<PAGE> 1
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 Quarter Ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___to ___
Commission file number 0-19386
FISCHER IMAGING CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-2756787
(State of incorporation) (I.R.S. Employer Identification No.)
12300 North Grant Street
Denver, Colorado 80241
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 452-6800
Indicate by check mark whether the Registrant (I) 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 (ii) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
<TABLE>
<CAPTION>
Shares Outstanding as of
Title of Class March 31, 1996
- --------------------- -------------------------
<S> <C>
Common Stock, $0.01 par value 5,682,410
Series D Convertible Preferred Sto1,333,333 par value 1,333,333
</TABLE>
<PAGE> 2
FISCHER IMAGING CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations -
Three months ended March 31, 1996
and April 2, 1995 4
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and April 2, 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
<PAGE> 3
FISCHER IMAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 580 $ 968
Trade accounts receivable, net of allowance for doubtful accounts
of approximately $421 and $449 at March 31, 1996 and
December 31, 1995, respectively 19,190 19,957
Inventories 22,745 20,790
Other current assets 3,370 3,202
-------- --------
Total current assets 45,885 44,917
-------- --------
PROPERTY AND EQUIPMENT (at cost):
Manufacturing equipment 7,798 7,591
Office equipment and leasehold improvements 4,598 4,789
-------- --------
12,396 12,380
Less- Accumulated depreciation and amortization 8,236 8,288
-------- --------
Property and equipment, net 4,160 4,092
-------- --------
INTANGIBLE ASSETS, net 4,833 4,798
DEFERRED COSTS AND OTHER ASSETS 2,019 1,843
-------- --------
Total assets $ 56,897 $ 55,650
======== ========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Disbursements in transit $ 725 $ 1,088
Notes payable and current maturities of long-term debt 5,689 4,344
Trade accounts payable 7,658 8,352
Accrued salaries and wages 2,247 2,192
Other current liabilities 4,398 4,973
-------- --------
Total current liabilities 20,717 20,949
LONG-TERM DEBT 181 378
OTHER NONCURRENT LIABILITIES 391 739
-------- --------
Total liabilities 21,289 22,066
-------- --------
STOCKHOLDERS' INVESTMENT:
Common Stock, $.01 par value, 25,000,000 shares authorized, 5,682,410
and 5,550,691 shares issued and outstanding at March 31, 1996 and
December 31, 1995, respectively 57 56
Series C Junior Participating Preferred Stock, $.01 par value, 500,000 shares
authorized, no shares issued and outstanding -- --
Series D Convertible Preferred Stock, $.01 par value, 1,333,333 shares
authorized, issued and outstanding at March 31, 1996 and
December 31, 1995; liquidation preference of $10,000,000 13 13
Additional paid-in capital 35,600 34,679
Accumulated earnings (deficit) 46 (1,027)
Cumulative translation adjustment (108) (137)
-------- --------
Total stockholders' investment 35,608 33,584
-------- --------
Total liabilities and stockholders' investment $ 56,897 $ 55,650
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
FISCHER IMAGING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
March 31, April 2,
1996 1995
--------- --------
<S> <C> <C>
NET REVENUES $ 20,073 $ 16,625
COST OF SALES 11,588 10,695
-------- --------
Gross profit 8,485 5,930
-------- --------
OPERATING EXPENSES:
Research and development 1,464 1,665
Selling, marketing and service 4,358 3,299
General and administrative 1,131 1,141
-------- --------
Total operating expenses 6,953 6,105
-------- --------
EARNINGS (LOSS) FROM OPERATIONS 1,532 (175)
Interest expense (220) (255)
Other income (expense), net 111 (39)
-------- --------
EARNINGS (LOSS) BEFORE INCOME TAXES 1,423 (469)
Provision for income taxes 350 --
-------- --------
NET EARNINGS (LOSS) $ 1,073 $ (469)
======== ========
NET EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.15 $ (0.08)
======== ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 7,211 5,548
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
FISCHER IMAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------
March 31, April 2,
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 1,073 $ (469)
------- -------
Adjustments to reconcile net earnings (loss) to net cash
(used in ) provided by operating activities-
