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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) May 2, 2000
APPLIED ANALYTICAL INDUSTRIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-21185 04-2687849
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
2320 Scientific Park Drive
Wilmington, North Carolina 28405
(Address of Principal Executive Offices)
(Zip Code)
(910) 254-7000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former name or address, if changed from last report)
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Item 5. Other Events.
On May 2, 2000, Applied Analytical Industries, Inc. (the "Company")
issued a press release reporting the Company's first quarter financial results
for the period ended March 31, 2000. The press release is filed as Exhibit 99.1
hereto and is incorporated by reference herein.
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 May 2, 2000
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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: May 2, 2000
APPLIED ANALYTICAL INDUSTRIES, INC.
By: /s/ William L. Ginna, Jr.
-----------------------------------------
William L. Ginna, Jr.
Vice President and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Exhibit
----------- -------
Exhibit 99.1 Press release dated May 2, 2000
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Exhibit 99.1
APPLIED ANALYTICAL INDUSTRIES, INC. (AAI) ANNOUNCES 2000 FIRST QUARTER FINANCIAL
RESULTS, REVIEWS PRODUCT DEVELOPMENT ACHIEVEMENTS
- - FOURTH CONSECUTIVE QUARTER OVER QUARTER GROWTH IN EARNINGS
- - FOUR DRUG APPROVALS RECEIVED DURING THE FIRST QUARTER
- - MARKETING ALLIANCE WITH GUILDFORD CLINICAL PHARMACOLOGY SIGNED
- - MOLECULAR STRUCTURE LABORATORY INITIATES OPERATIONs
WILMINGTON, NORTH CAROLINA, May 2, 2000 - AAI (NASDAQ:AAII) today announced
total revenues of $24.9 million for the quarter ended March 31, 2000 and net
income for the quarter of $524 thousand, or $0.03 per share, as compared to a
loss of $3.8 million, or $0.22 per share, in the first quarter of 1999. Results
for 1999 include a nonrecurring charge associated with a merger.
Revenues achieved in AAI's fee-for-service development business grew to $22.9
million reflecting 3.2% growth from the prior year's first quarter. Product
development revenues of $2.0 million (which include both fees and royalties)
were less than the first quarter of 1999. The 1999 quarter's product development
revenues included a milestone fee of $1.8 million, while the first quarter of
2000 results are primarily royalty based.
"Our first quarter results reflect a trend of continuous improvement quarter
over quarter, seen for the last four quarters. An improvement in earnings has
occurred each sequential quarter since the first quarter of 1999. We are clearly
on target to achieve our corporate objectives for 2000," said Dr. Frederick
Sancilio, AAI's chairman and chief executive officer. "The transition from being
a pure `fee-for-service' provider into a specialty pharmaceutical company began
in 1997. We have made major investments into several research programs and
products that will be the cornerstone of things to come. While product
development revenue dipped this quarter relative to last year's first quarter,
I'm quite comfortable with our progress in building long-term value in our
research program, and consequently long-term earnings potential. Revenue in
product development is made up of two parts: milestone fees and recurring
royalties. The milestone fees tend to be `lumpy' giving the appearance of
volatility to our overall earnings. However, as the proportion of royalties
grows, the effect will be lessened. We expect that to occur later this year or
early next."
Direct costs in the first quarter of $13.5 million were lower in dollars and as
a percent of sales than in the first quarter of 1999. Consequently overall gross
margins were up by two percentage points for the quarter. These lower cost
levels reflect successful implementation of efficiency improvement programs
initiated last year. "Selling, general and administrative costs increased by
14%, reflecting the expansion of our selling efforts as well as continued
investments in our information systems. We expect SG&A expenses, as a percentage
of sales, to be lower by year-end," said Mr. William Ginna, AAI's chief
financial officer.
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"This quarter's results reflect increasing efficiencies of our business model,"
continued Mr. Ginna. "We have achieved growth in our fee-for-service business
while significantly increasing the efficiency of our direct costs. Operating
cash usage in the quarter was neutral and debt was lowered by approximately $1
million. Collections were strong, reducing both our accounts receivable balance
and number of days' sales outstanding.
These events are good indicators of the success of our management programs."
Several recent highlights include:
- Tentative approval of the anti-anxiety agent, buspirone 5, 10
and 15 mg tablets, was received from FDA in March. The 15-mg
tablet is scored such that it can be divided into a 7.5-mg
dose or trisected to provide both the 5 and 10-mg dosages,
allowing maximum dosing flexibility for patients.
- FDA granted approval of both 5 and 10 mg methimazole tablets,
a potent inhibitor of thyroid hormones used in the treatment
of hyperthyroidism.
- AAI received 2 product approvals from the German regulatory
agency during the quarter. These products will remain
confidential while current marketing negotiations are
completed.
- AAI and Guildford Clinical Pharmacology announced a marketing
alliance for clinical services in the United Kingdom. The
alliance will allow AAI to leverage existing laboratory and
marketing capabilities into the region, without start-up costs
associated with either an acquisition or additional organic
growth.
- An expansion of AAI's research capability was announced during
the first quarter. AAI opened its molecular structure research
facilities in Wilmington. This state-of-the-art physical
chemistry laboratory enhances efforts to improve the efficacy
of existing drugs. These unique capabilities will be dedicated
to AAI product development activities, thereby adding to the
base of potential royalty generating contracts.
