<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 MARCH 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: 33-26398
-------------------------------
ADVANCED MEDICAL, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3492624
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9775 Businesspark Avenue, San Diego, CA 92131
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 566-0426
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
-------- --------
On April 25, 1995, 15,410,302 shares of Registrant's Common Stock were
outstanding.
Page 1 of 23
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
INDEX
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements:
Page
Condensed consolidated balance sheets at
December 31, 1994 and March 31, 1995 . . . . . . . . . . . . . . . 3
Condensed consolidated statements of operations for the
three months ended March 31, 1994 and 1995 . . . . . . . . . . . . 4
Condensed consolidated statements of cash flows for the
three months ended March 31, 1994 and 1995 . . . . . . . . . . . . 5
Condensed consolidated statement of changes in
stockholders' deficit for the period from
December 31, 1994 to March 31, 1995. . . . . . . . . . . . . . . . 6
Notes to the condensed consolidated financial statements . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings . . . . . . . . . . . . . . . . . . Not applicable
Item 2 - Changes in Securities . . . . . . . . . . . . . . . . Not applicable
Item 3 - Defaults Upon Senior Securities . . . . . . . . . . . 14
Item 4 - Submission of Matters to a Vote of
Security - Holders . . . . . . . . . . . . . . . . . . Not applicable
Item 5 - Other Information . . . . . . . . . . . . . . . . . . 15
Item 6 - Exhibits and Reports on Form 8-K. . . . . . . . . . . 22
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-2-
<PAGE>
FORM 10 - Q
PART 1 - ITEM 1
FINANCIAL INFORMATION
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, MARCH 31,
1994 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . $ 1,340 $ 447
Restricted cash and investment securities. . . . . . . . . . . . . . . . . 1,732 1,746
Securities available for sale. . . . . . . . . . . . . . . . . . . . . . . 2,883 3,076
Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,841 22,793
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,347 17,221
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . 2,140 2,530
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . 53,283 47,813
Net investment in sales-type and direct financing leases . . . . . . . . . . 14,807 15,728
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . 11,595 11,429
Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 4,921 3,842
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,518 46,709
---------- ----------
$ 132,124 $ 125,521
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt. . . . . . . . . . . . . . . . . . . . . $ 1,214 $ 1,244
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,427 7,807
Accrued expenses and other current liabilities . . . . . . . . . . . . . . 14,066 12,278
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 23,707 21,329
---------- ----------
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,803 74,667
Other non-current liabilities. . . . . . . . . . . . . . . . . . . . . . . . 7,285 6,958
---------- ----------
99,088 81,625
---------- ----------
Minority interests in consolidated subsidiaries. . . . . . . . . . . . . . . 5,000 5,000
---------- ----------
Contingent liabilities (Note 4)
Mandatorily redeemable equity securities . . . . . . . . . . . . . . . . . . 6,567 6,730
---------- ----------
Non-redeemable preferred stock, common stock, and other stockholders'
equity (deficit):
Preferred stock, authorized 6,000 and 3,000 shares at $.001 and $.01
par value, respectively; issued and outstanding -- none
Common stock, authorized 30,000 shares at $.01 par value; issued and
outstanding -- 15,492 shares. . . . . . . . . . . . . . . . . . . . . . 142 155
Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . 58,703 61,795
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,922) (52,092)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (734) (734)
Unrealized holding gains from securities available for sale. . . . . . . . 883 1,076
Other equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690 637
---------- ----------
Total non-redeemable preferred stock, common stock and other
stockholders' equity (deficit) . . . . . . . . . . . . . . . . . . . . . (2,238) 10,837
---------- ----------
$ 132,124 $ 125,521
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-3-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1994 1995
--------- ---------
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,143 $ 28,590
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,822 17,031
--------- ---------
Gross margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,321 11,559
--------- ---------
License fees revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 110
--------- ---------
Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,210 4,220
General and administrative expenses. . . . . . . . . . . . . . . . . . . . . 2,979 2,873
Research and development expenses. . . . . . . . . . . . . . . . . . . . . . 1,431 2,086
--------- ---------
Total operating expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 8,620 9,179
--------- ---------
Income from operations. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,811 2,490
--------- ---------
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596 563
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,341) (1,742)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,080 (159)
--------- ---------
(665) (1,338)
--------- ---------
Income before income taxes and extraordinary item. . . . . . . . . . . . . . 1,146 1,152
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297 129
--------- ---------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . 849 1,023
Extraordinary item - gain on early retirement of debt, net of tax. . . . . . 8,807
--------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 9,830
Dividends and accretion on mandatorily redeemable preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 163
--------- ---------
Net income applicable to common stock. . . . . . . . . . . . . . . . . . . . $ 493 $ 9,667
--------- ---------
--------- ---------
Income per common share assuming no dilution:
Income before extraordinary gain on early retirement of debt. . . . . . . . $ .04 $ .06
Extraordinary gain on early retirement of debt. . . . . . . . . . . . . . . .63
--------- ---------
Net income per common share assuming no dilution. . . . . . . . . . . . . . $ .04 $ .69
--------- ---------
--------- ---------
Income per common share assuming full dilution:
Income before extraordinary gain on early retirement of debt. . . . . . . . $ .03 $ .03
Extraordinary gain on early retirement of debt. . . . . . . . . . . . . . . .29
--------- ---------
Net income per common share assuming full dilution. . . . . . . . . . . . . $ .03 $ .32
--------- ---------
