SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE YEAR ENDED DECEMBER 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
incorporation or organization) Identification No.)
20001 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311-2185
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 886-7400
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.05 Par Value
(Title of Class)
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulations S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K
______
The aggregate market value of the voting stock held by non-
affiliates of the Registrant, computed by reference to the average
bid and asked prices of such stock on March 1, 1995, is
$78,557,456. The number of shares outstanding of the Registrant's
$0.05 par value common stock as of March 1, 1995, was 10,570,333
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to shareholders for the
period ended December 31, 1994, are incorporated by reference into
Parts I, II and IV of this report.
Portions of Registrant's definitive Proxy Statement for
Registrant's Annual Meeting of Shareholders on June 20, 1995 are
incorporated by reference into Part III of this report.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
December 31, 1994
Item 1. BUSINESS..............................................1
Item 2. PROPERTIES............................................6
Item 3. LEGAL PROCEEDINGS.....................................7
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...7
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................7
Item 6. SELECTED FINANCIAL DATA...............................7
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................8
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL
DATA..................................................8
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...................8
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....8
Item 11. EXECUTIVE COMPENSATION................................8
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................9
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........9
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K..............................................9
<PAGE>
PART I
______
ITEM 1. BUSINESS.
Unless otherwise indicated, the term "Syncor" or the "Company" as
used in this report refers to Syncor International Corporation,
incorporated in 1985 under the laws of the State of Delaware, and
its consolidated subsidiaries.
GENERAL DEVELOPMENT OF BUSINESS
The general development of the Company's business for the year
ended December 31, 1994 is covered in the Chairman of the Board and
President's letter to the Company's shareholders in the Company's
Annual Report to Shareholders for said year and is hereby
incorporated by reference. A copy of the Company's Annual Report
to Shareholders is attached hereto as Exhibit 13.
DESCRIPTION OF BUSINESS
PRINCIPAL PRODUCTS PRODUCED AND SERVICES RENDERED
_________________________________________________
The Company is a pharmacy services company primarily engaged in
compounding, dispensing and distributing radiopharmaceutical
products to hospitals and clinics through its nationwide network of
117 pharmacies. Four of the pharmacies also include Positron
Emission Tomography ("PET") pharmacy services.
The radiopharmaceuticals provided by the Company are principally
used for diagnostic imaging of physiological functions and organ
systems. In addition, the Company provides various services in
connection with the sale of radiopharmaceuticals, including
radiopharmaceutical record keeping required by federal and state
government agencies, and radiopharmaceutical technical consulting.
The Company estimates that its pharmacies service approximately
7,000 hospitals and clinics in 39 states throughout the United
States. During each of the last three fiscal years, the pharmacies
contributed more than 95 percent of the consolidated net sales of
the Company.
Other activities of the Company include the marketing and
distribution of imaging cold kits, isotopes and medical reference
sources in addition to nuclear and pharmacy equipment and
accessories.
The description of Syncor's various activities in the Company's
Annual Report to Shareholders for the year are hereby incorporated
by reference.
SOURCES AND AVAILABILITY OF RAW MATERIALS
_________________________________________
The Company pharmacies dispense approximately 60 different
radiopharmaceutical products which are obtained primarily from six
suppliers, however majority of the products are supplied by The
Radiopharmaceutical Division of The DuPont Merck Pharmaceutical
Company ("DuPont"). If DuPont is not able to supply its
proprietary products to the Company, it could have a short term
negative impact. Management believes that if any one of the other
suppliers of radiopharmaceuticals failed to supply products, then
the other suppliers would be able to supply additional products to
make up most of the shortfall. The failure of two or more
suppliers to provide products at a particular time, however could
have an adverse effect on the Company's business. Although
periodic product outages and shortages accurse, to date, the
Company's pharmacies have not experienced any difficulty in
securing sufficient supplies of radiopharmaceutical products.
One of Company's suppliers, Medi-Physics Inc., ("Medi-Physics"),
the U.S. healthcare arm of Amersham International, a United
Kingdom-based healthcare concern, has chosen to stop selling its
proprietary radiopharmaceutical products through Syncor's national
pharmacy network. The decision by Medi-Physics was effective
January 16, 1995 and is the result of a network that it has formed
with other radiopharmacies. In 1994, Syncor had approximately $19
million in sales and earned approximately $2.4 million from Medi-
Physics' proprietary products. During 1995, management will seek
to mitigate the loss in sales and income from Medi-Physics by
providing its current customers with substitute products and
services.
PATENTS, TRADEMARKS, LICENSES AND DISTRIBUTION AGREEMENTS
_________________________________________________________
The Company owns a number of trademarks and has a variety of
license agreements. In addition, the Company has entered into
exclusive radiopharmacy distribution agreements with two suppliers
for certain proprietary radiopharmaceutical products. While
certain of the foregoing trademarks and agreements are considered
to be of value to the Company, management believes at present its
competitive position is dependent principally on the efficient
operation of its pharmacies and high quality of its customer
service.
On December 3, 1993, the Company entered into a long-term
distribution agreement with its principal supplier of
radiopharmaceutical products, DuPont. Under the terms of the
agreement, DuPont will rely upon the Company as the primary
distributor channel for its radiopharmaceutical products in the
United States. The agreement became effective February 1, 1994,
replacing an existing supply agreement between the companies which
had been in place since 1988. In 1994, this agreement resulted in
approximately $64 million in new incremental sales for Syncor.
After the new agreement was implemented, both companies determined
there was an opportunity to improve the original terms of the
agreement to the benefit of each company. During 1994, Syncor
concluded a joint review of its distribution agreement with DuPont.
As a result of the DuPont agreement, Syncor recently began
distribution of the newly approved radiopharmaceutical agent
Neurolite, which is manufactured by DuPont. Neurolite, which is
utilized in Single Photon Emission Computed Tomography ("SPECT")
brain imaging, is distributed in unit-dose and bulk form.
DEPENDENCE ON CUSTOMERS
_______________________
The Company's operations are such that none of its business is
dependent upon a single customer or a very few customers to the
extent that the loss of such would have a material impact on
financial condition or results of operations.
COMPETITIVE CONDITIONS
______________________
The Company's pharmacies compete primarily with large manufacturers
of radiopharmaceuticals, which directly supply radiopharmaceutical
products to the hospitals. Two of such manufacturers have set up
their own centralized radiopharmacies to supply customers. As
stated above, Medi-Physics's decision to form a network with other
radiopharmacies to distribute its proprietary products is expected
to result in additional competitive pressures. The Company also
competes with a number of other independent entities, each of which
operates one or more radiopharmacies. In certain markets, there is
competition with universities which own and operate centralized
radiopharmacies. The principal competitive practices of the
manufacturers and others involve price and service. Management
believes that the advantages to a hospital of using a centralized
radiopharmacy rather than preparing its own radiopharmaceutical
products include: (i) reduced risk of radiation exposure to
hospital personnel; (ii) cost savings due to Syncor's volume
purchasing power; (iii) better utilization of time-sensitive
products purchased from the radiopharmaceutical manufacturers; and,
(iv) reduction in the time needed to maintain extensive records
required by the regulatory agencies. In addition, the Company's
pharmacies provide quality controlled unit-dose
radiopharmaceuticals, comprehensive nuclear medicine product-line
availability, professional consultation and delivery services, and
computer hardware and proprietary software products for use in
nuclear medicine department operations.
GOVERNMENT REGULATION
_____________________
Each of the Company's pharmacies is licensed by and must comply
with the regulations of the United States Nuclear Regulatory
Commission ("NRC") or corresponding state agencies. In addition,
each pharmacy is licensed and regulated by the Board of Pharmacy in
the state where it is located.
Periodic inspections of the Company's pharmacies are conducted by
the NRC and various other federal and state agencies. Inspection
results which lead to escalated enforcement action could lead to
the imposition of fines or the suspension, revocation or denial of
renewal of the licenses for the location inspected. The Company
devotes substantial human and financial resources to ensure
continued regulatory compliance and believes that it is currently
in compliance with all material rules and regulations.
In addition to the Company being subject to the various federal and
state regulations relating to occupational safety and health, and
the use and disposal of bio-hazardous materials, the Company's
products are subject to the federal and state regulations relating
to drugs and medical devices.
Compliance with the applicable environmental control laws or
regulations, such as those regulating the use and disposal of
radioactive materials, is inherent in the industry and the normal
operations of the Company's pharmacies. Historically, compliance
with such laws and regulations has not had a material adverse
effect on the capital expenditures, earnings or competitive
position of the Company.
<PAGE>
FOREIGN OPERATIONS
Syncor owns and operates nuclear pharmacies in Taipei and
Kaoshiung, Taiwan, Hong Kong and Manila, Philippines. In 1993, the
Company also entered into joint venture agreements with various
parties in the People's Republic of China to open and operate
nuclear pharmacies. So far, sites have been opened and are
operating in Beijing and Shanghai. The Company plans to open a new
radiopharmacy in Mexico City, Mexico in 1995 and anticipates
further expansion of its operations internationally in the future.
The Company's foreign operations are not immune to the inherent
uncertainties and risks of currency fluctuations, political
instability, trade restrictions, inconsistent product regulations
associated with the such marketplace.
EMPLOYEES
As of December 31, 1994, Syncor employed approximately 2,048
people. However, the full-time equivalent personnel for the same
period was approximately 1,724 people.
<PAGE>
ITEM 2. PROPERTIES.
The Company and its consolidated subsidiaries lease (and in one
location owns) and operate a number of pharmacies whose locations
are set forth in the following table:(1)
STATE LOCATION
_____ ________
Alabama Birmingham
Mobile
Arizona Gilbert (Mesa)
Phoenix*
Tucson
Arkansas Little Rock
California Bakersfield
Berkeley
Colton
Fresno
Los Angeles*
Modesto
Orange
Sacramento*
San Diego
San Jose
San Francisco
Torrance
Van Nuys (Los Angeles)
Colorado Colorado Springs
Denver
Connecticut Glastonbury (Hartford)
Stamford
Delaware Seaford
Florida Fort Myers
Gainesville
Jacksonville
Jupiter (West Palm Beach)
Miami Lakes (Miami)
Pensacola
Pompano Beach (Ft.Lauderdale)
St. Petersburg
Tampa
Winter Park Georgia (Orlando)
Georgia Augusta
Columbus
Doraville (Atlanta)
Illinois Des Plaines
Chicago
Springfield
Indiana Ft. Wayne
Indianapolis
Munster
West Lafayette (Purdue)
Iowa Des Moines
Kansas Wichita
Kentucky Lexington
Louisville
Louisiana New Orleans
Maryland Lanham (Washington DC)
Timonium (Baltimore)
Massachusetts Woburn (Boston)
Michigan Grand Rapids
Southfield (Detroit)
Swartz Creek (Flint)
Minnesota Moorhead (Fargo ND)
St. Paul
Mississippi Flowood (Jackson)
Gulfport
Missouri Kansas City
Overland (St. Louis)
Nebraska Lincoln
Omaha*
Nevada Las Vegas
Reno
New Hampshire Bedford
New Jersey Fairfield (Newark)
New Mexico Albuquerque
New York The Bronx
Cheektowaga (Buffalo)
Franklin Square(Long Island)
Newburgh
Rochester
Syracuse
Troy (Albany)
North Carolina Charlotte
Greensboro
Ohio Cincinnati
Columbus
Girard (Youngstown)
Holland (Toledo)
Miamisburg (Dayton)
Uniontown (Akron)
Valley View (Cleveland)
Oklahoma Oklahoma City
Tulsa
Oregon Portland
Pennsylvania Allentown
Bloomsburg
Bristol (N. Philadelphia)
Duncansville (Altoona)
Hummelstown (Harrisburg)
Pittsburgh
Sharon Hill (Philadelphia)
South Carolina Columbia
Tennessee Chattanooga
Knoxville
Memphis
Nashville
Texas Amarillo
Austin
Beaumont
Corpus Christi
Dallas
El Paso
Fort Worth
Houston
Lubbock
North Dallas
San Antonio
Virginia Richmond
Virginia Beach
Washington Seattle
Spokane
West Virginia Huntington
Wisconsin Appleton
Wauwatosa (Milwaukee)
(1) The Company also owns an interest in pharmacies in Salt
Lake City, Utah; Midland, Texas; and Huntsville, Alabama.
