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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
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 No. 1-13690
PolyMedica Industries, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-3033368
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
11 State Street, Woburn, Massachusetts 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 933-2020
Securities registered pursuant to Section 12(b) of the Act: None
Common Stock, $.01 par value per share
(Title of class)
Preferred Stock Purchase Rights
(Title of class)
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 if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to the Form 10-K. [ ]
The aggregate market value of voting Common Stock held by
nonaffiliates of the registrant was $62,252,000 based on the closing price of
the Common Stock as reported by the American Stock Exchange on June 25, 1997.
The number of shares issued of the registrant's class of Common
Stock as of June 25, 1997 was 8,600,741 which includes 158,661 shares held in
treasury.
Documents incorporated by reference: Annual Report to Stockholders
for the year ended March 31, 1997--Part II; Proxy Statement for the 1997 Annual
Meeting of Stockholders--Part III.
PART I
Item 1. BUSINESS
The Company
General
PolyMedica Industries, Inc. (the "Company") is a leading provider of
diabetes, compliance, and urological targeted medical products and services.
The Company's products and services are grouped within the following
businesses: Diabetes Supplies; Consumer Healthcare, which includes OTC
("over-the-counter") Medical Devices and Urinary Discomfort Products; and
Professional Products, which includes Prescription Urologicals and Dressings.
I. Diabetes Supplies
The Company entered the Diabetes Supplies business with its August 1996
acquisition of Liberty Medical Supply, Inc. ("Liberty Medical"). Liberty Medical
is among the largest patient-focused, direct-mail providers of diabetes supplies
to senior citizens covered by Medicare. It serves more than 30,000 patients
throughout the United States.
Liberty Medical is headquartered in Palm City, Florida and was founded
in 1989. Liberty Medical is a participating Medicare provider which directly
bills and is paid by Medicare and/or the patient's Medi-Gap insurer, rather than
the patient. This procedure benefits the patient by assuring automatic and
timely delivery of supplies, while avoiding the need for the patient to prepare
paperwork and pay the cost of the supplies while awaiting subsequent
reimbursement.
Approximately 16 million people, or roughly 6% of the total United
States population, are afflicted with diabetes, with about half of them having
actually been diagnosed. Approximately 1.2 million of these patients fall
within Liberty Medical's target market of senior citizens using insulin and
eligible for Medicare. This patient population is growing rapidly, with more
than 650,000 new cases diagnosed each year. Diabetes is a chronic disease in
which the body's metabolism of glucose is ineffective due to inadequate
production of insulin. Frequent monitoring of blood glucose has been documented
as an important part of managing diabetes to help avoid serious medical
complications, such as coronary artery disease, glaucoma, and circulatory
problems which can lead to limb amputation. The cost to manage diabetes is
high; the average person with diabetes spends $1,200 per year on supplies to
test and control the disease.
In addition to the above market, the Company believes that there is
significant growth potential for Liberty Medical's products if the
reimbursement market expands to include people with diabetes who are non-insulin
- -dependent. There are current proposals in Congress to people with diabetes who
are non-insulin-using under Medicare following a Congressional Budget
Office study indicating that improving diabetes coverage in this manner would
reduce Medicare expenditures. This change could add an estimated 2 million
patients who would qualify to use Liberty Medical's direct-mail system.
II. Consumer Healthcare
The Consumer Healthcare division includes OTC Medical Devices and
Urinary Discomfort Products. OTC Medical Devices include products holding the
number one private-label market position in digital thermometry and number two
overall market position. These products are sold through an extensive network
to major retailers, including most of the largest drug store chains and mass
merchandisers. Digital thermometry continues to be a growth category through
customer expansion and new product introduction.
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Urinary Discomfort Products for women include AZO-STANDARD(R), which is
currently the number one selling product in a growing market segment.
III. Professional Products
Professional Products include Prescription Urologicals and Dressings.
Prescription Urologicals include a stable line of branded products such as
URISED(R), CYSTOSPAZ(R), ANESTACON(R) and a line of suppositories. Dressings
include MITRAFLEX(R) and SPYROFLEX(R) advanced wound care products sold in the
professional and OTC markets.
Proposed Sale of Wound Care Business
The Company has experienced recent decreases in institutional wound
dressing sales, due in part to changes in product mix, new competition and
reimbursement guidelines for chronic wounds which have resulted in a switch
by healthcare providers to more frequent and less costly dressing changes
using low technology textile dressings (i.e., gauze and other cotton products).
In June 1997, the Company and PolyMedica Industries UK, Ltd, a
wholly-owned subsidiary of the Company, reported that they had entered into a
definitive Asset Purchase Agreement (the "Agreement") with Innovative
Technologies Group Plc, a United Kingdom public company ("IT") and certain
subsidiaries of IT, relating to the sale of the Company's institutional wound
care business (the "Business"). Pursuant to the Agreement, IT will purchase
certain assets from the Company for consideration consisting of (i) $9 million
in cash, (ii) a $4 million promissory note and (iii) up to $4.5 million of
additional contingent consideration. The closing of transactions contemplated by
the Agreement is contingent upon the approval of the shareholders of IT and
other customary conditions to closing.
Spinoff of CardioTech International, Inc. to the Company Shareholders
In May 1996, the Company's Board of Directors declared a stock dividend
for the purpose of making a distribution (the "Distribution") to the Company's
shareholders of all the outstanding shares held by the Company in CardioTech
International, Inc. ("CardioTech"), a former subsidiary of the Company. The
Company believes that the Distribution qualified as a "tax-free" spinoff under
Section 355 of the Internal Revenue Code of 1986, as amended. CardioTech
develops, manufactures and markets polymer products and technologies with
particular emphasis on the development of implantable synthetic grafts for a
broad variety of applications, including vascular access grafts, peripheral
grafts and coronary artery bypass grafts. Certain other technology of the
biomaterials business was retained by the Company.