--------- ---------
Weighted average common shares outstanding assuming no dilution. . . . . . . 14,069 14,084
--------- ---------
--------- ---------
Weighted average common shares outstanding assuming full dilution. . . . . . 19,869 30,568
--------- ---------
--------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-4-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1994 1995
--------- ---------
<S> <C> <C>
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . $ 2,765 $ 3,028
--------- ---------
Cash flows from investing activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (410) (944)
Proceeds from disposal of property . . . . . . . . . . . . . . . . . . . . 262
Proceeds from sale of investments. . . . . . . . . . . . . . . . . . . . . 2,642
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9)
--------- ---------
Net cash provided by investing activities. . . . . . . . . . . . . . . . . . 2,485 (944)
--------- ---------
Cash flows from financing activities:
Net repayments under credit facilities . . . . . . . . . . . . . . . . . . (3,237) (2,688)
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . (8,475) (296)
Proceeds from issuance of secured promissory note. . . . . . . . . . . . . 6,000
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
--------- ---------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . (5,692) (2,984)
--------- ---------
Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . . . . 28 7
--------- ---------
Net decrease in cash and cash equivalents. . . . . . . . . . . . . . . . . . (414) (893)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 1,762 1,340
--------- ---------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 1,348 $ 447
--------- ---------
--------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-5-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
HOLDING
GAINS
FROM
COMMON STOCK CAPITAL IN TREASURY STOCK SECURITIES
---------------- EXCESS OF ACCUMULATED ---------------- AVAILABLE OTHER
SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT FOR SALE EQUITY TOTAL
------ ------ ---------- ----------- ------ ------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 14,152 $ 142 $ 58,703 $(61,922) 83 $ (734) $ 883 $ 690 $ (2,238)
Issuance of common stock 1,340 13 3,255 3,268
Dividends on mandatorily
redeemable preferred stock (163) (163)
Unrealized holding gains from
securities available for sale 193 193
Other equity transactions (53) (53)
Net income for the period 9,830 9,830
------ ------ -------- -------- --- ------- ------ ------ --------
Balance at
March 31, 1995 15,492 $ 155 $ 61,795 $(52,092) 83 $ (734) $1,076 $ 637 $ 10,837
------ ------ -------- -------- --- ------- ------ ------ --------
------ ------ -------- -------- --- ------- ------ ------ --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-6-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------------------------------------------------------------------
NOTE 1 -- BUSINESS AND STATEMENT OF ACCOUNTING POLICY
BUSINESS:
Advanced Medical, Inc. ("Advanced Medical"), operating through its major
operating subsidiary, IMED Corporation ("IMED"), is a leading developer and
manufacturer of infusion products and related technologies for the health care
industry (Advanced Medical and its subsidiaries are collectively referred to
herein as "the Company").
STATEMENT OF ACCOUNTING POLICY:
The accompanying financial statements have been prepared by the Company without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations, although the Company believes that the disclosures herein are
adequate to make the information not misleading.
In the opinion of the Company, the accompanying financial statements contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
statement of the Company's financial position as of March 31, 1995, and the
results of its operations and its cash flows for the three months ended March
31, 1994 and 1995.
NET INCOME PER COMMON SHARE:
The Company's net income per common share assuming no dilution is computed using
the weighted average number of common shares outstanding of 14,069 and 14,084
during the three months ended March 31, 1994 and 1995, respectively. Net income
per common share assuming no dilution does not include common stock equivalents
(options and warrants) because the effect would be anti-dilutive. For the three
months ended March 31, 1994, the Company's net income per common share assuming
full dilution is computed using the weighted average number of common shares
outstanding plus the shares that would be outstanding assuming conversion of the
$6,000 secured promissory note ("Decisions Note") issued to Decisions
Incorporated ("Decisions") on January 4, 1994. For the three months ended March
31, 1995, the Company's net income per common share assuming full dilution is
computed using the weighted average number of common shares outstanding plus the
shares that would be outstanding assuming conversion of the Decision Note and
conversion of the $6,500 secured promissory note ("the Note") issued to
Decisions on August 12, 1994. The number of shares used in computing the net
income per common share assuming full dilution were 19,869 and 30,568 for the
three months ended March 31, 1994 and 1995, respectively. Net income applicable
to common stock for the three months ended March 31, 1994 and 1995 has been
increased by $74 and $149, respectively, for the interest expense (net of tax)
on the convertible debt since conversion on the Decisions Note and the Note was
assumed. The calculation of net income per common share assuming full dilution
excludes common stock equivalents and convertible securities that are anti-
dilutive.
NOTE 2 -- INVENTORIES
Inventories comprise the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1994 1995
----------- --------
<S> <C> <C>
Raw materials. . . . . . . . . . . . . . . . . . . $ 5,311 $ 6,368
Work-in-process. . . . . . . . . . . . . . . . . . 3,755 2,400
Finished goods . . . . . . . . . . . . . . . . . . 11,283 8,453
-------- --------
$ 20,347 $ 17,221
-------- --------
-------- --------
</TABLE>
-7-
<PAGE>
NOTE 3 -- DEBT
On March 31, 1995, the Company completed an exchange (the "Exchange") wherein
$28,245, or approximately 47%, in principal amount of the Company's 7 1/4%
Convertible Subordinated Debentures due 2002 ("Debentures") were exchanged for
an aggregate of $14,123 in principal amount of the Company's newly created 15%
Subordinated Debentures due 1999 ("15% Debentures") and 1,340 shares of the
Company's common stock ("Common Stock"). As a result of this transaction, the
Company recognized an extraordinary gain on the extinguishment of debt of
$10,855, net of the write-off of approximately 47% of unamortized debt issue
costs of $1,343 related to the exchange of Debentures and net of $705, the taxes
applicable to the Exchange.
On April 21, 1995, the Company issued an offer to exchange for up to all of the
outstanding $31,755 principal amount of Debentures for an aggregate of $15,877
of 15% Debentures plus 1,492 shares of Common Stock.
