<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly period ended JUNE 30, 1999 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
COMMISSION FILE NUMBER 0-11278
MINNTECH CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1229121
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14605 - 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
(Address of principal executive offices)
Registrant's telephone number, including area code: (6L2) 553-3300
------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding At July 5, 1999
----- ---------------------------
Common Stock, $0.05 par value 6,905,126 shares
<PAGE>
Minntech Corporation
Quarterly Report on Form 10-Q
June 30, 1999
Index
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Earnings 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MINNTECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Net sales - product $ 18,768 $ 18,319
Contract revenue 60 360
-------- --------
NET SALES 18,828 18,679
-------- --------
OPERATING COSTS AND EXPENSES
Cost of product sales 10,683 10,180
Research and development 1,231 1,076
Selling, general and administrative 5,199 5,063
Amortization of intangible assets 173 197
-------- --------
Total operating costs and expenses 17,286 16,516
-------- --------
EARNINGS FROM OPERATIONS 1,542 2,163
Other income, net 227 36
-------- --------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTEREST 1,769 2,199
Provision for income taxes 601 743
Minority interest -- (13)
-------- --------
NET EARNINGS $ 1,168 $ 1,469
-------- --------
-------- --------
NET EARNINGS PER SHARE
Basic $ .17 $ .22
-------- --------
-------- --------
Diluted $ .17 $ .21
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 6,815 6,789
-------- --------
-------- --------
Diluted 7,032 7,061
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3
<PAGE>
MINNTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
ASSETS (Unaudited)
June 30, 1999 March 31, 1999
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 7,397 $ 9,171
Accounts receivable, less allowance for doubtful accounts
of $597 and $590, respectfully 18,080 17,537
Inventories
Finished goods 5,516 5,626
Materials and work-in-process 6,842 6,611
-------- --------
Total inventories 12,358 12,237
Prepaid expenses and other current assets 2,619 2,330
-------- --------
TOTAL CURRENT ASSETS 40,454 41,275
PROPERTY AND EQUIPMENT
Land, buildings and improvements 10,473 10,507
Machinery and equipment 26,427 25,464
-------- --------
36,900 35,971
Less accumulated depreciation (21,663) (20,950)
-------- --------
Net property and equipment 15,237 15,021
OTHER ASSETS
Patent costs, net 697 524
Goodwill, net 855 960
Other 433 946
-------- --------
TOTAL ASSETS $ 57,676 $ 58,726
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable $ 247 $ 252
Accounts payable 3,565 3,977
Income taxes payable -- 543
Accrued expenses 2,065 4,599
-------- --------
TOTAL CURRENT LIABILITIES 5,877 9,371
Deferred income taxes 82 82
Deferred compensation 820 755
-------- --------
TOTAL LIABILITIES 6,779 10,208
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 shares authorized, -- --
none outstanding
Common stock, $.05 par value; 20,000,000 shares authorized, 344 339
6,884,126 and 6,778,617 shares issued and outstanding, respectively
Additional paid-in capital 14,142 12,889
Accumulated other comprehensive income (509) (347)
Retained earnings 36,920 35,637
-------- --------
TOTAL STOCKHOLDERS' EQUITY 50,897 48,518
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,676 $ 58,726
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4
<PAGE>
MINNECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
June 30
-----------------
1999 1998
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 1,168 $ 1,469
Adjustments to reconcile net earnings to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,058 1,155
Tax benefit from stock option exercises 115 33
Provision for losses on accounts receivable -- 45
Foreign currency exchange loss 11 (45)
Deferred income taxes -- 177
------- -------
Minority interest -- (13)
Gain on sale of land (176) --
Other, net 5 203
Changes in assets and liabilities:
Accounts receivable (543) 632
Inventories (121) 189
Prepaid expenses (289) (991)
Accounts payable (412) (751)
Accrued expenses (2,219) (1,546)
Income taxes payable (610) 585
------- -------
Total adjustments (3,181) (327)
------- -------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (2,013) 1,142
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (1,101) (1,421)
Patent application costs (240) (77)
Proceeds from sale of undeveloped land 709 --
Other (20) (5)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (652) (1,503)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on note payable (5) --
Proceeds from exercise of stock options 1,040 361
Proceeds from employee stock purchase plan 64 61
Repurchase of common stock (35) --
------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,064 422
Effects of exchange rate changes on foreign currency (173) 19
------- -------
cash balances
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,774) 80
Cash and cash equivalents at beginning of period 9,171 6,805
------- -------
Cash and cash equivalents at end of period $ 7,397 $ 6,885
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5
<PAGE>
MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - FINANCIAL INFORMATION
The unaudited interim condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission; accordingly, certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
These interim condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes in the
Company's Annual Report on Form 10-K for the year ended March 31, 1999 as filed
with the Securities and Exchange Commission.
