<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934. FOR THE THREE MONTH PERIOD FROM DECEMBER 31, 1995
TO MARCH 30, 1996.
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 0-20225
ZOLL MEDICAL CORPORATION
------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2711626
- - --------------------------------- ----------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification number)
32 SECOND AVENUE, BURLINGTON, MA 01803-4420
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(617) 229-0020
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Class Outstanding at May 6, 1996
Common Stock, $.02 par value 6,161,259
This document consists of 12 pages.
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<PAGE> 2
ZOLL MEDICAL CORPORATION
<TABLE>
INDEX
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited)
March 30, 1996 and September 30, 1995 3
Condensed Consolidated Income Statements (unaudited)
Three Months Ended March 30, 1996 and April 1, 1995 4
Condensed Consolidated Income Statements (unaudited)
Six Months Ended March 30, 1996 and April 1, 1995 5
Condensed Consolidated Statements of Cash Flows (unaudited)
Six Months Ended March 30, 1996 and April 1, 1995 6
Notes to Condensed Consolidated Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 2. Changes in Securities 11
ITEM 3. Defaults Upon Senior Securities 11
ITEM 4. Submission of Matters to a Vote of Security-Holders 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZOLL MEDICAL CORPORATION
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(unaudited)
<CAPTION>
MARCH 30, SEPTEMBER 30,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,557 $ 5,595
Investments 2,773 1,050
Accounts receivable, less allowance of $821 at
March 30, 1996; $786 at September 30, 1995 12,761 13,996
Inventories, net:
Raw materials 2,806 3,059
Work-in-process 1,770 1,192
Finished goods 3,644 3,077
------- -------
8,220 7,328
Prepaid expenses and other current assets 1,523 1,418
------- -------
Total current assets 30,834 29,387
Property and equipment, at cost:
Land and building 986 986
Machinery and equipment 7,424 6,705
Tooling 2,216 2,172
Furniture and fixtures 522 502
Leasehold improvements 694 694
------- -------
11,842 11,059
Less accumulated depreciation 5,416 4,699
------- -------
Net property and equipment 6,426 6,360
Other assets, net 1,630 645
------- -------
$38,890 $36,392
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,268 $ 2,112
Accrued expenses and other liabilities 3,248 3,313
Current maturities of long-term debt 112 112
------- -------
Total current liabilities 6,628 5,537
Deferred income taxes 498 498
Long-term debt 719 767
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value, authorized 1,000,000 shares,
none issued and outstanding
Common stock, $.02 par value, authorized 19,000,000 shares,
6,137,000 and 6,117,000 issued and outstanding at
March 30, 1996 and September 30, 1995, respectively 122 122
Capital in excess of par value 20,238 20,123
Retained earnings 10,685 9,345
------- -------
Total stockholders' equity 31,045 29,590
------- -------
$38,890 $36,392
======= =======
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
ZOLL MEDICAL CORPORATION
<TABLE>
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share and share data)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
---------------------------
March 30, April 1,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 13,106 $ 11,027
Cost of goods sold 5,677 4,505
---------- ----------
Gross profit 7,429 6,522
Expenses:
Selling and marketing 3,958 3,669
General and administrative 1,235 1,136
Research and development 1,113 1,095
---------- ----------
Total expenses 6,306 5,900
---------- ----------
Income from operations 1,123 622
Investment income 64 174
Interest expense 21 22
---------- ----------
Income before income taxes 1,166 774
Provision for income taxes 420 279
---------- ----------
Net income $ 746 $ 495
========== ==========
Earnings per share $ 0.12 $ 0.08
========== ==========
Weighted average common shares and
equivalent shares outstanding 6,294,000 6,211,000
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
ZOLL MEDICAL CORPORATION
<TABLE>
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share and share data)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
---------------------------
March 30, April 1,
1996 1995
---- ----
<S> <C> <C>
Net sales $ 25,437 $ 21,750
Cost of goods sold 11,014 8,996
---------- ----------
Gross profit 14,423 12,754
Expenses:
Selling and marketing 7,940 7,192
General and administrative 2,389 2,089
Research and development 2,145 2,253
---------- ----------
Total expenses 12,474 11,534
---------- ----------
Income from operations 1,949 1,220
Investment income 192 235
Interest expense 48 49
---------- ----------
Income before income taxes 2,093 1,406
Provision for income taxes 753 506
---------- ----------
Net income $ 1,340 $ 900
========== ==========
Earnings per share $ 0.22 $ 0.15
========== ==========
Weighted average common shares and
equivalent shares outstanding 6,226,000 6,204,000
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE> 6
ZOLL MEDICAL CORPORATION
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
----------------------
March 30, April 1,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,340 $ 900
Charges not affecting cash:
