<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-Q/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended January 28, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 0-14343
CABOT MEDICAL CORPORATION
-------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 23-2240207
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
2150 Cabot Boulevard West, Langhorne, Pennsylvania 19047
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(Address of principal executive offices and zip code)
Registrant`s telephone number, including area code (215) 752-8300
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for a shorter period that the registrant was
required to file such reports), and (2) has been sub ject to such filing
requirements for the past 90 days.
Yes X No ________
--------
Indicate the number of shares outstanding of each of the issuer`s classes of
common stock, as of the latest practicable date.
Common Stock, no par value 10,359,165
- -------------------------- --------------
Class Outstanding at January 28, 1995
Page 1 of 14 pages
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INDEX
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<TABLE>
<CAPTION>
Page
Number
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<S> <C>
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Consolidated Balance Sheets - January 28, 1995 and
October 29, 1994.........................................3
Consolidated Statements of Earnings - Three Months Ended
January 28, 1995 and January 29, 1994....................5
Consolidated Statements of Shareholders' Equity - Three
Months Ended January 28, 1995............................6
Consolidated Statements of Cash Flows - Three Months Ended
January 28, 1995 and January 29, 1994....................7
Notes to the Consolidated Condensed Financial
Statements...............................................9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................11
</TABLE>
2
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
January 28, October 29,
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ASSETS 1995 1994
- ----------------------------------------------------------------------
(In Thousands) (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,402 $ 2,129
Short-term investments 794 891
Accounts receivable, net 9,124 9,410
Inventories
Raw material 5,993 5,799
Work in process 2,047 1,394
Finished goods 5,596 5,859
-------- --------
Total inventories 13,636 13,052
Prepaid expenses and other current assets 1,165 821
Refundable income taxes 390 390
Deferred income taxes 310 310
-------- --------
Total current assets 27,821 27,003
-------- --------
Property, plant and equipment-at cost 32,630 31,479
Less accumulated depreciation
and amortization 8,886 7,836
-------- --------
Net property, plant and equipment 23,744 23,643
-------- --------
Intangible assets, net 35,693 36,509
Deferred income taxes 47 47
Other assets, net 2,650 2,576
-------- --------
TOTAL ASSETS $ 89,955 $ 89,778
======== ========
</TABLE>
(continued)
3
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(continued)
<TABLE>
<CAPTION>
January 28, October 29,
--------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
---------------------------------------------------------------------------
(In Thousands, except number of shares (Unaudited)
and per share amounts)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term obligations $ 726 $ 701
Accounts payable 981 1,370
Accrued restructuring charges 857 1,074
Accrued expenses 3,292 3,576
Accrued interest 2,143 887
Income taxes payable 80 ---
-------- --------
Total current liabilities 8,079 7,608
Long-term obligations, less current maturities 72,234 72,782
Deferred income taxes 357 357
-------- --------
Total liabilities 80,670 80,747
-------- --------
Shareholders' Equity:
Preferred stock-authorized 500,000 shares
of no par value; no shares issued and
outstanding --- ---
Common stock-authorized 50,000,000 shares
of no par value; issued and outstanding
10,359,165 and 10,185,682 shares, respectively
at stated value of $.01 per share 104 102
Additional paid-in-capital 30,657 30,327
Notes receivable from officers ( 569) ( 272)
Accumulated deficit (20,907) (21,126)
-------- --------
Total shareholders' equity 9,285 9,031
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 89,955 $ 89,778
========= ==========
</TABLE>
See accompanying notes to consolidated condensed financial statements
4
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands, except per share
amounts) Three months ended
January 28, January 29,
-----------------------
