SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from _________ to _______
Commission file number: 0-18793
VITAL SIGNS, INC.
(Exact name of registrant as specified in its charter)
New Jersey 11-2279807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Campus Road
Totowa, New Jersey 07512
(Address of principal executive office, including zip code)
973-790-1330
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At May 3, 1999, there were 12,262,889 shares of Common Stock, no par
value, outstanding.
<PAGE>
VITAL SIGNS, INC.
INDEX
Page
Number
PART I
Financial Information
Item 1. Financial Statements 1
Consolidated Balance Sheet as of
March 31, 1999 (Unaudited) and
September 30, 1998 2
Consolidated Statement of Income for the
Six Months Ended March 31, 1999 and 1998
(Unaudited) 3
Consolidated Statement of Income for the
Three Months Ended March 31, 1999 and 1998
(Unaudited) 4
Consolidated Statement of Cash Flows for the
Six Months Ended March 31, 1999 and 1998
(Unaudited) 5
Notes to Consolidated Financial Statements
(Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 7
ITEM 3. Quantitative and Qualitative Disclosure
About Market Risk 10 - 12
Part II
Item 1. Legal Proceedings 13
ITEM 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I.
Financial Information
Item 1.
Financial Statements
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. Vital Signs, Inc. (the "registrant" or the
"Company" or "Vital Signs") believes that the disclosures are adequate to assure
that the information presented is not misleading in any material respect. It is
suggested that the following consolidated financial statements be read in
conjunction with the year-end consolidated financial statements and notes
thereto included in the registrant's Annual Report on Form 10-K for the year
ended September 30, 1998.
The results of operations for the interim periods presented herein are
not necessarily indicative of the results to be expected for the entire fiscal
year.
<PAGE>
<TABLE>
<CAPTION>
VITAL SIGNS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, September 30,
1999 1998
(In thousands)
(Unaudited)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,362 $ 2,600
Marketable securities --- 2,157
Accounts receivable, less allowance for
doubtful accounts of $418 and $638 respectively 19,332 17,837
Inventory 20,688 19,322
Prepaid expenses and other current assets 5,512 3,903
------ ------
Total Current Assets 46,894 45,819
Property, plant and equipment - net 41,029 41,009
Marketable securities and other investments 15,321 17,739
Goodwill and other intangible assets 25,143 25,495
Deferred income taxes 1,869 1,918
Other assets 8,037 6,206
------- --------
Total Assets $ 138,293 $ 138,186
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,502 $ 5,462
Current portion of long-term debt 460 1,022
Accrued expenses 3,974 3,756
------ ------
Total Current Liabilities 9,936 10,240
Long term debt 2,216 2,462
Other liabilities 3,975 4,174
------ -------
Total Liabilities 16,127 16,876
------ -------
Commitments and contingencies:
Stockholder's Equity
Common stock - no par value; authorized 40,000,000 shares, outstanding
12,259,736 and 12,628,194 shares, respectively 15,016 21,520
Allowance for aggregate unrealized gain (loss) on marketable securities
(5) 14
Retained earnings 107,155 99,776
------- -------
Stockholders' equity 122,166 121,310
------- -------
Total Liabilities and Stockholders' Equity $ 138,293 $ 138,186
======= =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VITAL SIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Six Months Ended
March 31,
1999 1998
(In Thousands Except Per Share Amounts)
<S> <C> <C>
Net sales $ 63,714 $ 63,228
Cost of goods sold 31,877 31,098
------ ------
Gross Profit 31,837 32,130
Operating expenses:
Selling, general and administrative 16,215 19,035
Research and development 2,892 2,429
Interest (income) (172) (563)
Interest expense 168 238
Other expense, net 160 122
Goodwill amortization 352 413
------ ------
Income before provision for income taxes 12,222 10,456
Provision for income taxes 3,850 3,607
------ ------
Net income before cumulative effect of change in accounting principle $ 8,372 $ 6,849
Cumulative effect of change in accounting principle
(net of income tax effect of $803) (See Note 3) --- 1,524
------- -----
Net income $ 8,372 $ 5,325
======= =====
Basic net income per share before cumulative
effect of change in accounting principle $ .68 $ .54
======= =====
Diluted net income per share before cumulative effect
of change in accounting principle $ .68 $ .54
======= =====
Cumulative effect of change in accounting principle per share $ --- $ .12
