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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
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FOR QUARTER ENDED JUNE 30, 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 June
30, 1999, 11,725,469 shares of $.05 par value common stock were
outstanding.
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SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
Page
____
Part I. Financial Information
Item 1. Consolidated Condensed Financial Statements
Balance Sheets as of
June 30, 1999 and December 31, 1998........................... 3
Statements of Income for Three Months
Ended June 30, 1999 and 1998.................................. 4
Statements of Income for Six Months
Ended June 30, 1999 and 1998.................................. 5
Statements of Cash Flows for Six Months
Ended June 30, 1999 and 1998................................... 6
Notes to Consolidated Condensed Financial Statements............. 7
Item 2. Management's Discussion and Analysis of Financial Condition..... 10
Part II. Other Information............................................... 13
SIGNATURE.................................................................. 15
<PAGE>
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(in thousands, except per share data)
June 30, December 31,
1999 1998
____ ____
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16,117 $ 13,824
Short-term investments 6,525 4,707
Trade receivables, net 71,754 65,055
Patient receivables, net 9,824 10,724
Inventory 9,667 11,495
Prepaids and other current assets 15,630 12,780
_________________________
Total current assets 129,517 118,585
Marketable investment securities 1,192 1,191
Property and equipment, net 57,723 49,103
Excess of purchase price over net assets acquired, net 61,899 62,654
Other assets 31,976 25,034
_________________________
$282,307 $256,567
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,456 $ 44,578
Accrued liabilities 11,505 7,005
Accrued wages and related costs 10,070 12,563
Federal and state taxes payable 2,481 1,293
Current maturities of long-term debt 6,933 9,122
_________________________
Total current liabilities 75,445 74,561
Long-term debt, net of current maturities 77,525 70,322
Deferred compensation 1,346 311
Stockholders' equity:
Common stock, $.05 par value 656 626
Additional paid-in capital 86,228 72,622
Notes receivable-related parties (18,962) (9,028)
Employee stock ownership loan guarantee (4,213) (5,056)
Accumulated other comprehensive income 130 (527)
Retained earnings 76,676 65,260
Treasury stock, at cost; 1,356 shares at
June 30, 1999 and at December 31, 1998 (12,524) (12,524)
_________________________
Net stockholders' equity 127,991 111,373
_________________________
$282,307 $256,567
=========================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(in thousands, except per share data)
THREE MONTHS ENDED JUNE 30,
___________________________
1999 1998
____ ____
(Unaudited)
<S> <C> <C>
Net sales $130,290 $113,245
Cost of sales 87,045 78,653
__________________________
Gross profit 43,245 34,592
Operating, selling and administrative expenses 27,436 22,336
Depreciation and amortization 4,343 4,065
__________________________
Operating income 11,466 8,191
Other expense, net (676) (506)
__________________________
Income before taxes 10,790 7,685
Provision for income taxes 4,403 3,290
__________________________
Net income $ 6,387 $ 4,395
==========================
Net income per share - Basic $ .55 $.42
==========================
Weighted average shares outstanding - Basic 11,675 10,536
==========================
Net income per share - Diluted $ .50 $ .40
==========================
Weighted average shares outstanding - Diluted 12,757 11,057
==========================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Income
(in thousands, except per share data)
SIX MONTHS ENDED JUNE 30,
_________________________
1999 1998
____ ____
(Unaudited)
<S> <C> <C>
Net sales $254,158 $215,969
Cost of sales 172,331 154,222
________________________
Gross profit 81,827 61,747
Operating, selling and administrative expenses 52,250 40,939
Depreciation and amortization 8,490 7,130
________________________
Operating income 21,087 13,678
Other expense, net (1,558) (100)
________________________
Income before taxes 19,529 13,578
Provision for income taxes 8,113 5,825
________________________
Net income $11,416 $ 7,753
========================
Net income per share - Basic $ .99 $.74
========================
Weighted average shares outstanding - Basic 11,515 10,420
========================
Net income per share - Diluted $ .91 $ .71
========================
Weighted average shares outstanding - Diluted 12,588 10,921
========================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(in thousands)
SIX MONTHS ENDED JUNE 30,
_________________________
1999 1998
____ ____
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $11,416 $7,753
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 8,490 7,130
Provision for losses on receivables 213 1,285
Amortization of ESSOP loan guarantee 843 843
Decrease (increase) in:
