SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
______________________________________________________
For the Year Ended December 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
incorporation or organization) Identification No.)
6464 Canoga Avenue, Woodland Hills, California 91367-2407
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK $.05 PAR VALUE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K._______
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the average closing bid and asked prices
of such stock on March 24, 2000 was $283,018,195. For purposes of the
foregoing calculation, each executive officer and director of Registrant was
deemed an "affiliate" of Registrant. The number of shares outstanding
(excluding treasury shares) of the Registrant's $0.05 par value common stock
as of March 24, 2000 was 11,834,719 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for the year ended
December 31, 1999, are incorporated by reference into Parts I, II and IV of
this report.
Portions of Registrant's definitive Proxy Statement for Registrant's Annual
Meeting of Stockholders on June 20, 2000, are incorporated by reference into
Part III of this report.
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SYNCOR INTERNATIONAL CORPORATION
TABLE OF CONTENTS
FORM 10-K ANNUAL REPORT
December 31, 1999
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PART I
Item 1. BUSINESS 1
Item 2. PROPERTIES 9
Item 3. LEGAL PROCEEDINGS 12
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 12
Item 6. SELECTED FINANCIAL DATA 13
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 13
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 13
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 13
Item 11. EXECUTIVE COMPENSATION 14
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 14
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 14
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 14
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PART I
Item 1. BUSINESS.
Unless otherwise indicated, the term "Syncor" or the "Company" as used in
this report refers to Syncor International Corporation, incorporated in 1985
under the laws of the State of Delaware, and its consolidated subsidiaries.
General Development of Business
The general development of the Company's business for the year ended December
31, 1999, is covered in the letter from the Chairman of the Board and the
President and Chief Executive Officer to the Company's stockholders in the
Company's Annual Report to Stockholders for 1999 and is incorporated into
this Form 10-K by reference. A copy of the Company's Annual Report to
Stockholders is attached as Exhibit 13.
Principal Products Produced and Services Rendered
U.S. Pharmacy Services Business
The Company is primarily a pharmacy services company engaged in compounding,
dispensing and distributing radiopharmaceutical products and services to
hospitals and clinics through its network of 123 nuclear pharmacy service
centers in the United States. The Company's pharmacies process
radiopharmaceutical prescriptions in convenient packaging for the customer,
called "unit dose." The unit dose is then injected into a patient for
diagnostic imaging of physiological functions and organ systems and for
monitoring and treatment of diseases.
The Company is also a distributor of imaging cold kits, or "bulk"
radiopharmaceutical vials, from which customers draw their own unit doses.
The Company's sales of bulk vials have steadily decreased during the past
four years as hospitals and clinics increasingly convert to unit dose
purchases. Bulk and unit dose sales are discussed in more detail in the
section entitled "Competitive Conditions" below.
In addition, the Company provides various services in connection with the
sale of radiopharmaceuticals, including radiopharmaceutical record keeping
required by federal and state government agencies, and radiopharmaceutical
technical consulting. The Company also markets and distributes other
radioactive products, including radionuclide generators and radioactive
sealed sources, medical reference sources, and nuclear and pharmacy equipment
and accessories. The Company estimates that its pharmacies serve
approximately 7,000 hospitals and clinics in 48 states throughout the United
States.
U.S. Medical Imaging Business
The Company, through its subsidiary, Comprehensive Medical Imaging, Inc.
("CMI"), wholly owns 33 medical imaging centers and manages and partly owns
an additional 9 medical imaging centers located in 11 states. The centers
are concentrated primarily in California, Arizona, Virginia and Florida.
These medical imaging centers provide one or more outpatient and inpatient
diagnostic imaging services, including MRI (40 centers), computerized
tomography or CT (12 centers), nuclear imaging (3 centers), X-ray (15
centers), ultrasound (8 centers), mammography (8 centers) and fluoroscopy (13
centers). The Company's goal is to become more efficient and effective in
meeting the demands of patients, physicians and health plans for the
production of more timely, accurate and cost-effective diagnostic results
across multiple modalities and geographic markets. The medical services
provided in each imaging center are performed by groups of radiologists
affiliated with the Company. The radiologists interpret diagnostic images
and supervise technicians performing medical imaging procedures, while the
Company performs marketing, legal, billing and other administrative and
technical functions. All 9 of the partially-owned centers are managed by
TME, Inc., a subsidiary of CMI, in exchange for a management fee.
CMI also operates a service called IMI-Net, a multi-state patient referral
network that contracts with insurance payers to arrange the scanning of
patients in medical imaging facilities certified by IMI-Net to have met IMI-
Net's level of quality standards.
