SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended March 29, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-11827
TREX MEDICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1439626
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
36 Apple Ridge Road
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest
practicable date.
Class Outstanding at April 25, 1997
---------------------------- -----------------------------
Common Stock, $.01 par value 28,892,630
PAGE
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TREX MEDICAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
March 29, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 36,292 $ 33,966
Accounts receivable, less allowances
of $1,215 and $1,264 33,215 29,104
Inventories:
Raw materials and supplies 25,560 20,513
Work in process 11,493 9,218
Finished goods 4,030 3,279
Prepaid expenses 797 1,316
Prepaid income taxes 5,712 5,712
-------- --------
117,099 103,108
-------- --------
Property, Plant, and Equipment, at Cost 20,289 17,259
Less: Accumulated depreciation and
amortization 4,745 3,489
-------- --------
15,544 13,770
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 82,952 83,972
-------- --------
$215,595 $200,850
======== ========
2PAGE
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TREX MEDICAL CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
March 29, September 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 14,327 $ 12,598
Accrued payroll and employee benefits 2,945 4,616
Accrued income taxes 7,704 2,010
Accrued warranty costs 5,822 5,344
Customer deposits 3,517 3,414
Accrued commissions 2,797 1,938
Other accrued expenses 9,563 10,265
Due to affiliated companies 597 3,089
-------- --------
47,272 43,274
-------- --------
Deferred Income Taxes 170 170
-------- --------
Long-term Obligations:
4.2% Subordinated convertible note, due to
parent company 8,000 8,000
Other 85 109
-------- --------
8,085 8,109
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 50,000,000
shares authorized; 28,892,630 and
28,592,630 shares issued and outstanding 289 286
Capital in excess of par value 143,783 139,667
Retained earnings 15,996 9,344
-------- --------
160,068 149,297
-------- --------
$215,595 $200,850
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
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TREX MEDICAL CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
------------------------
March 29, March 30,
(In thousands except per share amounts) 1997 1996
----------------------------------------------------------------------
Revenues (includes $3,971 and $1,962 from
affiliated companies; Note 2) $58,642 $34,320
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $2,464 and
$919 for affiliated companies
revenues; Note 2) 36,904 19,344
Selling, general, and administrative
expenses 9,849 6,827
Research and development expenses (Note 2) 6,138 4,072
------- -------
52,891 30,243
------- -------
Operating Income 5,751 4,077
Interest Income 509 315
Interest Expense, Related Party (84) (441)
Other Income, Net 136 (4)
------- ------
Income Before Provision for Income Taxes 6,312 3,947
Provision for Income Taxes 2,946 1,839
------- -------
Net Income $ 3,366 $ 2,108
======= =======
Earnings per Share:
Primary $ .12 $ .10
======= =======
Fully Diluted $ .12 $ .09
======= =======
Weighted Average Shares:
Primary 28,893 22,100
======= =======
Fully Diluted 28,893 25,643
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
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TREX MEDICAL CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
------------------------
March 29, March 30,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues (includes $7,851 and $2,512 from
affiliated companies; Note 2) $113,557 $ 66,829
-------- --------
Costs and Operating Expenses:
Cost of revenues (includes $4,890 and
$1,182 for affiliated companies
revenues; Note 2) 70,354 37,592
Selling, general, and administrative
expenses 19,464 13,695
Research and development expenses (Note 2) 12,344 8,170
-------- --------
102,162 59,457
-------- --------
Operating Income 11,395 7,372
Interest Income 995 440
Interest Expense, Related Party (168) (872)
Other Income, Net 214 35
-------- --------
Income Before Provision for Income Taxes 12,436 6,975
Provision for Income Taxes 5,784 3,241
-------- --------
Net Income $ 6,652 $ 3,734
======== ========
Earnings per Share $ .23 $ .17
======== ========
Weighted Average Shares 28,759 21,547
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
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TREX MEDICAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
----------------------
March 29, March 30,
(In thousands) 1997 1996
----------------------------------------------------------------------
Operating Activities:
Net income $ 6,652 $ 3,734
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,376 1,463
Provision for losses on accounts receivable 53 51
Other noncash items 6 (82)
Changes in current accounts:
Accounts receivable (4,164) (4,050)
Inventories (8,073) (1,948)
Other current assets 519 (771)
Accounts payable 1,729 290
Other current liabilities 2,269 3,138
Other (73) -
-------- --------
Net cash provided by operating activities 1,294 1,825
-------- --------
Investing Activities:
Purchases of property, plant, and equipment (3,063) (1,505)
Proceeds from sale of property, plant, and
equipment - 35
-------- --------
Net cash used in investing activities (3,063) (1,470)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 4,119 18,688
Other (24) -
-------- --------
Net cash provided by financing activities 4,095 18,688
-------- --------
Increase in Cash and Cash Equivalents 2,326 19,043
Cash and Cash Equivalents at Beginning of
Period 33,966 202
-------- --------
Cash and Cash Equivalents at End of Period $ 36,292 $ 19,245
======== ========
Noncash Activities:
Issuance of subordinated convertible note
to parent company $ - $ 42,000
Conversion of subordinated convertible
note by parent company $ - $ 3,000
The accompanying notes are an integral part of these consolidated
financial statements.