Depreciation and amortization 765 695
Provision for losses on accounts receivable 180 180
Provision for warranty expense 49 20
Changes in current assets and liabilities:
Accounts receivable 1,055 (113)
Inventories (892) (2,639)
Prepaid expenses and other current assets (105) (171)
Accounts payable and accrued expenses 1,042 1,089
------- -------
Cash provided by (used for) operating activities 3,434 (39)
INVESTING ACTIVITIES:
Additions to property and equipment (783) (1,247)
Investment in marketable securities (2,423) (1,010)
Redemption of marketable securities 700 1,693
Other assets (33) (69)
Increase in long-term investment (1,000) 0
------- -------
Cash used for investing activities (3,539) (633)
FINANCING ACTIVITIES:
Exercise of stock options, including income tax benefit 115 210
Repayment of long-term debt (48) (82)
------- -------
Cash provided by financing activities 67 128
------- -------
Net decrease in cash (38) (544)
Cash and cash equivalents at beginning of year 5,595 5,002
------- -------
Cash and cash equivalents at end of year $ 5,557 $ 4,458
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year:
Interest $ 48 $ 50
Income taxes 868 445
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE> 7
ZOLL MEDICAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 30, 1996
1. The Balance Sheet as of March 30, 1996, the Statements of Income for the
three and six months ended March 30, 1996 and April 1, 1995, and the
Statements of Cash Flows for the six months ended March 30, 1996 and April 1,
1995 are unaudited, but in the opinion of management include all adjustments,
consisting of normal recurring items, necessary for a fair presentation of
results for these interim periods. The results for the interim periods are
not necessarily indicative of results to be expected for the entire year.
2. On January 5, 1996, the Company made an investment in the common stock of
Lifecor, Inc. of Pittsburgh, Pennsylvania. On April 17, 1996, an additional
$1,000,000 investment by the Company was made in its strategic alliance with
Lifecor, Inc. The Company's total investment is currently $2,000,000,
representing ownership of approximately 6% of Lifecor, Inc.'s common stock.
The information contained in the interim financial statements should be read in
conjunction with the Company's audited financial statements, included in its
Annual Report on Form 10-K for the year ended September 30, 1995, filed with the
Securities and Exchange Commission.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 30, 1996
---------------------------------
COMPARED TO THREE MONTHS ENDED APRIL 1, 1995
--------------------------------------------
The Company's net sales increased to $13,106,000 for the three months ended
March 30, 1996 from $11,027,000 for the three months ended April 1, 1995. Of
this increase, 58%, or $1,216,000 was due to increased domestic defibrillator
sales to the pre-hospital market as a result of new products; 63%, or $1,313,000
was due to increased sales in international markets resulting from increased
focus on international markets; and 15%, or $320,000 was due to increased
disposable electrode sales. These amounts were partially offset by a $787,000
decline in domestic hospital defibrillator sales.
Gross profit as a percentage of sales decreased to 57% from 59% primarily due to
changes in the mix of products sold. Gross profit increased to $7,429,000 from
$6,522,000 due to increased sales volumes.
Selling and marketing expenses as a percentage of sales decreased to 30% from
33%. Selling and marketing expenses increased 8% to $3,958,000 from $3,669,000.
Of this increase, 80%, or $230,000 was due to increased payroll related costs
and travel expenditures because of higher staffing levels in North America and
22%, or $63,000 was due to increased international selling expenditures.
General and administrative expenses as a percentage of sales decreased to 9%
from 10%. General and administrative expenses increased 9% to $1,235,000 from
$1,136,000. Of this increase, 75%, or $74,000 was due to increased professional
service costs and 47%, or $47,000 was due to increased payroll related costs
associated with new hires and salary and benefit related increases. These
amounts were partially offset by a $36,000 decrease in insurance premiums.
Research and development expenses as a percentage of sales decreased to 8% from
10%. Research and development expenses increased 2% to $1,113,000 from
$1,095,000.
Net investment income decreased to $64,000 from $174,000. This decrease was due
primarily to a decrease in short-term investment returns.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 30, 1996
-------------------------------
COMPARED TO SIX MONTHS ENDED APRIL 1, 1995
------------------------------------------
The Company's net sales increased to $25,437,000 for the six months ended March
30, 1996 from $21,750,000 for the six months ended April 1, 1995. Of this
increase, 70%, or $2,575,000 was due to increased domestic defibrillator sales
to the pre-hospital market; 56%, or $2,075,000 was due to increased sales in
international markets and 16%, or $597,000 was due to increased disposable
electrode sales. These amounts were partially offset by a decline in domestic
hospital defibrillator sales and lower sales volumes on product accessories.
