<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9042
MEDEX, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-4441680
(State of Incorporation) (I.R.S. Employer Identification No.)
3637 LACON ROAD, HILLIARD, OHIO 43026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 876-2413
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
As of September 20, 1995, 6,164,485 common shares were outstanding. The
aggregate market value of such common shares held by non-affiliates of the
Registrant (based upon actual last transaction price as reported by the NASDAQ
National Market System) was $ 60,284,100.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the 1995 Annual Report to Shareholders are incorporated by
reference in Parts II and IV of this Annual Report. The 1995 Annual
Report to Shareholders shall be deemed to have been "filed" only to the
extent portions thereof are expressly incorporated by reference.
(2) Portions of the Proxy Statement for the Annual Meeting of Shareholders
November 15, 1995, are incorporated in Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Medex, Inc. and its subsidiaries, (the Company), designs, manufactures,
assembles, and markets a broad range of health care products for the diagnosis
and treatment of patients receiving care in hospitals, alternative health care
facilities and the home health care environment. The Company operates in one
principal industry segment providing critical care accessories and infusion
systems for medical and surgical applications.
Medex, Inc. was formed as an Ohio corporation in 1959 under the name W & J,
Inc., and adopted its present name in 1961. Medex, Inc. and its subsidiaries
carry on the Company's business in the United States and throughout the world.
The Company's domestic operations are located in the Columbus, Ohio and Atlanta,
Georgia metropolitan areas. During fiscal 1995 the Company closed its Denver,
Colorado facility and integrated its functions and product lines into its
Columbus and Atlanta operations. Medex Medical, Inc., carries on the Company's
manufacturing, sales and distribution business in the United Kingdom and certain
other European countries. Ashfield Medical Systems Limited, acquired in fiscal
1995, and also located in the United Kingdom, manufactures surgical drapes for
the European market. Medex Medical, GmbH, a German corporation, carries on sales
and distribution operations in Germany and other parts of continental Europe.
Medex Medical France, SARL, is a French subsidiary which carries on sales and
distribution operations in France and certain other European countries. In
addition, the Company maintains a Foreign Sales Corporation, Medex Exports,
Inc., situated in the United States Virgin Islands.
<PAGE> 3
PRODUCTS
The Company's products are used to diagnose and treat patients in all age
groups. Treatment areas for these procedures include intensive care units,
operating rooms, anesthesia suites, post-anesthesia recovery rooms, outpatient
surgical centers, cardiac catheterization laboratories, labor and delivery
facilities and emergency rooms. Home infusion therapy products are also utilized
in hospital outpatient care facilities, oncology clinics, pain management
clinics and in the home where patients are managed by professional home health
care agencies.
The Company's products are categorized into two classes of similar products:
critical care accessories and infusion systems.
The Company's critical care accessories product line offers a wide range of
precision products utilized in intravenous therapies such as fluid and drug
administration. Other products include blood pressure transducers used by
clinicians monitoring the cardiovascular system, specialty devices used in
cardiac catheterization procedures and intrauterine monitoring products used
during high risk labor and delivery situations. Many of these products can be
used alone or as components assembled into kits. By offering standard and custom
configurations, the Company's critical care products can address the specific
needs of a customer.
The Company's infusion systems include a broad line of infusion pumps designed
to deliver prescribed doses of drugs and fluids to patients. These include
syringe pumps and large volume infusion pumps for bedside administration and
ambulatory pumps for patients who are more mobile. A full range of disposable
product sets, providing the interface between pump and patient, complete the
system.
<PAGE> 4
Included below is a representative sample of the products included in each of
these categories:
CRITICAL CARE ACCESSORIES
- - STOPCOCKS
Stopcocks are specialized valves used as a component in the administration of
parenteral fluids or blood and provide a convenient means to administer drugs or
liquid anesthetics in conjunction with such fluids. Stopcocks provide multiple
flow paths for the selection and direction of fluids, drugs and anesthetics
depending upon the particular procedural requirements and the preference of the
user. The Company has been manufacturing stopcocks of various types since 1961,
and these items are sold both separately and as components in the Company's
assembled products. The Company manufactures one-way, three-way and four-way
stopcocks, which it markets under the name Guide-Flo(R). In addition to fluid
and drug administration, the growth of invasive pressure monitoring and cardiac
catheterization diagnostic procedures have resulted in a significant increase in
demand for stopcocks of various configurations and performance characteristics.
The Company manufactures a line of stopcocks and other related components which
are composed of chemically resistant plastic materials to minimize cracking and
reactions with potent agents used in certain therapies.
- - ADMINISTRATION SETS
An administration set is the apparatus by which fluid is delivered from a
container or a pump to the patient. In delivery from a container, these sets
consist of an entry spike, drip chamber, a length of tubing with a flow control
device and a catheter adapter. The entry spike is used to enter the fluid bottle
or bag, and the drip chamber, which is made of a clear plastic, provides a
reservoir of fluid. Fluid flows into the system one drop at a
<PAGE> 5
time, which can be seen and counted, permitting calculation of the volume of
fluid being administered. This flow rate can be manually adjusted by external
clamps when gravity is used to create fluid flow.
Disposable administration sets are manufactured in standard and customized
configurations and may incorporate numerous additional components such as
stopcocks, continuous flush devices, or injection sites for intravenous drug
administration. The administration sets are designed to ensure clinical
flexibility, volumetric accuracy and sterility.
- - NUSITE
NuSite, introduced in fiscal 1995, is a needle-less injection system designed to
help prevent needlestick injuries to healthcare providers, and thereby reduce
associated risks of infectious disease. NuSite is adaptable to a large variety
of administration sets and accessories and is resistent to long-term exposure to
lipids and certain other plastic-interactive fluids.
- - TRANSTAR(TM)
TranStar is a redesigned disposable pressure transducer first released in fiscal
1994 for sale in Europe and other foreign markets and subsequently released in
the United States during fiscal 1995. A pressure transducer is a device that
senses hydraulic pressure and converts it to an electrical signal that is
transmitted to a patient monitor. The monitor then processes and graphically
displays this data.
- - NOVATRANS II(R)
NOVATRANS II is a reusable pressure transducer that provides the cost efficiency
of a reusable unit while providing electrical safety and accuracy.
<PAGE> 6
- - SIMULCATH(TM) AND IUP KITS
SimulCath is an intrauterine pressure monitoring system that accommodates the
implementation of amnioinfusion, a procedure designed to increase the efficiency
of labor as well as provide direct support to a fetus exhibiting signs of
distress. In this procedure, sterile saline is infused into the uterus to
directly relieve fetal distress by providing hydraulic support of the umbilical
cord and to increase the effect of labor contractions until delivery is
accomplished. In addition, the Company manufactures and markets intrauterine
pressure monitoring kits. These completely preassembled kits are designed to
monitor the intensity of contractions during child birth and are used in
conjunction with SimulCath.
- - SECURE(TM) SYSTEM
The Secure System is an arterial pressure monitoring kit for closed system
pressure monitoring whereby blood samples can be withdrawn through a special
access port that mitigates the risk of accidental line contamination and patient
infection. Another feature of the Secure System is the shrouded needle which is
mounted on a hypodermic syringe, thereby reducing the clinician's risk of
accidental needlestick injury. The shrouded needle and syringe are used to
access the arterial line for the aseptic sampling of blood. The system design
also allows the reinfusing of blood/saline mixture to preserve the red blood
cell mass of a critically ill patient.
- - KIDS KIT
Kids Kit is a pediatric version of the SECURE pressure monitoring system for
adults. The Kids Kit provides a closed system which minimizes contamination and
infant blood loss as well as helping to prevent accidental needlestick injuries
to clinicians.
<PAGE> 7
- - CONTINUOUS FLUSH DEVICES
The continuous flush device is a component used in invasive cardiovascular
pressure monitoring systems. This device allows a small amount of saline
(typically 3-6 cc(s) per hour) to be infused through the catheter in order to
reduce the tendency of blood to clot in the catheter, which could distort or
eliminate the ability of the system to monitor pressure. The continuous flush
device also incorporates a valve that, when activated, will allow a large volume
of fluid to enter the system for purposes such as priming the initial set up or
for clearing the system of accumulated blood. The continuous flush devices
manufactured by the Company are used primarily as components in standard and
custom pressure monitoring kits assembled and marketed by the Company.
- - PRESSURE INFUSOR CUFFS
Pressure infusor cuffs are designed to be placed around bags of fluid and
manually inflated with air to create and maintain a specific fluid pressure.
This pressure, in conjunction with the action of the continuous flush device,
permits controlled flow rates and fast flushing of the invasive pressure
monitoring systems. In addition, pressure infusor cuffs are used for rapid
infusion of blood and other fluids. The Company manufactures and markets two
infusor cuffs, C-Fusor(R) and Clear Cuff(R).
C-Fusor is made of clear polyurethane, which permits immediate assessment of the
fluid level in the bag from any angle. This material's stain resistance and
durability extends the useful life of the product. The closure system used in
the C-Fusor provides secure closure and significantly simplifies fluid bag setup
and replacement.
The Clear Cuff pressure infusor complements the Company's C-Fusor reusable
pressure infusor. The Clear Cuff offers the flexibility
<PAGE> 8
of being disposable or reusable as dictated by clinical considerations.
- - ANGIOGRAPHY AND CORONARY ANGIOPLASTY PRODUCTS
Angiography is a diagnostic procedure used to evaluate the condition of major
blood vessels within a patient's vascular system. Coronary angioplasty is a
therapeutic procedure that involves the utilization of a balloon catheter to
expand the inner diameter of a patient's coronary arteries to improve blood
flow.
The Company manufactures and markets a series of Hemostatic Y Connectors used to
facilitate the placement of specialty catheters for angiographic and angioplasty
procedures in the cardiac catheterization laboratory. In addition, the Company
markets the Matrix 250(TM) and the Matrix 550(TM) series of one-piece, hand-held
manifolds, the Encore II(TM) control syringe, high pressure injection tubing and
high pressure rotators which are used during angiography and angioplasty
procedures. During fiscal 1995, the Company introduced Medflator II to the
European market. This product, a new analog version of the original digital
product, is an inflation device used to inflate balloon catheters during
therapeutic or interventional procedures such as angioplasty.
- - KITS AND PROCEDURE PACKS
The Company assembles many of the disposable products described above into
integrated systems (kits). These kits are available in standard configurations
or they may be custom designed to meet the specific requirements of an
individual customer. Standard and custom kits may include one or more of the
following products: intravenous administration sets; stopcocks; pressure tubing;
continuous flush devices; and other products.
In Europe, the Company purchases various components from other manufacturers and
packages them with the Company's products to
<PAGE> 9
produce kits specifically for sophisticated hospital procedures. Procedure
packing lowers costs, increases hospital throughput, and saves labor by
eliminating the need for healthcare providers to purchase parts individually and
assemble them on site. Procedure packing is a growing market in Europe and the
Company has expanded its United Kingdom facilities to access this growing
market.
INFUSION SYSTEMS
- - MEDFUSION 2001 SYRINGE PUMP
The Company's leading pump product is the Medfusion Model 2001 syringe pump.
This product is capable of accepting all conventional hypodermic syringes which
range from 1 through 60 cc in volume. This capability makes the pump very useful
for the intravenous and regional infusion of anesthetic agents in the operating
room as well as in neonatal intensive care units where low volume drug infusions
are required for premature infants.
Additionally, a syringe offers the lowest cost intravenous fluid container
available to the hospital pharmacist. The pharmacist can prefill a syringe with
the exact amount of drug required by the patient, label the syringe, and deliver
it to the patient's bedside for loading into the syringe pump. The operational
programming of the pump is software prompted and easily taught to clinical
personnel.
The 2001 syringe pump is microprocessor based and capable of automatically
recognizing the size and manufacturer of the syringe attached to it. The pumps
occlusion alarm is automatically varied in accordance with the syringe size in
use. If the drug infusion line or catheter becomes kinked or obstructed, the
pump will automatically switch off and sound an alarm.
<PAGE> 10
- - MEDFUSION 2010 AND 2010i SYRINGE PUMPS
The Medfusion Model 2010 and 2010i syringe pumps are designed specifically for
use by anesthesiologists in the operating room. These syringe pumps build upon
the electromechanical success of the 2001 syringe pump through utilization of
expandable system architecture.
Anesthesiologists frequently administer drugs according to mass units (i.e., the
number of milligrams or micrograms of drug per kilogram of patient body weight
per unit of time required for the anesthetic.) The 2010 syringe pump is capable
of making drug concentration calculations in mass units as well as tracking the
total mass units of drugs infused over a period of time.
Additionally, anesthesiologists frequently manually infuse preselected volumes
of drugs intravenously into patients over short intervals ("bolus infusions") to
achieve rapid sequential effects. The 2010 syringe pump is capable of
automatically delivering programmed boluses of drugs to patients over a
specified time interval and then reverting to a continuous infusion mode for the
duration of the procedure.
The 2010i syringe pump, which was introduced in fiscal 1994, is an enhanced
version of the 2010 syringe pump. The 2010i syringe pump stores hospital managed
drug protocols in an on board computer library, thereby greatly extending the
utility and ease of use of the 2010 version anesthesia syringe pump.
- - EZ-1(TM)
The EZ-1 is a large volume infusion pump used for administrating large fluid
volumes ranging from 0.1 ml per hour to 999.9 ml per hour. The EZ-1 pump uses a
specially calibrated pumping cassette as part of the disposable infusion set.
The EZ-1, unlike syringe
<PAGE> 11
pumps, utilizes a broad range of dedicated disposable infusion sets for
different protocols.
- - KIDS(TM) PUMP
The Company's KIDS Pump, unlike syringe pumps, can be used for the
administration of large, as well as small, fluid volumes. However, syringe pumps
are routinely connected to the infusion set of the KIDS Pump via "piggyback"
administration sets for the administration of drug mixtures to the patient. The
KIDS Pump, in tandem with the 2001 syringe pump, is capable of delivering most
pediatric fluid and drug administration protocols.
The KIDS Pump, like the EZ-1 large volume pump, utilizes a broad range of
dedicated disposable infusion sets for different clinical protocols. A special
calibrated pumping cassette is inserted into the KIDS Pump as an integral part
of the disposable infusion set. The calibration of the cassette delivers flow
rates ranging from 0.1 ml per hour to 999.9 ml per hour. The combined accuracies
and safety features of the 2001 syringe pump and the KIDS Pump address concerns
of neonatal and pediatric intensive care physicians and nurses. The KIDS Pump is
among the easiest pumps of its kind to operate and can be programmed to prevent
tampering.
- - TRILOGY(TM)
Trilogy, a three-channel large volume pediatric infusion pump, which was
introduced in fiscal 1994, provides the capabilities of three KIDS pumps in one
housing of substantially less size and weight; thus allowing the clinician more
efficient use of bedside space.
- - WALKMED(R) INFUSION PUMPS
The Company designs and manufactures a line of battery powered, single channel
ambulatory infusion pumps for the administration of
<PAGE> 12
chemotherapeutic agents, anticancer drugs, and analgesics to manage intractable
pain. Ambulatory drug therapy is typically administered by indwelling vascular
access catheters or implanted ports of various types. Alternatively, ambulatory
pumps may be used for subcutaneous and/or epidural drug infusions when
clinically indicated.
The WalkMed series of peristaltic pumps weigh approximately 12 ounces and are
capable of delivering drugs from 0.01 to 30.0 cc per hour. The microprocessor in
the WalkMed series is capable of indicating different functional conditions by
audible signal, visible light, and written information on the liquid crystal
display.
