SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
XX Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
-- Act of 1934.
For the period ended March 31, 2001.
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: 0-16128
TUTOGEN MEDICAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3100165
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
925 ALLWOOD ROAD, CLIFTON, NEW JERSEY 07012
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 365-2799
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01
(Title of Class) (Name of Each Exchange on Which Registered)
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 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 No_.
As of April 30, 2001 there were outstanding 14,883,275 shares of Tutogen
Medical, Inc. Common Stock, par value $0.01.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
INDEX
-----
PART I. Financial Information.
ITEM 1. Financial Statements.
Consolidated Balance Sheets - March 31, 1
2001 and 1 September 30, 2000.
Consolidated Statements of Operations for 2
the 2 three and six months ended March
31, 2001 and 2000.
Consolidated Statements of Cash Flows for 3
the six 3 months ended March 31, 2001 and
2000.
Notes to Unaudited Consolidated Financial 4
Statements.
ITEM 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations.
PART II. Other Information.
ITEM 4. Submission of Matters to a Vote of Security- 9
Holders.
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) (audited)
March 31, September 30,
2001 2000
------------ ------------
ASSETS
Current Assets
Cash and cash equivalents $ 4,388 $ 3,835
Accounts receivable - net 1,786 1,559
Inventories - net 5,745 5,652
Deferred tax asset, current portion 605 135
Other current assets 744 585
------------ ------------
13,268 11,766
Property, plant and equipment, net 3,545 3,072
Intangible Assets - net 4 2
Deferred tax asset 2,380 -
------------ ------------
TOTAL ASSETS $ 19,197 $ 14,840
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 2,446 $ 1,966
Revolving credit arrangements 258 333
Current portion of deferred distribution fees 296 -
Current portion of long-term debt 59 58
------------ ------------
3,059 2,357
Other Liabilities
Long-term debt 717 745
Deferred distribution fees 2,192 -
Shareholders' Equity 13,229 11,738
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 19,197 $ 14,840
============ ============
See accompanying Notes to Consolidated Financial Statements.
1
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(unaudited)
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- --------------------------
2001 2000 2001 2000
---- ---- ---- ----
OPERATING REVENUES
Surgical products and related services $ 2,925 $ 4,372 $ 5,999 $ 8,780
Distribution fees 77 1,000 150 1,000
------------ ------------ ------------- ------------
Total revenues 3,002 5,372 6,149 9,780
Cost of revenue 2,259 2,477 4,202 4,997
------------ ------------ ------------- ------------
Gross margin 743 2,895 1,947 4,783
OPERATING EXPENSES
General and administrative 728 625 1,377 1,137
Distribution and marketing 664 610 1,289 1,128
Research and development 248 228 351 393
Depreciation and amortization 29 31 46 120
------------ ------------ ------------- ------------
1,669 1,494 3,063 2,778
OPERATING PROFIT (LOSS) (926) 1,401 (1,116) 2,005
Other income 112 85 280 96
Interest expense (15) (54) (26) (109)
------------ ------------ ------------- ------------
97 31 254 (13)
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE (829) 1,432 (862) 1,992
Income tax (benefit) expense - 36 (2,850) 72
------------ ------------ ------------- ------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (829) 1,396 1,988 1,920
Cumulative effect of accounting change - - 1,724 -
------------ ------------ ------------- ------------
NET INCOME (LOSS) $ (829) $ 1,396 $ 264 $ 1,920
============ ============ ============= ============
Average shares outstanding for basic
earnings per share 14,857,750 11,290,023 14,578,219 11,200,573
============ ============ ============= ============
Basic earnings (loss) per share $ (0.06) $ 0.12 $ 0.02 $ 0.17
============ ============ ============= ============
Average shares outstanding for diluted
earnings per share 14,857,750 15,085,380 15,980,417 13,965,565
============ ============ ============= ============
Diluted earnings (loss) per share $ (0.06) $ 0.09 $ 0.02 $ 0.14
============ ============ ============= ============
See accompanying Notes to Consolidated Financial Statements
2
TUTOGEN MEDICAL, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(in thousands)
(unaudited)
Six Months
Ended March 31,
2001 2000
---- ----
Cash flows from operating activities
Net income $ 264 $ 1,920
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 98 203
Cumulative effect of accounting change 1,724 -
Changes in assets and liabilities:
Accounts receivable (231) (439)
Inventories (115) 197
Deferred tax asset (2,850) -
Other current assets (163) (80)
Accounts payable and accrued liabilities 497 770
Deferred distribution fees revenue 872 -
------------ ------------
Net cash provided by in operating activities 96 2,571
Cash flows from investing activities
