FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
for the fiscal year ended
September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
1-12318
Commission file number
BALLARD MEDICAL PRODUCTS
Exact name of registrant
as specified in its charter
UTAH
State or other jurisdiction of incorporation
or organization
87-0340144
I.R.S. Employer Identification No.
12050 Lone Peak Parkway, Draper, Utah 84020
Address and Zip Code
of principal executive offices
(801) 572-6800
Registrant's telephone number,
including area code
Securities registered to 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Common
Par Value: $0.10 per share
[X] Yes Indicate by check mark whether the Registrant (1)
[ ] No has filed all reports required to be filed by
Section 12 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.
[ ] Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by
nonaffiliates of the registrant as of 11/30/95:
$424,652,872
The number of shares outstanding of the registrant's class
of common stock, as of 11/30/95:
26,870,710
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference
herein:
1. Annual Report to Shareholders for fiscal year
ended September 30, 1995: Incorporated into Parts
I and II hereof.
2. Proxy Statement for Annual Meeting of Shareholders
to be held January 22, 1996: Incorporated into
Part III hereof.
BALLARD MEDICAL PRODUCTS
Cross Reference Sheet Showing Location
in Annual Report or Proxy Statement
of Information Required by Certain Form 10-K Items
LOCATION IN
REFERENCE
FORM 10-K ITEMS MATERIALS
Part I
Item 1. Business Annual Report,
pp. 1-6
Item 2. Properties Annual Report,
pp. 1, 2
Part II
Item 5. Market for Registrant's Common Annual Report p.
Equity and Related Stockholder 6
Matters
Item 6. Selected Consolidated Financial Annual Report,
Data pp. 7, 8
Item 7. Management's Discussion and Annual Report,
Analysis of Financial Condition pp. 24-27
and Results of Operations
Item 8. Consolidated Financial Annual Report,
Statements and Supplementary pp. 9-23
Data
Part III
Item 10. Directors and Executive Proxy Statement,
Officers of the Registrant pp. 3,4, 16-18
Item 11. Executive Compensation Proxy Statement,
pp. 5-11
Item 12. Security Ownership of Certain Proxy Statement,
Beneficial Owners and pp. 2-4
Management
DEFINITIONS
As used herein, the following terms have the meanings
indicated:
1. "Ballard" refers to Ballard Medical Products.
2. The "Company" and the "Registrant" refer to
Ballard and its subsidiaries.
3. "MIC" refers to Medical Innovations Corporation, a
wholly-owned subsidiary of Ballard.
4. "BREH" refers to Ballard Real Estate Holdings,
Inc., a wholly-owned subsidiary of Ballard.
5. "BI" refers to Ballard International, Inc., a
wholly-owned subsidiary of Ballard.
6. The "Annual Report" refers to the Company's Annual
Report for the fiscal year ended September 30,
1995, which was mailed to its shareholders and to
the Commission on or about December 8, 1995.
7. The "Proxy Statement" refers to the Company's
Proxy Statement mailed to its shareholders and to
the Commission on or about December 8, 1995, for
the Annual Shareholder Meeting to be held January
22, 1996.
PART I
ITEM 1. BUSINESS
The information required by this item is incorporated
herein by reference from the Company's Annual Report. In
addition, the following information is provided:
BUSINESS DEVELOPMENTS
The United States continues to be the principal market
for the Company's products. The Company's 136-person sales
force is complemented by a distribution system comprised of
specialty and general line dealers.
Sales by the Company are generated in many areas within
the hospital, such as intensive care units, emergency
services, gastrointestinal and radiology procedure rooms,
burn units, and respiratory therapy, as well as the main
hospital operating room and outpatient/satellite surgical
centers. A second important market for certain of the
Company's products is the alternate care market. Alternate
care site sales continue to improve as patients are moved
into these locations at an increasing rate. The Company's
strategy will continue to be to focus on the specialized
critical care, operating room, and alternate care sites.
The sale of the Company's TRACH CARE products is
somewhat seasonal, in that sales are better during the
winter months when there is a greater incidence of
respiratory illness. Other product sales are not subject to
seasonal differences.
INDUSTRY SEGMENTS
All products of the Company are deemed to be of the
same class and are sold in the same industry segment.
RAW MATERIALS
The Company does not face any serious supply shortage
with respect to raw materials used in the manufacture of its
products. Many of the Company's products are manufactured
from various resins and plastics. The Company purchases
resins and plastics from a number of different vendors. One
exception to this is that the Company currently has only one
supplier of resins used in the Company's DOUBLE SCRUB scrub
brush. Although some resin companies are in short supply,
the Company so far has not had any serious problem obtaining
needed quantities of these resins.
The Company's Chlorhexidinegluconate ("CHG") solutions
used in its FOAM CARE products are purchased from two
different suppliers. The 4% CHG is currently purchased from
Xttrium Laboratories, Inc., and the 2% CHG is currently
purchased from Huntington Laboratories, Inc. There can be
no assurance that the Company will be able to continue to
have access to sufficient quantities of these CHG materials.
CHG is heavily regulated by the FDA.
The Company purchases significant amounts of paper
products and tubing, along with a number of different
chemicals used in the manufacture of other hand wash
solutions sold as part of the Company's FOAM CARE product
line. There are many different suppliers of such chemicals,
tubing, and paper products. Occasionally, paper product
companies are in short supply, but the Company has adjusted
lead times and made other adjustments so that this has not
presented a problem.
The Company also purchases different types of silicone
materials from various suppliers. Depending upon the
specific type of silicone involved, there are anywhere from
a few to many sources. Some manufacturers have scaled back
their supply of silicone materials which are implanted or
placed in the human body for more than thirty days, in part
because of legal problems surrounding silicone breast
implants. So far, the Company has not had any serious
difficulty obtaining needed silicone materials.
There are many potential sources of balloon materials
used by the Company in MIC's enteral feeding product line,
although MIC currently purchases substantially all of such
balloons from one source.
PATENTS
The Company owns numerous patents with respect to its
products and feels that these patents are extremely
important to the Company's ability to compete effectively in
the market place.
1. TRACH CARE
The Company owns 19 U.S. patents with respect to its
TRACH CARE family of products. The expiration dates on
these patents range from February, 2003 to January, 2011.
The Company also has several U.S. and foreign patents
pending covering various TRACH CARE improvements.
2. FOAM CARE
The Company's FOAM CARE products are protected by ten
U.S. patents either owned or licensed by the Company, along
with a number of foreign patents. The Company's U.S.
patents expire between January, 1997 and August, 2011. The
Company also has other U.S. and foreign patents pending,
covering its FOAM CARE technology.
3. EASI-LAV
The Company owns five U.S. patents with respect to its
EASI-LAV products, with expiration dates ranging from June,
2006 to July, 2011. There are also other pending U.S. and
foreign patents.
4. BAL CATH
The Company's BAL Cath product is protected by four
U.S. patents, all owned by the Company. Expiration dates
range from August, 2009 to September, 2010. Other U.S. and
foreign patent applications are also pending.
5. MIC
MIC's products (including products added from the May,
1995 acquisition of the assets of Cox Medical Enterprises,
Inc.) are protected by sixteen U.S. patents owned by the
Company, along with various foreign patents. The U.S.
patents expire between January, 1999 and October, 2012. The
Company also has other U.S. and foreign patents pending on
MIC products, and is a licensee of certain patented
technology under a License Agreement dated effective July
28, 1991 with Martin J. Winkler, M.D.
TRADEMARKS
1. BALLARD TRADEMARKS
Although patents and registered trademarks do not
provide guaranteed protection, the Company believes that
they are important to its competitive position in the health
care marketplace. The Company's rights in a given trademark
should last indefinitely, so long as the Company continues
to use the mark to identify the particular product involved.
Ballard owns numerous trademarks, including the following
which have been registered in the U.S. Patent and Trademark
Office:
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION REGISTERED
NUMBER DATE TRADEMARK
<S> <C> <C>
1,325,596 March 19, 1985 FOAM CARE DOUBLE SCRUB
1,328,357 April 2, 1985 DOUBLE SCRUB
1,328,358 April 2, 1985 TRACH CARE
1,338,744 June 4, 1985 BALLARD MEDICAL PRODUCTS
1,358,803 September 10, 1985 FOAM CARE
(Blown up letters)
1,358,802 September 10, 1985 FOAM CARE
1,491,006 June 7, 1988 SAFETY SHIELD KIT
1,500,402 August 16, 1988 READY CARE
1,569,479 December 5, 1989 SAFETY DRAIN
1,608,110 July 31, 1990 TRACH CARE WET PAK
1,655,483 September 3, 1991 EASI-LAV
1,753,765 February 23, 1993 BALLARD EASI-LAV
1,793,553 September 21, 1993 BAL Cath
1,797,703 October 12, 1993 CODE BLUE EASI-LAV
1,818,717 February 1, 1994 CHAR-FLO
1,837,691 May 31, 1994 FLASH FOAM
1,840,243 June 21, 1994 FOAM CARE
</TABLE>
2. MIC TRADEMARKS
MIC has registered the following trademarks with the
United States Patent and Trademark Office, in addition to
others pending:
<TABLE>
<CAPTION>
REGISTRATION REGISTRATION REGISTERED
NUMBER DATE TRADEMARK
<S> <C> <C>
1,414,121 October 21, 1986 MIC (with Snake)
1,512,575 November 15, 1988 SECUR-LOK
1,548,136 July 18, 1989 MEDICAL INNOVATIONS
CORPORATION
1,713,379 September 8, 1992 MIC-KEY
1,746,978 January 19, 1993 SHUR-FORM
1,897,441 June 6, 1995 WE MAKE LIFE A LITTLE EASIER
1,912,396 August 15, 1995 THERMAL OPTION
</TABLE>
The Company also maintains foreign trademark
registrations in Australia, Belgium/Luxembourg, Canada,
France, Germany, Spain, Switzerland and the United Kingdom.
In addition, the Company has various other trademark
registrations pending.
MANUFACTURING BACKLOG
Generally, all sales of product by the Company include
terms requiring payment within thirty days. Product is
typically not allowed to be returned unless defective or
shipped in error. As of November 30, 1995, the Company had
back orders of approximately $712,400, in contrast to
approximately $422,000 in back orders at the same time in
1994. Back orders are generally filled within ten days.
Most of these back orders are custom kits.
COMPETITION
Each of the Company's products competes in major
markets within the health care industry. Many of the
Company's competitors are larger and more established in the
market place than the Company, and many competitors have
larger research staffs, facilities, and marketing forces.
However, the aggressive marketing and unique qualities of
the Company's product lines continue to be well received and
are helping the Company maintain, and in some cases,
increase its portion of the market. The Company's market
share and competition vary from product to product. The
Company estimates there are approximately ten to fifteen
competing companies for its FOAM CARE products and three or
four competitors for its TRACH CARE products. Depending
upon the specific product line, there are anywhere from no
competitors to three or four competitors for MIC products.
Each year, there are an increasing number of competitors for
each of these product lines.
EMPLOYEES
The Company currently has 686 full-time employees, 396
of whom are hourly production employees. The total sales
force now numbers 110 U.S. sales representatives, split into
a TRACH CARE/EASI-LAV sales force with 62 representatives
and a FOAM CARE/MIC sales force with 48 representatives. In
addition, there are 21 full-time Division and National Sales
Managers and 5 international sales representatives.
MANUFACTURING AND WORKING CAPITAL
All of Ballard's products are assembled, and many
component parts are manufactured, at the Company's premises,
located in Draper, Utah, where Ballard has complete
facilities for the design and construction of the Company's
own tooling, prototype molds, and production molds. MIC's
products are manufactured at its plants in Milpitas and
Ventura, California. The Company uses plastic injection
molding and assembly techniques in the manufacture of each
of its products.
RESEARCH AND DEVELOPMENT
The Company maintains a staff of design engineers,
project managers, and other employees for continuing
research and development of products. We are committed to
constantly searching for new products and for improvements
to existing products, and we are committed to allocating
sufficient resources to meet these important objectives.
The following table sets forth the amounts expended by the
Company in the last three fiscal years for Company-
sponsored, in-house research and development activities:
9/30/95 9/30/94 9/30/93
Company-sponsored
in-house research and
development expenses $2,177,117 $1,638,475 $1,345,052
ITEM 2. PROPERTIES
The information required by this item is incorporated
herein by reference from the Company's Annual Report. In
addition, the following information is provided:
The Company owns a 276,000 square-foot plant on
approximately twenty acres of land in Draper, Salt Lake
County, Utah. The Draper plant has housed our executive
offices since March, 1991 and provides space needed for our
current production. Through BREH, the Company also owns
approximately one hundred acres of ground surrounding the
original twenty acres.
MIC's Milpitas, California plant (approximately 21,000
square feet) is a leased facility located at McCandless
Technology Park, Milpitas, California. The plant is leased
pursuant to a written lease whose term expires in July,
1998. MIC's Ventura, California plan (approximately 9,000
square feet) is also leased, pursuant to a written lease
whose term expires in February, 1996.
ITEM 3. LEGAL PROCEEDINGS
GUARDIANSHIP OF CARMEN MARIE SMOOT
v. BALLARD MEDICAL PRODUCTS, ET AL.
No material developments have occurred in this
litigation since the filing of the Company's Form 10-Q for
the quarter ended June 30, 1995. The parties continue to
engage in the discovery process.
BALLARD MEDICAL PRODUCTS
v. HUNTINGTON LABORATORIES, INC.
In August, 1995, Huntington filed a new motion for
summary judgment, asking the court to rule Ballard Medical's
U.S. Reissue Patent 33,564 (which is the subject of this
litigation) invalid. This motion was filed shortly before a
hearing which had been scheduled before Judge Jenkins on
August 21, 1995. At that hearing, Judge Jenkins postponed a
decision on Ballard's motion for injunction.
In response to Huntington's new motion for summary
judgment, Ballard renewed its motion for injunction and
filed a cross-motion for summary judgment, urging the court
to find the Reissue Patent to be valid. A hearing has been
scheduled on all pending motions for December 18, 1995.
LINDA MADSEN v. BALLARD MEDICAL PRODUCTS
During the past several months, Linda Madsen's attorney
has been attempting to withdraw from the case. No
explanation has been provided to Ballard Medical as to why
Ms. Madsen's attorney desires to withdraw. In the meantime,
discovery has been delayed pending appointment of a new
attorney for Ms. Madsen in this case.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
During the fourth quarter of the fiscal year ended
September 30, 1995, no matters were submitted to a vote of
shareholders.
RISK FACTORS
The following risks should be considered in evaluating
the Company and its shares and the financial information
presented herein:
COMPETITION. A number of well-established medical
products companies, both in the United States and abroad,
with substantially greater capital resources and larger
research and development staffs and facilities, and with
substantially greater marketing systems, are engaged in the
manufacture and sale of products which compete with products
of the Company, and such other companies are engaged in
research designed to reach similar goals as the Company.
Such companies may succeed in developing and marketing
similar products which are better than those of the Company
and also may prove to be more successful than the Company in
the manufacturing and marketing of their products. The
Company continues to face pressures to reduce pricing for
certain products in order to meet competition and the price
reductions demanded by hospitals and hospital buying groups.
In the future the results of the Company's operations could
continue to be impacted by increased competition and
continuing pricing pressures.
PATENTS. The Company owns certain patents and
proprietary information acquired while developing their
products, and they are licensees of certain other
technology. One of the Company's early U.S. TRACH CARE
patents has expired. As patents expire, more competing
products may be released into the marketplace by other
companies. The ability of the Company to continue to
compete effectively with other medical device companies may
be materially dependent upon the protection afforded by its
patents and the confidentiality of certain proprietary
information. There is no assurance that patents will be
issued for products recently released into the marketplace
or for products presently being developed. If patents of
the Company are challenged, an adverse ruling could
materially adversely affect the Company's sales and profits.
HEALTH CARE REFORM. Threatened government-mandated
reforms continue to cause concern and uncertainty throughout
the health care industry. The Company's future results of
operations could be severely impacted by government reforms
such as strict cost controls and other possible restrictions
being considered by federal and state law makers.
RESEARCH AND DEVELOPMENT. In the continuing
development of products, the Company spent $2,177,117,
$1,638,475, and $1,345,052, for research and development in
the fiscal years ended September 30, 1995, 1994, and 1993,
respectively. The Company plans to continue spending
substantial sums for research, development, and improvement
of existing products and for research and development of new
products. There is no assurance that research and
development expenditures in the past or in the future will
result in products which are commercially viable so as to
recoup related research and development costs or to allow
the Company to continue to grow and be profitable.
TECHNOLOGICAL CHANGE. The medical technology as
utilized by the Company has been subject to rapid advances.
While the Company feels that it currently possesses the
technology necessary to carry on its business, its
commercial success will depend on its ability to remain
current with respect to such technological advances and to
retain experienced technical personnel. Furthermore, there
is always a risk that other technological advances will
render the Company's technology and certain products
uneconomical to customers or obsolete.
FDA REGULATION. Certain Company products are regulated
by the United States Food and Drug Administration (FDA).
The Company is required to adhere to existing standards for
good manufacturing practices and to engage in extensive
record keeping and reporting. The Company may be subject to
additional FDA rules and regulations depending on the future
products it develops. While the Company believes it will be
able to satisfy FDA requirements with respect to its
proposed and existing products, there can be no assurance
that difficulties or excessive costs will not be encountered
in the Company's efforts to secure necessary FDA approvals
which would delay or preclude the Company from releasing and
marketing such products. In addition, the extent of
governmental regulation which may arise from future
legislative or administrative action cannot be predicted.
PRODUCT LIABILITY. The Company's products are intended
to be used on or around humans by competent medical
personnel. In the event a patient develops medical problems
in connection with the Company's products, the Company could
be liable for substantial damages. The Company has product
liability insurance, but there is no assurance that the
Company would not be materially adversely affected from any
claim which may be made, or judgment which may be entered,
against it.
LACK OF DIVIDENDS. Prior to January, 1990, no
dividends had been paid by the Company on its shares of
Common Stock. The Company has paid dividends since January,
1990. However, there can be no assurance that dividends
will be paid on shares in the future.
UNCERTAINTY OF FINANCIAL RESULTS AND CAPITAL NEEDS.
There may be substantial fluctuations in the Company's
results of operations because of the timing and receipt of
revenues and market acceptance of existing Company products.
The ability of the Company to expand its manufacturing and
marketing operations cannot be predicted with certainty. If
revenues do not continue to increase as rapidly as they have
in the past few years, or if manufacturing, marketing,
research and development are not successful or require more
money than is anticipated, the Company may have to scale
back product marketing, development and production efforts
and attempt to obtain additional financing. There can be no
assurance that the Company would be able to obtain timely
additional financing in the amounts required or that such
financing, if available, would be on terms advantageous to
the Company.
SUPPLY OF RAW MATERIALS. Certain of the Company's
products are dependent upon raw materials for which there
are single or few sources. So far, the Company has not had
any serious problems obtaining needed raw materials.
However, there can be no assurance that the Company will be
able to continue to depend on existing sources of certain
materials. SEE "RAW MATERIALS" in Part I.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information required by Item 5 of this Part II is
incorporated herein by reference from the Company's Annual
Report.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by Item 6 of this Part II is
incorporated by reference from the Company's Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by Item 7 of this Part II is
incorporated herein by reference from the Company's Annual
Report.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
The Company's consolidated balance sheets as of
September 30, 1995 and 1994 and the related consolidated
statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended
September 30, 1995 are incorporated herein by reference from
the Company's Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are no disagreements on accounting and financial
disclosure to be disclosed under this Item 9.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The information required by Item 10 related to
Directors of the Company is incorporated herein by reference
from the Proxy Statement.
EXECUTIVE OFFICERS
The President, Executive Vice President, Vice
Presidents, Secretary, Treasurer, and General Counsel of
Ballard Medical Products are elected annually at the regular
meeting of the Board of Directors following the Annual
Meeting of Shareholders and serve at the discretion of the
Board of Directors. There is no arrangement or
understanding between any executive officer and any other
person pursuant to which he was or is to be selected as an
officer. The business background for at least the past five
years of each executive officer is as follows:
NAME AND AGE BACKGROUND
Dale H. Ballard (72) President, Chief Executive Officer,
Chairman of the Board (1)
Harold R. ("Butch") Executive Vice President,
Wolcott (48) General Manager (2)
E. Martin Chamberlain (55) Director, Vice President of Regulatory
Affairs, Secretary (3)
Bradford D. Bell (46) Vice President of Sales and Marketing
(4)
Kenneth R. Sorenson (52) Treasurer and Principal Financial
Officer (5)
Paul W. Hess (41) Director, General Counsel (6)
(1) See Proxy Statement, p. 16.
(2) Mr. Wolcott was appointed by the Board of Directors as
Executive Vice President of Ballard in June, 1994. He
was hired by the Company as General Manager in
December, 1992. Prior to joining Ballard, he was
employed by Pilot Cardiovascular Systems, Inc. in San
Clemente, California, from April, 1991 until December,
1992, where he worked initially as Vice President of
Operations and later as Chief Operating Officer. From
April, 1990 to April, 1991, Mr. Wolcott provided
consulting services to various medical device
companies. From January, 1987 until April, 1990, Mr.
Wolcott worked for Catheter Technology Corporation of
Salt Lake City, Utah, as Vice President of
Manufacturing.
(3) See Proxy Statement, p. 17.