The following table sets forth the percentage of consolidated net sales
contributed by each class of similar products for the last three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30 1995 1994 1993
- ------------------ ---- ---- ----
<S> <C> <C> <C>
Critical Care Accessories 69% 70% 67%
Infusion Systems 31% 30% 33%
</TABLE>
The Company's backlog orders believed to be firm, at June 30, 1995, were
approximately $11,163,000 as compared to approximately $7,696,000 as of the
end of the preceding fiscal year. It is expected that approximately 90% of
these orders will be filled during the current fiscal year.
RESEARCH AND DEVELOPMENT
The Company's research and development activities concentrate on the
investigation and development of new and improved products in the area of
critical care medicine. The Company's research and development expenditures for
the years ended June 30, 1995, 1994, and 1993 were approximately $3,147,000,
$3,299,000 and $4,254,000 respectively.
<PAGE> 13
As a result of this activity, the Company has introduced invasive pressure
monitoring transducers, hospital and ambulatory infusion pumps, balloon
inflation devices, various products for fluid and drug delivery and special
pressure monitoring systems for critically ill patients. The majority of the
research and development activities are performed by the Company's personnel.
The Company maintains separate research and development groups at its Ohio and
Georgia facilities whose scientific and engineering disciplines are specific to
the products manufactured at those locations.
SALES AND MARKETING
The Company currently markets more than 600 standard products as well as
additional custom products in the United States, Canada and internationally.
Single patient use (disposable) products currently account for approximately 75%
of net sales.
The Company's domestic sales and marketing effort is accomplished primarily by a
network of direct sales representatives and is supplemented in select geographic
areas by independent sales agents. These representatives work with independent
hospital supply dealers to whom the Company sells many of its products. In
addition, these representatives work with the dealers' sales force at the
hospital level to promote sales of the Company's products. The Company also
sells directly to hospitals, home health care companies, other alternate site
health care facilities, as well as other medical device manufacturers on an
original equipment basis.
Sales in the United Kingdom, continental Europe, and the Middle East are
conducted mainly by direct sales representatives of Medex Medical, Inc., Medex
Medical GmbH, Ashfield Medical Systems Limited and Medex Medical France SARL.
Sales to other international markets are conducted through dealers located in
the various
<PAGE> 14
countries. See Note 7 of Notes to Consolidated Financial Statements.
During fiscal 1995, the Company completed the reorganization of its domestic
sales force to centralize sales, customer service and marketing efforts between
Medex and its former subsidiaries, Medfusion, Inc. and Ivion Corporation, with
the goal of creating a single sales force to focus on the Company's entire line
of hospital products.
Increasingly, hospitals and other customers are relying upon third parties to
purchase supplies, manage inventories and distribute goods. The Company
recognizes the influence of these hospital group purchasing organizations, as
well as "stockless" and "just in time" programs with major distributors, and
continues to establish and pursue on-going relationships with these types of
organizations. In addition, the Company has invested significant resources to
improve customer ordering efficiency through the implementation of a centralized
order entry and billing system utilizing an electronic data interface system
that allows customers to directly place domestic product orders to a single
location, thereby reducing human error and speeding order turn around.
MAJOR CUSTOMERS
During fiscal 1995, 1994 and 1993, Medex had sales to Owens & Minor, a domestic
distributor of its products, totaling approximately 12%, 11% and 11% of total
net sales, respectively.
MANUFACTURING OPERATIONS
The Company's manufacturing operations are undertaken at its facilities located
in Hilliard and Dublin, Ohio; Duluth, Georgia; Rossendale, England; and in
Cumbernauld, Scotland.
<PAGE> 15
The Company utilizes sixty automated molding machines and an array of automated
assembly machines located at the Dublin facility to fabricate over 400 million
components annually for its operating entities. This produces manufacturing
efficiencies by avoiding duplication of technical manpower, support facilities,
and capital equipment at its other manufacturing operations. The disposable
components manufactured at the Dublin facility are transferred directly to the
Company's various assembly facilities where the final assembly of products is
undertaken according to Good Manufacturing Practice (GMP) standards set forth by
the United States Food and Drug Administration. The quality control, packaging,
and labeling of disposable products are completed at those locations. The Ohio
facilities utilize the Company's own sterilization operations located at the
Hilliard facility, while the other assembly facilities primarily rely upon
contracted sterilization services.
The design, manufacture, and servicing of infusion pumps and certain disposable
products are undertaken at the Company's Duluth facility.
The Company assembles and packages products including procedure packs for
distribution to Europe, Africa and the Middle East from Medex Medical's
facilities in Rossendale, England. Surgical drapes are manufactured at Ashfield
Medical Systems Limited's facility in Cumbernauld, Scotland for inclusion in the
Company's procedure packs and for sale to other manufacturers.
Quality control procedures include rigid specifications for the examination of
components, packaging materials and labels, and sterilization procedures.
Quality control tests performed at different stages in the manufacturing and
assembly processes are designed to assure that exacting standards for finished
goods and their component parts are met. Periodically, these efforts are audited
by a group of qualified employees and outside consultants
<PAGE> 16
to confirm that the Company's actions fulfill regulatory requirements.
Certain components, such as extruded tubing, silicon chips, and
electromechanical subassemblies for infusion pumps are purchased from outside
suppliers. Outside suppliers of medical components must adhere to the Company's
specifications and GMP's.
RAW MATERIALS
Purchased raw materials used in the Company's production process are generally
available from a number of suppliers. The primary raw materials used include
thermoplastic resins, plastic tubing, electronic componentry, paper and plastic
packaging materials.
Due to increased worldwide demand, some users of polycarbonate resins have
experienced periodic shortages in supply and delays in delivery of such resins.
The Company uses polycarbonate in the manufacture of certain plastic components.
To date, the Company has been minimally impacted by such shortages and delays.
While the Company believes that an adequate supply will be available in the near
term, the cost of such material will likely continue to increase.
PATENTS AND TRADEMARKS
The Company possesses rights under a number of domestic and foreign patents and
trademarks relating to its products and business. While the Company considers
its trademarks important in the operation of its business and, in particular,
the name Medex, Inc.(R), the business of the Company is not dependent on any
trademark or on any single patent or group of patents.
As a condition of employment, many of the Company's employees involved in
research and development activities are required to sign an agreement to
maintain the confidentiality of Company
<PAGE> 17
secrets and to assign to the Company his or her interest in any inventions
conceived during the course of his or her employment. The Company recognizes
that such agreements are sometimes difficult to enforce.
COMPETITION
There are a significant number of manufacturers that compete with the Company.
The principal methods of competition are price, service, scope of product line
and product quality. The Company is not presently a dominant factor in the
markets served by its critical care accessories and most of its competitors have
greater financial and other resources. Although the infusion pump market is
extremely competitive, the Company believes that it is a major factor among
those manufacturers who supply the children's hospital, neonatal and pediatric
marketplace.
GOVERNMENT REGULATIONS
The Company is subject, in the manufacture, clinical testing and marketing of
its products, to mandatory procedures and safety standards which are
administered by the United States Food and Drug Administration (FDA) and similar
agencies in foreign countries. The FDA regulates the Company as to the quality
and safety of its products and the practices by which they are manufactured and
sold. The FDA also regulates the introduction of new products, makes periodic
inspections of manufacturing processes to confirm that such processes meet FDA
standards, and receives, investigates and resolves any complaints against the
Company. The Company believes that it is in compliance with the FDA's Good
Manufacturing Practice (GMP) standards.
FDA regulations require clearance by the agency, prior to marketing a new
product. The two principal processes for obtaining this clearance are known as
"510(k)" premarket notification and premarket approval ("PMA"). Historically,
the process of obtaining
<PAGE> 18
a 510(k) clearance typically has taken several months and involves the
submission of limited clinical data and supporting information. However, in
recent years this time period has been extended. The PMA process typically will
last more than a year and requires the submission of significant quantities of
clinical data and manufacturing information. Historically, the Company's new
products have fallen into the FDA's class of products which are subject to the
510(k) process. The Company presently expects that any new products it is
contemplating will be subject to the 510(k) process.
The Company is subject to various federal, state and local regulations relating
to the maintenance of safe working conditions, manufacturing practices, and the
use and discharge of harmful or potentially harmful substances. The Company
believes that it is in compliance with all such regulations applicable to its
operations.
The Company is currently operating three gas sterilizers at its Hilliard, Ohio
plant which use a sterilant gas mixture of ethylene oxide and HCFC 124. These
sterilizers are operational with the Company's sterilant recovery system.
ENVIRONMENTAL
During the fiscal year ended June 30, 1995, the amounts incurred in compliance
with federal, state and local environmental laws and regulations did not have a
material effect upon the capital expenditures or earnings of the Company and the
Company does not anticipate that such compliance will have a material effect on
future capital expenditures or earnings.
The Comprehensive Environmental Response Compensation and Liability Act (CERCLA)
provides governmental agencies with authority to require clean up of hazardous
waste sites and release of hazardous substances into the environment. Liability
under this act is joint
<PAGE> 19
and several and can be applied retroactively. During fiscal 1994 the Company,
along with over one hundred other companies, was identified by the United States
Environmental Protection Agency (EPA) as a potentially responsible party (PRP)
for the clean up of a contaminated waste disposal site near Granville, Ohio. The
Company along with approximately 80 other PRP's formed a PRP Group in order to
develop responsive actions in connection with the site. The Company, along with
the majority of the PRP group members, has entered into an Administrative Order
on Consent with the U.S. EPA and a clean up plan is currently being implemented
at the site. Current clean up estimates provided to the PRP Group are
approximately $7 million. However, because the Company's share allocation within
the PRP Group is de minimis, the Company, at this time, believes that its
liability for this matter will not have a materially adverse affect on its
results of operations or financial condition.
EMPLOYEES
The Company and its subsidiaries employ approximately 1,100 employees worldwide.
None of the Company's employees are currently employed under a union contract.
The Company believes it has a good relationship with its employees.
ITEM 2. PROPERTIES
The Company owns a complex of facilities totaling approximately 150,000 square
feet situated on approximately 11 acres of land located in Hilliard, Ohio. These
facilities contain the Company's executive offices, management information
systems, assembly and sterilization facilities, sterile goods quarantine,
quality control laboratories, and general warehouse space. During fiscal 1995,
the Company completely renovated an approximately 71,000 square feet building
(included in the square footage above) situated on the site to provide
additional space for assembly and warehousing operations.
<PAGE> 20
The Company owns an approximately 100,000 square feet facility located on
approximately 23 acres of land in Dublin, Ohio. The facility is being used for
research and development, production, automation, tooling, quality control
laboratories, warehousing and administrative offices.
The Company owns an approximately 52,000 square feet production, research,
warehouse, and office facility situated on an 8.2 acre parcel of land in Duluth,
Georgia.
The Company continues to lease an approximately 82,000 square feet facility in
Broomfield, Colorado which previously housed the Company's Denver operations.
The facility was closed during fiscal 1995 and its operations were consolidated
into the Ohio and Georgia facilities. The lease expires in September 1998 and
the Company is currently attempting to sublease this space.
Medex Medical, Inc. owns and occupies an approximately 24,000 square feet
building located in Rossendale, England. The facility houses office, warehouse
and production facilities for international manufacturing and distribution
operations. Additionally, the Company owns a 994 year leasehold interest in an
approximately 3.3 acre parcel of land and a 65,000 square feet building situated
adjacent to the above facility. This facility is being utilized for additional
manufacturing, warehousing and office space principally in connection with the
Company's European procedure packing operations. The leasehold provides an
option to purchase the fee interest in the property at any time for the sum of
116,000 pounds sterling.
Ashfield Medical Systems Limited leases approximately 15,600 square feet of
production, warehousing and office space located in Cumbernauld, Scotland. The
Company is currently renovating a portion of this facility to provide a new
"clean room" production area. The current term of the lease extends until May
2017.
<PAGE> 21
Medex Medical GmbH leases a facility located in Ratingen, Germany containing
approximately 26,000 square feet of office, sales, marketing and warehouse
space. The lease on this facility expires in September 1997.
Medex Medical France, SARL leases a facility in Nantes, France containing
approximately 3,000 square feet of office, sales and warehousing space. The
lease term extends until January 1997.
The Company believes that its current facilities and ongoing expansions will be
suitable and adequate for its operations for the immediate future.
<PAGE> 22
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE> 23
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning officers of the
Company:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- ---- ------------------------- ---
<S> <C> <C>
C. Craig Waldbillig Chairman of the Board 69
and Director
Phillip D. Messinger President, Chief Executive 59
Officer and Director
Terry L. Sanborn Senior Vice President, 52
Manufacturing and
Chief Operating Officer
Donald H. Barry Vice President, Treasurer and 57
Chief Financial Officer
Robert E. Boyd, Jr. Secretary, General Counsel 69
and Director
Bradley P. Gould Senior Vice President, 41
European Operations
William J. Post Senior Vice President, 45
Sales and Marketing
Michael J. Barilla Vice President, 44
Internal Auditing
Kevin L. Barnett Vice President and Corporate 33
Controller
William N. Bartleson Vice President, Human Resources 58
Roger A. Davis Vice President and General 49
Manager, Atlanta Operations
Georg W. Landsberg Vice President, European 41
Operations
Clint R. Lawson Vice President, Corporate Quality 46
Assurance and Regulatory Affairs
John L. Miclot Vice President, Marketing 36
David G. Musgrove Vice President, International/ 51
O.E.M. Development
Thomas O. Napper Vice President and General 56
Manager, Columbus Operations
</TABLE>
<PAGE> 24
C. Craig Waldbillig, a co-founder of the Company in 1959, was elected Chairman
of the Board in 1982. Mr. Waldbillig retired as Chief Executive Officer of the
Company during 1993. Mr. Waldbillig is also a director and Chairman of Medex
Medical, Inc. and a director of Medex Exports, Inc. Mr. Waldbillig serves as a
director of Danninger Medical Technology, Inc.
Phillip D. Messinger was elected Chief Executive Officer in March of 1993 and
has been President since 1982. Mr. Messinger has been a director since 1976 and
previously served as Chief Operating Officer from 1982 until 1993. Mr. Messinger
is also a director and Vice Chairman of Medex Medical, Inc., a director and
President of Medex Exports, Inc. and a managing director of Medex Medical GmbH.
Terry L. Sanborn was elected Chief Operating Officer in May of 1993. Mr. Sanborn
has served as Senior Vice President of Manufacturing since May, 1995. Mr.
Sanborn also served as Executive Vice President from May 1993 to 1995; Senior
Vice President, Corporate Operations from 1991 to 1993; and as a Vice President
since 1979.
Donald H. Barry was elected Vice President, Treasurer and Chief Financial
Officer in 1993. Prior to joining Medex, Inc. in October 1993, Mr. Barry was
Financial Controller and Treasurer for Chesebrough Ponds U.S.A., a business unit
of Unilever N.V. and Unilever PLC. Mr. Barry is also Assistant Treasurer for
Medex Medical, Inc. and Treasurer for Medex Exports, Inc.
Robert E. Boyd, Jr., was elected Secretary and General Counsel in 1960 and has
been a director since 1964. Mr. Boyd has been a practicing attorney for more
than 43 years. Mr. Boyd is also a director and Secretary of Medex Medical, Inc.
and Medex Exports, Inc.
Bradley P. Gould was elected Senior Vice President of European Operations in
1993. Mr. Gould is also a director and President of Medex Medical, Inc., a
director of Ashfield Medical Systems Limited, and a managing director of Medex
Medical GmbH and Medex Medical France SARL. Mr. Gould was first elected Vice
President in 1992. From 1991 until May of 1992, Mr. Gould was Director of
Sales/Marketing European Operations. Prior to 1991, Mr. Gould was General
Manager of Cardionova GmbH.
William J. Post was elected Senior Vice President, Sales and Marketing in 1993.
