<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 December 31,1997 or
----------------
Transition Report pursuant to section 13 or 15(d) of the Securities
---
Exchange Act of 1934 for the transition period from to
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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)
1501 Ardmore Blvd.
Pittsburgh, Pennsylvania 15221
(Address of principal executive offices) (Zip Code)
(Registrant's Telephone Number, including area code) 412-731-2100
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 January 31, 1998, there were 19,882,794 shares of Common Stock of the
registrant outstanding.
<PAGE>
INDEX
RESPIRONICS, INC.
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements (Unaudited).
Consolidated balance sheets -- December 31, 1997 and June 30, 1997.
Consolidated statements of operations -- Three months ended December
31, 1997 and 1996 and six months ended December 31, 1997 and 1996.
Consolidated statements of cash flows-- Six months ended December 31,
1997 and 1996.
Notes to consolidated financial statements -- December 31, 1997.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
PART II - OTHER INFORMATION
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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
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<PAGE>
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
---------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments $ 15,269,625 $ 15,706,657
Trade accounts receivable, less allowance for
doubtful accounts of $3,966,000 and $3,466,000 43,345,130 37,138,383
Inventories 32,879,734 33,699,256
Prepaid expenses and other 4,363,755 3,549,850
Deferred income tax benefits 5,008,897 5,008,897
------------ ------------
TOTAL CURRENT ASSETS 100,867,141 95,103,043
PROPERTY, PLANT AND EQUIPMENT
Land 3,327,812 3,327,775
Building 13,426,817 12,936,177
Machinery and equipment 24,286,040 19,853,845
Furniture and office equipment 22,111,979 17,059,117
Leasehold improvements 1,236,482 1,236,327
------------ ------------
64,389,130 54,413,241
Less allowances for depreciation
and amortization 28,392,990 23,705,759
------------ ------------
35,996,140 30,707,482
Funds held in trust for construction
of new facility 862,000 1,754,452
OTHER ASSETS 3,902,374 3,837,491
COST IN EXCESS OF NET ASSETS OF
BUSINESS ACQUIRED 51,906,867 52,829,458
------------ ------------
$193,534,522 $184,231,926
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
--------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,760,124 $ 6,425,853
Accrued compensation and related expenses 4,288,868 5,626,830
Accrued expenses 8,021,903 6,898,486
Income taxes 3,612,945 4,410,825
Current portion of long-term obligations 665,292 703,211
------------ ------------
TOTAL CURRENT LIABILITIES 22,349,132 24,065,205
LONG-TERM OBLIGATIONS 17,543,113 17,984,933
MINORITY INTEREST 589,086 604,072
COMMITMENTS
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value; authorized
100,000,000 shares; issued and outstanding
19,808,667 shares at December 31, 1997 and
19,763,057 shares at June 30, 1997 198,087 197,631
Additional capital 68,795,428 68,351,143
Cumulative effect of foreign currency translations (1,295,170) (689,813)
Retained earnings 86,048,410 74,601,203
Treasury stock (693,564) (882,448)
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TOTAL SHAREHOLDERS' EQUITY 153,053,191 141,577,716
------------ ------------
$193,534,522 $184,231,926
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
1997 1996 1997 1996
------------------------ -------------------------
<S> <C> <C> <C> <C>
Net sales $53,451,825 $43,001,308 $105,369,334 $77,113,720
Cost of goods sold 24,135,769 19,541,822 47,652,609 34,585,070
----------- ----------- ------------ -----------
29,316,056 23,459,486 57,716,725 42,528,650
General and administrative expenses 5,963,064 4,555,079 12,480,807 9,177,181
Sales, marketing and commission expense 11,004,073 8,384,341 20,875,342 13,958,029
Research and development expense 2,573,791 2,651,574 5,508,439 5,143,866
Interest expense 218,103 150,135 460,827 197,615
Other income (353,045) (517,917) (687,368) (1,485,095)
----------- ----------- ------------ -----------
19,405,986 15,223,212 38,638,047 26,991,596
----------- ----------- ------------ -----------
INCOME BEFORE INCOME TAXES 9,910,070 8,236,274 19,078,678 15,537,054
Income taxes 3,964,028 3,367,518 7,631,471 6,214,822
----------- ----------- ------------ -----------
NET INCOME $ 5,946,042 $ 4,868,756 $ 11,447,207 $ 9,322,232
=========== =========== ============ ===========
Basic earnings per share $ 0.30 $ 0.25 $ 0.58 $ 0.48
=========== =========== ============ ===========
Basic Shares Outstanding 19,798,143 19,620,932 19,785,515 19,464,816
=========== =========== ============ ===========
Diluted earnings per share $ 0.29 $ 0.24 $ 0.56 $ 0.46
=========== =========== ============ ===========
Diluted Shares Outstanding 20,481,705 20,230,672 20,463,260 20,196,647
=========== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Six months ended
December 31
1997 1996
-------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $11,447,207 $ 9,322,232