======= =====
Basic net income per share $ .68 $ .42
======= =====
Diluted net income per share $ .68 $ .42
======= =====
Basic weighted average number of shares 12,351 12,693
======= ======
Diluted weighted average number of shares 12,398 12,770
======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VITAL SIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
For the Three Months Ended
March 31,
1999 1998
(In Thousands Except Per Share Amounts)
<S> <C> <C>
Net sales $ 32,701 $ 32,304
Cost of goods sold 16,062 16,100
------ ------
Gross Profit 16,639 16,204
Operating expenses:
Selling, general and administrative 8,214 9,258
Research and development 1,484 1,467
Interest (income) (59) (301)
Interest expense 100 117
Other expense, net 348 220
Goodwill amortization 176 195
------ -----
Income before provision for income taxes 6,376 5,248
Provision for income taxes 1,979 1,810
------ -----
Net income $ 4,397 $ 3,438
====== =====
Basic net income per share $ 36 $ .27
====== =====
Diluted net income per share $ .36 $ .27
====== =====
Basic weighted average number of shares 12,270 12,684
====== ======
Diluted weighted average number of shares 12,317 12,770
====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VITAL SIGNS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months Ended
March 31,
1999 1998
(In thousands)
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 8,372 $ 5,325
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating
Activities:
Cumulative effect of change in accounting principle --- 1,524
Depreciation and amortization 1,903 1,776
Decrease in deferred income tax asset 49 67
Amortization of goodwill 352 413
Amortization of deferred credit (50) (50)
Net (gain) loss on sales of available for sale securities 16 (2)
Changes in operating assets and liabilities:
(Increase) in accounts receivable (1,495) (3,759)
(Increase) in inventory (1,366) (182)
(Increase) decrease in prepaid expenses and other current assets (1,609) 4,896
Increase (decrease) in accounts payable and accrued expenses 258 (3,302)
Decrease (increase) in other assets (1,831) 1,001
Decrease in other liabilities (149) (344)
------ ------
Net cash provided by operating activities 4,450 5,361
----- ------
Cash Flows from Investing Activities:
Proceeds from sales of available-for-sale securities 6,138 8,319
Purchases of available-for-sale securities (1,034) (1,646)
Acquisition of property, plant and equipment (1,923) (5,473)
Purchase of other investments (564)
Other --- (4,812)
----- -------
Net cash provided by (used in) investing activities 2,617 (3,612)
----- -------
Cash Flows from Financing Activities:
Net reissuance (purchase) of treasury stock (6,530) 1,064
Dividends paid (993) (1,048)
Proceeds from exercise of stock options and warrants 26 12
Principal payments of long-term debt and notes payable (808) (2,299)
------ -------
Net cash used in financing activities (8,305) (2,271)
------- -------
Net decrease in cash and cash equivalents (1,238) (522)
Cash and cash equivalents at beginning of period 2,600 3,685
------ -----
Cash and cash equivalents at end of period $ 1,362 $ 3,163
====== =====
Supplemental disclosures of cash flow information:
Cash paid during the six months for:
Interest $ 125 $ 230
Income taxes 3,234 1,697
</TABLE>
<PAGE>
VITAL SIGNS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of March 31, 1999, the consolidated
statement of income for the six and three months ended March 31, 1999 and
1998 and the consolidated statement of cash flows for the six months
ended March 31, 1999 and 1998 have been prepared by Vital Signs, Inc.
(the "Company" or "VSI") and are unaudited. In the opinion of management,
all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows at March 31, 1999 and 1998 and for all periods presented
have been made.
2. See the Company's Annual Report on Form 10-K for the year ended September
30, 1998 (the "Form 10-K") for additional disclosures relating to the
Company's consolidated financial statements.
3. In the second quarter of fiscal 1998 the Company adopted a new accounting
principle related to the accrual of distributor rebates. This change in
principle was adopted to more precisely record the amounts due
distributors who service the Company's hospital customers. The Company's
prior method resulted in fluctuations for financial reporting purposes
that were the result of activities outside the Company's control. The
charge has been shown in the Company's consolidated statement of
operations as if the charge occurred in the first quarter of fiscal 1998
in accordance with Generally Accepted Accounting Principles.
