<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 March 31, 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 March 31, 1996, the latest practicable date, 6,175,211 shares of
the registrant's common shares were issued and outstanding.
1
<PAGE> 2
MEDEX, INC.
-----------
INDEX TO FORM 10-Q
------------------
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996
--------------------------------------------------
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
ITEM 1
------
<S> <C>
Title Page 1
Index to Form 10-Q 2
Consolidated Statements of Income - Three and Nine 3
Months Ended March 31, 1996 and 1995
Consolidated Balance Sheets - March 31, 1996 and June 30, 1995 4-5
Consolidated Statement of Shareholders' Equity - Nine Months Ended March 31, 1996 6
Consolidated Statements of Cash Flows - Nine Months Ended March 31, 1996 and 1995 7
Notes To Consolidated Financial Statements 8
ITEM 2
------
Management's Discussion and Analysis of Financial Condition and Results of 9-14
Operations
PART II OTHER INFORMATION 15
- ------- ----------------- --
EXHIBIT
-------
10. Executive Employment Agreement with Bradley P. Gould
11. Computation of Earnings Per Share 17
27. Financial Data Schedule
</TABLE>
2
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
------------------------------
ITEMS 1 & 2
-----------
MEDEX, INC.
-----------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
March 31, March 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 25,468,469 $ 24,647,101 $ 72,699,582 $ 70,105,591
COST OF GOODS SOLD 14,188,690 12,902,615 37,979,381 38,198,889
DISCONTINUED ITEMS 1,677,957 1,677,957
------------ ------------ ------------ ------------
TOTAL COST of GOODS SOLD 15,866,647 12,902,615 39,657,338 38,198,889
GROSS MARGIN 9,601,822 11,744,486 33,042,244 31,906,702
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Sales and Marketing 5,693,447 5,662,417 17,001,750 15,947,373
Research and Development 838,951 800,971 2,216,318 2,302,428
Administrative 3,697,244 3,397,938 11,227,004 9,214,415
Restructuring Costs:
Turnaround Program 1,045,728 1,045,728
Denver Closing 381,286 1,074,730 2,055,548
------------ ------------ ------------ ------------
Total 1,045,728 381,286 2,120,458 2,055,548
------------ ------------ ------------ ------------
Total Operating Expenses 11,275,370 10,242,612 32,565,530 29,519,764
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (1,673,548) 1,501,874 476,714 2,386,938
OTHER INCOME (EXPENSE):
Investment Income 41,250 19,705 165,998 190,503
Interest Expense (70,544) (25,273) (167,754) (89,248)
Other - Net 546 301,373 (49,309) 417,730
------------ ------------ ------------ ------------
Total Other Income (Expense) (28,748) 295,805 (51,065) 518,985
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (1,702,296) 1,797,679 425,649 2,905,923
ESTIMATED INCOME TAXES 297,000 724,000 1,149,000 1,163,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 1,999,296) $ 1,073,679 ($ 723,351) $ 1,742,923
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON
SHARE:
NET INCOME (LOSS) ($ 0.32) $ 0.17 ($ O.12) $ 0.28
============ ============ ============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING 6,258,208 6,167,848 6,219,318 6,191,991
------------ ------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE> 4
MEDEX, INC.
