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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JULY 30, 1996
MAXXIM MEDICAL, INC.
(Exact Name of registrant as specified in its charter)
TEXAS 0-18208 76-0291634
(State or jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
---------------------------
104 INDUSTRIAL BOULEVARD, SUGAR LAND, TEXAS 77478
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 240-5588
N/A
(Former name or former address, if changed since last report)
---------------------------
Exhibit Index at Page 35
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<PAGE>
2 of 35
MAXXIM MEDICAL, INC. - AMENDMENT NO. 1 TO FORM 8-K
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
INDEX TO FINANCIAL STATEMENTS OF
STERILE CONCEPTS HOLDINGS, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheets at September 30, 1995 and 1994 ................... 3
Consolidated Statements of Earnings for the Years Ended
September 30, 1995, 1994 and 1993 .......................................... 4
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
September 30, 1995, 1994 and 1993 .......................................... 5
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993 .......................................... 6
Notes to Consolidated Financial Statements ................................... 7
Report of Independent Public Accountants ..................................... 22
Condensed Consolidated Balance Sheets at June 30, 1996 (unaudited) and
September 30, 1995 ......................................................... 23
Unaudited Condensed Consolidated Statements of Earnings for the Third Quarter
Ended June 30, 1996 and 1995 ............................................... 24
Unaudited Condensed Consolidated Statements of Earnings for the Nine Months
Ended June 30, 1996 and 1995 ............................................... 25
Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months
Ended June 30, 1996 and 1995 ............................................... 26
Notes to Condensed Consolidated Financial Statements ......................... 27
(b) Pro forma financial information
INDEX TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Financial Data ........................................... 29
Notes to Unaudited Pro Forma Financial Statements ............................ 32
</TABLE>
<PAGE>
3 of 35
MAXXIM MEDICAL, INC. - AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------- -------
(In thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................................... $ 803 $ 3,235
Receivables:
Trade, net of allowance for doubtful
accounts of $204 and $314 ............................................... 24,367 20,838
Due from affiliates (note 8) .............................................. -- 302
Due from officers (note 8) ................................................ -- 1,422
Other ..................................................................... 602 660
------- -------
Net receivables ...................................................... 24,969 23,222
------- -------
Inventories (note 2) ........................................................... 19,402 18,378
Prepaid expenses ............................................................... 1,281 470
Deferred income taxes (note 7) ................................................. 611 1,318
------- -------
Total current assets ................................................. 47,066 46,623
------- -------
Net property and equipment (note 3) ................................................. 2,498 1,667
Deferred income taxes (note 7) ...................................................... 68 --
Excess of cost over fair value of net
assets acquired, less accumulated amortization (note 11) .......................... 6,066 594
Other assets, less accumulated amortization (note 4) ................................ 1,940 3,330
------- -------
Total assets ......................................................... $57,638 $52,214
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 5) ................................ $ 340 $ 680
Current installments of long-term
notes payable to officers (note 6) ........................................... 3,895 --
Accounts payable ............................................................... 7,735 6,916
Accrued expenses ............................................................... 5,901 4,091
Due to affiliates (notes 7 and 8) .............................................. -- 4,314
Deferred compensation (note 9) ................................................. -- 9,049
------- -------
Total current liabilities ............................................. 17,871 25,050
------- -------
Long-term debt, excluding current installments (note 5) ............................. 5,588 340
Long-term notes payable to officers,
excluding current installments (note 6) ........................................... 167 --
Deferred income taxes (note 7) ...................................................... -- 125
------- -------
Total liabilities .................................................... 23,626 25,515
------- -------
Commitments and contingencies (notes 5, 6, 9, 10, 11, and 13)
Stockholders' equity (note 9):
Preferred stock, no par value. Authorized 10,000,000
shares, no shares issued and outstanding ..................................... -- --
Common stock, no par value. Authorized 25,000,000
shares, issued and outstanding 5,526,000 shares .............................. 1,472 1,472
Additional paid-in capital ..................................................... 7,947 7,947
Retained earnings .............................................................. 24,593 17,280
------- -------
Total stockholders' equity ........................................... 34,012 26,699
------- -------
Total liabilities and stockholders' equity ........................... $57,638 $52,214
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
4 of 35
MAXXIM MEDICAL, INC. - AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Net sales (notes 4 and 8) ................................................. $ 146,833 $ 132,098 $ 121,131
Cost of goods sold (note 8) ............................................... 113,977 99,393 90,677
Gross profit .................................................... 32,856 32,705 30,454
Selling, general, and administrative expenses
(notes 8 and 9) ......................................................... 19,350 23,833 18,589
Operating income ................................................ 13,506 8,872 11,865
--------- --------- ---------
Other income (deductions):
Other income ......................................................... 149 185 86
Interest income (note 8) ............................................. 28 519 133
Interest expense (notes 5, 6, 8 and 9) ............................... (512) (615) (647)
--------- --------- ---------
Total other income (deductions) ................................. (335) 89 (428)
--------- --------- ---------
Earnings from continuing operations before
taxes and cumulative effect of change in
accounting principle .......................................... 13,171 8,961 11,437
Income taxes (note 7) ..................................................... 4,979 3,419 4,390
--------- --------- ---------
Earnings from continuing operations
before cumulative effect of change
in accounting principle ....................................... 8,192 5,542 7,047
Discontinued operations - loss from operations of
discontinued division, net of income tax benefits of
$263 for 1993 (notes 7 and 11) .......................................... -- -- 563
--------- --------- ---------
Earnings before cumulative effect of
change in accounting principle ................................ 8,192 5,542 6,484
Cumulative effect of change in accounting for
income taxes (note 7) ................................................... -- 196 --
--------- --------- ---------
Net earnings .................................................... $ 8,192 $ 5,738 $ 6,484
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
(Note 1(a))
PRO-FORMA (UNAUDITED)
-----------------------------------------------
1995 1994 1993
--------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Earnings from continuing operations before cumulative
effect of change in accounting principle ................................ $ 8,192 $ 9,584 $ 8,556
Net earnings .............................................................. $ 8,192 $ 9,780 $ 7,993
========= ========= =========
Earnings per share from continuing operations before
cumulative effect of change in accounting principle ..................... $ 1.48 $ 1.73 $ 1.55
Net earnings per share .................................................... $ 1.48 $ 1.77 $ 1.45
Weighted average shares outstanding ....................................... 5,526 5,526 5,526
========= ========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
5 of 35
MAXXIM MEDICAL, INC. - AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
Consolidated Statements of Changes in Stockholders' Equity
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
----- ------ ------ -------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balances at September 30, 1992 ..................... 5,437 $ 50 $7,947 $ 18,044 $ 26,041
Net earnings ....................................... -- -- -- 6,484 6,484
----- ------ ------ -------- --------
Balances at September 30, 1993 ..................... 5,437 50 7,947 24,528 32,525
----- ------ ------ -------- --------
Cash dividend paid - $1.748 per
share (note 1(a)) ................................ -- -- -- (9,500) (9,500)
Dividends of tax benefit (note 7) .................. -- -- -- (3,486) (3,486)
Stock issuance to officers
(notes 1 and 8) .................................. 89 1,422 -- -- 1,422
Net earnings ....................................... -- -- -- 5,738 5,738
------ ------ -------- --------
Balances at September 30, 1994 ..................... 5,526 1,472 7,947 17,280 26,699
----- ------ ------ -------- --------
Cash dividend declared - $.16 per share ............ -- -- -- (879) (879)
Net earnings ....................................... -- -- -- 8,192 8,192
------ ------ -------- --------
Balances at September 30, 1995 ..................... 5,526 $1,472 $7,947 $ 24,593 $ 34,012
===== ====== ====== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
6 of 35
MAXXIM MEDICAL, INC. - AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
Consolidated Statements of Cash Flows
Years ended September 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(In thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations before cumulative
effect of change in accounting principle ...................................... $ 8,192 $ 5,542 $ 7,047
Adjustments to reconcile earnings from continuing
operations before cumulative effect of change in accounting principle to
net cash provided by (used in) operating activities:
Loss from discontinued operations ............................................. -- -- (563)
Depreciation and amortization ................................................. 1,909 1,537 1,789
Increase in allowance for doubtful accounts receivable ........................ 30 -- --
Increase in allowance for obsolete inventory .................................. 134 -- --
Increase (decrease) in allowance for
doubtful notes receivable ................................................... (428) (318) 1,303
Provision for deferred income taxes ........................................... 567 1,104 (404)
Provision for (payment of) deferred compensation .............................. (9,049) 4,162 1,703
Changes in assets and liabilities, net of effect of
acquisitions and dispositions:
Net receivables ............................................................. (68) (3,282) (2,457)
Inventories ................................................................. 1,018 (3,769) 8,029
Prepaid expenses ............................................................ (765) (353) 61
Other assets ................................................................ 1,076 917 (1,266)
Accounts payable ............................................................ 9 992 (796)
Accrued expenses ............................................................ 1,214 1,714 660
Due to affiliates ........................................................... (4,314) (2,025) 540
-------- -------- --------
Net cash provided by (used in) operating activities ...................... (475) 6,221 15,646
-------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment .............................................. (1,242) (575) (273)
Payment for purchase of Associated Medical Products
Company (note 11) ............................................................. (2,840) -- --
Decrease (increase) in short-term investments .................................... -- 7,000 (7,000)
-------- -------- --------
Net cash provided by (used in)
investing activities ................................................... (4,082) 6,425 (7,273)
-------- -------- --------
Cash flows from financing activities:
Proceeds from long-term credit facility .......................................... 77,358 -- 19,444
Payments on long-term credit facility ............................................ (71,770) -- (26,878)
Payments on short-term line of credit ............................................ (1,498) -- --
Payments on long-term debt ....................................................... (680) (680) (680)
Decrease in checks drawn in excess of cash
balances (note 11) ............................................................ (622) -- --
Payment of cash dividend ......................................................... (663) (9,500) --
-------- -------- --------
Net cash provided by (used in) financing activities ...................... 2,125 (10,180) (8,114)
Net increase (decrease) in cash .................................................... (2,432) 2,466 259
Cash and cash equivalents at beginning of year ..................................... 3,235 769 510
Cash and cash equivalents at end of year ........................................... $ 803 $ 3,235 $ 769
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ...................................................................... $ 1,040 $ 396 $ 612
Income taxes .................................................................. $ 4,439 $ 4,870 $ 3,865
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
7 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Organization and Background
Sterile Concepts Holdings, Inc. (the Company), formerly known as
Carilion Enterprises, Inc., is a Virginia corporation principally engaged in the
assembly, sterilization and distribution of custom procedure trays nationally
and internationally through its subsidiaries, Sterile Concepts, Inc. (SCI) and
Sterile Concepts, Ltd. (SCL). SCI and its subsidiary, Associated Medical
Products Company (AMP), assemble and distribute trays within the United States
and Canada. SCL assembles and distributes trays within Europe.
The initial public offering (the Offering) of Sterile Concepts Holdings,
Inc. common stock had an effective date of September 27, 1994, and a closing
date of October 4, 1994. Neither the Company nor SCI received any of the
proceeds of the Offering. In connection with the Offering, the Company underwent
certain reorganization transactions, as follows: (1) Effective September 14,
1994, the Company amended and restated its articles of incorporation to
authorize 25,000,000 shares of common stock and 10,000,000 shares of preferred
stock and eliminated the common stock's par value; (2) The Company paid a $1.748
per share cash dividend on the Company's common stock, for a total of
$9,500,000, payable to Carilion Services, Inc. (CSI), its sole shareholder of
record on September 16, 1994; (3) The Company's Board of Directors declared a
1,243.51 for 1 stock split effected in the form of a stock dividend to the sole
shareholder of record on September 26, 1994, and issued an additional 2,823,529
shares of common stock of the Company to CSI. All share and per share amounts
for September 30, 1994 and 1993, in these consolidated financial statements have
been restated to retroactively reflect the stock dividend and additional
issuance of shares; (4) On September 26, 1994, the Company transferred all
assets and liabilities other than its investment in SCI to CHS, Inc. (CHS), a
new wholly-owned subsidiary to provide initial capitalization for CHS in
exchange for shares of common stock of CHS; (5) The Company transferred to CSI
all of the Company's assets and liabilities, including its cash and its stock in
CHS, but excluding its stock in SCI. At September 30, 1994, the Company was a
wholly-owned subsidiary of CSI, of which Carilion Health System was the sole
member. On October 4, 1994, CSI sold 100% of the Company's common stock owned by
CSI through the Offering.
The following unaudited pro forma consolidated balance sheet data
assumes the Offering occurred on September 30, 1994.
Pro forma Consolidated Balance Sheet Data
(in thousands)
SEPTEMBER 30, 1994
-----------------------------------
PRO FORMA PRO FORMA
ACTUAL ADJUSTMENTS (UNAUDITED)
------- ----------- -----------
(see Note 9(c))
Current assets................... $46,623 $(1,070)(a)(b) $45,553
Total assets..................... 52,214 (1,070) 51,144
Current liabilities.............. 25,050 (9,337)(a) 15,713
Long-term liabilities............ 465 8,267 (b) 8,732
Stockholders' equity............. 26,699 -- 26,699
- -----------
(a) Reflects the payment of approximately $9,337,000 of deferred compensation
prior to the offering and includes the payment of approximately $288,000 in
accrued interest.
(b) To record borrowings to fund the payment of the deferred compensation.
<PAGE>
8 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Prior to the Offering, the Company paid to Carilion Health System a
general overhead charge of $2,301,000 and $852,000 in 1994 and 1993,
respectively. Additional interest expense was also allocated from Carilion
Health System of $398,000 and $239,000 in 1994 and 1993, respectively. Also
prior to the Offering, the Company had in effect certain long-term incentive and
stock option plans for which compensation and interest expense of $4,249,000 and
$1,770,000 was recorded in 1994 and 1993, respectively. These plans were
terminated prior to the Offering, therefore the foregoing expenses are no longer
incurred by the Company as a stand alone entity (see note 9). Pro forma earnings
and per share data have been calculated based on the elimination of the
after-tax effect of these overhead, interest, and compensation expenses which is
no longer incurred by the Company as a stand alone publicly owned Company, and
the addition of $413,350 of interest expense for 1994 and 1993, related to debt
incurred in October 1994, to pay out the long-term incentive and stock option
plans (see note 9).
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Sterile
Concepts Holdings, Inc., and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
(c) Cash and Cash Equivalents
Cash equivalents included in cash and cash equivalents totaled
$2,921,000 as of September 30, 1994 (none as of September 30, 1995). Prior to
the Offering, cash equivalents were held by Carilion Health System in a pooled
account and the Company was allocated its portion of interest on a monthly
basis. Cash equivalents are carried at cost, which approximates market. Cash and
cash equivalents consist primarily of demand deposits, temporary investments in
bank repurchase agreements, certificates of deposit and overnight master notes
with banks. For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid investments with an original maturity of
less than three months to be cash equivalents.
(d) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out (FIFO) method.
(e) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets. The
range of estimated useful lives are:
Machinery and equipment.................... 2 - 25 years
Office furnishings and equipment........... 2 - 10 years
Transportation equipment................... 5 years
Leased equipment........................... 10 years
Leasehold improvements are amortized on the straight-line method over
the shorter of the lease term or estimated useful life of the assets which
ranges from 2 to 10 years.
<PAGE>
9 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(f) Excess of Cost Over Fair Value of Net Assets Acquired
The excess of cost over fair value of net assets acquired is amortized
on a straight-line basis over periods ranging from 3 to 15 years. The cumulative
amount of goodwill amortization as of September 30, 1995 and 1994, is $1,596,000
and $1,134,000, respectively. Management of the Company periodically evaluates
the carrying value of the excess of cost over fair value of net assets acquired
to determine that no decline in carrying value has occurred. Upon determination
of a decline in value, an appropriate amount would be charged to earnings.
(g) Other Assets
Other assets consist of notes receivable net of an allowance for
doubtful notes of $557,000 and $985,000 as of September 30, 1995 and 1994,
respectively, arising from the sale of CliniTech in 1993 (see note 11), other
intangible assets and deposits. The cost of other intangible assets, principally
customer lists and agency and distribution agreements acquired in business
combinations is being amortized over the estimated useful lives of the
respective assets (5-15 years) using the straight-line method. The cumulative
amount of amortization as of September 30, 1995 and 1994 is $3,162,000 and
$2,415,000, respectively. Management of the Company periodically evaluates the
carrying value of other assets to determine that no decline in carrying value
has occurred. Upon determination of a decline in value, an appropriate amount
would be charged to earnings.