Prior to joining Medex, Inc. in October 1993, Mr. Post was Vice President, Field
Operations for Spectramed, Inc., The BOC Group, Windlesham, England.
Michael J. Barilla became Vice President, Internal Auditing in fiscal 1995. From
1993 to 1995 he served as Senior Vice President, Corporate Operations and
Administration. Mr. Barilla was first elected as Vice President in 1990 and
previously served as Corporate Controller.
Kevin L. Barnett was elected Vice President and Corporate Controller in 1994.
From April of 1992 until May of 1994 he was Assistant Treasurer of the Company.
Prior to April of 1992, Mr.
<PAGE> 25
Barnett was employed by Deloitte & Touche as Manager, Auditing Services. Mr.
Barnett is also Assistant Treasurer for Medex Medical, Inc. and Medex Exports,
Inc.
William N. Bartleson was elected Vice President, Human Resources in 1993. Prior
to November 1993, Mr. Bartleson served the Company as Manager of Development and
Training from August 1989 to February 1990; Manager of Human Resources from
February 1990 to January 1991; and Director, Human Resources from January 1991
to November 1993.
Roger A. Davis was elected Vice President and General Manager, Atlanta
Operations in 1993. From July 1993 to December 1993 he was Vice President,
General Manager, Medfusion, Inc. From March 1992 to June 1993 he was Vice
President of Operations for Medfusion, Inc. Prior to 1992 he served as a plant
manager for 3-M Corporation.
Georg W. Landsberg was elected Vice President of European Operations in 1994.
From May 1992 to November of 1994, he was Director, Sales & Marketing, European
Operations. Mr. Landsberg is also a managing director of Medex GmbH and Ashfield
Medical Systems Limited. Prior to May 1992 he served as Sales and Marketing
Manager, Cardionova GmbH.
Clint R. Lawson was elected Vice President in 1990 and is responsible for
quality assurance and regulatory affairs. Prior to 1990, he was Director of
Corporate Quality Control and Regulatory Affairs for the Company.
John L. Miclot was elected Vice President of Marketing in 1994. Prior to joining
the Company in January of 1994, Mr. Miclot was employed as Vice President of
International Marketing from October 1993 to January 1994, for Ohmeda Division
of BOC Healthcare; Director of International Marketing for Ohmeda Medical
Systems, Division of BOC Healthcare from November 1992 to October 1993; and
Director of Marketing, Viggo-Spectramed Division of BOC Healthcare from November
1989 to November 1992.
David G. Musgrove was elected Vice President in 1982 and is currently
responsible for international, OEM, and bulk sales development.
Thomas O. Napper became Vice President and General Manager, Columbus Operations
during fiscal 1995. From December 1993 to February 1995, Mr. Napper was Vice
President and General Manager, Denver Operations. From June 1992 to December
1993 he was President of Ivion Corporation; from August 1991 to June 1992 Senior
Director of Manufacturing, Medex, Inc. Prior to joining the Company, Mr. Napper
was Vice President of Engineering for Sherwood Medical Company.
Officers are elected by the Board of Directors following the annual meeting and
serve until the next annual meeting or until their successors are named.
<PAGE> 26
There are no family relationships between any director or executive officer and
any other director or executive officer of the Company.
There are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
There have been no events under any bankruptcy act, no original proceedings, and
no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
<PAGE> 27
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to
"Market for the Registrant's Common Stock and Related Shareholder Matters"
appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
"Selected Consolidated Financial Data" appearing in Exhibit 13 of this Form 10-K
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to
the financial statements and supplementary financial information appearing in
Exhibit 13 of this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth under the captions
"Election of Directors" in the Company's Proxy Statement for its annual meeting
of shareholders on November 15, 1995, and is incorporated herein by reference.
The information with respect to "Executive Officers of the Company" is contained
at the end of Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption
"Compensation of Directors and Executive Officers" in the Company's Proxy
Statement for its annual meeting of shareholders on November 15, 1995, and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information required by this item is set forth under the caption
"Beneficial Ownership of the Company's Common Stock" in the Company's Proxy
Statement for its annual meeting of shareholders on November 15, 1995, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption
"Election of Directors" in the Company's Proxy Statement for its annual meeting
of shareholders on November 15, 1995, and is incorporated herein by reference.
<PAGE> 29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
A. Documents filed as a part of this report.
1. FINANCIAL STATEMENTS
The consolidated financial statements as of June 30, 1995 and 1994 and
for each of the three years in the period ended June 30, 1995, together
with the report thereon of Deloitte & Touche LLP dated August 10, 1995,
appearing in Exhibit 13 of this Form 10-K Annual Report are
incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
Consolidated Statements of Income for the years ended June 30, 1995,
1994 and 1993.
Consolidated Balance Sheets at June 30, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended June 30,
1995, 1994 and 1993.
Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1995, 1994 and 1993.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. FINANCIAL STATEMENT SCHEDULES REQUIRED BY ITEMS 8 AND 14(d).
Included in Part IV of this report is the following additional
financial data which should be read in conjunction with the
consolidated financial statements in the 1995 Annual Report to
Shareholders.
Independent Auditors' Report
Supplemental Consolidated Schedules for each of the three years ended
June 30, 1995:
Schedule II - Valuation and Qualifying Accounts
<PAGE> 30
Schedules not included above have been omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
3. Exhibits
See Index to Exhibits.
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the three months ended June 30,
1995.
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MEDEX, INC.
Date September 25, 1995 By: /s/ Phillip D. Messinger
---------------------------------- -------------------------
Phillip D. Messinger
President,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/Phillip D. Messinger President, Chief September 25, 1995
- ----------------------- Executive Officer -------------------
Phillip D. Messinger and Director Date
/s/Donald H. Barry Vice President, September 22, 1995
- ----------------------- Treasurer and Chief -------------------
Donald H. Barry Financial Officer Date
/s/Kevin L. Barnett Vice President and September 25, 1995
- ----------------------- Corporate Controller -------------------
Kevin L. Barnett (Principal Accounting Date
Officer)
/s/Robert E. Boyd, Jr. Secretary and Director September 26, 1995
- ----------------------- -------------------
Robert E. Boyd, Jr. Date
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C>
/s/ James L. Ginter Director September 26, 1995
- --------------------------- --------------------
James L. Ginter Date
/s/ Thomas A. Helmrath, M.D. Director September 26, 1995
- --------------------------- --------------------
Thomas A. Helmrath, M.D. Date
/s/ John N. Holscher Director September 26, 1995
- --------------------------- --------------------
John N. Holscher Date
/s/ Thomas M. Jordan, Jr. Director September 26, 1995
- --------------------------- --------------------
Thomas M. Jordan, Jr. Date
/s/ John B. Joyce, Jr. Director September 26, 1995
- --------------------------- --------------------
John B. Joyce, Jr. Date
/s/ J. David Martino, M.D. Director September 26, 1995
- --------------------------- --------------------
J. David Martino, M.D. Date
/s/ C. Craig Waldbillig Chairman of the September 26, 1995
- --------------------------- Board and Director --------------------
C. Craig Waldbillig Date
</TABLE>
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of
Medex, Inc.:
We have audited the consolidated financial statements of Medex, Inc. and
subsidiaries as of June 30, 1995, and 1994, and for each of the three years in
period ended June 30, 1995, and have issued our report thereon dated August 10,
1995, which report includes an explanatory paragraph as to the change in the
method of accouting for income taxes; such financial statements and report are
included in your 1995 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Medex, Inc. listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 10, 1995
<PAGE> 34
MEDEX, INC. AND SUBSIDIARIES SCHEDULE II
<TABLE>
<CAPTION>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------------------------------
COLUMN C ADDITIONS
COLUMN B ----------------------------------
BALANCE AT (1) (2) COLUMN D COLUMN E
COLUMN A BEGINNING CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR COSTS AND EXPENSES OTHER ACCOUNTS (A) END OF YEAR
<S> <C> <C> <C> <C>
RESERVES DEDUCTED FROM ASSET TO WHICH IT APPLIES -
Allowance for doubtful accounts of trade receivables:
YEAR ENDED JUNE 30, 1995 $570,000 $367,000 $223,000 $714,000
YEAR ENDED JUNE 30, 1994 $548,000 $248,000 $226,000 $570,000
YEAR ENDED JUNE 30, 1993 $527,000 $184,000 $163,000 $548,000
</TABLE>
(A) Amount represents uncollectible accounts written off and the effect of
changes in foreign currency exchange rates used to translate foreign
subsidiary amounts.
<PAGE> 35
MEDEX, INC
FORM 10-K
JUNE 30, 1995
INDEX TO EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation, incorporated herein by reference to Exhibit
3(a) of the Company's Quarterly Report on Form 10-Q for quarter ended
December 31, 1991.
3.2 Code of Regulations, incorporated herein by reference to Exhibit 3.2
of the Company's Annual Report on Form 10-K for fiscal year ended June
30, 1994.
3.3 Code of By-Laws
4. The Company agrees to furnish to the Commission upon request copies of
instruments defining the rights of holders of long-term debt which are
not being filed as part of this Report in reliance on Item
601(b)(4)(iii) because the total amount of securities authorized under
each such instrument does not exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis.
10.1 Medex, Inc. Administrative Incentive Stock Option Plan II,
incorporated herein by reference to Exhibit 10.2 of the Company's
Annual Report on Form 10-K for fiscal year ended June 30, 1992.
10.2 Medex, Inc. Non-Employee Director Restricted Stock Option Plan,
incorporated herein by reference to Exhibit 10.3 of the Company's
Annual Report on Form 10-K for fiscal year ended June 30, 1994.
10.3 Medex, Inc. Non-Employee Director Restricted Stock Option Plan II.
10.4 Medex, Inc. Key Employee Nonstatutory Stock Option Plan, incorporated
herein by reference to Exhibit 10.5 of the Company's Annual Report on
Form 10-K for fiscal year ended June 30, 1992.
10.5 Split Dollar Life Insurance Agreement between the Company and Craig
Waldbillig Trust, incorporated herein by reference to Exhibit 10.5 of
the Company's Annual Report on Form 10-K for fiscal year ended June
30, 1994.
<PAGE> 36
10.6 Settlement Agreement and Release between the Company and Robert F.
Durbin, dated September 28, 1993, incorporated herein by reference to
Exhibit 10.6 of the Company's Annual Report on Form 10-K for fiscal
year ended June 30, 1994.
10.7 Split Dollar Life Insurance Agreement between the Company and Phillip
D. Messinger, incorporated herein by reference to Exhibit 10.7 of the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1992.
10.8 Master Agreement and Joinder Agreements to Executive Split Dollar
Insurance Benefit Plan available to executive officers and certain
management employees of the Company, incorporated herein by reference
to Exhibit 10.7 of the Company's Annual Report on Form 10-K for fiscal
years ended June 30, 1990, June 30, 1991 and Exhibit 10.8 for fiscal
years ended June 30, 1992 and June 30, 1994.
10.9 Employment Agreement as executed by all executive officers of the
Company, except C. Craig Waldbillig, Robert E. Boyd, Jr. and Georg W.
Landsberg, incorporated herein by reference to Exhibit 10.8 of the
Company's Annual Report on Form 10-K for fiscal year ended June 30,
1990.
10.10 Directors Retirement Plan, see Exhibit 3.3 hereto.
10.11 Description of Medex, Inc. Annual Incentive Compensation Program for
executive officers of the Company.
10.12 Non-Competition Agreement and Consulting Contract between the Company
and Mr. Waldbillig dated June 1, 1993, incorporated herein by
reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K
for fiscal year ended June 30, 1993.
10.13 Medex, Inc. Non-Employee Director Restricted Stock Option Plan III,
incorporated herein by reference to Exhibit 10.1 of the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1993.
10.14 Employment Compensation Agreement with William J. Post, incorporated
herein by reference to Exhibit 10.14 of the Company's Annual Report on
Form 10-K for fiscal year ended June 30, 1994.
10.15 Medex, Inc. Executive Stock Option Plan, incorporated herein by
reference to Exhibit 10.1 of the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1994.
<PAGE> 37
11. Computation of earnings per share.
13. Annual Report to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of Experts and Counsel. (1) The consent of Deloitte & Touche
LLP to the incorporation by reference in Registration Statements No.
33-23787, 33-36739, 33-44859, 33-79854 and 33- 89964 on Form S-8 of
their opinion dated August 10, 1995, appearing and incorporated by
reference in the Annual Report on Form 10-K of Medex, Inc. for the
year ended June 30, 1995.
27. Financial Data Schedule.
<PAGE> 1
EXHIBIT 3.3
MEDEX, INC.
CODE OF BY-LAWS
ARTICLE I
MEETINGS OF BOARD
Section 1. Organization of Meetings
At each meeting of the Board of Directors, the Chairman, or, in his
absence, the President, or, in the absence of both the foregoing, a Chairman
chosen by a majority of the Board of Directors present, shall preside. The
Secretary, or, in his absence, any person appointed by the Chairman, shall
perform the duties of Secretary of the meeting and shall keep the minutes
thereof.
Section 2. Place of Meetings
The meetings of the Board shall be held at such place or places, within or
without the State of Ohio, as may from time to time be fixed by the Board of
Directors, or as shall be specified or fixed in the respective notices or
waivers of notice thereof.
Section 3. Meetings
Meetings of the Board of Directors shall be held whenever called by the
Chairman, or, in his absence, the President, or by any two Directors. Unless
waived before, at or after the meeting as hereinafter provided, notice of each
such meeting shall be given by the Chairman or the persons calling such meetings
to each Director in any of the following way:
(1) By orally informing him of the meeting in person or by telephone not
later than two days before the date of the meeting.
(2) By personal delivery to him not later than two days before the date of
the meeting of written notice thereof.
(3) By mailing written notice to him, or by sending notice to him by
telegram, cablegram, radiogram, any such notice to be posted or dispatched, as
the case may be, a sufficient length of time before the meeting so that in the
ordinary course of the mail or of the transmission of telegrams, cablegrams, or
radiograms, as the case may be, delivery thereof would normally be made to him
not later than two days before the date of the meeting.
<PAGE> 2
Unless otherwise required by this Code of By-Laws, the notice of any
meeting need not specify the purpose or purposes of the meeting. Notice of any
meeting of the Board may be waived by any Director, either before, at or after
the meeting, in writing or by telegram, cablegram or radiogram.
Section 4. Order of Business
The order of business, but not the agenda at meetings of the Board shall be
such as the Chairman may prescribe or follow, subject, however, to his being
overruled with respect thereto by a majority vote of the members of the Board
present.
ARTICLE II
OFFICERS OF THE COMPANY AND THEIR AUTHORITY
Section 1. Creation of the Office of Chairman of the Board
There is hereby created the office of Chairman of the Board, who shall be
referred to in these By-Laws as the "Chairman." The Chairman shall have such
authority as is or may be conferred by the General Corporation Law of Ohio, the
Articles of Incorporation, the Code of Regulations, these By-Laws of the Company
and resolutions of the Board of Directors. The Chairman shall be a director.
The Chairman of the Board shall be responsible for the organization of and
shall conduct as presiding Officer all shareholder meetings and, with an Agenda
provided by the Chief Executive Officer and such additional matters as may be
requested by individual directors, shall conduct all meetings of the Board of
Directors of the Company.
Section 2. Creation of the Office of Chief Executive Officer
There is hereby created the office of Chief Executive Officer of the
Company, who shall be referred to in these By-Laws as the "CEO." The CEO shall
have such authority as is or may be conferred by the General Corporation Law of
Ohio, the Articles of Incorporation, and Code of Regulations and these By-Laws,
including the primary responsibility for and authority over the following
matters:
(1) The direction of the senior management in the development of the basic
mission, objective, policies, and operating plans of the company, to organize
this work into a short term (3 year) and long term (5 year) strategic plan for
presentation to and approval by the Board of Directors. Further, to periodically
and regularly see that these plans are reviewed and amended as necessary by the
Board of Directors.
