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 THE QUARTERLY PERIOD ENDED MARCH 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: 0-3585
________________________
EVEREST & JENNINGS INTERNATIONAL LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2536185
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1100 CORPORATE SQUARE DRIVE, ST. LOUIS, MISSOURI 63132
(Address of principal executive offices)
Registrant's telephone number, including area code: 314-995-7000
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
________________________
Securities registered pursuant to Section 12(b) of the Act:
Number of shares
issued and outstanding Name of exchange
Title of each class as of May 12, 1994 on which registered
___________________ __________________ ___________________
Common Stock;
par value: $.01 72,199,612 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
the filing requirements for the past 90 days: Yes X No
QUARTERLY REPORT ON FORM 10-Q
MARCH 31, 1994
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 2. Changes in Securities 26
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURE 28
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by the management of Everest & Jennings International Ltd. (the
"Company") without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary to
state fairly the data included herein in accordance with generally accepted
accounting principles for interim financial information 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 pursuant to such rules and
regulations. Management believes that the disclosures are adequate to make
the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per-share data)
Three Months Ended March 31
---------------------------
1994 1993
-------- --------
(Unaudited)
Revenues $20,213 $24,752
Cost of sales 14,606 17,449
_______ _______
Gross profit 5,607 7,303
Selling expenses 5,222 5,512
General and administrative expenses 1,534 3,159
_______ _______
Total operating expenses 6,756 8,671
_______ _______
Loss from operations (1,149) (1,368)
Interest expense, BIL (Note 5) 113 660
Interest expense 350 858
_______ _______
Loss before income taxes (1,612) (2,886)
Income tax provisions 61 91
_______ _______
Net loss $(1,673) $(2,977)
Loss per share (Note 7) $(.02) $(.33)
Weighted average number of Common
Shares outstanding 72,199,612 9,146,000
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
March 31 December 31
1994 1993
-------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 44 $ 1,872
Accounts receivable, less allowance
for doubtful accounts of $1,280
in 1994 and $1,506 in 1993 18,876 15,677
Inventories (Note 9) 13,236 15,289
Assets held for sale (Notes 1 and 6) 13,984 14,609
Other current assets 2,280 1,494
______ ______
Total current assets 48,420 48,941
______ ______
PROPERTY, PLANT AND EQUIPMENT:
Land 145 150
Buildings and improvements 3,570 3,597
Machinery and equipment 12,716 12,410
______ ______
16,431 16,157
Less accumulated depreciation
and amortization (9,331) (9,105)
______ ______
Property, plant and equipment, net 7,100 7,052
INTANGIBLE ASSETS, NET 932 1,007
OTHER ASSETS 507 515
______ ______
TOTAL ASSETS $56,959 $57,515
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31 December 31
1994 1993
-------- -----------
(Unaudited)
CURRENT LIABILITIES:
Short-term borrowings and current installments
of long-term debt of $1,579 in 1994
and $1,562 in 1993 (Note 5) $19,685 $20,897
Accounts payable 7,592 8,099
Accrued payroll costs 8,137 9,360
Accrued interest, BIL (Note 5) 298 185
Accrued expenses 10,673 10,863
Accrued restructuring expenses (Note 1) 6,705 6,292
______ ______
Total current liabilities 53,090 55,696
______ ______
LONG-TERM DEBT, NET OF CURRENT PORTION
(Note 5) 3,490 3,622
LONG-TERM BORROWINGS FROM BIL (Note 5) 9,052 4,802
OTHER LONG-TERM LIABILITIES 385 403
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' DEFICIT: (Notes 4 and 10)
Series A Convertible Preferred Stock 11,089 11,089
Series B Convertible Preferred Stock 1,317 1,317
Series C Convertible Preferred Stock 20,000 20,000
Common Stock, par value: $.01;
authorized 120,000,000 shares 722 722
Additional paid-in capital 105,578 105,578
Accumulated deficit (144,368) (142,449)
Minimum pension liability adjustment (2,606) (2,606)
Cumulative translation adjustments (790) (659)
______ ______
Total stockholders' deficit (9,058) (7,008)
______ ______
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIT $56,959 $57,515
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(Dollars in thousands)
(unaudited)
<CAPTION>
Series A Series B Series C
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Common Stock
--------------- --------------- --------------- ------------
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722
Accrued Dividends on Series A
Convertible Preferred Stock -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- -- --
Translation adjustments of
consolidated subsidiaries -- -- -- -- -- -- -- --
_________ _______ _______ ______ __________ _______ __________ ____
Balance at March 31, 1994 6,622,206 $11,089 786,357 $1,317 20,000,000 $20,000 72,199,612 $722
</TABLE>
<PAGE>
<TABLE>
EVEREST & JENNINGS INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE MONTHS ENDED MARCH 31, 1994
(Dollars in thousands)
(unaudited)
(continued) 6
<CAPTION>
Minimum
Additional Accumu- Pension Cumulative
Paid-in lated Liability Translation
Capital Deficit Adjustment Adjustments Total
---------- ------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $105,578 $(142,449) $(2,606) $(659) $(7,008)
Accrued Dividends on Series A
Convertible Preferred Stock -- (246) -- -- (246)
Net loss -- (1,673) -- -- (1,673)
Translation adjustments -- -- -- (131) (131)
______ ________ ______ ____ ______
Balance at March 31, 1994 $105,578 $(144,368) $(2,606) $(790) $(9,058)
The accompanying Notes are an integral part of this Consolidated Financial Statement
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31
-------------------------
1994 1993
-------- --------
(Unaudited)
Cash flows from operating activities:
Net loss $(1,673) $(2,977)
Adjustment to reconcile net loss to
cash used in operating activities:
Depreciation and amortization 301 733
Changes in operating assets and liabilities:
Accounts receivable (3,199) (1,322)
Inventories 2,053 (2,652)
Accounts payable (507) (3,229)
Accrued interest, BIL 113 660
Accrued payroll costs, expenses and
income taxes (1,659) (1,135)
Accrued restructuring expenses 413 (2,414)
Other, net (778) 133
______ ______
Cash used in operating activities (4,936) (12,203)
______ ______
Cash flows from investing activities:
Capital expenditures (274) (2,497)
Changes in Assets held for sale 625 ---
______ ______
Cash provided by (used in) investing
activities 351 (2,497)
______ ______
Cash flows from financing activities:
Advances from BIL 4,250 14,000
Increase (decrease) in short-term and
long-term borrowings, net (1,344) 714
Changes in other long-term liabilities (18) (17)
______ ______
Cash provided by financing activities 2,888 14,697
______ ______
Effect of exchange rate changes on cash flow (131) (9)
______ ______
Decrease in cash balance (1,828) (12)
Cash and cash equivalents balance at
beginning of year 1,872 145
______ ______
Cash and cash equivalents balance at end
of the three-month period $ 44 $ 133
Supplemental disclosures of cash flow information:
Cash paid for interest $ 195 $ 481
Cash paid for income taxes $ 106 $ 179
The accompanying Notes are an integral part of these
Consolidated Financial Statements
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per-share data)
NOTE 1 -- CORPORATE RESTRUCTURING
The Company has incurred substantial financial losses in a continuing
effort to restructure its operations with the objective of becoming a
stronger long-term competitor in the durable medical equipment industry.
