<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1997
--------------
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 0-21776
HEALTHDYNE TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 52-1756497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1255 KENNESTONE CIRCLE, MARIETTA GEORGIA 30066
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(Address of principal executive offices) (Zip Code)
(770) 499-1212
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(Registrant's telephone number, including area code)
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
---- ----
As of May 1, 1997, 12,741,408 shares of the Company's Common Stock, $.01 par
value, were outstanding.
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PART I - FINANCIAL INFORMATION
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1997 1996
----------- -----------
Current assets: (Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 3,229 3,041
Trade accounts and notes receivable, less
allowances of $1,312 at March 31, 1997 and $1,193
at December 31, 1996 38,409 36,164
Inventories:
Finished goods 7,836 7,862
Work in process 2,580 3,086
Raw materials 7,937 7,645
--------- ---------
Total inventories 18,353 18,593
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Deferred income taxes 1,660 1,523
Prepaid expenses and other current assets 1,802 2,296
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Total current assets 63,453 61,617
--------- ---------
Property and equipment 22,390 20,294
Less accumulated depreciation and
amortization (11,796) (11,000)
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Net property and equipment 10,594 9,294
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Excess of cost over net assets of businesses acquired,
less accumulated amortization of $2,007 at
March 31, 1997 and $1,815 at December 31, 1996 20,719 20,911
Intangible assets, less accumulated
amortization of $3,055 at March 31, 1997
and $2,992 at December 31, 1996 5,978 5,410
Other assets 1,479 846
--------- ---------
$ 102,223 98,078
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
<PAGE> 3
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 1,197 2,610
Accounts payable, principally trade 13,615 12,375
Accrued liabilities 11,987 9,745
-------- -------
Total current liabilities 26,799 24,730
Long-term debt, excluding current installments 29,078 29,078
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Total liabilities 55,877 53,808
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Shareholders' equity:
Preferred stock, without par value. Authorized 10,000
shares; issued none - -
Common stock, $.01 par value. Authorized 50,000 shares;
issued and outstanding 12,740 and 12,628 shares at
March 31, 1997 and December 31, 1996, respectively 127 126
Additional paid-in capital 23,551 22,755
Retained earnings 22,668 21,389
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Total shareholders' equity 46,346 44,270
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$102,223 98,078
======== =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
<PAGE> 4
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Revenues $ 35,671 27,482
Cost of revenues 21,860 16,017
--------- ---------
Gross profit 13,811 11,465
Selling and administrative expenses 7,969 6,675
Research and development expenses 1,873 1,350
--------- ---------
Operating profit 3,969 3,440
Costs associated with an unsolicited
offer to acquire the Company (1,300) --
Interest expense (592) (577)
Interest income 81 88
Other expense, net (26) (15)
--------- ---------
Earnings before income taxes 2,132 2,936
Income tax expense 853 1,159
--------- ---------
Net earnings $ 1,279 1,777
========= =========
Net earnings per common share and
common share equivalent $ .10 .14
========= =========
Weighted average number of common shares
and common share equivalents outstanding 13,270 12,950
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE> 5
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,279 1,777
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,051 828
Deferred income taxes (137) 234
(Increase) decrease in:
Trade accounts and notes receivable (2,245) 1,983
Inventories 240 (1,486)
Other assets (139) 341
Increase (decrease) in:
Accounts payable 1,240 (943)
Accrued liabilities 2,242 263
--------- ---------
Net cash provided by
operating activities 3,531 2,997
Cash flows from investing activities:
Purchase of product rights (631) (198)
Purchases of property and
equipment (2,096) (702)
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Net cash used in
investing activities (2,727) (900)
--------- ---------
</TABLE>
(continued)
5
<PAGE> 6
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from financing activities:
Net borrowings under revolving
credit agreement $ -- 500
Principal repayments of long-term debt (1,413) (912)
Proceeds from issuance of common stock 797 558
--------- ---------
Net cash provided by (used in)
financing activities (616) 146
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Net increase in cash and cash
equivalents 188 2,243
Cash and cash equivalents at beginning
of period 3,041 287
--------- ---------
Cash and cash equivalents at end
of period $ 3,229 2,530
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
6
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HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. General
The consolidated condensed financial statements as of March 31, 1997 and
for the three months ended March 31, 1997 and 1996 are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented
have been included. Results for interim periods are not necessarily
indicative of results that may be expected for the full fiscal year.
These consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Annual Report on Form 10-K of Healthdyne Technologies, Inc.
(the "Company") for the year ended December 31, 1996.
2. Earnings Per Share of Common Stock
Primary earnings per common share and common share equivalent are based on
the weighted average number of shares outstanding and common share
equivalents derived from dilutive stock options. Fully diluted earnings per
share are not significantly different from primary earnings per share.
3. Credit Agreement
In March 1997, the Company entered into an amendment to its revolving
credit and term loan agreement (the "Credit Agreement") which extended the
expiration date of the term loan portion to June 1999. Balances under the
Credit Agreement now will all be due at that time.