Accounts receivable, trade (7,750) (7,228)
Accounts receivable, patient 1,783 (262)
Inventory 1,835 (1,555)
Other current assets (2,935) (4,647)
Other assets 971 388
Increase (decrease) in:
Accounts payable (182) 6,537
Accrued liabilities 3,736 2,778
Accrued wages and related costs (1,059) (4,473)
Federal and state taxes payable 1,817 952
Deferred compensation 1,034 -
_____________________
Net cash provided by operating activities 20,212 9,501
_____________________
Cash flows from investing activities:
Purchase of property and equipment, net (13,549) (5,339)
Acquisitions of businesses, net of cash acquired (8,800) (45,338)
Net increase in short-term investments (1,814) (2,160)
Net increase in long-term investments (1) (11)
Unrealized gain on investments 17 11
_____________________
Net cash used in financing activities (24,147) (52,837)
_____________________
Cash flow from financing activities:
Proceeds from long-term debt 13,031 40,031
Repayment of long-term debt (9,955) (1,995)
Issuance of common stock 3,075 579
_____________________
Net cash provided by financing activities 6,151 38,615
_____________________
Net increase (decrease) in cash and cash equivalents 2,216 (4,721)
Effect of exchange rate on cash 77 (87)
Cash and cash equivalents at beginning of period 13,824 25,538
_____________________
Cash and cash equivalents at end of period $16,117 $20,730
=====================
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
1. GENERAL. The accompanying unaudited consolidated condensed
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair
presentation have been included. The results of the six months
ended June 30, 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 30,
2000. 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 not
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>
THREE MONTHS ENDED
__________________
June 30, 1999 June 30, 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 337 - 337 (60) - (60)
Unrealized gains (losses) on
investments:
Unrealized holding gains (losses)
arising during period 129 (59) 70 4 (2) 2
_________________________________________________________________
Other comprehensive income 466 (59) 407 (56) (2) (58)
=== ==== === ==== === ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
__________________
June 30, 1999 June 30, 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 640 - 640 66 - 66
Unrealized gains (losses) on
investments:
Unrealized holding gains (losses)
arising during period 42 (25) 17 19 (8) 11
_________________________________________________________________
Other comprehensive income 682 (25) 657 85 (8) 77
=== ==== === == === ==
</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:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
__________________
Pharmacy Services Business June 30, 1999 June 30, 1998
__________________________ _____________ _____________
<S> <C> <C>
Revenues $117,125 $101,633
Operating Income $ 14,841 $ 11,142
Medical Imaging Business
________________________
Revenues $ 13,165 $ 11,612
Operating Income $ 1,347 $ 1,200
Unallocated Corporate
_____________________
Operating Loss $ (4,722) $ (4,151)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
________________
Pharmacy Services Business June 30, 1999 June 30, 1998
__________________________ _____________ _____________
<S> <C> <C>
Revenues $229,131 $201,308
Operating Income $ 27,866 $ 20,449
Medical Imaging Business
________________________
Revenues $ 25,027 $ 14,661
Operating Income $ 2,520 $ 1,283
Unallocated Corporate
_____________________
Operating Loss $ (9,299) $ (8,054)
</TABLE>
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
and six months ended June 30, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
__________________
June 30, 1999 June 30, 1998
_________________________________________________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net income $6,387 $4,395
Basic EPS $6,387 11,675 $.55 $4,395 10,536 $.42
---- ____
Effect of Dilutive
Stock Options 1,082 521
_____ ___
Diluted EPS $6,387 12,757 $.50 $4,395 11,057 $.40
____ ____
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
__________________
June 30, 1999 June 30, 1998
_________________________________________________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
___________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Net income $11,416 $7,753
Basic EPS $11,416 11,515 $.99 $7,753 10,420 $.74
____ ____
Effect of Dilutive
Stock Options 1,073 501
_____ ___
Diluted EPS $11,416 12,588 $.91 $7,753 10,921 $.71
____ ____
</TABLE>
6. NOTES RECEIVABLE-RELATED PARTIES. The Company initiated a Senior
Management Stock Purchase Plan effective June 16, 1998. During the
second 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.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
For the Months Ended June 30, 1999 and 1998
NET SALES
Consolidated net sales for the three months ended June 30, 1999 increased
15.1% or $17.0 million to $130.3 million versus $113.2 million for the
second quarter of 1998. For the six months ended June 30, 1999 net sales
increased 17.7% or $38.2 million to $254.2 million compared to $216.0 million
for the same period in 1998.
