Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from ____________ to _______________.
Commision File Number
0-18208
MAXXIM MEDICAL, INC.
(Exact name of registrant as specified in its charter)
TEXAS 76-0291634
State or other jurisdiction of (I.R.S. Employee Identification No.)
incorporation or organization)
10300 49th Street North, Clearwater, Florida 33762
- --------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code........(727) 561-2100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities and 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Class Outstanding at September 9, 1998
- --------------------------- --------------------------------------
Common Stock, $.001 par value 14,222,802
<PAGE>
MAXXIM MEDICAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I. Financial Information Page No.
<S> <C> <C>
Item 1. Condensed Consolidated Balance Sheets as of
August 2, 1998 and November 2, 1997 2
Condensed Consolidated Statements of Operations
for the Three Months and Nine Months Ended
August 2, 1998 and August 3, 1997 3
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended August 2, 1998 and
August 3, 1997 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. Other Information
Item 5. Other Information 11
Item 6. Exhibits and Reports 12
Signatures 13
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
August 2, November 2,
1998 1997
-------------- --------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 12,897 $ 3,130
Accounts receivable, net of allowances of $2,229 and $3,181,respectively 65,571 77,209
Inventory, net 74,334 83,184
Prepaid expenses, deferred taxes and other 9,581 11,000
-------------- --------------
Total current assets 162,383 174,523
Property and equipment 144,148 122,938
Less: accumulated depreciation ( 38,225 ) ( 31,384 )
-------------- --------------
105,923 91,554
Goodwill and other intangibles, net 163,087 150,234
Other assets, net 8,848 7,735
-------------- --------------
Total assets $ 440,241 $ 424,046
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:
Current liabilities:
Current maturities of long-term debt $ - $ 12,750
Accounts payable 35,073 32,194
Accrued liabilities 24,859 26,631
Other short-term obligations 3,134 3,133
------------- --------------
Total current liabilities 63,066 74,708
Long-term debt, net of current maturities - 78,550
10 1/2% Senior subordinated notes 100,000 100,000
6 3/4% Convertible subordinated debentures - 23,352
Other long-term obligations, net of current maturities 7,748 3,300
Deferred taxes 6,748 6,208
-------------- --------------
Total liabilities 177,562 286,118
Commitments and contingencies
Shareholders' equity
Preferred Stock, $1.00 par, 20,000,000 shares authorized, none issued or
outstanding - -
Common Stock, $.001 par, 40,000,000 shares authorized, 14,222,802
and 8,871,355 shares issued and outstanding, respectively 14 9
Additional paid-in capital 218,201 103,872
Retained earnings 59,164 45,250
Subscriptions receivable (5,200) (5,200)
Cumulative translation adjustment (9,500) (6,003)
-------------- --------------
Total shareholders' equity 262,679 137,928
-------------- --------------
Total liabilities and shareholders' equity $ 440,241 $ 424,046
============== ==============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
Page 2
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- -------------------------
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 128,057 $ 128,654 $ 389,018 $ 398,097
Cost of sales 92,733 96,165 285,891 299,933
------------ ------------ ----------- -----------
Gross profit 35,324 32,489 103,127 98,164
Operating expenses 23,508 22,140 69,125 67,697
------------ ------------ ----------- -----------
Income from operations 11,816 10,349 34,002 30,467
Interest expense ( 2,754 ) ( 5,293 ) ( 10,668 ) ( 16,475 )
Other income, net 335 501 800 2,396
------------ ------------ ----------- -----------
Income before income taxes 9,397 5,557 24,134 16,388
Income taxes 3,953 2,365 10,220 7,020
------------ ------------ ----------- -----------
Net income $ 5,444 $ 3,192 $ 13,914 $ 9,368
============ ============ =========== ===========
Basic earnings per share $ 0.38 $ 0.38 $ 1.15 $ 1.14
============ ============ =========== ===========
Diluted earnings per share $ 0.37 $ 0.34 $ 1.11 $ 1.04
============ ============ =========== ===========
Basic weighted average shares outstanding 14,209 8,448 12,144 8,236