* Cities where the Company has both a nuclear and PET pharmacy.
Pharmacy lease terms vary from less than one year up to
approximately ten years, and average approximately five years.
Leased areas average approximately 4,500 square feet.
The Company leases its Corporate Office facilities in Chatsworth,
California, pursuant to a lease that commenced on March 1, 1987.
The lease is for the term of ten years with two successive five-
year renewal options. Presently, the Company leases approximately
76,464 square feet at such location, which is adequate for the
Company's current needs.
ITEM 3. LEGAL PROCEEDINGS.
There are various litigation proceedings in which the Company and
its subsidiaries are involved. Many of the claims asserted against
the Company in these proceedings are covered by insurance. The
results of litigation proceedings cannot be predicted with
certainty. However, in the opinion of the Company's General
Counsel, such proceedings either are without merit or do not have
a potential liability which would materially affect the financial
condition of the Company and its subsidiaries on a consolidated
basis.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
last quarter of the year.
PART II
_______
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The stock information which appears in the Company's Annual Report
to Shareholders under the heading of "Quarterly Stock Price Data",
included in this Form 10-K Annual Report as Exhibit 13, is
incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA.
The selected financial data which appears in the Company's Annual
Report to Shareholders for the year ended December 31, 1994, under
the heading of "Selected Financial Data", included in this Form 10-
K Annual Report as Exhibit 13, is incorporated herein by reference.
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and
results of operations which appears in the Company's Annual Report
to Shareholders for the year, under the heading of "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations" included in this Form 10-K Annual Report as Exhibit 13,
is incorporated herein by reference.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
The consolidated financial statements and the notes thereto which
appear in the Company's Annual Report to Shareholders for the year
under the headings of "Consolidated Statements of Income" and
"Consolidated Balance Sheets" included in this Form 10-K Annual
Report as Exhibit 13, are incorporated herein by reference.
Schedules containing certain supporting information are also
included. See Index to Financial Statement Schedules on page 10.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
________
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except as noted below in this Item, the information called for by
Item 10 of Form 10-K is incorporated by reference from the
Company's definitive Proxy Statement for its Annual Meeting of
Shareholders, to be held on June 20, 1995, which will be filed with
the Commission pursuant to Regulation 14A within 120 days from
December 31, 1994.
The Form 5 of Director Monty Fu were filed a few days late due to
the error of the Company's Legal Department who filed the same on
their behalf.
Item 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 of Form 10-K is incorporated
by reference from the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on June 20, 1995, which
will be filed with the Commission pursuant to Regulation 14A within
120 days from December 31, 1994.
<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by Item 12 of Form 10-K is incorporated
by reference from the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on June 20, 1995, which
will be filed with the Commission pursuant to Regulation 14A within
120 days from December 31, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 of Form 10-K is incorporated
by reference from the Company's definitive Proxy Statement for its
Annual Meeting of Shareholders to be held on June 20, 1995, which
will be filed with the Commission pursuant to Regulation 14A within
120 days from December 31, 1994.
PART IV
_______
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) 1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements listed below,
together with the report thereon of KPMG Peat Marwick
LLP, dated March 10, 1995, appear in the Company's Annual
Report to Shareholders included in this Form 10-K Annual
Report as Exhibit 13, is incorporated herein by
reference.
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
The following schedule supporting the financial
statements of the Company are included herein:
Page
____
Schedule VIII Valuation and Qualifying
Accounts and Reserves............12
All other schedules and financial statements of the
Company are omitted because they are not applicable, not
required or because the required information is included
in the consolidated financial statements or notes
thereto.
3. INDEX TO EXHIBITS
The list of exhibits filed as part of this report on Form
10-K or incorporated herein be reference appear as Index
to Exhibits on page 13.
(b) REPORTS ON FORM 8-K FILED IN THE QUARTER ENDED DECEMBER
31, 1994.
None.
(c) EXHIBITS
The exhibits required by Item 601 of Regulation S-K are
filed herewith or are incorporated by reference and the
list of the Index to Exhibits on page 13.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ Gene R. McGrevin
_____________________________________
Gene R. McGrevin
President, Chief Executive Officer
Date: 3/31/95
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
<PAGE>
/s/ Monty Fu
__________________________________________________________________
Monty Fu, Chairman of the Board and Director
Date: 3/31/95
/s/ Gene R. McGrevin
__________________________________________________________________
Gene R. McGrevin, President, Chief Executive Officer
(Principal Executive Officer) and Director
Date: 3/31/95
/s/ Michael E. Mikity
__________________________________________________________________
Michael E. Mikity, Vice-President,
(Principal Financial and Accounting Officer)
Date: 3/31/95
/s/ Robert G. Funari
________________________________________________________________
Robert G. Funari, Executive Vice-President, Chief Operating Officer
and Director
Date: 3/31/95
/s/ George S. Oki
__________________________________________________________________
George S. Oki, Director
Date: 3/31/95
/s/ Joseph Kleiman
__________________________________________________________________
Joseph Kleiman, Director
Date: 3/31/95
/s/ Arnold E. Spangler
__________________________________________________________________
Arnold E. Spangler, Director
Date: 3/31/95
/s/ Steven B. Gerber
__________________________________________________________________
Steven B. Gerber, Director
Date: 3/31/95
/s/ Henry N. Wagner, Jr.
__________________________________________________________________
Henry N. Wagner, Jr., Director
Date: 3/31/95
/s/ Gail R. Wilensky
__________________________________________________________________
Gail R. Wilensky, Director
Date: 3/31/95
<PAGE>
<TABLE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Schedule VIII. Valuation and Qualifying Accounts and Reserves
<CAPTION>
(In thousands)
=================================================================
Balance Balance
at Costs at End
Beginning and Deductions of
Description of Period Expenses (A) Period
=================================================================
<S> <C> <C> <C> <C>
Year Ended
December 31, 1994
Allowance for doubtful
accounts $1,200 $ 358 $ 404 $1,154
Seven-Months Ended
December 31, 1993
Allowance for doubtful
accounts $1,502 $ 224 $ 526 $1,200
Year Ended May 31, 1993
Allowance for doubtful
accounts $1,681 $1,123 $1,302 $1,502
Year Ended May 31, 1992
Allowance for doubtful
accounts $2,071 $ 605 $ 995 $1,681
<FN>
(A) Uncollectible accounts written-off, net of recoveries, and reduction of
reserve.
</TABLE>
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
___________
1. Certificate of Incorporation and By-Laws
________________________________________
2. Restated Certificate of Incorporation of the Company filed as Exhibit
3.1 to the 8/28/87 Form 10-K and incorporated herein by reference.
3. Restated By-Laws of the Company filed as Exhibit 3.2 to the 8/28/87
Form 10-K and incorporated herein by reference.
4. Instruments Defining The Rights of Security Holders
___________________________________________________
4.1 Stock Certificate for Common Stock of the Company filed as
Exhibit 4.1 to the 8/26/86 Form 10-K and incorporated herein
by reference.
4.2 Rights Agreement dated as of 11/8/89 between the Company and
American Stock Transfer & Trust Company filed as Exhibit 2.1
to the Registration Statement on Form 8-A dated 11/3/89 and
incorporated herein by reference.
1. Material Contracts
__________________
1.1 Employment Agreement dated 2/1/89, between the Company and Gene
R. McGrevin filed as Exhibit 10.2 to 1/27/89 Form 8-K and
incorporated herein by reference.*
1.2 First Amendment dated 7/11/89 to Employment Agreement dated
2/1/89 between the Company and Gene R. McGrevin filed as Exhibit
10.5 to 8/30/90 Form 10-K and incorporated herein by reference.*
1.3 Second Amendment dated 10/16/89 to Employment Agreement dated
2/1/89 between the Company and Gene R. McGrevin filed as Exhibit
10.6 to 8/30/90 Form 10-K and incorporated herein by reference.*
1.4 Third amendment dated 1/1/91 to Employment Agreement dated
2/1/89 between the Company and Gene R. McGrevin filed as
Exhibit 10.7 to 8/29/91 Form 10-K and incorporated herein by
reference.*
1.5 Syncor International Corporation 1981 Master Stock Option
Plan as amended filed as part of Company's Proxy Statement
dated 11/5/85, for its Annual Meeting of Shareholders held
11/26/85 and incorporated herein by reference.*
1.6 Stock Option Agreement of Gene R. McGrevin dated 1/2/92 filed as
Exhibit 10.16 to 8/27/92 Form 10-K and incorporated herein by
reference.*
1.7 Form of Indemnity Agreement substantially as entered into
between Company and each Director and Officer filed as
Exhibit 3.2 Appendix A to the 8/28/87 Form 10-K and
incorporated herein by reference.*
1.8 Form of Benefits Agreement substantially as entered into between
Company and each Director filed as Exhibit 10.31 to 8/30/90 Form
10-K and incorporated herein by reference.*
1.9 Form of Benefits Agreement substantially as entered into between
Company and certain employees see Exhibit 10.8.*
1.10 Syncor International Corporation 1990 Master Stock Incentive
Plan As Amended and Restated filed as part of Company's Proxy
Statement dated 10/4/93 for its Annual Meeting of
Shareholders held 11/15/93 and incorporated herein by
reference.*
1.11 Syncor International Corporation Deferred Compensation Plan
effective July 1, 1991 as Amended and Restated effective
April 19, 1993, filed as Exhibit 10.11 to 3/30/93 Form 10-K
and incorporated herein by reference.*
1.12 Employment Agreement dated July 21, 1993 between the Company and
Robert G. Funari filed as Exhibit 10.12 to 3/30/94 Form 10-K and
incorporated herein by reference.*
1.13 Syncor International Corporation McGrevin Deferred Compensation
Plan effective June 10, 1993 filed as Exhibit 10.13 to 3/30/94
Form 10-K and incorporated herein by reference.*
1.14 Split Ownership/Split Dollar Life Insurance Assignment Agreement
effective June 10, 1993 between the Company and Gene R. McGrevin
filed as Exhibit 10.14 to 8/30/90 Form 10-K and incorporated
herein by reference.*
1.15 Form of Stock Option Agreement substantially as entered into
between Company and certain employee Directors and employees
filed as Exhibit 10.15 to 3/30/94 Form 10-K and incorporated
herein by reference.*
1.16 Form of Stock Option Agreement substantially as entered into
between Company and certain non-employee Directors filed as
Exhibit 10.16 to 3/30/94 Form 10-K and incorporated herein
by reference.*
2. Statement Re: Computation of Per Share Earnings
________________________________________________
Computation can be clearly determined from the material contained in
Company's Annual Report to Shareholders for year ended December 31,
1994.
13. Annual Report to Security Holders
_________________________________
Syncor International Corporation Annual Report to Shareholders for
the year ended December 31, 1994, except for specific information in
such Annual Report expressly incorporated herein by reference, is
furnished for the information of the Commission and is not to be
deemed "filed" as part hereof.