6PAGE
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TREX MEDICAL CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Trex Medical Corporation (the Company) without audit and, in
the opinion of management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of the financial position at March
29, 1997, the results of operations for the three- and six-month periods
ended March 29, 1997, and March 30, 1996, and the cash flows for the
six-month periods ended March 29, 1997, and March 30, 1996. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of September 28, 1996,
has been derived from the consolidated financial statements that have
been audited by the Company's independent public accountants. The
consolidated financial statements and notes are presented as permitted by
Form 10-Q and do not contain certain information included in the annual
financial statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Annual
Report on Form 10-K, as amended, for the fiscal year ended September 28,
1996, filed with the Securities and Exchange Commission.
2. Transactions With Affiliated Companies
Revenues from affiliated companies in the accompanying statement of
income includes $3,950,000 and $7,830,000 during the three- and six-month
periods ended March 29, 1997, respectively, for sales of laser systems to
ThermoLase Corporation, a majority-owned subsidiary of ThermoTrex
Corporation, the majority owner of the Company. During the three- and
six-month periods ended March 30, 1996, the Company sold laser systems to
ThermoLase for aggregate revenues of $1,890,000 and $2,240,000,
respectively.
The Company was charged $500,000 and $1,000,000 by ThermoTrex in the
three- and six-month periods ended March 29, 1997, respectively, for
research and development services provided under a license agreement. The
Company was charged $450,000 and $900,000 under this agreement in the
three- and six-month periods ended March 30, 1996, respectively.
During the three- and six-month periods ended March 29, 1997, the
Company purchased high-transmission cellular grids valued at $239,000 and
$482,000, respectively, from the Tecomet division of Thermo Electron
Corporation, the majority owner of ThermoTrex, under a design and
production arrangement. No such purchases were made during the six months
ended March 30, 1996.
3. Sale of Common Stock
In December 1996, the Company issued 300,000 shares of its common
stock in a private placement at $14.50 per share, for net proceeds of
approximately $4,119,000. Following the private placement, ThermoTrex
owned 79% of the Company's outstanding common stock.
7PAGE
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TREX MEDICAL CORPORATION
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Forward-looking Statements"
in Exhibit 13 to the Company's Annual Report on Form 10-K, as amended,
for the fiscal year ended September 28, 1996, filed with the Securities
and Exchange Commission.
Overview
The Company designs, manufactures, and markets mammography equipment
and minimally invasive stereotactic breast-biopsy systems, general-
purpose radiography (X-ray) equipment, and X-ray imaging systems used for
cardiac catheterization and angiography, as well as radiographic/
fluoroscopic procedures. The Company sells its systems worldwide
principally through a network of independent dealers. In addition, the
Company manufactures mammography and radiography systems as an original
equipment manufacturer (OEM) for other medical equipment companies such
as United States Surgical Corporation, General Electric Company, Inc.,
and the Philips Medical Systems North America Company subsidiary of
Philips N.V. The Company has four operating units: Lorad, a manufacturer
of mammography and stereotactic breast-biopsy systems; Bennett X-Ray
Corporation, a manufacturer of general-purpose X-ray and mammography
equipment; XRE Corporation, a manufacturer of X-ray imaging systems used
in the diagnosis and treatment of coronary artery disease and other
vascular conditions; and Continental X-Ray Corporation, a manufacturer of
general-purpose and specialized X-ray systems.
The Company conducts all of its manufacturing operations in the
United States and sells its products on a worldwide basis. The Company
anticipates that an increasing percentage of its revenues will be from
export sales. The Company's export sales are denominated in U.S. dollars;
however, the Company's financial performance and competitive position can
be affected by currency exchange rate fluctuations affecting the
relationship between the U.S. dollar and foreign currencies.
Results of Operations
Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996
Revenues increased 71% to $58.6 million in the second quarter of
fiscal 1997 from $34.3 million in the second quarter of fiscal 1996,
primarily due to the inclusion of $17.6 million in revenues from
Continental, acquired in September 1996, and XRE, acquired in May 1996.
Revenues at Lorad increased 23% to $27.7 million in fiscal 1997 from
8PAGE
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TREX MEDICAL CORPORATION
Second Quarter Fiscal 1997 Compared With Second Quarter Fiscal 1996
(continued)
$22.5 million in fiscal 1996 as a result of increased sales of
higher-priced mammography systems, as well as lasers sold to ThermoLase
Corporation, a majority-owned subsidiary of ThermoTrex Corporation.
