<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 March 31, 1995
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 April 28, 1995:
16,069,399.
<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 third quarter and first nine 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 demand for intra-aortic balloon catheters.
The System 97 intra-aortic balloon pump, manufactured by the Company's
Patient Monitoring division and marketed by its Cardiac Assist division
also contributed to increased sales and earnings.
Sales of the Patient Monitoring division declined in the third quarter
and first nine months of fiscal 1995 compared to the same periods last
year primarily as a result of the U.S. shipment hold and sales reserves
taken on the Point of View(R) (POV) monitors. As previously reported,
the Company voluntarily informed the Food and Drug Administration (FDA)
of the results of certain regulatory audits. In particular, in October
1994 the Company notified the FDA of questions relating to the POV
monitor manufactured by the Patient Monitoring division, and in December
1993 the Company notified the FDA of questions relating to the
Pre-Market Approval (PMA) application for the Hemaguard(TM) graft
submitted by InterVascular, Inc. The Company voluntarily placed a hold
on domestic shipments of the POV monitor and instituted additional
independent regulatory audits intended to assure that all Company
filings are in compliance with applicable FDA regulations.
Subsequently, on April 26th, the Company advised its customers that the
POV monitor is being recalled from the domestic market. The Company
offered its customers other Datascope patient monitoring products
pending the completion of engineering corrections and regulatory
review, and is also offering credits or refunds to customers.
The FDA has determined to apply the provisions of the Application
Integrity Policy (AIP) to products manufactured by the Company's Patient
Monitoring division and InterVascular, Inc. The AIP generally provides
that substantive review of marketing applications are suspended pending
an assessment by the FDA of the validity of the data contained in such
applications. While the Company believes that the independent auditing
process previously initiated by it will facilitate the assessment by the
FDA of the validity of data, the AIP will probably result in longer time
frames for product approvals for the affected business units. The
Company intends to continue to cooperate with the FDA.
<PAGE> 3
Other product sales increases in the third quarter and first nine months
of fiscal 1995 were attributable to higher international sales of
coated grafts and higher worldwide collagen product sales.
The PMA application for VasoSeal, the percutaneous device for achieving
hemostasis in catheterization procedures involving puncture of the
femoral artery, was referred by the FDA to its Circulatory System
Devices Panel. The Panel met on May 8, 1995 to review the VasoSeal PMA
and recommended approval of VasoSeal for use in both coronary
angiography and coronary angioplasty procedures. The Panel's
recommendation is an important step in the regulatory approval process
leading to final FDA approval. The Company cannot estimate the timing
of final FDA action on the VasoSeal PMA.
The weakening of the U.S. dollar compared to major European currencies
favorably impacted sales by approximately $900 thousand and $2.0 million
in the third quarter and first nine months of fiscal 1995, respectively,
compared to the corresponding periods last year.
GROSS PROFIT (NET SALES LESS COST OF SALES)
The gross profit increase of 7% and 8% in the third quarter and first
nine months of fiscal 1995, respectively, was consistent with the sales
increase.
RESEARCH AND DEVELOPMENT (R&D)
Total R&D expenses of $5.0 million declined 2% in the third 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 of $14.2 million in the first nine months of fiscal 1995
were 1% higher than the corresponding period last year due to higher R&D
expenditures for collagen products and vascular grafts. As a percentage
of sales, R&D expenses amounted to 10% in both the third quarter and
first nine months of fiscal 1995 as compared to 11% for the same periods
last year.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES (SG&A)
SG&A expenses of $21.7 million increased $2.1 million or 11% in the
third quarter of fiscal 1995 compared to the third quarter last year.
SG&A expenses of $61.8 million were $5.5 million or 10% greater in the
first nine months of fiscal 1995 compared to the corresponding period
last year. The increases were primarily attributable to increased sales
and marketing expenses to support the higher sales, expenses associated
with installation of new computer systems, and higher legal and
regulatory expenses.
<PAGE> 4
The weakening of the U.S. dollar compared to major European currencies
increased SG&A expenses by approximately $464 thousand and $1.1 million
in the third quarter and first nine months of fiscal 1995, respectively,
compared to the corresponding periods last year.