21. Subsidiaries of the Registrant
______________________________
State of
Name of Company Incorporation
_______________ _____________
Syncor Management Corporation California
Syncor Investment Management Crop Delaware
Syncor Taiwan, Inc. Taiwan
Syncor Midland, Inc. Texas
Syncor Global Holdings, Inc. British Virgin Islands
Syncor Hong Kong Limited Hong Kong**
Syncor Philippines, Inc. Philippines**
Syncor de Mexico Mexico**
23. Consents of Experts and Counsel Consent of KPMG Peat Marwick
_______________________________
LLP.***
__________________________________________
* Management contracts or compensatory plan
** Subsidiaries of Syncor Global Holdings, Inc.
*** Included herewith
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' REPORT ON SCHEDULES AND CONSENT
The Board of Directors and Stockholders
Syncor International Corporation:
The audits referred to in our report dated March 10, 1995, included
the related financial statement schedules as of December 31, 1994,
and 1993, and for the year ended December 31, 1994, and the seven-
month ended December 31, 1993, and for each of the years in the
tow-year period ended May 31, 1993, included in the registration
statement of Syncor International Corporation. These financial
statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statement schedules based on our audits. In our opinion,
such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth
therein.
We consent to incorporation by reference in the registration
statement on Form S-3 (no.33-44395) and Forms S-8 (no.'s 33-7325,
33-39251, 33-43692, 33-57762, 33-52607) of Syncor International
Corporation of our report dated March 10, 1995, relating to the
consolidated balance sheets of Syncor International Corporation and
subsidiaries as of December 31, 1994, and 1993, and the related
consolidated statements of income, stockholders' equity and cash
flows and related schedules for the year ended December 31, 1994,
and the seven-month ended December 31, 1993, and for each of the
years in the tow-year period ended May 31, 1993 which report
appears in the December 31, 1994 annual report on Form 10-K of
Syncor International Corporation. Our report refers to changes in
accounting methods to adopt Financial Accounting Standard Board's
Statements No. 109 and No. 115.
KPMG Peat Marwick LLP
Los Angeles, California
March 31, 1995
<PAGE>
EXHIBIT 13
SYNCOR INTERNATIONAL CORPORATION
ANNUAL REPORT TO SHAREHOLDERS
FOR THE TWELVE MONTH TRANSITION PERIOD ENDED
DECEMBER 31, 1994
CORPORATE PROFILE
Syncor International Corporation operates an expanding network of 117 domestic
and six international nuclear pharmacy service centers. The Company compounds
and dispenses patient-specific unit dose radiopharmaceutical prescriptions,
as well as distributing bulk radiopharmaceutical products, for use in
diagnostic imaging and provides a complete range of advanced pharmacy
services. Syncor services over 7,000 customers and is the only national
pharmacy network of its kind that provides a combination of diagnostic and
information services to hospitals and alternate site markets.
<PAGE>
SYNCOR'S MISSION
Syncor's mission is to be the premier provider of prepared time-critical
pharmaceuticals and comprehensive value-added pharmacy services which meet the
needs of the professional health care community and their patients.
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
Twelve Seven Twelve
Months Months Months
Ended Ended Ended
In thousands, except per share December 31, December 31, May 31,
and other data 1994 1993 1993 1993 1992 1991 1990
______________________________ ______________________ ________ __________________________________________________
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $319,994 $241,289 $142,237 $230,949 $195,989 $145,139 $118,929
Gross profit 66,026 78,926 45,187 77,306 67,451 49,501 37,161
Income:
Continuing operations(1) 1,213 6,633 1,684 10,191 7,709 5,870 3,216
Discontinued operations, net - 120 - (379) (810) (1,115) -
Extraordinary item - - - - - - 334
Cumulative effect of
accounting change - 1,020 1,020 - - - -
Net income(1) $1,213 $7,773 $2,704 $9,812 $6,899 $4,755 $3,596
Earnings per share:
Continuing operations(1) $.11 $.62 $.16 $.95 $.70 $.57 $.32
Discontinued operations, net - .01 - (.03) (.07) (.11) -
Extraordinary item - - - - - - (.03)
Cumulative effect of
accounting change - .09 .09 - - - -
_________ _________ _________ _________ _________ _________
Net income per share(1) $.11 $.72 $.25 $.92 $.63 $.46 $.35
Cash, cash equivalents and
investments $19,201 $18,700 $18,700 $20,937 $9,970 $9,309 $9,609
Working capital 26,616 27,121 27,121 27,430 20,279 20,220 17,324
Total assets 128,684 114,586 114,586 103,953 90,847 74,591 65,744
Long-term debt 5,154 6,837 6,837 4,515 6,008 7,881 8,475
Stockholders' equity $73,850 $71,181 $71,181 $65,784 $52,359 $42,790 $35,805
Current ratio 1.54 1.74 1.74 1.82 1.64 1.89 1.85
Weighted average shares
outstanding 10,889 10,779 10,762 10,708 10,865 10,246 10,140
Number of domestic
radiopharmacies 117 109 109 100 95 87 83
Days sales outstanding 55 52 52 52 59 68 62
<FN>
(1) Seven months ended December 31, 1993 includes a charge for alliance
development costs of $4,500.
/TABLE
<PAGE>
PHARMACY LOCATIONS
__________________
Corporate Headquarters: Chatsworth, California
Domestic Radiopharmacies: Akron, Ohio ; Albany, New
York ; Albuquerque, New Mexico ; Allentown, Pennsylvania ; Altoona, Pennsylvania
; Amarillo, Texas ; Appleton, Wisconsin ; Atlanta, Georgia ; Augusta, Georgia ;
Austin, Texas ; Bakersfield, California ; Baltimore, Maryland ; Beaumont, Texas
; Berkeley, California ; Birmingham, Alabama ; Boston, Massachusetts ; Bristol,
Pennsylvania ; Bronx, New York ; Buffalo, New York ; Charlotte, North Carolina
; Chattanooga, Tennessee ; Chicago, Illinois ; Cincinnati, Ohio ; Cleveland,
Ohio ; Colorado Springs, Colorado ; Colton, California ; Columbia, South
Carolina ; Columbus, Georgia ; Columbus, Ohio ; Corpus Christi, Texas ;
Dallas, Texas ; North Dallas, Texas ; Dayton, Ohio ; Denver, Colorado ; Des
Moines, Iowa ; Des Plaines, Illinois ; Detroit, Michigan ; El Paso, Texas ;
Fargo, North Dakota ; Flint, Michigan ; Fort Lauderdale, Florida ; Fort
Myers, Florida ; Fort Wayne, Indiana ; Fort Worth, Texas ; Fresno, California
; Gainesville, Florida ; Grand Rapids, Michigan ; Greensboro, North Carolina
; Gulfport, Mississippi ; Harrisburg, Pennsylvania ; Hartford, Connecticut ;
Houston, Texas ; Huntington, West Virginia ; Indianapolis, Indiana ; Jackson,
Mississippi ; Jacksonville, Florida ; Kansas City, Missouri ; Knoxville,
Tennessee ; Las Vegas, Nevada ; Lexington, Kentucky ; Lincoln, Nebraska ;
Little Rock, Arkansas ; Long Island,
New York ; Louisville, Kentucky ; Lubbock, Texas ; Manchester, New Hampshire ;
Memphis, Tennessee ; Mesa, Arizona ; Miami, Florida ; Milwaukee, Wisconsin ;
Mobile, Alabama ; Modesto, California ; Munster, Indiana ; Nashville, Tennessee
; Newburgh, New York ; New Orleans, Louisiana ; Newark, New Jersey ; Oklahoma
City, Oklahoma ; Omaha, Nebraska ; Orange, California ; Orlando, Florida ; Palm
Beach, Florida ; Pensacola, Florida ; Philadelphia, Pennsylvania ; Phoenix,
Arizona ; Pittsburgh, Pennsylvania ; Portland, Oregon ; Reno, Nevada ; Richmond,
Virginia ; Rochester, New York ; Sacramento, California ; Saint Louis, Missouri
; Saint Paul, Minnesota ; Saint Petersburg, Florida ; San Antonio, Texas ; San
Diego, California ; San Francisco, California ; San Jose, California ; Seaford,
Delaware ; Seattle, Washington ; Spokane, Washington ; Springfield, Illinois ;
Stamford, Connecticut ; Syracuse, New York ; Tampa, Florida ; Toledo, Ohio ;
Torrance, California ; Tucson, Arizona ; Tulsa, Oklahoma ; Van Nuys, California
; Virginia Beach, Virginia ; Washington, District of Columbia ; West Lafayette,
Indiana ; Wichita, Kansas ; Youngstown, Ohio ; International Radiopharmacies:
Beijing, Republic of China ; Kowloon, Hong Kong ; Kaoshiung, Taiwan ; Manila,
Philippines ; Shanghai, Republic of China ; Taipei, Taiwan ; Positron Emission
Tomography Pharmacies: Los Angeles, California ; Omaha, Nebraska ; Phoenix,
Arizona ; Sacramento, California
<PAGE>
SYNCOR'S VISION:
________________
Making a difference in people's lives through service.
<PAGE>
LETTER TO SHAREHOLDERS
Dear Shareholder,
1994 was a year of significant highs and lows for our Company.
The year commenced with Syncor's twentieth anniversary. In January 1974, the
founders of Syncor International Corporation introduced a new service concept to
the nuclear medicine community: the delivery of time-critical unit dose
pharmaceuticals through centralized radiopharmacies. Twenty years later, Syncor
International Corporation is an established, international leader in the
distribution of high-tech pharmacy services. Today, we are a $320 million
corporation with a national network of 117 domestic and six international
radiopharmacies.
In February 1994, we launched our alliance with the Radiopharmaceutical Division
of The DuPont Merck Pharmaceutical Company ("DuPont Merck"). This alliance
positioned Syncor as the primary distribution channel for DuPont Merck's
radiopharmaceutical products in the United States, adding $64 million in
incremental sales in 1994.
We had high expectations for our performance; however, health care reform
initiatives led to severe price erosion and intense competition throughout the
year. While we were able to report a substantial 32.6% increase in net sales for
the year, our profit margins deteriorated significantly, and we reported losses
for the third and fourth quarters of 1994, though we maintained overall
profitability for the year.
We believe we have made substantial progress toward identifying and implementing
profit improvement programs which should improve our operating performance. We
are dedicated to revitalizing our Company and will be focusing on the following
key objectives during 1995:
. Maintaining a strong financial position: We must achieve an acceptable profit
level for enhanced shareholder value.
. Diversifying our core business: We must broaden the foundation of our core
business in order to adapt to the ever changing needs of the marketplace.
. Building effective partnerships: We will continue to improve the nature of the
DuPont Merck Alliance to foster the best interests of both companies. We
<PAGE>
demonstrated our commitment to this partnership when we announced the
successful joint review of this agreement, effective January 1995. We will
continue to explore similar arrangements with other quality companies.
. Strengthening our marketing strategy: We must develop creative and innovative
marketing approaches which will provide Syncor with a competitive advantage in
a changing and demanding health care market.
Syncor International Corporation's net sales in 1994 increased 32.6 percent to
$320 million, up from $241.3 million in 1993. Net income from continuing
operations in 1994 totaled $1.2 million or $.11 per share compared to net income
of $6.6 million or $.62 per share in 1993.
Despite the financial challenges of 1994, our balance sheet remained strong. At
December 31, 1994, cash, cash equivalents and investments totaled $19.2 million
and working capital totaled $26.6 million. The current ratio stands at
1.54:1.00.
We initiated several programs in 1994 to mitigate the negative market factors
that depressed our profit performance:
. We significantly reduced our corporate overhead.
. We reassessed our marketing strategy and placed greater emphasis on adding
profitable business.
. We reorganized our field organization to obtain greater focus on teamwork and
new product conversions.
. We postponed scheduled salary increases.
Throughout 1994, Syncor's management met with representatives from DuPont Merck
in order to reassess and review the original terms of the alliance. In January,
1995, Syncor and DuPont Merck successfully concluded this joint review and
modified the agreement accordingly. The resulting changes will help both
companies achieve the long-term full potential of this alliance; that being to
grow the nuclear medicine market so it may fully realize its potential of
contributing to affordable, quality health care. The expected financial impact
of the modified agreement on the Company for 1995 is to improve margins and cash
flow.<PAGE>
During the past year, our national pharmacy network continued its accelerated
expansion program, with the addition of eight radiopharmacies. This brings our
domestic total to 117. Our international radiopharmacy presence also increased.