Depreciation and amortization 572 553
Provision for minority interests (36) 7
Other (7) 60
Net changes in assets and liabilities-
Decrease in trade accounts receivable 767 1,325
Increase in inventories (1,955) (778)
Increase in other current assets (168) (476)
(Increase) decrease in deferred costs and other assets (176) 28
(Decrease) increase in disbursements in transit (363) 163
(Decrease) increase in trade accounts payable (694) 506
Increase in accrued salaries and wages 55 120
Decrease in other current liabilities (575) (644)
Increase (decrease) in other noncurrent liabilities 19 (25)
------- -------
Total adjustments (2,561) 839
------- -------
Net cash (used in) provided by operating activities (1,488) 370
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (407) (136)
------- -------
Net cash used in investing activities (407) (136)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 370 102
Net borrowings (repayments) under line of credit agreements 1,327 (131)
Repayments of long-term debt (219) (247)
Decrease in cumulative translation adjustment 29 243
------- -------
Net cash provided by (used in) financing activities 1,507 (33)
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (388) 201
CASH AND CASH EQUIVALENTS, beginning of period 968 508
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 580 $ 709
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
FISCHER IMAGING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated balance
sheets and statements of operations and cash flows contain all adjustments,
consisting only of normal recurring items, necessary to present fairly the
financial position of Fischer Imaging Corporation (the "Company") at March 31,
1996, its results of operations for the three months ended March 31, 1996 and
April 2, 1995 and cash flows for the three months ended March 31, 1996 and
April 2, 1995.
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles. The financial statements should be read in conjunction with the
audited financial statements and notes thereto contained in the Company's
latest annual report on Form 10-K for the year ended December 31, 1995.
2. INVENTORIES
Inventories include costs of materials, direct labor and manufacturing
overhead. Inventories are priced at the lower of cost (using primarily the
last-in, first-out ("LIFO") method of valuation) or market. Writedowns for
excess or obsolete inventories are charged to expense in the period in which
conditions giving rise to the writedowns are first recognized.
Inventories consisted of the following components (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Raw materials $ 11,372 $ 12,040
Work in process and finished goods 12,575 9,952
LIFO valuation adjustment (1,202) (1,202)
-------- --------
Total Inventories $ 22,745 $ 20,790
======== ========
</TABLE>
3. OTHER CURRENT LIABILITIES
Other current liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Customer deposits and deferred revenue $1,692 $2,132
Accrued warranty and installation costs 1,196 1,140
Other 1,510 1,701
------ ------
Total other current liabilities $4,398 $4,973
====== ======
</TABLE>
6
<PAGE> 7
4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Notes payable to banks under revolving
line of credit agreement $ 3,970 $ 2,643
Promissory notes payable 260 386
Non-competition note payable 844 829
Capitalized lease obligations 724 791
Other 72 73
------- -------
5,870 4,722
Less Current maturities (5,689) (4,344)
------- -------
Long-term debt $ 181 $ 378
======= =======
</TABLE>
The Company currently has a $15.0 million working capital line of credit
secured by accounts receivable, inventory and fixed assets. The line of credit
expires on February 1, 1997. Borrowings under the line of credit are subject to
borrowing base restrictions which, as of March 31, 1996, amounted to
approximately $ 15.0 million. See "Management's Discussion & Analysis -
Liquidity and Capital Resources" for an additional discussion of the Company's
line of credit.
5. ISSUANCE OF PREFERRED STOCK
During the second quarter of 1995, the Company issued 1,333,333 shares of
Series D Convertible Preferred Stock for $10 million. The preferred stock is
non-voting and not redeemable, bears no stated dividend, has a $7.50 per share
preference upon liquidation and is convertible into common stock on a
one-for-one basis (subject to customary anti- dilution protection) at the
option of the holder.
