As filed with the Securities and Exchange Commission
on May 13, 1996
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 1996
(for quarterly period ended)
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 Number)
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)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
The registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for 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.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of stock, as of the latest practicable
date:
27,253,057 - all common, May 10, 1996
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
FORM 10-Q INDEX
Page
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Unaudited Consolidated
Balance Sheets as of March 31,
1996 and September 30, 1995
Condensed Unaudited Consolidated
Statements of Operations for the
three and six months ended March
31, 1996 and 1995
Condensed Unaudited Consolidated
Statements of Cash Flows for the
six months ended March 31,
1996 and 1995
Notes to Condensed Unaudited
Consolidated Financial Statements
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations
Risk Factors
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote
of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Index to Exhibits
DEFINITIONS
As used herein, the following terms have the meanings
indicated:
GENERAL DEFINITIONS
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. "Neuro" refers to Neuro Navigational Corporation,
a Delaware corporation.
GLOSSARY OF TECHNICAL AND MEDICAL TERMS
CATHETER is a flexible tube that is inserted into the body
to deliver or remove fluid, retrieve blood, or act as a
conduit to pass other devices.
CLOSED SUCTION CATHETER is a sleeved catheter used with
endotracheal tubes, on patients receiving mechanical
ventilation, enabling the airways to be suctioned while
maintaining mechanical ventilatory support.
ENDOSCOPE is an instrument used in the examination of a
hollow space or cavity in the human body.
ENDOSCOPIC RETROGRADE CHOLANGIOPANCAROTOGRAPHY ("ERCP") is
the use of flexible catheters employed endoscopically, to
diagnose and treat disorders of the biliary (liver,
pancreas, and gall bladder) tree.
ENTERAL FEEDING CATHETER is a catheter used for the delivery
of nutritional liquids into the gastrointestinal tract of
the patient.
GASTROENTEROLOGY ("GI") is the human digestive tract,
including, but not limited to, the esophagus, stomach,
duodenum, small intestine and colon.
POLYPECTOMY is a procedure in which an abnormal growth,
within the GI tract is removed by means of a flexible wire
loop that incorporates electrocautery capability.
SCLEROTHERAPY uses a needle catheter, employed
endoscopically, to inject medication directly into the varix
of the esophagus, and is most commonly used in treatment of
alcoholics.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS 3/31/96 9/30/95
<S> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents $25,328,316 $27,329,371
Investments available-
for-sale 20,753,322 18,357,304
Trade accounts
receivable - net 14,780,058 13,504,572
Other receivables 1,314,323 1,173,871
Inventories:
Raw materials 4,142,539 3,784,222
Work-in-progress 2,503,048 2,286,542
Finished goods 5,715,231 5,220,882
Deferred income taxes 717,594 593,313
Income tax refunds
receivable 2,103,570
Royalties receivable 893,747 447,282
Prepaid expenses 1,477,610 232,315
Total current assets 77,625,788 75,033,244
PROPERTY AND EQUIPMENT:
Land 3,944,701 1,849,511
Buildings 11,892,512 11,886,512
Molds 2,877,142 2,539,615
Machinery and equipment 8,110,064 8,077,753
Vehicles 558,740 535,547
Furniture and fixtures 1,638,752 1,408,169
Leasehold improvements 249,141 246,735
Construction-in-
progress 4,106,316 1,234,998
Total 33,377,368 27,778,840
Less accumulated
depreciation 6,730,136 5,832,822
Property and
equipment net 26,647,232 21,946,018
INTANGIBLE ASSETS -
net 15,852,584 15,106,614
OTHER ASSETS 3,116,771 933,497
TOTAL $123,242,375 $113,019,373
</TABLE>
See Notes to Condensed Unaudited Consolidated Financial
Statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED BALANCE SHEETS (continued)
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY 3/31/96 9/30/95
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $1,219,015 $1,114,607
Accrued liabilities:
Employee
compensation 936,792 2,301,755
Royalties 391,531 344,712
Other 2,061,112 448,236
Total current
liabilities 4,608,450 4,209,310
DEFERRED INCOME TAXES 472,228 223,757
Total liabilities 5,080,678 4,433,067
STOCKHOLDERS' EQUITY:
Common stock 2,697,276 2,656,129
Additional paid-in
capital 34,077,907 29,213,647
Retained earnings 81,500,803 76,859,258
Net unrealized loss
on investments
available-for-sale