CardioTech's operations are accounted for as discontinued operations in
the Company's statement of operations, and accordingly, its operations are
segregated in the accompanying consolidated statements of operations for fiscal
1996 and all previous periods presented. Net sales, operating expenses, and
other income and expense have been reclassified for amounts associated with
CardioTech's discontinued operations.
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Business Strategies
Expand leadership position in providing diabetic supplies to senior
citizens. Since the August 1996 acquisition of Liberty Medical, the Company has
begun its investment in ongoing television advertising to reach the diabetes
patient market. The Company believes that this has resulted in a significant
sales gain as Liberty Medical has shipped products to a large number of new
patients. The Company continues to seek opportunities to deliver new products
to a broader customer base by leveraging its efficient, mail-order distribution
system and software for billing and customer monitoring. To manage its growth
effectively, Liberty Medical continues to expand, upgrade and develop its
operations and information systems to continue its high level of customer
service.
Significantly grow the consumer healthcare business. Fueled by the
growth in demand for the Company's urinary discomfort products, as well as
by the strength of sales of the Company's digital thermometers, the consumer
healthcare division achieved a record level of sales in fiscal 1997. Accelerated
growth in the consumer healthcare market is a key strategic objective as the
Company seeks to leverage leading positions in its core markets of urinary
discomfort, digital thermometry and medication compliance products. Increased
investments in advertising and new product programs have been put in place to
drive growth in this area.
Acquire complementary businesses. In order to take advantage of
economies of scale in production and marketing, the Company seeks to continue to
acquire businesses and products which complement the Company's existing product
lines. In selecting and evaluating acquisition candidates, the Company examines
the potential market opportunities for products that can be distributed through
the Company's existing marketing infrastructure by utilizing its strengths in
sales, marketing, distribution and marketing.
Existing Products and Services
Diabetes Supplies. Liberty Medical ships to more than 30,000 customers
in the U.S., making it one of the largest diabetic suppliers in the country. It
is estimated that 150,000 patients currently receive supplies from mail-order
companies similar to Liberty Medical. Liberty Medical sells more than 200
major brands products supplied by Lifescan, Boehringer Mannheim, Bayer and
others which address a potential market of more than 1.2 million Medicare-
eligible seniors with diabetes. These products include glucose test strips and
monitors, lancets, insulin, syringes and other products. Sales of glucose test
strips represented 24.0% of the Company's consolidated revenues for the fiscal
year ended March 31, 1997.
Consumer Healthcare Products. The Company's consumer healthcare
products include thermometers and pediatric products, and are marketed in
conjunction with a line of non-prescription urological drugs. The Company sells
digital, basal and glass thermometers and 40 other home-use diagnostic and
compliance products. The Company custom manufactures and/or distributes its
other consumer healthcare products under the brand names of BASIS, MEDI-AID, and
PeeDee Dose.
The Company's principal non-prescription urological product is
AZO-STANDARD. In fiscal 1995, the Company introduced into the retail market,
AZO-CRANBERRY, an internally developed dietary supplement used for urinary tract
discomfort. This is the first expansion of the AZO-STANDARD family of products.
3
Items in the Company's consumer healthcare product line are either
manufactured by the Company or by others to the Company's specifications or are
purchased by the Company for resale. In addition, the Company provides private
label products for many national retailers. The Company's major customers in the
United States include most of the top pharmacy chains, major supermarkets and
mass merchandisers, including CVS, Eckerd, Rite-Aid and Walgreen Co. as well as
the four largest drug wholesalers. The Company's consumer products are sold in
retail pharmacies in the beauty aid, cough and cold, baby and incontinence skin
care sections.
The Company markets a line of thermometers which includes products with
traditional mercury and digital displays. Sales of the Company's glass and
digital thermometers, both branded and private label represented 12.6%, 14.9%,
and 12.2% of the Company's consolidated revenues for the fiscal years ended
March 31, 1995, 1996 and 1997, respectively. The Company has the number one
private-label market thermometer position and number two overall market
position.
Professional Products. The Company also offers a family of
prescription products designed to treat urinary tract discomfort by
relieving pain, burning and a feeling of urgency. The Company's prescription
pharmaceuticals include analgesics, antispasmodics and antiseptics primarily
used to treat urinary tract discomfort and relieve the associated symptoms. The
Company's prescription-branded drugs include URISED, CYSTOSPAZ, ANESTACON and
B&O SUPPRETTES. The Company's retail distribution network includes the four
largest drug wholesalers in the United States.
MITRAFLEX and SPYROFLEX both provide a moist microenvironment for
healing through their moisture vapor transport capability and absorb varying
types and amounts of exudate. The Company believes that these products reduce
the formation of scabs and resultant scarring, provide a barrier against
bacteria, speed healing, reduce pain and are easy to apply and remove, and that
these attributes are beneficial to patients and attractive to healthcare
providers. As described above, the Company has signed an agreement to sell its
institutional wound care business of which these products are a part.
ChronoSphere. The Company's ChronoSphere products are microparticulate
entrapment systems containing active ingredients intended as topical control
delivery systems. In the pharmaceutical and personal care industries, entrapment
of active ingredients can have a number of beneficial effects, including
sustaining the topical effectiveness of ingredients, reducing irritation,
permitting liquids to be handled as solids, extending shelf life and overcoming
product incompatibilities. In fiscal 1994, Avon Products, Inc. ("Avon")
introduced the Company's ChronoSphere polymer technology in Avon's "ANEW Perfect
Foundation." The ChronoSphere microparticulates are used as part of a
time-release delivery system for skin moisturizers.