(h) Revenue Recognition
Revenue is recognized when title passes, which is upon shipment of the
product.
(i) Distribution Allowances
The Company has entered into distribution agreements with various
distributors. These agreements provide for a rebate to be paid to the
distributors based on a fixed percentage of the normal selling price of the
Company's products. These rebates and fees, paid to healthcare alliances and
group purchasing organizations, are deducted from sales to arrive at net sales
in the accompanying consolidated statements of earnings.
(j) Income Taxes
The Company accounts for its income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Deferred income taxes reflect the impact of temporary differences between the
amounts of assets and liabilities recognized for financial reporting purposes
and the amounts recognized for income tax purposes, measured by applying
currently enacted tax laws. The Company recognizes deferred tax assets if it is
more likely than not that a benefit will be realized. In years prior to fiscal
1994, deferred taxes were accounted for in accordance with APB Opinion No. 11.
(k) Earnings Per Share
Historical earnings per share data are not presented for the years ended
September 30, 1994 and 1993, as the historical capital structure of the Company
prior to the Offering is not comparable to the capital structure that exists
after the Offering and certain other historical expenses that were incurred
prior to the Offering are not incurred after the Offering.
Pro-forma earnings per share are based on the assumption that 5,526,000
shares of common stock were outstanding for the years ended September 30, 1994
and 1993. This amount represents the 5,437,000 shares previously outstanding
plus 89,000 shares issued to management in connection with management's
reinvestment of the after-tax
<PAGE>
10 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
deferred compensation proceeds (see note 8).
(l) Reclassification
Certain prior year balances have been reclassified to conform with the
current year presentation.
(2) Inventories
Classification of inventories are as follows as of September 30, 1995
and 1994:
1995 1994
--------- -------
(In thousands)
Finished goods............................. $ 9,946 $ 7,447
Work-in-process............................ 547 1,061
Raw materials and supplies................. 8,909 9,870
------- -------
$19,402 $18,378
======= =======
(3) Property and Equipment
A summary of property and equipment follows as of September 30, 1995 and
1994:
1995 1994
--------- ------
(In thousands)
Machinery and equipment.................... $ 1,567 $ 1,197
Office furnishings and equipment........... 3,197 2,124
Transportation equipment................... 38 13
Leased equipment........................... 43 43
Leasehold improvements..................... 1,318 828
------- -------
6,163 4,205
Less accumulated depreciation and amortization 3,665 2,538
------- ------
$ 2,498 $ 1,667
======= ========
(4) Customer Agreements and Concentrations of Credit Risk
In October 1990, the Company entered into a distribution agreement with
Owens & Minor, Inc. (O&M). The terms of the distribution agreement specify
certain target net sales volumes for each of the five years under the agreement
beginning January 1991. As of September 30, 1995, O&M has met the target net
sales volumes specified in the agreement. As incentive to enter into this
agreement, the Company paid O&M $3,150,000 in the form of a note payable (see
note 5). This amount is currently being amortized over the life of the agreement
using the straight-line method and is included in other assets in the
accompanying consolidated balance sheets. This agreement will terminate on
December 31, 1995, and management is currently negotiating renewal terms for the
agreement.
In April 1994 the Company signed a contract manufacturing agreement with
Medline, Inc. (Medline) pursuant to which the Company could sell to Medline, on
a private label basis, certain agreed upon volumes of custom procedure trays.
The agreement is for three years but can be canceled by either party upon six
months notice. During the first quarter of fiscal 1995, Medline and the Company
amended the agreement to eliminate the minimum purchase requirements. Future
sales to Medline are expected to be immaterial.
<PAGE>
11 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Trade accounts receivable from significant customers as a percentage of
gross accounts receivable as of September 30, 1995 and 1994, are as follows:
1995 1994
---- ----
Customer A................................. 33% 34%
Customer B................................. 14% 13%
Customer C................................. 9% 12%
(5) Long-term Debt
1995 1994
--------- ------
(In thousands)
Variable rate unsecured $40,000,000 credit
facility, payable no later than
October 31, 1998 (interest
of 7.03% as of September 30, 1995)..... $5,588 $ -
Unsecured $3,150,000 note payable to O&M,
bearing interest at 9%, payable in
equal semiannual payments of
principal and interest through
March 1, 1996......................... 315 945
Unsecured $250,000 note payable to O&M,
bearing interest at 9%, payable in
equal semiannual payments of
principal and interest through
March 1, 1996.......................... 25 75
------- ------
5,928 1,020
Less current installments of
long-term debt......................... 340 680
------ ------
Long-term debt, excluding current
installments........................... $5,588 $ 340
====== ======
The variable rate unsecured credit facility, which terminates on October
31, 1998, accrues interest at a variable rate based on the lender's prime rate,
CD rate or the applicable LIBOR rate plus from 40 to 70 basis points, depending
upon the results of certain financial ratio covenants. The Company must pay a
commitment fee of .10% or .15% annually on the unused portion of the commitments
based on the results of certain financial ratio covenants.
(6) Notes Payable to Officers
In connection with the acquisition of AMP on May 1, 1995, the Company
issued $4,062,000 in notes payable to the former shareholders of AMP, who are
now officers of the Company (see note 11).
Notes payable to officers are as follows as of September 30, 1995 (none
as of September 30, 1994):
1995
----
(In thousands)
Variable rate unsecured notes payable to officers with interest
payable monthly and principal payable monthly and principal
payable on April 1, 1996. The principal payments may be
deferred until April 1997 by the officers (interest of 7.03%
as of September 30, 1995)..................................... $3,860
Unsecured notes payable to officers, bearing interest at 7.5%,
payable in annual installments of interest and principal
through May 1, 2000........................................... 202
------
4,062
<PAGE>
12 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Less current installments of notes payable to officers 3,895
------
Long-term notes payable to officers,
excluding current installments.................... $ 167
======
(7) Income Taxes
As discussed in note 1(j), the Company adopted Statement 109 as of
October 1, 1993, and reported a net tax credit of $196,000 as the cumulative
effect of adopting this change in accounting principle on net earnings for the
year ended September 30, 1994.
Income tax expense (benefit) for the years ended September 30, 1995,
1994 and 1993, (including income tax benefit of $263,000 from loss from
operations of discontinued division for 1993) consists of:
CURRENT DEFERRED TOTAL
------- -------- -------
(In thousands)
1995:
Federal............................... $4,029 $ 580 $4,609
State................................. 326 44 370
------- -------- -------
$4,355 $ 624 $4,979
====== ======= ======
1994:
Federal............................... $2,073 $ 993 $3,066
State................................. 242 111 353
------- ------- -------
$2,315 $1,104 $3,419
====== ====== ======
1993:
Federal............................... $4,046 $ (361) $3,685
State................................. 485 (43) 442
------- ------- -------
$4,531 $ (404) $4,127
====== ====== ======
Income tax expense amounted to $4,979,000 for 1995 (an effective rate of
37.8%), $3,419,000 for 1994 (an effective rate of 38.2%) and $4,127,000 for 1993
(an effective rate of 38.9%). The actual expense for 1995, 1994 and 1993 differs
from the "expected" tax expense for those years (computed by applying the U.S.
Federal corporate income tax rate of 35% for 1995 and 1994 and 34% for 1993) as
follows:
1995 1994 1993
------ ------ -----
(In thousands)
Computed "expected" tax expense............ $4,610 $3,136 $3,607
Increase in income taxes resulting from:
State income taxes, net of Federal
income tax benefits ............. 127 121 288
Amortization of excess of cost over
fair value of net assets acquired 156 102 146
Other, net......................... 86 60 86
-------- -------- --------
$4,979 $3,419 $4,127
====== ====== ======
<PAGE>
13 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of September 30, 1995 and
1994, are as follows:
1995 1994
------ ------
(In thousands)
Deferred tax assets:
Deferred compensation................... $ - $ 678
Accrued expenses........................ 374 446
Inventories............................. 156 170
Allowance for doubtful accounts
and notes............................ 289 502
Other................................... 187 49
------ ------
Total deferred tax assets..... 1,006 1,845
====== ======
Deferred tax liabilities:
Notes receivable related to installment sale (202) (496)
Intangibles, principally due to
differences in amortization methods..... (92) (62)
Other...................................... (33) (94)
------ ------
Total deferred tax liabilities....... (327) (652)
------ ------
Net deferred tax assets.............. $ 679 $1,193
====== ======
Deferred taxes are classified on the accompanying consolidated balance
sheets as of September 30, 1995 and 1994, as follows:
1995 1994
------ ------
(In thousands)
Net current deferred tax assets......... $ 611 $1,318
Net noncurrent deferred tax assets (liabilities) 68 (125)
------ ------
$ 679 $1,193
====== ======
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the schedule reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based upon
recent levels of taxable income and projections for future taxable income over
the periods that the deferred tax assets are expected to become deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences as of September 30, 1995.