============ ============ =========== ===========
Diluted weighted average shares outstanding 14,621 10,244 12,646 9,984
============ ============ =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
August 2, August 3,
1998 1997
----------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 13,914 $ 9,368
Adjustment to reconcile net income to net cash provided by
operating activities:
Deferred income tax expense 5,314 -
Depreciation and amortization 13,965 13,571
Gain on sale of investment in equity securities - (1,510)
Change in operating assets and liabilities 18,210 143
----------------- ----------------
Net cash provided by operations 51,403 21,572
Cash flows from investing activities:
Proceeds from sale of long-term investment 1,500 -
Proceeds from sale of buildings 1,200 450
Purchase of Winfield, net of cash acquired (31,267) -
Proceeds from available-for-sale securities - 3,130
Purchase of property and equipment (15,519) (5,486)
----------------- ----------------
Net cash used in investing activities (44,086) (1,906)
Cash flows from financing activities:
Proceeds from secondary stock offering, net of offering costs 91,394 -
Payments on term loan (81,000) (4,500)
Payments on revolver, net of borrowings (10,300) (13,882)
Decrease in other obligations (1,144) (635)
Increase (decrease) in bank overdraft 3,514 (1,008)
Other, net 90 (173)
----------------- ----------------
Net cash provided by (used in) financing activities 2,554 (20,198)
Effect of foreign currency translation adjustment (104) (588)
----------------- ----------------
Net increase in cash and cash equivalents 9,767 (1,120)
Cash and cash equivalents at beginning of period 3,130 5,950
----------------- ----------------
Cash and cash equivalents at end of period $ 12,897 $ 4,830
================= ================
Supplemental cash flow disclosures:
Interest paid during the period $ 8,254 $ 18,924
Income taxes paid during the period 1,645 5,634
Noncash investing and financing activities
Conversion of 6 3/4% convertible subordinated debentures 22,278 -
Conversion of long-term note investment into stock investment 4,000 -
Receipt of equity investment in exchange for certain assets 2,706 -
Subscriptions receivable from officers for stock purchase - 5,200
Note received from the sale of building - 350
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
The accompanying condensed consolidated financial statements include
the accounts of Maxxim Medical, Inc. and its wholly owned subsidiaries
(collectively, the Company). The Company develops, manufactures and markets
specialty hospital products.
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments of a normal recurring nature which, in the opinion of
management, are necessary for a fair presentation of the results for the interim
periods presented. All significant intercompany balances and transactions have
been eliminated in consolidation.
These financial statements should be read in conjunction with the
Company's annual audited financial statements for the year ended November 2,
1997, included in the Company's Annual Report on Form 10-K/A (amendment no. 1)
as filed with the Securities and Exchange Commission.
Certain reclassifications have been made to the fiscal 1997 condensed
consolidated financial statements to conform with the fiscal 1998 presentation.
Note 2 - Summary of Significant Accounting Policies
Fiscal Year.
Commencing in fiscal year 1994 the Company implemented a fiscal year
which ends on the Sunday nearest to the end of the month of October. Normally
each fiscal year will consist of 52 weeks, but every five or six years, the
fiscal year will consist of 53 weeks. For fiscal 1998, the year end date will be
November 1 compared to a 1997 year end date of November 2. Fiscal 1998 will
consist of 52 weeks. The third quarter of fiscal 1998 ended on August 2 compared
to the fiscal 1997 third quarter end date of August 3.
Translation of Foreign Currency Financial Statements.
Assets and liabilities of foreign subsidiaries have been translated
into United States dollars at the applicable rates of exchange in effect at the
end of the period reported. Revenues and expenses have been translated at the
applicable weighted average rates of exchange in effect during the period
reported. Translation adjustments are reflected as a separate component of
shareholders' equity.