1995 1994
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<S> <C> <C>
Net sales $15,733 $16,716
Cost of sales 6,323 6,247
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Gross Profit 9,410 10,469
------- -------
Operating expenses:
Selling and administrative 6,480 6,099
Research and development 759 1,112
Amortization of intangibles 723 708
Restructuring expense ( 140) ---
------- -------
7,822 7,919
------- -------
Operating income 1,588 2,550
------- -------
Interest income ( 37) ( 8)
Interest expense 1,430 1,413
Other income ( 118) ( 5)
------- -------
1,275 1,400
------- -------
Earnings before income taxes 313 1,150
Income tax expense 94 103
------- -------
Net earnings $ 219 $ 1,047
======= =======
Net earnings per common and
equivalent share:
Primary $ .02 $ .10
Fully diluted $ .02 $ .10
======= =======
Weighted average number of common
and equivalent share:
Primary 10,307 11,362
Fully diluted 10,307 11,362
</TABLE>
See accompanying notes to consolidated condensed financial statements
5
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Three months ended January 28, 1995
<TABLE>
<CAPTION>
Notes
Common Additional Receivable
(In Thousands, except Stock Paid-in- from Accumulated
share amounts) Issued Capital officers deficit Total
------ ------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, October 29, 1994 $102 $30,327 $ (272) $ (21,126) $9,031
Issuance of 173,483 shares
under Stock Option Plans 2 330 (297) --- 35
Net earnings for the period
ended January 28, 1995 --- --- --- 219 219
-----------------------------------------------------------------------
Balance, January 28, 1995 $104 $30,657 $(569) $(20,907) $9,285
==== ======= ====== ========= ======
</TABLE>
6
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
(In Thousands) January 28, January 29,
-----------------------
1995 1994
------------ -----------
<S> <C> <C>
Cash Flows from operating activities:
Net earnings $ 219 $ 1,047
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 1,430 1,316
Provision for losses on accounts receivable 36 ( 123)
Net gain on disposal of an intangible asset ( 307) ---
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable 250 ( 589)
(Increase) decrease in inventory ( 584) 363
Increase in prepaid expenses and
other current assets ( 344) ( 227)
Decrease in refundable income taxes --- 730
Increase in accounts payable and
accrued expenses 366 630
Increase in income taxes payable 80 103
------ ------
Net cash provided by operating activities 1,146 3,250
Cash flows from investing activities:
Proceeds from maturity of short-term
investments 97 ---
Proceeds from the sale of an intangible asset 400 ---
Purchase of property, plant and equipment ( 708) ( 467)
Decrease in intangible assets --- 3
Increase in other assets ( 174) ( 206)
------ ------
Net cash used in investing activities ( 385) ( 670)
Cash flows from financing activities:
Net decrease in short-term borrowings --- ( 10)
Principal payments on capital lease
obligations ( 58) ( 57)
Proceeds from issuance of common stock 35 ---
Payments for treasury stock --- ( 648)
Principal payments on Industrial
Development Authority Bonds ( 465) ( 445)
------ ------
Net cash used in financing activities ( 488) (1,160)
</TABLE>
7
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CABOT MEDICAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands) Three months ended
January 28, January 29,
-----------------------
1995 1994
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<S> <C> <C>
Net increase in cash and
cash equivalents $ 273 $ 1,420
Cash and cash equivalents at beginning of year 2,129 3,452
Cash and cash equivalents at end of period $ 2,402 $ 4,872
===== =====
Supplemental disclosures of cashflow information:
Cash paid during the period for:
Interest $ 14 $ 58
Income taxes $ -- $ --
</TABLE>
8
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CABOT MEDICAL CORPORATION
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 28, 1995 AND JANUARY 29, 1994
(Unaudited)
Note 1 In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (all of which
were normal recurring accruals) necessary to present fairly the
financial position and results of operations for the interim periods
presented.
The statements of earnings for the three months ended January 28, 1995
and January 29, 1994 are not necessarily indicative of results for the
full year.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these
consolidated condensed financial statements be read in conjunction with
the consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10K for the fiscal year ended
October 29, 1994.
