<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to __________________
Commission File Number 0-9042
MEDEX, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-4441680
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
3637 Lacon Road, Hilliard, Ohio 43026
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (614) 876-2413
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 23 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
As of September 30, 1996, the latest practicable date, 6,211,247 shares
of the registrant's common shares were issued and outstanding.
<PAGE> 2
MEDEX, INC.
INDEX TO FORM 10-Q
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
ITEM 1
Title Page 1
Index to Form 10-Q 2
Consolidated Statements of Income - Three Months Ended 3
September 30, 1996 and 1995
Consolidated Balance Sheets - September 30, 1996 and June 4-5
30, 1996
Consolidated Statement of Shareholders' Equity - Three 6
Months Ended September 30, 1996
Consolidated Statements of Cash Flows - Three Months 7
Ended September 30, 1996 and 1995
Notes To Consolidated Financial Statements 8-9
ITEM 2
Management's Discussion and Analysis of Results of 10-14
Operations and Financial Condition
PART II OTHER INFORMATION 15
- ------- EXHIBITS
4.1 Amendment Agreement to Rights Agreement
10.1 Amendment to Employment Agreement with Michael J. Barilla
11. Computation of Earnings Per Share
27. Financial Data Schedule
99. Press Release
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEMS 1 & 2
MEDEX, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 24,262,971 $ 23,697,611
COST OF GOODS SOLD 13,022,502 11,639,177
------------ ------------
GROSS MARGIN $ 11,240,469 $ 12,058,434
------------ ------------
OPERATING EXPENSES:
Sales and Marketing 5,198,754 5,729,337
Research and Development 724,175 642,948
Administrative 3,177,806 3,460,800
Restructuring Costs:
Turnaround Program 740,599
Denver Closing 241,251
------------ ------------
Total Operating Expenses 9,841,334 10,074,336
------------ ------------
OPERATING INCOME 1,399,135 1,984,098
OTHER INCOME (EXPENSE):
Investment Income 119,408 51,970
Interest Expense (83,422) (53,100)
Gain on Sale of Product Line 3,097,666
Other - Net (7,989) (88,899)
------------ ------------
Total Other Income (Expense) 3,125,663 (90,029)
------------ ------------
INCOME BEFORE INCOME TAXES 4,524,798 1,894,069
ESTIMATED INCOME TAXES 1,811,000 757,000
------------ ------------
NET INCOME $ 2,713,798 $ 1,137,069
============ ============
EARNINGS PER SHARE:
Primary $ 0.43 $ 0.18
============ ============
Fully Diluted $ 0.42 $ 0.18
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Primary 6,357,941 6,198,153
============ ============
Fully Diluted 6,436,074 6,198,185
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 4
MEDEX, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Equivalents $10,804,917 $ 5,587,527
Trade Receivables (less allowance for doubtful accounts
September 30 - $787,000; June 30 - $763,00) 18,210,661 18,670,315
Inventories:
Raw Materials and Supplies 10,543,434 9,706,264
Work-in-Process 4,733,494 4,423,868
Finished Goods 9,468,837 8,936,451
----------- -----------
Total Inventories 24,745,765 23,066,583
Deferred Income Taxes 2,722,410 2,722,410
Prepaid Expenses & Other 1,456,299 613,930
----------- -----------
Total Current Assets $57,940,052 $50,660,765
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - At cost:
Land and Land Improvements 2,324,875 2,321,356
Buildings 18,738,927 18,716,605
Machinery and Equipment 17,696,767 17,681,223
Dies and Molds 9,505,530 9,510,043
Furniture and Data Processing Equipment 9,398,926 9,251,887
Additions in Progress 4,183,490 3,293,911
----------- -----------
Total 61,848,515 60,775,025
Less Accumulated Depreciation 27,219,879 26,172,126
----------- -----------
Property, Plant and Equipment - Net 34,628,636 34,602,899
----------- -----------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
(Net of accumulated amortization: September 30 - $1,215,287
June 30 - $1,171,496) 4,655,251 4,698,837
----------- -----------
OTHER ASSETS 2,381,966 2,378,855
----------- -----------
TOTAL $99,605,905 $92,341,356
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 5
MEDEX, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES & SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996
------------------ -------------
CURRENT LIABILITIES:
<S> <C> <C>
Current Portion of Long-Term Debt $ 600,000 $ 510,226
Accounts Payable (principally trade) 4,101,802 4,521,672
Accrued Liabilities:
