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 January 1, 2000
[ ] 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
incorporation or organization) (I.R.S. Employer Identification No.)
37 Apple Ridge Road
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 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 January 28, 2000
Common Stock, $.01 par value 31,976,531
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
TREX MEDICAL CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
<S> <C> <C>
January 1, October 2,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Assets:
Cash and cash equivalents $ 8,645 $ 8,075
Advance to affiliate 7,249 8,801
Accounts receivable, less allowances of $3,312 and $3,538 43,850 49,137
Inventories:
Raw materials and supplies 27,836 27,312
Work in process 9,578 15,070
Finished goods 14,023 15,730
Deferred tax asset and refundable income taxes 24,047 19,685
Other current assets 2,082 2,357
-------- --------
137,310 146,167
-------- --------
Property, Plant, and Equipment, at Cost (Note 7) 27,583 29,154
Less: Accumulated depreciation and amortization 13,859 13,262
-------- --------
13,724 15,892
Other Assets 659 702
-------- --------
Cost in Excess of Net Assets of Acquired Companies 110,208 114,266
-------- --------
$261,901 $277,027
======== ========
2
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TREX MEDICAL CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
January 1, October 2,
(In thousands except share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Current Liabilities:
Accounts payable $ 16,174 $ 15,065
4.2% subordinated convertible note, due to parent company 8,000 8,000
Current maturities of long-term obligations 354 377
Accrued payroll and employee benefits 4,891 6,487
Accrued warranty costs 7,368 7,696
Customer deposits 5,027 5,231
Accrued commissions 4,692 5,055
Accrued restructuring costs (Note 7) 3,379 3,702
Other accrued expenses (Note 6) 14,814 18,113
Due to affiliated companies 411 2,163
-------- --------
65,110 71,889
-------- --------
Deferred Income Taxes 964 964
-------- --------
Long-term Obligations 168 177
-------- --------
Minority Interest 393 216
-------- --------
Shareholders' Investment:
Common stock, $.01 par value, 50,000,000 shares authorized; 341 341
34,144,056 and 34,139,967 shares issued
Capital in excess of par value 213,032 213,022
Retained earnings 7,211 14,153
Treasury stock at cost, 2,167,525 and 2,136,725 shares (21,808) (21,634)
Deferred compensation (368) (579)
Accumulated other comprehensive items (Note 4) (3,142) (1,522)
-------- --------
195,266 203,781
-------- --------
$261,901 $277,027
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
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TREX MEDICAL CORPORATION
Consolidated Statement of Operations
(Unaudited)
Three Months Ended
January 1, January 2,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues (includes $746 and $634 to affiliated companies; Note 2) $43,860 $64,929
------- -------
Costs and Operating Expenses:
Cost of revenues (includes $450 and $469 for revenues to 34,533 42,556
affiliated companies; Note 2)
Selling, general, and administrative expenses 14,162 20,312
Research and development expenses 3,955 5,084
Restructuring costs and unusual item, net (Note 7) 1,033 -
------- -------
53,683 67,952
------- -------
Operating Loss (9,823) (3,023)
Interest Income 158 374
Interest Expense (includes $84 to related party in each period) (101) (84)
Other Expense (58) (52)
------- -------
Loss Before Income Taxes and Minority Interest (9,824) (2,785)
Income Tax Benefit 3,076 1,294
Minority Interest Expense (194) -
------- -------
Net Loss $(6,942) $(1,491)
======= =======
Basic and Diluted Loss per Share (Note 3) $ (.22) $ (.04)
======= =======
Basic and Diluted Weighted Average Shares (Note 3) 31,978 33,312
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
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TREX MEDICAL CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
January 1, January 2,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Operating Activities:
Net loss $ (6,942) $(1,491)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,885 2,191
Provision for losses on accounts receivable 259 211
Minority interest expense 194 -
Gain on sale of property, plant, and equipment (Note 7) (941) -
Other noncash items 37 (25)
Changes in current accounts:
Accounts receivable 4,400 3,417
Inventories 6,057 (9,826)
Other current assets (4,167) (3,591)
Accounts payable 1,412 5,348
Other current liabilities (5,532) (6,989)
-------- -------
Net cash used in operating activities (3,338) (10,755)
-------- -------
Investing Activities:
Advances to affiliate, net 1,552 -
Purchases of property, plant, and equipment (1,150) (1,089)
Proceeds from sale of property, plant, and equipment (Note 7) 3,269 -
Other - (3)
-------- -------
Net cash provided by (used in) investing activities 3,671 (1,092)
-------- -------
Financing Activities:
Net proceeds from issuance of Company common stock 10 -
Purchases of Company common stock - (16,991)
Repayment of short-term borrowings and capital lease obligations (3) (49)
-------- -------
Net cash provided by (used in) financing activities 7 (17,040)
-------- -------
Exchange Rate Effect on Cash 230 161
-------- -------
Increase (Decrease) in Cash and Cash Equivalents 570 (28,726)
Cash and Cash Equivalents at Beginning of Period 8,075 42,709
-------- -------
Cash and Cash Equivalents at End of Period $ 8,645 $13,983
======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
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 January 1, 2000, and the results of
operations and cash flows for the three-month periods ended January 1, 2000, and
January 2, 1999. Interim results are not necessarily indicative of results for a
full year.