(2) The recommendation to the Board of Directors of employment, terms of
employment, compensation, termination, terms
<PAGE> 3
of termination, including performance appraisals of all Officers of the Company
appointed by the Board of Directors.
(3) Have executive authority over and direct supervision of and
receive the reports of the Chief Operating Officer of the Company.
(4) Have final authority over all employment, compensation, terms of
employment, changes in terms of employment or compensation, and termination of
employment of all Company personnel to the level of Manager and Director.
Prescribe the specific limits of the authority of subordinates. Resolve any
conflicts arising between subsidiaries, operating groups, staff departments or
other functioning units.
(5) Have in accordance with such authority as is conferred by the Board of
Directors, the General Corporation Law of Ohio, the Articles of Incorporation,
the Code of Regulations, ultimate executive authority through the COO over all
the financial and legal affairs of the Company, receive the reports of the CFO,
The Vice President for Corporate Quality Assurance and Regulatory Affairs, and
the Secretary and General Counsel.
(6) Have responsibility for the long range physical and financial planning
of the Company, including the strategic planning process.
(7) Establish and maintain an effective system of communication throughout
the company and with the Board of Directors.
(8) The CEO of the Company is hereby authorized to execute and deliver on
behalf of the Company all contracts, deeds, mortgages, leases, promissory notes,
bonds, bills, drafts and other instruments in writing as he may deem necessary
and proper in the conduct of the Company's business. The CEO shall sign all
share certificates. The CEO is also authorized to borrow any money or otherwise
incur any indebtedness on behalf of the Company which the Board of Directors by
resolution deem necessary and proper in the conduct of the Company's business.
Provided, however, the CEO is authorized to borrow money or otherwise incur an
indebtedness on behalf of the Company up to a sum established by resolution of
the Board of Directors, without Board approval. Except as otherwise required by
law or by the Code of Regulations of the Company, resolutions of the Board of
Directors or these By-Laws, no other Officer shall execute or deliver on behalf
of the Company any instrument in writing or shall borrow any money or incur any
indebtedness without the specific authorization of the Board of Director and the
CEO.
(9) Have authority over and executive responsibility for all merger and
acquisition activities of the Company.
<PAGE> 4
(10) Have executive responsibility for all shareholder relations including
planning of the annual and special meeting of shareholders and reports to the
shareholders. Have responsibility for preparation of and presentation to the
Chairman of the Board, the Agenda for each Board meeting.
Section 3. Creation of the Office of Chief Operating Officer
There is hereby created the office of Chief Operating Officer of the
Company, who shall be referred to in these By-Laws as the "COO." The COO shall
have such authority as is or may be conferred by these By-Laws and resolutions
of the Board of Directors, including the responsibility for and authority over
the following matters:
(1) Recommending to the CEO the employment, terms of employment,
compensation, changes in terms of employment or compensation, termination, terms
of termination, of all Company personnel reporting to the COO.
(2) Have executive authority over and direct supervision of, and receive
the reports of all of the Officers of the Company except CEO, the CFO, the Vice
President for Corporate Quality Assurance and Regulatory Affairs, and the
Secretary and General Counsel and their direct subordinates.
(3) Have final authority over all employment, compensation, terms of
employment, changes in terms of employment or compensation, and term of
employment of all Company personnel below the title of Manager and Director.
(4) Have executive authority over and responsibility for the manufacturing,
marketing, and research and development operations of the Company and shall have
such executive authority to direct the CFO, the Vice President for Corporate
Quality Assurance and Regulatory Affairs, and the Secretary and General Counsel
in regard to their duties as is necessary to carry out this responsibility. Have
authority and responsibility to guide and direct the management in the
development, production, promotion, sale and servicing of the company's products
and services through out the world, to achieve budgeted profits, financial
criteria and preservation of the company capital.
(5) Have authority to direct the development of corporate communication and
information flow. Develop policies to ensure the execution of the policies of
the CEO.
(6) Have authority to direct creation and use of adequate and equitable
personnel and human resource policies. Participate and direct acquisition and
growth activities in accordance with the plans of the CEO and the Board of
Directors.
(7) Have authority over activities as may be directed from time to time by
the CEO.
<PAGE> 5
(8) Have authority to delegate activities and responsibilities as necessary
to those reporting to the COO.
(9) In case of the temporary absence or disability of the CEO, the COO of
the Company is hereby authorized to execute and deliver on behalf of the Company
all contracts, deeds, mortgages, leases, promissory notes, bonds, bills, drafts
and other instruments in writing as he may deem necessary and proper in the
conduct of the Company's business. The COO may also sign all share certificates.
With the written authority of the CEO, the COO is authorized to borrow any money
or otherwise incur any indebtedness on behalf of the Company up to the limit
established by the Board of Directors for the CEO. Except as otherwise required
by law, by the Code of Regulations of the Company, or by these By-Laws, no other
Officer shall execute or deliver on behalf of the Company any instruments in
writing or shall borrow any money or incur any indebtedness without the specific
authorization of the Board of Directors.
(10) In the temporary absence or disability of the CEO and with the written
approval of the majority of the Board of Directors the COO may exercise any
power of the CEO granted in these By-Laws.
Section 4. Creation of the Office of President
There is hereby created the office of President of the Company, who shall
be referred to in these By-Laws as the "President" and shall have such authority
as is or may be conferred by the General Corporation Law of the State of Ohio,
the Articles of Incorporation, the Code of Regulations, these By-Laws of the
Company, and resolutions of the Board of Directors.
Section 5. Creation of the Office of Executive Vice President
There is hereby created the office of Executive Vice President of the
Company, who shall be referred to in these By-Laws as the "Executive Vice
President." The Executive Vice President shall have such authority as is or may
be conferred by the Code of Regulations, these By-Laws of the Company, and
resolutions of the Board of Directors.
Section 6. Creation of the Office of Senior Vice President and Vice
President
There is hereby created the offices of Senior Vice-President and Vice
President of the Company, who shall be referred to in these By-Laws as "Senior
Vice-President and Vice President." There shall be as many Senior
Vice-Presidents and Vice Presidents as may be created from time to time by
resolution of the Board of Directors and these Senior Vice-Presidents and Vice
Presidents shall have such authority as is or may be conferred by the Code of
Regulations, these By-Laws of the Company, and resolutions of the
<PAGE> 6
Board of Directors. There is hereby created the office of Assistant Vice
President of the Company, who shall be referred to as "Assistant Vice
President." There shall be as many Assistant Vice Presidents with such authority
as is conferred by the Code of Regulations, these By-laws of the Company and
resolutions of the Board of Directors.
Section 7. Creation of the Office of Chief Financial Officer and Treasurer
There is hereby created the office of Chief Financial Officer and Treasurer
of the Company, who shall be referred to in these By-Laws as the "CFO." The CFO
shall report to the CEO. The CFO shall have such authority as is or may be
conferred by the General Corporation Law of Ohio, the Articles of Incorporation,
the Code of Regulations, the By-Laws of the Company and resolutions of the Board
of Directors, including the primary responsibility for and authority over the
following matters:
(1) The preservation of the balance sheet, and earnings of the company
through planning, budgeting and forecasting.
(2) The development and operation of a system of internal controls to
insure the integrity and reliability of the financial and management accounting
and reporting.
(3) The providing of accurate and timely information, counsel and judgement
to the CEO, the COO, and other officers on the executive team.
(4) The implementation of effective accounting policies and systems for
financial management of the company.
(5) The leadership and integration of related financial management
functions and accountabilities including, controllership, treasury, tax, parts
of strategic planning and investor relations and the internal administration of
stock options, profit sharing trust and other related employee benefits.
Section 8. Creation of the Office of Secretary
There is hereby created the office of Secretary of the Company, who shall
be referred to in these By-Laws as the "Secretary." The Secretary shall report
to the CEO. The Secretary shall have such authority as is or may be conferred by
the General Corporation Law of Ohio, the Articles of Incorporation, the Code of
Regulations, the By-Laws of the Company and resolutions of the Board of
Directors.
Section 9. Deposits and Bank Accounts
Such general and special bank accounts shall be opened with such banks,
trust companies or other depositories as the Board may designate or select for
the purpose.
<PAGE> 7
All funds of the Company shall be deposited to the credit of the Company in
such depositories unless they are invested in accordance with directions set
forth by resolution of the Board of Directors.
ARTICLE III
COMPENSATION AND RETIREMENT OF DIRECTORS
Section 1. Compensation of Directors
The compensation of Directors of the Company shall be established from time
to time by the Board of Directors in accordance with the provision of Article
4.07 of the Code of Regulations and these By-Laws.
(1) The annual directors fee shall be $ 5,000 payable $1,250 per quarter.
(2) The Board meeting fee shall be $1,000 per meeting.
(3) The Committee meeting fee shall be $400 per meeting for the committee
members and $500 per meeting for the Chairman.
Section 2. Retirement Ages and Ages for Eligibility for Election
(1) Unless an exception is created pursuant to Section 3 hereof, no
Director of the Company shall be eligible to be elected as a Director of the
Company if the term for which the Director is to be elected begins after the
annual meeting of the Company following that Directors' seventieth (70th)
birthday.
(2) Any Director who is no longer eligible for election as a Director of
the Company by virtue of Section 2. (1) above and who is not an Emeritus
Director under Article IV of these By-Laws and is otherwise in good standing,
shall be a retired Director of the Company.
Section 3. Minimum Retirement Age
(1) Any Director of the Company may elect to retire by notifying the
Company in writing of such election if,
(2) The Director is sixty-two (62) years of age and in good standing with
the Company and if,
(3) The Director has served a minimum of five (5) years as a Director and
if,
(4) The Director has not elected or been granted Emeritus status under
Article IV of these By-Laws.
<PAGE> 8
Section 4. Exception to Retirement and Eligibility for Election Ages
(1) The Board of Directors may by resolution adopted by affirmative vote of
seventy-five (75%) percent of the Directors of the Company waive for a specific
period any of the provisions of Section 1 of this Article, as to a specific
individual Director.
(2) The seventy-five (75%) percent affirmative vote shall not include the
vote of the Director affected.
Section 5. Retirement Benefit
(1) Eligibility:
Any outside Director non employee who has retired status in accordance with
the provisions of Article III of these By-Laws and is otherwise in good
standing, shall be entitled to receive the following annual benefit paid at
least in quarterly payments.
(2) The Annual Benefit:
Shall be three percent (3%) of the current annual fee times the number of
whole years of service as a Director.
(A) However, the maximum annual benefit shall be fifty (50%) percent of
the current annual fee.
(B) The annual benefit shall be payable until the death of the retired
Director, or for fifty percent (50%) of the whole years of service
of the retired Director or for a maximum of ten (10) years,
whichever is first.
Section 6. Vote Required to Change Directors Compensation or Amend this
Article III
The compensation of any Director, Director Emeritus or retired Director of
the Company provided for by Sections 1 or 5 of this Article III shall not be
stopped, reduced or otherwise diminished in any way or from any cause, prior to,
during or following any "business combination" as defined in Article Twelfth of
the Articles of Incorporation of the Company, and Article IV of these By-Laws,
nor shall this Article III of the By-Laws be amended, notwithstanding the
provisions of Article VII of these Company By-Laws, prior to, during or
following any "business combination" as defined in Article Twelfth of the
Company's Articles of Incorporation, unless the stopping, reducing or otherwise
diminishing of Directors compensation or the amending of this section is
approved by 80% of the "continuing Directors" of the Company as "continuing
Director" is defined by Article Twelfth of the Articles of Incorporation of the
Company.
<PAGE> 9
Section 7. Alternate Compensation
In the event, that contrary to the provisions of Section 6 of this Articles
III of these By-Laws there is in fact, prior to, during or following a "business
combination" as defined in Section 6, a diminution of Director compensation or a
retired Directors retirement benefit from any cause, then there shall be
immediately due and payable, from the Company, to each Director affected, in one
lump sum, together with any court costs and attorney's necessary to collect it,
an amount equal to two times the total compensation received by that Director or
retired Director during the twelve months immediately preceding the effective
date of the act or cause diminishing the Directors compensation or in the case
of a retired Director, an amount equal to the maximum total amount that the
retired Director could possibly receive over the life of the benefit pursuant to
Article II Section 5, plus an amount equal to any court cost and attorney's fees
necessary to collect it.
ARTICLE IV
EMERITUS DIRECTORS
Section 1. Eligibility For Director Emeritus
(1) Any Director of the Company who is eligible to be a retired Director of
the Company may upon obtaining such eligibility notify the Company in writing of
the Director's decision to become a Director Emeritus.
(2) Unless the Board at any time by resolution denies the Director Emeritus
such status, the Director shall serve as a Director Emeritus for five years from
the date of election or until the Director Emeritus' seventy-fifth (75th)
birthday, whichever shall occur first.
Section 2. Duties of Director Emeritus
(1) It is the purpose of the Company in creating Directors Emeritus to
preserve for the Board the source of wisdom and experience that the Director
Emeritus represent.
(2) A Director Emeritus shall attend all regular meetings of the Board and
shall offer such advice and expertise as may from time to time be appropriate.
(3) A Director Emeritus shall attend such committee meetings as the Board
may from time to time direct.
(4) A Director Emeritus may from time to time be assigned special projects
or reports to perform for the Board.
<PAGE> 10
Section 3. Compensation of the Director Emeritus
(1) A Director Emeritus shall be paid at the rate of fifty percent (50%) of
the current annual fee paid to Directors of the Company and fifty percent (50%)
of the current fee paid to Directors of the Company for attendance at meetings.
(2) A Director Emeritus shall be paid the same fee for committee meetings
actually attended, as a Director.
Section 4. Exception to Eligibility Requirement for Director Emeritus
The Board of Directors may by resolution adopted by affirmative vote of
seventy-five (75%) percent of the Directors of the Company waive for a specific
period any of the provisions of Section 1 of this Article, as to a specific
individual Director.
Section 5. Vote Required to Change Director Emeritus Compensation or Amend
this Article IV
The compensation of any Director Emeritus of the Company provided for by
Section 3 of this Article IV shall not be stopped, reduced or otherwise
diminished in any way or from any cause, prior to, during or following any
"business combination" as defined in Article Twelfth of the Articles of
Incorporation of the Company, and Article III of these By-Laws, nor shall this
Article IV of the By-Laws be amended, notwithstanding the provisions of Article
VII of these Company By-Laws, prior to, during or following any "business
combination" as defined in Article Twelfth of the Company's Articles of
Incorporation, unless the stopping, reducing or otherwise diminishing of
Directors compensation or the amending of this Section is approved by 80% of the
"continuing Directors" of the Company as "continuing Director" is defined by
Articles Twelfth of the Articles of Incorporation of the Company.
Section 6. Alternate Compensation
In the event, that contrary to the provisions of Section 5 of this Article
IV of these By-Laws there is in fact, prior to, during or following a "business
combination" as defined in Article III Section 6, a diminution of a Director
Emeritus' compensation from any cause, then there shall be immediately due and
payable, from the Company, to each Director Emeritus affected, in one lump sum,
together with any court costs and attorney's necessary to collect it, an amount
equal to three times the total compensation received by that Director Emeritus
during the twelve months immediately preceding the effective date of the act or
cause diminishing the Director Emeritus' compensation.
<PAGE> 11
ARTICLE V
STANDING COMMITTEES OF THE BOARD
The Board of Directors hereby creates the following permanent or standing
committees of the Board, each of which shall consist of not less than three
members chosen by the Board. The Committees shall have the duties and
responsibilities assigned herein, or assigned from time to time by resolution of
the Board.