NOTE 4 -- LITIGATION AND CONTINGENCIES
The Company is a defendant in various actions, claims, and legal proceedings
arising from normal business operations. Management believes they have
meritorious defenses and intends to vigorously defend against all allegations
and claims. As the ultimate outcome of the matters is uncertain, no contingent
liabilities or provisions have been recorded in the accompanying financial
statements for such matters. However, in management's opinion, based upon
discussion with legal counsel, liabilities arising from these matters, if any,
will not have a material adverse affect on consolidated financial position or
results of operations.
NOTE 5 -- MANDATORILY REDEEMABLE EQUITY SECURITIES
As of March 31, 1995, dividends in the arrears on the $.01 par value mandatorily
redeemable preferred stock ("10% Preferred Stock") and the $.01 par value
mandatorily redeemable convertible preferred stock ("Convertible Preferred
Stock") were approximately $660 and $640, respectively. Additionally, the
Company did not declare the March 28, 1994 redemption of its 10% Preferred Stock
(redemption price of approximately $3,300).
NOTE 6 -- SALE OF MARKETABLE SECURITIES
Other income for the three months ended March 31, 1994 includes gains on the
sale of marketable securities of $1,050.
NOTE 7 -- SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Income taxes paid during the three months ended March 31, 1994 and 1995 totaled
$156 and $909, respectively. Interest paid during the three months ended March
31, 1994 and 1995 totaled $2,966 and $2,857, respectively. As more fully
described in Note 3, the Company completed a noncash transaction wherein $28,245
of Debentures were exchanged for an aggregate of $14,123 of 15% Debentures plus
1,340 shares of Common Stock.
-8-
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
OVERVIEW
Advanced Medical is a holding company for IMED, Fidata Corporation ("Fidata")
and several investments. It also identifies and evaluates potential
acquisitions and investments and performs various corporate functions. As a
holding company, Advanced Medical currently has no revenues to fund its
operating and interest expense and relies on cash generated by cash flow from
IMED, external borrowings, sale of investments and other external sources of
funds to meet its obligations.
For purposes of this discussion and analysis, the three months ended March 31,
1994 and 1995 are referred to as 1994 and 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Company's debt restructurings during 1994, management
currently believes that sufficient cash will be available through IMED, based
upon current operations, to satisfy debt service and other corporate expenses of
Advanced Medical in the foreseeable future. In 1995, IMED's cash flow from
operations was $5.9 million which was used for (i) repayments of $2.7 million
under the revolving credit facility, (ii) advances of $3.0 million, as permitted
under IMED's amended loan agreement with General Electric Capital Corporation
("GECC"), to Advanced Medical and (iii) capital expenditures of $.9 million.
IMED relies on cash generated from operations, together with funds available
from the revolving credit facility, to fund its working capital requirements,
interest on the GECC credit facility and capital expenditures.
The Company had working capital of $29.6 million as of December 31, 1994
compared with working capital of $26.5 million as of March 31, 1995. The
decrease in working capital from December 31, 1994 to March 31, 1995 resulted
from reductions in finished goods inventory levels due to sales of instruments
and collection of accounts receivable.
On March 31, 1995, the Company completed the Exchange, wherein $28.2 million of
Debentures were exchanged for an aggregate of $14.1 million of 15% Debentures
and 1,340,441 shares of Common Stock. As a result of the Exchange, the
Company's long-term debt was reduced $14.1 million and shareholders' equity
increased $12.1 million. See Note 3 to the Condensed Consolidated Financial
Statements.
On April 21, 1995, the Company issued an offer to exchange for up to all of the
outstanding $31.8 million principal amount of Debentures for an aggregate of
$15.9 million of 15% Debentures and 1,492,485 shares of Common Stock (the
"Exchange Offer"). If 100% of the Debentures are accepted for exchange pursuant
to the Exchange Offer, the Company's long-term debt will be reduced $15.8
million and shareholders' equity will increase approximately $13.5 million. See
Item 5. Other Information - Unaudited Pro Forma Financial Information.
The Company considers its investment in the common stock of Alteon to be a
significant source of capital and liquidity if the sale of this investment
becomes necessary. The Company owns 512,600 shares of Alteon common stock which
were registered under the Securities Act on October 1, 1993, and have an
aggregate market value of approximately $2.9 million based upon the closing
price per share on April 26, 1995 on the NASDAQ National Market System. Prices
obtainable in any private sales of such securities are likely to be lower than
those quoted on the NASDAQ National Market System. Alteon is engaged in the
research and development of medical and pharmaceutical products and as such has
not yet successfully brought products to the market. Therefore, failure of
Alteon to develop and market their products successfully could adversely affect
the ability of the Company to dispose of its investments therein upon favorable
terms.
-9-
<PAGE>
The Company did not pay the March 28, 1994 mandatory redemption of all
outstanding shares of 10% Preferred Stock. As of March 31, 1995, there were
329,928 shares of 10% Preferred Stock currently outstanding with a liquidation
preference of $10 per share and accrued and unpaid dividends were approximately
$.7 million. In addition to the 10% Preferred Stock, as of March 31, 1995,
there were 333,000 shares of Convertible Preferred Stock currently outstanding
with a liquidation preference of $6.40 per share and accrued and unpaid
dividends were approximately $.6 million. The Company does not expect to
declare dividends or redeem the preferred stock issues in the near term due to
its limited capital resources.
In connection with borrowings associated with the IMED acquisition, IMED issued
to GECC a warrant to acquire at a de minimis price common shares equal to 10%,
on a fully diluted basis, of the common stock of IMED. Under the Amended Loan
Agreement, GECC retained the warrant. The IMED warrant is redeemable at the
option of GECC until August 12, 2004 at the higher of fair value or fully-
diluted net book value at the redemption date. Additionally, IMED has the
option to redeem not less than 25% of the shares under warrant, or warrant stock
if exercised, beginning April 2, 1995. The Company's liquidity would be
adversely affected, and capital resources would be significantly reduced, in the
event GECC exercises its mandatory redemption rights. However, GECC cannot
require redemption to the extent that it would render IMED unable to pay its
debts as they mature.