4. Financial Accounting Standards Board No. 130 "Reporting Comprehensive
Income" has not been applied since it is not material to the Company's
financial statements.
5. The Company plans to adopt Financial Accounting Standards Board No. 131
"Disclosures about segments of an enterprise and related information" at
September 30, 1999.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Forward Looking Statements
This Quarterly Report on Form 10-Q contains, and from time to time the
Company expects to make, certain forward-looking statements regarding its
business, financial condition and results of operations. In connection with the
"safe harbor" provisions of the Private Securities Litigation Reform Act of 1995
(the "Reform Act"), the Company intends to caution investors that there are
important factors that could cause the Company's actual results to differ
materially from those projected in its forward-looking statements, whether
written or oral, made herein or that may be made from time to time by or on
behalf of the Company. Investors are cautioned that such forward-looking
statements are only predictions and that actual events or results may differ
materially from such statements. The Company undertakes no obligation to
publicly release the results of any revisions to its forward-looking statements
to reflect subsequent events or circumstances or to reflect the occurrence of
unanticipated events.
<PAGE>
The Company wishes to ensure that any forward-looking statements are
accompanied by meaningful cautionary statements in order to comply with the
terms of the safe harbor provided by the Reform Act. Accordingly, the Company
has set forth a list of important factors that could cause the Company's actual
results to differ materially from those expressed in forward-looking statements
or predictions made herein and from time to time by the Company. Specifically,
the Company's business, financial condition, liquidity and results of operations
could be materially different from such forward-looking statements and
predictions as a result of (i) competitive factors that could affect the
Company's primary markets, including the results of competitive bidding
procedures implemented by group purchasing organizations and/or the success of
the Company's reduced sales force, (ii) interruptions or delays in manufacturing
and/or sources of supply, (iii) the Company's ability to develop or acquire new
products and to control costs, (iv) technological change, including the
Company's ability to assure that its hardware and software are Year 2000
compliant, (v) the scope, timing and effectiveness of changes to manufacturing,
marketing and sales programs and strategies, (vi) market acceptance of
competitors' existing or new products, (vii) adverse determinations arising in
the context of regulatory matters (see "Regulation") or legal proceedings (see
Part II, Item 1 of this Quarterly Report on Form 10-Q) and (viii) healthcare
reform and legislative and regulatory changes impacting the healthcare market.
Results of Operations
The following table sets forth, for the periods indicated, the percentage
increase (decrease) of certain items included in the Company's consolidated
statement of income.
Increase/(Decrease) From Prior Period
Three Months Ended Six Months Ended
March 31, 1999 March 31, 1999
Compared With Compared With
Three Months Ended Six Months Ended
March 31, 1998 March 31, 1998
-------------------------------------------
Net sales 1.2% .8%
Cost of goods sold (.2) 2.5
Gross profit 2.7 (.9)
Selling, general and
administrative expense (11.3) (14.8)
Research and development expenses 1.2 19.1
Income before provision for
income taxes 21.5 16.9
Provision for income taxes 9.3 6.7
Net income before cumulative
effect of change in accounting
principle 27.9 22.2
Net income 27.9 57.2
Earnings per share 33.3 25.9
<PAGE>
comparison: quarter ended march 31, 1999
and quarter ended march 31, 1998
Net sales for the quarter ended March 31, 1999 increased by 1.2%
compared with the same period last year. The increase was due to unit increases
offset by selling price declines. Prices on existing products declined on
average approximately .7% in the three months ended March 31, 1999 when compared
to the same period in 1998.
Sales of anesthesia products, representing 47.6% of net sales grew
3.2% from the quarter ended March 31, 1998 despite selling price declines. Sales
of critical care products, representing 17.6% of net sales decreased by 3.3% due
to lower sales at Vital Pharma. Sales of respiratory products, representing
34.8% of net sales, increased by 1% due largely to increased sales to our
International customers. Net sales in the 1999 second quarter grew by 5.4% over
net sales in the 1999 first quarter largely as a result of strong sales of
respiratory products in the international market.
