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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, 1998 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)
6464 CANOGA AVENUE, WOODLAND HILLS, CALIFORNIA 91367
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(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, 1998, 10,982,482 shares of $.05 par
value common stock were outstanding.
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<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
PAGE
____
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
September 30, 1998 and December 31, 1997 . . . . . . . . . . . 3
Statements of Income for Three Months
Ended September 30, 1998 and 1997 . . . . . . . . . . . . . . 4
Statements of Income for Nine Months
Ended September 30, 1998 and 1997 . . . . . . . . . . . . . . 5
Statements of Cash Flows for Nine Months
Ended September 30, 1998 and 1997 . . . . . . . . . . . . . . 6
Notes to Consolidated Condensed Financial Statements . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition . . 10
Part II. Other Information . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except per share data)
September 30, December 31,
1998 1997
_____________ ____________
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 18,654 $ 25,538
Short-term investments 4,541 2,583
Accounts receivable, net 75,879 54,972
Inventory 7,475 5,574
Prepaids and other current assets 15,437 9,288
_________ _________
Total current assets 121,986 97,955
Marketable investment securities 693 1,180
Property and equipment, net 46,131 28,870
Excess of purchase price over net assets
acquired, net 62,125 14,319
Other assets 20,231 22,239
_________ _________
$251,166 $164,563
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,805 $ 34,755
Accrued liabilities 10,436 4,353
Accrued wages and related costs 16,717 13,680
Federal and state taxes payable 1,312 1,129
Current maturities of long-term debt 8,345 3,978
_________ _________
Total current liabilities 74,615 57,895
Long-term debt, net of current maturities 69,539 17,332
Deferred compensation 1,969 1,969
Stockholders' equity:
Common stock, $.05 par value 618 572
Additional paid-in capital 69,455 55,061
Notes receivable related parties (8,360) -
Employee stock ownership loan guarantee (5,477) (6,741)
Accumulated other comprehensive income (132) (17)
Translation adjustment (345) (313)
Retained earnings 61,808 51,329
Treasury stock, at cost; 1,356 shares at
September 30, 1998 and at December 31, 1997 (12,524) (12,524)
_________ _________
Net stockholders' equity 105,043 87,367
_________ _________
$251,166 $164,563
========= =========
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 September 30,
________________________________
1998 1997
______ ______
(Unaudited)
Net sales $114,102 $94,493
Cost of sales 79,236 72,233
________ ________
Gross profit 34,866 22,260
Operating, selling and administrative expenses 29,288 19,708
________ ________
Operating income 5,578 2,552
Other income/expense, net (889) 371
________ ________
Income before taxes 4,689 2,923
Provision for income taxes 1,963 1,169
________ ________
Net income $ 2,726 $ 1,754
======== =========
Net income per share - Basic
____________________________
Net income $ .25 $ .18
Weighted average shares outstanding - Basic 10,982 9,920
======== =========
Net income per share - Diluted
______________________________
Net income $ .24 $ .17
Weighted average shares outstanding - Diluted 11,504 10,323
======== =========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
Nine Months Ended September 30,
_______________________________
1998 1997
______ ______
(Unaudited)
Net sales $330,071 $285,764
Cost of sales 233,458 219,534
________ ________
Gross profit 96,613 66,230
Operating, selling and administrative expenses 77,357 55,847
________ ________
Operating income 19,256 10,383
Other income/expense, net (989) 3,511
________ ________
Income before taxes 18,267 13,894
Provision for income taxes 7,788 5,557
________ ________
Income from continuing operations 10,479 8,337
Discontinued operations, net of taxes - 1,063
________ ________
Net income $ 10,479 $ 9,400
======== ========
Net income per share - Basic
____________________________
Income from continuing operations $ .99 $ .83
Discontinued operations, net of taxes $ - $ .11
________ ________
Net income $ .99 $ .94
Weighted average shares outstanding - Basic 10,607 9,998
======== ========
Net income per share - Diluted
______________________________
Income from continuing operations $ .94 $ .82
Discontinued operations, net of taxes $ - $ .10
________ ________
Net income $ .94 $ .92
Weighted average shares outstanding - Diluted 11,129 10,178
======== ========
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended September 30,
_______________________________
1998 1997
______ ______
(Unaudited)
Cash flows from operating activities:
Net income $ 10,479 $9,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,401 7,184
Provision for losses on receivables 3,545 -
Amortization of ESSOP loan guarantee 1, 264 945
Decrease (increase) in:
Accounts receivable, net (11,617) (4,831)
Inventory (1,881) 1,689
Net assets of discontinued operations - 1,198
Other current assets (5,292) 1,381
Other assets 1,304 -
Increase (decrease) in:
Accounts payable (1,303) (328)
Accrued liabilities 2,840 2,049
Accrued wages and related costs 3,039 2,067
Federal and state taxes payable 430 (973)
_________ _________
Net cash provided by operating activities 14,209 19,781
_________ _________
Cash flows from investing activities:
Purchase of property and equipment, net (9,800) (7,645)
Acquisitions of businesses, net of cash acquired (45,338) (6,550)
Net increase in short-term investments (1,960) (1,347)
Net decrease (increase) in long-term investments 487 (6,453)
Unrealized gain on investments (115) (8)
_________ _________
Net cash used in financing activities (56,726) (22,003)
_________ _________
Cash flow from financing activities:
Increase in ESSOP Guarantee - (3,563)
Proceeds from long-term debt 42,121 9,033
Repayment of long-term debt (7,199) (299)
Issuance of common stock 837 1,638
Reacquisition of common stock for treasury - (1,911)
_________ _________
Net cash provided by financing activities 35,759 4,898
_________ _________
Net (decrease) increase in cash and cash equivalents (6,758) 2,676
Effect of exchange rate on cash (126) (69)
Cash and cash equivalents at beginning of period $25,538 $25,214
_________ _________
Cash and cash equivalents at end of period $18,654 $27,821
========= =========
Non-cash transaction: 521,000 shares of common stock were issued
____________________
on June 16, 1998 in exchange for notes receivables from related
parties.
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 nine months ended September 30, 1998, 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 the period ended December 31, 1997.
Certain line items in the prior year's consolidated condensed
financial statements have been reclassified to conform to the
current year's presentation.
2. NEW ACCOUNTING STANDARDS: In 1997, the Financial Accounting and
Standards Board issued SFAS 130,"Reporting Comprehensive Income,"
which became effective for fiscal years beginning after December
15, 1997. SFAS 130 requires that the components of comprehensive
income be disclosed. Such amounts are as follows for the three
and nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
_________________________ _________________________
Tax Tax
Before-tax (expense) Net-of-Tax Before-Tax (expense) Net-of-Tax
Amount or benefit Amount Amount or Benefit Amount
____________________________________________________________________
<S> <C> <C> <C> <C> <C>
Foreign currency translation
Adjustments (98) - (98) (179) - (179)
____________________________________________________________________
Unrealized gains/(losses) on
investments:
Unrealized holding gains/(losses)
arising during period (218) 92 (126) (5) 2 (3)
____________________________________________________________________
Net unrealized holding gains (218) 92 (126) (5) 2 (3)
____________________________________________________________________
Other comprehensive income (316) 92 (224) (184) 2 (182)
====================================================================
</TABLE>
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
_________________________ _________________________
Tax Tax
Before-tax (expense) Net-of-Tax Before-Tax (expense) Net-of-Tax
Amount or benefit Amount Amount or Benefit Amount
____________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Foreign currency translation
Adjustments (32) - (32) (113) - (113)
____________________________________________________________________
Unrealized gains/(losses) on
investments:
Unrealized holding gains/(losses)
arising during period (199) 84 (115) (14) 6 (8)
____________________________________________________________________
Net unrealized holding gains (199) 84 (115) (14) 6 (8)
____________________________________________________________________
Other comprehensive income (231) 84 (147) (127) 6 (121)
====================================================================
</TABLE>
In June 1997, SFAS No. 131 - "Disclosure about Segments of an
Enterprise and Related Information" was issued and became effective for
periods beginning after December 15, 1997. SFAS No. 131 establishes
standards for reporting financial and descriptive information regarding
an enterprise's operating segments. In February 1998, SFAS No. 132 -
"Employers" Disclosure about Pensions and Other Post Retirement Benefits'
was issued and became effective for fiscal years beginning after December
15, 1997. These standards increase disclosure in the financial statements,
and will have no impact on the Company' financial position or results of
operations.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued and is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company is
currently evaluating the impact SFAS No. 133 will have on its financial
statements, if any.