For fiscal 1993, the deferred income tax benefit resulted from timing
differences in the recognition of income and expense for tax and financial
reporting purposes and was primarily related to expenses of the terminated plans
(see note 9(c)).
Prior to fiscal 1995, the Company joined with certain other related
companies in filing consolidated income tax returns. Each company included in
the consolidated return was generally liable for income taxes calculated on a
stand alone basis. The Company's allocated share of the consolidated current tax
liability was included in due to affiliates in the accompanying consolidated
balance sheets as of September 30, 1994 and 1993.
<PAGE>
14 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On September 26, 1994, the Company, CSI, CHS, Inc. Carilion Health
System and certain other affiliates of Carilion Health System entered into a tax
matters agreement under which they allocated responsibility for income tax
liabilities, agreed to indemnify each other for certain matters and provided for
payment by the Company to Carilion Health System of the tax savings to the
Company resulting from the Company's deduction of deferred compensation expenses
related to the terminated plans (see note 9(c)). Carilion Health System received
the tax benefit from the $9,337,000 of deferred compensation expense related to
the terminated plans and the related tax effect of this benefit of $3,486,000
was recorded as a dividend to Carilion Health System as of September 30, 1994.
(8) Related Party Transactions
(a)Former Parent
During fiscal 1994 and 1993, the Company, in the normal course of
business, had certain transactions with affiliated companies owned or
controlled by its former parent, Carilion Health System. All transactions
were completed at market value. Carilion Health System provided to the
Company certain administrative services and procured certain outside
services, such as legal, accounting and insurance for the Company. Carilion
Health System directly charged the Company for the actual cost of such
outside services. In addition to the direct charges for those services, the
Company paid to Carilion Health System a general overhead charge based on a
percentage of gross revenues for all years through 1993 and as a percentage
of net revenues for 1994. The general overhead charge was for administrative
services provided by Carilion Health System. The general overhead charge for
1994 and 1993 was $2,301,000 and $852,000, respectively. The outside
services procured by CSI are included in shared support expenses in the
table below. A summary of these transactions included in the consolidated
statements of earnings for 1994 and 1993 is as follows:
1994 1995
---- ----
(In thousands)
Sales to affiliates..................... $ 242 $ 220
Purchases from affiliates............... 305 244
Shared support expenses................. 3,103 1,664
Interest expense........................ 394 385
Interest income......................... 499 134
====== ======
In addition, during 1994 and 1993 certain of the Company's affiliates
purchased the Company's products through O&M (see note 4). The amount of
these sales is not readily available and is not included in the table above.
Prior to 1992 the Company's current tax liability in excess of the
Company's allocated share of the consolidated current tax liability was
forgiven by its former parent and recorded as additional paid-in capital.
The Company was charged interest on the accumulated additional paid-in
capital recorded as a result of forgiveness of the Company's current tax
liability. Interest expense of approximately $398,000 and $239,000 in 1994
and 1993, respectively (included in the table above), was recorded by the
Company using the intercompany loan rate of 4.50% and 3.98% in 1994 and
1993, respectively.
<PAGE>
15 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(b)Officers
The Company issued 89,000 shares of the Company's common stock to
certain members of management prior to the Offering. These shares were
issued at $15.98 per share, which represents the Offering price of $17.00
per share less underwriting discount. Due from officers of $1,422,220 was
recorded as of September 30, 1994, and common stock was credited for the
same amount. This amount was collected on October 4, 1994.
(9) Employee Benefit Plans
(a)Pension Plan
During fiscal 1995, the Company adopted a noncontributory, defined
benefit pension plan (the Plan) covering substantially all full-time and
qualified part-time employees. Prior to fiscal 1995, the Company was a
participant in the noncontributory defined benefit pension plan of Carilion
Health System (the Carilion Plan). The Carilion Plan covered substantially
all employees of the Company. The Company made annual contributions to the
Carilion Plan equal to the amounts allocated to the Company by Carilion
Health System for its share of the total pension expense. Total pension
expense for the Company in 1994 and 1993 was $288,000 and $282,000,
respectively. During fiscal 1995, the Company's pro-rata share of assets of
$2,114,000 and benefit accrued as of October 4, 1994, of $1,966,000 were
transferred to the Plan. The net periodic pension expense consists of the
following for the year ended September 30, 1995:
1995
----
(In thousands)
Service cost............................ $ 275
Interest cost........................... 173
Actual return on assets................. (378)
Net amortization and deferral........... 209
Net periodic pension expense............ $ 279
=====
The following table sets forth the funded status of the Plan as of
September 30, 1995:
1995
-------
(In thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations including
vested benefits of $1,323,902 in 1995 $1,787
Additional amounts related to projected
salary increases................... 1,011
-------
Projected benefit obligation............ 2,798
Plan assets at fair value (U.S. Government
securities, corporate bonds and
common stocks)....................... 2,695
-------
Plan assets in deficit of projected
benefit obligations.................. (103)
Unrecognized gain....................... 68
Unrecognized net assets being amortized
over 15 years........................ 26
--------
Accrued pension liability............... $ (9)
--------
<PAGE>
16 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Significant assumptions used in the accounting for the pension plan
were as follows:
1995
----
Discount rate........................... 7.75%
Rate of increase in future compensation level 4.50%
Expected long-term rate of return....... 8.00%
=====
(b)Stock Incentive Plan
In September 1994, the Company adopted a new stock incentive plan
which provides that awards in the form of incentive and non-qualified stock
options may be granted to management and key employees to purchase shares of
the Company's common stock, stock appreciation rights or restricted shares
of the Company's common stock. In addition, each outside director receives
an annual grant of nonqualified stock options under an award formula. The
exercise price for the options is generally the market value at the date of
grant. The options generally vest on a straight-line basis over a three year
period and are exercisable over a period of from one to ten years from the
date of grant. The Company may grant options under the plan for not more
than 220,000 shares in a calendar year and 550,000 shares in aggregate.
Changes in stock options outstanding (and option exercise prices for
such options) are as follows:
PRICE
OPTIONS PER SHARE
------- ------------
Outstanding at September 30, 1993....... - -
Granted................................. 220,000 $17.00
------- ------------
Outstanding at September 30, 1994....... 220,000 17.00
Granted................................. 35,798 11.60-17.00
Cancelled............................... (5,880) 17.00
------ ------------
Outstanding at September 30, 1995....... 249,918 $11.60-17.00
======= ============
At September 30, 1995, 71,373 options were exercisable.
On October 1, 1995 and November 2, 1995, subsequent to the Company's
fiscal year end, options totaling 432 and 157,843 shares were granted, with
an exercise price of $13.88 and $14.50 per share, respectively.
(c)Terminated Plans
In previous years, the Company instituted a long-term incentive plan,
which provided for key management members to be credited with an aggregate
of 5% of the increase in the value of the Company (as defined in the
incentive plan). Effective October 1, 1990, the aforementioned long-term
incentive plan was terminated and all amounts previously credited became
fully vested on October 1, 1992, with interest accruing on the vested
benefit amount at an interest rate based on the LIBOR rate plus 80 basis
points (4.50% at September 30, 1994) until the vested balances were paid in
accordance with the terms of plan described above. Interest expense related
to the long-term incentive plan during 1994 and 1993 was $87,000 and
$67,000, respectively, and is included in interest expense in the
accompanying consolidated statements of earnings.
<PAGE>
17 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In previous years, the Company adopted stock option plans for key
employees which provided for the issuance of SCI's common stock pursuant to
options granted under the plans. The options were generally not exercisable
until five years after the date of grant. On September 26, 1994, in
conjunction with the Offering, the stock options under the plans became
fully vested upon a change of control of the Company, as defined in the
plans' documents and the plans were then terminated. The value represented
by the vested stock options was paid to the option holders, all of whom were
members of management.