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,109,822 3,128,880
Provision for losses on accounts receivable -0- 150,000
Changes in operating assets and liabilities:
Increase in accounts receivable (6,706,747) (137,628)
Decrease (increase) in inventories and prepaid
expenses 5,617 (4,090,193)
(Increase) decrease in other assets (64,883) 156,741
(Decrease) increase in accounts payable (1,271,086) 951,915
Decrease in accrued compensation
and related expenses (1,337,962) (1,530,883)
Increase in accrued expenses 1,123,417 79,976
Decrease in accrued income taxes (797,880) (1,370,767)
----------- ------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 8,507,505 6,660,273
INVESTING ACTIVITIES
Purchase of property, plant and equipment (9,975,889) (2,295,357)
(Decrease) increase in funds held in trust for construction
of new facility 892,452 (25,631)
Acquisition of a business, net of cash acquired 0 (49,864,997)
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NET CASH USED BY
INVESTING ACTIVITIES (9,083,437) (52,185,985)
FINANCING ACTIVITIES
Reduction in long-term obligations (479,739) (7,563,403)
Issuance of common stock 444,741 925,441
Utilization (acquisition) of treasury stock 188,884 (156,250)
Decrease in minority interest (14,986) (255,425)
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NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 138,900 (7,049,637)
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DECREASE IN CASH AND
SHORT-TERM INVESTMENTS (437,032) (52,575,349)
Cash and short-term investments at beginning of period 15,706,657 65,255,699
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CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD $15,269,625 $ 12,680,350
=========== ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
DECEMBER 31, 1997
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 and six months ended December 31,
1997 are not necessarily indicative of the results that may be expected for the
year ended June 30, 1998. 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, 1997.
NOTE B -- INVENTORIES
The composition of inventory is as follows:
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
-------------- --------------
<S> <C> <C>
Raw materials $ 14,509,809 $ 14,827,760
Work-in-process 2,205,354 2,291,043
Finished goods 16,164,571 16,580,453
-------------- --------------
$ 32,879,734 $ 33,699,256
============== ==============
</TABLE>
NOTE C -- CONTINGENCIES
As previously disclosed, the Company is party to actions filed in a federal
District Court in January 1995 and June 1996 in which a competitor alleges that
the Company's manufacture and sale in the United States of certain products
infringes four of the competitor's patents. In its response to these actions,
the Company has denied the allegations and has separately sought a declaratory
judgment that the claims under the patents are invalid or unenforceable and that
the Company does not infringe upon the patents. The January 1995 and June 1996
actions have been consolidated, and discovery is currently underway. The Court
has granted the Company's
<PAGE>
motion for summary judgment that the Company does not infringe one of the
competitor's patents. The Company believes that none of its products infringe
any of the patents in question, in the event that any one or more of such
patents should be held to be valid, and it intends to vigorously defend this
position.
NOTE D -- ACQUISITIONS
As previously disclosed, the Company acquired LIFECARE International, Inc.
(since renamed Respironics Colorado, Inc.) on October 21, 1996 and Stimotron
Medizinische Gerate GmbH ("Stimotron") on February 26, 1997. Both transactions
were treated as purchases for financial accounting purposes, and accordingly the
Company's results of operations include the results of operations of Respironics
Colorado, Inc. and Stimotron since their acquisition dates. The results of
operations of both entities are therefore included in the Company's results of
operations for the three months and six months ended December 31, 1997. The
results of operations of Respironics Colorado, Inc. beginning on the acquisition
date are included in the Company's results of operations for the three months
and six months ended December 31, 1996. The results of operations of Stimotron
are not included in the Company's results of operations for the three months and
six months ended December 31, 1996.
The following unaudited pro forma summary presents the Company's results of
operations as if the acquisitions had occurred at the beginning of the periods
indicated and does not purport to be indicative of what would have occurred had
the acquisitions been made as of that date or of results which may occur in the
future.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, 1996 December 31, 1996
------------------- -----------------
<S> <C> <C>
Pro Forma Sales $48,675,500 $95,401,883
Pro Forma Net Income 5,387,720 9,998,254
Pro Forma Diluted Earnings Per Share .27 .50
</TABLE>
NOTE E -- SUBSEQUENT EVENT
On November 11, 1997, the Company announced that it had entered into a
definitive agreement to merge with Healthdyne Technologies, Inc. ("Healthdyne").