International Operations
The Company, through its subsidiary, Syncor Overseas Ltd., owns and/or
operates 17 nuclear pharmacy service centers in the following locations: New
Zealand, China, Hong Kong, Taiwan, Philippines, Thailand, South Korea,
Israel, Australia, Mexico, Colombia, Puerto Rico and South Africa. The
Company compounds, dispenses and distributes unit dose radiopharmaceuticals
in these locations and acts as a distributor of bulk radiopharmaceuticals for
various manufacturers. The Company also owns and/or operates 7 medical
imaging centers in the following locations: Puerto Rico, New Zealand and
Taiwan. Additional nuclear pharmacies and medical imaging centers in foreign
sites are being considered for development, including joint ventures in
Chengdu and Guangzhou, China.
The Company has expanded its business to provide outsource and other services
in the field of medical imaging and radiopharmacy. The Company manages the
MRI portion of a medical imaging department in a hospital in Chia-Yi City,
Taiwan. In 1999, the Company opened a cyclotron facility at a hospital in
Taichung, Taiwan to produce positron emission tomography (PET)
radiopharmaceuticals, and, in January 2000, entered into another agreement
with a hospital in Tel Aviv (Israel) to jointly operate a cyclotron facility.
Syncor Pharmaceuticals, Inc., a division of Syncor Overseas, manufactures
Iodine-123 capsules in its manufacturing facility in Golden, Colorado. An
Iodine-123 capsule is a radiopharmaceutical diagnostic product used for
thyroid disorders. Syncor Pharmaceuticals allows the Company to maintain a
reliable supply of Iodine-123 capsules for its customers and their patients.
In 2000, the Company will also begin to manufacture Iodine-125 and Palladium-
103 brachytherapy "seeds," radioactive implants used for the treatment of
localized prostate cancer. The seeds will be marketed under the trade name
Pharmaseed(TM) and will be manufactured in the Company's facility in
Shanghai, China.
The description of the Company's various activities in the Company's Annual
Report to Stockholders for the year ended December 31, 1999 is incorporated
into this Form 10-K by reference.
Sources and Availability of Raw Materials
The Company's pharmacies dispense approximately sixty different
radiopharmaceutical products, which are obtained primarily from six
suppliers. The Company's principal supplier of radiopharmaceutical products
in the U.S. is the Radiopharmaceutical Division of The DuPont Pharmaceutical
Company ("DuPont"), with whom the Company has had a long-standing
relationship with respect to the distribution of its products.
Cardiology sales constituted approximately 58 percent of the Company's sales
in 1999. Seventy eight percent of the cardiology sales was derived from
sales of Cardiolite(R), a DuPont cardiology product to which the Company has
preferred distribution rights.
If DuPont is not able to supply its proprietary products to the Company,
particularly Cardiolite(R), the Company's operations could be
negatively impacted. DuPont, however, is contractually committed to supply
Cardiolite(R) to Syncor on a preferential basis through December 31, 2003.
Management further believes that if DuPont or any other supplier of
proprietary radiopharmaceuticals to the Company failed to supply products,
the Company's other current suppliers would be in a position to supply
similar and additional products to make up most of the shortfall. The
failure of two or more suppliers to provide products at a particular time
could have an adverse effect on the Company's business.
The Company derives approximately 66 percent of its radiopharmacy net sales
per day from technetium-based products. The Company obtains its U.S. supply
of technetium, a radioactive isotope, from technetium generators provided
primarily by DuPont. Since radioactive isotopes decay naturally, the Company
cannot stockpile technetium generators for use during temporary shortages. An
interruption in the supply of technetium generators, depending on its
duration, could have a material adverse effect on the Company's business.
The principal raw material used by the Company in its manufacturing facility
in Colorado is the radioactive isotope, Iodine-123. The Company obtains its
supply of Iodine-123 from MDS Nordion, which has supplied the material
without interruption during the last seven years. The Iodine-125 and
Palladium-103 isotopes to be used for the production of brachytherapy seeds
will be obtained from MDS Nordion or other manufacturers.
The Company is consistently in pursuit of improving its relationships with
current suppliers and developing new long-term relationships.
Patents, Trademarks, and Licenses
The Company owns a number of trademarks and patents, including patent rights
to the SECURE(R) Safety Insert System, a safety insert container system
used for the safe delivery, handling and disposal of unit dose products.
The Company also has patent rights to a family of radiopharmaceutical
delivery systems referred to as the "Pigs" (Piglet(TM), Piglet2(TM) and
PETPig(TM)). The Pigs are tungsten containers that weigh considerably less
than current lead containers and set new industry standards for the safe
transport and handling of radioactive substances. They also provide
enhanced radiation shielding resulting in a reduction in radiation exposure
to our pharmacy personnel and customers.