-----------
CONSOLIDATED BALANCE SHEETS
---------------------------
ASSETS
------
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, 1996 JUNE 30, 1995
-------------- -------------
CURRENT ASSETS:
<S> <C> <C>
Cash and Equivalents $ 3,296,795 $ 4,911,074
Investments 345,000
Trade Receivables (less allowance for doubtful accounts
March 31 - $753,000; June 30 - $714,000) 20,203,036 18,506,153
Inventories:
Raw materials and supplies 11,590,292 11,495,702
Work-in-Process 5,414,295 3,626,058
Finished Goods 6,951,058 7,248,231
----------- -----------
Total Inventories 23,955,645 22,369,991
Deferred Income Taxes 1,633,456 1,633,456
Prepaid Expenses & Other 1,052,600 812,925
----------- -----------
Total Current Assets 50,141,532 48,578,599
----------- -----------
PROPERTY, PLANT AND EQUIPMENT - At cost:
Land and Land Improvements 2,314,317 2,053,046
Buildings 18,597,035 19,504,336
Machinery and Equipment 17,267,841 15,940,342
Dies and Molds 9,410,345 8,226,919
Fumiture and Data Processing Equipment 8,996,873 8,285,376
Additions in Progress 2,530,272 3,330,646
----------- -----------
Total 59,116,683 57,340,665
Less Accumulated Depreciation 25,158,664 23,028,147
----------- -----------
Property, Plant and Equipment - Net 33,958,019 34,312,518
----------- -----------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
(Net of accumulated amortization: March 31, $1,152,281
June 30 - $997,352) 4,718,052 4,872,981
----------- -----------
OTHER ASSETS:
Deferred Income Taxes 551,914 530,872
Other 2,053,886 2,206,581
----------- -----------
Total Other Assets 2,605,800 2,737,453
TOTAL $91,423,403 $90,501,551
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE> 5
MEDEX, INC.
-----------
CONSOLIDATED BALANCE SHEETS
---------------------------
LIABILITIES & SHAREHOLDERS' EQUITY
----------------------------------
(unaudited)
<TABLE>
<CAPTION>
MARCH 31,1996 JUNE 30,1995
------------- ------------
CURRENT LIABILITIES:
<S> <C> <C>
Current Portion of Long-Term Debt $ 484,294 $ 513,066
Accounts Payable (principally trade) 3,732,165 3,797,582
Accrued Liabilities:
Income Taxes 682,033 602,209
Compensation and Profit Sharing 4,712,841 2,873,619
Restructuring Costs 743,663 649,983
Other 4,012,527 2,807,811
------------ -----------
Total Current Liabilities 14,367,523 11,244,270
LONG-TERM DEBT - Less Current Portion 3,386,793 3,463,232
------------ -----------
Total Liabilities 17,754,316 14,707,502
------------ -----------
SHAREHOLDERS' EQUITY:
Common Stock - $.O1 Par Value
Shares Authorized - 20,000,000
Shares Outstanding March 31 - 6,175,211
Shares Outstanding June 30 - 6,159,502
(net of 150,590 treasury shares) 61,752 61,595
Additional Paid-In Capital 42,632,239 42,460,256
Retained Earnings 31,461,700 33,172,136
Foreign Currency Translation Adjustment (486,604) 100,062
------------ -----------
Total Shareholders' Equity 73,669,087 75,794,049
------------ -----------
TOTAL $ 91,423,403 $90,501,551
============ ===========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE> 6
MEDEX, INC.
-----------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
----------------------------------------------
FOR THE NINE MONTHS ENDED MARCH 31,1996
---------------------------------------
(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, 1995 6,159,502 $ 61,595 $42,460,256 $33,172,136 $ 100,062 $ 75,794,049
Net Loss ($723,351) ($ 723,351)
Cash Dividends
($.16 per share) ($987,085) ($ 987,085)
Foreign Currency
Translation
Adjustment ($586,666) ($ 586,666)
Issuance of Stock
Under Stock Option and
Purchase Plans 15,709 $ 157 $ 171,983 $ 172,140
----------------------------------------------------------------------------------
BALANCE AT
MARCH 31,1996 6,175,211 $ 61,752 $42,632,239 $31,461,700 ($486,604) $ 73,669,087
==================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE> 7
MEDEX, INC.