(4) Mr. Bell was appointed Vice President of Sales and
Marketing on August 1, 1994. He served as Director of
Marketing for Ballard since October, 1991. Prior to
coming to work for Ballard, Mr. Bell worked for Bard
Access Systems (formerly named Davol/Cath Tech, Inc.),
where he served as Director of Marketing from the fall
of 1988 until October, 1991.
(5) Mr. Sorenson joined the Company in July, 1985. He has
worked in the Company's accounting department since
joining the Company. He became Treasurer of the
Company in August, 1985. Mr. Sorenson is a graduate of
Brigham Young University in Accounting.
(6) See Proxy Statement, p. 17.
ITEMS 11, 12, and 13.
The information required by Items 11, 12 and 13 of this
Part III is incorporated herein by reference from the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENTS,
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) DOCUMENTS FILED AS PART OF REPORT
1. CONSOLIDATED FINANCIAL
STATEMENTS
The following are included in the Annual Report
incorporated by reference into Parts I and II of this
report:
Independent Auditor's Report, dated November 9,
1995 (November 14, 1995, as to the fourth and
fifth paragraph of Note 8);
Consolidated Balance Sheets as of September 30,
1995 and 1994;
Consolidated Statements of Operations for the
Years Ended September 30, 1995, 1994, and 1993;
Consolidated Statements of Stockholders' Equity
for the Years Ended September 30, 1995, 1994, and
1993;
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1995, 1994 and 1993;
Notes to Consolidated Financial Statements.
2. CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
The following are included in this report:
Independent Auditors' Report dated November 9,
1995;
Supplemental Schedule II - Valuation Accounts for
the Three Years Ended September 30, 1995;
Other schedules required by Rule 5.04 of
Regulation S-X are omitted because of the absence
of the conditions under which they are required or
because the required information is included in
the consolidated financial statements or related
notes.
3. EXHIBITS
See "Ballard Medical Products Index to Exhibits"
attached to this report.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter
ended September 30, 1995.
(c) EXHIBITS
See "Ballard Medical Products Index to Exhibits"
attached to this report.
(d) SEPARATE FINANCIAL STATEMENT
SCHEDULES
Not applicable.
INDEMNIFICATION UNDERTAKING
For the purpose of complying with the amendments to the
rules governing Form S-8 (effective July 13, 1990) under the
Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration
Statements on Forms S-8 No. 2-90684 (filed April 24, 1984);
No. 2-94306 (filed November 9, 1984); No. 33-0840 (filed
October 17, 1985); No. 33-17698 (filed October 9, 1987); No.
33-25628 (filed November 8, 1988); No. 33-36851 (filed
September 17, 1990; No. 33-41720 (filed July 10, 1991); No.
33-56302 (filed December 24, 1992); No. 33-73194 (filed
December 20, 1993); and No. 33-57735 (filed February 16,
1995).
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: December 8, 1995 BALLARD MEDICAL PRODUCTS
By: Dale H. Ballard
President, Director
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Date: December 12, 1995 By: Dale H. Ballard
Director
Date: December 12, 1995 By: E. Martin Chamberlain
Director
Date: December 12, 1995 By: Dale H. Ballard, Jr.
Director
Date: December 12, 1995 By: Paul W. Hess
Director
Date: December 12, 1995 By: Kenneth R. Sorenson
Treasurer (Principal
Accounting Officer)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Ballard
Medical Products:
We have audited the consolidated financial statements
of Ballard Medical Products and subsidiaries as of September
30, 1995 and 1994, and for each of the three years in the
period ended September 30, 1995, and have issued our report
thereon dated November 9, 1995 (November 14, 1995, as to the
fourth and fifth paragraph of Note 8), which report includes
an explanatory paragraph as to the change in the Company's
method of accounting for investment securities and income
taxes; such consolidated financial statements and report are
included in your 1995 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included
the consolidated financial statement schedule of Ballard
Medical Products and subsidiaries, listed in Item 14. This
consolidated financial statement schedule is the
responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, such consolidated financial statement
schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects, the information set forth
therein.
Deloitte & Touche LLP
Salt Lake City, Utah
November 9, 1995
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE II
BALLARD MEDICAL PRODUCTS
VALUATION ACCOUNTS
FOR THE THREE YEARS ENDED
SEPTEMBER 30, 1995
BALANCE AT ADDITION BALANCE AT
BEGINNING TO CHARGED TO END OF
OF YEAR ALLOWANCE COSTS YEAR
<S> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS:
1995 $200,000 NONE $(75,000) $125,000
1994 242,747 NONE (42,747) 200,000
1993 169,558 172,284 (99,095) 242,747
ALLOWANCE FOR
SALES RETURNS:
1995 $200,000 $300,000 NONE $500,000
1994 122,000 200,000 (122,000) 200,000
1993 77,284 44,716 NONE 122,000
ALLOWANCE FOR
INVENTORY
OBSOLESCENCE:
1995 NONE $130,453 NONE $130,453
1996 NONE NONE NONE NONE
1997 NONE NONE NONE NONE
BALLARD MEDICAL PRODUCTS
Index to Exhibits
EXHIBIT EXHIBIT DESCRIPTION SEQUENTIALLY NUMBERED PAGE
NO.
3.1 Restated Certificate Incorporated herein by
of Incorporation, reference to Exhibit 3.1 to
dated June 18, 1987 Form 10-K, filed December
29, 1989.
3.2 July 10, 1991 Incorporated herein by
Articles of reference to Exhibit 4.2 to
Amendment to the Registration Statement
Articles of on Form S-3, filed November
Incorporation 13, 1991, Registration No.
33-43910.
3.3 September 20, 1993 Incorporated herein by
Articles of reference to Exhibit 3.3 to
Amendment to Form 10-K filed December
Articles of 16, 1993.
Incorporation
3.4 Amended and Restated Incorporated herein by
Bylaws, dated reference to Exhibit 3.3 to
October 12, 1992 Form 10-K, filed December
24, 1992.
4.1 See Exhibits 3.1,
3.2, 3.3, 10.1,
10.2, 10.3, 10.4,
10.5, 10.6, 10.7,
10.8, and 10.9
9 None
10.1 Material Contract: Incorporated herein by
1984 Incentive Stock reference to the
Option Plan Registration Statement on
Form S-8, filed November 9,
1984, Registration No. 2-
94306.
10.2 Material Contract: Incorporated herein by
1987 Incentive Stock reference to the
Option Plan Registration Statement on
Form S-8, filed October 9,
1987, Registration No. 33-
17698.
10.3 Material Contract: Incorporated herein by
1988 Incentive Stock reference to the
Option Plan Registration Statement on
Form S-8, filed November
18, 1988, Registration No.
33-25628.
10.4 Material Contract: Incorporated herein by
1990 Incentive Stock reference to the
Option Plan Registration Statement on
Form S-8, filed September
17, 1990, Registration No.
33-36851.
10.5 Material Contract: Incorporated herein by
1991 Incentive Stock reference to Exhibit 4.2 to
Option Plan Registration Statement on
Form S-8, filed July 10,
1991, Registration No. 33-
41720.
10.6 Material Contract: Incorporated herein by
1992 Incentive Stock reference to Exhibit 4.3 to
Option Plan Registration Statement on
Form S-8, filed with Post-
Effective Amendment No. 1
on April 9, 1993,
Registration No. 33-56302.
10.7 Material Contract: Incorporated herein by
Amended and Restated reference to Exhibit 4.5 to
1993 Incentive Stock Registration Statement on
Option Plan Form S-8, filed December
20, 1993, Registration No.
33-73194.
10.8 Material Contract: Incorporated herein by
1994 Incentive Stock reference to Exhibit 10.8
Option Plan to Form 10-K filed December
15, 1994.
10.9 Material Contract: p.
1995 Incentive Stock
Option Plan
10.10 Material Contract: Incorporated herein by
Agreement of reference to Exhibit 19 to
Settlement dated Form 10-Q, filed May 15,
March 1, 1990, with 1990.
Smiths Industries
Medical Systems,
Inc. and Smiths
Industries PLC
10.11 Material Contract: Incorporated herein by
Development reference to Exhibit 10.25
Agreement, dated to Form 10-K, filed
June 11, 1990 with December 28, 1990.
Draper City
10.12 Material Contract: Incorporated herein by
Stock Purchase reference to Exhibit 10.1
Agreement Concerning to Form 8-K, filed March
the Purchase by 13, 1993.
Ballard Medical
Products of All
Stock of Medical
Innovations
Corporation
10.13 Material Contract: Incorporated herein by
Employment Agreement reference to Exhibit 10.17
dated February 26, to Form 10-K, filed
1993, among Stephen December 16, 1993.
K. Parks, Medical
Innovations
Corporation, and
Ballard Medical
Products
10.14 Material Contract: Incorporated herein by
Employment Agreement reference to Exhibit 10.18
dated February 26, to Form 10-K, filed
1993, among Damon December 16, 1993.
Nuckolls, Medical
Innovations
Corporation, and
Ballard Medical
Products
10.15 Material Contract: Incorporated herein by
Lease dated reference to Exhibit 10.19
September 8, 1986 to Form 10-K, filed
between Medical December 16, 1993.
Innovations
Corporation, as
Tenant, and
McCandless
Technology Park,
Milpitas, Phase I,
as Landlord, with
Fourth Amendment
10.16 Material Contract: Incorporated herein by
Agreement dated reference to Exhibit 10.21
effective October 1, to Form 10-K, filed
1993 between Ballard December 16, 1993.
Medical Products and
H. Earl Wright and
The Wright Foamer
Co.
10.17 Material Contract: p.
Development
Agreement, dated
effective November
14, 1995, by and
among Ballard Real
Estate Holdings,
Inc., City of
Pocatello, and Idaho
State University
10.18 Material Contract: p.
Agreement (for
acquisition of 20
acres in Pocatello,
Idaho), dated
effective November
29, 1995 by and
among Ballard Real
Estate Holdings,
Inc., Idaho State
University, and
Eastern Idaho
Strategic Alliance,
Inc.
11 Computation of p.
Income Per Common
Share and Common
Equivalent Share
12 Not Applicable
13 Ballard Medical p.
Products 1995 Annual
Report for the year
ended September 30,
1995
16 Not Applicable
18 Not Applicable
21 Subsidiaries of p.
Ballard Medical
Products
22 Not Applicable
23 Independent
Auditor's Consent p.
24 Not Applicable
25 Not Applicable
26 Not Applicable
27 Financial Data p.
Schedule
28 Not Applicable
</TABLE>
EXHIBIT 10.9
BALLARD MEDICAL PRODUCTS
1995 INCENTIVE STOCK OPTION PLAN
Adopted effective May 12, 1995
1. GRANT OF OPTIONS. The two stock Option
Committees, appointed by the Board of Directors of BALLARD
MEDICAL PRODUCTS (the "Company"), a corporation organized
under the laws of the State of Utah, with its principal
place of business located at 12050 Lone Peak Parkway,
Draper, Utah 84020, are hereby authorized to issue stock
options from time to time on the Company's behalf to any one
or more persons who, at the date of such grant, are
employees of the Company or a subsidiary of the Company and
meet the requirements contained in the remaining portions of
this 1995 Incentive Stock Option Plan (the "Plan"). Stock
Option Committee A ("Committee A") is authorized to grant
options to employees who are not also officers or directors
of the Company. Stock Option Committee B ("Committee B") is
authorized to grant options only to employees who are also
officers or Directors of the Company. Any option to be
granted pursuant to this Plan must be granted within ten
(10) years from the date hereof.
2. AMOUNT OF STOCK AVAILABLE TO THIS PLAN. The
aggregate amount of stock which may be purchased pursuant to
options granted under this Plan shall be 700,000 shares of
the Company's Common Stock (the "Stock"), said number to be
automatically increased or decreased, as the case may be, by
any increase or decrease in the number of shares of Stock
outstanding because of any:
(a) change in par value;
(b) split up, or reverse split;
(c) reclassification, or
(d) distribution of a dividend payable in stock.
3. ELIGIBLE EMPLOYEES. This Plan is available, at
the discretion of the Stock Option Committees, to all
employees of the Company and all employees of the Company's
subsidiaries.
4. PARTICIPATION. Subject to the express provisions
of the Plan, the Stock Option Committees shall:
(a) select from employees the individuals to whom
options shall be granted;
(b) determine the number of shares to be subject
to each option granted; and
(c) grant such options to such individuals.
5. PARTICIPATION BY DIRECTORS AND OFFICERS. With
respect to any and all options granted under the Plan to
employees who are either officers or Directors of the
Company, the decisions as to the selection of the officer or
Director to whom stock options may be granted and the number
or maximum number of shares which may be covered by stock
options granted to any such officer or Director shall be
made only by Committee B. All the members of which
Committee B shall be "disinterested persons" within the
meaning of Reg. Section 240.16b-3(c)(2)(i), promulgated under the
Securities Exchange Act of 1934.
6. NONTRANSFERABILITY. All options granted under
this Plan shall be nontransferable by the optionee, other
than by will or the laws of descent and distribution upon
death, and shall be exercisable during the optionee's
lifetime only by the optionee or by the optionee's guardian
or legal representative.
7. CONTINUED EMPLOYMENT REQUIREMENT. Any option
granted pursuant to this Plan may contain such provisions
established by the applicable Stock Option Committee as the
Committee deems appropriate and desirable regarding the
manner of exercise of such option, subject to the other
provisions of this Plan. No option granted under this Plan
may be exercised in whole or in part unless the optionee
continues to be an employee of the Company or a subsidiary
for a period of at least one (1) year following the date
such option is granted. In his discretion, the President of
the Company may extend this one-year continued employment
period up to three years. However, the occurrence of either
of the following events will cause all of an optionee's
options to become immediately and fully exercisable,
notwithstanding the above requirement:
(a) The death of the optionee; or
(b) The occurrence of a Business Combination
which is not approved by a two-thirds vote of the Continuing
Directors.
For purposes of this paragraph, the following
definitions apply:
(c) "Acquiring Person" shall mean any individual,
corporation (other than this corporation or any of its
subsidiaries), partnership, other person or entity which,
together with its affiliates and associates (as defined in
the Exchange Act or the rules and regulations promulgated
thereunder), and together with any other individual,
corporation (other than the Company or any of its
subsidiaries), partnership, person or entity with which it
or they have any agreement, arrangement, or understanding
with respect to acquiring, holding, voting, or disposing of
the Company's stock, beneficially owns (within the meaning
of the Exchange Act or the rules and regulations promulgated
thereunder) in the aggregate 10% or more of the outstanding
Voting Stock of the Company. "Acquiring Person" shall also
include any assignee of, or person or entity which has
succeeded to any shares of the Company's stock which were at
any time prior to the date of assignment or succession
beneficially owned by, a 10% Voting Stock owner, or an
affiliate or associate of a 10% Voting Stock owner, if such
assignment or succession shall have occurred in the course
of a transaction or series of transactions not involving a
public offering within the meaning of the Securities Act of
1933, as amended. A person or entity, its affiliates and
associates, assignees and successors, and all such other
persons or entities with whom they have any such agreement,
arrangement, or understanding shall be deemed a single
Acquiring Person for purposes of this paragraph. Also for
purposes of this paragraph, the Continuing Directors shall
by majority vote have the power to determine, on the basis
of information known to the Board, if and when there is an
Acquiring Person. Any such determination shall be
conclusive and binding for all purposes of this paragraph,
provided such determination is reasonable and made in
accordance with applicable law.
(d) "Business Combination" shall mean:
(i) any merger, consolidation, or share
exchange of the Company or a subsidiary of the Company with
or into an Acquiring Person;
(ii) any purchase for cash and/or securities
by an Acquiring Person of 20% or more of the Company's
outstanding shares of Voting Stock (including the
purchase(s) which cause(s) the purchaser to become an
Acquiring Person hereunder);
(iii) any sale, lease, exchange, transfer or
other disposition (including without limitation, a mortgage
or other security device) in a single transaction or related
series of transactions, of all or any Substantial Part (as
hereinafter defined) of the assets either of the Company
(including without limitation, any voting securities of a
subsidiary) or of a subsidiary of the Company to or with an
Acquiring Person;
(iv) any merger or consolidation of an
Acquiring Person with or into the Company or a subsidiary of
the Company;
(v) any sale, lease, exchange, transfer or
other disposition (including without limitation, a mortgage
or other security device) in a single transaction or related
series of transactions, of all or any Substantial Part of
the assets of an Acquiring Person to the Company or a
subsidiary of the Company;
(vi) the issuance or transfer of any
securities of the Company or a subsidiary of the Company to
an Acquiring Person;
(vii) the adoption of any plan or proposal for
the liquidation or dissolution of the Company proposed,
directly or indirectly, by or on behalf of, or pursuant to
any agreement, arrangement or understanding (whether or not
in writing) with an Acquiring Person;
(viii) any merger or consolidation of the
Company with a subsidiary of the Company proposed by or on
behalf of an Acquiring Person;
(ix) any reclassification of securities
(including without limitation, any stock split, stock
dividend, or other distribution of stock in respect of
stock, or any reverse stock split), or recapitalization of
the Company or any merger or consolidation of the Company
with any subsidiary of the Company, or any other transaction
(whether or not with or into, or otherwise involving the
Acquiring Person), proposed by, on behalf of, or pursuant to
any agreement, arrangement or understanding (whether or not
in writing) with the Acquiring Person or any affiliate or
associate of the Acquiring Person which has the effect,
directly or indirectly, of increasing the proportionate
share of the outstanding shares of stock of the Company or
any subsidiary of the Company which is directly or
indirectly owned by the Acquiring Person, except as a result
of immaterial fractional share adjustments;
(x) any agreement, contract, or other
arrangement providing for any of the transactions described
in this definition of Business Combination; and
(xi) any other transaction with an Acquiring
Person which requires the approval of the Company's
stockholders under the Utah Revised Business Company Act.
A person who is an Acquiring Person as of:
(xii) the time any definitive agreement
relating to a Business Combination is entered into;
(xiii) the record date for the determination of
stockholders entitled to notice of and to vote on a Business
Combination; or
(xiv) immediately prior to the consummation of
a Business Combination,
shall be an Acquiring Person for purposes of this
definition.
(e) "Continuing Director" shall mean any
director of the Company who was a director prior to the time
the Acquiring Person became such, and any other director
whose election or appointment as a director was recommended
or approved by a majority vote of the Continuing Directors.
A majority or two-thirds vote of the Continuing Directors
shall mean, respectively, a vote of the majority of the
Continuing Directors, a vote of or two-thirds of the
Continuing Directors, then in office, provided that at least
two Continuing Directors are then in office and participate
in such vote.
(f) "Exchange Act" shall mean the Securities
Exchange Act of 1934.
(g) "Substantial Part" shall mean an amount of
assets having an aggregate fair market value of at least
$500,000.
(h) "Voting Stock" shall mean Common Stock and
all other securities of the Company entitled to vote
generally for the election of directors.
8. OTHER RESTRICTIONS.
(a) In no event will any option granted to a
person be, by its terms, exercisable after the expiration of
ten (10) years from the date such option is granted, and any
option granted pursuant to this Plan and not exercised
within said ten (10)-year period shall be void; provided,
however, that such period shall be only five (5) years,
instead of ten (10), for an optionee who, immediately before
the grant of the option, owns more than ten percent (10%) of
the voting power of all classes of the Company's Stock.
(b) No option granted under this Plan or any
part hereof may be exercised more than three (3) months
after the optionee ceases to be an employee of the Company.
However, if the optionee ceases employment with the Company
or subsidiary because of permanent and total disability,
then an option granted under this Plan may be exercised
within one (1) year of such cessation of employment so long
as the optionee has been an employee of the Company or
subsidiary for at least the period specified in the Stock
Option Agreement entered into by the Company and said
optionee. For purposes of this Plan, the term "permanent
and total disability" shall mean that the optionee is unable
to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not
less than twelve months.
(c) No option or installment thereof shall be
exercisable except in respect of whole shares, and
fractional share interests shall be disregarded. No fewer
than one hundred (100) shares may be purchased at one time
unless the number purchased is the total number which may be
purchased at said time under the option.
9. PURCHASE PRICE. For any option granted hereunder,
the purchase price for a share of Stock shall be determined
by the applicable Stock Option Committee but shall not be
less than (but may be greater than) the fair market value of
the Stock on the date such option is granted. The fair
market value of such Stock shall be determined in accordance
with any reasonable valuation method, including the
valuation methods described in Treasury Regulations.
However, in the case of any person then owning more than ten
percent (10%) of the voting power of all classes of the
Company's capital stock, options will be granted at a
purchase price of not less than one hundred ten percent
(110%) of the fair market value of the Stock on the date
such option is granted. In either case, the applicable
Stock Option Committee will use good faith to determine the
fair market value of the Stock.
For so long as the Company's Stock is traded on the New
York Stock Exchange, the fair market value shall mean the
reported closing price on the last trading day preceding the
grant of the option. If the Company's Stock is traded in
the over-the-counter market, the fair market value shall
mean the reported closing price on the last trading day
preceding the grant of the option.
10. PAYMENT OF PURCHASE PRICE WITH COMPANY STOCK. The
optionee may, if the optionee chooses, pay the purchase
price to exercise an option granted under this Plan with
other shares of the Company's stock which the optionee owns.
In such cases, credit will be given the optionee for the
fair market value of such outstanding shares used in
payment, as of the date of payment, less any applicable
brokerage fees. The Company's Board of Directors will use
good faith to determine the fair market value of the stocks
thus used in payment as of the date of such payment.
11. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
(a) If options issued under this Plan are
outstanding when the total number of issued shares of the
Stock is increased or decreased by any:
(i) change in par value;
(ii) split up, or reverse split;
(iii) reclassification; or
(iv) distribution of a dividend payable in
stock;
then the number of shares subject to such options and the
option price per share shall be proportionately adjusted.
(b) If the Company is reorganized, consolidated,
or merged with another corporation (regardless of which
entity will be the surviving corporation), the optionees of
any options then outstanding pursuant to this Plan shall be
entitled to receive options covering shares of the surviving
corporation:
(i) in substantially the same proportion;
(ii) at a substantially equivalent option
price; and
(iii) subject to the same conditions as their
prior, outstanding options granted under
this Plan.
12. AMENDMENTS TO THIS PLAN. The Board of Directors
is hereby authorized to amend this Plan as necessary to
comply with state and federal laws or as the Board deems to
be necessary or appropriate for the benefit of the Company,
its subsidiaries, or their employees.
13. DATE OF GRANT OF OPTIONS. The date of grant of an
option shall be the day of the grant of the option by the
applicable Stock Option Committee; provided, however, that
if the appropriate resolution of the Stock Option Committee
indicates that an option is to be granted as of and on some
future date, then the date of grant shall be such future
date. The applicable Stock Option Committee may also select
a past effective date for option grants, so long as the
Committee action is within a reasonable period of time
following the effective date of the grant.
14. STOCK OWNERSHIP. No optionee shall be entitled to
the privileges of Stock ownership as to any shares of Stock
not actually issued and delivered to such optionee in
certificate form.
15. STOCKHOLDER APPROVAL; EFFECTIVE DATE. This Plan
is subject to approval by the Shareholders of the Company
and will not remain in force unless approved by the
Shareholders within twelve (12) months after the date the
Plan is adopted.
16. STOCK RESERVE. The Company will, at all times
during the term of this Plan, reserve and keep available
such number of authorized but unissued shares of its Stock
and/or Treasury Stock as will be sufficient to satisfy the
requirements of this Plan. The Company will pay all fees
and expenses incurred by the Company in connection with the
exercise of options granted under this Plan. If any option
shall expire for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for purposes of the Plan.
17. INTERPRETATION OF PLAN. Options granted pursuant
to the Plan are intended to be "Incentive Stock Options"
within the meaning of Section 422 of the Internal Revenue
Code (the "Code"), and the Plan shall be construed to
implement that intent. If all or any part of an option
shall not be deemed an "Incentive Stock Option" within the
meaning of Section 422 of the Code, said option shall
nevertheless be valid and carried into effect.
It is also intended that the Plan and its provisions
satisfy the conditions and requirements of Reg. Section 240.16b-3
promulgated by the Securities and Exchange Commission under
Section 16(b) of the Securities Exchange Act of 1934, both
before and after May 1, 1991 (the effective date of Release
No. 34-28869).
18. OTHER TERMS. Any option granted under this Plan
may contain such other and additional terms as are deemed
necessary or desirable by the applicable Stock Option
Committee, or the President of the Company, so long as such
terms do not materially differ from the terms of this Plan.
CERTIFICATE OF SECRETARY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby certify that he is the
Secretary of BALLARD MEDICAL PRODUCTS, a Utah corporation;
that the above and foregoing 1995 Incentive Stock Option
Plan was duly and regularly adopted as such by the Board of
Directors of the Company by unanimous Consent Resolution
dated effective May 12, 1995; that said Plan, as adopted by
the Board, was duly approved by a majority of Shareholders
of the Company at the Annual Meeting of Shareholders held
, 1996; and that the above 1995 Incentive
Stock Option Plan is now in full force and effect.
Dated this day of ,
1995.
Secretary
(Corporate Seal)
DEVELOPMENT AGREEMENT
THIS AGREEMENT, dated effective November 14, 1995 is
made by and among the following parties:
CITY OF POCATELLO
Peter J. Angstadt, Mayor
Dean Tranmer, City Attorney
P.O. Box 4169
Pocatello, ID 83205
(the "City")
IDAHO STATE BOARD OF EDUCATION
acting as Trustees for
IDAHO STATE UNIVERSITY,
a body politic and corporate of
the State of Idaho,
J. Kelley Wiltbank, University Counsel
Idaho State University
Administration Box 8410
Pocatello, ID 83209
(the "University")
and
BALLARD REAL ESTATE HOLDINGS, INC.,
a Utah corporation
Dale H. Ballard, President
12050 Lone Peak Parkway
Draper, Utah 84020
("Ballard")
RECITALS:
A. The University owns an approximately 300-acre
tract of real property which has been designated by the
State as the Idaho State University Research and Business
Park (the "Research Park"). The Research Park is located
within the city limits of Pocatello, Bannock County, Idaho.
B. Ballard desires to acquire from the University
title to the parcel of land described in Exhibit A attached
hereto and made a part of this Agreement (the "Land"), which
Land is located within the Research Park. Contemporaneously
with this Agreement, Ballard and the University are entering
into a Land Acquisition Agreement governing the transfer of
the Land to Ballard (the "Acquisition Agreement").
C. The City and the University have determined that
it is in the best public interest and welfare that they
provide improvements including roadways and public utility
improvements to the Land to encourage development in the
Research Park.
D. The covenants and agreements of the City and the
University set forth in this Agreement constitute a material
inducement to Ballard to develop a light manufacturing
facility on the Land. Ballard would not move forward with
construction of a facility on the Land without the
assurances provided by the City and the University herein.
NOW, THEREFORE, in consideration of the promises and
agreements set forth below to be kept and performed by one
or the other of the parties hereto, the parties agree as
follows:
1. Obligations of the City. Contingent upon the
Closing of the conveyance of the Land by the University to
Ballard, the City covenants and agrees as follows:
(a) Alvin Ricken Drive. At no cost whatsoever to
Ballard, the City shall complete or cause to be completed,
construction of a publicly dedicated road (including curb
and gutter on both sides), extending the existing Alvin
Ricken Drive to the South, to connect to Barton Road. The
City and the University represent and warrant that Alvin
Ricken Drive, running from Buckskin Road to Barton Road has
previously been dedicated to the City as a public road, all
in compliance with applicable laws and regulations. The
extended Alvin Ricken Drive will be at least the same width
and of at least the same quality of road construction as the
completed portion of Alvin Ricken Drive. The extended Alvin
Ricken Drive, as described herein, will be completed in two
phases, as follows:
Phase I. Completion to the southern boundary line of
the Land by May 1, 1996; and
Phase II. Completion to Barton Road by November 1,
1996.
(b) Temporary Road. Upon the parties' execution
of this Agreement, the City and the University will provide
(at no cost to Ballard), or cause to be provided, to Ballard
access to the Land via a temporary road in a location
acceptable to Ballard, with access via said temporary road
to continue until the completion of the construction of
Alvin Ricken Drive.
(c) Sewer.
(i) The City will provide, or cause to be
provided (at no cost to Ballard except a one-time connection
fee not to exceed $5,000), to the Land access to the City's
sanitary sewer system. The City will, at its cost, obtain
all easements, rights of way, permits, and consents
reasonably needed to provide sanitary sewer service to the
Land. The City will pay all development, installation, and
construction costs associated with the installation of such
sewer lines. The sewer line shall be at least an 8-inch
line.
(ii) The initial, temporary access will be to
the sewer main located to the West of the Veteran's Home in
the Research Park. The installation of this initial sewer
line to the northern boundary of the Land shall be completed
by the City no later than March 1, 1996, as provided in
subparagraph (i) above. The easement for this temporary
easement will terminate automatically upon completion and
activation of the sewer access described in subparagraph
(iii) below. The legal description of this temporary sewer
line easement is as follows:
A twenty (20.0)-foot wide easement for
the construction and maintenance of a
sanitary sewer line, said easement being
ten (10.0) feet on each side of the
following described centerline:
Commencing at the northwest corner of
Section 31, Township 6 South, Range 35
East, Boise Meridian; thence
South 89 degrees 44 minutes 03 seconds
East along the north line of Section 31
for a distance of 610.05 feet to a point
on the west line of the land associated
with the Idaho State Veterans Home;
thence
South for a distance of 469.22 feet to
the southwest corner of the land
associated with the Idaho State Veterans
Home; thence
West for a distance of 10.00 feet to the
TRUE POINT OF BEGINNING; thence
North along the centerline of the
easement being described, said
centerline being parallel with and 10.0
feet west of the west boundary line of
the land associated with the Idaho State
Veterans Home, for a distance of 510.0
feet to the terminus of the easement
being described.
(iii) The long-term plan of the City and the
University is for a sewer line to be placed in the easement
of Alvin Ricken Drive, as shown in Exhibit B, attached to
and made a part of this Agreement. The City will complete,
or cause to be completed, construction of such sewer line to
the eastern boundary of the Land and cause such line to be
activated no later than June 1, 1996, in accordance with the
provisions of subparagraph (i) above, except that Ballard
will not be required to pay a new connection fee. This
sewer line will be constructed at an elevation which will
accommodate the gravity flow of sewage into it from
Ballard's facility to be constructed on the land, without
the need of a lift station.
(d) Culinary Water.
(i) At no cost to Ballard, the City will
construct and install a culinary water system and 10-inch
water lines as are reasonably necessary, to provide culinary
water service from the City's culinary water system, which
shall service the Land at its eastern boundary, as shown on
Exhibit B. The culinary water system shall be constructed
and installed within Alvin Ricken Drive to provide access to
the system by Ballard. Connection to the system shall be at
a hook-up cost not to exceed $2,000 (including water meter
fee). The culinary water system shall adequately satisfy
the reasonable needs and requirements of Ballard, including
fire protection, in accordance with plans and specifications
provided by Ballard to the City. The City shall be required
to provide adequate fire hydrants at appropriate locations
in Alvin Ricken Drive. The installation of all culinary
water improvements shall be completed by the City no later
than January 1, 1996.
(ii) Ballard estimates the following
potential water capacity for fire flows (and to maintain
acceptable rating with its property and casualty insurance
carrier):
- Four to six 8 inch risers per 100,000
square feet of building;
- 75 psi at least;
- Need to be able to pump approximately
1300-1500 gal. per min for two hours.
(iii) Upon the execution of this Agreement by
the parties and continuing until completion of the culinary
water improvements as specified in subparagraph (i) above,
the City and the University hereby authorize Ballard to use
in its excavation, soil compaction, and development
activities, water from existing water service in Alvin
Ricken Drive. For this purpose, Ballard may pull water from
existing fire hydrants. This temporary use of water for
construction will be at no charge to Ballard.
(e) Electricity, Gas, Fiberoptics and Telephone.
At no cost to Ballard, the City will construct or cause to
be constructed, and install an underground electric line, an
underground natural gas line (at least 2 inches), an
underground fiberoptics cable, and underground telephone
cable, to provide access by the Land (at its eastern
boundary) to electricity, natural gas, fiberoptics, and
telephones, respectively, all as shown in Exhibit B. The
City will, at its cost, obtain all easements, rights of way
and permits reasonably needed to provide such electricity,
natural gas, fiberoptics and telephone service to the Land.
The City will pay all development, installation and
construction costs associated with the installation of such
lines. The City shall obtain all consents and permits
required from any applicable electricity, gas, fiberoptics
or telephone authority. Installation of electricity and gas
lines shall be completed no later than December 15, 1995.
Installation of telephone and fiberoptics lines shall be
completed no later than April 1, 1996.
(i) Electricity. Ballard needs the
following to allow for potential future capacity of the
facility on the Land:
- 480 volts
- 3 phase 4 wire (277 per wire for each of
3 wires plus a neutral 4th wire)
- 3,000 amps
- 1.6 megaWatt demand
(ii) Natural Gas. Ballard needs the
following to allow for potential future capacity of the
facility on the land:
- 2-inch gas line - 6 psi
(iii) Telephone
- Ballard needs a potential of 50 pairs of
lines, to enable future expansion of its
facility on the Land. Initially,
Ballard would require 25 pairs.
(f) $150,000 Contribution to Improvements. The
City will contribute $150,000 of value toward any one of, or
a combination of, the following projects in connection with
the development of Ballard's facility on the Land:
(i) Purchase of fill dirt from the hill
located on the northwest corner of the Land.
(ii) Grading the Land for storm drainage
purposes;
(iii) Developing and providing landscaping
within the right of way of Alvin Ricken Drive; and
(iv) Funding assistance in the construction
of the fire line (water) loop to be located on the Land,
with respect to which an easement (for access and
maintenance) would be granted to the City by Ballard.
Ballard and the City shall cooperate together to decide
where and how said $150,000 assistance will be allocated.
The contribution of $150,000 will be made through a Revenue
Allocation District to be created and approved by the City
and administered by PDA. The proceeds of tax increment
financing within the District are to be used for items (i)
through (iv) above.
(g) Storm Drainage. The parties shall cooperate
together to develop a storm sewer plan for the Land.
Ballard currently anticipates a storm sewer plan as follows:
- Ballard will install storm sewer
pipelines and drains.
- Storm water will be piped to
detention basins located in the existing gully south of the
Land.
- The detention pond will release
water into nearby ravines.
- The University will grant to
Ballard a storm drainage easement to allow for release and
runoff of storm water onto University property.
(h) Certificate of Completion. Promptly after
the completion of all improvements required herein by the
City substantially in accordance with the approved plans,
the City shall furnish to Ballard an instrument certifying
completion of the infrastructure and improvements.
(i) Cooperation to Develop/Permits. The City
will cooperate fully in promptly reviewing, pursuant to its
regulations and ordinances and, absent reasonable
objections, promptly approving plans and specifications
submitted by Ballard for its proposed development and
construction on the Land and granting appropriate building
permits therefor. The City has appointed Lynn Transtrum, as
a "Fast-Track Officer," to assist Ballard to obtain prompt
inspection and prompt processing of needed building permits.
Building permit fees will be paid one-half by Ballard and
one-half by the City.
(j) Bus Service. The City will provide adequate
commuter bus service on Alvin Ricken Drive adjacent to the
Land, after Ballard begins production at its facility
located on the Land. Such commuter service shall connect at
Ballard's facility to the downtown Pocatello area.
(k) Priority Snow Removal. The City covenants
and agrees that it will make Ricken Drive a priority snow
removal route.
2. Obligations of the University. Contingent upon
the closing of the conveyance of the Land to Ballard, the
University covenants and agrees as follows:
(a) Easements. The University will transfer and
convey, for no consideration other than the covenants of
Ballard and the City as set forth herein, all easements and
rights of way reasonably needed for all of the utilities
described in the paragraphs of Section 1 above, to the
extent such easements and rights of way are reasonably
needed across real estate owned by the University.
(b) Cooperate to Develop. The University will
cooperate fully in Ballard's development and construction on
the Land.
3. Obligations of Ballard. Ballard agrees,
contingent upon the closing of the conveyance of the Land to
Ballard and upon satisfaction of the covenants and
agreements of the City and the University herein, that
Ballard shall construct on the Land a building and
improvements of generally the same quality of construction
as Ballard's facility in Draper, Utah.
4. Default. Time is of the essence in this
Agreement. In the event of any default in or breach of this
Agreement or any of its terms and conditions by any party,
such party shall, upon written notice from the other party
or parties, proceed immediately to cure or remedy such
default or breach, and in any event shall cure within thirty
(30) days after receipt of such notice. In case the default
or breach shall not be cured or remedied within such thirty
(30) day period, the aggrieved party may institute such
proceedings as may be necessary to realize on rights or
remedies available to it as law or equity, including, but
not limited to, proceedings to compel specific performance
by the party in default or breach of its obligations. In
addition, the aggrieved party shall have the right to
complete construction of any improvements in connection with
which the defaulting party is in breach, and to then demand
and receive reimbursement from the defaulting party for
funds so expended, plus interest at 8% per annum.
5. Force Majeure. In the event that any work or
construction required herein cannot be completed by the date
provided herein due to interruption of transport, strikes,
fire, flood or extreme weather, or acts of God or similar
occurrences, then the date for completion shall be extended
for the period of such interruption. No such allowance
shall be made unless the party claiming such allowance shall
provide notice of the interruption, in writing, to all other
parties, citing specifically the conditions impeding
performance within 30 days of the event which caused the
delay.
6. Representations and Warranties of Parties. The
parties each hereby represent and warrant solely with
respect to itself:
(a) All Consents. Said party has all consents
and approvals required to enter into and perform this
Agreement.
(b) Powers, Authorizations. The execution,
delivery, and performance of this Agreement by said party:
(i) is within the power of said party;
(ii) has been duly authorized by all
necessary actions; and
(iii) does not contravene or constitute a
default under any provisions of applicable law or regulation
or of any agreement, judgment, injunction, order, decree or
other instrument binding upon said party.
(c) Pending or Threatened Litigation. There is
no action, suit, or proceeding pending, or to the knowledge
of said party threatened, against or affecting said party
before any court or arbitrator or any governmental body,
agency, or official in which there is a reasonable
possibility of an adverse decision which could materially
affect the Land, or which in any manner questions the
validity of this Agreement or the covenants made herein.
(d) Binding Agreement. This Agreement
constitutes a valid and binding agreement of said party.
7. Land Use. The City represents and warrants that
the only approvals needed from the City for construction of
Ballard's facility on the Land is the obtaining of building
permits. No zoning, conditional use, or other permits are
required. The intended use of the Land by Ballard (i.e., as
a manufacturing facility) is fully authorized and proper
under applicable laws and regulations.
8. Miscellaneous. No waiver made by any party shall
apply to obligations beyond those expressly waived in
writing. There are no representations or agreements between
the parties regarding the subject matter addressed by this
Agreement except as set forth herein and in the Acquisition
Agreement, and this Agreement and the Acquisition Agreement
supersede any and all prior negotiations, agreements, or
understandings between the parties hereto in any way related
to the subject matter. None of the provisions of this
Agreement may be altered or modified except through a
document in writing signed by both of the parties hereto.
To the extent permitted by the provisions hereof, all of the
terms, provisions, agreements, and undertakings herein
contained shall be binding upon and shall inure to the
benefit of the respective successors and assigns of the
parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the dates written below, effective as the
date first written above.
CITY OF POCATELLO
Peter J. Angstadt, Mayor
November 30, 1995
IDAHO STATE BOARD OF EDUCATION
acting as Trustees for
IDAHO STATE UNIVERSITY
Richard L. Bowen, President
Idaho State University
November 30, 1995
BALLARD REAL ESTATE HOLDINGS, INC.
Dale H. Ballard, President
November 29, 1995
EXHIBIT A
(Attached to and forming part of Development Agreement)
Legal Description of the Land
A tract of land in the northwest quarter
of Section 31, Township 6 South, Range
35 East, Boise Meridian, described as
follows:
Commencing at the northwest corner of
Section 31, Township 6 South, Range 35
East, Boise Meridian; thence
South 89 degrees 44 minutes 03 seconds
East along the north line of Section 31
for a distance of 610.05 feet to a point
on the west line of the land associated
with the Idaho State Veterans Home;
thence
South for a distance of 469.22 feet to
the southwest corner of the land
associated with the Idaho State Veterans
Home, the TRUE POINT OF BEGINNING;
thence
East along the south boundary line of
the land associated with the Idaho State
Veterans Home for a distance of 496.84
feet; thence
South 08 degrees 07 minutes 22 seconds
West for a distance of 909.12 feet;
thence
West for a distance of 903.77 feet; thence
North for a distance of 900.00 feet; thence
East for a distance of 535.39 feet to the point of
beginning.
Comprising 20.00 acres, more or less.
EXHIBIT B
Utility Plan Map
AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of
the 29th day of November, 1995, by, between and among
BALLARD REAL ESTATE HOLDINGS, INC., a Utah corporation with
its headquarters at 12050 Lone Peak Parkway, Draper, Utah
84020 ("BALLARD"); IDAHO STATE UNIVERSITY, a body politic
and corporate of the State of Idaho, of P.O. Box 8219,
Pocatello, Idaho 83209 ("UNIVERSITY"); and, EASTERN IDAHO
STRATEGIC ALLIANCE, INC., an Idaho nonprofit corporation
with its headquarters at 1651 Alvin Ricken Drive, Pocatello,
Idaho 83201 ("EISA"). BALLARD, UNIVERSITY and EISA are
sometimes hereinafter collectively referred to as the
"parties."
RECITALS
A. BALLARD is a wholly-owned subsidiary of BALLARD MEDICAL
PRODUCTS, a manufacturer and marketer of specialized
medical products, and desires to acquire from EISA (for
the purpose of constructing a new manufacturing
facility) certain real property in Pocatello, Idaho
that currently is owned by UNIVERSITY (and which will
be conveyed by UNIVERSITY to EISA in exchange for
certain other real properties to be acquired by EISA as
described herein).
B. UNIVERSITY is the owner of a parcel of twenty (20)
acres of real property described in Exhibit "A" annexed
hereto and made a part of this Agreement by reference
(the "University Parcel"), and desires to exchange the
University Parcel for certain real properties to be
acquired by EISA (which properties can be used for
UNIVERSITY purposes). The University Parcel is located
in the Idaho State University Research and Business
Park.
C. EISA is a non-profit economic development organization
that desires, through the combined funding of LOCKHEED
IDAHO TECHNOLOGIES COMPANY ("LOCKHEED"), EISA and, to
the extent described herein, UNIVERSITY, to acquire
certain real properties described in Exhibit "B"
annexed hereto and made a part of this Agreement by
reference, which properties will be conveyed by EISA to
UNIVERSITY in exchange for the aforementioned
University Parcel (which already will have been
conveyed by UNIVERSITY to EISA and re-conveyed by EISA
to BALLARD as described herein).