To record the liabilities for termination of the long-term incentive
and stock option plans, approximately $9,049,000 was accrued as deferred
compensation in the accompanying consolidated balance sheets as of September
30, 1994. Compensation expense related to the plans during 1994 and 1993 was
$4,162,000 and $1,703,000, respectively, and is reflected in selling,
general, and administrative expenses in the accompanying consolidated
statements of earnings.
On October 4, 1994, net payments of approximately $7,915,000 were
made to pay the Company's obligation under the terminated stock incentive
plans which represented approximately $9,049,000 to cover deferred
compensation costs, approximately $288,000 in accrued interest relating to
deferred compensation net of approximately $1,422,000 which was applied to
repay notes receivable from certain members of management. These notes
receivable resulted from the purchase of 89,000 shares of the Company's
common stock on September 26, 1994 (see note 8).
(10) Commitments and Contingencies
(a) The Company is obligated under operating leases, principally for
office, warehouse and manufacturing facilities, that expire at various
dates through the year 2007.
Future minimum lease payments under noncancellable operating leases
are as follows:
MINIMUM LEASE
PAYMENTS
--------------
(In thousands)
Year ending September 30,
1996.................................. 1,486
1997.................................. 1,471
1998.................................. 1,306
1999.................................. 1,333
2000.................................. 1,356
Thereafter............................ 5,444
-------
Total minimum lease payments...... $12,396
=======
Total rental expense for operating leases in fiscal 1995, 1994, and
1993 was $1,372,000, $1,195,000, and $1,152,000, respectively.
(b) Effective January 1991, the Company entered into an agreement to
purchase sterilization services from an independent contractor for a period of
seven years. The terms of the agreement provide that the Company will purchase a
minimum amount of sterilization services from the contractor in each year of the
agreement. The aggregate minimum remaining amount to be purchased under this
agreement totals $1,931,000 at September 30, 1995.
<PAGE>
18 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(c) Effective July 1, 1993, the Company entered into an agreement to
purchase certain raw materials and finished products from a supplier for a
period of five years as part of the sale of the CliniTech operations (see note
11). The terms of the agreement provide that the Company will purchase a minimum
amount of raw materials and finished products from the supplier in each year of
the agreement. The aggregate minimum remaining amount to be purchased under this
agreement totals $14,495,000 as of September 30, 1995. In addition, the Company
sold certain assets to the supplier during 1993. The proceeds from the sales are
being collected over the life of the aforementioned agreement (see note 11).
(11) Acquisitions and Dispositions
On May 1, 1995, SCI purchased all of the outstanding stock of
Associated Medical Products Company, a privately held company based in
Minnetonka, Minnesota, for approximately $2,840,000 in cash and $4,062,000 in
notes payable (see note 6). The purchase price could be reduced contingent upon
the collectability of certain receivables, the salability of certain inventory,
and attainment of a specified sales level over the period from the purchase date
to December 31, 1995. AMP produces custom sterile trays for hospitals and
surgical centers in 28 states, primarily in the midwestern United States. The
acquisition was accounted for using the purchase method. The excess of cost over
the fair value of the net assets acquired is being amortized on a straight-line
basis over a period of fifteen years.
A summary of the fair value of assets acquired and liabilities assumed
follows:
(In thousands)
Current assets, including inventories
of $2,176............................. $3,931
Current liabilities, including checks drawn
in excess of cash balances of $622.... (1,807)
Other noncurrent assets................... 342
Excess of cost over fair value of
net assets acquired................... 5,934
Liabilities assumed....................... (5,560)
-------
Cash paid................................. $ 2,840
=======
The following unaudited pro-forma combined results of operations have
been prepared as if the acquisition of AMP had occurred at the beginning of each
fiscal year presented. The combined results of operations for fiscal 1994 are
based on the results of operations for the twelve months ended September 30,
1994, and December 31, 1994, for the Company and AMP, respectively, after giving
effect to certain pro-forma adjustments. The combined results of operations for
fiscal 1995 are based on the results of operations for the twelve months ended
September 30, 1995, for the Company and the results of operations from October
1, 1994, through April 30, 1995, for AMP, after giving effect of certain
pro-forma adjustments. The results of AMP's operations are included in the
Company's consolidated financial statements from May 1, 1995 through September
30, 1995. The results of operations for AMP from October 1, 1994 through
December 31, 1994, are included in both fiscal 1994 and 1995 pro-forma combined
results of operations.
The pro-forma adjustments included in the combined results of
operations relate to the purchase of AMP by the Company and to the initial
public offering made by the Company (see note 1). Pro-forma adjustments related
to the purchase of AMP serve to eliminate certain overhead expenses which AMP
will not incur as a wholly owned subsidiary of SCI and to adjust interest and
compensation expenses which will be incurred in different amounts by AMP as a
wholly owned subsidiary.
<PAGE>
19 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The pro-forma results of operations are provided for informational
purposes only and are not necessarily indicative of the actual results of
operations that would have occurred if the acquisition had taken place as of the
beginning of each fiscal year presented nor are they indicative of future
results of the combined companies.
Pro-forma unaudited
Years ended September 30,
(In thousands)
1995 1994
--------- --------
(In thousands, except per
share data)
Net sales............................... $ 156,151 $147,936
Net earnings............................ $ 8,031 $ 9,493
Net earnings per share.................. $ 1.45 $ 1.72
========= ========
On February 8, 1993 (measurement date), the majority of the tangible
fixed assets and all intangible assets of the Company's CliniTech operations
were sold for approximately $2,500,000. The remaining assets, which consisted of
inventories and receivables, were sold, written off or collected by the Company
in the normal course of business. Under the terms of the sale, this amount will
be paid to the Company over seven years in the form of cash payments and credits
for inventories purchased by the Company. As described in note 10(c), the
Company entered into a product purchase and supply agreement with the purchaser
of the CliniTech operations in exchange for a $1,279,000 note receivable. Under
the terms of the agreement, the Company is required to purchase a minimum amount
of inventory over five years. However, the agreement allows for the note to be
paid over seven years in the form of credits for inventory purchased by the
Company. During fiscal 1995, there was a change in ownership of the company
which purchased CliniTech. In connection with this change in ownership, the
Company received a principal payment of $750,000 in return for not calling the
note. The remaining principal balance is to be paid under the original terms of
the note. The Company has no continuing involvement with CliniTech other than
purchasing inventory in the normal course of business to satisfy the
requirements in the product purchase and supply agreement, as more fully
described in note 10(c). At the time of the sale of the CliniTech operations,
the Company was released from all contractual obligations and commitments of
CliniTech. Company management has no further association with the management of
CliniTech in the operation of CliniTech.
The loss from CliniTech operations in fiscal year 1993 up to the
measurement date was $826,000 and is recorded as discontinued operations, net of
tax benefits in the accompanying consolidated statements of earnings. The
Company recognized no gain or loss related to the CliniTech operations from the
date of the sale to year-end.
(12) Supplemental Disclosures of Non-Cash Investing Activities
The consolidated statement of cash flows for 1994 excludes the effects
of the $3,486,000 dividend of tax benefit which was included due to affiliates
on the accompanying consolidated balance sheets, as well as the effects of the
$1,422,220 due from officers (see note 8).
The consolidated statement of cash flows for 1993 excludes the effects
of certain non-cash investing activities relating to the sale of CliniTech. The
following is a summary of the non-cash effects of this transaction:
<PAGE>
20 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands)
(Increase) decrease in:
Notes receivable, net..................... $(2,493)
Inventories............................... 250
Intangible assets......................... 1,832
Property and equipment.................... 411
---------
Net increase in cash and cash equivalents $ -
=========
(13) Subsequent Event
In October 1995, SCI acquired substantially all of the assets and
assumed certain liabilities of the custom procedure tray business of Medical
Design Concepts, Inc. (MDC), a privately held company in Temecula, California
for approximately $18,000,000 in cash. The purchase price could increase if the
net assets exceed a specified amount upon completion of the acquisition audit.
The purchase price could be reduced contingent upon the collectability of
certain receivables, the salability of certain inventory, and the maintenance of
certain gross profit contribution levels on sales in specified states over the
two year period following the acquisition date. MDC produces custom sterile
procedure trays for hospitals and surgical centers in 21 states, primarily in
the western United States, and had revenues of $26,100,000 for the nine months
ended September 30, 1995. The acquisition, which will be accounted for under the
purchase method, was financed under the Company's variable rate unsecured credit
facility (see note 5).