4. Costs Associated With an Unsolicited Offer to Acquire the Company
On January 2, 1997, A. Malachi Mixon, III, Chairman and Chief Executive
Officer of Invacare Corporation ("Invacare"), sent a letter to Craig B.
Reynolds, President and Chief Executive Officer of the Company, indicating
Invacare's interest in a combination with the Company and proposing to
acquire the Company in a negotiated merger transaction in which
shareholders of the Company would receive $12.50 in cash for each share of
the Company's Common Stock (the "Invacare Preliminary Proposal"). On
January 10, 1997, Invacare issued a press release disclosing the
unsolicited Invacare Preliminary Proposal and the Company issued a press
release announcing that its Board would consider the Invacare Preliminary
Proposal in due course.
On January 15, 1997, the Company's Board of Directors met to discuss the
Invacare Preliminary Proposal and appointed Cowen & Company ("Cowen"), as
financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP as legal
advisor to the Board of Directors. On January 23, 1997, the Board of
Directors of the Company met again to review the Company's financial
performance and the Invacare Preliminary Proposal. The Board of Directors
determined that the sale of the Company was not in the best interests of
its shareholders at such time and issued a press release on January 24,
1997, rejecting the Invacare Preliminary Proposal.
On January 27, 1997, Invacare commenced an unsolicited tender offer to
purchase all of the outstanding shares of Company Common Stock at $13.00
per share in cash (the "Invacare Initial Offer Price"), upon certain terms
and subject to certain conditions (the "Invacare Initial Offer"), to be
followed by a second-step merger in which holders of shares not validly
tendered would receive the
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same per share price as in the Invacare Initial Offer. The Invacare Initial
Offer also disclosed that Invacare owned 600,000 shares (approximately
4.9%) of the Company's Common Stock.
On January 30, 1997, the Board of Directors reviewed the Invacare Initial
Offer and unanimously concluded that it was grossly inadequate and not in
the best interests of the Company and its shareholders. In particular, the
Board of Directors determined that the Company's current strategic plan
offered the potential for greater benefits for the Company's shareholders
than the Invacare Initial Offer, based on, among other things, greater
opportunities for business expansion, revenue and earnings growth, and the
introduction of new products and product lines into the health care market.
The Board unanimously recommended that shareholders reject the Invacare
Initial Offer and not tender any of their shares.
On February 25, 1997, the Invacare Initial Offer, which had been scheduled
to expire on February 24, 1997, was extended to March 24, 1997. On March
20, 1997, the Company received Invacare's notice to the Company announcing
its intention to nominate candidates for election to the Company's Board
and to make certain shareholder proposals at the Annual Meeting. On March
24, 1997, Invacare again extended the Invacare Initial Offer to April 7,
1997.
On March 31, 1997, Invacare revised the Invacare Initial Offer by
announcing that it would increase the price in its tender offer from $13.00
per share to $13.50 per share (together, with the Invacare Initial Offer,
the "Invacare Offer"). On such date, Invacare also announced another
extension of the Invacare Initial Offer, this time until April 28, 1997.
On April 2, 1997, the Company issued a press release announcing that the
Board of Directors voted unanimously to reject the Invacare Offer as
grossly inadequate and to recommend that shareholders of the Company not
tender any of their shares pursuant to the Invacare Offer. On April 29,
1997, Invacare again extended the Invacare Offer until May 27, 1997.
The Company and certain of its Directors are also defendants in a lawsuit
brought by Invacare, as well as in certain class action lawsuits
purportedly brought on behalf of Company shareholders. The Company incurred
$1,300 in expense in the first quarter of 1997, primarily related to costs
related to the Invacare Offer and defending the litigation (see Part I,
Item 3 "Legal Proceedings" of the Company's annual report on Form 10-K for
the fiscal year ended December 31, 1996).
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
Except for the historical information contained herein, this report contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed in this section, and in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, as well as factors discussed or identified
from time to time in the Company's other filings with the Securities and
Exchange Commission.
GENERAL
Healthdyne Technologies' revenues are derived from sales of technologically
advanced medical devices primarily for use in the home and alternate care sites.
These products include diagnostic and therapeutic devices for the evaluation and
treatment of sleep disorders, oxygen delivery systems, noninvasive ventilators,
medication nebulizers, peak flow meters and drug delivery systems for the
treatment of respiratory disorders, and monitors for infants at risk for SIDS,
as well as a limited line of obstetrical care products. The Company markets its
products, both domestically and internationally, through a dedicated sales force
and a network of independent manufacturers' representatives and distributors.
The Company is the subject of an unsolicited hostile tender offer from Invacare
Corporation. The offer, whether or not successful, may have a material adverse
effect on the operation of the Company. Please see Note 4 of Notes to
Consolidated Condensed Financial Statements herein.
The Company has announced the planned introduction of numerous new products in
1997 and 1998. These actions are scheduled to be completed on an accelerated
timetable. Timely introduction of products is dependent on several factors,
including but not limited to, timely completion of design and engineering work,
successfully tested prototypes, clinical device testing, clearance or approval
where necessary by the FDA, intellectual property matters and availability of
materials and components from suppliers. There can be no assurance that each of
these products will be introduced, the products will be introduced in accordance
with planned schedules, or that, once introduced, products will be commercially
successful. The anticipated rapid development cycle also may result in higher
than anticipated warranty claims, which also could adversely affect future
financial performance.