Restructuring activities have included asset sales, significant reductions
in headcount, salaries and fringe benefits, plant closures and
consolidations, product line rationalization, debt to equity conversion and
outsourcing of manufacturing operations. In addition to the foregoing, the
Company is pursuing the sale or other disposition of the Smith & Davis
institutional business and Everest & Jennings de Mexico.
The accompanying consolidated financial statements have been prepared
under the going concern concept. The going concern concept anticipates an
entity will continue in its present form and, accordingly, uses the
historical cost basis to prepare financial statements. The Company has
incurred substantial restructuring expenses and recurring operating losses
and has a net capital deficiency at March 31, 1994. No assurance can be
made that the Company will successfully emerge from or complete its
restructuring activities.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed for the three month period
ended March 31, 1994 are the same as those disclosed in the Notes to the
Company's December 31, 1993 Consolidated Financial Statements, which were
included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993. All dollar amounts in these Notes to Unaudited
Consolidated Financial Statements are in thousands except per-share data or
as otherwise specified. In the opinion of management, all adjustments,
consisting of normal recurring adjustments necessary for a fair
presentation of (a) the consolidated results of operations for the three
month periods ended March 31, 1994 and 1993; (b) the consolidated financial
position at March 31, 1994 and December 31, 1993; and (c) the consolidated
cash flows for the three month periods ended March 31, 1994 and 1993 have
been made. Certain reclassifications have been made to prior period
financial statements to conform with current period presentation.
NOTE 3 -- ACQUISITION
In January, 1994, the Company completed the acquisition (the
"Acquisition") of Medical Composite Technology, Inc. ("MCT"). The $10.6
million purchase price consisted of the issuance of 8,000,000 shares of
Common Stock, $2 million in the form of pre-closing cash advances, and the
assumption of $0.6 million of net liabilities. Additionally, the Company
assumed the equivalent of 107,614 unvested stock options for the purchase
of the Company's Common Stock.
The Acquisition was accounted for as a purchase. Of the $10.6 million
purchase price, $9.7 million was attributable to in-process research and
development, and was expensed in 1993. The balance of the purchase price
over the fair value of assets acquired, $0.9 million, was allocated to
goodwilland is being amortized over a period of three years.
For purposes of consolidated financial statement presentation, the
Acquisition was accounted for as if it was completed on December 31, 1993.
Accordingly, the Company's consolidated financial statements as of March
31, 1994 and December 31, 1993 include the assets and liabilities of MCT.
Pro forma combined results of operations (unaudited) of the Company and
MCT for the three month period ended March 31, 1993 are shown below. Pro
forma results of operations are not necessarily indicative of the results
of operations if the companies had constituted a single entity during the
period combined.
March 31, 1993
--------------
(Dollars in millions,
except per-share data)
Net sales $25.1
Net loss from continuing operations (13.3)
Net loss per share (.78)
NOTE 4 -- DEBT RESTRUCTURING AND CONVERSION
As of September 30, 1993, the Company, Everest & Jennings, Inc. ("E&J
Inc."), Jennings Investment Co. and BIL entered into a Debt Conversion
Agreement to provide for the conversion (the "Debt Conversion Transaction")
of approximately $75 million in principal and accrued, unpaid interest (the
"Converted BIL Debt"), owed by the Company and E&J Inc. Pursuant to the
Debt Conversion Agreement, (a) the Company and E&J Inc. issued to BIL a
Convertible Promissory Note -- Common Stock (the "Common Stock Note") in
the initial principal amount of $45 million and a Convertible Promissory
Note -- Preferred Stock (the "Preferred Stock Note") in the original
principal amount of $20 million; (b) BIL agreed to lend to E&J Inc. $5.7
million to allow E&J Inc. to repay the outstanding balance of cash advances
owed by E&J Inc. to the Hongkong & Shanghai Banking Corporation ("HSBC")
under the terms of a Revolving Credit Agreement dated as of September 30,
1992, as amended (the "Revolving Credit Agreement"), between E&J Inc. and
HSBC; (c) Brierley Investments Limited, an affiliate of BIL, agreed to
guarantee a letter of credit facility ("Letter of Credit Facility") between
E&J Inc. and HSBC (or an alternative commercial lending institution) in an
amount not exceeding $6 million through and including June 30, 1995; (d)
BIL, as guarantor of the obligations of E&J Inc. under the Revolving Credit
Agreement, agreed to an amendment of the Revolving Credit Agreement whereby
cash advances of up to $10 million were made available for E&J Inc.'s
working capital needs; (e) the Company and E&J Inc. agreed to indemnify
(the "Indemnification Obligation") BIL from and against any and all losses
arising out of BIL's guarantee of the Letter of Credit Facility and the
Revolving Credit Agreement; (f) BIL agreed to lend to the Company and E&J
Inc. up to $12.5 million pursuant to the terms of the Revolving Promissory
Note; (g) BIL and the Company and E&J Inc. entered into a Security
Agreement (the "Security Agreement") pursuant to which the Company and E&J
Inc. granted a security interest in all of their assets to BIL to secure on
a pari passu basis the obligations of the Company and E&J Inc. to BIL under
the Common Stock Note, the Preferred Stock Note, the Revolving Promissory
Note and the Indemnification Obligation; and (h) the Company and BIL
entered into a Registration Rights Agreement pursuant to which the Company
granted to BIL registration rights with respect to shares of Common Stock
held as of the date of the Registration Rights Agreement and shares of
Common Stock obtained by BIL as a result of the conversion of the Common
Stock Note and Series C Preferred Stock issuable upon conversion of the
Promissory Stock Note.
