SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
FORM 10-Q
| (Mark One) | ||
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| x Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
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| for the quarterly period ended March 31, 2003 | ||
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| or | ||
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| o Transition Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
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| for the transition period from ____________to ___________ | ||
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| Commission File No. 000-16723 | ||
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| RESPIRONICS, INC. | ||
| (Exact name of registrant as specified in its charter) | ||
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| Delaware |
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25-1304989 |
| (State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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| 1010 Murry Ridge Lane |
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15668-8525 |
| (Address of principal executive offices) |
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(Zip Code) |
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| (Registrant’s Telephone Number, including area code) 724-387-5200 | ||
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 o |
As of April 30, 2003, there were 37,275,480 shares of Common Stock of the registrant outstanding, of which 3,548,588 were held in treasury.
INDEX
RESPIRONICS, INC.
| PART I - |
FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements (Unaudited). |
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3 | |
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Consolidated balance sheets -- March 31, 2003 and June 30, 2002. |
4 |
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Consolidated statements of operations -- Three months and nine months ended March 31, 2003 and 2002. |
5 |
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Consolidated statements of cash flows -- Nine months ended March 31, 2003 and 2002. |
6 |
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Notes to consolidated financial statements -- March 31, 2003. |
7 |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
14 |
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| Item 3. |
18 | |
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| Item 4. |
19 | |
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| PART II - |
19 | |
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| Item 1. |
19 | |
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| Item 2. |
19 | |
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| Item 3. |
19 | |
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| Item 4. |
19 | |
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| Item 5. |
19 | |
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| Item 6. |
20 | |
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| 21 | ||
2
Independent Accountants’ Review Report
Board of Directors
Respironics, Inc. and Subsidiaries
We have reviewed the accompanying condensed consolidated balance sheet of Respironics, Inc. and Subsidiaries as of March 31, 2003, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended March 31, 2003 and 2002, and the condensed consolidated statements of cash flows for the nine-month periods ended March 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Respironics, Inc. and Subsidiaries as of June 30, 2002, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the year then ended not presented herein and in our report dated July 23, 2002, except for Note N as to which the date is August 19, 2002, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of June 30, 2002, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
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/s/ ERNST & YOUNG LLP |
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| Pittsburgh, Pennsylvania |
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| April 22, 2003 |
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3
RESPIRONICS, INC. AND SUBSIDIARIES
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(Unaudited) |
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June 30 |
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| ASSETS |
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| CURRENT ASSETS |
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| Cash and cash equivalents |
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$ |
71,956,892 |
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$ |
62,334,684 |
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| Trade accounts receivable |
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129,538,516 |
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121,281,073 |
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| Inventories |
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82,282,591 |
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86,632,027 |
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| Prepaid expenses and other current assets |
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12,455,698 |
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23,875,193 |
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| Deferred income tax benefits |
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19,015,612 |
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18,514,480 |
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| TOTAL CURRENT ASSETS |
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315,249,309 |
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312,637,457 |
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| PROPERTY, PLANT AND EQUIPMENT |
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| Land |
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2,867,555 |
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2,867,555 |
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| Building |
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16,484,611 |
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16,049,671 |
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| Production and office equipment |
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217,175,769 |
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188,806,072 |
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| Leasehold improvements |
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7,163,014 |
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6,413,872 |
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243,690,949 |
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214,137,170 |
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| Less allowances for depreciation and amortization |
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143,087,394 |
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114,202,311 |
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100,603,555 |
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99,934,859 |
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| OTHER ASSETS |
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37,861,963 |
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33,802,545 |
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| GOODWILL |
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105,798,638 |
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103,860,749 |
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$ |
559,513,465 |
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$ |
550,235,610 |
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| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| CURRENT LIABILITIES |
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| Accounts payable |
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$ |
40,424,072 |
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$ |
39,081,748 |
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| Accrued expenses and other current liabilities |
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47,438,522 |
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45,744,098 |
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| Current portion of long-term obligations |
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8,930,508 |
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28,845,785 |
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| TOTAL CURRENT LIABILITIES |
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96,793,102 |
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113,671,631 |
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| LONG-TERM OBLIGATIONS |
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47,896,038 |
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59,502,381 |
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| MINORITY INTEREST and OTHER |
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11,117,868 |
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9,341,531 |
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| SHAREHOLDERS’ EQUITY |
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| Common Stock, $.01 par value; authorized 100,000,000 shares; issued 37,219,226 shares at March 31, 2003 and 36,885,795 shares at June 30, 2002; outstanding 33,670,314 shares at March 31, 2003 and 33,293,070 at June 30, 2002 |
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372,192 |
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368,858 |
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| Additional capital |
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218,630,128 |
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213,837,023 |
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| Accumulated other comprehensive loss |
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(3,894,335 |
) |
