<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended OCTOBER 31, 2000
----------------
[ ] 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: 0-5958
------
MERIDIAN MEDICAL TECHNOLOGIES, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-0898764
------------------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
10240 OLD COLUMBIA ROAD, COLUMBIA, MARYLAND 21046
------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 410-309-6830
----------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AS OF NOVEMBER 30, 2000
------------------------------------ -----------------------------------
<S> <C>
Common Stock, $.10 par value 3,038,641 Shares
</TABLE>
<PAGE> 2
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
------------------------------
<S> <C> <C>
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
October 31, 2000 and July 31, 2000............................... 4
Consolidated Statements of Operations for
the Three Months Ended October 31, 2000 and 1999 ................ 5
Consolidated Statements of Cash Flows for
the Three Months Ended October 31, 2000 and 1999................. 6
Notes to Consolidated Financial Statements.......................... 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 8
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk......... 11
PART II. OTHER INFORMATION
--------------------------
ITEM 6. Exhibits and Reports on Form 8-K................................... 11
SIGNATURES..................................................................... 12
EXHIBIT INDEX.................................................................. 13
</TABLE>
2
<PAGE> 3
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
INTRODUCTION
Meridian Medical Technologies, Inc. (hereinafter referred to as the "Company"
or "MMT" or "Meridian") is a medical technology company operating in two
segments: Pharmaceutical Systems and Cardiopulmonary Systems.
Pharmaceutical Systems - The Pharmaceutical Systems segment consists of the
Commercial Systems and Government Systems businesses, both of which utilize
the Company's auto-injector technology. The principal source of Commercial
Systems revenue currently is the EpiPen(R) family of auto-injectors, which are
prescribed for severe allergic reactions and other causes of anaphylaxis. The
Company expects, over the coming years, to realize significant revenue growth
from new commercial applications of its auto-injector products. Additionally,
revenue growth is anticipated from alliances that introduce new products in
auto-injectors and other drug delivery devices. Current new therapies under
development or in negotiations for delivery in auto-injectors include a drug
for hypoglycemia and an anti-seizure drug for management of breakthrough
seizures. Government Systems revenues are principally generated from
auto-injector products and services marketed to the U.S. Department of Defense
(DoD), and other federal, state, local, and foreign governments. Marketing
efforts from this unit will focus on maintaining the Industrial Base
Maintenance Contract with the U.S. Department of Defense, as well as expanding
international markets and domestic preparedness applications.
Cardiopulmonary Systems - The Cardiopulmonary Systems segment utilizes the
Company's electrocardiology and telemedicine technologies. Telemedicine sales
currently are the principal source of revenue. In fiscal 2000, the Company
introduced its PRIME ECG(TM) electrocardiac mapping system after several years
of development. Management believes that PRIME ECG has the potential to become
the standard ECG system of the future and to generate significant revenues and
profits for the Company.
FORWARD LOOKING STATEMENTS
This report and other written and oral statements made by the Company may
contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act with respect to financial performance and
other financial and business matters. Forward-looking statements are typically
identified by future or conditional verbs or similar expressions regarding
events that have yet to occur. These forward-looking statements are based on
the Company's current expectations and are subject to numerous assumptions,
risks and uncertainties. The following factors, among others, could cause
actual results to differ materially from forward-looking statements: economic
and competitive conditions; capital availability or costs; fluctuations in
demand for the Company's products; government procurement timing and policies;
technological challenges associated with the development and manufacture of
the Company's products; commercial acceptance of the Company's products;
delays, costs and uncertainties associated with clinical testing and
government approvals required to market new drugs and medical devices;
availability and quality of raw materials; success and timing of cost
reduction and quality enhancement programs; regulatory and contract
compliance; relationships with significant customers; adequacy of product
liability insurance; ability to obtain, timing and success of marketing
representatives and strategic alliances; and adequacy of intellectual property
protection. Meridian assumes no duty to update forward-looking statements.
