- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1999 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 March 31,
1999, 11,614,670 shares of $.05 par value common stock were outstanding.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
-----
Page
----
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
March 31, 1999 and December 31, 1998............................. 3
Statements of Income for Three Months
Ended March 31, 1999 and 1998.................................... 4
Statements of Cash Flows for Three Months
Ended March 31, 1999 and 1998................................... 5
Notes to Consolidated Condensed Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial Condition...... 8
Part II. Other Information................................................11
SIGNATURE...................................................................12
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
March 31, December 31,
_______________________
1999 1998
____ ____
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $15,643 $13,824
Short-term investments 7,250 4,707
Trade receivables, net 72,600 65,055
Patient receivables, net 10,139 10,724
Inventory 8,432 11,495
Prepaids and other current assets 14,338 12,780
______________________
Total current assets 128,402 118,585
Marketable investment securities 1,194 1,191
Property and equipment, net 50,857 49,103
Excess of purchase price over net assets acquired, net 63,128 62,654
Other assets 31,857 25,034
_______________________
$275,438 $256,567
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,850 $ 44,578
Accrued liabilities 10,183 7,005
Accrued wages and related costs 8,574 12,563
Federal and state taxes payable 2,472 1,293
Current maturities of long-term debt 8,019 9,122
------------------------
Total current liabilities 74,098 74,561
Long-term debt, net of current maturities 81,942 70,322
Deferred compensation 431 311
Stockholders' equity:
Common stock, $.05 par value 649 626
Additional paid-in capital 84,385 72,622
Notes receivable-related parties (18,921) (9,028)
Employee stock ownership loan guarantee (4,634) (5,056)
Accumulated other comprehensive income (277) (527)
Retained earnings 70,289 65,260
Treasury stock, at cost; 1,356 shares at March 31,
1999 and at December 31, 1998 (12,524) (12,524)
_________________________
Net stockholders' equity 118,967 111,373
_________________________
$275,438 $256,567
=========================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(in thousands, except per share data)
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
(Unaudited)
Net sales $123,868 $102,724
Cost of sales 85,286 75,569
----------------------------
Gross profit 38,582 27,155
Operating, selling and administrative expenses 24,814 18,602
Depreciation and amortization 4,147 3,066
____________________________
Operating income 9,621 5,487
Other income (expenses), net (882) 406
____________________________
Income before taxes 8,739 5,893
Provision for income taxes 3,710 2,535
____________________________
Net income $ 5,029 $ 3,358
============================
Net income per share - Basic $ .44 $.33
____________________________
Weighted average shares outstanding - Basic 11,363 10,304
============================
Net income per share - Diluted $ .41 $ .31
============================
Weighted average shares outstanding - Diluted 12,393 10,786
============================
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(in thousands)
Three Months Ended March 31,
____________________________
1999 1998
____ ____
(Unaudited)
Cash flows from operating activities:
Net income $ 5,029 $ 3,358
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,147 3,066
Provision for losses on receivables 216 11
Amortization of ESSOP loan guarantee 422 422
Decrease (increase) in:
Accounts receivable, trade (8,129) (4,921)
Accounts receivable, patient 959 (577)
Inventory 3,067 (417)
Other current assets (1,498) 515
Other assets (8,091) (1,006)
Increase (decrease) in:
Accounts payable 262 5,009
Accrued liabilities 3,444 463
Accrued wages and related costs (3,989) (1,824)
Federal and state taxes payable 1,808 2,091
Deferred compensation 120 -
_____________________
Net cash provided by (used in) operating activities (2,233) 6,190
_____________________
Cash flows from investing activities:
Purchase of property and equipment, net (4,374) (2,269)
Acquisitions of businesses, net of cash acquired - (14,000)
Net (increase) decrease in short-term investments (2,543) 3
Net increase in long-term investments (3) (9)
Unrealized gain (loss) on investments (52) 9
______________________
Net cash provided by financing activities (6,972) (16,266)
Cash flow from financing activities:
Proceeds from long-term debt 13,001 11,618
Repayment of long-term debt (3,212) (1,456)
Issuance of common stock 1,266 345
______________________
Net cash provided by (used in) financing activities 11,055 10,507
______________________
Net increase in cash and cash equivalents 1,850 431
Effect of exchange rate on cash (31) (15)
Cash and cash equivalents at beginning of period 13,824 25,538
______________________
Cash and cash equivalents at end of period $15,643 $25,954
======================
See notes to consolidated condensed financial statements.<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
1. GENERAL. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of the
three months ended March 31, 1999, 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 on Form
10-K for the year ended December 31, 1998. 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 June 1998, the Financial Accounting
and Standards Board issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which became effective for
fiscal years beginning after June 15, 1999. SFAS 133 requires that
entities value all derivative instruments at fair value and record
the instruments on the balance sheet. The Company believes that the
adoption will no have an impact on its financial statements as the
Company holds no derivative instruments.
