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 June 28, 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 July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 28,892,630
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TREX MEDICAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, September 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 30,232 $ 33,966
Accounts receivable, less allowances
of $1,291 and $1,264 41,584 29,104
Inventories:
Raw materials and supplies 27,295 20,513
Work in process 11,509 9,218
Finished goods 5,128 3,279
Prepaid expenses 1,182 1,316
Prepaid income taxes 5,712 5,712
-------- --------
122,642 103,108
-------- --------
Property, Plant, and Equipment, at Cost 22,068 17,259
Less: Accumulated depreciation and
amortization 5,539 3,489
-------- --------
16,529 13,770
-------- --------
Cost in Excess of Net Assets of Acquired
Companies 82,406 83,972
-------- --------
$221,577 $200,850
======== ========
2PAGE
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TREX MEDICAL CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, September 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Accounts payable $ 14,305 $ 12,598
Accrued payroll and employee benefits 3,976 4,616
Accrued income taxes 8,359 2,010
Accrued warranty costs 5,996 5,344
Customer deposits 3,513 3,414
Accrued commissions 3,326 1,938
Other accrued expenses 9,433 10,265
Due to affiliated companies 700 3,089
-------- --------
49,608 43,274
-------- --------
Deferred Income Taxes 170 170
-------- --------
Long-term Obligations:
4.2% Subordinated convertible note, due to
parent company 8,000 8,000
Other 71 109
-------- --------
8,071 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 19,656 9,344
-------- --------
163,728 149,297
-------- --------
$221,577 $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
-----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
----------------------------------------------------------------------
Revenues (includes $2,604 and $3,100 from
affiliated companies; Note 2) $58,103 $36,681
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $1,554 and
$1,506 for affiliated companies
revenues; Note 2) 34,818 20,720
Selling, general, and administrative
expenses 10,786 6,835
Research and development expenses (Note 2) 6,164 4,775
------- -------
51,768 32,330
------- -------
Operating Income 6,335 4,351
Interest Income 437 176
Interest Expense, Related Party (84) (412)
Other Income (Expense), Net 188 (28)
------- ------
Income Before Provision for Income Taxes 6,876 4,087
Provision for Income Taxes 3,216 1,918
------- -------
Net Income $ 3,660 $ 2,169
======= =======
Earnings per Share:
Primary $ .13 $ .10
======= =======
Fully diluted $ .13 $ .09
======= =======
Weighted Average Shares:
Primary 28,893 22,386
======= =======
Fully diluted 28,893 25,694
======= =======
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)
Nine Months Ended
----------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
-----------------------------------------------------------------------
Revenues (includes $10,455 and $5,612 from
affiliated companies; Note 2) $171,661 $103,510
-------- --------
Costs and Operating Expenses:
Cost of revenues (includes $6,360 and
$2,688 for affiliated companies
revenues; Note 2) 105,173 58,312
Selling, general, and administrative
expenses 30,249 20,530
Research and development expenses (Note 2) 18,508 12,945
-------- --------
153,930 91,787
-------- --------
Operating Income 17,731 11,723
Interest Income 1,431 616
Interest Expense, Related Party (252) (1,284)
Other Income, Net 402 7
-------- --------
Income Before Provision for Income Taxes 19,312 11,062
Provision for Income Taxes 9,000 5,159
-------- --------
Net Income $ 10,312 $ 5,903
======== ========
Earnings per Share:
Primary $ .36 $ .27
======== ========
Fully diluted $ .36 $ .26
======== ========
Weighted Average Shares:
Primary 28,804 21,839
======== ========
Fully diluted 28,804 25,310
======== ========
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)
Nine Months Ended
---------------------
June 28, June 29,
(In thousands) 1997 1996
----------------------------------------------------------------------
Operating Activities:
Net income $ 10,312 $ 5,903
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,716 2,302
Provision for losses on accounts receivable 133 88
Other noncash items 6 (85)
Changes in current accounts, excluding the
effects of acquisition:
Accounts receivable (12,613) (2,964)
Inventories (10,922) (2,518)
Other current assets 134 (4,006)
Accounts payable 1,707 (438)
Other current liabilities 4,627 6,498
Other (73) -
-------- --------
Net cash provided by (used in) operating
activities (2,973) 4,780
-------- --------
Investing Activities:
Acquisition, net of cash acquired - (18,817)
Purchases of property, plant, and equipment (4,842) (2,515)
Proceeds from sale of property, plant, and
equipment - 46
-------- --------
Net cash used in investing activities (4,842) (21,286)
------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 4,119 18,688
Other (38) (5)
-------- --------
Net cash provided by financing activities 4,081 18,683
-------- --------
Increase (Decrease) in Cash and Cash
Equivalents (3,734) 2,177
Cash and Cash Equivalents at Beginning of
Period 33,966 202
-------- --------
Cash and Cash Equivalents at End of Period $ 30,232 $ 2,379
======== ========
6PAGE
<PAGE>
TREX MEDICAL CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Nine Months Ended
---------------------
June 28, June 29,
(In thousands) 1997 1996
----------------------------------------------------------------------
Noncash Activities:
Fair value of assets of acquired Company $ - $28,956
Cash paid for acquired Company - (18,878)
-------- --------
Liabilities assumed of acquired Company $ - $ 10,078
======== ========
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.
