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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 JUNE 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 June 30, 1995,
10,600,134 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
June 30, 1995 and December 31, 1994. . . . . . . . . . . . . 2
Statements of Income for three months
ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . 3
Statements of Income for six months
ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . 4
Statements of Cash Flows for six months
ended June 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)
JUNE 30, DECEMBER 31,
1995 1994
___________ ___________
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 21,434 $ 17,761
Short-term investments 1,511 230
Accounts receivable, net 50,171 49,972
Inventory 4,364 5,369
Prepaids and other current assets 3,225 2,964
_________ __________
Total current assets 80,705 76,296
Marketable investment securities 1,224 1,210
Property and equipment, net 24,703 26,766
Excess of purchase price over net assets
acquired, net 13,650 13,874
Other assets 9,736 10,538
_________ __________
$130,018 $128,684
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32,491 $ 39,105
Accrued liabilities 3,240 2,928
Accrued wages and related costs 9,532 5,494
Federal and state taxes payable 687 -
Current maturities of long-term debt 2,110 2,153
_________ __________
Total current liabilities 48,060 49,680
_________ __________
Long-term debt, net of current maturities 6,583 5,154
Stockholders' equity:
Common stock, $.05 par value 530 529
Additional paid-in-capital 47,110 46,508
Unrealized loss on investments (40) (52)
Employee stock ownership loan guarantee (3,663) (1,934)
Foreign currency translation adjustment 124 133
Retained earnings 33,226 30,929
Treasury stock, at cost; 250 shares (1,912) (2,263)
_________ __________
Net stockholders' equity 75,375 73,850
_________ __________
$130,018 $128,684
========= ==========
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 June 30,
___________________________
1995 1994
________ ________
(UNAUDITED)
Net sales $83,299 $81,888
Cost of sales 64,688 64,873
________ ________
Gross profit 18,611 17,015
Operating, selling and administrative expenses 16,624 15,788
________ ________
Operating income 1,987 1,227
Other income, net 141 52
________ ________
Income before income taxes 2,128 1,279
Provision for income taxes 851 535
________ ________
Net income $ 1,277 $ 744
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Net income per share $ .12 $ .07
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Weighted average shares outstanding 10,503 10,830
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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)
SIX MONTHS ENDED JUNE 30,
_________________________
1995 1994
_________ _________
(UNAUDITED)
Net sales $166,300 $156,688
Cost of sales 129,852 121,252
_________ _________
Gross profit 36,448 35,436
Operating, selling and administrative expenses 32,837 30,891
_________ _________
Operating income 3,611 4,545
Other income, net 217 178
_________ _________
Income before income taxes 3,828 4,723
Provision for income taxes 1,531 1,889
_________ _________
Net income $ 2,297 $ 2,834
========= =========
Net income per share $ .22 $ .26
========= =========
Weighted average shares outstanding 10,452 10,800
========= =========
See notes to consolidated condensed financial statements.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
SIX MONTHS ENDED JUNE 30,
__________________________
1995 1994
_________ _________
(UNAUDITED)
Cash flows from operating activities:
Net income $2,297 $2,834
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,394 5,205
Amortization of ESSOP loan guarantee 506 553
Decrease (increase) in:
Accounts receivables, net (199) (16,005)
Inventory 1,005 (1,951)
Other current assets (261) (77)
Other assets (622) 202
Increase (decrease) in:
Accounts payable (6,614) 14,401
Accrued alliance development costs - (3,656)
Accrued liabilities 312 (123)
Accrued wages and related costs 4,038 (657)
Federal and state taxes payable 687 1,112
Foreign currency translation adjustment (9) (33)
_________ _________
Net cash provided by operating activities 6,534 1,805
_________ _________
Cash flows from investing and financing activities:
Purchase of property and equipment, net (1,683) (5,481)
Decrease (increase) in short-term/long-term
investments (1,295) 1,935
Issuance of common stock 603 861
Reacquisition of common stock 351 -
Unrealized gain (loss) in investments 12 (32)
Proceeds of short-term/long-term debt 3,663 500
Repayment of short-term/long-term debt (2,277) (2,122)
Increase in ESSOP Loan Guarantee (2,235) -
_________ _________
Net cash used in investing and financing
activities (2,861) (4,339)
_________ _________
Net increase (decrease) in cash and cash
equivalents 3,673 (2,534)
Cash and cash equivalents at beginning of period 17,761 15,110
_________ _________
Cash and cash equivalents at end of period $21,434 $12,576
========= =========
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 six
months ended June 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.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NET SALES
Consolidated net sales for the second quarter of 1995 rose 1.7% or
$1.4 million to $83.3 million versus $81.9 million for the second
quarter of 1994. For the six months ended June 30, 1995, net sales
increased to $166.3 million, a $9.6 million or 6.1% increase as
compared to $156.7 million for the corresponding period of the
prior year.