-----------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,1996 MARCH 31,1995
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) ($ 723,351) $ 1,742,923
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 2,574,170 2,535,336
Loss on Disposal of Assets 339,413
Change in Operating Assets and Liabilites:
Increase in Trade Receivables (1,997,981) (1,946,326)
(Increase) Decrease in Inventories (1,890,799) 279,632
Increase in Prepaid Expenses and Other (110,575) (13,548)
(Decrease) Increase in Accounts Payable (8,639) 265,485
Increase in Accrued Restructuring Costs 93,680 1,416,001
Increase (Decrease) in Accrued Liabilities 3,114,143 (1,735,024)
Increase in Accrued Income Taxes 157,142 103,156
Other Operating Items - Net (18) (93,747)
----------- -----------
Net Cash Provided by Operating Activities 1,547,185 2,553,888
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property Additions (2,632,269) (4,438,745)
Proceeds From Sale of Investments 345,000 5,000
Acquisition of Subsidiary, net of cash acquired 0 (368,027)
----------- -----------
Net Cash Used In Investing Activities (2,287,269) (4,801,772)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of Long-Term Obligations (105,211) (395,224)
Proceeds From Issuance of Common Shares 172,140 168,449
Issuance of Treasury Shares 87,477
Cash Dividends Paid (987,085) (982,227)
----------- -----------
Net Cash Used By Financing Activities (920,156) (1,121,525)
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 45,961 (226,482)
----------- -----------
NET DECREASE IN CASH AND EQUIVALENTS (1,614,279) (3,595,891)
----------- -----------
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 4,911,074 8,604,455
----------- -----------
CASH AND EQUIVALENTS AT END OF PERIOD $ 3,296,795 $ 5,008,564
=========== ===========
SUPPLEMENTAL DISCLOSURES:
CASH PAID DURING THE PERIOD FOR:
Interest $ 85,222 $ 32,682
----------- -----------
Income Taxes $ 525,050 $ 797,000
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE> 8
MEDEX, INC.
-----------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
MARCH 31, 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 March 31, 1996, and the
results of operations and cash flows. The notes to the Consolidated Financial
Statements which are contained in the 1995 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 1996.
2. RESTRUCTURING
-------------
During the third quarter, the Company initiated a "turnaround program" for its
domestic operations. The cost of the program is expected to approximate
$4,200,000 of which $2,800,000 was incurred in the third quarter. The remaining
$1,400,000 of turnaround costs which primarily relate to consulting services and
estimated severances are expected to be incurred by September 30, 1996. The
Company intends to use available cash to fund these expenditures.
In the third quarter, the Company recorded $1,046,000 in restructuring costs and
$1,700,000 in write-offs of discontinued items related to the "turnaround
program". The restructuring costs consist of $346,000 for consulting services,
$594,000 for severances for terminated employees and the remainder for legal and
outplacement expenses incurred during the quarter. The $1,700,000 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.
3. INCOME TAXES
------------
Estimated income taxes primarily relate to foreign income taxes on the Company's
European operations profits. The domestic operating loss cannot offset foreign
taxes due to limitations in the foreign tax credit regulations.
8
<PAGE> 9
MEDEX, INC.
-----------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
MARCH 31, 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 NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales 100.00 100.00 100.00 100.00
Cost of Goods Sold 62.30 52.35 54.55 54.49
------ ------ ------ ------
Gross Margin 37.70 47.65 45.45 45.51
Operating Expenses 44.27 41.56 44.79 42.11
------ ------ ------ ------
Operating Income (Loss) (6.57) 6.09 0.66 3.40
Other Income (Expense) (0.11) 1.20 (0.07) 0.74
------ ------ ------ ------
Income (Loss) Before
Income Taxes (6.68) 7.29 0.59 4.14
Estimated Income Taxes 1.17 2.94 1.58 1.65
------ ------ ------ ------
Net income (Loss) (7.85) 4.35 (0.99) 2.49
====== ====== ====== ======
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $25,468 $24,647 $72,700 $70,106
- -----------------------------------------------------------------------------
</TABLE>
Net Sales for the three months ended March 31, 1996 increased $821,000 or three
percent over the same period of the previous year. Net sales from domestic
operations decreased $640,000 or four percent to $16,080,000 while sales from
the Company's European operations increased $1,461,000 or eighteen percent to
$9,388,000.
9
<PAGE> 10
The decrease in domestic sales consists of an increase in critical care
accessories of $324,000 offset by a decrease in infusion systems of $964,000.
Critical care accessories sales increased due to increased sales of fluid & drug
products partially offset by a decrease in sales of cath lab and pressure
monitoring products. Sales of infusion systems decreased in all areas.
European sales increased $1,461,000 primarily due to increases in cath lab
(procedure pack) and due to $213,000 of sales from Ashfield Medical Systems,
which was acquired March 28, 1995. The impact of foreign currency translation
rates was insignificant.