Certain reclassifications have been made to make the prior year financial
statements comparable with the current year's presentation. The reclassification
had no effect on earnings or shareholders' equity as previously reported.
In the opinion of management, the condensed consolidated financial statements
reflect all adjustments necessary for a fair presentation of the interim
periods.
NOTE 2 - RESTRUCTURING AND UNUSUAL ITEMS
During the first quarter ended June 30, 1999, $.08 million of employee related
costs were paid, reducing the restructuring reserve balance. The restructuring
reserve balance as of June 30, 1999 totaled $.23 million.
NOTE 3 - LINE OF CREDIT
At June 30, 1999, the Company had a line of credit with a commercial bank which
allowed the Company to borrow up to $10 million on an unsecured basis at the
prime rate of interest (7.75% at June 30, 1999) or the indexed London Interbank
Offered Rate (LIBOR). As of June 30, 1999, the Company had no outstanding
borrowings under the line of credit.
NOTE 4 - NET EARNINGS PER SHARE
The following table reconciles the numerators and denominators of the basic and
diluted earnings per share computations for the three month periods ended June
30, 1999 and 1998.
<TABLE>
<CAPTION>
(in thousands, except per share amounts) Basic Effect of Dilutive Diluted
Three months ended 6/30/99 Earnings Per Share Stock Options Earnings Per Share
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings $1,168 $1,168
Weighted average common shares outstanding 6,815 217 7,032
Per share amount $ .17 $ .17
Three months ended 6/30/98
- ------------------------------------------------------------------------------------------------------------
Net earnings $1,469 $1,469
Weighted average common shares outstanding 6,789 272 7,061
Per share amount $ .22 $ .21
</TABLE>
Outstanding stock options to purchase 43,788 shares of common stock as of June
30, 1999 were not included in the computation of diluted earnings per share
because the options' exercise prices were greater than the average market price
of the common shares during the period.
Page 6
<PAGE>
MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 5 - COMPREHENSIVE INCOME
The components of comprehensive income are as follows (in thousands):
Consolidated Statement of Stockholders' Equity
(dollars in thousands)
<TABLE>
<CAPTION>
Common Stock
-----------------------------------
Shares Additional Accumulated other
Issued and Paid-In Comprehensive Retained
Outstanding Amount Capital Income Earnings Total
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at March 31, 1999 6,778,617 $ 339 $ 12,889 $ (347) $ 35,637 $ 48,518
Net earnings -- -- -- -- 1,168 1,168
Foreign currency translation adjustment -- -- -- (162) -- (162)
(including taxes of $83)
--------------------------------------------------------------------------------
Comprehensive Income -- -- -- -- -- 1,006
--------------------------------------------------------------------------------
Exercise of stock options 86,500 4 1,036 -- -- 1,040
Repurchase of common stock (3,000) -- (35) -- -- (35)
Employee stock purchase plan 22,009 1 252 -- -- 253
Tax benefit from exercise of stock options -- -- -- -- 115 115
--------------------------------------------------------------------------------
Balances at June 30, 1999 6,884,126 $ 344 $ 14,142 $ (509) $ 36,920 $ 50,897
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
NOTE 6 - SUBSEQUENT EVENT
During July 1999, the Company signed a letter of intent to transfer all
assets and rights related to it's Biocor-TM- oxygenator and EnGUARD-TM- PHX
cardioplegia systems components to Lifestream International LLC, a newly
formed cardiopulmonary products company, in exchange for $7.2 million in cash
and warrants. Under the terms of the agreement, Minntech will receive $2.5
million in cash at closing, and the balance of $4.7 million over the
following two years. The company anticipates that this transaction will
result in a small capital gain which, will be offset by related nonrecurring
expenses.