Purchase of property, plant and equipment (591) (383)
------------ ------------
Net cash used in investing activities (591) (383)
Cash flows from financing activities
Issuance of stock
1,300 875
Proceeds from revolving credit arrangements 258
-
Repayment of revolving credit arrangements (333) (753)
Proceeds from long-term debt 1 580
Repayment of long-term debt (27) -
------------ ------------
Net cash provided by financing activities 1,199 702
Effect of exchange rate changes on cash (151) (107)
Net increase in cash and cash equivalents 553 2,783
Cash and cash equivalents at beginning of period 3,835 376
------------ ------------
Cash and cash equivalents at end of period $ 4,388 $ 3,159
============ ============
Supplemental cash flow disclosures
Interest paid $ 26 $ 109
============ ============
See accompanying Notes to Consolidated Financial Statements
3
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For The Year Ended December 31, 2000 and Quarter Ended March 31, 2001
Accumulated
Other Total
Amounts in Thousands Shares Common Paid-in Retained Treasury Comprehensive Shareholders'
(except per share and share data) Issued Stock Capital Earnings Stock Income Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 4,819,002 $ 2,409 $ 26,674 $ 20,213 $ - $ (5,336) $ 43,960
Comprehensive Income:
Net income - 2000 - - - 7,010 - - 7,010
Other comprehensive income, net
of income taxes
Net unrealized appreciation in the
fair value of securities available
for sale - - - - - 5,364 5,364
------------
Comprehensive Income: 12,374
Cash dividends - $.55 per share - - - (2,964) - - (2,964)
Net proceeds from
issuance of common stock 85,038 43 1,176 - - - 1,219
5% Stock dividend 241,055 121 3,525 (3,652) - - (6)
Purchase of treasury stock - - - - (583) - (583)
Retirement of treasury stock (37,250) (19) (564) - 583 - -
Deferred compensation - - (29) - - - (29)
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000 5,107,845 $ 2,554 $ 30,782 $ 20,607 $ - $ 28 $ 53,971
Comprehensive Income:
Net income - 2001 - - - 1,796 - - 1,796
Other comprehensive income, net of
income taxes
Net unrealized appreciation in the
fair value of securities available
for sale - - - - - 1,695 1,695
---------
Comprehensive Income: 3,491
Cash dividends - $.14 per share - - - (761) - - (761)
Net proceeds from
issuance of common stock 18,570 9 325 - - - 334
5% Stock dividend 254,916 127 5,392 (5,519) - - -
Purchase of treasury stock - - - - (546) - (546)
Retirement of treasury stock (28,100) (14) (532) - 546 - -
------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2001 5,353,231 $ 2,676 $ 35,967 $ 16,123 $ - $ 1,723 $ 56,489
------------------------------------------------------------------------------------------------------------------------------------
The accompanying notes to consolidated financial statements are an integral part
of these statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Amounts in Thousands
Three Months Ended March 31,
2001 2000
----------------------------------------------------
Cash Flows From Operating Activities:
Net Income $ 1,796 $ 1,749
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 280 233
Provision for loan losses 225 316
Decrease in accrued interest receivable 320 153
Increase in accrued interest payable (105) (123)
Net change in other assets and other liabilities (789) 144
Net (accretion) amortization on securities (1) 26
Net losses (gains) on sales of securities (85) 242
Net gains on sales of loans (22) (151)
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Net Cash Provided By Operating Activities 1,619 2,589
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Cash Flows From Investing Activities:
Proceeds from maturities of securities available for sale 4,775 6,351
Proceeds from sales of securities available for sale 14,140 14,564
Purchases of securities available for sale (17,232) (17,938)
Net decrease (increase) in loans 7,535 (19,113)
Proceeds from sales of loans 358 2,092
Net capital expenditures (321) (755)
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Net Cash Provided By (Used for) Investing Activities 9,255 (14,799)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities:
Net increase in demand and savings deposits 6,653 232
Net increase in time deposits 892 6,000
Net (decrease) increase in borrowed funds (4,979) 4,663
Net increase in long-term debt 2,500 8,000
Net proceeds from issuance of common stock 334 269
Net treasury stock transactions (546) (128)
Cash dividends paid (761) (674)
------------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 4,093 18,362
------------------------------------------------------------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 14,967 6,152
Cash and Cash Equivalents, Beginning of Period 37,769 29,397
------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, End of Period $ 52,736 $ 35,549
------------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Interest paid $6,418 $ 5,678
Income taxes paid 0 50
Supplemental Disclosures of Investing and Financing Activities:
Transfers from loans to other real estate owned 40 85
The accompanying notes to consolidated financial statements are an integral part
of these statements.