The consolidated balance sheet presented as of October 2, 1999, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. Certain amounts in fiscal 1999 have
been reclassified to conform to the presentation in the fiscal 2000 financial
statements. 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 October 2, 1999, filed with the Securities and
Exchange Commission.
2. Transactions with Affiliated Companies
Revenues from affiliated companies in the accompanying statement of
operations includes $717,000 and $633,000 during the first quarter of fiscal
2000 and fiscal 1999, respectively, for the sale of laser systems, components,
and related services to ThermoLase Corporation, a majority-owned subsidiary of
ThermoTrex Corporation, the majority owner of the Company. As a result of
ThermoLase's intention to exit this business, the Company does not expect such
sales in the future.
During the first quarter of fiscal 2000 and fiscal 1999, the Company
purchased high-transmission cellular (HTC) grids valued at $203,000 and
$340,000, respectively, from the Tecomet division of Thermo Electron
Corporation, the majority owner of ThermoTrex, under a design and production
arrangement.
3. Loss per Share
Basic and diluted loss per share were calculated as follows:
Three Months Ended
January 1, January 2,
(In thousands except per share amounts) 2000 1999
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Net Loss $(6,942) $(1,491)
------- -------
Weighted Average Shares 31,978 33,312
------- -------
Basic and Diluted Loss per Share $ (.22) $ (.04)
======= =======
Options to purchase 2,191,000 and 1,928,000 shares of common stock were
not included in the computation of diluted loss per share for fiscal 2000 and
1999, respectively, because their effect would have been antidilutive due to the
Company's net loss position. In addition, the computation of diluted loss per
share for each period excludes the effect of assuming the conversion of the
Company's $8,000,000 principal amount 4.2% subordinated convertible note,
convertible at $11.79 per share, because the effect would be antidilutive due to
the Company's net loss position.
6
<PAGE>
4. Comprehensive Income
Comprehensive income combines net loss and "other comprehensive items,"
which represents foreign currency translation adjustments, reported as a
component of shareholders' investment in the accompanying balance sheet. During
the first quarter of fiscal 2000 and 1999, the Company had comprehensive losses
of $8,562,000 and $1,159,000, respectively.
5. Business Segment Information
Three Months Ended
January 1, January 2,
(In thousands) 2000 1999
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Revenues:
Medical Imaging $27,895 $39,908
Dental Imaging 15,965 25,021
------- -------
$43,860 $64,929
------- -------
Loss Before Income Taxes and Minority Interest:
Medical Imaging (a) $(8,501) $(3,427)
Dental Imaging (b) (82) 1,450
Corporate (c) (1,240) (1,046)
------- -------
Total operating loss (9,823) (3,023)
Interest and other income (expense), net (1) 238
------- -------
$(9,824) $(2,785)
======= =======
(a) Reflects restructuring costs and unusual item, net, of $0.9 million in
fiscal 2000.
(b) Reflects restructuring costs of $0.1 million in fiscal 2000.
(c) Primarily general and administrative expenses.