Products Under Development
Thermometry is a target area for growth and plans to strengthen its
branded position through new product introductions and marketing programs are
underway.
After a year of extensive investigation and patent engineering, the
Company is introducing a "Flexible-Tip Digital Thermometer with Fever Alarm(TM)"
to be available for this year's cough and cold season. This unique thermometer
offers a comfortable flat tip and soft flexible probe designed to provide
4
gentle care for children and ease of reading. It also has an exclusive Fever
Alarm feature to alert parents to an elevated temperature.
Major Customers
For the fiscal year ended March 31, 1996, total revenues from Mylan
Laboratories, Inc. ("Mylan"), McKesson Drug Company ("McKesson"), Bergen
Brunswig Drug Company and Bristol-Myers Squibb were 12.9%, 11.7%, 10.8%, and
11.2%, respectively, of total consolidated revenues. In the fiscal year ended
March 31, 1995, total revenues, including certain one-time fees received from a
company formerly owned by Merck and presently owned by Bristol-Myers Squibb,
represented 16.6% of total consolidated revenues. In the fiscal year ended March
31, 1995, total revenues from McKesson and Mylan comprised 10.9% and 11.0%,
respectively, of total consolidated revenues.
Patents and Trade Secrets
With respect to the Company's wound care business described above, the
Company seeks to protect its technology through the use of patents and trade
secrets. The Company is the owner of five United States patents relating to its
wound dressing technology and controlled delivery systems and the co-owner of
one United States patent relating to biodurable polyurethane technology. The
Company has filed applications for additional patents in the United States and
European jurisdictions, which are currently pending. It is expected that these
patents and trade secrets will be assigned to the buyer in connection with the
proposed sale of the wound care business.
Manufacturing
The Company's polymer-based wound care medical devices and Chronosphere
products are manufactured at the Company's facilities. The Company's
pharmaceutical products are currently manufactured in-house and by others on
its behalf. The Company purchases a majority of its consumer healthcare products
from other manufacturers.
This year marked the culmination of several years of planning with the
launch of in-house pharmaceutical production at the Woburn facility. By April
1997, all of the steps to validate, manufacture and sell products made at the
Woburn site were completed. With receipt of an FDA Establishment
5
Registration Number, in-house manufacturing is now underway for several
established products, including AQUACHLORAL(R), B&O(R) and URISED(R). The
Company's state-of-the-art automated suppository machine forms, fills and seals
automatically and the computer-controlled, hands-off equipment provides improved
manufacturing efficiency.
Government Regulation
The production and marketing of the Company's products and its ongoing research
and development activities are subject to regulation by numerous governmental
authorities in the United States, the United Kingdom and other countries,
and may become subject to the regulations of additional countries. The Company
cannot predict the extent to which government regulations or changes thereto
might have an adverse effect on the production and marketing of the Company's
existing or future products. Products that the Company may develop in the
future may require clearance by the Food and Drug Administration ("FDA") in the
United States. Although the Company believes each of these products, if
successfully developed, will obtain FDA clearance, no assurance can be made that
each will obtain such clearance, or that the process of clearance will be
without undue delay or expense.
The FDA and other regulatory agency requirements for manufacturing,
product testing and marketing can vary depending upon whether the product is a
medical device or a drug. Sales of the Company's products outside of the United
States are subject to foreign regulatory requirements that may vary from country
to country. The time required to obtain clearance from a foreign country may be
longer or shorter than that required by the FDA, and clearance or approval or
other product requirements may differ. There can be no assurance that the
Company will be able to obtain necessary regulatory clearances or approvals on a
timely basis, if at all, for any of its products under development, and delays
in receipt or failure to receive such clearances or approvals, the loss of
previously received clearances or approvals, or failure to comply with existing
or future regulatory requirements could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company is subject to numerous federal, state and local laws
relating to such matters as controlled drug substances, safe working conditions,
manufacturing practices, environmental protection, fire hazard control and
disposal of hazardous or potentially hazardous substances. For example, the Drug
Enforcement Administration ("DEA") regulates controlled drug substances, such as
narcotics, under the Controlled Substances Act and the Controlled Substances
Import and Export Act. Manufacturers, distributors and dispensers of controlled
substances must be registered and inspected by the DEA, and are subject to
inspection, labeling and packaging, export, import, security, production quota
and record keeping and reporting requirements. The Company currently markets two
prescription drug products containing controlled drug subjects, and therefore is
subject to the DEA regulatory requirements. In addition, labeling and
promotional activities relating to medical devices and drugs are, in certain
instances, subject to regulations by the Federal Trade Commission. There can be
no assurance that the Company will not be required to incur significant costs to
comply with such laws and regulations in the future or that such laws or
regulations will not have a material adverse effect upon the Company's ability
to do business.
6
Competition
The Company is engaged in rapidly evolving and highly competitive
fields. Many major pharmaceutical, medical product and personal care companies
in the United States and abroad seek to develop competitive products.
Competition from medical device manufacturers, pharmaceutical companies and
others is intense and expected to increase. Many of these companies have
substantially greater capital resources, research and development staffs and
facilities and experience in obtaining regulatory approvals, as well as in the
marketing and distribution of products, than the Company.
In the diabetes supply market, Universal Self Care, Inc. and Transworld
Home Healthcare, Inc., are publicly-held companies which compete with Liberty
Medical in the mail-order supply business. There are several smaller
privately-held companies which also compete in this market.