The Company also licenses its proprietary Windows-based SYNtrac(TM),
Unit Dose Manager(TM) and NucLink(TM) integrated software and hardware
systems to its customers to assist in the management of their nuclear
medicine departments and to facilitate electronic communication between the
Company's local radiopharmacies and customers. As of December 31, 1999, the
Company had almost 1,400 customers who were active licensees of the software
systems. The foregoing trademarks, patents and licenses are key components
to the Company's ability to operate its pharmacies efficiently, provide high
quality customer service, and build mutually beneficial long-term
relationships with the Company's customers.
Dependence on Customers
Pharmacy Services Customers
The Company has primarily three types of radiopharmacy customers in the U.S.:
(i) corporate account customers that negotiate contracts on behalf of
regional or national networks of hospitals and clinics, including hospital
alliances, proprietary hospital systems and group purchasing organizations
("GPOs"); (ii) local independent hospitals and clinics that purchase
radiopharmaceuticals from the company independent of any agreement or
membership with a national managed care provider or GPO; and (iii) community-
based multi-facility integrated healthcare networks ("IHNs") that control
purchasing for a limited but highly integrated group of hospitals and clinics
that may or may not be affiliated or aligned with a corporate account
customer.
In 1999, the Company's largest corporate account customers included Health
Trust (formerly Columbia/HCA), AmeriNet, Inc., TENET, Health Service
Corporation of America and Kaiser Foundation Health Plan, Inc. Sales to
corporate account customers and IHNs affiliated with GPOs were valued at
approximately $130 million in 1999, representing nearly 30% of the Company's
total radiopharmacy sales, compared to $146 million in 1998 representing 35%
of the Company's 1998 radiopharmacy sales. In 1999, sales to the Company's
three biggest corporate account customers (TENET, Health Trust and AmeriNet)
accounted for approximately 78% of the total corporate account sales,
compared to 81% in 1998. The contrast between 1998 and 1999 can be
attributed primarily to the loss of the Novation contract in March 1999;
while Syncor has been successful in retaining as customers 97 percent of the
hospitals and clinics affiliated with Novation after the contract
termination, Syncor no longer classified those sales as corporate account
sales. The advantage to having a corporate account agreement in place is that
the affiliated hospitals and clinics are more likely to be bound by long-term
supply agreements with the Company.
Sales to non-corporate account customers, including sales to IHNs not
affiliated with a corporate account customer, were valued at approximately
$310 million in 1999, representing nearly 70% of the Company's total
radiopharmacy sales, compared to $250 million in 1998 representing 63% of the
Company's 1998 radiopharmacy sales.
The Company's radiopharmacy operations are not dependent upon a single
customer. If two or more corporate account customers were to cause all or
most of their affiliated or member hospitals and clinics to cease using the
Company's services, it could result in a negative impact on the Company's
operations. If a corporate account customer terminates its agreement with
the Company, however, the Company's experience has been that many of that
customer's affiliated or member hospitals and clinics will continue to do
business with the Company. They remain with the Company for one or more of
the following reasons: (i) the affiliated hospital or clinic may be
contractually committed to purchase radiopharmaceuticals from the Company for
a set term, independent of its affiliation with the corporate account
customer; (ii) since the Company is the only true nationwide distributor of
radiopharmaceuticals, in several markets the Company's radiopharmacy may be
the only viable source of radiopharmaceutical products and services; (iii)
the Company offers products and services that are not offered by competitors;
or (iv) the hospital or clinic prefers the service offered by the Company
over the service provided by a competitor.
Medical Imaging Customers
The Company's ability to attract medical imaging customers depends on many
factors, including its ability to contract with health care providers and
payers and to attract referrals from physicians representing various medical
specialties, the type and quality of equipment, and the quality and
timeliness of test results. Referrals may depend on the existence of a
contractual relationship between a center and a patient's insurance carrier
or between a center and a health care provider (such as a managed care
provider, hospital or clinic). The loss of one or a few large customers
would not have a material adverse effect on the Company's business; however,
such a loss could have a material adverse impact on the local imaging centers
operated by the Company with whom such customers do business. Approximately
9.1% of CMI's revenues are related to patients participating in the Medicare
and Medicaid programs. If CMI were to be disqualified from participation in
both the Medicare and Medicaid programs, the resulting loss in revenues would
have a material adverse impact on CMI's business.
Manufacturing Customers
The Company's manufacturing facility in Colorado supplies almost all of its
Iodine-123 capsules to the Company's radiopharmacies. The Company aims to
expand the customer base for its Iodine-123 capsules.