The Company competes in a highly competitive environment with numerous
competitors which are financially strong and capable of competing effectively
with the Company in the marketplace. Such competitors may take actions to meet
the Company's new product introductions and other initiatives. Some competitors
may be willing to accept lower margins and to reduce prices to compete with the
Company. As a result, the Company could fail to achieve anticipated sales
increases, to realize anticipated price increases, or otherwise fail to meet its
anticipated results. Any of such circumstances would likely have an adverse
effect on future financial performance, which effect could be material.
The Company's present operations and future prospects may be influenced by
several factors, including developments in the healthcare industry, third-party
reimbursement policies and practices, and changes in regulatory requirements
with respect to approval and sale of medical devices. As a result of the
increasing cost of healthcare in the United States, government and third party
payors are becoming increasingly focused on promoting cost-effective health care
services, and payors, in particular, have become more involved in decisions
regarding diagnosis and treatment to ensure that care is delivered in a
cost-effective manner. As a result of this focus on cost-effective healthcare
delivery, the Company believes that home-based healthcare services and medical
products will continue to provide a viable and cost-effective alternative to
treatment in traditional institutional care settings in many instances.
The Company's success is dependent to a large extent upon the ability of its
customers to obtain adequate reimbursement from third-party payors, such as
government and private insurance programs, for procedures using the Company's
products. For example, Congress passed legislation in December 1995 (which was
vetoed by the President) which would have imposed a plan for balancing the
federal budget over a seven year period. The plan included major reductions in
Medicare and Medicaid expenditures and would have reduced Medicare payment rates
for oxygen by 20% beginning in 1996, gradually rising to 30% by 2002. President
Clinton's budget plan contained similar provisions, as well as
9
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competitive bidding for selected items of equipment, which could include oxygen.
Similar proposals could be enacted as part of future budget legislation.
Congress and the White House recently agreed to a budget framework that would
reduce Medicare expenditures by $115 billion over the next five fiscal years.
That framework apparently does not specify any level of reductions or policy
changes for oxygen and oxygen equipment. Those decisions will be made by the
health committees in Congress and ultimately by the entire Congress. Similarly,
the Health Care Financing Administration ("HCFA") has announced a plan to adjust
Medicare payment amounts for oxygen and oxygen equipment on the grounds that
such amounts are not "inherently reasonable". Before making any such
adjustments, HCFA will need to consider specific economic factors and provide
notice and an opportunity for public comment. While this plan would be
superseded if Congress were to enact final budget legislation, HCFA intends to
issue a proposed rule with potential reductions in oxygen payments in the ranges
contained in the budget legislation. Reductions in the reimbursement rates that
the Company's customers receive for services rendered could have an adverse
impact on the Company. The Company, however, is hopeful that the overall
cost-effective nature of diagnosis and treatment in the home will be recognized
by any new initiatives.
The Company's business also may be affected by changes in government regulation
to which the Company's products are subject or changes in the manner in which
such regulations are enforced or medical devices are approved. Performance
standards in proposed form for monitors for infants at risk for SIDS recently
have been published for comment by the FDA. The Company is unable to predict
whether, or in what form, these performance standards ultimately will be
adopted, but anticipates that it should be able to design and manufacture
products that will comply with any such standards.
A number of businesses within the healthcare industry, including in some
instances customers of the Company, recently have begun to consolidate in order,
among other things, to increase the size, efficiency and purchasing power of the
entities in question, to broaden the number and nature of products and services
offered to consumers or simply to better serve the changing healthcare industry
with its focus upon cost-effective medical care. The Company's two largest home
care dealer customers, both of which were publicly held and had branch locations
throughout the U.S., merged in August 1995. The consolidated entity, which
represents approximately 20% of homecare dealers, together with similar large
national healthcare dealers, have the capability of exerting significant price
pressure on manufacturers. Changing buying patterns may also have a negative
effect on the Company's business. The Company expects that consolidation among
home care dealers is likely to continue; however, the Company cannot predict the
effect of such mergers and consolidations on its business.
The Company acquired HealthScan Products during 1994 and acquired Fiberoptic
Medical Products, Inc. and certain assets of Trent Products Limited during 1996
in an effort to broaden its product offerings and will continue to examine
possible candidates for acquisitions in the future should the opportunity arise.
No assurance, however, can be given that any such acquisitions will be
consummated by the Company or, if consummated, that they will be financially or
operationally successful.
On May 22, 1995, Healthdyne consummated a transaction pursuant to which the
10,000 shares of the Company's Common Stock owned at that time by Healthdyne
were distributed to Healthdyne's shareholders as a tax-free dividend (the
"Spin-off"). In an effort to facilitate the Spin-off, the Board of Directors of
the Company adopted a special stock option plan pursuant to which options to
purchase 1,344 shares of the Company's common stock were granted to holders,
including employees of the Company, of outstanding Healthdyne stock options. The
Company believes the Spin-off has been and will continue to be beneficial to the
Company in that, among other things, it has increased the number of shares of
common stock of the Company available for trading and is expected to permit the
Company to raise capital more economically and with less restrictions than if it
were a subsidiary of Healthdyne.