D. LOCKHEED is the primary contractor at the Idaho
National Engineering Laboratory, and already has
provided to EISA the sum of $200,000.00 to assist EISA
in the acquisition of certain real properties which
EISA thereafter will convey to UNIVERSITY (in exchange
for the aforementioned University Parcel that already
will have been conveyed by UNIVERSITY to EISA and re-
conveyed by EISA to BALLARD as described herein).
E. The parties desire to set forth in this Agreement their
respective commitments and obligations in order to
achieve the aforementioned mutually-desired results.
F. Contemporaneously with the parties' execution of this
Agreement, Ballard is also entering into a Development
Agreement with UNIVERSITY and the City of Pocatello
(the "Development Agreement").
NOW THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, the parties agree
as follows:
1.0 EISA/UNIVERSITY EXCHANGE.
Pursuant to the "Real Estate Exchange Agreement"
annexed hereto as Exhibit "C," EISA will commit to convey to
UNIVERSITY on or before March 1, 1996 (or such later date to
which UNIVERSITY may expressly agree) the real properties
described in Exhibit "B," and UNIVERSITY immediately will
convey to EISA the University Parcel described in Exhibit
"A." EISA will cause the Warranty Deed it receives from
UNIVERSITY for the University Parcel to be immediately
recorded. After EISA acquires the properties described in
Exhibit "B," EISA promptly shall convey such properties to
UNIVERSITY, and UNIVERSITY will cause the Corporation
Warranty Deeds it receives from EISA for such properties to
be immediately recorded.
2.0 BALLARD'S ACQUISITION OF PROPERTY FROM EISA.
2.1 Upon UNIVERSITY's conveyance of the University Parcel
to EISA as described in Section 1.0, EISA will convey to
BALLARD (as evidenced by EISA's delivery to BALLARD of the
"Corporation Warranty Deed" annexed hereto as Exhibit "D,"
together with an ALTA owner's extended coverage title
insurance policy obtained by UNIVERSITY at its expense in
the amount of $240,000.00, insuring good and marketable
title in BALLARD), the University Parcel. BALLARD will cause
the Corporation Warranty Deed it receives from EISA to be
immediately recorded. (The closing of EISA's conveyance of
the University Parcel to BALLARD is referred to herein as
the "Ballard Closing." The date of the Ballard Closing is
referred to herein as the "Ballard Closing Date.")
2.2 EISA's conveyance of the University Parcel to BALLARD
will be made at no purchase price or other consideration to
be payable by BALLARD, other than BALLARD's covenants in
this Agreement.
2.3 BALLARD's obligation to consummate the transaction
described in Sections 2.1 and 2.2 above is subject to and
conditional upon the satisfaction or waiver of the following
conditions:
(a) The Ballard Closing Date shall be no later
than December 15, 1995.
(b) All of the representations and warranties of
UNIVERSITY set forth in Section 3.0 below
shall be true and accurate as of the Ballard
Closing Date.
(c) On the Ballard Closing Date, all of the
terms, covenants and conditions of this
Agreement and the various agreements annexed
hereto to be complied with or performed by
parties other than BALLARD on or before the
Ballard Closing Date shall have been fully
complied with or performed. In addition, on
the Ballard Closing Date, the Development
Agreement shall have been executed by all
parties thereto.
(d) As of the Ballard Closing Date, no material
adverse change shall have occurred since the
effective date of this Agreement as regards
the University Parcel, or as regards any of
the approvals given or conditions or
requirements imposed by any governmental
agency or by UNIVERSITY in connection with
BALLARD's planned development of the
University Parcel, or as regards BALLARD's
studies and research regarding its planned
development of the University Parcel.
If any of the above-described conditions is not satisfied,
BALLARD shall have the right, exercisable by written notice
delivered to the other parties hereto, to terminate its
obligation to consummate the Ballard Closing.
2.4 BALLARD covenants and agrees to use the University
Parcel for light manufacturing and fabrication. Subject to
UNIVERSITY's prior written approval (which approval shall
not unreasonably be withheld), BALLARD also may use the
University Parcel for other uses allowed under current or
future zoning laws and regulations, but at no time will
BALLARD use the land for any of the following uses, which
shall be prohibited:
(i) Manufacturing of cement, lime, gypsum, rock
wool or plaster of paris;
(ii) Refining of petroleum and crank case oil;
(iii) Milling or smelting of ore;
(iv) Garbage dumps or dead animals reduction;
(v) Stock yards, feed yards or slaughter of
animals; or
(vi) Amusement enterprises.
This covenant shall run with the University Parcel.
2.5 If at any time after the closing BALLARD desires to
sell the property conveyed to it by EISA (as improved),
UNIVERSITY shall have the right of first refusal to
repurchase such property (including all improvements
thereon), at the fair market value of the property (as
improved). BALLARD shall give UNIVERSITY written notice of
any bona fide written offer BALLARD receives for the
property (as improved) which offer BALLARD desires to accept
(the "First Notice"). UNIVERSITY shall have the period of
thirty (30) days after BALLARD gives the First Notice to
exercise its right of first refusal by written notice of
exercise to BALLARD (the "Second Notice"). Upon BALLARD's
receipt of the Second Notice from UNIVERSITY:
(a) Each party shall pay for and obtain a
separate MAI appraisal on the property (as
improved). The fair market value of the
property (as improved) shall be the mean of
both appraisals.
(b) Closing of the purchase and sale shall occur
within ten (10) days after the two written
appraisals are received by both parties. The
purchase price will be paid in cash at the
closing.
If UNIVERSITY does not exercise its right of first refusal
strictly as provided herein, the right shall lapse.
2.6 UNIVERSITY covenants and agrees that all of its
representations, warranties and covenants (including without
limitation the indemnification obligations) made in the
following documents or by operation of law shall inure to
the benefit of, and be fully enforceable by, BALLARD, and
BALLARD shall be an intended third-party beneficiary of all
such representations, warranties and covenants:
(a) Real Estate Exchange Agreement (Exhibit "C"
hereto); and,
(b) The Warranty Deed from UNIVERSITY to EISA
(Exhibit "3" to the Real Estate Exchange
Agreement).
3.0 REPRESENTATIONS AND WARRANTIES OF UNIVERSITY.
UNIVERSITY hereby represents and warrants to
BALLARD as follows:
(a) UNIVERSITY has all consents and approvals
required to enter into and perform this
Agreement and the Real Estate Exchange
Agreement.
(b) On or about September 21, 1995, the Idaho
State Board of Education, as Trustees for
UNIVERSITY, approved, and authorized Richard
L. Bowen (President of UNIVERSITY) to execute
all documents necessary to consummate, the
transactions contemplated herein and in the
Real Estate Exchange Agreement.
(c) The execution, delivery and performance by
UNIVERSITY of this Agreement and said Real
Estate Exchange Agreement:
(i) are within UNIVERSITY's power;
(ii) have been duly authorized by all
necessary action;
(iii) require no action by and no filing with
any governmental body, court, agency or
official; and,
(iv) do not contravene, or constitute a
default under, any provisions of
applicable law or regulation or of any
agreement, judgment, injunction, order,
decree or other instrument binding upon
UNIVERSITY.
(d) There is no action, suit or proceeding
pending, affecting, or, to the knowledge of
UNIVERSITY, threatened against UNIVERSITY
before any court, arbitrator, or any
governmental body, agency, or official in
which there is a reasonable possibility of an
adverse decision which could materially
affect the University Parcel or which in any
manner would question the validity of this
Agreement or the conveyances contemplated
herein.
(e) This Agreement constitutes a valid and
binding agreement of UNIVERSITY.
(f) UNIVERSITY owns good and marketable title to
the University Parcel, free and clear of
liens and encumbrances.
4.0 FUNDING TO EISA.
The sources of the funds to be used by EISA in
acquiring the real properties described in Exhibit "B"
annexed hereto are as follows:
(a) LOCKHEED already has remitted to EISA the sum
of $200,000.00;
(b) EISA itself will provide $50,000.00,
consisting of its own funds and such other
funds as may be secured by EISA from other
sources; and,
(c) UNIVERSITY will provide up to $50,000.00 as
may be necessary for EISA to acquire real
properties acceptable to UNIVERSITY as part
of the exchange transaction between EISA and
UNIVERSITY described herein.
5.0 EISA'S ACQUISITION OF PROPERTIES.
Utilizing the combined funds described in Section
4.0 of this Agreement, EISA will acquire the real properties
described in Exhibit "B." Upon the closing of each such
acquisition, EISA will cause the Warranty Deeds it receives
from the respective sellers of such properties to be
immediately recorded.
6.0 EISA'S CONVEYANCE OF PROPERTIES TO UNIVERSITY.
Immediately upon the recording by EISA of the
respective Warranty Deeds for the real properties described
in Exhibit "B" as acquired by EISA pursuant to Section 5.0
above, EISA will convey each such parcel of real property to
UNIVERSITY (as evidenced by EISA's delivery to UNIVERSITY,
for each such parcel, of the form of "Corporation Warranty
Deed" annexed as Exhibit "4" to the Real Estate Exchange
Agreement). UNIVERSITY will cause the Corporation Warranty
Deeds it receives from EISA to be immediately recorded.
7.0 MISCELLANEOUS.
7.1 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of
Idaho, and the parties hereby submit to the exclusive
jurisdiction and venue of the courts located in the County
of Bannock, State of Idaho, for any dispute arising out of
this Agreement.
7.2 Binding on Successors. This Agreement shall be binding
upon and inure to the benefit of the respective parties and
their successors in interest.
7.3 Attorney Fees. In any litigation arising out of this
Agreement, the prevailing party shall be entitled to recover
reasonable attorney fees from the non-prevailing party.
Determination of the prevailing party in any such litigation
shall be made on the basis of the factors enumerated in Rule
54(d)(1)(B), Idaho Rules of Civil Procedure, as the same now
exists or may subsequently be amended.
7.4 Prior Agreements. This Agreement supersedes all prior
agreements of the parties with respect to the properties
herein described, and any such prior agreements are hereby
rescinded.
7.5 Assignment; Amendment. None of the parties may assign
this Agreement, or any right or obligation hereunder,
without the prior written consent of all of the other
parties. No addition to or modification of any provision of
this Agreement shall be binding on any of the parties unless
made in writing and signed by the respective duly authorized
representatives of all of the parties.
7.6 No Merger. Neither the occurrence of any closing
contemplated by this Agreement nor the execution and
delivery of the various documents that are contemplated by
this Agreement to be executed and delivered in connection
with said closing(s) shall result in the termination or
extinguishment of this Agreement or the merger of this
Agreement into such documents.
7.7 Notices. Any notice required or permitted hereunder to
be given or transmitted from any party to another shall be
either personally delivered (including by courier service)
to, or mailed postage prepaid by United States mail directed
to, the address of the party concerned specified at the
beginning of this Agreement. Any party may, by notice to
the other parties given as prescribed in this Section 7.7,
change said address for any future notices which are given
under this Agreement. Any notice which is mailed shall be
effective only upon delivery thereof to the address which
applies for the party in question.
7.8 Execution by Facsimile and Counterparts. Signatures
sent via facsimile transmission shall constitute original
signatures. This Agreement may be executed separately or
independently in any number of counterparts, each and all of
which together shall be deemed to have been executed
simultaneously and for all purposes be one Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement the day and year first above written.
IDAHO STATE UNIVERSITY
(a body politic and corporate of the
State of Idaho)
Richard L. Bowen
President
November 30, 1995
EASTERN IDAHO STRATEGIC ALLIANCE, INC.
Thomas A. Arnold
Project Director
November 30, 1995
BALLARD REAL ESTATE HOLDINGS, INC.
Dale H. Ballard
President
November 29, 1995
ISU
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Richard L. Bowen, known or identified to me to be
the President of IDAHO STATE UNIVERSITY that executed the
within instrument, and acknowledged to me that IDAHO STATE
UNIVERSITY executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Barbara A. Gorman, Notary
My commission expires September 27, 2000
EISA
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Thomas A. Arnold, known or identified to me to be
the Project Director of EASTERN IDAHO STRATEGIC ALLIANCE,
INC., the corporation that executed the within instrument or
the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Cresta Knighton, Notary
My commission expires May 30, 1998
BALLARD
STATE OF UTAH )
:ss
County of Salt Lake )
On this 29th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Dale H. Ballard, known or identified to me to be
the President of BALLARD REAL ESTATE HOLDINGS, INC., the
corporation that executed the within instrument or the
person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Jane R. Olsen, Notary
My commission expires April 23, 1997
EXHIBIT "A"
DESCRIPTION OF THE UNIVERSITY PARCEL
A tract of land in the northwest quarter of Section 31,
Township 6 South, Range 35 East, Boise Meridian, described
as follows:
Commencing at the northwest corner of Section 31, Township 6
South, Range 35 East, Boise Meridian; thence
South 89 degrees 44 minutes 03 seconds East along the north
line of Section 31 for a distance of 610.05 feet to a point
on the west line of the land associated with the Idaho State
Veterans Home; thence
South for a distance of 469.22 feet to the southwest corner
of the land associated with the Idaho State Veterans Home,
the TRUE POINT OF BEGINNING; thence
East along the south boundary line of the land associated
with the Idaho State Veterans Home for a distance of 496.84
feet; thence
South 08 degrees 07 minutes 22 seconds West for a distance
of 909.12 feet; thence
West for a distance of 903.77 feet; thence
North for a distance of 900.00 feet; thence
East for a distance of 535.39 feet to the point of
beginning.
Comprising 20.00 acres, more or less.
RETAINING THEREFROM:
An easement for the construction and maintenance of public
utility lines, extending over, under and across the easterly
fifteen (15.0) feet of the afore described tract of land.
EXHIBIT "B"
DESCRIPTION OF THE EISA PARCELS
Parcel 1 (The Sherburne Property)
NW 1/4 SE 1/4 OF SECTION 31, TOWNSHIP 6 SOUTH,
RANGE 35 E.B.M., BANNOCK COUNTY, IDAHO.
EXCEPT: BEGINNING AT THE SOUTHEAST 1/16 CORNER OF
SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35 E.B.M.,
THENCE NORTH ALONG THE EAST 1/16 LINE 400.0 FEET,
THENCE WEST PARALLEL TO THE SOUTH 1/16 LINE 544.5
FEET, THENCE SOUTH PARALLEL TO THE EAST 1/16 LINE
400.0 FEET, TO THE SOUTH 1/16 LINE, THENCE EAST
ALONG THE SOUTH 1/16 LINE 544.5 FEET TO THE POINT
OF BEGINNING. A TRACT OF LAND IN THE NW 1/4 SE
1/4 SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35 E.B.M.,
BANNOCK COUNTY IDAHO.
ALSO EXCEPT: A STRIP OF LAND 75 FEET IN WIDTH,
WITH 37.5 FEET ON THE RIGHT AND LEFT OF THE
FOLLOWING DESCRIBED CENTERLINE BEGINNING AT A
POINT 37.5 FEET EAST OF THE NORTHWEST CORNER OF SW
1/4 NE 1/4, SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35
E.B.M., THENCE SOUTH AND PARALLEL TO THE
MERIDIONAL CENTERLINE OF SAID SECTION 31, TO THE
SOUTH 1/16 LINE OF THE SAME SECTION TO A POINT
37.5 FEET EAST OF THE SOUTHWEST CORNER OF THE NW
1/4 SE 1/4. THIS STRIP OF LAND IS LOCATED IN THE
SW 1/4 NE 1/4 AND THE NW 1/4 SE 1/4 OF SECTION 31,
TOWNSHIP 6 SOUTH, RANGE 35 E.B.M., BANNOCK COUNTY,
IDAHO.
Parcel 2
This parcel shall be mutually determined at a
subsequent date by EISA and UNIVERSITY, and shall have a
fair market value of not less than $126,320.00.
EXHIBIT "C"
REAL ESTATE EXCHANGE AGREEMENT
This REAL ESTATE EXCHANGE AGREEMENT (the "Agreement")
is made and entered into as of the 30th day of November,
1995, by and between EASTERN IDAHO STRATEGIC ALLIANCE, INC.
(hereinafter "EISA), a nonprofit corporation, with its
principal office located at 1651 Alvin Ricken Drive,
Pocatello, Idaho 83201, and IDAHO STATE UNIVERSITY
("University"), a body politic and corporate of the State of
Idaho, of P.O. Box 8219, Pocatello, Idaho, 83209. EISA and
University are sometimes hereinafter collectively referred
to as the "parties."
RECITALS
WHEREAS, EISA will be acquiring certain real properties
located in Bannock County, State of Idaho, which properties
are more particularly described in Exhibit "1" attached
hereto and incorporated herein by this reference (the "EISA
Parcels"); and
WHEREAS, University is the owner of real property
located in Bannock County, State of Idaho, which property is
more particularly described in Exhibit "2" attached hereto
and incorporated herein by this reference (the "University
Parcel"); and
WHEREAS, EISA is willing to exchange the EISA Parcels
for the University Parcel upon the terms and conditions set
forth herein; and
WHEREAS, University is willing to exchange the
University Parcel for the EISA Parcels upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the exchange of
real properties and the mutual promises set forth herein,
EISA and University covenant, promise and agree as follows:
1. Exchange of Parcels: The parties agree to an
exchange of the parcels, the EISA Parcels for the University
Parcel, with the University Parcel to be conveyed to EISA
immediately upon execution of this Agreement by both
parties, and the EISA Parcels to be conveyed to University
on or before March 1, 1996 (or such later date to which
University may expressly agree). The parties agree that
time is of the essence in this matter and that extensions of
time will not be granted for insubstantial causes.
2. Conveyance of Properties: University, as Grantor,
immediately shall execute, acknowledge and deliver to EISA,
as Grantee, a Warranty Deed (in the form attached hereto as
Exhibit "3") transferring and conveying title to the
University Parcel (with existing water rights, improvements,
utilities and appurtenances, if any, thereon) to EISA.
Immediately upon its acquisition of the EISA Parcels, EISA,
as Grantor, shall execute, acknowledge and deliver to
University or its nominee, as Grantee, Corporation Warranty
Deeds (in the form attached hereto as Exhibit "4")
transferring and conveying title to the respective EISA
Parcels (with existing water rights, improvements, utilities
and appurtenances, if any, thereon) to University or its
nominee. Upon their respective deliveries, the
aforementioned deeds shall be immediately recorded by the
respective parties.
3. No Retention of Mineral Interests: EISA shall not
retain any mineral interests or rights in or to the EISA
Parcels upon transferring such parcels to University.
University shall not retain any mineral interests or rights
in or to the University Parcel upon transferring such parcel
to EISA. The nonretention of mineral rights in the deed by
the University shall not be construed as a transfer or
obligation to transfer by University of mineral rights, if
any, vested in the State of Idaho or other body politic.
4. Title Insurance: University shall obtain, at its
sole cost and expense, ALTA owner's extended coverage title
insurance with respect to the University Parcel. Such
policy or policies shall name EISA (or, if EISA so requests,
Ballard Real Estate Holdings, Inc.) as the insured and shall
be in extended coverage form and in an amount of Two Hundred
Forty Thousand Dollars ($240,000), which amount is relevant
only for purposes of such insurance coverage. EISA shall
arrange to obtain, without cost or expense to University,
title insurance with respect to the EISA Parcels. Such
policies shall name University as the insured and shall be
in standard coverage form and in a total amount to be
determined (but not less than a combined total of Two
Hundred Forty Thousand Dollars ($240,000.00), which amount
is relevant only for purposes of such insurance coverage).
All such title insurance policies shall insure vesting of
title in the insured free and clear of liens and
encumbrances against the respective parcels to be exchanged
(except for easements and rights-of-way of record to be
specified in the respective Commitments for Title Insurance
of Alliance Title & Escrow Corporation to be obtained with
respect to the EISA Parcels, and except for easements and
rights-of-way of record specified in Commitment for Title
Insurance (Full Supplemental) of Alliance Title & Escrow
Corporation, dated as of September 14, 1995 (Commitment No.
1-63993) as to the University Parcel).
5. Costs: EISA shall bear the entire expense for any
appraisal(s) of the EISA Parcels authorized to be conducted
by EISA. University shall bear the entire expense for any
appraisal(s) of the University Parcel authorized to be
conducted by the University. EISA and University shall
equally share (i.e., 50% to EISA and 50% to University)
closing fees and recording fees. University shall also
take, at its sole cost and expense, such other action as is
necessary to make the University Parcel legally
transferrable to EISA.
6. Possession: EISA may enter into and take
possession of the University Parcel upon the date of the
closing on that parcel. University may enter into and take
possession of the EISA Parcels upon the date of the
respective closings on those parcels.
7. Care of Property: EISA agrees that during such
period of time as may transpire between the date of this
Agreement and the date of conveyance by EISA to University
of the respective EISA Parcels, EISA shall not make
alterations or changes to the EISA Parcels without the prior
written consent of the University. University agrees that
during such period of time as may transpire between the date
of this Agreement and the date of conveyance by University
to EISA of the University Parcel, University shall not make
alterations or changes to the University Parcel without the
prior written consent of the EISA.
