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, 1996 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, 1996: 14,021,977.
<PAGE>
BARR LABORATORIES, INC.
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 and June 30, 1995 3
Consolidated Statements of Earnings
for the three and nine-months ended
March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the nine-months ended
March 31, 1996 and 1995 5
Notes to Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 9-13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except share amounts)
(unaudited)
<CAPTION>
March 31, June 30,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,074 $ 52,987
Accounts receivable, less allowances
of $1,885 and $2,100, respectively 29,936 27,307
Inventories 41,843 35,890
Deferred income taxes 3,693 3,601
Prepaid expenses 817 678
Total current assets 121,363 120,463
Property, plant and equipment, net 40,808 34,799
Other assets 1,235 691
Total assets $163,406 $155,953
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 56,915 $ 55,355
Accrued liabilities 6,117 5,495
Income taxes payable 2,240 1,249
Total current liabilities 65,272 62,099
Long-term debt 18,339 20,371
Other liabilities 236 253
Deferred income taxes 1,239 1,377
Commitments & Contingencies
Contingencies (note 6)
Shareholders' Equity:
Common Stock $.01 par value per share
Authorized 30,000,000; issued
14,100,614 and 9,334,852,
respectively 141 93
Additional paid-in capital 43,368 42,230
Retained earnings 34,824 29,543
78,333 71,866
Treasury stock at cost: 78,637 and
52,425 shares, respectively (13) (13)
Total shareholders' equity 78,320 71,853
Total liabilities and shareholders'
equity $163,406 $155,953
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(thousands of dollars, except share amounts)
(unaudited)
<CAPTION>
Three Months Nine Months
Ended Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $60,088 $49,286 $171,729 $144,211
Cost of sales 49,405 39,559 139,405 113,519
Gross Profit 10,683 9,727 32,324 30,692
Costs and expenses:
Selling, general and
administrative 5,714 5,038 16,207 13,517
Research and development 3,552 2,780 8,325 7,942
Earnings from operations 1,417 1,909 7,792 9,233
Interest income 1,003 487 2,288 1,178
Interest expense (457) (687) (1,361) (2,081)
Other (expense) income, net - (2) (12) 87
Earnings before income taxes and
extraordinary loss 1,963 1,707 8,707 8,417
Income tax expense 694 666 3,248 3,283
Earnings before extraordinary loss 1,269 1,041 5,459 5,134
Extraordinary loss on early
extinguishment of debt, net of
taxes (125) (145) (125) (145)
Net earnings $ 1,144 $ 896 $ 5,334 $ 4,989
PER COMMON SHARE:
Earnings before extraordinary loss $ 0.09 $ 0.08 $ 0.39 $ 0.39
Extraordinary loss on early
extinguishment of debt,
net of taxes (0.01) (0.01) (0.01) (0.01)
Net earnings per common and
common equivalent shares $ 0.08 $ 0.07 $ 0.38 $ 0.38
Net earnings per common share
assuming full dilution $ 0.08 $ 0.07 $ 0.36 $ 0.38
Weighted average number of
common shares 13,987,686 13,523,837 13,961,797 13,248,786
Weighted average number of
shares assuming full dilution 14,703,839 13,523,837 14,677,950 13,248,786
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended March 31, 1996 and 1995
(thousands of dollars, except share information;
unaudited)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net earnings $ 5,334 $ 4,989
Adjustments to reconcile net earnings
to net cash provided by (used in) operating
activities:
Depreciation and amortization 3,681 3,266
Deferred income tax benefit (230) (438)
Write-off of deferred financing fees
associated with early extinquishment debt 31 188
Loss (gain) on disposal of equipment 19 (84)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (2,629) (5,677)
Inventories (5,953) (2,400)
Prepaid expenses (139) 33
Other assets (620) (53)
Increase (decrease) in:
Accounts payable and accrued
liabilities 2,165 18,453
Income taxes payable 991 512
Net cash provided by operating activities 2,650 18,789
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,843) (4,600)
Proceeds from sale of property, plant and
equipment 179 300
Net cash used in investing activities (9,664) (4,300)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on long-term debt (2,032) (51)
Fees associated with conversion of debt to equity - (17)
Costs associated with stock split (20) -
Proceeds from exercise of stock options
and employee stock purchases 1,153 660
Net cash used in financing activities (899) 592
Increase (decrease) in cash (7,913) 15,081
Cash and cash equivalents, beginning of period 52,987 36,499
Cash and cash equivalents, end of period $45,074 $51,580
Supplemental cash flow data-Cash paid during the period:
Interest, net of portion capitalized $ 906 $ 1,580
Income taxes $ 2,681 $ 3,127
Supplemental disclosures of non-cash financing activity:
Issuance of 765,537 shares of common stock upon
conversion of $10,000 Convertible Subordinated Notes - $10,000
Declaration of a 3-for-2 stock split effected in the form
of a stock dividend - -
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
BARR LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited) (in thousands, except share information)
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, 1995, and
quarterly reports on Form 10-Q for the periods ended
September 30, and December 31, 1995.