Although the Company derives a portion of its revenues from foreign customers,
substantially all of these sales have historically been invoiced in U.S. Dollars
and, therefore, the Company has not been exposed to any significant foreign
exchange rate risk. The Company does not expect that a significant portion of
its foreign sales in the future will be invoiced in currencies other than U.S.
Dollars and, therefore, does not anticipate that it will be exposed to a
material amount of exchange rate risk. However, no assurance can be given that
this will be the case.
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with financial information herein and
the Company's consolidated financial statements and related notes presented in
the Company's Annual Report on Form 10-K for the year ended December 31, 1996 as
filed with the Securities and Exchange Commission.
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Operating Results
The following table sets forth the percentage of revenues represented by line
items in the Consolidated Condensed Statements of Earnings for the three months
ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Revenues 100% 100%
Cost of revenues 61 58
--- ---
Gross profit 39 42
Selling and administrative expenses 23 24
Research and development expenses 5 5
--- ---
Operating profit 11 13
Costs associated with an unsolicited
offer to acquire the Company (3) -
Interest expense (2) (2)
---- ----
Earnings before income taxes 6 11
Income tax expense 2 4
--- ---
Net earnings 4% 7%
=== ===
</TABLE>
Revenues for the three months ended March 31, 1997 increased 30% to $35,671 from
$27,482 in the equivalent period in 1996. This strong increase in revenue is
primarily attributable to sales growth in all of the Company's principal product
lines. Revenues from the Company's ventilation product line grew from
approximately $1,800 in the first quarter of 1996 to approximately $6,200 in the
first three months of 1997, due to the outstanding market acceptance received by
Quantum(TM), the Company's noninvasive ventilator. Revenues from the respiratory
therapy product line grew 13% in the first quarter of 1997 as compared to the
first quarter of 1996, due primarily to the 54% increase in revenue recorded by
the Company's asthma management product line. The sleep disorders product line
grew 6% from the first quarter of 1996 due principally to the continued growth
of the Tranquility(R) sleep therapy system. Domestically, sleep therapy product
sales increased 33% over the similar period in 1996, offset somewhat by lower
international sales of these products. The Company believes that this
international sales decline was primarily attributable to customer decisions to
delay purchase of these products in anticipation of new products to be released,
particularly the Company's new Tranquility(R) Bilevel product. The
Tranquility(R) Bilevel was introduced internationally late in the first quarter
of 1997, but did not contribute significantly to revenue and was approved by the
FDA for U.S. distribution in April 1997. Excluding the effect of the acquisition
of Fiberoptic Medical Products, Inc. in June, 1996, revenues from the infant
management product line increased 22% in the three months ended March 31, 1997
over the year-earlier period, primarily due to the achievement of greater market
share.
In the first quarter of 1997 the Company entered into an agreement with
Allegiance Healthcare for distribution of certain of the Company's asthma
management products. This agreement is part of the Company's ongoing efforts to
increase its distribution strength in large national accounts; however, there
can be no assurance that the agreement will be successful in improving the
Company's position with such accounts.
The Company's gross profit margins decreased approximately 3 percentage points
to 39% during the three months ended March 31, 1997 as compared to the three
months ended March 31, 1996 primarily due to lower average selling prices on
many of the Company's principal products; however, gross profit margin improved
over one percentage point from the fourth quarter of 1996. This increase was
primarily due to a slightly improved product mix and lower warranty expense in
the first quarter of 1997.
Selling and administrative expenses decreased slightly as a percentage of
revenues in the first quarter of 1997 as compared to the first quarter of 1996
due primarily to the operating efficiencies generated as a result of accelerated
revenue growth.
Research and development expenses increased to $1,873 in the first quarter of
1997 from $1,350 in the year-earlier period, primarily due to the addition of
engineering staff and engineering costs relating principally to the development
and introduction of new products. As a percentage of revenues, these expenses
remained relatively constant. In
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the first quarter of 1997, the Company successfully introduced its new spacer
device, the OptiChamber(TM) and successfully introduced internationally its new
Tranquility(R) Bilevel product. There are several existing competing products
for both the Company's new asthma spacer device and the new bilevel device.
While the Company is hopeful that the features and pricing of these devices will
allow rapid market acceptance, there can be no assurances that these products
will gain market acceptance or, if attained, over what period of time.
A non-operating charge of $1,300 for expenses associated with the Invacare
hostile tender offer and related litigation was recorded in the three months
ended March 31, 1997.
Interest expense remained relatively constant in the three months ended March
31, 1997 as compared to the same period in 1996.
The effective income tax rate remained relatively constant in the first quarter
of both 1997 and 1996.
The Company had deferred tax assets of $1,660 at March 31, 1997, which resulted
from allowances for uncollectible accounts and accruals and reserves recorded
for financial statement purposes but not yet deducted for income tax purposes.