RESULTS OF OPERATIONS
The Company's sales, cost of sales, and selling expenses for the historical
periods shown consist exclusively of IMED's sales, cost of sales and selling
expenses and are presented in the table below.
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN MILLIONS)
<S> <C> <C>
U.S. sales . . . . . . . . . . . . . . . . . . . . . $ 22.1 $ 23.5
International sales. . . . . . . . . . . . . . . . . 5.0 5.1
------- -------
Total sales. . . . . . . . . . . . . . . . . . . . $ 27.1 $ 28.6
------- -------
------- -------
Total sales. . . . . . . . . . . . . . . . . . . . . 100.0% 100.0%
Cost of sales. . . . . . . . . . . . . . . . . . . . 62.0 59.6
------- -------
Gross margin . . . . . . . . . . . . . . . . . . . . 38.0% 40.4%
------- -------
------- -------
Selling expenses . . . . . . . . . . . . . . . . . . $ 4.2 $ 4.2
------- -------
------- -------
Selling expenses as a percentage of sales. . . . . . 15.5% 14.8%
------- -------
------- -------
</TABLE>
SALES
The following table sets forth IMED sales by major product groups, for the
periods presented.
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN MILLIONS)
<S> <C> <C>
Piston Cassette Disposables. . . . . . . . . . . . . $ 6.3 $ 5.4
Peristaltic Disposables. . . . . . . . . . . . . . . 12.5 13.7
Piston Cassette Pumps. . . . . . . . . . . . . . . . 0.2 0.4
Peristaltic Pumps. . . . . . . . . . . . . . . . . . 4.2 6.2
ReadyMED . . . . . . . . . . . . . . . . . . . . . . 1.0 0.9
Other (1). . . . . . . . . . . . . . . . . . . . . . 2.9 2.0
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . $ 27.1 $ 28.6
------- -------
------- -------
<FN>
(1) Primarily includes operating lease income relating to pumps, service fees
and accessory sales and 1994 includes $.9 million of revenue associated with
products manufactured in Ireland.
</TABLE>
-10-
<PAGE>
The Company's major source of revenue is the sale of proprietary disposable
administration sets for its installed infusion instrument base. The overall
volume of disposables sold has grown from 1994 through 1995. This growth has
been achieved despite a change in protocol at certain hospitals increasing the
maximum time between set changes from every 24 hours to as much as every 72
hours, and results primarily from an increase in IMED's installed base,
including the addition of new accounts. The Company is unable to predict the
potential effect of this change in protocol, which is expected to continue with
respect to certain applications of IMED's products, on the Company's future
financial condition or results of operations. IMED's products are at the high
end of the industry price range and compete on the basis of technological
sophistication, quality, safety and flexibility in application.
Disposable administration sets used with IMED's piston cassette pumps had
generated, prior to the third quarter of 1992, a majority of IMED's overall
sales of disposables and of IMED's total revenues. However, during 1994 and
1995 fewer than 11% of the worldwide unit sales of new pumps were attributable
to piston cassette pumps, with the remainder being represented by sales of
Gemini pumps. Virtually all placements to new customers from 1992 through 1995
consisted of Gemini instruments. Therefore, sales of piston cassette products
(pumps and disposables) are expected to continue to decline as demand for IMED's
pumps and proprietary disposable administration sets reflects to an increasing
extent the expected gradual shift away from piston cassette technology and
toward peristaltic technology, such as that used in IMED's Gemini series of
instruments, and other newer technology. IMED's current sales efforts, which
emphasize its Gemini series of products, are both consistent with and encourage
this shift. There can be no assurance that future sales of peristaltic products
will be sufficient to offset the anticipated continued decline in sales of older
technology.
The increase in U.S. sales from 1994 to 1995 is due primarily to increased
volume of instruments and disposables partially offset by a decline in selling
prices of instruments and disposable administration sets. Declines in selling
prices from 1994 to 1995 are a result of market conditions. As hospitals
continue to seek ways to control operating costs, IMED can expect continuing
pressure to reduce prices. The Company believes that its future levels of
profitability will depend on reducing manufacturing costs, successful new
product introductions and the development of new markets for these new products.
The increase in international sales from 1994 to 1995 is primarily due to (i)
increased volume of instruments and disposables in Australia, Latin America and
the Far East and (ii) increased volume of instruments sold in the European
territory ("European Territory") covered by the distribution agreement with its
European marketing and distribution partner, Pharmacia AB ("Pharmacia"). These
increases were partly offset by (i) the discontinuance of revenue ($.9 million)
associated with Pharmacia products manufactured in Ireland during 1994 due to
the sale of the Irish manufacturing facility in August 1994 and (ii) decreased
disposables volume in the European Territory due to Pharmacia purchasing
patterns.
GROSS MARGIN
The gross margin percentage increased from 1994 to 1995 primarily due to (i)
molded parts and components for disposable administration sets sourced from
outside vendors at lower costs than previous costs to manufacture in Ireland and
(ii) reductions in manufacturing costs of disposable administration sets due to
continuing cost containment efforts. The increase in gross margin percentage
from 1994 to 1995 was partially offset by the decline in instrument and
disposable administration sets selling prices in the U.S. market as previously
discussed.
SELLING EXPENSES
The increase in selling expenses from 1994 to 1995 is primarily due to increases
in personnel costs associated with additional headcount in international
territories previously covered exclusively by a dealer network.
-11-
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES
The following table sets forth general and administrative ("G&A") expenses, in
millions, for Advanced Medical and its subsidiaries for the periods presented.