2. Inventories
Inventories consisted of the following:
March 31, June 30,
1996 1995
Raw materials and supplies $19,864 $17,470
Work-in-process 5,599 4,520
Finished goods 16,380 13,900
$41,843 $35,890
Tamoxifen Citrate, purchased as a finished product, accounted
for approximately $11,840 and $9,966 of finished goods as of
March 31, 1996 and June 30, 1995, respectively.
3. Earnings Per Common Share and Common Share Equivalents
For the three and nine-months ended March 31, 1996 and 1995,
earnings per primary common and common equivalent shares was
computed by dividing the earnings applicable to common stock
by the weighted average number of common shares outstanding
during the period. The inclusion of dilutive stock options
resulted in less than 3% dilution. In the calculation of
fully diluted earnings per share, dilutive stock options were
included in fiscal 1996 but excluded in fiscal 1995 since
inclusion resulted in less than 3% dilution.
On February 21, 1996, the Company's Board of Directors
declared a 3-for-2 stock split effected in the form of a 50%
stock dividend. Approximately 4.7 million additional shares
of common stock were distributed on March 25, 1996 to
shareholders of record as of March 4, 1996. All prior year
share and per share amounts have been adjusted for the stock
split.
<PAGE>
4. Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid
investments (primarily municipal bonds with interest rates
that are re-set in intervals of 7 to 71 days) which are
readily convertible into cash at par value (cost). As of
March 31, 1996 and June 30, 1995, approximately $19,763 and
$41,143, 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 Note 7 and
Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital
Resources.)
5. Other
Included within selling, general and administrative expenses
("SG&A") for the three- and nine-months ended March 31, 1996
are non-recurring charges of approximately $700 in connection
with a voluntary early retirement program and a legal
settlement, all of which amounts have been paid as of March
31, 1996. SG&A expenses also include a credit of $700 in
legal costs to be reimbursed by another company. See
Management's Discussion and Analysis. Interest income for
the three- and nine-months ended March 31, 1996 includes $485
of interest received in February 1996 in connection with an
income tax refund from the Internal Revenue Service.
6. Extraordinary Items
In the quarter ended March 31, 1996, the Company negotiated
the prepayment of $2 million in principal of its $20 million
10.15% Senior Secured Notes. This prepayment allowed the
Company to complete an equipment financing to support its
ongoing expansion efforts under more favorable terms (See
Note 9). The cash payment of $2,213 included a prepayment
penalty of $169 and accrued interest through March 15, 1996
of $44. The Company successfully negotiated a lower
prepayment penalty than the amount required by the Note
Agreement. The prepayment penalty of $169 and the related
write-off of approximately $31 in previously deferred
financing costs resulted in an extraordinary loss for the
three- and nine- months ended March 31, 1996. This
extraordinary loss from early extinguishment of debt, net of
taxes of $76, was $125 or $0.01 per share.