6
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) OPERATIONS AND ORGANIZATION
Tutogen Medical, Inc. along with its consolidated subsidiaries ("the
Company") processes, manufactures and distributes worldwide specialty
surgical products and provides tissue processing services for neuro,
orthopedic, cardiovascular, reconstructive and general surgical
applications. The Company's core business is processing human donor tissue
("allografts") utilizing its patented Tutoplast(R) process for distribution
to hospitals and surgeons.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of the Company
and the unaudited results of operations and cash flows for the three and
six months ended March 31, 2001 and 2000 have been prepared in conformity
with generally accepted accounting principles for interim financial
reporting. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
necessary in order to make the financial statements not misleading have
been made. Operating results for the three and six months ended March 31,
2001 are not necessarily indicative of the results, which may be expected
for the fiscal year ending September 30, 2001. The interim financial
statements should be read in conjunction with the audited consolidated
financial statements of the Company for the year ended September 30, 2000.
(3) INVENTORIES
Major classes of inventory at March 31, 2001 and September 30, 2000 were as
follows:
March 31, September 30,
2001 2000
Raw materials $ 1,067 $ 820
Work in process 1,747 2,564
Finished goods 3,608 3,018
Less reserves for obsolescence 677 750
------------- --------------
$ 5,745 $ 5,652
============= ==============
4
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
(4) INCOME TAXES
The Company has incurred total net operating losses through December 31,
2000 of $14.8 million, generated from its U.S. and German operations of
$8.3 million and $6.5 million, respectively. These net operating losses are
the primary component of the Company's deferred tax asset of $5.5 million
as of December 31, 2000, generated from its U.S. and German operation of
$2.6 million and $2.9 million, respectively. A full valuation allowance had
been provided on all but $135,000 of the U.S. deferred tax asset and a full
valuation allowance had been provided for the German deferred tax asset in
the Company's consolidated financial statements as of and for the year
ended September 30, 2000. The Company establishes valuation allowances in
accordance with the provisions of FASB Statement No. 109, ACCOUNTING FOR
INCOME TAXES. The Company continually reviews the adequacy and necessity of
the valuation allowance and recognizes these benefits only as reassessment,
based on recent developments including income from new contracts, indicates
that it is more likely than not that the benefits will be realized. As of
December 31, 2000, the Company continues to record the existing valuation
allowance on its U.S. operations and eliminated the full valuation
allowance on its German operations based upon future taxable income
projections.
(5) ACCOUNTING CHANGE
The company has entered into comprehensive long term agreements with
various organizations, including Mentor Corporation, Sulzer Spin-Tech, Inc.
and Calcitek, Inc. for the worldwide distribution of its patented
Tutoplast(R) processed bone and soft tissue. Upon execution of these
agreements, each of these organizations made initial non-refundable
payments to the Company, which was recognized as distribution fees. During
the quarter ended December 31, 2000, the Company has adopted the Securities
and Exchange Commission Staff Accounting Bulletin No. 101 - REVENUE
RECOGNITION IN FINANCIAL STATEMENTS ("SAB 101"). SAB101 provides that up
front payments under these arrangements be recognized as revenue as
products are delivered over the periods that the fees are earned. The
cumulative effect of this accounting change was to decrease net income by
$1.7 million or $0.12 per basic earnings per share.