3. COMPREHENSIVE INCOME. Other comprehensive income includes foreign
currency translation adjustments and net unrealized gains and
losses on investments in equity securities. Such amounts are as
follows:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
_________________________________ _________________________________
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 302 - 302 126 - 126
Unrealized gains/(losses) on
investments:
Unrealized holding gains
(losses) arising during
period (86) 34 (52) 15 (6) 9
____________________________________________________________________
Other comprehensive income 216 34 250 141 (6) 135
====================================================================
</TABLE>
4. SEGMENT INFORMATION. Syncor has identified two primary operating
segments: Pharmacy Services and Medical Imaging. Segment selection was
based upon internal organizational structures, the way these operations
are managed and evaluated, the availability of separate financial
results, and materiality considerations. Segment detail is summarized as
follows:
<PAGE>
Pharmacy Services Business March 31, 1999 March 31, 1998
__________________________ ______________ ______________
Revenues $112,006 $99,675
Operating Income $ 13,025 $ 9,307
Medical Imaging Business
________________________
Revenues $ 11,862 $ 3,049
Operating Income $ 1,173 $ 83
Unallocated Corporate
_____________________
Operating Loss $ (4,577) $(3,903)
5. NET INCOME PER SHARE. Basic earnings per share (EPS) amounts are
computed by dividing earnings applicable to common stockholders by the
average number of shares outstanding. Diluted EPS amounts assume the
issuance of common stock for all potentially dilutive equivalents
outstanding. Anti-dilutive outstanding stock options have been excluded
from the diluted calculation.
The reconciliation of the numerator and denominators of the basic and
diluted earnings per share computations are as follows for the three months
ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
March 31, 1999 March 31, 1998
__________________________________________________________________________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
==================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net income $5,029 $3,358
Basic EPS $5,029 11,363 $.44 $3,358 10,304 $.33
____ ____
Effect of Dilutive
Stock Options 1,030 482
_____ ___
Diluted EPS $5,029 12,393 $.41 $3,346 10,786 $.31
____ ____
</TABLE>
6. NOTES RECEIVABLE-RELATED PARTIES. The Company initiated a Senior
Management Stock Purchase Plan effective June 16, 1998. During the
first quarter of 1999, officers and key employees of the Company
purchased shares of Syncor stock pursuant to this plan. The shares were
paid with a five-year interest bearing promissory note payable to the
Company. Interest on each note is payable on each anniversary date,
with the entire outstanding principal and unpaid interest due on the
fifth anniversary date.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the Months Ended March 31, 1999 and 1998
NET SALES
Consolidated net sales for the three months ended March 31, 1999, increased
20.6% or $21.2 million to $123.9 million versus $102.7 million for the first
quarter of 1998.