Section 1. Audit Committee
The Audit Committee shall consist of three members of the Board appointed
by the Board and shall be responsible for:
(1). Recommending to the Board of Directors the selection of the
independent accountants to be employed by the Company.
(2). Reviewing the scope of the independent audit and the results
thereof, including overseeing management's compliance with auditor's
deficiency letters.
(3). Reviewing the Company's internal accounting controls with the
independent auditors and acting as an overseer of the financial
reporting process (including quarterly reports).
(4). Reviewing the management discussion and analysis section of the
annual report with the management of the Company.
(5). Reviewing annually management's program for monitoring compliance
with the Code of Corporate Conduct.
(6). Reviewing the representation letter submitted by management to the
independent auditor.
(7). Reporting to the Board of Directors the activities of the Audit
Committee.
Section 2. Executive Compensation Committee
The Committee shall consist of four members of the Board, appointed by the
Board and shall be responsible for studying on an ongoing basis, the
compensation of the Officers and Directors of the Company and for reporting at
least annually to the Board on the status of the compensation of the Officers
and Directors and for:
(1) Recommending to the Board from time to time, but at least annually, any
changes in the compensation of the Officers and Directors it feels are
appropriate, to review and recommend to the Board of Directors the adoption of
any compensation plans in which Directors and Officers are eligible to
participate.
<PAGE> 12
(2) Preparing such reports as are required by law for the annual proxy
statement.
(3) Studying, advising and recommending to the Board what types of stock
option or stock appreciation plans may be available to the Company and advising
on the desirability, effect and operation of any plan the Company presently has
or might have or might consider in the future.
(4) Assuming such duties or responsibilities for administration and
interpretation of any option plan of the Company as may from time to time be
delegated to the Committee by a plan or by the Board of Directors, including
selection the employees who are to participate in such plans and determining the
terms of their participation.
(5) Performing the duties delegated to it under the Company employee's
profit sharing plan and trust agreement and in addition to its duties under the
Company Employee's Profit Sharing Plan and Trust Agreement, shall be responsible
for advising the Board of Directors with regard to any and all other ERISA
qualified pension, profit sharing or bonus plans established by the Company.
Section 3. Nominating Committee
(1) The Committee shall be composed of three members of the Board of
Directors. Two of whom are not officers or employees of the Company. The
Chairman may name such additional ex-officio members as he deems appropriate.
(2) The Committee shall be responsible on an ongoing basis for the search
for, investigation of, recommendation to the Board for nomination of, the
recruitment of, any new candidates for election to the Board of Directors as
they are needed from time to time.
Section 4. Executive Committee
(1) This Committee is created pursuant to Article Four, Section 4.09 of the
Code of Regulations of the Company. The Executive Committee shall be composed of
four members of the Board of Directors, not less than two of whom shall be non
employee outside Directors.
(2) The Committee shall have authority to act for the Board of Directors to
the extent provided in this By-Law or by future resolution of the Board of
Directors. The Committee will advise management on personnel, legal, board
agenda organization and strategic planning matters.
(3) The Committee shall meet at least quarterly at the call of the Chairman
and when practicable at a time close to the week falling between Board of
Directors' meetings. The Committee shall
<PAGE> 13
meet at any other times necessary for the transaction of its business.
(4) The Committee shall, at any time when it is not practical or in the
best interest of the Company to wait until a Board meeting, have authority to
approve contracts, obligations and transactions of the Company up to $350,000.
(5) The Committee shall have responsibility for directing or contracting
for the disposition of charitable grants from the amounts of money set aside
annually by the Board of Directors for charitable contributions.
(6) The minutes of the Committee meetings shall be kept and submitted to
the entire Board for approval by the Board, at the next meeting of the Board,
approval of the minutes by the Board of Directors shall constitute approval of
and ratification of all actions of the Committee set forth in those minutes by
the Board of Directors.
Section 5. Finance Committee
(1) The Committee shall be composed of four members of the Board of
Directors which shall include not less than two outside non-employee directors,
the Chief Executive Officer and when a member of the Board, the Chief Operating
Officer. The Committee shall be responsible for formulating and presenting
recommendations to the Board of Directors on investment policy, financial
matters, capital structure and allocation, dividends, financing arrangements,
financial planning, budgeting and shall undertake such other duties and
responsibilities relating to corporate financing as the Board of Directors may
from time to time delegate to the Committee.
(2) The Committee shall keep the Board advised on its evaluation of the
financial operations of the Company resulting from its review of the short and
long term financial plans and results of the Company and its consultations with
the Chief Financial Officer, the Treasurer, and the Controller.
ARTICLE VI
SHAREHOLDER MEETINGS
Section 1. Transaction of Business
No business may be transacted at an annual meeting of stockholders, other
than business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any
<PAGE> 14
duly authorized committee thereof), (b) otherwise properly brought before the
annual meeting by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Corporation (i) who is a stockholder of
record on the date of the giving of the notice provided for in Section 2 of this
Article VI and on the record date for the determination of stockholders entitled
to vote at such annual meeting and (ii) who complies with the notice procedures
set forth in the Section 2 of this Article VI. The nomination by a stockholder
of any person for election as a director, other than the persons nominated by
the Board of Directors or any duly authorized committee thereof, shall be
considered business other than business specified in clauses (a) and (b) above
and shall be permitted only upon compliance with the requirements of this
Section 2 of this Article VI.
Section 2. Notice of Business
In addition to any other applicable requirements for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for on a
date that is not within (30) days before or after such anniversary date, notice
by the stockholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure of the
date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
be set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business described to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business, (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting, and in the case of the nomination of a person as a director, a brief
description of the background and credentials of such person including (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the Corporation which are
<PAGE> 15
beneficially owned by such person, and (D) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or as otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected).
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 2 of this Article VI, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2 of this Article VI shall be deemed to
preclude discussion by any stockholder of any such business. If the Chairman of
an annual meeting determines that business was not properly brought before the
meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted.
ARTICLE VII
AMENDMENT OF CODE OF BY-LAWS
At any meeting of the Board, notice of which shall have been given or
waived as required by this Code of By-Laws, this Code may be amended or repealed
in whole or in part, or new By-Laws added thereto and adopted, by the
affirmative vote of the majority of all of the Directors of the Company, except
as provided in Article III Section 6 and Article IV Section 5 of these By-Laws.
<PAGE> 1
EXHIBIT 10.3
MEDEX, INC.
NON-EMPLOYEE DIRECTOR RESTRICTED
STOCK OPTION PLAN II
1. Purpose
The Medex, Inc. Non-Employee Director Restricted Stock Option Plan II (the
"Plan") is intended to strengthen the ability of Medex, Inc. (the "Company") to
attract and retain the services of knowledgeable and experienced persons who,
through their efforts and expertise, can make a significant contribution to the
success of the Company's business by serving as members of the Company's Board
of Directors and to provide additional incentive for such non-employee directors
to continue to work for the best interests of the Company and its stockholders
through continuing ownership of its Common Stock, $.01 par value ("Common
Stock"). Accordingly, the Company will grant to each non-employee director (the
"Optionee") an option (the "Option") to purchase shares of Common Stock of the
Company on the terms and conditions hereinafter established.
2. Administration of the Plan
The Plan shall be administered by a committee composed of employee
members(s) of the Board of Directors of the Company (the "Committee"). The
interpretation and construction by the Committee of any provisions of the Plan
or of any agreement or other matters related to the Plan shall be final. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem advisable. No member of the Committee shall be
liable for any action or determination made in good faith with respect to the
Plan.
3. Stock Subject to the Plan
The shares to be issued under the Plan shall be made available either from
authorized but unissued shares of Common Stock of the Company or from shares of
Common Stock reacquired by the Company, including shares purchase in the open
market.
Shares issued under the Plan shall be subject to the terms, conditions and
restrictions specified in the Plan.
Subject to the provisions of the succeeding paragraphs of this Section 3,
the aggregate number of shares which may be issued under the Plan shall not
exceed 120,000 shares.
<PAGE> 2
If prior to May 25, 1999, Options issued under the Plan shall be
reacquired by the Company pursuant to the provisions hereof, such Options shall
again become available for issuance under the Plan.
In the event that the number of outstanding shares of Common Stock of the
Company shall be changed by reason of split-ups, combinations of shares,
recapitalization or stock dividends, the number of shares which may thereafter
be available under the Plan, the number of options held and the option exercise
price shall be appropriately adjusted as determined by the Committee so as to
reflect any such change.
4. Eligibility and Grant of Options
A. An Option to purchase 15,000 shares of the Company's Common stock shall
automatically be granted under the Plan to each serving non-employee director of
the Company on the date of the approval of this Plan by the Board of Directors
subject to the restrictions on exercise set out in Section Seven hereof.
B. Further, any new non-employee director who is first elected (elected for
the first time) a director of the Company following the adoption of this Plan by
the Board of Directors shall automatically upon election be granted Options to
purchase that number of shares which is determined by multiplying three thousand
(3000) by a number determined by subtracting the year in which the director is
elected from the year 1994. Theses Options shall also be subject to the
restrictions on exercise contained in Section Seven hereof.
C. No non-employee director to whom an Option has been granted or will be
granted shall be eligible to receive additional Option under this Plan.
D. The exercise price for Option granted under this Plan shall be the fair
market value of the stock at the time such Option is granted, which shall be the
date this Plan is approved by the Board of Directors or as to a new non-employee
director, the date of election to the Board of Directors. The fair market value
shall be determined by the "last transaction" price (or price of the stock on
the last trade) at which shares of the Company's stock are listed in the "NASDAQ
National Market System" quotation of the over the counter market at the close of
business at the date of granting the option, or if no quotation is made on that
date, on the next such quotation is made.
5. Non-Transferability of Options
The term of the Option shall be for a period of ten years from the date of
issuance. The right of the Optionee to purchase Common Stock through the
exercise of the Option, wholly or in part, shall be available to the Optionee at
any time during the term of the
<PAGE> 3
Option subject to restrictions on exercise in Section Seven hereof.
The Option shall be exercisable by the Optionee only while serving as a
director of the Company or upon his death or cessation of service as a director
of the Company. If the Optionee shall die while serving as a director of the
Company, his executor, personal representative or beneficiary shall have the
right to exercise the Option at any time within twelve (12) months from the date
of death in respect of the total number of shares as to which he would be
entitled to exercise at the date of his death, that is, those shares free of all
restrictions on exercise imposed by Section Seven hereof.
If the Optionee shall cease to serve as a director of the Company before
the Option shall have terminated, the Optionee may exercise the Option within
ninety (90) days after the date on which he ceases to serve as a director of the
Company, as to those shares which at the close of business on the date of
cessation of service as a director are free of all restrictions on exercise
imposed by Section 7 hereof.
No Option under the Plan shall be sold, assigned, pledged, encumbered or
otherwise transferred by the Optionee.
6. Exercise of Option
An Optionee electing to exercise an Option under the Plan shall give
written notice to the Company of such election and of the number of shares the
Optionee has elated to acquire. Until the Optionee has been issued a certificate
or certificates for the shares so acquired, the Optionee shall possess no
stockholder rights with respect to any such shares.
7. Restrictions on the Exercise of the Options and Sale of Shares Issued for
Such Options
No Option granted pursuant to this Plan shall be exercised prior to the
approval of this Plan by the shareholders of the Company at the next annual
meeting.
Options granted pursuant to Section 4(A) and Section 4(B) hereof shall not
be exercised by the Optionee while serving as a non-employee director except as
provide in the following paragraph.
The restrictions against exercise shall lapse cumulatively to the extent of
three thousand shares per year, starting on the date of approval of this Plan by
the shareholders of this Company, and thereafter on each anniversary of the date
of grant.
Upon the occurrence of the earlier of the death of the Optionee or the
Optionee's cessation of service as a director of the Company, Options as to
which the restrictions on exercise shall
<PAGE> 4
not have lapsed under the Plan, shall immediately lapse and revert to the
Plan.
Notwithstanding any of the foregoing restrictions, any free or restricted
Options acquired under the Plan may at any time be pledged or otherwise
hypothecated to secure borrowings by the Optionee to obtain the acquisition
price to be paid by the Optionee for such shares; provided, however, that the
amount of such borrowing may not exceed the acquisition price of such shares.
No shares shall be issued upon exercise of Options granted under the Plan
prior to the effective date of an S-8 Registration of the shares with the
Securities and Exchange Commission, which the Company undertakes to do, or in
violation of the requirements of Rule 16(B)(3) of the Securities and Exchange
Act of 1934.
Any questions as to whether and when there has been a cessation of service
as a director shall be determined by the Committee and its determination of such
questions shall be final.
8. Acceleration of Exercisability on Change in Control
Upon a Change in Control of the Company, all options theretofore granted
and not previously exercisable shall become fully exercisable to the same
extent and in the same manner as if they had become exercisable by passage of
time in accordance with the provisions of the Plan relating to periods of
exercisability.
For purposes of the Plan, a "Change in Control" of the Company shall mean a
change in control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred if: (A)
any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes the "beneficial owner" (ad defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the Company's then
outstanding stock; (B) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of the period; or (C) the business of the Company for
which the Optionee's services are principally performed is disposed of by the
Corporations pursuant to a partial or complete liquidation of the Company, a
sale of assets of the Corporation, or otherwise.
A Change in Control shall also be deemed to occur if the Company enters
into an agreement, the consummation of which would result in the occurrence of a
Change in Control of the Company, or
<PAGE> 5
any person (other than the Company) publicly announces an intention to take or
to consider taking actions which if consummated would constitute a Change in
Control of the Company.
9. Payment
The option exercise price shall be payable upon the exercise of the Option
and shall be payable in cash, by check or shares of Medex Common Stock of the
Company. If shares of Common Stock are tendered as payment of the option
exercise price, the value of such shares shall be their fair market value as of
the date of exercise as determined in section 4(D) hereof. If such tender would
result in the issuance of fractional shares of Common Stock, the Company shall
instead return the difference in cash or by check to the Optionee.
10. Notice of Election Under Section 83(b)
Each Optionee making an election under Section 83(b) of the Internal
Revenue Code of 1954, as amended, and the Regulations and Rulings promulgated
thereunder will provide a copy thereof to the Company within 30 days of the
filing of such election with the Internal Revenue Service.
11. Amendments to the Plan
The Board of Directors of the Company may at any time terminate or from
time to time modify or suspend the Plan, provided that no such termination or
modification without the approval of the stockholders of the Company shall:
(a) increase the maximum number of shares which may be issued under the
Plan in the aggregate or the number of shares which may be issued to each
non-employee director (except as permitted by the last two paragraphs of
Section 3);
(b) amend the option exercise price (except as permitted by the last
paragraph of Section 3); or reduce the vesting period;
(c) extend the period during which Options may be exercised or granted
under the Plan; or
(d) effect the rights of Optionee as to Options already granted.
12. Successor and Assigns
The provisions of the Plan shall be binding upon all successors and assigns
of an Optionee acquiring shares under the Plan, including, without limitation,
the estate of any such Optionee and the executions, administrators or trustees
of such estate, and any receiver, trustee in bankruptcy or representative of the
creditors of any such Optionee.
<PAGE> 6
13. Termination Date of the Plan
The Plan shall terminate on May 25, 1999; provided, however, that Options
granted on or before such date shall remain exercisable, in accordance with
their respective terms, after the termination of the Plan; and provided,
further, that it shall terminate as of the date of the next annual shareholders'
meeting of the Company if it is not approved by a majority of the shares present
and eligible to vote at that meeting.
<PAGE> 1
EXHIBIT 10.11
DESCRIPTION OF MEDEX, INC.