Competitive Conditions
Pharmacy Services Business
The nuclear medicine market is divided into two segments: the market for bulk
products and the market for unit dose products. In 1999, the U.S. nuclear
medicine market was valued at approximately $850 million, with unit dose
sales accounting for approximately 80 percent of the market, and bulk product
sales accounting for the remaining 20 percent. The Company competes as a
distributor of unit dose products and as a distributor of bulk products on
behalf of manufacturers.
With respect to the bulk sales market, the Company competes with
radiopharmaceutical manufacturers that sell their products directly to
hospitals and clinics. The hospital or clinic, in turn, compounds the bulk
product into unit doses. Through its distribution agreements with
manufacturers, the Company acts as their agent to compete for bulk business.
In the U.S., Syncor's primary supplier of bulk products is DuPont.
The core of the Company's business, however, is in unit dose sales, which
generate higher profit margins than bulk sales. In 1999, the Company's unit
dose sales represented 92 percent of the Company's total radiopharmacy sales,
the same as in 1998. The advantages to customers of using a centralized
radiopharmacy to compound unit doses rather than preparing their own
radiopharmaceutical products include: (i) reduced risk of radiation exposure
to hospital personnel; (ii) cost savings due to the Company's volume
purchasing power; (iii) better utilization of time-sensitive products
purchased from radiopharmaceutical manufacturers; (iv) reduction in the time
needed to maintain extensive records required by regulatory agencies; and (v)
elimination or reduction of personnel, working space and equipment that would
otherwise have been necessary to compound unit doses.
The Company's radiopharmacies compete for unit dose sales with a number of
distributors, including two radiopharmaceutical manufacturers that have also
set up their own centralized radiopharmacies to supply unit doses to
customers, and approximately 100 to 105 independent radiopharmacies located
in cities throughout the U.S. The advantages to operating an independent
radiopharmacy include lower start-up and overhead costs and greater
management flexibility. In certain markets, there is competition with
universities which own and operate centralized radiopharmacies. The
advantages to operating a university radiopharmacy include having a
guaranteed customer base from the university's nuclear medicine department
and having access to subsidies from the university. In 1999, the Company
held approximately 50 to 55 percent of the market share for unit dose sales.
The Company differentiates itself from its competitors, and adds value to its
customers, by providing, among other things: (i) unit dose
radiopharmaceuticals under rigorous quality control standards; (ii) a
comprehensive nuclear medicine product line; (iii) professional consultation
and delivery services, including health physics and relief technology
services; (iv) the SECURE(R) Safety Insert System and the Pigs system for the
safe delivery, handling and disposal of unit dose products; and (v) the
SYNtrac(TM) and Unit Dose Manager(TM) software and hardware systems to allow
customers to better manage their nuclear medicine departments.
Medical Imaging Business
The Company's medical imaging centers compete with other diagnostic imaging
centers owned by physicians, hospitals, and other medical imaging providers.
The market is fragmented and has no dominant national imaging services
provider. In the beginning of 1999, there were approximately 3,000
outpatient diagnostic imaging centers in the U.S., and the largest provider
owns approximately 5% of those centers. The principal competitive factors
are the quality and timeliness of results, price, center location, type of
equipment available at the center, reputation of interpreting radiologists
and the center's ability to establish and maintain relationships with health
care providers and referring physicians. The Company plans to enhance its
network of referrals by building upon existing relationships and developing
new relationships through the radiopharmacy business. The Company plans to
differentiate itself from the competition by becoming a regional leader in
providing medical diagnostic imaging services in selected markets. Managed
care entities and other payers increasingly prefer to work with fewer
providers of healthcare services, including medical diagnostic imaging.
Regional differentiation combined with a complete offering of medical
imaging services may allow the Company to be the medical diagnostic imaging
partner of choice among regional payers seeking to minimize the number of
providers under contract.
Government Regulation and Reimbursement
Pharmacy Services and Manufacturing Business
Each of the Company's pharmacies in the U.S. is licensed by and must comply
with the regulations of the United States Nuclear Regulatory Commission
("NRC") or corresponding state agencies. In addition, each pharmacy is
licensed and regulated by the Board of Pharmacy in the state where it is
located. The Company's manufacturing facility in Colorado is licensed by the
state of Colorado for radioactive materials and is licensed by the Food and
Drug Administration ("FDA") as a manufacturing facility. The FDA also
inspects the facility for compliance with its "good manufacturing practices"
standards.
Periodic inspections of the Company's pharmacies are conducted by the NRC and
various other federal and state agencies. Unsatisfactory inspection results
could lead to escalated enforcement action, the imposition of fines or the
suspension, and/or revocation or denial of renewal of the licenses for the
location inspected. The Company devotes substantial human and financial
resources to ensure continued regulatory compliance and believes that it is
currently in material compliance with all material rules and regulations.
