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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
__________________________
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
__________________________
For Quarter Ended March 31, 1994 Commission File Number 0-8640
SYNCOR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 85-0229124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20001 Prairie Street, Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
(818) 886-7400
(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 (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. As of March 31, 1994
10,545,483 shares of $0.05 par value common stock were outstanding.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Page
____
Balance Sheets as of
March 31, 1994 and December 31, 1993...........................2
Statements of Income for three months
ended March 31, 1994 and 1993..................................3
Statements of Cash Flows for three months
ended March 31, 1994 and 1993..................................4
Notes to Consolidated Condensed Financial Statements.............5
Item 2. Management's Discussion and Analysis of Financial Condition......7
Part II. Other Information................................................9
SIGNATURE..................................................................10
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
March 31, December 31,
1994 1993
____________ _______
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,456 $ 15,110
Short-term investments 1,599 3,590
Accounts receivable, net 45,055 35,052
Inventory 5,398 4,522
Prepaids and other current assets 6,831 5,415
________ ________
Total current assets 77,339 63,689
Property and equipment, net 26,172 25,122
Excess of purchase price over net assets
acquired, net 14,004 14,123
Other assets 10,199 11,652
________ ________
$127,714 $114,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,996 $ 20,817
Accrued alliance development costs 1,083 4,066
Accrued liabilities 2,172 3,073
Accrued wages and related costs 4,167 5,332
Current maturities of long-term debt 1,946 3,280
________ ________
Total current liabilities 46,364 36,568
________ ________
Long-term debt, net of current maturities 6,142 6,837
Stockholders' equity:
Common stock, $.05 par value 527 518
Additional paid-in capital 45,409 43,786
Employee stock ownership loan guarantee (2,659) (2,970)
Foreign currency translation adjustment 125 131
Retained earnings 31,806 29,716
________ ________
Net stockholders' equity 75,208 71,181
________ ________
$127,714 $114,586
======== ========
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(in thousands, except per share data)
Three Months Ended March 31,
___________________________
1994 1993
____ ____
(Unaudited)
Net sales $74,800 $59,749
Cost of sales 56,379 39,494
_______ _______
Gross profit 18,421 20,255
Operating, selling and administrative expenses 15,103 16,265
_______ _______
Operating income 3,318 3,990
Other income, net 126 285
_______ _______
Income from continuing operations before
income taxes and discontinued operations 3,444 4,275
Provision for income taxes 1,354 1,686
_______ _______
Income from continuing operations before
discontinued operations 2,090 2,589
Discontinued operations, net of taxes - (447)
_______ _______
Net income $ 2,090 $ 2,142
======= =======
Net income per share:
Income from continuing operations $ .19 $ .24
Discontinued operations, net - (.04)
_____ _____
Net income per share $ .19 $ .20
===== =====
Weighted average shares outstanding 10,981 10,749
====== ======
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
____________________________
1994 1993
____ ____
(Unaudited)
Cash flows from operating activities:
Net income $ 2,090 $2,142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,583 2,018
Amortization of ESSOP loan guarantee 311 230
Decrease (increase) in:
Accounts receivables, net (10,003) 143
Inventory (876) 456
Other current assets (2,220) (354)
Other assets 1,572 (1,412)
Increase (decrease) in:
Accounts payable 16,179 960
Accrued alliance development costs (2,983) -
Accrued liabilities (901) (84)
Accrued wages and related costs (1,165) 352
Foreign currency translation adjustment (6) (16)
_______ ______
Net cash provided by operating activities 4,581 4,435
activities _______ ______
Cash flows from investing and financing activities:
Purchase of property and equipment, net (2,829) (1,409)
Decrease in short-term investments 1,991 239
Issuance of common stock 1,632 3
Repayment of long-term debt (2,029) (1,771)
_______ ______
Net cash used in investing and
financing activities (1,235) (2,938)
_______ ______
Net increase in cash and cash equivalents 3,346 1,497
Cash and cash equivalents at beginning of period 15,110 4,108
_______ ______
Cash and cash equivalents at end of period $18,456 $5,605
======= ======
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
1. GENERAL. The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to form 10-Q. Accordingly, they 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 only of normal recurring
accruals) considered necessary for a fair presentation have been
included. The results of the three months ended March 31, 1994, are
not necessarily indicative of the results to be expected for the full
year. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report and Form 10K for the transition period ended December 31, 1993.
2. CHANGE IN FISCAL YEAR. The Company announced a change in its fiscal
year-end to December 31 from May 31, beginning with the seven month
transition period ended December 31, 1993. The calendar quarters of
1993 have been restated to reflect comparable periods.
3. DISCONTINUED OPERATIONS. On May 31, 1993, the Company completed the
divestiture of a minor segment of its business, referred to as its Home
Infusion business. The Company's consolidated statements of income
reflected a net loss from discontinued operations of $.4 million for
the three months ended March 31, 1993.
4. ACCRUED ALLIANCE DEVELOPMENT COSTS. On December 3, 1993, the Company
entered into a long-term supplier distribution agreement (the Strategic
Alliance) with its principal supplier of radiopharmaceutical products,
the Radiopharmaceutical Division of the DuPont Merck Pharmaceutical
Company (DuPont Merck). The agreement, which became effective
February 1, 1994, replaced an existing supply agreement between the
companies which has been in place since 1988. Under the terms of the
new agreement, DuPont Merck will rely upon Syncor as the primary
distribution channel for its radiopharmaceutical products in the United
States.