(6) RECLASSIFICATION
Certain reclassifications have been made to the 2000 financial statements
to conform to the 2001 presentation.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
RESULTS OF OPERATIONS
REVENUE AND COST OF REVENUE
Revenue from surgical products and related services for the three months ended
March 31, 2001 decreased 33% to $2,925 from $4,372 for the comparable period.
The decrease in revenue primarily occurred from the US operation as its revenue
decreased to $1,326 from $2,712 for the same period last year. In 1999, revenue
was unusually high due to the fulfillment of significant backorders from the
Company's marketing and distribution alliance with Mentor Corporation. The
revenue shortfall was partially offset by the continued rollout by Sulzer
Spine-Tech, the Company's marketing partner, of the Company's Tutoplast(R) bone
products for spinal applications, which contributed nearly $450 of revenue.
International revenue decreased to $1,599 from $1,660 or less than 4% for the
same period last year.
Revenue from surgical products and related services for the six months ended
March 31, 2001 decreased 32% to $5,999 from $8,780 for the comparable period.
Here again, the decrease in revenue primarily occurred from the US operation as
its revenue decreased to $2,802 from $5,673 for the same period last year. The
revenue shortfall from the Mentor product line of $3,008, and the lower US
distribution revenue of $514, was partially offset by the incremental Sulzer
Spine-Tech revenues of $837. International revenue increased slightly to $3,197
from $3,107 or 3% higher for the same period last year.
Revenue from distribution fees for the three and six months ended March 31, 2001
were $77 and $150, respectively compared to $1,000 for the comparable periods.
In 1999, the Company entered into a long-term agreement with Sulzer Spine-Tech,
Inc. whereby $1,000 represented an upfront payment under such agreement.
Cost of Revenue on surgical products revenue for the three and six months ended
March 31, 2001 were 77% and 70%, respectively compared to 57% for the comparable
periods. The higher cost of revenue margins were primarily due to inventory
write-offs and rejected material of $640 and lower throughputs at the US
operation.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 16% and 21% for the three and six
months ended March 31, 2001, respectively from the comparable periods last year.
The higher expenses are due to additional staff of $124 and investor relations
and banking program of $50, partially offset by cost savings in other areas. For
the three months ended March 31, 2001, as a percentage of surgical products
revenues, General and Administrative expenses increased from 14% in 2000 to 25%
in 2001.
6
DISTRIBUTION AND MARKETING
Distribution and marketing expenses increased 9% and 14% for the three and six
months ended March 31, 2001, from the comparable periods last year. The increase
was solely due to marketing fees earned, under the agreement with Sulzer
Spine-Tech as a result of the rollout of the Company's Tutoplast bone products
for spinal application. For the three months ended March 31, 2001, as a
percentage of surgical product revenues, Distribution and Marketing expenses
increased from 14% in 2000 to 23% in 2001, primarily due to the lower revenue
performance.
RESEARCH AND DEVELOPMENT
Research and development expenses increased 9% and decreased 10% for the three
and six months ended March 31, 2001, from the comparable periods last year. The
changes from quarter to quarter are due to the timing and completion of certain
R & D projects. For the three months ended March 31, 2001, as a percentage of
surgical product revenues, Research and Development increased from 5% in 2000 to
8% in 2001.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased 6% and 62% for the three and six months
ended March 31, 2001, from the comparable periods last year. The reduction in
depreciation and amortization was attributed to an increase in fully depreciated
property, plant and equipment.
OTHER INCOME
Other income increased 32% and 192% for the three and six months ended March 31,
2001, from the comparable periods last year. Other income increased
substantially due to favorable foreign exchange gains and interest income.