Pharmacy Services
The Pharmacy Services revenues grew in excess of 12% which resulted from
continued growth in both the overall market-place and the cardiology sector
of the Company's business. The overall growth rate for the cardiology sector
was approximately 16% on a quarter-to-quarter basis. Sales of Cardiolite(R),
a proprietary heart imaging agent to which the Company has preferential
distribution rights, increased approximately 22% for the first quarter of
1999. The growth in the technetium-based heart agent Cardiolite(R) has been
partially offset by declining sales of two other generic cardiology agents,
Thallium(R) and I.V. Persantine(R). However, the rate of decline of these
two other cardiology agents has slowed on a quarter-to-quarter basis. Pricing
within this sector has remained stable. While competition from a competing
cardiac agent continues, it is the Company's belief that the continued market
penetration of this agent has been moderated. In addition, the Company is
experiencing a slowing of quarter-to-quarter volume declines in non-
proprietary products.
In 1998, the Company announced the loss of a contract to provide
radiopharmaceuticals to a large hospital-buying group as a result of a
competitive bidding process. The Company announced at that time the
estimated lost revenue would be from $10 to $15 million in 1999. The Company
believes that it has secured a substantial portion of the overall revenue
associated with this group through alternative means and as a result, the
estimated revenue loss will be diminished. The Company also believes the
ultimate impact on earnings will be negligible.
Medical Imaging
The Company entered the Medical Imaging business with our start-up of the
"Open MRI" joint venture in June 1997. The Company also acquired three
Medical Imaging businesses during the first six months ended June 30, 1998
and has continued with both start-ups and additional acquisitions of Medical
Imaging centers throughout 1998 and into 1999. Sales from the Medical
Imaging businesses contributed $11.9 million to the Company's total sales for
the current quarter, compared to $3.0 million during the same period in 1998.
GROSS PROFIT
Gross profit for the three months ended March 31, 1999 increased $11.4
million to $38.6 million, and as a percentage of net sales reached 31.1%,
compared to 26.4% of net sales or $27.2 million for the comparable quarter in
1998.
Pharmacy Services
The gross profit from this group continues to increase for several reasons.
Material costs remained constant while the Company was able to pass on some
price increases. In addition, there continues to be a mix shift to the
cardiology sector of the business. Direct labor costs as a percentage of
sales have declined due to a restructuring that occurred late in the prior
year.
Medical Imaging
The substantial increase in the gross profit percentage is primarily the
result of the addition of this group. The gross margin for Medical Imaging
business is approximately 76% of sales. This segment contributed
approximately $6.5 million of the $11.4 million increase.<PAGE>
OPERATING, SELLING, AND ADMINISTRATION EXPENSES
Operating, Selling, and Administration costs for the quarter increased 33.4%
or $6.2 million to $24.8 million, compared to $18.6 million for the
comparable period in 1998. In addition, the ratio of these expenses to sales
increased to 20.0% for the quarter from 18.1% for the same period last year.
The increases were caused primarily by the addition of the Medical Imaging
business. Traditionally, the Medical Imaging business has a much higher cost
to sales ratio than the Pharmacy Services business. The Medical Imaging
business contributed $4.4 million of the overall increase of $6.2 million.
Other cost increases were increased labor and consulting costs associated
with expanded systems applications and certain sales bonuses associated with
higher sales levels.
DEPRECIATION
Depreciation increased by $1.1 million or 35.3% versus the first quarter of
1998. The Medical Imaging business contributed the majority of this increase
($1.0 million.) The Company expects increases in depreciation expense to
continue due to the increased level of expenditures in the Medical Imaging
business as this segment is expanded, new systems are implemented as a result
of re-engineering efforts, systems are upgraded, and the international
business is expanded.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and investments of $24.1 million at
March 31, 1999, compared with $19.7 million at December 31, 1998. The
Company's total debt position of $90.0 million at March 31, 1999, reflects an
increase of $10.6 million when compared to the debt position at December 31,
1998 of $79.4 million. The increase in debt for the quarter ended March 31,
1999, results primarily from financing the continued expansion in the Medical
Imaging business. Working capital increased by $10.3 million to $54.3 million
at March 31, 1999, compared to $44.0 million at December 31, 1998.
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 March 31, 1999, the Company had an unused line
of credit of $17.4 million.
