Financial Highlights
Year Ended June 30 1997 1996 1995 1994 1993 ______________________________________________________________________________________ Amounts in thousands except per share data Net Sales $178,560 $125,766 $99,450 $78,171 $69,286 ______________________________________________________________________________________ Net Income 20,316 15,339 11,677 4,741 7,379 ______________________________________________________________________________________ Primary Earnings per Share 1.00 0.84 0.67 0.27 0.43 ______________________________________________________________________________________ Average Shares of Common Stock Outstanding and Equivalents 20,272 18,324 17,532 17,281 17,319 ______________________________________________________________________________________ Working Capital 71,038 99,434 39,413 31,032 25,171 ______________________________________________________________________________________ Long-Term Obligations 17,985 4,966 5,538 4,854 4,288 ______________________________________________________________________________________ Total Assets 184,232 143,947 78,039 58,917 54,331
Respironics views its corporate mission statement and statement of values as living documents that truly guide both the management decision-making and the day-to-day operation of our company's business.
Similarly, corporate directors endorse and subscribe to a series of value statements expressing the objectives and responsibilities of Board service. Specifically:
Governance
The Board recognizes that its primary function is to serve as informed representatives of Respironics' entire shareholder family. Directors are charged with ensuring that an excellent management team is in place to employ the company's resources strategically and productively. While assigning appropriate value to outstanding financial performance, the Board also recognizes the importance of ethical conduct and responsible community citizenship as vital components of business results.
Empowering Employees
The Board believes that, as a core corporate asset, Respironics associates must be nurtured and empowered to perform the full scope of their assignments. Board responsibilities include ensuring that management subscribes to that conviction.
Perspective
The Board is resolved to view corporate performance from a perspective most conducive to maximizing long-term results, reflecting its belief that an unreasonable focus on short-term profits is incompatible with the best interests of shareholders.
Strategic Planning
Excellent corporate performance, both over short-term and extended reporting periods, is widely recognized to result from effective strategic planning. By maintaining a strategic focus throughout all its proceedings, the Respironics Board of Directors seeks to ensure that the company's plan is complete, appropriately innovative and consistent with its values and mission statement.
Directors' Commitment
The Board views individual director commitment as an imperative responsibility of membership. Key areas of this responsibility include attendance and preparedness, ethics and independence, and social and environmental awareness.
Directors' Stockholding
The Board believes that directors function more effectively as shareholder representatives when their respective positions as company shareholders represent a meaningful component of their total investments.
I am pleased to report that the Board's August 15, 1997 adoption of these statements was unanimous.
Gerald E. McGinnis
Chairman
Strategy: Respironics' sustained growth evidences the continued effectiveness of its basic corporate strategies: Customer partnerships are nurtured through an acute awareness of disease management requirements and the development of therapy systems to meet evolving patient and customer needs. Geographic markets are expanded through a steadily increasing presence of company products and people. And investments in technology are backed by a commitment to maximize the value of Respironics' considerable intellectual property created through the company's continuing efforts to innovate in its marketplace.
The fiscal 1997 accomplishments of Respironics associates extended beyond the year's strong financial performance. Reviewing our year-end totals generally, net sales of $178.6 million and net income of $20.3 million exceeded fiscal 1996 levels by 42 percent and 32 percent, respectively. Importantly, the results were realized while maintaining margins, continuing to invest heavily in product development initiatives and underscoring our position as a truly global company. We also largely overcame the effect of a second-quarter change in our designated supplier status with our largest customer by maintaining superior effort and demonstrating our ability to increase valued service with our product offerings.
From the standpoint of fulfilling long-standing corporate objectives, fiscal 1997 represented something of a milestone year. Recent research and development expenditures, as projected, produced more than five significant new product introductions. Domestically, five units of our Great Performers™ Series of sleep-related devices were cleared for sale by the United States Food and Drug Administration. Additionally, we received FDA clearance to market the BiPAP® S / T-D 30 bi-level, noninvasive ventilatory support system for use in hospital and alternative care settings. And our capacity to provide noninvasive ventilation therapy was broadened by the introduction - in international markets - of our BiPAP® Vision™ model. We expect this new unit to be available in the United States during fiscal 1998. A second generation of the Great Performers Series, meanwhile, is expected to be launched before the close of calendar 1997. The year's new product activity was concluded in June with our initial distribution of the RinoFlow™ nasal irrigation device for the treatment of sinus disorders.
The advanced technological content of our products was also central to other fiscal 1997 and early 1998 developments. In our first licensing of patented Respironics intellectual property to another supplier, we began receiving royalty income from DeVilbiss Health Care, Inc., a division of Sunrise Medical Inc., for that company's use of our bi-level airway pressure technology. The agreement recognizes the economic value of the broad patent coverage we enjoy in this area. Consistent with our intent to aggressively protect this proprietary position, however, we found it necessary to file patent infringement suits against two other producers of bi-level therapy devices. We believe that our patent coverage is strong and enforceable, and we expect favorable rulings in both instances. A United States District Court, meanwhile, granted Respironics' motion for summary judgment thereby dismissing a claim charging that our patient masks infringe a patent held by an Australian medical products manufacturer. We expect to pursue a similar course of action in connection with other infringement claims in the suits filed by the offshore company.
Regarding acquisition activity, fiscal 1997 was our most active year to date. The LIFECARE and Stimotron purchases, described in greater detail elsewhere in this report, served to expand our product "bundle" and extend our geographic reach. Both operate from multiple locations, coinciding with our objective of getting as close to our customers as is practical. Both Stimotron, based in Germany, and LIFECARE, with its core European operations headquartered in Germany, boast a strong presence in that country, arguably Europe's most fully developed market for our product mix.
To achieve their intended results, expansions by acquisition require a successful blending of the organizations involved. And we've experienced a smooth and highly productive integration of the operations we've acquired due to the determined and diligent efforts of all of our associates. Solid business relationships were established virtually immediately, and 1997 results contain the first installment of acquisition-related benefits we should continue to enjoy for years to come.
In his message in this report, your company's chairman references management's continued close attention to Respironics' mission and core beliefs. The events of fiscal 1997 reflect those principles in every major respect. They feature a strong concentration on product innovation and customer service, and they contain opportunities for our employees and value for all of our stakeholders. The year's performance, meanwhile, was achieved in a marketplace that is increasingly competitive and price-oriented. We don't expect a change in those conditions. But we do expect that holding to our strategic course will enable us to record continued progress throughout fiscal 1998.
Dennis S. Meteny
President and Chief Executive Officer