For the nine months ended March 31, 1996, net sales increased $2,594,000 or four
percent over the same period of the previous year. Domestic sales decreased
$1,012,000 or two percent to $47,787,000 while European sales increased
$3,606,000 or seventeen percent to $24,912,000.
Domestic sales decreased primarily due to infusion systems which decreased
$1,145,000. This decrease consists of a $1,765,000 decrease in large volume pump
products partially offset by increases in syringe and ambulatory pumps. Sales of
critical care products were flat.
The European sales increase for the nine months is primarily due to increased
sales of cath lab (procedure pack) and pressure monitoring products along with
the Company recording $586,000 from Ashfield Medical Systems. Increased foreign
currency translation rates accounted for approximately twenty-seven percent, or
3 percentage points, of the increase.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cost of Goods Sold $14,189 $12,903 $37,979 $38,199
Discontinued Items 1,678 1,678
------- ------- ------- -------
Total Cost of Goods Sold $15,867 $12,903 $39,657 $38,199
- -----------------------------------------------------------------------------
Gross Margin $ 9,602 $11,744 $33,042 $31,907
- -----------------------------------------------------------------------------
</TABLE>
Gross Margin as a percent of net sales for the third quarter of fiscal 1996
decreased to 37.7% from the 47.6% reported in the previous year. Domestic
margins decreased 14.3 percentage points while European margins decreased 2.9
percentage points.
Domestic margins decreased primarily due to the discontinued items which
accounted for 10.4 of the 14.3 percentage point decline. These items represent
the write off of inventory and fixed assets related to items which will be
discontinued or replaced. Excluding the discontinued items, domestic margins
decreased to 41.7% from the 45.6% reported in the previous year. This reduction
is attributable the mix of products sold during the quarter, pricing pressures
and the effect of increased labor rates in a tight labor market.
10
<PAGE> 11
European margins decreased to 48.9% from 51.8% reported in the previous year.
This decrease is due to pricing pressures and a change in product mix to include
more procedure pack sales which carry a lower margin.
On a year to date basis, the consolidated gross margin percentage remained
constant at 45.5%. However, excluding the discontinued items the gross margin
increased to 47.8% in the current year. Domestic margins remained flat at 43.6%;
however, excluding the discontinued items the gross margin increased to 47.1% in
the current year from 43.6% reported in the prior year. European margins
decreased slightly to 49.5% from 49.8%.
For the nine months, the domestic margins have improved due to a change in mix
to include fewer large volume pump sales, which have a lower margin, and due to
lower volume related manufacturing variances. The decrease in manufacturing
variances is attributed to increased production volumes at both the Columbus and
Atlanta plants due to the Company closing its Denver facility and moving
production to these locations.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Selling, Research and
Administration Expenses $10,229 $ 9,862 $30,446 $27,464
Restructuring Expenses 1,046 381 2,120 2,056
------- ------- ------- -------
Total Operating Expenses $11,275 $10,243 $32,566 $29,520
- -----------------------------------------------------------------------------
</TABLE>
Total operating expenses for the three months ended March 31, 1996 increased
$1,033,000 over the same period for the previous year. This increase consists of
a $588,000 increase in domestic operating expenses and a $445,000 increase in
European operating expenses.
The domestic increase consists of a $76,000 decrease in selling, research and
administration expenses offset by a $665,000 increase in restructuring expenses.
The decrease in selling, research and administration expenses is primarily due
to decreased selling expenses partially offset by increased administration
costs.
During the third quarter, the Company initiated a "turnaround program" for its
domestic operations that 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.
Management estimates the "turnaround program" will realize the Company
approximately $4,000,000 to $5,000,000 in annualized savings. The savings
associated with the plan are expected to be primarily achieved by reducing
headcount in the administrative areas and in manufacturing areas by achieving
greater efficiencies.
Restructuring expenses recorded during the quarter of $1,046,000 represent
consulting fees, severances, legal fees and outplacement services related to the
turnaround program discussed in Note 2 of the "Notes to Consolidated Financial
Statements". The initial phase of the program began late in the third quarter
and included the hiring of a consulting group to
11
<PAGE> 12
help facilitate the process, as well as the elimination of 46 positions.
The annualized salaries and fringe benefits associated with these positions
total approximately $2,100,000.