The Company is subject to the various federal, state and local regulations
relating to occupational safety and health and the use and disposal of bio-
hazardous materials. In addition, the Company's products are subject to
federal, state and local regulations relating to drugs and medical devices.
Compliance with the applicable environmental control laws and regulations,
such as those regulating the use and disposal of radioactive materials, is
inherent in the industry and the normal operations of the Company's
pharmacies and its manufacturing facility. Historically, compliance with such
laws and regulations has not had a material adverse effect on the capital
expenditures, earnings or competitive position of the Company.
The Federal Medicare and Medicaid Anti-Kickback Statute and similar state
statutes prohibit the offering, payment, solicitation or receipt of any form
of remuneration in return for the purchase, lease or order or provision of
any item or service that is covered by Medicare or Medicaid. Violations of
the Anti-Kickback Statute or similar state statutes could result in
substantial civil and/or criminal penalties in connection with willful
violations of the statutes. Violations could also result in the Company's
exclusion from Medicare or Medicaid programs. The Company believes that its
pharmacy services business is in material compliance with the Anti-Kickback
Statute and similar state statutes.
Changes to the current framework by which the Health Care Financing
Administration ("HCFA") reimburses healthcare providers for healthcare
services, primarily with the introduction of ambulatory payment
classifications (APCs), are scheduled to take into effect in mid-year 2000.
While the Company's pharmacy services business does not get reimbursement
from HCFA, the implementation of APCs could have an effect on the hospitals
that purchase their radiopharmaceuticals from Syncor, and that impact, in
turn, could affect the Company's revenues. The Company cannot predict at this
time what impact those changes will have on the Company's pharmacy services
business, but based on information currently available to it, the Company's
management believes that the changes will have a favorable impact.
Medical Imaging Business
The federal government and all states in which the Company operates or plans
to operate medical imaging centers in the U.S. regulate various aspects of
the medical imaging business. Failure to comply with these laws and
regulations could have an adverse impact on the Company's ability to receive
reimbursement for its services from government agencies and could also result
in civil and criminal penalties against the Company and its management.
Reimbursement for medical imaging may be undergoing change as third-party
payers, such as Medicare and Medicaid, health maintenance organizations and
other health insurance carriers, increase efforts to control the cost,
utilization and delivery of healthcare services. Legislation has been
proposed or enacted at both the federal and state levels to regulate
healthcare delivery in general and radiology services in particular. In June
1998, HCFA, acting pursuant to the Balanced Budget Act of 1997, published a
proposed reimbursement schedule that, if implemented, would have resulted in
reductions in Medicare reimbursement for medical imaging services over a
four-year phase-in period. The proposed schedule was not implemented because
the data from which HCFA prepared the proposed reimbursement schedule was not
complete. As of March 2000, HCFA was still in the process of analyzing data
to determine what reductions, if any, should be made in medical imaging
reimbursement. The final outcome to the proposed fee restructuring and the
impact on diagnostic facilities, and on the Company, cannot be predicted at
this time. As for the introduction of APCs in mid-year 2000, since APCs
apply only to outpatient services performed by hospital-based medical
providers, the Company's management does not expect that change to affect the
Company's medical imaging centers, which are not hospital-based.
The medical imaging business is subject to state insurance laws governing the
presentation and payment of insurance claims for medical imaging services to
patients with health insurance. The Company believes that it is in material
compliance with such laws.
The establishment and operation of outpatient diagnostic imaging centers are
subject to various licensure requirements. Some states require a Certificate
of Need ("CON") in certain circumstances to establish, construct, acquire or
expand healthcare facilities and services. The Company may also have to
comply with federal certification requirements, such as the federal
certification requirement to provide mammography examinations. The Company's
imaging centers are also subject to federal and state regulations relating to
testing standards, personnel accreditation and compliance with government
reimbursement programs.
The Federal Medicare and Medicaid Anti-Kickback Statute and similar state
statutes prohibit the offering, payment, solicitation or receipt of any form
of remuneration in return for the referral of Medicare or Medicaid patients
or patient care opportunities, or in return for the purchase, lease or order
or provision of any item or service that is covered by Medicare or Medicaid.
The Company believes that its medical imaging centers are in material
compliance with the Anti-Kickback Statute and similar state statutes.
The Federal False Claims Act and similar state statutes prohibit the
presentation of a claim for payment under Medicare, Medicaid and other
federally funded programs containing false or misleading information.
Violations of the False Claims Act can result in civil penalties of between
$5,000 and $10,000 per false claim plus treble damages. The Company believes
that its medical imaging centers are in material compliance with the False
Claims Act.