ANNUAL INCENTIVE COMPENSATION PROGRAM
Under the Medex Annual Incentive Compensation Program, incentive awards are
based on performance in three separate areas:
1. Corporate Business Results: primary emphasis tied to total Company
Operating Income Return on Assets Employed, with an adjustment based on
revenue versus budget.
2. Business Unit Performance: primary emphasis on business unit profitability,
modified by business unit revenue versus budget.
3. Executive Performance: based on review of each individual executive's
performance on specific objectives as well as identified competencies.
These measures are weighed differently for different positions. Target award
levels are established for each position. Actual award amounts are based upon
the actual performance levels attained on the three measures.
<PAGE> 1
MEDEX, INC. AND SUBSIDIARIES EXHIBIT 11
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- ---------------------------------------------------------------------
Year Ended June 30
--------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
PRIMARY:
Weighted average
common shares
outstanding 6,137,628 6,087,898 6,014,381
Common equivalent
shares - stock
options 51,880 (1) 93,223 (1) 137,517 (1)
---------- ---------- ----------
Common shares and
common equivalent
shares outstanding 6,189,508 6,181,121 6,151,898
---------- ---------- ----------
NET INCOME
$1,755,884 $6,730,995 $4,235,501
========== ========== ==========
NET INCOME PER SHARE $.28 $1.09 $.69
========== ========== ==========
FULLY DILUTED:
Weighted average
common shares
outstanding 6,137,628 6,087,898 6,014,381
Common equivalent
shares - stock
options 66,266 (1) 102,775 (1) 138,115 (1)
---------- ---------- ----------
Common shares and
common equivalent
shares outstanding 6,203,894 6,190,673 6,152,496
---------- ---------- ----------
NET INCOME $1,755,884 $6,730,995 $4,235,501
========== ========== ==========
NET INCOME PER SHARE $.28 $1.09 $.69
========== ========== ==========
</TABLE>
(1) Calculated under the Treasury Stock Method using the average price or
year-end market price of Medex stock, as applicable.
<PAGE> 1
Exhibit 13
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA Dollar amounts in millions, except per-share data
Year Ended June 30 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $95.2 $95.6 $92.3 $87.0 $65.5 $44.7 $36.7 $28.0 $23.2 $19.7
Net Income (1) 1.8 6.7 4.2 6.9 4.9 3.9 2.8 2.7 2.1 1.8
Net Income Per Share: (1), (2)
Primary .28 1.09 .69 1.15 .98 .86 .65 .63 .48 .41
Fully Diluted .28 1.09 .69 1.14 .97 .83 .65 .63 .48 .41
Total Assets 90.5 89.1 84.7 81.3 55.1 35.3 28.8 25.7 21.0 18.3
Long term Debt 3.5 4.0 4.6 4.9 8.4 1.3 1.8 2.3 1.5 1.6
Cash Dividends 1.0 .9 .8 .7 .5 .4 .4 .3 .2 .2
Cash Dividends
Per Share (2) .16 .15 .14 .12 .10 .09 .08 .07 .05 .04
</TABLE>
1) 1994 amounts include income of $355,827, or $.06 per primary and fully
diluted share, representing the cumulative effect of a change in accounting for
income taxes.
2 ) Restated to reflect a 10% and 5% stock dividend declared in February 1989
and 1988, respectively.
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
The following table shows the Company's results of operations as a percent of
net sales for the years indicated for certain items in the consolidated
statements of income. Dollar amounts in the following tables are in thousands.
<TABLE>
<CAPTION>
PERCENT OF NET SALES
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of goods sold 54.80 50.03 49.76
------- ------- -------
Gross margin 45.20 49.97 50.24
Operating expenses 42.77 39.49 42.78
------- ------- -------
Operating income 2.43 10.48 7.46
Other income (expense) .57 .49 (.07)
------- ------- -------
Income before income taxes 3.00 10.97 7.39
Income taxes 1.15 4.30 2.80
------- ------- -------
Income before accounting change 1.85 6.67 4.59
Cumulative effect of change in
accounting for income taxes .37
------- ------- -------
Net income 1.85% 7.04% 4.59%
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NET SALES
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Net sales $95,156 $95,578 $92,295
</TABLE>
Net sales for fiscal 1995 decreased $422,000 or .4 percent from the previous
fiscal year. Net sales from domestic operations decreased $8,522,000 or 12
percent to $65,158,000 while sales from the Company's European operations
increased $8,100,000 or 37 percent to $29,998,000.
The decrease in domestic sales consists of decreases in both critical
care accessories of $8,160,000 and infusion systems of $362,000. Approximately
78% of the decrease in critical care accessories (75% of the decrease in total
domestic sales) is due to a decrease in bulk/OEM sales caused by certain
customers electing to produce various products in-house versus purchasing them
from Medex. The remaining decreases occurred in the cath lab and pressure
monitoring product lines. The decrease in infusion systems is due to decreased
syringe pump sales partially offset by increased large volume pump sales. These
decreases were caused by continued pressures in the U.S. health care market and
the continuation of the sales force reorganization which began in late fiscal
1994 and was completed in fiscal 1995. Syringe pump sales were also impacted by
fewer sales to pharmaceutical companies who often use syringe pumps in drug
promotions.
The increase in sales from the Company's European operations is
primarily due to increased sales of cath lab and pressure monitoring products
which increased equally and due to the effect of increased foreign currency
translation rates. Cath lab sales increased primarily due to increased sales of
procedure packs which were introduced in fiscal 1993. The increase in pressure
monitoring products is primarily due to sales efforts being redirected into
this product line as a result of the procedure pack business being more
established. The increase in foreign currency exchange rates accounted for
$2,815,000 of the $8,100,000 increase in sales.
Net sales for fiscal 1994 increased $3,283,000 or four percent over
the previous fiscal year. Net sales from domestic operations increased
$1,206,000 or two percent to $73,680,000 while sales from the Company's
European operations increased $2,077,000 or 10 percent to $21,898,000.
Domestic sales in fiscal 1994 were affected by the uncertainty in the
United States health care market. The domestic sales increase was due to an
increase in sales of critical care accessories of $1,868,000 and a decrease in
infusion systems of $662,000. The increase in critical care accessories sales
was primarily due to increased bulk/OEM sales. Infusion systems sales decreased
as a result of decreases in sales of disposable infusion sets and ambulatory
pump products which were partially offset by an increase in syringe pump sales.
The increase in sales from the Company's European operations in fiscal
1994 was primarily due to increased sales in cath lab products which increased
primarily due to sales of procedure packs which were introduced in fiscal 1993.
<PAGE> 3
<TABLE>
<CAPTION>
COST OF GOODS SOLD AND GROSS MARGIN
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Cost of goods sold $52,142 $47,820 $45,924
Gross margin $43,014 $47,758 $46,371
</TABLE>
Gross margin as a percent of net sales for fiscal 1995 decreased over the
previous fiscal year. This decrease is entirely due to a seven percentage
point decrease in the domestic margin as the European margin remained
approximately the same as the prior year. Domestic margins have decreased
primarily due to significant unfavorable manufacturing variances attributable
to reduced production volumes caused by lower sales.
European gross margins have remained the same due to the effect of
lower per unit manufacturing costs associated with increased volume from
procedure packing and favorable purchase price variances due to foreign
currency fluctuations offset by a change in product mix to include a larger
percentage of procedure packs which generally have a lower gross margin than
the Company's other products.
Gross margin as a percent of net sales decreased slightly in fiscal
1994 as compared to fiscal 1993. This decrease was primarily due to continued
pricing pressures, changes in product mix and increased bulk/OEM and procedure
packing sales in fiscal 1994 which generally have a lower gross margin.
<TABLE>
<CAPTION>
OPERATING EXPENSES
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Operating expenses $40,700 $37,743 $39,486
</TABLE>
Operating expenses for 1995 increased over the previous year both in total
dollars and as a percent of net sales. The $2,957,000 increase in total
operating expenses is primarily due to the Company incurring $2,635,000 of
restructuring expenses related to the closing of the Company's Denver
operations. In October, 1994 the Company announced a plan to close the
Medex/Denver operations and integrate all functions and product lines into
other Company locations. Management estimates this integration plan will save
the Company approximately $2,500,000 annually, while costing approximately
$3,200,000 to implement. The savings associated with the plan primarily relate
to the elimination of 25% of the 177 positions previously existing in Denver
and the avoidance of rent and other facility costs. The physical move was
completed during April 1995 as planned; however, the Company expects to incur
the remaining $565,000 of costs, primarily related to the hiring and
relocation of personnel in the first half of fiscal 1996. See Note 2 of the
"Notes to Consolidated Financial Statements" for further information.
Excluding the effect of restructuring costs, domestic operating
expenses decreased $768,000 primarily due to lower administrative expenses.
Administrative expenses decreased primarily due to the elimination of
personnel and decreased bonuses resulting from lower domestic profit levels.
These decreases were offset by increases in European selling and
administrative expenses of $1,090,000. Virtually all of these increases are
attributable to the effects of increased foreign currency translation rates.
In fiscal 1994, operating expenses decreased both in total dollars and
as a percent of net sales. The decrease in operating expenses was primarily due
to an overall reduction in expenses resulting from cost containment programs
implemented by the Company and a reduction in research and development
expenses, predominantly outside engineering services associated with several
projects which were completed or were nearing completion. Additionally, in
fiscal 1993, the Company incurred a restructuring charge of $1.5 million
related to a series of management changes and a reorganization of the Company's
sales and marketing operations. The restructuring for which this charge was
related was completed in fiscal 1994 as planned.
<TABLE>
<CAPTION>
OTHER INCOME (EXPENSE)
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Other income (expense) $539 $468 $(66)
</TABLE>
The increase in other income in fiscal 1995 as compared to fiscal 1994 is due
to an increase in foreign currency exchange gains and other miscellaneous items
partially offset by an increase in interest expense. The Company recorded a
foreign currency exchange gain of $312,000 in 1995 versus a $241,000 gain in
1994. This additional income was partially offset by an increase in interest
expense of $74,000 in fiscal 1995 over fiscal 1994. The increase in interest
expense is due to a reduction of interest capitalized related to the
construction of a new facility in Georgia which was completed in fiscal 1994.
The increase in other income in fiscal 1994 as compared to fiscal 1993
was primarily due to the Company recording a foreign currency exchange gain of
$241,000 in 1994 versus a $454,000 loss in 1993. This increase was partially
offset by a reduction in investment income and an increase in interest expense.
The increase in interest expense was due to debt incurred to finance the new
Georgia facility discussed above.
<PAGE> 4
<TABLE>
<CAPTION>
INCOME TAXES
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Income taxes $1,097 $4,107 $2,583
</TABLE>
Income taxes for fiscal 1995, 1994 and 1993 were 38.5 percent, 39.2 percent and
37.9 percent of pre-tax income, respectively. The decrease in the Company's
effective tax rate for fiscal 1995 as compared to the prior year is primarily
due to benefits received as the result of carry backs of excess foreign tax
credits, which had previously been reserved, partially offset by an increase
in foreign taxes, both in actual dollars and as a percent of total taxes,
resulting from increased foreign income in relation to total income.
In fiscal 1994, the Company's effective tax rate increased over fiscal
1993 primarily due to increases in foreign taxes resulting from increased
foreign income and due to a decrease in the tax credit for research and
development expenditures.
In fiscal 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect
of adopting SFAS No. 109 on the Company's consolidated financial statements was
to increase income by $356,000, which was reported separately as the cumulative
effect of an accounting change. See Note 1 to "Notes to Consolidated Financial
Statements" for further information.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at June 30, 1995, decreased $2,435,000 from working capital
at June 30, 1994. The current ratio at June 30, 1995 was 4.32 to 1.00,
compared to 4.52 to 1.00 at June 30, 1994.
Property additions of approximately $6,959,000 primarily relates to
the renovation of a 71,000 square foot facility acquired in Hilliard, Ohio in
fiscal 1994 and the acquisition of machinery and equipment.
Management believes that currently available cash and investments,
cash provided from future operations and debt financing options will be
sufficient to finance these and other future capital expenditures.
MANAGEMENT'S OUTLOOK
Management was disappointed with the Company's overall results for fiscal 1995.
The Company experienced a significant decline in both sales and profits from
the domestic operations which were not offset by record sales and profits from
the European operations.
In fiscal 1996, Management anticipates the Company's European
operations will continue to post increases in sales and profits over fiscal
1995 barring any material unfavorable changes in foreign currency exchange
rates. The domestic operations are expected to post improved performance over
fiscal 1995. Sales are expected to increase; however, they are expected to
continue to be impacted by the conditions of the United States health care
industry. Profits are expected to improve, particularly in the second half
of the year as the savings associated with the Denver integration are
experienced.
