<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[_] 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: 0-25323
ALBANY MOLECULAR RESEARCH, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 14-1742717
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21 Corporate Circle
Albany, New York 12203
(Address of principal executive offices)
(518) 464-0279
(Registrant's telephone number, including area code)
N/A
(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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 10, 1999
----- ---------------------------
Common Stock, $.01 par value 12,894,668
<PAGE>
ALBANY MOLECULAR RESEARCH, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statement of Operations 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Unaudited Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports Filed on Form 8-K 11
Signatures 12
Exhibit Index 13
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ALBANY MOLECULAR RESEARCH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1999 DECEMBER 31, 1998
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 42,184,951 $ 3,957,091
Accounts receivable (net of allowance for doubtful accounts of $52,000 at
March 31, 1999 and $0 at December 31, 1998) 3,077,394 2,798,742
Current installment of notes receivable 79,800 104,832
Royalty income receivable 3,836,338 3,256,498
Investment securities, available-for-sale 2,014,550 2,026,620
Interest receivable 28,893 27,043
Inventory 695,478 575,525
Unbilled services 170,099 105,036
Income tax prepayments -- 517,840
Prepaid expenses 356,035 744,701
------------------ ------------------
Total current assets 52,443,538 14,113,928
Property and equipment:
Laboratory equipment and fixtures 10,803,037 9,919,153
Office equipment 2,132,536 1,997,278
Leasehold improvements 4,499,246 4,019,378
Construction-in-progress 3,507 615,571
------------------ ------------------
17,438,326 16,551,380
Accumulated depreciation (2,595,611) (2,233,163)
------------------ ------------------
Net property and equipment 14,842,715 14,318,217
Other assets:
Patents and patent application costs 225,020 224,449
Notes receivable, excluding current installment 60,000 60,000
Deferred income tax benefit 61,000 61,000
Other assets 120,011 130,581
Total other assets 466,031 476,030
------------------ ------------------
Total assets $ 67,752,284 $ 28,908,175
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,860,318 $ 2,849,828
Income taxes payable 310,160 --
Unearned income 1,067,205 1,150,858
Customer deposits 182,293 182,293
Current installments of long-term debt -- 1,587,168
------------------ ------------------
Total current liabilities 3,419,976 5,770,147
Long-term liabilities:
Long-term debt, excluding current installments -- 13,348,672
Deferred income taxes 814,984 509,812
------------------ ------------------
Total liabilities 4,234,960 19,628,631
Stockholders' equity:
Preferred stock, $0.01 par value, authorized 2,000,000 shares, issued and
outstanding 0 and 100,000 shares at March 31, 1999 and December 31, 1998,
respectively -- 1,000
Common stock, $0.01 par value, authorized 50,000,000 shares; issued
12,886,472 at March 31, 1999 and 11,102,127 at December 31, 1998;
outstanding 12,886,472 at March 31, 1999 and 9,970,224 at December 31, 1998 128,865 111,021
Additional paid-in capital 45,166,399 3,834,411
Retained earnings 18,162,846 15,328,015
Treasury stock, at cost -- (10,061,360)
Accumulated other comprehensive income 59,214 66,457
------------------ ------------------
Total stockholders' equity 63,517,324 9,279,544
------------------ ------------------
Total liabilities and stockholders' equity $ 67,752,284 $ 28,908,175
================== ==================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
3
<PAGE>
ALBANY MOLECULAR RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------
MARCH 31, 1999 MARCH 31, 1998
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
Contract revenue $ 4,666,134 $ 3,060,687
Reimbursed expenses (240,486) (187,679)
------------------ ------------------
Net contract revenue 4,425,648 2,873,008
Cost of contract revenue 2,502,622 1,507,721
------------------ ------------------
Gross profit from contract revenue 1,923,026 1,365,287
------------------ ------------------
Other operating revenue:
Non-recurring licensing fees, milestones, and royalties -- 6,368,921
Recurring royalties 4,183,747 1,729,680
Technology incentive award (415,085) (809,860)
------------------ ------------------
Other operating revenue, net 3,768,662 7,288,741
------------------ ------------------
Operating expenses:
Research and development 128,770 208,794
Selling, general and administrative 1,263,419 1,083,189
------------------ ------------------
Total operating expenses 1,392,189 1,291,983
------------------ ------------------
Income from operations 4,299,499 7,362,045
------------------ ------------------
Other income (expense):
Interest expense (132,758) (39,760)