8. Inspection of Title: EISA and University shall
each have a reasonable time in which to examine a
preliminary title report and/or abstract of title regarding
the parcels prior to the respective closings. The exchange
of parcels contemplated herein shall be subject to EISA's
approval, in EISA's sole and absolute discretion, of the
preliminary title report for the University Parcel as well
as University's approval, in University's sole and absolute
discretion, of the preliminary title reports for the EISA
Parcels. Should either EISA or University object to any
condition of title relative to the parcel(s) of the other,
EISA and/or University, as the case may be, shall specify
such objections in writing to the other party. Thereafter,
the notified party may elect, at its sole option and choice,
to cure or not to cure the specified defect(s). If the
notified party elects not to cure and satisfy the written
objections of the objecting party, and upon giving notice to
the objecting party of that election not to cure, the
objecting party's options shall be limited to: (a) waiving
the title objections and proceeding to close or (b)
terminating this Agreement. If the objecting party elects
to terminate this Agreement for this specific reason, such
party shall be entitled to a return of any earnest money
deposited.
9. Examination of Properties: EISA and University,
except as otherwise set forth herein, acknowledge,
respectively, that they have examined, or will have had the
opportunity to examine, the respective properties that they
will acquire from each other, that they have conducted or
will conduct such investigation and studies with relation to
such properties as they deem advisable, and that they have
satisfied or will satisfy themselves as to the nature and
condition of such properties and all pertinent factors in
relation thereto, and that they agree to receive the
properties in their existing conditions. Such examinations
shall not be construed as an estoppel to or a waiver of the
representations and indemnities set forth herein.
10. Prorations: To the extent applicable, all current
property taxes and assessments relating to the EISA Parcels
and the University Parcel shall be prorated between EISA and
University as of the date of the respective closings on
those parcels.
11. Further Encumbrances: EISA and University shall
not, from and after the date of this Agreement and through
the dates of the respective closings, grant, convey, or
allow any easement, right-of-way, lease, encumbrance,
mortgage, deed of trust, license, permit, lien, or any other
legal or beneficial interest in or to the EISA Parcels or
the University Parcel.
12. Approvals: Notwithstanding anything to the
contrary herein, this Agreement is subject to obtaining of
appropriate approvals. University shall exercise due
diligence and promptly proceed and persist in taking all
necessary action to obtain all appropriate approvals.
Likewise, EISA shall exercise due diligence and promptly
proceed to obtain approval of this exchange from its
appropriate officials. Failure of University and/or EISA,
as the case may be, to promptly proceed and persist in such
efforts shall constitute a breach of this Agreement and
entitle the non-breaching party, in its sole discretion, to
rescind this Agreement.
13. Compliance with Law: EISA and University each
acknowledge and covenant that they each, for themselves,
have complied and shall hereafter comply with applicable
federal, state, county, and other governmental and/or quasi-
governmental laws, rules and regulations which may affect
the properties at issue.
14. Environmental Indemnifications: Each party to
this Agreement affirmatively represents and acknowledges
that they individually or collectively have not deposited,
and further have no knowledge of, any environmental waste in
violation of any local, state, or federal laws or
regulations on their respective parcels. Specifically,
University represents and acknowledges that it has not
deposited nor has knowledge of any environmental waste
existing on the University Parcel; and EISA represents and
acknowledges that it has not deposited nor has knowledge of
any environmental waste existing on the EISA Parcels.
Moreover, the University covenants to defend, indemnify and
hold EISA, its officers, agents, directors and employees,
harmless from any environmental clean-up costs and expenses
insofar and to the extent of damage caused by hazardous or
toxic discharge on the University Parcel during University's
ownership thereof and not caused by or related to the
activities of EISA or EISA's predecessors. Likewise, EISA
covenants to defend, indemnify and hold University, its
officers, agents, directors and employees harmless from any
environmental clean-up costs and expenses insofar and to the
extent of damage caused by any hazardous or toxic discharge
on the EISA Parcels during EISA's ownership thereof and not
caused by or related to the activities of University or
University's predecessors.
15. Notices: Any notices required or permitted under
this Agreement shall be deemed appropriately served three
(3) days after deposit in the United States Mail, adequate
postage prepaid, certified mail, return receipt requested,
and addressed to the parties as follows:
TO EISA: Thomas A. Arnold
Eastern Idaho Strategic Alliance,
Inc.
1651 Alvin Ricken Drive
Pocatello, ID 83201
TO UNIVERSITY: Idaho State University
ATTN: President Richard L. Bowen
Campus Box 8310
Pocatello, Idaho 83209
Any party may, by notice to the other party, change the
above address for any future notices which are to be given
under this Agreement.
16. Further Assurances: Each party shall provide all
information and take or forebear from all such action(s) as
may be necessary or appropriate to complete the transactions
contemplated by this Agreement. Each party shall, from time
to time, deliver, and execute, if necessary, such additional
documents as the other party may reasonably request to
complete the transactions contemplated by this Agreement.
17. Applicable Law and Jurisdiction: The validity,
construction, and performance of this Agreement shall be
governed by and construed in accordance with the laws of the
State of Idaho. Any legal proceeding relating to this
Agreement shall be brought in a state or federal court
located in Bannock County, State of Idaho, and the parties
hereby specifically consent and submit to the jurisdiction
of such courts exclusively for this purpose.
18. Default: In the event that either party shall
breach any of its obligations, the non-defaulting party
shall have the right to enforce specific performance or to
bring suit for damages incurred as a result thereof.
19. Assignment: The parties recognize that University
is an institution of higher education and has an interest in
protecting the integrity of its role as an academic
enterprise and the allowable uses of its properties.
Therefore, any subsequent alienation, assignment or
conveyance by EISA of the University Parcel shall be
compatible with University's purpose as an institution of
higher education and shall be subject to the prior written
approval of University, such approval not to be unreasonably
withheld or delayed. University hereby expressly approves
EISA's conveyance of the University Parcel to Ballard Real
Estate Holdings, Inc.
20. Option to Repurchase: In the event that EISA
shall, after taking deed to the University Parcel, desire to
sell or otherwise convey the same to any person or entity
other than Ballard Real Estate Holdings, Inc., in such event
the University is granted the first right, option and
privilege to purchase such parcels as herein described,
together with buildings and improvements thereon, if any, at
its then fair and reasonable market value; and in the event
the parties in such event cannot agree as to the fair and
reasonable market value of such property, then each party
shall appoint an appraiser, which appraisers shall appoint a
third, and said appraisers shall inspect the property and
appraise the same as to the fair and reasonable market value
and report to each of the parties, in writing, within ninety
(90) days after their appointment, as to the value
established by them, or a majority of them, which value EISA
agrees to accept from the University at the University's
option, notice of the exercise of said option to be given by
the University to EISA within thirty (30) days after the
receipt of the valuation fixed by the appraisers. EISA
covenants and agrees that it will not convey the University
Parcel to any person or entity other than Ballard Real
Estate Holdings, Inc. without first obtaining the express
prior approval of University, which approval will not be
unreasonably withheld or delayed. University covenants and
agrees that it will make every reasonable and appropriate
effort to support EISA in complying with any and all
governmental and other regulatory requirements with respect
to the improvement or development of the hereinbefore
mentioned real property, including, without limitation, the
obtaining of building permits.
21. Waiver: The failure of either party to this
Agreement to insist upon the performance of any of the terms
and conditions of this Agreement, shall not be construed as
thereafter waiving any such terms and conditions or
subsequent breach, but the same shall continue and remain in
full force and effect as if no such forbearance or waiver
had occurred.
22. Attorney Fees and Costs: In the event of any
dispute with respect to any of the covenants or agreements
contained herein, the prevailing party shall be entitled to
recover from the other party all costs and expenses,
including reasonable attorney fees, which may arise or
accrue from enforcing this Agreement or in pursuing any
remedy by this Agreement or the laws of the State of Idaho,
whether such remedy is pursued by filing suit or otherwise.
23. Representations, Covenants and Warranties: All
covenants, conditions, representations, agreements,
understandings, and indemnities set forth in this Agreement
shall be continuing and perpetual in nature for the benefit
of the party in whose favor such covenants, conditions,
representations, agreements, understandings, and/or
indemnities run.
24. Entire Agreement: This Agreement constitutes the
entire understanding and agreement between the parties and
supersedes all prior agreements (whether written or oral),
representations and understandings of the parties relating
to the subject matter of this Agreement. No representations
have been made to induce either party to enter into this
Agreement except as are specifically set forth herein.
25. Severability and Power to Modify: All terms,
provisions, covenants and agreements contained in this
Agreement are severable, and if any of them is held to be
invalid by any court of competent jurisdiction, the
remaining provisions not held to be invalid shall be fully
enforceable according to their terms. The parties
specifically agree that the Court shall have the power to
modify any provision held to be invalid by, among other
things, reducing the geographical scope, the duration, the
amount and/or the terms and provisions covered in order to
make the same valid and in such event this Agreement and
terms and conditions hereof, as modified by the Court, shall
be interpreted and enforced in accordance with such
modification, or where applicable, as if such invalid terms
or provisions were not contained herein.
26. Applicable to Successors and Assigns: The
covenants and agreements contained herein shall transfer,
inure to the benefit of, and be binding upon the successors
in interest, transferees and assigns of the parties hereto;
and the parties acknowledge that Ballard Real Estate
Holdings, Inc. is a third party beneficiary of University's
representations, warranties and contract of indemnity
hereunder.
IN WITNESS WHEREOF, EISA and University have executed
this Real Estate Exchange Agreement effective as of the date
first set forth above.
IDAHO STATE UNIVERSITY
Richard L. Bowen
President
EASTERN IDAHO STRATEGIC ALLIANCE, INC.
Thomas A. Arnold
Authorized Agent
ISU
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Richard L. Bowen, known or identified to me to be
the President of IDAHO STATE UNIVERSITY that executed the
within instrument, and acknowledged to me that IDAHO STATE
UNIVERSITY executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Barbara A. Gorman, Notary
My commission expires September 27, 2000
EISA
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Thomas A. Arnold, known or identified to me to be
the Authorized Agent of the EASTERN IDAHO STRATEGIC
ALLIANCE, INC., an Idaho Corporation, who acknowledged to me
that he signed the foregoing instrument as Authorized Agent
for said Corporation, and the said Thomas A. Arnold
acknowledged to me that the said Corporation executed the
same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Cresta Knighton, Notary
My commission expires May 20, 1998
EXHIBIT "1"
DESCRIPTION OF THE EISA PARCELS
Parcel 1 (The Sherburne Property)
NW 1/4 SE 1/4 OF SECTION 31, TOWNSHIP 6 SOUTH,
RANGE 35 E.B.M., BANNOCK COUNTY, IDAHO.
EXCEPT: BEGINNING AT THE SOUTHEAST 1/16 CORNER OF
SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35 E.B.M.,
THENCE NORTH ALONG THE EAST 1/16 LINE 400.0 FEET,
THENCE WEST PARALLEL TO THE SOUTH 1/16 LINE 544.5
FEET, THENCE SOUTH PARALLEL TO THE EAST 1/16 LINE
400.0 FEET, TO THE SOUTH 1/16 LINE, THENCE EAST
ALONG THE SOUTH 1/16 LINE 544.5 FEET TO THE POINT
OF BEGINNING. A TRACT OF LAND IN THE NW 1/4 SE
1/4 SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35 E.B.M.,
BANNOCK COUNTY IDAHO.
ALSO EXCEPT: A STRIP OF LAND 75 FEET IN WIDTH,
WITH 37.5 FEET ON THE RIGHT AND LEFT OF THE
FOLLOWING DESCRIBED CENTERLINE BEGINNING AT A
POINT 37.5 FEET EAST OF THE NORTHWEST CORNER OF SW
1/4 NE 1/4, SECTION 31, TOWNSHIP 6 SOUTH, RANGE 35
E.B.M., THENCE SOUTH AND PARALLEL TO THE
MERIDIONAL CENTERLINE OF SAID SECTION 31, TO THE
SOUTH 1/16 LINE OF THE SAME SECTION TO A POINT
37.5 FEET EAST OF THE SOUTHWEST CORNER OF THE NW
1/4 SE 1/4. THIS STRIP OF LAND IS LOCATED IN THE
SW 1/4 NE 1/4 AND THE NW 1/4 SE 1/4 OF SECTION 31,
TOWNSHIP 6 SOUTH, RANGE 35 E.B.M., BANNOCK COUNTY,
IDAHO.
Parcel 2
This parcel shall be mutually determined at a
subsequent date by EISA and UNIVERSITY, and shall have a
fair market value of not less than $126,320.00.
EXHIBIT "2"
DESCRIPTION OF THE UNIVERSITY PARCEL
A tract of land in the northwest quarter of Section 31,
Township 6 South, Range 35 East, Boise Meridian, described
as follows:
Commencing at the northwest corner of Section 31, Township 6
South, Range 35 East, Boise Meridian; thence
South 89 degrees 44 minutes 03 seconds East along the north
line of Section 31 for a distance of 610.05 feet to a point
on the west line of the land associated with the Idaho State
Veterans Home; thence
South for a distance of 469.22 feet to the southwest corner
of the land associated with the Idaho State Veterans Home,
the TRUE POINT OF BEGINNING; thence
East along the south boundary line of the land associated
with the Idaho State Veterans Home for a distance of 496.84
feet; thence
South 08 degrees 07 minutes 22 seconds West for a distance
of 909.12 feet; thence
West for a distance of 903.77 feet; thence
North for a distance of 900.00 feet; thence
East for a distance of 535.39 feet to the point of
beginning.
Comprising 20.00 acres, more or less.
RETAINING THEREFROM:
An easement for the construction and maintenance of public
utility lines, extending over, under and across the easterly
fifteen (15.0) feet of the afore described tract of land.
EXHIBIT "3"
WARRANTY DEED
FOR VALUE RECEIVED, IDAHO STATE COLLEGE (NOW KNOWN AS
IDAHO STATE UNIVERSITY) AND THE IDAHO STATE BOARD OF
EDUCATION, AS TRUSTEES FOR IDAHO STATE UNIVERSITY, a body
politic and corporate of the State of Idaho (collectively,
"Grantor"), does hereby grant, bargain, sell and convey unto
EASTERN IDAHO STRATEGIC ALLIANCE, INC., a non-profit
corporation organized and existing under the laws of the
State of Idaho ("Grantee"), 1651 Alvin Ricken Drive,
Pocatello, Idaho 83201, the following described real estate
(including all existing water rights, improvements,
utilities and appurtenances thereon), to wit:
A tract of land in the northwest quarter of
Section 31, Township 6 South, Range 35 East, Boise
Meridian, described as follows:
Commencing at the northwest corner of Section 31,
Township 6 South, Range 35 East, Boise Meridian;
thence
South 89 degrees 44 minutes 03 seconds East along
the north line of Section 31 for a distance of
610.05 feet to a point on the west line of the
land associated with the Idaho State Veterans
Home; thence
South for a distance of 469.22 feet to the
southwest corner of the land associated with the
Idaho State Veterans Home, the TRUE POINT OF
BEGINNING; thence
East along the south boundary line of the land
associated with the Idaho State Veterans Home for
a distance of 496.84 feet; thence
South 08 degrees 07 minutes 22 seconds West for a
distance of 909.12 feet; thence
West for a distance of 903.77 feet; thence
North for a distance of 900.00 feet; thence
East for a distance of 535.39 feet to the point of
beginning.
Comprising 20.00 acres, more or less.
RETAINING THEREFROM:
An easement for the construction and maintenance
of public utility lines, extending over, under and
across the easterly fifteen (15.0) feet of the
afore described tract of land.
TO HAVE AND TO HOLD the said premises, with its
appurtenances unto the said Grantee, its successors in
interest and assigns forever. And the said Grantor does
hereby covenant and warrant to and with the said Grantee
that it is the owner in fee simple of said real property;
that it conveys good and marketable title to the same; that
the property is free from all liens and encumbrances, except
as set out above, and that Grantor will forever warrant and
defend the same and Grantee's (and its successors in
interest and assigns') quiet and peaceable possession of
said premises from all lawful claims whatsoever.
IN WITNESS WHEREOF, the Grantor, pursuant to the
authority vested in it, has executed this Warranty Deed this
30th day of November, 1995.
GRANTOR:
IDAHO STATE COLLEGE (NOW KNOWN AS
IDAHO STATE UNIVERSITY) AND THE
IDAHO STATE BOARD OF EDUCATION, AS
TRUSTEES FOR IDAHO STATE UNIVERSITY
(a body politic and corporate of
the State of Idaho)
Richard L. Bowen
President, Idaho State
University
November 30, 1995
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Richard L. Bowen, known or identified to me to be
the President of IDAHO STATE UNIVERSITY, and acknowledged to
me that he executed the within instrument on behalf of IDAHO
STATE COLLEGE (NOW KNOWN AS IDAHO STATE UNIVERSITY) AND THE
IDAHO STATE BOARD OF EDUCATION, AS TRUSTEES FOR IDAHO STATE
UNIVERSITY (a body politic and corporate of the State of
Idaho).
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year first above
written.
Barbara A. Gorman, Notary
My commission expires September 27, 2000
EXHIBIT "4"
[FORM OF]
CORPORATION WARRANTY DEED
FOR VALUE RECEIVED, EASTERN IDAHO STRATEGIC
ALLIANCE, INC., a corporation organized and existing under
the laws of the State of Idaho ("Grantor"), does hereby
grant, bargain, sell and convey unto IDAHO STATE UNIVERSITY,
a body politic and corporate of the State of Idaho
("Grantee"), P.O. Box 8219, Pocatello, Idaho 83209, the
following described real estate (including all existing
water rights, improvements, utilities and appurtenances
thereon), to wit:
TO HAVE AND TO HOLD the said premises, with its
appurtenances unto the said Grantee, its successors in
interest and assigns forever. And the said Grantor does
hereby covenant and warrant to and with the said Grantee
that it is the owner in fee simple of said real property;
that it conveys good and marketable title to the same; that
the property is free from all liens and encumbrances, except
as set out above, and that Grantor will forever warrant and
defend the same and Grantee's (and its successors in
interest and assigns') quiet and peaceable possession of
said premises from all lawful claims whatsoever.
IN WITNESS WHEREOF, the Grantor, pursuant to a
resolution of its Board of Directors, has caused its
corporate name to be hereunto subscribed by its Project
Director this day of , 199 .
GRANTOR:
EASTERN IDAHO STRATEGIC
ALLIANCE, INC.
Date:
STATE OF IDAHO )
:ss
County of Bannock )
On this _____ day of ________________, 199_____,
before me, the undersigned Notary Public in and for said
State, personally appeared Thomas A. Arnold, known or
identified to me to be the Project Director of EASTERN IDAHO
STRATEGIC ALLIANCE, INC., the corporation that executed the
within instrument or the person who executed the instrument
on behalf of said corporation, and acknowledged to me that
such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year first above
written.
NOTARY PUBLIC - STATE OF IDAHO
My commission expires
EXHIBIT "D"
CORPORATION WARRANTY DEED
FOR VALUE RECEIVED, EASTERN IDAHO STRATEGIC
ALLIANCE, INC., a non-profit corporation organized and
existing under the laws of the State of Idaho ("Grantor"),
does hereby grant, bargain, sell and convey unto BALLARD
REAL ESTATE HOLDINGS, INC., a corporation organized and
existing under the laws of the State of Utah ("Grantee"),
12050 Lone Peak Parkway, Draper, Utah 84020, the following
described real estate (including all existing water rights,
improvements, utilities and appurtenances thereon), to wit:
A tract of land in the northwest quarter of
Section 31, Township 6 South, Range 35 East, Boise
Meridian, described as follows:
Commencing at the northwest corner of Section 31,
Township 6 South, Range 35 East, Boise Meridian;
thence
South 89 degrees 44 minutes 03 seconds East along
the north line of Section 31 for a distance of
610.05 feet to a point on the west line of the
land associated with the Idaho State Veterans
Home; thence
South for a distance of 469.22 feet to the
southwest corner of the land associated with the
Idaho State Veterans Home, the TRUE POINT OF
BEGINNING; thence
East along the south boundary line of the land
associated with the Idaho State Veterans Home for
a distance of 496.84 feet; thence
South 08 degrees 07 minutes 22 seconds West for a
distance of 909.12 feet; thence
West for a distance of 903.77 feet; thence
North for a distance of 900.00 feet; thence
East for a distance of 535.39 feet to the point of
beginning.
Comprising 20.00 acres, more or less.
RETAINING THEREFROM:
An easement for the construction and maintenance
of public utility lines, extending over, under and
across the easterly fifteen (15.0) feet of the
afore described tract of land.
TO HAVE AND TO HOLD the said premises, with its
appurtenances unto the said Grantee, its successors in
interest and assigns forever. And the said Grantor does
hereby covenant and warrant to and with the said Grantee
that it is the owner in fee simple of said real property;
that it conveys good and marketable title to the same; that
the property is free from all liens and encumbrances, except
as set out above, and that Grantor will forever warrant and
defend the same and Grantee's (and its successors in
interest and assigns') quiet and peaceable possession of
said premises from all lawful claims whatsoever.
IN WITNESS WHEREOF, the Grantor, pursuant to a
resolution of its Board of Directors, has caused its
corporate name to be hereunto subscribed by its Project
Director this 30th day of November, 1995.
GRANTOR:
EASTERN IDAHO STRATEGIC
ALLIANCE, INC.
Thomas A. Arnold
Project Director
Date: November 30, 1995
STATE OF IDAHO )
:ss
County of Bannock )
On this 30th day of November, 1995, before me, the
undersigned Notary Public in and for said State, personally
appeared Thomas A. Arnold, known or identified to me to be
the Project Director of EASTERN IDAHO STRATEGIC ALLIANCE,
INC., the corporation that executed the within instrument or
the person who executed the instrument on behalf of said
corporation, and acknowledged to me that such corporation
executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year first above
written.