While net sales increased in dollars by 1.2%, gross profit dollars
increased by 2.7%. The increase in gross profit is primarily the result of the
Company's cost improvement program. The Company's gross profit percentage for
the quarter ended March 31, 1999 was 50.9% compared to 50.2% in the same time
period of the last fiscal year.
Selling, general and administrative expenses decreased by $1,044,000
primarily due to the realignment of the Company's sales force from 182 to 90
sales personnel, offset by increased shipping costs and fees paid to Group
Purchasing Organizations in the current quarter.
Research and development expenses ("R&D") increased 1.2%, primarily
due to the increased efforts of Vital Pharma, Inc. on the Vasceze product line.
Other expense, net, which includes dividend income, realized capital
gains and losses, legal and other expenses related to non-operational items and
currency gains and losses, increased by $128,000 from the quarter ended March
31, 1998 to the quarter ended March 31, 1999 primarily due to product
contributions.
The Company's effective tax rates were 31.0% and 34.5% for the
quarters ended March 31, 1999 and 1998, respectively. The rates for the three
months ended March 31, 1999 and 1998 are less than the federal and state
combined statutory rate due to the utilization of deductions for tax return
purposes which do not effect book earnings.
<PAGE>
comparison: six months ended march 31, 1999
and six months march 31, 1998
Net sales for the six months March 31, 1999 increased by .8% compared
with the same period last year. The increase was due to unit increases offset by
selling price declines. Prices on existing products declined on average
approximately 1.1% in the six months ended March 31, 1999 when compared to the
same period in 1998.
Sales of anesthesia products, representing 48.0% of net sales grew
2.2% from the six months ended March 31, 1998 despite selling price declines.
Sales of critical care products, representing 19.5% of net sales increased by
8.8% due to the growth of The Validation Group. Sales of respiratory products,
representing 32.5% of net sales, decreased by 5.3% due to decreased sales to
national distributors.
While net sales increased in dollars by .8%, gross profit dollars
decreased by .9%. The discrepancy between the increase in sales and the decrease
in gross profit is the result of higher sales of certain product lines with
gross margins below the Company's average gross margin. Additionally, the
aforementioned price decline in existing products contributed to the gross
margin decline. The Company's gross profit percentage for the six months ended
March 31, 1999 was 50.0% compared to 50.8% in the same time period of the last
fiscal year.
Selling, general and administrative expenses decreased by $2,820,000
primarily due to the realignment of the Company's sales force from 182 to 90
sales personnel, representing a reduction in sales expenses of $2,980,000 in the
current six months.
Research and development expenses ("R&D") increased 19.1%, primarily
due to the increased efforts of Vital Pharma, Inc. on the Vasceze product line.
Other expense, net, which includes dividend income, realized capital
gains and losses, legal and other expenses related to non-operational items and
currency gains and losses, increased by $38,000 from the six months ended March
31, 1998 to the six months ended March 31, 1999.
The Company's effective tax rates were 31.5% and 34.5% for the six
months ended March 31, 1999 and 1998, respectively. The rates for the six months
ended March 31, 1999 and 1998 are less than the federal and state combined
statutory rate due to the utilization of deductions for tax return purposes
which do not effect book earnings.
<PAGE>
Liquidity and Capital Resources
The Company continues to rely upon cash flow from its operations as
well as the funds previously generated from its initial and secondary public
offerings. During the six months ended March 31, 1999, cash and cash equivalents
and short-term marketable securities decreased by $3,395,000 and long-term
marketable securities and other investments decreased by $2,418,000. During the
period, $6,610,000 was expended to acquire approximately 380,000 of the Company
shares of Common Stock pursuant to a previously announced buy-back plan and the
Company paid dividends, of approximately $990,000. In addition, accounts
receivable increased by $1.5 million and inventory increased by $1.4 million.
The combined total of cash and cash equivalents, short-term marketable
securities, long-term marketable securities and other investments was
approximately $16.7 million at March 31, 1999 as compared to $22.5 million at
September 30, 1998.
