<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission File Number 0-6516
DATASCOPE CORP.
- - - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2529596
- - - - ------------------------------- --------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 Philips Parkway, Montvale, New Jersey 07645-9998
- - - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 391-8100
- - - - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report:
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 pre-
ceding 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
----- -----
Number of Shares of Company's Common Stock outstanding as of January 31, 1995:
16,065,723.
<PAGE> 2
DATASCOPE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
NET SALES
Sales increased 7% and 8% in the second quarter and first six months of
fiscal 1995 respectively, as compared to the corresponding periods last
year, primarily due to worldwide growth of the Cardiac Assist division
and InterVascular, the Company's subsidiary that produces vascular
grafts.
The Cardiac Assist division made the principal contribution to
increased sales with continued strong worldwide sales of the
intra-aortic balloon catheters and the new System 97 intra-aortic
balloon pump.
The increased vascular graft sales were primarily attributable to higher
international sales of coated grafts. Collagen product sales increased
in the second quarter of fiscal 1995 compared to the same period last
year.
Sales of the Patient Monitoring division declined in the second quarter
and first six months of fiscal 1995 compared to the same periods last
year due to the impact of the U.S. shipment hold on Point of View(TM)
monitors. International sales of monitoring products increased. As
previously reported, the Company voluntarily put U.S. shipments of the
Point of View monitor on hold in October 1994 after an audit conducted
by the Company disclosed a regulatory issue concerning data submitted to
the Food and Drug Administration (FDA). After meeting with the FDA on
November 9, 1994, the Company continued to hold U.S. shipments pending
the FDA's satisfactory review of data supporting the Company's 510(k)
filing.
The weakening of the U.S. dollar compared to major European currencies
favorably impacted sales by approximately $600 thousand and $1.1 million
in the second quarter and first six months of fiscal 1995, compared to
the corresponding periods last year.
GROSS PROFIT (NET SALES LESS COST OF SALES)
The gross profit increase of 8% in the second quarter of fiscal 1995 was
slightly higher than the sales increase primarily reflecting an improved
mix of sales of higher margin products. The gross profit increase of 8%
in the first six months of fiscal 1995 was in line with the sales
increase. The gross profit percentage improved slightly to 65.5% and
65.2% for the second quarter and first six months of fiscal 1995,
respectively, compared to 65.0% and 65.1% for the corresponding periods
last year because of the more favorable sales mix.
<PAGE> 3
RESEARCH AND DEVELOPMENT (R&D)
As a percentage of sales, R&D expenses amounted to 10% in both the
second quarter and first six months of fiscal 1995 as compared to 11%
for the same periods last year. Total R&D expenses declined 2% in the
second quarter of fiscal 1995 compared to the same period last year
primarily attributable to a slight decline in R&D expenditures in the
Patient Monitoring and Cardiac Assist divisions, as both divisions
introduced major new products last year. Partially offsetting the above
decline was increased R&D expenditures for collagen products and
vascular grafts. R&D expenses increased 3% in the first six months of
fiscal 1995 compared to the corresponding period last year due to higher
R&D expenditures for collagen products and vascular grafts.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A)
As a percentage of sales, SG&A expenses were 43.5% and 44.5% in the
second quarter and first six months of fiscal 1995, respectively,
compared to the 42.3% and 43.9% for the corresponding periods last year.
SG&A expenses increased $2.0 million or 10% in the second quarter and
$3.4 million or 9% in the first six months of fiscal 1995 compared to
the corresponding periods last year. The increases were primarily
attributable to increased sales and marketing expenses to support the
higher sales, and to expenses associated with installation of new
computer systems.
The weakening of the U.S. dollar compared to major European currencies
increased SG&A expenses by approximately $400 thousand and $600 thousand
in the second quarter and first six months of fiscal 1995, respectively,
compared to the corresponding periods last year.
INTEREST INCOME AND EXPENSE
The higher interest income in the second quarter and first six months of
fiscal 1995 compared to the same periods last year was attributable to
an increase in the investment portfolio and an increase in interest
rates.
OTHER INCOME AND EXPENSE
The Company enters into foreign exchange forward contracts to hedge a
major portion of its foreign currency exposures, primarily related to
certain receivables denominated in foreign currencies. The hedging has
reduced the Company's exposure to fluctuations in foreign currencies.
The net foreign exchange transaction gain or loss is reported in other
income and expense. Forward foreign exchange contracts outstanding at
December 31, 1994 totaled $3.7 million, all of which were in European
currencies, with maturities that do not exceed 12 months.