Cresta Knighton
My commission expires May 20, 1998
EXHIBIT 11
<TABLE>
<CAPTION>
BALLARD MEDICAL PRODUCTS
COMPUTATION OF INCOME PER COMMON SHARE AND
COMMON EQUIVALENT SHARE FOR THE THREE YEARS
ENDED SEPTEMBER 30, 1995
Cumulative Period Average Net Income
Shares Out- Shares Income Per
Standing Share
<S> <C> <C> <C> <C> <C>
Primary
income
per
share:
1995 10,075,965,160 365 27,605,384 $20,415,191 $0.74
1994 9,903,476,745 365 27,132,813 16,180,377 0.60
1993 9,977,390,340 365 27,335,316 18,540,009 0.68
Fully
diluted
income
per
share:
1995 10,256,944,935 365 28,101,219 $20,415,191 $0.73
1994 9,936,750,875 365 27,223,975 16,180,377 0.59
1993 9,987,161,755 365 27,362,087 18,540,009 0.68
</TABLE>
EXHIBIT 13
BALLARD MEDICAL PRODUCTS
ANNUAL REPORT
1995
ABOUT THE COMPANY
Ballard Medical Products ("Ballard") is a manufacturer
and marketer of specialized, niche medical products. Our
strategy for maintaining the Company's growth continues to
incorporate four directives:
- Developing innovative products through internal
research and development and through acquisitions.
- Maintaining the highest quality possible on
products.
- Increasing sales through a superior sales force,
through strategic accounts, and through expansion
in the international marketplace.
- Reducing costs through production efficiencies.
Ballard has three wholly-owned subsidiaries, MEDICAL
INNOVATIONS CORPORATION ("MIC"), BALLARD REAL ESTATE
HOLDINGS, INC. ("BREH"), and BALLARD INTERNATIONAL, INC.
("BI"). (As used in this report, the term "Company" refers
to Ballard Medical Products and its subsidiaries.)
The Company's headquarters and principal manufacturing
plant (276,000 square feet) are located in Draper, Utah.
MIC has manufacturing facilities in Milpitas, California and
Ventura, California.
Our products are sold in 32 countries, and the
customers purchasing our products include more than 11,578
hospitals and other medical care facilities worldwide. At
September 30, 1995, Ballard and its subsidiaries employed
over 872 people in 6 countries.
The Company's common stock is traded on the New York
Stock Exchange under the symbol BMP.
1995 IN REVIEW
Fiscal year 1995 was the best year in the Company's
history, so far. Our net sales for the year were
$81,762,142, compared to $65,062,801 for fiscal year 1994,
which represents a 25.7% increase for the year. Even more
impressive was our 38.2% growth in net income (before
cumulative effect of change in accounting principle), from
$14,777,145 in fiscal year 1994 to $20,415,191 in fiscal
year 1995. Earnings per share for the year were 73 cents,
up 33.7% over 54 cents for fiscal year 1994.
During fiscal year 1995, sales of MIC products
increased by 64.7% and international sales of all Company
products grew by 32.1%. We now have eight international
sales representatives and approximately 47 international
distributors and look to the international markets as an
important, exciting frontier for all of the Company's
products.
Acquisitions continue to be an important part of our
strategic plan. In May, 1995, we acquired (through MIC) the
assets and ongoing business of Cox Medical Enterprises, Inc.
("Cox"), a Ventura, California-based manufacturer of
disposable endoscopic devices, for $4 million. In the
Ventura, California facility, we now produce disposable
cleaning brushes, polypectomy snares, cytology brushes,
biopsy forceps, grasping forceps, retrieval baskets, and a
reposable accessory BASICS endoscopy system, all for use in
connection with the GI (gastroenterology tract) and
pulmonary endoscopy. See "New Products." The Cox product
line, in and of itself, was an excellent addition to the
Company's product families. Also, we are confident that
Cox's products will strengthen even further the Company's
position in the GI and pulmonary market, by enabling us to
offer a broader range of products to existing customers.
In July, 1995, Ballard signed an agreement with Neuro
Navigational Corporation ("NNC") to purchase preferred stock
representing 19.5 percent of NNC's capital stock and an
option to acquire all of the assets of NNC. The closing of
this purchase occurred November 14, 1995. The total
purchase price for the Stock was $2,000,000, and Ballard
paid $500,000 for the option. If the option is exercised,
the purchase price for the assets will be $9,500,000 (less
the $500,000 previously paid for the option) if the option
is exercised during the first 12 months, or two times net
sales of NNC (for the 12 full calendar months immediately
preceding the date of option exercise) if the option is
exercised during the remainder of the option term. The
option term runs from November 14, 1995 through November 13,
1997.
Located in Costa Mesa, California, NNC develops,
manufactures, and markets fiberoptics imaging technology and
disposable microtools designed for minimally invasive brain
surgery. NNC is also developing products for vascular
surgery. NNC's principal products are disposable micro-
endoscopes, designed to allow a surgeon to perform delicate
surgical procedures through small incisions rather than the
larger incisions associated with traditional brain surgery,
e.g., procedures such as: 1. the treatment of
hydrocephalus (water on the brain); 2. tumor removal and
biopsy; 3. cyst drainage; 4. hematoma evacuation; and 5.
aneurysm repair. These minimally invasive procedures offer
many advantages to patients, surgeons, hospitals, and health
care reimbursers, such as reduced trauma, faster recovery
for the patient, shorter operating time for the surgeon, and
reduced hospital stays and overall medical costs.
We believe that the endoscope expertise and fiberoptics
imaging technology of NNC will provide significant
opportunities for product improvement and expansion for
Ballard with our existing product lines. We also believe
that the purchase of shares in NNC is an investment in the
Company's future, diversifying our technology base, and
offering the potential for the Company to be a market leader
in the rapidly growing minimally invasive segment of
Neurosurgery and Vascular surgery. The purchase contract
provides that two nominees of Ballard will serve on the 5-
person Board of Directors of NNC throughout the option term.
During the option term, Ballard intends to monitor the
progress of NNC, in order to determine whether to exercise
its asset purchase option.
In October, 1995, the Company broke ground for an
additional manufacturing facility (approximately 104,000
square feet) to be located in the Idaho State University
Business and Research Park in Pocatello, Idaho. The plant
will be located on a 20-acre parcel of land granted to the
Company at no charge. The total cost of development and
construction of the Pocatello facility is estimated at $6.8
million. The weather in Pocatello this fall has been very
mild, and development of this project is proceeding on
schedule. We believe this expansion will assist in
accommodating our projected continuing growth. Construction
is scheduled to be completed in June, 1996.
With over $113 million in total assets, no long-term
debt, continuing product development, and an active
acquisition program, we are confident about the future.
NEW PRODUCTS
During fiscal year 1995, our new product acquisitions
and releases included the following:
The TRACH CARE MAC product is a unique tool which
allows clinicians to administer exogenous surfactants
directly to an infant's lung tissue. This product provides
added safety and convenience to critically ill neonates.
In July, 1995, the Company received FDA approval to
market a pediatric version of its EASI-LAV gastric lavage
system. This allows for the use of the device to treat
childhood poisoning, which is an important segment of the
market.
A pediatric version of the MIC TRANSGASTRIC JEJUNAL
TUBE was released in August, 1995. This unique feeding tube
allows for simultaneous gastric decompression and jejunal
feeding. The prior, adult version has shown strong growth
in the adult arena.
The successful MIC-KEY SKIN LEVEL GASTROSTOMY FEEDING
KIT received a "face lift" during 1995. The MIC-KEY skin
level feeding tube was redesigned to be more cosmetically
pleasing, and certain kit components were added to be more
user friendly. The MIC-KEY device continues to be the
gastrostomy tube of choice for the pediatric patient,
because of its unique aesthetic appearance and its ease of
insertion and removal.
The MIC-PEG (percutaneous endoscopic gastrostomy) 24-
french feeding tube was released in September, 1995. Larger
than our prior 20-french version, the 24-french PEG feeding
tube allows for greater formula flow rates and minimizes the
possibility of clogging, a common problem encountered with
smaller feeding tubes.
ENDOSCOPY PRODUCTS ACQUIRED FROM COX MEDICAL ENTERPRISES
The CB-X1/X2 disposable cleaning brush is a versatile
device that offers maximum channel scrubbing power and the
ability to scrub endoscope components.
The THERMAL OPTION disposable biopsy/coagulating
forceps is a unique dual-purpose device enabling
endoscopists to obtain precision cut tissue samples as well
as providing "on demand" coagulating capability for patient
safety and cost efficiency.
The disposable CYTOLOGY BRUSH incorporates a unique
barium loaded "cap" at the distal end of the brush that
enables an endoscopist to obtain "site specific" cytological
samples while maximizing cell retention.
The BASICS endoscopy system incorporates the benefits
of disposable and reusable instrumentation into a
"reposable" system of reusable handles with attachable
disposable patient-contact components, thus addressing the
issues of cross-contamination and cost-efficiency.
CONTINUING PRODUCTS
The Company's strong commitment to research and
development and product enhancements has enabled the Company
to continue to be a significant player in certain domestic
markets, such as the closed suctioning market and the
chronic enteral feeding market. In addition to the new
product releases described above, the Company continues to
sell the following principal products:
TRACH CARE
The TRACH CARE closed endotracheal suction catheter
system continues to be the Company's flagship product in the
intensive care/critical care arena. It enables patients
with endotracheal tubes, on ventilators, to have their
airways suctioned while maintaining ventilator support, thus
improving patient care. Further, this product reduces
infection risks due to its "closed" design, keeping both
users and the environment from contaminating the suction
catheter and from being contaminated.
The TRACH CARE system is available in sizes, from adult
to neonatal, as well as in several variations such as WET
PAK and DOUBLE LUMEN. This family of products also includes
a line of accessories used to complement TRACH CARE such as
METERED DOSE INHALER adapters, BALLARD UNIT DOSE, START KIT,
etc. These accessories are designed to allow the TRACH CARE
catheter to be used, among other things, as a drug delivery
system or to adapt it to specific patient needs.
The NEONATAL "Y" TRACH CARE catheter is an improved
suction catheter, engineered for use on sophisticated
neonatal ventilators. It provides a side stream catheter
approach, which not only gives greater patient flexibility,
but also couples closed suction with high frequency
oscillators, high frequency jet ventilators, and volume and
physiologic monitors.
The TRACH CARE DOUBLE SWIVEL ELBOW is a calibrated
closed suction catheter which has low dead space, provides
more patient comfort and flexibility, and gives the
clinician a better "feel" for the catheter inside the new
envelope material.
The SAFETY DRAIN closed drain provides clinicians with
a way to empty the ventilator circuit of condensate without
opening it. Users are thereby able to complete the closed
system started with the TRACH CARE catheter, thus providing
additional safety for both clinician and patient.
HMEs (heat and moisture exchangers) have been offered
by the Company since December, 1993. The HMEs (manufactured
for Ballard by Engstrom Medical AB) provide a means of
humidifying the patient's airways during ventilation and are
sold with our TRACH CARE catheter. In July, 1995, the
Company became Engstrom Medical's exclusive HME distributor
in the United States and Canada.
MIC PRODUCTS
The chronic enteral feeding market is experiencing
rapid growth due to the aging of the population. There is
also an emerging physician consensus that early post-
operative enteral support benefits the high risk surgical
patient by decreasing septic morbidity, maintaining
immunocompetence, and improving wound healing and recovery
time. MIC's full range of specialty feeding tubes firmly
places the Company in a position to take advantage of the
growing enteral feeding market.
The MIC GASTROSTOMY TUBE is the first tube specifically
designed for the gastrostomy procedure. The MIC GASTROSTOMY
TUBE can be placed by surgeons, gastroenterologists,
interventional radiologists and replaced by qualified
registered nurses at bedside in the hospital, and in home
care and alternate care settings. The unique design of the
MIC GASTROSTOMY TUBE becomes a problem solver for the
physician and other care givers. The MIC GASTROSTOMY TUBE
virtually eliminates inadvertent tube dislodgement, controls
gastric leakage, and is provided in several sizes and
versions, to accommodate a wide range of patient needs.
The MIC JEJUNAL TUBE is a large bore, easy-to-place
tube for direct jejunal feeding when bypassing the stomach
is indicated. The MIC JEJUNAL TUBE can be placed
surgically, endoscopically or under fluoroscopy.
The MIC JEJUNOSTOMY TUBE is a surgically placed tube
that accommodates liquid enteral formulas delivered into the
small intestine. Its design minimizes irritation and
increases patient comfort.
The MIC BOWEL MANAGEMENT KIT is designed to control
fecal incontinence, provide predictable bowel management,
and promote patient independence.
The MIC PEG (percutaneous endoscopic gastrostomy)
catheter line is a traction removable, enteral feeding
catheter. The MIC PEG's distinct advantage is that the
physician can remove the MIC PEG without a second endoscopic
procedure.
The MIC TRANSGASTRIC JEJUNAL TUBE allows for
simultaneous gastric decompression and jejunal feeding. The
TGJ TUBE is very easy to place. Its design minimizes
jejunal dislodgement and tube clogging experienced with
competitive tubes on the market. The TGJ TUBE is placed
surgically, endoscopically, or fluoroscopically.
FOAM CARE
FOAM CARE foamers and solutions are designed for use
throughout the hospital and are the Company's principal
product in the operating room. FOAM CARE is one of our
franchise products, affording us unique opportunities in the
operating room, and providing additional avenues for the
sale of MIC products. FOAM CARE foamers utilize a unique,
patented, foaming device that turns the soap solution into
rich foam lather.
FOAM CARE products provide users with cost savings when
compared to common liquid soaps. FOAM CARE products are
gentle on the hands and, in the operating room, are
complemented by our DOUBLE SCRUB brush, a soft-on-the-hands
surgical scrub brush.
OTHER
The EASI-LAV gastric lavage system is a closed gastric
lavage system. It is used to clean out the stomach in drug
overdose patients or those with gastric bleeding. It makes
the lavage process cleaner, faster and more effective while
providing additional clinician protection. This product is
used in the hospital emergency room and gastrointestinal
labs.
The CHAR FLO activated charcoal system is a unique
charcoal delivery system designed for use with our EASI-LAV
system in over-dose patients. It enables faster, more
accurate and environmentally clean charcoal delivery.
The SAFETY SHIELD mask is a surgical grade mask which
includes a plastic shield for eye protection. This
product's design provides users with complete facial splash
protection, while also providing excellent filtration
characteristics. It is available in various styles for use
everywhere in the hospital.
The BAL CATH catheter product is designed to obtain
bronchoalveolar lavage samples for use in the diagnosis of
nosocomial and opportunistic respiratory infections.
Because it is used without a bronchoscope, it is much more
cost effective for the hospital.
CAPITAL EXPENDITURES
During fiscal year 1995, the Company continued to make
strides toward automation of its manufacturing processes.
For example, in June, 1995, the Company installed an
automated materials handling system for its DOUBLE SCRUB
scrub brush products. This system feeds materials
automatically (by vacuum) into molding machines, thus
obviating the need for additional employees. The Company
estimates that this system alone will save us approximately
$90,000 per year.
In addition, the Company expanded its injection molding
capacity and added a new clean room to MIC's facility in
Milpitas, California. In its Draper facility, the Company
purchased six new molding machines, at a cost of
approximately $100,000 each, and a second saline vial
machine (four cavity), at a total acquisition and
refurbishing cost of approximately $350,000. The Company
also installed additional sprue pickers, conveyers, part
separators, and a new grinder in its Draper facility.
In addition to our plans to expand into Pocatello,
Idaho, we are also in the process of reviewing plans for the
construction of a new facility in Milpitas, California. We
intend to consolidate our Ventura, California operations,
along with MIC operations already located in Milpitas, into
this new facility to be constructed in fiscal year 1996.
FOREIGN OPERATIONS
The following table sets forth the dollar amount of
sales by the Company internationally during the last three
fiscal years. All sales shown are denominated in U.S.
dollars and all payments are received in U.S. dollars. No
foreign currency is received by the Company. The amount of
export sales to unaffiliated customers does not exceed 10%
of the Company's domestic consolidated net sales.
FISCAL YEAR INTERNATIONAL SALES
9/30/95 $6,172,904
9/30/94 $4,672,611
9/30/93 $3,825,172
COMMON STOCK
TRADING
The Company's common stock is traded on the New York
Stock Exchange ("NYSE"). The following table sets forth,
for the respective periods indicated, the high and low sales
prices for the Company's common stock, as reported and
summarized by the NYSE for fiscal years 1995 and 1994:
<TABLE>
<CAPTION>
FISCAL YEAR 1995 FISCAL YEAR 1994
QUARTER HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter 11 1/8 9 18 3/8 11 1/4
Second Quarter 12 7/8 10 1/8 15 1/4 12 1/2
Third Quarter 13 5/8 10 3/4 13 7/8 9 1/8
Fourth Quarter 17 1/2 12 5/8 11 1/8 8 1/2
</TABLE>
On November 21, 1995, the closing quotation for the
Company's Common Stock, as reported by the WALL STREET
JOURNAL, was 17 3/8 high and 17 low. As of November 21,
1995, there were approximately 12,167 holders of the
Company's Common Stock (based upon the number of record
holders and including individual participants in security
position listings).
DIVIDENDS
The Company has paid the following cash dividends
during the two most recent fiscal years:
DIVIDEND
RECORD DATE PAYMENT DATE PER SHARE
December 2, 1993 December 21, 1993 $.0497
December 12, 1994 December 28, 1994 .0600
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA (1)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $81,762,142 $65,062,801 $64,849,837 $49,787,199 $38,297,843
Other
Income, Net 4,078,702 3,519,586 3,716,649 2,492,363 1,317,908
Net Income 20,415,191 16,180,377 18,540,009 13,464,291 7,824,274
Net Income
Per Common
Share (2) .73 .54 .68 .48 .30
Total
Assets 113,019,373 92,639,225 80,291,809 58,801,704 37,509,132
Cash
Dividends
Declared
Per
Share .0600 .0497 .0375 .0300 .0233
</TABLE>
(1) All per share income and dividend information has been
adjusted to give effect to stock splits which have
occurred. The consolidated financial data shown above
includes the accounts of Ballard Medical Products and
its wholly-owned subsidiaries, MIC, BI, and BREH, as
well as the accounts of Cox as of May 1, 1995, the date
of acquisition of its assets and ongoing business. The
consolidated financial data for 1993 includes the
accounts of MIC as of February 26, 1993, its date of
acquisition. The subsidiary accounts of BI and BREH
did not materially affect the consolidated financial
data shown above.
(2) Does not include the cumulative effect of a change in
1994 in accounting for income taxes.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA
(UNAUDITED)
FISCAL YEAR 1995
QUARTERS ENDED: 9/30/95 6/30/95 3/31/95 12/31/94
<S> <C> <C> <C> <C>
Net Sales $21,868,032 $21,353,249 $20,030,632 $18,510,229
Gross Margin 14,830,345 14,283,404 13,408,645 12,291,352
Net Income 5,599,545 5,269,166 4,980,016 4,566,464
Net Income Per
Common Share 0.198 0.190 0.180 0.167
FISCAL YEAR 1994
QUARTERS ENDED: 9/30/94 6/30/94 3/31/94 12/31/93
Net Sales $12,534,754 $18,445,692 $18,047,000 $16,035,355
Gross Margin 7,099,945 12,626,642 12,898,597 11,186,038
Income Before
Cumulative
Effect of Change
in Accounting
for Income Taxes 1,287,145 4,338,014 4,860,000 4,291,986
Cumulative
Effect of Change
in Accounting
for Income Taxes 1,403,232
Net Income 1,287,145 4,338,014 4,860,000 5,695,218
Per Common Share:
Income Before
Cumulative
Effect of
Accounting
Change 0.047 0.160 0.178 0.158
Cumulative
Effect of
Accounting
Change 0.052
Net Income 0.047 0.160 0.178 0.210
</TABLE>
See additional analysis of net sales, margins, and net
income in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Ballard
Medical Products:
We have audited the accompanying consolidated balance
sheets of Ballard Medical Products and subsidiaries as of
September 30, 1995 and 1994, and the related consolidated
statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended
September 30, 1995. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements
present fairly, in all material respects, the financial
position of Ballard Medical Products and subsidiaries as of
September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years
in the period ended September 30, 1995 in conformity with
generally accepted accounting principles.
As discussed in Notes 1 and 2 to the consolidated
financial statements, effective October 1, 1994 the Company
changed its method of accounting for investment securities
to conform with Statement of Financial Accounting Standards
No. 115. As discussed in Notes 1 and 4 to the consolidated
financial statements, the Company changed its method of
accounting for income taxes, effective October 1, 1993, to
conform with Statement of Financial Accounting Standards No.
109.