Management believes such deferred tax assets will be recoverable through reduced
income taxes payable in future periods.
Liquidity and Capital Resources
The Company had working capital of approximately $36,700 as of March 31, 1997
and the current ratio was 2.4 to 1.0.
Cash flow provided by operations increased to $3,531 in the three months ended
March 31, 1997, from $2,997 in the three months ended March 31, 1996. Cash used
in investing activities increased to $2,727 in the three months ended March 31,
1997 from $900 in the same period in 1996, due primarily to increased capital
expenditures related to manufacturing tooling for new product introductions and
cost reductions on existing products.
The Company entered into a Secured Revolving Credit Agreement in June 1993 (the
"Credit Agreement") with two commercial banks and in December 1994 entered into
an amendment to the Credit Agreement which increased the total commitment from
$15,000 to $25,000. During the last half of 1995, the Credit Agreement was
amended to increase the total commitment to $35,000 and was further amended in
June 1996 to add a term loan commitment of $15,000. In March 1997, the Credit
Agreement was amended again to extend the expiration date of the term loan to
June 1999. Both the revolving credit facility and the term loan now expire and
are payable in full in June 1999. This facility may be used for general
corporate purposes and is secured by all accounts receivable, inventory, deposit
accounts and all intangible assets of the Company and contains various
covenants, including but not limited to, net worth and financial ratio
requirements. As of March 31, 1997, the Company had outstanding borrowings of
$28,500 under its Credit Agreement at interest rates ranging from 7.1% to 8.8%.
The Company believes that its existing cash balances, together with internally
generated funds and remaining amounts available under its Credit Agreement, will
be sufficient to meet the Company's operating capital requirements for at least
the next twelve months. Additional indebtedness and/or equity, in all
likelihood, would be needed to finance possible acquisitions should the Company
decide to pursue such transactions in the future.
As of March 31, 1997, the Company had outstanding commitments for capital
expenditures of approximately $600 relating primarily to manufacturing tooling.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Report:
(10) Fifth Amendment to Amended and Restated Revolving Credit
Agreement between the Company and Bank of America National
Trust and Savings Association
(11) Computation of Earnings Per Common Share
(27) Financial Data Schedule
(b) The Company filed a current report on Form 8-K dated January 24,
1997, reporting under Item 5 actions taken by the Company's Board
of Directors at a special meeting held on January 23, 1997. The
Company filed a current report on Form 8-K dated February 3, 1997
reporting under Item 5 the adoption of an amendment to the
Company's Shareholder Rights Plan and the issuance of a press
release reporting year end financial results and setting forth
certain cautionary statements for the purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995.
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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.
HEALTHDYNE TECHNOLOGIES, INC.
May 14, 1997 By: /s/ M. Wayne Boylston
---------------------------------------
M. Wayne Boylston
Vice President - Finance,
Chief Financial Officer and Treasurer
(duly authorized and
principal financial officer)
14
<PAGE> 1
EXECUTION COPY
FIFTH AMENDMENT TO
AMENDED AND RESTATED SECURED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This Agreement, dated as of March 31, 1997 (this "Amendment"), is entered
into by and among HEALTHDYNE TECHNOLOGIES, INC., a Georgia corporation (the
"Company"), the financial institutions party to the Credit Agreement referred
to below (collectively, the "Banks"; individually, a "Bank") and BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for the Banks (the
"Agent").
RECITALS
The Company, the Agent and the Banks are parties to an Amended and
Restated Secured Revolving Credit and Term Loan Agreement dated as of December
29, 1994 (as heretofore amended, supplemented or otherwise modified, the
"Credit Agreement"). Capitalized terms used and not otherwise defined or
amended in this Amendment shall have the respective meanings assigned to them
in the Credit Agreement.
The Company has requested that the Banks amend the Credit Agreement to
extend the final maturity date of the Term Loans to June 30, 1999, and the
Banks are willing to make such amendment on the terms and conditions set forth
herein.
AGREEMENT
In consideration of the mutual covenants and agreements hereinafter set
forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
1. Amendment of Section 2.6 (Notes Evidencing Term Loans). Section 2.6 of
the Credit Agreement is hereby amended by deleting such Section in its entirety
and substituting therefor the following:
"2.6 Notes Evidencing Term Loans. The Term Loans made by
each Bank shall be evidenced by the Term Notes, payable to the
order of that Bank in an amount equal to its Pro Rata Share of the
Term Commitment and shall mature on June 30, 1999 (the 'Term Loan
Maturity Date')."
2. Amendment of Exhibit B (Term Note). Exhibit B to the Credit Agreement
is hereby amended by deleting such Exhibit in its entirety and substituting
therefor a new Exhibit B in the form of Schedule I attached hereto.