Income Taxes 2,874,069 1,263,015
Compensation and Profit Sharing 3,146,325 3,603,801
Restructuring Costs 414,126 416,453
Other 4,400,708 3,715,457
------------ ------------
Total Current Liabilities 15,537,030 14,030,624
LONG-TERM DEBT - Less Current Portion 6,175,000 2,952,661
DEFERRED INCOME TAXES 295,867 232,972
------------ ------------
Total Liabilities 22,007,897 17,216,257
------------ ------------
SHAREHOLDERS' EQUITY:
Common Stock - $.01 Par Value
Shares Authorized - 20,000,000
Shares Outstanding September 30 - 6,211,247
Shares Outstanding June 30 - 6,197,413
(net of 150,590 treasury shares) 62,112 61,974
Additional Paid-In Capital 43,042,570 42,886,968
Retained Earnings 34,776,921 32,559,918
Foreign Currency Translation Adjustment (283,595) (383,761)
------------ ------------
Total Shareholders' Equity 77,598,008 75,125,099
------------ ------------
TOTAL $ 99,605,905 92,341,356
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 6
MEDEX, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(unaudited)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK CURRENCY
OUTSTANDING ADDITIONAL PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT EQUITY
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
JUNE 30, 1996 6,197,413 $61,974 $42,886,968 $32,559,918 (383,761) $75,125,099
Net Income $ 2,713,798 2,713,798
Cash Dividends
($.08 PER SHARE) (496,795) (496,795)
Foreign Currency
Translation 100,166 100,166
Adjustment
Issuance of Stock
Under Stock Option and
Purchase Plans 13,834 138 155,602 155,740
---------------------------------------------------------------------------------------------
BALANCE AT
SEPTEMBER 30, 1996 6,211,247 $62,112 $43,042,570 $34,776,921 ($283,595) $77,598,008
=============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 7
MEDEX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,713,798 $ 1,137,069
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 1,092,420 1,021,390
Gain on Sale of Product Line (3,097,666)
Change in Operating Assets and Liabilities:
(Increase) Decrease in Trade Receivables 487,157 (185,719)
Increase in Inventories (1,655,350) (455,901)
Increase in Prepaid Expenses and Other (841,466) (560,299)
Decrease in Accounts Payable (430,977) (439,322)
Decrease in Accrued Restructuring Costs (2,327) (125,290)
Decrease in Accrued Liabilities (167,613) (131,136)
Increase in Accrued Income Taxes 1,500,010 1,421,509
Other Operating Items - Net 56,756 341,436
------------ -----------
Net Cash (Used in) Provided by Operating Activities (345,258) 2,023,737
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Product Line, Net of Expenses 3,079,316
Property Additions (1,024,813) (1,272,694)
------------ -----------
Net Cash Provided by (Used in) Investing Activities 2,054,503 (1,272,694)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Long-Term Obligations (687,887) (31,094)
Proceeds from Issuance of Common Shares 155,740 79,187
Proceeds from Industrial Revenue Bond Issuance 4,000,000
------------ -----------
Net Cash Provided By Financing Activities 3,467,853 48,093
------------ -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 40,292 66,036
------------ -----------
NET INCREASE IN CASH AND EQUIVALENTS 5,217,390 865,172
------------ -----------
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,587,527 4,911,074
------------ -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 10,804,917 $ 5,776,246
============ ===========
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE PERIOD FOR:
Interest $ 54,290 $ 44
------------ -----------
Income Taxes $ 46,453
------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE> 8
MEDEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(unaudited)
1. PRESENTATION
------------
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and include all of the
information and disclosures required by generally accepted accounting
principles for interim reporting, which are less than those required for annual
reporting. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (all of which are normal and recurring in
nature) necessary to present fairly the financial position of Medex, Inc. at
September 30, 1996, and the results of operations and cash flows. The notes to
the Consolidated Financial Statements which are contained in the 1996 Annual
Report to Shareholders should be read in conjunction with these Consolidated
Financial Statements. Certain reclassifications have been made to prior year's
amounts to conform with the classifications of such amounts for fiscal 1997.