<PAGE> 5
MEDEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
NET SALES $95,156,058 $95,578,046 $92,295,439
COST OF GOODS SOLD 52,142,292 47,820,332 45,924,307
----------- ----------- -----------
GROSS MARGIN 43,013,766 47,757,714 46,371,132
OPERATING EXPENSES:
Sales and marketing 21,983,891 21,682,624 21,334,004
Research and development 3,147,421 3,299,430 4,254,370
Administrative 12,934,014 12,761,107 12,397,955
Restructuring costs 2,634,630 1,500,000
----------- ----------- -----------
Total 40,699,956 37,743,161 39,486,329
----------- ----------- -----------
OPERATING INCOME 2,313,810 10,014,553 6,884,803
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 246,346 250,914 301,966
Interest expense (176,811) (102,757) (64,756)
Other net 469,539 319,458 (303,512)
----------- ----------- -----------
Total 539,074 467,615 (66,302)
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,852,884 10,482,168 6,818,501
INCOME TAXES 1,097,000 4,107,000 2,583,000
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 1,755,884 6,375,168 4,235,501
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR
INCOME TAXES (NOTE 1) 355,827
----------- ----------- -----------
NET INCOME $1,755,884 $6,730,995 $4,235,501
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Income before cumulative effect
of change in accounting principle $0.28 $1.03 $0.69
Cumulative effect of change in accounting
for income taxes 0.06
----------- ----------- -----------
Net Income $0.28 $1.09 $0.69
=========== =========== ===========
Weighted average number of common
shares outstanding 6,189,508 6,181,121 6,151,898
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
MEDEX INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30 1995 1994
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and equivalents $ 4,911,074 $ 8,604,455
Investments 345,000 1,457,437
Trade receivables (less allowance for
doubtful accounts: 1995 - $714,000; 1994 - $570,000) 18,506,153 16,131,332
Inventories:
Raw materials and supplies 11,495,702 11,093,697
Work-in-process 3,626,058 3,752,113
Finished goods 7,248,231 7,599,961
----------- -----------
Total inventories 22,369,991 22,445,771
Deferred income taxes 1,633,456 1,307,931
Prepaid expenses and other 812,925 1,109,754
----------- -----------
Total current assets 48,578,599 51,056,680
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - AT COST:
Land and land improvements 2,053,046 1,967,491
Buildings 19,504,336 15,541,850
Machinery and equipment 15,940,342 14,412,533
Dies and molds 8,226,919 7,515,263
Furniture and data processing equipment 8,285,376 7,462,920
Additions in progress 3,330,646 3,984,893
----------- -----------
Total 57,340,665 50,884,950
Less accumulated depreciation 23,028,147 19,362,173
----------- -----------
Property, plant and equipment-net 34,312,518 31,522,777
----------- -----------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
(Net of accumulated amortization: 1995 - $997,352; 1994 - $855,020) 4,872,981 4,362,651
----------- -----------
OTHER ASSETS:
Deferred income taxes 530,872 244,258
Other 2,206,581 1,925,337
----------- -----------
Total other assets 2,737,453 2,169,595
----------- -----------
TOTAL ASSETS $90,501,551 $89,111,703
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 513,066 $ 643,143
Accounts payable (principally trade) 3,797,582 3,138,688
Accrued liabilities:
Income taxes 602,209
Compensation and profit sharing 2,873,619 4,244,975
Restructuring costs 649,983 240,000
Other 2,807,811 3,021,026
----------- -----------
Total current liabilities 11,244,270 11,287,832
----------- -----------
LONG-TERM DEBT-LESS CURRENT PORTION 3,463,232 3,975,027
----------- -----------
RESTRUCTURING COSTS - LESS CURRENT PORTION 165,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
SHAREHOLDERS' EQUITY:
Common stock - $ .01 par value; shares authorized-20,000,000; shares
outstanding: 1995 - 6,159,502; 1994 - 6,129,866 (net of treasury shares:
1995 - 150,590; 1994 - 156,650) 61,595 61,299
Additional paid-in capital 42,460,256 41,702,515
Retained earnings 33,172,136 32,398,479
Foreign currency translation adjustment 100,062 (478,449)
----------- -----------
Total shareholders' equity 75,794,049 73,683,844
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $90,501,551 $89,111,703
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
MEDEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
COMMON CURRENCY TOTAL
STOCK OUTSTANDING ADDITIONAL RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT PAID IN CAPITAL EARNINGS ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1992 5,954,071 $59,541 $40,197,456 $23,188,220 $ 552,521 $63,997,738
Net income 4,235,501 4,235,501
Cash dividends ($.14 per share) (842,616) (842,616)
Foreign currency translation adjustment (1,378,905) (1,378,905)
Issuance of stock under
stock option and purchase
plans (net of exchange of
20,196 treasury shares) (Note 4) 89,309 893 500,743 501,636
Tax benefit received from
exercise of stock options (Note 4) 81,622 81,622
---------- ------- ----------- ----------- -------- -----------
BALANCE AT JUNE 30, 1993 6,043,380 60,434 40,779,821 26,581,105 (826,384) 66,594,976
Net income 6,730,995 6,730,995
Cash dividends ($.15 per share) (913,621) (913,621)
Foreign currency
translation adjustment 347,935 347,935
Issuance of stock under
stock option and purchase
plans (net of exchange of
14,595 treasury shares) (Note 4) 86,486 865 880,514 881,379
Tax benefit received from
exercise of stock options (Note 4) 42,180 42,180
---------- ------- ----------- ----------- -------- -----------
BALANCE AT JUNE 30, 1994 6,129,866 61,299 41,702,515 32,398,479 (478,449) 73,683,844
Net income 1,755,884 1,755,884
Cash dividends ($.16 per share) (982,227) (982,227)
Foreign currency
translation adjustment 578,511 578,511
Issuance of stock under
stock option and purchase
plans (net of exchange of
2,163 treasury shares) (Note 4) 21,413 214 206,533 206,747
Tax benefit received from
exercise of stock options (Note 4) 463,812 463,812
Issuance of treasury shares 8,223 82 87,396 87,478
---------- ------- ----------- ----------- -------- -----------
Balance at June 30, 1995 6,159,502 $61,595 $42,460,256 $33,172,136 $100,062 $75,794,049
========== ======= =========== =========== ======== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
MEDEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,755,884 $6,730,995 $4,235,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
for income taxes (355,827)
Depreciation and amortization 4,301,592 4,473,862 4,025,815
Deferred income taxes (631,000) 1,434,000 (922,000)
Change in operating assets and liabilities net of
effects from acqusition:
Increase in trade receivables (1,640,600) (1,435,691) (584,412)
Decrease (increase) in inventories 967,346 (4,760,842) (1,618,390)
Decrease (increase) in prepaid expenses and other 55,131 147,166 (337,110)
Increase in accounts payable 325,195 69,073 290,363
Increase (decrease) in accrued
restructuring costs 244,983 (1,000,000) 1,405,000
Decrease in accrued liabilities (1,457,407) (346,351) (14,846)
Other operating items-net 238,275 127,411 (773,585)
---------- ---------- -----------
Net cash provided by operating activities 4,159,399 5,083,796 5,706,336
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (6,959,261) (8,758,708) (9,992,714)
Proceeds from sale of property 35,072 1,995 313,986
Purchase of investments (757,840) (848,460)
Proceeds from maturity of investments 1,112,437 648,258 1,400,277
Acquisition of subsidiary, net of cash acquired (330,632)
Decrease in unused proceeds of
industrial revenue bond 2,818,659 645,696
---------- ---------- -----------
Net cash used in investing activities (6,142,384) (6,047,636) (8,481,215)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term obligations 27,831
Payment of long-term obligations (641,872) (320,470) (285,638)
Proceeds from issuance of common stock - net 206,747 881,379 501,636
Cash dividends paid (982,227) (913,621) (842,616)
---------- ---------- -----------
Net cash used by financing activities (1,417,352) (352,712) (598,787)
---------- ---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (293,044) (197,666) 143,203
---------- ---------- -----------
NET DECREASE IN CASH AND EQUIVALENTS (3,693,381) (1,514,218) (3,230,463)
---------- ---------- -----------
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 8,604,455 10,118,673 13,349,136
---------- ---------- -----------
CASH AND EQUIVALENTS AT END OF YEAR $4,911,074 $8,604,455 $10,118,673
========== ========== ===========
Supplemental Disclosures
CASH PAID DURING THE YEAR FOR:
Interest $176,811 $102,757 $64,756
========== ========== ===========
Income taxes $1,337,617 $4,265,720 $ 3,522,525
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 9
MEDEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1995, 1994, AND 1993
1 ACCOUNTING POLICIES
The Company designs, manufactures, assembles and markets a broad range of
products for the diagnosis and treatment of patients receiving care in
hospitals, alternative health care facilities and the home health care
environment. The Company's products are used by clinicians for fluid and drug
infusion, invasive pressure monitoring, angiographic imaging and coronary
angioplasty. The Company's significant accounting policies are as follows:
Principles of Consolidation - The consolidated financial statements include the
accounts of all subsidiaries and all significant intercompany transactions and
balances have been eliminated.
Revenue Recognition - Revenue from product sales is recognized at the time
products are shipped.
Translation of Foreign Currencies - The Company has operations in three foreign
countries (see Note 7). The assets and liabilities of these foreign
subsidiaries are translated at the exchange rates in effect at the balance
sheet date. Revenues and expenses are translated at the average exchange rates
in effect during the year. Translation gains and losses are not included in
income but are accumulated and reported as a separate component of shareholders
equity. Foreign currency exchange gains (losses) arise primarily from the
translation of intercompany balances that are expected to be repaid in the
foreseeable future and from forward exchange contracts and are included in
other income (expense) in the amount of approximately $312,000, $241,000 and
$(454,000) in fiscal 1995, 1994 and 1993, respectively. The Company enters into
forward exchange contracts to hedge against foreign currency fluctuations on
certain intercompany transactions. Transactions hedged with forward exchange
contracts will come due at the approximate time that forward exchange contracts
held expire. Realized and unrealized gains and losses on these contracts are
included in net income. At June 30, 1995 and 1994 the Company had contracts of
approximately $720,000 maturing from July 26, 1995 through August 30, 1995 and
approximately $740,000 maturing from July 25, 1994 through August 30, 1994,
respectively, to exchange pounds sterling for United States dollars.
Investments - Investments consist primarily of tax-exempt interest bearing
securities with remaining maturities of less than one year. Investments are
classified as held-to-maturity and therefore are recorded at amortized cost
which approximates market value.
Inventories - The Company values its inventories at lower of cost or market
using the first-in, first-out method.
Research and Development - Research and development expenditures are charged to
operations in the year incurred.
Advertising Costs - Advertising costs primarily relate to product catalogues and
product literature. The cost of product catalogues is capitalized and amortized
over the period in which future benefits are expected. The cost of product
literature is expensed as incurred. Total advertising expenses were $712,000,
$1,112,000, and $1,241,000 in 1995, 1994 and 1993, respectively.
Depreciation - Property, plant, and equipment are depreciated using the
straight-line method based on estimated useful lives as follows:
ESTIMATED USEFUL
ASSETS LIVES (YEARS)
Land improvements 20
Buildings 20-40
Machinery and equipment 2-10
Dies and molds 5
Furniture and data
processing equipment 2-10
Depreciation expense for fiscal years 1995, 1994 and 1993 was $4,159,000,
$4,293,000 and $3,807,000, respectively.
Interest Capitalization - The Company capitalizes interest costs associated with
the construction of plant and equipment. During fiscal years 1995, 1994 and
1993, the Company incurred total interest costs of approximately $306,000,
$335,000 and $282,000 of which approximately $129,000, $232,000 and $217,000
were capitalized, respectively.
Cost in Excess of Fair Value of Net Assets Acquired - The cost in excess of fair
value of tangible net assets acquired is being amortized on a straight-line
basis over lives ranging from 20 to 40 years. The Company evaluates the
carrying value of these intangible assets for possible impairment by assessing
whether the undiscounted forecasted net operating cash flows of the business
acquired over the remaining life of the assets is adequate to recover the
carrying value of the assets.
Major Customer - The Company had sales to a domestic distributor in fiscal 1995,
1994 and 1993 which represent approximately 12%, 11% and 11% of the Company's
total net sales, respectively.
Income Taxes - Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
on a prospective basis. Accordingly, deferred income taxes are provided for the
temporary differences between the financial reporting and the tax basis of the
Company's assets and liabilities by applying enacted statutory tax rates
applicable to future years to the book tax basis differences. In fiscal 1993,
income taxes were provided under Accounting Principles Board Opinion No. 11.
<PAGE> 10
Net Income Per Common Share - Net income per common share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. Common share equivalents represent the dilutive effect of the
assumed exercise of certain outstanding stock options.
Cash and Equivalents - The Company considers all highly liquid investments
with original maturities of three months or less at the date of purchase to
be cash equivalents. Cash equivalents at June 30, 1995 and 1994 consist of
tax-exempt mutual funds and commercial paper.
Reclassifications - Certain reclassifications have been made to prior years
amounts to conform with the classifications of such amounts for fiscal 1995.
2 RESTRUCTURING COSTS
Restructuring costs recorded in fiscal 1995 represent the costs associated with
closing the Company's Denver operations and integrating all functions and
product lines into other company locations. The Company originally estimated
that the restructuring costs would be approximately $3,200,000 consisting
primarily of employee severance costs and other exit costs. At June 30, 1995
approximately $2,635,000 of restructuring costs have been recognized and the
Company estimates that the remaining costs to be recognized in fiscal 1996 will
be $565,000. Of the $2,635,000 of costs recognized at June 30, 1995, $480,000
remains to be paid and is included in accrued restructuring cost. The amounts
included in accrued restructuring cost along with costs to be recognized in
fiscal 1996 will be funded with available cash and investments on hand and cash
generated from operations during fiscal 1996.
Severance of 177 employees at the Denver operations resulted in $896,000 of
restructuring costs, all of which has been paid at June 30, 1995. The
difference between the original severance accrual of $942,000 and actual
severance costs incurred was recognized in restructuring costs in the fourth
quarter of fiscal 1995. The remaining restructuring costs of $1,739,000
represent exit costs consisting primarily of noncancellable lease costs net
of estimated sub-lease payments, costs of hiring, training and relocating
personnel, travel costs, costs of moving equipment and inventory, and facility
shutdown costs.
The restructuring costs incurred in fiscal 1993 represent the costs associated
with a series of management changes and a reorganization of the Company's sales
and marketing operations. A portion of the costs are being paid over a three
year period.
<TABLE>
<CAPTION>
3 LONG-TERM DEBT, BANK NOTES, AND LEASES
Long-term debt consists of the following:
June 30 1995 1994
<S> <C> <C>
MORTGAGES PAYABLE:
Industrial Revenue Bond, average interest rate of
6.09%, due in variable yearly principal installments
through June 2002, secured by a $3,400,000
bank letter of credit $3,150,000 $3,500,000
9% Industrial Revenue Bond, due in monthly
installments of $13,500 (including interest) through
November 2001, collateralized by first mortgage on
land and buildings and security interest in certain
equipment with an approximate net book
value of $1,700,000 778,679 866,271
2% Ohio Development Financing Commission Loan,
due in monthly installments of $2,705 (including
interest) through October 1996, collateralized by
second mortgage on land and buildings 37,397 68,768
Capital leases and other, 8.4% to 11.9%, due in
monthly installments through March 1996 and
collateralized by certain equipment 10,222 183,131
---------- ----------
Total 3,976,298 4,618,170
Less current portion 513,066 643,143
---------- ----------
Long-term debt $3,463,232 $3,975,027
========== ==========
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
Long-term debt as of June 30, 1995 matures as follows:
<S> <C>
June 30
1996 $ 513,066
1997 510,222
1998 539,664
1999 575,420
2000 607,185
Thereafter 1,230,741
----------
Total $3,976,298
==========
</TABLE>
At June 30, 1995, the Company had available a $5,000,000 line of credit and a
$3,400,000 letter of credit. The line of credit bears interest at LIBOR plus
one half percent and expires in May, 1996. The letter of credit can only be
used to pay principal and interest on the Industrial Revenue Bond maturing in
2002. Any borrowings made under the letter of credit bear interest at the
bank's prime rate plus two percent and are secured by land and buildings with
an approximate net book value of $3,500,000. The letter of credit agreement
automatically renews every month through the maturity of the bond, subject to a
13-month notification from the issuer of their intention not to renew the
letter. No borrowings were made from the line of credit or the letter of credit
during fiscal 1995.
The Company leases buildings, equipment, furniture and automobiles in the
United States and Europe under operating leases. Future minimum rental
payments required under such leases that have initial or remaining
noncancellable lease terms in excess of one year as of June 30, 1995 are as
follows:
<TABLE>
<CAPTION>
June 30
<S> <C>
1996 $1,477,070
1997 1,311,853
1998 915,941
1999 282,184
2000 195,975
Thereafter 1,547,215
----------
Total $5,730,238
==========
</TABLE>
Total rental expense was approximately $2,097,323, $1,906,000 and $1,413,000
for fiscal 1995, 1994 and 1993, respectively.
4 STOCK OPTIONS
Incentive Stock Option Plan - Pursuant to an incentive stock option plan, as
previously approved by the shareholders, the Company reserved 1,050,000 shares
of common stock for issuance to qualified key employees. Under the plan,
options may be granted at a price equal to the fair market value at the date of
grant. Options expire after five years and are exercisable at date of grant.
Expiration dates on options outstanding at June 30, 1995 range from August 1995
to February 1999.
Employees Stock Purchase Plan - Pursuant to an employees stock purchase plan,
as amended and approved by the shareholders in fiscal 1995, the Company
reserved 160,000 shares of common stock for issuance to qualified employees.
Under this plan, qualified employees may request options to purchase shares of
common stock, subject to certain limitations contained in the plan, at a price
equal to 87.5% of the fair market value at the date of grant. Options expire
after twenty-seven months and are exercisable at date of grant subject to
certain limitations. Expiration dates on options outstanding at June 30, 1995
range from August 1995 to August 1997.
Non-Employee Director Restricted Stock Option Plans - Pursuant to Non-Employee
Director Restricted Stock Option Plans, as previously approved by the
shareholders, the Company reserved 384,315 shares of common stock for issuance
to directors and directors emeritus not otherwise employed by the Company.
These plans provide for one-time grants of options to purchase shares of common
stock at a price equal to the fair market value at the date of grant. Options
are exercisable at the date of grant subject to certain restrictions contained
in the plan and expire after ten years; however, the options shall be exercised
by the optionee only while serving as a director or director emeritus of the
Company or a limited time thereafter. Expiration dates on options outstanding
range from May 1997 to August 2003.