PHARMACY SERVICES
The Pharmacy Services revenue grew in excess of 15% for the quarter and 13.8%
for the six months ended June 30, 1999. The Company's sales growth continues
to outpace the overall growth in the marketplace estimated by the Company to
be between 6-8%. However, the primary source of growth continues to be from
cardiology. Within the cardiology sector the Company's sales growth of 18%
for the quarter continued to outpace this sector's growth which is estimated
by the Company to be growing from between 14-16%. Sales of Cardiolite(R), a
proprietary heart imaging agent to which the Company has preferential
distribution rights, increased approximately 26% in the second quarter as
compared to the second quarter of 1998 and 24% for the six months ended June
30, 1999, when compared to the corresponding period in 1998. Pricing within
this sector has remained stable despite competition from a competing cardiac
agent. While this competition continues, it is the Company's belief that
Cardiolite(R) continues to gain market share and is outpacing this competing
agent.
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 range 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 result, the
estimated lost revenue will range from $1 to $2 million in 1999. The Company
believes the ultimate impact on earnings will be negligible.
MEDICAL IMAGING
Sales from the Medical Imaging businesses contributed $13.2 million to the
Companies total sales for the quarter, compared to $11.6 million for same
period in 1998 or a 13.8% increase. For the six months ended June 30, 1999,
sales were $25.0 million compared to $14.7 million for the same period in
1998. Sales growth was attributed to a combination of internal growth and
acquisitions.
GROSS PROFIT
Gross profit for the three months ended June 30, 1999 increased $8.7 million
to $43.3 million, and as percentage of net sales reached 33.2% in this
quarter as compared to 30.5% of net sales for the second quarter of 1998. The
gross profit for the six months ended June 30, 1999 increased by $20.1
million to $81.8 million or 32.5% and as percentage of net sales to 32.2%,
compared to 28.6% for the comparable period in 1998.
PHARMACY SERVICES
Both the dollar value and gross profit margin percentage continues to
increase in this area. The gross profit margin increased in the quarter ended
June 30, 1999 from 25.8% in 1998 to 28.4% in 1999. For the six months ended
June 30, 1999, the gross margin increased from 25.3% to 27.4%. Material
costs have decreased slightly as a percentage of sales due to better
contracted rates and mix changes which have resulted in sales of higher
margin products. Direct labor costs have declined as a percentage of sales
due to more efficient staffing levels and higher efficiency with the
increased volumes.
MEDICAL IMAGING
The gross profit margin of this group increased in the quarter ended June 30,
1999 from 71.8% in 1998 to 75.7% in 1999. For the six months ended June
30,1999 the gross margin increased from 74.2% to 75.9%. Volume continues to
increase from a combination of increased site growth and site acquisitions.
This segment contributed $8.1 million of the $20.1 million increase in gross
profit.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Operating, Selling and Administrative costs for the quarter ended June 30,
1999 increased by $5.1 million or 22.8% to $27.4 million as compared to $22.3
million for the comparable quarter in 1998. For the six months ended June 30,
1999 these expenses increased by $11.3 million or 27.6% to $52.2 million as
compared to $40.9 million for the same period in 1998. The ratio of these
expenses to sales increased from 19.7% in 1998 to 21.1% in 1999 for the
comparable quarters and from 19.0% to 20.6% for the comparable six month
periods. The Medical Imaging business, which traditionally has higher cost to
sales ratio, contributed the majority of the six months change. This business
showed an increase in costs of $1.3 million for the quarter and $5.6 million
for the six month period. The Pharmacy Services business expenses in this
area were affected by increased labor and associated costs of expanded
systems applications, certain bonuses associated with the achievement of much
higher sales levels and profit margins and the expansion of international
operations via new sites.
DEPRECIATION
Depreciation increased by $.2 million to $4.3 million or 6.8% in the three
months ended June 30, 1999 as compared to the same period in 1998. For the
six months ended June 30, 1999 depreciation expense increased by $1.4 million
to $8.5 million or 19.1%. The Medical Imaging business contributed all of the
increase in the quarter and $1.2 million of the increase for the six month
period. The Company expects these trends to continue as this segment of the
Company is very capital intensive and as further expansion of this segment is
undertaken.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash, cash equivalents and investments of $23.8 million at
June 30, 1999 compared with $19.7 million at December 31, 1998. The Company's
total debt position of $84.5 million at June 30, 1999 reflects an increase of
$5.1 million when compared to the balance of $79.4 million at December 31,
1998. The increase in debt for the six months ended June 30, 1999, results
primarily from the financing of the continued expansion of the Medical
Imaging business. Working capital increased by $10.1 million to $54.1 million
at June 30, 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 plans. Of the $75 million credit line
facility initiated on January 5, 1998, $21.1 million is available at June 30,
1999.