2. RESTRUCTURING
-------------
During the first quarter, the Company finalized the "turnaround program" for
its domestic operations which began in the third quarter of fiscal 1996. The
total cost of the program was expected to be approximately $4,350,000. The
actual costs of the "turnaround program" totaled 4,382,000. The difference of
$32,000 between the actual and the expected expense is primarily due to
consulting costs being higher than anticipated. The Company used available cash
to fund these expenditures.
The Company's total cost for the "turnaround program" consisted of $2,704,000
in restructuring costs and $1,678,000 in write-offs of discontinued items. The
restructuring costs consist of $1,643,000 for consulting services, $781,000 for
severances for terminated employees and the remainder for legal and
outplacement expenses. The $1,678,000 charge associated with discontinued items
represents the write-off of inventory and fixed assets as a result of the
Company's decision to discontinue or replace certain items. All these costs
were recorded in fiscal 1996 with the exception of $741,000 of restructuring
costs recorded during the quarter which consisted of $175,000 for severances
costs and $566,000 for consulting services.
3. SALE OF PRODUCT LINE
--------------------
In July, 1996, the Company sold its WalkMed(R) ambulatory infusion pump product
line, related disposable products and associated assets. The Company will
continue to manufacture the WalkMed line and related disposables and will
distribute the products outside of North America for up to three years. The
Company's sales related to WalkMed in fiscal 1996 were approximately
$3,500,000. The Company recognized a gain of approximately $3,100,000 on the
sale of the product line. WalkMed infusion systems are used to administer
intravenous therapies to patients in non-hospitalized, alternate site locations.
<PAGE> 9
4. SUBSEQUENT EVENT
----------------
On November 13, 1996, the Company and Furon Company, headquartered in Laguna
Niguel, California, announced the signing of a Merger Agreement under which FCY,
Inc., Furon's subsidiary, will commence a tender offer to acquire all of the
Company's outstanding shares for $23.50 per share. The total transaction is
valued at $160 million (including outstanding stock options). Following
consummation of the tender offer, Furon intends to acquire any remaining Medex
shares in a cash merger at the same price as paid in the tender offer. The
merger agreement and tender offer have been approved by the boards of directors
of each Company.
<PAGE> 10
MEDEX, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SEPTEMBER 30, 1996
RESULTS OF OPERATIONS
The following table shows Medex, Inc. operating results as a percent of
net sales for the periods 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
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
------- --------
<S> <C> <C>
Net Sales 100.00 100.00
Cost of Goods Sold 53.67 49.12
------ -------
Gross Margin 46.33 50.88
Operating Expenses 40.56 42.51
------- -------
Operating Income 5.77 8.37
Other Income (Expense) 12.88 (0.38)
------ -------
Income Before Income Taxes 18.65 7.99
Estimated Income Taxes 7.46 3.19
------ -------
Net Income 11.19 4.80
====== =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Net Sales $24,263 $23,698
- -------------------------------------------------------------------
</TABLE>
Net Sales for the three months ended September 30, 1996 increased $565,000 or
two percent over the same period of the previous year. Net sales from domestic
operations decreased $908,000 or six percent to $14,916,000 while sales from the
Company's European operations increased $1,474,000 or nineteen percent to
$9,347,000.
<PAGE> 11
The decrease in domestic sales consists of decreases in critical care
accessories of $156,000 and in infusion systems of $752,000. Critical care
accessories sales decreased due to decreases in sales of cath lab and pressure
monitoring products partially offset by increased sales of fluid & drug
products. Cath lab sales were negatively impacted by backorders caused by
manufacturing delays. Sales of infusion systems decreased in all areas but the
decrease is most significant in the large volume pump product (LVP) line.