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
IMED . . . . . . . . . . . . . . . . . . . . . . . $ 2.5 $ 2.4
Advanced Medical . . . . . . . . . . . . . . . . . .4 .4
Fidata . . . . . . . . . . . . . . . . . . . . . . .1 .1
------- -------
Total G&A expenses. . . . . . . . . . . . . . . $ 3.0 $ 2.9
------- -------
------- -------
</TABLE>
Due to the nature of Advanced Medical's operations, G&A expenses can fluctuate
from period to period as the majority of its costs are comprised of (i)
professional and consulting fees and indirect costs (such as travel costs)
associated with identifying, evaluating and making acquisitions and investments,
(ii) communication and meeting costs of shareholder and investor relations and
(iii) other costs of performing general holding company functions.
Advanced Medical is winding down Fidata's remaining operations. Management
expects to settle certain remaining claims and liquidate Fidata completely in
the third quarter of 1995. However, there can be no assurance that Fidata will
be completely liquidated in the third quarter of 1995 as such will require court
and regulatory approval.
RESEARCH AND DEVELOPMENT EXPENSES
The Company's R&D expenses, which consist exclusively of IMED's, increased from
1994 to 1995 due primarily to personnel and related costs associated with IMED's
in-house development of a new line of hospital infusion pumps and associated
disposable administration sets based upon its patented technology and know-how.
Staffing and development programs which are in place in 1995 were not fully
implemented in 1994.
RESTRUCTURINGS
During 1993, the Company recorded a $3.5 million restructuring charge in
connection with the sale of its Irish manufacturing operations and relocation of
its molding operations to the United States. Outside vendors can supply to the
Company molded parts and components at costs which are lower than the costs to
manufacture in Ireland. Due to the time required to relocate molding
operations, the Company will purchase molded parts and components from Pharmacia
in declining quantities over several years, pursuant to an agreement. The
charge included accruals of $1.3 million related to estimated relocation costs
and professional fees. Cash payments of approximately $.1 million were made
during 1994 and 1995. Accrued expenses of $.7 million remained at March 31,
1995. Expenditures of $.5 million and $.2 million are expected to be paid
during the remainder of 1995 and 1996, respectively.
The Company implemented a plan to restructure the operations of IMED during the
fourth quarter of 1993 and recorded a $1.0 million restructuring charge. The
restructuring included (i) consolidation of certain operations, (ii) the
reduction in IMED's domestic work force by approximately 10%, (iii) the
modification of certain employee benefit plans and (iv) the elimination of non-
value added activities and expenditures. Cash payments of $.3 and $.1 million
were paid during 1994 and 1995, respectively. Accrued severance costs and other
restructuring expenses of approximately $.4 million remained at March 31, 1995.
Expenditures of $.4 million are expected to be paid during the remainder of
1995.
SEASONALITY
Infusion instrument sales are typically higher in the fourth quarter due to
sales compensation plans which reward the achievement of annual quotas and the
seasonal characteristics of the industry, including hospital purchasing
patterns. First quarter sales are traditionally not as strong as the fourth
quarter. The Company anticipates that this trend will continue but is unable to
predict the effect, if any, from health care reform and increased competitive
pressures.
-12-
<PAGE>
OTHER MATTERS
Other income/(expenses), net for 1994, in the accompanying Condensed
Consolidated Statement of Operations includes income of $1.1 million from the
sale of marketable securities. The Company did not sell any of its marketable
securities in 1995.
Effective January 1, 1994 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities."
HEALTH CARE REFORM
Heightened public awareness and concerns regarding the growth in overall health
care expenditures in the United States may result in the enactment of national
health care reform or other legislation affecting payment mechanisms and health
care delivery. Legislation which imposes limits on the number and type of
medical procedures which may be performed or which has the effect of restricting
a provider's ability to select specific devices or products for use in
administrating medical care may adversely impact the demand for the Company's
products. In addition, legislation which imposes restrictions on the price
which may be charged for medical products may adversely affect the Company's
results of operations. It is not possible to predict the extent to which the
Company or the health care industry in general may be adversely affected by the
aforementioned in the future.
-13-
<PAGE>
PART II
OTHER INFORMATION
- -------------------------------------------------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(b) ARREARAGES IN THE PAYMENT OF PREFERRED STOCK DIVIDENDS
On March 28, 1994, Advanced Medical was required to redeem all the shares
outstanding of its 10% Preferred Stock at the redemption price of $10 per share
plus all accrued and unpaid dividends to the redemption date (329,913 shares
currently outstanding). On April 26, 1995, the total amount of dividend
arrearages on the 10% Preferred Stock was approximately $685,000. Unless
converted, Advanced Medical is required to redeem all the shares outstanding of
its Convertible Preferred Stock at an aggregate redemption price of
approximately $2,100,000 plus accrued and unpaid dividends at such time as the
10% Preferred Stock is completely redeemed. On April 26, 1995, the total amount
of dividend arrearages on the Convertible Preferred Stock was approximately
$660,000. No such redemption and dividend payments have been made due to
Advanced Medical's limited capital resources.
Advanced Medical did not declare and pay the September 1993, March 1994,
September 1994 and March 1995 dividends.
-14-
<PAGE>
PART II
OTHER INFORMATION
- -------------------------------------------------------------------------------
Item 5. Other Information
UNAUDITED PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
PRO FORMA CONDENSED BALANCE SHEET
The unaudited Pro Forma Condensed Balance Sheet presented herein reflects the
unaudited historical condensed consolidated balance sheet of the Company at
March 31, 1995, after giving effect to the pro forma adjustments described in
the footnotes thereto as if the Exchange Offer had been consummated on March 31,
1995.