- Several significant changes to management occurred during the
first quarter. These include the promotion of Mr. Eugene T.
Haley to international managing director responsible for all
of AAI's foreign operations, the addition of Mr. William Ginna
as chief financial officer replacing Mr. Haley, the hiring of
Dr. David Johnston as executive vice president of non-clinical
operations and the appointment of Dr. Richard G. Morrison as a
member of the board of directors.
"Overall, the first quarter's activities reflect our focus on the future,"
continued Dr. Sancilio. "AAI has accelerated the pace toward becoming a
specialty pharmaceutical company. We have selected certain therapeutic niches
that will not impact our relationship with our clients. As the strategy unfolds,
we will build upon a base of royalty-generating research and AAI will
increasingly look like other successful specialty pharmaceutical firms, having
revenues both from product development activities for our own and our customers'
pharmaceutical products and from sales of AAI-developed products in these
selected therapeutic niches. Over our history, we have added significant value
to hundreds of pharmaceutical products worldwide. As the years go on, we will
seek to foster relationships with our clients to share in the 'upside' of these
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projects more and more. The future seems brighter than ever for our company, and
I'm confident with our direction and our plan to achieve strong growth and value
for our shareholders."
About AAI
AAI is a specialty pharmaceutical and product development company with
comprehensive drug development capabilities in the United States, Europe and
Asia. Since 1979, AAI has partnered with pharmaceutical companies on both a
fee-for-service and royalty and milestone payment basis, providing the expertise
and knowledge to create quality health care products. The Company has earned a
reputation for solving complex pharmaceutical challenges utilizing analytical
testing and formulations development techniques, as well as validation and
regulatory affairs support service. Its stock is listed on NASDAQ (AAII). For
more information about AAI, visit the Company's website at
http://www.aaiintl.com.
* * * * * * * *
Information in this 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, including those included in the quotes
by Dr. Sancilio and Mr. Ginna, the third through fifth bulleted paragraphs
above, and the preceding paragraph. These statements involve risks and
uncertainties that could cause actual results to differ materially, including,
without limitation, the ability to successfully and timely complete planned
product development and R&D activities, negotiate beneficial agreements with
pharmaceutical companies for AAI's products and services (including those
providing greater proportions of royalty to milestone payments), select and
commercialize therapeutic niches for AAI's own sales while avoiding conflicts
with our clients' businesses, obtain additional efficiency and profitability
improvements in AAI operations, and obtain regulatory approvals of AAI's
products; the ability of contractual marketing alliances to be integrated
successfully with AAI's operations without unexpected costs; actual operational
performance; the ability to hire and retain qualified personnel; other
regulatory approvals; and industry outsourcing trends. Additional factors that
may cause the actual results to differ materially are discussed in the Company's
recent filings with the Securities and Exchange Commission, including, but not
limited to its registration statement, as amended, its Annual Report on Form
10-K filed on March 30, 2000, its Form 8-Ks, and its other periodic filings.
For additional information contact Dr. Meg Humphrey, VP, AAI at (704) 367-5119
or Ken Rabb at Phoenix Communications (919) 383-7779.
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Applied Analytical Industries, Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
---------------------
2000 1999
-------- --------
Net revenues:
Fee-for-service $ 22,927 $ 22,218
Product development 1,979 3,897
-------- --------
24,906 26,115
-------- --------
Operating costs and expenses:
Direct costs 13,526 14,598
Selling, general and administrative 9,006 7,931
Research and development 1,467 1,868
Transaction, integration, and restructuring costs -- 6,400
-------- --------
23,999 30,797
-------- --------
Income (loss) from operations 907 (4,682)
Other income:
Interest expense (497) (179)
Other, net 114 (32)
-------- --------
(383) (211)
-------- --------
Income (loss) before income taxes 524 (4,893)
Provision (benefit) for income taxes -- (1,130)
-------- --------
Net income (loss) $ 524 $ (3,763)
======== ========
Basic earnings (loss) per share $ 0.03 $ (0.22)
======== ========
Weighted average shares outstanding 17,288 17,199
======== ========
Diluted earnings (loss) per share $ 0.03 $ (0.22)
======== ========
Weighted average shares outstanding 17,703 17,199
======== ========
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Applied Analytical Industries, Inc.
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
2000 1999
--------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,842 $ 2,013
Accounts receivable 28,201 33,564
Work-in-progress 16,226 14,189
Prepaid and other current assets 11,561 11,426
--------- ---------
Total current assets 57,830 61,192
Property and equipment, net 43,375 45,026
Goodwill and other intangibles, net 11,739 13,040
Other assets 3,746 4,228
--------- ---------
Total assets $ 116,690 $ 123,486
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and short-term debt $ 27,329 $ 28,387
Accounts payable 5,082 6,969
Customer advances 7,217 9,146
Accrued wages and benefits 3,979 4,081
Other accrued liabilities 4,514 6,102
--------- ---------
Total current liabilities 48,121 54,685
Long-term debt 808 962
Other liabilities 730 1,281
Stockholders' equity:
Common stock 17 17
Paid-in capital 70,040 69,732
Retained earnings (deficit) (1,736) (2,260)
Accumulated other comprehensive losses (1,266) (906)
Stock subscriptions receivable (24) (25)
--------- ---------
Total stockholders' equity 67,031 66,558
--------- ---------
Total liabilities and stockholders' equity $ 116,690 $ 123,486
========= =========
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