The following unaudited pro-forma combined results of operations have
been prepared as if the acquisition of MDC had occurred at the beginning of each
fiscal year presented. The combined results of operations for fiscal 1995 are
based on the unaudited pro-forma combined results of operations of the Company
as if the acquisition of AMP had occurred at the beginning of fiscal 1995 (see
note 11) and the results of operations for the twelve months ended September 30,
1995, for MDC after giving effect to certain pro-forma adjustments. The combined
results of operations for fiscal 1994 are based on the unaudited combined
results of operations of the Company as if the acquisition of AMP had occurred
at the beginning of fiscal 1994 (see note 11) and the MDC results of operations
for the twelve months ended December 31, 1994, after giving effect to certain
pro-forma adjustments. The results of operations for MDC from October 1, 1994
through December 31, 1994, are included in both fiscal 1995 and 1994 pro-forma
combined results of operations.
The pro-forma adjustments included in the combined results of
operations relate to the purchase of MDC and the purchase of AMP (see note 11)
for fiscal 1995 and 1994 and the initial public-offering (see note 1) for fiscal
1994 only. Pro-forma adjustments related to the purchase of MDC serve to record
interest expense and amortization of excess of cost over fair value of net
assets acquired and adjust cost related to sterilization which will be incurred
by MDC as a division of SCI.
The pro-forma results of operations are provided for informational
purposes only and are not necessarily indicative of the actual results of
operations that would have occurred if the acquisition had taken place as of the
beginning of each fiscal year presented nor are they indicative of future
results of the combined companies.
Pro-forma unaudited
Years ended September 30,
1995 1994
--------- ----------
(In thousands, except
per share amounts)
Net sales............................... $ 182,233 $ 179,753
Net earnings............................ $ 7,815 $ 9,276
Net earnings per share.................. $ 1.41 $ 1.68
========= ==========
<PAGE>
21 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(14) Quarterly Operating Results - Unaudited
FISCAL 1995
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
(In thousands, except per share data)
Historical:
Net sales ................... $35,974 $35,007 $36,976 $38,876 $146,833
Gross profit ................ 8,224 7,454 8,329 8,849 32,856
Net earnings ................ $ 2,365 $ 1,711 $ 2,016 $ 2,100 $ 8,192
Earnings per share .......... $ 0.43 $ 0.31 $ 0.36 $ 0.38 $ 1.48
======= ======= ======= ======= ========
<TABLE>
<CAPTION>
FISCAL 1994
------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- --------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Historical:
Net sales ......................... $28,998 $31,708 $34,939 $36,453 $132,098
Gross profit ...................... 7,056 8,319 8,814 8,516 32,705
Earnings from continuing operations
before cumulative effect of
change in accounting principle . 1,168 1,255 1,919 1,200 5,542
Net earnings ...................... $ 1,364 $ 1,255 $ 1,919 $ 1,200 $ 5,738
Pro-forma:
Earning from continuing operations
before cumulative effect of
change in accounting principle . $ 1,988 $ 2,144 $ 2,791 $ 2,661 $ 9,584
Net earnings ...................... $ 2,184 $ 2,144 $ 2,791 $ 2,661 $ 9,780
Earnings per share from
continuing operations before
cumulative effect of change in
accounting principle ........... $ 0.36 $ 0.39 $ 0.50 $ 0.48 $ 1.73
Earnings per share ................ $ 0.40 $ 0.39 $ 0.50 $ 0.48 $ 1.77
======= ======= ======= ======= ========
</TABLE>
<PAGE>
22 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Sterile Concepts Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Sterile
Concepts Holdings, Inc. and subsidiaries (the Company) as of September 30, 1995
and 1994, and the related consolidated statements of earnings, changes in
stockholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Sterile Concepts Holdings, Inc. and subsidiaries as of September 30, 1995 and
1994, and the results of their operations and their cash flows for each of the
years in the three-year period ended September 30, 1995, in conformity with
generally accepted accounting principles.
As discussed in note 1(j) to the consolidated financial statements, the
Company changed its method of accounting for income taxes in fiscal 1994.
KPMG PEAT MARWICK LLP
Richmond, Virginia
November 10, 1995
<PAGE>
23 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................... $ -- $ 803
Receivables:
Trade, net of allowance for doubtful accounts of $356 and $204 ........................ 30,477 24,367
Other ................................................................................. 583 602
------- -------
Net receivables .......................................................................... 31,060 24,969
Inventories ............................................................................. 30,486 19,402
Prepaid Expenses ........................................................................ 2,235 1,205
Income taxes receivable ................................................................. 279 76
Deferred income taxes ................................................................... 493 611
------- -------
Total current assets ..................................................................... 64,553 47,066
------- -------
Net property and equipment ............................................................... 3,387 2,498
Deferred income taxes .................................................................... 55 68
Excess of cost over fair value of net assets acquired, less
accumulated amortization ................................................................. 17,529 6,066
Other assets, less accumulated amortization .............................................. 2,325 1,940
------- -------
Total assets ............................................................................. $87,849 $57,638
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks drawn in excess of cash balances ................................................. $ 334 $ --
Current installments of long-term debt .................................................. -- 340
Current installments of long-term notes payable to officers ............................. 3,018 3,895
Accounts payable ........................................................................ 10,848 7,735
Accrued expenses ........................................................................ 4,647 5,871
Income taxes payable .................................................................... -- --
------- -------
Total current liabilities ................................................................ 18,847 17,841
------- -------
Long-term debt, excluding current installments ........................................... 31,366 5,588
Long-term notes payable to officers, excluding current installments ...................... 130 167
Other liabilities ........................................................................ 442 30
------- -------
Total liabilities ........................................................................ 50,785 23,626
------- -------
Stockholders' equity:
Preferred stock, no par value ........................................................... -- --
Common stock, no par value .............................................................. 1,472 1,472
Additional paid-in capital .............................................................. 7,955 7,947
Retained earnings ....................................................................... 27,637 24,593
------- -------
Total stockholders' equity ......................................................... 37,064 34,012
------- -------
Total liabilities and stockholders' equity .................................... $87,849 $57,638
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
24 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THIRD QUARTER ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1996 1995
-------- --------
Net sales .......................................... $ 51,586 $ 36,976
Cost of goods sold ................................. 42,220 28,647
-------- --------
Gross profit ................................ 9,366 8,329
Selling, general and administrative expenses ....... 6,760 4,810
Amortization of intangibles ........................ 434 189
-------- --------
Operating income ............................ 2,172 3,330
Interest expense ................................... (536) (152)
Interest income .................................... 32 3
Other income ....................................... 10 147
-------- --------
Earnings before income taxes ................ 1,678 3,328
Income taxes ....................................... 720 1,312
-------- --------
Net earnings ................................ $ 958 $ 2,016
======== ========
Net earnings per share ............................. $ 0.17 $ 0.36
======== ========
Weighted average shares outstanding ................ 5,526 5,526
======== ========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
25 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
1996 1995
--------- ---------
Net sales ........................................ $ 146,515 $ 107,958
Cost of goods sold ............................... 118,599 83,950
--------- ---------
Gross profit ................................. 27,916 24,008
Selling, general and administrative expenses ..... 19,078 13,564
Amortization of intangibles ...................... 1,319 430
--------- ---------
Operating income ................................. 7,519 10,014
Interest expense ................................. (1,513) (334)
Interest income .................................. 82 13
Other income ..................................... 28 309
--------- ---------
Earnings before income taxes ................. 6,116 10,002
Income taxes ..................................... 2,631 3,910