The pro forma adjustments described herein are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Balance Sheet should be read in conjunction with
the Company's audited historical consolidated financial statements and
accompanying notes thereto. Due to the fact that the Exchange Offer has not yet
been consummated, the pro forma financial information presented herein is not
necessarily indicative of the results or balances that would have been attained
had the Exchange Offer actually taken place prior to March 31, 1995 and the
actual adjustments and balances may vary from those presented in the unaudited
Pro Forma Condensed Balance Sheet. However, the Company believes that any
differences between actual adjustments and pro forma adjustments will not have a
material impact on the pro forma financial statements.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
The unaudited Pro Forma Condensed Statement of Operations for the year ended
December 31, 1994 is based upon the audited historical condensed statement of
operations of the Company for the year ended December 31, 1994, after giving
effect to the pro forma adjustments described in the footnotes thereto as if the
Exchange and the Exchange Offer had been consummated on January 1, 1994.
The unaudited Pro Forma Condensed Statement of Operations for the quarter ended
March 31, 1995 is based upon the unaudited historical condensed statement of
operations of the Company for the quarter ended March 31, 1995, after giving
effect to the pro forma adjustments described in the footnotes thereto as if the
Exchange Offer had been consummated on January 1, 1995.
The pro forma adjustments described herein are based upon currently available
information and upon certain assumptions that the Company believes are
reasonable under current circumstances and which are described herein. The
unaudited Pro Forma Condensed Statement of Operations should be read in
conjunction with the Company's audited historical consolidated financial
statements and footnotes thereto. The Proforma Condensed Statements of
Operations are not necessarily indicative of what actual results of operations
would have been had the Exchange and the Exchange Offer actually taken place at
the beginning of the respective periods and does not purport to project the
Company's results of operations for any future period.
-15-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
MARCH 31, 1995
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
EXCHANGE
OFFER MARCH 31,
PRO FORMA 1995
ACTUAL ADJUSTMENTS PRO FORMA
1995 DEBIT/(CREDIT) AS ADJUSTED
--------- -------------- -----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 447 $ (400) (B) $ 47
Receivables, net 22,793 22,793
Inventories 17,221 17,221
Restricted cash and investment securities,
securities available for sale, prepaid expenses
and other current assets 7,352 7,352
--------- ---------
Total current assets 47,813 47,413
Net investment in sales-type and direct financing leases 15,728 15,728
Property, plant and equipment, net 11,429 11,429
Other non-current assets 3,842 (1,565) (A) 2,677
400 (B)
Intangible assets, net 46,709 46,709
--------- ---------
$ 125,521 $ 123,956
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current portion of long-term debt and
accounts payable $ 9,051 $ 9,051
Accrued expenses and other current liabilities 12,278 (814) (A) 13,092
--------- ---------
Total current liabilities 21,329 22,143
--------- ---------
Long-term debt 74,667 31,755 (A) 58,789
(15,877) (A)
Other non-current liabilities 6,958 6,958
--------- ---------
81,625 65,747
--------- ---------
Minority interests in consolidated subsidiaries and
mandatorily redeemable equity securities 11,730 11,730
--------- ---------
Common stock and other stockholders' equity:
Preferred Stock
Common Stock 155 (15) (A) 170
Capital in excess of par value 61,795 (4,090) (A) 65,885
Accumulated deficit (52,092) (9,394) (A) (42,698)
Treasury stock, unrealized holding gains from
securities available for sale and other equity 979 979
--------- ---------
Total non-redeemable preferred stock, common
stock and other stockholders' (deficit) equity 10,837 24,336
--------- ---------
$ 125,521 $ 123,956
--------- ---------
--------- ---------
</TABLE>
-16-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Note 1 - The Exchange Offer pro forma adjustments assume the exchange of $31,755
in principal amount of Debentures for 1,492,485 shares of Common Stock (assumed
value of $2.75/share) and $15,877 principal amount of 15% Debentures. The
Exchange Offer pro forma adjustments are made as follows:
(A) Reflects the exchange of $31,755 of Debentures for an aggregate of
1,492,485 shares of the Common Stock (assumed value of $2.75/share) and
$15,877 principal amount of 15% Debentures and the corresponding
extraordinary gain of $11,773. The gain is net of the write-off of
unamortized debt issue costs of $1,565 related to the Debentures and net of
$814, the taxes applicable to the Exchange Offer.
(B) Reflects the use of cash to pay $400 of debt issue costs in connection with
the Exchange Offer.
-17-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
- -------------------------------------------------------------------------------
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EXCHANGE
EXCHANGE OFFER DECEMBER 31,
PRO FORMA PRO FORMA PRO FORMA 1994
ACTUAL ADJUSTMENTS REFLECTING ADJUSTMENTS PRO FORMA
1994 DEBIT/(CREDIT) EXCHANGE DEBIT/(CREDIT) AS ADJUSTED
------- -------------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Income from operations $12,591 $12,591 $12,591
------- ------- -------
Other income (expenses):
Interest income 2,526 2,526 2,526
Interest expense (8,690) $ (122) (D) (8,638) $ (121) (H) (8,597)
70 (E) 80 (I)
Other, net 1,136 1,136 1,136
------- ------- -------
(5,028) (4,976) (4,935)
------- ------- -------
Income before income taxes and
extraordinary item 7,563 7,615 7,656
Provision for income taxes 1,886 20 (F) 1,906 16 (J) 1,922
------- ------- -------
Income before extraordinary item 5,677 5,709 5,734
Extraordinary item - gain on early retirement
of debt, net of tax (8,618) (C) 8,618 (9,173) (G) 17,791
------- ------- -------
Net income 5,677 14,327 23,525
Dividends on mandatorily redeemable
preferred stock 874 874 874
------- ------- -------
Net income applicable to common stock $ 4,803 $13,453 $22,651
------- ------- -------
------- ------- -------
Income per common share assuming no dilution:
Income before extraordinary item $ .34 $ .31 $ .29
Extraordinary item .56 1.05
------- ------- -------
Net income per common share assuming
no dilution $ .34 $ .87 $ 1.34
------- ------- -------
------- ------- -------
Income per common share assuming full dilution:
Income before extraordinary item $ .22 $ .20 $ .20
Extraordinary item .34 .66
------- ------- -------
Net income per common share assuming
full dilution $ .22 $ .54 $ .86
------- ------- -------
------- ------- -------
Weighted average common shares outstanding
assuming no dilution 14,069 15,410 16,903
------- ------- -------
------- ------- -------
Weighted average common shares outstanding
assuming full dilution 24,099 25,440 26,933
------- ------- -------
------- ------- -------
</TABLE>
-18-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Note 1 - The Exchange pro forma adjustments assume the exchange of $28,245
principal amount of Debentures for $14,122 principal amount of 15% Debentures
and 1,340,441 shares of Common Stock. The Exchange pro forma adjustments are
made as follows:
(C) Reflects the extraordinary gain of $10,855 on the extinguishment of debt
due to the Exchange of $28,245 principal amount of Debentures for 14,123
principal amount of 15% Debentures and 1,340,441 shares of the Common Stock
($2.4375/share). The gain is recorded net of $1,590, comprising the write-
off of approximately 47% of the unamortized Debenture debt issue costs and
net of $647, the taxes applicable to the Exchange.
