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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number:
BORON, LEPORE & ASSOCIATES, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2365997
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
17-17 Route 208 North, Fair Lawn, New Jersey 07410
- -------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(201) 791-7272
----------------------
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing
requirements for the past 90 days.
____ Yes __X__ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 10,738,647 Shares of Common
Stock as of November 3, 1997.
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FORM 10-Q
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CONTENTS
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PAGE
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PART I - ITEM 1:
FINANCIAL STATEMENTS
Balance Sheets at December 31, 1996 and
September 30, 1997 (unaudited)....................................... 1
Statements of Operations for the Three and Nine Months
Ended September 30, 1997and 1996 (unaudited)......................... 2
Statements of Cash Flows for the Nine Months ended
September 30, 1997 and 1996 (unaudited).............................. 3-4
Notes to Financial Statements ....................................... 5
ITEM 2:
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 6
PART II - OTHER INFORMATION
Item 1: Legal Proceedings............................................. not applicable
Item 2: Changes in Securities......................................... 13
Item 3: Defaults in Senior Securities................................. not applicable
Item 4: Submission of Matters to a Vote of Security Holders........... 15
Item 5: Other Information............................................. not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
11 Statement re: Computation of per share earnings data
27 Financial Data Schedules
(b) Reports on Form 8-K
There have been no reports on Form 8-K for the quarter for
which this form on Form 10-Q is being filed.
SIGNATURES
EXHIBIT INDEX
</TABLE>
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BORON, LEPORE & ASSOCIATES, INC.
BALANCE SHEETS
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SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------------- -------------------
<S> <C> <C>
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 27,154,487 $ 7,175,648
Accounts receivable, net 18,147,990 14,969,261
Prepaid expenses and other current assets 966,517 254,802
------------ ------------
Total current assets 46,268,994 22,399,711
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Furniture, fixtures and equipment, at cost, net of accumulated
depreciation of $698,732 at September 30, 1997 and $544,232
at December 31, 1996 2,731,164 325,296
Security deposits 46,401 27,166
Intangibles 22,750 344,767
------------ ------------
Total assets $ 49,069,309 $ 23,096,940
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ - $ 1,000,000
Accounts payable and accrued expenses 9,627,638 12,775,623
Deferred revenue 7,500,230 5,138,696
Billings in excess of costs 830,500 1,069,850
------------ ------------
Total current liabilities 17,958,368 19,984,169
------------ ------------
Long-term debt, less current maturities - 19,000,000
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Revolving line of credit - 1,000,000
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Deferred income taxes 1,000,000 -
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Convertible participating preferred stock - 12,500,000
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Redeemable preferred stock - -
------------ ------------
Stockholders' equity (deficit):
Common stock, $.01 par value, 50,000,000 shares authorized;
14,938,646 issued and 10,738,647 outstanding at September 30,
1997; 12,000,000 shares authorized, 5,733,328 issued and
1,999,995 outstanding at December 31, 1996 148,695 57,333
Class A common stock, $.01 par value, 1,333,333 authorized;
none issued and outstanding at September 30, 1997; 666,666
issued and outstanding at December 31, 1996 - 6,667
Class B common stock, $.01 par value, 4,666,666 shares - -
authorized; none issued and outstanding
Treasury stock, at cost, 4,199,999 shares at September 30,
1997; 3,733,333 shares at December 31, 1996 (24,349,992) (18,850,000)
Additional paid-in capital 64,176,844 1,813,606
Accumulated deficit (9,864,606) (12,414,835)
------------ ------------
Total stockholders' equity (deficit) 30,110,941 (29,387,229)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 49,069,309 $ 23,096,940
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues $17,500,329 $9,592,401 $49,621,223 $25,738,941
Cost of sales 12,408,425 5,949,739 35,247,949 16,422,062
----------- ---------- ----------- -----------
Gross profit 5,091,904 3,642,662 14,373,274 9,316,879
Selling, general and
administrative expenses 3,059,569 1,972,715 8,068,613 6,322,581
----------- ---------- ----------- -----------
Operating income 2,032,335 1,669,947 6,304,661 2,994,298
Interest expense, net 657,969 23,795 1,424,432 127,938
----------- ---------- ----------- -----------
Income before income taxes 1,374,366 1,646,152 4,880,229 2,866,360
Provision for income taxes 300,000 - 1,500,000 -
----------- ---------- ----------- -----------
Net Income $ 1,074,366 $1,646,152 $ 3,380,229 $ 2,866,360
=========== ========== =========== ===========
Weighted average common and