European sales increased $1,474,000 primarily due to increases in procedure
packs and the fluid & drug product line. The procedure pack increase is
primarily due to the growing pack business and due to a portion of the
backorders existing at June 30, 1996 being filled. Decreases in foreign currency
exchange rates had the effect of reducing reported sales by $366,000
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Cost of Goods Sold $13,023 $11,639
- -------------------------------------------------------------------
Gross Margin $11,240 $12,058
- -------------------------------------------------------------------
</TABLE>
Gross Margin as a percent of net sales for the first quarter of fiscal 1997
decreased to 46.3% from the 50.9% reported in the previous year. Domestic
margins decreased 6 percentage points while the European margins decreased 1.9
percentage points.
Domestic margins decreased to 46.4% due to the increases in product costs and
due to the product mix. Approximately five percentage points of the decrease are
due to increases in costs over the fiscal 1996 standards due to increases in
overhead, labor and material costs. Other items negatively impacting the margin
are the mix of products sold during the quarter and pricing pressures.
European margins decreased to 47.1% from 49.0% reported in the previous year.
This decrease is primarily due to pricing pressures, increased costs and a
change in product mix to include more procedure pack sales which carry a lower
margin.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Selling, Research and
Administrative Expenses $9,100 $ 9,833
Restructuring Expenses 741 241
------ -------
Total Operating Expenses $9,841 $10,074
- -------------------------------------------------------------------
</TABLE>
Total operating expenses for the three months ended September 30, 1996 decreased
$233,000 from the same period of the previous year. This decrease consists of a
$259,000
<PAGE> 12
decrease in domestic operating expenses and a $26,000 increase in European
operating expenses.
The domestic decrease consists of a $759,000 decrease in selling and
administrative expenses offset by a $500,000 increase in restructuring
expenses. The decrease in selling, research and administrative expenses is due
to decreased selling as the result of open positions and cost containment
practices and decreases in administrative expenses due to legal fees and
professional services.
The restructuring expenses recorded during the quarter of $741,000 represent
the final costs associated with the Company's "turnaround program". This
program, for the domestic operations, is focused on a number of efficiency and
organizational measures including "right sizing" the organization, developing
management tools to achieve consistent performance, creating new programs to
manage inventories, improving cost competitiveness, and developing bench
marking and "best of class" measures to track Company performance. The nature of
the items included in the $741,000 recorded in the quarter is discussed in Note
2 of the "Notes to Consolidated Financial Statements".
The total cost of the turnaround program was $4,382,000. Management estimates
the "turnaround program" will result in approximately $4,000,000 to $5,000,000
in annualized savings for the Company. The savings associated with the plan are
expected to be primarily achieved by reducing salaried personnel in the
manufacturing, sales and administrative areas and by achieving greater
manufacturing efficiencies. Approximately 50 positions were eliminated during
the program. The annualized salaries and fringe benefits associated with these
positions total approximately $2,300,000.
The restructuring expenses of $241,000 in the prior year relate to the closing
of the Denver facility which was announced in October, 1994. The closing of
this facility and the integration of all functions and product lines into the
Columbus and Atlanta operations was finalized during the quarter ended December
31, 1995.
Reported European operating expenses increased $26,000. However, decreases in
the foreign currency exchange rates had the effect of reducing the reported
expenses by $127,000. Excluding the effect of currency, the increase is due to
increased selling expenses due primarily to increased sales.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Other Income (Expenses) $3,126 ($90)
- ------------------------------------------------------------------------------
</TABLE>
The increase in other income for the three months ended September 30, 1996, is
due to the Company recording a gain on the sale of its WalkMed ambulatory
infusion pump product line of approximately $3,100,000. Investment income has
increased approximately $67,000 due to an increase in investable cash. The
Company also recorded foreign currency exchange losses of $67,000 in the
current quarter versus losses of $104,000 in the prior year.
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
- -------------------------------------------------------------------
<S> <C> <C>
Estimated Income
Taxes $1,811 $757
- -------------------------------------------------------------------
</TABLE>
The income taxes for both the current and previous fiscal year are estimated to
be 40 percent of pre-tax income.
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net working capital at September 30, 1996 increased $5,773,000 over the working
capital at June 30, 1996. The current ratio was $3.73 to 1.00 at September 30,
1996 as compared to 3.61 to 1.00 at June 30, 1996.
