FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For quarterly period ended July 31, 1995
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 0-11571
AEQUITRON MEDICAL, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1359703
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14800 28th Avenue North
Plymouth, Minnesota 55447
(Address of principal executive offices)
(Zip Code)
612/557-9200
(Issuer's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 and 15 (d) of the
Securities and Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods 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.
Common Stock, $.01 Par Value--4,863,950 Shares as of September 12,
1995
INDEX
AEQUITRON MEDICAL, INC.
Part I. Financial Information Page No.
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets--
July 31, 1995 and April 30, 1995. 3-4
Condensed Consolidated Statements of
Income for the Three Months ended
July 31, 1995 and 1994. 5
Condensed Consolidated Statements of
Cash Flows for the Three Months ended
July 31, 1995 and 1994. 6
Notes to Consolidated Financial Statements
- July 31, 1995. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-10
Part II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
PART I. FINANCIAL INFORMATION
AEQUITRON MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, April 30,
1995 1995
(Unaudited)
ASSETS
Current Assets:
Cash $ 1,872,100 $ 4,986,800
Accounts receivable 6,847,900 4,311,200
Inventories 4,240,600 3,071,100
Prepaid expenses 618,100 336,100
Deferred income taxes 606,100 606,100
Total Current Assets $14,184,800 $13,311,300
Property and equipment
Buildings 671,000 652,600
Equipment 4,326,500 3,930,900
Leasehold improvements 32,600 26,800
5,030,100 4,610,300
Less allowances for depreciation (3,037,600) (2,901,400)
1,992,500 1,708,900
Other Assets
Goodwill, net of accumulated
amortization of $2,627,900 at
July 31, 1995 and $2,520,000
at April 30, 1995 3,833,700 1,789,500
Demonstration, evaluation and
rental equipment 1,043,500 1,133,600
Patents 689,400 -
Non-compete agreement 292,900 -
5,859,500 2,923,100
Total Assets $22,036,800 $17,943,300
<PAGE>
AEQUITRON MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CON'T)
July 31, April 30,
1995 1995
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Note payable $ 595,600 $ -
Accounts payable 982,800 1,161,100
Employee compensation 983,700 1,104,900
Commissions payable 533,500 543,200
Other liabilities and accrued
expenses 1,363,500 1,075,000
Current maturities of long-term
debt 405,200 38,300
Income taxes payable 391,900 -
Total Current Liabilities 5,256,200 3,922,500
Long-term debt 2,188,600 64,000
Shareholders' Equity:
Preferred stock, no par value per
share; authorized 4,000,000;
issued and outstanding - none
Common stock, par value $.01 per
share; authorized 15,000,000
shares; issued July 31, 1995--
4,855,000 shares; April 30, 1995
-- 4,848,500 shares 48,600 48,500
Additional paid-in capital 5,844,100 5,933,700
Retained earnings 8,699,300 7,974,600
Total shareholders' equity 14,592,000 13,956,800
Total Liabilities & Shareholders'
Equity $22,036,800 $17,943,300
<PAGE>
AEQUITRON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended July 31,
1995 1994
% of % of
Amount Sales Amount Sales
Net sales $9,562,100 100.0% $8,104,400 100.0%
Cost of sales 4,266,300 44.6% 3,637,400 44.9%
Gross profit 5,295,800 55.4% 4,467,000 55.1%
Operating Expenses:
Selling & marketing 1,841,500 19.3% 1,546,100 19.1%
General & administrative 1,572,300 16.5% 1,411,100 17.4%
Research & development 739,100 7.7% 562,200 6.9%
Other income (45,200) (0.5)% 58,400 (0.7)%
Total 4,107,700 43.0% 3,461,000 42.7%
Income before income taxes 1,188,100 12.4% 1,006,000 12.4%
Income taxes 463,400 4.8% 422,600 5.2%
Net income $ 724,700 7.6% $ 583,400 7.2%
Earnings per share:
Net income per share $ .14 $ .12
Weighted average number
of shares outstanding 5,267,900 4,798,400<PAGE>
AEQUITRON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED JULY 31,
1995 1994
OPERATING ACTIVITIES
Net income $ 724,700 $ 583,400
Adjustments to reconcile to net
cash provided by (used in)
operating activities:
Depreciation 137,600 124,000
Amortization of goodwill and
other intangible assets 125,600 104,000
Provision for losses on
accounts receivable 45,600 44,100
Provision for deferred
income taxes 0 67,500
Change in operating assets
and liabilities:
Accounts receivable (1,986,700) (948,400)
Inventories 130,500 (25,400)
Rental equipment 390,100 151,700
Accounts payable (178,300) 61,000
Other assets and liabilities 34,000 120,100
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (576,900) 282,000
INVESTING ACTIVITIES
Purchases of property, plant
and equipment (117,300) (140,900)
Proceeds from disposal of equipment 400 -
Purchase of sleep diagnostic
product line (4,822,900) -
NET CASH USED IN
INVESTING ACTIVITIES (4,939,800) (140,900)
FINANCING ACTIVITIES
Proceeds from long term borrowings 2,500,000 -
Repayments of long term debt (8,400) (27,300)
Proceeds from exercise of stock options 89,300 -
Purchases & retirement of common stock (178,900) -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,402,000 13,600
NET INCREASE (DECREASE) IN CASH (3,114,700) 154,700
CASH AT BEGINNING OF PERIOD 4,986,800 2,375,200
CASH AT END OF PERIOD $ 1,872,100 $2,529,900<PAGE>
AEQUITRON MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
July 31, 1995
NOTE A--BASES OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended
July 31, 1995 are not necessarily indicative of the results that may
be expected for the year ended April 30, 1996. For further
information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year
ended April 30, 1995.