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 into
765,537 post-split shares of common stock in February 1995.
This extraordinary loss from early extinguishment of debt,
net of taxes of $92, was $145 or $0.01 per share for the
three- and nine-months ended March 31, 1995.
7. Collateral Agreement
In December 1995, the Company and the Innovator of Tamoxifen
entered into an Alternative Collateral Agreement ("Collateral
Agreement") which suspends certain sections of the Supply and
Distribution Agreement ("Distribution Agreement") entered
into in March, 1993. Under the Collateral Agreement,
extensions of excess credit to the Company will no longer
need to be secured by a letter of credit or cash collateral.
As of December 8,
<PAGE>
1995, the effective date of the Collateral Agreement, the
balance of the funds held in the cash collateral account
totaled approximately $45 million. Beginning with the
Company's first purchase after the effective date of the
Collateral Agreement, the Company is not required to fund the
cash collateral account at the time of purchase. However,
the Company may at its discretion maintain a balance in the
escrow account based on its short-term cash requirements.
All remaining terms of the Distribution Agreement remain in
place.
In return for the elimination of the cash collateral
requirement and in lieu of issuing letters of credit, the
Company has agreed to pay the Innovator monthly interest
based on the average monthly Tamoxifen payable balance, as
defined in the agreement, and maintain compliance with
certain financial covenants.
8. Commitments and Contingencies
In December 1995, the Company received a "30-day" letter from
the IRS disallowing approximately $750 in research and
development tax credits, originating from the fiscal years
ended June 30, 1987 through June 30, 1992, on the grounds
that research and development tax credits taken in developing
generic drugs for approval under the ANDA procedure are
excluded from the definition of the term "qualified research"
by the duplication exclusion contained in section 41(d)(4)(C)
of the IRS Code, and other grounds. The Company intends to
vigorously defend its position and has filed a written
protest requesting reconsideration by the IRS Office of
Appeals. If the Company does not reach an agreement with the
Appeals office, the Company would litigate the controversy.
Based on the advice of legal counsel, the Company believes it
has a strong position and that the ultimate disposition will
not have a significant adverse effect on the Company's
consolidated financial statements.
Litigation
The Company, at March 31, 1996, 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. (See also Legal
Proceedings.)
9. Subsequent Events
Labor Agreement: On April 1, 1996, the Company and employees
represented by Local 8-149 of the Oil, Chemical and Atomic
Workers International Union agreed to a new five-year
contract replacing the previous three-year contract which
expired on March 31, 1996.
Equipment Financing: On April 15, 1996, the Company signed a
Loan and Security Agreement ("the Agreement") with
BankAmerica Leasing and Capital Group which will provide the
Company up to $18,750 in financing for equipment to be
purchased over the next 12 months. Notes entered into under
the Agreement require no principal payment for the first two
quarters; bear interest quarterly at a rate equal to the
London Interbank Offer Rate (LIBOR) plus 125 basis points;
and have a term of 72 months. On April 16, 1996, the Company
received an initial advance under the Agreement of
approximately $2,500.
<PAGE>
BARR LABORATORIES, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations: Comparison of the Quarter Ended March 31, 1996
to the Quarter Ended March 31, 1995 - (thousands of dollars)
Net sales increased 22% to $60,088 from $49,286. The increase is
attributable to an increase in both Barr-manufactured products
and Tamoxifen Citrate ("Tamoxifen"), the breast cancer treatment
distributed by the Company.
