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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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-6516
DATASCOPE CORP.
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(Exact name of registrant as specified in its charter)
Delaware 13-2529596
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14 Philips Parkway, Montvale, New Jersey 07645-9998
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 391-8100
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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 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
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Number of Shares of Company's Common Stock outstanding as of January 31, 1996:
16,118,641.
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DATASCOPE CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net Sales
Sales increased 8% and 9% in the second quarter and first six months of
fiscal 1996, respectively, as compared to the corresponding periods last
year, reflecting increases in all of the Company's businesses.
The Cardiac Assist division made the principal contribution to increased
sales as a result of continued strong worldwide sales of intra-aortic
balloon catheters.
Worldwide sales of Patient Monitoring products increased for the second
consecutive quarter, despite slightly lower domestic sales, as a result
of continued strong international sales growth. The slight decline in
domestic Patient Monitoring sales was primarily due to the continued
U.S. shipment hold on the Point of View(R) monitor. 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). The Company continues to hold U.S.
shipments pending its submission, and satisfactory review by FDA, of a
new 510(k) pre-market notification.
InterVascular, Inc., the Company's wholly owned producer of Vascular
grafts, continued its strong growth pattern with sales primarily in the
international market.
The Company was pleased with the progress of the VasoSeal(R) U.S. market
launch initiated during the second quarter of fiscal 1996. The VasoSeal
vascular hemostasis device is currently the only device of its kind
approved by the Food and Drug Administration and sold in the U.S., for
use in both coronary angiography and coronary angioplasty procedures,
key tools in the battle against heart disease.
The weakening of the U.S. dollar compared to major European currencies
favorably impacted sales by approximately $400 thousand and $1.1 million
in the second quarter and first six months of fiscal 1996, respectively,
compared to the corresponding periods last year.
Gross Profit (Net Sales Less Cost of Sales)
The gross profit percentage improved to 65.9% and 65.7% for the second
quarter and first six months of fiscal 1996, respectively, compared to
65.2% and 64.9% for the corresponding periods last year because of a
more favorable sales mix.
2
<PAGE> 3
Research and Development (R&D)
R&D expenses, as a percentage of sales, amounted to 11% and 12% in the
second quarter and first six months of fiscal 1996, as compared to 10%
for the same periods last year. Total R&D expenses increased 25% and 26%
in the second quarter and first six months of fiscal 1996, respectively,
compared to the same periods last year as R&D activity increased in all
businesses.
Selling, General & Administrative Expenses (SG&A)
SG&A expenses, as a percentage of sales, were 42.5% and 43.7% in the
second quarter and first six months of fiscal 1996, respectively,
compared to 43.2% and 44.1% for the corresponding periods last year.
SG&A expenses increased $1.3 million or 6% in the second quarter and
$3.2 million or 8% in the first six months of fiscal 1996, compared to
the corresponding periods last year. The increases were primarily
attributable to sales and marketing expenses relating to higher sales
volume and start-up costs associated with the U.S. market launch of
VasoSeal.
The weakening of the U.S. dollar compared to major European currencies
increased SG&A expenses by approximately $300 thousand and $700 thousand
in the second quarter and first six months of fiscal 1996, respectively,
compared to the corresponding periods last year.
Income from Settlement of Litigation
In the second quarter of fiscal 1996 the Company settled all litigation
brought by its wholly owned subsidiaries, InterVascular, Inc. and
InterVascular, SA (France), against several former employees and certain
other defendants. Income from the settlement of litigation, net of
related expenses, was $10.7 million, or $7.9 million after tax,
equivalent to $0.47 per share.
Interest Income and Expense
The higher interest income in the second quarter and first six months of
fiscal 1996 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. Foreign exchange forward contracts outstanding at
December 31, 1995 totaled $700 thousand, all of which were in European
currencies, with maturities that do not exceed 12 months.
3
<PAGE> 4
Liquidity and Capital Resources
The Company maintained its strong financial position during the first
six months of fiscal 1996. Working capital was $126.0 million at
December 31, 1995, compared to $110.7 million at June 30, 1995.
The current ratio at December 31, 1995 was 4.5:1 compared to 4.3:1 at
June 30, 1995. Cash provided by operating activities was $16.8 million
in the first six months of fiscal 1996 compared to $15.3 million in the
corresponding period last year. In the first six months of fiscal 1996
cash provided by operating activities included litigation settlement
income of $7.9 million, partially offset by an increase in inventory to
support the higher sales level and an increase in accounts receivable
attributable to extended terms given to certain customers in September
1995 and lower December collections. In the first six months of fiscal
1995 cash from operating activities was favorably impacted by
significantly lower accounts receivable due to strong collections.
In the first six months of fiscal 1996 cash was used to purchase $10.4
million of marketable securities and $5.7 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.
