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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 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 March 31, 1995, 10,570,333 shares of $.05 par
value common stock were outstanding.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
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Page
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Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
March 31, 1995 and December 31, 1994. . . . . . . . . . . . . 2
Statements of Income for three months
ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . 3
Statements of Cash Flows for three months
ended March 31, 1995 and 1994 . . . . . . . . . . . . . . . . 4
Notes to Consolidated Condensed Financial Statements. . . . . . 5
Item 2. Management's Discussion and Analysis of Financial Condition . . 6
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . . . 8
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
MARCH 31, DECEMBER 31,
1995 1994
____ ____
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 16,860 $ 17,761
Short-term investments 411 230
Accounts receivable, net 49,066 49,972
Inventory 5,052 5,369
Prepaids and other current assets 3,357 2,964
_______________________
Total current assets 74,746 76,296
Marketable investment securities 1,211 1,210
Property and equipment, net 26,183 26,766
Excess of purchase price over net assets
acquired, net 13,762 13,874
Other assets 9,938 10,538
_______________________
$125,840 $128,684
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 33,747 $ 39,105
Accrued liabilities 3,136 2,928
Accrued wages and related costs 6,300 5,494
Federal and state taxes payable 541 -
Current maturities of long-term debt 2,130 2,153
________________________
Total current liabilities 45,854 49,680
________________________
Long-term debt, net of current maturities 4,874 5,154
Stockholders' equity:
Common stock, $.05 par value 529 529
Additional paid-in-capital 46,508 46,508
Unrealized loss on investments (52) (52)
Employee stock ownership loan guarantee (1,692) (1,934)
Foreign currency translation adjustment 133 133
Retained earnings 31,949 30,929
Treasury stock, at cost; 250 shares (2,263) (2,263)
________________________
Net stockholders' equity 75,112 73,850
________________________
$125,840 $128,684
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See notes to consolidated condensed financial statements.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
THREE MONTHS ENDED MARCH 31,
____________________________
1995 1994
____ ____
(UNAUDITED)
Net sales $83,001 $74,800
Cost of sales 65,164 56,379
_______________________
Gross profit 17,837 18,421
Operating, selling and administrative expenses 16,213 15,103
_______________________
Operating income 1,624 3,318
Other income, net 76 126
________________________
Income before income taxes 1,700 3,444
Provision for income taxes 680 1,354
________________________
Net income $ 1,020 $ 2,090
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Net income per share $ .10 $ .19
=========================
Weighted average shares outstanding 10,428 10,981
=========================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended March 31,
____________________________
1995 1994
____ ____
(Unaudited)
Cash flows from operating activities:
Net income $1,020 $2,090
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,683 2,583
Amortization of ESSOP loan guarantee 242 311
Decrease (increase) in:
Accounts receivables, net 906 (10,003)
Inventory 317 (876)
Other current assets (393) (2,220)
Other assets (104) 1,572
Increase (decrease) in:
Accounts payable (5,358) 16,179
Accrued alliance development costs - (2,983)
Accrued liabilities 208 (901)
Accrued wages and related costs 806 (1,165)
Federal and state taxes payable 541 -
Foreign currency translation adjustment - (6)
_______________________
Net cash provided by operating activities 868 4,581
_______________________
Cash flows from investing and financing activities:
Purchase of property and equipment, net (1,284) (2,829)
Decrease (increase) in short-term/long-term
investments (182) 1,991
Issuance of common stock - 1,632
Repayment of long-term debt (303) (2,029)
_______________________
Net cash used in investing and financing
activities (1,769) (1,235)
______________________
Net increase (decrease) in cash and cash equivalents (901) 3,346
Cash and cash equivalents at beginning of period 17,761 15,110
_______________________
Cash and cash equivalents at end of period $16,860 $18,456
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See notes to consolidated condensed financial statements.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. GENERAL. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair
presentation have been included. The results of the three
months ended March 31, 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.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for the first quarter of 1995 rose 11% or
$8.2 million to $83.0 million versus $74.8 million for the first
quarter of 1994. The Company's net sales growth 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 first quarter of 1995 includes three months of
sales associated with this strategic alliance, compared to only two
months of sales activity for the first quarter of 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 62% of the Company's net
sales for the first quarter of 1995, compared to 55% of net sales
for the first quarter of 1994. Other favorable factors affecting
sales growth in the first quarter of 1995 include the 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 first 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 first quarter of 1995, the
loss in sales as a direct result of this decision was approximately
$2.6 million.
