On AVEI, I don't know what tomorrow will bring. A quick glance at
the press release shows a significant increase in receivables. They
may have stuffed the trade. Look at the 10Q BS numbers:
> Item 1. Financial Statements
ARTERIAL VASCULAR ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)<CAPTION>
December 31, June 30,
1997 1997
------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 14,471 $ 25,036
Short-term investments 68,920 62,192
Trade accounts receivable, net 34,778 22,850
Inventories 13,590 7,302
Deferred income tax 2,413 2,413
Prepaid expenses and other current assets 6,074 4,472
------------- -------------
Total current assets 140,246 124,265
Deferred income tax 1,598 1,598
Property, plant and equipment, net 41,666 21,759
Purchased technology, net 292 357
------------- -------------
Total assets $183,802 $147,979
============= =============
LIABILITIESCurrent liabilities:
Short-term borrowings $ 10,148 $ -
Accounts payable 7,933 4,035
Accrued expenses 8,417 5,744
Income taxes payable 995 -
------------- -------------
Total current liabilities 27,493 9,779
------------- -------------
STOCKHOLDERS' EQUITY
Common stock 31 31
Additional paid-in capital 97,974 93,021
Treasury stock (390) (390)
Cumulative translation adjustment (1,672) (1,364)
Retained earnings 60,366 46,902
------------- -------------
Total stockholders' equity 156,309 138,200
------------- -------------
Total liabilities and stockholders' equity $183,802 $147,979
============= =============
<FN> See accompanying notes
and now look at the press release balance sheet:
ARTERIAL VASCULAR ENGINEERING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
March 31, June 30,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $49,653 $25,036
Short-term investments 80,399 62,192
Accounts receivable, net 83,358 22,850
Inventories 9,736 7,302
Deferred income tax 2,413 2,413
Prepaid expenses and
other current assets 6,472 4,472
Total current assets 232,031 124,265
Deferred income tax 1,598 1,598
Property, plant and
equipment, net 52,465 21,759
Purchased technology, net 260 357
Total assets $286,354 $147,979
LIABILITIES
Current liabilities:
Short-term borrowings $17,471 $--
Accounts payable 8,799 4,035
Accrued expenses 33,439 5,744
Income taxes payable 10,628 --
Total current liabilities 70,337 9,779
STOCKHOLDERS' EQUITY
Common stock 64 62
Additional paid-in capital 115,743 92,990
Treasury stock (390) (390)
Cumulative translation
adjustment (2,007) (1,364)
Retained earnings 102,607 46,902
Total stockholders'
equity 216,017 138,200
Total liabilities and
stockholders' equity $286,354 $147,979
Looks like receivables increased by 50 million. This is more than one third of their sales of 141 million.
The litigation portion in their latest
10Q is interesting:
5. Contingencies
ESS Litigation. Effective as of October 1992, a subsidiary of
the Company purchased substantially all the assets of Endothelial
Support Systems, Inc. (subsequently known as Endovascular Support
Systems, Inc.) ("ESS") in consideration of certain royalty payments
payable by the Company based on the net sales of products using or
adapted from such assets. The Company was informed that the
shareholders of ESS ratified the transaction on May 27, 1993. The
purchased assets included an application for a stent patent which
resulted in a patent owned by the Company. Following such asset
purchase, the Company between June 1993 and March 1995 purchased in
several transactions 100% of the shares of capital stock of ESS from
its shareholders in consideration of shares of common stock of the
Company and, in certain instances, other consideration, and ESS was
merged into the Company. In June 1996, the Company received notice of
a lawsuit filed by Dr. Azam Anwar and Benito Hidalgo, each of whom is
a former shareholder of ESS (who together held approximately 48% of
ESS's outstanding shares of common stock) and each of whom currently
holds shares of common stock of the Company, in the District Court of
Dallas County, Texas. The suit names as defendants the Company,
Bradly A. Jendersee and John D. Miller, each a director, officer and
principal stockholder of the Company, Dr. Simon H. Stertzer, a
director and principal stockholder of the Company, and Dr. Gerald
Dorros, a principal stockholder of the Company. In January 1997, the
plaintiffs filed an amended petition alleging common law fraud,
negligent misrepresentation, securities fraud pursuant to the Texas
Securities Act, fraud pursuant to the Texas Business and Commercial
Code, control person liability, aider and abetter liability of the
individual defendants, civil conspiracy, breach of fiduciary duty,
and constructive fraud in connection with the Company's acquisition
of ESS and the Company's acquisition of shares of ESS capital stock
from the plaintiffs. The plaintiffs seek $395 million in damages,
rescission of the Company's acquisition of the ESS assets and its
subsequent acquisition of the ESS stock, reconstitution of ESS,
punitive damages, interest and attorneys' fees and other relief. On
February 10 and 12, 1997, the court overruled defendants' special
appearances and denied motions objecting to jurisdiction, motions to
dismiss based on forum non conveniens, and motions to abate or stay
the Texas proceedings. The defendants, including the Company, have
filed an answer denying the plaintiffs' claims, and also filed a
counterclaim against the plaintiffs. The counterclaim alleges claims
against Mr. Hidalgo for specific performance, breach of contract,
breach of the implied covenant of good faith and fair dealing, and
declaratory relief based on comparative indemnity, contribution and
absence of fraud. The counterclaim alleges claims against
7<PAGE>
ARTERIAL VASCULAR ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Dr. Anwar for intentional and negligent interference with contract,
equitable estoppel and declaratory relief based on absence of fraud.