3. ACQUISITIONS: In January 1998, the Company acquired a medical imaging
business from National Diagnostic Services, Inc. and an affiliate ("NDS").
The purchase price for the acquisition was $12 million, including the
assumption of $4.8 million in debt. This acquired business included nine
medical imaging centers owned or managed by NDS. This transaction has
been accounted for as a purchase for the quarter ended March 31, 1998.
Also in January 1998, a subsidiary of Syncor merged with and into TME,
Inc. a company based in Houston, Texas, pursuant to which TME, Inc. became
a wholly owned subsidiary of Syncor. TME owns, operates and/or manages
freestanding medical imaging centers through joint ventures and
partnerships. It has 20 facilities in its network, with five additional
facilities in development. As consideration for the merger, Syncor paid
$14.5 million in cash to TME's stockholders. This transaction was
accounted for as a purchase for the quarter ended March 31, 1998.
In April 1998, Syncor acquired the medical imaging business of
International Magnetic Imaging, Inc. a subsidiary of Consolidated
Technology Group Ltd. The business acquired includes ten outpatient
medical imaging centers and an imaging referral network operating in 35
states. The purchase price of the acquisition was $20.5 million, plus the
assumption of approximately $24.3 million in liabilities and trade
payables. The acquisition was accounted for as a purchase and closed on
April 2, 1998.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
The new medical imaging services segment operates under the name of
Comprehensive Medical Imaging, Inc. ("CMI"), which is a wholly owned
subsidiary of Syncor International Corporation.
4. NET INCOME PER SHARE: In 1997, the Financial Accounting Standard Board
issued SFAS No. 128, "Earnings Per Share" (EPS). SFAS No. 128 replaced
the calculation of primary and fully diluted earnings per share with basic
and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effect of options. Diluted
earnings per share is very similar to the previously reported primary
earnings per share. All earnings per share amounts for all periods have
been restated to conform to SFAS No. 128 requirements.
The reconciliation of the numerator and denominators of the basic and
diluted earnings per share computations are as follows for the three
months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
_________________________ __________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net income $2,726 $1,754
Basic EPS $2,726 10,982 $.25 $1,754 9,920 $.18
______ ______
Effective of Dilutive
Stock Options 522 403
_____ _____
Diluted EPS $2,726 11,504 $.24 $1,754 10,323 $.17
------ ------
</TABLE>
The reconciliation of the numerator and denominators of the basic and
diluted earnings per share computations are as follows for the nine months
ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended Three months ended
Sept. 30, 1998 Sept. 30, 1997
_________________________ __________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net income $10,479 $9,400
Basic EPS $10,479 10,607 $.99 $9,400 9,998 $.94
______ ______
Effective of Dilutive
Stock Options 522 180
_____ _____
Diluted EPS $10,479 11,129 $.94 $9,400 10,178 $.92
______ ______
</TABLE>
<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 third quarter of 1998 increased 20.8 percent
or $19.6 million to $114.1 million versus $94.5 million for the third quarter
of 1997. For the nine months ended September 30, 1998, net sales increased
15.5 percent or $44.3 million to $330.1 million compared to $285.8 million
for the same period in 1997.
The primary driving force behind the sales growth for the first nine months
of 1998, is the continued expansion in the Company's radiopharmaceutical
business. Cardiology sales for the three months ended September 30, 1998,
increased by 11 percent to $67.2 million compared to $60.3 million for the
corresponding quarter of the prior year. Sales of Cardiolite(R), a
proprietary heart imaging agent to which the Company has preferential
distribution rights, increased approximately 20 percent for both the third
quarter and nine months ended September 30, 1998, when compared to the
corresponding periods of the prior year. Additional, the number of unit dose
prescriptions for Cardiolite(R) for the three months ended September 30, 1998
increased by 20 percent when compared to the corresponding period of the
prior year.
However, the growth in the technetium-based heart agent Cardiolite(R) has
been partially offset by a decrease in sales of two other generic cardiology
agents, thallium and I.V. Persantine(R). Thallium sales have declined due to
a combination of competitive pressures and customers switching to technetium-
based heart agents. A competing radiopharmaceutical manufacturer/distributor
is also currently marketing a rival product to Cardiolite(R),which is also a
technetium based heart agent. During the first nine months of 1998, this
competing product continued to gain market share, currently estimated at 18
percent of the total profusion market, compared to a market share of
approximately 54% for Cardiolite(R). Total cardiology sales for the three
months and nine months ended September 30, 1998 were approximately 65 percent
of the Company's total radiopharmaceutical sales.
Sales for the three months ended September 30, 1998 were also positively
impacted as a result of a moderate price increase instituted in August 1998.
The Company increased the price of both unit dose and bulk Cardiolite(R) and
Miraluma(R). A general price increase on all other products is also being
implemented over the remaining months of 1998. The quarter three 1998 price
increases resulted in incremental net sales for the three months ended
September 30, 1998 of approximately $1.3 million.
The Company continues to forecast additional lost sales within the
radiopharmaceutical segment associated with the 1997 loss, through the
process of competitive bidding, of a contract to supply products to a large
hospital buying group. The Company estimates it has retained approximately 70
percent of sales associated with this contract. For 1998, the Company
estimates the loss to sales to be approximately $7.0 million in net sales.
Sales for the nine months ended September 30, 1998 were also negatively
affected as a result of a temporary interruption in the supply of molybdenum,
the parent isotope of technetium. The nuclear medicine community experienced
this interruption due to a labor dispute by one of North America's major
suppliers of molybdenum. This interruption in the supply of molybdenum
impacted the Company's sales for the second quarter of 1998 by an estimated
$2.5 million. The estimated impact on net income was in the range of $.1
million to $.2 million and the estimated impact on earnings per share was
approximately $.01 per share.
The Company anticipates sales growth during the current year in the
radiopharmacy services business to be above the 1997 levels. For the nine
months ended September 30, 1998, sales from this business segment were
approximately 6.5 percent or $18.7 million above the corresponding period of
the prior year.
The Company completed the acquisition of three medical imaging businesses
during the first half of 1998. Sales from these three newly acquired
businesses and the Company's "open" MRI business contributed $25.6 million in
sales for the nine months ended September 30, 1998. The Company anticipates
the medical imaging business segment to contribute approximately $40 million
in net sales for 1998.
GROSS PROFIT
Gross profit for the third quarter of 1998 increased $12.6 million to $34.9
million, and as a percentage of net sales to 30.6 percent, compared to 23.6
percent of net sales or $22.3 million for the comparable quarter in 1997.
For the nine months ended September 30, 1998, gross profit increased $30.4
million to $96.6 million and as a percentage of net sales to 29.3 percent,
compared to 23.2 percent of net sales for the comparable period in 1997.