7PAGE
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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 June
28, 1997, the results of operations for the three- and nine-month periods
ended June 28, 1997, and June 29, 1996, and the cash flows for the
nine-month periods ended June 28, 1997, and June 29, 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 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 $2,597,000 and $10,427,000 during the three- and
nine-month periods ended June 28, 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 nine-month periods ended June 29, 1996, the Company sold laser
systems to ThermoLase for aggregate revenues of $3,010,000 and
$5,250,000, respectively.
The Company was charged $500,000 and $1,500,000 by ThermoTrex in the
three- and nine-month periods ended June 28, 1997, respectively, for
research and development services provided under a license agreement. The
Company was charged $450,000 and $1,350,000 under this agreement in the
three- and nine-month periods ended June 29, 1996, respectively.
During the three- and nine-month periods ended June 28, 1997, the
Company purchased high-transmission cellular (HTC) grids valued at
$127,000 and $609,000, respectively, from the Tecomet division of Thermo
Electron Corporation, the majority owner of ThermoTrex, under a design
and production arrangement. During the three- and nine-month periods
ended June 29, 1996, the Company purchased HTC grids valued at $93,000.
3. Sale of Common Stock
In December 1996, the Company sold 300,000 shares of its common stock
at $14.50 per share, for net proceeds of approximately $4,119,000.
Following the sale, ThermoTrex owned 79% of the Company's outstanding
common stock.
8PAGE
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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 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
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
Revenues increased 58% to $58.1 million in the third quarter of
fiscal 1997 from $36.7 million in the third quarter of fiscal 1996.
Revenues increased $16.5 million as a result of the acquisitions of
Continental in September 1996 and XRE in May 1996. Revenues at Lorad
9PAGE
<PAGE>
TREX MEDICAL CORPORATION
Third Quarter Fiscal 1997 Compared With Third Quarter Fiscal 1996
(continued)
increased 13% in fiscal 1997, primarily as a result of increased sales of
higher-priced mammography systems.
The gross profit margin declined to 40% in the third quarter of
fiscal 1997 from 44% in the third quarter of fiscal 1996, primarily due
to the mix of products sold at Lorad, as well as the inclusion of
lower-margin revenues at Continental.
Selling, general, and administrative expenses as a percentage of
revenues remained constant at 19% in the third quarter of fiscal 1997 and
fiscal 1996. Research and development expenses increased to $6.2 million
in fiscal 1997 from $4.8 million in fiscal 1996. Research and development
expenses increased $1.7 million due to the acquisitions of XRE and
Continental, offset in part by lower expenses at Lorad due to the
acceleration of product development expenses in 1996 for the Company's
M-IV mammography system. Research and development expenses reflect 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 third quarter of fiscal 1997 primarily
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, primarily in the fourth quarter of fiscal 1996.
The effective tax rate was 47% in the third 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 Nine Months Fiscal 1997 Compared With First Nine Months Fiscal 1996
Revenues increased 66% to $171.7 million in the first nine months of
fiscal 1997 from $103.5 million in the first nine months of fiscal 1996.
Revenues increased $50.7 million as a result of the acquisitions of
Continental in September 1996 and XRE in May 1996. Revenues at Lorad
increased 21% in fiscal 1997 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 39% in the first nine months of
fiscal 1997 from 44% in the first nine months of fiscal 1996, primarily
due to the mix of products sold at Lorad, as well as the inclusion of
lower-margin revenues at Continental.