(D) Reflects the elimination of approximately 47% of the amortization of
Debenture debt issue costs of $197, net of additional amortization of debt
issue costs of $75 incurred with the Exchange.
(E) Reflects additional interest expense of $2,118 incurred on the $14,123 of
15% Debentures, net of the elimination of interest expense of $2,048
related to the $28,245 of Debentures which is assumed to have been retired
in connection with the Exchange.
(F) Reflects the tax effect on items (D) and (E) above, calculated at the
statutory rate.
Note 2 - The Exchange Offer pro forma adjustments assume the exchange of $31,755
principal amount of Debentures for 1,492,485 shares of Common Stock (assumed
value $2.75/share) and $15,877 principal amount of 15% Debentures. The Exchange
Offer pro forma adjustments are made as follows:
(G) Reflects the extraordinary gain of $11,773 on the extinguishment of debt
due to the Exchange Offer of $31,755 principal amount of Debentures for an
aggregate of $15,877 principal amount of 15% Debentures and 1,492,485
shares of Common Stock (assumed value $2.75/share). The gain is recorded
net of $1,786, comprising the write-off of the remaining unamortized
Debentures debt issue costs and net of $814, the taxes applicable to the
Exchange Offer.
(H) Reflects elimination of the amortization of Debentures debt issue costs of
$221, net of additional amortization of debt issue costs of $100 incurred
with the Exchange Offer.
(I) Reflects additional interest expense of $2,382 incurred on the $15,877
of New Debentures, net of the elimination of interest expense of
$2,302 related to the $31,755 of Debentures which are assumed to have
been retired in connection with the Exchange Offer.
(J) Reflects the tax effect on items (H) and (I) above, calculated at the
statutory rate.
-19-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
QUARTER ENDED MARCH 31, 1995
- -------------------------------------------------------------------------------
(DOLLAR AND SHARE AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
EXCHANGE
OFFER MARCH 31,
PRO FORMA 1995
ACTUAL ADJUSTMENTS PRO FORMA
1995 DEBIT/(CREDIT) AS ADJUSTED
-------- -------------- -----------
<S> <C> <C> <C>
Income from operations $ 2,490 $ 2,490
-------- --------
Other income (expenses):
Interest income 563 563
Interest expense (1,742) $ (31) (B) (1,736)
25 (C)
Other, net (159) (159)
-------- --------
(1,338) (1,332)
-------- --------
Income before income taxes and
extraordinary item 1,152 1,158
Provision for income taxes 129 2 (D) 131
-------- --------
Income before extraordinary item 1,023 1,027
Extraordinary item - gain on early retirement
of debt, net of tax 8,807 (9,449) (A) 18,256
-------- --------
Net income 9,830 19,283
Dividends on mandatorily redeemable
preferred stock 163 163
-------- --------
Net income applicable to common stock $ 9,667 $ 19,120
-------- --------
-------- --------
Income per common share assuming no dilution:
Income before extraordinary item $ .06 $ .06
Extraordinary item .63 1.17
-------- --------
Net income per common share assuming
no dilution $ .69 $ 1.23
-------- --------
-------- --------
Income per common share assuming full dilution:
Income before extraordinary item $ .03 $ .03
Extraordinary item .29 .57
-------- --------
Net income per common share assuming
full dilution $ .32 $ .60
-------- --------
-------- --------
Weighted average common shares outstanding
assuming no dilution 14,084 15,577
-------- --------
-------- --------
Weighted average common shares outstanding
assuming full dilution 30,568 32,061
-------- --------
-------- --------
</TABLE>
-20-
<PAGE>
ADVANCED MEDICAL, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
- -------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
Note 1 - The Exchange Offer pro forma adjustments assume the exchange of $31,755
principal amount of Debentures for 1,492,485 shares of Common Stock (assumed
value $2.75/share) and $15,877 principal amount of 15% Debentures. The Exchange
Offer pro forma adjustments are made as follows:
(A) Reflects the extraordinary gain of $11,773 on the extinguishment of debt
due to the Exchange Offer of $31,755 principal amount of Debentures for an
aggregate $15,877 principal amount of 15% Debentures and 1,492,485 shares
of Common Stock (assumed value $2.75/share). The gain is recorded net of
$1,510, comprising the write-off of the remaining unamortized Old
Debentures debt issue costs and net of $814, the taxes applicable to the
Exchange Offer.
(B) Reflects elimination of the amortization of Debentures debt issue costs of
$56, net of additional amortization of debt issue costs of $25 incurred
with the Exchange Offer.