The reasons for the substantial improvement in gross profit margin over the
comparable quarter are three fold. First, the medical imaging businesses
contributed $8.2 million and $19.0 million to gross profit for the three
months and nine months ended September 30, 1998. Secondly, gross profit from
the Company's radiopharmaceutical business increased due to a price increase
initiated during the second quarter of 1998. This price increase resulted in
incremental gross margin dollars of $.7 million for the three months ended
September 30, 1998. Thirdly, a reduction in certain material acquisition
costs positively impacted the gross margin. In 1997, the Company completed
contract re-negotiations with one of its major suppliers and received
significant material savings beginning in the second quarter of 1997.
Although some of these price concessions were due to expire in early 1998,
the Company has been successful in extending terms and in some cases
negotiating additional savings into 1998.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, selling and administrative expenses increased by 48.6 percent for
the third quarter of 1998 or $9.6 million to $29.3 million, and as a
percentage of sales increased to 25.7 percent from 20.9 percent for the same
period in 1997. For the nine months ended September 30, 1998, operating,
selling and administrative expenses increased by 38.5 percent or $21.5
million to $77.4 million, or 23.4 percent of sales, compared to $55.8 million
or 19.5 percent of sales for the same period in 1997.
A significant portion of the increase in operating, selling and
administrative expenses for the nine months ended September 30, 1998 is the
result of the Company's acquisition of certain medical imaging businesses.
Included in the total increase for the three months and nine months ended
September 30, 1998 is $7.3 million and $16.9 million in expenses associated
with the medical imaging business. Other additional expenses associated with
the increase are: increased amortization of costs associated with the 1997
acquisition of a manufacturing business, increased depreciation from hardware
and software acquisitions associated with system conversions and upgrades,
increased depreciation associated with the relocation to a new corporate
headquarters, and increased consulting costs for employee incentive plans and
recruiting.
The Company expects the increased level of expenditures in these areas to
continue as the medical imaging business is expanded, new systems are
implemented as a result of a re-engineering effort, field systems are
upgraded and expansion in the international marketplace continues.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and investments of $23.9 million at
September 30, 1998, compared with $29.3 million at December 31, 1997. The
Company's total debt position of $77.9 million at September 30, 1998,
reflects an increase of $56.6 million when compared to the debt position at
December 31, 1997 of $21.3 million. The increase in debt for the quarter
ended September 30, 1998 is the direct result of financing three acquisitions
in the medical imaging business and debt assumed as a result of these
acquisitions. Working capital increased by $7.3 million to $47.4 million at
September 30, 1998, compared to $40.1 million at December 31, 1997.
The Company believes sufficient internal and external sources exist to fund
operations and future expansion programs. On January 5, 1998, a new credit
line facility became effective in the amount of $75 million to fund working
capital and acquisitions. At September 30, 1998, the Company had an unused
line of credit of $32.6 million, before reductions in letters of credit.
<PAGE>
YEAR 2000
_________
Like many other companies, the Year 2000 computer issue creates risk for the
Company. If the Company's computer systems do not correctly recognize date
information when the year changes to 2000, there could be an adverse impact
on the Company's operations. The Company has therefore initiated a
comprehensive project to prepare its computer systems for the year 2000.
Information Technology (IT) Systems
___________________________________
Introduction of SAP System and Migration of Legacy Systems. The Company's
financial information IT systems include an SAP system implemented in 1997.
This system is believed to be "Year 2000" compliant. The Company is testing
this system, and is analyzing its remaining computer systems to identify any
potential "Year 2000" issues, and will take appropriate corrective action
based on the results of such analysis. Such actions will include migrating
other corporate legacy systems from a two-character year to a four-character
year. The estimated cost of migrating such corporate legacy systems,
including amounts spent to date, is $500,000. This effort is scheduled to be
completed in January of 1999.
Company Field Based IT Systems and Company Supplied Customer IT Systems. The
Company's field based pharmacy systems have been modified and are believed to
be Year 2000 compliant and are currently undergoing testing. The Company
expects the rollout of these systems to all field locations will be completed
in March of 1999. All IT systems supplied by the Company for use in customer
locations were either designed as Year 2000 compliant or are being converted
to be Year 2000 compliant and are currently being tested. The Company
expects to have the system changes available for rollout to all customer
sites by January 1999. The estimated cost of such modifications to field and
customer-installed systems, including amounts spent to date, is $250,000. The
actual implementation will be dependent on customer cooperation; however, the
Company expects this roll out to be completed by mid-1999.
Residual Systems
________________
The effort to determine the Year 2000 compliance of residual systems (i.e.
software supplied by external vendors and other "embedded" systems),
including CMI imaging equipment and systems, is estimated to be completed by
year-end 1998. The imaging systems are critical to CMI's business and may
require replacing of certain equipment or systems or hardware upgrades, in
addition to those scheduled and budgeted for upgrade/ replacement in the
ordinary course of business. Many of the vendor supplied residual systems
are small (e.g., alarm systems, postage meters, etc.), while some are more
sophisticated (e.g., desktops, desktop applications, and LAN applications).
The estimated cost of such Year 2000 driven modifications/replacements to
residual systems and CMI, including amounts spent to date, is not expected to
exceed $750,000. This effort is scheduled to be completed in the third
quarter of 1999.
Year to Date Status on Non-Company IT Systems
_____________________________________________
The Company is also contacting significant suppliers, other vendors and
fiscal payers, including federal and state governments, Medicare fiscal
intermediaries, insurance companies and managed care companies to determine
the state of their Year 2000 compliance or to monitor their progress toward
Year 2000 preparedness. In addition, the Company is exploring contingency
arrangements pursuant to which certain of such entities would continue to
make timely payments for services through alternative means in the event of
potential Year 2000 caused system failures. Such payments would be followed
by reconciliation at a later date, and would be consistent with certain of
such entities past practices during periodic computer system outages.
Notwithstanding the foregoing, there can be no assurance that another
entity's failure to ensure Year 2000 capability would not have an adverse
effect on the Company.
Risk Mitigation Strategy
________________________
A key to the Company's risk mitigation strategy is the establishment of a
Year 2000 Program Office. The Program Office has positioned the organization
to proactively prepare the enterprise infrastructure (both technical and
contractual) as well as educate appropriate staff members for what is a high-
risk situation. Once educated about the pervasiveness of the Year 2000
issue, each operational area was called upon to participate in the risk
mitigation effort, and to participate in the development of contingency plans
to minimize potential disruptions to their operational area. Such contingency
plans are expected to be in place by the third quarter of 1999.
The charter for the Program Office has been to identify all likely areas of
Year 2000 impact. This has involved undertaking technical and business
challenges. Additionally, the Program Office is also focusing on the
potential legal ramifications and liabilities for potential non-compliance,
both on the part of Syncor and that of suppliers, vendors, payers, and
customers.
Potential Risks; Costs
______________________
The costs of the Company's Year 2000 readiness and the dates on which the
Company believes it will complete the Year 2000 modifications are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events, including the continued availability of certain
resources and other factors. However, there can be no guarantee that these
estimates will be achieved and actual results could differ materially from
those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all
relevant computer codes, unforeseen circumstances causing the Company to
allocate its resources elsewhere, and similar uncertainties. Additionally, as
testing of Year 2000 functionality of the Company's systems must occur in a
simulated environment, the Company will not be able to test full system Year
2000 interfaces and capabilities prior to Year 2000. The Company believes
that the cost of its Year 2000 compliance projects over the next two years
will not have a material effect on the Company's financial position or
overall trends in results of operations.