ACQUISITION OF BUSINESSES
In April, the Company acquired two imaging center sites in the expansion of
its Medical Imaging business. The first of these sites was in Tempe, Arizona
for a total purchase price of $1.5 million. The second was the acquisition
of a site in Bakersfield, California. The purchase price was $1.0 million
plus the assumption of $.2 million in debt. In addition, the Company
completed the purchase of the minority interests in certain open MRI sites
for $6.1 million. The Company acquired the remaining minority interests in
the open MRI sites in July, 1999 for $.7 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 in 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 have been completed and system installation is underway.
To date, four installations have been completed. The remaining installations
are scheduled to be complete in late October 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 customer system conversion
effort was completed in July 1999.
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 planning, testing with business
partners, and contingency planning activity is currently underway and is
expected to be completed by early September 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. These plans have been drafted and will be finalized
in September 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 Companys 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 4. Submission of Matters to a Vote of Security Holders
On June 23, 1999, the Company held its annual meeting of stockholders.
Five proposals were presented to the stockholders for their approval. The
following summarizes the proposals and the results of the voting:
1. Election of Directors
The first proposal was to elect Monty Fu, Henry N. Wagner and Ronald
A. Williams as directors for an additional three-year term. The
stockholders voted to re-elect the three directors:
FOR AGAINST
Monty Fu 10,236,806 37,519
Henry N. Wagner, Jr. 10,235,928 38,397
Ronald A. Williams 10,237,829 36,496
2. Selection of Independent Auditors
The second proposal was to ratify the selection of KPMG LLP as the
Company's independent auditors for the 1999 fiscal year. The
stockholders ratified the selection:
FOR AGAINST ABSTAIN
10,248,629 16,434 9,262
3. Increase the Number of Authorized Shares of Common Stock
The third proposal was to amend the Company's Restated Certificate of
Incorporation to increase the number of authorized shares of the
Company's common stock from 20,000,000 to 200,000,000. The
stockholders approved the amendment:
FOR AGAINST ABSTAIN
7,624,661 2,607,385 14,779
4. The fourth proposal was to approve the use of unused option shares
under the Company's Universal Performance Equity Participation Plan
for grants under the Company's other stock incentive plans. The
stockholders approved the proposal:
FOR AGAINST ABSTAIN
7,984,529 1,300,077 62,219
5. The fifth proposal was to approve the cash and stock awards for
officers upon the attainment of the $34, $43, $53 and $65 stock price
targets under the Executive Long-Term Performance Equity Plan. The
stockholders approved the proposal:
FOR AGAINST ABSTAIN
8,222,529 1,954,851 31,025
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation
10. Material Contracts
10.1 Second Amendment to Executive Long-Term Performance
Equity Plan, dated as of June 23, 1999
10.2 Second Amendment to the Universal Performance Equity
Participation Plan, dated as of June 23, 1999
10.3 Third Amendment to Universal Performance Equity
Participation Plan, dated as of June 23, 1999
10.4 First Amendment to Syncor International Corporation
1990 Master Stock Incentive Plan, As Amended and
Restated, dated as of June 23, 1999
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)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
August 16, 1999 By: /s/ Michael E. Mikity
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
(Principal Financial /
Accounting Officer)
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
SYNCOR INTERNATIONAL CORPORATION
SYNCOR INTERNATIONAL CORPORATION, a corporation organized and existing
under the Laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Syncor International Corporation
and the name under which the corporation was originally incorporated was
Nuclear Pharmacy Incorporated.
The date of filing its original Certificate of Incorporation was
October 15, 1985.
2. This Restated Certificate of Incorporation was duly adopted in
accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware. The amendment to Article SECOND, which changes
the name and address of the registered agent, was approved by the
Corporation's Board of Directors pursuant to Section 133 of the General
Corporation Law of the State of Delaware. The amendment to Article FOURTH,
which increases the number of authorized shares of Common Stock from
20,000,000 to 200,000,000, was made pursuant to a vote of the stockholders
as prescribed by Section 242 of the General Corporation Law of the State of
Delaware.