As a percentage of sales, SG&A expenses were 43.1% and 44.0% in the
third quarter and first nine months of fiscal 1995, respectively,
compared to 41.6% and 43.1% for the corresponding periods last year.
INTEREST INCOME AND EXPENSE
The higher interest income in the third quarter and first nine 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
March 31, 1995 totaled $2.3 million, all of which were in European
currencies, with maturities that do not exceed 12 months.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintained its strong financial position during the first
nine months of fiscal 1995. Working capital was $107.5 million at March
31, 1995 compared to $105.0 million at June 30, 1994. Working capital
was reduced in the first nine months of fiscal 1995 by a $9.5 million
investment in non-current marketable securities with maturities up to 4
years.
The current ratio at March 31, 1995 was 4.5:1 compared to 4.2:1 at June
30, 1994. Cash provided by operating activities was $25.4 million in
the first nine months of fiscal 1995 compared to $11.5 million in the
corresponding period last year, with the increase primarily attributable
to higher accounts receivable collections. In the first nine months of
fiscal 1995 cash was used to purchase $10.8 million of plant and
equipment which included sales demonstration units for new products.
After deducting $2.5 million book value of sales demonstration units
returned to inventory, the net additions to plant and equipment were
$8.3 million.
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
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAR. 31, JUNE 30,
1995 1994
----------- --------
(unaudited) (a)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,981 $ 2,082
Marketable securities, at cost (Note 4) 48,361 43,339
Accounts receivable, less allowance for doubtful
accounts of $1,355 and $1,188 42,800 51,278
Inventories (Note 2) 35,587 33,474
Prepaid expenses and other current assets 9,699 8,081
-------- --------
Total Current Assets 138,428 138,254
Property, Plant and Equipment, net of accumulated
depreciation of $32,210 and $28,358 44,196 40,864
Marketable Securities, non-current at cost (Note 4) 9,509 -
Other Assets 6,185 6,303
-------- --------
$198,318 $185,421
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,962 $ 9,515
Accrued expenses 13,383 11,485
Accrued compensation 8,009 9,813
Income taxes payable 2,542 2,462
-------- --------
Total Current Liabilities 30,896 33,275
Other Liabilities 9,849 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, 16,066,159 and 16,043,411 shares 161 160
Additional paid-in capital 41,780 41,605
Retained earnings 115,645 104,008
Cumulative translation adjustments (13) (1,711)
-------- --------
157,573 144,062
-------- --------
$198,318 $185,421
======== ========
</TABLE>
(a) Derived from audited financial statements
See notes to consolidated financial statements
<PAGE> 6
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------- ------------------
1995 1994 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET SALES $140,500 $130,600 $50,500 $47,300
-------- -------- -------- -------
Costs and Expenses:
Cost of sales 49,053 45,751 17,775 16,650
Research and development
expenses 14,152 13,975 5,036 5,125
Selling, general and
administrative expenses 61,754 56,230 21,744 19,660
-------- -------- -------- -------
124,959 115,956 44,555 41,435
-------- -------- -------- -------
OPERATING EARNINGS 15,541 14,644 5,945 5,865
Other (Income) Expense:
Interest income (1,859) (1,193) (727) (377)
Interest expense 18 17 11 8
Other, net 209 320 112 157
-------- -------- -------- -------
(1,632) (856) (604) (212)
-------- -------- -------- -------
EARNINGS BEFORE TAXES ON INCOME 17,173 15,500 6,549 6,077
Taxes on Income 5,536 4,993 2,030 1,884
-------- -------- -------- -------
NET EARNINGS $ 11,637 $ 10,507 $ 4,519 $ 4,193
======== ======== ======== =======
Earnings Per Share (Note 3) $ 0.72 $ 0.65 $ 0.28 $ 0.26
======== ======== ======== =======
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding (Note 3) 16,206 16,152 16,211 16,163
======== ======== ======== =======
</TABLE>
See notes to consolidated financial statements
<PAGE> 7
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Earnings $ 11,637 $ 10,507
