<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to section 13 or 15(d) of the Securities
- Exchange Act of 1934 for the quarterly period ended September 30, 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 No. 000-16723
RESPIRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1304989
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1001 Murry Ridge Dr.
Murrysville, Pennsylvania 15668
(Address of principal executive offices) (Zip Code)
(Registrant's Telephone Number, including area code) 412-733-0200
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 and (2) has been subject to such filing requirements for
at least the past 90 days. Yes X No .
- -
As of October 31, 1995, there were 16,819,111 shares of Common Stock of the
registrant outstanding.
1
<PAGE>
INDEX
RESPIRONICS, INC.
PART I - FINANCIAL INFORMATION
- - - - - ------------------------------
Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -- September 30, 1995 and June 30,
1995.
Consolidated statements of operations -- Three months ended
September 30, 1995 and 1994.
Consolidated statements of cash flows-- Three months ended
September 30, 1995 and 1994.
Notes to consolidated financial statements -- September 30, 1995.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
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
- - - - - ----------
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
September 30 June 30
1995 1995
---------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $13,918,896 $16,126,904
Trade accounts receivable, less allowance for
doubtful accounts of $750,000 and $700,000 20,413,400 19,448,187
Inventories 16,675,789 13,136,664
Prepaid expenses and other 2,093,949 1,951,358
Deferred income tax benefits 2,200,595 2,200,595
----------- -----------
TOTAL CURRENT ASSETS 55,302,629 52,863,708
PROPERTY, PLANT AND EQUIPMENT
Land 2,734,337 2,589,117
Building 8,707,993 8,674,675
Machinery and equipment 15,167,404 14,155,510
Furniture and office equipment 10,023,892 9,394,000
Leasehold improvements 939,327 577,175
----------- -----------
37,572,953 35,390,477
Less allowances for depreciation
and amortization 16,309,657 15,443,041
----------- -----------
21,263,296 19,947,436
Funds held in trust for construction
of new facility 720,106 710,929
OTHER ASSETS 2,792,308 2,668,592
COST IN EXCESS OF NET ASSETS OF
BUSINESS ACQUIRED 1,808,588 1,847,905
----------- -----------
$81,886,927 $78,038,570
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
September 30 June 30
1995 1995
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 3,822,181 $ 4,858,554
Accrued compensation and related expenses 3,013,479 3,827,187
Accrued expenses 3,220,616 2,694,298
Income taxes 3,365,036 1,572,121
Current portion of long-term obligations 495,455 498,150
----------- -----------
TOTAL CURRENT LIABILITIES 13,916,767 13,450,310
LONG-TERM OBLIGATIONS 5,440,396 5,537,996
MINORITY INTEREST 646,199 681,068
COMMITMENTS
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; authorized
40,000,000 shares; issued and outstanding
16,811,155 shares at September 30, 1995 and
16,744,785 shares at June 30, 1995 168,112 167,448
Additional capital 19,549,410 19,254,977
Retained earnings 42,166,043 38,946,771
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 61,883,565 58,369,196
----------- -----------
$81,886,927 $78,038,570
=========== ===========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended
September 30
1995 1994
-------------------------
<S> <C> <C>
Net sales $26,674,675 $21,669,809
Cost of goods sold 11,514,510 9,470,731
----------- -----------
15,160,165 12,199,078
General and administrative expense 4,016,803 3,168,640
Sales, marketing and commission expense 4,523,786 3,884,167
Research and development expense 1,692,907 1,470,779
Interest expense 50,054 47,060
Other income (315,760) (212,863)
----------- -----------
9,967,790 8,357,783
----------- -----------
INCOME BEFORE INCOME TAXES 5,192,375 3,841,295
Income taxes 1,973,103 1,421,279
----------- -----------
NET INCOME $ 3,219,272 $ 2,420,016
=========== ===========
Earnings per share $ 0.18 $ 0.14
=========== ===========
Weighted Average Number of Shares
Used in Computing Earnings Per Share 17,858,788 17,274,522
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended
September 30
1995 1994
-------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income $ 3,219,272 $2,420,016
Adjustments to reconcile net income to net
cash (used) provided by operating activities:
Depreciation and amortization 905,933 863,222
Provision for losses on accounts receivable 50,000 75,000
Changes in operating assets and liabilities:
Increase in accounts receivable (1,015,213) (136,806)
Increase in inventories and prepaid
expenses (3,681,716) (817,944)
Increase in other assets (123,716) (60,772)
Decrease in accounts payable (1,036,373) (740,659)
Decrease in accrued compensation
and related expenses (813,708) (440,108)
Increase in accrued expenses 526,318 18,132
Increase in accrued income taxes 1,792,915 1,405,485
----------- -----------
NET CASH (USED) PROVIDED BY
OPERATING ACTIVITIES (176,288) 2,585,566
INVESTING ACTIVITIES
Purchase of property, plant and equipment (2,182,476) (1,455,536)
Increase in funds held in trust for construction
of new facility (9,177) (4,807)
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (2,191,653) (1,460,343)
FINANCING ACTIVITIES
Reduction in long-term obligations (100,295) (74,833)
Issuance of common stock 295,097 99,766
Decrease in minority interest (34,869) (3,519)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 159,933 21,414
----------- -----------
(DECREASE) INCREASE IN CASH AND
SHORT-TERM INVESTMENTS (2,208,008) 1,146,637
Cash and short-term investments at beginning of period 16,126,904 12,384,054
----------- -----------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $13,918,896 $13,530,691
=========== ===========
</TABLE>
See notes to consolidated financial statements.