6. Accrued Acquisition Expenses
The Company has undertaken restructuring activities at certain acquired
businesses. The Company's restructuring activities, which were accounted for in
accordance with the requirements of Emerging Issues Task Force Pronouncement
(EITF) No. 95-3, primarily have included reductions in staffing levels and the
abandonment of excess facilities. In connection with these restructuring
activities, as part of the cost of the acquisitions, the Company established
reserves, primarily for severance and excess facilities. In accordance with the
requirements of EITF 95-3, the Company finalizes its restructuring plans no
later than one year from the date of acquisition.
7
<PAGE>
</TABLE>
6. Accrued Acquisition Expenses (continued)
Accrued acquisition expenses relate to Trophy Radiologie and are included
in other accrued expenses in the accompanying balance sheet. A summary of the
changes in accrued acquisition expenses is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(In thousands) Severance Excess Total
Facilities
- --------------------------------------------------------- ------------ ----------- ----------- -----------
Balance at October 2, 1999 $1,430 $ 404 $1,834
Usage (659) - (659)
Currency translation (51) (22) (73)
----- ----- ------
Balance at January 1, 2000 $ 720 $ 382 $1,102
===== ===== ======
</TABLE>
The Company expects to pay the severance costs during the second quarter
of fiscal 2000 and the excess-facility costs over the term of facility leases,
which expire primarily through fiscal 2001.
7. Restructuring Costs and Unusual Item
During fiscal 1999, the Company recorded restructuring costs, primarily in
connection with the consolidation of the Company's Bennett X-Ray Corporation and
Continental X-Ray Corporation facilities into the Company's Danbury,
Connecticut, and Littleton, Massachusetts, sites and, to a lesser extent,
actions to reduce costs in other operations. Restructuring costs in the Medical
Imaging segment included severance for 308 employees across all functions, 162
of whom were terminated in fiscal 1999 and 116 of whom were terminated in fiscal
2000. Restructuring costs in the Dental Imaging segment included severance for
40 employees across all functions, 7 of whom were terminated in fiscal 1999 and
30 of whom were terminated in fiscal 2000.
During the first quarter of fiscal 2000, the Company recorded
restructuring charges of $1,974,000 for costs related to the consolidation and
relocation of facilities and retention bonuses that were earned, which could not
be accrued previously under EITF 94-3.
In November 1999, the Company sold the operating facility of its
Continental X-Ray subsidiary for $3,119,000 in cash, resulting in a gain of
$941,000, which is included in restructuring costs and unusual item, net, in the
accompanying statement of operations.
In connection with these actions, the Company expects to record
approximately $600,000 of additional costs as they are incurred in the second
quarter of fiscal 2000 for costs not permitted as charges currently, pursuant to
EITF 94-3. These additional costs primarily include costs for certain employee
and business relocation and related costs in the Medical Imaging segment.
8
<PAGE>
7. Restructuring Costs and Unusual Item (continued)
A summary of the changes in accrued restructuring costs is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Facility- Other (b) Total
(In thousands) Severance closing
Costs
- ------------------------------------------------------------ ------------ ---------- ----------- ---------
Balance at October 2, 1999 $ 973 $ 2,250 $ 479 $ 3,702
Provision charged to expense (a) 204 - 1,770 1,974
Usage (505) - (1,770) (2,275)
Currency translation (22) - - (22)
------- ------- -------- -------
Balance at January 1, 2000 $ 650 $ 2,250 $ 479 $ 3,379
======= ======= ======== =======
(a) Reflects restructuring costs of $1.9 million and $0.1 million recorded by
the Medical Imaging and Dental Imaging segments, respectively.
(b) Includes provisions in fiscal 2000 of $1.0 million for
facility-consolidation costs incurred during the period and $0.8 million for
retention bonuses.
The aggregate future cash expenditures for restructuring will include
amounts accrued at January 1, 2000, as well as the $600,000 of future costs that
are expected to be incurred in the second quarter of fiscal 2000. These amounts
total $4.0 million, of which $2.5 million is expected to be paid during the
remainder of fiscal 2000, and the balance will be paid over the term of facility
leases expiring through 2005.
8. Subsequent Event
On January 31, 2000, the Company announced that, as part of a major
reorganization plan, Thermo Electron plans to seek a buyer for the Company.