Tamoxifen net sales increased 25% to $44,715 from $35,695,
representing approximately 74% and 72% of total net sales,
respectively. The growth resulted from higher volumes due to
increases in the Company's market share and higher price due to a
slight price increase instituted in mid January 1996. While the
Company's Tamoxifen revenues increased in fiscal 1996, the rate
of growth between fiscal 1995 and 1996 declined compared to prior
years. This decline in the rate of growth was expected given the
dramatic growth achieved immediately after the Company began
distributing Tamoxifen and given the Company's share of the
current market. Tamoxifen is a patented product manufactured for
the Company by the Innovator, and is distributed by the Company
under a non-exclusive license agreement with the Innovator. Prior
to December 1995, the Company competed against the Innovator's
10mg dosage strength only. In December 1995, the Innovator
introduced a 20 mg strength of this product. While the Company
may experience some decline in its market share during calendar
year 1996 as some consumers switch to the new dosage strength,
the new dosage strength has not had a material adverse effect on
the Company's sales through March 31, 1996. Under the terms of
its existing agreement with the Innovator, the Company will be
permitted to begin distributing the 20mg strength in December
1996. The Company will continue to evaluate market conditions
and plans to launch the 20mg strength when it becomes available
to Barr. Based on current sales of the branded product, it would
not appear that such an introduction would have a material impact
on Barr's financial statements.
Net sales of Barr-manufactured products increased 13% as a result
of additional volume and lower discounts and allowances compared
to the prior year when shelf-price adjustments were more
significant.
Although gross margin percentages declined to 18% from 20%, gross
profit increased to $10,683 from $9,727 due to increased sales
volume and lower discounts and allowances as compared to the
prior year. The decline in gross margin is primarily attributed
to the lower gross margins associated with the increased
distribution of Tamoxifen. The Company believes that its new
product, Megestrol Acetate, which was introduced in November
1995, will provide a positive impact during the remainder of the
year and will contribute to offsetting lower margins on certain
Barr-manufactured products, including Methotrexate. The Company
continues to experience competition on its sales of Methotrexate.
While it is impossible to predict whether future price erosion
will occur, if it were to occur this could have an adverse effect
on the Company's gross margins and gross profits.
<PAGE>
Research and development expenses increased to $3,552 from
$2,780. This resulted from higher outside testing and raw
material costs associated with an increase in the number of
products under development when compared to the prior year as
well as increases in salaries and related costs associated with
the addition of scientists.
Selling, general and administrative expenses increased from
$5,038 to $5,714, yet remained consistent as a percentage of net
sales as was expected, due to the significant increase in net
sales. The increase reflects, among other things, higher
advertising and promotion costs associated with the introduction
of Megestrol Acetate in late November 1995. The quarter also
included approximately $700 in non-recurring charges in
connection with a voluntary early retirement program and a legal
settlement. These non-recurring charges were offset by a
reduction in legal fees of approximately $700. During the
quarter ended March 31, 1996, Barr entered into an agreement with
another company to share in development and litigation costs
associated with one of its patent challenges. This agreement
resulted in the above mentioned reduction of $700 in legal fees
which will be reimbursed by the other company.
Interest income increased to $1,003 from $487 primarily as a
result of $485 in interest income received in February 1996 in
connection with an income tax refund from the Internal Revenue
Service.
Interest expense declined $230 primarily due to the reduction in
long-term debt from the February 1995 conversion of $10 million
in Convertible Subordinated Notes into Barr common stock and an
increase in capitalized interest associated with an increase in
capital improvements as compared to the prior year. These
decreases were partially offset by an increase in interest
expense in connection with the Company's December 1995 agreement
with the Innovator of Tamoxifen to pay monthly interest on the
unsecured Tamoxifen payable balance in return for the elimination
of the cash collateral requirement.
In the quarters ended March 31, 1996 and 1995, the Company
incurred extraordinary losses on the early extinguishment of
debt. In March 1996, the Company negotiated the prepayment of $2
million in principal of its $20 million 10.15% Senior Secured
Notes. The Company recorded an extraordinary loss for the
related prepayment penalty and write-off of deferred financing
costs. In February 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.
Results of Operations: Comparison of the Nine Months Ended March 31, 1996
to the Nine Months Ended March 31, 1995 (thousands of dollars)
Net sales increased to $171,729 from $144,211. The 19% increase
is primarily attributable to a continued increase in demand for
Tamoxifen, the breast cancer treatment distributed by the
Company, as well as increased sales for the balance of the
Company's product lines.