(net of taxes) (114,289) (142,728)
Total
Stockholders'
equity 118,161,697 108,586,306
TOTAL $123,242,375 $113,019,373
</TABLE>
See Notes to Condensed Unaudited Consolidated Financial
Statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
3/31/96 3/31/95 3/31/96 3/31/95
<S> <C> <C> <C> <C>
NET SALES $25,117,211 $20,030,632 $48,258,843 $38,540,861
COST OF PRODUCTS
SOLD 8,489,698 6,621,987 16,323,434 12,840,864
GROSS MARGIN 16,627,513 13,408,645 31,935,409 25,699,997
OPERATING EXPENSES:
Selling, general,
and administrative 7,214,346 5,678,318 13,618,988 11,034,441
Research and
development 737,834 528,291 1,384,679 989,856
Royalties 407,300 307,980 764,601 678,480
Total operating
expenses 8,359,480 6,514,589 15,768,268 12,702,777
OPERATING INCOME 8,268,033 6,894,056 16,167,141 12,997,220
OTHER INCOME - Net 1,583,417 958,460 2,624,447 1,869,760
INCOME BEFORE INCOME
TAX EXPENSE 9,851,450 7,852,516 18,791,588 14,866,980
INCOME TAX EXPENSE 3,600,000 2,872,500 6,830,510 5,320,500
NET INCOME 6,251,450 4,980,016 11,961,078 9,546,480
INCOME PER SHARE:
Common and common
equivalent shares $0.221 $0.181 $0.423 $0.349
Common shares
assuming full
dilution $0.220 $0.180 $0.420 $0.345
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING:
Common and common
equivalent shares 28,301,706 27,515,066 28,304,673 27,380,862
Common shares
assuming full
dilution 28,370,205 27,659,806 28,457,978 27,666,752
</TABLE>
See Notes to Condensed Unaudited Consolidated Financial
Statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
3/31/96 3/31/95
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES $13,181,778 $10,520,909
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures for
property and equipment (3,754,996) (989,654)
Capital expenditures for land (2,158,456)
Proceeds from sale of land 511,429
Investment in Neuro (2,545,454)
Interest bearing advances to
Neuro (920,000)
Receipt of principal on
advances to Neuro 1,275,000
Purchases of investments
available-for-sale (11,761,758) (11,534,097)
Purchases of intangible assets (1,235,515) (1,068,215)
Proceeds from sales of
investments available-for-sale 9,406,746 8,576,440
Net cash used in investing
activities (11,183,004) (5,015,526)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from exercise of
options 3,349,704 166,470
Cash dividends paid (2,153,015) (1,587,600)
Purchase of treasury stock (5,196,518)
Net cash used in financing
activities (3,999,829) (1,421,130)
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (2,001,055) 4,084,253
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 27,329,371 15,109,682
CASH AND CASH EQUIVALENTS,
END OF PERIOD $25,328,316 $19,193,935
</TABLE>
See notes to condensed unaudited consolidated financial
statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
CONDENSED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period
for taxes $4,685,000 $4,466,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
During the six months ended March 31, 1996 and 1995, the
Company increased additional paid-in capital by $1,585,703
and $83,616, respectively, which represents the tax benefit
attributable to the compensation received by employees from
the exercise and disqualifying disposition of incentive
stock options.
During the six months ended March 31, 1996 and 1995, the
Company included in equity $114,289 and $97,311,
respectively, of net unrealized losses on investments
available-for-sale (net of taxes).
See Notes to Condensed Unaudited Consolidated Financial
Statements.
BALLARD MEDICAL PRODUCTS AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
1. In management's opinion, the accompanying condensed
unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial
condition of Ballard and its subsidiaries as of March
31, 1996 and September 30, 1995, the results of
operations for the three and six months ended March 31,
1996 and 1995, and the cash flows for the six months
ended March 31, 1996 and 1995.
2. The results of operations for the three and six months
ended March 31, 1996 are not necessarily indicative of
the results to be expected for the full year ended
September 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's 1995 Annual Report to Shareholders
contains management's discussion and analysis of the
financial condition and results of operations at and for the
year ended September 30, 1995. The following discussion and
analysis describes material changes in the Company's
financial condition and position from September 30, 1995.
Trends of a material nature are discussed to the extent
known and considered relevant. The analysis of results of
operations compares the three and six months ended March 31,
1996, respectively, with the corresponding periods of 1995.