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 heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K, for the
fiscal year ended October 2, 1999, filed with the Securities and Exchange
Commission.
Overview
The Company operates in two segments: Medical Imaging and Dental Imaging.
The Medical Imaging segment designs, manufactures, and markets mammography
equipment, minimally invasive digital breast-biopsy systems, and general-purpose
and specialized medical X-ray equipment. The Company sells its products
principally through dealers and direct sales. The Company is the world's largest
manufacturer of mammography systems and also manufactures minimally invasive
digital breast-biopsy systems, which provide a low-cost, less-invasive
alternative to open surgery for the biopsy of suspicious breast lesions. All of
the Company's general-purpose X-ray systems as well as its digital
radiographic/fluoroscopic (R/F) system, which is used to diagnose
gastrointestinal disorders and other problems, are
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<PAGE>
Overview (continued)
now part of the Trex Heritage Series line of products. The Company also
manufactures and markets specialized X-ray imaging systems called cardiac
catheterization laboratories that are used during diagnostic and interventional
vascular and cardiac procedures, such as balloon angioplasty. In addition, the
Company manufactures electrophysiology products that aid doctors in diagnosing
and treating cardiac arrhythmia.
Through Trophy Radiologie, which represents the Company's Dental Imaging
segment, the Company manufactures digital and conventional dental X-ray systems.
Trophy is based just outside Paris and sells its dental imaging systems in the
U.S. through the Company's TREXTrophy Dental division.
The Company conducts all of its manufacturing operations, other than those
of Trophy, in the United States and sells its products worldwide. Although the
Company seeks to charge its customers in the same currency as its operating
costs, 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. The Company may use forward
contracts to reduce its exposure to currency fluctuations.
During fiscal 1999, the Company experienced a decline in business due to
the loss of an OEM customer, lower demand for its products resulting from a
decline in the radiographic market, and a decline in sales of cardiac
catheterization systems. In response, the Company initiated certain
restructuring activities in fiscal 1999, including consolidation of
manufacturing facilities and headcount reductions to achieve material cost
improvements and focus on cost efficiencies. In connection with these actions,
the Company expects to record approximately $0.6 million of additional costs as
they are incurred during the second quarter of fiscal 2000 for costs not
permitted as charges currently, pursuant to the requirements of Emerging Issues
Task Force Pronouncement No. 94-3. These additional costs primarily include
costs for certain employee and business relocation and related costs in the
Medical Imaging segment. The Company substantially completed implementation of
its domestic restructuring plan during the first quarter of fiscal 2000 and
plans to complete implementation of its international restructuring plan in the
second quarter of fiscal 2000. The Company estimates that it will achieve pretax
operating savings of approximately $9 to $10 million in fiscal 2000 as a result
of the cost reductions. In addition to undertaking restructuring actions, the
Company is in the process of reorganizing its product distribution channels by
consolidating and reassigning certain dealer relationships.
Results of Operations
First Quarter Fiscal 2000 Compared With First Quarter Fiscal 1999
Revenues decreased to $43.9 million in the first quarter of fiscal 2000
from $64.9 million in the first quarter of fiscal 1999. Revenues in the Medical
Imaging segment decreased $12.0 million to $27.9 million as a result of lower
revenues for most of its product lines. Sales of general-purpose X-ray systems,
breast-imaging products, and cardiac catheterization systems decreased $4.7
million, $4.4 million, and $2.2 million, respectively, primarily due to shipping
delays and an industry-wide reduction in demand for radiographic systems, lower
customer demand for breast-biopsy tables, and production delays associated with
the Company's facility consolidation. In addition, a reorganization of the
Company's distribution channels resulted in lower dealer demand. Revenues in the
Dental Imaging segment were $16.0 million in fiscal 2000, compared with $25.0
million in fiscal 1999. The decline resulted primarily from lower demand in
fiscal 2000, compared with fiscal 1999, which included a $4.1 million sale to a
customer in the Philippines and other one-time shipments totaling $2.2 million.