In the consumer healthcare products market, the Company competes with
various other suppliers for retail shelf space and consumer purchase. While
there are numerous companies that manufacture and market consumer healthcare
products, the Company believes that no single company is readily identifiable by
consumers as a maker of products which attempt to detect or monitor medical
problems in the home. The Company believes that it offers consumers practical,
easy-to-use products at reasonable prices. In the urinary discomfort category,
the Company's AZO-STANDARD urinary analgesic is one of the category leaders.
Competitors include Numark Laboratories, Inc. (Cystex) and Breckenridge
Pharmaceutical, Inc. (Prodium) and Johnson & Johnson (Uristat).
In the professional market, numerous pharmaceutical companies develop
and market prescription products which compete with the Company's products on a
branded and generic basis. The Company's principal branded competitors include:
Astra USA, Inc. (Xylocaine vs. ANESTACON), G & W Labs, Inc.(chloral hydrate vs.
AQUACHLORAL), Parke-Davis, a division of Warner-Lambert Co., (Pyridium vs.
URISED), Schwarz-Pharma (Levsin line vs. CYSTOSPAZ line) and Wyeth-Ayerst
Laboratories, a division of American Home Products Corp. (belladonna and opium
vs. B&O SUPPRETTES).
Employees
As of March 31, 1997, the Company had 196 full-time employees. The
Company expects to employ additional personnel as it expands its operations. The
Company believes that its relations with its employees are good.
Item 2. PROPERTIES
The Company's facilities are located in Woburn, Massachusetts; Palm
City and Stuart, Florida; Golden, Colorado; and Tarvin, Cheshire, UK. The
Company's corporate headquarters is located in Woburn in a 60,000 square foot
facility which the Company owns. The Company also leases approximately 25,000
square feet at its facilities in Palm City and Stuart, Florida and approximately
30,000 square feet at its Golden, Colorado facility and approximately 12,000
square feet at its United Kingdom facility.
A portion of the Golden facility and the Tarvin facility relate to the
Company's wound care business and will be transferred to the proposed buyer for
that business.
The Company believes that its current and new facilities will be
adequate for its current and anticipated needs.
7
Item 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the Company,
through solicitations of proxies or otherwise, during the last quarter of the
fiscal year ended March 31, 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company are as follows:
Name Age Position
Steven J. Lee................ 50 Chairman and Chief Executive Officer
Arthur A. Siciliano, Ph.D.... 54 President; President, PolyMedica
Pharmaceuticals (U.S.A.), Inc.
Eric G. Walters.............. 45 Chief Financial Officer, Treasurer and
Clerk
Randy M. Sloan............... 40 Vice President of Marketing; Group
Executive, PolyMedica Healthcare, Inc.
and PolyMedica Wound Care Company
Mark A. Libratore............ 46 Vice President; President, Liberty Medical
Supply, Inc.
Andrew M. Reed, Ph.D......... 44 Vice President; President, PolyMedica
Wound Care Company
Robert J. Zappa.............. 53 Vice President; President, PolyMedica
Healthcare, Inc.
Mr. Lee has been Chairman of the Company since June 1996 and Chief
Executive Officer and a director of the Company since May 1990. Mr. Lee served
as President of the Company from May 1990 through June 1996. From March 1990 to
May 1990, Mr. Lee was a Manager in the Mergers and Acquisitions practice at
Coopers & Lybrand. From November 1987 to March 1990, Mr. Lee was President and a
director of Shawmut National Ventures, the venture capital division of Shawmut
Bank,N.A. From 1984 to 1986, he was President, Chief Executive Officer and a
director of RepliGen Corporation, a biotechnology company. Mr. Lee also spent
eleven years in venture capital as President of Venture Management Advisors and
at Bankers Trust Company. Mr. Lee currently serves as a director of Commonwealth
BioVentures, Inc. and Fibersense Technology Company.
Dr. Siciliano has been President of the Company since June 1996,
Executive Vice President since July 1994, Senior Vice President since January
1993, Vice President, Pharmaceutics of the Company since July 1991 and served as
Vice President, Manufacturing from June 1990 to July 1991.
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From the Company's inception until June 1990, he served as Chief Operating
Officer. From 1984 to 1986, Dr. Siciliano served as President of Microfluidics
Corporation, a high technology equipment manufacturer and a subsidiary of the
Biotechnology Development Corporation and then helped found a subsidiary,
MediControl Corporation, and served as its President from 1986 to 1989. He
served as President of the Heico Chemicals Division of the Whittaker Corporation
from 1982 to 1984, as General Manager of Reheis Chemicals (Ireland), Ltd. during
1981 and as Technical Director for Reheis Chemical Co., a division of Revlon
Inc., from 1975 to 1982. Dr. Siciliano also served as Director of Corporate
Research for Kolmar Laboratories, Inc. from 1973 to 1975 and as Senior Scientist
for The Gillette Company from 1969 to 1973.
Mr. Walters joined the Company in August 1990 as Chief Financial
Officer and Treasurer. From 1987 to 1990, Mr. Walters served in various
positions at John Hancock Capital Growth Management, Inc., most recently as
Assistant Treasurer. From 1983 to 1987, Mr. Walters served as Controller of
Venture Founders Corporation and from 1979 to 1983, he was employed at Coopers &
Lybrand, most recently as an Audit Supervisor. Mr. Walters is a Certified Public
Accountant.
Mr. Sloan has served as Vice President of Marketing of the Company
since October 1996 and Group Executive since March 1997. From 1984 to 1996, Mr.
Sloan served in various positions at Ciba Self-Medication, Inc., a division of
Ciba-Geigy, most recently as Vice President of Marketing. From 1980-1984, Mr.
Sloan was employed at Colgate Palmolive Company, most recently as a Product
Manager in their Household Products Group. Mr. Sloan holds an M.B.A. from the
University of Chicago and a B.S. in Finance and Accounting from the University
of Pennsylvania.
