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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 3, 1998
APPLIED ANALYTICAL INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation or Organization)
0-21185 04-2687849
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(Commission File Number) (I.R.S. Employer Identification Number)
5051 New Centre Drive
Wilmington, North Carolina 28403
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(Address of Principal Executive Offices) (Zip Code)
(910) 392-1606
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(Registrant's Telephone Number, Including Area Code)
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APPLIED ANALYTICAL INDUSTRIES, INC.
FORM 8-K
(Any item which is not applicable or to which the
answer is negative has been omitted.)
Item 5. Other Events.
On November 3, 1998, Applied Analytical Industries, Inc. (the "Company") issued
a press release reporting the Company's unaudited consolidated financial results
for the period ended September 30, 1998. The press release is filed as Exhibit
99.1 hereto and is incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
Exhibits:
Exhibit No. Description
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99.1 Press release dated November 3, 1998
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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 hereunto duly authorized.
APPLIED ANALYTICAL INDUSTRIES, INC.
Date: November 5, 1998 By: /s/ Eugene T. Haley
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Eugene T. Haley
Executive Vice President and
Chief Financial Officer
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APPLIED ANALYTICAL INDUSTRIES, INC.
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press release dated November 3, 1998
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
3 November 1998
Contact:
Investor Information: Eugene T. Haley, CFO, AAI 910.392.1606
Media Information: Kenneth C. Rabb 919.286.3444
APPLIED ANALYTICAL INDUSTRIES, INC (AAI) ANNOUNCES THE
THIRD CONSECUTIVE QUARTER OF RECORD FINANCIAL RESULTS
- -- AAI delivers significant increases in quarterly sales and earnings,
expands capabilities, and advances Internal Product Development
pipeline.
- -- Third quarter revenues increase 44% over last year to $20.1 million.
- -- Third quarter net income increases substantially over last year to $1.4
million.
- -- AAI customer, CollaGenex, receives FDA approval of Periostat(R); AAI
begins manufacturing phase of relationship.
- -- New Jersey laboratory facility opens first phase October 26, 1998.
- -- Kansas City Analytical Services, Inc. acquired on September 14, 1998
for $5.5 million dollars.
Wilmington, North Carolina, November 3, 1998 - Applied Analytical Industries,
Inc. (NASDAQ:AAII) today announced financial results for the third quarter ended
September 30, 1998.
Net sales for the third quarter of 1998 rose 44% to $20.1 million from net sales
of $14.0 million reported in the third quarter of 1997. The Company reported net
income for the third quarter of 1998 of $1.4 million, or $0.09 per share, versus
a net loss of $1.2 million or $0.07 per share, for the same period a year ago.
Third quarter 1997 results reflected certain one-time impacts, including items
related to certain merger activities which were discontinued in August 1997.
Quarterly net sales of the Company's core Fee-for-Service business increase by
46% to $18.4 million in 1998 from $12.6 million for the same period of 1997.
Internal Product Development revenues for the third quarter were $1.7 million,
compared to $1.4 million for the same period in 1997.
-- more --
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AAI 3rd Quarter 1998 Release
3 November 1998
page 002
For the nine months ending September 30, 1998, net sales were $56.7 million, an
increase of 26% from the sales of $45.0 million reported for the same period of
1997. Net income was $3.8 million, or $0.23 per share, versus net income of $.3
million, or $0.02 per share in 1997. Net sales of the Company's core
Fee-for-Service business increased by 23% to $51.2 million in 1998 from $41.6
million in 1997. Internal Product Development revenues in 1998 increased by 61%
to $5.5 million versus Internal Product Development revenues of $3.4 million in
1997.
Gross margin was 51% for the third quarter of 1998 compared to 43% for the same
period of 1997. Research and Development (R&D) expenses were 6.8% of net sales
in the third quarter of 1998, compared to 17% in the third quarter of 1997. The
reduction in R&D spending as a percent of sales reflects the company's
continuing ability to reduce R&D expenses through the use of internal clinical
capabilities acquired in Europe at the end of 1996. The R&D spending rate is
expected to rise in future quarters as several projects enter larger clinical
trial phases.