A trial date of February 1, 1998 had been scheduled for the Texas
action. As of the date of this Form 10-Q, however, the trial date had
been continued for at least three weeks, and the parties were
discussing whether to continue such date further and to drop the
Consolidated Action (as defined below) in California. The Company
believes it has meritorious defenses to the claims alleged by the
plaintiffs, and that it has meritorious claims against the
plaintiffs, in the Texas action. However, no assurance can be given
as to the outcome of the action. The inability of the Company to
prevail in the action, including the loss or impairment of the right
to produce products based on the Company's issued patents, could have
a material adverse effect on the Company's business, financial
condition and results of operations.
The Company also received notice in August 1996 of a lawsuit
filed by Messrs. Anwar and Hidalgo in the Superior Court of Sonoma
County, California, which names the same defendants as in the Texas
action and alleges claims for securities fraud and unregistered
securities under the California securities laws, breach of fiduciary
duty and fraud. The plaintiffs seek unspecified damages, rescission
of the Company's acquisition of the ESS assets and its subsequent
acquisition of the ESS stock, reconstitution of ESS and other relief.
The defendants, including the Company, have filed an answer denying
plaintiff's claims, and also filed a cross-complaint against the
plaintiffs. The cross-complaint alleges claims against Mr. Hidalgo
for specific performance, breach of contract, breach of the implied
covenant of good faith and fair dealing, and declaratory relief based
on comparative indemnity, contribution and absence of fraud. The
cross-complaint alleges claims against Dr. Anwar for intentional and
negligent interference with contract, equitable estoppel and
declaratory relief based on absence of fraud. Mr. Hidalgo and Dr.
Anwar have filed an answer generally denying the claims contained in
the cross-complaint.
On July 11, 1996, the Company, along with the individual
defendants named in the Texas and Sonoma County actions, filed two
actions against Mr. Hidalgo in the Superior Court of San Mateo
County, California. The first action alleges claims for specific
performance, breach of contract, breach of the implied covenant of
good faith and fair dealing, and declaratory relief based on
indemnity. These claims arise out of a stock exchange agreement
entered into between Mr. Hidalgo and the Company, and out of Mr.
Hidalgo's actions as a director of ESS. The second action alleges
claims for specific performance, breach of contract, and breach of
the implied covenant of good faith and fair dealing. These claims
arise out of a separation and release agreement entered into between
Mr. Hidalgo and the Company.
On December 6, 1996, the Superior Court of Sonoma County,
California, pursuant to the stipulation of the parties, transferred
the Sonoma County action to the Superior Court of San Mateo County.
On December 11, 1996, the Superior Court of San Mateo County,
pursuant to the stipulation of the parties, consolidated all three
pending California actions into a single action (the "Consolidated
Action"), and ordered that the pleadings from the Sonoma County
action shall be the operative pleadings in the Consolidated Action. A
motion by the Company and the individual defendants for summary
judgment against Mr. Hidalgo in the Consolidated Action was denied by
the Superior Court of San Mateo County on May 5, 1997 with respect to
each of the 8<PAGE>
ARTERIAL VASCULAR ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
plaintiffs' claims. A trial date of March 2, 1998 has been scheduled
for the Consolidated Action. The Company believes that it has
meritorious defenses to the claims alleged by the plaintiffs, and
that it has meritorious claims against the plaintiffs, in the
Consolidated Action. However, no assurance can be given as to the
outcome of the Consolidated Action. The inability of the Company to
prevail in the Consolidated Action, including the loss or impairment
of the right to produce products based on the Company's issued
patents, could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company has agreed to indemnify each of the individuals
named as defendants in the lawsuits against the Company relating to
the ESS transaction.
U.S. Patent Litigation. Two of the Company's competitors have
filed claims against the Company with respect to their alleged
intellectual property rights. The Company has filed for declatory and
injunctive relief in connection with one of the claims.
On October 21, 1997, the Company received notice that it had
been named as an additional defendant, along with Boston Scientific
Corporation and SCIMED Life Systems, Inc., in a lawsuit originally
filed by Cordis Corporation ("Cordis") against Guidant Corporation
and Advanced Cardiovascular Systems, Inc. in federal district court
in Delaware. Cordis alleges, among other things, that the sale by the
Company of its stents in the United States would infringe on certain
patents licensed by Cordis. The complaint seeks declaratory and
injunctive relief, unspecified damages, attorneys' fees and other
relief. On November 6, 1997, the Company filed a motion to dismiss
Cordis' complaint. The Company believes that it has meritorious
defenses to the claims alleged by Cordis in the action. However, no
assurance can be given as to the outcome of the action. The inability
of the Company to prevail in the action, including the loss or
impairment of the right to produce products in the United States,
could have a material adverse effect on the Company's business,
financial condition and results of operations.