SAFE HARBOR STATEMENT
Statements which are not historical facts, including statements about our
confidence, strategies and expectations, opportunities, industry and market
growth, demand and acceptance of new and existing products and return on
investments are forward looking statements that involve risks and
uncertainties, including without limitation, the effect of general economic
and market conditions, supply and demand for the Company's products,
competitor pricing, maintenance of the Company's current market position and
other factors. Given these uncertainties, undue reliance should not be
placed on such forward looking statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Part II. OTHER INFORMATION
Item 4.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Material Contracts
10.1 New Employee Stock Option Plan dated as of June 1, 1998.
11. Statement re: Computation of Per Share Earnings
Computation can be clearly determined from the material contained in
Part I of this Form 10-Q.
27. Financial Data Schedule (filed electronically)
<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)
November 10, 1998 /s/ Michael E. Mikity
_______________________
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
<PAGE>
EXHIBIT 10.1
SYNCOR INTERNATIONAL CORPORATION
NEW EMPLOYEE STOCK OPTION PLAN
I. THE PLAN.
1.1 Purpose. The purpose of this Plan is to promote the
success of the Company by providing an additional means to attract new
officers or key employees through the grant of Options and other Awards
that provide added long term incentives for high levels of performance and
for significant efforts to improve the financial performance of the
Company. This Plan is available only to persons not previously employed by
the Company, as an inducement to the person's employment with the Company.
1.2 Administration.
(a) This Plan shall be administered by the Administrator.
The Administrator may delegate ministerial, nondiscretionary functions to
individuals who are officers or employees of the Company.
(b) Subject to the express provisions of this Plan, the
Administrator shall have the authority to construe and interpret this Plan
and any agreements defining the rights and obligations of the Company and
Participants under this Plan; to identify among Eligible Employees those to
whom Awards will be granted and (consistent with express limits of this
Plan) the terms of such Awards; to further define the terms used in this
Plan and prescribe, amend and rescind rules and regulations relating to the
administration of this Plan; either generally or on a case by case basis to
establish terms and conditions pertaining to termination of employment,
modify or amend any outstanding Award or waive any condition or restriction
of an Award, or extend the term or post-termination exercise period of any
outstanding Award, or reduce (subject to Sections 2.4, 3.2(d) and 6.5) the
minimum vesting period after initial grant to a Participant; to determine
the duration and purposes of leaves of absence which may be granted to
Participants without constituting a termination of their employment for
purposes of this Plan; and to make all other determinations necessary or
advisable for the administration of this Plan. The determinations of the
Administrator on the foregoing matters shall be conclusive.
(c) Any action taken by, or inaction of, the Corporation,
any Subsidiary, the Board or the Administrator relating to this Plan shall
be within the absolute discretion of that entity or body. No member of the
Administrator, or officer of the Corporation or any Subsidiary, shall be
liable for any such action or inaction.
1.3 Participation. Awards may be granted only to Eligible
Employees. An Eligible Employee who has been granted an Award may, if
otherwise eligible, be granted additional Awards if the Administrator shall
so determine.
1.4 Stock Subject to the Plan. The maximum aggregated number of
shares of Common Stock that may be issued after June 1, 1998 pursuant to
Awards granted under this Plan shall not exceed the sum of (i) 450,000
shares, plus (ii) 50,000 shares underlying the option granted to Brad
Nutter on July 7, 1997 as an inducement to his employment with the Company.
1.5 Grant of Awards. Subject to the express provisions of the
Plan, the Administrator shall determine from the class of Eligible
Employees those individuals to whom Awards under the Plan shall be granted,
the terms of Awards (which need not be identical) and the number of shares
of Common Stock subject to each Award. Each Award shall be subject to the
terms and conditions set forth in the Plan and such other terms and
conditions established by the Administrator as are not inconsistent with
the purpose and provisions of the Plan.
1.6 Exercise of Awards. Notwithstanding any other provision of
this Plan, the Administrator may impose, by rule and in Award Agreements,
such conditions upon the exercise of Awards (including, without limitation,
conditions limiting the time of exercise to specified periods) as may be
required to satisfy applicable regulatory requirements, including without
limitation Rule l6b-3.
1.7 Share Reservation. No Award may be granted under this Plan
unless, on the date of grant, the sum of (i) the maximum number of shares
issuable at any time pursuant to such Award, plus (ii) the number of shares
that previously have been issued pursuant to Awards granted under this
Plan, other than reacquired shares available for reissue consistent with
any applicable limitations under Rule 16b-3, plus (iii) the maximum number
of shares that may be issued after such date of grant pursuant to Awards
granted under this Plan that remain outstanding on such date, does not
exceed the share limit in Section 1.4.
1.8 Provisions for Certain Cash Awards. The number of Awards
under this Plan that are payable solely in cash that would constitute
derivative securities but for the exclusion in Rule l6a-l(c)(3)(i) under
the Exchange Act ("Cash Only Awards") shall be determined by reference to
the number of shares referenced for purpose of determining the value or
price of the Cash Only Award (the "Underlying shares"). The maximum number
of Cash Only Awards under this Plan shall not, together with the number of
shares previously issued and subject to then outstanding Awards payable (or
deemed payable) in shares under this Plan, exceed the share limit in
Section 1.4. To the extent that any Cash Only Awards expire or are
terminated without the cash payment being made, the underlying shares shall
again be available under this Plan. Except as limited by Rule l6b-3, if an
Award is or may be settled only in cash and satisfies the requirements for
exclusion from the definition of derivative securities under Rule 16a-
1(c)(3)(ii), such Award need not be counted against any of the limits
under Section 1.4 or 1.7 or this Section 1.8.
1.9 Reissue of Awards and Shares.Other Awards payable in cash or
payable in cash or shares that are forfeited or for any reason are not so
paid under this Plan, as well as shares subject to Awards that expire or
for any reason are terminated and are not issued, shall again, to the
extent permitted under Rule l6b-3, be available for subsequent Awards under
the Plan.
1.10 Plan Not Exclusive. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Administrator to grant
awards or authorize any other compensation, with or without reference to
the Common Stock, under any other plan or authority.
II. OPTIONS.
2.1 Grants. One or more Options may be granted to any Eligible
Employee. Each Option so granted shall be designated by the Administrator
as either a Nonqualified Stock Option or a Performance Stock Option. The
maximum number of shares underlying Options that may be granted to any one
Eligible Employee during any given fiscal year of the Corporation shall be
200,000 shares.
2.2 Option Price.
(a) Subject to applicable law, the purchase price per
share of the Common Stock covered by each Option shall be determined by the
Administrator. The purchase price of any shares purchased on exercise of
any Option shall be paid in full at the time of each purchase in one or a
combination of the following methods:
(i) in cash, or by check payable to the order of the
Corporation,
(ii) if authorized by the Administrator or specified
in the Option being exercised, by a promissory note made by the Participant
in favor of the Corporation, upon the terms and conditions determined by
the Administrator, bearing interest at a rate sufficient to avoid imputed
interest under the Code, and secured by the Common Stock issuable upon
exercise in compliance with applicable law (including, without limitation,
state corporate law and federal margin requirements), or
(iii) by shares of Common Stock of the Corporation
already owned by the Participant; provided, however, the Administrator may
in its absolute discretion limit the Participant's ability to exercise an
Option by delivering shares, and any shares delivered which were initially
acquired upon exercise of a stock option must have been owned by the
Participant at least six months as of the date of delivery. Shares of
Common Stock used to satisfy the exercise price of an Option shall be
valued at their Fair Market Value on the date of exercise.
(b) In addition to the payment methods described in
subsection (a), the Option may provide that the Option can be exercised and
payment made by delivering a properly executed exercise notice together
with irrevocable instructions to a bank or broker to promptly deliver to
the Corporation the amount of sale or loan proceeds necessary to pay the
exercise price and, unless otherwise allowed by the Administrator, any
applicable tax withholding under Section 6.6. The Corporation shall not be
obligated to deliver certificates for the shares unless and until it
receives full payment of the exercise price therefor.