4
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DATASCOPE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC 31, JUNE 30,
1995 1995
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ASSETS (unaudited) (a)
<S> <C> <C>
Current Assets:
Cash and cash equivalents 4,404 3,096
Marketable securities 63,600 53,165
Accounts receivable, less allowance for doubtful
accounts of $1,317 and $1,273 47,063 45,590
Inventories (Note 2) 40,933 36,499
Prepaid expenses and other current assets 6,095 5,880
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Total Current Assets 162,095 144,230
Property, Plant and Equipment, net of accumulated
depreciation of $35,307 and $32,681 44,884 44,278
Marketable Securities, non-current 9,328 9,354
Other Assets 9,789 9,001
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226,096 206,863
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 7,577 7,644
Accrued expenses 16,188 14,149
Accrued compensation 7,554 9,384
Taxes on income 4,728 2,309
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Total Current Liabilities 36,047 33,486
Other Liabilities 10,588 10,058
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, 16,117,441 and 16,070,689 shares 161 161
Additional paid-in capital 42,477 41,837
Retained earnings 137,160 121,347
Cumulative translation adjustments (337) (26)
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179,461 163,319
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226,096 206,863
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</TABLE>
(a) Derived from audited financial statements
See notes to consolidated financial statements
5
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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,
---------------------- ----------------------
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
NET SALES 98,200 90,000 52,300 48,400
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Costs and Expenses:
Cost of sales 33,720 31,565 17,859 16,834
Research and development
expenses 11,450 9,116 5,839 4,665
Selling, general and
administrative expenses 42,938 39,723 22,244 20,915
Income from settlement of litigation (Note 4) (10,691) -- (10,691) --
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77,417 80,404 35,251 42,414
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OPERATING EARNINGS 20,783 9,596 17,049 5,986
Other (Income) Expense:
Interest income (2,056) (1,132) (1,041) (605)
Interest expense 38 7 20 4
Other, net 346 97 211 84
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(1,672) (1,028) (810) (517)
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EARNINGS BEFORE TAXES ON INCOME 22,455 10,624 17,859 6,503
Taxes on Income 6,642 3,506 5,148 2,146
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Net Earnings 15,813 7,118 12,711 4,357
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Earnings Per Share (Note 3) 0.95 0.44 0.76 0.27
======= ======= ======= =======
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding (Note 3) 16,564 16,185 16,647 16,188
======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
DATASCOPE CORP. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
----------------------
1995 1994
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<S> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating activities 16,811 15,255
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INVESTING ACTIVITIES:
Capital expenditures (5,733) (6,933)
Purchases of short-term marketable securities (67,498) (41,081)
Maturities of short-term marketable securities 57,089 41,481
Purchases of long-term marketable securities -- (8,110)
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Net cash used in investing activities (16,142) (14,643)
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FINANCING ACTIVITIES:
Net cash provided by financing activities 473 93
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Effect of exchange rates on cash 166 (111)
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Increase in cash and cash equivalents 1,308 594
Cash and cash equivalents, beginning of period 3,096 2,082
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Cash and cash equivalents, end of period 4,404 2,676
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SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes 4,221 3,085
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</TABLE>
See notes to consolidated financial statements
7
<PAGE> 8
DATASCOPE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated balance sheet as of December 31, 1995 and the statements of
consolidated earnings and cash flows for the three and six month periods ended
December 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, 1995 annual report to
shareholders. The results of operations for the period ended December 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)
DEC 31, JUNE 30,
1995 1995
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<S> <C> <C>
Materials $16,636 $15,452
Work in Process 7,664 6,592
Finished Goods 16,633 14,455
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$40,933 $36,499
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</TABLE>
3. STOCKHOLDERS' EQUITY
Changes in the components of stockholders' equity for the six months ended
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Net income $15,813
Translation adjustments (311)
Proceeds on the exercise of options to purchase
46,752 shares of common stock 640
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Total increase in stockholders' equity $16,142
=======
</TABLE>
8
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4. INCOME FROM SETTLEMENT OF LITIGATION
In the second quarter of fiscal 1996 the Company settled all litigation brought
by its wholly owned subsidiaries, InterVascular, Inc. and InterVascular, SA
(France), against several former employees and certain other defendants. Income
from the settlement of litigation, net of related expenses, was $10.7 million,
or $7.9 million after tax, equivalent to $0.47 per share.
9
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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.
10
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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
Chief Executive Officer
By: /s/ Murray Pitkowsky
----------------------------
Murray Pitkowsky
Senior Vice President and
Secretary
Dated: February 13, 1996
11
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EXHIBIT INDEX
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Exhibit No. Description
- - ----------- -----------
Ex-27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CONSOLIDATED EARNINGS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 4404
<SECURITIES> 63600
<RECEIVABLES> 48380
<ALLOWANCES> (1317)
<INVENTORY> 40933
<CURRENT-ASSETS> 162095
<PP&E> 80191
<DEPRECIATION> (35307)
<TOTAL-ASSETS> 226096
<CURRENT-LIABILITIES> 36047
<BONDS> 0
0
0
<COMMON> 161
<OTHER-SE> 179300
<TOTAL-LIABILITY-AND-EQUITY> 226096
<SALES> 98200
<TOTAL-REVENUES> 98200
<CGS> 33720
<TOTAL-COSTS> 33720
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 22455
<INCOME-TAX> 6642
<INCOME-CONTINUING> 15813
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15813
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
</TABLE>