--------- ---------
Net earnings ................................. $ 3,485 $ 6,092
========= =========
Net earnings per share ........................... $ 0.63 $ 1.10
========= =========
Weighted average shares outstanding .............. 5,526 5,526
========= =========
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
26 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30,
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ............................................. $ 3,485 $ 6,092
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization ........................ 2,284 1,892
Increase in allowance for doubtful accounts receivable 115 15
Increase in allowance for obsolete inventory ......... 195 30
Decrease in allowance for doubtful notes receivable .. (219) (178)
Provision for deferred income taxes .................. 131 703
Provision for deferred compensation .................. -- --
Changes in assets and liabilities, net of acquisition:
Receivables ........................................... (2,766) 1,677
Inventories ........................................... (6,268) (209)
Prepaid expenses ...................................... (896) (422)
Income taxes receivable ............................... (204) --
Other assets .......................................... (421) 194
Accounts payable ...................................... 959 1,064
Accrued expenses ...................................... (1,816) 875
Due to affiliates ..................................... -- (4,314)
Deferred compensation ................................. -- (9,049)
Income taxes payable .................................. -- 131
Other liabilities ..................................... (35) --
-------- --------
Net cash used in operating activities .............. (5,456) (1,499)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment ...................... (782) (1,591)
Acquisition of Associated Medical
Products Company ....................................... (48) (3,462)
Acquisition of sterile procedure tray
business of Medical Design Concepts, Inc. .............. (18,940) --
-------- --------
Net cash used in investing activities ................. (19,770) (5,053)
-------- --------
Cash flows from financing activities:
Checks drawn in excess of cash balances .................. 334 --
Proceeds from long-term debt ............................. 84,123 61,872
Payments on long-term debt ............................... (59,600) (57,557)
Proceeds from exercised stock options .................... 8 --
Payment of cash dividend ................................. (442) (442)
-------- --------
Net cash provided by financing activities ............. 24,423 3,873
-------- --------
Net decrease in cash and cash equivalents ..................... (803) (2,679)
Cash and cash equivalents at beginning of period .............. 803 3,235
-------- --------
Cash and cash equivalents at end of period .................... $ -- $ 556
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period
for:
Interest ................................................ $ 1,519 $ 780
Income taxes ............................................ 2,697 3,074
======== ========
</TABLE>
<PAGE>
27 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements
1. ACCOUNTING POLICIES
The condensed consolidated balance sheet as of June 30, 1996 and
the condensed consolidated statements of earnings and cash flows for the
third quarter and nine months ended June 30, 1996 and 1995 are unaudited
and reflect all adjustments (consisting only of normal recurring
adjustments and the use of estimates) which are, in the opinion of
management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of
operations, contained in the Sterile Concepts Holdings, Inc. (the
"Company") Annual Report to Shareholders incorporated by reference in
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995. The results of operations for the third quarter and
nine months ended June 30, 1996, are not necessarily indicative of the
results for the entire fiscal year ending September 30, 1996.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
3. ACQUISITION:
On October 1, 1995, the Company's wholly owned subsidiary Sterile
Concepts, Inc. ("SCI") acquired substantially all of the assets and
assumed certain liabilities of the custom procedure tray business of
Medical Design Concepts, Inc. ("MDC"), a privately held company based in
Temecula, California for approximately $18,940,000. The purchase price
could be reduced contingent upon the collectability of certain
receivables, the salability of certain inventory, and the maintenance of
certain gross profit contribution levels on sales in specified states
over the two year period following the acquisition date. MDC produces
custom sterile procedure trays for hospitals and surgical centers in 21
states, primarily in the western United States, and had revenues of
approximately $26,100,000 for the nine months ended September 30, 1995.
The acquisition was accounted for using the purchase method. This
treatment resulted in the recording of approximately $12,566,000 of
excess of cost over the fair value of the net assets acquired. The
excess cost, which could decrease for any purchase price reductions, is
being amortized on a straight-line basis over a period of fifteen years.
A summary of the book value of the assets and liabilities assumed
follows: (in thousands)
Net receivables ............................................ $ 3,440
Inventories ................................................ 5,011
Prepaid expenses ........................................... 184
Net property and equipment ................................. 934
Excess of cost over the fair
value of the net assets acquired ......................... 12,566
Accounts payable ........................................... (2,154)
Accrued expenses and other liabilities ..................... (1,041)
--------
Cash paid .................................................. $ 18,940
========
4. DIVIDEND
On December 22, 1995, the Company declared a cash dividend of
$0.04 per share payable to shareholders of record on December 29, 1995.
The dividend was paid on January 10, 1996. On March 26, 1996, the
Company declared a cash dividend of $0.04 per share payable to
shareholders of record on April 4, 1996. The dividend was paid on April
17, 1996.
<PAGE>
28 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
STERILE CONCEPTS HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements - (Continued)
5. INVENTORIES
Classification of inventories are as follows as of June 30, 1996
and September 30, 1995 (in thousands):
JUNE 30, 1996 SEPTEMBER 30, 1995
------------- ------------------
Finished goods ................ $12,252 $ 9,946
Work in process ............... 992 547
Raw materials and supplies .... 17,242 8,909
------- -------
$30,486 $19,402
======= =======
6. LONG-TERM DEBT
The acquisition of the custom procedure tray business of MDC (see
note 3) was financed through the Company's $40,000,000 unsecured
long-term credit facility with a maturity date of October 31, 1998. The
credit facility accrues interest at a variable rate based on the
lender's prime rate, CD rate or the applicable LIBOR rate plus 40 to 70
basis points, depending upon the results of the calculation of certain
financial ratios. The interest rate was 6.23% on June 30, 1996. The
Company must pay a commitment fee of .10% or .15% annually on the unused
portion of the commitment based upon the results of the calculation of
certain financial ratios.
7. SUBSEQUENT EVENT
On July 29, 1996 Maxxim Medical, Inc. completed a tender offer to
shareholders of Sterile Concepts Holdings, Inc. Approximately 98.4% or
5,438,059 shares were validly tendered and accepted for $20 per share.
The remaining 88,325 shares are expected to be acquired for $20 per
share in a merger which the Company anticipates will be completed on
September 17, 1996.
<PAGE>
29 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
UNAUDITED PRO FORMA FINANCIAL DATA
The following presents summary unaudited combined pro forma
financial data of the Company and Sterile Concepts. The pro forma
statements of operations were prepared as if the Acquisition occurred on
October 31, 1994. The pro forma statements of operations data also give
effect to the acquisition by the Company of the Glove Operations (as
defined herein), the divestiture by the Company of the Henley Healthcare
division in April, 1996, and the acquisitions by Sterile Concepts of AMP
and Medical Design Concepts, as if the acquisitions and the divestiture
occurred on October 31, 1994. Management believes that the following
presentation will assist holders of the Notes in evaluating the ability
of the Company to meet debt service requirements and other obligations.
The pro forma information for the year ended October 29, 1995 is
based on the historical financial statements of the Company for the year
ended October 29, 1995 and Sterile Concepts for the year ended September
30, 1995. The pro forma financial information for the nine months ended
August 4, 1996 is based on the historical financial statements of the
Company for the nine months ended August 4, 1996 and those of Sterile
Concepts for the nine months ended June 30, 1996.
The summary unaudited combined pro forma financial data do not
necessarily reflect the results of operations of the Company and Sterile
Concepts that actually would have resulted had the Sterile Concepts
Acquisition, the acquisition of the Glove Operations, the divestiture of
Henley Healthcare and the acquisitions by Sterile Concepts of AMP and
Medical Design Concepts, Inc. been consummated as of the dates referred
to above. Accordingly, such data should not be viewed as fully
representative of the past performance of the Company or Sterile
Concepts or indicative of future results. The summary unaudited combined
pro forma financial data should be read together with the Financial
Statements and Notes of the Company and Sterile Concepts included
elsewhere herein.