Earnings Per Share.
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", specifies new measurement, presentation and disclosure requirements for
earnings per share and is required to be applied retroactively upon initial
adoption. The Company has adopted SFAS No. 128 effective with the release of
February 1, 1998, earnings data, and accordingly, has restated herein all
previously reported earnings per share data. Basic earnings per share is based
on the weighted average shares outstanding without any dilutive effects
considered. Diluted earnings per share reflects dilution from all contingently
issuable shares, including options and convertible debt. A reconciliation of
such earnings per share data is as follows:
Page 5
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended August 2, 1998 Nine Months Ended August 2, 1998
------------------------------------ -------------------------------------
Per Share Per Share
Income Shares Amounts Income Shares Amounts
----------- ----------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
Net Income $ 5,444 14,209 $ 0.38 $ 13,914 12,144 $ 1.15
============ ============
Effect of dilutive
securities:
Convertible Debt 107 121
Options 412 381
----------- ----------- ----------- -----------
Diluted EPS $ 5,444 14,621 $ 0.37 $ 14,021 12,646 $ 1.11
=========== =========== ============ =========== =========== ============
Three Months Ended August 3, 1997 Nine Months Ended August 3, 1997
------------------------------------ -------------------------------------
Per Share Per Share
Income Shares Amounts Income Shares Amounts
----------- ----------- ------------ ----------- ----------- ------------
Basic EPS
Net Income $ 3,192 8,448 $ 0.38 $ 9,368 8,236 $ 1.14
============ ============
Effect of dilutive
securities:
Convertible Debt 341 1,597 1,023 1,597
Options 199 151
----------- ----------- ----------- -----------
Diluted EPS $ 3,533 10,244 $ 0.34 $ 10,391 9,984 $ 1.04
=========== =========== ============ =========== =========== ============
</TABLE>
Estimates Involved in Preparing the Condensed Consolidated Financial Statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Inventories.
The amount reflected as inventory as of August 2, 1998, and the related
amount for the cost of sales, have been determined using the Company's normal
accounting procedures. In management's opinion, no significant adjustment would
have been required had an actual count of the inventory been made. Inventory as
of August 2, 1998, and November 2, 1997, included the following:
<TABLE>
<CAPTION>
August 2, November 2,
1998 1997
-------------- ---------------
(In thousands)
<S> <C> <C>
Raw materials $ 33,756 $ 36,613
Work in progress 6,074 7,227
Finished goods 38,860 43,393
Reserve (4,356) (4,049)
-------------- ---------------
$ 74,334 $ 83,184
============== ===============
</TABLE>
Page 6
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
Income Taxes.
The Company has calculated current and deferred income tax provisions
for the periods ended August 2, 1998, and August 3, 1997, based on its best
estimate of the effective income tax rate expected to be applicable for the full
fiscal year.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income and its components. The components of comprehensive income refer to
revenues, expenses, gains and losses that are excluded from net income under
current accounting standards, including foreign currency translation items,
minimum pension liability adjustments and unrealized gains and losses on certain
investments in debt and equity securities. SFAS 130 requires that all items that
are recognized under accounting standards as components of comprehensive income
be reported in a financial statement displayed in equal prominence with other
financial statements; the total or other comprehensive income for a period is
required to be transferred to a component of equity that is separately displayed
in a statement of financial position at the end of an accounting period. SFAS
130 is effective for both interim and annual periods beginning after December
15, 1997. The Company plans to adopt SFAS 130 in the first quarter of fiscal
1999.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosure About Segments of an Enterprise and Related
Information" (SFAS 131) which is effective for the Company's fiscal year ending
in 1999. This statement establishes standards for reporting segment information
in annual and interim financial statements. It also establishes standards for
related disclosure of products and services, geographical areas and major
customers. Under SFAS 131, reporting segments are determined consistent with the
way management organizes and evaluates financial information internally for
making operating decisions and assessing performance. The Company has not
determined the impact of adoption of SFAS 131 on its consolidated financial
statements.