Gross profit as a percentage of sales decreased to 57% from 59% primarily due to
changes in the mix of products sold. Gross profit increased to $14,423,000 from
$12,754,000 due to increased sales volumes.
Selling and marketing expenses as a percentage of sales decreased to 31% from
33%. Selling and marketing expenses increased 10% to $7,940,000 from $7,192,000.
Of this increase, 79%, or $594,000 was due to increased payroll related costs
and travel expenditures because of higher staffing levels in North America and
45%, or $334,000 was due to increased international selling expenditures. These
amounts were partially offset by a $119,000 reduction in marketing expenditures
as a result of the lower level of marketing activities in 1996 following the
introduction and release of new products in 1995.
General and administrative expenses as a percentage of sales decreased to 9%
from 10%. General and administrative expenses increased 14% to $2,389,000 from
$2,089,000. Of this increase, 53%, or $160,000 was due to increased professional
service costs and 16%, or $49,000 was due to increased payroll related costs
associated with new hires and salary and benefit related increases.
Research and development expenses as a percentage of sales decreased to 8% from
10%. Research and development expenses decreased 5% to $2,145,000 from
$2,253,000. The decrease was due to the substantial completion of research and
development activities related to the release of new products in 1995.
9
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and marketable securities position at March 30, 1996 was
$8,330,000 compared to $6,645,000 at September 30, 1995, an increase of
$1,685,000. Cash provided by operating activities for the six months ended March
30, 1996 increased by $3,473,000 over the same period in 1995. This increase was
due to the Company's efforts to reduce accounts receivable and maintain stable
inventory levels.
The amount of cash required to fund investing activities was $2,906,000 higher
in the six months ended March 30, 1996 compared to the same period in 1995. The
increase was primarily due to an increase in both long-term and short-term
investments, including the Company's $1,000,000 investment in the common stock
of Lifecor, Inc.
The amount of cash provided by the Company's financing activities decreased
$61,000 for the six months ended March 30, 1996 compared to the same period in
1995. This decrease was due to a reduction in excised stock options of $95,000
which was partially offset by a decrease in long term debt repayments of
$34,000.
The Company expects that the combination of the existing cash balances, funds
generated from operations and borrowings under the existing line of credit will
be adequate to meet its liquidity and capital requirements at least through
fiscal 1996.
SAFE HARBOR STATEMENTS
Except for the historical information contained herein, the matters set forth
herein are forward looking statements that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward looking statements. Such risks and uncertainties
include, but are not limited to: product demand and market acceptance risks, the
effect of economic conditions, the impact of competitive products and pricing,
product development and commercialization, technological difficulties, the
government regulatory environment, trade environment, capacity and supply
constraints or difficulties, the results of financing efforts, actual purchases
under agreements, the effect of the Company's accounting policies.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain officers and former officers are
defendants in various lawsuits, including commercial disputes
and certain shareholder claims. Due to the preliminary nature
of these lawsuits, it is not possible at this time to predict
the outcome of the legal actions. However, in management's
opinion the disposition of the lawsuits will not have a
material impact on the Company's financial position or its
results of operations.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
Not Applicable.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K.
The registrant filed no reports on Form 8-K during the
quarter ended March 30, 1996.
11
<PAGE> 12
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.
ZOLL MEDICAL CORPORATION
(Registrant)
Date: May 9, 1996 By: /s/ Rolf S. Stutz
-------------------------------------------------
Rolf S. Stutz, President and Chief Executive Officer
Date: May 9, 1996 By: /s/ Richard A. Packer
----------------------------------------------------
Richard A. Packer, Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> MAR-30-1996
<EXCHANGE-RATE> 1
<CASH> 5,557
<SECURITIES> 2,773
<RECEIVABLES> 13,582
<ALLOWANCES> 821
<INVENTORY> 8,220
<CURRENT-ASSETS> 30,834
<PP&E> 11,842
<DEPRECIATION> 5,416
<TOTAL-ASSETS> 38,890
<CURRENT-LIABILITIES> 6,628
<BONDS> 719
0
0
<COMMON> 122
<OTHER-SE> 30,923
<TOTAL-LIABILITY-AND-EQUITY> 38,890
<SALES> 25,437
<TOTAL-REVENUES> 25,629
<CGS> 11,014
<TOTAL-COSTS> 11,014
<OTHER-EXPENSES> 12,474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 2,093
<INCOME-TAX> 753
<INCOME-CONTINUING> 1,340
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,340
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