Property additions of approximately $1,043,000 primarily relate to the
acquisition of machinery and equipment. Management believes that currently
available cash, investments and cash provided from future operations will be
sufficient to finance these and other future capital expenditures.
The Company during the quarter borrowed $4,000,000 through the issuance of
Industrial Revenue Bonds. The bonds bear interest at a weekly adjustable rate
and mature in June, 2016. Annual principal payments of $200,000 are scheduled
beginning in July, 1997.
Following any purchase of shares of Common Stock of the Company pursuant to the
tender offer contemplated by the Merger Agreement (See Note 4., Subsequent
Event), the Company will be obligated to purchase for the same amount paid in
the tender offer (currently set at $23.50 per share) all shares owned by
officers and directors of the Company, and to pay the same amount less the
exercise price of all stock options surrendered to the Company by officers,
directors and employees (or former employees) of the Company. Such payments for
these shares and options are expected to total approximately $25.4 million and
will be funded out of the Company's working capital and, if necessary, funds
provided by Furon.
MANAGEMENT'S OUTLOOK
- --------------------
Management anticipates that the Company's European operations will continue to
post increases in sales, and profits are expected to be in line with fiscal
year 1996 barring any material unfavorable changes in foreign currency exchange
rates. Domestic operations are expected to post improved performance over
fiscal 1996. Domestic sales are expected to show a modest increase; however,
they are expected to continue to be impacted by pricing pressures in the
market, especially in infusion systems. The Company plans to introduce two new
products in the second half of fiscal 1997.
Profits for fiscal year 1997 over fiscal year 1996 are expected to improve, as
the savings associated with the "turnaround program" are experienced. However,
the domestic operations will continue to experience production related
variances which will affect the Company's performance. The Company will
continue to pursue opportunities, including product line extensions through
acquisitions and strategic alliances, to strengthen the Company's product
offering in strategic markets. If the acquisition of the Company by Furon
Company occurs, as anticipated, management expects to develop new medical
products and expand on a global basis.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
- --------------------------------------------------------------------
ACT OF 1995
- -----------
Except for the historical information, the matters discussed herein are
forward-looking statements which involve risks and uncertainties, including but
not limited to: business conditions in the health care industry and the general
economy; competitive factors, including further consolidation in the health
care industry; regulatory requirements; new technologies and pricing pressures;
and management decisions to pursue new products or businesses which involve
additional costs, risks or capital expenditures.
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Medex, Inc. ("the Company") has been named as a Defendant, along with five other
defendants, in a civil complaint filed on October 21, 1996 in the United States
District Court for the Southern District of Ohio Eastern Division, Case Number
C2-96-1065, Vicki McBrayer, Dennis McBrayer, Adam McBrayer, A Minor and Alex
McBrayer, A Minor vs. Laidlaw Environmental Services, (WT), Inc., Beaver
Adhesives, Inc., OSF America, Inc., Medex, Inc., City of Hilliard, Ohio and
Board of Education of the Hilliard City School District. The suit was brought by
former students of an elementary school and the parents of the said former
students, against the named Defendants, claiming liability for the alleged
negligent, intentional, reckless, and unlawful release into the environment,
including school premises, of hazardous substances, pollutants, and contaminants
which allegedly resulted in personal injuries to Plaintiffs. Plaintiffs have
demanded $15 million in compensatory damages and $100 million in punitive
damages, equitable relief, costs, and attorney fees for negligent and
intentional infliction of serious emotional distress, negligence and intentional
torts.
ITEM 2.
CHANGES IN SECURITIES
On November 12, 1996, the Board of Directors of the Company approved an
amendment to the Rights Agreement dated as of October 12, 1996 among the Company
and The Huntington National Bank as Rights Agent (the "Rights Agreement") to
provide that neither Furon Company nor any of its affiliates or associates shall
be deemed to beneficially own securities any such person may acquire or have the
right to acquire, vote or dispose of as a result of the transactions
contemplated by the Merger Agreement referred to in Item 5 of this Report.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
<PAGE> 16
ITEM 5.