The "Stark II" statute, enacted under the Omnibus Budget Reconciliation Act
of 1993, prohibits a physician from making a referral to an entity for the
furnishing of designated health services (including diagnostic imaging
services) for which Medicare may otherwise pay, if the physician has a
financial relationship with that entity. In addition, a number of states
(including California and Florida) have enacted their own versions of self-
referral laws similar to Stark. The Company believes that it is currently in
material compliance with Stark and similar statutes.
The medical imaging business may be subject to the laws of certain states
which prohibit the practice of medicine by non-physicians and/or the
splitting of fees between physicians and non-physicians. The Company
believes its operations are conducted in material compliance with existing
applicable laws relating to the corporate practice of medicine and fee
splitting.
The Company is also subject to licensing and regulation under federal, state
and local laws relating to the handling and disposal of medical specimens,
infectious and hazardous waste and radioactive materials as well as to the
safety and health of laboratory employees. The sanctions for failure to
comply with these regulations may include denial of the right to conduct
business, significant fines and criminal penalties. The Company believes
that it is in material compliance with all such applicable laws and regulations.
International Risks and Uncertainties
The Company's foreign operations are not immune to the inherent uncertainties
and risks of currency fluctuations, political and civil unrest, trade
restrictions, and inconsistent market and regulatory conditions.
Employees
As of December 31, 1999, the Company employed over 2,900 people in the United
States, of whom approximately 2,000 were full-time employees. The Company
employs approximately 200 people outside the United States, of whom
approximately 180 are full-time employees.
Item 2. PROPERTIES.
The Company's corporate headquarters is located in Woodland Hills,
California. The Company leases approximately 60,967 square feet at that
location, which is adequate for the Company's current needs. The lease is
for a term of ten years commencing on March 1, 1997, with one five-year
renewal option. The Company also leases an administrative office facility in
Duluth, Georgia. The Company leases approximately 19,666 square feet at that
location, which is adequate for the Company's current needs. The lease is
for a term of ten years commencing on October 18, 1996.
The Company and its consolidated subsidiaries lease (and in one location own)
and operate a number of pharmacies in the U.S. whose locations are set forth
in the following table*:
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STATE LOCATION STATE LOCATION
ALABAMA Birmingham NEBRASKA Lincoln
Mobile Omaha
ARIZONA Gilbert(Mesa) NEVADA Las Vegas
Phoenix NEW JERSEY Kenilworth(Newark)
Tucson NEW MEXICO Albuquerque
ARKANSAS Jonesboro NEW YORK The Bronx
Little Rock Cheektowaga
CALIFORNIA Bakersfield (Buffalo)
Berkeley Franklin Square
Colton (Long Island)
Fresno Newburgh
Modesto Rochester
Palm Springs Syracuse
Redding Troy(Albany)
Sacramento NORTH CAROLINA Charlotte
San Diego Greensboro
San Jose Raleigh
Torrance OHIO Cincinnati
Van Nuys(Los Angeles) Columbus
COLORADO Colorado Springs Girard(Youngstown)
Denver Holland(Toledo)
CONNECTICUT Glastonbury(Hartford) Miamisburg(Dayton)
Stamford Uniontown/Green
DELAWARE Seaford (Akron)
FLORIDA Fort Myers Valley View
Gainesville (Cleveland)
Jacksonville OKLAHOMA Oklahoma City
Jupiter(West Palm Beach) Tulsa
Miami Lakes(Miami) OREGON Portland
Pensacola PENNSYLVANIA Allentown
Pompano Beach Bristol
(Ft. Lauderdale) (N. Philadelphia)
Sarasota Erie
Tampa Hummelstown
Winter Park(Orlando) (Harrisburg)
GEORGIA Augusta Pittsburgh
Columbus Sharon Hill
Doraville(Atlanta) (Philadelphia)
Rome RHODE ISLAND Providence
ILLINOIS Chicago SOUTH CAROLINA Columbia
Elmhurst TENNESSEE Chattanooga
INDIANA Ft. Wayne** Jackson
Griffith Knoxville
Indianapolis Memphis
IOWA Des Moines Nashville
KANSAS Wichita TEXAS Amarillo
KENTUCKY Lexington Austin
Louisville Beaumont
LOUISIANA New Orleans Corpus Christi
MARYLAND Silver Springs Dallas
Timonium(Baltimore) El Paso
MASSACHUSETTS Woburn(Boston) Fort Worth
MICHIGAN Grand Rapids Houston
Southfield(Detroit) Lubbock
Swartz Creek(Flint) San Antonio
MINNESOTA Moorhead(Fargo, ND) VIRGINIA Richmond
St. Paul Virginia Beach
MISSISSIPPI Flowood(Jackson) WASHINGTON Seattle
Tupelo Spokane
MISSOURI Kansas City Tacoma
Overland(St. Louis) Huntington
Springfield Princeton
WISCONSIN Appleton
(Green Bay)
Mosinee
Wauwatosa
(Milwaukee)
<FN>
<F1>* The Company also owns an interest in pharmacies in: Salt Lake City,
Utah; Midland, Texas; Huntsville, Alabama; and Reno, Nevada.