The Company held a Special Meeting of Stockholders on December 31,
1993, to ratify and approve the Debt Conversion Transaction. Concurrent
with ratification and approval of the Debt Conversion Transaction, the
Company's stockholders approved and adopted amendments to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 25,000,000 to 120,000,000 and to increase the number of
authorized shares of Preferred Stock from 11,000,000 to 31,000,000 (the
"Recapitalization Proposals").
BIL had agreed, upon stockholder approval of the Debt Conversion
Transaction and the Recapitalization Proposals, to advance E&J Inc. $10
million to pay HSBC the cash advance it made to E&J Inc. under the
Revolving Credit Agreement. Such advance by BIL to E&J Inc. which has
resulted in an increase in the principal amount of the Common Stock Note
from $45 million to $55 million. However, subsequent to the Special
Meeting of Stockholders, BIL and E&J Inc. agreed to transfer $10 million
from the Revolving Promissory Note to the Common Stock Note, thus
increasing the balance of the Common Stock Note to $55 million.
The Common Stock Note was convertible into that number of shares of
Common Stock equal to the outstanding principal balance of that Note at
conversion divided by a stated conversion price ($1.00 per share, subject
to antidilution adjustment).
The Common Stock Note automatically converted in full upon satisfaction
of all of the following conditions: (a) ratification of the Debt
Conversion Transaction by the stockholders of the Company; (b) approval and
adoption of the Common Stock Amendment and the Preferred Stock Amendment by
the stockholders of the Company; (c) the filing and effectiveness of an
amendment to the Company's Certificate of Incorporation to effect the
Common Stock Amendment and the Preferred Stock Amendment; (d) adoption by
the Board of Directors of resolutions to designate the Series C Preferred
Stock and the filing and effectiveness of a Certificate of Designations of
the Series C Preferred Stock (the "Series C Certificate of Designations");
(e) reservation of a sufficient number of shares of Series C Preferred
Stock for issuance on conversion of the Preferred Stock Note;
(f) reservation of a sufficient number of Common shares for issuance on
conversion of the Common Stock Note and the Series C Preferred Stock issued
on conversion of the Preferred Stock Note; and (g) approval for listing on
the American Stock Exchange of the Common shares issuable on conversion of
the Common Stock Note and the Series C Preferred Stock issued on conversion
of the Preferred Stock Note. BIL waived condition (g), and the Common
Stock Note converted into 55 million shares of Common stock on January 12,
1994.
The Preferred Stock Note was convertible into that number of shares of
Series C Preferred Stock equal to the outstanding principal balance of that
Note at conversion divided by a stated conversion price ($1.00 per share,
subject to antidilution adjustment). The Series C Preferred Stock is
convertible into shares of Common Stock on a one-for-one basis.
The Preferred Stock Note automatically converted in full upon
satisfaction of all of the following conditions: (a) ratification of the
Debt Conversion Transaction by the stockholders of the Company;
(b) approval and adoption of the Common Stock Amendment and the Preferred
Stock Amendment by the stockholders of the Company; (c) the filing and
effectiveness of an amendment to the Company's Certificate of Incorporation
to effect the Common Stock Amendment and the Preferred Stock Amendment;
(d) adoption by the Board of Directors of resolutions to designate the
Series C Preferred Stock and the filing and effectiveness of the Series C
Certificate of Designations; (e) reservation of a sufficient number of
shares of Series C Preferred Stock for issuance on conversion of the
Preferred Stock Note; (f) reservation of a sufficient number of Common
shares for issuance on conversion of the Common Stock Note and the Series C
Preferred Stock issued on conversion of the Preferred Stock Note; and
(g) approval for listing on the American Stock Exchange of the Common
shares issuable on conversion of the Common Stock Note and the Series C
Preferred Stock issued on conversion of the Preferred Stock Note. BIL
waived condition (g), and the Preferred Stock Note converted into 20
million shares of Series C Convertible Preferred Stock on January 12, 1994.
The conversions of both the Common Stock Note and the Preferred Stock Note
were reflected in the consolidated financial statements as of December 31,
1993. No gain or loss was recognized as a result of the Debt Conversion
Transaction.
NOTE 5 -- DEBT
The Company's debt as of March 31, 1994 and December 31, 1993 is as
follows:
March 31 December 31
1994 1993
-------- -----------
Revolving Promissory Note to BIL $ 9,052 $ 4,802
Loans payable to HSBC 10,000 10,000
Other domestic debt 9,871 10,844
Foreign debt 3,304 3,675
______ ______
Total debt 32,227 29,321
Less short-term debt and current installments
of long-term debt 19,685 20,897
______ ______
Long-term debt, net of current
installments, including Revolving
Promissory Note to BIL $12,542 $ 8,424
On September 30, 1992, E&J Inc. entered into a $20 million unsecured
Revolving Credit Agreement with HSBC. Advances under the Revolving Credit
Agreement bear interest at the prime rate announced by Marine Midland Bank,
N.A. from time to time. Repayment of existing debt with BIL is
subordinated to the HSBC debt, and Brierley Investments Limited, an
affiliate of BIL, has guaranteed its repayment.
In September, 1993, the outstanding HSBC loan balance of $5.7 million
was repaid utilizing a cash advance provided by BIL under the Revolving
Promissory Note. Furthermore, as of September 30, 1993, HSBC and E&J Inc.
agreed to amend the Revolving Credit Agreement and extend its term for
approximately one year. The HSBC facility, as amended, provides up to $6
million for letter of credit availability and, additionally, cash advances
of up to $10 million to E&J Inc.