This analysis should be considered in conjunction with the
condensed unaudited consolidated balance sheets, condensed
unaudited consolidated statements of operations, and
condensed unaudited consolidated statements of cash flows.
RESULTS OF OPERATIONS
OVERVIEW - The Company's net sales for the second
quarter and first six months of fiscal year 1996 continued
to grow at better than a 25.0% rate over the corresponding
1995 periods. The growth in net sales reflects the
Company's ability to gain market share through expansion of
its existing business base and to efficiently develop and
deliver new products and enhancements.
The Company's after-tax profits for the second quarter
and first six months of fiscal year 1996 also grew more than
25.0% over the corresponding 1995 periods. The increase in
profits reflects the Company's ongoing cost control programs
and its ability to effectively compete in a dynamic, cost
competitive environment.
SALES - Net sales for the three months ended March 31,
1996 increased 25.4% to $25,117,211, compared with
$20,030,632 for the corresponding period in fiscal year
1995. Net sales for the six months ended March 31, 1996
increased 25.2% to $48,258,843, compared with $38,540,861
for the corresponding period in fiscal year 1995.
The growth in net sales is principally due to expanding
market penetration of all of Ballard's principal product
lines, as well as acceptance of the Company's new products.
The Company's MIC enteral feeding catheters continue to show
especially strong sales growth, with overall growth of MIC
products during the first six months of fiscal 1996 of 44.9%
over the corresponding period in 1995. International sales
showed strong growth in the second quarter of 1996, with
growth of 54.3% over the corresponding quarter of fiscal
1995.
Throughout the first half of the year, pricing for
several products was reduced in order to meet competition
and price reductions demanded by hospitals and large buying
groups. No price increases occurred during the three or six
months covered by this report; therefore, substantially all
of the increase in net sales is attributable primarily to an
increased volume of products sold.
All sales of the Company and related receipts were in
U.S. dollars. Export sales to unaffiliated customers from
the Company's domestic operations did not exceed 10% of the
Company's domestic consolidated net sales.
COST OF PRODUCTS SOLD - Cost of products sold for the
three months ended March 31, 1996 was $8,489,698, compared
to $6,621,987 for the corresponding three months in fiscal
1995. Cost of products sold for the six months ended March
31, 1996 was $16,323,434, compared to $12,840,864 for the
corresponding six months in fiscal year 1995. As a
percentage of net sales, cost of products sold for the three
and six months ended March 31, 1996 was 33.8% for both
periods, compared with 33.0% and 33.3%, respectively, for
the three and six months ended March 31, 1995.
Cost of products sold as a percentage of net sales has
remained relatively consistent during the periods reflecting
the Company's continuing efforts to control manufacturing
costs despite increases resulting from inflationary
pressures. The Company continues to refine and automate its
manufacturing processes, as well as expand its injection
molding capacity. The Company expects cost of products sold
to remain fairly constant at approximately 34.0% of net
sales for the remainder of fiscal year 1996.
OPERATING EXPENSES - Operating expenses consist of
selling, general, and administrative expenses, research and
development expenses, and royalty expenses. Total operating
expenses for the three and six months ended March 31, 1996
were $8,359,480 and $15,768,268, respectively, which
represents increases of 28.3% and 24.1%, respectively, over
the corresponding periods of fiscal year 1995. As a
percentage of net sales, operating expenses for the three
and six months ended March 31, 1996 totaled 33.3% and 32.7%,
respectively, compared with 32.5% and 32.9%, respectively,
for the corresponding periods in fiscal year 1995.
The increase in total operating expenses is due
primarily to selling, general, and administrative expenses
which increased from $5,678,318 and $11,034,441,
respectively, in the three and six months ended March 31,
1995 to $7,214,346 and $13,618,988, respectively, in the
three and six months ended March 31, 1996. These increased
costs are attributable primarily to increased wages,
commissions, and other selling costs associated with the
increased levels of sales. As a percentage of net sales,
selling, general, and administrative expenses remained
relatively consistent, at 28.7% and 28.2%, respectively, for
the three and six months ended March 31, 1996, compared with
28.3% and 28.6%, respectively, for the corresponding periods
of fiscal year 1995. As a percentage of net sales, these
consistent percentages reflect the Company's successful
efforts in controlling its variable selling expenses.
Research and development expenses and royalty expenses,
as a percentage of net sales, also remained relatively
consistent between the periods, approximating 2.9% and 1.6%,
respectively, for both the three and six months ended March
31, 1996, compared with 2.6% and 1.6%, respectively, for the
corresponding periods in fiscal year 1995.