3
<PAGE> 4
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
October 31, July 31,
Assets 2000 2000
------ ------------ -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36 $ 79
Restricted cash 286 285
Receivables, less allowances of $533 and $524, respectively 6,039 7,229
Inventories 9,274 8,061
Deferred income taxes 1,937 1,937
Other current assets 773 1,218
--------- ---------
Total current assets 18,345 18,809
--------- ---------
Property, plant and equipment 23,536 23,261
Less - Accumulated depreciation (7,969) (7,466)
---------- ----------
Net property, plant and equipment 15,567 15,795
--------- ---------
Deferred financing fees 658 691
Capitalized software costs, net 1,350 1,429
Excess of cost over net assets acquired, net 6,074 6,340
Other intangible assets, net 1,539 1,621
--------- ---------
Total assets $ 43,533 $ 44,685
========= =========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable and other accrued liabilities $ 5,704 $ 8,062
Note payable to bank 2,499 1,743
Customer deposits 383 392
Current portion of long-term debt 1,000 1,026
--------- ---------
Total current liabilities 9,586 11,223
--------- ---------
Long-term debt - notes payable, net of discount 16,633 16,823
Deferred income taxes 1,765 1,765
Other non-current liabilities 810 783
Shareholders' equity:
Common stock (voting and non-voting)
Par value $.10 per share; 18,000,000 shares
authorized; 3,032,685 and 3,001,962 shares issued 303 300
Additional capital 32,594 32,345
Accumulated other comprehensive income --
cumulative translation adjustment (192) (154)
Accumulated deficit (17,727) (18,152)
Unearned stock option compensation (26) (35)
Treasury stock, 30,176 shares at cost (213) (213)
---------- ----------
Total shareholders' equity 14,739 14,091
--------- ---------
Total liabilities and shareholders' equity $ 43,533 $ 44,685
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 5
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
---- ----
<S> <C> <C>
Net sales $ 12,986 $ 11,755
Cost of sales 7,848 7,067
-------- ---------
Gross profit 5,138 4,688
Selling, general, and administrative expenses 1,967 1,883
Research and development expenses 783 517
Depreciation and amortization 871 806
-------- ---------
3,621 3,206
-------- ---------
Operating income 1,517 1,482
Other expense:
Interest expense (701) (843)
Other expense (1) (58)
--------- ----------
(702) (901)
-------- ---------
Income before income taxes 815 581
Provision for income taxes 390 227
-------- ---------
Net income $ 425 $ 354
======== =========
Net income per share:
Basic $ .14 $ .12
======== =========
Diluted $ .12 $ .11
======== =========
Weighted average shares:
Basic 3,010 2,994
Diluted 3,616 3,189
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
MERIDIAN MEDICAL TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 425 $ 354
Adjustments to reconcile net income to net cash (used
for) provided by operating activities:
Depreciation and amortization 871 806
Amortization of capitalized software costs 79 ---
Amortization of notes payable discount and
deferred financing fees 102 92
Changes in assets and liabilities
Receivables 1,190 (144)
Inventories (1,213) (1,233)
Prepaid taxes and other current assets 445 301
Accounts payable and other accrued liabilities (2,367) 646
Other (31) 60
--------- --------
Net cash (used for) provided by operating activities (499) 882
INVESTING ACTIVITIES
Purchase of fixed assets (275) (428)
Increase in restricted cash (1) (2)
--------- --------
Net cash used for investing activities (276) (430)
FINANCING ACTIVITIES
Net proceeds from line of credit 756 86
Payment on long-term debt (276) (313)
Payment of deferred financing fees --- (20)
Proceeds from issuance of common stock 252 ---
--------- --------
Net cash provided by (used for) financing activities 732 (247)
--------- --------
Net (decrease) increase in cash (43) 205
Cash and cash equivalents at beginning of period 79 227
--------- --------
Cash and cash equivalents at end of period $ 36 $ 432
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE> 7
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the Company's financial
position as of October 31, 2000 and July 31, 2000, and the results of
its operations and cash flows for the three-month period ended October
31, 2000 and 1999. The results of operations for the three-month period
ended October 31, 2000 are not necessarily indicative of the results
that may be expected for the fiscal year ending July 31, 2001. Certain
prior period amounts have been reclassified to conform to current period
presentation. The information included in this Form 10-Q should be read
in conjunction with Management's Discussion and Analysis and financial
statements and notes thereto included in the Meridian Medical
Technologies, Inc. 2000 Form 10-K.
