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__________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
____________________
FOR QUARTER ENDED SEPTEMBER 30, 1995 COMMISSION FILE NUMBER 0-8640
SYNCOR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0229124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
20001 PRAIRIE STREET, CHATSWORTH, CALIFORNIA 91311
(Address of principal executive offices) (Zip Code)
(818) 886-7400
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
___ ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. As of
September 30, 1995, 10,352,509 shares of $.05 par value common
stock were outstanding.
__________________________________________________________________
_________________________________________________________________
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
Page
____
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
September 30, 1995 and December 31, 1994 2
Statements of Operations for three months
ended September 30, 1995 and 1994 3
Statements of Income for nine months
ended September 30, 1995 and 1994 4
Statements of Cash Flows for nine months
ended September 30, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition 7
Part II. Other Information 9
SIGNATURE 10
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
SEPTEMBER 30, DECEMBER 31,
1995 1994
_____________ ____________
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 22,107 $ 17,761
Short-term investments 2,433 230
Accounts receivable, net 49,526 49,972
Inventory 4,286 5,369
Prepaids and other current assets 2,371 2,964
________ ________
Total current assets 80,723 76,296
Marketable investment securities 1,233 1,210
Property and equipment, net 23,456 26,766
Excess of purchase price over net assets
acquired, net 13,567 13,874
Other assets 10,306 10,538
________ ________
$129,285 $128,684
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,204 $ 39,105
Accrued liabilities 3,003 2,928
Accrued wages and related costs 8,476 5,494
Federal and state taxes payable 648 -
Current maturities of long-term debt 1,883 2,153
________ ________
Total current liabilities 46,214 49,680
________ ________
Long-term debt, net of current maturities 6,305 5,154
Stockholders' equity:
Common stock, $.05 par value 530 529
Additional paid-in-capital 47,092 46,508
Unrealized loss on investments (32) (52)
Employee stock ownership loan (3,401) (1,934)
guarantee
Foreign currency translation 20 133
adjustment
Retained earnings 34,46 30,929
Treasury stock, at cost; 250 shar (1,912) (2,263)
_______ _______
Net stockholders' equity 76,766 73,850
_______ ______
$129,285 $128,684
======== ========
See notes to consolidated condensed financial statements.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended September30,
_______________________________
1995 1994
_________ _________
(Unaudited)
Net sales $81,014 $81,635
Cost of sales 62,927 66,639
_______ _______
Gross profit 18,087 14,996
Operating, selling and 16,199 16,998
administrative expenses
______ _______
Operating income 1,888 (2,002)
Other income, net 184 53
________ ________
Income before income taxes 2,072 (1,949)
Provision for income taxes 829 (865)
________ _________
Net income $ 1,243 $(1,084)
======== ========
Net income per share $ .12 $ (.10)
======== ========
Weighted average shares outstanding 10,607 10,684
======== =========
See notes to consolidated condensed financial statements.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
Nine Months Ended September 30,
_______________________________
1995 1994
____________ __________
(Unaudited)
Net sales $247,314 $238,323
Cost of sales 192,779 187,891
_______ _______
Gross profit 54,535 50,432
Operating, selling and 49,036 47,889
administrative expenses
_______ _______
Operating income 5,499 2,543
Other income, net 401 231
Income before income taxes 5,900 2,774
Provision for income taxes 2,360 1,024
_______ _______
Net income $ 3,540 $ 1,750
======== ========
Net income per share $ .34 $ .16
======== ========
Weighted average shares outstanding 10,496 10,920
======== ========
See notes to consolidated condensed financial statements.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended September 30,
_______________________________
1995 1994
__________ _________
(Unaudited)
Cash flows from operating activities:
Net income $3,540 $1,750
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,021 7,872
Amortization of ESSOP loan 832 818
guarantee
Decrease (increase) in:
Accounts receivables, net 446 (15,871)
Inventory 1,083 (1,327)
Other current assets 592 1,357
Other assets (2,571) (835)
Increase (decrease) in:
Accounts payable (6,901) 12,845
Accrued alliance development - (3,871)
costs
Accrued liabilities 76 (169)
Accrued wages and related costs 2,982 (400)
Federal and state taxes payable 647 749
Foreign currency translation (113) 5
adjustment
_______ _______
Net cash provided by operating 8,634 2,923
activities
________ _______
Cash flows from investing and financing activities:
Purchase of property and equipment, (1,600) (7,767)
net
Decrease (increase) in (2,226) 2,047
short-term/long-term investments
Issuance of common stock 585 1,814
Reacquisition of common stock 351 (2,263)
Unrealized gain (loss) in investments 20 (39)
Proceeds of short-term/long-term debt 3,663 2,700
Repayment of short-term/long-term (2,782) (2,613)
debt
Increase in ESSOP Loan Guarantee (2,299) -
Net cash used in investing and
financing activities (4,288) (6,011)
_______ _______
Net increase (decrease) in cash and 4,346 (3,088)
cash equivalents
Cash and cash equivalents at 17,761 15,110
beginning of period
________ _________
Cash and cash equivalents at $22,107 $12,022
end of period
======== =========
See notes to consolidated condensed financial statements.
<PAGE>7
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of the
nine months ended September 30, 1995, are not necessarily
indicative of the results to be expected for the full year. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report and
Form 10-K for year ended December 31, 1994.
2. EMPLOYEE BENEFIT PLAN. On June 29, 1995, the Company
contributed 250,000 shares of its common stock, which it had
purchased during 1994 in the open market, to the Employee Savings
and Stock Ownership Plan (ESSOP). The 250,000 shares contributed
to the ESSOP were originally classified as "treasury stock." The
stock contribution totaled $2.3 million and reflects the fair
market value price at the time of the contribution of $9.25 per
share. The purchase of these shares was financed through a loan
the Company obtained during the second quarter of 1995. The shares
will be utilized to match employee contributions made to the ESSOP.