Under the terms of the agreement, the company will issue a number of shares of
its common stock determined by multiplying $24.00 by the number of outstanding
shares of Healthdyne (resulting in a transaction value of approximately
$336,000,000) and dividing by the Company's then current share price (as
determined by calculating a weighted average closing price for the 20 business
days prior to three days before the closing) within a collar of $26.03 to
$31.03. Based on the Company's share price during the period, $26.03 would be
used in the calculation. The transaction is expected to
<PAGE>
be accounted for as a pooling of interests. Healthdyne is a publicly held
company headquartered in Marietta, Georgia and is a leading designer,
manufacturer and marketer of technologically advanced medical devices for use in
the home, hospital and alternate clinic settings. Its sales for the twelve
months ending December 31, 1997 were $155,000,000. The Company expects to incur
one time charges and related adjustments of between $20,000,000 and $25,000,000
in connection with the transaction, representing transaction costs and other one
time charges. The cash portion of these charges is expected to be approximately
$16,000,000. The transaction closed on February 11, 1998.
NOTE F -- EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share. Statement 128 replaced the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants, and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented, and where necessary, restated to conform to the
Statement 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended 12/31/97 Ended 12/31/96 Ended 12/31/97 Ended 12/31/96
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $ 5,946,042 $ 4,868,756 $11,447,207 $ 9,322,232
Denominator:
Denominator for basic
earnings per share -
weighted average shares 19,798,143 19,620,932 19,785,515 19,464,816
Effect of Dilutive Securities:
Stock Options 683,562 609,740 677,745 731,831
----------- ----------- ----------- -----------
Denominator for diluted
earnings per share -
adjusted weighted -
average shares and
assumed conversions 20,481,705 20,230,672 20,463,260 20,196,647
=========== =========== =========== ===========
Basic Earnings Per Share $0.30 $0.25 $0.58 $0.48
=========== =========== =========== ===========
Diluted Earnings Per Share $0.29 $0.24 $0.56 $0.46
=========== =========== =========== ===========
</TABLE>
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES REFORM ACT OF 1995
The statements contained in this Quarterly Report on Form 10-Q, specifically
those contained in Item 2 "Management's Discussion and Analysis of Results of
Operations and Financial Condition", along with statements in other reports
filed with the Securities and Exchange Commission, external documents and oral
presentations which are not historical are "Forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21B of the Securities and Exchange Act of 1934, as amended. These
forward looking statements represent the Company's present expectations or
beliefs concerning future events. The Company cautions that such statements are
qualified by important factors that could cause actual results to differ
materially from those in the forward-looking statements. Results actually
achieved may differ materially from expected results included in these
statements. Those factors, which were discussed in detail in the Company's
Annual Report on form 10-K for the year ended June 30, 1997, include the
following: foreign currency fluctuations, regulations and other factors
affecting operations and sales outside the United States including potential
future effects of the change in sovereignty of Hong Kong, customer consolidation
and concentration, increasing price competition and other competitive factors in
the sale of products, intellectual property and related litigation, FDA and
other government regulation, and third party reimbursement.
Item 2. Management's Discussion and Analysis of Result of Operations
and Financial Condition
RESULTS OF OPERATIONS
Net sales for the quarter ended December 31, 1997 were $53,452,000 representing
a 24% increase over the $43,001,000 recorded for the quarter ended December 31,
1996. Sales for the six months ended December 31, 1997 were $105,369,000, an
increase of 37% over the $77,114,000 recorded in the year earlier period. Sales
for the current quarter and six month period included $7,185,000 and $16,595,000
respectively, generated by Respironics Colorado, Inc. Sales for the quarter and
six month period ending December 31, 1996, also included $6,235,000 generated by
Respironics Colorado, Inc.. This entity was acquired by the Company on October
21, 1996 (prior to its acquisition by the Company, Respironics Colorado, Inc.