NOTE B--INVENTORIES
The major classes of inventories consist of the following:
July 31, April 30,
1995 1995
Raw Materials $2,811,400 $1,594,300
Work In Progress 994,100 854,500
Finished Goods 435,100 622,300
$4,240,600 $3,071,100
<PAGE>
AEQUITRON MEDICAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of operations for the first quarter ended July 31, 1995,
versus the first quarter ended July 31, 1994, and analysis of
financial condition as of July 31, 1995 compared to the fiscal year
ended April 30, 1995.
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended July 31, l995, totaled $9,562,100,
which represents an 18.0% increase from the $8,104,400 in net sales
reported for the comparable period of the prior year. The increased
sales are due in part to increased sales in the ventilator product
line both domestically, as a result of a concerted sales and marketing
effort, and internationally, due to larger than anticipated shipments
to Germany-based Dragerwerk. Sales from the recently acquired sleep
diagnostic product line also contributed to the increased sales, while
sales of apnea monitors were less than expected. The Company's
subsidiary, Crow River Industries, also experienced record sales for
the first quarter. The Company expects international sales to level
off and sleep diagnostic product sales to increase for the remainder
of the fiscal year. The Company believes sales in general will remain
strong for the balance of the fiscal year.
Cost of Sales
Gross margins as a percentage of net sales for the quarter ended July
31, 1995, increased to 55.4% from 55.1% for same period in fiscal
1994. The slight increase in gross margin is the result of changes in
product lines with the addition of the sleep diagnostics product line.
Margin levels are expected to remain at first quarter levels for the
balance of the fiscal year.
Operating Expenses
Selling and marketing expenses for the quarter ended July 31, l995
increased $295,400, or 19.1%, over the first quarter of last year,
representing 19.3% of net sales for the quarter ended July 31, 1995,
compared to 19.1% for the comparable quarter of last year.
The increase in expenses reflects additional selling expenses incurred
related to the new sleep diagnostic product line. Sales and marketing
expenses as a percentage of sales are expected to increase slightly
for the remainder of the fiscal year as additional costs will continue
to be incurred relative to the marketing of the sleep diagnostic
product line.<PAGE>
General and administrative expenses for the quarter ended July 31,
l995, increased $161,200, or 11.4%, over the first quarter of last
year. The increase in expenses reflects the costs associated with the
acquisition of the sleep diagnostic product line including,
amortization of goodwill, patent and covenant-not-to-compete,
additional insurance and employee benefits, and additions to the human
resources staff. General and administrative expenses are expected to
remain at current levels for the remainder of the fiscal year.
Research and development expenses for the quarter ended July 31, l995,
increased $176,900, or 31.5%, compared to the same period last year.
The increase in research and development expenditures in fiscal 1995
is part of the Company's commitment to growth through expanded new
product development efforts, along with the additional staff and
expenses associated with the sleep diagnostic product line. Research
and development expenditures may increase marginally for the balance
of the fiscal year as new product development projects continue.
Interest expense for the quarter ended July 31, l995, increased by
$34,800 from the first quarter of fiscal 1994 as a direct result of an
additional $2,500,000 in long-term borrowings used to finance the
acquisition of the sleep diagnostic product line. Other income
increased $21,600 from the same period last year due to additional
earnings on investments and accounts payable discounts.
Net Income
Net income for the quarter ended July 31, l995 was $724,700 which
represents a $141,300 increase compared with the same period a year
ago. This results in net income per share for the three months ended
July 31, 1995 of $.14 compared to net per share of $.12 for the
comparable period last year. The effective tax rate for the quarter
ended July 31, 1995 was 39.0% compared to 42.0% for the same period
last year.