OTHER INCOME - Other income generally consists of
interest income from investments and royalty income from the
licensing of the TRACH CARE closed suction system. In
addition, for the three months ended March 31, 1996 other
income included $448,162 of net gain from the sale of
approximately four acres of land located to the south of the
Company's facility. For the three and six months ended
March 31, 1996, other income totaled $1,583,417 and
$2,624,447, respectively, compared to $958,460 and
$1,869,760, respectively, for the corresponding periods in
fiscal year 1995. Besides the land sale, the increases
primarily reflect the increase in interest income from the
Company's increased cash and investment balances. Royalty
income remains fairly consistent on a quarterly basis,
approximating $600,000 quarterly.
NET INCOME - Net income after taxes for the three and
six months ended March 31, 1996 increased 25.5% and 25.3%,
respectively, to $6,251,450 and $11,961,078, compared to
$4,980,016 and $9,546,480, respectively, for the
corresponding periods in fiscal year 1995. The increase in
net income reflects the growth in net sales, including
strong contributions and market-share gains from the MIC
business, and reflects the Company's successful efforts in
controlling production and operating costs.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended March 31, 1996 the Company's
operating activities provided $13,181,778 in cash and cash
equivalents, compared with $10,520,909 in cash and cash
equivalents provided during the corresponding period in
fiscal year 1995. At March 31, 1996, working capital
totaled $73,017,338, compared with $70,823,934 at September
30, 1995, and the Company's current ratio was 16.8 to 1.0 at
March 31, 1996. The Company had $46,081,638 in cash, cash
equivalents, and investments available-for-sale at March 31,
1996, compared with $45,686,675 at September 30, 1995.
Significant uses of cash during the six months ended
March 31, 1996 included the purchase of 300,000 shares of
treasury stock for $5,196,518, the purchase of a 19.5%
interest in Neuro Navigational for $2,000,000 and related
option for $500,000 (see December 31, 1995 Form 10-Q), the
payment of $2,153,015 in cash dividends, the purchase of
land in California for $2,158,456 (see Item 5. Other
Information), and $1,994,233 in progress payments toward the
construction of the Company's new manufacturing facility in
Pocatello, Idaho.
In addition to its strong liquidity and overall
financial position, the Company does not have any long-term
debt nor does management intend to utilize debt to fund
future expansion. The Company maintains a $5,000,000
unsecured line of credit with its bank but has never drawn
on this line. Continued growth in cash, cash equivalents,
and investments provides the Company financial stability and
flexibility to fund current operations, an aggressive
acquisition program, future growth and expansion, and its
dividend payment policy.
No significant commitments for the purchase of
inventory or property or equipment existed as of March 31,
1996 except as noted in "Item 5 - Other Information."
RISK FACTORS
The following risks should be considered in evaluating
the Company and its shares and the foregoing financial
information:
COMPETITION. A number of well-established medical
device 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 goals similar to the Company's.
Such companies may succeed in developing and marketing
similar products which are better or more cost effective
than those of the Company and its subsidiaries and also may
prove to be more successful than the Company in the
manufacturing and marketing of their products. In recent
months, the Company has reduced pricing for certain products
in order to meet competition pricing and the price
reductions demanded by certain hospitals and large 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 its
products or through acquisitions, and the Company is the
licensee of certain other technology. One of the Company's
early U.S. TRACH CARE patents expired in 1993. 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 and product improvements
recently released into the marketplace or for products
presently being developed. If a significant patent of the
Company were challenged, an adverse ruling could materially
adversely affect the Company's sales and profits.
ACQUISITIONS. In order to continue increasing sales
volume and profits, the Company relies heavily on a program
of acquiring business and new product lines from other
companies. There is always a significant risk that a given
acquisition by the Company will prove to be unsuccessful or
end up not contributing sufficiently to sales and profit
growth of the Company. There is also a risk that hidden and
contingent liabilities of an acquired company could
negatively impact the Company's financial position or even
the acquisition transaction itself.
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 some federal and state law makers.
RESEARCH AND DEVELOPMENT. In the continuing discovery
and development of products, the Company spent $737,834 and
$1,384,679, respectively, in the three and six months ended
March 31, 1996 for research and development activities, and
$2,177,117, $1,638,245 and $1,345,052 in the years ended
September 30, 1995, 1994, and 1993, respectively. The
Company plans to continue spending substantial sums for
discovery, research, and development of products and
improvements of existing 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
costsor toallowthe Companytocontinue togrowand beprofitable.