Dr. Frederick Sancilio, AAI's Chief Executive Officer and Chairman, announced
the third quarter results, saying; "AAI made progress on several major fronts in
the third quarter. Our Internal Product Development programs, in which we work
with client partners on carefully chosen shared risk projects, made positive
current earnings contribution for the fourth consecutive quarter while
continuing to build value for the future. We have broadened our therapeutic
expectations for our Diclofenac with Pro-Sorb(TM) product from our original
focus on migraine with aura to now include general migraine applications and
certain post-surgical pain. We are planning further trials to establish
Diclofenac's impact on this wider range of indications. We were also pleased to
have one of our products approved by the FDA in this quarter along with our
customer CollaGenex's Periostat(R) product. We recognized a milestone payment on
our recently approved product in the third quarter and expect manufacturing
revenues to begin on Periostat(R) in the fourth quarter."
- -more- -
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AAI 3rd Quarter 1998 Release
3 November 1998
page 003
Speaking of other recent achievements, Dr. Sancilio said "the demand for
pharmaceutical development outsourcing continues to be strong, and we are very
please with our effort to expand our abilities to meet that demand. The
acquisition of Kansas City Analytical Services in September brings world
recognized bioanalytical talents into our organization, and our substantial New
Jersey expansion opened on time and on budget last week. We plan to continue to
build shareholder value by providing our pharmaceutical customers with the
premier solution to their product development needs."
About AAI
AAI is a leading contract research and development organization (CRO) providing
pharmaceutical product development and support services to the worldwide
pharmaceutical and biotechnology industries. The Company offers seamless
outsourcing as well as an integrated broad spectrum of pharmaceutical services,
both clinical and non-clinical. Additionally, AAI leverages its drug development
expertise to generate licensing and royalty revenues by licensing internally
developed drugs and drug technologies to pharmaceutical client companies
worldwide. Further information about the company can be found at the Company's
website http:\\www.aaiintl.com or by contacting Eugene T. Haley, CFO.
Information in the press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements involve risks and
uncertainties that could cause actual results to differ materially, including
without limitation, the ability of acquired businesses to be integrated with
AAI's operations, actual operational performance, the ability to acquire and
maintain large client contracts, the ability to hire and retain qualified
employees and other items that may cause the actual results to differ
materially, which may be discussed in the Company's recent Form 10-K filings,
its registration statement, as amended, and other filings with the Securities
and Exchange Commission.
-- www.aaiintl.com --
(Table to follow)
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Applied Analytical Industries, Inc.
Condensed Consolidated Statement of Income
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net sales:
Fee for service $18,396 $ 12,617 $51,171 $ 41,586
Internal product development 1,742 1,404 5,505 3,424
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20,138 14,021 56,676 45,010
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Operating costs and expenses:
Cost of sales 9,854 7,994 27,316 23,051
Selling 2,249 2,268 6,431 5,932
General and administrative 4,958 4,022 13,020 11,056
Research and development 1,372 2,379 4,740 5,750
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18,433 16,663 51,507 45,789
------- -------- ------- --------
Income from operations 1,705 (2,642) 5,169 (779)
Other income (expense):
Interest income, net of expense 75 196 321 770
Other, net 131 298 101 515
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206 494 422 1,285
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Income before income taxes 1,911 (2,148) 5,591 506
Provision for income taxes 498 (984) 1,799 177
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Net income $ 1,413 $ (1,164) $ 3,792 $ 329
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Basic earnings per share $ 0.09 $ (0.07) $ 0.23 $ 0.02
======= ======== ======= ========
Weighted average shares outstanding 16,308 16,291 16,303 16,289
======= ======== ======= ========
Diluted earnings per share $ 0.09 $ (0.07) $ 0.23 $ 0.02
======= ======== ======= ========
Weighted average shares outstanding 16,356 16,519 16,390 16,457
======= ======== ======= ========
</TABLE>