common equivalent shares
outstanding (Note 3) 8,058,026 7,873,946
=========== ===========
Net income per common and
common equivalent share $0.13 $0.43
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
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NINE MONTHS ENDED
SEPTEMBER 30,
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1997 1996
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CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net income............................................. $ 3,380,229 $ 2,866,360
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization................... 207,183 74,396
Write-off of unamortized loan fees.............. 270,834 -
Non cash compensation expense................... 42,558 -
Deferred income taxes........................... 1,000,000 -
Changes in operating assets and liabilities:
Increase in accounts receivables, net......... (3,178,729) (786,500)
(Increase) decrease in prepaid expenses
and other current assets...................... (711,715) 10,764
Increase in security deposits................. (19,235) -
Increase in intangible assets................. (1,500) -
Increase in due from affiliates............... - (1,094,672)
Decrease in due from officers................. - 260,903
(Decrease) increase in accounts payable
and accrued expenses.......................... (3,147,985) 157,705
Increase (decrease) in deferred revenue
and billings in excess of costs............... 2,122,184 (709,713)
----------- -----------
Net cash (used in) provided by
operating activities.......................... (36,176) 779,243
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of furniture, fixtures and
equipment............................................ (2,560,368) (99,564)
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Net cash used in investing activities......... (2,560,368) (99,564)
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</TABLE>
3
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<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
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CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of long-term debt.......................... $(20,000,000) $ -
Repayments of revolving line of credit............... (1,000,000) (1,093,500)
Redemption of convertible participating
preferred stock................................... (10,819,178) -
Proceeds from the issuance of common
stock.............................................. 59,787,126 -
Proceeds from the issuance of Class A
common stock...................................... 107,427 -
Capital contributions by stockholders................ - 451,000
Repurchase of treasury stock ........................ (5,499,992) (643,674)
------------ -----------
Net cash provided by (used in)
financing activities............................. 22,575,383 (1,286,174)
------------ -----------
Net increase (decrease) in cash.................. 19,978,839 (606,495)
CASH AND CASH EQUIVALENTS,
beginning of period................................. 7,175,648 962,660
------------ -----------
CASH AND CASH EQUIVALENTS, end of
period.............................................. $ 27,154,487 $ 356,165
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest........................................... $ 1,583,079 $ 160,958
Taxes.............................................. $ 30,000 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION:
Boron, LePore & Associates, Inc. (the "Company") provides outsourced
promotional, marketing and educational services to the pharmaceutical industry.
The accompanying financial statements are unaudited and have been prepared in
accordance with generally accepted accounting principles. The foregoing
financial information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the periods
presented. All such adjustments are of a normal, recurring nature. These
results, however, are not necessarily indicative of the results to be expected
for the full fiscal year. The financial statements should be read in conjunction
with the summary of significant accounting policies and notes to financial
statements contained in the Company's Registration Statement on Form S-1 as
filed.
(2) PUBLIC OFFERING, STOCKHOLDERS' EQUITY AND STOCK SPLIT:
On September 24, 1997, the Company completed the public offering of 3,735,000
shares (including underwriters over allotment of 135,000 shares) of Common Stock
at $17.50 per share resulting in net proceeds, after underwriter commissions
and offering costs, of approximately $59.8 million (the "Offering"). Of these
net proceeds, $19.6 million was used to retire outstanding debt and pay related
interest expense, $10.8 million was used to redeem all shares of Redeemable
Preferred Stock and $5.6 million was used to purchase 466,666 shares of Common
Stock from a former officer of the Company.
In connection with the Offering, the authorized stock of the Company was
increased on September 22, 1997 to 50,000,000 shares of $.01 par value common
stock and 2,000,000 shares of $.01 par value preferred stock. Upon completion of
the Offering, all outstanding shares of non-voting Class A Common Stock
converted into shares of Common Stock. Also upon completion of the Offering, the
Convertible Participating Preferred Stock of the Company converted into
4,666,664 of Common Stock and 5,600,000 of Redeemable Preferred Stock which, as
described above, was redeemed with a portion of the net proceeds of the
Offering.