On December 24, 1997, the Company received notice that
Advanced Cardiovascular Systems, Inc. ("ACS"), a subsidiary of
Guidant Corporation, had filed a lawsuit against the Company in
federal district court in San Jose, California. ACS alleges, among
other things, that the Company is selling in the United States stents
that infringe on certain patents of ACS. The complaint seeks
injunctive relief, unspecified damages, attorneys' fees and other
relief. The Company believes that it has meritorious defenses to the
claims alleged by ACS in the action. However, no assurance can be
given as to the outcome of the action. The inability of the Company
to prevail in the action, including the loss or impairment of the
right to produce products in the United States, could have a material
adverse effect on the Company's business, financial condition and
results of operations.
On December 26, 1997, the Company filed an action against
Johnson & Johnson, Cordis and Expandable Grafts Partnership in
federal district court in Delaware. The action seeks (i) a
declaration that certain patents are invalid, void, unenforceable and
not infringed by the Company's activities with respect to its stent
systems in the United States, (ii) an injunction prohibiting the
defendants from asserting infringement of such patents against the
Company and (iii) a declaration that the defendants have violated
certain antitrust laws. The Company believes that it has meritorious
claims against the defendants. However, no assurance can be given as
to the outcome of the action.
Claims of Terminated Distributors. In connection with the
Company's termination of certain distributor relationships, several
of such distributors have filed claims against the Company with
respect to such terminations.
In November 1996, in connection with the Company's termination
of its distribution relationship with Alfatec-Medicor N.V.
("Alfatec-Medicor") and Medicor
9<PAGE>
ARTERIAL VASCULAR ENGINEERING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Unaudited)
Nederland B.V. ("Medicor Nederland") in Belgium and The Netherlands,
respectively, effective September 30, 1996, the Company received
notice of a lawsuit filed by Alfatec-Medicor in the Second Chamber of
the Commercial Court of Brussels, Belgium, alleging insufficient
notice of termination of a distribution agreement between the
parties, promotion costs, personnel restructuring claims and
additional compensation. Alfatec-Medicor seeks compensation of
BF189,389,135 (approximately $5.1 million using current exchange
rates), of which BF30,000,000 (approximately $810,000) is sought as a
provisional payment. The Company has entered counterclaims for
$257,000 in unpaid accounts receivable and has requested from
Alfatec-Medicor information that would support its claims for
indemnification, but has not yet received such information. Following
a hearing on April 18, 1997, the court postponed further
consideration of the matter until the parties have conducted an
appropriate exchange of information and prepared written pleadings. A
pleadings hearing is scheduled for April 24, 1998. On February 20,
1997, the Company commenced an action against Medicor Nederland
before the Amsterdam District Court for payment of $269,000 in unpaid
accounts receivable. On July 23, 1997, Medicor Nederland filed a
statement of defense and entered a counterclaim for DG2,284,379
(approximately $1.1 million using current exchange rates) on the
grounds of insufficient notice of termination of a distribution
agreement between the parties and unjust enrichment. On October 29,
1997, the Company filed a reply and answer to the counterclaim. On
December 24, 1997, Medicor Nederland filed a statement of rejoinder
and reply to the counterclaim.
On August 19, 1996, in connection with the Company's
termination of its distribution relationship in Switzerland with
Medicor AG, effective September 30, 1996, such distributor filed an
action against the Company in the United States District Court for
the Northern District of California alleging breach of written, oral
and implied-in-fact contracts, inducement to breach an employment
contract with one of such distributor's employees, intentional
interference with contractual relations, intentional and negligent
interference with prospective economic advantage, misappropriation of
trade secrets, and intentional and negligent misrepresentation. On
October 11, 1996, the court denied the distributor's request for
preliminary and temporary injunctive relief. On January 30, 1997, the
court entered an order dismissing the entire action on forum non
conveniens grounds. As part of the dismissal, AVE has agreed to
submit to the jurisdiction of the appropriate forum in Switzerland,
waive any defense of statute of limitations to any substantially
similar claims made there, make available witnesses and documents
there and satisfy any judgment entered against it there. The
distributor has appealed the court's dismissal of the action. On
January 27, 1997, the Company filed an action in the debt collection
office of Cham, Switzerland against the distributor for $93,000 plus
accrued interest in connection with unpaid accounts receivable from
the distributor relationship. The distributor obtained a preliminary
stay on the debt collection proceedings and a hearing with respect to
the Company's motion to lift such stay was held on March 11, 1997. On
July 14, 1997, the District Court of Zug denied the Company's motion
to lift such stay in a summary proceeding |