(C) Reflects additional interest expense of $2,382 incurred on the $15,877 of
15% Debentures, net of the elimination of interest expense of $2,302
related to the $31,755 of Debentures which are assumed to have been retired
in connection with the Exchange Offer.
(D) Reflects the tax effect on items (B) and (C) above, calculated at the
statutory rate.
-21-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 - Form of Certificate of Voting Powers, Designation, Rights, Preferences
and Restrictions of 10% Cumulative Preferred Stock. (Incorporated by
reference to Appendix A to the Prospectus/Joint Proxy Statement, dated
March 3, 1989, of Fidata Corporation, Advanced Medical, Inc. and
Controlled Therapeutics Corporation included and forming part of the
Registration Statement on Form S-4 of Advanced Medical.)
4.2 - Loan Agreement, dated as of April 2, 1990, by and among IMED, as
borrower, and General Electric Capital Corporation ("GECC"), as agent
and lender. (Incorporated by reference to Exhibit 10(a) to the
Company's report on Form 8-K dated April 17, 1990.)
4.3 - Form of Certificates of Voting Powers, Designation, Rights,
Preferences and Restrictions of Convertible Preferred Stock.
(Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1990 [the "1990 10-K"].)
4.4 - Registration Rights Agreement, dated as of March 26, 1991, by and
among the Company, Mr. Picower, Decisions and JA Special Limited
Partnership, regarding the Convertible Preferred Stock. (Incorporated
by reference to Exhibit 10.10(a) to the 1990 10-K.)
4.5 - Indenture to U.S. Trust Company California, N.A., Trustee, dated
January 30, 1992. (Incorporated by reference to Exhibit 4.26 to the
Company's Annual Report on Form 10-K for the year ended December 31,
1991.)
4.6 - Letter Agreement, dated as of December 27, 1993, by and between Mr.
Picower and the Company (Incorporated by reference to Exhibit 1 to the
Company's Report on Form 8-K dated January 12, 1994.)
4.7 - Promissory Note dated January 4, 1994 issued to Decisions.
(Incorporated by reference to Exhibit 4.33 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1993.)
4.8 - Promissory Note, dated August 12, 1994, issued to Decisions.
(Incorporated by reference to Exhibit 99.3 to the Company's report on
Form 10-Q for the quarter ended June 30, 1994 [the "June 30, 1994 10-
Q].)
4.9 - Modification Agreement dated February 3, 1995, by and between the
Company and Decisions Incorporated. (Incorporated by reference to the
Exhibit 4.11 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 [the "1994 10-K"].)
4.10 - Exchange Agreement dated February 3, 1995, by and among the Company
and Fidelity Convertible Securities Fund and Fidelity Select
Healthcare Fund. (Incorporated by reference to Exhibit 4.12 to the
Company's 1994 10-K.)
10.1 - Warrant Purchase Agreement, dated April 2, 1990, between IMED and
GECC. (Incorporated by reference to Exhibit 10-18 to the Company's
report on Form 10-Q for the quarter ended March 31, 1990 ([the "March
31, 1990 10-Q].)
10.2 - Warrant to Purchase Common Stock of IMED, dated April 2, 1990.
(Incorporated by reference to Exhibit 10-19 to the March 31, 1990 10-
Q.)
10.3 - Amended and Restated Distribution Agreement dated as of August 12,
1994 by and among Pharmacia AB, IMED Corporation and the Company.
(Incorporated by reference to Exhibit 10.25 to the Company's Form 10-Q
for the quarter ended September 30, 1994 [the "September 30, 1994 10-
Q"].)
10.4 - Final Agreement dated as of August 12, 1994 by and among the Company,
AM General Development Corp., AM Development Limited, Kamen, Deka
Research & Development Corp. and IMED Corporation. (Incorporated by
reference to Exhibit 10.26 to the Company's September 30, 1994 10-Q.)
10.5 - Letter Agreement, dated as of June 29, 1994, by and between Mr.
Picower and the Company. (Incorporated by reference to Exhibit 99.1
to the June 30, 1994 10-Q.)
10.6 - Amended and Restated Loan Agreement, dated August 12, 1994, by and
between IMED and GECC. (Incorporated by reference to Exhibit 99.2 to
the June 30, 1994 10-Q.)
_________________________________________
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report is
being filed.
-22-
<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.
ADVANCED MEDICAL, INC.
----------------------
(Registrant)
Date: April 28, 1995 By: /s/ JOSEPH W. KUHN
----------------------
Joseph W. Kuhn
President
(Principal Financial Officer)
-23-
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. No.
- ------- ----
27.1 Financial Data Schedules 25
-24-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 447
<SECURITIES> 3,076
<RECEIVABLES> 23,390
<ALLOWANCES> (1,014)
<INVENTORY> 17,221
<CURRENT-ASSETS> 47,813
<PP&E> 26,509
<DEPRECIATION> (15,080)
<TOTAL-ASSETS> 125,521
<CURRENT-LIABILITIES> 21,329
<BONDS> 74,667
<COMMON> 155
6,730
0
<OTHER-SE> 9,703
<TOTAL-LIABILITY-AND-EQUITY> 125,521
<SALES> 28,590
<TOTAL-REVENUES> 28,700
<CGS> 17,031
<TOTAL-COSTS> 17,031
<OTHER-EXPENSES> 9,154
<LOSS-PROVISION> 25
<INTEREST-EXPENSE> 1,742
<INCOME-PRETAX> 1,152
<INCOME-TAX> 129
<INCOME-CONTINUING> 1,023
<DISCONTINUED> 0
<EXTRAORDINARY> 8,807
<CHANGES> 0
<NET-INCOME> 9,830
<EPS-PRIMARY> .69
<EPS-DILUTED> .32
</TABLE>