In 1994, we accelerated our international market expansion program and opened
radiopharmacies in Beijing and Shanghai in the Republic of China, a second
pharmacy in Taiwan and, in January 1995, a pharmacy in the Philippines. In 1995,
we look forward to additional international openings in Mexico and Thailand. We
are truly an "International" company and will continue to pursue business
opportunities in foreign markets.
Despite all our difficulties, challenges and organizational changes, our
employees never lost focus on servicing our customers. They dealt with the
reductions in staffing and the lack of salary increases, and they continued to
provide the highest level of quality service to our customers. In fact, an
independent market research audit documented that Syncor's customer service
continued to improve in 1994 while competing companies' performance declined or
stayed the same.
We would like to personally commend all of our 2,000-plus employees for their
professionalism and dedication to our Customer Value:
OUR CUSTOMERS ARE NUMBER ONE. WE ARE DEDICATED TO PROVIDING
QUALITY SERVICE WHICH EXCEEDS THEIR EXPECTATIONS AND MAINTAINS
THEIR TRUST.
We expect to continue to be challenged in 1995. The market-based initiatives
stimulated by health care reform will continue. Cost effective medicine is
becoming a reality in the private sector. Competition will continue to be
intense. However, we are optimistic that Syncor's performance should improve in
spite of these obstacles. Our optimism is based on four factors:
1.The health care market overreaction to health care reform initiatives will
diminish. Nuclear medicine departments will expand and order new equipment.
New products should be approved by the FDA. Market penetration and market
expansion of existing products will continue.
<PAGE>
2.We have successfully completed the implementation phase of our alliance with
DuPont Merck. Both companies can now concentrate on expanding the nuclear
medicine market by demonstrating that nuclear medicine is superior clinically
and is cost-effective versus other modalities. Both companies are now focused
on profitably converting customers to Syncor's unit dose system, which is more
efficient than purchasing in bulk. Both companies are now focused on
increasing penetration and conversion of DuPont Merck's Cardiolite(R), the
cardiac imaging product, and Neurolite(R), the new brain imaging agent.
3.We have streamlined our corporate and field organizations. Our entire
organization is focused on profit improvement as our primary objective in
1995. All of our incentive programs are based on achieving our profit goals.
4.Our people continue to demonstrate their ability to deliver quality
cost-effective services to our customers. We are convinced that quality, cost
effective services will be rewarded in the long run by the majority of
customers.
We would be remiss if we did not recognize our shareholders for their
understanding, patience and support in 1994. The strategies and plans we have
initiated should continue to earn your support. We remain committed to exceeding
the expectations of our customers and rewarding our employees and shareholders
for their continued dedication to our Vision, Values and Mission.
Sincerely,
Gene R. McGrevin
President & Chief Executive Officer
Monty Fu
Chairman of the Board<PAGE>
FINANCIAL CONTENTS
__________________
Management's Discussion and Analysis 8
Consolidated Balance Sheets 13
Consolidated Statements of Income 14
Consolidated Statements of Stockholders' Equity 15
Consolidated Statements of Cash Flows 16
Notes to Consolidated Financial Statements 17
Selected Quarterly Results of Operations 27
Independent Auditors' Report 28
Officers and Directors 29
<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS OF
FINANCIAL CONDITION & RESULTS OF OPERATIONS
RESULTS OF OPERATIONS CALENDAR YEARS 1994 AND 1993
NET SALES:
Consolidated net sales in 1994 totaled $320 million, an increase of 32.6%, or
$78.7 million, over 1993. The Company's net sales growth is primarily the result
of activity associated with the strategic alliance that the Company entered into
with its principal supplier of radiopharmaceutical products, as discussed in
Note 6 of Notes to Consolidated Financial Statements. Sales in the cardiology
sector of the business continue to be the driving force in nuclear medicine
and the Company's sales growth. Cardiology sales represent approximately 56%
of the Company's net sales. Other favorable factors affecting sales growth
include the addition of significant sales volume due to the expansion of
certain large managed care contracts, plus the opening and acquisition of
eight new pharmacies during 1994. Sales growth was negatively affected by
recent trends in national health care economics, primarily aggressive price
competition, plus the strategic decision made during the first quarter of
this year to reduce the price of the Company's leading cardiology product.
GROSS PROFIT:
The Company's gross profit as a percentage of net sales decreased to 20.6% in
1994 compared to 32.7% in 1993. The decline in gross profit percentage is the
result of a variety of factors. These factors include general price reductions
across most of Syncor's product line including the Cardiology area, in response
to competitive market pressures, in addition to the acquisition of several large
managed care contracts that traditionally have lower profit margins. The Company
also experienced a decline in the volume of some of its core (non-cardiology)
products, due to changes in certain physician practice patterns. Material
costs, as a percentage of pharmacy sales, have been rising due to price
increases from suppliers, while the current government focus on cost
containment and managed care has made it difficult to recover these material
cost increases through price increases to customers. Beginning in 1995, the
Company believes pricing is stabilizing in the marketplace. In early January
1995, the Company concluded a
joint review and modification of the strategic alliance agreement with the
Radiopharmaceutical Division of the (DuPont Merck). The resulting changes are
anticipated to improve the gross margin as a percentage of sales in early 1995
and the Company expects this trend to continue.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES:
Operating, selling and administrative expenses decreased $1.9 million in 1994
compared to 1993, despite a significant increase in net sales, and decreased as
a percentage of net sales from 23.1% to 16.8%. The decline was a direct result
of several programs initiated by the Company in 1994 to reduce losses, reduce
certain overhead, and improve control over radiopharmacy expenditures. The
Company continues, as a part of its business strategy, to invest in
developmental business opportunities. These opportunities require ongoing
resources in the area of operating, selling and administrative expenses. The
Company does not believe there will be a significant increase in the level of
operating, selling and administrative expenditures during 1995.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization in 1994 increased to $10.6 million or 24 percent
over $8.5 million in 1993. The increase is due to the opening or acquiring of
eight new radiopharmacies since December 31, 1993, and an extensive remodeling
and relocation program of the Company's facilities which was initiated in prior
years.
ALLIANCE DEVELOPMENT COSTS:
On December 3, 1993, the Company entered into a long-term supplier distribution
agreement with its principal supplier of radiopharmaceutical products, DuPont
Merck. The agreement, which became effective February 1, 1994, replaced an
existing supply agreement between the companies which had been in place since
1988. Under the terms of the new agreement, DuPont Merck will rely upon the
Company as the primary distribution channel for its radiopharmaceutical products
in the United States.<PAGE>
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. These costs, which resulted in cash outlays, included $2.8 million related
to launch and implementation of the strategic alliance program, $1.1 million of
employee-related expenses associated with the consolidation, relocation and
reorganization of certain sales and service operations, and $.6 million for
incremental accounting, legal and regulatory fees. Accrued alliance development
costs of $4.1 million at December 31, 1993, were fully utilized in 1994 as the
strategic alliance with DuPont Merck was implemented.
PROVISION FOR INCOME TAXES:
The provision for income taxes as a percentage of income before taxes increased
to 41.8 percent in 1994 from 39.7 percent in 1993. The increase in the effective
tax rate is due to an increase in goodwill amortization and other non-tax
deductible expenses as a percentage of pre-tax book income.
..............................................................................
RESULTS OF OPERATIONS SEVEN MONTH TRANSITION PERIOD ENDED DECEMBER 31, 1993 AND
1992
NET SALES:
Consolidated net sales for the seven month transition period ended December 31,
1993, increased 7.8 percent to $142.2 million or $10.3 million over net sales
for the comparable 1992 period. This steady growth was attributed to continued
expansion in the cardiology market, which constitutes a significant portion of
the Company's net sales, and from incremental revenue growth associated with the
acquisition and start-up of new radiopharmacies.
Despite the increased growth in net sales described above, the Company believes
that the uncertainty surrounding health care reform will continue to impact
companies providing health care related products and services. Current
government focus on health care cost containment has made it difficult to
cover rising costs
and expenses through price increases. This has created pressure on the selling
prices of several major products in the diagnostic imaging market. Management
believes the Company's 1994 revenue growth will continue to be impacted by these
forces. The Company is responding to these challenges by developing health care
alliances which will concentrate resources, expand the Nuclear Medicine market
as a whole and deliver increased value to the customer. In addition, the Company
is focusing its marketing efforts on attracting and retaining national accounts,
which currently represent a significant portion of the Company's annual net
sales.
GROSS PROFIT:
The Company's gross profit increased to $45.2 million, an increase of 3.7
percent over the seven months ended December 31, 1992. However, the Company
experienced a continued decline in its gross profit as a percentage of net
sales from 33.0 percent to 31.8 percent for the seven months ended December
31, 1992, and 1993, respectively. The decrease is due to a combination of
competitive pricing pressures in several key markets, material cost increases
and initial lower margins for start up radiopharmacies. Material costs, as a
percentage of pharmacy net sales, have been rising consistently in recent
periods. In addition, as the cardiology marketplace expands and the strategic
alliance, as discussed below, is implemented, the Company's traditional net
sales mix continues to change. This changing mix delivers a higher volume of
dollars to the gross profit line, but at a lesser rate as a percentage
of net sales when compared to the Company's traditional radiopharmaceutical
margins.
In addition to those factors mentioned above, the Company's management will
continue to be challenged by the competitive marketplace and uncertainty in
health care reform.
<PAGE>
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES:
Although operating, selling and administrative expenses as a percentage of
net sales decreased slightly from 23.6 percent for the seven months ended
December 31, 1992, to 23.2 percent for the seven months ended December 31,
1993, the components of operating, selling and administrative expenses were
somewhat different in each of the periods. The increase of $1.8 million for
the seven months ended December 31, 1993, over the comparable 1992 period was
attributable to several factors including increases in administrative staff,
recruitment of additional sales and pharmacy personnel, and continued
commitment to a number of long-term strategic management programs. During
the seven months ended December 31, 1993, the Company's nationwide network
increased from 100 to 109 radiopharmacies. Six of these radiopharmacies were
new openings and three were acquisitions. See Note 2 of Notes to Consolidated
Financial Statements.
The Company continues, as a part of its overall business strategy, to invest in
developmental business opportunities. These opportunities require ongoing
resources in the areas of operating, selling and administrative expenses.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization increased by $1.4 million in the seven month
period ended December 31, 1993, from the same period in 1992. The increased
dollar amount reflects additional expense in 1993 for the remodeling and
relocation program of the Company's field facilities and costs associated
with acquisitions and start-up of new radiopharmacies.
ALLIANCE DEVELOPMENT COSTS:
As stated on page eight under "Alliance Development Costs", the Company entered
into a long-term supplier distribution agreement with its principal supplier of
radiopharmaceutical products, DuPont Merck. The agreement, which became
effective February 1, 1994, replaced an existing supply agreement between
the companies which had been in place since 1988.
In connection with this agreement, the Company established a reserve for
alliance development costs of $4.5 million. These costs, which are expected
to result in cash outlays, include $2.8 million related to launch and
implementation of the strategic alliance program, $1.1 million of
employee-related expenses associated with the consolidation, relocation and
reorganization of certain sales and service operations, and $.6 million for
incremental accounting, legal and regulatory fees.
PROVISION FOR INCOME TAXES:
The provision for income taxes as a percentage of income before taxes
decreased to 39.3 percent for the seven months ended December 31,1993, from
39.5 percent for the comparable 1992 period. The decrease in the effective
tax rate is due to the continued benefit from state tax planning strategies
implemented in 1992.