<PAGE> 4
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained its strong financial position during the first
six months of fiscal 1995. Working capital was $103.5 million at
December 31, 1994, compared to $105.0 million at June 30, 1994. The
slight decline in working capital was primarily attributable to an $8.1
million investment in non-current marketable securities.
The current ratio at December 31, 1994 was 4.6:1 compared to 4.2:1 at
June 30, 1994. Cash provided by operating activities was $15.3 million
in the first six months of fiscal 1995 compared to $7.0 million in the
corresponding period last year, with the increase primarily attributable
to higher accounts receivable collections. In the first six months of
fiscal 1995 cash was used to purchase $8.1 million of marketable
securities with terms up to 4 years and $6.9 million of plant and
equipment which included sales demonstration units for new products.
Management believes that the Company's financial resources are
sufficient to meet its projected cash requirements. The moderate rate
of current U.S. inflation has not significantly affected the
Company.
<PAGE> 5
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET SALES $90,000 $83,300 $48,400 $45,200
------- ------- ------- -------
Costs and Expenses:
Cost of sales 31,278 29,101 16,681 15,804
Research and development
expenses 9,116 8,850 4,665 4,783
Selling, general and
administrative expenses 40,010 36,570 21,068 19,104
------- ------- ------- -------
80,404 74,521 42,414 39,691
------- ------- ------- -------
Operating Earnings 9,596 8,779 5,986 5,509
Other (Income) Expense:
Interest income (1,132) (816) (605) (423)
Interest expense 7 9 4 3
Other, net 97 163 84 147
------- ------- ------- -------
(1,028) (644) (517) (273)
------- ------- ------- -------
Earnings Before Taxes on Income 10,624 9,423 6,503 5,782
Taxes on Income 3,506 3,109 2,146 1,908
------- ------- ------- -------
Net Earnings $ 7,118 $ 6,314 $ 4,357 $ 3,874
======= ======= ======= =======
Earnings Per Share (Note 3) $0.44 $0.39 $0.27 $0.24
======= ======= ======= =======
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding (Note 3) 16,185 16,148 16,188 16,164
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE> 6
DATASCOPE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Dec. 31, June 30,
1994 1994
----------- ---------
(unaudited) (a)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 2,676 $ 2,082
Marketable securities, at cost (Note 5) 42,939 43,339
Accounts receivable, less allowance for doubtful
accounts of $1,275 and $1,188 43,533 51,278
Inventories (Note 2) 33,218 33,474
Prepaid expenses and other current assets (Note 4) 10,068 8,081
-------- --------
Total Current Assets 132,434 138,254
Property, Plant and Equipment, net of accumulated
depreciation of $31,383 and $28,358 42,441 40,864
Marketable Securities, non-current at cost (Note 5) 8,074 -
Other Assets (Note 4) 6,016 6,303
-------- --------
$188,965 $185,421
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,650 $ 9,515
Accrued expenses 12,145 11,485
Accrued compensation 7,275 9,813
Income taxes payable 1,898 2,462
-------- --------
Total Current Liabilities 28,968 33,275
Other Liabilities 8,506 8,084
Stockholders' Equity (Note 3)
Preferred stock, par value $1.00 per share:
Authorized 5,000,000 shares;
Issued and outstanding, none - -
Common stock, par value $.01 per share:
Authorized, 45,000,000 shares; Issued and
outstanding, 16,059,608 and 16,043,411 shares 161 160
Additional paid-in capital 41,697 41,605
Retained earnings 111,126 104,008
Cumulative translation adjustments (1,493) (1,711)
-------- --------
151,491 144,062
-------- --------
$188,965 $185,421
======== ========
</TABLE>
(a) Derived from audited financial statements
See notes to consolidated financial statements
<PAGE> 7
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 7,118 $ 6,314
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,001 2,957
Provision for supplemental pension 460 700
Provision for losses on accounts receivable 103 72
Deferred income tax (benefit) - (31)
Tax benefit of stock options exercised - 7
Changes in operating assets and liabilities:
Accounts receivable 7,785 (79)
Inventories 1,991 (1,786)
Other assets (1,764) (4,073)
Accounts payable (1,894) 1,801
Income taxes payable (564) 2,345
Accrued and other liabilities (1,981) (1,203)
-------- --------
Net cash provided by operating activities 15,255 7,024
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (6,933) (6,865)
Purchases of short-term marketable securities (41,081) (38,587)
Sales of short-term marketable securities 41,481 38,919
Purchases of long-term marketable securities (8,110) -
Sales of long-term marketable securities - -
-------- --------
Net cash used in investing activities (14,643) (6,533)
-------- --------
FINANCING ACTIVITIES:
Exercise of stock options 172 85
Treasury shares acquired upon exercise of stock options (79) (9)
-------- --------
Net cash provided by (used in) financing activities 93 76
-------- --------
Effect of exchange rates on cash (111) (37)
-------- --------
Increase (decrease) in cash and cash equivalents 594 530
Cash and cash equivalents, beginning of period 2,082 856
-------- --------
Cash and cash equivalents, end of period $ 2,676 $ 1,386
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 7 $ 9
-------- --------
Income taxes $ 3,085 $ 2,076
-------- --------
</TABLE>
See notes to consolidated financial statements
<PAGE> 8
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of December 31, 1994, the statements of
consolidated earnings for the three and six month periods ended December 31,
1994 and 1993 and the consolidated statements of cash flows for the six month
periods ended December 31, 1994 and 1993 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods presented have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1994 annual
report to shareholders. The results of operations for the period ended December
31, 1994 are not necessarily indicative of the operating results for the full
year.
