(Mark One) |
| [X] | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended September 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) | ||||||
| (Former name, former address, and former fiscal year, if changed since last report) | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of October 8, 2003, the registrant had 71,013,793 shares of common stock outstanding.
Page 1 of 35
| PART I. FINANCIAL INFORMATION | |||
| Item 1 - Financial Statements: | |||
| Condensed consolidated statement of operations for the three and nine | |||
| months ended September 30, 2003 and 2002 (unaudited) | 3 | ||
| Consolidated balance sheet at September 30, 2003 (unaudited) and | |||
| December 31, 2002 | 4 | ||
| Condensed consolidated statement of cash flows for the nine months ended | |||
| September 30, 2003 and 2002 (unaudited) | 5 | ||
| Condensed consolidated statement of changes in stockholders' equity and | |||
| comprehensive loss for the period from December 31, 2002 to September | |||
| 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 | 28 | ||
| Item 4 - Controls and Procedures | 29 | ||
| PART II. OTHER INFORMATION | |||
| Item 6 - Exhibits and Reports on Form 8-K | 30 | ||
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 September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 |
2003 |
2002 | ||||||||||||||||||||
| Sales |
$ | 130,454 |
$ | 113,063 | $ | 379,393 | $ | 325,983 | |||||||||||||||
| Cost of sales | 60,035 | 55,519 | 177,195 | 162,597 | |||||||||||||||||||
| Gross profit | 70,419 | 57,544 | 202,198 | 163,386 | |||||||||||||||||||
| Selling and marketing expenses | 25,284 | 22,512 | 75,061 | 65,025 | |||||||||||||||||||
| General and administrative expenses | 11,902 | 10,108 | 35,229 | 30,372 | |||||||||||||||||||
| Research and development expenses | 9,635 | 8,064 | 27,934 | 21,846 | |||||||||||||||||||
| Restructuring and other non-recurring items | - | - | - | (585 | ) | ||||||||||||||||||
| Total operating expenses | 46,821 | 40,684 | 138,224 | 116,658 | |||||||||||||||||||
| Interest income from sales-type | |||||||||||||||||||||||
| capital leases | 780 | 1,080 | 2,530 | 3,391 | |||||||||||||||||||
| Income from operations | 24,378 | 17,940 | 66,504 | 50,119 | |||||||||||||||||||
| Other income (expenses): | |||||||||||||||||||||||
| Interest income | 119 | 144 | 632 | 626 | |||||||||||||||||||
| Interest expense | (6,612 | ) | (14,632 | ) | (35,271 | ) | (43,523 | ) | |||||||||||||||
| Recapitalization expenses | - | - | (67,695 | ) | - | ||||||||||||||||||
| Other, net | (261 | ) | (334 | ) | (783 | ) | (635 | ) | |||||||||||||||
| Total other expense | (6,754 | ) | (14,822 | ) | (103,117 | ) | (43,532 | ) | |||||||||||||||
| Income (loss) before income taxes | 17,624 | 3,118 | (36,613 | ) | 6,587 | ||||||||||||||||||
| Provision for (benefit from) income taxes | 6,695 | 1,246 | (14,213 | ) | 2,634 | ||||||||||||||||||
| Net income (loss) | $ | 10,929 | $ | 1,872 | $ | (22,400 | ) | $ | 3,953 | ||||||||||||||
| Net income (loss) per common share, basic | $ | .15 | $ | .03 | $ | (.35 | ) | $ | .07 | ||||||||||||||
| Net income (loss) per common share, diluted | $ | .15 | $ | .03 | $ | (.35 | ) | $ | .06 | ||||||||||||||
| Weighted average common shares | |||||||||||||||||||||||
| outstanding, basic | 70,716 | 59,507 | 63,684 | 59,350 | |||||||||||||||||||
| Weighted average common shares | |||||||||||||||||||||||
| outstanding, diluted | 75,250 | 62,922 | 63,684 | 62,112 | |||||||||||||||||||
accompanying notes are an integral part of these condensed consolidated financial
statements
— 3 —
| September 30, 2003 |
December 31, 2002 | |||||||
|---|---|---|---|---|---|---|---|---|
| (Unaudited) | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 38,517 | $ | 69,739 | ||||
| Receivables, net | 77,726 | 90,050 | ||||||
| Inventories | 58,078 | 56,924 | ||||||
| Deferred tax assets, net, current | 37,922 | 18,063 | ||||||
| Prepaid expenses and other current assets | 10,038 | 8,703 | ||||||
| Total current assets | 222,281 | 243,479 | ||||||