was named LIFECARE International, Inc.). Sales for the current quarter and six
month period also included $4,529,000 and $8,947,000, respectively, generated by
Stimotron Medizinische Gerate GmbH ("Stimotron") which was acquired on February
26, 1997. Both acquisitions were treated as purchases for financial accounting
purposes, and accordingly the Company's results of operations for the quarter
and six month period ended December 31, 1997 include the results of
<PAGE>
operations of Respironics Colorado, Inc. and Stimotron, while the results of
operations for the quarter and six month period ended December 31, 1996 include
the results of operations of Respironics Colorado, Inc. since its acquisition
date and do not include the results of Stimotron. Excluding the impact of these
acquisitions, sales grew by 17% in the quarter to quarter and year to date
comparison. This increase was attributable primarily to increases in unit and
dollar sales for the Company's ventilation, face masks, and obstructive sleep
apnea therapy products. The Company's Far East sales, which account for
approximately 5% of total sales, were adversely impacted during the quarter
ended December 31, 1997 because of the decline in value of certain Far East
currencies vs. the U.S. dollar and because of current economic conditions in
that region. While the Company's Far East sales are primarily denominated in
U.S. dollars, currency fluctuations can affect the Company's sales because the
Company's products become more expensive as the foreign currencies decline in
value. Finally, Medicare reimbursement for home oxygen equipment was reduced by
25% effective January 1, 1998. While that change will not impact the Company
directly because its oxygen sales are not significant and because it does not
sell its products to Medicare directly, the Company has seen, and expects to see
in the future, changes in buying patterns by its home care dealer customers as
those customers attempt to control their inventory and cash flow in response to
the reimbursement reductions.
The Company's gross profit was 55% of net sales for the quarter and six months
ended December 31, 1997 and 55% for the quarter and six months ended December
31, 1996. For both the quarter and year to date comparison, the impact of
reduced average selling prices for certain of the Company's products, which had
been expected, was offset by increases in manufacturing support costs at rates
less than the rate of overall sales growth and by sales mix.
General and administrative expenses were $5,963,000 (11% of net sales) for the
quarter ended December 31, 1997 as compared to $4,555,000 (11% of net sales) for
the quarter ended December 31, 1996. General and administrative expenses were
$12,481,000 (12% of net sales) for the six months ended December 31, 1997 as
compared to $9,177,000 (12% of net sales) for the year earlier period. The
increases in absolute dollars for both periods were due in part to the addition
of expenses incurred by the Company's new subsidiaries, Respironics Colorado,
Inc., and Stimotron. In addition, amortization of the goodwill generated by
these acquisition is included in general and administrative expenses for the
current quarter and six month period ended December 31, 1997. Finally, the
Company incurred increased expenses in information systems costs and legal fees
for the quarter and year to date comparison.
Sales, marketing and commission expenses were $11,004,000 (21% of net sales) for
the quarter ended December 31, 1997 as compared to $8,384,000 (19% of net sales)
for the quarter ended December 31, 1996. Sales, marketing and commission
expenses were $20,875,000 (20% of net sales) for the six months ended December
31, 1997 as compared to $13,958,000 (18% of net sales) for the year earlier
period. The increases for both periods were due in part to the addition of
expenses incurred by the Company's new subsidiaries, Respironics Colorado, Inc.,
and Stimotron. Respironics Colorado, Inc. has a network of 19 fully staffed
customer satisfaction centers throughout the United States, a portion of the
costs of which are included in sales, marketing and commissions. In addition,
because Stimotron serves as the Company's exclusive distributor in Germany, most
of its operating expenses are included in sales, marketing and commissions.
Finally, increased costs were incurred in advertising, trade show, and meeting
expenses for the quarter and year to date comparison.
Research and development expenses were $2,574,000 (5% of net sales) for the
quarter ended December 31, 1997 as compared to $2,652,000 (6% of net
<PAGE>
sales) for the quarter ended December 31, 1996. Research and development
expenses were $5,508,000 (5% of net sales) for the six months ended December 31,
1997 as compared to $5,144,000 (7% of net sales) for the year earlier period.
The slight decrease in quarterly absolute dollar spending and decrease in six
month spending as a percentage of sales reflects the fact that early in the
quarter ended December 31, 1997, primary development work was completed on two
major new product initiatives, the LX series of Great Performers obstructive
sleep apnea therapy products and the next generation version of the Company's
BiPAP ventilatory support systems, and spending related to the development of
these products ended or slowed significantly. Development efforts on a variety
of other new products are continuing.
The Company's effective income tax rate was 40% for the quarter ended December
31, 1997 as compared to 41% for the quarter ended December 31, 1996 and 40% for
the six months ended December 31, 1997 as compared to 40% for the six months
ended December 31, 1996. 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 and European operations versus taxable
income attributable to its Far East operations because the United States and
European operations pays income taxes at a higher rate (approximately 41% before
available income tax credits) than do the Far East operations. The relative
proportion of taxable income among the Company's various operating entities did
not vary significantly in the quarterly or year to date comparisons.