In February 1992, Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (Statement 109) was issued. This Statement
required changes in accounting for income taxes from the deferred method
(APB 11) to an asset and liability method. The Company adopted the provisions
of Statement 109 in the seven months ended December 31, 1993, which increased
net income by approximately $1 million for the cumulative effect of a change
in method of accounting for income taxes.
..............................................................................
RESULTS OF OPERATIONS FISCAL YEARS 1993 AND 1992
NET SALES:
Consolidated net sales increased to $230.9 million in fiscal 1993, up from
$196.0 million in fiscal 1992, an increase of 17.8 percent. This revenue
growth is being fueled primarily by the continued growth in the cardiology
market and, to a much smaller extent, by price increases to customers.
Cardiology revenue growth is related to the overall penetration of the
marketplace by the new cardiology imaging agents introduced two
<PAGE>
years ago and by new protocols resulting from use of these new products. The
Company maintains exclusive distribution rights to these new cardiology imaging
agents through its commercial radiopharmacies. Fiscal 1993 reflects a slowing
in the rate of net sales growth (from 35 percent in 1992 to 17.8 percent in
1993) due to the penetration of new cardiac imaging agents. Cardiac imaging
now constitutes a significant portion of the Company's net sales.
In addition to the growth from cardiology, the Company has also benefited
from the full year incremental revenue growth associated with the acquisition
and start-up of new radiopharmacies in fiscal 1992, the acquisition of three
new radiopharmacies in fiscal 1993 and, to a lesser extent, moderate price
increases. The Company expects to continue to acquire and start-up new
radiopharmacies in the future.
Uncertainty surrounding health care reform has impacted companies providing
health care related products and services. Management believes the Company's
fiscal 1994 revenue growth may also be impacted by these forces.
GROSS PROFIT:
The Company's gross profit in fiscal 1993 increased to $77.3 million, an
increase of 14.6 percent when compared to fiscal 1992; however, as a
percentage of net sales, gross profit declined to 33.5 percent of net sales
in the current fiscal year from 34.4 percent of net sales in the prior fiscal
year. This decline is attributable to a number of factors. The Company was
unable to pass along all of the price increases received from its suppliers
due to strong price-based competition. In addition, as the cardiology
marketplace expands, the Company's traditional net sales mix is changing. This
changing mix delivers a higher volume of dollars to the gross profit line,
but at a lesser rate as a percentage of net sales when compared to the
Company's traditional radiopharmaceutical margins.
In addition to those factors mentioned above, the Company's management will
continue to be challenged by the competitive marketplace and uncertainty in
health care reform.
The Company continues to implement meaningful new programs designed to improve
productivity, efficiency and contain direct costs. Programs designed to improve
material utilization and reduce delivery costs figure prominently in the near
and longer term strategic focus of the Company. The Company is also focused
on contracting with national buying groups in order to stabilize margins and
secure business on a longer term basis. Contracts with national buying groups
currently represent a significant portion of the Company's annual net sales.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES:
Operating, selling and administrative expenses increased 7.7 percent in fiscal
1993 compared to fiscal 1992, but decreased as a percentage of net sales
from 25.5 percent to 23.3 percent of net sales. In prior years, the Company
made significant investments in infrastructure to improve efficiencies. These
investments included additional sales and pharmacy personnel, management at
all levels of the organization, training, education and development costs,
systems that added value and improved customer service, information and
management systems, and the continued upgrading of the pharmacies. All of
these investments were designed to support a much larger organization than
existed at the time of these investments. With the Company's infrastructure
in place, the current year's net sales growth did not require the same level
of expenditures.
Certain strategic management programs were expanded in fiscal 1993. Shortages of
qualified professional pharmacists, coupled with the need for a competitive
compensation structure, will continue to impact the Company and necessitate the
continuation of extensive recruiting efforts. Focused sales and marketing
efforts and the continued improvement of management and information systems
will continue to be a priority. The Company considers these programs to be of
long-term strategic importance and will require the continued commitment of
resources in order to maintain a competitive advantage.
<PAGE>
The Company continues, as a part of its overall business strategy, to invest in
developmental business opportunities. These opportunities require ongoing
resources in the areas of operating, selling and administrative expenses.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization in fiscal 1993 increased to $7.2 million or 51.2
percent over $4.7 million in fiscal 1992. The increase is due to a number of
factors, although it primarily results from the extensive remodeling and
relocation program of the Company's facilities which was initiated in prior
years and is expected to continue. The cost of this remodeling and relocation
program includes both the physical surroundings and the related furniture and
equipment. To a lesser extent, costs associated with acquisitions and
start-up of facilities also impacted this category during fiscal 1993.
PROVISION FOR INCOME TAXES:
The provision for income taxes as a percentage of income before taxes
decreased to 39.7 percent in fiscal 1993 from 40.6 percent in fiscal 1992.
The decrease in the effective tax rate is due to a slight reduction in state
taxes brought about by various state tax planning strategies.
RECENT ACCOUNTING PRONOUNCEMENTS:
In May, 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting 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 investments
in debt securities when there is intent and ability to hold these securities
to maturity.
Statement 115 is effective for fiscal years beginning after December 15,
1993. Upon adoption in the first quarter of 1994, the Company applied the
provisions of the statement without restating prior years' consolidated
financial statements. The implementation of this new standard did not have a
material effect on the Company's consolidated financial position for the year
ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES:
In 1994, total cash and investments, which includes cash and cash equivalents
and short and long-term investments, increased to $19.2 million from $18.7
million at December 31, 1993. The Company's debt position of $7.4 million at
December 31, 1994 was $2.7 million lower than the debt position at December
31, 1993. Working Capital decreased from $27.1 million in 1993 to $26.6
million in 1994.This change reflects continued expenditures for alliance
implementation, including the financing of bulk radiopharmaceutical products,
acquisition of independent radiopharmacies, the start-up of new
radiopharmacies, and the re-equipping of existing radiopharmacies and
information technology for both internal and customer systems.
Days Sales Outstanding were 55 days at December 31, 1994 compared to 52 days
at December 31, 1993. This increase results from the Company's expanded customer
base associated with implementing the strategic alliance with DuPont Merck.
The nature of the Company's business is not capital intensive and, as new
products become available, the capital requirements to accommodate these
products will be minimal. The Company believes sufficient internal and
external capital sources exist to fund operations and future expansion
programs. At December 31, 1994, the Company has unused lines of credit of
pproximately $16.2 million to fund short-term needs.<PAGE>
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31, December 31,
1994 1993
______________________________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 17,761 $ 15,110
Short-term investments 230 3,590
Accounts receivable, less allowance for doubtful
accounts of $1,154, and $1,200, respectively 49,972 35,052
Inventory 5,369 4,522
Prepaid taxes 1,191 3,198
Other current assets 1,773 2,217
________ ________
Total current assets 76,296 63,689
Marketable investment securities 1,210 -
Property and equipment, net 26,766 25,122
Excess of purchase price over net assets
acquired, net of accumulated amortization of
$3,810 and $3,373, respectively 13,874 14,123
Other 10,538 11,652
________ ________
$128,684 $114,586
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,105 $ 20,817
Accrued alliance development costs - 4,066
Accrued liabilities 2,928 3,073
Accrued wages and related costs 5,494 5,332
Current maturities of long-term debt 2,153 3,280
________ ________
Total current liabilities 49,680 36,568
________ ________
Long-term debt, net of current maturities 5,154 6,837
Stockholders' equity:
Common stock, $.05 par value; authorized 20,000
shares, issued, 10,320 and 10,355 shares at
December 31, 1994 and 1993, respectively 529 518
Additional paid-in capital 46,508 43,786
Unrealized loss on investments (52) -
Employee savings and stock ownership loan guarantee (1,934) (2,970)
Foreign currency translation adjustment 133 131
Retained earnings 30,929 29,716
Treasury stock, at cost; 250 shares at
December 31, 1994 (2,263) -
_________ ________
Net stockholders' equity 73,850 71,181
________ ________
$128,684 $114,586
======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<CAPTION>
Twelve Months Ended Seven Months Ended Twelve Months Ended
December 31, December 31, May 31,
In thousands, except per share data 1994 1993 1993 1992 1993 1992
___________________________________ _______________________ _______________________ _______________________
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net sales $319,994 $241,289 $142,237 $131,897 $230,949 $195,989
Cost of sales 253,968 162,363 97,050 88,330 153,643 128,538
________ ________ ________ ________ ________ ________
Gross profit 66,026 78,926 45,187 43,567 77,306 67,451
Operating, selling and
administrative expenses 53,802 55,696 32,949 31,132 53,879 50,047
Depreciation and amortization 10,592 8,548 5,248 3,856 7,156 4,734
Alliance development costs - 4,500 4,500 - - -
________ ________ ________ ________ ________ ________
Operating income 1,632 10,182 2,490 8,579 16,271 12,670
Other income (expense):
Interest income 658 804 450 260 614 651
Interest expense (747) (528) (311) (396) (613) (842)
Other, net 542 546 145 221 622 510
________ ________ ________ ________ ________ ________
Other income, net 453 822 284 85 623 319
Income from continuing operations
before income taxes and cumulative
effect of accounting change 2,085 11,004 2,774 8,664 16,894 12,989
Provision for income taxes 872 4,371 1,090 3,422 6,703 5,280
________ ________ ________ ________ ________ ________
Income from continuing operations
before cumulative effect of
accounting change 1,213 6,633 1,684 5,242 10,191 7,709
Discontinued operations:
Discontinued operations,
net of taxes - (162) - (499) (661) (810)
Gain on sale of discontinued
operations, net of taxes - 282 - - 282 -
Cumulative effect of change in
method of accounting for income
taxes - 1,020 1,020 - - -
________ ________ ________ ________ ________ ________
Net income $1,213 $7,773 $2,704 $4,743 $9,812 $6,899
======== ======== ========= ======== ======== ========
Net income per share:
Income from continuing
operations $.11 $.62 $.16 $.49 $.95 $.70
Discontinued operations:
Discontinued operations, net - - - (.05) (.06) (.07)
Gain on sale of discontinued
operations - .01 - - .03 -
Cumulative effect of change in
method of accounting for
income taxes - .09 .09 - - -
________ ________ ________ ________ ________ ________
Net income per share $.11 $.72 $.25 $.44 $.92 $.63
======== ======== ========= ======== ======== ========
Weighted average shares outstanding 10,889 10,779 10,762 10,668 10,708 10,865
======== ======== ========= ======== ======== ========
<FN>
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Employee
Savings &
Stock Foreign
Additional Unrealized Ownership Currency Total
Common Stock Paid-In Loss on Loan Translation Retained Treasury Stockholders'
In thousands Shares Amount Capital Investments Guarantee Adjustment Earnings Stock Equity
_____________________________ ________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 1, 1991 9,846 $492 $37,048 - $(5,270) $219 $10,301 - $42,790
Issuance of common stock 133 7 847
Tax benefit from the exercise
of stock options 794 794
Foreign currency translation
adjustment 102 102
Amortization of loan guarantee 920 920
Net income 6,899 6,899
__________________________________________________________________________________________________________________________________
BALANCE AT MAY 31, 1992 9,979 499 38,689 - (4,350) 321 17,200 - 52,359
Issuance of common stock 212 11 1,659 1,670
Tax benefit from the exercise
of stock options 1,205 1,205
Foreign currency translation
adjustment (182) (182)
Amortization of loan guarantee 920 920
Net income 9,812 9,812
_________________________________________________________________________________________________________________________________
BALANCE AT MAY 31, 1993 10,191 510 41,553 - (3,430) 139 27,012 - 65,784
Issuance of common stock 164 8 1,615 1,623
Tax benefit from the exercise
of stock options 618 618
Foreign currency translation
adjustment (8) (8)
Amortization of loan guarantee 460 460
Net income 2,704 2,704