NOTE 7 - SEGMENT DATA AND SIGNIFICANT CUSTOMERS
Effective for fiscal year end 1999, the Company adopted Statement of Financial
Accounting Standards (SFAS) 131, "Disclosure about Segments of an Enterprise and
Related Information". SFAS 131 requires that a public business enterprise report
financial and descriptive information about its reportable operating segments.
Generally, financial information is required to be reported on the basis that it
is used internally for evaluating segment performance and deciding how to
allocate resources to segments. The objective is to provide information about
the different types of business activities in which the Company engages, and the
different economic environments in which it operates to help users of financial
statements.
The Company's businesses are organized, managed, and internally reported as
three segments. These segments, which are based upon products, services and
industry, are Dialysis Products, Cardiosurgery Products and Other (Developing
Businesses). Management of these segments includes responsibility for different
product lines and services on a geographic basis, including accountability for
revenues as well as sales and marketing costs.
Page 7
<PAGE>
MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
Research and development is managed at the corporate level. Resource decisions
and performance assessment is managed by corporate officers. Research and
development expenses are monitored by project and allocated to their respective
segments. Corporate Administration costs are not allocated to reportable
segments. Therefore, management does not represent that these segments, if
operated independently, would report the operating income and other financial
information shown below. The table below presents information about reportable
segments for the first quarter of fiscal 2000 and the first quarter of fiscal
1999.
BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
Other
Dialysis Cardiosurgery Developing Corporate & Total
Products Products Businesses Unallocated (1) Company
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUES
First quarter 2000 $13,816 $ 3,673 $1,279 $ 60 $18,828
First quarter 1999 $12,850 $ 3,794 $1,675 $ 360 $18,679
INCOME (LOSS) FROM OPERATIONS
First quarter 2000 $ 4,068 $ 459 $ (318) $(2,667) $ 1,542
First quarter 1999 $ 4,232 $ 541 $ (287) $(2,323) $ 2,163
IDENTIFIABLE ASSETS (2)
First quarter 2000 $21,010 $14,200 $2,910 $19,556 $57,676
First quarter 1999 $16,224 $11,510 $3,161 $20,899 $51,814
</TABLE>
(1) Loss from operations consists of unallocated corporate administrative
expenses and amortization of intangibles.
(2) Identifiable segment assets include accounts receivable, property plant and
equipment, and inventories. Additional assets included in Corporate
Administration primarily include cash and marketable securities,
capitalized patent costs, deferred income taxes, goodwill, land and certain
prepaid expenses.
GEOGRAPHIC AREAS
Information in the table below is presented on the basis which the company uses
it to manage the identifiable segments. International sales amounted to 25% and
23% of revenues for the first quarter of fiscal 2000, and the first quarter of
fiscal 1999, respectively. Substantially all of the Company's export sales are
negotiated, invoiced and paid in U.S. dollars.
GEOGRAPHIC AREA INFORMATION
<TABLE>
<CAPTION>
United states International Other Eliminations Total
------------- ------------- ----- ------------ -----
<S> <C> <C> <C> <C> <C>
REVENUES
First quarter 2000 $16,229 $5,441 $ 60 (1) $(2,902) $18,828
First quarter 1999 $16,007 $4,975 $360 (1) $(2,663) $18,679
Property, Plant
& EQUIPMENT, NET
First quarter 2000 $12,405 $2,832 -- -- $15,237
First quarter 1999 $12,320 $1,409 -- -- $13,729
</TABLE>
(1) Contract revenue received during fiscal 1999.