2. The Company considers all investments with a maturity of three months or
less on their acquisition date to be cash equivalents. Restricted cash
consists of cash pledged as collateral on an outstanding letter of
credit supporting the working capital line of credit at the Company's
Belfast subsidiary.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
October 31, July 31,
---------- --------
2000 2000
---- ----
<S> <C> <C>
Components and subassemblies $ 6,145 $ 4,673
Work in process 3,485 3,250
Finished goods 476 884
---------- ----------
10,106 8,807
Less: inventory valuation allowance (832) (746)
---------- ----------
$ 9,274 $ 8,061
========== ==========
</TABLE>
4. A reconciliation of net income to comprehensive income is as follows:
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
---- ----
<S> <C> <C>
Net income $ 425 $ 354
Foreign exchange translation adjustment (38) 17
-------- --------
Comprehensive income $ 387 $ 371
======== ========
</TABLE>
5. In accordance with Statement of Financial Accounting Standards No. 86,
the Company began amortizing capitalized software costs relating to its
PRIME ECG product during the third quarter of fiscal 2000, as it was
available for sale. Amortization, which is being provided on a 5 year,
straight-line basis, totaled $79,000 for the three months ended October
31, 2000, and is included in cost of sales.
7
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MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
6. Segment information is as follows:
<TABLE>
<CAPTION>
Three Months Ended
October 31,
2000 1999
---- ----
<S> <C> <C>
Revenues:
Pharmaceutical systems $ 12,526 $ 11,614
Cardiopulmonary systems 460 141
--------- ---------
Total revenues $ 12,986 $ 11,755
========= =========
Operating income:
Pharmaceutical systems $ 2,376 $ 2,140
Cardiopulmonary systems (859) (658)
--------- ---------
Total operating income $ 1,517 $ 1,482
========= =========
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THE QUARTER IN REVIEW
MMT's net income was $425,000 ($.14 basic and $.12 diluted earnings per share)
on sales of $13.0 million for the quarter ended October 31, 2000, the first
quarter of fiscal 2001. This compares with net income of $354,000 ($0.12 basic
and $0.11 diluted earnings per share) on sales of $11.8 million in the same
period of fiscal 2000. This represents a 10% increase in revenues, a 20%
increase in net income, and a 9% increase in diluted earnings per share from
the same quarter of the prior year. Weighted average diluted shares
outstanding for the quarter were 3.6 million versus 3.2 million for the first
quarter of fiscal year 2000 due to the increase in market share price.
Revenues of MMT's two business segments and total gross profit for the
three-month periods ended October 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three months ended October 31,
-----------------------------
($ in thousands) 2000 1999
---- ----
<S> <C> <C>
Pharmaceutical Systems:
Commercial Systems $ 7,850 $ 6,123
Government Systems 4,676 5,491
----------- -----------
Total Pharmaceutical Systems 12,526 11,614
Cardiopulmonary Systems 460 141
----------- -----------
Total Revenues 12,986 11,755
=========== ===========
Gross Profit $ 5,138 $ 4,688
=========== ===========
Gross Profit % 39.6% 39.9%
EBITDA (1) $ 2,466 $ 2,230
=========== ===========
</TABLE>
Commercial Systems revenue for the quarter ended October 31, 2000 was $7.9
million, $1.7 million higher than in the comparable prior year period. The
28.2% increase in revenue primarily resulted from higher sales of EpiPens in
the current quarter compared to the same quarter in the prior year. Units of
EpiPen sold increased 30% compared to the same period of the prior year. R&D
revenue also increased to $716,000 from $334,000 in prior year due to the
timing and number of projects.