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.
Corporate Systems Migration & Legacy Systems. The Company's financial
information systems include an SAP system implemented in 1997. This system
has been vendor certified to be "Year 2000" compliant. The Company has
conducted and continues to conduct periodic tests of this system. The
Company analyzed its remaining computer systems to identify any potential
Year 2000 issues, and took appropriate corrective action based on the results
of such analysis. This effort was completed as of late February 1999.
Pharmacy Services Field-Based IT Systems and Related company-Supplied
Customer IT Systems. The Company's domestic field based pharmacy system has
been modified, tested, and fully deployed as of late February 1999. This
system is believed to be Year 2000 compliant. The Company's international
field-based system is being replaced by a newer Year 2000 compliant system.
Development efforts for this new system are underway and are expected to be
completed by late August 1999. All IT systems supplied by the Company for
use by customers in their locations were either designed as year 2000
compliant, or customers have been offered the opportunity to convert to a
Year 2000 compliant system. The full and complete implementation of such
conversions is dependent, however, on customer cooperation. The Company
expects this rollout to be substantially completed by mid-1999. The
estimated cost of such modifications to field and customer-installed systems,
including amounts spent to date, is $250,000.
Residual Systems & Medical Imaging Business. The effort to determine the
Year 2000 compliance of residual systems (i.e. software supplied by external
vendors and other "embedded" systems), including medical imaging equipment
and systems, is estimated to be completed prior to year-end 1999. The
imaging systems are critical to the Medical Imaging business and may require
replacement 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 the Medical
Imaging business's systems, 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.
Risk Assessment; Contingency Planning. The Company is also in contact with
suppliers, customers, 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
and to assess the potential impact on the Company's operations if key third
parties are not successful in converting their systems in a timely manner.
Risk assessment, readiness evaluation, action plans, testing with major
suppliers, and contingency plans related to these third parties are expected
to be completed by middle of calendar 1999. 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.
The Company's risk management program includes emergency backup and recovery
procedures to be followed in event of failure of a business-critical system.
These procedures will be expanded to include specific procedures for
potential Year 2000-related interruptions. These plans will be completed by
middle of calendar 1999.
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 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 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. Material Contracts
10.1 Nonqualified Stock Option Award Agreement, dated February 24, 1999,
between the Company and Robert G. Funari.
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)
May 17, 1999 By: /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
NONQUALIFIED STOCK OPTION
AWARD AGREEMENT
Name of Participant : Robert G. Funari
Address of Participant : 25615 Melbourne Court
Calabasas, California 91302
Social Security Number : ###-##-####
Number of Shares : 25,000
Exercise Price Per Share : $27.625
Award Date : February 24, 1999
Expiration Date : February 24, 2009
WHEREAS, pursuant to a vote by the Corporation's Board of
Directors, the Participant has been granted a Nonqualified Stock Option (the
"Option" or "Award") to purchase shares of Common Stock of the Corporation
upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, the Participant and the Corporation agree as
follows:
1. Grant of Option. The Corporation has granted to the
Participant as a matter of separate inducement and agreement in connection
with his employment, and not in lieu of any salary or other compensation for
his services, the right and option to purchase all or any part of the number
of shares of Common Stock stated above (the "Common Stock") at the price
stated above (the "Price"), exercisable from time to time subject to the
provisions of this Award Agreement prior to the close of business on the
Expiration Date stated above.
2. Exercisability of Option. Except as otherwise provided in
this Award Agreement, the Option is 100% exercisable upon the Award Date
stated above; provided, however, that the Option may not be exercised as to
less than 10 shares at any one time unless the number of shares purchased is
the total number at the time available for purchase. If the Participant does
not purchase all of the shares which he is entitled to purchase, the
Participant's right to purchase any shares not so purchased shall continue
until the Expiration Date, unless theretofore terminated in accordance with
the provisions hereof. The Option may be exercised only as to whole shares.