All share amounts have been retroactively adjusted to reflect a two-for-three
reverse stock split which occurred September 11, 1997.
(3) EARNINGS PER SHARE
Net income per share is calculated using the weighted average number of shares
of common stock and, where dilutive, common stock equivalents outstanding during
each period. The number of weighted average shares used in computing per share
results were 8,058,026 and 7,873,946 for the three and nine month periods ending
September 30, 1997, respectively.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") which
requires the presentation of basic EPS and diluted EPS. Basic EPS is calculated
by dividing income available to common shareholders by the weighted average
number of shares of common stock outstanding during the period. Diluted EPS is
calculated by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period adjusted to
reflect potentially dilutive securities. Implementation of SFAS 128 is required
for all financial statements issued subsequent to December 15, 1997 and requires
pro forma disclosure in financial statements issued prior to that date.
Previously reported EPS amounts must be restated under the new standard when it
becomes effective.
5
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For the three and nine month periods ending September 30, 1997, reported EPS
under the new standard would have been:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1997 September 30, 1997
---------------------- ----------------------
<S> <C> <C>
Basic Earnings per Share:
Net income $1,074,366 $3,380,229
Weighted average shares outstanding 7,747,958 7,563,878
Basic Earnings per Share $ 0.14 $ 0.45
Diluted Earnings per Share:
Weighted average shares outstanding 7,747,958 7,563,878
Common stock equivalents 310,068 310,068
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Total weighted average common and
common equivalent shares outstanding 8,058,026 7,873,946
Diluted Earnings per Share $ 0.13 $ 0.43
</TABLE>
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Boron, LePore & Associates, Inc. ("BLP" or the "Company") provides outsourced
promotional, marketing and educational services to the pharmaceutical industry.
Substantially all of the Company's customers are large pharmaceutical companies
seeking to communicate their messages to physicians and other healthcare
professionals on a cost-effective basis. The Company's objective is to enhance
its position as a leading provider of peer-to-peer and other meetings and to
continue to expand its array of other outsourced promotional, marketing and
educational services.
Following several years of relatively modest revenue growth, BLP's revenues grew
significantly from 1995 to 1996 and revenues in the first nine months of 1997
have increased significantly as compared to the first nine months of 1996. This
growth resulted from increased business with existing customers, the addition of
new customers, and the expansion of services offered. The Company believes that
the increase in business with existing customers and the addition of new
customers reflect increased recognition of peer-to-peer meeting programs as an
effective promotional technique and increased levels of promotional, marketing
and educational spending in the pharmaceutical industry. Principal elements of
the Company's growth strategy are further enhancing and expanding its service
offerings, continuing to increase business with existing customers, and
obtaining new customers. As part of this strategy, the Company recently
increased its focus on both symposia and educational conferencing services and
expanded its portfolio of services to include product marketing, teleservices
and contract sales. The Company opened its new teleservice center in Norfolk,
Virginia in July 1997 to support the expansion of its teleservices capabilities
and in August 1997, established a contract sales organization.