Interest income 310,715 65,464
Other income 57,375 3,525
------------------ ------------------
Total other income (expense) 235,332 29,229
------------------ ------------------
Income before income tax expense 4,534,831 7,391,274
Income tax expense 1,700,000 2,852,611
------------------ ------------------
Net income $ 2,834,831 $ 4,538,663
================== ==================
Basic earnings per share $ 0.24 $ 0.42
================== ==================
Diluted earnings per share $ 0.22 $ 0.38
================== ==================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
4
<PAGE>
ALBANY MOLECULAR RESEARCH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
MARCH 31, 1999 MARCH 31, 1998
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,834,831 $ 4,538,663
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 373,018 194,597
Provision for doubtful accounts 52,000 29,000
Deferred income tax expense 310,000 2,464
(Increase) decrease in:
Accounts receivable (330,652) (50,407)
Royalty income receivable (579,840) (1,729,680)
Inventory, prepaid expenses and income tax prepayments 786,554 187,449
Interest receivable (1,851) (1,922)
Unbilled services (65,063) 62,977
Notes receivable 25,031 (100,000)
(Decrease) increase in:
Accounts payable and accrued expenses (989,511) 1,108,817
Unearned income (83,653) 425,245
Income taxes payable 310,161 2,512,111
------------------ -----------------
Net cash provided by operating activities 2,641,025 7,179,314
------------------ -----------------
INVESTING ACTIVITIES
Purchases of investment securities -- (1,341)
Purchases of property and equipment (886,945) (1,032,797)
Purchase of customer list -- (18,000)
Payments for patent application costs (571) (19,366)
------------------ -----------------
Net cash used in investing activities (887,516) (1,071,504)
------------------ -----------------
FINANCING ACTIVITIES
Principal payments on long-term debt (14,935,840) (114,624)
Principal payments under capital lease obligations -- (938)
Proceeds from sale of common stock 51,410,191 206,297
------------------ -----------------
Net cash provided by financing activities 36,474,351 90,735
------------------ -----------------
Increase in cash and cash equivalents 38,227,860 6,198,545
Cash and cash equivalents at beginning of year 3,957,091 1,261,518
------------------ -----------------
Cash and cash equivalents at end of year $ 42,184,951 $ 7,460,063
================== =================
Noncash items:
Common stock issued for customer list $ -- $ 100,000
Common stock issued for relocation incentive $ -- $ 200,000
(Decrease) in net unrealized gain on securities
available-for-sale, net of tax $ (7,243) $ (2,585)
Additional disclosures relative to cash flows:
Interest paid $ 132,758 $ 48,806
Income taxes paid $ 562,000 $ 5,420
</TABLE>
See notes to unaudited condensed consolidated financial statements.
5
<PAGE>
ALBANY MOLECULAR RESEARCH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
applicable Securities and Exchange Commission regulations for interim financial
information. These financial statements do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the full year.
These financial statements should be read in conjunction with the Company's
audited financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
Note B - Initial Public Offering
In the first quarter of 1999, the Company completed an initial public offering
of 2,815,000 shares of common stock. The Company received net proceeds of $51.4
million, which is net of $4.9 million in expenses relating to the issuance and
distribution of the securities. The Company used a portion of the net proceeds
to repay in full a $7.9 million note payable to the Company's former chief
financial officer and a trust for the benefit of his family. The Company also
utilized approximately $5.0 million of the proceeds to repay a portion of the
Company's outstanding indebtedness under its existing credit facility with Fleet
Bank, N.A.
Note C - Earnings Per Share
A summary of the shares used in the calculation of earnings per share is shown
below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------
MARCH 31, 1999 MARCH 31, 1998
------------------------------- --------------------------------
AVERAGE PER AVERAGE PER
NET SHARES SHARE NET SHARES SHARE
INCOME OUTSTANDING AMOUNT INCOME OUTSTANDING AMOUNTS
------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C>
Basic earnings per share $2,834,831 11,637,875 $ 0.24 $4,538,663 10,778,520 $ 0.42
Dilutive effect of stock
options and grants -- 1,304,881 -- -- 1,275,980 --
Dilutive effect of assumed
preferred stock conversion -- -- -- -- 45,000 --
---------- ---------- ---------- ----------
Diluted earnings per share $2,834,831 12,942,756 $ 0.22 $4,583,663 12,099,500 $ 0.38
========== ========== ====== ========== ========== ========
</TABLE>
Not included in the March 31, 1999 shares above were 132,000 shares that were
anti-dilutive for earnings per share purposes.