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(2,718,213 |
) |
| Retained earnings |
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230,466,339 |
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198,450,389 |
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| Treasury stock |
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(41,867,867 |
) |
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(42,217,990 |
) |
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| TOTAL SHAREHOLDERS’ EQUITY |
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403,706,457 |
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367,720,067 |
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$ |
559,513,465 |
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$ |
550,235,610 |
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See notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
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Three months ended |
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Nine months ended |
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2003 |
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2002 |
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2003 |
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2002 |
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| Net sales |
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$ |
161,858,391 |
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$ |
126,708,403 |
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$ |
452,381,799 |
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$ |
351,500,713 |
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| Cost of goods sold |
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79,131,099 |
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67,144,406 |
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225,188,730 |
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186,337,954 |
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82,727,292 |
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59,563,997 |
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227,193,069 |
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165,162,759 |
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| General and administrative expenses |
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21,641,980 |
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15,397,699 |
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60,678,255 |
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42,452,059 |
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| Sales, marketing and commission expenses |
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29,627,879 |
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21,118,867 |
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84,439,604 |
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60,175,095 |
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| Research and development expenses |
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5,817,370 |
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3,904,476 |
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16,825,341 |
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12,206,180 |
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| Restructuring and integration expenses |
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3,182,224 |
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— |
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13,390,703 |
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— |
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| Interest expense, net |
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87,774 |
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437,418 |
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386,578 |
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1,694,533 |
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60,357,227 |
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40,858,460 |
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175,720,481 |
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116,527,867 |
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| INCOME BEFORE INCOME TAXES |
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22,370,065 |
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18,705,537 |
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51,472,588 |
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48,634,892 |
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| Income taxes |
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8,453,027 |
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7,389,435 |
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19,456,638 |
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19,259,417 |
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| NET INCOME |
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$ |
13,917,038 |
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$ |
11,316,102 |
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$ |
32,015,950 |
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$ |
29,375,475 |
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| Basic earnings per share |
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$ |
0.41 |
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$ |
0.37 |
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$ |
0.96 |
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$ |
0.96 |
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| Basic shares outstanding |
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33,621,676 |
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30,582,388 |
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33,483,453 |
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30,494,796 |
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| Diluted earnings per share |
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$ |
0.41 |
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$ |
0.36 |
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$ |
0.93 |
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$ |
0.94 |
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| Diluted shares outstanding |
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34,308,200 |
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31,441,712 |
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34,253,738 |
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31,415,630 |
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See notes to consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
RESPIRONICS, INC. AND SUBSIDIARIES
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Nine Months Ended March 31 |
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2003 |
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2002 |
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| OPERATING ACTIVITIES |
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| Net income |
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$ |
32,015,950 |
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$ |
29,375,475 |
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| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
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32,593,724 |
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24,818,539 |
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| Change in minority interest and other |
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1,776,337 |
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— |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
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(8,257,443 |
) |
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(7,652,941 |
) |
| Inventories |
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2,284,065 |
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6,501,816 |
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| Other operating assets and liabilities |
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11,585,493 |
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2,797,652 |
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| NET CASH PROVIDED BY OPERATING ACTIVITIES |
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71,998,126 |
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55,840,541 |
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| INVESTING ACTIVITIES |
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| Purchase and production of property, plant and equipment |
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(30,794,219 |
) |
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(22,940,974 |
) |
| Acquisition of business |
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(4,000,049 |
) |
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— |
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| Additional purchase price and transaction costs for previously acquired business |
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(1,206,592 |
) |
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(606,511 |
) |
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| NET CASH USED BY INVESTING ACTIVITIES |
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(36,000,860 |
) |
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(23,547,485 |
) |
| FINANCING ACTIVITIES |
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| Net decrease in borrowings |
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(31,521,620 |
) |
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(14,015,252 |
) |
| Issuance of common stock |
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5,146,562 |
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3,227,830 |
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| NET CASH USED BY FINANCING ACTIVITIES |
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