Research & development 3,018,195 3,147,421 3,299,430
Administrative 14,567,854 12,491,541 12,191,039
Restructuring costs (note 3)
Turnaround program 1,963,312
Denver closing 1,074,730 2,634,630
----------- ----------- -----------
Total restructuring costs 3,038,042 2,634,630
----------- ----------- -----------
Total operating expenses 42,459,995 40,257,483 37,173,093
----------- ----------- -----------
OPERATING INCOME 1,917,799 2,313,810 10,014,553
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 188,426 246,346 250,914
Interest expense (247,432) (176,811) (102,757)
Other - net (65,927) 469,539 319,458
----------- ----------- -----------
Total other income (expense) (124,933) 539,074 467,615
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,792,866 2,852,884 10,482,168
INCOME TAXES 1,418,000 1,097,000 4,107,000
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 374,866 1,755,884 6,375,168
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES (note 1) 355,827
----------- ----------- -----------
NET INCOME $374,866 $1,755,884 $6,730,995
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Income before cumulative effect of
change in accounting principle $0.06 $0.28 $1.03
Cumulative effect of change in accounting
for income taxes 0.06
----------- ----------- -----------
NET INCOME $0.06 $0.28 $1.09
=========== =========== ===========
Weighted average number of
common shares outstanding 6,227,898 6,189,508 6,181,121
=========== =========== ===========
See notes to consolidated financial statements.
6
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CONSOLIDATED BALANCE SHEETS
June 30
ASSETS 1996 1995
----------- -----------
CURRENT ASSETS:
Cash & equivalents $5,587,527 $4,911,074
Investments 345,000
Trade receivables (less allowance for doubtful
accounts: 1996 - $763,000; 1995 - $714,000) 18,670,315 18,506,153
Inventories:
Raw materials & supplies 11,433,900 11,495,702
Work-in-process 4,423,868 3,626,058
Finished goods 7,208,815 7,248,231
----------- -----------
Total inventories 23,066,583 22,369,991
Deferred income taxes 2,722,410 1,633,456
Prepaid expense and other 613,930 812,925
----------- -----------
Total Current Assets 50,660,765 48,578,599
----------- -----------
PROPERTY, PLANT & EQUIPMENT - AT COST:
Land & land improvements 2,321,356 2,053,046
Buildings 18,716,605 19,504,336
Machinery & equipment 17,681,223 15,940,342
Dies & molds 9,510,043 8,226,919
Furniture & data processing equipment 9,251,887 8,285,376
Additions in progress 3,293,911 3,330,646
----------- -----------
Total 60,775,025 57,340,665
Less accumulated depreciation 26,172,126 23,028,147
----------- -----------
Property, Plant & Equipment - Net 34,602,899 34,312,518
----------- -----------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
(Net of accumulated amortization: 1996 - $1,171,496; 1995 - $997,352) 4,698,837 4,872,981
----------- -----------
OTHER ASSETS:
Deferred income taxes 530,872
Other 2,378,855 2,206,581
----------- -----------
Total Other Assets 2,378,855 2,737,453
----------- -----------
TOTAL ASSETS $92,341,356 $90,501,551
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $510,226 $513,066
Accounts payable (principally trade) 4,521,672 3,797,582
Accrued liabilities:
Income taxes 1,263,015 602,209
Compensation & profit sharing 3,603,801 2,873,619
Restructuring costs 416,453 649,983
Other 3,715,457 2,807,811
----------- -----------
Total Current Liabilities 14,030,624 11,244,270
----------- -----------
LONG TERM DEBT - LESS CURRENT PORTION 2,952,661 3,463,232
----------- -----------
DEFERRED INCOME TAXES 232,972
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
SHAREHOLDERS' EQUITY:
Common stock - $.01 par value, shares authorized - 20,000,000;
shares outstanding: 1996 - 6,197,413; 1995 - 6,159,502
(net of treasury shares: 1996 - 150,590; 1995 - 150,590) 61,974 61,595
Additional paid-in capital 42,886,968 42,460,256
Retained earnings 32,559,918 33,172,136
Foreign currency translation adjustment (383,761) 100,062
----------- -----------
Total Shareholders' Equity 75,125,099 75,794,049
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $92,341,356 $90,501,551
=========== ===========
See notes to consolidated financial statements.