Deloitte & Touche LLP
Salt Lake City
November 9, 1995
(November 14, 1995, as to the fourth
and fifth paragraph of Note 8)
<TABLE>
<CAPTION>
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash (Note 1) $27,329,371 $15,109,682
Investments (Notes 1 and 2) 18,357,304 16,330,685
Accounts receivable - trade
(less allowance for doubtful
accounts: 1995 - $125,000,
1994 - $200,000; and allowance
for sales returns: 1995 -
$500,000, 1994 - $200,000) 13,504,572 13,505,173
Royalties receivable 447,282 542,616
Other receivable 1,173,871 1,181,021
Inventories (Note 1):
Raw materials 3,784,222 3,231,757
Work-in-process 2,286,542 2,088,350
Finished goods 5,220,882 4,353,529
Deferred income taxes
(Notes 1 and 4) 593,313 407,405
Income tax refund receivable
(Notes 1 and 4) 2,103,570 3,001,385
Prepaid expenses 232,315 35,789
Total current assets 75,033,244 59,787,392
PROPERTY AND EQUIPMENT
(Notes 1 and 6):
Land 1,849,511 1,849,511
Buildings 11,886,512 11,912,302
Molds 2,539,615 2,044,983
Machinery and equipment 8,077,753 7,401,870
Vehicles 535,547 441,135
Furniture and fixtures 1,408,169 1,067,148
Leasehold improvements 246,735 71,118
Construction in progress 1,234,998 729,922
Total 27,778,840 25,517,989
Less accumulated depreciation (5,832,822) (4,514,129)
Property and equipment - net 21,946,018 21,003,860
INTANGIBLE ASSETS
(less accumulated amortization:
1995 - $2,657,776; 1994 -
$1,577,991) (Notes 1 and 8) 15,106,614 11,568,397
OTHER ASSETS (Note 8) 933,497 20,624
DEFERRED INCOME TAXES
(Notes 1 and 4) 258,952
TOTAL $113,019,373 $92,639,225
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $1,114,607 $228,749
Accrued liabilities:
Employee compensation 2,301,755 1,114,092
Royalties (Note 6) 344,712 370,579
Other 448,236 492,306
Total current liabilities 4,209,310 2,205,726
DEFERRED INCOME TAXES
(Notes 1 and 4) 223,757
Total liabilities 4,433,067 2,205,726
COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 6 and 8)
STOCKHOLDERS' EQUITY (Note 5):
Common stock - $.10 par value;
75,000,000 shares authorized;
issued and outstanding:
1995 - 26,561,287 shares,
1994 - 26,455,862 shares 2,656,129 2,645,586
Additional paid-in capital 29,213,647 28,291,261
Unrealized losses on investments -
net of tax (Notes 1 and 2) (142,728)
Retained earnings 76,859,258 59,496,652
Total stockholders' equity 108,586,306 90,433,499
TOTAL $113,019,373 $92,639,225
</TABLE>
See notes to consolidated financial statements.
<TABLE>
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994, AND 1993
1995 1994 1993
<S> <C> <C> <C>
NET SALES
(Notes 1 and 9) $81,762,142 $65,062,801 $64,849,837
COST OF PRODUCTS SOLD 26,948,396 21,251,579 19,319,895
GROSS MARGIN 54,813,746 43,811,222 45,529,942
OPERATING EXPENSES:
Selling, general and
administrative
(Notes 6 and 7) 23,665,400 21,063,809 17,669,488
Research and development 2,177,117 1,638,475 1,345,052
Royalties (Note 6) 1,385,841 1,404,681 1,401,542
Total operating
expenses 27,228,358 24,106,965 20,416,082
OPERATING INCOME 27,585,388 19,704,257 25,113,860
OTHER INCOME:
Interest income 1,900,922 772,645 1,580,872
Royalty income 2,147,620 2,204,347 1,693,354
Other 30,160 542,594 442,423
Total other income 4,078,702 3,519,586 3,716,649
INCOME BEFORE
INCOME TAX EXPENSE 31,664,090 23,223,843 28,830,509
INCOME TAX EXPENSE
(Notes 1 and 4) 11,248,899 8,446,698 10,290,500
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 20,415,191 14,777,145 18,540,009
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE 1,403,232
(Notes 1 and 4)
NET INCOME $20,415,191 $16,180,377 $18,540,009
INCOME PER SHARE BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (Note 1):
Common and common
equivalent share $0.74 $0.55 $0.68
Common share assuming
full dilution $0.73 $0.54 $0.68
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE PER SHARE
(Note 1):
Common and common
equivalent share $0.05
Common share assuming
full dilution $0.05
NET INCOME PER SHARE
(Note 1):
Common and common
equivalent share $0.74 $0.60 $0.68
Common share assuming
full dilution $0.73 $0.59 $0.68
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
(Note 1):
Common and common
equivalent share 27,605,384 27,132,813 27,335,316
Common share assuming
full dilution 28,101,219 27,223,975 27,362,087
</TABLE>
See notes to consolidated financial statements.
<TABLE>
<CAPTION>
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994, AND 1993
Unrealized
Additional Losses on
Common Paid-in Invest- Retained
Shares Amount Capital ments Earnings
<S> <C> <C> <C> <C> <C>
BALANCE
OCTOBER
1, 1992 25,825,640 $2,582,564 $19,996,082 $31,646,164
Net
Income 18,540,009
Cash
divi-
dends
paid
($.0375
per
share)
(Note 1) (980,187)
Common
stock
issued
from
exer-
cise of
stock
options
(Note 5) 592,607 59,261 2,108,645
Acqui-
sition
and
retire-
ment of
trea-
sury
stock
(Note 5) (303,997) (30,400) (290,830) (4,334,145)
Tax
benefit
attri-
butable
to
appre-
ciation
in value
of stock
issued
in con-
junc-
tion
with the
exer-
cise and
quali-
fying
dispo-
sitions
of
incen-
tive
stock
options 2,908,205
Other 261,093
BALANCE
SEPTEM-
BER 30,
1993 26,114,250 2,611,425 24,983,195 44,871,841
Net
income 16,180,377
Cash
divi
dends
paid
($.050
per
share) (1,314,485)
Common
stock
issued
from
exer-
cise
of stock
options
(Note 5) 361,612 36,161 1,511,520
Acqui-
sition
and
retire-
ment
of
trea-
sury
stock
(Note
5) (20,000) (2,000) (241,081)
Tax
benefit
attri-
butable
to
appre-
ciation
in value
of stock
issued
in con-
junc-
tion
with the
exer-
cise and
dis-
quali-
fying
dispo-
sitions
of
incen-
tive
stock
options 1,796,546
BALANCE
SEPTEM-
BER 30,
1994 26,455,862 2,645,586 28,291,261 59,496,652
Net
income 20,415,191
Cash
divi-
dends
paid
($.060
per
share) (1,587,600)
Common
stock
issued
from
exer-
cise
of stock
options
(Note 5) 205,425 20,543 432,869
Acqui-
sition
and
retire-
ment of
trea-
sury
stock
(Note 5) (100,000) (10,000) (1,464,985)
Tax
benefit
attri-
butable
to
appre-
ciation
in value
of
stock
issued
in con-
junc-
tion
with the
exer-
cise
and
dis-
qual-
ifying
dispo-
sitions
of
incen-
tive
stock
options 489,517
Unre-
alized
losses
on
invest-
ment
secur-
ities -
net of
tax
(Notes
1 and 2) $(142,728)
BALANCE
SEPTEM-
BER 30,
1995 26,561,287 $2,656,129 $29,213,647 $(142,728) $76,859,258
</TABLE>
<TABLE>
<CAPTION>
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994, AND 1993
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net income $20,415,191 $16,180,377 $18,540,009
Adjustments to
reconcile net
income to net
cash provided by
operating
activities:
Depreciation and
amortization 3,061,618 2,477,007 1,756,706
Loss on disposal
of property 7,044 110,479 108,752
Tax benefit from
disqualifying
dispositions of
incentive stock
options 489,517 1,796,546 2,908,205
Provision for
losses on
accounts
receivable -
trade and sales
returns 225,000 200,000 217,000
Cumulative effect
of change in
accounting
principle (Note 1) (1,403,232)
Deferred income
taxes 373,655 828,489 (146,552)
Changes in
operating assets
and liabilities-
net of effects
from purchase of
MIC in 1993 and
Cox in 1995 (Note
8):
Accounts
receivable -
trade 4,389 2,738,233 (8,372,887)
Royalties and
other receivables 102,484 (757,909) (341,571)
Inventories (1,374,419) (2,053,477) (2,782,180)
Income tax refund
receivable 897,815 929,232 1,714,055
Prepaid expenses (196,526) (430,813) (184,605)
Accounts payable 199,168 (1,579,876) 310,274
Accrued
liabilities 1,117,726 (3,695,745) 805,676
Total
adjustments 4,907,471 (841,066) (4,007,127)
Net cash
provided by
operating
activities 25,322,662 15,339,311 14,532,882
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Capital
expenditures for
property and
equipment (2,769,625) (6,335,228) (3,998,999)
Proceeds from
sales of property
and equipment
45,250 5,899 21,110
Purchases of
investments (38,534,828) (29,744,216) (11,055,383)
Proceeds from
maturities of
investments 36,288,627 20,485,633 26,395,918
Purchases of
intangible assets (1,330,255) (245,685)
Purchases of
other assets (909,319)
Payments for
purchase of MIC
and Cox, net of
cash acquired (3,283,650) (500,000) (11,901,055)
Net cash used
in investing
activities (10,493,800) (16,333,597) (538,409)
CASH FLOWS FROM
FINANCING
ACTIVITIES:
Cash dividends
paid (1,587,600) (1,314,485) (980,187)
Proceeds from
issuance of
common stock and
exercise of
options 453,412 1,547,681 2,294,493
Purchase of
treasury stock (1,474,985) (243,081) (4,655,375)
Net cash used
in financing
activities (2,609,173) (9,885) (3,341,069)
NET INCREASE
(DECREASE) IN
CASH AND CASH
EQUIVALENTS 12,219,689 (1,004,171) 10,653,404
CASH AND CASH
EQUIVALENTS,
BEGINNING OF YEAR 15,109,682 16,113,853 5,460,449
CASH AND CASH
EQUIVALENTS, END
OF YEAR $27,329,371 $15,109,682 $16,113,853
SUPPLEMENTAL
DISCLOSURE OF
CASH FLOW
INFORMATION -
Cash paid during
the year for
income taxes $9,487,912 $7,571,800 $5,231,000
</TABLE>
See notes to consolidated financial statements.
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
On May 2, 1995, the Company acquired substantially all
of the net assets of Cox Medical Enterprises, Inc. for
approximately $3,313,000 cash (see Note 8). In conjunction
with the acquisition, liabilities were assumed as follows:
Fair value of assets acquired
(including goodwill) $4,000,000
Cash paid 3,313,310
Liabilities assumed $686,690
During the year ended September 30, 1995, the Company
in conjunction with its adoption of Financial Accounting
Standards No. 115 (see Note 1), wrote down its short-term
investments in total by $219,582. The effect of this
adjustment was a decrease in stockholders' equity in the
amount of $142,728 and an increase in current deferred
income taxes in the amount of $76,854.
During the years ended September 30, 1995, 1994, and
1993, the Company increased additional paid-in capital by
$489,517, $1,796,546, and $2,908,205, respectively, which
represents the tax benefit attributable to the compensation
received by employees from the exercise and disqualifying
dispositions of incentive stock options (see Note 5).
Effective February 26, 1993, the Company purchased all
of the outstanding capital stock of Medical Innovations
Corporation for approximately $12,464,000 cash (see Note 8).
In conjunction with the acquisition, liabilities were
assumed as follows:
Fair value of assets acquired
(including goodwill) $14,558,483
Cash paid 12,464,228
Liabilities assumed $2,094,255
See notes to consolidated financial statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Ballard Medical Products ("Ballard") and
its subsidiaries develop, manufacture, and market medical
products.
BASIS OF PRESENTATION - The consolidated financial
statements include the accounts of Ballard and its wholly-
owned subsidiaries, Medical Innovations Corporation ("MIC")
(see Note 8), Ballard Real Estate Holdings ("BREH"), and
Ballard International, Inc. ("BI") (collectively, the
"Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
On April 21, 1992, the Company formed BREH by
purchasing 1,500,000 shares of BREH's common stock in
exchange for $1,600,000 cash. Substantially all of such
cash was used by BREH to purchase approximately 100 acres of
unimproved land adjacent to Ballard's principal
manufacturing facility.
On February 19, 1993, the Company formed BI by
purchasing 1,000 shares of BI's common stock for $1,000. BI
is a foreign sales corporation incorporated in the Virgin
Islands. BI's primary purpose is to conduct business for
the Company in foreign countries.
INVESTMENTS - Investments consist principally of time
certificates of deposit, tax free municipal bonds, and U.S.
treasury securities with maturity dates of 1 to 12 months.
Through September 30, 1994, investments were recorded at
cost which approximated fair market value. As of September
30, 1995, investments are recorded at fair market value (see
Note 2).
Effective October 1, 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities." SFAS No. 115 requires the classification of
investment securities as either held-to-maturity securities,
trading securities, or available-for-sale securities. Upon
adoption of SFAS 115, the Company reclassified all of its
investments as available-for-sale. The adoption of SFAS 115
had no material effect on the consolidated financial
statements.
INVENTORIES - Inventories are stated at the lower cost
(on a first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT - Property and equipment are
stated at cost. Depreciation is computed on the straight-
line method over the estimated useful lives of the related
assets.
INTANGIBLE ASSETS - Intangible assets include goodwill,
patent rights, and organizational costs which are stated at
cost and are being amortized using the straight-line method
over their estimated lives, which range from four to
seventeen years.
REVENUE RECOGNITION - Revenues are recognized when the
related product is shipped.
INCOME TAXES - Effective October 1, 1993, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 109 (the Statement), "Accounting for Income
Taxes." The Statement requires an asset and liability
approach for financial accounting and reporting for income
taxes. The cumulative effect in 1994 of the change in
accounting principle of $1,403,232 is reflected in the 1994
consolidated statement of operations. The adoption of the
Statement had no effect on the pre-tax income from
continuing operations. Prior to October 1, 1993, the
Company accounted for income taxes under Accounting
Principles Board Opinion No. 11.
INCOME PER SHARE - Income per share is computed on the
basis of the weighted average number of shares outstanding
plus the common stock equivalents which would arise from the
exercise of stock options. Such income per share amounts
are adjusted to give retroactive effect to the stock split
described in Note 5.
DIVIDENDS PER SHARE - Dividends per share are adjusted
retroactively to give effect to the stock split discussed in
Note 5.
STATEMENTS OF CASH FLOWS - For purposes of the
consolidated statements of cash flows, the Company considers
cash and interest bearing securities with original
maturities of less than three months to be cash equivalents.
RECLASSIFICATIONS - Certain reclassifications have been
made to the 1994 and 1993 consolidated financial statements
to conform to classifications adopted in 1995.
2. INVESTMENTS
Investments consist of the following at September 30,
1995 and 1994:
1995 1994
Time certificates
of deposit $3,901,262
U.S. Treasury
securities 293,045
Municipal bonds $18,357,304 12,136,378
Total
investments $18,357,304 $16,330,685
The amortized cost and fair value of investments at
September 30, 1995, which consisted of municipal bonds
classified as available-for-sale, is as follows:
Amortized cost $18,576,886
Gross unrealized gains None
Gross unrealized losses (219,582)
Fair value $18,357,304
As of September 30, 1995, all of the municipal bonds
had a contractual maturity of one year or less. During the
year ended September 30, 1995, there were no gross realized
gains or gross realized losses from sales of investments
classified as available for sale.
3. LINE OF CREDIT
At September 30, 1995, the Company had an unused,
unsecured line of credit with a bank totaling $4,000,000
which expires January 31, 1996. The line, if drawn upon,
bears interest at prime (8.75% at September 30, 1995). No
compensating cash balances are required. As of September
30, 1995 and during the year then ended, there were no
borrowings under the line of credit.
4. INCOME TAXES
As described in Note 1, the Company adopted Statement
of Financial Accounting Standards No. 109 during the year
ended September 30, 1994. The Company has recorded current
deferred tax assets and net long-term deferred tax assets
and (liabilities) at September 30, 1995 and 1994, as
follows:
<TABLE>
<CAPTION>
1995 1994
Current Long-Term Current Long-Term
<S> <C> <C> <C> <C>
Deferred income tax
assets $593,313 $452,323 $407,405 $821,451
Deferred income tax
liabilities (676,080) (562,499)
Net $593,313 $(223,757) $407,405 $258,952
</TABLE>
Net deferred income tax assets and liabilities at
September 30, 1995 and 1994 consisted of the following
temporary differences and carryforward items:
<TABLE>
<CAPTION>
1995 1994
Current Long-Term Current Long-Term
<S> <C> <C> <C> <C>
Deferred income tax
assets:
Allowance for
uncollectible
accounts receivable $47,513 $76,020
Allowance for
sales returns and
allowances 190,050 76,020
Allowance for
obsolete inventory 49,585
Accrued expenses 214,506 255,365
Accumulated
amortization $743
Unrealized losses on
investments 76,854
Net operating loss
carryforwards of
acquired subsidiaries 14,805 $341,097 709,482
Research and
development credits 111,226 111,226
593,313 452,323 407,405 821,451
Deferred income tax
liabilities -
differences between
tax basis and
financial reporting
basis of property and
equipment (676,080) (562,499)
Total $593,313 $(223,757) $407,405 $258,952
</TABLE>
The components of income tax expense (benefit) for the
years ended September 30, 1995, 1994, and 1993 are
summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $9,425,942 $6,685,047 $9,132,420
State 1,449,302 933,162 1,304,632
10,875,244 7,618,209 10,437,052
Deferred:
Federal 323,859 727,007 (128,233)
State 49,796 101,482 (18,319)
373,655 828,489 (146,552)
Total $11,248,899 $8,446,698 $10,290,500
</TABLE>
Income tax expense differed from amounts computed by
applying the statutory Federal tax rate to pretax income as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Computed
federal tax
expense at
statutory rate $11,082,432 $8,128,345 $10,090,678
State income
tax expense,
net of federal
benefit 990,493 661,806 672,163
Environmental
tax 30,000 25,000 25,000
Tax exempt
income (624,750) (210,000) (408,800)
Foreign sales
corporation (121,756) (126,000) (61,750)
Amortization
of goodwill 316,969 278,773 160,919
Utilization of
acquired
operating loss
carryforwards (275,375)
Other (424,489) (311,226) 87,665
Total $11,248,899 $8,446,698 $10,290,500
</TABLE>
As a result of the Company's acquisitions (see Note 8),
the Company has net operating loss carryforwards for federal
income tax purposes of approximately $940,000, which can
only be used to offset future taxable income of acquired
subsidiaries as of September 30, 1995. The utilization of
the tax loss carryforwards is subject to certain limitations
and the carryforwards expire through the year 2007.
5. COMMON STOCK AND STOCK OPTIONS
A 4 for 3 stock split was approved for stockholders of
record on February 8, 1993. The effect of this stock split
is retroactively reflected in all share and per share
amounts in the accompanying consolidated financial statements.
During the years ended September 30, 1995, 1994, and
1993, the Company repurchased 100,000, 20,000, and 303,997
shares of its outstanding common stock for $1,474,985,
$243,081, and $4,655,375, respectively. In accordance with
Utah State law, this treasury stock was accounted for as
retired common stock.
The Company has adopted several incentive stock option
plans for key employees and reserved shares of common stock
totaling approximately 3,483,000 and 2,985,000 at September
30, 1995 and 1994, respectively, for issuance under the
plans. Options are granted at a price not less than the
fair market value on the date of grant, become exercisable
between one to two years following the date of grant, and
expire in ten years.
Changes in stock options are as follows for the years
ended September 30:
<TABLE>
<CAPTION>
1995 Shares Price Range
Per Share
<S> <C> <C>
Granted 740,000 $9.38 - $14.25
Expired 101,666 $8.63 - $13.50
Exercised 205,425 $1.46 - $11.00
Outstanding at
September 30 3,331,162 $1.46 - $14.25
Exercisable 2,410,490 $1.46 - $14.25
1994
Granted 3,747,340 $8.63 - $16.50
Expired 2,582,256 $11.00 - $19.79
Exercised 361,612 $.67 - $11.00
Outstanding at
September 30 2,898,253 $1.46 - $13.50
Exercisable 766,486 $1.46 - $13.50
1993
Granted 367,533 $12.00 - $19.79
Expired 37,322 $11.00 - $19.79
Exercised 592,607 $.99 - $11.00
Outstanding at
September 30 2,094,781 $.67 - $22.22
Exercisable 1,944,136 $.67 - $22.22
</TABLE>
6. COMMITMENTS AND CONTINGENT LIABILITIES
MIC leases office and production facilities under long-
term operating lease agreements. Rent expense on the above
operating leases was approximately $187,000, $187,000, and
$108,800 for the years ended September 30, 1995, 1994, and
1993, respectively. The following represents MIC's future
commitments under such leases:
1996 $186,500
1997 140,000
Total $326,500
The Company has the option to extend the lease terms at
its discretion. As of September 30, 1995, the Company has
not exercised its option to extend the leases.
The Company has agreements with the inventors of
certain of its products which provide for the payment of
royalties ranging from 2% to 6.5% of defined net sales or a
fixed rate per unit sold of the related products.
During the year ended September 30, 1993, the Company
entered into an approximate $3,200,000 construction contract
to expand its production facilities. The construction on
the facilities was completed during the year ended September
30, 1994.
The Company is involved in certain litigation matters
in the normal course of business which, in the opinion of
management, will not result in any material adverse effects
on the Company.
In October, 1995, the Company began construction of an
additional manufacturing facility in Pocatello, Idaho. The
total anticipated cost of construction is estimated to be
$6,800,000. Construction of the facility is anticipated to
be completed in June, 1996.
