(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 30, 2003 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:
1-10207
______________________________________________
| ALARIS MEDICAL SYSTEMS, INC. | ||||||
| (Exact name of registrant as specified in its charter) | ||||||
| Delaware | 13-3492624 | |||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||
| 10221 Wateridge Circle, San Diego, CA 92121 | ||||||
| (Address of principal executive offices)
(Zip Code) |
||||||
| (858) 458-7000 | ||||||
|
(Registrant's telephone number, including area code) | ||||||
| ALARIS MEDICAL, INC. | ||||||
| (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:[ ]
The registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [|X|] No [ ]
As of July 14, 2003, the registrant had 70,550,029 shares of Common Stock outstanding.
Page 1 of 35
| INDEX |
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|---|---|
| PART I. FINANCIAL INFORMATION |
|
| Item 1 - Financial Statements: | |
| Page | |
|
Condensed consolidated statement of operations for the three and six months ended June 30, 2003 and 2002 (unaudited) |
3 |
|
Condensed consolidated balance sheet at June 30, 2003 (unaudited) and December 31, 2002 |
4 |
|
Condensed consolidated statement of cash flows for the
six months ended June 30, 2003 and 2002 (unaudited) |
5 |
|
Condensed consolidated statement of changes in stockholders' equity and comprehensive income for the period from December 31, 2002 to June 30, 2003 (unaudited) |
6 |
| Notes to the condensed consolidated financial statements (unaudited) | 7 |
| Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations |
17 |
| Item 3 - Quantitative and Qualitative Disclosures About Market Risk | 29 |
| Item 4 - Controls and Procedures | 30 |
| PART II. OTHER INFORMATION | |
|---|---|
| Item 1 - Legal Proceedings | 31 |
| Item 4 - Submission of Matters to a Vote of Security Holders | 32 |
| Item 6 - Exhibits and Reports on Form 8-K | 33 |
We have registered, applied to register or are using the following trademarks referred to in this document: ALARIS®, ALARIS Medical Systems®, Guardrails®, Medication Safety at the Point of Care™, Medley™, and SmartSite®
| FORM 10–Q PART 1-ITEM 1 FINANCIAL STATEMENTS ALARIS MEDICAL SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (Dollar and share amounts in thousands, except per share data) | |||||
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 | |||||||||||||||||
| Sales | $ | 127,765 | $ | 108,520 | $ | 248,939 | $ | 212,920 | ||||||||||||
| Cost of sales | 59,160 | 54,390 | 117,160 | 107,078 | ||||||||||||||||
| Gross profit | 68,605 | 54,130 | 131,779 | 105,842 | ||||||||||||||||
| Selling and marketing expenses | 25,535 | 21,077 | 49,777 | 42,513 | ||||||||||||||||
| General and administrative expenses | 12,185 | 10,548 | 23,327 | 20,264 | ||||||||||||||||
| Research and development expenses | 9,501 | 7,580 | 18,299 | 13,782 | ||||||||||||||||
| Restructuring and other non-recurring items | - | - | - | (585 | ) | |||||||||||||||
| Total operating expenses | 47,221 | 39,205 | 91,403 | 75,974 | ||||||||||||||||
| Interest income from sales-type | ||||||||||||||||||||
| capital leases | 877 | 1,122 | 1,750 | 2,311 | ||||||||||||||||
| Income from operations | 22,261 | 16,047 | 42,126 | 32,179 | ||||||||||||||||
| Other income (expenses): | ||||||||||||||||||||
| Interest income | 291 | 269 | 513 | 482 | ||||||||||||||||
| Interest expense | (14,103 | ) | (14,464 | ) | (28,659 | ) | (28,891 | ) | ||||||||||||
| Recapitalization expenses | (66,150 | ) | - | (67,695 | ) | - | ||||||||||||||
| Other, net | (711 | ) | 193 | (522 | ) | (301 | ) | |||||||||||||
| Total other expense | (80,673 | ) | (14,002 | ) | (96,363 | ) | (28,710 | ) | ||||||||||||
| (Loss) income before income taxes | (58,412 | ) | 2,045 | (54,237 | ) | 3,469 | ||||||||||||||
| (Benefit from) provision for income taxes | (22,536 | ) | 818 | (20,908 | ) | 1,388 | ||||||||||||||
| Net (loss) income | $ | (35,876 | ) | $ | 1,227 | $ | (33,329 | ) | $ | 2,081 | ||||||||||
| Net (loss) income per common share, basic | $ | (.59 | ) | $ | .02 | $ | (.55 | ) | $ | .03 | ||||||||||
| Net (loss) income per common share, diluted | $ | (.59 | ) | $ | .02 | $ | (.55 | ) | $ | .03 | ||||||||||
| Weighted average common shares outstanding, basic |
60,543 | 59,347 | 60,160 | 59,270 | ||||||||||||||||
| Weighted average common shares outstanding, diluted |
60,543 | 62,320 | 60,160 | 61,519 | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| ALARIS MEDICAL
SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Dollar and share amounts in thousands, except per share data) | |||||
| ASSETS | ||||||||
|---|---|---|---|---|---|---|---|---|
| June 30, 2003 |
December 31, 2002 | |||||||
| (Unaudited) | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 30,746 | $ | 69,739 | ||||
| Receivables, net | 83,350 | 90,050 | ||||||
| Inventories | 61,092 | 56,924 | ||||||
| Deferred tax assets, net, current | 40,683 | 18,063 | ||||||
| Prepaid expenses and other current assets | 7,992 | 8,703 | ||||||
| Total current assets | 223,863 | 243,479 | ||||||