Page 8
<PAGE>
MINNTECH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
SIGNIFICANT CUSTOMERS
The following table summarizes sales to the Company's customers exceeding 10% of
total revenues as follows:
<TABLE>
<CAPTION>
Significant customer Revenues Percentage of Revenues
-------------------- -------- ----------------------
<S> <C> <C> <C>
Quarter Ended June 30, 1999 A -- --
Quarter Ended June 30, 1998 A $1,893 10%
</TABLE>
Customer A is included in the Dialysis Products segment. The Company's
historical credit losses have not been significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues in the first quarter of fiscal 2000 increased .8 percent, to $18.8
million compared to $18.7 million in the first quarter of fiscal 1999. Revenues
in the first quarter of last fiscal year included $.36 million for achieving
milestone events in the Company's licensing and development agreement with
Advanced Sterilization Products, a division of Ethicon, Inc., a Johnson &
Johnson Company (ASP).
Excluding contract revenue, product sales increased 2.5 percent compared to the
first quarter of fiscal 1999. Sales of dialysis products increased 7.5 percent
over the same period a year ago due primarily to a 40 percent increase in
dialysis concentrate sales partially offset by a 7.5 percent decline in dialyzer
reprocessing product sales. Cardiosurgery product sales decreased 3.2 percent as
a result of a decline in hemofilter and hemoconcentrator sales. Developing
business product sales decreased 23.6 percent for the quarter due to lower sales
of endoscope reprocessing products, partially offset by a 52 percent increase in
filtration and separation product sales.
Product sales by group are summarized on the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Three Months Ended June 30
(in thousands of dollars) 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dialysis products $13,816 73,6% $12,850 70.1%
Cardiosurgery products 3,673 19.6% 3,794 20.7%
Developing Business Products 1,279 6.8% 1,675 9.2%
---------------------------------
Total Company Sales $18,768 100.0% $18,319 100.0%
---------------------------------
---------------------------------
</TABLE>
Following is a summary of income/(loss) from operations before income taxes by
business segment:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Three Months Ended June 30 % of Segment % of Segment
(in thousands of dollars) 1999 Revenues 1998 Revenues
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dialysis products $ 4,068 29.4% $ 4,232 32.9%
Cardiosurgery products 459 12.5% 541 14.3%
Other (Developing Businesses) (318) -- (287) --
Corporate & Unallocated (2,667) -- (2,323) --
-------------------------------------------------------
Total Company $ 1,542 8.2% $ 2,163 11.6%
-------------------------------------------------------
-------------------------------------------------------
</TABLE>
Page 9
<PAGE>
Gross margin on net product sales as a percentage of sales in the quarter ended
June 30, 1999 decreased to 43.1 percent from 44.4 percent in the same quarter
last fiscal year. The decrease in gross margin this quarter is attributable to
unfavorable product mix combined with lower average selling prices in dialyzer
reprocessing products. The unfavorable product mix is attributable to increased
dialysis concentrate product sales.
Research and development expenses in the first quarter ended June 30, 1999 were
$1.2 million or 6.5 percent of revenues compared to $1.1 million or 5.8 percent
of revenues, in the first quarter of fiscal 1999. The increase in research and
development spending in the quarter is related to the development of a
second-generation endoscope reprocessing system combined with increased spending
on dialyzer reprocessing programs. The Company expects that research and
development in fiscal 2000 will approximate 5.0 to 5.7 percent of revenues.
Selling, general and administrative expenses in the quarter ended June 30, 1999
were $5.2 million or 27.6 percent of revenues, compared to $5.1 million or 27.1
percent of revenues, in the first quarter one year ago. The selling, general and
administrative increase is primarily due to expanded dialyzer reprocessing
marketing efforts.
Other income in the first quarter reflects a $.176 million gain related to the
sale of a parcel of undeveloped land.
The Company's effective income tax rate was 34 percent for the quarter ended
June 30, 1999 compared to an effective rate of 33.8 percent in the first quarter
of the prior fiscal year. The Company expects the effective tax rate for fiscal
2000 to range between 33.5 and 34.5 percent.