-1-
<PAGE> 2
B. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and Banks that:
1. No Event of Default or Unmatured Event of Default has occurred and is
continuing, and neither the Company nor any of its Subsidiaries is in material
violation of any law or governmental regulation or court order or decree;
2. The representations and warranties of the Company pursuant to Article 7
of the Credit Agreement are true and correct with the same effect as if made on
the date hereof (unless stated to relate solely to an earlier date in which
case such representations and warranties shall be true and correct as of such
earlier date);
3. The execution and delivery by the Company of this Amendment and the
performance by the Company of the Credit Agreement, as amended hereby, have
been duly authorized by all necessary corporate action; and
4. No consent, approval, authorization, permit or license from any federal
or state regulatory authority is required in connection with the making or
performance of the Credit Agreement, as amended hereby.
C. CONDITIONS PRECEDENT
This Amendment will become effective as of the date first written above
when the Agent has received, in form and substance satisfactory to the Agent
and the Banks, all of the following:
1. Counterparts of this Amendment, duly executed by the Company and each
Bank, and duly acknowledged by the Agent.
2. A duly executed Term Note payable to the order of each Bank in the form
attached hereto as Schedule I (collectively, the "Amended Term Notes").
3. A copy of a resolution of the Board of Directors of the Company,
certified by the Secretary or an Assistant Secretary of the Company as being in
full force and effect on the date hereof, authorizing the execution and
delivery of this Amendment and the Amended Term Notes and the performance of
the Credit Agreement, as amended hereby, and the Amended Term Notes.
4. A certificate of incumbency from the Secretary or an Assistant
Secretary of the Company, dated the date hereof, certifying the names of the
officers of the Company authorized to
-2-
<PAGE> 3
sign this Amendment and the Amended Term Notes, together with the true
signatures of such officers.
5. A Consent of each Material Subsidiary in the form attached hereto as
Exhibit A.
6. A non-refundable amendment fee in the amount of $18,750, to be
distributed to the Banks ratably in accordance with their respective Pro Rata
Shares of the Term Commitment.
D. MISCELLANEOUS
1. This Amendment shall be deemed to be an amendment to the Credit
Agreement, and the Credit Agreement, as amended hereby, shall remain in full
force and effect and is hereby ratified, approved and confirmed in each and
every respect. After the effectiveness of this Amendment in accordance with
its terms, all references to the Credit Agreement in the Loan Documents or in
any other document, instrument, agreement or writing shall be deemed to refer
to the Credit Agreement as amended hereby.
2. Any provision of this Amendment which is prohibited or unenforceable in
any jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or affecting the
validity or enforceability of such provision in any other jurisdiction.
3. The various headings of this Amendment are inserted for convenience
only and shall not affect the meaning or interpretation of this Amendment or
any provision hereof.
4. This Amendment may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written above.
HEALTHDYNE TECHNOLOGIES, INC.
By: /s/ M. Wayne Boylston
-----------------------------
Title: Vice Pesident & CFO
--------------------------
BANK OF AMERICA ILLINOIS
By: /s/ Michael J. McKenney
-----------------------------
Title: Vice President
--------------------------
FIRST UNION NATIONAL BANK OF
GEORGIA
By: /s/ Richard Davis
-----------------------------
Title: Vice President
--------------------------
Acknowledged:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ Michael J. McKenney
-----------------------------
Title: Vice President
--------------------------
-4-
<PAGE> 5
SCHEDULE I
TO AMENDMENT
EXHIBIT B
TERM NOTE
$____________.00 Dated: March 31, 1997
Due: June 30, 1999
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC. (the
"Company"), promises to pay to the order of _____________________ (the "Bank"),
the principal sum of ________________ AND 00/100 DOLLARS ($________.00) on June
30, 1999.
The Company further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date of the Original Note (as defined below) until paid in full at the
rates per annum which shall be determined in accordance with the provisions of
the Credit Agreement hereinafter referred to. Accrued interest shall be
payable on the dates specified in the Credit Agreement.
Each denomination of the Term Loan made pursuant to the Credit Agreement
as an Alternate Reference Rate Term Loan or a Eurodollar Term Loan (as such
terms are defined in the Credit Agreement) and all payments of principal shall
be recorded by the holder in its records or, at its option, on the schedule (or
any continuation thereof) attached to this Note.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association (the "Agent") at 1455 Market Street, 12th Floor, San
Francisco, California 94103, or at such other place as may be designated by
the Agent to the Company in writing.
This Note is one of the Term Notes referred to in, and evidences
indebtedness incurred under, the Amended and Restated Secured Revolving Credit
and Term Loan Agreement dated as of December 29, 1994 (as the same may be
amended, modified or supplemented from time to time, herein called the "Credit
Agreement") among the Company, certain Banks (including the Bank) and the
Agent, to which Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Company is permitted
and required to make prepayments and repayments of principal of such under
which such indebtedness may be declared to be immediately due and payable.
<PAGE> 6
This Note is secured pursuant to certain Security Documents (as such term
is defined in the Credit Agreement), to which reference is made for a
description of the collateral provided thereby and the rights of the Bank and
the Company in respect of such collateral.
This Note is issued as a replacement and substitution for the Term Note,
dated June 28, 1996, in the original principal amount of $____________,
executed by the Company and payable to the order of the Bank (the "Original
Note"). Nothing contained herein shall be construed to (i) deem paid any
amount of principal or interest on the Original Note, or (ii) release, cancel,
terminate or otherwise impair all of any part of any lien or security interest
granted for the benefit of the Bank as collateral security for the obligations
of the Company under the Original Note.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
Illinois.