7
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON STOCK OUTSTANDING PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
Shares Amount CAPITAL EARNINGS ADJUSTMENT EQUITY
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1993 6,043,380 $60,434 $40,779,821 $26,581,105 $(826,384) $66,594,976
Net income 6,730,995 6,730,995
Cash dividends ($.15 per share) (913,621) (913,621)
Foreign currency translation adjustment 347,935 347,935
Issuance of stock under stock option
and purchase plans (net of exchange
of 14,595 treasury shares) (note 5) 86,486 865 880,514 881,379
Tax benefit received from exercise of
stock options (note 5) 42,180 42,180
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1994 6,129,866 61,299 41,702,515 32,398,479 (478,449) 73,683,844
Net income 1,755,884 1,755,884
Cash dividends ($.16 per share) (982,227) (982,227)
Foreign currency translation adjustment 578,511 578,511
Issuance of stock under stock option
and purchase plans (net of exchange
of 2,163 treasury shares) (note 5) 21,413 214 206,533 206,747
Tax benefit received from exercise
of stock options (note 5) 463,812 463,812
Issuance of treasury shares 8,223 82 87,396 87,478
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1995 6,159,502 61,595 42,460,256 33,172,136 100,062 75,794,049
Net income 374,866 374,866
Cash dividends ($.16 per share) (987,084) (987,084)
Foreign currency translation adjustment (483,823) (483,823)
Issuance of stock under stock option
and purchase plans (note 5) 37,911 379 350,255 350,634
Tax benefit received from exercise of
stock options (note 5) 76,457 76,457
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1996 6,197,413 $61,974 $42,886,968 $32,559,918 $(383,761) $75,125,099
========= ======= =========== =========== ========= ===========
See notes to consolidated financial statements.
8
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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30 1996 1995 1994
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $374,866 $1,755,884 $6,730,995
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting for income taxes (355,827)
Depreciation & amortization 4,484,402 4,301,592 4,473,862
Loss on disposal of property, plant & equipment 958,877
Deferred income taxes (311,000) (631,000) 1,434,000
Change in operating assets and liabilities net of effects
from acquisition:
Increase in trade receivables (589,930) (1,640,600) (1,435,691)
(Increase) decrease in inventories (1,025,444) 967,346 (4,760,842)
Decrease in prepaid expenses and other 181,147 55,131 147,166
Increase in accounts payable 764,782 325,195 69,073
Increase (decrease) in accrued restructuring costs (233,530) 244,983 (1,000,000)
Increase (decrease) in accrued liabilities 2,508,591 (1,457,407) (346,351)
Other operating items - net (106,331) 238,275 127,411
---------- ---------- ----------
Net cash provided by operating activities 7,006,430 4,159,399 5,083,796
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (5,765,782) (6,959,261) (8,758,708)
Proceeds from sale of property 45,555 35,072 1,995
Purchase of investments (757,840)
Proceeds from maturity of investments 345,000 1,112,437 648,258
Acquisition of subsidiary, net of cash acquired (330,632)
Decrease in unused proceeds of industrial revenue bond 2,818,659
---------- ---------- ----------
Net cash used in investing activities (5,375,227) (6,142,384) (6,047,636)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term obligations (513,411) (641,872) (320,470)
Proceeds from issuance of common stock - net 350,634 206,747 881,379
Cash dividends paid (987,084) (982,227) (913,621)
---------- ---------- ----------
Net cash used by financing activities (1,149,861) (1,417,352) (352,712)
---------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 195,111 (293,044) (197,666)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 676,453 (3,693,381) (1,514,218)
---------- ---------- ----------
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 4,911,074 8,604,455 10,118,673
---------- ---------- ----------
CASH AND EQUIVALENTS AT END OF YEAR $5,587,527 $4,911,074 $8,604,455
========== ========== ==========
Supplemental Disclosures
CASH PAID DURING THE YEAR FOR:
Interest $247,432 $176,811 $102,757
========== ========== ==========
Income taxes $1,734,881 $1,337,617 $4,265,720
========== ========== ==========
See notes to consolidated financial statements.