In addition, revenues in this segment decreased $2.1 million due to the
unfavorable effects of currency translation as a result of the strengthening in
value of the U.S. dollar relative to foreign currencies in countries in which
the Company operates. The Company's backlog decreased to $42.8 million at
January 1, 2000, from $45.6 million at October 2, 1999, primarily due to a
decline in orders in the Medical Imaging segment. The Company believes that the
decline in revenues is due in part to the consolidation of facilities and a
reorganization of its distribution system; however, there can be no assurance
that this trend will not continue.
10
<PAGE>
First Quarter Fiscal 2000 Compared With First Quarter Fiscal 1999 (continued)
The gross profit margin decreased to 21% in the first quarter of fiscal
2000 from 34% in the first quarter of fiscal 1999. The gross profit margin
decreased primarily due to a lower contribution toward fixed costs as a result
of lower revenues in each segment, a less favorable mix of products sold in the
Medical Imaging segment, and operating inefficiencies associated with the
facility consolidation in the Medical Imaging segment.
Selling, general, and administrative expenses as a percentage of revenues
was 32% in the first quarter of fiscal 2000, compared with 31% in the first
quarter of fiscal 1999. Selling, general and administrative expenses as a
percentage of revenues increased in the Medical Imaging segment due to a decline
in revenues. As a result of cost-reduction efforts across the Company, selling,
general, and administrative expenses decreased to $14.2 million in fiscal 2000
from $20.3 million in fiscal 1999. The decrease consisted primarily of a $4.4
million reduction in sales and marketing costs and a $1.5 million decrease in
administrative costs.
Research and development expenses decreased to $4.0 million in the first
quarter of fiscal 2000 from $5.1 million in the first quarter of fiscal 1999.
The Medical Imaging segment reduced spending by $0.7 million, primarily due to
cost reduction efforts associated with the Company's restructuring plan.
Research and development expenditures decreased $0.4 million in the Dental
Imaging segment due to the inclusion in fiscal 1999 of development costs for the
RVGui system, which was introduced in fiscal 1999.
The Company recorded net restructuring costs and unusual item of $1.0
million in the first quarter of fiscal 2000 (Note 7). Restructuring charges of
$2.0 million represent $1.9 million recorded by the Medical Imaging segment and
$0.1 million recorded by the Dental Imaging segment. These charges were offset
in part by a $0.9 million gain from the November 1999 sale of a building by the
Medical Imaging segment. In the second quarter of fiscal 2000, the Company
expects to record an additional $0.6 million of costs, primarily for certain
employee and business relocation and related costs in the Medical Imaging
segment. The Company intends to complete implementation of its restructuring
plans in the second quarter of fiscal 2000.
Interest income decreased to $0.2 million in the first quarter of fiscal
2000 from $0.4 million in the first quarter of fiscal 1999, due to lower average
invested balances resulting from purchases of Company common stock in fiscal
1999 and the funding of operating losses. Interest expense includes interest
associated with the Company's $8.0 million principal amount 4.2% subordinated
convertible note issued to ThermoTrex Corporation and short-term borrowings in
the Dental Imaging segment.
The Company recorded a tax benefit of 31% and 46% in the first quarter of
fiscal 2000 and 1999, respectively. The effective tax rates varied from the
statutory federal income tax rate primarily due to foreign tax losses not
benefited in the Dental Imaging segment, state tax losses not benefited in the
Medical Imaging segment, and nondeductible amortization of cost in excess of net
assets of acquired companies. The effective tax rate decreased in fiscal 2000
primarily due to the higher relative effect of nondeductible amortization of
cost in excess of net assets of acquired companies on the estimated effective
tax rate for fiscal 2000.
Minority interest expense represents earnings allocable to minority
investors in Trophy's joint ventures.
The Company is a defendant in two patent infringement lawsuits and a
lawsuit alleging the Company misappropriated certain other technology owned by a
third party. An unsuccessful resolution of one or more of these matters could
have a material adverse effect on the Company's future results of operations and
financial position.
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Liquidity and Capital Resources
Consolidated working capital was $72.2 million at January 1, 2000,
compared with $74.3 million at October 2, 1999. Included in working capital are
cash and cash equivalents of $8.6 million at January 1, 2000, compared with $8.1
million at October 2, 1999. In addition, the Company had advances to affiliate
of $7.2 million and $8.8 million at January 1, 2000, and October 2, 1999,
respectively.