Net sales of Tamoxifen accounted for $126,038 or 73% of net
sales, compared to $101,936 or 71% of net sales. The 24% growth
was due to increases in the Company's market share and price.
While the Company's Tamoxifen revenues increased in fiscal 1996,
the rate of growth between fiscal 1995 and 1996 declined compared
to prior years. This decline in the rate of growth was expected
given the dramatic growth achieved immediately after the Company
began
<PAGE>
distributing Tamoxifen and given the Company's share of the
current market. Prior to December 1995, the Company competed
against the Innovator's 10mg dosage strength only. In December
1995, the Innovator introduced a 20 mg strength of this product.
While the Company may experience some decline in its market share
during calendar year 1996 as some consumers switch to the new
dosage strength, the new dosage strength has not had a material
adverse effect on the Company's sales through March 31, 1996.
Under the terms of its existing agreement with the Innovator, the
Company will be permitted to begin distributing the 20mg strength
in December 1996. The Company will continue to evaluate market
conditions and plans to launch the 20mg strength when it becomes
available to Barr. Based on current sales of the branded
product, it would not appear that such an introduction would have
a material impact on Barr's financial statements.
Net sales of Barr-manufactured products increased 8% as a result
of favorable changes in product mix, increases in volume, and
lower discounts and allowances compared to the prior year when
shelf-price adjustments were more significant.
Gross profit increased to $32,324 from $30,692 due to increased
sales volume and lower discounts and allowances as compared to
the prior year. However, gross margin decreased as a percentage
of net sales from 21% to 19%. The decline in gross margin is
primarily attributed to the lower gross margins associated with
the increased distribution of Tamoxifen. The Company believes
that its new product, Megestrol Acetate, which was introduced in
November 1995, will provide a positive impact during the
remainder of the year and will contribute to offsetting lower
margins on certain Barr-manufactured products, including
Methotrexate. The Company continues to experience competition on
its sales of Methotrexate. While it is impossible to predict
whether future price erosion will occur, if it were to occur this
could have an adverse effect on the Company's gross margins and
gross profits.
Research and development expenses increased to $8,325 from
$7,942. This resulted from higher outside testing and raw
material costs associated with an increase in the number of
products under development when compared to the prior year as
well as increases in salaries and related costs associated with
the addition of scientists. These increases were partially
offset by a decrease in fees paid to outside laboratories to
conduct biostudies. Such a decrease was expected since the prior
year's amounts included biostudy costs for conjugated estrogens.
The number, complexity and associated costs of biostudies for
conjugated estrogens are greater than those for other products
currently under development.
Selling, general and administrative expenses increased to $16,207
from $13,517, yet remained consistent as a percentage of net
sales as was expected, due to the increase in net sales. The
increase reflects higher legal expenses in connection with
ongoing patent challenges; additional advertising and promotion
costs associated with the introduction of Megestrol Acetate in
late November 1995; and, additional depreciation from the
December 1994 implementation of a new core computer system.
Fiscal 1996 also included approximately $700 in non-recurring
charges in connection with a voluntary early retirement program
and a legal settlement. These non-recurring charges were offset
by a reduction in legal fees of approximately $700. During the
nine months ended March 31, 1996, Barr entered into an agreement
with another company to share in development and litigation costs
associated with one of its patent challenges. This agreement
resulted in the above mentioned reduction of $700 in legal fees
which will be reimbursed by the other company.
<PAGE>
Interest income increased 94% to $2,288 from $1,178, due to a 23%
increase in the average cash and cash equivalent balance, an
increase in the rate of return earned on those investments, and
$485 in interest income received in February 1996 in connection
with an income tax refund from the Internal Revenue Service.