9
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30, 1996, 1995 and 1994
- ------------------------------------------------
1. ACCOUNTING POLICIES
The Company designs, manufactures, assembles and markets a broad range of
products for the diagnosis and treatment of patients receiving care in
hospitals, alternative health care facilities and the home health care
environment. The Company's products are used by clinicians for fluid and drug
infusion, invasive pressure monitoring, angiographic imaging and coronary
angioplasty. The Company's significant accounting policies are as follows:
Principles of Consolidation -- The consolidated financial statements include the
accounts of all subsidiaries and all significant intercompany transactions and
balances have been eliminated. The accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles (GAAP). The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition -- Revenue from product sales is recognized at the time
products are shipped.
Translation of Foreign Currencies -- The Company has operations in three foreign
countries (see Note 8). The assets and liabilities of these foreign subsidiaries
are translated at the exchange rates in effect at the balance sheet date.
Revenues and expenses are translated at the average exchange rates in effect
during the year. Translation gains and losses are not included in income but are
accumulated and reported as a separate component of shareholders' equity.
Foreign currency exchange gains (losses) arise primarily from the translation of
intercompany balances that are expected to be repaid in the foreseeable future
and from forward exchange contracts and are included in other income (expense)
in the amount of approximately ($272,000), $312,000 and $241,000 in fiscal 1996,
1995 and 1994, respectively. The Company enters into forward exchange contracts
to hedge against foreign currency fluctuations on certain intercompany
transactions. Transactions hedged with forward exchange contracts will come due
at the approximate time the forward exchange contracts expire. Realized and
unrealized gains and losses on these contracts are included in other income
(expense). At June 30, 1996, the Company had no forward exchange contracts. At
June 30, 1995 the Company had contracts of approximately $720,000 maturing from
July 26, 1995 through August 30, 1995 to exchange pounds sterling for United
States dollars.
Investments -- Investments consist primarily of tax-exempt interest bearing
securities with remaining maturities of less than one year. Investments are
classified as held-to-maturity and therefore are recorded at amortized cost. The
fair value of the investments approximates amortized cost.
Inventories -- The Company values its inventories at the lower of cost, using
the first-in, first-out method, or market.
Research and Development -- Research and development expenditures are charged to
operations in the year incurred.
Advertising Costs -- Advertising costs primarily relate to trade shows, product
catalogues and product literature. The cost of product catalogues is capitalized
and amortized over the period in which future benefits are expected. The cost of
product literature is expensed as incurred. Total advertising expenses were
$969,000, $712,000, and $1,112,000 in 1996, 1995 and 1994, respectively.
Depreciation -- Property, plant and equipment are depreciated using the
straight-line method based on estimated useful lives as follows:
ASSETS Estimated Useful Lives (Years)
Land improvements 20
Buildings 20 - 40
Machinery & equipment 2 - 10
Dies & molds 5
Furniture & data processing equipment 2 - 10
Depreciation expense for fiscal years 1996, 1995 and 1994 was $4,310,000,
$4,159,000 and $4,293,000, respectively.
Interest Capitalization -- The Company capitalizes interest costs associated
with the construction of plant and equipment. During fiscal years 1996, 1995 and
1994, the Company incurred total interest costs of approximately $326,000,
$306,000 and $335,000 of which approximately $79,000, $129,000 and $232,000 were
capitalized, respectively.
Cost in Excess of Fair Value of Net Assets Acquired -- The cost in excess of
fair value of tangible net assets acquired is being amortized on a straight-line
basis over lives ranging from 20 to 40 years. The Company evaluates the carrying
value of these intangible assets for possible impairment by taking into
consideration such factors as recent operating results, projected cash flows and
plans for future operations.
Major Customers and Concentration of Credit Risk -- The Company had sales to a
domestic distributor in fiscal 1996, 1995 and 1994 which represent approximately
11%, 12% and 11% of the Company's total net sales, respectively. The Company had
sales to a European medical device company in fiscal 1996, 1995 and 1994 which
represent approximately 12%, 8% and 1% of the Company's total net sales,
respectively. Substantially all of the Company's revenues and receivables relate
to companies operating in the health care industry.
Income Taxes -- Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," on
a prospective basis. Accordingly, deferred income taxes are provided for the
temporary differences between the financial reporting and the tax basis of the
Company's assets and liabilities by applying enacted statutory tax rates
applicable to future years to the book tax basis differences.
10
Net Income Per Common Share -- Net income per common share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. Common share equivalents represent the dilutive effect of the
assumed exercise of certain outstanding stock options.