3. The text of the Restated Certificate of Incorporation reads as
follows:
FIRST: The name of the Corporation is Syncor International
Corporation.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 9 East Loockerman Street in the City of Dover,
County of Kent, Delaware 19901. The name of its registered agent at such
address is The National Registered Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: The total number of shares which the Corporation shall
have authority to issue is 200,000,000 shares of Common Stock, par value $.05
per share.
FIFTH: The Board of Directors shall have power to make, alter,
amend and repeal the by-laws (except so far as the by-laws adopted by the
stockholders shall otherwise provide). Any by-laws made by the Directors
under the powers conferred hereby may be altered, amended or repealed by the
Directors or by the stockholders. Notwithstanding the foregoing and anything
contained in this Certificate of Incorporation to the contrary, Sections 2,
3 and 11 of Article II (as amended), Sections 2, 3, 12 and 13 of Article III
(as amended) and Article VIII (as amended) of the by-laws shall not be
altered, amended or repealed and no provision inconsistent therewith shall be
adopted without the affirmative vote of the holders of at least 75% of the
voting power of the outstanding Voting Stock, voting together as a single
class. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at
least 75% of the voting power of the Outstanding Voting Stock, voting
together as a single class, shall be required to alter, amend, or adopt any
provision inconsistent with or repeal this Article FIFTH.
SIXTH:
SECTION 1. Election of Directors. Election of Directors need not
be by written ballot unless and to the extent the by-laws of the Corporation
so provide.
SECTION 2. Number, Election and Terms. Except as otherwise fixed
pursuant to the provisions of this Certificate of Incorporation, relating to
the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect additional
Directors under specified circumstances, the number of Directors of the
Corporation shall be fixed from time to time by or pursuant to the by-laws.
The Directors, other than those who may be elected by the holders of any
class or series of stock having preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time
for which they severally hold office, into three classes, as nearly equal in
number as possible, as shall be provided in the manner specified in the by-
laws, one class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 1987, another class to be originally
elected for a term expiring at the annual meeting of stockholders to be held
in 1988, and another class to be originally elected for a term expiring at
the annual meeting of stockholders to be held in 1989, with the members of
each class to hold office until their successors are elected and qualified.
At each annual meeting of the stockholders of the Corporation, the successors
of the class of Directors whose term expires at that meeting shall be elected
to hold office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election.
SECTION 3. Stockholder Nomination of Director Candidates.
Advance notice of stockholder nominations for the election of Directors and
of any stockholder proposals to be considered at an annual stockholder
meeting shall be given in the manner provided in the by-laws.
SECTION 4. Newly Created Directorships and Vacancies. Except as
otherwise fixed in the provisions of this Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation to
elect additional Directors under specified circumstances, newly created
directorships resulting from any increase in the number of Directors and any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other cause shall be filled by the affirmative
vote of a majority of the remaining Directors then in office, even though
less than a quorum of the Board of Directors. Any Director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new Director was created
or the vacancy occurred and until such director's successor shall have been
elected and qualified. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.
SECTION 5. Removal of Directors. Subject to the rights of any
class or series of stock having preference over the Common Stock as to
dividends or upon liquidation to elect Directors under specified
circumstances, any Director may be removed from office, without cause, only
by the affirmative vote of the holders of 75% of the combined voting power of
the then outstanding Voting Stock, voting together as a single class.
SECTION 6. Amendment or Repeal of this Article SIXTH.
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of the holders of at least 75% of the
voting power of the outstanding Voting Stock, voting together as a single
class, shall be required to alter, amend, or adopt any provision inconsistent
with or to repeal this Article SIXTH.
SEVENTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise required by law and subject to
the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
special meetings of stockholders of the Corporation may be called only by
the Chairman of the Board, by the President or by the Board of Directors
pursuant to a resolution adopted by a majority of the entire Board of
Directors. Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at
least 75% of the voting power of the outstanding Voting Stock, voting
together as a single class, shall be required to alter, amend, or adopt any
provision inconsistent with, or to repeal this Article SEVENTH.
EIGHTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of the Delaware
Code or on the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of Section 279
of Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths in value
of the creditors or class of creditors, and/or of the stockholders or class
of stockholders of this Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which said application has been made, be binding on all the creditors or
class of creditors, and/or on all of the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
NINTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
TENTH: Except as provided below, a Director shall have no personal
liability to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a Director; however, the foregoing provision
shall not limit the liability of a Director (i) for any breach of the
director's duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the Delaware
Corporation Law, (iv) for any transaction from which the Director derived an
improper personal benefit, or (v) for any act or omission occurring prior
to the date when this Section TENTH becomes effective.
IN WITNESS WHEREOF, said SYNCOR INTERNATIONAL CORPORATION, has
caused its corporate seal to be hereunto affixed and this Certificate to
be signed by Robert G. Funari, its President, and attested by Haig S.
Bagerdjian, its Secretary, this 23rd day of July, 1999.
SYNCOR INTERNATIONAL CORPORATION
By: /s/ Robert G. Funari
President
ATTEST:
By: /s/ Haig S. Bagerdjian
Secretary
Exhibit 10.1
SECOND AMENDMENT TO
EXECUTIVE LONG-TERM PERFORMANCE EQUITY PLAN
This Second Amendment to Executive Long-Term Performance Equity Plan,
dated as of June 23, 1999 (this "Amendment"), hereby amends that certain
Executive Long-Term Performance Equity Plan, dated as of January 1, 1998
and amended as of November 17, 1998 (the "Plan"), for Syncor International
Corporation, a Delaware corporation (the "Company"), and is made pursuant to
the approval of the stockholders of the Company during the stockholders'
meeting held on June 23, 1999.
1. In addition to the stock price targets of $20, $25, $34 and $43, the
following stock price targets will be added: $53 by June 30, 2003, and
$65 by June 30, 2004.
2. Awards may be granted under the Plan at any time up to June 30, 2004;
thereafter, no awards may be granted under the Plan.
3. Options that do not vest on an accelerated basis for the $53 and $65
targets will vest on June 30, 2008. The same options will expire on
June 23, 2009.
4. In the event that there are insufficient shares under the 1990 Master
Stock Incentive Plan to allocate the awards required under the Plan,
the Board of Directors will have discretion to grant cash in lieu of
the stock and option components under the Plan.
5. This Amendment is effective as of the date first set forth above.
Except as amended hereunder, all other terms and conditions of the
Plan shall remain in full force and effect.
Exhibit 10.2
SECOND AMENDMENT TO
THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN
This SECOND AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION
PLAN is made as of June 23, 1999 pursuant to resolutions passed by the Board
of Directors of Syncor International Corporation, a Delaware corporation (the
"Company"), during a meeting held on June 23, 1999, and amends that certain
Universal Performance Equity Participation Plan, dated as of June 16, 1998
and amended as of June 17, 1998 (as amended, the "Plan"). The purpose of
this Second Amendment is to change the references to the June 30 date to
July 1.
1. Section 2.1(b)(ii) of the Plan is hereby deleted in its entirety,
and in substitution thereof shall be the following:
(ii) For each Optionee, the Maximum Shares will be
adjusted depending on the date in which the Optionee
becomes an Eligible Employee. If the Optionee becomes
an Eligible Employee on or before July 1, 1999, the
Optionee will be entitled to receive the maximum Shares
available to the Optionee. For any Optionee who becomes
an Eligible Employee during the following dates, the
number of Option shares that may be granted to that
Optionee will be a percentage of the Maximum Shares,
calculated as follows:
% of
Date Maximum Shares
____ ______________
After July 1, 1999 but on or before
January 1, 2000 85%
After January 1, 2000 but on or before
July 1, 2000 66%
After July 1, 2000 but on or before
January 1, 2001 50%
After January 1, 2001 but on or before
July 1, 2001 33%
After July 1, 2001 0%
2. The definition of "Eligible Employee" as set forth in Section
4.1(o) of the Plan shall be deleted in its entirety, and in substitution
thereof shall be the following:
(o) "Eligible Employee" shall mean any employee of
the Company who is eligible to participate in the
ESSOP as of July 1, 2001 and who works for the
Company at least 30 hours per week. "Eligible
Employee" does not include any officer or other
employee of the Company who participates in any
of the Company's Performance Equity Plans for
executive officers and key employees.
