<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 29, 1996.
[ ] 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at August 1, 1996
Common Stock, $.02 par value 6,174,259
This document consists of 12 pages.
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ZOLL MEDICAL CORPORATION
INDEX
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Condensed Consolidated Balance Sheets (unaudited)
June 29, 1996 and September 30, 1995 3
Condensed Consolidated Income Statements (unaudited)
Three Months Ended June 29, 1996 and July 1, 1995 4
Condensed Consolidated Income Statements (unaudited)
Nine Months Ended June 29, 1996 and July 1, 1995 5
Condensed Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended June 29, 1996 and July 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
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
ZOLL MEDICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
<CAPTION>
JUNE 29, SEPTEMBER 30,
1996 1995
---- ----
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 5,290 $ 5,595
Investments 2,177 1,050
Accounts receivable, less allowance of $821 at
June 29, 1996; $786 at September 30, 1995 13,459 13,996
Inventories, net:
Raw materials 3,118 3,059
Work-in-process 2,499 1,192
Finished goods 3,399 3,077
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9,016 7,328
Prepaid expenses and other current assets 1,411 1,418
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Total current assets 31,353 29,387
Property and equipment, at cost:
Land and building 995 986
Machinery and equipment 7,699 6,705
Tooling 2,252 2,172
Furniture and fixtures 559 502
Leasehold improvements 710 694
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12,215 11,059
Less accumulated depreciation 5,780 4,699
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Net property and equipment 6,435 6,360
Other assets, net 2,594 645
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$40,382 $36,392
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,904 $ 2,112
Accrued expenses and other liabilitis 3,898 3,313
Current maturities of long-term debt 112 112
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Total current liabilities 6,914 5,537
Deferred income taxes 498 498
Long-term debt 691 767
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
6,174,000 and 6,117,000 issued and outstanding at
June 29, 1996 and September 30, 1995, respectively 124 122
Capital in excess of par value 20,540 20,123
Retained earnings 11,615 9,345
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Total stockholders' equity 32,279 29,590
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$40,382 $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
----------------------
June 29, July 1,
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 13,971 $ 10,818
Cost of goods sold 6,089 4,920
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Gross Profit 7,882 5,898
Expenses:
Selling and marketing 4,368 4,120
General and administrative 1,102 1,180
Research and development 1,016 1,032
---------- ----------
Total expenses 6,486 6,332
---------- ----------
Income/(loss) from operations 1,396 (434)
Investment income 83 97
Interest expense 25 23
---------- ----------
Income/(loss) before income taxes 1,454 (360)
Provision/(benefit) for income taxes 523 (130)
---------- ----------
Net income/(loss) $ 931 $ (230)
========== ==========
Earnings/(loss) per share $ 0.15 $ (0.04)
========== ==========
Weighted average common shares and
equivalent shares outstanding 6,318,000 6,096,000
</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>
NINE MONTHS ENDED
----------------------
June 29, July 1,
1996 1995
---- ----
<S> <C> <C>
Net Sales $ 39,408 $ 32,568
Cost of goods sold 17,103 13,916
---------- ---------
Gross Profit 22,305 18,652
Expenses:
Selling and marketing 12,307 11,312
General and administrative 3,492 3,269
Research and development 3,161 3,285
---------- ---------
Total expenses 18,960 17,866
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Income from operations 3,345 786
Investment income 275 332
Interest expense 73 72
---------- ---------
Income before income taxes 3,547 1,046
Provision for income taxes 1,277 376
---------- ---------
Net income $ 2,270 $ 670
========== =========
Earnings per share $ 0.36 $ 0.11
========== =========
Weighted average common shares and
equivalent shares outstanding 6,232,000 6,207,000
</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>
NINE MONTHS ENDED
-----------------
June 29, July 1,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,270 $ 670
Charges not affecting cash:
Depreciation and amortization 1,157 1,058
Provisions for losses on accounts receivable 35 180
Provision for warranty expense 64 0
Changes in current assets and liabilities:
Accounts receivable 502 (47)
Inventories (1,688) (2,317)
Prepaid expenses and other current assets 7 (97)
Accounts payable and accrued expenses 1,313 (44)
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Cash provided by (used for) operating activities 3,660 (597)
INVESTING ACTIVITIES:
Additions to property and equipment (1,370) (1,721)
Disposals of property and equipment 214 0
Investment in short-term investments (2,593) (2,477)
Redemption of short-term investments 1,466 3,487
Other assets (25) (98)
Increase in long-term investment (2,000) 0
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Cash used for investing activities (4,308) (809)
FINANCING ACTIVITIES:
Exercise of stock options, including income tax benefit 419 213
Repayment of long-term debt (76) (114)
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Cash provided by financing activities 343 99
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Net decrease in cash (305) (1,307)
Cash and cash equivalents at beginning of year 5,595 5,002
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Cash and cash equivalents at end of year $ 5,290 $ 3,695
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year:
Interest $ 73 $ 73
Income taxes 1.171 460
</TABLE>
See notes to unaudited condensed consolidated financial statements.
6
<PAGE> 7
ZOLL MEDICAL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 29, 1996
1. The Balance Sheet as of June 29, 1996, the Statements of Income for the
three and nine months ended June 29, 1996 and July 1, 1995, and the
Statements of Cash Flows for the nine months ended June 29, 1996 and July
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 Lifecore, 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 JUNE 29, 1996
--------------------------------
COMPARED TO THREE MONTHS ENDED JULY 1, 1995
-------------------------------------------
The Company's net sales increased to $13,971,000 for the three months ended June
29, 1996 from $10,818,000 for the three months ended July 1, 1995. Of this
increase, $1,557,000 was due to increased domestic defibrillator sales to the
pre-hospital market as a result of new products; $967,000 was due to increased
sales in international markets resulting from increased focus on international
markets; and $773,000 was due to increased domestic hospital defibrillator
sales.