Cash and Equivalents -- The Company considers all highly liquid investments with
original maturities of three months or less at the date of purchase to be cash
equivalents. Cash equivalents at June 30, 1996 consist of tax exempt mutual
funds and at June 30, 1995 consists of tax-exempt mutual funds and commercial
paper.
New Accounting Standards -- In March 1995, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of. " In accordance with SFAS 121, management evaluates the
recoverability of the long-lived assets on an on going basis taking into
consideration such factors as recent operating results, projected cash flows and
plans for future operations. At June 30, 1996, there were no material
impairments of the Company's assets.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock Based Compensation" which requires
adoption no later than fiscal years beginning after December 15, 1995. Under
SFAS 123, companies are encouraged but not required to adopt the fair value
method of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but
would be required to disclose in a note to the financial statements pro forma
net income and earnings per share, as if the Company had applied the new method
of accounting. The Company has determined that it will not adopt the expense
recognition provisions of this standard; therefore, the new standard will have
no effect on the Company's financial condition or results of operations.
Reclassifications -- Certain reclassifications have been made to prior years'
amounts to conform with the classifications of such amounts for fiscal 1996.
- --------------------------------------------------------------------------------
2. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturity of these instruments. The fair value and carrying amounts of long-term
debt as of June 30, 1996 was $3,514,000 and $3,463,000 respectively. Fair values
are based on current quoted interest rates of similar financial instruments with
like maturities.
- --------------------------------------------------------------------------------
3. RESTRUCTURING COSTS
Turnaround costs recorded in fiscal 1996 represent costs associated with a
"turnaround program" for the domestic operations. The Company originally
estimated the program costs would be approximately $4,200,000 consisting
primarily of consulting costs, severance costs and the write off of discontinued
items. At June 30, 1996 approximately $1,963,000 of restructuring costs and
$1,678,000 in write-offs of discontinued items relating to the turnaround
program have been recognized. The Company estimates the remaining restructuring
costs to be recognized in fiscal 1997 will be approximately $709,000. Of the
costs recognized at June 30, 1996, $416,000 remains to be paid and is included
in accrued restructuring costs. The amounts included in accrued restructuring
costs along with costs to be recognized in fiscal 1997 will be funded with
available cash on hand and cash generated from operations during fiscal 1997.
The turnaround costs recorded in fiscal 1996 consist primarily of consulting
services, severances for terminated employees, outplacement and legal costs and
the discontinued items consist primarily of inventory and fixed assets as a
result of the Company's decision to discontinue or replace certain items. The
difference of $150,000 between the originally estimated costs and the current
estimate of $4,350,000 is primarily due to consulting and severance costs being
greater than originally anticipated.
Denver restructuring costs recorded in fiscal 1996 and 1995 represent costs
associated with closing the Company's Denver operations and integrating all
functions and product lines into other Company locations. The Company originally
estimated that the restructuring costs would be approximately $3,200,000
consisting primarily of employee severance and other exit costs related to
lease; hiring, training and relocating personnel; travel; moving equipment and
inventory; and facility shutdown. The difference of $509,000 between the
originally estimated costs and the total actual costs is primarily due to the
termination of the Denver lease being greater than originally anticipated.
11
4. LONG-TERM DEBT, BANK NOTES AND LEASES
Long-term debt consists of the following:
June 30 1996 1995
---------- ----------
Mortgages payable:
Industrial Revenue Bond, average interest rate of 6.18%, due in variable yearly
principal installments through June 2002, secured by a $3,002,000 bank letter
of credit at June 30, 1996 $2,775,000 $3,150,000
9% Industrial Revenue Bond, due in monthly installments
of $13,500 (including interest) through November 2001, collateralized by first
mortgage on land and buildings and security interest in certain equipment with
an approximate
net book value of $1,500,000 at June 30, 1996 682,491 778,679
Other 5,396 47,619
---------- ----------
Total 3,462,887 3,976,298
Less current portion 510,226 513,066
---------- ----------
Long-term debt $2,952,661 $3,463,232
========== ==========
Long-term debt as of June 30, 1996 matures as follows:
Year Ending June 30
1997 $510,226
1998 539,664
1999 575,420
2000 607,185
2001 650,054
Thereafter 580,338
----------
Total $3,462,887
==========
At June 30, 1996, the Company had available a $5,000,000 line of credit and a
$3,002,000 letter of credit. The line of credit bears interest at LIBOR plus one
half percent and expires in April, 1997. The letter of credit can only be used
to pay principal and interest on the Industrial Revenue Bond maturing in 2002.