| Net investment in sales-type capital leases, less current portion | 11,051 | 16,050 | ||||||
| Property, plant and equipment, net | 62,752 | 56,448 | ||||||
| Other non-current assets | 40,692 | 35,666 | ||||||
| Goodwill | 143,984 | 143,984 | ||||||
| Intangible assets, net | 88,425 | 90,074 | ||||||
| $ | 569,185 | $ | 585,701 | |||||
| Current liabilities: | ||||||||
| Current portion of long-term debt | $ | 2,450 | $ | - | ||||
| Accounts payable | 21,570 | 19,187 | ||||||
| Accrued expenses and other current liabilities | 57,980 | 51,157 | ||||||
| Total current liabilities | 82,000 | 70,344 | ||||||
| Long-term debt | 386,938 | 527,468 | ||||||
| Other non-current liabilities | 27,190 | 20,038 | ||||||
| Total non-current liabilities | 414,128 | 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 71,449 and 60,045 shares at September 30, 2003 | ||||||||
| and December 31, 2002, respectively | 714 | 600 | ||||||
| Capital in excess of par value | 275,857 | 151,423 | ||||||
| Accumulated deficit | (199,807 | ) | (177,407 | ) | ||||
|
Treasury stock, at cost, 453 shares issued at September 30, 2003
and December 31, 2002 |
(2,027 | ) | (2,027 | ) | ||||
| Accumulated other comprehensive loss | (1,680 | ) | (4,738 | ) | ||||
| Total stockholders' equity | 73,057 | (32,149 | ) | |||||
| $ | 569,185 | $ | 585,701 | |||||
The accompanying notes are an
integral part of these condensed consolidated financial statements
— 4 —
| Nine Months Ended September 30, |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2003 |
2002 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net (loss) income | $ | (22,400 | ) | $ | 3,953 | ||||||
| Adjustments to reconcile net income to net cash | |||||||||||
| provided by operating activities: | |||||||||||
| Depreciation and amortization | 19,684 | 17,409 | |||||||||
| Stock options granted to non-employees for service | - | 100 | |||||||||
|
Net loss on disposal/write-off of property, plant and equipment and intangibles |
707 | 442 | |||||||||
| Debt discount and issue costs amortization and write-offs | 2,539 | 1,993 | |||||||||
| Accretion of bond interest | 8,921 | 13,493 | |||||||||
| Recapitalization expenses | 67,695 | - | |||||||||
| (Increase) decrease in assets: | |||||||||||
| Receivables, net | 13,152 | (12,563 | ) | ||||||||
| Inventories | (976 | ) | 2,407 | ||||||||
| Prepaid expenses and other current assets | (901 | ) | 3,467 | ||||||||
| Deferred tax assets, net, current | (17,042 | ) | (7,386 | ) | |||||||
| Net investment in sales-type capital leases, non-current portion | 4,999 | 6,379 | |||||||||
| Other non-current assets | 552 | (871 | ) | ||||||||
| Increase (decrease) in liabilities: | |||||||||||
| Accounts payable | 2,850 | (1,187 | ) | ||||||||
| Accrued expenses and other current liabilities | 5,031 | 3,712 | |||||||||
| Other non-current liabilities | 7,152 | 2,383 | |||||||||
| Net cash provided by operating activities | 91,963 | 33,731 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (21,930 | ) | (11,699 | ) | |||||||
| Patents, trademarks and other | (8,494 | ) | (922 | ) | |||||||
| Net cash used in investing activities | (30,424 | ) | (12,621 | ) | |||||||
| Cash flows from financing activities: | |||||||||||
| Repurchase of debt and related costs | (591,839 | ) | - | ||||||||
| Principal payments on long-term debt | (30,613 | ) | (15,969 | ) | |||||||
| Proceeds from term loan borrowing | 245,000 | - | |||||||||
| Proceeds from issuance of long-term debt | 175,000 | - | |||||||||
| Proceeds from exercise of stock options | 3,776 | 1,695 | |||||||||
| Proceeds from sale of common stock | 125,000 | - | |||||||||
| Equity issuance costs | (7,459 | ) | - | ||||||||
| Debt issuance costs | (12,230 | ) | - | ||||||||
| Net cash used in financing activities | (93,365 | ) | (14,274 | ) | |||||||
| Effect of exchange rate changes on cash | 604 | 380 | |||||||||
| Net (decrease) increase in cash | (31,222 | ) | 7,216 | ||||||||
| Cash and cash equivalents at beginning of period | 69,739 | 51,200 | |||||||||
| Cash and cash equivalents at end of period | $ | 38,517 | $ | ||||||||