The number of shares of stock available to match employee
contributions is directly related to the amount of principal
payments made on the ESSOP loan.
This is the second stock contribution the Company has made to the
ESSOP since 1989.
3. TREASURY STOCK. During the first and second quarters of 1995,
the Company purchased 250,000 shares of its common stock in the
open market at an average price of $7.65. These shares are
classified as "treasury stock at cost," on the accompanying balance
sheet.
<PAGE>8
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for the third quarter of 1995 decreased 0.8%
or $0.6 million to $81.0 million versus $81.6 million for the third
quarter of 1994. For the nine months ended September 30, 1995, net
sales increased to $247.3 million, a $9.0 million or 3.8% increase
as compared to $238.3 million for the corresponding period of the
prior year.
The Company's net sales growth for 1995 is primarily the result of
activity associated with the strategic alliance entered into 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 Syncor as the primary
distribution channel for its radiopharmaceutical products in the
United States. The nine months ended September 30, 1995, includes
nine months of sales associated with this strategic alliance,
compared to only eights months of sales activity for the same
period in 1994.
Sales in the cardiology sector of the business continues to be the
driving force in nuclear medicine and the Company's sales growth.
Cardiology sales represented approximately 71% of the Company's net
sales for the third quarter of 1995, compared to 57% of net sales
for the third quarter of 1994. Unit dose sales showed an increase
of 4.4% for the third quarter of 1995 and a current year-to-date
increase of 6.2% This growth in unit dose sales is a direct result
of the on-going effort of the Company to convert bulk
radiopharmaceutical customers to the higher sales and margin unit
dose service.
Other favorable factors affecting sales growth in the third quarter
of 1995 include growth in the sales of a newly approved brain
imaging agent, start-up of new and the acquisition of existing
pharmacies during the prior year which are now fully operational
and the increased sales volume resulting from the expansion of
certain managed care contracts. Sales growth was negatively
impacted in the third quarter of 1995 due to a decision by one of
the Company's suppliers to stop selling its proprietary products
through Syncor's national pharmacy network effective January 16,
1995. During the third quarter of 1995, the loss in sales as a
direct result of this decision was approximately $4.5 million and
$10.6 million for the nine months ended September 30, 1995.
Although profitability continues to improve in 1995, the impending
launch of a competing cardiac imaging agent will impact financial
results in future quarters. In mid-July 1995, the FDA issued an
approvable letter for a new cardiac imaging agent which will
compete directly against Cardiolite, one of the cardiac
radiopharmaceuticals distributed by the Company. The Company
anticipates this product will be available in the market in early
1996 and expects to experience some loss of market share following
the introduction.
GROSS PROFIT
Gross profit for the third quarter of 1995 increased $3.1 million
to $18.1 million or 22.3% of sales compared to $15.0 million or
18.4% of sales for the comparable quarter in 1994. For the nine
months ended September 30, 1995, gross profit increased to $54.5
million or 22.1% of sales, up from $50.4 million or 21.2% of sales
for the corresponding period of the prior year.
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The gross profit percentage for the third quarter of 1995, was
consistent with the second quarter 1995 result of 22.3% and 3.9%
points better than the comparable quarter in 1994. This
improvement continues to reflect the impact of several actions the
Company took in late 1994 to improve cost effectiveness of its
operations. Other factors which have positively impacted the gross
margin percentage during 1995 include the modification to the
DuPont Merck strategic alliance in January 1995, changing product-
mix and increased emphasis in improving business economics.
Additionally, although the Company continues to experience extreme
pricing pressure in the market place, it has made significant
progress in halting the erosion which it experienced in 1994. For
the first time in two years, the Company experienced no price
erosion for the third quarter of 1995, when compared to the
comparable quarter in 1994.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses decreased 4.7% for
the third quarter or $.8 million to $16.2 million and decreased as
a percentage of sales to 20.0% from 20.8% for the same period of
1994. For the nine month period ended September 30, 1995, these
expenses increased 2.4% or $1.1 million to $49.0 million, however
decreased as a percentage of sales to 19.8% from 20.1% for the
comparable period in 1994.
The increase in expenses for 1995 is due primarily to a management
incentive accrual, depreciation and amortization expense associated
with the acquisition of existing and start-up of new
radiopharmacies, additional expenses associated with the DuPont
Merck strategic alliance, offset by lower costs associated with
programs established in late 1994 to reduce losses, certain
overhead expenses, and improve control over radiopharmacy
expenditures. The Company continues, as a part of its overall
business strategy, to invest in developmental business
opportunities. These opportunities require ongoing resources in
the area of operating, selling and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents and short and long-term
investments of $25.8 million at September 30, 1995, compared with
$19.2 million at December 31, 1994. The Company's total debt
position of $8.2 million at September 30, 1995, was $0.8 million
higher than the debt position at December 31, 1994, due to loan
proceeds associated with the contribution of an additional 250,000
shares to the Company's ESSOP plan during the second quarter of
1995. Working capital increased from $26.6 million at December 31,
1994 to $34.5 million at September 30, 1995. Days Sales
Outstanding on receivables decreased to 53 days at September 30,
1995, compared to 55 days at December 31, 1994.
The nature of the Company's business is not capital intensive and,
as new products become available, the capital requirement to
accommodate these products will be minimal. The Company believes
sufficient internal and external capital sources exist to fund
operations and future expansion programs. At September 30, 1995,
the Company had unused lines of credit of approximately $17.3
million to fund short-term cash needs.
<PAGE>10
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
None.
<PAGE>11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
November 14, 1995 By: /s/ Michael E. Mikity
_____________________
Michael E. Mikity
Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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