Any borrowings made under the letter of credit bear interest at the bank's prime
rate plus two percent and are secured by land and buildings with an approximate
net book value of $3,200,000. The letter of credit agreement automatically
renews every month through the maturity of the bond, subject to a 13-month
notification from the issuer of their intention not to renew the letter. No
borrowings were made from the line of credit or the letter of credit during
fiscal 1996 or 1995.
Subsequent to year end, the Company borrowed an additional $4,000,000 through
the issuance of Industrial Revenue Bonds. The bonds bear interest at a weekly
adjustable rate and mature in June, 2016. Annual principal payments of $200,000
are scheduled beginning in July, 1997. Also in July 1996, the Company retired
the 9% Industrial Revenue Bond.
The Company leases buildings, equipment, furniture and automobiles in the United
States and Europe under operating leases. Future minimum rental payments
required under such leases that have initial or remaining noncancellable lease
terms in excess of one year as of June 30, 1996 are as follows:
Year Ending June 30
1997 $1,338,712
1998 709,405
1999 176,330
2000 109,139
2001 152,672
Thereafter 1,397,546
----------
Total $3,883,804
==========
Total rental expense was approximately $2,099,000, $2,097,000 and $1,906,000 for
fiscal 1996, 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
5. STOCK OPTIONS
Key Employee Nonstatutory Stock Option Plan -- Pursuant to a key employee stock
option plan, as previously approved by the shareholders, the Company reserved
1,000,000 shares for issuance to certain key employees. Under this plan, options
may be granted at a price equal to the fair market value at the date of grant.
The options shall be exercised by the optionee only while employed by the
Company or a limited time thereafter. The plan contains provisions which define
certain limitations on the right to exercise options and provides for the
expiration and forfeiture of options based upon the Company's achievement of
certain goals. These goals are set by the employee benefits committee of the
Company's Board of Directors. Additionally, all options expire after ten years
from the date of grant if not previously exercised or forfeited. In fiscal 1996,
the plan was amended, subject to shareholder approval in November 1996, whereby
for options granted on or after November 15, 1995, the employee benefit
committee may waive certain provisions of the plan defining the limitations on
the right to exercise and the forfeiture of options and may establish any
limitations or forfeiture provisions they deem appropriate. At June 30, 1996,
expiration dates on options outstanding range from December 2001 to November
2005 without regards to the forfeiture provisions tied to the attainment of
achievement goals discussed above.
12
Non-Employee Director Restricted Stock Option Plans -- Pursuant to Non-Employee
Director Restricted Stock Option Plans, as previously approved by the
shareholders, the Company reserved 384,315 shares of common stock for issuance
to directors and directors emeritus not otherwise employed by the Company. These
plans provide for one-time grants of options to purchase shares of common stock
at a price equal to the fair market value at the date of grant. Options are
exercisable at the date of grant subject to certain restrictions contained in
the plans and expire after ten years; however, the options shall be exercised by
the optionee only while serving as a director or director emeritus of the
Company or a limited time thereafter. Expiration dates on options outstanding
range from May 1997 to August 2003.
Executive Stock Option Plan -- Pursuant to an executive stock option plan, as
previously approved by the shareholders, the Company reserved 300,000 shares for
issuance to certain key employees. Under this plan, options may be granted at
prices equal to the fair market value at the date of grant. Options expire after
five years and are exercisable six months after the date of grant. At June 30,
1996, expiration dates on options outstanding range from August 1999 to December
2000.
Employees Stock Purchase Plan -- Pursuant to an employees stock purchase plan,
as previously approved by the shareholders, the Company reserved 160,000 shares
of common stock for issuance to qualified employees. Under this plan, qualified
employees may request options to purchase shares of common stock, subject to
certain limitations contained in the plan, at a price equal to 87.5% of the fair
market value at the date of grant. Options expire after twenty-seven months and
are exercisable at date of grant subject to certain limitations. Expiration
dates on options outstanding at June 30, 1996 range from August 1996 to August
1998.