HEALTHDYNE TECHNOLOGIES, INC.
By:
---------------------------
Title:
------------------------
Address:
1255 Kennestone Circle
Marietta, GA 30066
-2-
<PAGE> 7
Schedule attached to Term Note dated March 31, 1997 of Healthdyne Technologies,
Inc., payable to the order of .
----------------------
DENOMINATIONS OF TERM LOAN AND PRINCIPAL PAYMENTS
Type of
Amount Term Loan Interest Amount of Unpaid
of Term & Applicable Period (if Principal Principal Notation
Date Loan Interest Rate Applicable) Repaid Balance Made By
- ------------------------------------------------------------------------
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any Term Loan on this
schedule shall not, however, limit or otherwise affect the Company's
obligations under the Credit Agreement or this Note to repay the principal
amount of the Term Loan together with all interest accruing thereon.
<PAGE> 8
EXHIBIT A
CONSENT
The undersigned hereby agrees and consents to the terms and provisions of
the foregoing Fifth Amendment to Amended and Restated Secured Revolving Credit
and Term Loan Agreement (the "Amendment"), and agrees that the Subsidiary
Guaranty and Loan Documents executed by the undersigned shall remain in full
force and effect notwithstanding the provisions of the Amendment.
Dated: As of March 31, 1997
HEALTHSCAN PRODUCTS, INC.
By: /s/ M. Wayne Boylston
------------------------------
Title: Vice President
---------------------------
<PAGE> 9
TERM NOTE
$9,000,000.00 Dated: March 31, 1997
Due: June 30, 1999
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC. (the
"Company"), promises to pay to the order of BANK OF AMERICA ILLINOIS (the
"Bank"), the principal sum of NINE MILLION AND 00/100 DOLLARS ($9,000,000.00)
on June 30, 1999.
The Company further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date of the Original Note (as defined below) until paid in full at the
rates per annum which shall be determined in accordance with the provisions of
the Credit Agreement hereinafter referred to. Accrued interest shall be
payable on the dates specified in the Credit Agreement.
Each denomination of the Term Loan made pursuant to the Credit Agreement
as an Alternate Reference Rate Term Loan or a Eurodollar Term Loan (as such
terms are defined in the Credit Agreement) and all payments of principal shall
be recorded by the holder in its records or, at its option, on the schedule (or
any continuation thereof) attached to this Note.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association (the "Agent") at 1455 Market Street, 12th Floor, San
Francisco, California 94103, or at such other place as may be designated by
the Agent to the Company in writing.
This Note is one of the Term Notes referred to in, and evidences
indebtedness incurred under, the Amended and Restated Secured Revolving Credit
and Term Loan Agreement dated as of December 29, 1994 (as the same may be
amended, modified or supplemented from time to time, herein called the "Credit
Agreement") among the Company, certain Banks (including the Bank) and the
Agent, to which Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Company is permitted
and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be
immediately due and payable.
This Note is secured pursuant to certain Security Documents (as such term
is defined in the Credit Agreement) to which reference is made for a
description of the collateral provided thereby and the rights of the Bank and
the Company in respect of such collateral.
<PAGE> 10
This Note is issued as a replacement and substitution for the Term Note,
dated June 28, 1996, in the original principal amount of $9,000,000.00,
executed by the Company and payable to the order of the Bank (the "Original
Note"). Nothing contained herein shall be construed to (i) deem paid any
amount of principal or interest on the Original Note, or (ii) release, cancel,
terminate or otherwise impair all of any part of any lien or security interest
granted for the benefit of the Bank as collateral security for the obligations
of the Company under the Original Note.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
Illinois.
HEALTHDYNE TECHNOLOGIES, INC.
By:/s/ M. Wayne Boylston
---------------------------
Title: Vice President and CFO
-----------------------
Address:
1255 Kennestone Circle
Marietta, GA 30066
-2-
<PAGE> 11
Schedule attached to Term Note dated March 31, 1997 of Healthdyne Technologies,
Inc., payable to the order of Bank of America Illinois.
DENOMINATIONS OF TERM LOAN AND PRINCIPAL PAYMENTS
Type of
Amount Term Loan Interest Amount of Unpaid
of Term & Applicable Period (if Principal Principal Notation
Date Loan Interest Rate Applicable) Repaid Balance Made By
- ----------------------------------------------------------------------
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any Term Loan on this
schedule shall not, however, limit or otherwise affect the Company's
obligations under the Credit Agreement or this Note to repay the principal
amount of the Term Loan together with all interest accruing thereon.
<PAGE> 12
TERM NOTE
$6,000,000.00 Dated: March 31, 1997
Due: June 30, 1999
FOR VALUE RECEIVED, the undersigned, HEALTHDYNE TECHNOLOGIES, INC. (the
"Company"), promises to pay to the order of FIRST UNION NATIONAL BANK OF
GEORGIA (the "Bank"), the principal sum of SIX MILLION AND 00/100 DOLLARS
($6,000,000.00) on June 30, 1999.