10PAGE
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TREX MEDICAL CORPORATION
First Nine Months Fiscal 1997 Compared With First Nine Months Fiscal 1996
(continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased to 18% in the first nine months of fiscal 1997 from
20% in the first nine months of fiscal 1996, primarily due to increased
revenues at Lorad and Bennett and, to a lesser extent, lower advertising
and other selling expenses at Bennett. Research and development expenses
increased to $18.5 million in fiscal 1997 from $12.9 million in fiscal
1996. Research and development expenses increased $5.4 million due to the
acquisitions of XRE and Continental, and reflect 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 nine months of fiscal 1997 primarily
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, primarily in the fourth quarter of fiscal 1996.
The effective tax rate was 47% in the first nine 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 $73.0 million at June 28, 1997,
compared with $59.8 million at September 28, 1996. Included in working
capital are cash and cash equivalents of $30.2 million at June 28, 1997,
compared with $34.0 million at September 28, 1996.
Net cash used in operating activities was $3.0 million in the first
nine months of fiscal 1997. During this period, $10.9 million and $12.6
million of cash was used to fund increases in inventories and accounts
receivable, respectively. Inventories increased primarily to support the
Company's increased sales, new product introductions at Bennett and
Lorad, and, to a lesser extent, materials required for commitments under
an OEM agreement. The increase in accounts receivable resulted primarily
from the timing of third quarter shipments at Lorad, as well as the
Company's increased sales to international customers, which have longer
payment cycles.
The Company expended $4.8 million for property, plant, and equipment
in the first nine months of fiscal 1997 and expects to make capital
expenditures of approximately $1.1 million during the remainder of the
fiscal year.
11PAGE
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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 generally 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 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
12PAGE
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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 1st day of August
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
13PAGE
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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 Nine Months Ended
------------------------- -------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net Income (a) $ 3,660,000 $ 2,169,000 $10,312,000 $ 5,903,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 28,892,630 22,216,452 28,803,619 21,669,462
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - 169,414 - 169,414
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 28,892,630 22,385,866 28,803,619 21,838,876
----------- ----------- ----------- -----------
Primary Earnings per
Share (a) / (b) $ .13 $ .10 $ .36 $ .27
=========== =========== =========== ===========
PAGE
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Exhibit 11
TREX MEDICAL CORPORATION
Computation of Earnings per Share (continued)
Three Months Ended Nine Months Ended
-------------------------- -------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
- -------------------------------------------------------------------------------
Computation of Fully
Diluted Earnings
per Share:
Income:
Net income $ 3,660,000 $ 2,169,000 $10,312,000 $ 5,903,000
Add: Convertible
debt interest,
net of tax - 246,000 - 773,000
----------- ----------- ----------- -----------
Income applicable
to common stock
assuming full
dilution (a) $ 3,660,000 $ 2,415,000 $10,312,000 $ 6,676,000
----------- ----------- ----------- -----------
Shares:
Weighted average
shares outstanding 28,892,630 22,216,452 28,803,619 21,669,462
Add: Shares issuable
from assumed
exercise of
options (as
determined by
the application
of the treasury
stock method) - 169,414 - 169,414
Shares issuable
from assumed
conversion of
subordinated
convertible note - 3,307,888 - 3,470,999
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 28,892,630 25,693,754 28,803,619 25,309,875
----------- ----------- ----------- -----------
Fully Diluted Earnings
per Share (a) / (b) $ .13 $ .09 $ .36 $ .26
=========== =========== =========== ===========
<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 JUNE 28, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 30,232
<SECURITIES> 0
<RECEIVABLES> 42,875
<ALLOWANCES> 1,291
<INVENTORY> 43,932
<CURRENT-ASSETS> 122,642
<PP&E> 22,068
<DEPRECIATION> 5,539
<TOTAL-ASSETS> 221,577
<CURRENT-LIABILITIES> 49,608
<BONDS> 71
0
0
<COMMON> 289
<OTHER-SE> 163,439
<TOTAL-LIABILITY-AND-EQUITY> 221,577
<SALES> 171,661
<TOTAL-REVENUES> 171,661
<CGS> 105,173
<TOTAL-COSTS> 105,173
<OTHER-EXPENSES> 18,508
<LOSS-PROVISION> 133
<INTEREST-EXPENSE> 252
<INCOME-PRETAX> 19,312
<INCOME-TAX> 9,000
<INCOME-CONTINUING> 10,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,312
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
