UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1995 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 number 1-9860
BARR LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
New York 22-1927534
(State or Other Jurisdiction of (I.R.S. -
Employer
Incorporation or Organization) Identification
No.)
Two Quaker Road, P. O. Box 2900, Pomona, New York 10970-0519
(Address of principal executive offices)
914-362-1100
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
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
Number of shares of Common Stock, Par Value $.01, outstanding as
of March 31, 1995: 9,282,427.
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1995 and June 30, 1994 3
Consolidated Statements of Earnings
for the three and nine-months ended
March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows
for the nine-months ended
March 31, 1995 and 1994 5
Notes to Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
<TABLE>
PART I.
BARR LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except per share amounts)
(unaudited)
<CAPTION>
March 31, June 30,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash $ 51,580 $ 36,499
Accounts receivable, less allowances
of $2,210 and $2,000, respectively 27,310 21,633
Inventories 31,750 29,350
Deferred income taxes 4,023 3,578
Prepaid expenses 610 643
Total current assets 115,273 91,703
Property, plant and equipment, net 34,310 33,127
Other assets 877 1,077
Total assets $150,460 $125,907
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $49,914 $32,735
Accrued liabilities 6,073 4,812
Income taxes payable 1,441 929
Total current liabilities 57,428 38,476
Long-term debt 20,393 30,433
Other liabilities 255 253
Deferred income taxes 1,768 1,761
Commitments & Contingencies
Shareholders' Equity:
Common Stock $.01 par value per
share
Authorized 30,000,000; issued
9,334,852 and 8,783,737,
respectively 93 88
Additional paid-in capital 42,229 31,591
Retained earnings 28,307 23,318
70,629 54,997
Less: cost of 52,425 shares of common
stock in treasury 13 13
Total shareholders' equity 70,616 54,984
Total liabilities and shareholders'
equity $150,460 $125,907
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(thousands of dollars, except per share amounts)
(unaudited)
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $49,286 $29,675 $144,211 $68,493
Cost of sales 39,559 21,838 113,519 47,106
Gross Profit 9,727 7,837 30,692 21,387
Costs and expenses:
Selling, general and
administrative 5,038 4,630 13,517 13,641
Research and development 2,780 1,689 7,942 4,923
Earnings from operations 1,909 1,518 9,233 2,823
Interest income 487 180 1,178 451
Interest expense (687) (663) (2,081) (1,961)
Other (expense) income, net (2) (28) 87 (56)
Earnings before income taxes,
extraordinary loss
and cumulative effect of
accounting change 1,707 1,007 8,417 1,257
Income tax expense 666 398 3,283 490
Earnings before extraordinary
loss and cumulative
effect of accounting change 1,041 609 5,134 767
Extraordinary loss on early
extinguishment of debt,
net of taxes (145) - (145) -
Earnings before cumulative effect
of accounting change 896 609 4,989 767
Cumulative effect of accounting
change - - - 374
Net earnings $896 $609 $4,989 $1,141
PER COMMON SHARE:
Earnings before extraordinary
loss and cumulative
effect of accounting change $0.12 $0.07 $0.58 $0.09
Extraordinary loss on early
extinguishment of debt,
net of taxes (0.02) - (0.02) -
Earnings before cumulative effect 0.10 0.07 0.56 0.09
of accounting change
Cumulative effect of accounting
change - - - 0.04
Net earnings $0.10 $0.07 $0.56 $0.13
Weighted average number of
common shares 9,015,891 8,707,204 8,832,524 8,677,774
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Nine Months Ended March 31, 1995 and 1994
(thousands of dollars, except share information;
unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net earnings 4,989 1,141
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,266 2,643
Deferred income tax benefit (438) -
Cumulative effect of accounting change - (374)
Write-off of deferred financing fees
associated with early extinquishment of debt 188 -
(Gain) Loss on disposal of equipment (84) 24
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (5,677) (8,160)
Inventories (2,400) (14,317)
Prepaid expenses 33 (149)
Other assets (53) (190)
Increase (decrease) in accounts payable,
accrued liabilities and income taxes
payable 18,965 22,809
Net cash provided by operating activities 18,789 3,427
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment (4,600) (3,014)
Proceeds from sale of property, plant and
equipment 300 36
Net cash used in investing activities (4,300) (2,978)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on long-term debt (51) (118)
Fees associated with conversion of debt to equity (17) -
Proceeds from exercise of stock options
and employee stock purchases 660 779
Net cash provided by financing activities 592 661
Increase in cash 15,081 1,110
Cash and cash equivalents at beginning of period 36,499 25,048
Cash and cash equivalents at end of period $51,580 $26,158
Supplemental cash flow data-Cash paid during the
period:
Interest, net of portion capitalized $ 1,580 $ 1,546
Income taxes $ 3,127 $ -
Supplemental disclosure of non-cash financing
activity:
Issuance of 510,358 shares of common stock upon
conversion of $10,000 Convertible Subordinated
Notes $10,000 -
<FN>
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts
of Barr Laboratories, Inc. and its wholly-owned subsidiaries
(the "Company" or "Barr").