Government Systems revenues were $4.7 million in the quarter ended October 31,
2000, compared to $5.5 million in the first quarter of fiscal 1999. This
decrease in revenues resulted primarily from the timing of DoD and
8
<PAGE> 9
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
foreign government procurements. The Company anticipates higher Government
Systems sales during the remainder of the year as foreign orders are filled.
Cardiopulmonary Systems revenues were $460,000 in the quarter ended October
31, 2000 compared to $141,000 in the prior period. This primarily represents
telemedicine sales, but also includes the sales of several PRIME ECG units in
Europe. The Company continued to invest in the development of its sales and
marketing network in Europe during the quarter. Additionally, the Company
expanded its ongoing clinical study to include two additional locations during
the quarter.
Gross profits were $5.1 million or 39.6% of revenues during the first quarter
of 2001, compared to $4.7 million or 39.9% for the same period of the prior
year. The comparable gross profit percentage is a result of product price,
cost, and sales mix.
Operating costs were $3.6 million for the three months ended October 31, 2000,
compared to $3.2 million incurred in the same quarter of last year. Selling,
general and administrative expenses (SG&A) were $84,000 higher than the same
period of the prior year, but decreased as a percentage of net sales. R&D
costs were also higher for the quarter compared to prior year due to the
Company's continued investment in PRIME ECG and other potential new products
being developed. Higher depreciation expense reflects the Company's investment
in fixed asset additions.
Interest expense was $701,000 in the first quarter of fiscal 2001. This
represents a decrease from the first quarter of fiscal 2000 due to lower
average debt balances, partially offset by higher interest rates.
The provision for income taxes was $390,000 for the three months ended October
31, 2000, reflecting an estimated effective tax rate of 48% for the year. The
tax provision incorporates estimated benefits from utilization of operating
loss carryforwards, offset by permanent book to tax differences and losses
from foreign subsidiaries. The Company takes no consolidated tax benefit from
the foreign losses. U.S. pre-tax income, taxed at the statutory rate after
permanent and temporary differences, is higher than the consolidated pre-tax
income, which inflates the effective rate.
(1) EBITDA represents operating income plus other income and depreciation and
amortization. EBITDA is not a measure of performance or financial condition
under generally accepted accounting principles, but is presented to provide
additional information related to operating results. EBITDA should not be
considered in isolation or as a substitute for other measures of financial
performance or liquidity under generally accepted accounting principles. While
EBITDA is frequently used as a measure of operations and the ability to meet
debt service requirements, it is not necessarily comparable to other similarly
titled captions of other companies due to potential inconsistencies in the
method of calculation.
9
<PAGE> 10
MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
LIQUIDITY AND CAPITAL RESOURCES
Total cash as of October 31, 2000 was $36,000, a decrease of $43,000 from July
31, 2000. The Company used $0.5 million in cash from operations in the first
three months of fiscal 2001 attributable mostly to net income, non-cash
depreciation, and lower accounts receivable, offset by lower accounts payable
and higher inventories. Investing activities in the first quarter of fiscal
2001 used $0.3 million of cash, mostly for capital additions. Financing
activities generated $0.7 million, primarily from net borrowings on existing
debt and the sale of stock through stock option and warrant exercises. The
maximum available under the Company's asset based line of credit with
International Nederlanden (U.S.) Capital Corporation ("ING") reverted to $6.5
million on October 31, 2000, down from the $8.5 million maximum, to which it
was increased in fiscal 1999. Availability under the working lines of credit
was $4.2 million at October 31, 2000.