The gross profit margin declined to 37% in the second quarter of
fiscal 1997 from 44% in the second quarter of fiscal 1996, primarily due
to the mix of products sold at Lorad and Bennett, as well as the
inclusion of lower-margin revenues at Continental.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 17% in the second quarter of fiscal 1997 from 20%
in the second quarter of fiscal 1996, primarily due to increased revenues
at Lorad and, to a lesser extent, Bennett. Research and development
expenses of $6.1 million in fiscal 1997, compared with $4.1 million in
fiscal 1996, reflect the inclusion of $2.0 million of expense at XRE and
Continental and the Company's continued efforts to develop and
commercialize new products, including the full-breast digital mammography
system and direct-detection X-ray sensor, as well as enhancements of
existing systems.
Interest income in the second quarter of fiscal 1997 represents
interest earned on the invested proceeds from the Company's initial
public offering of common stock in July 1996, net of cash paid for the
September 1996 acquisition of Continental. Interest expense, related
party, represents interest associated with the $42.0 million principal
amount 4.2% subordinated convertible note issued to ThermoTrex. Interest
expense decreased in fiscal 1997, compared with fiscal 1996, as a result
of the conversion by ThermoTrex of $34.0 million principal amount in
fiscal 1996.
The effective tax rate was 47% in the second quarter of fiscal 1997
and fiscal 1996. The effective tax rate exceeds the statutory federal
income tax rate primarily due to the impact of state income taxes and
nondeductible amortization of cost in excess of net assets of acquired
companies.
First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996
Revenues increased 70% to $113.6 million in the first six months of
fiscal 1997 from $66.8 million in the first six months of fiscal 1996,
primarily due to the inclusion of $34.1 million in revenues from
Continental, acquired in September 1996, and XRE, acquired in May 1996.
Revenues at Lorad increased 25% to $54.7 million in fiscal 1997 from
$43.8 million in fiscal 1996 as a result of increased sales of
higher-priced mammography systems, increased sales of lasers to
ThermoLase, and increased demand for biopsy systems.
The gross profit margin declined to 38% in the first six months of
fiscal 1997 from 44% in the first six months of fiscal 1996, primarily
due to the mix of products sold at Lorad and Bennett, as well as the
inclusion of lower-margin revenues at Continental.
9PAGE
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TREX MEDICAL CORPORATION
First Six Months Fiscal 1997 Compared With First Six Months Fiscal 1996
(continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased to 17% in the first six months of fiscal 1997 from 20%
in the first six months of fiscal 1996, primarily due to increased
revenues at Lorad and, to a lesser extent, lower advertising and other
selling expenses at Bennett. Research and development expenses of $12.3
million in fiscal 1997, compared with $8.2 million in fiscal 1996,
reflect the inclusion of $3.7 million of expense at XRE and Continental
and the Company's continued efforts to develop and commercialize new
products, including the full-breast digital mammography system and
direct-detection X-ray sensor, as well as enhancements of existing
systems.
Interest income in the first six months of fiscal 1997 represents
interest earned on the invested proceeds from the Company's initial
public offering of common stock in July 1996, net of cash paid for the
September 1996 acquisition of Continental. Interest expense, related
party, represents interest associated with the $42.0 million principal
amount 4.2% subordinated convertible note issued to ThermoTrex. Interest
expense decreased in fiscal 1997, compared with fiscal 1996, as a result
of the conversion by ThermoTrex of $34.0 million principal amount in
fiscal 1996.
The effective tax rate was 46.5% in the first six months of fiscal
1997 and fiscal 1996. The effective tax rate exceeds the statutory
federal income tax rate primarily due to the impact of state income taxes
and nondeductible amortization of cost in excess of net assets of
acquired companies.
Liquidity and Capital Resources
Consolidated working capital was $69.8 million at March 29, 1997,
compared with $59.8 million at September 28, 1996. Included in working
capital are cash and cash equivalents of $36.3 million at March 29, 1997,
compared with $34.0 million at September 28, 1996.
Net cash provided by operating activities was $1.3 million in the
first six months of fiscal 1997. During this period, $8.1 million and
$4.2 million of cash was used to fund increases in inventories and
accounts receivable, respectively. The increase in inventories primarily
represents materials required for commitments under an OEM agreement and
higher inventory levels in support of the Company's increased sales. The
Company began shipping products under the OEM agreement in March 1997 and
expects to continue to ship under this agreement throughout fiscal 1997.
The increase in accounts receivable results primarily from the timing of
second quarter shipments at XRE.