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 six months ended June 30, 1995, includes six
months of sales associated with this strategic alliance, compared
to only five 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 65% of the Company's net
sales for the second quarter of 1995, compared to 57% of net sales
for the second quarter of 1994. Other favorable factors affecting
sales growth in the second quarter of 1995 include the increased
sales of unit dose Cardiolite, 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 second 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 second quarter of 1995, the loss in
sales as a direct result of this decision was approximately $3.5
million and $6.1 million for the six months ended June 30, 1995.
Although profitability has improved in 1995, the introduction 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 radiopharmaceutical
distributed by the Company. The Company anticipates this product
to be available in the market in late 1995. As with any new
product, the degree in which this new product will affect the
overall marketplace will depend on the introduction and penetration
strategy employed.
GROSS PROFIT
Gross profit for the second quarter of 1995 increased $1.6 million
to $18.6 million or 22.3% of sales compared to $17.0 million or
20.8% of sales for the comparable quarter in 1994. For the six
months ended June 30, 1995, gross profit increased to $36.4 million
or 21.9% of sales, up from $35.4 million or 22.6% of sales for the
corresponding period of the prior year.
The improvement in the gross profit percentage during 1995 is the
continued result of a variety of factors. These factors include
the modification to the DuPont Merck strategic alliance in January
1995, improved price stability, changing product-mix and increased
emphasis in improving business economics.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased 5.3% for
the second quarter or $.8 million to $16.6 million and increased to
20.0% from 19.3% as a percentage of sales for the same period of
1994. For the six month period ended June 30, 1995 and 1994, these
expenses remained constant at 19.7% as a percentage of sales,
however, these expenses increased $1.9 million.
The increase for the second quarter and six months of 1995 is due
primarily to a bonus 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. Excluding the bonus accrual and the opening of new
pharmacies; operating, selling and administrative expenses in the
second quarter of 1995 would have declined by approximately 2%.
These cost control programs will continue throughout 1995.
As a part of its overall business strategy, the Company continues
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 $24.2 million at June 30, 1995, compared with $19.2
million at December 31, 1994. The Company's total debt position of
$8.7 million at June 30, 1995, was $1.3 million higher than the
debt position at December 31, 1994, due to loan proceed 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 $32.6
million at June 30, 1995. Days Sales Outstanding for receivables
decreased to 53 days at June 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 June 30, 1995, the
Company had unused lines of credit of approximately $17.3 million
to fund short-term cash needs.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Stock Repurchase Program
________________________
On June 20, 1995, the Company announced that the Board of
Directors had given additional authorization to repurchase of up
to 500,000 shares of its common stock from time to time in the
open market. This is the second authorization given by the Board
of Directors within a twelve month period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Annual Meeting of Security Holders was held on June
20, 1995.
(b) There was no solicitation in opposition to the
management's nominees as listed in the Proxy Statement and
all of such nominees were elected.
(c) (i) At such meeting, Registrant proposed certain
amendments to its By-Laws. As set forth in the Proxy
Statement beginning on page 20, the proposed amendments
would: (I) change the Annual Meeting date; (II) tie
deadline for the receipt of nominations of directors to
the previous Annual Meeting and create certainty as to
when notice is deemed given by the Registrant; (III)
change the indemnification agreement of directors and
officers; (IV) clarify the vote required to amend the By-
Laws as well as matters related to the amendments. The
four proposed amendments to the By-Laws were approved with
up to 8,302,029 shares voted and the voting results were
as follows:
Proposal Number
_______________
Votes in %Voted in Votes Votes
Favor Favor Against Abstained
_________ _________ _______ _________
(I) 8,302,029 78.5% 420,085 70,087
(II) 7,905,948 74.7% 821,530 73,723
(III) 8,179,386 77.5% 441,162 171,653
(IV) 6,753,429 63.8% 331,571 78,738
(ii) Up to 8,747,508 shares were voted in the election of
each of the three nominees for Director and the voting results
were as follows:
Votes in Favor % Voted
of Election in Favor
______________ ________
Gene R. McGrevin 8,747,508 82.7%
George S. Oki 8,737,898 82.6%
Robert G. Funari 8,746,264 82.7%
<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)
August 9, 1995 by: /s/ Michael E. Mikity
____________________________
Michael E. Mikity
Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