Note 2 Net earnings per share computations are based on the weighted average
number of common shares outstanding including common stock equivalents
(stock options and warrants) utilizing the modified treasury stock
method when their effect is dilutive. For the quarter ended January 28,
1995, the effect of the common stock equivalents on the net earnings per
share computations utilizing the modified treasury stock method was
antidilutive.
Weighted average number of common shares outstanding and net earnings
per share computations give retroactive recognition to the 2% stock
dividend declared February 2, 1993, the 10% stock dividend declared June
1, 1993, the 10% stock dividend declared December 6, 1993 and the 10%
stock dividend declared April 13, 1994 for all periods presented.
Shares issuable upon conversion of the Company's 7.50% Convertible
Subordinated Notes due March 1, 1999 are excluded from the per share
computations as they are not common stock equivalents and are
antidilutive.
9
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CABOT MEDICAL CORPORATION
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JANUARY 28, 1995 AND JANUARY 29, 1994
Note 3 Cash Equivalents are short-term highly liquid investments readily
convertible to known amounts of cash and have original maturities of
three months or less.
Note 4 Short-term investments consist of United States government agency
obligations with an original maturity of greater than three months but
less than one year. Such investments are recorded at amortized cost,
which approximates market value as the Company has the intent and
ability to hold these securities until maturity pursuant to Statement of
Financial Accounting Standards No. 115.
10
<PAGE>
CABOT MEDICAL CORPORATION
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Position
- ------------------
Comparison of the quarter ended January 28, 1995 to the fiscal year ended
October 29, 1994.
Cash and cash equivalents increased by $273,000 or 13% primarily as a function
of timing differences between when cash is received and when it is utilized.
Accounts receivable, net, decreased $286,000 or 3% primarily as a result of a
decrease of $575,000 in international accounts receivable which coincides with
the international sales decrease from the fourth quarter of the previous year.
Inventory increased $584,000 or 4% primarily to support: (i) new specialty
disposables and Urological product introductions; and (ii) the transition of
manufacturing operations to Racine, Wisconsin during the Company's facilities
rationalization program. Inventory levels should be reduced once the transition
process is completed.
Prepaid expenses and other current assets increased $344,000 due to the
prepayment of: (i) business insurance premiums; and (ii) prepaid marketing
and engineering costs.
Other assets, net, increased $74,000 primarily due to approximately $211,000 in
loans to certain officers of the Company to pay tax liabilities incurred by them
in connection with their exercise of Company stock options. Such loans are
evidenced by promissory notes that are due on demand, bear interest at the prime
rate plus .25% per annum and are secured by shares of the Company's common
stock.
Accounts payable decreased $389,000 or 28% due to the timing differences of when
goods and services are purchased versus when they are paid and as part of the
Company's lower expense levels established as part of its facility and human
resource rationalization programs.
Accrued restructuring decreased $217,000 due to the payments of costs associated
with the Company's human resources and facility rationalization program and
reductions in the restructing accrual reflecting changes (savings) realized
during the rationalization program.
Accrued expenses decreased $284,000 primarily as a result of a decrease of
$589,000 in accrued payroll and commissions due to the timing differences
created when compensation is earned versus when it is paid coupled with lower
expenditure levels.
Accrued interest increased by $1,256,000 due to the 7.5% per annum interest on
the Notes which is payable semi-annually, with the next payment scheduled in
March, 1995.
11
<PAGE>
CABOT MEDICAL CORPORATION
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Notes receivable from officers of $297,000 represent loans made to certain
officers of the Company to pay the exercise price due upon their exercise of
Company stock options. Such loans are evidenced by promissory notes that are due
on demand, bear interest at the prime rate plus .25% per annum and are secured
by shares of the Company's common stock.
Results of Operations
---------------------
Comparison of the quarter ended January 28, 1995, to the quarter ended
January 29, 1994.
Net sales decreased $983,000 or 6% due to a decrease of $710,000 and $273,000 in
domestic and international sales respectively.