6
<PAGE>
ALBANY MOLECULAR RESEARCH, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note D - Comprehensive Income
The Company is required to report comprehensive income and its components in
accordance with the provisions of the Financial Accounting Standards Board SFAS
No. 130 "Reporting Comprehensive Income."
The following table presents the components of the Company's comprehensive
income for the three months ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
---------------- ----------------
<S> <C> <C>
Net income $ 2,834,831 $ 4,538,663
Other comprehensive (loss):
Change in unrealized (loss) on available-for-sale securities,
net of tax benefit of $4,828 in 1999 and $1,723 in 1998 (7,243) (2,585)
---------------- ----------------
Total comprehensive income $ 2,827,588 $ 4,536,078
================ ================
</TABLE>
Note E - Financial Information by Customer Concentration and Geographic Area
Contract revenue from the Company's three largest customers represented
approximately 19%, 13% and 12% of total consolidated contract revenue for the
three months ended March 31, 1999, and 19%, 17% and 17% of total consolidated
contract revenue for the three months ended March 31, 1998.
The Company's contract revenue for the three months ended March 31, 1999 and
1998 was recognized from customers in the following geographic regions:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
---------------- ----------------
<S> <C> <C>
United States 90% 83%
Europe 10% 17%
---------------- ----------------
Total 100% 100%
================ ================
</TABLE>
Note F - Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information," which
established standards for reporting information about operating segments,
geographic areas and major customers. The Company does not have any reportable
segments as defined by SFAS No. 131. The Company has made the required
disclosures concerning major customers and geographic areas.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. This statement is effective for all fiscal quarters and all
fiscal years beginning after June 15, 1999. Management does not anticipate that
the adoption of this statement will have a material effect on the Company's
financial statements because the Company does not utilize derivative investments
or engage in hedging activities.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting the Costs
of Start-up Activities" (SOP 98-5). SOP 98-5 requires that the costs of start-up
activities including organizational costs, be expensed as incurred. SOP 98-5 is
effective for financial statements for fiscal years beginning after December 15,
1998. The adoption of this statement did not have a material effect on the
Company's financial statements.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
FORWARD LOOKING STATEMENTS
The following discussion of the results of operations and financial condition of
the Company should be read in conjunction with the accompanying Condensed
Consolidated Financial Statements and the Notes thereto included within this
report. This Form 10-Q contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Company's actual results could
differ materially from those projected in the forward-looking statements and
therefore, prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties. Actual events or results may differ from those discussed in the
forward-looking statements as a result of various factors, including, without
limitation, the Company's ability to attract and retain experienced scientists,
any decline in the recent trend of outsourcing chemistry research services by
pharmaceutical and biotechnology companies, the continuation of royalties from
the Company's Allegra/Telfast license agreement with Hoechst Marion Roussel,
Inc. ("HMRI"), and the Company's ability to manage its growth, as well as the
factors set forth under the caption "Risk Factors and Certain Factors Affecting
Forward-Looking Statements," in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998 filed with the Securities and Exchange Commission
on March 31, 1999, the discussion set forth below and the matters set forth in
this Form 10-Q generally.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Net contract revenue. Net contract revenue consists primarily of fees earned
under contracts with third party customers, net of reimbursed expenses.
Reimbursed expenses consist of laboratory supplies, chemicals and other costs
reimbursed by customers and, in accordance with industry practice, are included
in contract revenue. Reimbursed expenses vary from contract to contract.
Accordingly, the Company views net contract revenue as its primary measure of
revenue growth rather than licensing fees and royalties, which are dependent
upon the Company's licensee's sales. Net contract revenue for the first quarter
of 1999 increased 54% to $4.4 million compared to $2.9 million for the same
period in 1998. This increase was due principally to the performance of a
greater number of projects, primarily for core medicinal chemistry and chemical
development services.