6
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited consolidated 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 Article 10 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 months ended September 30, 1995
are not necessarily indicative of the results that may be expected for the year
ended June 30, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1995.
NOTE B -- INVENTORIES
The composition of inventory is as follows:
<TABLE>
<CAPTION>
September 30 June 30
1995 1995
-------------- ------------
<S> <C> <C>
Raw materials $ 10,539,409 $ 7,960,573
Work-in-process 1,356,807 1,105,010
Finished goods 4,779,573 4,071,081
-------------- ------------
$ 16,675,789 $ 13,136,664
============== ============
</TABLE>
7
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Item 2. Management's Discussion and Analysis of Result of Operations
and Financial Condition
RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 1995 were $26,675,000 representing
a 23% increase over the $21,670,000 recorded for the quarter ended September 30,
1994. The increase in net sales was primarily attributable to increases in total
unit and dollar sales for the Company's obstructive sleep apnea products. In
addition, sales of the Company's face masks and other patient interface devices
used as accessories for its obstructive sleep apnea and ventilatory support
units increased significantly in both unit and dollar terms. Finally, sales of
the Company's ventilatory support units also increased in both unit and dollar
terms as well.
The Company's gross profit was 57% of net sales for the quarter ended September
30, 1995 as compared to 56% for the quarter ended September 30, 1994. This
improvement was due primarily to the Company's ability to limit the growth of
manufacturing and manufacturing support costs to rates less than the rate of
sales increase achieved.
General and administrative expenses were $4,017,000 (15% of net sales) for the
quarter ended September 30, 1995 as compared to $3,169,000 (15% of net sales)
for the quarter ended September 30, 1994. The increase in absolute dollars was
due primarily to increased legal fees incurred relating to the previously
disclosed action brought against the Company by a competitor, Rescare Limited.
The increase was also due, to a lesser extent, to a larger provision made during
the quarter for year end profit sharing bonuses based on financial results
achieved and to increased staffing.
Sales, marketing and commission expenses were $4,524,000 (17% of net sales) for
the quarter ended September 30, 1995 as compared to $3,884,000 (18% of net
sales) for the quarter ended September 30, 1994. This increase in absolute
dollars was due primarily to costs associated with trade shows, salary expenses
for new employees, and commission expenses based on higher sales levels
achieved.
Research and development expenses were $1,693,000 (6% of net sales) for the
quarter ended September 30, 1995 as compared to $1,471,000 (7% of net sales) for
the quarter ended September 30, 1994. This increase in absolute dollars reflects
the extensive new product development efforts currently underway to support new
product introductions in the Company's major product groups. Several new
products were introduced during the current quarter, and other new product
introductions are scheduled for the remainder of fiscal year 1996 with initial
distribution in international markets until regulatory approval in the United
States is obtained.
8
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The Company's effective income tax rate was 38% for the quarter ended September
30, 1995 as compared to 37% for the quarter ended September 30, 1994. Changes
in the Company's effective income tax rate are due primarily to changes in the
relative proportion of the Company's taxable income attributable to its United
States operation versus taxable income attributable to its Hong Kong and Peoples
Republic of China operations because the United States operation pays income
taxes at a higher rate (approximately 41% before available income tax credits)
than do the Hong Kong and Peoples Republic of China operations. For the
quarter to quarter comparison, the proportion of taxable income attributable to
the United States operation increased.