Working capital at October 31, 2000 was $8.8 million, up from $7.6 million at
July 31, 2000. The increase was primarily attributable to higher inventories
($1.2 million) and lower accounts payable and accrued expenses ($2.4 million),
offset by lower accounts receivable ($1.2 million) and higher notes payable to
bank ($0.8 million). At October 31, 2000, accounts receivable were $6.0
million, representing 48 days-sales-outstanding, and inventories were $9.3
million representing a turn-over rate of 3.6 times per year.
OUTLOOK
The Company continues to anticipate that the core Pharmaceutical Systems
segment of the business will have a strong overall year, which should result
in double digit growth in profits before tax for the company. Demand for
EpiPen remains strong as evidenced by the product's sales performance in the
first quarter. The second quarter is historically the unit's lowest sales
quarter due to the seasonality associated with EpiPen, which sales are highest
in the spring and summer months. Overall for the year, Commercial Systems
anticipates an increase in demand for its core products of approximately ten
percent.
The Cardiopulmonary Systems segment of the business is expected to continue to
generate increased sales through its telemedicine products and through the
sales of PRIME ECG . The Company anticipates filing for a 510(k) marketing
approval with the FDA for PRIME ECG near the end of the second quarter. The
Company anticipates that initial sales of PRIME ECG in the United States could
occur by the end of fiscal 2001, subject to receipt of FDA approval. The
Company anticipates sales of the product in Europe will continue to increase
during the course of the year.
The Company expects to generate increased EBITDA during fiscal year 2001. The
Company will invest substantial amounts in developing the market for PRIME ECG
and will increase its expenditures in research and development focused on
further applications for its autoinjector technology. Additionally, the
Company expects to reduce its debt during the year through cash generated by
operations and/or a placement of equity securities.
10
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MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
ITEM 3. Quantitative and Qualitative Disclosure About Market Risk
The Company's earnings are affected by fluctuations in the value of the U.S.
dollar, as compared to foreign currencies, as a result of transactions in
foreign markets. At October 31, 2000, the result of a uniform 10%
strengthening or weakening in the value of the dollar relative to the
currencies in which the Company's transactions are denominated would have
resulted in a $60,000 increase or decrease, respectively, in operating income
for the three months ended October 31, 2000. This calculation assumes that
each exchange rate would change in the same direction relative to the U.S.
dollar. In addition to the direct effects of changes in exchange rates, which
change the dollar value of the resulting sales, changes in exchange rates also
affect the volume of sales or the foreign currency sales price as competitors'
services become more or less attractive. The Company's sensitivity analysis of
the effects of changes in foreign currency exchange rates does not factor in a
potential change in sales levels or local currency prices.
The Company is exposed to changes in interest rates as a result of its
outstanding debt. Total short-term and long-term debt outstanding at October
31, 2000 was $20.1 million, consisting of $5.7 million in variable rate
borrowing and $14.4 million in fixed rate borrowing. At this level of variable
rate borrowing, a hypothetical 10% increase in interest rates would have
decreased pre-tax earnings by approximately $14,000 for the three months ended
October 31, 2000. At October 31, 2000, the fair value of the Company's fixed
rate debt outstanding was estimated at $15.0 million. A hypothetical 10%
change in interest rates would not result in a material change in the fair
value of the Company's fixed rate debt. The Company does not currently utilize
any derivative financial instruments related to its interest rate exposure.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
ITEM 6. Exhibits and Reports on Form 8-K:
<S> <C>
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended October 31, 2000.
</TABLE>
11
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MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
SIGNATURES
Pursuant to the requirement 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.
<TABLE>
<CAPTION>
MERIDIAN MEDICAL TECHNOLOGIES, INC.
-----------------------------------
Registrant
<S> <C> <C>
December 14, 2000 By: /S/James H. Miller
----------------- ------------------
Date James H. Miller
President and
Chief Executive Officer
(Principal Executive Officer)
December 14, 2000 By: /S/Dennis P. O'Brien
----------------- --------------------
Date Dennis P. O'Brien
Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
12
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MERIDIAN MEDICAL TECHNOLOGIES, INC.
FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- ----------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
13