OTHER INFORMATION
On November 13, 1996, Medex, Inc. and Furon Company announced they had signed
the Merger Agreement under which FCY, Inc., Furon's subsidiary, will commence a
tender offer to acquire all of Medex's outstanding shares as described in the
press release filed as an exhibit to this Form 10-Q. The information contained
in such press release is hereby incorporated by reference into this Report.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
4.1 Amendment Agreement to Rights Agreement
10.1 Amendment to Employment Agreement with Michael J. Barilla
11. Computation of Earnings Per Share
27. Financial Data Schedule
99. Press Release
B. REPORTS ON FORM 8-K
No reports on form 8-K were filed for the three months ended September
30, 1996.
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
MEDEX, INC.
Date: November 14, 1996 By: Bradley P. Gould
-------------------------- ----------------------
President
Chief Executive Officer
And: Michael J. Barilla
----------------------
Senior Vice President
Chief Financial Officer
<PAGE> 1
Exhibit 4.1
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT dated as of November 12, 1996, between
Medex, Inc., an Ohio corporation (the "Company"), and The Huntington National
Bank (the "Rights Agent").
WHEREAS, the Company and the Rights Agent have heretofore
executed and entered into a Rights Agreement dated as of October 12, 1996,
between the Company and the Rights Agent (the "Rights Agreement"), setting forth
the terms of the Company's common share purchase Rights (as defined in the
Rights Agreement);
WHEREAS, the Company and the Rights Agent may from time to
time supplement or amend the Rights Agreement pursuant to the provisions of
Section 26 of the Rights Agreement; and
WHEREAS, all acts and things necessary to make this Amendment
Agreement a valid, legal and binding instrument of the Company and the Rights
Agent have been duly done, performed and fulfilled, and the execution and
delivery hereof by each of the Company and the Rights Agent have been in all
respects duly authorized by the Company and the Rights Agent, respectively.
NOW, THEREFORE, the Company and the Rights Agent hereby agree
as follows:
1. Pursuant to Section 26 of the Rights Agreement, Section
1(c) of the Rights Agreement is hereby amended to add the following sentence at
the end of such Section:
"The foregoing notwithstanding, neither Furon Company
("Purchaser") nor any of its Affiliates or Associates shall be deemed
to be the "Beneficial Owner" of, or to "beneficially own," any
securities which such Person may, directly or indirectly, acquire or
have the right to vote or dispose of, or may be deemed to have the
right to acquire, to vote or to dispose of, as a result of the
transactions contemplated by that certain Agreement and Plan of Merger
among Purchaser, Furon Company and the Company (the "Merger
Agreement"), including without limitation (A) securities acquired as a
result of the "Offer" and the "Merger" (as such terms are defined in
the Merger Agreement), (B) securities acquired from officers and
directors of the Company as contemplated by Section (6.16) of the
Merger Agreement and (C) securities acquired pursuant to the Company
Option Agreement contemplated by Section (6.18) of the Agreement."
2. This Amendment Agreement may be executed in any number of
counterparts, each of which shall be an original, and such counterparts shall
together constitute but one and the same instrument. Terms not defined herein
shall, unless the context otherwise requires, have the meanings assigned to such
terms in the Rights Agreement.
<PAGE> 2
3. In all respects not inconsistent with the terms and
provisions of this Amendment Agreement, the Rights Agreement is hereby ratified
and confirmed. In executing and delivering this Amendment Agreement, the Rights
Agent shall be entitled to all of the privileges and immunities afforded to the
Rights Agent under the terms and conditions of the Rights Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment Agreement to be duly executed and their respective corporate seals to
be hereunto affixed and attested, all as of the day and year first above
written.
Attest: MEDEX, INC.
/s/ By:/s/ Bradley P. Gould
- -------------------------- --------------------------------
Name: Name: Bradley P. Gould
Title: Title: President and CEO
Attest: THE HUNTINGTON NATIONAL BANK
/s/ By:/s/ Mark A. Dunn
- -------------------------- ----------------------------------
Name: Name: Mark A. Dunn
Title: Title: Trust Officer
<PAGE> 1
Exhibit 10.1
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the original Employment Agreement, dated May 10,
1992, between Medex, Inc. (the "Company") and Michael J. Barilla (the
"Employee") is hereby effective as of the date of execution herein.