On October 8, 1993, E&J Inc. fully utilized the $10 million in cash
advances under the Revolving Credit Agreement to repay a $10 million loan
from Mercantile Bank, resulting in no further cash availability under the
Revolving Credit Agreement.
In connection with the MCT acquisition, a total of $2.0 million was
advanced by the Company to MCT prior to the closing of the transaction in
January, 1994. These advances have been treated as part of the purchase
price for the MCT acquisition. The advances were funded to the Company by
BIL and constituted borrowings under the Revolving Promissory Note.
As of September 30, 1993, the Company entered into the Debt Conversion
Agreement with BIL whereby $75 million of indebtedness was restructured by
the issuance of the Common Stock Note and the Preferred Stock Note (see
Note 4). The balance of the indebtedness owed BIL ($6.8 million) which was
not converted into the Common Stock Note and the Preferred Stock Note was
treated as advances under the Revolving Promissory Note.
As part of the Debt Conversion Transaction, BIL agreed to provide to
the Company and E&J Inc. a revolving credit facility of up to $12.5
million, as evidenced by the Revolving Promissory Note. At March 31, 1994,
$9.1 million had been advanced to the Company and E&J Inc. by BIL under the
Revolving Promissory Note. The Revolving Promissory Note matures on June
30, 1995, bears interest at the rate of 8% per annum, and is secured by a
lien on and security interest in all assets of the Company and E&J Inc.
The Revolving Promissory Note is subordinated to all debt borrowed by the
Company or E&J Inc. from, or the payment of which has been guaranteed by
the Company or E&J Inc. to, principal lenders to the Company and/or E&J
Inc. As of March 31, 1994, $0.3 million of accrued, unpaid interest was
due BIL under the Revolving Promissory Note.
In July, 1991, the Company obtained a three-year $13 million secured
credit facility at an interest rate of prime plus 3% for its Smith & Davis
subsidiary. The facility is secured by substantially all of the assets of
Smith & Davis. In February, 1993 this credit line was amended to increase
the availability of funding to the Company and reduce the borrowing cost to
prime plus 2%. At March 31, 1994, the Company had borrowed $4.2 million
under this line. Additionally, Smith & Davis had other borrowings
primarily consisting of amounts owed under certain industrial revenue bonds
totaling $1.2 million at March 31, 1994, with interest rates ranging from
8% to prime plus 3%. These amounts are due at various semi-annual
intervals through 1996.
The Company's Canadian operation has credit facilities in the aggregate
of $4.7 million, of which $3.3 million was borrowed as of March 31, 1994 at
interest rates ranging from prime plus 1/2% to prime plus 3/4%. The loans
are secured by the net assets of the Canadian subsidiary.
At March 31, 1994, the Company was contingently liable under existing
letters of credit in the aggregate amount of approximately $3.5 million.
Pursuant to an agreement with its joint venture partner in Indonesia,
the Company has agreed to guarantee up to $1 million of indebtedness
incurred by the joint venture to fund its operations.
NOTE 6 -- ASSETS HELD FOR SALE
Net assets held for sale for the disposition of the Company's Smith &
Davis institutional business and Mexican subsidiary consist of the
following as of March 31, 1994 and December 31, 1993, and are stated at net
realizable values:
March 31 December 31
1994 1993
-------- -----------
Smith & Davis:
Accounts receivable $ 4,275 $ 7,699
Inventories 6,214 6,146
Land and buildings 1,490 1,490
Machinery & equipment 1,100 1,100
Other assets 135 196
______ ______
13,214 16,631
Everest & Jennings de Mexico:
Net assets 770 678
______ ______
Total assets held for sale $13,984 $17,309
Results of operations for the Smith & Davis institutional business for
the three month period ended March 31, 1994 were as follows:
Three Months
Ended March 31, 1994
--------------------
Revenues $5,082
Cost of sales 3,601
______
Gross profit 1,481
Operating expenses 1,629
Interest expense 113
______
Net loss $ (261)
During the phase out period through the disposal date, the results of
the Smith & Davis institutional business are being included as a component
of Accrued restructuring expenses on the consolidated balance sheet. The
operating results of the Company's Mexican subsidiary for the three month
period ended March 31, 1994 were not material.
NOTE 7 -- LOSS PER SHARE
Loss per share for the three month periods ended March 31, 1994 and
1993 is calculated based on the weighted average number of shares of Common
Stock during the periods.
NOTE 8 -- INCOME TAXES
In January 1993, the Company adopted SFAS 109, "Accounting for Income
Taxes". SFAS 109 utilizes an asset and liability approach in accounting
for income taxes and requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's consolidated financial statements or tax
returns. Since it is unlikely that the Company will realize the future tax
benefits of the deferred tax asset related to its substantial net operating
losses, a valuation allowance has been established for the full amount and
thus the adoption of SFAS 109 has no impact on the consolidated financial
statements of the Company.
The Company's foreign source income is not material.
NOTE 9 -- INVENTORIES
Inventories at March 31, 1994 and December 31, 1993 consist of the
following:
March 31 December 31
1994 1993
-------- -----------
Raw materials $ 6,587 $ 8,219
Work-in-process 3,942 4,131
Finished goods 2,707 2,939
______ ______
$13,236 $15,289
NOTE 10 -- COMMON STOCK
On March 17, 1992, the stockholders of the Company approved a Plan of
Reclassification. Under the Plan of Reclassification, the Certificate of
Incorporation of the Company was amended to replace the Company's
authorized Class A Common Stock and Class B Common Stock with a new single
class of Common Stock having 25,000,000 authorized shares, and reclassified
each outstanding Class A Common share and each outstanding Class B Common
share into one share of such new single class of Common Stock. The Plan of
Reclassification became effective as of the close of business on November
18, 1993.
On December 31, 1993, the Company's stockholders approved the Debt
Conversion Transaction (see Note 4), which resulted in the issuance of 55
million shares of Common Stock and 20 million shares of 7% Series C
Convertible Preferred Stock for conversion of the Common Stock Note and the
Preferred Stock Note, respectively.
On December 31, 1993, the Company issued 8 million shares of Common
Stock to the stockholders of MCT (see Note 3).