The Company expended $3.1 million for property, plant, and equipment
in the first six months of fiscal 1997 and expects to make capital
expenditures of approximately $2.8 million during the remainder of the
fiscal year.
10PAGE
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TREX MEDICAL CORPORATION
Liquidity and Capital Resources (continued)
In December 1996, the Company issued 300,000 shares of its common
stock in a private placement for net proceeds of approximately $4.1
million.
Although the Company expects to have positive cash flow from its
existing operations, the Company may require significant amounts of cash
for any acquisition of a business or technology. The Company expects that
it will finance any such acquisitions through a combination of internal
funds, additional debt or equity financing, and/or short-term borrowings
from ThermoTrex or Thermo Electron Corporation, although it has no
agreement with these companies to ensure funds will be available on
acceptable terms or at all. The Company believes its existing resources
are sufficient to meet the capital requirements of its existing
operations for the foreseeable future.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
On March 12, 1997, at the Annual Meeting of Stockholders, the
stockholders elected ten incumbent directors to a one-year term expiring
in 1998. The Directors elected at the meeting were: Dr. Elias P.
Gyftopoulos, Mr. Robert C. Howard, Mr. Hal Kirshner, Mr. Earl R. Lewis,
Mr. James W. May Jr., Ms. Hutham S. Olayan, Mr. Anthony J. Pellegrino,
Mr. Firooz Rufeh, Dr. Kenneth Y. Tang, and Mr. Gary S. Weinstein. Each
director received 25,819,309 shares voted in favor of his or her election
and 16,839 shares voted against. No abstentions or broker nonvotes were
recorded on the election of directors.
At the Annual Meeting of Stockholders, the stockholders also approved
a proposal to adopt an employees' stock purchase plan and to reserve
100,000 shares of the Company's common stock for issuance thereunder as
follows: 25,791,512 shares voted in favor of the proposal, 36,243 shares
voted against the proposal, and 8,393 shares abstained. No broker
nonvotes were recorded on the proposal.
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
11PAGE
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TREX MEDICAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized as of the 2nd day of May 1997.
TREX MEDICAL CORPORATION
Paul F. Kelleher
---------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
---------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
12PAGE
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TREX MEDICAL CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule.
Exhibit 11
TREX MEDICAL CORPORATION
Computation of Earnings per Share
Three Months Ended Six Months Ended
-------------------------- -------------------------
March 29, March 30, March 29, March 30,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 3,366,000 $ 2,108,000 $ 6,652,000 $ 3,734,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 28,892,630 21,948,606 28,759,114 21,395,967
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - 151,414 - 151,414
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 28,892,630 22,100,020 28,759,114 21,547,381
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .12 $ .10 $ .23 $ .17
=========== =========== =========== ===========
PAGE
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Exhibit 11
TREX MEDICAL CORPORATION
Computation of Earnings per Share (continued)
Three Months Ended
------------------------
March 29, March 30,
1997 1996
- ----------------------------------------------------------------------------
Computation of Fully Diluted Earnings
per Share:
Income:
Net income $ 3,366,000 $ 2,108,000
Add: Convertible debt interest,
net of tax - 263,146
----------- -----------
Income applicable to common stock
assuming full dilution (a) $ 3,366,000 $ 2,371,146
----------- -----------
Shares:
Weighted average shares outstanding 28,892,630 21,948,606
Add: Shares issuable from assumed
exercise of options (as determined
by the application of the treasury
stock method) - 151,414
Shares issuable from assumed
conversion of subordinated
convertible note - 3,542,768
----------- -----------
Weighted average shares outstanding,
as adjusted (b) 28,892,630 25,642,788
----------- -----------
Fully Diluted Earnings per Share (a) / (b) $ .12 $ .09
=========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TREX MEDICAL
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> MAR-29-1997
<CASH> 36,292
<SECURITIES> 0
<RECEIVABLES> 34,430
<ALLOWANCES> 1,215
<INVENTORY> 41,083
<CURRENT-ASSETS> 117,099
<PP&E> 20,289
<DEPRECIATION> 4,745
<TOTAL-ASSETS> 215,595
<CURRENT-LIABILITIES> 47,272
<BONDS> 85
0
0
<COMMON> 289
<OTHER-SE> 159,779
<TOTAL-LIABILITY-AND-EQUITY> 215,595
<SALES> 113,557
<TOTAL-REVENUES> 113,557
<CGS> 70,354
<TOTAL-COSTS> 70,354
<OTHER-EXPENSES> 12,344
<LOSS-PROVISION> 53
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> 12,436
<INCOME-TAX> 5,784
<INCOME-CONTINUING> 6,652
<DISCONTINUED> 0
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<NET-INCOME> 6,652
<EPS-PRIMARY> .23
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</TABLE>