Mr. Libratore has served as President of Liberty Medical Supply, Inc.
since 1989. He has managed this business from its inception. Mr. Libratore has
23 years of medical experience and has been a respected member of the medical
community for many years. Mr. Libratore is a graduate of the Hartford Hospital
School of Respiratory Therapy of the University of Connecticut.
Dr. Reed has been a Vice President of the Company since June 1996 and
was named President of PolyMedica Wound Care Company in January 1993. He
previously served as General Manager, Wound Care Operations since June 1992 and
before that as Vice President, Research and Development of the Company since
September 1990. From 1982 to 1990, Dr. Reed served as the Director of Research
and Development for Matrix Membranes, Inc. Prior to 1982, Dr. Reed held various
positions with Mitral Medical, Inc., a Canadian subsidiary of Matrix Membranes,
Inc. ("Mitral Medical"), Millipore Corporation and Imperial Chemical Industries
PLC (ICI). He is the inventor of the MITRAFLEX wound dressing and co-inventor of
a family of biocompatible polyurethanes.
Mr. Zappa has been a Vice President of the Company since June 1996 and
was named President of PolyMedica Healthcare, Inc. in September 1992. He has
over 25 years of experience in all aspects of sales and distribution. Mr. Zappa
served as President, Chief Operating Officer and Director of American CDI, Inc.
from June 1991 to September 1992. From 1981 until November 1988, he was
President and Chief Executive Officer of R. J. Zappa Distributing, Inc. ("RJZ
Dist."), a distributor of home appliances, personal care products and
electronics. Mr. Zappa sold all of the shares of RJZ Dist. to JRE Holdings Co.
("JRE") in November 1988. Mr. Zappa remained as President of the wholly-owned
subsidiary, RJZ Dist., until April 1990. JRE filed a bankruptcy petition under
Chapter 11 in April 1990 and under Chapter 7 in September 1990. Prior to 1982,
Mr. Zappa was Vice President and Partner in a privately held distribution
company from 1975 to 1982.
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PART II
Items 5-8.
The information required by Items 5 through 8 in this Annual Report on
Form 10-K is incorporated by reference from certain sections of the Company's
Annual Report to Shareholders, the relevant portions of which are included in
Exhibit 13 to this Annual Report on Form 10-K. Such information is contained in
the sections of the Annual Report to Shareholders entitled "Corporate
Information", "Selected Consolidated Financial Data", "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and in the
Consolidated Financial Statements.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting and financial disclosure
matters.
10
PART III
Items 10-13.
The information required for Part III in the Annual Report on Form 10-K is
incorporated by reference from the Company's definitive proxy statement for the
Company's 1997 Annual Meeting of Shareholders. Such information will be
contained in the sections of such proxy statement captioned "Election of
Directors," "Board and Committee Meetings," "Compensation of Executive
Officers," "Directors' Compensation," "Report of the Compensation Committee,"
"Compensation Committee Interlocks and Insider Participation," "Comparative
Stock Performance," "SEC Reporting," "Security Ownership and Certain Beneficial
Owners and Management," and "Certain Transactions." Information regarding
executive officers of the Company is also furnished in Part I of this Annual
Report on Form 10-K under the heading "Executive Officers of the Registrant."
11
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on
Form 10-K.
1. The following Financial Statements and other sections shown below are
filed as part of the Company's Annual Report to Shareholders.
Such Financial Statements are incorporated herein by reference.
Consolidated Balance Sheets as of
March 31, 1997 and 1996
Consolidated Statements of Operations
for the years ended March 31, 1997,
1996, and 1995
Consolidated Statements of Shareholders'
Equity for the years ended March 31, 1997,
1996, and 1995
Consolidated Statements of Cash Flows
for the years ended March 31, 1997,
1996, and 1995
Notes to Consolidated Financial Statements
Report of Independent Accountants
2. All schedules are omitted because the required information is either
inapplicable or is presented in the consolidated financial statements
or related notes thereto.
3. The Exhibits listed in the Exhibit Index
immediately preceding such Exhibits are filed as
part of this Annual Report on Form 10-K.
(b) There were no Current Reports on Form 8-K filed by the Company
during the last quarter of the period covered by this report.
-------------------------------
12
The following trademarks are used in this Annual Report on Form 10-K:
MITRAFLEX, SPYROFLEX, ChronoSphere, BASIS, PeeDee Dose, MEDI-AID, URISED,
CYSTOSPAZ, ANESTACON, AZO-STANDARD, AZO-CRANBERRY, B&O, SUPPRETTES, and
AQUACHLORAL are registered trademarks of PolyMedica Industries, Inc. Fever Alarm
is a trademark of PolyMedica Industries, Inc. WEBCON is a trademark of Alcon.
ANEW is a trademark of Avon Products, Inc. Uristat is a registered trademark
of Ortho Pharmaceutical Corp., a division of Johnson & Johnson. Xylocaine is a
registered trademark of Astra USA, Inc. Pyridium is a registered trademark of
Parke-Davis, a division of Warner-Lambert Co. Levsin is a registered trademark
of Schwarz-Pharma, Inc. Cystex is a trademark of Numark Laboratories, Inc.
Prodium is a trademark of Breckenridge Pharmaceutical, Inc.
13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 26, 1997 POLYMEDICA INDUSTRIES, INC.