Interest expense declined $720 primarily due to the reduction in
long-term debt from the February 1995 conversion of $10 million
in Convertible Subordinated Notes into Barr common stock and an
increase in capitalized interest associated with an increase in
capital improvements as compared to the prior year. These
decreases were partially offset by an increase in interest
expense in connection with the Company's December 1995 agreement
with the Innovator of Tamoxifen to pay monthly interest on the
unsecured Tamoxifen payable balance in return for the elimination
of the cash collateral requirement.
In the nine months ended March 31, 1996 and 1995, the Company
incurred extraordinary losses on the early extinguishment of
debt. In March 1996, the Company negotiated the prepayment of $2
million in principal of its $20 million 10.15% Senior Secured
Notes. The Company recorded an extraordinary loss for the
related prepayment penalty and write-off of deferred financing
costs. In February 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.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $45,074 at March 31,
1996, a decrease from $52,987 at June 30, 1995. However, the
Company's unrestricted cash increased $13,467 to $25,311 from
June 30, 1995, as the cash held in a cash collateral account to
secure credit extended to the Company by the Innovator of
Tamoxifen decreased to $19,763 from $41,143 at June 30, 1995.
The decrease in the cash collateral account is a result of an
Alternative Collateral Agreement ("Collateral Agreement") entered
in December 1995 between the Company and the Innovator of
Tamoxifen. As discussed in Note 7 to the financial statements,
extensions of excess credit to the Company no longer need to be
secured by a letter of credit or cash collateral. As a result, a
significant portion of the Company's cash balances are no longer
subject to the restrictions imposed by the escrow account, and
can be used at the Company's discretion. The Company pays the
Innovator monthly interest based on the average unsecured monthly
Tamoxifen payable balance, as defined in the agreement. The
Company may from time to time secure a portion of its payable in
the cash collateral account until a required use arises for the
available cash. The amount in the cash collateral account at
March 31, 1996 represents the portion of its payable which the
Company has decided to secure in connection with its cash
management policy.
Cash provided from operating activities was $2,650 for the nine
months ended March 31, 1996, which included net earnings of
$5,334. Accounts receivable increased primarily as a result of
higher sales volume. Increases in inventory were primarily due
to increased purchases of Tamoxifen and raw materials for Barr-
manufactured products in anticipation of new product launches.
Accounts payable increased primarily as a result of the increased
raw material purchases.
<PAGE>
The Company purchased $9,843 in capital assets during the nine
months ended March 31, 1996 including the $2.3 million purchase
of a manufacturing facility in Forest, Virginia, the expansion of
the Company's manufacturing facilities, and the purchase of new
machinery and equipment. In December 1995, the Company
announced plans to expand its existing manufacturing facilities
in Pomona, New York and Northvale, New Jersey. This investment
will consist of approximately $4 million in construction and $4
million in the purchase and installation of new equipment. Over
the next year, the Company estimates that it will invest an
additional $11.4 million to retrofit the Virginia facility,
purchase and install equipment to manufacture pharmaceutical
products, and outfit laboratory and support facilities.
Management believes that its purchase of the Virginia facility
will result in significant cost savings as compared to new
construction since the existing facility can be easily converted
to meet the Company's needs, and ongoing operating expenses are
more favorable in Virginia when compared to New York and New
Jersey.
On April 15, 1996, the Company signed a Loan and Security
Agreement ("Equipment Agreement") with BankAmerica Leasing and
Capital Group which will provide the Company up to $18,750 in
financing for equipment purchased over the next 12 months. Barr
intends to utilize this facility for the acquisition of certain
of its machinery and equipment. Under the Equipment Agreement,
the Company will be required to meet certain financial covenants.
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.
The Company used $899 in cash for financing activities for the
nine months ended March 31, 1996. This resulted from the
prepayment of $2,000 in principal of the $20 million 10.15%
Senior Secured Notes partially offset by $1,153 received in
connection with employee stock purchases and exercises of stock
options.
In February 1996, the Company's Board of Directors declared a 3-
for-2 stock split effected in the form of a 50% stock dividend.