In the opinion of the Management of the Company, the interim
consolidated financial statements include all adjustments
consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. Interim
results are not necessarily indicative of the results that
may be expected for a full year. These financial statements
should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended June 30, 1994, and
quarterly reports on Forms 10-Q for the periods ended
September 30, and December 31, 1994.
Certain amounts in prior years' financial statements have been
reclassified to conform with the current year presentation.
2. Inventories
Inventories consisted of the following (in thousands of
dollars):
March 31, June 30,
1995 1994
Raw materials and supplies $18,131 $18,064
Work-in-process 5,863 5,093
Finished goods 7,756 6,193
Totals $31,750 $29,350
Tamoxifen Citrate, purchased as a finished product, accounted
for approximately $3,500 and $1,992 of finished goods as of
March 31, 1995, and June 30, 1994, respectively.
3. Cumulative Effect of Accounting Change - SFAS No.109
Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). The Standard requires a change
from the deferred method under APB Opinion 11 to the asset
and liability method of accounting for income taxes. Under
the asset and liability method of SFAS 109, deferred income
taxes are recognized for future tax consequences attributable
to differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences
are expected to be recovered or settled. The cumulative
effect of this accounting change was a one-time gain of
$374,000 or $.04 per share.
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. Earnings Per Common Share and Common Share Equivalents
For the three and nine-month periods ended March 31, 1995 and
1994, earnings per common share are computed by dividing the
earnings applicable to common stock by the weighted average
number of common shares outstanding during the period. The
effects of stock options outstanding resulted in less than 3%
dilution. The effects of the convertible subordinated debt
and related interest adjustment to earnings were excluded
from the three and nine-months ended March 31, 1994, as they
would be anti-dilutive.
5. Cash and Cash Equivalents
As of March 31, 1995, and June 30, 1994, approximately
$37,000 and 17,000, respectively, of the Company's cash was
held in a cash collateral account to secure extension of
credit to it by the manufacturer of Tamoxifen Citrate. (See
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations -- Liquidity and Capital
Resources.)
6. Commitments and Contingencies
Litigation
The Company, at March 31, 1995, was involved in lawsuits
incidental to its business, including patent infringement
actions. Management, based on the advice of legal counsel,
believes that the ultimate disposition of these lawsuits will
not have any significant adverse effect on the Company's
consolidated financial statements.
7. Extraordinary Loss from Early Extinguishment of Debt
In the quarter ended March 31, 1995, the Company incurred an
extraordinary loss resulting primarily from the write-off of
deferred financing costs associated with its 10.05%
Convertible Subordinated Notes which were converted to
510,358 shares of common stock in February 1995. This
extraordinary loss from early extinguishment of debt, net of
taxes, was $145,000 or $0.02 per share for the three- and
nine-months ended March 31, 1995.
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
Item 2.
Management's Discussion And Analysis Of Financial
Condition And Results Of Operations
Results of Operations
Comparison of the Quarter Ended March 31, 1995
to the Quarter Ended March 31, 1994 - (thousands of dollars)
Net sales increased 66.1% to $49,286 from $29,675. The increase
is primarily attributable to a continued increase in demand for
Tamoxifen Citrate ("Tamoxifen"), the breast cancer treatment
distributed by the Company.
Tamoxifen sales increased 126% to $35,695 from $15,825. The
increase reflects the Company's growing market share of the total
Tamoxifen market. Tamoxifen is a patented product and is
manufactured for the Company by the innovator/patent holder.
Tamoxifen, which is distributed by the Company under a non-
exclusive license agreement with the innovator, currently only
competes against the innovator's product, which is sold under a
brand name.
Gross profit increased to $9,727 from $7,837 primarily due to
increased sales volume. However, the gross margin decreased to
19.7% from 26.4%. This decrease is primarily attributed to the
lower gross margins earned on the distribution of Tamoxifen and
by price erosion encountered on certain of the Company's
manufactured products.
Selling, general and administrative expenses increased to $5,038
from $4,630, yet declined as a percentage of net sales to 10.2%
from 15.6%. This increase of $408 is primarily attributed to
increases in salaries and related expenses, additional
depreciation and associated expenses resulting from
implementation of a new core computer system, and additional
legal fees. This increase was offset in part by a reduction in
sales commissions as a result of the re-negotiation of an outside
sales representative's contract with the Company in the quarter
ended March 31, 1994. The decrease as a percentage of net sales
was expected and is due to the significant increase in net sales.