Gross profit. The Company's cost of revenue, from which it derives gross profit,
consists primarily of compensation and associated fringe benefits for employees
and other direct project related costs. Gross profit increased 66% to $1.9
million in the first quarter of 1999 from $1.4 million for the same period in
1998. The gross profit margin percentage was approximately 43.5% for the first
quarter of 1999 as compared to 47.5% for the first quarter of 1998. The decrease
in the gross profit margin was mainly attributable to overhead, depreciation and
one-time supply expenses associated with the expansion of the Company's
laboratory facilities, which was completed in January 1999.
Other operating revenue. Other operating revenue consists of licensing fees,
milestones and royalties net of technology incentive award expense incurred
under the Company's Technology Development Incentive Plan. The Company earns
royalties from HMRI under a license agreement based on sales of fexofenadine
HCI, marketed as Allegra in the Americas and as Telfast elsewhere. Royalty
payments are due within 45 days after the end of a calendar quarter and
determined based on such quarter's sales. Other operating revenue for the first
quarter decreased 48% to $3.8 million compared to $7.3 million in 1998. The
decline in other operating revenue in 1999 was attributable to $6.4 million in
non-recurring royalties and milestones recognized during the first quarter of
1998. The Company expects no future non-recurring income from its
Allegra/Telfast license agreements with HMRI. Excluding this non-recurring
income, other operating revenue increased 142% to $4.2 million in the first
quarter of 1999 as compared to $1.7 million in the first quarter of 1998 as a
result of increased royalties under the Allegra/Telfast license agreement due to
increased sales of the drug product.
Research and development. Research and development expense consists of payments
in connection with collaborations with academic institutions, compensation and
benefits for scientific personnel for work performed on proprietary research
projects and costs of supplies and related chemicals. Research and development
expense decreased 38% to $129,000 in 1999 from $209,000 for the same period in
1998. The decrease was due primarily to contractual renewals with the Company's
research collaborators pertaining to propriety research programs funded at a
lower level than in previous periods.
Selling, general and administrative. Selling, general and administrative expense
consists of compensation and related fringe benefits for marketing and
administrative employees, professional services, marketing costs and all costs
related to facilities and information services. Selling, general and
administrative expenses increased 16.6% to $1.3 million for the first three
months of 1999 from $1.1 million for the corresponding period of 1998. Selling,
general and administrative expenses represented 28.5% of net contract revenue in
the first quarter 1999 as compared to 37.7% in the first quarter 1998. The
dollar increase was mainly attributable to an increase in administrative and
marketing staffing to support the expansion of operations, an increase in
expenses related to recruitment of scientists, and an increase in overhead
expenses relating to the expansion of the Company's Albany facility. During the
first three months of 1998, the Company incurred a one-time expense for partial
reimbursement of its landlord for expenses in relation to relocating other
tenants in order to facilitate the Company's expansion. Excluding this charge,
selling, general and administrative expenses for the first three months of 1998
would have represented 30.7% of net contract revenue for the period.
Income tax expense. Income tax expense decreased $1.2 million from $2.9 million
in the first quarter of 1998 to $1.7 million for the same period in 1999. The
effective rate for the provision for income taxes was 37.5% in the first quarter
of 1999 and 38.5% for the same period in 1998. The Company's effective income
tax rate was consistent between periods.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded its business through operating cash flows,
proceeds from borrowings and the issuance of equity securities. During the first
three months of 1999, the Company generated cash of $2.6 million from operating
activities of which $0.9 million was used in investing activities, principally
towards the purchase of additional laboratory equipment. Also, during the first
quarter of 1999 the Company generated $36.5 million from financing activities
consisting of $51.4 million from its recent initial public offering of 2,815,000
shares of common stock, net of $14.9 million of proceeds used to repay principal
on outstanding debt obligations. Working capital was approximately
$49.0 million at March 31, 1999 as compared to $8.3 million as of March 31,
1998. The Company has available a $25 million credit facility to supplement
its liquidity needs.
The Company recently announced a preliminary plan for expansion of operations at
its Rensselaer, New York site. This expansion would accommodate additional
chemical development laboratories, as well as a small-scale chemical
manufacturing facility. The total cost of this expansion is estimated to be $9
to $11 million, over approximately 18 to 24 months. The Company has received
initial approval of over $2 million in state grants to assist in funding the
expansion. The Company expects to fund the remaining cost of the expansion
through cash on hand, funds from operations, and, if necessary, its credit
facility.