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
can be no assurance that other technological advances will
not render the Company's technology and certain products
uneconomical 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.
FOREIGN REGULATION. Company products face a wide
variety of existing difficult regulations and a changing
regulatory environment in foreign countries. For example,
in Europe, there is significant pressure to achieve
compliance with international quality standards and to
obtain various certifications which are available at great
effort and expense to the Company. There can be no
assurance that the Company will be successful at obtaining
such certifications so as to be able to continue to sell and
distribute its products in international markets such as
Europe, or that the Company will be able to satisfy
international standards and regulations. Failure to do so
may severely impair the Company's sales growth in
international markets.
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 can be 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, particularly since the
Company prefers to reserve its cash and liquid assets for
growth and possible business acquisitions.
UNCERTAINTY OF FINANCIAL RESULTS AND CAPITAL NEEDS.
There may be substantial fluctuations in the Company's
results of operations because of the timing and recording 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, or
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 external financing. There can be no
assurance that the Company would be able to obtain timely
external 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.
PART II - OTHER INFORMATION
ITEM 1. 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 December 31, 1995. The parties continue
to engage in the discovery process.
LINDA MADSEN V. BALLARD MEDICAL PRODUCTS
Ms. Madsen has retained new counsel. Otherwise, no
material developments have occurred in this litigation since
the filing of the Company's Form 10-Q for the quarter ended
December 31, 1995.
OTHER LITIGATION
The Company is also a party to ordinary routine
litigation incidental to the Company's business.
ITEM 2. CHANGES IN SECURITIES
There are no changes in the rights of the holders of
common stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There are no senior securities of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Since the Company's January, 1996 Annual Meeting of
Shareholders, no matters have been submitted to a vote of
the shareholders.
ITEM 5. OTHER INFORMATION
CALIFORNIA FACILITY
On or about March 26, 1996, the Company purchased
approximately 6.5 acres of land in Fremont City, Alameda
County, California, in order to construct a new
manufacturing facility. The Company intends to consolidate
all of its California manufacturing operations (Milpitas and
Ventura) into this new facility to be built in Fremont. The
purchase price for the land was $2,158,456, all of which was
funded from the Company's cash reserves.
ENDOVATIONS, INC.
On or about April 19, 1996, the Company purchased
(through its California subsidiary, Medical Innovations
Corporation) substantially all the assets and business of
Endovations, Inc. ("Endovations"), a wholly-owned subsidiary
of Arrow Precision Products, Inc. The product lines
purchased from Endovations include the following GI products
(with related patents issued and pending): CAN-OPT ERCP
catheters, ENDO-GUARD mouthguards, polypectomy products,
sclerotherapy needles, and certain pharmaceutical products.
The purchase price for the Endovations assets was
$1,216,382, all of which was funded from the Company's cash
reserves. The Company feels that this acquisition will
complement and strengthen its presence in the hospital GI
environment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Statements concerning computation of income per
share are included in the financial information provided in
Item 1 of Part I and are incorporated by reference into this
Item 6 of Part II of this report.
(b) No reports on Form 8-K were filed during the
period covered by this Form 10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
BALLARD MEDICAL PRODUCTS
(Registrant)
Date: 5/13/96 Dale H. Ballard, President and
Principal Executive Officer
Date: 5/13/96 Kenneth R. Sorenson,
Treasurer and
Principal Financial Officer
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE NO.
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the second
quarter 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 25,328,316
<SECURITIES> 20,753,322
<RECEIVABLES> 15,505,058
<ALLOWANCES> 725,000
<INVENTORY> 12,360,818
<CURRENT-ASSETS> 77,625,788
<PP&E> 33,377,368
<DEPRECIATION> 6,730,136
<TOTAL-ASSETS> 123,242,375
<CURRENT-LIABILITIES> 4,608,450
<BONDS> 0
0
0
<COMMON> 2,697,276
<OTHER-SE> 115,464,421
<TOTAL-LIABILITY-AND-EQUITY> 123,242,375
<SALES> 25,117,211
<TOTAL-REVENUES> 25,117,211
<CGS> 8,489,698
<TOTAL-COSTS> 8,489,698
<OTHER-EXPENSES> 8,359,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 9,851,450
<INCOME-TAX> 3,600,000
<INCOME-CONTINUING> 6,251,450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,251,450
<EPS-PRIMARY> 0.221
<EPS-DILUTED> 0.220
</TABLE>