At March 31, 1999, the Company had $1.4 million in cash and cash
equivalents. On that date, the Company's working capital was $37.0 million and
the current ratio was 4.7 to 1, as compared to $35.6 million and 4.5 to 1 at
September 30, 1998.
The Company's current policy is to retain working capital and earnings
for use in its business, subject to the payment of certain cash dividends and
treasury stock repurchases. Such funds may be used for product development,
product acquisitions and business acquisitions, among other things. The Company
regularly evaluates and negotiates with domestic and foreign medical device
companies regarding potential business or product line acquisitions or licensing
arrangements by the Company.
The Company has a $15 million line of credit with Chase Manhattan Bank
("Chase"). Chase has also expressed its intention to provide additional funds
for the Company's future acquisitions, provided that each such acquisition meets
certain criteria. The terms for any borrowing would be negotiated at the date of
origination.
Management believes that the funds generated from operations, along
with the Company's current working capital position and bank credit, will be
sufficient to satisfy the Company's capital requirements for the foreseeable
future. This statement constitutes a forward-looking statement under the Reform
Act. The Company's liquidity could be adversely impacted and its need for
capital could materially change if costs are higher than anticipated, the
Company were to undertake acquisitions demanding significant capital, operating
results were to differ significantly from recent experience or adverse events
were to affect the Company's operations.
<PAGE>
Year 2000 Compliance
The Year 2000 problem is the result of computer programs written with
two digits (rather than four) to define the applicable year. A computer program
written in that manner would recognize the entry of "00" in a date field as
referring to the year 1900 and not the year 2000. An error of this type could
result in various types of miscalculations, systems failures and business
process interruption. This issue is not unique to the Company and is sometimes
known as 'Y2K", Year 2000 or the millennium bug (collectively, "Y2K issues").
The Company has examined its products and systems to assess and
minimize what problems may be encountered with regard to the Y2K issues and the
Company's ability to transact business without interruption. The Company's
primary focus on Y2K issues is to assure the ability to continue to provide safe
and effective products to its customers and end users. A technical review of the
Company's product lines addressing Y2K issues has been completed. None of the
Company's single use products are affected by Y2K issues because their
components do not include any form of microprocessor or clock. The Company has
also inquired of its major suppliers of raw materials to obtain their assurances
that key raw materials sold to the Company will not be impacted by Y2K issues.
There can be no assurance, however, that there will not be any interruption in
supply of any raw materials. In order to determine the potential impact of Y2K
issues on the Company's products, the Company has inquired of its suppliers or
subcontractors, as appropriate, to obtain an understanding that products will
not be affected by Y2K issues.
The Company has not as yet developed a formal contingency plan for
addressing problems resulting from vendors and suppliers of goods and services
who are not Year 2000 compliant. However, based upon the Company's Y2K issues
compliance investigations, the Company believes that as to most of the raw
materials, supplies and services used in its business, alternative means of
supply would be available to the extent a supplier or vendor was unable to
continue to provide such materials, supplies or services due to Y2K issues.
Notwithstanding the foregoing, if the supply of face masks from Respironics,
Inc. were interrupted as a result of Y2K issues (including, without limitation,
Y2K issues relating to common carriers in transporting face masks from the place
of manufacture in China), no assurance can be given that the Company could
maintain the required supply of face masks in the quantity and at a cost that
would not have a material adverse effect on the Company's business, including
sale of compatible products. The Company will continue its communication with
its suppliers including Respironics to address adverse consequence of Y2K
issues. However, no assurance can be given and the Company's policy is to
maintain a sufficient inventory of face masks to lessen the impact of temporary
interruptions.
The Company began a process of upgrading its computer software
approximately two years ago. While this effort was not undertaken in order to
address Y2K issues, the need to upgrade the software occurred contemporaneously
with an increased awareness of Y2K issues. The hardware and software components
purchased or licensed by the Company in connection with the upgrade of the
computer software were analyzed for Y2K issues compliance. The Company believes
that when the new software is fully installed and operational, all material
computer systems will be Y2K compliant. Certain components of the system have
already been installed and are operating generally as anticipated. The Company
anticipates that the software upgrade will be fully operational during the third
quarter of calendar year 1999. Because the upgrade of the computer software was
to address increases in volume, number of users and unsupported software, the
Company has not ascribed any of these computer costs to Y2K issues compliance,
but as capital expenditures made in the ordinary course of business.