The Company further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date of the Original Note (as defined below) until paid in full at the
rates per annum which shall be determined in accordance with the provisions of
the Credit Agreement hereinafter referred to. Accrued interest shall be
payable on the dates specified in the Credit Agreement.
Each denomination of the Term Loan made pursuant to the Credit Agreement
as an Alternate Reference Rate Term Loan or a Eurodollar Term Loan (as such
terms are defined in the Credit Agreement) and all payments of principal shall
be recorded by the holder in its records or, at its option, on the schedule (or
any continuation thereof) attached to this Note.
All payments of principal and interest under this Note shall be made in
immediately available funds at the office of Bank of America National Trust and
Savings Association (the "Agent") at 1455 Market Street, 12th Floor, San
Francisco, California 94103, or at such other place as may be designated by
the Agent to the Company in writing.
This Note is one of the Term Notes referred to in, and evidences
indebtedness incurred under, the Amended and Restated Secured Revolving Credit
and Term Loan Agreement dated as of December 29, 1994 (as the same may be
amended, modified or supplemented from time to time, herein called the "Credit
Agreement") among the Company, certain Banks (including the Bank) and the
Agent, to which Credit Agreement reference is made for a statement of the terms
and provisions thereof, including those under which the Company is permitted
and required to make prepayments and repayments of principal of such
indebtedness and under which such indebtedness may be declared to be
immediately due and payable.
This Note is secured pursuant to certain Security Documents (as such term
is defined in the Credit Agreement), to which reference is made for a
description of the collateral provided thereby and the rights of the Bank and
the Company in respect of such collateral.
<PAGE> 13
This Note is issued as a replacement and substitution for the Term Note,
dated June 28, 1996, in the original principal amount of $6,000,000.00,
executed by the Company and payable to the order of the Bank (the "Original
Note"). Nothing contained herein shall be construed to (i) deem paid any
amount of principal or interest on the Original Note, or (ii) release, cancel,
terminate or otherwise impair all of any part of any lien or security interest
granted for the benefit of the Bank as collateral security for the obligations
of the Company under the Original Note.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
Illinois.
HEALTHDYNE TECHNOLOGIES, INC.
By:/s/ M. Wayne Boylston
--------------------------
Title: Vice President and CFO
-----------------------
Address:
1255 Kennestone Circle
Marietta, GA 30066
-2-
<PAGE> 14
Schedule attached to Term Note dated March 31, 1997 of Healthdyne Technologies,
Inc., payable to the order of First Union National Bank of Georgia.
DENOMINATIONS OF TERM LOAN AND PRINCIPAL PAYMENTS
Type of
Amount Term Loan Interest Amount of Unpaid
of Term & Applicable Period (if Principal Principal Notation
Date Loan Interest Rate Applicable) Repaid Balance Made By
- ----------------------------------------------------------------------
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
The aggregate unpaid principal amount shown on this schedule shall be
rebuttable presumptive evidence of the principal amount owing and unpaid on
this Note. The failure to record the date and amount of any Term Loan on this
schedule shall not, however, limit or otherwise affect the Company's
obligations under the Credit Agreement or this Note to repay the principal
amount of the Term Loan together with all interest accruing thereon.
<PAGE> 1
EXHIBIT 11
HEALTHDYNE TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Primary
Net earnings $ 1,279 1,777
========= =========
Shares:
Weighted average number of
common shares outstanding 12,665 12,482
Shares issuable from assumed
exercise of options and warrants 605 468
--------- ---------
Weighted average number of
common shares and common
share equivalents 13,270 12,950
========= =========
Net earnings per common share
and common share equivalent $ .10 .14
========= =========
Fully Diluted
Net earnings $ 1,279 1,777
========= =========
Shares:
Weighted average number of
common shares outstanding as
adjusted per primary
computation above 13,270 12,950
Additional shares issuable from
assumed exercise of options and
warrants computed on a fully
diluted basis 60 61
--------- ---------
13,330 13,011
========= =========
Net earnings per common share
and common share equivalent $ .10 .14
========= =========
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF HEALTHDYNE TECHNOLOGIES, INC. AND
SUBSIDIARIES FOR THE PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,229
<SECURITIES> 0
<RECEIVABLES> 39,721
<ALLOWANCES> 1,312
<INVENTORY> 18,353
<CURRENT-ASSETS> 63,453
<PP&E> 22,390
<DEPRECIATION> 11,796
<TOTAL-ASSETS> 102,223
<CURRENT-LIABILITIES> 26,799
<BONDS> 29,078
0
0
<COMMON> 127
<OTHER-SE> 46,219
<TOTAL-LIABILITY-AND-EQUITY> 102,223
<SALES> 35,671
<TOTAL-REVENUES> 35,671
<CGS> 21,860
<TOTAL-COSTS> 21,860
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 592
<INCOME-PRETAX> 2,132
<INCOME-TAX> 853
<INCOME-CONTINUING> 1,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,279
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