Recitals
A. WHEREAS, Employee, who previously served as Vice President and acting
Chief Financial Officer, has recently been elected Senior Vice
President and Chief Financial Officer of the Company and the Company
recognizes that Employee is a valuable resource for the Company and the
Company desires to be assured of the continued service of Employee; and
B. WHEREAS, Employee has concerns about the continuation of his
employment and/or his status and responsibilities with the
Company in the event of a possible or threatened change in
control of the Company; and
C. WHEREAS, the Company is concerned about the possible effect on Employee
of the uncertainties created by any proposed or threatened change of
control, whether approved by the Board of Directors or otherwise, and
the possibility that Employee may be approached by others with
employment opportunities.
D. WHEREAS, Employee is willing to continue to serve as Senior Vice
President and Chief Financial Officer but desires assurance that in the
event of any such change in control, regardless of its approval by the
Board of Directors, he will continue to have the responsibility and
status he has earned.
<PAGE> 2
THEREFORE, in consideration of the foregoing and other valuable
consideration, the parties agree to amend the original Employment Agreement as
follows:
1. Delete Section 1(e) of the Employment Agreement.
2. All other recitals, terms and conditions as set forth in the original
Employment Agreement dated May 10, 1992, shall remain unchanged and in
full force and effect.
IN WITNESS WHEREOF, this Agreement has been executed on the 21 day of
September, 1996.
Medex, Inc.
By: /s/ Bradley P. Gould
--------------------------
Bradley P. Gould
Its: President & Chief
Executive Officer
/s/ Michael J. Barilla
-----------------------------
Michael J. Barilla, Employee
<PAGE> 1
EXHIBIT 11
MEDEX, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
PRIMARY:
Weighted Average Common
Shares Outstanding 6,200,872 6,161,025
Common Equivalent Shares -
Stock Options 157,069 (1) 37,128 (1)
---------- ----------
Common Shares and Common
Equivalent Shares Outstanding 6,357,941 6,198,153
========== ==========
NET INCOME $2,713,798 $1,137,069
========== ==========
NET INCOME PER SHARE $ 0.43 $ 0.18
========== ==========
FULLY DILUTED:
Weighted Average Common
Shares Outstanding 6,200,872 6,161,025
Common Equivalent Shares -
Stock Options 235,202 (1) 37,160 (1)
---------- ----------
Common Shares and Common
Equivalent Shares Outstanding 6,436,074 6,198,185
========== ==========
NET INCOME $2,713,798 $1,137,069
========== ==========
NET INCOME PER SHARE $ 0.42 $0.18
========== ==========
</TABLE>
(1) Calculated under the Treasury Stock Method using the average price or
period-end market price of Medex stock, as applicable.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AND STATEMENTS OF INCOME FOR THE PERIOD ENDED SEPTEMBER
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10,804,917
<SECURITIES> 0
<RECEIVABLES> 18,210,661
<ALLOWANCES> 787,000
<INVENTORY> 24,745,765
<CURRENT-ASSETS> 57,940,052
<PP&E> 61,848,515
<DEPRECIATION> 27,219,879
<TOTAL-ASSETS> 99,605,905
<CURRENT-LIABILITIES> 15,537,030
<BONDS> 6,175,000
0
0
<COMMON> 62,112
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 99,605,905
<SALES> 24,262,971
<TOTAL-REVENUES> 24,262,971
<CGS> 13,022,502
<TOTAL-COSTS> 9,841,334
<OTHER-EXPENSES> (3,209,085)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83,422
<INCOME-PRETAX> 4,524,798
<INCOME-TAX> 1,811,000
<INCOME-CONTINUING> 4,524,798
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,713,798
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
<PAGE> 1
Exhibit 99
PRESS RELEASE
FURON, MEDEX SIGN MERGER PACT
IN TRANSACTION VALUED AT APPROXIMATELY $160 MILLION
Laguna Niquel, CA--November 13, 1996--Furon Company (NYSE:FCY),
headquartered in Laguna Niquel, California, and Medex, Inc. (NASDAQ:MDEX) of
Hilliard, Ohio, today announced they have signed a definitive merger agreement
under which FCY, Inc., Furon's subsidiary, will commence a tender offer to
acquire all of Medex's outstanding shares for $23.50 per share. The total
transaction is valued at $160 million (including outstanding stock options). The
purchase price represents a premium of about 59% over the average trading price
of the last 30 days. Following consummation of the tender offer, Furon intends
to acquire any remaining Medex shares in a cash merger at the same price as paid
in the tender offer.