Certain of BLP's newer services, particularly symposia, have lower gross margins
than the Company's historical business. Further, although revenues from the
Company's peer-to-peer meeting business grew from $20.6 million in 1995 to $33.4
million in 1996, the Company does not anticipate that future growth,
if any, of revenues from this business will continue at such an accelerated
rate. Additionally, the on-going start-up costs related to the Company's new
teleservice center and new contract sales organization, as well as the
development and implementation costs of the Company's technology enhancement
project, will continue to negatively impact the Company's near-term financial
performance. The Company's objective
6
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is to maintain its operating profit margins through efficiency efforts and
leveraging its operating expenses by increasing revenues. However, if the
Company's efforts to enhance the profitability of its services are not
successful, the proportion of symposia revenue to total revenues increases,
total revenues do not grow sufficiently to fully leverage operating expenses or
if the costs associated with the teleservice center, contract sales organization
or technology enhancement project are greater than anticipated, the Company's
operating margins could be adversely affected.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues certain items
reflected in the Company's Statement of Operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 70.9 62.0 71.0 63.8
----------- ---------- ---------- -----------
Gross profit 29.1 38.0 29.0 36.2
Selling, general and administrative expenses 17.5 20.6 16.3 24.6
----------- ---------- ---------- -----------
Operating income 11.6 17.4 12.7 11.6
Interest expense, net 3.8 0.2 2.9 0.5
----------- ---------- ---------- -----------
Income before provision for income taxes 7.8 17.2 9.8 11.1
Provision for income taxes 1.7 - 3.0 -
----------- ---------- ---------- -----------
Net income 6.1% 17.2% 6.8% 11.1%
=========== ========== ========== ===========
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Revenues increased $7.9 million, or 82%, from $9.6 million in the three month
period ended September 30, 1996 to $17.5 million in the three month period ended
September 30, 1997. This increase was primarily due to growth of the Company's
conferencing services, which increased $7.8 million, or 92%. This growth
resulted from the addition of $5.2 million of revenue from symposia services,
which were introduced in late 1996, and $2.6 million of incremental revenue from
peer-to-peer meetings and other conferencing services. Contract sales services,
which were introduced by the Company in August 1997, accounted for $0.6 million
in the three month period ended September 30, 1997 and no revenue in the prior
year period. These revenue increases were partially offset by a $0.7 million
decrease in revenues from teleservices. This decrease was due to the prior year
period containing one significant teleservices project, whereas the current year
period did not have a teleservices project of such magnitude. Revenues from
product marketing services increased $0.1 million from the three month period
ended September 30, 1996 to the three month period ended September 30, 1997.
Cost of sales increased $6.5 million, or 109%, from $5.9 million in the three
month period ended September 30, 1996 to $12.4 million in the three month period
ended September 30, 1997. Cost of sales as a percentage of revenues increased
from 62.0% in the prior year period to 70.9% in the current year period. The
increase in cost of sales as a percentage of revenues was primarily due to: (i)
the introduction of symposia services, which have a lower average gross profit
than the Company's historical business due to the higher proportion of
production costs which are passed through to the customer with little or no
markup; (ii) an increase in moderator training costs; and (iii) the prior year
period containing one significant teleservices project which had a higher gross
profit percentage than the Company's historical core business.
7
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Selling, general and administrative expenses increased $1.1 million, or 55%,
from $1.9 million in the three month period ended September 30, 1996 to $3.0
million in the three month period ended September 30, 1997. This increase was
due to: (i) the cost of personnel additions of approximately $0.5 million; (ii)
the increase in outside services, rent, depreciation and other operating costs
of approximately $0.5 million incurred to support the Company's growth; and
(iii) a $0.1 million non-recurring charge related to the repurchase of stock
from a former officer of the Company. Selling, general and administrative
expenses decreased as a percentage of revenues from 20.6% in the prior year
period to 17.5% in the current year period primarily as a result of increased
revenues.
Operating income increased $0.4 million, or 22%, from $1.6 million in the three
month period ended September 30, 1996 to $2.0 million in the three month period
ended September 30, 1997. Operating income as a percentage of revenues
decreased from 17.4% in the prior year period to 11.6% in the current year
period. The decrease in operating income as a percentage of revenues was due to
the aforementioned increase in cost of sales as a percentage of revenues
partially offset by the aforementioned decrease in selling, general and
administrative expenses as a percentage of revenues.
Interest expense net of interest income increased from $24,000 in the three
month period ended September 30, 1996 to $0.7 million in the three month period
ended September 30, 1997. Approximately $0.3 million of this increase was
attributable to increased borrowings in the current year period. The interest
expense increase was also due to the current year period including a $0.3
million write-off of unamortized financing fees and a $31,000 expense to
terminate an interest rate swap agreement. Both of these transactions were
related to the Company's early settlement of its term loan in connection with
the Company's September 24, 1997 initial public offering of Common Stock.