The Company reported net earnings of $1.17 million for the quarter ended June
30, 1999, or 6.2 percent of revenue, compared to net earnings of $1.47 million,
or 7.9 percent of revenues, in the first quarter one year ago. The decrease in
net earnings is primarily attributable to a decrease in contract revenues as
compared to fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities used $2.0 million of cash and cash equivalents in the
first quarter of fiscal 2000. In addition, the Company invested $1.1 million
in capital equipment in the first quarter and plans to invest between $3.5
million and $4.0 million during fiscal 2000. Proceeds from the exercise of
stock options provided $1.0 million in equity capital during the first
quarter of fiscal 2000. The Company also received $.7 million for the sale of
underdeveloped land in the first quarter of fiscal 2000.
On August 21, 1998 the Company announced a stock repurchase program. Through
August 4, 1999 the Company expended $1.3 million to repurchase 129,200 shares of
common stock. During the first quarter of fiscal 2000 the Company repurchased
3,000 shares of common stock. At June 30, 1999, the Company had $7.4 million of
cash and cash equivalents.
Working capital at June 30, 1999 was $34.6 million compared to $31.9 million at
March 31, 1999. The current ratio at June 30, 1999 was 6.9, compared to 4.4 at
March 31, 1999.
In April 1998, the Company signed a finite risk insurance policy to cover
potential future product liability and legal defense exposures. Payments of $1.0
million in April 1998 and $.7 million in April 1999 were made. Future payments
of $.7 million are planned through April 2001. In the event that these exposures
do not materialize, the Company will recover a portion of these premiums.
In May 1999, the Company signed a letter of intent to acquire the rights to
commercialize a patented cancer therapy and purchase a related apheresis clinic.
The Company expects its cash balances, cash flows from operations, and line of
credit to be adequate to meet its obligations to complete this acquisition and
other anticipated operating cash needs in fiscal 2000.
Page 10
<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year. As a result of this
issue, computer programs that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. The Year 2000 issue could
result in system failures or miscalculations causing disruption of operations,
including, among other things, a temporary inability to process transactions
involving the recording of sales, manufacture of products, management of
inventory and distribution, preparation of invoices and collection of accounts
receivable.
The Company's management has established a program to address the Year 2000
issue in three phases as follows: (a) an assessment phase, (b) an analysis and
resolution strategy phase, and (c) a remediation and testing phase. The
compliance program focuses on the Company's information technology systems as
well as non-information technology systems (such systems contain embedded
technology in manufacturing, laboratory, or process control equipment containing
microprocessors or other similar circuitry).
The assessment phase, during which management attempted to identify all hardware
and software that affect the Company's operations, has been completed with
respect to the majority of the Company's operations. Based on the results of the
assessment phase, the Company has determined that its primary hardware and
operating system software is Year 2000 compliant. In addition, the Company's
internal financial and enterprise resource planning systems are compliant.
Management has determined that certain hardware and software will need to be
updated or replaced so that its information systems will properly recognize
dates after December 31, 1999.
The Company is currently in the remediation phase for most of its information
technology systems. For non-information technology, or embedded technology
systems, the Company is in the assessment, analysis and resolution strategy
phase. The Company anticipates that internal Year 2000 remediation projects will
be completed and tested by August 30, 1999.
In addition, the Company has reviewed and requested assurances on the status of
Year 2000 readiness of its critical suppliers. Many of these suppliers have
either declined to provide, or have limited their assurances on the status of
Year 2000 readiness. The Company will continue to monitor critical suppliers.
The Company is in the process of assessing the Year 2000 readiness of major
customers and their Year 2000 status is unclear. If a significant number of
suppliers and customers experience disruptions as a result of Year 2000 issues,
this could have a material adverse effect on the Company.
The Company is currently developing contingency plans and scenarios, and
anticipates that such plans and testing will be completed by October 31, 1999.
Through June 30, 1999, the Company has spent approximately $.7 million for Year
2000 remediation. Based on the status of assessments and re-mediation plans to
date, the Company estimates the total remaining cost of remediation at less than
$.1 million. The Company believes it has ample resources to fund and complete
remediation and testing. However, estimates of Year 2000 costs are based on
numerous assumptions, and there can be no assurance that the estimates are
correct or that the actual costs will not be materially greater than
anticipated.