(c) An Option shall be deemed to be exercised when the
Secretary of the Corporation receives written notice of such exercise from
the Participant, together with payment of the purchase price made in
accordance with Section 2.2(a) and satisfaction of any applicable tax
withholding under Section 6.6, except to the extent payment may be
permitted to be made following delivery of written notice of exercise in
accordance with Section 2.2(b).
2.3 Option Period. Each Option and all rights or obligations
thereunder shall expire on such date as shall be determined by the
Administrator, and shall be subject to earlier termination as hereinafter
provided.
2.4 Exercise of Options. Except as otherwise provided in Section
6.4 or in the case of death or Total Disability, no Option shall be
exercisable for at least six months after the Award Date. The
Administrator may, at any time after grant of the Option and from time to
time, increase the number of shares purchasable on or after any particular
date so long as the total number of shares then subject to the Option is
not increased. No Option shall be exercisable except in respect of whole
shares, and fractional share interests shall be disregarded. Not less than
10 shares of Common Stock may be purchased at one time unless the number
purchased is the total number at the time available for purchase under the
terms of the Option.
2.5 Performance Stock Options. The Administrator may grant
Performance Stock Options to Eligible Employees who are deemed by the
Administrator to be members of senior management whose performance has a
direct relationship to improvement of the earnings of the Company. Vesting
of such Options shall be contingent upon attainment of performance
objectives measured by compounded earnings growth and such other criteria
as may be established by the Administrator.
2.6 Stock Depreciation Rights; Tax Offset Bonuses.
(a) The Administrator may grant Stock Depreciation Rights
to a Participant who is subject to Section 16(b) of the Exchange Act. Such
Stock Depreciation Rights shall be evidenced in the Award Agreement or by
means of an amendment to the Award Agreement in the event an employee
becomes subject to Section 16(b) of the Exchange Act subsequent to the date
of grant of the Option. A Stock Depreciation Right shall entitle such
officer or employee to a payment by the Company in the event that the Fair
Market Value of shares of Common Stock issued pursuant to the exercise of
an Option declines during the six month period after exercise while such
Common Stock is still held by a Participant to the extent that such shares
if sold would be subject to matching liability under Section 16 by virtue
of a prior purchase. Payment may be made in cash in an amount per covered
share equal to the lesser of (i) the difference between the Fair Market
Value of a share of Common Stock on the date of expiration of such six
month period and the Fair Market Value of a share of Common Stock on the
date of exercise, (ii) the difference between the Fair Market Value of a
share of Common Stock on the date of disposition of the covered share and
the Fair Market Value of a share of Common Stock on the date of exercise
and (iii) the difference between the Fair Market Value of a share of Common
Stock on the date of exercise and the exercise price. This amount per
share shall become payable subsequent to the disposition of the covered
shares on or after the expiration of the six month period subject to such
conditions, limits and rules as the Administrator may impose, including,
without limitation, conditions required to satisfy the applicable
regulatory requirements under Rule l6b-3.
(b) In its discretion the Administrator may, in the Award
Agreement, provide for a Tax-Offset Bonus to Participants upon exercise of
Nonqualified or Performance Stock Options. The Tax-Offset Bonus shall be
in the form of a cash payment equal to a percentage of the difference
between the exercise price and the Fair Market Value on the date of
exercise of the Common Stock with respect to which the Tax-Offset Bonus is
payable. Such percentage shall be designed to offset the impact of
additional taxes which result from the exercise of the Option.
III. STOCK APPRECIATION RIGHTS.
3.1 Grants. In its discretion, the Administrator may grant
Stock Appreciation Rights concurrently with the grant of Options. A Stock
Appreciation Right shall extend to all or a portion of the shares covered
by the related Option. A Stock Appreciation Right shall entitle the
Participant who holds the related Option, upon exercise of the Stock
Appreciation Right and surrender of the related Option, or portion thereof,
to the extent the Stock Appreciation Right and related Option each were
previously unexercised, to receive payment of an amount determined pursuant
to Section 3.3. In its discretion, the Administrator may also grant Stock
Appreciation Rights independently of any Option subject to such conditions
as the Administrator may in its absolute discretion provide.
3.2 Exercise of Stock Appreciation Rights.
(a) A Stock Appreciation Right granted concurrently with an
option shall be exercisable only at such time or times, and to the extent,
that the related Option shall be exercisable and only when the Fair Market
Value of the stock subject to the related Option exceeds the exercise price
of the related Option.
(b) In the event that a Stock Appreciation Right granted
concurrently with an Option is exercised, the number of shares of Common
Stock subject to the related Option shall be charged against the maximum
amount of Common Stock that may be issued or transferred pursuant to Awards
under this Plan. The number of shares subject to the Stock Appreciation
Right and the related Option of the Participant shall also be reduced by
such number of shares.
(c) If a Stock Appreciation Right granted concurrently with
an Option extends to less than all the shares covered by the related Option
and if a portion of the related Option is thereafter exercised, the number
of shares subject to the unexercised Stock Appreciation Right shall be
reduced only if and to the extent that the remaining number of shares
covered by such related Option is less than the remaining number of shares
subject to such Stock Appreciation Right.
(d) A Stock Appreciation Right granted independently of any
Option shall be exercisable pursuant to the terms of the Award Agreement
but in no event earlier than six months after the Award Date, except in the
case of death or Total Disability.
3.3 Payment.
(a) Upon exercise of a Stock Appreciation Right and
surrender of an exercisable portion of the related Option, the Participant
shall be entitled to receive payment of an amount determined by multiplying
(l) the difference obtained by subtracting the
exercise price per share of Common Stock under the related Option from the
Fair Market Value of a share of Common Stock on the date of exercise of the
Stock Appreciation Right, by
(2) the number of shares with respect to which the
Stock Appreciation Right shall have been exercised.
(b) The Administrator, in its sole discretion, may settle
the amount determined under paragraph (a) above solely in cash, solely in
shares of Common Stock (valued at Fair Market Value on the date of exercise
of the Stock Appreciation Right), or partly in such shares and partly in
cash, provided that the Administrator shall have determined that such
exercise and payment are consistent with applicable law. In any event,
cash shall be paid in lieu of fractional shares. Absent a determination to
the contrary, all Stock Appreciation Rights shall be settled in cash as
soon as practicable after exercise. The exercise price for the Stock
Appreciation Right shall be the exercise price of the related Option.
Notwithstanding the foregoing, the Administrator may, in the Award
Agreement, determine the maximum amount of cash or stock or a combination
thereof which may be delivered upon exercise of a Stock Appreciation Right.
(c) Upon exercise of a Stock Appreciation Right granted
independently of any Option, the Participant shall be entitled to receive
payment of an amount based on a percentage, specified in the Award
Agreement, of the difference obtained by subtracting the Fair Market Value
per share of Common Stock on the Award Date from the Fair Market Value per
share of Common Stock on the date of exercise of the Stock Appreciation
Right. Such amount shall be paid as described in paragraph (b) above.
IV. RESTRICTED STOCK AWARDS.
4.1 Grants. Subject to Section 1.4, the Administrator may, in
its discretion, grant one or more Restricted Stock Awards to any Eligible
Employee. Each Restricted Stock Award Agreement shall specify the number
of shares of Common Stock to be issued to the Participant, the date of such
issuance, the consideration to be paid for such shares by the Participant
and the restrictions imposed on such shares, which restrictions shall not
terminate earlier than six (6) months nor later than ten (10) years after
the Award Date.
4.2 Restrictions.
(a) Except as provided in or pursuant to Section 6.12,
shares of Common Stock comprising Restricted Stock Awards may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered,
either voluntarily or involuntarily, until such shares have vested.