The provision for income taxes for the three month period ended September 30,
1997 was $0.3 million, reflecting estimated Federal and state income tax expense
partially offset by the utilization of benefits from net deferred tax assets
recognized on the Company's December 31, 1996 balance sheet which are related to
net operating loss carryforwards previously not recognized. Prior to December
4, 1996, the Company had elected to be subject to taxation under Subchapter S of
the Code and, therefore, no income tax expense was recorded in the three month
period ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Revenues increased $23.9 million, or 93%, from $25.7 million in the nine month
period ended September 30, 1996 to $49.6 million in the nine month period ended
September 30, 1997. This increase was primarily due to growth of the Company's
conferencing services, which increased $23.4 million, or 96%. This growth
resulted from the addition of $15.1 million of revenue from symposia services,
which were introduced in late 1996, and $8.3 million of incremental revenue from
peer-to-peer meetings and other conferencing services. Contract sales services,
which were introduced by the Company in August 1997, accounted for $0.6 million
in the nine month period ended September 30, 1997 and no revenue in the prior
year period. These revenue increases were partially offset by a $0.7 million
decrease in revenues from teleservices. This decrease was due to the prior year
period containing one significant teleservices project whereas the current year
period did not have a teleservices project of such magnitude. Revenues from
product marketing services increased $0.6 million from the nine month period
ended September 30, 1996 to the nine month period ended September 30, 1997.
Cost of sales increased $18.8 million, or 115%, from $16.4 million in the nine
month period ended September 30, 1996 to $35.2 million in the nine month period
ended September 30, 1997. Cost of sales as a percentage of revenues increased
from 63.8% in the prior year period to 71.0% in the current year period. The
increase in cost of sales as a percentage of revenues was primarily due to the
introduction of symposia services, which have a lower average gross profit than
the Company's historical business due to the higher proportion of production
costs which are passed through to the customer with little or no markup and an
increase in moderator training costs.
Selling, general and administrative expenses increased $1.8 million, or 28%,
from $6.3 million in the nine month period ended September 30, 1996 to $8.1
million in the nine month period ended September 30,
8
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1997. This increase was due to: (i) the cost of personnel additions of
approximately $0.9 million; (ii) the increase in outside services, rent,
depreciation and other operating costs of approximately $0.8 million incurred to
support the Company's growth; and (iii) a $0.1 million non-recurring charge
related to the repurchase of stock from a former officer of the Company.
Selling, general and administrative expenses decreased as a percentage of
revenues from 24.6% in the prior year period to 16.3% in the current year period
primarily as a result of increased revenues.
Operating income increased $3.3 million, or 111%, from $3.0 million in the nine
month period ended September 30, 1996 to $6.3 million in the nine month period
ended September 30, 1997. Operating income as a percentage of revenues
increased from 11.6% in the prior year period to 12.7% in the current year
period. The increase in operating income as a percentage of revenues was due to
the aforementioned decrease in selling, general and administrative expenses as a
percentage of revenues partially offset by the aforementioned increase in cost
of sales as a percentage of revenues.
Interest expense net of interest income increased from $0.1 million in the nine
month period ended September 30, 1996 to $1.4 million in the nine month period
ended September 30, 1997. Approximately $1.0 million of this increase was
attributable to increased borrowings in the current year period. The increase
was also due to the current year period including a $0.3 million write-off of
unamortized financing fees and a $31,000 expense to terminate an interest rate
swap agreement. Both of these transactions were related to the Company's early
settlement of its term loan.
The provision for income taxes for the nine month period ended September 30,
1997 was $1.5 million, reflecting estimated Federal and state income tax expense
partially offset by the utilization of benefits from net deferred tax assets
recognized on the Company's December 31, 1996 balance sheet which are related to
net operating loss carryforwards previously not recognized. Prior to December
4, 1996, the Company had elected to be subject to taxation under Subchapter S of
the Code and, therefore, no income tax expense was recorded in the nine month
period ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $28.3 million in net working capital, an
increase of $25.9 million from December 31, 1996. As described below,
substantially all of the Company's net working capital resulted from the public
offering of Common Stock which was completed in September 1997. The Company's
primary sources of liquidity as of September 30, 1997 consisted of cash and cash
equivalents, accounts receivable and borrowing availability under a revolving
credit facility.
The Company's accounts receivable turnover averaged 93 days for the periods
ended September 30, 1997 and December 31, 1996. The allowance for doubtful
accounts was $0.3 million at September 30, 1997 and December 31, 1996.
During the nine month period ended September 30, 1997, the Company used in
operating activities approximately $36,000. This included $7.5 million in
payments of officer bonuses which were accrued in 1996, offset by $7.5 million
of cash provided by other operating activities.