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 5,937 4,476
Provision for supplemental pension 646 850
Provision for losses on accounts receivable 253 117
Deferred income tax (benefit) - (31)
Tax benefit of stock options exercised 7 7
Changes in operating assets and liabilities:
Accounts receivable 9,047 (5,988)
Inventories 1,331 (1,059)
Other assets (1,532) (3,448)
Accounts payable (2,703) 2,300
Income taxes payable 80 2,159
Accrued and other liabilities 722 1,639
-------- --------
Net cash provided by operating activities 25,425 11,529
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (10,772) (11,757)
Purchases of short-term marketable securities (57,077) (54,858)
Sales of short-term marketable securities 52,055 56,174
Purchases of long-term marketable securities (9,509) -
-------- --------
Net cash used in investing activities (25,303) (10,441)
-------- --------
FINANCING ACTIVITIES:
Exercise of stock options 292 97
Treasury shares acquired upon exercise of stock options (124) (9)
-------- --------
Net cash provided by financing activities 168 88
-------- --------
Effect of exchange rates on cash (391) (66)
-------- --------
Increase (decrease) in cash and cash equivalents (101) 1,110
Cash and cash equivalents, beginning of period 2,082 856
-------- --------
Cash and cash equivalents, end of period $ 1,981 $ 1,966
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 18 $ 17
-------- --------
Income taxes $ 4,480 $ 4,146
-------- --------
</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 March 31, 1995, the statements of
consolidated earnings for the three and nine month periods ended March 31, 1995
and 1994 and the consolidated statements of cash flows for the nine month
periods ended March 31, 1995 and 1994 have been prepared by the Company, without
audit. In the opinion of management, all adjustments (which include only normal
recurring adjustments) have been made that are necessary to present fairly the
financial position, results of operations and cash flows for all periods
presented.
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 the condensed consolidated
financial statements included herein be read in conjunction with the financial
statements and notes included in the Company's June 30, 1994 annual report to
shareholders. The results of operations for the period ended March 31, 1995 are
not necessarily indicative of a full year's operations.
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)
March 31, June 30,
1995 1994
--------- --------
<S> <C> <C>
Materials $18,752 $15,785
Work in Process 4,377 3,582
Finished Goods 12,458 14,107
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$35,587 $33,474
======= =======
</TABLE>
3. STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity for the nine months ended
March 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Net income $11,637
Translation adjustments 1,698
Proceeds on the exercise of options to purchase
22,748 shares of common stock 176
-------
Total increase in stockholders' equity $13,511
=======
</TABLE>
<PAGE> 9
4. 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. A Report on Form Form 8-K was
filed on April 27, 1995.
<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
/s/ Lawrence Saper
By:______________________________
Lawrence Saper
Chairman of the Board
and President
/s/ Murray Pitkowsky
By:______________________________
Murray Pitkowsky
Senior Vice President and Secretary
Dated: May 12, 1995
<PAGE> 12
EXHIBIT INDEX
Exhibit No. Description Page No.
- - ---------- ------------- -------
Ex-27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,981
<SECURITIES> 48,361
<RECEIVABLES> 44,155
<ALLOWANCES> (1,355)
<INVENTORY> 35,587
<CURRENT-ASSETS> 138,428
<PP&E> 76,406
<DEPRECIATION> (32,210)
<TOTAL-ASSETS> 198,318
<CURRENT-LIABILITIES> 30,896
<BONDS> 0
<COMMON> 161
0
0
<OTHER-SE> 157,412
<TOTAL-LIABILITY-AND-EQUITY> 198,318
<SALES> 140,500
<TOTAL-REVENUES> 140,500
<CGS> 49,053
<TOTAL-COSTS> 49,053
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18
<INCOME-PRETAX> 17,173
<INCOME-TAX> 5,536
<INCOME-CONTINUING> 11,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,637
<EPS-PRIMARY> 0.72
<EPS-DILUTED> 0.72
</TABLE>