As a result of the factors described above, the Company's net income was
$5,946,000 (11% of net sales) or $0.29 per diluted share for the quarter ended
December 31, 1997 as compared to $4,869,000 (11% of net sales) or $0.24 per
diluted share for the quarter ended December 31, 1996 and $11,447,000 (11% of
net sales) or $0.56 per diluted share for the six months ended December 31, 1997
as compared to $9,322,000 (12% of net sales) or $0.46 per diluted share for the
six months ended December 31, 1996.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $78,518,000 at December 31, 1997 and
$71,038,000 at June 30, 1997. Net cash provided by operating activities was
$8,508,000 for the six months ended December 31, 1997 as compared to $6,660,000
for the six months ended December 31, 1996. The increase in net cash provided by
operating activities for the current six month period was due primarily to a
decrease in inventory, an increase in accrued expenses, and higher earnings.
Net cash used by investing activities was $9,083,000 for the six months ended
December 31, 1997 as compared to $52,186,000 for the six months ended December
31, 1996. Included in the prior year total is $49,865,000 used for the October
21, 1996 acquisition of LIFECARE International, Inc. (since
<PAGE>
renamed Respironics Colorado, Inc.). The majority of the remaining 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 the investment activities in
both periods was provided by positive cash flows from operating activities and
accumulated cash and short-term investment balances.
On November 11, 1997, the Company announced that it had entered into a
definitive agreement to merge with Healthdyne Technologies, Inc. ("Healthdyne").
Under the terms of the agreement, the company will issue a number of shares of
its common stock determined by multiplying $24.00 by the number of outstanding
shares of Healthdyne (resulting in a transaction value of approximately
$336,000,000) and dividing by the Company's then current share price (as
determined by calculating a weighted average closing price for the 20 business
days prior to three days before the closing) within a collar of $26.03 to
$31.03. Based on the Company's share price during the period, $26.03 would be
used in the calculation. The transaction is expected to be accounted for as a
pooling of interests. Healthdyne is a publicly held company headquartered in
Marietta, Georgia and is a leading designer, manufacturer and marketer of
technologically advanced medical devices for use in the home, hospital and
alternate clinic settings. Its sales for the twelve months ending December 31,
1997 were $155,000,000. The Company expects to incur one time charges and
related adjustments of between $20,000,000 and $25,000,000 in connection with
the transaction, representing transaction costs and other one time charges. The
cash portion of these charges is expected to be approximately $16,000,000. The
transaction closed on February 11, 1998.
On January 6, 1998 the Company announced that it had been awarded shared-primary
supplier status by Apria Healthcare Group Inc. ("Apria") for obstructive sleep
apnea therapy devices and non-invasive ventilatory support systems for the
period January 1, 1998 through December 31, 1999 (Healthdyne was awarded the
other shared primary supplier status for these products for the same period).
Since October 1996, the Company's status with Apria for these products had been
sole secondary supplier, and sales levels for all periods since that date were
adversely affected. Additionally, the Company was named, for the first time, as
shared-primary supplier for portable volume ventilators for the period March 1,
1998 through February 28, 2000.
The Company's management has begun a program to prepare the Company's computer
systems and related applications for the year 2000. The computer systems at
certain of the Company's facilities are already year 2000 compliant, and the
Company believes that a majority of its remaining year 2000 issues will be
addressed by the installation of an enterprise resource planning ("ERP")
software package known as SAP. The SAP system, which is year 2000 compliant and
will be used for the Company's primary business applications at its
headquarters, its Murrysville, Pennsylvania manufacturing facility, and its
Customer Satisfaction Centers, is currently being installed. The total cost of
the SAP project is currently estimated at $6,100,000 with the majority of this
cost to be capitalized and charged to expense over the estimated useful life of
the SAP software and related hardware. Healthdyne Technologies, Inc., which
recently merged with the Company, uses an Oracle ERP software package that is
similar to SAP and is year 2000 compliant. Estimated incremental costs to
address other year 2000 issues for the remainder of calendar year 1998 and
calendar year 1999 are approximately $500,000.
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, commercial bank financing
committed for the additional consideration that may be due for the Stimotron
acquisition, and its accumulated cash and short-term investments will be
sufficient to meet its current and presently anticipated future needs for the
<PAGE>
remainder of fiscal year 1998 for operating activities, investing activities,
and financing activities (primarily consisting of payments on long-term debt).