During this nine month period, the Company used $2.6 million in investing
activities to purchase additional equipment, primarily related to the Company's
new teleservice center in Norfolk, Virginia.
Financing activities during the nine month period ended September 30, 1997
generated $22.6 million of net cash inflows. Included in these activities was
the Company's September 24, 1997 initial public offering of 3,735,000 shares
Common Stock at $17.50 per share resulting in net proceeds, after underwriter
commissions and offering costs, of approximately $59.8 million (the "Offering").
Of these net proceeds, $19.5 million was used to retire outstanding debt (an
additional $0.1 million used to pay related interest expense), $10.8 million was
used to redeem all shares of Redeemable Preferred Stock and $5.5 million was
used to purchase 466,666 shares of Common Stock from a former officer of the
Company (an additional $0.1 million used to pay related compensation expense).
The impact of these financing activities was a net cash inflow of $24.0 million.
Financing activities during this period also included the use of $1.0 million to
9
<PAGE>
pay-down the Company's revolving line of credit, the use of $0.5 million to meet
scheduled term loan payments and the sale of stock to employees and directors
which generated $0.1 million in cash inflows.
Primarily in connection with the Company's development of its new teleservice
center in Norfolk, Virginia and the implementation of a new management
information system, the Company anticipates capital expenditures to increase to
approximately $4.8 million in 1997.
The Company's credit facility (the "Credit Facility") provides for a $5.0
million revolving credit facility and is secured by the Company's assets. As of
December 31, 1996 and September 30, 1997, $1.0 million and $0, respectively,
was outstanding under the revolving credit facility. Borrowings under the
revolver are due on December 31, 2001. The Credit Facility contains various
financial and reporting covenants. In July and November 1997, the Company
amended certain covenants to allow for the anticipated increases in capital
expenditures related to its new teleservice center.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The statements contained in this report which are not historical facts are
forward-looking statements. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those expressed or implied by such forward-
looking statements include, but are not limited to the Company's: dependence on
the pharmaceutical industry, customer concentration, reliance on new services
for continued growth, management of growth, acquisition risks, variation in
quarterly operating results, regulation, potential litigation exposure and
reliance of certain personnel, and those risks and uncertainties contained under
the heading "Risk Factors" on page 6 of the Company's Registration Statement on
Form S-1 as filed.
10
<PAGE>
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.
BORON, LEPORE & ASSOCIATES, INC.
Date: November 14, 1997 By: /s/ Patrick G. LePore
-------------------------------------
Patrick G. LePore
Chief Executive Officer, President
and Chairman of the Board
Date: November 14, 1997 By: /s/ Martin J. Veilleux
-------------------------------------
Martin J. Veilleux
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------------------------------------------------
11 Statement re: Computation of per share earnings data
27 Financial Data Schedules
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
(a) On September 11, 1997, the Company effected a two-for-three
reverse stock split with respect to its Common Stock and Class A
Common Stock. Except as otherwise noted, all information contained
in this Part II has been adjusted to reflect such reverse stock
split. On September 29, 1997, (i) all of the shares of the
Company's non-voting Class A Common Stock were converted into
Common Stock and (ii) the Company's Convertible Participating
Preferred Stock was converted into Redeemable Preferred Stock and
Common Stock, in each case in accordance with the terms of these
securities and in conjunction with the closing of the Company's
initial public offering. See Item 4(c) below.
Further, an amendment to the Company's certificate of
incorporation was approved by the Company's Board of Directors on
August 18, 1997 and by its stockholders on August 25, 1997
establishing a classified Board of Directors and effecting certain
other changes as described in Item 4(c), below, affecting the
rights of the holders of the Company's Common Stock.
(b) Not applicable.
(c) In June 1997, pursuant to the Company's 1996 Stock Option and
Grant Plan (the "1996 Stock Plan"), the Company granted options to
purchase 262,327 shares of the Company's restricted Class A Common
Stock at a price of approximately $9.45 per share for an aggregate
purchase price of $2,479,050 to employees of the Company and
granted 9,332 shares of the Company's Class A Common Stock at a
price of approximately $.01 per share to employees of the Company
for an aggregate cash purchase price of $93 in reliance upon the
exemption from registration under Rule 701 promulgated under the
Securities Act and the exemption from registration under Section
4(2) of the Securities Act.