The domestic sales decrease is primarily the result of the impact of pricing
pressures created on disposable products by large buying groups and competitive
products coupled with the continuing shift away from capital equipment sales,
the effect of which has not yet been fully offset by increased specialty
disposable and reusable instrument sales.
The decrease in international sales is attributable to the continued
recessionary pressures in the European and Latin American markets negatively
impacting the Company's prices for capital equipment which is primarily sold in
these markets.
Gross Profit decreased as a percentage of sales from 63% to 60% primarily due
to the impact of pricing pressures created on disposable products by large
buying groups and competitive products coupled with a shift in product mix
favoring the lower margin capital equipment products.
Selling and administrative expenses increased by $383,000 from 37% to 41% of
sales. Sales and marketing expenses increased by $893,000 primarily due to
expenses related to the integration of the Company's endoscopy and urology sales
force initiated during the period, offset in part by Administrative expenses
decreasing approximately $510,000 primarily due to the reduction in
administrative operating costs resulting from the Company's human resource
rationalization program and a reduction in bad debt expense resulting from the
Company's belief that the overall reserve for bad debt is adequate for future
needs.
Research and development expenses decreased $353,000 due to the reduction in the
departmental operating costs resulting from the Company's human resource
rationalization program which eliminated redundant positions when the research
and development functions were consolidated into one Company facility
(Langhorne, Pennsylvania) and a decreased level of
12
<PAGE>
CABOT MEDICAL CORPORATION
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
funding necessary to provide for product development and support of the
specialty disposables and reusable instrument product lines as compared to the
funding necessary to support the Company's previous capital equipment product
lines.
The restructuring credit of $140,000 reflects adjustments made for changes
(savings) in relocation, severance, facility refurbishing and carrying costs
associated with the Company's human resource and facility rationalization
programs due to a higher then expected voluntary resignations, lower actual
refurbishing costs and a reduced need for transitional equipment costs.
Interest income of $37,000 is the interest earned on short-term investments.
Other income increased $113,000 primarily due to the net proceeds received from
the sale of an intangible asset.
Liquidity and Capital Resources
- -------------------------------
There are no existing material commitments for capital expenditures nor are any
anticipated in the foreseeable future. If material unanticipated capital
expenditures are required, the Company believes it has adequate credit lines
available to meet such needs. The Company believes it has sufficient cash
resources from operations and available credit lines to meet foreseeable cash
needs. The Company presently has $16,638,000 available on all bank credit lines,
after contingent liabilities for guarantees of currently issued letters of
credit.
13
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CABOT MEDICAL CORPORATION
-------------------------
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 duly authorized.
CABOT MEDICAL CORPORATION
Date: 5/16/95 /s/Warren G. Wood
-------- -------------------------------------------
Warren G. Wood, President, Chairman of
the Board of Directors
and Chief Executive Officer
Date: 5/16/95 /s/Marvin Sharfstein
-------- -------------------------------------------
Marvin Sharfstein, Treasurer and Vice
President of Corporate
Development
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
1ST QUARTER 10Q/A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-29-1994
<PERIOD-END> JAN-28-1995
<CASH> 2,402
<SECURITIES> 794
<RECEIVABLES> 10,717
<ALLOWANCES> 1,593
<INVENTORY> 13,636
<CURRENT-ASSETS> 27,821
<PP&E> 32,630
<DEPRECIATION> 8,886
<TOTAL-ASSETS> 89,955
<CURRENT-LIABILITIES> 8,079
<BONDS> 72,234
<COMMON> 104
0
0
<OTHER-SE> 9,181
<TOTAL-LIABILITY-AND-EQUITY> 89,955
<SALES> 15,733
<TOTAL-REVENUES> 15,733
<CGS> 0
<TOTAL-COSTS> 6,323
<OTHER-EXPENSES> 7,824
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,430
<INCOME-PRETAX> 313
<INCOME-TAX> 94
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 219
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