The restructuring expenses of $381,000 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.
European operating expenses increased $445,000 partially due to effects of
increased foreign currency translation rates which caused $43,000 of the
increase. The remaining increase was due to increased selling expenses, caused
by increased salaries and related items resulting from increased personnel and
increased commissions due to increased sales levels, and increased
administrative expenses. Administrative expenses increased due to Ashfield
Medical Systems which was acquired in the prior year.
For the nine months ended March 31, 1996, operating expenses increased
$3,046,000 or ten percent. Excluding the restructuring costs recorded in both
years, operating expenses increased $2,981,000 consisting of a $1,150,000
increase in domestic expenses and a $1,831,000 increase in European expenses.
The increase for the nine month period is primarily due to the same items as
discussed above for the three month period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Income ($29) $296 ($51) $519
- -----------------------------------------------------------------------------
</TABLE>
The decrease in other income for the three months ended March 31, 1996, is
primarily due to foreign currency exchange gains and losses. The Company
recorded foreign currency exchange losses of $70,000 in the current quarter
versus gains of $233,000 in the prior year. Also effecting this amount is
investment income which has increased due to increased rates and interest
expense which has increased due to a reduction in the amount of interest
capitalized on construction projects.
For the nine months ended March 31, 1996, the Company recorded an expense of
$51,000 compared to a prior year gain of $519,000. The change is also primarily
due to a reduction in foreign currency exchange gains. The company recorded a
$155,000 foreign currency loss for the nine months ended March 31, 1996 as
compared to a gain of $327,000 for the same period in the prior year. Investment
income has decreased due to lower investment levels while interest expense has
increased due to the reasons noted above.
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Estimated Income
Taxes $297,000 $724,000 $1,149,000 $1,163,000
- -----------------------------------------------------------------------------
</TABLE>
Estimated income taxes for the three months ended March 31, 1996 consist of
foreign income taxes recorded on the profits from the Company's European
operations partially offset by a tax benefit recorded as a result of the
domestic operating loss.
For the nine months, estimated income taxes primarily relate to foreign income
taxes on the Company's European operations profits. The domestic operating loss
cannot offset foreign taxes due to limitations in the foreign tax credit
regulations.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net working capital at March 31, 1996 decreased $1,560,000 over the working
capital at June 30, 1995. The current ratio was $3.49 to 1.00 at March 31, 1996
as compared to 4.32 to 1.00 at June 30, 1995.
Property additions of approximately $2,632,000 primarily relate to the
acquisition of machinery and equipment and dies and molds. 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
- --------------------
The Company remains in a turnaround mode and management is working to position
the Company for consistent performance. The restructuring at the Company's
domestic operations will continue through September 30, 1996 and is estimated to
cost an additional $1,400,000. The annualized savings from this "turnaround
program" is expected to be approximately $4,000,000 to $5,000,000.
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 economic, competitive and governmental factors affecting the
Company's markets, prices and other facets of its operations.
14
<PAGE> 15
PART II - OTHER INFORMATION
---------------------------
ITEM 1.
LEGAL PROCEEDINGS
- -----------------
The Company is not presently a party to any material pending legal
proceedings.
ITEM 2.
- ------
CHANGES IN SECURITIES
- ---------------------
None
ITEM 3.
- -------
DEFAULTS UPON SENIOR SECURITIES
- -------------------------------
None
ITEM 4.
- -------
SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
- -------------------------------------------------
None
ITEM 5.
- ------
OTHER INFORMATION
- -----------------
A. Mr. Phillip D. Messinger, former Vice Chairman of the Company, has
resigned as a Director of the Company.
B. Mr. William J. Post, Senior Vice President - Sales and Marketing, has
left the Company. To date a successor has not been appointed.
ITEM 6.
- -------
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------
A. EXHIBITS
--------
10 Executive Employment Agreement with Bradley P. Gould.
11 Computation of Earnings per Share.
B. REPORTS ON FORM 8-K
-------------------
No reports on form 8-K were filed for the three months ended March
31, 1996.