In August 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted options to purchase 246,666 shares of the
Company's restricted Class A Common Stock at a price of $12.00 per
share to two employees of the Company for an aggregate cash
purchase price of $1,973,328 in reliance upon the exemption from
registration under Rule
13
<PAGE>
701 promulgated under the Securities Act and the exemption from
registration under Section 4(2) of the Securities Act.
In September 1997, pursuant to the Company's 1996 Stock Plan, the
Company granted an option to purchase 40,000 shares of the
Company's restricted Class A Common Stock at a price of $17.00 per
share to an employee of the Company for an aggregate cash purchase
price of $680,000 in reliance upon the exemption from registration
under Section 4(2) of the Securities Act.
(d) Use of Proceeds from initial public offering (the "Offering")
(1) Effective date of Registration Statement on Form S-1:
September 23, 1997; Commission file number: 333-30573
(2) The Offering commenced on September 24, 1997 and was
consummated on September 29, 1997.
(3) Not applicable
(4)(i) All securities registered in the Offering were sold.
(ii) The managing underwriters of the Offering were:
Bear, Stearns & Co. Inc.
Smith Barney Inc.
Wessels, Arnold & Henderson
(iii) Common Stock, par value $.01 per share
(iv) Issuer:
amount registered - 3,735,000 shares
aggregate purchase price of the Offering amount
registered - $65,362,500
amount sold - 3,735,000 shares
aggregate Offering price of the amount sold - $65,362,500
Selling Securityholder:
amount registered - 405,000 shares
aggregate purchase price of the Offering amount
registered - $7,087,500
amount sold - 405,000 shares
aggregate Offering price of the amount sold - $7,087,500
(v) $5,071,500 in underwriting discounts and expenses paid to
underwriters $1,000,000 other expenses incurred,
including estimated expenses
14
<PAGE>
$6,071,500 in total underwriting discounts and expenses
$496,125 of underwriter discounts were paid by the
selling security holder and all other underwriting
discounts and expenses were borne by the issuer
(vi) $59,787,125 net Offering proceeds to the issuer
(vii) Use of proceeds:
repayment of indebtedness - $19,600,000
redemption of Redeemable Preferred Stock - $10,800,000
repurchase of 466,666 shares of Common Stock from a
former officer of the Company - $5,600,000 temporary
investments with original maturities of 90 days or less-
$23,787,125 Total proceeds - $59,787,125
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to Vote of Security-Holders
(a) The stockholders of the Company acted by a written consent in lieu
of a special meeting of stockholders dated August 25, 1997.
(b) As described in paragraph (c) below, as of August 25, 1997, the
Company's stockholders approved a Second Amended and Restated
Certificate of Incorporation including designation of the
Company's current directors under a classified board arrangement.
(c) In the written consent in lieu of special meeting of stockholders
dated August 25, 1997, the Company's stockholders approved a two-
for-three reverse stock split with respect to the Company's Common
Stock and Class A Common Stock, approved a Second Amended and
Restated Certificate of Incorporation, approved a Third Amendment
and Restated Certificate of Incorporation, approved amendments to
the Company's By-Laws, approved amendments to the Company's 1996
Stock Plan and approved the Company's 1997 Employee Stock Purchase
Plan (the "ESPP"). The votes for these proposals (which have not
been adjusted to reflect the reverse stock split) were as follows:
15
<PAGE>
<TABLE>
<CAPTION>
Abstentions/
Class Outstanding For Against Withheld Broker Non Votes
<S> <C> <C> <C> <C> <C> <C>
1. Approval of two-for- Common: 3,000,000 2,272,000 0 0 0
three reverse stock split
with respect to Convertible
Company's Common Preferred: 7,000,000 7,000,000 0 0 0
Stock and Class A
Common Stock
2. Approval of Second Common: 3,000,000 2,272,000 0 0 0
Amended and Restated
Certificate of Convertible
Incorporation Preferred: 7,000,000 7,000,000 0 0 0
3. Approval of Third Common: 3,000,000 2,272,000 0 0 0
