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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) March 2, 1999
APPLIED ANALYTICAL INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-21185 04-2687849
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(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
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)
Not Applicable
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(Former name or address, if changed from last report)
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Item 5. Other Events.
On March 2, 1999, Applied Analytical Industries, Inc. (the "Company")
issued a press release reporting the Company's consolidated financial results
for the quarter and fiscal year ended December 31, 1998. The press release is
filed as Exhibit 99.1 hereto and is incorporated by reference herein.
The Company does not undertake to update any of the information set
forth in the Release, which information constitutes only the Company's current
estimate with respect to revenues and net income for the periods identified in
the Release. Information in the Release may contain 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 following: the ability of acquired businesses
to be integrated with AAI's operations; the company's dependence on continued
strict government regulation of the drug development process; the company's
dependence on research and development expenditures and production-related
compliance testing expenditures by the pharmaceutical and biotechnology
industries (and the consequent risk that a general economic decline in these
industries or any reduction in the outsourcing of research, development and
testing activities within these industries could adversely affect the company's
business); fluctuation in the company's quarterly results due to a number of
factors, including without limitation, the commencement, completion or
cancellation of large contracts, progress of ongoing contracts, achieving
expected levels of licensing and royalty revenues, potential acquisitions, the
timing of start-up expenses for new facilities and changes in the mix of
services; the ability to acquire and maintain large client contracts; the
ability to hire and retain qualified employees; the reliance on certain key
executive officers; and other items that may cause the actual results to differ
materially, which may be discussed in the company's recent Form 10-K and Form
10-Q, its registration statement on Form S-3, and other filings with the
Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Exhibit 99.1 -- Press release dated March 2, 1999
2
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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.
Date: March 2, 1999
APPLIED ANALYTICAL INDUSTRIES, INC.
By: /s/ Eugene T. Haley
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Eugene T. Haley
Vice President and Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
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<S> <C>
Exhibit 99.1 Press release dated March 2, 1999
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FOR RELEASE MARCH 2, 1999 For: APPLIED ANALYTICAL INDUSTRIES, INC.
NASDAQ: AAII
Contacts: FINANCIAL CONTACT
Eugene Haley
Executive Vice-President and
Chief Financial Officer
(910) 392-1606
MEDIA CONTACT
Ken Rabb
Phoenix Communications
(919) 286-3444
APPLIED ANALYTICAL INDUSTRIES, INC. (AAI) REPORTS
RECORD FOURTH QUARTER AND 1998 RESULTS
- AAI REPORTS RECORD SALES AND EARNINGS FOR THE FOURTH QUARTER OF 1998
- FULL YEAR EARNINGS PER SHARE OF $.35 ARE MORE THAN FOUR TIMES 1997
RESULTS
- PLANNED ACQUISITION OF MTRA, A $20 MILLION CRO, PASSES REGULATORY
REVIEW
- SIGNIFICANT PROGRESS ANNOUNCED ON SUPERIOR VISION PROJECT TO INSTALL
STATE-OF-THE-ART ENTERPRISE-WIDE INFORMATION SYSTEMS
WILMINGTON, NORTH CAROLINA, MARCH 2, 1999 - Applied Analytical Industries, Inc.
(NASDAQ:AAII) achieved record revenues and earnings in 1998, CEO and Chairman
Frederick D. Sancilio, Ph.D. reported today. "This is the fourth consecutive
quarter that both sales and earnings have achieved record levels, again
demonstrating the benefit of our Company's focus on globally providing high
quality analytical and development services to pharmaceutical companies."
Diluted earnings per share for the fourth quarter of $.12 per share were double
1997's fourth quarter EPS of $.06. Efficiency gains in Selling, General and
Administrative expenses contributed to the record results. SG&A spending
increased slightly in the fourth quarter compared to a year ago, but declined
as a percent of Sales.