15
<PAGE> 16
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:_______________________________ By: Bradley P. Gould
----------------
Chief Executive Officer
And: Michael J. Barilla
------------------
Vice President
Chief Financial Officer
16
<PAGE> 1
EXHIBIT 10
EXECUTIVE EMPLOYMENT AGREEMENT
This Agreement, dated February 14, 1996, by and between Medex, Inc., an Ohio
corporation (the "Company"), and Bradley P. Gould (the "Executive").
The Company agrees to employ Executive in the position of Chief Executive
Officer and Executive agrees to serve in the employ of Company as an executive,
as follows:
1. TERM. Executive acknowledges that this Agreement does not create any
obligation on Executive's part to work for Company, nor for Company to employ
Executive for any fixed period of time, and Executive's employment may be
terminated at anytime with or without cause. Executive and Company acknowledge
that employment of Executive will be subject to the terms and conditions of
this Agreement, but shall be terminable at will by either party.
2. NOTICE. Written notice of termination of Executive's employment shall be
given by either the Company or Executive to the other Party not less than
ninety days prior to the effective date of said termination. Such notice shall
be given to the Company at 3637 Lacon Road, Hilliard, Ohio 43026, Attention:
Vice President, Human Resources and to Executive at his place of employment.
Executive and Company acknowledge that the notice of termination requirement of
this Section in no way effects the at-will
<PAGE> 2
employment relationship between the Parties.
3. COMPENSATION. As compensation for all services rendered by Executive under
this Agreement, Executive shall be paid as follows:
A. SALARY. Executive shall be paid a base salary of $320,000 per annum.
The salary will be paid in the same installments as prevail for other
executives of the Company or such other installments as are agreed upon between
the Executive and the Company which will be reviewed annually by the Executive
Compensation Committee of the Board of Directors.
B. BENEFITS. In addition, Executive shall be eligible to participate in the
following plans:
1. Company's Health, Disability and Life Insurance Plans
2. Key Employee Stock Option Plan
3. Executive Stock Option Plan
4. Administrative Incentive Stock Option Plan II
5. Executive Split Dollar Insurance Plan
6. Company car allowance for BMW 740L or equivalent and all normal operating
expenses relating thereto
7. Incentive Bonus Compensation Program
8. 401-K Savings Plan
Executive shall also be entitled to receive the following benefits:
1. Reasonable relocation expenses, including: temporary living expenses;
moving expenses; real estate closing costs; real estate fees; and house
hunting trips
2. Continued participation in German pension plan
3. Tax preparation services and consultation
C. SEVERANCE. In the event Executive's employment is involuntarily
terminated by the Company, other than as a result of a "Change of Control" as
defined in the Employment Agreement, as amended, previously executed by
Executive, Executive shall be
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<PAGE> 3
entitled to severance payments equivalent to one year of salary and bonus
(based upon "Target Income"). However, should Executive's employment be
terminated due to the occurrence of any of the following: Executive violates
the provisions of Sections 3 or 4 herein, commits, is arrested or otherwise
officially charged with a felony or any crime involving moral turpitude, or any
other criminal activity or unethical conduct which, in the good faith opinion
of the Company, would impair Executive's ability to perform his duties
hereunder or would impair the business reputation of the Company, Executive
shall not be entitled to receive any severance payments.
4. OBLIGATION OF LOYALTY. Throughout Executive's employment with the Company,
Executive is required to devote his full time and energy to the performance of
his duties and responsibilities and to the promotion of the Company's
interests.
5. CONFIDENTIALITY. Recognizing that the knowledge and information about, or
relationships with, the business associates, customers, clients and agents of
the Company and its subsidiaries or affiliates and the business methods,
systems, plans and policies of the Company and of its subsidiaries and
affiliates which Executive has heretofore and shall hereafter receive, obtain
or establish as an employee of the Company or otherwise are valuable and unique
assets of the Company, Executive agrees that, during the continuance of this
Agreement and thereafter, he shall not
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<PAGE> 4
(otherwise than pursuant to his duties hereunder) disclose without the written
consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, its
subsidiaries or affiliates, or its business, personnel or plans, to any person,
firm, corporation or other entity, for any reason or purpose whatsoever.