NOTE 11 -- CONTINGENT LIABILITIES
In July, 1990, a class action suit was filed by a stockholder of the
Company in the United States District Court for the Central District of
California. The suit is against the Company and certain of its present and
former directors and officers and seeks unspecified damages for alleged
non-disclosure and misrepresentation concerning the Company in violation of
federal securities laws. The Company twice moved to dismiss the complaint
on various grounds. After the first such motion was granted, plaintiff
filed a first amended complaint, which subsequently was dismissed by order
filed on September 20, 1991. Plaintiff then notified the court that it did
not intend to further amend the complaint, and an order dismissing the
complaint was entered in November 1991. Plaintiff filed a notice of appeal
to the Court of Appeals for the Ninth Circuit on December 23, 1991. The
case was briefed and oral argument heard in June, 1993. On January 18,
1994, the Ninth Circuit ordered that the plaintiff's submission be vacated
pending the outcome of a petition for rehearing in another case that
addresses a similar procedural issue that was argued on appeal in that
case. The Company continues to believe the case is without merit and
intends to contest the asserted complaints vigorously. The ultimate
liability, if any, cannot be determined at this time.
In December, 1992 ICF Kaiser Engineers, Inc. ("ICF Kaiser") filed a
Demand for Arbitration (the "Demand") against the Company before the
American Arbitration Association in Los Angeles, California. ICF Kaiser in
its demand claims breach of contract between the parties for consulting and
clean up work by ICF Kaiser at E&J's former facilities located at 3233 East
Mission Oaks Boulevard, Camarillo, California. The Arbitration Demand is
in the sum of $1.1 million. In January, 1993 an answer and counter-claim
were filed on behalf of the Company. The answer denies breach of the
contract and disputes the monetary claim asserted in the Demand. In the
counterclaim, the Company asserts that ICF Kaiser breached the contract,
above referenced, by inter alia failing to perform the services required
under the Agreement in a reasonably cost effective manner and in accordance
with the terms and conditions of the Agreement. In February, 1993 E&J made
a payment without prejudice to ICF Kaiser in the sum of approximately $0.6
million. This payment, together with prior payments, brings the total paid
to date by the Company to ICF Kaiser to approximately $0.7 million. The
entirety of the charges by ICF Kaiser are disputed as unreasonable under
the circumstances and the Company intends to vigorously defend its
position. The Company has recorded an appropriate reserve to reflect this
matter and does not consider the amount to be material to the Company's
consolidated financial statements. The arbitration hearings commenced in
July, 1993 and concluded at the end of the first quarter of 1994. A
decision is anticipated in the second half of 1994.
Die Cast Products, Inc. ("Die Cast Products"), a former subsidiary of
the Company, has been named as a defendant in a lawsuit filed by the State
of California pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. par.9601 et sec ("CERCLA"). The
Company was originally notified of this action on December 10, 1992. The
lawsuit seeks to recover response and remediation costs in connection with
the release or threatened release of hazardous substances at 5619-21
Randolph Street, in the City of Commerce, California ("Randolph Street
Site"). It is alleged that the Randolph Street Site was used for the
treatment, storage and disposal of hazardous substances. The Company
anticipates being named as a defendant as a result of its former ownership
of Die Cast Products, which allegedly disposed of hazardous waste materials
at the Randolph Street Site. Investigation with respect to potential
liability of the Company is in the early stages. Issues to be addressed
include whether the Company will be responsible for the disposals made by
Die Cast Products; whether Die Cast Products actually sent hazardous waste
materials to the Randolph Street Site; the nature, extent and costs of the
ultimate cleanup required by the State of California; the share of that
cleanup which may ultimately be allocated to Die Cast Products and/or the
Company; and the extent to which insurance coverage may be available for
any costs which may eventually be assigned to the Company. Remedial
investigations performed on behalf of the State of California at the
Randolph Street Site have disclosed soil and groundwater contamination.
The Company has recorded a reserve of $1.0 million for this matter, which
was included in the Consolidated Statements of Operations for 1993.
In March, 1993, Everest & Jennings, Inc. ("EJI") received a notice from
the United States Environmental Protection Agency ("EPA") regarding an
organizational meeting of generators with respect to the Casmalia Resources
Hazardous Waste Management Facility ("Casmalia Site") in Santa Barbara
County, California. The EPA alleges that the Casmalia Site is an inactive
hazardous waste treatment, storage and disposal facility which accepted
large volumes of commercial and industrial wastes from 1973 until 1989. In
late 1991, the Casmalia Site owner/operator abandoned efforts to actively
pursue site permitting and closure and is currently conducting only minimal
maintenance activities. The EPA estimates that the Casmalia Site's closure
trust fund, approximately $10 million, is substantially insufficient to
cover cleanup and closure of the site. Since August, 1992, the EPA has
undertaken certain interim stabilization actions to control actual or
threatened releases of hazardous substances at the Casmalia Site. The EPA
is seeking cooperation from generators to assist in the cleaning up, and
closing of, the Casmalia Site. EJI and 64 other entities were invited to
the organizational meeting. The EPA has identified EJI as one of the
larger generators of hazardous wastes transported to the Casmalia Site.
EJI is a member of a manufacturers' group of potentially responsible
parties which has investigated the site and proposed a remediation plan to
the EPA. To reflect EJI's estimated allocation of costs thereunder, a
reserve of $1.0 million has been recorded, which was included in the
Consolidated Statements of Operations for 1993.
In 1989, a patent infringement case was initiated against EJI and other
defendants in the U.S. District Court, Central District of California. EJI
prevailed at trial with a directed verdict of patent invalidity and non-
infringement. The plaintiff filed an appeal with the U.S. Court of Appeals
for the Federal Circuit. On March 31, 1993, the Court of Appeals vacated
the District Court's decision and remanded the case for trial. Impacting
the retrial of this litigation was a re-examination proceeding before the
Board of Patent Appeals with respect to the subject patent. A ruling was
rendered November 23, 1993 sustaining the claim of the patent which EJI has
been charged with infringing. Upon the issuance of a patent re-examination
certificate by the U.S. Patent Office, it is anticipated that the plaintiff
will present a motion to the District Court for an early retrial of the
case. EJI believes that this case is without merit and intends to contest
it vigorously. The ultimate liability of EJI, if any, cannot be determined
at this time.