Approximately 4.7 million additional shares of common stock were
distributed.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
AZT Patent Challenge
As previously disclosed in the Company's Form 10-Q for
the quarter ended December 31, 1995, on January 16,
1996, the U.S. Supreme Court decided it would not hear
an appeal seeking to overturn the Court of Appeals
ruling on Burroughs Wellcome Co.'s ("BW&Co.'s") patents
on zidovudine, the generic versions of the AIDS
treatment AZT. This decision effectively ended the
Company's challenge of the patents. However, BW&Co.'s
claim for recovery of its attorney's fees from the
Company on the grounds that the Company's conduct
rendered the case "exceptional" under patent law
remained outstanding. While the Company believes its
challenge of the patents was valid, it agreed to a
settlement with BW&Co. to avoid substantial legal costs
associated with defending its position. The settlement
amount of $400 was paid on February 27, 1996 and is
included in selling, general and administrative
expenses.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit
Number Exhibit
11 Computation of per share earnings
27 Financial data schedule
(b) The following report on Form 8-K was filed by
the Company in the quarter ended March 31, 1996:
Report Date Item Reported
February 21, 1996 The Company announced the declaration of a
3-for-2 stock split.
<PAGE>
BARR LABORATORIES, INC.
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: April 29, 1996 /s/ Paul M. Bisaro
Paul M. Bisaro, Vice President,
Chief Financial Officer
and General Counsel
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 45,074
<SECURITIES> 0
<RECEIVABLES> 29,936
<ALLOWANCES> 0
<INVENTORY> 41,843
<CURRENT-ASSETS> 121,363
<PP&E> 40,808
<DEPRECIATION> 0
<TOTAL-ASSETS> 163,406
<CURRENT-LIABILITIES> 65,272
<BONDS> 18,339
<COMMON> 141
0
0
<OTHER-SE> 78,192
<TOTAL-LIABILITY-AND-EQUITY> 163,406
<SALES> 171,729
<TOTAL-REVENUES> 171,729
<CGS> 139,405
<TOTAL-COSTS> 139,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,361
<INCOME-PRETAX> 8,707
<INCOME-TAX> 3,248
<INCOME-CONTINUING> 5,334
<DISCONTINUED> 0
<EXTRAORDINARY> 125
<CHANGES> 0
<NET-INCOME> 5,334
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.36
<FN>
Accounts Receivable and PP&E are Net
</FN>
</TABLE>
<TABLE>
BARR LABORATORIES, INC
COMPUTATION OF PER SHARE EARNINGS
QUARTER AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(Amounts in thousands, except per share amounts)
<CAPTION>
1996 1995 1996 1995
QUARTER QUARTER (i) Y-T-D Y-T-D (i)
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 13,988 13,524 13,962 13,249
Net effect of dilutive stock
options - based on the treasury
stock method using average market
price -ii -ii -iii -iii
Total 13,988 13,524 13,962 13,249
Net earnings $1,144 $896 $5,334 $4,989
Net earnings per share $0.08 $0.07 $0.38 $0.38
FULLY DILUTED
Average shares outstanding 13,988 13,524 13,962 13,249
Net effect of dilutive stock
options - based on the treasury
stock method using:
quarter-end market price 716 - 716 -
average market price - - iv - -iv
Total 14,704 13,524 14,678 13,249
Net earnings $1,144 $896 $5,334 $4,989
Net earnings per share $0.08 $0.07 $0.36 $0.38
i) Share and earnings per share amounts have been restated to reflect a
3 for 2 stock split effected in the form of a 50% stock dividend,
distributed in March, 1996.
ii) Stock options of 653 and 298 in 1996 and 1995, respectively, are not
included because their inclusion results in less than 3% dilution.
iii) Stock options of 441 and 330 in 1996 and 1995, respectively, are not
included because their inclusion results in less than 3% dilution.
iv) Stock options of 298 and 351 in the three and nine months ended
March 31, 1995, respectively, are not included because their inclusion
results in less than 3% dilution.
</TABLE>