Executive acknowledges and agrees that all memoranda, notes, records and other
documents made or compiled by Executive or made available to Executive
concerning the Company's business shall be the Company's exclusive property and
shall be delivered by Executive to the Company upon expiration or termination
of this Agreement or at any other time upon the request of the Company.
6. SEVERABILITY. If any provision of this Agreement or any part hereof is
invalid, unlawful or incapable of being enforced by reason of any rule of law
or public policy, all conditions and provisions of this Agreement which can be
given effect without such invalid, unlawful or unenforceable provision shall,
nevertheless, remain in full force and effect.
7. WARRANTY. Executive warrants and represents that he is not and will not
become a party to any agreement, contract, arrangement or understanding,
whether of employment or otherwise, that would in anyway restrict or prohibit
him from undertaking or performing his duties in accordance with this
Agreement.
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8. EFFECT OF OTHER AGREEMENTS. This Agreement does not supersede any
previously written and executed agreements between the parties herein, such as
the "Employment Agreement" which becomes effective under certain conditions
when there is a change in control of the Company. This Agreement shall, from
the date of its execution, supersede, in all respects, all previous oral
agreements in regard to employment between Executive and the Company. This
Agreement shall not be altered, modified, amended or terminated except by
written instrument signed by each of the Parties hereto.
9. GOVERNING LAW. This Executive Employment Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of Ohio.
In witness whereof, the parties hereto, intending to be legal bound, have
executed this Agreement as of the date first written above.
EXECUTIVE COMPANY: MEDEX, INC.
Name: Bradley P. Gould Name: Robert E. Boyd, Jr.
---------------------- ------------------------
Title: CEO Title: Secretary
--------------------- -----------------------
Date: 2/14/96 Date: 2/14/96
---------------------- ------------------------
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<PAGE> 1
EXHIBIT 11
MEDEX, INC.
-----------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
---- ---- ---- ----
PRIMARY:
<S> <C> <C> <C> <C>
Weighted Average
Common Shares Outstanding 6,172,684 6,139,401 6,166,955 6,134,080
Common Equivalent
Shares - Stock Options 85,524 (1) 28,447 (1) 52,363 (1) 57,911 (1)
----------- ----------- ----------- -----------
Common Shares and
Common Equivalent
Shares Outstanding 6,258,208 6,167,848 6,219,318 6,191,991
=========== =========== =========== ===========
NET INCOME (LOSS) ($1,999,296) $ 1,073,679 ($ 723,351) $ 1,742,923
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE ($ 0.32) $ 0.17 ($ 0.12) $ 0.28
=========== =========== =========== ===========
FULLY DILUTED:
Weighted Average Common
Shares Outstanding 6,172,684 6,139,401 6,166,955 6,134,080
Common Equivalent Shares -
Stock Options 90,942 (1) 31,375 (1) 54,389 (1) 68,399 (1)
----------- ----------- ----------- -----------
Common Shares and Common
Equivalent Shares Outstanding 6,263,626 6,170,776 6,221,344 6,202,479
=========== =========== =========== ===========
NET INCOME (LOSS) ($1,999,296) $ 1,073,679 ($ 723,351) $ 1,742,923
=========== =========== =========== ===========
NET INCOME (LOSS) PER SHARE ($ 0.32) $ 0.17 ($ 0.12) $ 0.28
=========== =========== =========== ===========
<FN>
(1) Calculated under the Treasury Stock Method using the average price or
period-end market price of Medex stock, as applicable.
</TABLE>
17
<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 MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,296,795
<SECURITIES> 0
<RECEIVABLES> 20,203,036
<ALLOWANCES> 753,000
<INVENTORY> 23,955,645
<CURRENT-ASSETS> 50,141,532
<PP&E> 59,116,683
<DEPRECIATION> 25,158,664
<TOTAL-ASSETS> 91,423,403
<CURRENT-LIABILITIES> 14,367,523
<BONDS> 3,386,793
<COMMON> 61,752
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 91,423,403
<SALES> 72,699,582
<TOTAL-REVENUES> 72,699,582
<CGS> 39,657,338
<TOTAL-COSTS> 32,565,530
<OTHER-EXPENSES> 51,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 425,649
<INCOME-TAX> 1,149,000
<INCOME-CONTINUING> 425,649
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (723,351)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