The Company and its subsidiaries are parties to other lawsuits and
other proceedings arising out of the conduct of its ordinary course of
business, including those relating to product liability and the sale and
distribution of its products. While the results of such lawsuits and other
proceedings cannot be predicted with certainty, management does not expect
that the ultimate liabilities, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1994
The following table summarizes operating results of the Company for the
three months ended March 31, 1994 and 1993 (dollars in millions):
Three Months Ended March 31
---------------------------
1994 1993
------------ ------------
Amount % Amount %
------ --- ------ ---
Revenue $20.2 100 $24.7 100
Cost of sales 14.6 72 17.4 71
______ ____ ______ ____
Gross profit 5.6 28 7.3 29
Operating expenses 6.7 33 8.7 35
______ ____ ______ ____
Operating loss (1.1) (5) (1.4) (6)
Interest expense 0.5 2 1.5 6
______ ____ ______ ____
Loss before income taxes (1.6) (7) (2.9) (12)
Income tax provisions 0.1 1 0.1 1
______ ____ ______ ____
Net loss $(1.7) (8) $(3.0) (13)
First quarter 1994 revenues of $20.2 million decreased $4.5 million, or
18%, from 1993, due primarily to discontinuing the Smith & Davis
institutional business. Sales of this business and related costs were
included in the consolidated results of operations of the Company for 1993
but not 1994. If the 1994 first quarter revenues of the Smith & Davis
institutional business ($5.1 million) had been included in the consolidated
results, revenues would have increased by $0.6 million or 2% from 1993
levels. First quarter 1993 wheelchair sales and operations were negatively
impacted by the relocation of the Company's primary domestic manufacturing
facility from Camarillo, California to St. Louis, Missouri which occurred
during 1992. Delivery delays caused by the 1992 move have decreased and
lead times have been brought into line with historic levels. To improve
the Company's operating efficiencies and cost structure, certain production
relocation and facility rationalizations are planned during 1994.
First quarter 1994 revenues in the Everest & Jennings' Canadian and
Mexican subsidiaries were down $0.1 million or 3%, due primarily to an
unfavorable Canadian exchange rate change.
Total Company first quarter gross profit decreased $1.7 million from
$7.3 million in 1993 to $5.6 million in 1994, due primarily to exclusion of
the Smith & Davis institutional business gross profit ($1.5 million) from
the Company's 1994 operating results. Additionally, during the first
quarter, margins were negatively affected by increases in private label
wheelchair sales to distributors.
Total Company first quarter operating expenses decreased $2.0 million
from $8.7 million in 1993 to $6.7 million in 1994 due primarily to
exclusion of the Smith & Davis institutional business operating expenses
($1.6 million) from the Company's 1994 operating results and reduced
general and administrative spending levels during the first quarter. These
reductions were partially offset by increases in research and development
spending of $0.4 million from $0.1 million during 1993 to $0.5 million
during 1994.
Interest expense of $0.5 million in the first quarter of 1994 decreased
from the comparable period in the prior year due to the conversion of $75
million of debt to equity which occurred during the fourth quarter of 1993.
In January 1993 the Company adopted the provisions of SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109 did
not have an impact on the consolidated financial statements.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash provided from
operations, borrowings and cash on hand. At March 31, 1994, the Company
had $0.04 million in cash or $1.83 million less than the $1.87 million in
cash at December 31, 1993. At March 31, 1994, total debt of $32.2 million
was $2.9 million higher than the $29.3 million in debt at December 31,
1993. The increase was due to advances from BIL in the amount of $4.3
million during the first quarter of 1994 offset by a $1.0 million decrease
in other domestic debt and a $0.4 million decrease in other foreign debt.
On September 30, 1992 the Company entered into a $20 million Revolving
Credit Agreement with HSBC. The repayment of this facility was guaranteed
by Brierley Investments Limited, an affiliate of BIL. The facility would
not have been made available to the Company without such guaranty. As of
September 30, 1993, HSBC and E&J Inc. agreed to amend the Revolving Credit
Agreement and extend its term for approximately one year. The HSBC
facility, as amended, provides to E&J Inc. up to $6 million letter of
credit availability and up to $10 million of cash advances. The $10
million of cash advances has been fully utilized.
At March 31, 1994 and December 31, 1993, under the debt agreements with
BIL and HSBC, the Company was obligated to repay the following amounts at
the various dates listed below.
3/31/94 12/31/93
Balance Balance
Debt Agreement $ millions $ millions Repayment Date
-------------- ---------- ---------- --------------
Revolving Promissory Note 9.1 4.8 June 30, 1995
HSBC Revolving Credit
Agreement (1) 10.0 10.0 September 30, 1994
Accrued, unpaid interest
due BIL 0.3 0.2 -----
_____ _____
TOTAL $19.4 $15.0
[FN]
(1) Excludes approximately $3.5 million and $3.7 million,
respectively, committed with respect to outstanding letters of
credit as of both March 31, 1994 and December 31, 1993.
As of September 30, 1993, the Company entered into the Debt Conversion
Agreement with BIL whereby $75 million of indebtedness was restructured by
the issuance of the Common Stock Note and the Preferred Stock Note. The
balance of the BIL indebtedness ($6.8 million) which was not converted into
the Common Stock Note and the Preferred Stock Note was treated as advances
under the Revolving Promissory Note. See Note 4 -- Debt Restructuring and
Conversion of the Notes to the unaudited Consolidated Financial Statements
for a discussion of the Debt Conversion Transaction.
As part of the Debt Conversion Transaction, BIL agreed to provide to
the Company and E&J Inc. a revolving credit facility of up to $12.5
million, as evidenced by the Revolving Promissory Note. As of March 31,
1994, $9.1 million had been advanced to the Company and E&J Inc. by BIL
under such Note, leaving an availability balance of $3.4 million.