Note 3 - Sale of Nonoperating Assets
In the second quarter of fiscal 1998, the Company's prior headquarters
was sold for $1,200,000. A resulting gain of $25,000, was recorded and is
reflected in other income in the financial statements.
In the first quarter of fiscal 1997, the Compay recorded a one-time
gain from the sale of an investment in marketable equity securities in the
amount of $1,510,000, which is reflected in other income in the financial
statements.
Note 4 - 6 3/4% Convertible Subordinated Debentures
In March 1993, the Company issued $28,750,000 in principal amount of 6
3/4% Convertible Subordinated Debentures (the "Debentures") due March 1, 2003.
The Debentures were convertible at the option of the holder into Common Stock at
a conversion price of $18 per share and paid interest every six months
commencing September 1, 1993, through maturity on March 1, 2003.
Page 7
<PAGE>
MAXXIM MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(Unaudited)
On October 3, 1997, the Company called for the redemption of
$10,000,000, in principal amount, of the Debentures effective as of November 4,
1997 (the "First Redemption Date"). On the First Redemption Date, the redemption
price of 104.17% of the principal amount, or $1,041.70 plus accrued interest of
$11.81 per $1,000 face amount of the Debentures was paid to the holders of
Debentures called for redemption who did not exercise their right to convert
their Debentures into common stock. On November 12, 1997, the Company called for
the redemption of the remaining outstanding Debentures effective as of December
12, 1997 (the "Second Redemption Date"). On the Second Redemption Date, the
redemption price of 104.17% of the principal amount, or $1,041.70 plus accrued
interest of $18.94 per $1,000 face amount of the Debentures, was paid to the
holders who had not exercised their right to convert their Debentures into
common stock.
As of May 3, 1998, $28,381,000 of the Debentures had converted into
1,576,614 shares of the Company's common stock and debt issuance costs of
$867,000 related to these converted Debentures were written off to additional
paid-in capital. During the conversion, $369,000 in principal amount was paid to
Debenture holders who presented their Debentures for redemption.
Note 5 - Management Stock Purchase Plan
On May 23, 1997, the Company issued 400,000 shares of common stock
pursuant to a Senior Management Stock Purchase Plan at $13.00 per share, the
closing stock price on April 30, 1997. The stock was issued in exchange for an
aggregate of $5.2 million in non-interest bearing, full recourse promissory
notes due May 23, 2000, from the participating managers. These notes have been
recorded as subscriptions receivable and are included in the shareholders'
equity section of the balance sheet. Payment of these notes is also secured by
the pledge of the 400,000 shares of common stock. Net compensation costs
associated with these shares was not significant.
Note 6 - Public Offering of Common Stock
In March 1998, the Company completed an offering of 4,025,000 shares of
its common stock at a price to the public of $24.00 per share, including 525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting offering costs and commissions, the Company received net proceeds of
approximately $91,400,000.
Note 7 - Acquisition
Effective June 26, 1998, the Company purchased all of the issued and
outstanding common stock of Winfield Medical. The assets acquired in the
Winfield acquisition consist primarily of accounts receivable, inventory,
furniture and equipment and leased manufacturing and other facilities in San
Diego, California and Clarksburg, West Virginia. Winfield Medical is a
developer, manufacturer and distributor of medical products.
The purchase price consisted of approximately $31,267,000 in cash and the
assumption of approximately $5,300,000 of capital lease obligations. The
acquisition has been accounted for as a purchase with the purchase price and
direct acquisition costs allocated based on fair value of assets acquired and
liabilities assumed. Goodwill of approximately $20,600,000 was recorded in
connection with this transaction.