Incentive Stock Option Plan -- Pursuant to an incentive stock plan, as
previously approved by the shareholders, the Company reserved 1,050,000 shares
of common stock for issuance to qualified key employees. In November 1995, this
plan expired and no additional options may be granted under this plan; however,
options previously granted remain exercisable until expiration of the option
term. Options expire after five years and are exercisable at date of grant.
Expiration dates on options outstanding at June 30, 1996 range from August 1996
to February 1999.
The following summarizes stock option transactions for all effective plans
during the three years ended June 30, 1996:
NUMBER OF OPTION PRICE
OPTIONS SHARES Per Share Total
--------- --------------- -----------
Outstanding at June 30, 1993 919,589 $5.63 - $33.00 $19,640,495
Granted 327,378 $10.58 - $19.13 4,160,053
Exercised (101,081) $8.86 - $29.70 (1,055,331)
Forfeited (195,650) $10.35 - $33.00 (5,395,631)
-------- -----------
Outstanding at June 30, 1994 950,236 $5.63 - $33.00 17,349,586
Granted 134,271 $8.75 - $13.75 1,586,760
Exercised (23,576) $7.63 - $29.70 (230,409)
Forfeited (181,640) $10.35 - $33.00 (4,497,393)
-------- -----------
Outstanding at June 30, 1995 879,291 $5.63 - $33.00 14,208,544
Granted 445,571 $9.19 - $11.38 4,820,690
Exercised (37,911) $6.93 - $17.22 (350,634)
Forfeited (343,441) $8.75 - $33.00 (6,629,539)
-------- -----------
Outstanding at June 30, 1996 943,510 $5.63 - $33.00 $12,049,061
======== ===========
13
The following summarizes the status of shares reserved and options outstanding
as of June 30, 1996:
Shares presently exercisable 648,610
Shares not presently exercisable 294,900
---------
Total options outstanding 943,510
Available for future grants 993,900
---------
Shares reserved for exercise of options 1,937,410
=========
In fiscal 1995 and 1994, certain employees of the Company exchanged 2,163 and
14,595 common shares outstanding and owned by the employees for 2,600 and 17,430
shares issued related to stock options exercisable under the incentive stock
option plan. Stock issued is included as outstanding shares, while stock
received in the exchange is included as treasury shares.
For certain stock options, the Company is permitted a tax deduction equal to the
difference between the option price on the date of grant and the fair market
value of the stock on the date an employee exercises such stock option. In
fiscal 1996, 1995 and 1994 the Company received a tax benefit of $76,457, $6,280
and $42,180, respectively, related to such sales, and the benefit was recorded
as a credit to additional paid-in capital. In fiscal 1995 the Company also
amended prior years Federal income tax returns to correct deductions originally
filed related to such sales. The tax benefit of $457,532 related to the amended
returns was recognized in fiscal 1995 and recorded as a credit to additional
paid-in capital.
- --------------------------------------------------------------------------------
6. PROFIT SHARING AND RETIREMENT PLANS
The Company has a deferred profit sharing plan and a 401(k) savings plan
covering substantially all of its domestic employees. Contributions to the
deferred profit sharing plan are determined at the discretion of the Board of
Directors, and are funded annually. Contributions to the 401(k) savings plan are
determined based upon a percentage of the employees' elective contributions up
to specified levels.
Total profit sharing and 401(k) expenses for fiscal 1996, 1995 and 1994 were
approximately $238,000, $152,000 and $726,000, respectively. The profit sharing
and 401(k) amounts unpaid and included in accrued liabilities at June 30, 1996,
1995 and 1994 were approximately $111,000, $11,000 and $593,000, respectively.