3. Method of Exercise and Payment.
(a) Each exercise of the Option shall be by means of written
notice of exercise duly delivered to the Corporation, specifying the number
of whole shares with respect to which the Option is being exercised, together
with any written statements required pursuant to Section 10 below and payment
in full of the purchase price of any shares purchased. Payment may be made
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 (as defined in the 1990
Master Stock Incentive Plan (the "Plan")), 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 (as defined in the Plan), and secured
by the Common Stock issuable upon exercise in compliance with applicable law
(including, without limitation, state corporation 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 (as defined in the Plan) on the date of
exercise.
(b) In addition to the payment methods described in subsection
(a), 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 13. 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 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 3(a) and satisfaction of any applicable tax withholding under
Section 13, except to the extent payment may be permitted to be made
following delivery of written notice of exercise in accordance with Section
3(b).
4. Not a Contract for Employment. Nothing contained in this
Award Agreement shall confer upon the Participant any right to continue in
the employ of the Corporation or constitute any contract or agreement of
employment. The Participant acknowledges that the Corporation has the right
to terminate the Participant at will. Nothing contained in this Award
Agreement shall interfere in any way with the right of the Corporation to (a)
terminate the employment of the Participant at any time for any reason
whatsoever, with or without cause, or (b) reduce the compensation received by
the Participant from the rate in existence on the Award Date.
5. Effect of Termination of Employment.
(a) The Option and all other rights hereunder, to the extent such
rights shall not have been exercised prior thereto, shall terminate and
become null and void on the date the Participant ceases to be employed by the
Corporation; provided, however, that the Participant or the Participant's
Personal Representative (as defined in the Plan) in the case of Total
Disability (as defined in the Plan) or Retirement (as defined in the Plan)
may, to the extent the Option shall have become exercisable prior to such
date, exercise the Option at any time within (1) up to three (3) months after
termination of employment other than termination for Retirement, Total
Disability, death or through discharge for cause; (2) up to twelve (12)
months after such termination if such termination occurs by reason of
Retirement or Total Disability; or (3) up to twelve (12) months after the
Participant's death, if the Participant dies while in the employ of the
Corporation or during the period referred to in clause (2) above. During the
period after death, the Option may, to the extent exercisable on the date of
death (or earlier termination), be exercised by the person or persons to whom
the Participant's rights under this Award Agreement shall pass by will or by
the applicable laws of descent and distribution. In the event the
Participant is discharged for cause, the Option shall terminate immediately
upon such termination of employment. Unless sooner terminated pursuant to
this Award Agreement, the Option shall expire at the end of the applicable
period specified in clauses (1), (2) or (3) above, to the extent not
exercised within that period. In no event may the Option be exercised by any
person after the Expiration Date.
(b) 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, (subject to
the ten (10)-year limit) extend the period after termination during which the
Award may continue to be exercisable upon such terms and subject to such
conditions as the Administrator shall determine.
6. Non-Assignability of Option. The Option shall not be subject
to sale, transfer, pledge, assignment or alienation other than by will or the
laws of descent and distribution regardless of any community property or
other interest therein of the Participant's spouse or such spouse's successor
in interest. In the event that the spouse of the Participant shall have
acquired a community property interest in the Option, the Participant, or
such transferees, may exercise it on behalf of the spouse of the Participant
or such spouse's successor in interest.
7. Adjustments Upon Specified Changes.
(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 pursuant to this Award Agreement. 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.
(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 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 this Award theretofore granted or the
substitution by such corporation for such Award of award 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 Award 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 this Award.
(c) In adjusting this Award to reflect the changes described in
this Section 7 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 Award
Agreement on account of any adjustments.
8. Acceleration. Upon the occurrence of an Event (as defined in
the Plan) including a Change of Control (as defined in the Plan), the Award
shall become immediately exercisable to the full extent theretofore not
exercisable unless prior to an Event the Board determines otherwise; subject,
however, to compliance with applicable regulatory requirements including
without limitation Rule 16b-3 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
9. Participant Not a Shareholder. Neither the Participant nor
any other person entitled to exercise the Option shall have any of the rights
or privileges of a shareholder of the Corporation as to any shares of Common
Stock for which stock certificates have not been actually issued and
delivered to him or her. No adjustment will be made for dividends or other
rights for which the record date is prior to the date on which such stock
certificate or certificates are issued even if such record date is subsequent
to the date upon which notice of exercise was delivered and the tender of
payment was accepted.