Research and development expenses increased nearly 65% to $2,780
from $1,689. This increase reflects the Company's commitment to
its research and development efforts in fiscal 1994-1995. The
Company has hired additional personnel, purchased raw material
used in research and development, and has increased spending with
outside laboratories to conduct biostudies.
Interest income increased approximately 171% to $487 from $180,
due to an increase in the average balance of short-term
investments as well as an increase in the rate of return earned
on those investments.
In the quarter ended March 31, 1995, the Company incurred an
extraordinary loss resulting primarily from the write-off of
deferred financing costs associated with its 10.05% Convertible
Subordinated Notes which were converted to common stock in
February 1995.
<PAGE>
The tax provisions for the quarters ended March 31, 1995, and
March 31, 1994, were calculated at an effective tax rate of 39.0%
and 39.5% respectively.
Results of Operations
Comparison of the Nine Months Ended March 31, 1995
to the Nine Months Ended March 31, 1994
(thousands of dollars, except for per share amounts)
Net sales increased approximately 111% to $144,211 from $68,493.
This increase is primarily attributable to a continued increase
in demand for Tamoxifen, the breast cancer treatment distributed
by the Company.
During the nine months ended March 31, 1995, sales of Tamoxifen
accounted for approximately 71% of net sales. Since the Company
did not commence selling Tamoxifen until November 1, 1993, a
comparison of sales of the product during the nine month period
ended March 31, 1995, with such sales during the comparable
period in 1994, would not be meaningful. Tamoxifen is a patented
product and is manufactured for the Company by the
innovator/patent holder. Tamoxifen, which is distributed by the
Company under a non-exclusive license agreement with the
innovator, currently only competes against the innovator's
product, which is sold under a brand name.
Gross profit increased to $30,692 from $21,387 due to increased
sales volume. However, the gross margin decreased to 21.3% from
31.2%. This decrease is primarily attributed to the lower gross
margins associated with the distribution of Tamoxifen, price
erosion on certain of the Company's manufactured products and, to
a lesser extent, to higher manufacturing overhead costs.
Selling, general and administrative expenses decreased slightly
to $13,517 from $13,641, and declined as a percentage of net
sales to 9.4% from 19.9%. Increases in salaries and bonuses,
recruiting expenses, training expenses, as well as additional
depreciation and associated expenses resulting from the
implementation of a new core computer system, were offset by
decreases in legal fees. The Company's legal expenses decreased
as a result of the settlement of its dispute with the FDA and a
decrease in legal expenses incurred in connection with the
Company's lawsuit challenging the validity of the patent on AZT.
The increases discussed above were also offset by a reduction in
sales commissions as a result of the re-negotiation of an outside
sales representative's contract with the Company in the quarter
ended March 31, 1994.
Research and development expenses increased over 60% to $7,942
from $4,923. This increase reflects the Company's commitment to
its research and development efforts in fiscal 1994-1995. The
Company has hired additional personnel, purchased raw material
used in research and development, and has increased spending with
outside laboratories to conduct biostudies.
Interest income increased 161% to $1,178 from $451, due to an
increase in the average balance of short-term investments as well
as an increase in the rate of return earned on those investments.
<PAGE>
In the quarter ended March 31, 1995, the Company incurred an
extraordinary loss resulting primarily from the write-off of
deferred financing costs associated with its 10.05% Convertible
Subordinated Notes which were converted to common stock in
February 1995.
The tax provisions for the nine months ended March 31, 1995, and
1994 were calculated at an effective tax rate of 39.0%.
Additionally, effective July 1, 1993, the Company adopted
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." The cumulative effect of this accounting
change was a one time gain of $374 or $.04 per share. (See Note
3 to the Consolidated Financial Statements.)
Liquidity and Capital Resources
The Company had cash and cash equivalents of $51,580 at March 31,
1995, compared to $36,499 at June 30, 1994, an increase of
$15,081. This increase resulted primarily from cash provided by
operations, slightly offset by capital expenditures. As of March
31, 1995, approximately $37,000 of the Company's cash was held in
a cash collateral account to secure credit extended to the
Company by the manufacturer of Tamoxifen. The Company continues
to evaluate alternatives to using cash to secure this payable,
including obtaining a letter of credit facility. The Company has
the right to replace the cash collateral with letters of credit
once such a facility is obtained.
Cash provided from operating activities was $18,789 for the nine
months March 31, 1995, which included net earnings of $4,989.