- --------------------------------------------------------------------------------
7. INCOME TAXES
The provisions for income taxes are as follows:
Year Ended June 30 1996 1995 1994
---------- ---------- ----------
Current expense (benefit):
United States Federal $(124,000) $147,000 $1,959,000
Foreign 1,608,000 1,505,000 399,000
State and local 245,000 76,000 315,000
---------- ---------- ----------
Total 1,729,000 1,728,000 2,673,000
---------- ---------- ----------
Deferred expense (benefit):
United States Federal (154,000) (575,000) 1,280,000
Foreign (59,000) (35,000) 82,000
State and local (98,000) (21,000) 72,000
---------- ---------- ----------
Total (311,000) (631,000) 1,434,000
---------- ---------- ----------
Total provision $1,418,000 $1,097,000 $4,107,000
========== ========== ==========
The sources of income (loss) before income taxes and cumulative effect of change
in accounting principle are as follows:
Year Ended June 30 1996 1995 1994
----------- --------- ----------
United States $(1,903,626) $(770,174) $9,401,486
Foreign 3,696,492 3,623,058 1,080,682
----------- --------- ----------
Total $1,792,866 $2,852,884 $10,482,168
----------- --------- ----------
14
The differences between the Company's effective tax rate and the statutory
Federal income tax rate are as follows:
Year Ended June 30 1996 1995 1994
---------- ---------- ----------
Amount based on statutory rate $610,000 $970,000 $3,569,000
State and local taxes, net of federal benefit 97,000 36,000 255,000
Foreign taxes 1,549,000 1,470,000 481,000
Foreign tax credit including tax rate differential (792,000) (1,414,000) (268,000)
Foreign sales corporation (61,000) 42,000 (45,000)
Other 15,000 77,000 115,000
---------- ---------- ----------
Total $1,418,000 $1,097,000 $4,107,000
========== ========== ==========
Effective tax rate 79.1 % 38.5 % 39.2 %
========== ========== ==========
The significant components of the Company's net deferred tax asset at June 30,
1996 and 1995 are as follows:
Year Ended June 30 1996 1995
DEFERRED TAX ASSETS:
Net operating loss carryforwards $1,939,131 $2,151,800
Foreign tax credit carryforwards 849,460 1,563,513
Uniform inventory capitalization 673,263 556,718
Vacation accrual 379,625 201,670
Trade receivable allowances 236,243 225,577
Restructuring costs 153,237 267,699
Sales returns and allowances 339,288 224,210
Obsolete inventory 829,569 101,921
Other 448,643 415,800
---------- ----------
Total 5,848,459 5,708,908
Less valuation allowance (1,352,450) (1,376,334)
---------- ----------
Total deferred tax assets 4,496,009 4,332,574
---------- ----------
DEFERRED TAX LIABILITIES:
Accelerated depreciation 1,154,227 1,265,648
Other 852,344 902,598
---------- ----------
Total deferred tax liabilities 2,006,571 2,168,246
---------- ----------
NET DEFERRED TAX ASSET $2,489,438 $2,164,328
========== ==========
The Company has Federal net operating loss carryforwards of approximately
$4,224,000 that expire from fiscal 2000 through fiscal 2005 and approximately
$849,000 of foreign tax credit carryforwards for Federal income tax purposes
that expire in fiscal 2000 and fiscal 2001. The Company also has foreign net
operating loss carryforwards of approximately $1,635,000 that expire from fiscal
1997 through fiscal 2001. The foreign tax credits and the foreign net operating
loss carryforwards have been fully reserved by a valuation allowance due to the
uncertainties related to their future utilization.
The valuation allowance decreased during fiscal 1996 by $23,884 and during
fiscal 1995 by $73,832 primarily as a result of the use of foreign tax credits
for tax purposes that had been reserved for financial statement purposes.
At June 30, 1996 no provision for Federal income taxes was recorded for
approximately $1,251,000 of undistributed earnings of certain foreign
subsidiaries as remittance of the earnings would be treated as a tax-free
liquidation or would be substantially offset by foreign tax credits.