Operating activities used $3.3 million of cash in the first three months
of fiscal 2000. In addition to funding an operating loss, the Company used $5.5
million to reduce other current liabilities, including due to affiliated
companies, accrued payroll and employee benefits, and acquisition and
restructuring reserves, and $4.2 million to fund an increase in deferred tax
asset. Decreases in accounts receivable and inventories resulting from lower
sales provided cash of $4.4 million and $6.1 million, respectively. The Company
expects to spend an additional $4.0 million of cash for restructuring costs, of
which $2.5 million is expected to be paid during the remainder of fiscal 2000
and the balance will be paid over the term of facility leases expiring through
2005. The Company expects to expend $1.1 million in the future for accrued
acquisition expenses related to the 1998 acquisition of Trophy, including $0.7
million in the second quarter of fiscal 2000 and the remainder over the term of
facility leases that expire primarily through fiscal 2001.
In connection with the acquisition of U.S. Surgical by Tyco International,
Ltd., and U.S. Surgical's decision to focus on other areas of its business, the
Company has committed to purchase inventories that had been sold to U.S.
Surgical in prior periods. Estimated payments under the purchase obligation,
which aggregates approximately $4.9 million at January 1, 2000, include $2.9
million in calendar 2000 and $2.0 million in calendar 2001.
Excluding the advance to affiliate activity, the Company's investing
activities during the quarter primarily consisted of $3.1 million of cash
received for the sale of a building (Note 7) and $1.2 million expended for
purchases of property, plant, and equipment. The Company expects to make capital
expenditures of approximately $2.5 million during the remainder of fiscal 2000.
The maturity of the Company's $8.0 million convertible note to ThermoTrex
will adversely affect the Company's liquidity in the fourth quarter of fiscal
2000. Excluding the debt to ThermoTrex, the Company believes its existing
resources are sufficient to meet the capital requirements of its existing
operations for the foreseeable future, however, Thermo Electron has expressed
its willingness to lend the Company up to $10 million for short-term liquidity
should the need arise.
Year 2000
As of the date of this report, the Company has completed its year 2000
initiatives, which included: (i) testing and upgrading significant information
technology systems and facilities; (ii) testing and developing upgrades, where
necessary, for the Company's current products and certain discontinued products;
(iii) assessing the year 2000 readiness of its key suppliers, vendors, and
customers; and (iv) developing contingency plans.
As a result of completing these initiatives, the Company believes that all
of its material information technology systems and critical non-information
technology systems are year 2000 compliant. The Company believes that all of the
material products that it currently manufactures and sells are year 2000
compliant or are not date sensitive. In addition, the Company is not aware of
any significant supplier or vendor that has experienced material disruption due
to year 2000 issues. The Company has also developed a contingency plan to allow
its primary business operations to continue despite disruptions due to year 2000
problems, if any, that might yet arise in the future. The costs incurred to date
by the Company in connection with the year 2000 issue have not been material.
12
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Year 2000 (continued)
While the Company to date has been successful in minimizing negative
consequences arising from year 2000 issues, there can be no assurance that in
the future the Company's business operations or financial condition may not be
impacted by year 2000 problems, such as increased warranty claims, vendor and
supplier disruptions, or litigation relating to year 2000 issues.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in equity prices,
interest rates, and foreign currency exchange rates has not changed materially
from its exposure at fiscal year-end 1999.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On February 1, 2000, the Company filed a Current Report on Form 8-K dated
January 31, 2000, with respect to the proposed sale of the Company by its
ultimate parent company, Thermo Electron Corporation, as part of a major
reorganization plan.
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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 10th day of February 2000.
TREX MEDICAL CORPORATION
/s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description of Exhibit
10.1 First Amendment to Purchase Agreement dated as of December 3,
1999, among the Registrant, United States Surgical Corporation,
and Tyco Healthcare Group LP*.
27.1 Financial Data Schedule for the period ended January 1, 2000.
27.2 Restated Financial Data Schedule for the period ended January
2, 1999.
* Confidential treatment requested as to certain portions of the document, which
portions have been omitted and filed separately with the Securities and
Exchange Commission.
