UNITED STATES
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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18160
Surgical Technologies, Inc.
(Exact name of registrant as specified in charter)
Utah 87-0468225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 South Decker Lake Lane, Salt Lake City, Utah 84119
(Address of principal executive offices) (Zip Code)
(801) 974-5555
(Registrant's telephone number, including area code)
None
(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
As of August 7, 1995, the registrant had 4,218,687 shares of its common stock
issued and outstanding.
Page 1 of 8 pages
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements presented herein
have been prepared by the Company in accordance with the instructions to Form
10-Q and do not include all of the information and note disclosures required
by generally accepted accounting principles. These condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-K
filing for the year ended March 31, 1995. The accompanying financial
statements have not been examined by independent accountants in accordance
with generally accepted auditing standards, but in the opinion of management
such financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the Company's financial
position and results of operations. The results of operations for the three
months ended June 30, 1995, may not be indicative of the results that may be
expected for the year ending March 31, 1996.
SURGICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, March 31,
1995 1995
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 549,021 $ 184,826
Accounts Receivable, net 722,533 633,668
Other Current Assets 1,379,271 1,698,171
Inventories 1,820,559 1,504,350
Marketable Securities 474,536 601,988
Total Current Assets 4,945,920 4,623,003
PROPERTY AND EQUIPMENT: At Cost 3,162,655 3,358,718
Less: Accumulated Depreciation (793,339) (726,839)
2,369,316 2,631,879
INTANGIBLE AND OTHER ASSETS, net 1,855,266 2,855,455
Total Assets $ 9,170,502 $10,110,337
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 115,558 $ 299,075
Revolving Bank Loan - 545,505
Current Portion of Long-Term
Obligations 1,088,845 1,083,484
Accrued Liabilities 90,632 333,663
Total Current Liabilities 1,295,035 2,261,727
LONG-TERM OBLIGATIONS, net of
current portion - 1,760
STOCKHOLDERS' EQUITY:
Common Stock (Par Value $0.01
Authorized 20,000,000 Shares,
Issued and Outstanding, 4,328,741
Shares 43,287 43,287
Capital in Excess of Par Value 10,670,034 10,670,034
Retained Earnings (2,338,886) (2,367,503)
Less Common Stock in Treasury,
at cost, 110,054 shares (498,968) (498,968)
Total Stockholders' Equity 7,875,467 7,846,850
Total Liabilities and
Stockholders' Equit $ 9,170,502 $10,110,337
The accompanying notes are an integral part of the condensed consolidated
financial statements.
SURGICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended June 30,
1995 1994
REVENUES $1,200,288 $1,220,350
COST OF REVENUES 839,290 1,031,861
Gross Margin 360,998 188,489
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 406,511 600,652
Income (Loss) From
Operations (45,513) (412,163)
OTHER INCOME (EXPENSE), NET 89,143 (184,284)
Income (Loss) From
Operations Before Income Taxes 43,630 (596,447)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 15,013 (214,717)
NET INCOME (LOSS) $ 28,617 $ (381,730)
NET INCOME (LOSS) PER COMMON SHARE $ .01 $ (.10)
Weighted Average Shares
Outstanding 4,218,687 3,735,311
The accompanying notes are an integral part of the condensed consolidated
financial statements.
SURGICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
For the Three Months
Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 28,617 $ (381,730)
Adjustments to Reconcile Net Income
(Loss)to Net Cash
Used in Operating Activities:
Depreciation and Amortization 87,397 131,144
Provision for Losses on Accounts
Receivable 503 11,232
(Gain) Loss on Sale of Property and
Equipment (59,795) 154,991
Increase (Decrease) in Deferred Taxes - (121,785)
(Increase) Decrease in Receivables (88,865) (117,750)
(Increase) Decrease in Inventories (316,209) (195,520)
(Increase) Decrease in Other Current
Assets (11,541) (68,695)
(Increase) Decrease in Intangible and
Other Assets 112,325 28,662
Increase (Decrease) in Accounts
Payable (183,517) (163,649)
Increase (Decrease) in Accrued
Liabilities (243,031) 688
Total Adjustments (702,733) (340,682)
Net Cash Used in Operating Activities (674,116) (722,412)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (118,005) (28,000)
Maturities of Marketable Securities 127,452 -
Proceeds from Sale of Property and
Equipment 397,350 90,000
Payments Received on Notes Receivable 1,173,420 -
Net Cash Provided by Investing Activities 1,580,217 62,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments on Long-Term
Obligations (39,848) (1,074,400)
Proceeds From Issuance of Long-Term
Obligations 43,447 1,000,000
Net Change in Revolving Bank Loan (545,505) (1,276)
Proceeds From Issuance of Note Payable
to a Related Party - 450,000
Proceeds From Sale of Common Stock - 281,500
Net Cash Provided by (Used in) Financing
Activities (541,906) 655,824
Net Decrease in Cash and Cash Equivalents 364,195 (4,588)
Cash and Cash Equivalents at Beginning of
Period 184,826 39,117
Cash and Cash Equivalents at End of
Period $ 549,021 $ 34,529
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period For:
Interest $ 19,134 $ 33,440
Income Taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing and Financing Activities: On
June 22, 1994 the two small buildings located in North Salt Lake were sold
for $50,000 in cash and notes receivable of $210,000.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
SURGICAL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1
The unaudited condensed consolidated financial statements presented
herein have been prepared by the Company in accordance with the instructions
to Form 10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
annual report on form 10-K filing for the year ended March 31, 1995. The
accompanying financial statements have not been examined by independent
accountants in accordance with generally accepted auditing standards, but in
the opinion of management such financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's financial position and results of operations. The results of
operations for the three months ended June 30, 1995, may not be indicative of
the results that may be expected for the year ending March 31, 1996.
NOTE 2
On September 1, 1995 the revolving bank loan will expire. The
Company does not intend on renewing the agreement.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This discussion should be read in conjunction with Management's
Discussion and analysis of Financial Condition and Results of Operations in
the Registrant's annual report on form 10-K for the year ended March 31, 1995.
Results of Operations
During the quarter ended June 30, 1995, revenues remained
relatively steady compared to the corresponding period during the preceding
year. The specialty metal fabrication division decreased revenues 8% over
the prior year first quarter while the medical division increased 11%. The
medical division provided 40% of total revenues of the Company compared
to 35% of total revenues in the first quarter of the prior year.
Cost of revenues decreased to 70% of sales versus 85% in 1994. The
decrease in cost of revenues as a percentage of revenues is attributable to
the higher gross margin the medical products division was able to generate
during the quarter. As the volume of medical sales have increased, the fixed
cost portion of the cost of revenues decreases as a percentage of sales.
Selling, general and administrative expenses decreased $194,000 over
the prior year first quarter. The decrease in administrative expense is in
part the result of cost cutting measures implemented during the later part of
the prior year. Approximately 25% of the decreased expense was a result of
the elimination of duplicate facilities. In addition to the cost cutting
measures implemented, amortization expense was reduced by $18,000 due to the
write-off of goodwill in the fourth quarter of the prior year.
The net income during the first quarter of 1995 included a gain of
$60,000 from the sale of surplus land (which is the majority of the $89,000
net other income). The increase in net income also reflects decreased
interest expense and increase in interest income due to the reduction of debt.
Liquidity and Capital Resources
The Company's liquidity and capital resources improved during the
first quarter. Current assets increased $323,000 while current liabilities
decreased $967,000 for a net increase in working capital of $1,290,000. The
improvement in working capital is primarily the result of the sale of property
and equipment and the use of the proceeds to pay off current liabilities.
The Company currently has an unutilized $1,000,000 revolving credit facility
with a bank that will expire September 1, 1995. Due to the improved
liquidity of the Company, management does not intend on renewing the line of
credit when it expires.
Operating activities used $674,000 in cash during the quarter,
compared to such activities using $722,000 in the comparable period of the
preceding year. During the quarter, the majority of the changes in the use of
operating cash was the result of the Company increasing inventory by
$316,000, accounts receivable by $89,000 and decreasing accounts payable
and accrued expenses by $427,000.
Investing activities provided net cash of $1,580,000 primarily
from the sale of property and equipment and the payments received on notes
receivable from previous asset sales.
Financing activities used net cash of $542,000 primarily in the
reduction of the revolving bank loan.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) During the quarter for which this report is filed, no
reports have been filed on form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be a signed
on its behalf by the undersigned, thereunto duly authorized.
SURGICAL TECHNOLOGIES, INC.
Dated: August 9, 1995 By /s/
Todd B. Crosland,
Vice-President-Finance
(Principal financial and
Accounting Officer)
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<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET OF SURGICAL TECHNOLOGIES, INC. AS OF JUNE 30, 1995 AND THE RELATED
STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE THREE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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