In connection with this agreement, the Company established a reserve for
alliance development costs of $4.5 million during the seven months ended
December 31, 1993. Included in these charges were $2.8 million of costs
related to launch and implementation of the strategic alliance program,
$1.1 million of employee-related expenses associated with the consoli-
dation, relocation and reorganization of certain sales and service
operations and $.6 million for incremental accounting, legal and
regulatory fees.
Cash outlays for the first calendar quarter of 1994 amounted to approxi-
mately $2.9 million. The remaining reserve of $1.1 million at March 31,
1994 is expected to be used during 1994 as the strategic alliance is
implemented.
5. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115. In May 1993, the
Financial Accounting Standard Board issued Statement of Financial Account-
ing Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (Statement 115). This Statement supersedes Statement
No. 12, "Accounting for Certain Marketable Securities". Statement 115
addresses the accounting and reporting for certain investments in debt
and equity securities, and expands the use of fair value accounting for
these securities. Statement 115 retains the use of the cost method for
investment in debt securities when there is intent and ability to hold
the securities to maturity. Statement No. 115 is effective for fiscal
years beginning after December 15, 1993.
The Company adopted Statement 115 in the first quarter of calendar 1994.
However, the adoption of this Statement is determined to be immaterial
and is not reported separately in the consolidated financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Net Sales
_________
Consolidated net sales for the first quarter of 1994 rose 25.2% or $15.1
million to $74.8 million versus $59.8 million for the first calendar quarter
of 1993. The Company's net sales growth for the quarter is primarily the
result of activity associated with the Strategic Alliance entered into with
its principal supplier of radiopharmaceutical products, as discussed in
Note 4 of Notes to Consolidated Condensed Financial Statements. Net sales
growth also continues to be the result of an increase in the cardiology
sector of nuclear medicine, the opening and acquisition of new pharmacies
and increased market share, offset by aggressive price competition,
including a strategic decision to reduce the price of the Company's
largest single product. This price reduction was deemed necessary as
part of a product penetration strategy prior to the expected introduction
of a competing cardiac imaging agent later on this year. In addition, the
Company has noticed a decline in the volume and pricing of some of its
core (noncardiology) products due to what appears to be the result of
changes in certain physician practice patterns.
Gross Profit
____________
Gross profit for the first quarter of 1994 decreased to $18.4 million
down from $20.3 million for the comparable 1993 period. Gross profit as a
percentage of net sales also declined during the current quarter to 24.6%
versus 33.9% in 1993.
The decline in the gross profit percentage is attributable to a number of
factors. These factors include aggressive price competition in many key
markets, material cost increases and initial lower margins (as expected) as
a result of the implementation of the Strategic Alliance with DuPont Merck.
Material costs, as a percentage of pharmacy sales, have been rising due to
price increases from suppliers. Current government focus on health care
cost containment, as well as aggressive price competition, has made it
difficult to cover these costs through price increases. In response to
health care reform pressures and overall changes in the market, the Company
made a strategic decision in the recent quarter to reduce the pricing of
its largest single product in order to increase market penetration, as
discussed above.
The Company anticipates most of these trends to continue throughout the
balance of the year. The Company continues to invest in the start-up and
opening of new central radiopharmacies. These pharmacies have a dilutive
effect on gross margin until they reach a certain level of net sales.
<PAGE>
Operating, Selling and Administrative Expenses
______________________________________________
Operating, selling and administrative expenses decreased 7.1% for the first
quarter or $1.2 million to $15.1 million and declined as a percentage of
sales to 20.2% from 27.2% for the same period of 1993.
This decrease reflects the Company's continued success in its efforts to
tightly control operating expenses. During the quarter, the Company was
able to produce a significant increase in net sales without corresponding
increases in operating expenses.
The Company continues, as a part of its overall business strategy, to invest
in developmental business opportunities. These opportunities require ongoing
resources in the area of operating, selling and administrative expenses.
Liquidity and Capital Resources
_______________________________
The Company's balance sheet was significantly strengthened with the
divestiture of the Home Infusion Services Division which was completed
at the end of fiscal 1993 (May 31, 1993). The divestiture resulted in
a cash infusion of $9.1 million.
The Company had cash, cash equivalents and short-term investments of $ 20.1
million at March 31, 1994, compared with $18.7 million at December 31, 1993.
Working capital increased $3.9 million to $31 million while the current ratio
decreased to 1.67 from 1.74. Days Sales Outstanding increased to 54 days at
March 31, 1994 compared to 52 days at December 31, 1993.
The Company continues expenditures for the alliance implementation, acquisi-
tion of independent radiopharmacies, start-up of new radiopharmacies, the re-
equipping of existing radiopharmacies and information technology for both
internal and customer uses. These programs are expected to continue through
1994 and will be funded with proceeds from operations. The Company expects
its overall cash position to decline somewhat in the upcoming quarters as
the Strategic Alliance is fully implemented.
The nature of the Company's business is not capital intensive and, as new
products become available, the capital requirement to accommodate these
products will be minimal. The Company believes sufficient internal and
external capital sources exist to fund operations and future expansion
programs. The were no borrowings outstanding on the line of credit at
March 31, 1994 and December 31, 1993.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Part II. OTHER INFORMATION
None.
<PAGE>
SIGNATURE
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.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
March 16, 1994 By: /s/ Michael A. Piraino
____________________________
Michael A. Piraino
Senior Vice President and
Chief Financial Officer
(Principal Financial/Accounting
Officer)