INTEREST EXPENSE
Interest expense decreased 72% and 76% for the three and six months ended March
31, 2001, from the comparable periods last year. The overall decrease in
interest was due to the Company's strong cash position and its ability to
maintain minimum revolving credit balances.
NET INCOME (LOSS)
Net loss for the three months ended March 31, 2001 totaled $829 or $0.06 basic
and diluted loss per share compared to a net income of $1,396 or $0.12 basic
earnings per share and $0.09 diluted earnings per share for the same period last
year. Last years earnings included the upfront distribution fee of $1,000 as
part of the Sulzer Spine-Tech partnership arrangement. The loss for the period
is directly attributable to unanticipated production costs related to the
rollout of the Sulzer product line and the decrease in revenues.
Net income this year was impacted by the one-time recognition of the tax benefit
of net operating carryforward losses from the International operation of $2,850.
In addition, the Company recorded a one-time cumulative effect of the Company's
change in accounting for the income recognition of distribution fees of $1,724.
The impact of these two accounting transactions resulted in net income for the
six months ended March 31, 2001 of $264 or $0.02 basic and diluted earnings per
share compared to a net income of $1,920 or $0.17 basic earnings per share and
$0.14 diluted earnings per share for the same period a year ago.
7
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2001 and September 30, 2000 the Company had working capital of
$10.2 million and $9.4 million, respectively. The Company maintains current
working capital credit lines totaling DM 2.9 million (approximately $1.3
million) with several German banks and a $1.0 million credit line with a U.S.
bank. At March 31, 2001 the Company had $258 borrowings against these lines.
The Company has experienced a positive cash flow during the year ended September
30, 2000 and the six months ended March 31, 2001, as indicated by the increase
in cash and cash equivalents from $0.4 million at September 30, 1999 to $4.4
million at March 31, 2001.
The Company's ability to generate positive operational cash flow is dependent
upon increasing processing revenues through increased recoveries by tissue banks
in the U.S. and Europe, and the development of additional markets and surgical
applications worldwide. While the Company believes that it continues to make
progress in both these areas, there can be no assurances that changing
governmental regulations will not have a material adverse effect on the results
of operations and cash flow.
8
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
---------------------------------------------------
An annual Meeting of Stockholders was held on March 26,
2001. All management's nominees for director, as listed in
the Proxy Statement for the Annual Meeting, were elected.
Listed below are the matters voted on by stockholders and
the number of votes cast at the Annual Meeting:
(a) ELECTION OF SEVEN MEMBERS OF THE BOARD OF DIRECTORS.
Broker
Voted Votes Non-Votes
Name Voted For Against Withheld and Abstentions
---- --------- ------- -------- ---------------
G. Russell Cleveland 13,668,364 0 5,007 0
Robert C. Farone 13,667,814 0 5.557 0
J. Harold Helderman 13,668,614 0 4,757 0
Manfred Kruger 13,668,364 0 5,007 0
Thomas W. Pauken 13,668,414 0 4,957 0
Theodore I. Malinin 13,668,602 0 4,769 0
Carlton E. Turner 13,668,364 0 9,207 0
(b) RATIFICATION OF THE APPOINTMENT OF DELOITTE AND TOUCHE L.L.P.
AS INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 2001.
Voted For: 13,671,091
Voted Against: 1,520
Voted Abstained: 760
Broker Non-Votes 0
(c) TO APPROVE THE AMENDMENT TO THE 1996 INCENTIVE AND
NON-STATUTORY STOCK OPTION PLAN
Voted For: 12,277,309
Voted Against: 48,462
Voted Abstained: 9,535
Broker Non-Votes 0
9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
--------
No. 27 Financial Data Schedule
No reports on Form 8-K were filed by the Company
during the quarter ended March 31, 2001.
10
SIGNATURES
Registrant has duly caused this report to be signed on its behalf by the
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
undersigned, thereunto duly authorized.
TUTOGEN MEDICAL, INC.
Date: May 4, 2001 /s/ Manfred Kruger
------------------
President and Chief Executive Officer
Date: May 4, 2001 /s/ George Lombardi
-----------------------
Chief Financial Officer
(Principal Financial and Accounting Officer)
11