In July, 1991, the Company obtained a three-year $13 million secured
credit line for its Smith & Davis subsidiary which is secured by
substantially all of the subsidiary's assets. In February, 1993 this
credit line was amended to increase the availability of funding to the
Company and reduce the borrowing costs thereunder. At March 31, 1994 Smith
& Davis had borrowed $4.2 million under this line. The Company expects to
either extend this credit line in 1994 or terminate it upon the sale or
other disposition of the Smith & Davis institutional business. The
Company's Canadian operation has existing credit facilities in the
aggregate of $4.7 million, on which $3.3 million was borrowed as of March
31, 1994.
Accordingly, at March 31, 1994 the Company owed $20.1 million to banks
and other commercial lenders, $3.0 million under capitalized lease
obligations, and $9.1 million to BIL.
During April 1994, the Company has required $1.3 million of additional
financing to fund its operating requirements and accrued restructuring
expenses. This additional funding has been provided to the Company by BIL,
bringing the total advances under the Revolving Promissory Note to $10.4
million as of May 12, 1994, out of an available line of credit of $12.5
million. The Company expects to need additional financing at least through
the end of the third quarter of 1994, and will seek to amend the Revolving
Promissory Note with BIL to provide for such requirement.
The Company's 1994 year to date revenues and operating results have
been negatively impacted by ongoing price competition, liquidity
constraints and loss of market share due to the relocation of the Company's
primary domestic wheelchair manufacturing facility from California to
Missouri. The loss of customer confidence stemming from long lead times
and shipping delays due to start-up inefficiencies, computer system
problems and inventory imbalances in St. Louis manufacturing operations is
expected to adversely impact revenues, operating income and cash flow at
least through the end of the third quarter of 1994. Management is
implementing a plan which is intended to address the Company's problems
with manufacturing and shipment delays. The plan also addresses the
rationalization of the Company's production facilities and the increased
outsourcing of products and product components, the effects of which will
be to lower the Company's production costs. Order rates, margins and
market share must increase, production and operating costs must be reduced
and customer confidence must be restored in the very near term if the
Company is to generate the cash flow necessary to fund its operations on a
continuing basis and to achieve profitability.
With respect to its bed and institutional products, the Company
anticipates, for the remainder of the year, severe price and product
competition; however, the market demand for these products may improve once
a national health care reform plan is enacted. The Company is exploring
the sale or other disposition of (i) the Smith & Davis hospital bed and
nursing home bed and furniture business, and has retained an investment
banker to advise it on the various methods and means of implementing any
such sale or disposition; and (ii) Everest & Jennings de Mexico.
Management believes that the Company's domestic and international
manufacturing capacity is sufficient to meet anticipated demand for the
foreseeable future.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In July, 1990, a class action suit was filed by a stockholder of the
Company in the United States District Court for the Central District of
California. The suit is against the Company and certain of its present and
former directors and officers and seeks unspecified damages for alleged
non-disclosure and misrepresentation concerning the Company in violation of
federal securities laws. The Company twice moved to dismiss the complaint
on various grounds. After the first such motion was granted, plaintiff
filed a first amended complaint, which subsequently was dismissed by order
filed on September 20, 1991. Plaintiff then notified the court that it did
not intend to further amend the complaint, and an order dismissing the
complaint was entered in November 1991. Plaintiff filed a notice of appeal
to the Court of Appeals for the Ninth Circuit on December 23, 1991. The
case was briefed and oral argument heard in June, 1993. On January 18,
1994, the Ninth Circuit ordered that the plaintiff's submission be vacated
pending the outcome of a petition for rehearing in another case that
addresses a similar procedural issue that was argued on appeal in that
case. The Company continues to believe the case is without merit and
intends to contest the asserted complaints vigorously. The ultimate
liability, if any, cannot be determined at this time.
In December, 1992 ICF Kaiser Engineers, Inc. ("ICF Kaiser") filed a
Demand for Arbitration (the "Demand") against the Company before the
American Arbitration Association in Los Angeles, California. ICF Kaiser in
its demand claims breach of contract between the parties for consulting and
clean up work by ICF Kaiser at E&J's former facilities located at 3233 East
Mission Oaks Boulevard, Camarillo, California. The Arbitration Demand is
in the sum of $1.1 million. In January, 1993 an answer and counter-claim
were filed on behalf of the Company. The answer denies breach of the
contract and disputes the monetary claim asserted in the Demand. In the
counterclaim, the Company asserts that ICF Kaiser breached the contract,
above referenced, by inter alia failing to perform the services required
under the Agreement in a reasonably cost effective manner and in accordance
with the terms and conditions of the Agreement. In February, 1993 E&J made
a payment without prejudice to ICF Kaiser in the sum of approximately $0.6
million. This payment, together with prior payments, brings the total paid
to date by the Company to ICF Kaiser to approximately $0.7 million. The
entirety of the charges by ICF Kaiser are disputed as unreasonable under
the circumstances and the Company intends to vigorously defend its
position. The Company has recorded an appropriate reserve to reflect this
matter and does not consider the amount to be material to the Company's
consolidated financial statements. The arbitration hearings commenced in
July, 1993 and concluded at the end of the first quarter of 1994. A
decision is anticipated in the second half of 1994.
Die Cast Products, Inc. ("Die Cast Products"), a former subsidiary of
the Company, has been named as a defendant in a lawsuit filed by the State
of California pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act 42 U.S.C. par.9601 et sec ("CERCLA"). The
Company was originally notified of this action on December 10, 1992. The
lawsuit seeks to recover response and remediation costs in connection with
the release or threatened release of hazardous substances at 5619-21
Randolph Street, in the City of Commerce, California ("Randolph Street
Site"). It is alleged that the Randolph Street Site was used for the
treatment, storage and disposal of hazardous substances. The Company
anticipates being named as a defendant as a result of its former ownership
of Die Cast Products, which allegedly disposed of hazardous waste materials
at the Randolph Street Site. Investigation with respect to potential
liability of the Company is in the early stages. Issues to be addressed
include whether the Company will be responsible for the disposals made by
Die Cast Products; whether Die Cast Products actually sent hazardous waste
materials to the Randolph Street Site; the nature, extent and costs of the
ultimate cleanup required by the State of California; the share of that
cleanup which may ultimately be allocated to Die Cast Products and/or the
Company; and the extent to which insurance coverage may be available for
any costs which may eventually be assigned to the Company. Remedial
investigations performed on behalf of the State of California at the
Randolph Street Site have disclosed soil and groundwater contamination.