6. NET EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net earnings (loss) per share is computed based on results of operations
attributable to common stock and the weighted average number of common and
common equivalent shares outstanding during each of the periods. The preferred
shares issued during the second quarter of 1995 (see Note 5) are treated as
common stock equivalents in the calculation of earnings per share. The Company
uses the treasury stock method for determining the effect of outstanding stock
options on earnings per share.
Earnings per share are calculated by dividing the net earnings by the weighted
average of common and common equivalent shares outstanding during each of the
periods.
7
<PAGE> 8
7. FISCHER MIDWEST ACQUISITION
During the fourth quarter of 1995, the Company reached an agreement in
principle for the acquisition of the 45% minority interest of Fischer Imaging
Midwest, Inc. in exchange for 63,162 shares of the Company's stock. The Company
accounted for this transaction, which closed in February 1996, as a purchase,
acquiring net assets with a net book value of approximately $331,000 and
recording goodwill of approximately $221,000. As part of the acquisition
agreement, the purchase price may be adjusted based on subsequent realization
of certain working capital assets as of June 1, 1996. The Company placed 10,000
of the shares of Company stock in escrow, pending the outcome of this potential
purchase price adjustment.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth the percentage of net revenues represented
by certain data included in the Company's statement of operations for the
periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
APRIL 2, MARCH 31,
1995 1996
-------- ---------
<S> <C> <C>
Net revenues.................................... 100.0% 100.0%
Cost of sales................................... 64.3 57.7
----- -----
Gross profit.......................... 35.7 42.3
----- -----
Operating expenses:
Research and development...................... 10.0 7.3
Selling, marketing and service................ 19.8 21.7
General and administrative.................... 6.9 5.6
----- -----
Total operating expenses.............. 36.7 34.6
----- -----
Earnings (loss) from operations................. (1.1) 7.6
Interest expense................................ (1.5) (1.1)
Other income, net............................... (0.2) 0.6
----- -----
Earnings (loss) before income taxes (loss)...... (2.8) 7.1
Provision for income taxes...................... 0.0 1.7
----- -----
Net earnings (loss)............................. (2.8)% 5.3%
===== =====
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED APRIL 2, 1995
Net Revenues. First quarter 1996 net revenues were $20,073,000, an increase
of 20.7% from first quarter 1995 revenues of $16,625,000. Revenue growth for the
first quarter of 1996 reflects expanded OEM revenues, principally Tilt-C systems
sold to GE Medical Systems, improved sales of mammography and general
radiography products, principally through the Company's direct sales channel,
and service revenue improvements. In the first quarter of 1996, the Company
experienced a decline in revenues from international direct and dealer channels
compared to the first quarter of 1995 due primarily to a large system sale that
occurred in the first quarter of 1995. The Company does not believe the reduced
international revenues in the first quarter of 1996 is indicative of
international revenues for the entire year.
Gross Profit. For the first quarter of 1996, gross profit expressed as a
percentage of net revenues was 42.3%, up from 35.7% for the first quarter of
1995, principally due to reductions in manufacturing costs as well as higher
absorption of manufacturing costs associated with increased volumes. Gross
margins also benefited from increases in high margin service revenues.
Research and Development Expenses. Research and development expenses for
the first quarter of 1996 and 1995 were $1,464,000 and $1,665,000 respectively,
a $201,000, or 12.1%, decrease. As a percentage of net revenues, research and
development expenses decreased to 7.3% for the first quarter of 1996 from 10.0%
for the first quarter of 1995. The decrease is primarily attributable to
engineering efforts temporarily assigned to product enhancement and other
production activities during the first quarter of 1996. The Company anticipates
that these engineering efforts will be refocused on research and development
activities during the second quarter of 1996.
Selling, Marketing and Service Expenses. Selling, marketing and service
expenses for the first quarter of 1996 and 1995 were $4,358,000 and $3,299,000,
respectively, or 21.7% and 19.8% of net revenues, respectively. The increase in
selling, marketing and service expense as a percentage of net revenues reflects
increases in sales through the direct sales channel, for which the Company
incurred commission expenses, as compared to the comparable three months of
1995.