The merger agreement and tender offer have been unanimously approved by
the board of directors of each company.
Consummation of the tender offer is subject to customary terms and
conditions, including acceptance by the holders of at least 60% of the shares of
Medex along with certain regulatory approvals and the expiration of the waiting
period under the Hart-Scott-Rodino Act. The tender offer will be made pursuant
to definitive documents to be filed with the Securities and Exchange Commission.
Dean Witter Reynolds Inc. is Dealer Manager for the offer, and MacKenzie
Partners, Inc. is the Information Agent.
In the event of a termination of the merger agreement due to a superior
takeover proposal or certain other circumstances, Medex would be obligated to
pay Furon a fee of approximately $8 million. Medex has granted Furon an option
to acquire 10 percent of the Medex common stock exercisable at the tender offer
price, upon termination of the merger agreement due to a superior takeover
proposal or certain other circumstances. Management shareholders
<PAGE> 2
and directors of Medex have also granted Furon an option and have agreed to sell
their shares to Medex upon completion of the tender offer.
Medex, founded in 1959, had sales of $99.3 million for its fiscal year
ended June 30, 1996. The company manufacturers polymer-based critical care
products and infusion systems for medical and surgical applications. Medex
products are sold in more than 50 countries to hospitals and alternate care
facilities and to original equipment manufacturers serving the health care
industry worldwide.
Furon, a leading international manufacturer of engineered polymer
components serving a number of industries, including health care, had sales of
$345 million for its fiscal year ended February 3, 1996. The company was founded
in 1955.
J. Michael Hagan, Furon's chairman and chief executive officer, said
"The acquisition of Medex represents an important step in the implementation of
Furon's growth strategy by leveraging our materials technology and manufacturing
know how in an industry sector that is non cyclical and provides a balance to
our overall business. In addition to its strong management, sales, marketing and
manufacturing team, Medex has excellent channels to market directly to health
care providers. From this base, we can accelerate growth with new products,
product line extensions, and market penetration.
Hagan added that Furon has secured financing commitments to complete
the transaction.
Bradley P. Gould, president and chief executive officer of Medex, said
"Joining forces with Furon provides added resources that will permit us to
develop new medical products and expand our market penetration on a global
basis. The transaction signifies a quantum stride in our quest to attain greater
market recognition
<PAGE> 3
for our products in the neonatal and pediatric intensive care and
the adult critical care and anesthesia markets."
Furon currently manufacturers a line of shunts, catheters, tubing and
other medical products primarily for original equipment manufacturers. Its
medical products comprised approximately three percent of the company's total
sales during fiscal 1996.
Medex designs, manufacturers and distributes critical care products and
infusion systems for a wide range of medical and surgical applications. Critical
care products are utilized in intravenous therapies such as fluid and drug
administration, as well as pressure monitoring and cardiac catheterization.
Infusion systems include a range of infusion pumps designed to deliver
prescribed doses of drugs and fluids to patients. With corporate headquarters in
Columbus, the company has domestic operations in Ohio and Georgia. Medex also
operates subsidiaries in the United Kingdom, Germany and France. Medex stock is
traded over-the-counter on the Nasdaq National Market under the MDEX symbol.
Furon is the world's leader in engineered polymer components for the
industrial marketplace. The company serves five key markets: electronics,
processing industries, capital goods, transportation, and health care.
Certain statements contained in this release are forward looking and
may involve risk and uncertainties including, but not limited to, product demand
and market acceptance risks, the effect of economic conditions, the impact of
competitive products and pricing, product development, and other risks disclosed
in the company's Securities and Exchange Commission filings.