The Company is pursuing the expansion of its operations through internal growth
and strategic acquisitions. The Company expects such activities will be funded
from existing cash and cash equivalents, cash flow from operations, the
issuance of equity securities and borrowings. The Company believes that the
remaining net proceeds from its recent public offering, together with cash
generated from operations and borrowings under the credit facility, will be
sufficient to fund its anticipated working capital expenditures (other than
financing necessary to complete future acquisitions, if any) for at least the
next 12 months. Future acquisitions, if any, could be funded with cash from
operations, borrowings under the credit facility and/or the issuance of debt or
equity securities. There can be no assurance that attractive acquisition
opportunities will be available to the Company or will be available at prices
and upon such other terms that are attractive to the Company. The Company
regularly evaluates potential acquisitions of other businesses, products and
product lines and may hold discussions regarding such potential acquisitions. As
a general rule, the Company will publicly announce such acquisitions only after
a definitive agreement has been signed. In addition, in order to meet its long-
term liquidity needs or consummate future acquisitions, the Company may incur
additional indebtedness or issue additional equity and debt securities, subject
to market and other conditions. There can be no assurance that such additional
financing will be available on terms acceptable to the Company or at all. The
failure to raise the funds necessary to finance its future cash requirements or
consummate future acquisitions could adversely affect the Company's ability to
pursue its strategy and could negatively affect its operations in future
periods.
YEAR 2000 COMPLIANCE
General. The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the application year of business transactions. The
Company's Year 2000 remediation and compliance program (the "Year 2000 Project")
is managed by a Task Force consisting of representatives from all major
operational units within the Company and is directed by the Company's President.
The Year 2000 Project Task Force's focus has been the functional areas of
information technology, non-information technology (embedded processors) and
customer/vendor Year 2000 assessment.
Information technology. The Company's Task Force and independent information
technology consultants have conducted a comprehensive assessment of the
Company's main computer system to identify the enterprise-wide hardware and
software impact of the Year 2000 problem and to identify mission critical
software systems. They determined that no substantial changes are required for
the Company's hardware and software to be considered Year 2000 compliant. Since
substantially all of the Company's software are standard "off the shelf"
packages, much of the remediation and testing process is dependent on the
accuracy of work performed by, and the Year 2000 compliance of, such purchased
software. The Company's Task Force has completed an assessment of computer
hardware and software systems and concluded that no mission critical systems
will require extensive modifications to become Year 2000 compliant.
Non-information technology. The Company's non-information technology systems
consist mainly of embedded processors such as microcontrollers in security, fire
prevention and climate control systems. The Company has reviewed the Year 2000
readiness of vendors supplying such equipment and systems in order to assess the
possibility of a Year 2000 failure in these areas. Because of the Company's
recent physical expansion at its Albany, New York facility, the majority of the
centralized microcomputer systems have been either recently installed or
upgraded in capacity. Thus, the Company believes that substantially all of the
non-information technology systems within its infrastructure are Year 2000
compliant.
Customer/vendor relationships. The Task Force is seeking to confirm the Year
2000 readiness of its material customers (such as Astra AB and Eli Lilly and
Company), its key licensees (such as HMRI), along with the Company's critical
vendors. The failure of any of its significant customers or vendors to be Year
2000 compliant could have a material adverse effect on the Company's business,
financial position and results of operations.
Due to the non-proprietary nature of the Company's software systems, along with
the recent acquisition of a majority of the Company's information technology
hardware, the Company anticipates that it will incur no material costs to become
Year 2000 compliant. Due to the unlikely nature of internal failures at the
Company, no contingency plans have been prepared to address this problem. The
most likely reasonable worst case scenario for the Company with respect to the
Year 2000 problem would be the failure of a significant customer or vendor,
including an energy vendor, to be Year
9
<PAGE>
2000 compliant such that the failure would either cause the Company to lose a
revenue stream or to experience a withholding of a vendor's goods or services
because of the situation. In the case of a material customer, this could result
in lost revenue, while in the case of a vendor, this could result in higher than
anticipated expenses, as the Company would be required to seek alternative
suppliers of these goods and services.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company, from time to time, may be involved in various claims and
legal proceedings arising in the ordinary course of its business. The Company is
not currently a party to any such claims or proceedings which, if decided
adversely to the Company, would either individually or in the aggregate have a
material adverse effect on the Company's business, financial condition or
results of operations.