Based on its assessments and current knowledge, the Company believes it will
not, as a result of the Year 2000 issue, experience any material disruptions in
internal manufacturing processes, information processing or interfaces with
major customers, or with processing orders and billing. However, if certain
critical third-party providers, such as providers of electricity, water or
telephone service experience difficulties resulting in disruption of service to
the Company, a shutdown of the Company's operations at individual facilities
could occur for the duration of the disruption. The Company's management will
establish a contingency plan to provide for continuity of processing if the
Company's Year 2000 compliance efforts fail. Assuming no major disruption in
service from utility companies or other critical third-party providers, the
Company believes that Year 2000 compliance will not have a material effect on
the Company's results of operations or financial condition.
Part 11
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT FORM OF FILING
- ----------- ------------------------------------------------------------ --------------
<S> <C> <C>
3(a) Restated Articles of Incorporation, as amended
3(b) Restated By-Laws(1)
3(c) Amendment to By-Laws in November 1998(2)
4(a) Form of Specimen Common Stock Certificate(3)
4(b) Rights Agreement, dated as of July 1, 1999, between
Company and Norwest Bank Minnesota, National Association(4)
10(a) 1989 Stock Plan, as amended(5)*
10(b) Amendment to 1989 Stock Plan Effecitve February 25, 1998(6)*
10(c) Form of Employment Agreement dated September 1, 1996 with
certain officers of the Company(5)*
10(d) Separation and Consulting Agreement with Dr. Louis C. Cosentino
dated April 1, 1997(5)*
10(e) 1990 Employee Stock Purchase Plan, as amended June 1, 1993(3)
10(f) Supplemental Executive Retirement Plan effective April 1,
1996(7)*
10(g) Amendment to Supplemental Executive Retirement Plan effective
April 1, 1998(6)*
10(h) Director Emeritus Consulting Plan(8), as amended(9)*
10(i) Amended 1998 Stock Option Plan(2)
21 Subsidiaries of the Registrant
23 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
</TABLE>
- ----------
b) Reports on Form 8-K Current Report on Form 8-K, filed on July 13, 1999,
relating to press release regarding execution of letter of intent of
proposed acquisition.
Current Report on Form 8-K, filed on May 25, 1999, relating to the
adoption of the rights agreement.
* Management contract, compensatory plan or arrangement filed purusant to Rule
601(b)(1)(iii)(A) of Regulation S-K under the Securities Exchange Act of 1934.
(1) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995, File No. 0-11278
(2) Incorporated by reference to the specified to the specified exhibit filed
as part of the Company's Registration Statement on Form S-8, Registration No.
333-70545.
(3) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1993, File
No. 0-11278.
(4) Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed on July 12, 1999, File No. 0-11278.
(5) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1997, File
No. 0-11278.
(6) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1998, File
No. 0-11278.
(7) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-K for the year ended March 31, 1995, File
No. 0-11278.
(8) Incorporated by reference to the specified exhibit filed as part of the
Company's Annual Report on Form 10-Q for the quarter ended June 30, 1995,
File No. 0-11278.
(9) Incorporated by reference to the specified exhibit filed as part of the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, File No. 0-11278.
Page 12
<PAGE>
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.
Minntech Corporation
Date: August 13, 1999
---------------
/s/ Jules l. Fisher
-----------------------------
Jules L. Fisher
Chief Financial Officer
(Duly authorized officer)
(Principal financial officer)
Page 13
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCES TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY>U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
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<CASH> 7,397
<SECURITIES> 0
<RECEIVABLES> 18,677
<ALLOWANCES> 597
<INVENTORY> 12,358
<CURRENT-ASSETS> 40,454
<PP&E> 36,900
<DEPRECIATION> 21,663
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<CURRENT-LIABILITIES> 5,877
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0
0
<COMMON> 344
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<SALES> 18,768
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<INCOME-PRETAX> 1,769
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<INCOME-CONTINUING> 1,168
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<EXTRAORDINARY> 0
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<EPS-BASIC> .17
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