15
8. FOREIGN OPERATIONS
The Company's operations include assembly and distribution centers in the United
Kingdom and distribution centers in Germany and France. Information about the
Company's operations in different geographic areas is presented below, with the
United Kingdom, Germany and France operations collectively shown as Europe:
UNITED STATES EUROPE ELIMINATIONS TOTAL
------------- ------------ ------------ ------------
Fiscal 1996
Sales:
Unaffiliated customers $64,379,428 $34,918,031 $99,297,459
Between geographic areas 6,913,707 $(6,913,707)
----------- ----------- ----------- -----------
Net sales 71,293,135 34,918,031 $(6,913,707) 99,297,459
=========== =========== =========== ===========
Net income (loss) (1,521,280) 1,896,146 374,866
=========== =========== ===========
Identifiable assets at year-end $69,906,519 $22,434,837 $92,341,356
=========== =========== ===========
Fiscal 1995
Sales:
Unaffiliated customers $65,158,275 $29,997,783 $95,156,058
Between geographic areas 5,693,820 $(5,693,820)
----------- ----------- ----------- -----------
Net sales 70,852,095 29,997,783 $(5,693,820) 95,156,058
=========== =========== =========== ===========
Net income (loss) (176,432) 1,932,316 1,755,884
=========== =========== ===========
Identifiable assets at year-end $71,331,370 $19,170,181 $90,501,551
=========== =========== ===========
Fiscal 1994
Sales:
Unaffiliated customers $73,679,731 $21,898,315 $95,578,046
Between geographic areas 5,434,972 $(5,434,972)
----------- ----------- ----------- -----------
Net sales 79,114,703 21,898,315 $(5,434,972) 95,578,046
=========== =========== =========== ===========
Net income 6,164,093 566,902 6,730,995
=========== =========== ===========
Identifiable assets at year-end $73,780,255 $15,331,448 $89,111,703
=========== =========== ===========
Substantially all sales between geographic areas are based on manufacturing cost
plus allowances for freight, other expenses and a reasonable profit to the
seller. Export sales included in the United States sales approximated 7% of
total net sales in fiscal 1996 and approximated 5% in fiscal 1995 and 1994. The
majority of such sales were to Asia and the Pacific Rim and Canada.
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENT
In July 1996, the Company sold its WalkMed ambulatory infusion pump product
line, related disposable products and associated assets. The Company will
continue to manufacture the WalkMed line and related disposables and will
distribute the products outside of North America for up to three years. The
Company's sales related to WalkMed in fiscal 1996 were approximately $3,500,000.
The Company will recognize a gain of approximately $3,000,000. WalkMed infusion
systems are used to administer intravenous therapies to patients in
non-hospitalized, alternate site locations.
- --------------------------------------------------------------------------------
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
For Fiscal Year Ended: 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER FULL YEAR
----------- ----------- ----------- ----------- -----------
June 30, 1996:
Net sales $23,697,611 $23,533,502 $25,468,469 $26,597,877 $99,297,459
Gross margin 12,058,434 11,381,988 9,601,822 11,335,550 44,377,794
Net income (loss)(1) 1,137,069 138,876 (1,999,296) 1,098,217 374,866
Net income (loss) per share $0.18 $0.02 $(0.32) $0.18 $0.06
June 30, 1995:
Net sales $23,082,139 $22,376,351 $24,647,101 $25,050,467 $95,156,058
Gross margin 10,589,719 9,572,497 12,809,550 9,599,527 42,571,293
Net income (loss)(2) 1,317,662 (648,418) 1,073,679 12,961 1,755,884
Net income (loss) per share $0.21 $(0.10) $0.17 $0.00 $0.28
<FN>
(1) Includes pre-tax restructuring expenses of $241,251, $833,479, $2,723,685,
and $917,584, respectively for each quarter.
(2) Includes pre-tax restructuring expenses of $1,674,262, $381,286, and
$579,082, respectively, for the second, third and fourth quarters.
16
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of Medex, Inc.:
We have audited the accompanying consolidated balance sheets of Medex, Inc. and
subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Medex, Inc. and subsidiaries as of
June 30, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
effective July 1, 1993, the Company changed its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
/s/ Deloitte & Touche LLP
Columbus, Ohio
August 13, 1996
- --------------------------------------------------------------------------------
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
1996 STOCK PRICE 1995 STOCK PRICE
HIGH LOW HIGH LOW
First quarter $12.75 $9.75 $14.25 $11.25
Second quarter 11.50 10.13 17.75 12.25
Third quarter 12.50 10.75 13.75 10.00
Fourth quarter $14.25 $11.50 $12.75 $9.50
The common shares of the Company are traded in the over-the-counter market and
are identified by the NASDAQ symbol "MDEX."
The source of the stock price information is NASDAQ and represents the high and
low last transaction price as reported by the NASDAQ National Market System.
The Company paid cash dividends in fiscal years 1996 and 1995 of $987,084 ($.16
per share) and $982,227 ($.16 per share), respectively. There were approximately
1,200 shareholders of record as of August 13, 1996. The Company intends to
continue to pay cash dividends on its common stock, subject to the Company's
earnings, financial condition, capital requirements and such other factors as
the Board of Directors deems relevant. It is currently intended that the amount
of cash dividends will continue as a low percentage of earnings, and that the
Company will continue its policy of retaining the major portion of earnings for
use in the Company's business.