10. Application of Securities Laws.
(a) No shares of Common Stock may be purchased pursuant to the
Option unless and until any then applicable requirements of federal and state
securities laws and regulations, exchanges upon which the Common Stock may be
listed, shall have been fully satisfied. The Participant represents, agrees
and certifies that:
(i) If the Participant exercises the Option in whole or in
part at a time when there is not in effect under the Securities Act of 1933,
as amended (the "Securities Act"), a registration statement relating to the
Common Stock issuable upon exercise and available for delivery to him or her
a prospectus meeting the requirements of Section 10 of the Securities Act
("Prospectus"), the Participant will acquire the Common Stock issuable upon
such exercise for the purpose of investment and not with a view to resale or
distribution and that, as a condition to each such exercise, he or she will
furnish to the Corporation a written statement to such effect, satisfactory
in form and substance to the Corporation; and
(ii) If and when the Participant proposes to publicly offer
or sell the Common Stock issued to him or her upon exercise of the Option,
the Participant will notify the Corporation prior to any such offering or
sale and will abide by the opinion of counsel to the Corporation as to
whether and under what conditions and circumstances,if any, he or she may
offer and sell such shares, but such procedure need not be followed if a
Prospectus was delivered to the Participant with the shares of Common Stock
and the Common Stock was and is listed on a national securities exchange or
traded as a National Market System security through the facilities of NASDAQ.
(b) The Participant understands that the certificates representing
the Common Stock acquired pursuant to the Option may bear a legend referring
to the foregoing matters and any limitations under the Securities Act and
state securities laws with respect to the transfer of such Common Stock, and
the Corporation may impose stop transfer instructions to implement such
limitations, if applicable. Any person or persons entitled to exercise the
Option under the provisions of Section 5 above shall be bound by and
obligated under the provisions of this Section 10 to the same extent as is
the Participant.
(c) The Board of Directors of the Corporation may impose such
conditions on an award or on its exercise or acceleration or on the payment
of any withholding obligation (including without limitation restricting the
time of exercise to specified periods) as may be required to satisfy
applicable regulatory requirements, including, without limitation, Rule 16b-3
(or any successor rule) promulgated by the Commission pursuant to the
Exchange Act.
11. Notices. Any notice to be given to the Corporation under the
terms of this Award Agreement shall be in writing and addressed to the
Secretary of the Corporation at its principal office and any notice to be
given to the Participant shall be addressed to him or her at the address
stated above, or at such other address as either party may hereafter
designate in writing to the other party. Any such notice shall be deemed to
have been duly given when enclosed in a properly sealed envelope addressed as
aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government.
12. Effect of Award Agreement. This Award Agreement shall be
assumed by, be binding upon and inure to the benefit of any successor or
successors of the Corporation. The Corporation may provide in writing to the
successor or successors one or all of the following alternatives (separately
or in combination): (i) for the assumption by the successor or successors of
this Award theretofore granted or the substitution by such successor for such
Award of award covering the stock of the successor or successors, or a parent
or subsidiary thereof, with an appropriate adjustment as to the number and
kind of securities and/or other property and prices; (ii) for the continuance
of this Award in the manner and under the terms provided; or (iii) for the
payment in cash, securities and/or property in lieu of and in complete
satisfaction of this Award.
13. Tax Withholding.
(a) Upon the disposition by the Participant or other person of
shares of Common Stock acquired pursuant to the exercise of the Option the
Corporation shall have the right to require the Participant or such other
person to pay by cash, or certified or cashier's check payable to the
Corporation, the amount of any taxes which the Corporation 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 Award Agreement,
the Participant may elect, pursuant to such rules as the Administrator may
establish, to have the Corporation 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 of federal, state and local authorities,
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 Corporation to the Participant in the amount of any taxes which the
Corporation may be required to withhold with respect to shares of Common
Stock received. 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.