The Company currently expects that financing will be required for part of the
cash portion of the one time charges described above, and it expects to have
such financing in place when and if needed.
<PAGE>
PART 2 OTHER INFORMATION,
Item 1: Legal Proceedings
- ------- -----------------
Not Applicable
Item 2: Change in Securities
- ------- --------------------
(a) Not applicable
(b) Not applicable
(c) 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
- ------- ---------------------------------------------------
The Company's Annual Meeting of Shareholders was held on November 20, 1997. The
holders of 14,978,013 shares of the Company's stock (approximately 76% of the
outstanding shares) were present at the meeting in person or by proxy. The only
matters voted upon at the meeting were:
(i) the election of three persons to serve as directors for a three year term
expiring at the Annual Meeting of Shareholders in 2000,
(ii) the approval of the adoption of the Company's Employee Stock Purchase
Plan.
(iii) the ratification of the selection of Ernst & Young as independent public
accountants to audit the financial statements of the Company for the
fiscal year ending June 30, 1998.
The results of voting were as follows:
(i) James H. Hardie, Joseph C. Lawyer, and Dennis S. Meteny, the nominees of
the Company's Board Of Directors, were elected to serve until the Annual
Meeting of Shareholders in 2000. There were no other nominees.
<PAGE>
Shares were voted as follows:
<TABLE>
<CAPTION>
Withhold
Name For Vote For
- ------------------------------- ---------- --------
<S> <C> <C>
James H. Hardie 14,486,410 593,856
Joseph C. Lawyer 14,979,157 101,109
Dennis S. Meteny 14,963,607 116,659
</TABLE>
(ii) The adoption of the Company's Employee Stock Purchase Plan was approved:
affirmative votes, 13,554,512 shares, negative votes, 1,390,097 shares.
(iii) The selection of Ernst & Young as independent public accountants for the
1998 fiscal year was ratified: affirmative votes, 15,025,501 shares;
negative votes, 26,573 shares.
<PAGE>
Item 5: Other Information
- ------- -----------------
Not applicable
Item 6: Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits
The following exhibits were inadvertantly omitted from the Company's Exhibit
Index to its 10-K for the fisal year ended June 30, 1997.
3.4 Amendment to Restated Certficate of Incorporation of the Company, filed as
Exhibit 4.2 to Company's, Registration Statement on Form S-8, Registration
No. 33-36459.
3.5 Amendment to Restated Certificate of Incorporation of the Company, filed as
Exhibit 4.2 to Company's Registration Statement on Form S-8, Registration
No. 33-89308.
3.6 Amendment to Restated Certificate of Incorporation of the Company, filed as
Exhibit 3.5 to Form 10-Q for fiscal quarter ended December 31, 1996.
(b) Reports on Form 8-K
Not applicable
<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: February 13, 1998 /s/ Daniel J. Bevevino
----------------------- -----------------------------------
Daniel J. Bevevino
Vice President, and Chief
Financial and Principal Accounting
Officer
Signing on behalf of the registrant
and as Chief Financial and
Principal Accounting Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 15,269,625 12,680,350
<SECURITIES> 0 0
<RECEIVABLES> 47,311,130 37,476,031
<ALLOWANCES> 3,966,000 2,250,000
<INVENTORY> 32,879,734 28,249,464
<CURRENT-ASSETS> 100,867,141 81,645,068
<PP&E> 64,389,130 66,055,000
<DEPRECIATION> 28,392,990 34,956,803
<TOTAL-ASSETS> 193,534,522 162,306,284
<CURRENT-LIABILITIES> 22,349,132 20,780,919
<BONDS> 0 0
0 0
0 0
<COMMON> 198,087 197,187
<OTHER-SE> 152,855,104 131,439,071
<TOTAL-LIABILITY-AND-EQUITY> 193,534,522 162,306,284
<SALES> 105,369,334 77,113,720
<TOTAL-REVENUES> 105,369,334 77,113,720
<CGS> 47,652,609 34,585,070
<TOTAL-COSTS> 47,652,609 34,585,070
<OTHER-EXPENSES> 38,864,588 28,279,076
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 460,827 197,615
<INCOME-PRETAX> 19,078,678 15,537,054
<INCOME-TAX> 7,631,471 6,214,822
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,447,207 9,322,232
<EPS-PRIMARY> 0.58 0.48
<EPS-DILUTED> 0.56 0.46
</TABLE>