LIQUIDITY AND CAPITAL RESOURCES
Cash decreased to $1,872,100 at July 31, 1995, from $4,986,800 at
April 30, 1995. Operating activities used cash of $576,900 during the
first quarter ended July 31, 1995 compared to providing cash of
$282,000 for the comparable prior year period. The reduction in
operating cash flows resulted primarily from an increase in accounts
receivable of $1,986,700 due to the significant increase in first
quarter sales.<PAGE>
During the quarter the company paid $4,822,900 for the
purchase of the sleep diagnostics product line from CNS, Inc. This
purchase price was financed by a long term debt borrowing of $2,500,000,
a note payable to CNS, Inc. for receivables of $595,600 and the balance
in cash. The company used $8,400 to reduce long term debt and an
additional $117,300 to purchase capital equipment. Capital equipment
expenditures for the balance of the fiscal year are expected to be
approximately $1,225,000.
The maturity date of the Company's line of credit is October 31, 1996.
The Company believes that internally generated funds and existing
borrowing potential will provide sufficient working capital to meet
all present commitments.<PAGE>
PART II
Item 1. Legal Proceedings
There have been no material legal developments since the
last report by the Company.
Item 2. Changes in Securities
No changes have been made in any registered securities.
Item 3. Defaults on Senior Securities
No event constituting a default has occurred with
respect to any senior security of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of securities
holders during the first quarter of fiscal year 1995.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 is filed with this Form 10-Q.
(b) During the first quarter of fiscal 1996, the Company
filed a Form 8-K dated June 1, 1995, reporting the
acquisition of the sleep diagnostics business from CNS,
Inc. under Item 2 and additional information under Item
5.
This Form 8-K was amended on August 14, 1995, to provide
financial statements under Item 7, including (i)
financial statements of the business acquired
(independent auditor's report dated July 17, 1995;
audited statements of assets, liabilities and equity for
the years ended December 31, 1993 and 1994, and unaudited
for the period ended March 31, 1995; audited statements
of operations for the years ended December 31, 1993 and
1994, and unaudited for the period ended March 31, 1995;
audited statements of cash flows for the years ended
December 31, 1993 and 1994, and unaudited for the period
ended March 31, 1995; and notes to above financial
statements); and (ii) pro forma financial information
(unaudited pro forma financial statements of the Company
as of April 30, 1995; unaudited pro forma consolidated
balance sheets as of April 30, 1995; unaudited pro forma
consolidated statement of operations for the year ended
April 30, 1995; and notes to unaudited pro forma
financial statements.)
Pursuant to the requirements of the Securities and Exchange Act of
1934 the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AEQUITRON MEDICAL, INC.
(Registrant)
Dated: September 13, 1995 By /s/ James B. Hickey, Jr.
James B. Hickey, Jr.
President and Chief
Executive Officer
Dated: September 13, l995 By /s/ William M. Milne
William M. Milne
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JUL-31-1995
<CASH> 1,872,100
<SECURITIES> 0
<RECEIVABLES> 7,150,900
<ALLOWANCES> (303,000)
<INVENTORY> 4,240,600
<CURRENT-ASSETS> 14,184,800
<PP&E> 5,030,100
<DEPRECIATION> (3,037,600)
<TOTAL-ASSETS> 22,036,800
<CURRENT-LIABILITIES> 5,256,200
<BONDS> 0
<COMMON> 48,600
0
0
<OTHER-SE> 14,543,400
<TOTAL-LIABILITY-AND-EQUITY> 22,036,800
<SALES> 9,562,100
<TOTAL-REVENUES> 9,562,100
<CGS> 4,266,300
<TOTAL-COSTS> 4,266,300
<OTHER-EXPENSES> 4,067,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,000
<INCOME-PRETAX> 1,188,100
<INCOME-TAX> 463,400
<INCOME-CONTINUING> 724,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 724,700
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share amounts)
Three Months Ended
July 31,
1995 1994
Primary earnings per share:
Average share outstanding 4,850,800 4,798,400
Net effect of dilutive stock
options and warrants-based on
the treasury stock method
using average market price 417,100 2,300
5,267,900 4,800,700
Net income $ 724,700 $ 583,400
Net income per share $ .14 $ .12
Fully-diluted earnings per
share:
Average shares outstanding 4,850,800 4,798,400
Net effect of dilutive stock
options and warrants-based on
the treasury stock method
using ending market price (or
average market price if higher) 417,100 2,300
5,267,900 4,800,700
Net income $ 724,700 $ 583,400
Net income per share $ .14 $ .12