(b) Unless the Administrator otherwise provides,
Participants receiving Restricted Stock shall be entitled to dividend and
voting rights for the shares issued even though they are not vested,
provided that such rights shall terminate immediately as to any forfeited
Restricted Stock.
(c) In the event that the Participant shall have paid cash
in connection with the Restricted Stock Award, the Award Agreement shall
specify whether and to what extent such cash shall be returned upon a
forfeiture (with or without an earnings factor).
(d) Restricted Stock Awards may include performance or other
conditions to vesting as the Administrator deems appropriate.
V. PERFORMANCE SHARE AWARDS.
5.1 Grants. The Administrator may, in its discretion, grant
other types of performance-based Awards related to equity of the Company or
any part thereof ("Performance Share Awards") to Eligible Employees based
upon such factors as the Administrator shall determine. A Performance Share
Award Agreement shall specify the number of shares of Common Stock subject
to the Performance Share Award, the price, if any, to be paid for such
shares by the Participant and the conditions upon which issuance to the
Participant shall be based, which issuance shall not be earlier than six
(6) months nor later than ten (10) years after the Award Date.
VI. OTHER PROVISIONS.
6.1 Rights of Eligible Employees, Participants and Beneficiaries.
(a) Adoption of this Plan shall not be construed as a
commitment that any Award will be made under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) Nothing contained in this Plan (or in Award Agreements
or in any other documents related to this Plan or to Awards) shall confer
upon any Eligible Employee or Participant any right to continue in the
employ of the Company or constitute any contract or agreement of
employment, or interfere in any way with the right of the Company to reduce
such person's compensation or other benefits or to terminate the employment
of such Eligible Employee or Participant, with or without cause. Nothing
contained in this Plan or any document related thereto shall affect any
other contractual right of any Eligible Employee or Participant.
6.2 Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are changed
into or exchanged for cash or a different number or kind of shares or
securities of the Corporation or of another issuer, or if additional shares
or new or different securities are distributed with respect to the
outstanding shares of the Common Stock, through a reorganization or merger
to which the Corporation is a party, or through a combination,
consolidation, recapitalization, reclassification, stock split, stock
dividend, reverse stock split, stock consolidation or other capital change
or adjustment, an appropriate proportionate, equitable adjustment shall be
made in the number and kind of shares or other consideration that is
subject to or may be delivered under this Plan and pursuant to outstanding
Awards. Corresponding adjustments to the consideration payable with
respect to Awards granted prior to any such change and to the price, if
any, paid in connection with or the criteria applicable to Restricted Stock
Awards or Performance Share Awards shall also be made. Any such
adjustments, however, shall be made without change in the total payment, if
any, applicable to the portion of the Award not exercised but with a
corresponding adjustment in the price for each share. Corresponding
adjustments shall be made with respect to Stock Appreciation
Rights based upon the adjustments made to the Options to which they are
related or, in the case of Stock Appreciation Rights granted independently
of any Option, based upon the adjustments made to Common Stock.
(b) Upon the dissolution or liquidation of the Corporation,
or upon a reorganization, merger or consolidation of the Corporation with
one or more corporations as a result of which the Corporation is not the
surviving corporation, the Plan shall terminate. The Administrator may
provide in writing in connection with, or in contemplation of, any such
transaction for any or all of the following alternatives (separately or in
combination): (i) for the assumption by the successor corporation (if any)
of the Awards theretofore granted or the substitution by such corporation
for such Awards of awards covering the stock of the successor corporation,
or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of securities and/or other property and prices; (ii) for
the continuance of the Plan by such successor corporation in which event
the Plan and the Awards shall continue in the manner and under the terms so
provided; or (iii) for the payment in cash, securities and/or other
property in lieu of and in complete satisfaction of such Awards.
(c) In adjusting Awards to reflect the changes described in
this Section 6.2, or in determining that no such adjustment is necessary,
the Administrator may rely upon the advice of independent counsel and
accountants of the Corporation, and the determination of the Administrator
shall be conclusive. No fractional shares of stock shall be issued under
this Plan on account of any such adjustment.
6.3 Termination of Employment. Unless the Administrator otherwise
expressly provides, either in the applicable Award Agreement or by
subsequent modification thereof:
(a) If the Participant's employment by the Company
terminates for any reason other than Retirement, death or Total Disability,
the Participant shall have, subject to earlier termination pursuant to or
as contemplated by Section 2.3, three (3) months from the date of
termination of employment to exercise any Option to the extent it shall
have become exercisable on the date of termination of employment, and any
Option not exercisable on that date shall terminate. Notwithstanding the
preceding sentence, in the event the Participant is discharged for cause as
determined by the Administrator in its sole discretion, all Options shall
terminate immediately upon such termination of employment.
(b) If the Participant's employment by the Company
terminates as a result of Retirement or Total Disability, the Participant
or Participant's Personal Representative, as the case may be, shall have,
subject to earlier termination pursuant to or as contemplated by Section
2.3, twelve (12) months from the date of termination of employment to
exercise any Option to the extent it shall have become exercisable by the
date of termination of employment, and any Option not exercisable on that
date shall terminate.
(c) If the Participant's employment by the Company
terminates as a result of death while the Participant is employed by the
Company or during the twelve (12) month period referred to in subsection
(b) above, the Participant's Option shall be exercisable by the
Participant's Beneficiary, subject to earlier termination pursuant to or as
contemplated by Section 2.3, during the twelve (12) month period following
the Participant's death, as to all or any part of the shares of Common
Stock covered thereby to the extent exercisable on the date of death (or
earlier termination).
(d) Each Stock Appreciation Right granted concurrently with
an Option shall have the same termination provisions and exercisability
periods as the Option to which it relates. The termination provisions and
exercisability periods of any Stock Appreciation Right granted
independently of an Option shall be established in accordance with Section
3.2(d). The exercisability period of a Stock Appreciation Right shall not
exceed that provided in Section 2.3 or in the related Award Agreement and
the Stock Appreciation Right shall expire at the end of such exercisability
period.
(e) In the event of termination of employment with the
Company for any reason, (i) shares of Common Stock subject to a
Participant's Restricted Stock Award shall be forfeited in accordance with
the provisions of the related Award Agreement to the extent such shares
have not become vested on that date; and (ii) shares of Common Stock
subject to the Participant's Performance Share Award shall be forfeited in
accordance with the provisions of the related Award Agreement to the extent
such shares have not been issued or become issuable on that date.
(f) In the event of (or in anticipation of) a Participant's
termination of employment with the Company for any reason, other than
discharge for cause, the Administrator may, in its discretion, accelerate
the exercisability of or increase the portion of the Participant's Award
available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or (subject to the ten (10)-year limit)
extend the period after termination during which the Award may continue to
vest and/or be exercisable upon such terms and subject to such conditions
as the Administrator shall determine.
(g) If an entity ceases to be a Subsidiary, such action
shall be deemed for purposes of this Section 6.3 to be a termination of
employment of each employee of that entity who does not continue as an
employee of another entity within the Company.
6.4 Acceleration of Awards. Except to the extent that prior to an
Event the Administrator determines that, upon its occurrence, there shall
be no acceleration of Awards held by Participants or determines those
Awards held by Participants that will be accelerated and the extent to
which they will be accelerated, upon the occurrence of an Event (i) each
Option and each related Stock Appreciation Right shall become immediately
exercisable to the full extent theretofore not exercisable, (ii) Restricted
Stock shall immediately vest free of restrictions and (iii) the number of
shares covered by each Performance Share Award shall be issued to the
Participant; subject, however, to compliance with applicable regulatory
requirements, including without limitation Rule l6b-3 promulgated by the
Commission pursuant to the Exchange Act and Section 422 of the Code.