General and Administrative Expenses. General and administrative expenses
for the first quarter of 1996 were $1,131,000, or approximately the same as the
$1,141,000 for the first quarter of 1995. General and administrative expenses
declined as a percentage of net revenues from 6.9% to 5.6%, due primarily to an
increased level of net revenues.
Interest Expense. Interest expense for the first quarter of 1996 and 1995
was $220,000 and $255,000, respectively. The decrease from 1995 to 1996 is
principally due to reductions in the outstanding borrowings under the Company's
revolving line of credit and other borrowing arrangements.
Net Earnings (Loss). For the first quarter of 1996, the Company reported
net earnings of $1,073,000 compared with a net loss of $469,000 for the first
quarter of 1995. Earnings for the first quarter of 1996 were favorably impacted
by the results of ongoing cost reduction efforts and by increased OEM revenues
and sales of mammography products, principally through the direct sales channel,
as compared to the first quarter of 1995.
9
<PAGE> 10
INCOME TAXES
Based upon anticipated earnings for the year, an anticipated reduction in
the valuation allowance on deferred tax assets, and a review of other factors
giving rise to differences between statutory and effective income tax rates, the
Company has estimated its effective tax rate for the year ended December 31,
1996 to be approximately 25.0% and, accordingly, has provided income taxes in
the first quarter of 1996 of $350,000, against its first quarter earnings before
taxes of $1.4 million.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations for the three months ended March 31, 1996 was $1.5
million compared to $0.4 million provided from operations in the same period in
1995. The increase in cash used in operations principally reflects higher
investment in inventories and reductions in customer deposits and accounts
payable, partially offset by $1.6 million of net earnings before depreciation
and amortization, as well as improved accounts receivable collection activities
which have reduced accounts receivable balances as of March 31, 1996 as
compared to April 2, 1995.
The Company plans to fund its planned capital expenditures, working capital
needs and other cash requirements for the foreseeable future through its
operating cash flows and available lines of credit. The Company may also seek
additional debt or equity financing in 1996 to the extent it believes
beneficial or necessary.
As of March 31, 1996, the Company had $0.6 million in cash and cash
equivalents and working capital of $25.2 million. The Company has in place a
$15.0 million working capital line of credit, which expires February 1, 1997 and
is secured by accounts receivable, inventory and fixed assets. The maximum
amount available under this line of credit is subject to borrowing base
restrictions which are a function of defined balances in accounts receivable,
inventory and fixed assets. As of March 31, 1996, borrowing availability under
this line of credit was approximately $11.0 million beyond actual borrowings as
of that date of $4.0 million. The Company believes its current level of
profitability, available borrowing capacity, and potential equity financing
currently being pursued will be sufficient to fund foreseeable working
capital and capital expenditure needs.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 to be signed on its behalf by the undersigned thereunto
duly authorized.
FISCHER IMAGING CORPORATION
/S/ James A. Newcomb
--------------------
James A. Newcomb
Vice President Finance /
Chief Financial Officer
May 11, 1996
12
<PAGE> 13
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 580
<SECURITIES> 0
<RECEIVABLES> 19,611
<ALLOWANCES> 421
<INVENTORY> 22,745
<CURRENT-ASSETS> 45,885
<PP&E> 12,396
<DEPRECIATION> 8,236
<TOTAL-ASSETS> 56,897
<CURRENT-LIABILITIES> 20,717
<BONDS> 181
0
13
<COMMON> 57
<OTHER-SE> 35,538
<TOTAL-LIABILITY-AND-EQUITY> 56,897
<SALES> 20,073
<TOTAL-REVENUES> 20,073
<CGS> 11,588
<TOTAL-COSTS> 11,588
<OTHER-EXPENSES> 6,953
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 220
<INCOME-PRETAX> 1,423
<INCOME-TAX> 350
<INCOME-CONTINUING> 1,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,073
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