<PAGE> 12
Key Employee Nonstatutory Stock Option Plan - Pursuant to a key employee stock
option plan, as previously approved by the shareholders, the Company reserved
1,000,000 shares for issuance to certain key employees. Under this plan,
options may be granted at a price equal to the fair market value at the date of
grant. The options shall be exercised by the optionee only while employed by
the Company or a limited time thereafter. Additionally, no options shall be
exercised until one year after the date of grant. At the end of one year from
the date of grant, 20 percent of the options granted, and each year thereafter
an additional 20 percent, shall be eligible to be exercised, subject to certain
vesting requirements. Each year the stock option committee of the Company's
Board of Directors shall set achievement goals for the Company and its
operating divisions. To the extent that these goals are not met, certain
options otherwise exercisable shall not vest and shall become forfeited.
Additionally, all options expire after ten years from the date of grant if not
previously exercised or forfeited. At June 30, 1995, expiration dates on
options outstanding range from December 2001 to November 2003.
Executive Stock Option Plan - Pursuant to an executive stock option plan
approved by the shareholders in fiscal 1995, the Company reserved 300,000
shares for issuance to certain key employees. Under this plan, options may be
granted at prices equal to the fair market value at the date of grant. Options
expire after five years and are exercisable six months after the date of grant.
At June 30, 1995, expiration dates on options outstanding range from August
1999 to February 2000.
The following summarizes stock option transactions for all effective
plans during the three years ended June 30, 1995:
<TABLE>
<CAPTION>
OPTION PRICE
NUMBER OF ------------------------------------
OPTIONS SHARES PER SHARE TOTAL
<S> <C> <C> <C>
Outstanding at June 30, 1992 1,012,224 $5.63 -- $33.00 $22,163,459
Granted 175,325 $13.28 -- $24.00 2,946,049
Exercised (109,505) $5.63 -- $29.70 (895,902)
Forfeited (158,455) $14.85 -- $33.00 (4,573,111)
--------- ----------
Outstanding at June 30, 1993 919,589 $5.63 -- $33.00 19,640,495
Granted 327,378 $10.58 -- $19.13 4,160,053
Exercised (101,081) $8.86 -- $29.70 (1,055,331)
Forfeited (195,650) $10.35 -- $33.00 (5,395,631)
--------- ----------
Outstanding at June 30, 1994 950,236 $5.63 -- $33.00 17,349,586
Granted 134,271 $8.75 -- $13.75 1,586,760
Exercised (23,576) $7.63 -- $29.70 (230,409)
Forfeited (181,640) $10.35 -- $33.00 (4,497,393)
--------- ----------
Outstanding at June 30, 1995 879,291 $5.63 -- $33.00 $14,208,544
========= ==========
</TABLE>
<PAGE> 13
The following summarizes the status of shares reserved and options outstanding
as of June 30, 1995:
<TABLE>
<S> <C>
Shares presently exercisable 685,891
Shares not presently exercisable 193,400
--------
Total options outstanding 879,291
Available for future grants 1,326,667
---------
Shares reserved for exercise
of options 2,205,958
=========
</TABLE>
In 1995, 1994 and 1993, certain employees of the Company exchanged,
2,163, 14,595 and 20,196 common shares outstanding and owned by the employees
for 2,600, 17,430 and 70,291 shares issued related to stock options exercisable
under the incentive stock option plan. Stock issued is included as outstanding
shares, while stock received in the exchange is included as treasury shares.
For certain stock options, the Company is permitted a tax deduction
equal to the difference between the option price on the date of grant and the
fair market value of the stock on the date an employee exercises such stock
option. In 1995, 1994 and 1993 the Company received a tax benefit of $6,280,
$42,180 and $81,622, respectively, related to such sales, and the benefit was
recorded as a credit to additional paid-in capital. In 1995 the Company amended
prior years Federal income tax returns to correct deductions originally filed
related to such sales. The tax benefit of $457,532 related to the amended
returns was recognized in fiscal 1995 and recorded as a credit to additional
paid-in capital.
5 PROFIT SHARING AND RETIREMENT PLANS
The Company has a deferred profit sharing plan and a 401(k) savings plan
covering substantially all of its domestic employees. Contributions to the
deferred profit sharing plan are determined at the discretion of the Board of
Directors, and are funded annually. Contributions to the 401(k) savings plan
are determined based upon a percentage of the employees' elective contributions
up to specified levels.
Total profit sharing and 401(k) expense for fiscal 1995, 1994 and 1993
was approximately $152,000, $726,000 and $645,000, respectively. The profit
sharing and 401(k) amounts unpaid and included in accrued liabilities at June
30, 1995, 1994 and 1993 were approximately $11,000, $593,000 and $515,000,
respectively.
6 INCOME TAXES
The provisions for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
CURRENT EXPENSE:
United States Federal $ 147,000 $ 1,959,000 $ 2,938,000
Foreign 1,505,000 399,000 142,000
State and local 76,000 315,000 425,000
----------- ----------- -----------
Total 1,728,000 2,673,000 3,505,000
----------- ----------- -----------
DEFERRED EXPENSE (BENEFIT):
United States Federal (575,000) 1,280,000 (967,000)
Foreign (35,000) 82,000 154,000
State and local (21,000) 72,000 (109,000)
----------- ------------ -----------
Total (631,000) 1,434,000 (922,000)
----------- ------------ -----------
Total provision $ 1,097,000 $ 4,107,000 $ 2,583,000
=========== ============ ===========
</TABLE>
The sources of income (loss) before income taxes and cumulative effect of
change in accounting principle are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
United States $ (770,174) $ 9,401,486 $6,322,042
Foreign 3,623,058 1,080,682 496,459
---------- ---------- ----------
Total $2,852,884 $10,482,168 $6,818,501
========== ========== ==========
</TABLE>
<PAGE> 14
The differences between the Company's effective tax rate and the statutory
Federal income tax rate are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1995 1994 1993
<S> <C> <C> <C>
Amount based on statutory rate $ 970,000 $ 3,569,000 $ 2,318,000
State and local taxes, net of Federal benefit 36,000 255,000 209,000
Foreign Taxes 1,470,000 481,000 296,000
Foreign tax credit including tax rate differential (1,414,000) (268,000) (143,000)
Other 35,000 70,000 (97,000)
---------- ---------- ----------
Total $1,097,000 $4,107,000 $2,583,000
========== ========== ==========
Effective tax rate 38.5% 39.2% 37.9%
========== ========== ==========
</TABLE>
The significant components of the Company's net deferred tax asset at June 30,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS: 1995 1994
<S> <C> <C>
Net operating loss carryforward $ 1,682,660 $ 1,745,252
Foreign tax credit carryforward 1,147,817 780,022
Uniform inventory capitalization 539,221 357,511
Excess foreign tax credits
utilized for books 415,696 332,350
Vacation accrual 201,670 249,948
Trade receivable allowances 225,577 196,663
Restructuring costs 267,699 137,700
Sales returns and allowances 224,210 179,270
Other 604,944 498,482
---------- ----------
Total 5,309,494 4,477,198
Less valuation allowance (966,819) (1,040,651)
---------- ----------
Deferred tax assets 4,342,675 3,436,547
---------- ----------
DEFERRED TAX LIABILITIES:
Accelerated depreciation 1,265,648 1,048,602
Other 912,699 835,756
---------- ----------
Deferred tax liabilities 2,178,347 1,884,358
---------- ----------
NET DEFERRED TAX ASSET $ 2,164,328 $ 1,552,189
========== ==========
</TABLE>
The Company has Federal net operating loss carryforwards of approximately
$4,949,000 that expire from fiscal 1998 through fiscal 2005 and foreign tax
credit carryforwards for Federal income tax purposes that expire from fiscal
1998 through fiscal 2000.
The valuation allowance decreased during fiscal 1995 by $73,832 primarily due to
the identification of additional foreign source income which will be used to
realize foreign tax credit carrybacks which had previously been reserved. During
fiscal 1994 the valuation allowance was reduced by $2,208,332 due to the
Company's adoption of a plan to legally combine the domestic based subsidiaries
which will allow the Company to utilize net operating loss carryforwards to
reduce future Federal tax liabilities of the combined entity. Since the net
operating loss carryforwards were acquired as a part of a previous acquisition,
the Company recorded a corresponding reduction in cost in excess of fair value
of net assets acquired for the same amount.
At June 30, 1995, no provision for Federal income taxes was recorded for
approximately $784,000 of undistributed earnings of certain foreign subsidiaries
as remittance of the earnings would be treated as a tax-free liquidation or
would be substantially offset by foreign tax credits.
<PAGE> 15
7 FOREIGN OPERATIONS
The Company's operations include assembly and distribution centers in the
United Kingdom and distribution centers in Germany and France. Information
about the Company's operations in different geographic areas is presented
below, with the United Kingdom, Germany and France operations collectively
shown as Europe:
<TABLE>
<CAPTION>
FISCAL 1995 UNITED STATES EUROPE ELIMINATIONS TOTAL
<S> <C> <C> <C> <C>
Sales:
Unaffiliated customers $ 65,158,275 $ 29,997,783 $ 95,156,058
Between geographic areas 5,693,820 $(5,693,820)
------------ ------------ ----------- ------------
Net sales $ 70,852,095 $ 29,997,783 $(5,693,820) $ 95,156,058
============ ============ ============ ============
Net income (loss) $ (176,432) $ 1,932,316 $ 1,755,884
============ ============ ============
Identifiable assets at year-end $ 71,331,370 $ 19,170,181 $ 90,501,551
============ ============ ============
FISCAL 1994
Sales:
Unaffiliated customers $ 73,679,731 $ 21,898,315 $ 95,578,046
Between geographic areas 5,434,972 $(5,434,972)
------------ ------------ ------------ ------------
Net sales $ 79,114,703 $ 21,898,315 $(5,434,972) $ 95,578,046
============ ============ ============ ============
Net income $ 6,164,093 $ 566,902 $ 6,730,995
============ ============ ============
Identifiable assets at year-end $ 73,780,255 $ 15,331,448 $ 89,111,703
============ ============ ============
FISCAL 1993
Sales:
Unaffiliated customers $72,473,943 $19,821,496 $ 92,295,439
Between geographic areas 4,879,053 $(4,879,053)
------------ ------------ ------------ ------------
Net sales $77,352,996 $19,821,496 $(4,879,053) $ 92,295,439
============ ============ ============ ============
Net income (loss) $ 4,430,182 $ (194,681) $ 4,235,501
============ ============ ============
Identifiable assets at year-end $71,791,369 $12,892,058 $ 84,683,427
============ ============ ============
</TABLE>
Substantially all the sales between geographic areas are based on manufacturing
cost plus allowances for freight, other expenses, and a reasonable profit to
the seller.
Export sales included in the United States sales approximated 5% of
total net sales in fiscal 1995, 1994 and 1993. The majority of such sales were
to Canada.
8 DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value because of the short term maturity of
these instruments. The fair value and carrying amounts of long-term debt at
June 30, 1995 was $4,100,000 and $3,976,000, respectively. Fair values are
based on current quoted interest rates of similar financial instruments with
like maturities.
9 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
For Fiscal Year Ended: 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER FULL YEAR
<S> <C> <C> <C>
June 30, 1995
Net sales $23,082,139 $22,376,351 $24,647,101 $25,050,467 $95,156,058
Gross margin 10,703,468 9,678,676 11,852,125 10,779,497 43,013,766
Net income (loss) 1,317,662 (648,418) 1,073,679 12,961 1,755,884
Earnings per share data-
net income $0.21 ($0.10) $0.17 $0.00 $0.28
June 30, 1994
Net sales $22,750,705 $23,668,259 $24,884,939 $24,274,143 $95,578,046
Gross margin 10,833,490 12,116,375 12,809,550 11,998,299 47,757,714
Income before cumulative effect
of change in accounting principle 1,246,976 1,503,216 1,798,757 1,826,219 6,375,168
Net income 1,602,803 1,503,216 1,798,757 1,826,219 6,730,995
Earnings per share data:
Income before cumulative effect
of change in accounting principle $0.20 $0.24 $0.29 $0.30 $1.03
Net income $0.26 $0.24 $0.29 $0.30 $1.09
</TABLE>
<PAGE> 16
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND DIRECTORS OF MEDEX, INC.:
We have audited the accompanying consolidated balance sheets of Medex, Inc.
and subsidiaries as of June 30, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
three years in the period ended June 30, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Medex, Inc. and
subsidiaries as of June 30, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
1995 in conformity with generally accepted accounting principles.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
effective July 1, 1993, the Company changed its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
/s/ Deloitte & Touche LLP
Columbus, Ohio
August 10, 1995
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
<TABLE>
<CAPTION>
1995 Stock Price 1994 Stock Price
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $14.25 $11.25 $14.25 $11.13
Second Quarter 17.75 12.25 17.25 11.25
Third Quarter 13.75 10.00 19.63 16.00
Fourth Quarter 12.75 9.50 17.25 11.25
</TABLE>
The common shares of the Company are traded in the over-the-counter market and
are identified by the NASDAQ symbol "MDEX."
The source of the stock price information is NASDAQ and represents the high
and low last transaction price as reported by the NASDAQ National Market System.
The Company paid cash dividends in fiscal years 1995 and 1994 of $982,227
($.16 per share) and $913,621 ($.15 per share), respectively. There were
approximately 1,375 shareholders of record as of August 8, 1995. The Company
intends to continue to pay cash dividends on its common stock, subject to the
Company's earnings, financial condition, capital requirements and such other
factors as the Board of Directors deems relevant. It is currently intended that
the amount of cash dividends will continue as a low percentage of earnings, and
that the Company will continue its policy of retaining the major portion of
earnings for use in the Company's business.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
A. Medex Exports, Inc., a U.S. Virgin Islands corporation.
B. Medex Medical, Inc., an Ohio corporation
C. Medex Medical France SARL, organized under the laws of France.
D. Medex Medical GmbH, organized under the laws of Germany.
E. Ashfield Medical Systems Limited, organized under the laws of Scotland.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-23787, No. 33-44859, No. 33-36739, No. 33-79854 and No. 33-89964 of
Medex, Inc. on Form S-8 of our reports dated August 10, 1995, (which expresses
an unqualified opinion and includes an explanatory paragraph relating to the
change in the method of accounting for income taxes) appearing and incorporated
by reference in this Annual Report on Form 10-K of Medex, Inc. for the year
ended June 30, 1995.
DELOITTE & TOUCHE LLP
Columbus, Ohio
September 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains Summary Financial Information extracted from the
Company's Consolidated Balance Sheet and Statement of Income for the year ended
June 30, 1995 and is qualified in its entirety by reference to such Financial
Statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,911,074
<SECURITIES> 345,000
<RECEIVABLES> 18,506,153
<ALLOWANCES> 714,000
<INVENTORY> 22,369,991
<CURRENT-ASSETS> 48,578,599
<PP&E> 57,340,665
<DEPRECIATION> 23,028,147
<TOTAL-ASSETS> 90,501,551
<CURRENT-LIABILITIES> 11,244,270
<BONDS> 3,463,232
<COMMON> 61,595
0
0
<OTHER-SE> 75,794,049
<TOTAL-LIABILITY-AND-EQUITY> 90,501,551
<SALES> 95,156,058
<TOTAL-REVENUES> 95,156,058
<CGS> 52,142,292
<TOTAL-COSTS> 52,142,292
<OTHER-EXPENSES> 40,699,956
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,811
<INCOME-PRETAX> 2,852,884
<INCOME-TAX> 1,097,000
<INCOME-CONTINUING> 1,755,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,755,884
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