________________________________________________________________________________________________________________________________
BALANCE AT DECEMBER 31, 1993 10,355 518 43,786 - (2,970) 131 29,716 - 71,181
Issuance of common stock 215 11 1,827 1,838
Tax benefit from the exercise
of stock options 895 895
Unrealized loss on
investments (52) (52)
Foreign currency translation
adjustment 2 2
Amortization of loan guarantee 1,036 1,036
Reacquisition of common
stock for treasury (2,263) (2,263)
Net income 1,213 1,213
-------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 10,570 $529 $46,508 $(52) $(1,934) $133 $30,929 $(2,263) $73,850
======= ======= ======= ======= ======== ======= ======= ======== =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<TABLE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Twelve Months Ended Seven Months Ended Twelve Months Ended
December 31, December 31, May 31,
In thousands 1994 1993 1993 1992 1993 1992
_____________________________________ ____________________ ____________________ ____________________
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,213 $ 7,773 $ 2,704 $ 4,743 $ 9,812 $ 6,899
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 10,592 8,548 5,248 3,856 7,156 4,734
Provision for losses on
receivables (46) (530) (302) 49 (179) (390)
Amortization of loan guarantee 1,036 920 460 460 920 920
Net gain on assets from
discontinued operations - (282) - - (282) -
Loss on discontinued operations - 162 - 499 661 810
Cumulative effect of change in
method of accounting for
income taxes - 1,020 1,020 - - -
Decrease (increase) in:
Accounts receivable (14,874) (54) (372) 477 795 (6,724)
Inventory (874) 529 47 (1,441) (951) (885)
Prepaid taxes 2,902 (2,580) (2,580) - - -
Other current assets 444 1,492 (1,370) (2,140) (713) 54
Other assets (1,328) (10,577) (5,885) (770) (1,266) (1,798)
Increase (decrease) in:
Accounts payable 18,288 4,379 959 (3,310) 110 6,500
Accrued alliance
development costs (4,066) 4,066 4,066 - - -
Accrued liabilities (145) (1,898) 418 2,063 (253) 696
Accrued wages and
related costs 162 (116) (3,140) (1,413) 1,611 1,036
Federal and state taxes
payable - (1,459) (619) 1,459 1,824 769
Deferred income taxes - (1,632) (1,373) (116) (375) (577)
Foreign currency
translation adjustment 2 (89) (8) (101) (182) 102
_______ ________ ________ _______ _______ _______
Net cash provided by (used in)
operating activities 13,333 9,672 (727) 4,315 18,688 12,146
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment, net (9,209) (7,292) (5,538) (6,546) (10,646) (11,220)
Payments for acquisitions (336) (1,500) (1,500) (140) (563) (176)
Net decrease (increase) in
short-term investments 3,343 691 (1,746) 789 3,226 1,620
Net decrease (increase) in
long-term investments (1,245) - - - - -
Proceeds from sales of
discontinued operations - 9,100 - - 9,100 -
Disposition of assets from
discontinued operations - (4,618) - - (4,618) -
_______ ________ ________ _______ _______ _______
Net cash used in investing
activities (7,447) (3,619) (8,784) (5,897) (3,501) (9,776)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,838 3,111 1,623 1,387 1,670 854
Reacquisition of common stock (2,263) -
Proceeds from (repayment of)
short-term debt - (1,094) - (10) 1,000 (1,000)
Proceeds from (repayment of)
long-term debt (2,810) 2,932 3,905 (587) (1,664) (1,943)
_______ ________ ________ _______ _______ _______
Net cash provided by (used in)
financing activities (3,235) 4,949 5,528 790 (994) (89)
_______ ________ ________ _______ _______ _______
Net increase (decrease) in cash
and cash equivalents 2,651 11,002 (3,983) (792) 14,193 2,281
Cash and cash equivalents at
beginning of period 15,110 4,108 19,093 4,900 4,900 2,619
_______ ________ ________ _______ _______ _______
Cash and cash equivalents at
end of period $17,761 $15,110 $15,110 $4,108 $19,093 $4,900
======= ======== ======== ======= ======== =======
<FN>
See accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
SYNCOR INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dollars in Thousands, Except Per Share Data
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Syncor International Corporation
include the assets, liabilities and operations of the Company and its
subsidiaries. All significant intercompany accounts and transactions have
been eliminated in consolidation. The Company's business is primarily
compounding, dispensing and distributing radiopharmaceuticals to hospitals
and clinics.
GENERAL:
The unaudited operating results have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
include all adjustments necessary for a fair presentation for the periods.
CHANGE IN FISCAL YEAR:
The Company changed its fiscal year-end to December 31 from May 31, beginning
with the seven month transition period ended December 31, 1993.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS:
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Short-term investments
consist principally of time deposits and tax-exempt municipal securities and are
carried at cost, which approximates market value.
FINANCIAL INSTRUMENTS:
The carrying value of financial instruments such as cash and cash equivalents,
trade receivables, payables and floating rate short and long-term debt,
approximate their fair value.
INVENTORY:
Inventories, consisting of purchased products, are stated at the lower of cost
(first-in, first-out) or market.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and depreciated or amortized on a
straight-line basis over the estimated useful lives ranging from two to 15
years.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED:
The cost in excess of net assets of acquired businesses is being amortized on a
straight-line basis over a period of 15 to 40 years. The Company periodically
evaluates the carrying value of these assets and, accordingly, considers the
ability to generate positive cash flow through undiscounted future operating
cash flows of the acquired operation as the key factor in determining whether
the assets have been impaired. The Company has not experienced an impairment
of value of any of its intangible assets as of December 31, 1994.
MARKETABLE INVESTMENT SECURITIES:
Marketable investment securities are carried at cost, and consist primarily of
corporate debt and United States government obligations. In the first quarter
1994, the Company adopted the provisions of Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (Statement 115) on a prospective basis. Under Statement 115, the
Company classifies its debt and marketable equity securities in one of three
categories: trading, available- for-sale or held-to-maturity. Trading securities
are bought and held principally for the purpose of selling them in the near
term. Held-to-maturity securities are those securities in which the
<PAGE>
Company has the ability and intent to hold the security until maturity. All
other securities not included in trading or held-to-maturity are classified as
available-for-sale.
Held-to-maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized holding gains and
losses on trading securities are included in earnings. Unrealized holding gains
and losses, net of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component of stockholders'
equity until realized.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities of foreign operations are translated into U.S. dollars
based upon the prevailing exchange rates in effect at the balance sheet date.
Foreign exchange gains and losses resulting from these translations are included
as a separate component of stockholders' equity. Actual gains or losses incurred
on currency transactions in other than the country's functional currency are
included in net income currently.
NET INCOME PER SHARE:
Income per share amounts are based upon the weighted average number of shares
outstanding during each period adjusted for common stock equivalents.
RECLASSIFICATIONS:
Certain items in the prior years' consolidated financial statements have been
reclassified to conform to the current year's presentation.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109:
Effective June 1, 1993, the Company adopted the Financial Accounting Standard
Board Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," (Statement 109) and has reported the cumulative effect of that change in
the method of accounting for income taxes in the consolidated statement of
income for the seven months ended December 31, 1993.
Under the asset and liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Pursuant to the deferred method under APB Opinion 11, which was applied in the
fiscal year ended May 31, 1993, and prior years, deferred income taxes are
recognized for income and expense items that are reported in different years for
financial reporting purposes and income tax purposes using the tax rate
applicable for the year of the calculation. Under the deferred method, deferred
taxes are not adjusted for subsequent changes in tax rates.
PRE-OPENING COSTS:
Costs, included in "Other" in the consolidated balance sheets relating to the
opening of new radiopharmacies, are deferred and amortized ratably over a 24
month period commencing at the date of opening.
<PAGE>
NOTE 2: ACQUISITIONS:
In 1993, the Company acquired certain net assets of three existing
radiopharmacies in Florida and Nebraska for total consideration of approximately
$4.9 million. The consideration consisted of $1.5 million in cash and $3.4
million in promissory notes payable over a three- to five-year period.
These acquisitions have been accounted for as purchases and the purchase price
was allocated to fixed assets, non-compete and consulting agreements and
goodwill. The results of these operations are included in the Company's
consolidated financial statements at December 31, 1993, from the effective date
of the acquisition. Pro forma information is not presented since the
acquisitions are not material to the accompanying consolidated financial
statements.
NOTE 3: DISPOSITION OF BUSINESS:
On May 31, 1993, the Company divested itself of nine home infusion sites for
$9.1 million in cash and closed four remaining sites. Accordingly, this business
segment was classified as a discontinued operation in the consolidated financial
statements. All prior periods have been restated to conform to this
presentation. Net sales for the home infusion business were $14,116 and
$14,229 for the years ended May 31, 1993 and 1992 respectively.
The net loss from discontinued operations for the year ended May 31, 1993,
included losses from operations up to the measurement date, losses during the
phase-out period of $1,212 and expenses associated with sale and closure of
facilities offset by a net gain on disposal of assets. Net ax benefits of $247
and $555 for the years ended May 31, 1993 and 1992 respectively were recognized
as a result. The remaining net assets are not material.
NOTE 4: PROPERTY AND EQUIPMENT, NET:
Depreciation and amortization are provided at rates based on the estimated
useful lives of the various assets, principally utilizing the straight-line
method. The major classes of property and equipment are:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
________________________________
<S> <C> <C>
Land and buildings $ 3,089 $ 3,089
Furniture and equipment 41,674 34,923
Leasehold improvements 13,822 11,364
_____________ ___________
58,585 49,376
Less accumulated depreciation and amortization 31,819 24,254
_____________ ___________
$ 26,766 $ 25,122
============= ===========
/TABLE
<PAGE>
NOTE 5: MARKETABLE INVESTMENT SECURITIES:
Marketable investment securities consists of:
<TABLE>
<CAPTION>
December 31,
1994
______
<S> <C>
Available-for-sale, at fair value, net of tax effect $ 645
Held-to-maturity, at amortized cost 565
____________
$ 1,210
============
</TABLE>
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and fair value for available-for-sale and held-to-maturity securities by
major security type at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
________________________ Unrealized ________________
Amortized Holding Holding Fair
Cost Gains Losses Value
_________ ________ _______ _______
<S> <C> <C> <C> <C>
Available-for-sale
Corporate debt securities $ 645 $ --- $ --- $ 645
645 --- --- 645
________ _______ _______ ______
Held-to-maturity:
U.S. Treasury securities 500 --- (19) 481
Mortgage-backed securities 65 --- (16) 49
$ 565 $ --- $ (35) $ 530
========= ======== ======== ========
</TABLE>
Maturities of investment securities classified as available-for-sale and
held-to-maturity were as follows at December 31, 1994:
<TABLE>
<CAPTION>
Amortized Cost Fair Value
______________________________________ _________________________________
<S> <C> <C>
Available-for-sale:
Due after one year through five years --- ----
Due after five years through ten years $476 $470
Due after ten years 169 166
Held-to-maturity:
Due after one year through five years $565 $530
======= =======
</TABLE>
At December 31, 1993, equity securities are stated at the lower of aggregate
cost or market and debt securities are carried at aggregate cost.
NOTE 6: ACCRUED ALLIANCE DEVELOPMENT COSTS:
On December 3, 1993, the Company entered into a long-term supplier distribution
agreement 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 had been in place since
1988. Under the terms of the new agreement, DuPont Merck relies upon the Company
as the primary distribution channel for its radiopharmaceutical products in the
United States.
<PAGE>
In connection with this agreement, the Company established a reserve for
alliance development costs of $4,500 during the seven months ended December
31, 1993. Included in these charges were $2,800 of costs related to launch and
implementation of the strategic alliance program, $1,100 of employee-related
expenses associated with the consolidation, relocation and reorganization of
certain sales and service operations and $600 for incremental accounting, legal
and regulatory fees. Accrued alliance development costs of $4,066 at December
31, 1993 were fully utilized in 1994 as the strategic alliance was implemented.