By: /s/ Steven J. Lee
Steven J. Lee
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: June 26, 1997 /s/ Steven J. Lee
------------------
Steven J. Lee
Chairman, Chief Executive Officer and
Director
(Principal Executive Officer)
Dated: June 26, 1997 /s/ Eric G. Walters
--------------------
Eric G. Walters
Chief Financial Officer, Treasurer and
Clerk
(Principal Financial and Accounting
Officer)
Dated: June 26, 1997 /s/ Richard H. Bard
-------------------
Richard H. Bard
Director
Dated: June 26, 1997 /s/ Frank W. LoGerfo
---------------------
Frank W. LoGerfo
Director
Dated: June 26, 1997 /s/ Daniel S. Bernstein
------------------------
Daniel S. Bernstein
Director
Dated: June 26, 1997 /s/ Marcia J. Hooper
---------------------
Marcia J. Hooper
Director
Dated: June 26, 1997 /s/ Thomas S. Soltys
---------------------
Thomas S. Soltys
Director
Dated: June 26, 1997 /s/ Peter K. Hoffman
---------------------
Peter K. Hoffman
Director
Exhibit Index
The following exhibits are filed as part of this Annual Report on Form 10-K.
Exhibit Description
Number
2.1 - Stock Purchase Agreement, dated as of August 30, 1996,
among the Registrant, Liberty Medical Supply, Inc., and
the Shareholders of Liberty Medical Supply, Inc. (19)
2.2 - Amendments dated March 26, 1997, to the Stock Purchase
Agreement dated as of August 30, 1996, among the
Registrant, Liberty Medical Supply, Inc. and the
Shareholders of Liberty Medical Supply, Inc.
2.3 - Asset Purchase Agreement dated as of June 23, 1997 by
and among the Registrant, PolyMedica Industries UK, Ltd.,
Innovative Technologies Limited, Innovative Technologies
(US) Inc., and Innovative Technologies
Group Plc.
3.1 - Restated Articles of Organization of the Company. (1)
3.2 - Amended and Restated By-Laws of the Company. (14)
4.1 - Specimen certificate for shares of Common Stock, $.01 par
value, of the Company. (1)
4.2 - Note and Warrant Agreement dated January 26, 1993 and
$25,000,000 10.65% Guaranteed Senior Secured Notes due
January 31, 2003 of PolyMedica Pharmaceuticals (U.S.A.),
Inc. and PolyMedica Pharmaceuticals (Puerto Rico), Inc.
and Warrant for 500,000 (subject to adjustment) shares of
Common Stock, $0.01 per value, of the Registrant. (6)
4.3 - Letter Agreement, Note Guarantee and Security Agreement,
all dated April 27, 1993, by and among the Registrant,
PolyMedica Pharmaceuticals (U.S.A.), Inc., PolyMedica
Pharmaceuticals (Puerto Rico), Inc.,PolyMedica Securities,
Inc., PolyMedica Pharmaceuticals Securities, Inc. and the
John Hancock Mutual Life Insurance Company. (9)
4.4 - Letter Agreement amending the Note and Warrant Agreement
dated June 15, 1993. (9)
4.5 - Letter Agreement amending the Note and Warrant Agreement
dated March 29, 1994. (10)
4.6 - Letter Agreement amending the Note and Warrant Agreement
dated June 17, 1994. (10)
4.7 - Letter Agreement amending the Note and Warrant Agreement
dated June 30, 1994. (11)
4.8 - Letter Agreement amending the Note and Warrant Agreement
dated October 27, 1994. (12)
4.9 - Letter Agreement amending the Note and Warrant Agreement
dated June 27, 1995. (14)
Exhibit Description
Number
4.10 - Letter Agreement amending the Note and Warrant Agreement
dated October 18, 1995 (15)
4.11 - Letter Agreement amending the Note and Warrant Agreement
dated June 19, 1996. (18)
4.12 - Letter Agreement amending the Note and Warrant Agreement
dated August 2, 1996. (20)
4.13 - Letter Agreement amending the Note and Warrant Agreement
dated October 30, 1996 (20)
4.14 - Letter Agreement amending the Note and Warrant Agreement
dated January 23, 1997 (21)
10.1 - Supply-Requirements Contract and Licensing Agreement,
dated January 1, 1990, by and between Calgon Vestal
Laboratories, a division of Calgon Corporation, and Matrix
Membranes, Inc., assigned to the Company on June 15, 1991,
and December 5, 1991. (1)(22)
10.2 - Supply Requirements and Licensing Agreement dated November
30, 1992 between Calgon Vestal Laboratories and the
Registrant. (9)(22)
10.3 - Distributorship Agreement, dated as of January 1, 1992 by
and between CV Laboratories Ltd. and the Company, as
amended by letter agreement dated as of January 7, 1992.
(1)(22)
10.4 - License Agreement, dated February 9, 1990, by and between
Laboratoires de Therapeutique Moderne, S.A. and PolyMedica
Industries UK, Ltd. (formerly Beam Tech Ltd). (1)(22)
10.5 - Supply Agreement, dated March 15, 1990, by and between
Laboratoires de Therapeutique Moderne, S.A. and
PolyMedica
Industries UK, Ltd. (formerly Beam Tech Ltd). (1)(22)
10.6 - Distributorship Agreement, dated as of December 21, 1990,
by and between Cellife SRL and PolyMedica Industries UK,
Ltd. (formerly Beam Tech Ltd). (1)(22)
10.7 - Distributorship Agreement, dated as of June 25, 1991 by
and between Internationale Verbandstoff - Fabrik and
PolyMedica Industries UK, Ltd. (formerly Beam Tech Ltd).