Page 8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following discussion should be read in conjunction with the
Condensed Consolidated Financial Statements and related Notes appearing
elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage which selected items in the Condensed Consolidated Statements of
Operations bear to net sales:
<TABLE>
<CAPTION>
Percentage of Net Sales
-------------------------------------------------------------------
Three Months Ended Nine Months Ended
--------------------------- --------------------------
August 2, August 3, August 2, August 3,
1998 1997 1998 1997
-------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 72.4% 74.7% 73.5% 75.3%
-------------- ------------- ------------ --------------
Gross profit 27.6% 25.3% 26.5% 24.7%
Operating expenses 18.4% 17.2% 17.8% 17.0%
-------------- ------------- ------------ --------------
Income from operations 9.2% 8.1% 8.7% 7.7%
Interest expense (2.2%) (4.1%) (2.7%) (4.1%)
Other income, net 0.3% 0.4% 0.2% 0.6%
-------------- ------------- ------------ --------------
Income before income taxes 7.3% 4.4% 6.2% 4.2%
Income taxes 3.1% 1.8% 2.6% 1.8%
-------------- ------------- ------------ --------------
Net income 4.2% 2.6% 3.6% 2.4%
============== ============= ============ ==============
</TABLE>
Net sales - Net Sales for the third fiscal quarter of 1998 decreased
.5% to $128,057,000 from $128,654,000 reported for the third quarter of 1997.
Net sales for the first nine months of fiscal 1998 were $389,018,000, a 2.3%
decrease from the $398,097,000 reported for the comparable period in the prior
fiscal year. This decrease is primarily due to the planned cessation of certain
low margin custom procedure trays.
Gross profit - In the third quarter of fiscal 1998 the Company's gross
profit was $35,324,000, compared to $32,489,000 reported in the third quarter of
last year, an increase of 8.7% over the prior fiscal period. The Company's gross
profit rate increased to 27.6% in the third quarter of fiscal 1998 from 25.3% in
the third quarter of fiscal 1997. For the nine months ended August 2, 1998 and
the nine months ended August 3, 1997 gross profit was $103,127,000 and
$98,164,000, or 26.5% and 24.7% of net sales respectively. The increase in both
dollars and rate are primarily attributable to the improved gross profit in the
Company's custom procedure tray and medical examination glove product lines.
Operating expenses - Operating expenses for the third quarter were
$23,508,000 or 18.4% of net sales for fiscal 1998 compared to $22,140,000 or
17.2% of net sales for fiscal 1997. For the first nine months of fiscal 1998 and
1997 operating expenses were $69,125,000 and $67,697,000, or 17.8% and 17.0% of
net sales, respectively. The increase in operating expense as a percentage of
net sales is primarily attributable to increases in administrative fees paid on
contracts with group purchasing organizations and the impact of the Winfield
Medical acquisition.
Income from operations - Income from operations increased to
$11,816,000, or 9.2% of net sales, in the third quarter of fiscal 1998 from
$10,349,000, or 8.1% of net sales, in the comparable period of the prior fiscal
year. This is an increase of 14.2% over the prior fiscal period. For the first
nine months of fiscal 1998 and 1997 income from operations were $34,002,000 and
$30,467,000, or 8.7% and 7.7% of net sales, respectively.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - (Continued)
Interest expense - The Company's interest expense decreased from
$5,293,000 in the third quarter of fiscal 1997 to $2,754,000 in the third
quarter of fiscal 1998. For the nine months ended August 2, 1998 and August 3,
1997 interest expense was $10,668,000 and $16,475,000, respectively. The
decrease in interest expense for the fiscal 1998 periods is due to the reduced
debt balances in fiscal 1998 versus fiscal 1997.
Other income - A one-time gain of $1,510,000 from the sale of
investment securities was included in other income for the first quarter of
fiscal 1997.
Income taxes - The Company's effective tax rate for the nine months
ended August 2, 1998 and August 3, 1997 was 42.3% and 42.8%, respectively and is
higher than the statutory rate primarily due to non-deductible goodwill from
acquisitions.