NOTE 7: LINE OF CREDIT:
At December 31, 1994, the Company had an unsecured line of credit for short-term
borrowings aggregating $20,000, bearing interest at the bank's reference rate
(8.5 percent at December 31, 1994) and expiring on May 1, 1996. The availability
of this line of credit, at December 31, 1994, has been reduced by $3,800 as a
result of standby letters of credit. To maintain this line of credit, the
Company is required to pay a quarterly commitment fee of 1/8 of one percent
per annum on the unused portion. There were no amounts outstanding under the
line of credit at December 31, 1994.
The line of credit agreement contains covenants that include requirements to
maintain certain financial covenants and ratios (including minimum current
ratio, working capital and tangible net worth) and limitations on payments
of dividends, new borrowings and purchases of its stock. At December 31,
1994, the Company violated certain debt covenants and has obtained a bank
waiver.
NOTE 8: LONG-TERM DEBT:
The Company's long-term debt was as follows:
<TABLE>
<CAPTION>
December 31, December 31,
1994 1993
_________________________________________________ __________________________
<S> <C> <C>
Capital lease obligations, payable in varying
installments through 1999, with interest
rates ranging from 10.5% to 12% $ 1,742 $ 2,001
Notes payable, unsecured, payable in installments
through 1999, with effective interest rates
ranging from 6% to 12.75% 2,054 3,569
Notes payable, unsecured, payable in installments
through 1996 with a floating interest rate of
either the lower of prime, LIBOR plus .75%, or
six month Treasury bill rates plus 1.4% 1,934 2,970
Notes payable, secured, payable in installments
through year 2000 with a non-interest bearing
rate, net of unamortized discount of $413 at
6% of $222 and $413 at December 31, 1994 and
1993, respectively 1,577 1,577
________ _______
7,318 10,117
Less current maturities of long-term debt 2,153 3,280
________ ________
Long-term debt, net of current maturities $ 5,154 $ 6,837
======== ========
</TABLE>
At December 31, 1994, long-term debt maturing over the next five years is as
follows: 1995, $2,153; 1996, $2,163; 1997, $982; 1998, $1,246; 1999, $602; and
thereafter, $172.
Interest paid was $694 and $725 for the years ended December 31, 1994 and 1993
(unaudited), $268 and $280 for the seven months ended December 31, 1993 and 1992
(unaudited). Interest paid for the years ended May 31, 1993 and 1992 were $601
and $806, respectively.
<PAGE>
NOTE 9: INCOME TAXES:
As discussed in Note 1, the Company adopted Statement 109 as of June 1, 1993.
The cumulative effect of this change in method of accounting of $1,020 was
determined as of June 1, 1993, and is reported separately in the consolidated
statement of income for the seven month period ended December 31, 1993. Prior
years' financial statements were not restated to apply the provisions of
Statement 109. Total income tax expense for the years ended December 31,
1994; (and 1993 unaudited), was allocated as follows (in thousands):
<TABLE>
<CAPTION>
Twelve Months Ended
December 31,
1994 1993
_________________________________________________ _______________________
(unauthorized)
<S> <C> <C>
Income from continuing operations $ 872 $ 4,371
Stockholders' equity for compensation expense for
tax purposes in excess of amounts recognized
for financial reporting (895) (1,153)
$ (23) $ 3,218
</TABLE>
Income tax expense (benefit) attributable to income from continuing operations
consisted of:
<TABLE>
<CAPTION>
Twelve Months Ended Seven Months Ended Twelve Months Ended
December 31, December 31, May 31,
1994 1993 1993 1992 1993 1992
____________ _____________________ ___________________ __________________
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Current:
Federal $ 1,329 $ 3,859 $ 717 $ 3,093 $ 6,411 $ 4,456
State 127 583 48 585 1,240 1,152
_______ _______ ______ _______ _______ _______
1,456 4,442 765 3,678 7,651 5,608
Deferred:
Federal (505) (156) 241 (219) (800) (269)
State (79) 85 84 (37) (148) (59)
_______ ________ _______ ________ ________ _______
(584) (71) 325 (256) (948) (328)
_______ ________ _______ ________ ________ _______
$ 872 $ 4,371 $ 1,090 $ 3,422 $ 6,703 $ 5,280
======= ======== ======= ======== ======== =======
</TABLE>
The amounts differed from the amounts computed by applying the federal income
tax rate of 35 percent (34 percent for the periods ending prior to December
31, 1993) to pretax income from continuing operations as a result of the
following:
<TABLE>
<CAPTION>
Twelve Months Ended Seven Months Ended Twelve Months Ended
December 31, December 31, May 31,
1994 1993 1993 1992 1993 1992
______________________________ _____________________ ___________________ __________________
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Federal income taxes at
"expected" rate $ 730 $3,851 $ 971 $2,946 $5,744 $4,416
Increase (reduction) in income
taxes resulting from:
Tax exempt interest (92) (50) (29) (10) (45) (68)
Amortization of intangible
assets 143 146 84 80 139 101
State taxes, net of Federal
benefit 31 434 86 350 721 721
Utilization of general
business credits - (10) (10) - - -
Other 60 - (12) 56 144 110
_____ ______ ______ ______ ______ ______
$ 872 $4,371 $1,090 $3,422 $6,703 $5,280
===== ====== ====== ====== ====== ======
/TABLE
<PAGE>
Deferred taxes are recorded based upon differences between the financial
statement and tax basis of assets and liabilities. Temporary differences which
give rise to a significant portion of deferred tax expense (benefit) are
presented. For the seven months ended December 31, 1992, and for the years ended
May 31, 1993 and May 31, 1992, deferred income tax expense results from timing
differences in the recognition of income and expense for income tax and
financial reporting purposes. The sources and tax effects of those timing
differences are also presented below:
<TABLE>
<CAPTION>
Twelve Months Ended Seven Months Ended Twelve Months Ended
December 31, December 31, May 31,
1994 1993 1993 1992 1993 1992
______________________________ _____________________ ___________________ __________________
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net operating losses $ 81 $ - $ - $ - $ 12 $ (65)
Depreciation and amortization (814) (182) (22) (26) (81) 57
Allowances and other reserves 126 40 256 (140) (880) (280)
Other, net 23 71 91 (90) 1 (40)
_______ _______ _______ _______ _______ ______
$ (584) $ (71) $ 325 $ (256) $ (948) $(328)
======= ======= ======= ======= ======= ======
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1994 and
1993, are presented below (in thousands):
<TABLE>
<CAPTION>
December 31,
1994 1993
____________________________________________________ _______________________
<S> <C> <C>
DEFERRED TAX ASSETS:
Compensated absences, principally due to
accrual for financial reporting purposes $ 873 $ 632
Accounts receivable, due to allowance for
doubtful accounts 420 472
Accrued liabilities, primarily due to self-
insurance accrual for financial reporting
purposes 712 921
Deferred compensation, due to accrual for
financial reporting purposes 796 577
Deferred subsidiary start-up expenses 178 ---
Other 137 13
________ ________
Total gross deferred tax assets 3,116 2,615
DEFERRED TAX LIABILITIES:
Plant and equipment, principally due to difference
in depreciation and lease capitalization 653 903
Other assets, principally due to difference in
intangible capitalization and amortization for
income tax and financial reporting purposes 1,342 1,427
________ ________
Total gross deferred tax liabilities 1,995 2,330
________ ________
Net deferred tax asset $ 1,121 $ 285
======== ========
</TABLE>
Income tax payments amounted to $539, $6,036, $4,056, $2,607, $4,753 and $4,514,
for the years ended December 31, 1994 and 1993, (unaudited) the seven months
ended December 31, 1993, and 1992 (unaudited), and for the years ended May 31,
1993 and 1992, respectively.
<PAGE>
NOTE 10: COMMITMENTS:
The Company leases facilities, vehicles and equipment with terms ranging from
three years to 15 years. The majority of property leases contain renewal options
and some have escalation clauses for increases in property taxes, Consumer Price
Index and other items.
The Company leases a building and certain items of equipment under capital
leases which had an approximate cost of $3,744 at December 31, 1994 and 1993 and
accumulated depreciation of $2,647 and $2,357, respectively. The Company was not
utilizing this building and, accordingly, sublet this building to a third party
for the balance of the lease term.
Future minimum lease payments under capital leases and noncancellable operating
leases with terms greater than one year and related sublease income were as
follows at December 31, 1994:
<TABLE>
<CAPTION>
Capital Operating Sublease
Leases Leases Income
____________________________ _________________________________
<S> <C> <C> <C>
Year ending December 31,
1995 $ 496 $ 5,779 $ 198
1996 496 5,239 175
1997 496 3,768 175
1998 496 2,510 166
1999 248 1,766 97
Remainder 0 2,747 8
_______ ________ _______
2,232 $ 21,809 $ 819
======== =======
Less amount representing interest (490)
________
Present value of net minimum lease payments $1,742
========
</TABLE>
Rental expense under operating leases was $6,573 and $5,470 for the years ended
December 31, 1994 and 1993 (unaudited), and $3,208 and $2,152 for the seven
months ended December 31, 1993 and 1992, respectively. Rental expense for the
years ended May 31, 1993 and 1992 were $4,861 and $3,868, respectively.
NOTE 11: STOCK OPTIONS AND RIGHTS:
Options to purchase common stock have been granted under various plans to
officers, directors and other key employees at prices equal to the fair market
value at date of grant. At December 31, 1994, 414,339 shares are reserved for
issuance under the various plans.
In July 1994, the Company's Board of Directors authorized Syncor to offer to its
current employees holding stock options under the Syncor 1990 Master Stock
Incentive Plan, the opportunity to exchange their options within a certain price
range for a reduced number of option shares at the price as of the close of
market on July 14, 1994.
All option holders who were employees and held unexercised option shares
exercisable at prices of $9.125 or greater were offered exchange options at the
price of $8.50, with the replacement option being for a lesser number of shares,
in accordance with a formula approved by the Board of Directors. To further
enhance the exchange program, the new options are valid for a period of ten
years instead of five years with an accelerated vesting schedule. The Company
cancelled 831,240 option shares and reissued 675,752 option shares as a
result of this exchange offer.
<PAGE>
A summary of employee stock options is as follows:
<TABLE>
<CAPTION>
Number of
Shares Price Range Per Share
_____________________________ ________________________________________
<S> <C> <C> <C>
Outstanding at June 1, 1991 1,431 $ 3.90 - $ 9.12
Granted 680 $ 15.25 - $ 26.50
Exercised (119) $ 3.90 - $ 9.13
Cancelled (44) $ 5.40 - $ 21.75
_______ _______ ________
Outstanding at May 31, 1992 1,948 $ 3.90 - $ 26.50
Granted 66 $ 17.12 - $ 23.75
Exercised (204) $ 3.90 - $ 21.75
Cancelled (50) $ 4.15 - $ 21.75
_______ _______ ________
Outstanding at May 31, 1993 1,760 $ 4.75 - $ 26.50
Granted 205 $ 17.12 - $ 21.00
Exercised (164) $ 5.28 - $ 21.00
Cancelled (40) $ 9.12 - $ 21.75
_______ _______ ________
Outstanding at December 31, 1993 1,761 $ 4.75 - $ 26.50
Granted 964 $ 8.25 - $ 23.25
Exercised (215) $ 5.10 - $ 21.75
Cancelled (885) $ 4.80 - $ 26.50
_______ _______ ________
Outstanding at December 31, 1994 1,625 $ 4.75 - $ 21.88
======= ======= ========
Exercisable at December 31, 1994 733 $ 4.75 - $ 21.88
======= ======= ========
</TABLE>
The Company derives a tax benefit from the options exercised and sold by
employees and as such the benefit is credited to additional paid-in capital when
realized.