Gross profit as a percentage of sales increased to 56% from 55%.
Selling and marketing expenses as a percentage of sales decreased to 31% from
38%. Selling and marketing expenses increased 6% to $4,368,000 from $4,120,000.
Of this increase, $517,000 was due to payroll related costs because of higher
staffing levels in North America, increased sales commissions and travel
expenses due to greater sales volumes. International selling expenses also
increased by $90,000 due to an increased focus on international markets. These
increases were partially offset by a $214,000 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; a $50,000
reduction in warranty repair and other repair-related expenses; and a reduction
in training and other selling-related costs.
General and administrative expenses as a percentage of sales decreased to 8%
from 11%. General and administrative expenses decreased 7% to $1,102,000 from
$1,180,000. Of this decrease $48,000 was due to reduced insurance premiums.
Research and development expenses as a percentage of sales decreased to 7% from
10%. Research and development expenses decreased 2% to $1,016,000 from
$1,032,000. The decrease was due to the substantial completion of research and
development activities related to the release of new products in 1995.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 29, 1996
-------------------------------
COMPARED TO NINE MONTHS ENDED JULY 1, 1995
------------------------------------------
The Company's net sales increased to $39,408,000 for the nine months ended June
29, 1996 from $32,568,000 for the nine months ended July 1, 1995. Of this
increase, $4,135,000 was due to increased domestic defibrillator sales to the
pre-hospital market as a result of new products; $3,042,000 was due to increased
sales in international markets; $775,000 was due to increased disposable
electrode sales. These amounts were partially offset by a decline in domestic
hospital defibrillator sales.
Selling and marketing expenses as a percentage of sales decreased to 31% from
35%. Selling and marketing expenses increased 9% to $12,307,000 from
$11,312,000. Of this increase, $1,276,000 was due to payroll related costs
because of higher staffing levels in North America and increased sales
commissions and travel expenses due to greater sales volumes. International
selling expenses also increased by $426,000 due to an increased focus on
international markets. These amounts were partially offset by a $548,000
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 and a $244,000 reduction in warranty repair and other repair-related
expenses.
General and administrative expenses as a percentage of sales decreased to 9%
from 10%. General and administrative expenses increased 7% to $3,492,000 from
$3,269,000. Of this increase, $137,000 was due to increased legal fees and other
professional service costs; and $221,000 was due to increased payroll and
related costs associated with new hires and salary and benefit related
increases. These amounts were partially offset by a $90,000 reduction in bad
debt expense and an $85,000 reduction in insurance premiums.
Research and development expenses as a percentage of sales decreased to 8% from
10%. Research and development expenses decreased 4% to $3,161,000 from
$3,285,000. 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
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and short-term investments position at June 29, 1996, was
$7,467,000 compared with $6,645,000 at September 30, 1995, an increase of
$822,000. Cash provided by operating activities for the nine months ended June
29, 1996, increased by $4,259,000 over the same period in 1995. This increase
was due to increased earnings and the Company's efforts to reduce accounts
receivable and maintain stable inventory levels.
The amount of cash required to fund investing activities was $3,510,000 higher
in the nine months ended June 29, 1996, compared with the same period in 1995.
The increase was primarily due to an increase in the net short-term investments
and an increase in long-term investments, including the Company's $2,000,000
investment in the common stock of Lifecor, Inc.
The amount of cash provided by the Company's financing activities increased
$244,000 for the nine months ended June 29, 1996, compared with the same period
in 1995. This increase was due primarily to an increase in exercised stock
options of $206,000.
The Company maintains a line of credit with its bank. Under this working capital
line, the Company may borrow up to $3,000,000 on a demand basis, and bears
interest at the bank's base rate. The full amount of the line was available to
the Company at June 29, 1996.
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 for the foreseeable
future.
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, and 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 June 29, 1996.
11
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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: August 9, 1996 By: /s/ Richard A. Packer
-------------- -----------------------------------------
Richard A. Packer, President and
Chief Operating Officer
(Principal Financial and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 3rd QUARTER 10-Q
</LEGEND>
<RESTATED>
<CIK> 0000887568
<NAME> ZOLL MEDICAL CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> JUN-29-1996
<EXCHANGE-RATE> 1
<CASH> 5,290
<SECURITIES> 2,177
<RECEIVABLES> 14,280
<ALLOWANCES> 821
<INVENTORY> 9,016
<CURRENT-ASSETS> 31,353
<PP&E> 12,215
<DEPRECIATION> 5,780
<TOTAL-ASSETS> 40,382
<CURRENT-LIABILITIES> 6,914
<BONDS> 691
<COMMON> 0
0
124
<OTHER-SE> 32,155
<TOTAL-LIABILITY-AND-EQUITY> 40,382
<SALES> 39,408
<TOTAL-REVENUES> 39,408
<CGS> 17,103
<TOTAL-COSTS> 17,103
<OTHER-EXPENSES> 18,960
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73
<INCOME-PRETAX> 3,547
<INCOME-TAX> 1,277
<INCOME-CONTINUING> 2,270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,270
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