<PAGE>
30 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MAXXIM STERILE CONCEPTS
HISTORICAL HISTORICAL PRO FORMA
YEAR ENDED YEAR ENDED COMBINED
OCTOBER 29, SEPTEMBER 30, YEAR ENDED
1995 1995 PRO FORMA OCTOBER 29,
AS REPORTED AS REPORTED ADJUSTMENTS 1995
-------- -------- ---------------------------- --------
<S> <C> <C> <C> <C> <C>
Net sales ............................. $265,726 $146,833 $ 18,680 $ 68,363(g,f) $502,349
4,611 (h)
44,718(i)
Cost of sales ......................... 186,495 113,977 54,764 8,463(f,g) 380,737
4,611(h)
38,575 (i)
-------- -------- -------- -------- --------
Gross profit .......................... 79,231 32,856 116,630 126,155 121,612
Operating expenses .................... 59,493 19,350 1,806 4,000(c,d) 84,377
11,960 (f)
5,217 9,449(i,g)
Nonrecurring charges .................. 10,845 10,845
-------- -------- -------- -------- --------
Income from operations ................ 8,893 13,506 135,613 139,604 26,390
Interest expense ...................... 4,088 512 467 (c) 22,865
17,484 (e)
314 (i)
Other income, net ..................... 28 177 31 (f) 159
15 (i)
-------- -------- -------- -------- --------
Income before income taxes ............ 4,833 13,171 153,924 139,604 3,684
Income taxes .......................... 1,904 4,979 4,679(f) 2,204
-------- -------- -------- -------- --------
Net income ............................ $ 2,929 $ 8,192 $153,924 $144,283 $ 1,480
======== ======== ======== ======== ========
Net income per share .................. $ 0.36 $ 1.48 $ 0.18
======== ======== ========
Weighted average shares
outstanding .................... 8,159 5,526 8,159
======== ======== ========
</TABLE>
<PAGE>
31 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MAXXIM STERILE CONCEPTS
HISTORICAL HISTORICAL PRO FORMA
NINE MONTHS NINE MONTHS COMBINED
ENDED ENDED NINE MONTHS
AUGUST 4, 1996 JUNE 30, 1996 PRO FORMA ENDED
AS REPORTED AS REPORTED ADJUSTMENTS AUGUST 4, 1996
-------- -------- ---------------------------- --------
<S> <C> <C> <C> <C>
Net sales ............................ $ 261,587 $146,515 $ 8,339 (g) $396,386
3,377 (h)
Cost of sales ........................ 188,531 118,599 3,712(g) 300,041
3,377(h)
--------- -------- -------- -------- --------
Gross profit ......................... 73,056 27,916 11,716 7,089 96,345
Operating expenses ................... 53,438 20,397 1,355 3,000(c,d) 67,882
4,308(g)
--------- -------- -------- -------- --------
Income from operations ............... 19,618 7,519 13,071 14,397 28,463
Interest expense ..................... 5,582 1,513 350 (c) 18,125
10,680 (e)
Other Income (Expense), net .......... (265) 110 (155)
--------- -------- -------- -------- --------
Income before income taxes ........... 13,771 6,116 24,101 14,397 10,183
Income taxes ......................... 5,142 2,631 3,375(f) 4,398
--------- -------- -------- -------- --------
Net income ........................... $ 8,629 $ 3,485 $ 24,101 $ 17,772 $ 5,784
========= ======== ======== ======== ========
Net income per share ................. $ 1.04 $ 0.63 $ 0.70
========= ======== ========
Weighted average shares
outstanding ...................... 8,304 5,526 8,304
========= ======== ========
</TABLE>
<PAGE>
32 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA ACQUISITION ADJUSTMENTS
(a) Maxxim purchased all of the outstanding Sterile Concepts
Common Shares at a price of $20.00 per share net to the sellers.
Maxxim has also agreed to acquire certain options held by
employees of Sterile Concepts for $1,800 in cash. Transaction costs are
estimated at $15,000, of which $4,000 relate to financing costs.
Giving effect to the above, the Acquisition will result in the
following:
Assets Acquired
Current assets ...................... $ 66,509
Property and equipment .............. 3,551
Goodwill ............................ 120,000
--------
$190,060
========
Liabilities assumed and consideration paid
Current liabilities ................... $ 27,956
Long-term debt ........................ 34,208
Other liabilities ..................... 568
Cash Paid ............................. 127,328
--------
$190,060
========
(b) In conjunction with the Acquisition, the Company entered into
a new $165 million credit facility agreement and issued $100 million of
10 1/2% Senior Subordinated Notes. The new credit facility and 10 1/2%
Senior Subordinated Notes were used to repay approximately $34.2 million
of Sterile Concepts debt, refinance approximately $72.6 million of
existing Maxxim debt, and pay the cash portion of the purchase price
identified at (a) above. To finance the cash portion of the transaction,
the Company utilized the $97 million net proceeds from the offering of
the 10 1/2% Senior Subordinated Notes and approximately $127.3 million
of the new credit facility.
(c) Reflects increased amortization related to costs in excess of
net assets acquired, amortized over 40 years, and amortization of
deferred financing cost of the Senior Subordinated Notes over 10 years
and the bank debt over 6 years.
YEAR ENDED NINE MONTHS ENDED
OCTOBER 29, 1995 AUGUST 4, 1996
---------------- --------------
Amortization of goodwill of $120,000 $ 3,000 $ 2,250
Less Sterile Concepts historical
goodwill amortization ............ (1,194) (896)
------- -------
$ 1,806 $ 1,355
======= =======
Amortization of deferred financing
costs of $4,000 .................. $ 467 $ 350
======= =======
(d) Reflects the elimination of salaries, benefits and related
costs incurred during 1995 and the first nine months of 1996 of
personnel who will be redundant to the combined entity and thus not
retained on an ongoing basis.
<PAGE>
33 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
(e) Reflects an adjustment to interest expense due to additional
debt that would have been outstanding. As Maxxim incurred bank debt of
$127,300 and $100,000 related to the Notes, each increase of 1/4
percentage point in the borrowing rate will result in additional
interest of approximately $318 annually or $80 quarterly.
(f) Reflects an adjustment for the Glove Operations acquired on
June 30, 1995.
(g) Reflects an adjustment for the sale of Henley Healthcare in
May 1996.
(h) Reflects an adjustment for sales to Sterile Concepts by
Maxxim.
(i) Reflects an adjustment for the operations of Associated
Medical Products Co. and Medical Design Concepts acquired by Sterile
Concepts on May 1, 1995 and October 4, 1995, respectively.
(j) Reflects an adjustment to income tax expense related to the
above adjustments, except the amortization of goodwill, at a rate of
37%.
<PAGE>
34 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
(c) Exhibits.
Documents filed as part of this report:
1. Agreement and Plan of Merger dated as of June 10, 1996 by and among
(Maxxim, Maxxim-Delaware, Purchaser and Sterile Concepts (Filed as
Exhibit (d) to the Schedule 14D-1 of Maxxim, Maxxim-Delaware, and
Purchaser with the Commission on June 14, 1996 and incorporated
herein by reference).
2. Second Amended and Restated Credit Agreement, dated July 30, 1996, by
and among NationsBank and the banks named therein (Filed as Exhibit 2
to Form 8-K of Maxxim with the Commission on August 14, 1996 and
incorporated herein by reference).
3. Purchase Agreement dated July 18, 1996 between Maxxim, NCMI and Bear
Sterns (Filed as Exhibit 3 to Form 8-K of Maxxim with the Commission
on August 14, 1996 and incorporated herein by reference).
4. Indenture dated July 30, 1996, by and among Maxxim, as Issuer,
Maxxim-Delaware, Purchaser, Fabritek La Romana, Inc., Maxxim Medical
Canada Limited, Medica B.V. and Medica Hospital Supplies, N.V., as
Guarantors and First Union National Bank of North Carolina, as
Trustee (Filed as Exhibit 4 to Form 8-K of Maxxim with the Commission
on August 14, 1996 and incorporated herein by reference).
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 hereunto duly authorized.
Maxxim Medical, Inc.
Date: October 11, 1996 s/ KENNETH W. DAVIDSON
Kenneth W. Davidson
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
35 of 35
MAXXIM MEDICAL, INC.-AMENDMENT NO. 1 TO FORM 8-K
EXHIBIT INDEX
EXHIBIT NUMBER EXHIBIT DESCRIPTION
- -------------- -------------------
1. Agreement and Plan of Merger dated as of June 10, 1996 by and among
Maxxim, Maxxim-Delaware, Purchaser and Sterile Concepts (Filed as
Exhibit (d) to the Schedule 14D-1 of Maxxim, Maxxim-Delaware, and
Purchaser with the Commission on June 14, 1996 and incorporated
herein by reference).
2. Second Amended and Restated Credit Agreement, dated July 30, 1996, by
and among NationsBank and the banks named therein (Filed as Exhibit 2
to Form 8-K of Maxxim with the Commission on August 14, 1996 and
incorporated herein by reference).
3. Purchase Agreement dated July 18, 1996 between Maxxim, NCMI and Bear
Sterns (Filed as Exhibit 3 to Form 8-K of Maxxim with the Commission
on August 14, 1996 and incorporated herein by reference).
4. Indenture dated July 30, 1996, by and among Maxxim, as Issuer,
Maxxim-Delaware, Purchaser, Fabritek La Romana, Inc., Maxxim Medical
Canada Limited, Medica B.V. and Medica Hospital Supplies, N.V., as
Guarantors and First Union National Bank of North Carolina, as
Trustee (Filed as Exhibit 4 to Form 8-K of Maxxim with the Commission
on August 14, 1996 and incorporated herein by reference).