<F2>** Managed by, and under the name of, Spectrum Pharmacy, Inc.
</FN>
</TABLE>
Pharmacy lease terms vary from less than one year to approximately ten years,
and average approximately five years. Leased areas average approximately
4,500 square feet.
CMI has its corporate headquarters in Westlake Village, California. CMI owns
or manages medical imaging centers in various locations throughout the U.S.
The following table lists the medical imaging centers in the U.S. and
describes CMI's ownership interest in each center and the types of imaging
modalities offered in each center:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
NAME OF CENTER LOCATION PROPERY OWNERSHIP MODALITIES
Anaheim Cath Lab* Anaheim, CA N/A 0 Catheterization
Laboratory
Comprehensive OPEN Bakersfield, CA Leased 100 MRI
MRI-Bakersfield
Comprehensive OPEN
MRI-Carmichael/Folsom Carmichael, CA Leased 100 MRI
Comprehensive OPEN
MRI-Carmichael/Folsom Folsom, CA Leased 100 MRI
Comprehensive OPEN Dallas, TX Leased 100 MRI
MRI-Dallas
Comprehensive OPEN Encino, CA Leased 100 MRI
MRI-Encino
Comprehensive OPEN Fullerton, CA Leased 100 MRI
MRI-Fullerton
Comprehensive OPEN Laguna Hills, CA Leased 100 MRI
MRI-Laguna Hills
Comprehensive OPEN Plano, TX Leased 100 MRI
MRI-Plano
Comprehensive OPEN Sacramento, CA Leased 100 MRI
MRI-Sacramento
Comprehensive Medical Bakersfield, CA Leased 100 MRI/CT/X-ray/
Imaging-Bakersfield Fluoroscopy/
Mammography/
Ultrasound
Comprehensive Medical Fairfax, VA Leased 100 MRI/CT/Nuclear
Imaging-Fairfax Medicine/X-ray/
Fluoroscopy
Comprehensive Medical Rancho Cucamonga, Leased 100 MRI/CT
Imaging- CA
Rancho Cucamonga
Corona Inland MRI Corona, CA Leased 100 MRI
Crescent City MRI New Orleans, LA Leased 27.07 MRI
Desert CT/MRI Palm Springs, CA Leased 100 MRI/CT
Desert CT/MRI Rancho Mirage, CA Leased 100 MRI/CT
Fairfield Cath Lab* Fairfield, CA N/A 0 Catheterization
Laboratory
Fox Valley Imaging Naperville, IL Leased 7.62 MRI/CT/X-ray/
Fluoroscopy
Greenville MRI Greenville, NC Leased 32.63 MRI
IMI of Arlington Arlington, VA Leased 100 MRI
IMI of Boca Raton Boca Raton, FL Owned 100 MRI/CT/X-ray/
Fluoroscopy
IMI Diagnostic Center Plantation, FL Leased 100 CT/X-ray/
Nuclear
Medicine/
Ultrasound/
Mammography/
Tomography/
Fluoroscopy
IMI of Kansas City Overland Park, KS Owned 100 MRI/X-ray
IMI of Miami Miami, Fl Leased 100 MRI/CT/X-ray/
Fluoroscopy/
Ultrasound/
Mammography
IMI of North Miami North Miami Leased 100 MRI/X-ray/
Beach Beach, FL Fluoroscopy
IMI of Oakland Park Oakland Park, FL Leased 100 MRI
IMI of Pine Island Plantation, FL Owned 100 MRI
Jefferson Imaging - Bala Cynwyd, PA Leased 7.62 MRI
Bala
Jefferson Imaging - Langhorne, PA Leased 100 MRI
Langhorne
Lodi CT-MRI* Lodi, CA N/A 0 CT
Lodi Imaging Center* Lodi, CA N/A 0 Catheterization
Laboratory/
Nuclear
Medicine/X-ray/
Ultrasound
Los Gatos MRI Los Gatos, CA Leased 100 MRI
MRI of Woodbridge Woodbridge, VA Leased 7.62 MRI
Medical Imaging Center W. Orange, NJ Leased 100 MRI/CT/X-ray
of the Oranges Ultrasound/
Mammography/
Fluoroscopy
Mesa MRI Mesa, AZ Leased 7.62 MRI
Mid States Diagnostic Wichita, KS N/A 0 Ultrasound/
Services* Nuclear Medicine
Mountain View MRI Paradise Valley, Leased 100 MRI
AZ
Riverside MRI Center Riverside, CA Leased 52.5 MRI/
Fluoroscopy/
X-ray
Santa Maria MRI Center Santa Maria, CA Leased 100 MRI
Tampa Diagnostic Tampa, FL Leased 7.62 MRI/CT/X-ray
Institute Fluoroscopy/
Ultrasound/
Mammography/
Nuclear Medicine
Tempe OPEN MRI Phoenix, AZ Leased 100 MRI/X-ray/
Fluoroscopy/
Ultrasound
Thunderbird MRI Glendale, AZ Leased 100 MRI