Amended and Restated
Certificate of Convertible
Incorporation Preferred: 7,000,000 7,000,000 0 0 0
4. Approval of Amended Common: 3,000,000 2,272,000 0 0 0
and Restated By-Laws
Convertible
Preferred: 7,000,000 7,000,000 0 0 0
5. Amendment to 1996 Common: 3,000,000 2,272,000 0 0 0
Stock Option and Grant
Plan Convertible
Preferred: 7,000,000 7,000,000 0 0 0
6. Approval of 1997 Common: 3,000,000 2,272,000 0 0 0
Employee Stock
Purchase Plan Convertible
Preferred: 7,000,000 7,000,000 0 0 0
</TABLE>
By adopting the Second Amended and Restated Certificate of Incorporation,
the stockholders approved the classification of the current Board of
Directors as follows:
Class I - Term Expires at Annual Meeting of Stockholders held in 1998:
Jacqueline C. Morby
John A. Staley, IV
Class II - Term Expires at Annual Meeting of Stockholders held in 1999:
Gregory F. Boron
Roger B. Kafker
Joseph E. Smith
16
<PAGE>
Class III - Term Expires at Annual Meeting of Stockholders held in 2000:
Roger Boissenault
Patrick G. LePore
The above described Second Amended and Restated Certificate of
Incorporation became effective immediately prior to the Company's initial
public offering and, among other things; (a) increased the total number of
shares of capital stock which the Company had authority to issue 73,600,000
shares, of which such total number of shares (i) 50,000,000 shares shall be
Common Stock, (ii) 2,000,000 shares shall be Class A Common Stock, (iii)
7,000,000 shares shall be Class B Common Stock, (iv) 2,000,000 shares shall
be undesignated preferred stock, (v) 7,000,000 shares shall be Convertible
Participating Preferred Stock, and (vi) 5,600,000 shares shall be
Redeemable Preferred Stock; (b) requires advance notice for stockholder
proposals and director nominations; (c) requires that stockholder actions
must be effected at duly called meetings of stockholders and not by written
consent; (d) requires a two-thirds super-majority voting requirement for
the removal of directors and certain amendments to the Certificate of
Incorporation and By-Laws of the Company and (e) effects certain other
matters relating to the foregoing.
The above described Third Amended and Restated Certificate of Incorporation
became effective following the Company's initial public offering and
decreased the total number of shares of capital stock which the Company has
authority to issue to 52,000,000 shares, of which such total number of
shares (i) 50,000,000 shares shall be Common Stock and (ii) 2,000,000
shares shall be undesignated preferred stock.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of net income per share
27 Financial Data Schedule
(b) Reports on Form 8-K. None.
17
<PAGE>
EXHIBIT 11
Boron, LePore & Associates, Inc.
Compuation of Net Income Per Share
(unaudited)
Primary
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $1,074,366 $1,646,152 $3,380,229 $2,866,360
---------- ---------- ---------- ----------
Weighed average common
shares outstanding 7,747,958 7,563,878
Weighted average common
share equivalents 310,068 310,068
Total weighted common and
common share equivalents
outstanding 8,058,026 7,873,946
---------- ----------
Net income per share $0.13 $0.43
========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT SEPTEMBER 30, 1997 AND STATEMENTS OF OPERATIONS FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 0 27,154,487
<SECURITIES> 0 0
<RECEIVABLES> 0 18,447,990
<ALLOWANCES> 0 300,000
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 966,517
<PP&E> 0 3,429,896
<DEPRECIATION> 0 698,732
<TOTAL-ASSETS> 0 49,069,309
<CURRENT-LIABILITIES> 0 17,958,368
<BONDS> 0 0
0 0
0 0
<COMMON> 0 148,695
<OTHER-SE> 0 29,962,246
<TOTAL-LIABILITY-AND-EQUITY> 0 49,069,309
<SALES> 0 0
<TOTAL-REVENUES> 17,500,329 49,621,223
<CGS> 0 0
<TOTAL-COSTS> 12,408,425 35,247,949
<OTHER-EXPENSES> 3,059,569 8,068,613
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 657,969 1,424,432
<INCOME-PRETAX> 1,374,366 4,880,229
<INCOME-TAX> 300,000 1,500,000
<INCOME-CONTINUING> 1,074,366 3,380,229
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,074,366 3,380,229
<EPS-PRIMARY> .13 .43
<EPS-DILUTED> .13 .43
</TABLE>