The Company continues to focus on improving profitability in 1995,
in spite of several challenges. The introduction of a new cardiac
imaging agent which would compete directly against Cardiolite is
one of these challenges. Although this new agent has not yet been
approved by the FDA for distribution, the Company believes that it
will be approved during 1995. A new competing imaging agent by its
nature will impact the Company's sales and profit, however, the
degree in which it will affect the overall marketplace will depend
on the introduction and penetration strategy employed.
GROSS PROFIT
Gross profit for the first quarter of 1995 declined $.6 million to
$17.8 million or 21.5% of sales compared to $18.4 million or 24.6%
of sales for the comparable quarter in 1994. The decline in the
gross profit percentage is the continued result of a variety of
factors which impacted the Company during 1994. These factors
include general price reductions in 1994 across the majority of
Syncor's product line in response to competitive market pressures,
material cost increases, and the entering into several large
managed care contracts that traditionally have lower profit
margins. In 1994, the Company reduced prices on the majority of
its product line by approximately 8% in response to market
conditions. Beginning in 1995, the Company began to experience
price stability in the marketplace.
In the first quarter of 1995, the Company announced that it will
increase prices compatible with its responsible pricing commitment
to recover some portion of the material cost increases it received
from suppliers during 1994. The vast majority of these price
increases will range between 4% and 6%, depending on the specific
product.
In early January 1995, the Company also concluded a joint review
and modification of the strategic alliance agreement with DuPont
Merck. The resulting changes are anticipated to improve the gross
margin as a percentage of sales beginning in early 1995 and the
Company expects this trend to continue.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased 7.4% for
the first quarter or $1.1 million to $16.2 million but declined as
a percentage of sales to 19.5% from 20.2% for the same period of
1994.
The increase for the first quarter is due primarily to 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
improved controls over Company expenditures. In late 1994, the
Company initiated several programs to reduce losses, certain
overhead and improve control over radiopharmacy expenditures.
These cost control programs will continue in 1995.
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.
IMPROVEMENTS IN GROSS PROFIT AND OPERATING, SELLING AND
ADMINISTRATIVE EXPENSES OVER THE THIRD AND FOURTH QUARTERS 1994
Gross profit for the first quarter of 1995 increased to $17.8
million from $15.6 million or $2.2 million compared to the fourth
quarter of 1994 and $15.0 million or $2.8 million in the third
quarter of 1994. Gross profit as a percentage of sales also
improved during the current quarter to 21.5% versus 19.1% in the
fourth quarter of 1994 and 18.4% in the third quarter of 1994.
This improvement is the direct result of the joint review and
modification made to the DuPont Merck strategic alliance in January
1995, as well as actions taken in the fourth quarter to improve
pharmacy productivity.
Operating, selling and administrative expenses decreased $.3
million to $16.2 million and as a percentage of net sales to 19.5%
compared to $16.5 million or 20.2% of net sales in the fourth
quarter of 1994 and $17 million or 20.8% of net sales in the third
quarter of 1994. The decline was a direct result of several
programs initiated by the Company in late 1994 to reduce losses,
certain overhead and improve control over radiopharmacy
expenditures.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents and short and long-term
investments of $18.5 million at March 31, 1995, compared with $19.2
million at December 31, 1994. The Company's total debt position of
$ 7.0 million at March 31, 1995 was $.4 million lower than the debt
position at December 31, 1994. Working capital increased from
$26.6 million at December 31, 1994 to $28.9 million at March 31,
1995. Days Sales Outstanding decreased to 53 days at March 31,
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 March 31, 1995, the
Company had unused lines of credit of approximately $17.2 million
to fund short-term cash needs.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Stock Repurchase
________________
On June 15, 1994, the Company announced that the Board of
Directors had approved the repurchase of up to 500,000 shares
of its common stock from time to time in the open market. Up
to 250,000 shares could be contributed to the Syncor
Employees' Savings and Stock ownership Plan (ESSOP).
During the period of June 1994 and July 1994, the Company
purchased 250,000 shares in the open market at an average
price of $9.05 per share. These shares were classified as
treasury stock.
During the first quarter of 1995, the Company began the second
phase of the repurchase program. As of this filing, the
Company had purchased 250,000 shares in the open market at an
average price of $7.65. The Company intends to allocate
these shares to the ESSOP.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
May 12, 1995 By: /s/ Michael E. Mikity
____________________________
Michael E. Mikity
Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
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<PERIOD-END> MAR-31-1995
<CASH> 16,860
<SECURITIES> 1,211
<RECEIVABLES> 50,214
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