Net Sales for the fourth quarter were $23.7 million, a 16% increase over the
fourth quarter of 1997. Quarterly net sales from the Company's core
Fee-for-Service business were $22.0 million, an increase of 22% over the prior
year. Fourth quarter Fee-for-Service results include sales contributed by
Kansas City Analytical Services, which AAI acquired in September, 1998. Product
development revenues of $1.7 million in the fourth quarter were generally
comparable with 1997's fourth quarter.
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Net Income for 1998 increased to $5.7 million, or more than four times AAI's
1997 income of $1.3 million. Per share earnings for 1998 also increased more
than four fold to $.35 in 1998, compared to $.08 in 1997.
Net Sales increased from $65.4 million in 1997 to $80.4 million in 1998, a 23%
increase. These sales increases reflect market share gains in the Company's
core services, as well as increases from the acquisition of Kansas City
Analytical Services.
Gross Margin increased to 50.3% in 1998, from 49.0% in 1997. Efficiency gains
represented $1.0 million of the increase in gross margin. SG&A spending for the
year was 11% higher, but declined as a percent of Sales by 3.5 points.
Dr. Sancilio noted that, "We continue to enjoy the results of our strategy: to
add both breadth and depth to our line of services. We've added to our ability
to leverage client relationships by expanding our services to include
bioanalytical testing with the acquisition of KCAS late in the third quarter,
and by completing our new Clinical Trials Distribution Center in Wilmington in
December.
Dr. Sancilio continued, "With our previously announced acquisition of MTRA, a
U.S. based Phase II-IV clinical trials and data management company, we can
offer our clients a complete, global development service, which is unmatched.
We can now take a medicinal product from preliminary development through all
clinical trials using only AAI resources. We can do this domestically or
globally depending on the needs of our client." AAI received notice on February
26, 1999 from the Federal Trade Commission of early termination by the FTC of
the Hart-Scott-Rodino review of the transaction.
During 1998, AAI initiated its "Superior Vision" project. Superior Vision is an
enterprise-wide information system utilizing state-of-the-art software and
systems, designed to ensure that business functions, organizational elements,
data and technology, interact cohesively over the course of each AAI business
process. The design encompasses the currently identified needs of the AAI
organization-at-large as well as the five-year-plan for the Company. The system
is scalable to accommodate future growth and expansion at a minimal incremental
expenditure. Gene Haley, AAI's Chief Financial Officer stated, "The company has
invested approximately $2 million in the project to date, and we expect
significant benefits to begin to accrue in 1999, through further reductions in
Cost of Goods Sold and SG&A."
"Demand remains very strong for our services," said Sancilio, "with clients
rapidly expanding their use of AAI into the clinical trials area. We are
already seeing the results of our efforts which will be reflected in additional
value to our shareholders."
Information in this press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 2lE
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
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ability to meet projected revenue and earnings, 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 1O-K filings,
its registration statement, as amended, and other filings with the Securities
and Exchange Commission.
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APPLIED ANALYTICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Net sales:
Fee for service $ 21,954 $ 18,045 $ 73,125 $ 59,631
Internal product development 1,749 2,346 7,254 5,770
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23,703 20,391 80,379 65,401
Operating costs and expenses:
Cost of sales 12,646 10,327 39,962 33,378
Selling 2,187 2,430 8,618 8,362
General and administrative 4,516 4,151 17,536 15,207
Research and development 1,391 2,041 6,131 7,791
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$ 20,740 $ 18,949 $ 72,247 $ 64,738
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Income from operations 2,963 1,442 8,132 663
Other income (expense):
Interest, net (82) (162) 239 608
Other 97 250 198 765
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$ 15 $ 88 $ 437 $ 1,373
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Income before income taxes 2,978 1,530 8,569 2,036
Provision for income taxes 1,070 604 2,869 781
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Net income $ 1,908 $ 926 $ 5,700 $ 1,255
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Basic earnings per share $ 0.12 $ 0.06 $ 0.35 $ 0.08
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Weighted average shares outstanding 16,378 16,294 16,322 16,290
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Diluted earnings per share $ 0.12 $ 0.06 $ 0.35 $ 0.08
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Weighted average shares outstanding 16,584 16,435 16,417 16,459
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