6.5 Government Regulations. This Plan, the granting of Awards
under this Plan and the issuance or transfer of shares of Common Stock
(and/or the payment of money) pursuant thereto are subject to all
applicable federal and state laws, rules and regulations and to such
approvals by any regulatory or governmental agency (including without
limitation "no action" positions of the Commission) which may, in the
opinion of counsel for the Corporation, be necessary or advisable in
connection therewith. Without limiting the generality of the foregoing, no
Awards may be granted under this Plan, and no shares shall be issued by the
Corporation, nor cash payments made by the Corporation, pursuant to or in
connection with any such Award, unless and until, in each such case, all
legal requirements applicable to the issuance or payment have, in the
opinion of counsel to the Corporation, been complied with. In connection
with any stock issuance or transfer, the person acquiring the shares shall,
if requested by the Corporation, give assurances satisfactory to counsel to
the Corporation in respect of such matters as the Corporation may deem
desirable to assure compliance with all applicable legal requirements.
6.6 Tax Withholding.
(a) Upon the exercise of a Nonqualified Stock Option or a
Performance Stock Option, the exercise of a Stock Appreciation Right, the
vesting of a Restricted Stock Award, the payment of a Performance Share
Award, payment pursuant to a Stock Depreciation Right or payment of a Tax-
Offset Bonus, the Company shall have the right to require such Participant
or such other person to pay by cash, or certified or cashier's check
payable to the Company, the amount of any taxes which the Company may be
required to withhold with respect to such transactions. The above
notwithstanding, in any case where a tax is required to be withheld in
connection with the issuance or transfer of shares of Common Stock under
this Plan, the Participant may elect, pursuant to such rules as the
Administrator may establish, to have the Company reduce the number of such
shares issued or transferred by the appropriate number of shares to
accomplish such withholding; provided, the Administrator may impose such
conditions on the payment of any withholding obligation as may be required
to satisfy applicable regulatory requirements, including, without
limitation, Rule 16b-3 promulgated by the Commission pursuant to the
Exchange Act.
(b) The Administrator may, in its discretion, permit a loan
from the Company to a Participant in the amount of any taxes which the
Company may be required to withhold with respect to shares of Common Stock
received pursuant to a transaction described in subsection (a) above. Such
a loan will be for a term, at a rate of interest and pursuant to such other
terms and rules as the Administrator may establish.
6.7 Amendment, Termination and Suspension.
(a) The Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan.
(b) In the case of Awards issued before the effective date
of any amendment, suspension or termination of this Plan, such amendment,
suspension or termination of this Plan shall not, without specific action
of the Administrator and the consent of the Participant, in any manner
materially adverse to the Participant, modify, amend, alter or impair any
rights or obligations under any Award previously granted under this Plan.
(c) No Awards may be granted during any suspension of this
Plan or after its termination, but Awards theretofore granted may be
amended to the same extent as if this Plan had not been terminated or
suspended, provided no additional shares become the subject of the Award by
reasons of the amendment.
(d) The Administrator may, subject to the consent of the
Participant in the case of an amendment that might have a material adverse
effect on the Participant, make such modifications of the terms and
conditions of such Participant's Award as it shall deem advisable,
including an amendment to the terms of any Option to provide that the
Option price of the shares remaining subject to the original Award shall be
established at a price not less than 100% of the Fair Market Value of the
Common Stock on the effective date of the amendment. No modification of
any other term or provision of any Option which is amended in accordance
with the foregoing shall be required, although the Administrator may, in
its discretion, make such other modifications of any such Option as are not
inconsistent with or prohibited by this Plan.
(e) Adjustments pursuant to Section 6.2 shall not be deemed
amendments requiring the consent of the Participant.
6.8 Privileges of Stock Ownership; Nondistributive Intent. A
Participant shall not be entitled to the privilege of stock ownership as to
any shares of Common Stock not actually issued to him or her. Upon the
issuance and transfer of shares to the Participant, unless a registration
statement is in effect under the Securities Act, relating to such issued
and transferred Common Stock and there is available for delivery a
prospectus meeting the requirements of Section 10 of the Securities Act,
the Common Stock may be issued and transferred to the Participant only if
he or she represents and warrants in writing to the Corporation that the
shares are being acquired for investment and not with a view to the resale
or distribution thereof. No shares shall be issued and transferred unless
and until there shall have been full compliance with any then applicable
regulatory requirements (including those of exchanges upon which any Common
Stock of the Corporation may be listed).
6.9 Effective Date of the Plan. This Plan shall be effective as
of June 1, 1998.
6.10 Term of the Plan. Unless previously terminated by the Board,
this Plan shall terminate at the close of business on May 31, 2008, and no
Awards shall be granted under it thereafter, but such termination shall not
affect any Award theretofore granted or the authority of the Administrator
with respect to then outstanding Awards.
6.11 Governing Law. This Plan and the documents evidencing Awards
and all other related documents shall be governed by, and construed in
accordance with, the laws of the State of Delaware. If any provision shall
be held by a court of competent jurisdiction to be invalid and
unenforceable, the remaining provisions of this Plan shall continue to be
fully effective.
6.12 Transfer Restrictions.
(a) Awards constituting derivative securities shall be
exercisable only by, and shares, cash or other property payable pursuant to
such Awards shall be paid only to, the Participant (or, in the event of the
Participant's death, to the Participant's Beneficiary or, in the event of
the Participant's Total Disability, to the Participant's Personal
Representative or, if there is none, to the Participant). Other than by
will or the laws of descent and distribution, no such Awards, or interest
in or under any such Award or this Plan, shall be transferable or subject
in any manner to encumbrance or other charge and any such attempted
transfer or charge shall be void.
(b) The restrictions on exercise, transfer and payment in
Section 6.12 (a) shall not be deemed to prohibit (l) "cashless exercise"
procedures through unaffiliated third parties which provide financing for
the purpose of exercising an Award consistent with applicable legal
restrictions and Rule 16b-3, nor (2) to the extent permitted by the
Administrator and expressly set forth in the Award Agreement or an
amendment thereto, transfers without consideration for estate or financial
planning purposes, notwithstanding that the inclusion of such features may
render the particular Awards ineligible for the benefits of Rule l6b-3, nor
(3) in the case of Participants who are not Section 16 Persons, transfers
in such other circumstances as the Administrator may (to the extent
consistent with Rule 16b-3, applicable provisions of the Code and
applicable securities or other laws) in the applicable Award Agreement or
other writing expressly provide, nor (4) the subsequent transfer of shares
issued on exercise of a derivative security or the vesting of a Restricted
Stock or Performance Share Award (except to the extent that the Award, this
Plan or the Administrator otherwise expressly provides).
(c) No Participant, Beneficiary or other person shall have
any right, title or interest in any fund or in any specific asset
(including shares of Common Stock) of the Company by reason of any Award
granted hereunder. Neither the provisions of this Plan (or of any
documents related hereto), nor the creation or adoption of this Plan, nor
any action taken pursuant to the provisions of this Plan shall create, or
be construed to create, a trust of any kind or a fiduciary relationship
between the Company and any Participant, Beneficiary or other person. To
the extent that a Participant, Beneficiary or other person acquires a right
to receive an Award hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Company.
6.13 Plan Construction. It is the intent of the Corporation that
this Plan and Awards hereunder satisfy and be interpreted in a manner that
in the case of persons who are or may be subject to Section 16 of the
Exchange Act satisfies the applicable plan requirements of Rule l6b-3, so
that such persons will be entitled (unless otherwise expressly acknowledged
in writing) to the benefits of the Rule 16b-3 or other exemptive rules
under Section 16 of the Exchange Act and will not be subjected to avoidable
liability thereunder. In furtherance of such intent, any provision of this
Plan or of any Award would otherwise frustrate or otherwise conflict with
the intent expressed above, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid conflict, but to the extent
of any remaining irreconcilable conflict with such intent as to such
persons in the circumstances, such provision may be deemed void.