The presentation of certain prior year information has been reclassified to
conform with the current year presentation.
2. INVENTORIES
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market.
<TABLE>
<CAPTION>
(In thousands)
DECEMBER 31, JUNE 30,
1994 1994
------------ --------
<S> <C> <C>
Materials $16,194 $15,785
Work in Process 5,470 3,582
Finished Goods 11,554 14,107
------- -------
$33,218 $33,474
======= =======
</TABLE>
3. STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity for the six months ended
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Net income $7,118
Translation adjustments 218
Proceeds on the exercise of options to purchase
16,197 shares of common stock 93
------
Total increase in stockholders' equity $7,429
======
</TABLE>
<PAGE> 9
4. TAXES ON INCOME
Effective July 1, 1993, the Company adopted FASB Statement No. 109, "Accounting
for Income Taxes." Under Statement 109, the asset and liability method is used
in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
Prior to the adoption of Statement 109, income tax was determined using the
deferred method. Deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the difference
originated.
Included in prepaid expenses at December 31, 1994 is a current deferred tax
asset of $1,672,000. Other assets at December 31,1994 includes a non-current
deferred tax asset of $1,182,000, which is net of a valuation allowance of
$1,236,000 related to tax loss carryforwards. These amounts represent
management's best estimate of the amount which more likely than not will be
realized.
There was no change in the valuation allowance during the six months ended
December 31, 1994.
5. NEW FINANCIAL ACCOUNTING STANDARDS IN FISCAL 1995
As required by the Financial Accounting Standards Board, the Company has adopted
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits", which requires accrual accounting for postemployment
benefits rather than the cash method, and Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (Statement 115), which establishes the accounting and reporting for
such investments. The Company has determined that these statements do not have a
material impact on the Company's consolidated financial statements. For purposes
of Statement 115, the Company has determined that its investment portfolio, both
current and non-current, will be classified as held-to-maturity and therefore
carried at amortized cost.
<PAGE> 10
Part II:
Item 6 Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. No reports on Form 8-K
have been filed during the quarter for which
this report is filed.
<PAGE> 11
Form 10-Q
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.
DATASCOPE CORP.
Registrant
By: /s/ LAWRENCE SAPER
------------------------------------
Lawrence Saper
Chairman of the Board
and President
By: /s/ MURRAY PITKOWSKY
------------------------------------
Murray Pitkowsky
Senior Vice President, Secretary and
Chief Financial Officer
Dated: February 10, 1995
<PAGE> 12
EXHIBIT INDEX
-------------
Exhibit No. 27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From Consolidated
Balance Sheets and Statements of Consolidated Earnings.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,676
<SECURITIES> 42,939
<RECEIVABLES> 44,808
<ALLOWANCES> (1,275)
<INVENTORY> 33,218
<CURRENT-ASSETS> 132,434
<PP&E> 73,824
<DEPRECIATION> (31,383)
<TOTAL-ASSETS> 188,965
<CURRENT-LIABILITIES> 28,968
<BONDS> 0
<COMMON> 161
0
0
<OTHER-SE> 151,330
<TOTAL-LIABILITY-AND-EQUITY> 188,965
<SALES> 90,000
<TOTAL-REVENUES> 90,000
<CGS> 31,278
<TOTAL-COSTS> 31,278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 10,624
<INCOME-TAX> 3,506
<INCOME-CONTINUING> 7,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,118
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