Additionally, increases in accounts payable, accrued liabilities
and income taxes payable of $18,965, as well as non-cash charges
(depreciation and amortization) of $3,266 had a favorable impact
on the cash provided by operating activities. The increases in
accounts payable and accounts receivable were primarily due to
increased purchases and sales of Tamoxifen.
The Company purchased approximately $4,600 in capital assets
during the nine months ended March 31, 1995. Upgrading the
Company's core computer systems, an expansion of the Company's
executive and administrative offices and purchase of new
equipment accounted for the majority of these expenditures. The
Company expects that its capital expenditures may increase
significantly during the fourth quarter of fiscal 1995 and during
the next fiscal year. This anticipated increase will be primarily
attributed to the construction of a new multi-purpose facility.
The Company is currently evaluating alternatives for financing
the construction of this facility.
On February 17, 1995, the Company issued 510,358 common shares of
Barr Laboratories stock upon conversion by the noteholders of the
$10 million principal amount of all outstanding 10.05%
Convertible Subordinated Notes.
The Company is currently exploring numerous alternatives to
secure a working capital line of credit, including a facility to
provide standby letters of credit to secure future Tamoxifen
purchases. The Company believes that such a line will allow the
Company to utilize its existing escrow funds to help fund
operations and capital expenditures.
Management believes that existing capital resources, along with
the Company's ability to obtain additional capital, if required,
will be adequate to meet its needs for the foreseeable future.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit Number Exhibit
11 Computation of per share
earnings
27 Financial data schedule
(b) A report on Form 8-K was filed, dated February 22,
1995, containing a press release issued by the
Registrant announcing that its noteholders had elected
to convert the entire amount of all outstanding 10.05%
Convertible Subordinated Notes to common shares of Barr
Laboratories stock.
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
BARR LABORATORIES, INC.
Dated: May 10, 1995 /s/ Bruce L. Downey
Bruce Downey, Chairman,
Chief Executive Officer and President
Dated: May 10, 1995 /s/ Paul M. Bisaro
Paul M. Bisaro, Chief Financial Officer
and General Counsel
Dated: May 10, 1995 /s/ Peter J. Finnerty
Peter J. Finnerty, Corporate Controller
<PAGE>
[ARTICLE] 5
[MULTIPLIER] 1,000
<TABLE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
QUARTER AND NINE MONTHS ENDED MARCH 31, 1995 AND 1994
(Amounts in thousands, except per share amounts)
<CAPTION>
1995 1994 1995 1994
QUARTER QUARTER Y-T-D Y-T-D
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 9,016 8,707 8,833 8,678
Net effect of dilutive stock options -
based on the treasury stock method using
average market price - i - i - ii - ii
Total 9,016 8,707 8,833 8,678
Net earnings $896 $609 $4,989 $1,141
Net earnings per share $0.10 $0.07 $0.56 $0.13
FULLY DILUTED
Average shares outstanding 9,016 8,707 8,833 8,678
Net effect of dilutive stock options -
based on the treasury stock method using:
average market price - iii 189 - iii 216
Convertible debenture - 503 - 503
Total 9,016 9,399 8,833 9,397
Net earnings $896 $609 $4,989 $1,141
Deferred finance charges, net of tax - 14 - 14
Interest adjustment, net of tax - 151 - 307
Total $896 $774 $4,989 $1,462
Net earnings per share $0.10 $0.08 iv $0.56 $0.16 iv
i) Stock options of 199 and 189 in 1995 and 1994, respectively, are not
included because their inclusion results in less than 3% dilution.
ii) Stock options of 220 and 216 in 1995 and 1994, respectively, are not
included because their inclusion results in less than 3% dilution.
iii) Stock options of 199 and 234 in the three and nine months of 1995 are
not included because their inclusion results in less than 3% dilution.
iv) Anti-dilutive
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 51580
<SECURITIES> 0
<RECEIVABLES> 27310
<ALLOWANCES> 0
<INVENTORY> 31750
<CURRENT-ASSETS> 115273
<PP&E> 34310
<DEPRECIATION> 0
<TOTAL-ASSETS> 150460
<CURRENT-LIABILITIES> 57428
<BONDS> 20393
<COMMON> 93
0
0
<OTHER-SE> 70523
<TOTAL-LIABILITY-AND-EQUITY> 150460
<SALES> 144211
<TOTAL-REVENUES> 144211
<CGS> 113519
<TOTAL-COSTS> 113519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2081
<INCOME-PRETAX> 8417
<INCOME-TAX> 3283
<INCOME-CONTINUING> 5134
<DISCONTINUED> 0
<EXTRAORDINARY> (145)
<CHANGES> 0
<NET-INCOME> 4989
<EPS-PRIMARY> .56
<EPS-DILUTED> .56
<FN>
Accounts Receivable and PP&E are Net
</TABLE>