(1)(22)
10.8 - Distributorship Agreement, dated as of January 13,1992, by
and between Rauscher & Co. and the Company. (1)(22)
10.9 - Distributorship Agreement, dated as of December 20, 1991,
by and between MicroBiomedics, Inc. and the Company. (1)
(22)
10.10 - Development Agreement, dated as of October 4, 1990, by and
between C.R. Bard, Inc. and the Company, as amended by
letter agreement dated August 12, 1991. (1)(22)
10.11 - Development Agreement dated as of November 1, 1991, by and
between Brooks Industries, Inc. and the Company. (1)(22)
10.12 - 1990 Stock Option Plan, as amended. (14)
10.13 - 1992 Employee Stock Purchase Plan, as amended. (14)
10.14 - 1992 Directors' Stock Option Plan, as amended. (10)
10.15 - Rights Agreement dated as of January 23, 1992 by and
between the Company and the First National Bank of Boston.
(3)
Exhibit Description
Number
10.16 - Secured Promissory Note, dated June 11, 1991, executed by
the Company and delivered to the Flagship Bank and Trust
Company. (1)
10.17 - Employment Agreement by and between the Registrant and
Steven J. Lee dated May 16, 1990, as amended by letter
agreements dated June 1, 1991 and December 5, 1991.(1)(24)
10.18 - Letter agreement amendment by and between the Registrant
and Steven J. Lee dated April 3, 1996. (17)(24)
10.19 - Letter agreement amendment by and between the Registrant
and Dr. Andrew M. Reed dated April 3, 1996. (17)(24)
10.20 - Employment Agreement by and between the Registrant and Dr.
Arthur A. Siciliano dated September 1, 1990, as amended by
letter agreements dated June 1, 1991 and December 5, 1991.
(1)(24)
10.21 - Employment Agreement by and between the Registrant and Dr.
Andrew M. Reed dated September 1, 1990, as amended by
letter agreements dated June 1, 1991 and December 5, 1991.
(1)(24)
10.22 - Employee Stock Purchase Agreement by and between the
Registrant and Steven J. Lee dated May 16, 1990, as
amended. (1)(24)
10.23 - Letter agreement amendment by and between the Registrant
and Dr. Arthur A. Siciliano dated April 3, 1996. (17)(24)
10.24 - Letter agreement amendment by and between the Registrant
and Robert J. Zappa dated April 3, 1996. (17)(24)
10.25 - Stock Restriction Agreement by and between the Registrant
and Dr. Arthur A. Siciliano dated September 1, 1990, as
amended. (1)
10.26 - Employee Stock Purchase Agreement by and between the
Registrant and Andrew M. Reed dated September 1, 1990, as
amended. (1)
10.27 - Lease Agreement, dated June 23, 1989, by and between
Robert Andrew Chilton and a subsidiary of the Registrant,
as amended, for industrial space in Cheshire County,
England. (1)
10.28 - Option Agreement dated as of October 19, 1990 by and among
certain Shareholders of Beam Tech Ltd named therein, as
amended by supplemental Deeds dated as of December 6,
1990. (1)
10.29 - Sublease dated February 10, 1992 by and between Ampex
Corporation and the Registrant. (1)
10.30 - Supply Agreement, dated as of May 27, 1992, by and between
Medtronic, Inc. and the Company. (2)(22)
10.31 - Employment Agreement by and between the Registrant and
Eric G. Walters dated June 1, 1991 as amended by letter
agreement dated December 5, 1991. (9)(24)
10.32 - Letter agreement amendment by and between the Registrant
and Steven J. Lee dated March 18, 1993. (9)(24)
10.33 - Letter agreement amendment by and between the Registrant
and Eric G. Walters dated April 3, 1996. (17)(24)
10.34 - Letter agreement amendment by and between the Registrant
and Dr. Arthur A. Siciliano dated March 18, 1993. (9)(24)
10.35 - Letter agreement amendment by and between the Registrant
and Dr. Andrew M. Reed dated March 18, 1993. (9)(24)
Exhibit Description
Number
10.36 - Letter agreement amendment by and between the Registrant
and Eric G. Walters dated March 18, 1993. (9)(24)
10.37 - License and Supply Agreement dated as of December 22, 1992
between Dow B. Hickam, Inc. and the Registrant. (9)(22)
10.38 - Exclusive Distribution Agreement dated September 28, 1992
between Hisamitsu Pharmaceutical Co., Inc. and the
Registrant. (9)(22)
10.39 - Development, Supply and License Agreement dated November
11, 1992 between Bard Access Systems, Inc. and the
Registrant. (9)(22)
10.40 - Letter Agreement dated July 15 , 1993 between Alcon
Laboratories Inc. and the Registrant. (7)
10.41 - Purchase and Sale Agreement between Allstate Life
Insurance Company as Seller and PolyMedica Industries,
Inc. as Buyer as of August 13, 1993. (8)
10.42 - Letter agreement amendment by and between the Registrant
and Steven J. Lee dated March 31, 1994. (10)(24)
10.43 - Letter agreement amendment by and between the Registrant
and Dr. Arthur A. Siciliano dated March 31, 1994.(10)(24)
10.44 - Letter agreement amendment by and between the Registrant
and Dr. Andrew M. Reed dated March 31, 1994. (10)(24)
10.45 - Letter agreement amendment by and between the Registrant
and Eric G. Walters dated March 31, 1994. (10)(24)
10.46 - Employment Agreement between the Registrant and Robert J.