Net income - As a result of the foregoing, net income for the third
quarter of fiscal 1998 was $5,444,000 versus $3,192,000 for fiscal 1997. Diluted
earnings per share was $0.37 compared to $0.34 for the same period last year.
For the nine months of fiscal 1998 and 1997, net income was $13,914,000 versus
$9,368,000, respectively. Diluted earnings per share was $1.11 compared to $1.04
for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
At August 2, 1998, the Company had cash and cash equivalents of
$12,897,000, working capital of $99,317,000, long-term liabilities of
$114,496,000 and shareholders' equity of $262,679,000. For the nine months ended
August 3, 1998, cash flow from operations was favorably impacted by a reduction
in operations working capital of $18,210,000 primarily resulting from improved
management of accounts receivable and inventory.
On October 3, 1997, the Company called for redemption of $10,000,000 in
principal amount of its $28,750,000 6 3/4% Debentures due March 1, 2003,
effective as of November 4, 1997. On November 12, 1997, the Company called for
the redemption of the remaining outstanding principal amount of Debentures
effective as of December 12, 1997. In fiscal 1998, $22,983,000 of the Debentures
converted into 1,276,732 shares of common stock and debt issuance costs of
$705,000 related to these converted Debentures were written off to additional
paid-in capital. The balance of $369,000 was paid to Debenture holders upon
surrender of their certificates.
In March 1998, the Company completed an offering of 4,025,000 shares of
its common stock at a price to the public of $24.00 per share, including 525,000
shares pursuant to the underwriters' exercise of the overallotment option. After
deducting offering costs and commissions, the Company received net proceeds of
approximately $91,400,000. The Company plans to use approximately $20,000,000 to
expand glove production capacity and the balance to repay certain outstanding
bank debt. In the first six months of fiscal 1998, the Company repaid
$91,300,000 of bank debt which extinguished its term loan and revolver credit
facility balances. As a result of debt repayments, the Company has an unused
commitment of $75,000,000 on its revolver credit facility as of August 2, 1998.
In June 1998, the Company used approximately $31,267,000 in cash and
assumed $5,300,000 of capital lease obligations for the purchase of Winfield
Medical. (See Note 7).
The Company believes that its present cash balances together with
internally generated cash flows and borrowings under its existing credit
facility will be sufficient to meet its working capital requirements in the
foreseeable future.
Page 10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - (Continued)
Year 2000 Compliance
Historically, most computer systems have utilized software that
processes transactions using two digits to represent the year of the transaction
(i.e., 97 represents that year 1997). This software needs to be modified to
properly process dates beyond December 31, 1999 and to avoid miscalculation or
system failures (the "Year 2000 issues"). The Company is currently working to
resolve the potential impact of the Year 2000 issue on the computerized
information systems it utilizes internally, and with regard to its products and
customers.
The Company has completed a preliminary assessment of the Year 2000
issue with respect to the systems and software internally utilized in its
business enterprises. The Company is in the process of bringing its internally
utilized information system software into compliance and estimates that such
software will be fully Year 2000 compliant by mid-1999. While the Company will
be unable to make a firm estimate of the projected dollar expenditures required
to bring the Company's internally utilized system into full Year 2000 compliance
until the Company's final assessment is completed, based on information
available from its preliminary assessment, the Company does not currently
believe that this amount will be material to the Company's business, operations
or financial condition or have a material impact on the Company's financial
position, results of operations or liquidity.
While the Company has not yet completed its overall assessment of the
Year 2000 issue with respect to its products sold to customers, it has formed a
focus team responsible for this area. The focus team is in the process of
reviewing these issues and contacting certain of the Company's suppliers and
customers to assist them in identifying and resolving Year 2000 issues. Because
its assessment is not yet completed, the Company has not yet determined whether
it, its customers or its suppliers have any material Year 2000 issues, and if
so, the potential effects on the Company's operations, results of operations or
financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the registrant at this time.