As a result of the factors described above, the Company's net income was
$3,219,000 (12% of net sales) for the quarter ended September 30, 1995 as
compared to $2,420,000 (11% of net sales) for the quarter ended September 30,
1994.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $41,386,000 at September 30, 1995 and
$39,413,000 at June 30, 1995. Net cash used by operating activities was
$176,000 for the three months ended September 30, 1995 as compared to net cash
provided by operating activities of $2,586,000 for the three months ended
September 30, 1994. The net use of cash for the current quarter was due
primarily to increases in inventory and accounts receivable and decreases in
accounts payable and accrued compensation in amounts greater than the changes in
those accounts during the first quarter of last fiscal year. The increase in
inventory was due to the Company's purchase of raw materials for certain of its
new products, including those introduced during the current quarter and those
scheduled for introduction during the remainder of the fiscal year and to the
completion of stocking of the Company's warehouse in Reno, Nevada. This
warehouse opened in March 1995.
Net cash used by investing activities was $2,192,000 for the three months ended
September 30, 1995 as compared to $1,460,000 for the three months ended
September 30, 1994. Essentially all of the cash used by investing activities
for both periods represented capital expenditures, including the purchase of
production equipment, computer and telecommunications equipment, and office
equipment. The funding for capital expenditures in the current quarter was
provided by accumulated cash and short-term investment balances, and in last
year's first quarter was provided by positive cash flows from operating
activities and by accumulated cash and short-term investment balances.
The Company believes that positive cash flow from operating activities
projected for the remainder of the fiscal year, the availability of the full
amount of funds under its commercial bank line of credit, and its accumulated
cash and short-term investments will be sufficient to meet its current and
presently
9
<PAGE>
anticipated future needs for the remainder of fiscal year 1996 for
operating activities, investing activities, and financing activities (primarily
consisting of payments on long-term debt ).
10
<PAGE>
PART 2 OTHER INFORMATION
Item 1: Legal Proceedings
- - - - - ------- -----------------
Not applicable
Item 2: Change in Securities
- - - - - ------- --------------------
(a) Not applicable
(b) Not applicable
Item 3: Defaults Upon Senior Securities
- - - - - ------- -------------------------------
(a) Not applicable
(b) Not applicable
Item 4: Submission of Matters to a Vote of Security Holders
- - - - - ------- ---------------------------------------------------
Not applicable
Item 5: Other Information
- - - - - ------- -----------------
Not applicable
Item 6: Exhibits and Reports on Form 8-K
- - - - - ------- --------------------------------
(a) Exhibits
Not applicable
(b) Reports on Form 8-K
Not applicable
11
<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.
RESPIRONICS, INC.
Date: November 10, 1995 /s/ Daniel J. Bevevino
______________________ ________________________
Daniel J. Bevevino
Controller, and Chief
Financial and Accounting Officer
Signing on behalf of the registrant
and as Chief Financial and
Accounting Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995
<PERIOD-START> JUL-01-1995 JUL-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1994
<CASH> 13,918,896 13,530,691
<SECURITIES> 0 0
<RECEIVABLES> 21,163,400 15,673,091
<ALLOWANCES> 750,000 600,000
<INVENTORY> 16,675,789 8,614,250
<CURRENT-ASSETS> 55,302,629 42,232,689
<PP&E> 37,572,953 30,870,271
<DEPRECIATION> 16,309,657 12,793,133
<TOTAL-ASSETS> 81,886,927 61,601,500
<CURRENT-LIABILITIES> 13,916,767 9,419,601
<BONDS> 0 0
<COMMON> 168,112 163,658
0 0
0 0
<OTHER-SE> 61,715,743 46,580,233
<TOTAL-LIABILITY-AND-EQUITY> 81,886,927 61,601,500
<SALES> 26,674,675 21,669,809
<TOTAL-REVENUES> 26,674,675 21,669,809
<CGS> 11,514,510 9,470,731
<TOTAL-COSTS> 11,514,510 9,470,731
<OTHER-EXPENSES> 9,917,736 8,310,723
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 50,054 47,060
<INCOME-PRETAX> 5,192,375 3,841,295
<INCOME-TAX> 1,973,103 1,421,279
<INCOME-CONTINUING> 3,219,272 2,420,016
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,219,272 2,420,016
<EPS-PRIMARY> 0.18 0.14
<EPS-DILUTED> 0.18 0.14
</TABLE>