Zappa dated August 23 , 1992 , as amended by letter
agreement dated March 18, 1993, and further amended by
letter agreement dated March 31, 1994. (10)(24)
10.47 - Mortgage, Assignment of Leases and Rents and Security
Agreement between PolyMedica Pharmaceuticals (U.S.A.),
Inc. and John Hancock Mutual Life Insurance Company dated
May 31, 1994. (10)
10.48 - Processing Agreement dated December 11, 1992, by and
between the Registrant and Alcon (Puerto Rico) Inc. (10)
(22)
10.49 - Processing Agreement dated December 11, 1992, by and
between the Registrant and Alcon Laboratories, Inc. (10)
(22)
10.50 - Letter Agreement dated March 25, 1994 between Alcon
(Puerto Rico) Inc. and the Registrant. (10)
10.51 - Amendment dated November 2, 1994, to Supply-Requirements
and License Agreement dated November 30, 1992, between
PolyMedica Industries, Inc. and Calgon Vestal
Laboratories, Inc. (13)
10.52 - Letter Agreement amendment by and between the Registrant
and Steven J. Lee dated April 11, 1995. (14) (24)
10.53 - Amended and Restated License Agreement between the
Registrant and CardioTech dated May 13, 1996. (17)
10.54 - Letter Agreement amendment by and between the Registrant
and Dr. Arthur A. Siciliano dated April 11, 1995. (14)(24)
10.55 - Letter Agreement amendment by and between the Registrant
and Dr. Andrew M. Reed dated April 11, 1995. (14) (24)
10.56 - Letter Agreement amendment by and between the Registrant
and Eric G. Walters dated April 11, 1995. (14) (24)
Exhibit Description
Number
10.57 - Letter Agreement amendment by and between the Registrant
and Robert J. Zappa dated April 11, 1995. (14) (24)
10.58 - 1996 Executive Incentive Compensation Plan (14) (22) (24)
10.59 - Amendment to the Lease Agreement by and between Robert
Andrew Chilton and a subsidiary of the Registrant. (14)
10.60 - Letter Agreement to the Lease Agreement, dated February
16, 1995, by and between Robert W. Murray, Trustee of
Constitution Park Trust Three and the Registrant for
offices and laboratory space in Woburn, Massachusetts.(14)
10.61 - Letter Agreement dated February 2, 1995, amending the
Processing Agreement dated December 11, 1992, by and
between the Registrant and Alcon (Puerto Rico), Inc. (14)
(22)
10.62 - Letter Agreement dated May 3 , 1995 , amending the
Processing Agreement dated December 11, 1992 , by and
between the Registrant and Alcon (Puerto Rico), Inc. (14)
(22)
10.63 - Construction Agreements dated March 1, 1994, June 15,
1994, and September 28 , 1994 , by and between the
Registrant and Execuspace Construction Corp. (14)
10.64 - Construction Agreements dated June 6, 1994, and October
13, 1994, by and between the Registrant and Commercial Air
Control, Inc. (14)
10.65 - Letter Agreement, dated March 20, 1995, by and between the
Registrant and Alcon Laboratories, Inc. (15)
10.66 - License Agreement, dated March 30, 1994, between the
Registrant as Licensor and PolyMedica Industries UK, Ltd.,
as Licensee (15)
10.67 - Form of Warrant issued by the Registrant to the John
Hancock Mutual Life Insurance Company (17)
10.68 - Form of Promissory Note, dated December 13, 1994,
executed by certain officers and delivered to the
Registrant (15)
10.69 - Form of Jefferies & Company, Inc. and Rodman & Renshaw,
Inc. Warrant (15)
10.70 - Form of Promissory Note made in favor of the Company by
certain officers of the Company (21)
10.71 - Employment Agreement between the Registrant and Randy M.
Sloan dated October 1, 1996 (24)
10.72 - 1998 Executive Incentive Compensation Plan (23) (24)
10.73 - Employment Agreement between the Registrant and Mark A.
Libratore dated August 30, 1996, incorporated by
reference as Exhibit D1 to the Stock Purchase Agreement
dated August 30, 1996 among the Registrant, Liberty
Medical Supply, Inc., and the Shareholders of Liberty
Medical Supply, Inc. (19)
10.74 - Amendment No. 1 to the Employment Agreement between the
Registrant and Mark A. Libratore dated March 26, 1997,
incorporated by reference into Amendments dated as of
August 30, 1996, among the Registrant, Liberty Medical
Supply, Inc. and the Shareholders of Liberty Medical
Supply, Inc.
13 - Annual Report to Shareholders for the year ended March 31,
1997, which shall not be deemed to be "filed" except to
the extent that portions thereof are expressly
incorporated by reference in this Annual Report on Form
10-K.
21 - Subsidiaries of the Registrant
23.1 - Consent of Coopers & Lybrand L.L.P.
27 - Financial Data Schedule
- ---------------------
1 Incorporated herein by reference to the Company's Registration
Statement on Form S-1 (File No. 33-45425).
2 Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1992 filed June 26, 1992.
3 Incorporated herein by reference to the Company's Current Report on
Form 8-K filed March 13, 1992.
4 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1992 filed August 13,
1992
5 Incorporated herein by reference to the Company's Current Report on
Form 8-K filed December 26, 1992, as amended by Amendment No. 1 on
Form 8 filed February 24, 1993.
6 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1992 filed February
13, 1993.
7 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993, filed August 13,
1993.
8 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993, filed
November 9, 1993
9 Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1993, filed June 25, 1993.
10 Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended March 31, 1994, filed June, 29, 1994.
11 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1994, filed August 12,
1994.
12 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994, filed October
31, 1994.
13 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1994, filed February
2, 1995.
14 Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1995, filed June 29,
1995.
15 Incorporated herein by reference to the Company's Registration
Statement on Form S-1 (File No. 33-97872).
16 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1995, filed February
9, 1996.
17 Incorporated herein by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, filed June 26,
1996.
18 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996, filed August 14,
1996.
19 Incorporated herein by reference to the Company's Current Report on
Form 8-K filed September 13, 1996.
20 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1996, filed
November 13, 1996.
21 Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1996, filed February
13, 1997.
22 Confidential treatment granted as to certain portions.
23 Confidential treatment requested as to certain portions, which
portions are omitted and filed separately with the Commission.
24 Management contract or compensation plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of Form 10-K.