PART II. OTHER INFORMATION
Items 1, 2, 3 and 4 for which provision is made in the applicable
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
Item 5. OTHER INFORMATION
Restatement of Earnings Per Share Data
<TABLE>
<CAPTION>
Restatement of Earnings Per Share Data
November 2, November 3, October 29, October 30, October 31,
1997 1996 1995 1994* 1993
------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
As Previously Reported
Primary earnings per share $ 1.51 $ 1.05 $ 0.36 $ 1.05 $ 0.94
Fully diluted earnings per share $ 1.40 $ 1.01 $ 0.36 $ 1.00 $ 0.91
As Restated for SFAS No. 128, "Earnings
per Share"
Basic earnings per share $ 1.55 $ 1.08 $ 0.36 $ 1.05 $ 0.94
Diluted earnings per share $ 1.42 $ 1.02 $ 0.36 $ 1.01 $ 0.92
<FN>
* Primary and fully diluted as well as basic and diluted earnings per share exclude a $.05 and $.04 adjustment
respectively, to reflect the change in accounting for income taxes.
</FN>
</TABLE>
The Company has restated all previous earnings per share data to comply
with Statement of Financial Accounting Standards No. 128 "Earnings per
Share,"which became effective on a retroactive basis with the issuance of
February 1, 1998 earnings data.
Page 11
<PAGE>
PART II. OTHER INFORMATION-(Continued)
Shareholder Proposals To Be Presented At The 1999 Annual Meeting Of Shareholders
As stated under the caption "Shareholder Proposals For Presentation At
The 1999 Annual Meeting" in the Company's proxy statement dated February 20,
1998, the Board of Directors of the Company has requested that any shareholder
proposals intended for presentation at the 1999 Annual Meeting be submitted in
writing to Peter M. Graham, Secretary of the Company, no later than October 22,
1998, for consideration for inclusion in the Company's proxy materials for such
meeting.
Further, the members of the Company's proxy committee will have
discretionary voting authority with respect to all shares represented by proxies
held by them at the Annual Meeting for any matters raised at the meeting about
which the Company does not receive notice prior to January 6, 1999.
Item 6. EXHIBITS AND REPORTS
(a) Exhibits
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
Page 12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAXXIM MEDICAL, INC.
Date: 9/11/98 By: __/s/ Kenneth W. Davidson________
Kenneth W. Davidson
Chairman of the Board, President &
Chief Executive Officer
(principal executive officer)
Date: 9/11/98 By: __/s/ Peter M. Graham_____________
Peter M. Graham
Executive Vice President,
Chief Operating Officer & Secretary
(principal financial officer)
Date: 9/11/98 By: __/s/ Alan S. Blazei______________
Alan S. Blazei
Treasurer, Vice President,
& Corporate Controller
(principal accounting officer)
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000858660
<NAME> Maxxim Medical, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-02-1998
<PERIOD-START> NOV-03-1997
<PERIOD-END> AUG-02-1998
<CASH> 12,897
<SECURITIES> 0
<RECEIVABLES> 67,800
<ALLOWANCES> 2,229
<INVENTORY> 74,334
<CURRENT-ASSETS> 162,383
<PP&E> 144,148
<DEPRECIATION> 38,225
<TOTAL-ASSETS> 440,241
<CURRENT-LIABILITIES> 63,066
<BONDS> 100,000
0
0
<COMMON> 14
<OTHER-SE> 262,665
<TOTAL-LIABILITY-AND-EQUITY> 440,241
<SALES> 389,018
<TOTAL-REVENUES> 389,018
<CGS> 285,891
<TOTAL-COSTS> 355,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,668
<INCOME-PRETAX> 24,134
<INCOME-TAX> 10,220
<INCOME-CONTINUING> 13,914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,914
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.11
</TABLE>