In November 1989, the Company made a rights distribution of one common share
purchase right on each outstanding share of common stock. When exercisable, each
right will entitle its holder to buy from the Company one-fourth of a share of
the Company's common stock at a price of $5 per share subject to adjustment (the
"Purchase Price"). The rights expire on September 30, 1999. With certain
exceptions, subject to the approval of the Board of Directors, the rights will
become exercisable if a person has acquired or makes an offer, the consummation
of which will result in beneficial ownership of 20 percent or more of the
Company's general voting power ("Acquiring Person"). At such time (the
"Distribution Date"), the rights will be evidenced by the certificates
representing the common shares and will be transferred with and only with the
common shares. Except for certain transactions approved by the Board of
Directors, in the event: (i) the Company is acquired in a merger; (ii) 50
percent or more of its consolidated assets or earning power are sold; or
(iii) any person becomes an Acquiring Person, proper provisions shall be made
so that each holder of the right (other than rights beneficially owned by the
Acquiring Person) receive, upon the exercise thereof at the adjusted exercise
price of the right, which shall be four times the Purchase Price, that number
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the adjusted exercise price
of the right.<PAGE>
NOTE 12: EMPLOYEE BENEFIT PLAN:
On July 31, 1986, the Company adopted a defined contribution 401(k) plan. The
plan is open to all employees who are at least 21 years of age and have a
minimum of twelve consecutive months of service. In 1989, the Company's Board of
Directors amended the plan to an Employee Savings and Stock Ownership Plan
(ESSOP) to allow the plan to purchase one million of the Company's shares
through a leveraged employee stock ownership plan transaction. In connection
with this transaction, the Company has guaranteed the repayment of the ESSOP
loan which had an outstanding balance of $1,934 at December 31, 1994. Prior
to the ESSOP transaction, participants were able to contribute one percent to
ten percent of their compensation to the plan. The Company made matching
contributions to 50 percent of the employees' contributions up to a maximum
of four percent of the employees' compensation. Matching contributions were
used to purchase Company stock.
With the adoption of the ESSOP, participants may contribute one percent to
fourteen percent of their compensation to 401(k) investment options and an
additional two percent of their compensation to purchase Company stock.
Employees become eligible to participate in the plan after six consecutive
months of service. The Company may make discretionary matching contributions
to 50 percent of the employees 401(k) investment contributions of up to a
maximum of four percent of the employees' compensation and may make
discretionary matching contributions to 100 percent of the employees'
Company stock purchases up to two percent of the employees' compensation. The
Company's matching contribution is made in the form of Company common stock
and partially comes from the one million shares of Company stock which the plan
purchased during 1989. The number of shares of stock available to match
employee contributions is directly related to the amount of principal and
interest payments made on the ESSOP loan. Once the number of available shares
is determined, the Company matches the employees' contributions as described
above by determining the fair market value of the available stock. The
remainder of any shares not allocated after all matching is complete will be
allocated to all eligible employees based on relative compensation.
Participants are fully and immediately vested in employee contributions and vest
in employer contributions over a five-year period of continuous employment.
After five years of continuous employment, any further employer contributions
are fully and immediately vest.
The Company's contribution for the years ended December 31, 1994 and 1993
(unaudited), amounted to $1,165 and $1,086, of which $1,036 and $920 were used
to pay down principal on the ESSOP loan and $129 and $146 to pay interest. For
the seven months ended December 31, 1993 and the years ended May 31, 1993 and
1992, contributions to the ESSOP amounted to $1,006, $1,098 and $1,214,
respectively, and were used to satisfy principal and interest obligations in
those years.
NOTE 13: LITIGATION AND CONTINGENCIES:
There are various litigation proceedings in which the Company and its
subsidiaries are involved. Many of the claims asserted against the Company in
these proceedings are covered by insurance. The results of litigation
proceedings cannot be predicted with certainty. However, in the opinion of the
Company's general counsel, such proceedings either are without merit or do
not have a potential liability which would materially affect the financial
condition of the Company and its subsidiaries on a consolidated basis.
<PAGE>
NOTE 14: SELECTED QUARTERLY RESULTS OF OPERATIONS:
Unaudited calendar quarterly data is summarized below:
<TABLE>
<CAPTION>
__________________________________________________________
March June September December
31 30 30 31 1994
___________________________________ __________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $ 74,800 $ 81,888 $ 81,625 $ 81,671 $ 319,994
Gross profit (loss) $ 18,421 $ 17,015 $ 14,996 $ 15,594 $ 66,026
Net income (loss) $ 2,090 $ 744 $ (1,084) $ (537) $ 1,213
Net income (loss) per share $ .19 $ .07 $ (.10) $ (.05) $ .11
Weighted average shares outstanding 10,981 10,830 10,684 10,567 10,889
======== ======== ======== ========= =========
Market price per share:
High $ 24 $ 20 1/2 $ 9 1/2 $ 8 3/4 $ 24
Low $ 20 $ 8 1/2 $ 6 3/4 $ 6 3/4 $ 6 3/4
======== ======== ======== ========= =========
__________________________________________________________
March June September December
31 30 30 31 1994
___________________________________ __________________________________________________________
Net sales $ 59,749 $ 59,656 $ 60,356 $ 61,528 $ 241,289
Gross profit $ 20,255 $ 20,042 $ 20,537 $ 18,092 $ 78,926
Net income (loss):
Continuing operations $ 2,589 $ 3,122 $ 2,961 $ (2,039) $ 6,633
Discontinued operations $ (447) $ 567 --- --- $ 120
Cumulative effect of
accounting change --- --- --- 1,020 1,020
________ ________ ________ _________ _________
Net income (loss) $ 2,142 $ 3,689 $ 2,961 $(1,019) $ 7,773
======== ======== ======== ========= =========
Net income (loss) per share:
Continuing operations $ .24 $ .29 $ .28 $(.19) $ .62
Discontinued operations (.04) .05 --- --- .01
Cumulative effect of
accounting change --- --- --- .09 .09
________ ________ ________ _________ _________
Net income (loss) per share $ .20 $ .34 $ .28 $ (.10) $ .72
======== ======== ======== ========= =========
Net income (loss) per share 10,749 10,729 10,779 10,860 10,779
======== ======== ======== ========= =========
Weighted average shares outstanding 10,749 10,729 10,779 10,860 10,779
======== ======== ======== ========= =========
Market price per share:
High $ 25 5/8 $ 21 1/4 $ 22 1/2 $ 22 1/2 $ 25 5/8
Low $ 16 3/4 $ 16 $ 14 7/8 $ 15 1/4 $ 14 7/8
======== ======== ======== ========= =========
/TABLE
<PAGE>
The Board of Directors and Stockholders
Syncor International Corporation
We have audited the accompanying consolidated balance sheets of Syncor
International Corporation and Subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, stockholders' equity and cash
flows for the year ended December 31, 1994, the seven month period ended
December 31, 1993, and each of the years in the two-year period ended May 31,
1993. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Syncor International
Corporation and Subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for the year ended December 31, 1994
and the seven month period ended December 31, 1993, and for each of the years
in the two year period ended May 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in Notes 1 and 9 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in the seven month
period ended December 31, 1993 to adopt the provision of the Financial
Accounting Standard Board's Statement No. 109, "Accounting for Income Taxes."
As discussed in Notes 1 and 5 to the consolidated financial statements, the
Company changed its method of accounting for investments to adopt the
provisions of the Financial Standards Board's Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," on January 1, 1994.
KPMG Peat Marwick LLP
Los Angeles, California
March 10, 1995
MANAGEMENT'S REPORT
The management of Syncor International Corporation is responsible for the
consolidated financial statements and all other information presented in this
report. The consolidated financial statements have been prepared in conformity
with generally accepted accounting principles appropriate in the circumstances
and, therefore, include in the consolidated financial statements are certain
amounts based on management's informed estimates and judgments. Management
is responsible for establishing and maintaining a system of internal control
designed to provide reasonable assurance as to the integrity and reliability of
financial reporting. The concept of reasonable assurance is based on the
recognition that there are inherent limitations in all systems of interal
control, and that the cost of such systems should not exceed the benefits
to be derived therefrom. Other financial information in this report is
consistent with that in the consolidated financial statements. The consolidated
financial statements have been examined by Syncor Intenational Corporation's
independent certified public accountants and have been reviewed by the Audit
Committee of the Board of Directors.
CORPORATE INFORMATION
BOARD OF DIRECTORS
__________________
Monty Fu,
Chairman of the Board
Director since 1985
Gene R. McGrevin,
President and Chief Executive Officer
Director since 1989
Robert G. Funari,
Executive Vice President and Chief Operating Officer
Director since 1995
George S. Oki,
Chairman of the Board, Meta Information Services, Inc.
Director since 1985
Joseph Kleiman,
Retired Executive, Financial Consultant
Director since 1985
Arnold Spangler,
Managing Director, Mancuso & Company
Director since 1985
Steven B. Gerber, MD
Senior Vice President, Oppenheimer & Co.
Director since 1990
Henry N. Wagner, Jr., MD
Professor of Medicine and Director of Nuclear Medicine, The John Hopkins Medical
Institutions
Director since 1992
Gail R. Wilensky, PhD
Senior Fellow, Project HOPE, former HCFA Administrator and Deputy Assistant to
President Bush
Director since 1993
OFFICERS
________
Monty Fu
Chairman of the Board
Gene R. McGrevin
President and Chief Executive Officer
Robert G. Funari
Executive Vice President and Chief Operating Officer
Michael E. Mikity
Vice President and Chief Financial Officer
Jack L. Coffey
Vice President, Quality and Regulatory
Sheila H. Coop
Vice President, Human Resources
Haig Bagerdjian
Vice President and General Counsel
Charles A. Smith
Vice President, Corporate Development
SHAREHOLDER INFORMATION
_______________________
INQUIRIES
Shareholders, interested investors and investment professionals are invited to
contact the Company for further information throughout the year.
ANNUAL MEETING
The Company's Annual Meeting of Shareholders will be held at 1:00 pm, Tuesday,
June 20, 1995, at the Warner Center Marriott Hotel, 21800 Oxnard Street,
Woodland Hills, California 91367. Shareholders of record on April 21, 1995,
are invited to attend and vote at that meeting.
FORM 10-K
To receive a copy of the Company's Annual Report or form 10-K, filed with the
Securities and Exchange Commission, contact the Corporate Headquarters, Syncor
International Corporation, Attn: Investor Relations Department, 20001 Prairie
Street, Chatsworth, California 91311.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
725 South Figueroa Street
Los Angeles, California 90017
STOCK DATA
The Company's common stock is quoted on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) under the symbol SCOR.
TRANSFER AGENT AND REGISTRAR
Stockholders wishing to report a change of address may forward details,
including both the old and new address, to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
(212) 936-5100
STOCK MARKET INFORMATION
Stock price quotations are printed daily in major newspapers, including the Wall
Street Journal. As of March 31, 1995, there were 10,570,333 shares of common
stock outstanding. Shareholders of record at that date amounted to 1,553. The
Company has not paid cash dividends on its stock and has no current intention of
paying cash dividends in the foreseeable future.
SYNCOR'S VALUES
Syncor's Values reflect our shared beliefs as a Company of people. Our Values
are our code of conduct in working together, setting priorities and making
decisions. They guide us individually and as a team to make the best
decisions each day for our customers, employees and shareholders.
CUSTOMERS: Our customers are number one. We are dedicated to providing
quality services which exceed their expectations and maintain their trust.
TEAMWORK: Teamwork is the result of open communication and the free exchange
of ideas and information in an enviornment which values and encourages
respect and dignity for every individual. PROFESSIONALISM: Our employees
are professionals who demonstrate knowledge, skills and accountability in
performing their jobs. HEALTH AND SAFETY: The health and safety of our
employees, customers and community will never be compromised. EMPLOYEE
OWNERSHIP: We support employee ownership to share responsibility in creating
future value for all shareholders. COMMUNITY SERVICE: We believe in
community service and encourage employee participation in community activities.