The Company has recorded a reserve of $1.0 million for this matter, which
was included in the Consolidated Statements of Operations for 1993.
In March, 1993, Everest & Jennings, Inc. ("EJI") received a notice from
the United States Environmental Protection Agency ("EPA") regarding an
organizational meeting of generators with respect to the Casmalia Resources
Hazardous Waste Management Facility ("Casmalia Site") in Santa Barbara
County, California. The EPA alleges that the Casmalia Site is an inactive
hazardous waste treatment, storage and disposal facility which accepted
large volumes of commercial and industrial wastes from 1973 until 1989. In
late 1991, the Casmalia Site owner/operator abandoned efforts to actively
pursue site permitting and closure and is currently conducting only minimal
maintenance activities. The EPA estimates that the Casmalia Site's closure
trust fund, approximately $10 million, is substantially insufficient to
cover cleanup and closure of the site. Since August, 1992, the EPA has
undertaken certain interim stabilization actions to control actual or
threatened releases of hazardous substances at the Casmalia Site. The EPA
is seeking cooperation from generators to assist in the cleaning up, and
closing of, the Casmalia Site. EJI and 64 other entities were invited to
the organizational meeting. The EPA has identified EJI as one of the
larger generators of hazardous wastes transported to the Casmalia Site.
EJI is a member of a manufacturers' group of potentially responsible
parties which has investigated the site and proposed a remediation plan to
the EPA. To reflect EJI's estimated allocation of costs thereunder, a
reserve of $1.0 million has been recorded, which was included in the
Consolidated Statements of Operations for 1993.
In 1989, a patent infringement case was initiated against EJI and other
defendants in the U.S. District Court, Central District of California. EJI
prevailed at trial with a directed verdict of patent invalidity and non-
infringement. The plaintiff filed an appeal with the U.S. Court of Appeals
for the Federal Circuit. On March 31, 1993, the Court of Appeals vacated
the District Court's decision and remanded the case for trial. Impacting
the retrial of this litigation was a re-examination proceeding before the
Board of Patent Appeals with respect to the subject patent. A ruling was
rendered November 23, 1993 sustaining the claim of the patent which EJI has
been charged with infringing. Upon the issuance of a patent re-examination
certificate by the U.S. Patent Office, it is anticipated that the plaintiff
will present a motion to the District Court for an early retrial of the
case. EJI believes that this case is without merit and intends to contest
it vigorously. The ultimate liability of EJI, if any, cannot be determined
at this time.
The Company and its subsidiaries are parties to other lawsuits and
other proceedings arising out of the conduct of its ordinary course of
business, including those relating to product liability and the sale and
distribution of its products. While the results of such lawsuits and other
proceedings cannot be predicted with certainty, management does not expect
that the ultimate liabilities, if any, will have a material adverse effect
on the consolidated financial position or results of operations of the
Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
During the first quarter of 1994, the Company borrowed a total of
$4.25 million from BIL as advances under the Revolving Promissory Note to
provide cash necessary for operations of the Company's headquarters and
manufacturing facility in St. Louis, Missouri and for accrued restructuring
expenses, as follows:
$1,500,000 January 31, 1994
1,100,000 March 14, 1994
400,000 March 28, 1994
1,250,000 March 31, 1994
_________
$4,250,000
Since the end of the first quarter of 1994, the Company has borrowed an
additional $1.3 million from BIL for the same purposes, as follows:
$1,300,000 April 25, 1994
Each of the foregoing borrowings was treated as an advance under the
Revolving Promissory Note, which bears interest at 8.0% per annum and
requires that all principal and unpaid interest is due on June 30, 1995.
Interest has been accrued accordingly, with a balance of $0.3 million as of
March 31, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS:
None
REPORTS ON FORM 8-K:
Financial
Date of Report Item(s) Reported Statements Filed
-------------- ---------------- ----------------
1. January 5, 1994 5 (relating to debt None
conversion transaction and
recapitalization proposals)
2. January 14, 1994 2, 7 (relating to acquisition See following
or disposition of assets)
Financial Statements filed in Form 8-K dated January 14, 1994:
Relating to Medical Composite Technology, Inc.:
Report of Certified Public Accountants
Audited Balance Sheets for Fiscal Years ended December 31, 1991 and
December 31, 1992
Audited Statements of Operations for the Fiscal Years ended December 31,
1991 and December 31, 1992 and the Cumulative Period from April 7,
1989 (date of inception) to December 31, 1992
Audited Statements of Shareholders' Equity for the Cumulative Period
from April 7, 1989 (date of inception) to December 31, 1992
Audited Statements of Cash Flows for the Fiscal Years ended December 31,
1991 and December 31, 1992 and the Cumulative Period from April 7,
1989 (date of inception) to December 31, 1992
Notes to Financial Statements
Unaudited Statement of Operations for the Nine-Month Period ended
September 30, 1993
Unaudited Balance Sheet as of September 30, 1993
Unaudited Statement of Cash Flows for the Nine-Month Period ended
September 30, 1993
Notes to Financial Statements
Everest & Jennings International Ltd./Medical Composite Technology, Inc.
Pro Forma Financial Information:
Notes to Condensed Pro Forma Financial Statements
Pro Forma Unaudited Consolidated Statement of Operations for the Fiscal
Year Ended December 31, 1992
Pro Forma Unaudited Consolidated Statement of Operations for the Nine
Month Period Ended September 30, 1993
Pro Forma Unaudited Consolidated Balance Sheet as of September 30, 1993
Management's Discussion and Analysis of Financial Condition and Results
of Operations at December 31, 1992
Management's Discussion and Analysis of Financial Condition and Results
of Operations at September 30, 1993
SIGNATURE
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.
Date: May 16, 1994 EVEREST & JENNINGS INTERNATIONAL LTD.
(Registrant)
By (JOSEPH A. NEWCOMB)
Joseph A. Newcomb
Executive Vice President and
Chief Financial Officer
By (BEVIL J. HOGG)
Bevil J. Hogg
President and
Chief Executive Officer