VII. DEFINITIONS.
7.1 Definitions.
(a) "Administrator" shall mean the Board, and, to the extent
theretofore delegated authority hereunder, the Compensation Committee of
the Board or any other Committee of directors appointed by the Board for
purposes of serving as the Committee under this Plan.
(b) "Award" shall mean a Nonqualified Stock Option, a
Performance Stock Option, a Stock Appreciation Right, a Restricted Stock
Award, or a Performance Share Award granted under this Plan.
(c) "Award Agreement" shall mean a written agreement setting
forth the terms of an Award.
(d) "Award Date" shall mean the date upon which the
Administrator took the action granting an Award or such later date as is
prescribed by the Administrator.
(e) "Award Period" shall mean the period beginning on an
Award Date and ending on the expiration date of such Award.
(f) "Beneficiary" shall mean the person, persons, trust or
trusts entitled by will or the laws of descent and distribution to receive
the benefits specified under this Plan in the event of a Participant's
death, and shall mean the Award holder's executor or administrator in such
circumstances if no other Beneficiary is identified and able to act.
(g) "Board" shall mean the Board of Directors of the
Corporation.
(h) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Commission" shall mean the Securities and Exchange
Commission.
(j) "Committee" shall mean a committee of directors
satisfying the requirements for disinterested administration under Rule
l6b-3.
(k) "Common Stock" shall mean the Common Stock of the
Corporation.
(l) "Company" shall mean, collectively, Syncor International
Corporation and its Subsidiaries.
(m) "Corporation" shall mean Syncor International
Corporation and its successors.
(n) "Disinterested" shall mean disinterested within the
meaning of any applicable regulatory requirements, including those set
forth in Rule 16b-3 or otherwise promulgated under Section 16 of the
Exchange Act.
(o) "Eligible Employee" shall mean a new officer or key
employee of the Company who was not previously employed by the Company.
(p) "Event" shall mean any of the following:
(1) Approval by the shareholders of the Corporation
of the dissolution or liquidation of the Corporation;
(2) Approval by the shareholders of the Corporation
of an agreement to merge or consolidate, or otherwise reorganize,
with or into one or more entities which are not Subsidiaries, as a
result of which less than 50% of the outstanding voting securities of
the surviving or resulting entity are, or are to be, owned by former
shareholders of the Corporation;
(3) Approval by the shareholders of the Corporation
of the sale of substantially all of the Corporation's business and/or
assets to a person or entity which is not a Subsidiary; or
(4) A Change in Control. A "Change in Control" shall
be deemed to have occurred if (A) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Corporation representing
20% or more of the combined voting power of the Corporation's then
outstanding securities; or (B) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Administrator cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the
Corporation's shareholders, of each new Administrator member was
approved by a vote of at least three-fourths of the Administrator
members then still in office who were Administrator members at the
beginning of such period.
(q) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(r) "Fair Market Value" shall mean (i) if the stock is
listed or admitted to trade on a national securities exchange, the closing
price of the stock on the Composite Tape, as published in the Western
Edition of The Wall Street Journal, of the principal national securities
exchange on which the stock is so listed or admitted to trade, on such
date, or, if there is no trading of the stock on such date, then the
closing price of the stock as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares; (ii) if the stock
is not listed or admitted to trade on a national securities exchange, the
last price for the stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is
no longer reporting such information; (iii) if the stock is not listed or
admitted to trade on a national securities exchange and is not reported on
the National Market Reporting System, the mean between the bid and asked
price for the stock on such date, as furnished by the NASD; or (iv) if
the stock is not listed or admitted to trade on a national securities
exchange, is not reported on the National Market Reporting System and if
bid and asked prices for the stock are not furnished by the NASD or a
similar organization, the values established by the Administrator for
purposes of the Plan.
(s) "Non-Employee Director" shall mean a director of the
Corporation who is not an officer or key employee of the Company.
(t) "Nonqualified Stock Option" shall mean an option which
is designated as a Nonqualified Stock Option.
(u) "Option" shall mean an option to purchase Common Stock
under this Plan. An Option shall be designated by the Administrator as a
Nonqualified Stock Option or a Performance Stock Option.
(v) "Optionee" shall mean the person to whom an Option is
granted.
(w) "Participant" shall mean an Eligible Employee who has
been awarded an Award.
(x) "Performance Share Award" shall mean an award of shares
of Common Stock, issuance of which is contingent upon attainment of
performance objectives specified by the Administrator.
(y) "Performance Stock Option" shall mean an option granted
under Section 2.6 of this Plan, the exercise of which is contingent upon
the attainment of specified performance objectives.
(z) "Personal Representative" shall mean the legal
representative or representatives who, upon the disability or incompetence
of a Participant, shall have acquired on behalf of the Participant by legal
proceeding or otherwise the power to exercise the rights and receive the
benefits specified in this Plan.
(aa) "Plan" shall mean this New Employee Stock Option Plan,
as amended from time to time.
(bb) "Restricted Stock" shall mean those shares of Common
Stock issued pursuant to a Restricted Stock Award which are subject to the
restrictions set forth in the related Award Agreement.
(cc) "Restricted Stock Award" shall mean an award of a fixed
number of shares of Common Stock to the Participant subject, however, to
payment of such consideration, if any, and such forfeiture provisions, as
are set forth in the Award Agreement.
(dd) "Retirement" shall mean retirement at normal retirement
date with the consent of the Company.
(ee) "Rule l6b-3" means Rule l6b-3 under Section 16 of the
Exchange Act, as applicable to this Plan (taking into consideration
relevant transition period provisions) and as the same may be amended from
time to time.
(ff) "Section l6 Person" means a person subject to the
<PAGE>
reporting requirements of Section 16(a) of the Exchange Act.
(gg) "Securities Act" shall mean the Securities Act of 1933.
(hh) "Stock Appreciation Right" shall mean a right to receive
a number of shares of Common Stock or an amount of cash, or a combination
of shares and cash, determined as provided in the applicable Section of
this Plan or in the Award Agreement with respect thereto.
(ii) "Stock Depreciation Right" shall mean a right to receive
a number of shares of Common Stock or an amount of cash, or a combination
of shares and cash, determined as provided in the applicable Section of
this Plan or in an Award Agreement providing for such right.
(jj) "Subsidiary" shall mean any corporation or other entity
a majority or more of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.
(kk) "Tax-Offset Bonus" shall mean a bonus payable upon
exercise of a nonstatutory Option, determined as provided in the applicable
Section of
this Plan or in an Award Agreement providing for such Bonus.
(ll) "Total Disability" shall mean a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Code.
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
<S> <C>
Period type 9 mos
Fiscal year end 12/31/98
Period start 1/1/98
Period end 09/30/98
Cash 23,195
Securities 693
Receivables 80,464
Allowances (4,585)
Inventory 7,475
Current assets 121,986
PP&E 93,758
Depreciation (47,627)
Total assets 251,166
Current liabilities 74,615
Bonds 0
Preferred mandatory 0
Preferred 0
Common 618
Other SE 104,425
Total Liability and Equity 251,166
Sales 330,071
Total Revenue 330,071
CGS 233,458
Total costs 233,458
Other expenses 77,357
Loss provision 0
Interest expense (2,134)
Income pre tax 18,267
Income tax 7,788
Income continuing 10,479
Discontinued 0
Extraordinary 0
Changes 0
Net income 10,479
EPS basic .99
EPS diluted .94
</TABLE>