Several of the Company's in-house manufacturing lines used to
manufacture raw materials into component parts are controlled by equipment
incorporating microprocessors. The Company also has certain other operating
equipment which incorporate microprocessors. The Company has made inquiry of
manufacturers and providers of certain key equipment and device contract
companies and is upgrading certain equipment. The Company believes that the
costs to upgrade such equipment are not expected to be material to the Company
and that such other equipment material to the Company's operations will not be
materially effected by Y2K issues.
THE ESTIMATES AND CONCLUSIONS HEREIN WITH RESPECT TO Y2K ISSUES ARE
FORWARD-LOOKING STATEMENTS UNDER THE REFORM ACT AND ARE BASED ON MANAGEMENT'S
BEST ESTIMATES OF FUTURE EVENTS. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
COMPANY'S ESTIMATES AND CONCLUSIONS AS A RESULT OF A NUMBER OF FACTORS INCLUDING
THE AVAILABILITY OF RESOURCES, THE ABILITY TO DISCOVER AND CORRECT THE POTENTIAL
Y2K SENSITIVE ISSUES WHICH COULD HAVE A SERIOUS IMPACT ON CERTAIN OPERATIONS AND
THE ABILITY OF THE COMPANY'S VENDORS, SUPPLIERS, PROVIDERS OF GOODS AND SERVICES
AND CUSTOMERS TO BRING THEIR SYSTEMS INTO Y2K ISSUES COMPLIANCE.
ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk
Not Applicable
<PAGE>
PART II
Other Information
Item 1.
Legal Proceedings:
(a) Reference is made to Item 3 of the Company's Annual Report on Form 10-K for
the year ended September 30, 1998 and to Item 1 of the Company's Quarterly
Report on Form 10-Q for the three months ended December 31, 1998.
(b) In the pending action against Vital Pharma, Inc. (VPI), a Company
subsidiary, in the United States District Court for the Southern District
of Florida alleging patent infringement and theft of trade secrets
involving blow-fill-seal technology, VPI filed an answer denying the
complaint, asserted a counterclaim that the plaintiff's patent is invalid,
noninfringed and unenforceable, and requested an award of costs and
attorneys' fees. On April 6, 1999, the Court set a trial date of January 3,
2000. On May 3, 1999 the Court denied plaintiff's motion to strike VPI's
claims of inequitable conduct in view of VPI's amended answer and
counterclaim filed April 2, 1999. Pretrial discovery has commenced.
On March 2, 1999, VPI commenced an action in the same Court against the
plaintiff's sister company seeking a declaratory judgment that five other
blow-fill-seal patents are invalid, non infringed and unenforceable and
requesting an award of costs and attorneys' fees. On April 1, 1999,
defendant made a motion to dismiss VPI's complaint claiming the Court
lacked personal jurisdiction over the defendant and on April 16, 1999 VPI
submitted its opposition to the motion. On April 21, 1999, the Court
transferred this action to the judge handling the first action.
ITEM 4.
Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of shareholders on March 3, 1999. At the
meeting, each of the Board's nominees were re-elected to the Board. Shares were
voted for the election of directors as follows:
For Authority Withheld
David J. Bershad 11,594,487 106,087
Anthony J. Dimun 11,594,487 106,087
Stuart Esslg 11,584,487 106,087
Joseph Thomas 11,594,487 106,087
Terence D. Wall 11,594,487 106,087
C. Barry Wicker 11,594,487 106,087
<PAGE>
Item 6.
Exhibits and Reports on Form 8-K
a) Exhibits: 27.1 - Financial Data Schedule.
b) Reports on Form 8-K filed during the quarter ended March 31, 1999:
None.
<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.
VITAL SIGNS, INC.
By: /s/ Anthony J. Dimun
Anthony J. Dimun
Executive Vice President of
Finance and Chief Financial Officer
Date: May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Company's balance sheet at March 31, 1999 and six month
income statement ending March 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000865846
<NAME> VITAL SIGNS, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,362
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0
0
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</TABLE>