7. PROFIT SHARING PLAN
In 1991, the Company's Board of Directors adopted the
Company's Employee Retirement and Savings Plan (the Plan)
under Section 401(k) of the Internal Revenue Code. The Plan
is designed to allow participating employees to accumulate
savings for retirement or other purposes. Under the Plan,
all employees, who have completed at least one year of
service and have reached age 21, are eligible to
participate. The Plan allows employees to make
contributions to the plan from salary reductions each year,
up to a maximum of 15% of a participant's annual
compensation. Under the Plan, the Company matches up to 4%
of a participant's contribution. The Company may, if it
desires, make additional contributions to the 401(k) Plan on
behalf of its employees. For the years ended September 30,
1995, 1994, and 1993, the Company expensed approximately
$545,000, $372,000, and $247,000, respectively, as matching
contributions to the Plan. Employees are always fully
vested in their own contributions and become fully vested in
any contributions made by the Company after six years of
service. Employees are allowed to direct the investment of
their Plan contributions within a group of designated
investment funds.
8. MERGERS AND ACQUISITIONS
Effective February 26, 1993, the Company acquired all
of the issued and outstanding common stock of MIC for
approximately $12,464,000 cash. The acquisition was
accounted for as a purchase. In conjunction with the
acquisition, the Company recorded goodwill of approximately
$11,823,000 which is being amortized on a straight-line
basis over 15 years. The accompanying consolidated
financial statements include MIC's net assets at their
estimated fair values at the date of acquisition and the
results of operations of MIC from the date of acquisition.
The proforma results of operations of the Company for
the year ended September 30, 1993 (assuming the acquisition
of MIC had occurred as of October 1, 1992) are as follows:
Revenues $67,395,567
Net income 18,335,511
Income per share:
Common and common
equivalent share $0.67
Common share assuming
full dilution $0.67
On May 2, 1995, the Company acquired substantially all
of the assets of Cox for a purchase price of $4,000,000
consisting of $3,313,310 in cash and the assumption of
liabilities in the amount of $686,690. Cox is a
manufacturer of disposable endoscopic devices. The
acquisition has been accounted for using the purchase method
of accounting and, as such, Cox's results of operations have
been included in the accompanying consolidated financial
statements from the date of acquisition. The cost of this
acquisition exceeded the estimated fair value of the
acquired net assets by $423,000 which is being amortized
over 10 years. Pro forma consolidated results of operations
of the Company for the years ended September 30, 1995, 1994,
and 1993 are not presented as the effect on the Company's
consolidated financial position is immaterial.
On July 17, 1995, the Company entered into an agreement
with Neuro Navigational Corporation (Neuro) under which the
Company acquired on November 14, 1995, 200,000 shares of
Neuro's preferred stock representing a 19.5% equity interest
in Neuro for $2,000,000. As of September 30, 1995, the
Company had made advances to Neuro in the amount of
$800,000. These advances are included in other assets in
the accompanying consolidated balance sheet as of September
30, 1995 and were subsequently credited towards the
$2,000,000 purchase price on November 14, 1995.
In addition, on November 14, 1995, the Company paid
Neuro $500,000 for an option to purchase all of the assets
of Neuro during the first 12 months of the option period for
$9,500,000. If the option is exercised during the remainder
of the option term, the purchase price will be equal to two
times the net sales of Neuro for the 12 months immediately
preceding the exercise of the option. In either event, the
$500,000 option price will be credited towards the purchase
price. The option term expires two years following the
closing date of the preferred stock purchase by the Company.
9. SALES
During the years ended September 30, 1995, 1994, and
1993, the Company had foreign export sales of approximately
$6,200,000, $4,700,000, and $3,800,000, respectively.
10. EFFECT OF RECENTLY ISSUED FINANCIAL ACCOUNTING
STANDARDS
In October, 1995, the Financial Accounting Standards
Board issued SFAS No. 123. "Accounting for Stock-Based
Compensation." SFAS No. 123 defines a fair value based
method of accounting for an employee stock option. Fair
value of the stock option is determined considering factors
such as the exercise price, the expected life of the option,
the current price of the underlying stock and its
volatility, expected dividends on the stock, and the risk-
free interest rate for the expected term of the option.
Under the fair value based method, compensation cost is
measured at the grant date based on the fair value of the
award and is recognized over the service period. A company
may elect to adopt SFAS No. 123 or elect to continue
accounting for its stock option or similar equity awards
using the intrinsic method, where compensation cost is
measured at the date of grant based on the excess of the
market value of the underlying stock over the exercise
price. If a company elects not to adopt SFAS No. 123, then
it must provide pro forma disclosure of net income and
earnings per share, as if the fair value based method had
been applied.
SFAS No. 123 is effective for transactions entered into
for fiscal years that begin after December 15, 1995. Pro
forma disclosures for entities that elect to continue to
measure compensation cost under the old method must include
the effects of all awards granted in fiscal years that begin
after December 15, 1994. It is currently anticipated that
the Company will continue to account for stock-based
compensation plans under the intrinsic method and therefore,
SFAS No. 123 will have no effect on the Company's
consolidated financial statements.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This analysis of the Company's operations encompassing
the fiscal years ended September 30, 1995, 1994, and 1993,
should be considered in conjunction with the consolidated
balance sheets, statements of operations, and statements of
cash flows. All of the figures discussed herein have been
adjusted to reflect the purchase of the assets of Cox on May
1, 1995 and the purchase of MIC on February 26, 1993.
RESULTS OF OPERATIONS
SALES - For the year ended September 30, 1995,
consolidated net sales increased $16,699,341 or 25.7%, as
compared to fiscal year 1994. The solid growth of net sales
reflects the successful efforts of a more established, more
experienced sales force, as well as continued expansion and
market penetration of the TRACH CARE and MIC product lines,
both domestically as well as internationally. 1995
consolidated gross sales increased $19,989,929, an
impressive 29.4% increase over 1994 consolidated gross
sales, but increased pressures to reduce prices resulted in
an increase in price discounts and rebates from $2,927,064
in 1994 to $6,217,652 in 1995.
Domestic consolidated net sales totaled $75,589,238 for
the year ended September 30, 1995, compared with $60,390,190
for 1994, an increase of 25.2%. International consolidated
net sales totaled $6,172,904 for the year ended September
30, 1995, compared with $4,672,611 for 1994, an increase of
32.1%.
Near the end of the third quarter of fiscal year 1995,
pricing on several of the MIC products was increased by up
to 5%. Effective April 1, 1995, pricing on the Neonatal
products of the TRACH CARE line also increased by up to 5%.
No other price increases occurred during the year.
For the year ended September 30, 1994, consolidated net
sales totaled $65,062,801, a 3.3% increase of $212,964 over
consolidated net sales of $64,849,837 in 1993. While the
Company's 1994 consolidated gross sales increased $2,303,862
over 1993 consolidated gross sales, price discounts and
rebates also increased from $836,166 in 1993 to $2,927,064
in 1994, reflecting the increased pressures on the providers
of medical products to reduce prices. The basically flat
net sales between 1994 and 1993 also reflected some
distribution restructuring and a reduction in existing
dealer inventories. The Company also attributes the 1994
decline in net sales growth to the uncertainty of possible
Federal Health Care Reform mandates debated throughout most
of the fiscal year, delays in receiving FDA approvals for
certain of its new products, trends by hospitals toward
"Just in Time" inventory reductions, and increases in
hospital group purchasing alliances.
All sales of the Company and related receipts are in
U.S. dollars. Export sales to unaffiliated customers from
the Company's domestic operations did not exceed ten percent
(10%) of the Company's domestic consolidated net sales for
either of the years ended September 30, 1995 or 1994.
COST OF PRODUCTS SOLD - For the year ended September
30, 1995, consolidated cost of products sold totaled
$26,948,396, compared with $21,251,579 for fiscal year 1994,
an increase of 26.8% which is proportionate with the
increase in net sales over the same period. Gross margins
remained consistent between 1995 and 1994 with the margin as
a percent of net sales for 1995 of 67.0%, compared with
67.3% for fiscal year 1994. During the year the Company
continued to refine and automate its manufacturing
processes. In addition, the Company brought in-house
several previously out-sourced manufacturing operations and
expanded its injection molding capacity. Through these
efforts, the Company has achieved greater manufacturing
efficiencies and related cost savings to help offset the
ever-increasing costs of raw materials and labor.
For the year ended September 30, 1994, consolidated
cost of products sold totaled $21,251,579, an increase of
9.9% over consolidated cost of products sold in 1993. The
increase in costs was due to an unfavorable sales mix and to
rising costs of raw materials and labor, as well as to the
purchase of MIC, whose comparable costs were included in
1993 figures only from its acquisition date. Increased
costs were also attributed to start-up costs associated with
the significant expansion of both Ballard's and MIC's
manufacturing facilities.
OPERATING EXPENSES - Operating expenses consist of
selling, general, and administrative expenses, research and
development expenses, and royalties. Total consolidated
operating expenses for the year ended September 30, 1995
were $27,228,358, compared with $24,106,965 for fiscal year
1994, an increase of 12.9%. The increase is due principally
to increased selling costs resulting from the increased
level of sales, as well as to increased research and
development costs and general overall increases in operating
expenses over the prior year.
The primary increase in operating expenses occurred
with consolidated selling, general, and administrative
expenses. In fiscal year 1995, these expenses increased
$2,601,591, or 12.4%, over 1994. As a percentage of
consolidated net sales, consolidated selling, general, and
administrative expenses decreased 3.5%, from 32.4% in 1994
to 28.9% in 1995. Consolidated expenses related to research
and development and royalties, as a percentage of
consolidated net sales for fiscal year 1995, remained fairly
consistent with those in 1994.
Total consolidated operating expenses for the year
ended September 30, 1994 totaled $24,106,965, compared with
$20,416,082 for fiscal year 1993, an increase of 18.0%. The
increase was due principally to increased selling costs
resulting from the expansion of the sales force, as well as
to increased research and development costs and general
overall increases in operating expenses. Additional
increases were due to the purchase of MIC, whose comparable
costs were included in fiscal year 1993 starting from its
acquisition date.
OTHER INCOME - Other income consists principally of
interest income from short-term investments, royalty income
from the licensing of the TRACH CARE closed suction system,
and the netting of insignificant gains and losses from the
sale or retirement of property and equipment.
For the year ended September 30, 1995 consolidated
other income totaled $4,078,702, compared with $3,519,586
for fiscal year 1994. The increase is primarily due to
increased interest income earned from the Company's
investment of its excess cash reserves. Royalty income
remained consistent between the periods, at approximately
$2,200,000 for each of 1995 and 1994.
For the year ended September 30, 1994, consolidated
other income decreased to $3,519,586 compared with
$3,716,649 in fiscal 1993. During 1994 interest income
decreased approximately $800,000, resulting from decreased
cash and investment reserves (because of the 1993 cash
purchase of MIC), while royalty income increased
approximately $500,000 over 1993.
NET INCOME - Consolidated net income from operations
(before the cumulative effect of change in accounting
principle) for the year ended September 30, 1995 totaled
$20,415,191, an increase of $5,638,046, or 38.2%, over the
previous period. As a percent of net sales, net income for
the year ended September 30, 1995 was 25.0%, compared with
22.7% for the year ended September 30, 1994. The overall
increase in net income reflects the increase in net sales
and management's efforts to control the costs of products
and operations.
Consolidated net income from the Company's operations
(before the cumulative effect of change in accounting
principle) in fiscal year 1994 of $14,777,145 represented a
decrease of 20.3% from the consolidated net income of
$18,540,009 in fiscal year 1993. Despite the decrease,
income, as a percentage of net sales, for the year ended
September 30, 1994 was still strong at 22.7%. In addition
to the slower growth and price reductions previously
discussed above for 1994, the lower net income percentage
resulted in part from higher-than-expected backorders in
high margin products and increased overhead costs.
The cumulative effect of the change in accounting for
income taxes of $1,403,232 in 1994 represented a one-time
benefit (recorded as of October 1, 1993) from the adoption
of Financial Accounting Standards Board Statement No. 109.
INFLATION - Inflation can be expected to have an
effect on most of the Company's operating costs and
expenses. The extent to which inflationary cost increases
can be offset by price increases depends on competition and
other factors. The effect of inflation has been
insignificant during the periods reported herein.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Balance Sheet presents the Company's
financial position at the end of each of the last two years.
The statement lists the Company's assets and liabilities,
and the equity of its stockholders. Major changes in the
Company's financial position are summarized in the
Consolidated Statement of Cash Flows. This statement
summarizes the changes in the Company's cash and cash
equivalents balance for each of the last three years and
helps to show the relationship between operations (presented
in the Consolidated Statement of Operations) and liquidity
and financial resources (presented in the Consolidated
Balance Sheets).
Continued growth in cash and investments provides the
Company financial stability and flexibility to fund current
operations, acquisitions, future growth, and expansion, and
to continue its dividend payment policy. At September 30,
1995, cash and investments grew 45.3% to $45,686,675,
compared with $31,440,367 at September 30, 1994. The
Company's primary source of liquidity comes from cash
provided by operations. The net cash provided to the
Company by operations during the year ended September 30,
1995 grew 65.1% to $25,322,662, compared with $15,339,311
for the year ended September 30, 1994. During fiscal year
1995 the Company paid cash dividends totaling $1,587,600, an
increase of 20.8% over the prior year's payout of
$1,314,485.
At September 30, 1995, the Company's current assets
exceeded its current liabilities by $70,823,934, an increase
of 23.0% over the September 30, 1994 total of $57,581,666.
The Company's current ratio at September 30, 1995 was 17.8
to 1.0. In addition to its strong current ratio, the
Company does not have any long-term debt nor does it intend
to utilize debt to fund future expansion. The Company
maintains a $4,000,000 unsecured line of credit with its
bank but has not drawn on this line during either of the
years ended September 30, 1995 or 1994.
During the year ended September 30, 1995, the Company
made a decision to develop a new, additional manufacturing
facility in Pocatello, Idaho. See discussion of Pocatello
facility under "1995 in Review." Total development and
construction costs of the proposed facility are expected to
approximate $6.8 million. Also during the year, the
Company expanded it injection molding capacity, added a new
clean room to its Milpitas, California facility, and
continued its overall capital investment program to expand
and upgrade operations to meet the growing needs of present
and new business. Other than the Pocatello Facility
mentioned above, no other material commitments for capital
expenditures exist as of September 30, 1995.
Following the signing of the Company's July, 1995
agreement with NNC, the Company advanced $1,275,000
($800,000 of which was advanced in fiscal year 1995) to NNC
to fund NNC's operations pending the closing of the
Company's purchase of the 19.5% equity interest in NNC.
This sum was advanced as a secured loan, in bi-weekly draws
ranging between $50,000 and $100,000. The entire balance of
$1,275,000, plus accrued interest (at 10% per annum) of
$20,637, was paid back to the Company out of the $2.5
million purchase price paid by the Company at the November
14, 1995 closing. See discussion of NNC under "1995 in
Review."
Also during the year ended September 30, 1995, the
Company purchased and retired 100,000 shares of its
outstanding common stock for $1,474,985. A valuation
allowance has not been provided on deferred tax asset
balances due to the Company's projection of future taxable
income in excess of such tax assets.
GLOSSARY OF TECHNICAL AND MEDICAL TERMS
1. Bronchoalveolar lavage is a medical procedure for
obtaining samples from smaller airways in the lungs. A
catheter is wedged into the bronchus. Then a lavage
fluid is injected into the airways. A fluid sample is
withdrawn to determine whether infectious organisms are
present in the airways or air sacs.
2. Biopsy is a procedure to remove living tissue from the
body for diagnostic examination.
3. Catheter is a flexible tube that is inserted into the
body to deliver or remove fluid or act as a conduit to
pass other devices.
4. Closed suction catheter is a sleeved catheter used to
suction the endotracheal tube of a patient receiving
mechanical ventilation. The catheter keeps the patient
oxygenated because the ventilator is not disconnected
during the suctioning procedure.
5. Coagulate means to solidify or change from a fluid
state to a semisolid mass.
6. Cytology brush is a brush used to collect cell samples
from the gastrointestinal or pulmonary tract.
7. Endoscope is an instrument used in the examination of a
hollow space or cavity in the human body.
8. Endoscopic refers to a procedure performed by means of
an endoscope.
9. Endoscopy is an examination of organs accessible to
observation through an endoscope.
10. Endotracheal tube is a tube inserted into the patient's
upper airway allowing medical ventilatory support.
11. Enteral feeding catheter is a catheter used for the
delivery of nutritional liquids into the
gastrointestinal tract of the patient.
12. Exogenous means originating outside an organ or part.
13. Fluoroscopy is the use of a fluoroscope for medical
diagnosis or for testing various materials by roentgen
rays.
14. Gastric means pertaining to the stomach.
15. Gastrostomy is a surgical opening through the skin into
the stomach.
16. Jejunal means pertaining to the jejunum (part of the
small bowel).
17. Jejunostomy is a surgical opening through the skin into
the jejunum.
18. Nosocomial infection is an infection acquired while a
patient is in a hospital.
19. Percutaneous Endoscopic Gastrostomy (PEG) catheter is a
flexible tube inserted through the mouth, esophagus,
and stomach to the outside of the body with the aid of
an endoscope. Name refers to the placement procedure
and is a variation of a gastrostomy tube.
20. Polypectomy is a medical procedure for removal of
polyps (growths).
21. Septic means pertaining to pathogenic organisms or
their toxins, i.e., putrid, rotten or decayed.
22. A surfactant is an agent that lowers surface tension.
23. Transgastric pertains to a bypass of the stomach.
Transgastric tubes are placed through the skin and into
the stomach, with the distal tip terminating in the
jejunum, or elsewhere in the digestive system.
24. A ventilator is a life support device used to assist
breathing.
DIRECTORS
NAME TITLE
Dale H. Ballard Chairman of the Board, Chief
Executive Officer, and President of
Ballard Medical Products
John I. Bloomberg General Partner of J.I.B.
Associates, Bricoleur Partners,
Olympic Growth Fund, and Utah
Capital Corp., all private
investment companies
J. Dallas VanWagoner Practicing Physician, Clinical
Instructor at the University of
Utah School of Medicine
Robert V. Petersen Professor Emeritus of Pharmaceutics
at the University of Utah
E. Martin Chamberlain Vice President of Regulatory
Affairs and Corporate Secretary of
Ballard Medical Products
Dale H. Ballard, Jr. Owner of his own financial planning
business called Stratco
Paul W. Hess General Counsel of Ballard Medical
Products
OFFICERS
NAME TITLE
Dale H. Ballard President, Chief Executive Officer,
and Chairman of the Board.
Harold R. ("Butch") Executive Vice President and
Wolcott General Manager
E. Martin Chamberlain Vice President of Regulatory
Affairs and Corporate Secretary
Bradford D. Bell Vice President of Sales and
Marketing
Kenneth R. Sorenson Treasurer and Chief Financial
Officer
Paul W. Hess General Counsel
SHAREHOLDER INFORMATION
CORPORATE HEADQUARTERS
Ballard Medical Products
12050 Lone Peak Parkway
Draper, Utah 84020
(801) 572-6800
(801) 572-6869
TRANSFER AGENT
First Security Bank
of Utah, N.A.
79 South Main
Salt Lake City, Utah 84111
CO-TRANSFER AGENT
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
ANNUAL MEETINGS
The Annual Meeting of Stockholders of Ballard Medical
Products will be held Monday, January 22, 1996, at the
Company's executive offices, 12050 Lone Peak Parkway,
Draper, Utah, beginning at 11:00 a.m., Mountain Standard
Time. Shareholders of record on November 21, 1995 are
entitled to notice of and to vote at the meeting. A notice
of meeting and proxy statement are enclosed with the Annual
Report.
FORM 10-K
Any shareholder who sends a written request to the
Company's Secretary, E. Martin Chamberlain, at Ballard
Medical Products, 12050 Lone Peak Parkway, Draper, Utah
84020, may obtain without charge a copy of the Company's
Form 10-K for fiscal year 1995, including the financial
statements and the financial schedules.
SHAREHOLDER/ANALYST INQUIRIES
Shareholders, analysts, and others seeking information
about the Company are encouraged to contact Kenneth R.
Sorenson, Chief Financial Officer, Ballard Medical Products,
12050 Lone Peak Parkway, Draper, Utah 84020, with any
questions or comments.
RESEARCH COVERAGE
The following firms currently provide research coverage
of Ballard Medical Products:
AG Edwards - St. Louis, Missouri
Barrett & Company - Providence, Rhode Island
Bear Stearns - New York, New York
Hanifen, Imhoff, Inc. - Denver, Colorado
Olde Discount - Detroit, Michigan
Piper Jaffray - Minneapolis, Minnesota
AUDITORS
Deloitte & Touche LLP
50 South Main Street, Suite 1800
Salt Lake City, Utah 84144
EXHIBIT 21
SUBSIDIARIES OF BALLARD MEDICAL PRODUCTS
JURISDICTION OF
SUBSIDIARY INCORPORATION BUSINESS NAMES
Medical Innovations California Medical Innovations
Corporation Corporation
Ballard Real Estate Utah Ballard Real Estate
Holdings, Inc. Holdings, Inc.
Ballard Virgin Islands Ballard
International, Inc. International, Inc.
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement Nos. 33-23232, 33-34384, 33-43910, and 33-50040 on Form
S-3 and in Registration Statement Nos. 2-90684, 2-94306, 33-0840,
33-17698, 33-25628, 33-36851, 33-41720, 33-56302, 33-73194, AND
33-57735 on Form S-8 of our reports dated November 9, 1995
(November 14, 1995, as to the fourth and fifth paragraph of Note
8), appearing in and incorporated by reference in this Annual
Report on Form 10-K of Ballard Medical Products for the year
ended September 30, 1995.
Deloitte & Touche LLP
Salt Lake City, Utah
November 9, 1995
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