</TABLE>
Exhibit 10.1
This First Amendment to Purchase Agreement ("First Amendment"), by and
between the Lorad division of Trex Medical Corporation (together with its
affiliates, "Lorad"), United States Surgical Corporation (together with its
affiliates, "USSC") and Tyco Healthcare Group, LP (together with its affiliates,
"Tyco"), is dated as of December 3, 1999.
WHEREAS, Lorad, USSC, and Tyco are parties to that certain Purchase
Agreement ("Purchase Agreement"), dated as of May 14, 1999;
WHEREAS, Lorad, USSC and Tyco wish to amend the Purchase Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Section 1 is hereby amended to add the following sentence between the
first and second sentences of that section:
"(Table shall mean both the stereotactic prone table as well as the
Digital Spot Mammography unit, which were sold together as a system by
Lorad to USSC.)"
2. Sections 2(b), 2(c), and 3 of the Purchase Agreement shall be deleted
in their entirety.
3. The following language shall be substituted for Section 2(b):
(b) Lorad will take title possession of all ****** Tables in accordance
with the following schedule: ****** Tables per quarter for a period of
****** calendar quarters commencing ****** and ending ******. The last
****** Tables will be picked up and Lorad will take title and
possession on ******. Lorad may, in its discretion, accelerate the
foregoing schedule. The purchase price will be ****** per Table for an
aggregate purchase price of ****** (which aggregate shall be adjusted
downward in the event the actual number of Tables available for sale is
less than ******). The ****** purchase price will be payable at a rate
of ****** per quarter for a period of seven calendar quarters
commencing ****** and ending ******, followed by a final payment of
****** on ******. If more than ****** Tables are bought by Lorad from
USSC in any of these ****** calendar quarters, Lorad will pay to USSC
within thirty (30) days after delivery and acceptance of any such Table
by Lorad, the sum of ****** per Table. To the extent any payment in
excess of the required payment is made in any of the ****** calendar
quarters referenced above, the remaining installments shall be reduced
(in reverse order) so that the aggregate purchase price paid does not
exceed ******. For example, if in the calendar quarter ending ******,
Lorad purchases 22 Tables, then the payment due March 31, 2000 shall be
****** and the payment ****** shall be ******. The purchase price for
the Tables set forth above and the Additional Consideration set forth
below include all federal, state or local excise, sales, use, or other
similar taxes.
4. The following language shall be substituted for Section 2(c):
<PAGE>
In addition to the purchase price set forth above, Lorad agrees to pay
USSC an additional amount not to exceed ****** in connection with its
purchase of Tables with a manufacture date after January 1, 1998 (the
"Additional Consideration"). There are ****** such Tables, ****** of
which were manufactured prior to January 1, 1998, and Lorad has agreed
to include those ****** in regards to the Additional Consideration.
These ****** Tables are hereafter referred to as the "Additional
Consideration Table(s)." The Additional Consideration shall be payable
upon resale of Current Inventory Tables to end users as opposed to
distributors unless such distributors have paid the purchase price in
full. The Additional Consideration shall be payable as each Current
Inventory Table is sold at a rate per Current Inventory Table as
specified in the following schedule:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Current Inventory Table Rate Maximum
- -----------------------------------------------------------------------------------------
Units ****** to ****** ****** per table ******
Units ****** to ****** ****** per table ******
Units ****** to****** ****** per table ******
</TABLE>
Additional Consideration payments will be payable in arrears quarterly
but (subject to reductions for sales to Novation and shortfalls in the
number of Tables actually sold to Lorad) in any event any balance of
the Additional Consideration owed but remaining unpaid will be paid to
USSC by Lorad on or before ******. If the actual number of Additional
Consideration Tables available for sale is less than ****** Tables,
then the Additional Consideration payable to USSC shall be reduced by
****** multiplied by the shortfall. In addition, notwithstanding the
above, sales to Novation (as described in Section 8 below) will reduce
the Additional Consideration by ****** per Additional Consideration
Table sold to Novation (as described in Section 8 below). Each
Additional Consideration Table sold or leased to Novation or any
Novation participants (as described in Section 8 below), whether sold
or leased for the account of Lorad or USSC, will reduce the Additional
Consideration payable to USSC by ****** per Additional Consideration
Table sold (or leased). By way of example, if six (6) Additional
Consideration Tables are sold or leased to Novation, three (3) for the
account of USSC and three (3) for the account of Lorad, the maximum
Additional Consideration payable to USSC by Lorad shall not exceed
******. In addition, for any Novation sales or leases after ******,
USSC shall refund to Lorad a portion of the Additional Consideration
paid at a rate of ****** per Additional Consideration Table sold or
leased to Novation (whether sold pursuant to Section 8 below for the
account of USSC or Lorad). Such refunds shall be paid to Lorad by USSC
within fifteen (15) business days of the sale to Novation. Overdue
refunds shall be subject to interest at a rate of 8% per annum computed
on a 30/360 day year until paid in full by USSC to Lorad.