14. Law Applicable to Construction. The interpretation,
performance and enforcement of this Award and this Award Agreement shall be
governed by 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 Award Agreement shall continue to be fully
effective. All currencies expressed are in U.S. Dollars.
15. Government Regulations. This Award Agreement, the Award
granted pursuant to this Award Agreement and the issuance or transfer or
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 shares shall
be issued by the Corporation, nor cash payments made by the Corporation,
pursuant to or in connection with this 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.
16. Administration.
(a) Subject to the express provisions of this Award Agreement the
Administrator shall have the authority to construe and interpret this Award
Agreement and any agreements defining the rights and obligations of the
Corporation and the Participant under this Award Agreement; to further define
the terms used in this Award Agreement and prescribe, amend and rescind rules
and regulations relating to the administration of this Award Agreement; to
establish terms and conditions pertaining to termination of employment,
modify or amend this Award Agreement or waive any condition or restriction of
this Award Agreement, or to extend (up to a maximum term of ten (10) years
after the initial Award) the term of post-termination exercise period of this
Award; to determine the duration and purpose of leave of absence which may be
granted to the Participant without constituting a termination of his
employment for purposes of this Award Agreement; and to make all other
determinations necessary or advisable for the administration of this Award
Agreement. The determinations of the Administrator on the foregoing matters
shall be conclusive.
(b) Any action taken by, or inaction of, the Corporation, the
Board or the Administrator relating to this Award Agreement shall be within
the absolute discretion of that entity or body. No member of the
Administrator, or officer of the Corporation, shall be liable for any such
action or inaction.
17. Limitations as to Section 16 Persons. It is the intent of the
Corporation that this Award Agreement satisfy and be interpreted in a manner
that in the case where the Participant is or may be subject to Section 16 of
the Exchange Act satisfies the applicable requirement of Rule 16b-3, so that
the Participant will be entitled (unless otherwise expressly acknowledged in
writing) to the benefits of the Rule 16b-3 or other exemptive rules under
Section 16 Exchange Act and will not be subjected to avoidable liability
thereunder. In furtherance of such intent, any provision of this Award
Agreement 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 provisions may be deemed void.
IN WITNESS WHEREOF, the Corporation has caused this Award Agreement
to be executed on its behalf by a duly authorized officer and the Participant
has hereunto set his hand as of the Award Date.
CORPORATION: PARTICIPANT:
SYNCOR INTERNATIONAL CORPORATION,
a Delaware Corporation
By:/s/ Monty Fu By:/s/ Robert G. Funari
Monty Fu Robert G. Funari
Chairman of the Board
CONSENT OF SPOUSE
I join with my spouse, the Participant herein named, in executing the
foregoing Nonqualified Stock Option Award Agreement and agree to be bound by
all of the terms and provisions thereof.
/s/ Marilyn Funari
Signature of Participant's Spouse
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
<S> <C>
Period type 3 mos
Fiscal year end 12/31/99
Period start 1/1/99
Period end 3/31/99
Cash 15,643
Securities 7,250
Receivables 86,513
Allowances (3,774)
Inventory 8,432
Current assets 128,402
PP&E 102,605
Depreciation (51,748)
Total assets 275,438
Current liabilities 74,098
Bonds 0
Preferred mandatory 0
Preferred 0
Common 649
Other SE 118,318
Total Liability and Equity 275,438
Sales 123,868
Total Revenue 123,868
CGS 85,286
Total costs 85,286
Other expenses 28,961
Loss provision 216
Interest expense 540
Income pre tax 8,739
Income tax 3,710
Income continuing 5,029
Discontinued 0
Extraordinary 0
Changes 0
Net income 5,029
EPS basic .44
EPS diluted .41
</TABLE>