Exhibit 10.3
THIRD AMENDMENT TO
THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN
This THIRD AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION
PLAN is made as of June 23, 1999 pursuant to a vote taken by the stockholders
of Syncor International Corporation, a Delaware corporation (the "Company"),
during its annual meeting held on June 23, 1999, and amends that certain
Universal Performance Equity Participation Plan, dated as of June 16, 1998
and amended as of June 17, 1998 and as of June 23, 1999 (as amended, the
"Plan"). During that annual meeting, the stockholders approved a proposal
that grants the Company's Board of Directors discretion to use projected
unused option shares under the Plan for awards under the Company's other
stock
incentive plans. The purpose of this Third Amendment is to amend the Plan
to provide such discretion to the Board of Directors.
1. The following Section 2.8 is hereby added to the Plan:
2.8 Awards Under Other Company Plans.
Notwithstanding any term in this Plan to the
contrary, including the definition of "Eligible
Employee," the Board shall have the discretion to
use the projected unused option shares (the "Unused
Shares") that would otherwise have been available
for grants under this Plan for awards under the
Company's other stock incentive plans, including
the 1990 Master Stock Incentive Plan, As Amended
and Restated. The Unused Shares may be used for
any type of award that the Board is authorized to
grant under those other stock incentive plans, and
to whomever is eligible to receive awards under such
plans. In no event, however, shall the sum of (i)
the number of Unused Shares made available for awards
under other stock incentive plans plus (ii) the
number of outstanding option shares under this Plan,
exceed the 1,800,000 shares authorized for issuance
under this Plan.
Exhibit 10.4
FIRST AMENDMENT TO
THE SYNCOR INTERNATIONAL CORPORATION 1990 MASTER STOCK INCENTIVE PLAN,
AS AMENDED AND RESTATED
This FIRST AMENDMENT TO THE SYNCOR INTERNATIONAL CORPORATION 1990
MASTER STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED, is made as of June
23, 1999, pursuant to a vote taken by the stockholders of Syncor
International Corporation, a Delaware corporation (the "Company"), during its
annual meeting held on June 23, 1999, and amends that certain Syncor
International Corporation 1990 Master Stock Incentive Plan, As Amended and
Restated, dated as of June 18, 1997 (the "1990 Plan"). During that annual
meeting, the stockholders approved a proposal that grants the Company's Board
of Directors discretion to use projected unused option shares under the
Company's Universal Performance Equity Participation Plan (the "Universal
Plan") for awards under the Company's other stock incentive plans, including
the 1990 Plan. The purpose of this First Amendment is to amend the 1990
Plan to increase the number of shares available for awards under the 1990
Plan by such number of option shares that are available for issuance under
the Universal Plan but are projected to remain unused after July 1, 2001,
the last date on which grants may be made under the Universal Plan.
1. Section 1.4 of the 1990 Plan is hereby deleted in its entirety
and in replacement thereof shall be the following:
1.4 Stock Subject to the Plan. The
maximum aggregated number of Common Stock that
may be issued after June 18, 1997 pursuant to
Awards granted under this Plan shall not exceed
the sum of: (i) 2,417,506 shares; plus (ii) up
to 785,000 shares which were authorized and
subject to options then outstanding under the
1981 Master Stock Option Plan of the Corporation
(the "1981 Plan") but are not issued under the
1981 Plan because of the expiration, cancellation
or termination of such options without having
been exercised in full; plus (iii) up to such
number of option shares that are available for
issuance under the Corporation's Universal
Performance Equity Participation Plan but are
projected to remain unused after July 1, 2001;
in each case subject to adjustment as set forth
in or pursuant to Section 6.2 (and corresponding
provisions of the 1981 Plan, as the case may be).
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
1,000
EXHIBIT 27
Financial Data Schedule
<S> <C>
Period type 6 mos
Fiscal year end Dec 31, 1999
Period start Jan 1, 1999
Period end June 30, 1999
Cash 16,117
Securities 6,525
Receivables 85,565
Allowances (3,987)
Inventory 9,667
Current assets 129,517
PP&E 111,416
Depreciation (53,693)
Total assets 282,307
Current liabilities 75,445
Bonds 0
Preferred mandatory 0
Preferred 0
Common 656
Other SE 127,335
Total Liability and Equity 282,307
Sales 254,158
Total Revenue 254,158
CGS 172,331
Total costs 172,331
Other expenses 60,740
Loss provision 770
Interest expense 3,212
Income pre tax 19,529
Income tax 8,113
Income continuing 11,416
Discontinued 0
Extraordinary 0
Changes 0
Net income 11,416
EPS basic .99
EPS diluted .91
</TABLE>