5. Section 2(d) is hereby amended to delete the third sentence thereof and
substitute the following therefor:
"Any damage to Tables with a manufacture date prior to January 1, 1998,
whether due to age, caused directly or indirectly by USSC or its
agents, or due to any other factor shall be reported by Lorad to USSC
on or before June 30, 2000."
<PAGE>
6. The following language will be substituted for Section 3:
******. Lorad will pick up and take title and possession of the Tables
in accordance with the following schedule: ****** Tables per quarter
for a period of ****** calendar quarters commencing ****** and ending
******. The last 8 Tables will be picked up by Lorad and Lorad will
take title and possession thereof on ******. Lorad may, in its
discretion, accelerate the foregoing schedule. USSC agrees that it
shall not sell, give away, transfer, or otherwise dispose of the Tables
until scheduled pick-up and title transfer. In the event that fewer
than ****** Tables are sold to Lorad, USSC shall pay to Lorad an amount
equal to the shortfall multiplied by Lorad's current list price for
stereotactic tables. Such amount shall be due within fifteen days of
discovery of such shortfall, but in any event shall be paid no later
than ******.
IN WITNESS WHEREOF, the undersigned have executed as an instrument
under seal as of the date first written above.
TREX MEDICAL CORPORATION,
LORAD division
By: /s/ William Webb
--------------------------
Name: William Webb
Title: President & CEO
UNITED STATES SURGICAL, division of Tyco
Healthcare Group, LP
By: /s/ Steven Amlico
-------------------------
Name: Steven Amlico
Title: VP & Controller
TYCO HEALTHCARE GROUP, LP
By: /s/ Larry C. Heaton II
----------------------------
Name: Larry C. Heaton II
Title: President, USS
<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 PERIOD ENDED JANUARY 1, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> JAN-01-2000
<CASH> 8,645
<SECURITIES> 0
<RECEIVABLES> 47,162
<ALLOWANCES> 3,312
<INVENTORY> 51,437
<CURRENT-ASSETS> 137,310
<PP&E> 27,583
<DEPRECIATION> 13,859
<TOTAL-ASSETS> 261,901
<CURRENT-LIABILITIES> 65,110
<BONDS> 168
0
0
<COMMON> 341
<OTHER-SE> 194,925
<TOTAL-LIABILITY-AND-EQUITY> 261,901
<SALES> 43,860
<TOTAL-REVENUES> 43,860
<CGS> 34,533
<TOTAL-COSTS> 34,533
<OTHER-EXPENSES> 4,988
<LOSS-PROVISION> 259
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> (9,824)
<INCOME-TAX> (3,076)
<INCOME-CONTINUING> (6,942)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,942)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
<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 PERIOD ENDED JANUARY 2, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 13,983
<SECURITIES> 0
<RECEIVABLES> 72,697
<ALLOWANCES> 2,805
<INVENTORY> 86,926
<CURRENT-ASSETS> 184,117
<PP&E> 30,337
<DEPRECIATION> 11,311
<TOTAL-ASSETS> 324,411
<CURRENT-LIABILITIES> 75,323
<BONDS> 562
0
0
<COMMON> 341
<OTHER-SE> 239,555
<TOTAL-LIABILITY-AND-EQUITY> 324,411
<SALES> 64,929
<TOTAL-REVENUES> 64,929
<CGS> 42,556
<TOTAL-COSTS> 42,556
<OTHER-EXPENSES> 5,084
<LOSS-PROVISION> 211
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> (2,785)
<INCOME-TAX> (1,294)
<INCOME-CONTINUING> (1,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,491)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