Item 2. Changes in Securities and Use of Proceeds
Use of Proceeds from Registered Securities.
(1) The effective date of the Securities Act registration statement
for which the use of proceeds information is being disclosed was
February 3, 1999, and the Commission file number assigned to the
registration statement is 333-58795.
(2) The offering commenced as of February 4, 1999.
(3) The offering did not terminate before any securities were sold.
(4) (i) As of the date of the filing of this report, the offering
has terminated and approximately 2,815,000 of the
securities registered were sold.
(ii) The names of the managing underwriters are ING Baring
Furman Selz LLC and Hambrecht & Quist LLC.
(iii) The Company's Common Stock, par value $0.01 per share, was
the class of securities registered.
(iv) The Company registered 2,875,000 shares of its Common
Stock (which includes 375,000 shares solely to cover over-
allotments), having an aggregate price of the offering
amount registered of $57,500,000 million. As of the date
of the filing of this report, 2,815,000 of the total
shares registered have been sold at an aggregate offering
price of $56,300,000.
(v) From February 4, 1999 to the date hereof, the amount of
expenses incurred by the Company in connection with the
issuance and distribution of the securities totaled $4.9
million, which consisted of direct payments of: (i) $.8
million in legal, accounting and printing fees; (ii) $3.9
million in underwriters discount, fees and commissions;
and (iii) $.2 million in miscellaneous expenses. No
payments for such expenses were made to (i) any of the
Company's directors, officers, general partners or their
associates, (ii) any person(s) owning 10% or more of any
class of equity securities of the Company or (iii) the
Company's affiliates.
(vi) The net offering proceeds to the Company after deducting
its total expenses was $51.4 million.
10
<PAGE>
(vii) The Company used the net proceeds as follows: (i)
approximately $7.9 million was used to repay indebtedness
incurred in connection with the repurchase by the Company
on October 28, 1998 of a total of 1,131,903 shares of
Common Stock from the Company's former chief financial
officer and a trust for the benefit of his family for an
aggregate purchase price of approximately $9.9 million
(the "Share Repurchase"); and (ii) approximately $5.0
million was used to repay a portion of the Company's
outstanding indebtedness under its existing credit
facility with Fleet Bank, N.A., including fees and accrued
and unpaid interest. Other than in connection with the
Share Repurchase, no such payments were made to (i) any of
the Company's directors, officers, general partners or
their associates, (ii) any person(s) owning 10% or more of
any class of equity securities of the Company or (iii) the
Company's affiliates.
(viii) The uses of proceeds described do not represent a material
change in the use of proceeds described in the Company's
prospectus.
Item 6. Exhibits and Reports Filed on Form 8-K
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None.
11
<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.
ALBANY MOLECULAR RESEARCH, INC.
/s/ Thomas E. D'Ambra, Ph.D.
Date: May 14, 1999 By:____________________________
Thomas E. D'Ambra, Ph.D.
Chairman and Chief Executive Officer
/s/ David P. Waldek
Date: May 14, 1999 By:____________________________
David P. Waldek
Treasurer and Chief Financial Officer
12
<PAGE>
Exhibit 27.1 Financial Data Schedule
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 42,184,951
<SECURITIES> 2,014,550
<RECEIVABLES> 0
<ALLOWANCES> 52,000
<INVENTORY> 695,478
<CURRENT-ASSETS> 52,443,538
<PP&E> 17,438,326
<DEPRECIATION> 2,595,611
<TOTAL-ASSETS> 67,752,284
<CURRENT-LIABILITIES> 3,419,976
<BONDS> 0
0
0
<COMMON> 128,865
<OTHER-SE> 63,388,459
<TOTAL-LIABILITY-AND-EQUITY> 67,752,284
<SALES> 4,425,648
<TOTAL-REVENUES> 8,609,395
<CGS> 2,502,622
<TOTAL-COSTS> 2,917,707
<OTHER-EXPENSES> 1,392,189
<LOSS-PROVISION> 52,000
<INTEREST-EXPENSE> 132,758
<INCOME-PRETAX> 4,534,831
<INCOME-TAX> 1,700,000
<INCOME-CONTINUING> 2,834,831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,834,831
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.22
</TABLE>