| Net investment in sales-type capital leases, less current portion | 12,420 | 16,050 | ||||||
| Property, plant and equipment, net | 60,047 | 56,448 | ||||||
| Other non-current assets | 42,391 | 35,666 | ||||||
| Goodwill | 143,984 | 143,984 | ||||||
| Intangible assets, net | 88,973 | 90,074 | ||||||
| $ | 571,678 | $ | 585,701 | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 2,450 | $ | - | ||||
| Accounts payable | 25,855 | 19,187 | ||||||
| Accrued expenses and other current liabilities | 51,734 | 51,157 | ||||||
| Total current liabilities | 80,039 | 70,344 | ||||||
| Long-term debt | 417,575 | 527,468 | ||||||
| Other non-current liabilities | 26,882 | 20,038 | ||||||
| Total non-current liabilities | 444,457 | 547,506 | ||||||
| Contingent liabilities and commitments (Note 9) | ||||||||
| Stockholders' equity: | ||||||||
| Non-redeemable preferred stock, authorized 9,000 shares, | ||||||||
| issued and outstanding: none | - | - | ||||||
| Common stock, authorized 85,000 shares at $.01 par value; | ||||||||
| issued 69,727 and 60,045 shares at June 30, 2003 | ||||||||
| and December 31, 2002, respectively | 697 | 600 | ||||||
| Capital in excess of par value | 260,834 | 151,423 | ||||||
| Accumulated deficit | (210,736 | ) | (177,407 | ) | ||||
| Treasury stock, at cost, 453 shares issued at June 30, 2003 | ||||||||
| and December 31, 2002 | (2,027 | ) | (2,027 | ) | ||||
| Accumulated other comprehensive loss | (1,586 | ) | (4,738 | ) | ||||
| Total stockholders' equity | 47,182 | (32,149 | ) | |||||
| $ | 571,678 | $ | 585,701 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| ALARIS MEDICAL
SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (Dollars in thousands) | |||||
| Six Months Ended June 30, |
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|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net (loss) income | $ | (33,329 | ) | $ | 2,081 | ||||||
| Adjustments to reconcile net income to net cash | |||||||||||
| provided by operating activities: | |||||||||||
| Depreciation and amortization | 12,743 | 11,365 | |||||||||
| Stock options granted to non-employees for service | - | 100 | |||||||||
| Net loss on disposal of property, plant and equipment | 357 | 129 | |||||||||
| Debt discount and issue costs amortization | 1,323 | 1,324 | |||||||||
| Accretion of bond interest | 8,921 | 8,859 | |||||||||
| Recapitalization expenses | 67,695 | - | |||||||||
| (Increase) decrease in assets: | |||||||||||
| Receivables, net | 7,690 | (3,905 | ) | ||||||||
| Inventories | (3,967 | ) | 4,511 | ||||||||
| Prepaid expenses and other current assets | 1,317 | (509 | ) | ||||||||
| Deferred tax assets, net, current | (22,729 | ) | (118 | ) | |||||||
| Net investment in sales-type capital leases, non-current portion | 3,630 | 4,084 | |||||||||
| Other non-current assets | 614 | (123 | ) | ||||||||
| Increase (decrease) in liabilities: | |||||||||||
| Accounts payable | 7,165 | (2,906 | ) | ||||||||
| Accrued expenses and other current liabilities | (1,160 | ) | (9,362 | ) | |||||||
| Other non-current liabilities | 6,844 | 2,012 | |||||||||
| Net cash provided by operating activities | 57,114 | 17,542 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (13,727 | ) | (6,435 | ) | |||||||
| Patents, trademarks and other | (7,837 | ) | (647 | ) | |||||||
| Net cash used in investing activities | (21,564 | ) | (7,082 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Repurchase of debt and related costs | (591,814 | ) | - | ||||||||
| Principal payments on long-term debt | - | (15,969 | ) | ||||||||
| Proceeds from term loan borrowing | 245,000 | - | |||||||||
| Proceeds from issuance of long-term debt | 175,000 | - | |||||||||
| Proceeds from exercise of stock options | 2,154 | 1,547 | |||||||||
| Proceeds from sale of common stock | 113,750 | - | |||||||||
| Equity issuance costs | (6,868 | ) | - | ||||||||
| Debt issuance costs | (12,230 | ) | - | ||||||||
| Net cash used in financing activities | (75,008 | ) | (14,422 | ) | |||||||
| Effect of exchange rate changes on cash | 465 | 416 | |||||||||
| Net decrease in cash | (38,993 | ) | (3,546 | ) | |||||||
| Cash and cash equivalents at beginning of period | 69,739 | 51,200 | |||||||||
| Cash and cash equivalents at end of period | $ | 30,746 | $ | 47,654 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements
| ALARIS MEDICAL
SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (Unaudited) (Dollar and share amounts in thousands) | |||||
| Common Stock Shares Amount |
Capital in Excess of Par Value |
Accumulated Deficit |
Treasury Stock Shares Amount |
Accumulated Other Compre- hensive Loss |
Total Stock- holders’ Equity |
Compre- hensive Loss |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at December 31, 2002 | 60,045 | $ | 600 | $ | 151,423 | $ | (177,407 | ) | 453 | $ | (2,027 | ) | $ | (4,738 | ) | $ | (32,149 | ) | |||||||||||||||||
| Comprehensive income: | |||||||||||||||||||||||||||||||||||
| Net loss for the period | (33,329 | ) | (33,329 | ) | $ | (33,329 | ) | ||||||||||||||||||||||||||||
| Equity a | |||||||||||||||||||||||||||||||||||