Valley Imaging Center- Apple Valley, CA Leased 100 MRI/CT/X-ray
Apple Valley Fluoroscopy/
Mammography
Valley Imaging Center- Hesperia, CA Leased 100 Ultrasound/
Hesperia X-ray
Mammography
Valley Imaging Center- Victorville, CA Leased 100 Ultrasound/
Victorville X-ray
Fluoroscopy/
Mammography
Valley MRI Phoenix, AZ Leased 59.16 MRI
West Coast Radiology Santa Ana, CA N/A 0 MRI/CT/X-ray
Center* Mammography/
Ultrasound/
Nuclear
Medicine/
Bone
Densitometry/
Radiation
Therapy
<FN>
_____________________
<F1>* The Company receives a management fee for financial and accounting
services from these 6 medical imaging centers.
</FN>
</TABLE>
In addition to the listed imaging centers, the Company receives a fee for
managing the equipment leases in 9 other medical imaging centers.
Outside of the United States, the Company operates radiopharmacies and
medical imaging centers in the following locations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LOCATION TYPE OF FACILITY PROPERTY OWNERSHIP
Auckland, New Zealand Medical Imaging Leased 100
(Nuclear Medicine)
Auckland, New Zealand Radiopharmacy Leased 100
Bangkok, Thailand Radiopharmacy Leased 100
Beijing, China Radiopharmacy Own 79.78
Bogota, Colombia Radiopharmacy Leased 100
Chia-Yi City, Taiwan Medical Imaging (MRI) N/A 0
Chia-Yi City, Taiwan Medical Imaging Leased 100
(Nuclear Medicine)
Hong Kong, S.A.R., China Radiopharmacy Leased 100
Johannesburg, South Africa Radiopharmacy Leased 100
Kaoshiung, Taiwan Radiopharmacy Own 100
Loudon City, Taiwan Medical Imaging Leased 100
(Nuclear Medicine)
Manila, Philippines Radiopharmacy Leased 100
Mexico City, Mexico Radiopharmacy Leased 100
Perth, Australia Radiopharmacy Leased 100
San Juan, Puerto Rico Radiopharmacy Leased 100
Santurce, Puerto Rico Medical Imaging (MRI) Own 100
Seoul, South Korea Radiopharmacy Own 100
Shanghai, China Radiopharmacy Own 83.67
Sydney, Australia Radiopharmacy Leased 100
Taichung, Taiwan Cyclotron Facility Leased 100
Taichung, Taiwan Radiopharmacy Leased 100
Taipei, Taiwan Radiopharmacy Own 100
Taipei, Taiwan Medical Imaging Leased 100
(Nuclear Medicine)
Taipei, Taiwan Medical Imaging Leased 100
(Nuclear Medicine)
Tel Aviv, Israel Radiopharmacy N/A 0*
<FN>
_________________
<F1>* Licensing arrangement with an Israeli company.
</FN>
</TABLE>
Item 3. LEGAL PROCEEDINGS.
The Company and its subsidiaries are involved in various litigation
proceedings. Many of the claims asserted against the Company in these
proceedings are covered by insurance. The results of litigation proceedings
cannot be predicted with certainty. In the opinion of the Company's General
Counsel, however, such proceedings either are without merit or do not have a
potential liability which would materially affect the financial condition of
the Company and its subsidiaries on a consolidated basis.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The information relating to the Company's Common Stock which appears in the
Company's Annual Report to Stockholders for the year ended December 31, 1999,
under "Selected Quarterly Results of Operations" and "Stockholder
Information," included in this Form 10-K Annual Report as Exhibit 13, is
incorporated by reference.
Item 6. SELECTED FINANCIAL DATA.
The selected financial data which appears in the Company's Annual Report to
Stockholders for the year ended December 31, 1999, under the heading of
"Selected Financial Data," included in this Form 10-K Annual Report as
Exhibit 13, are incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations which appears in the Company's Annual Report to Stockholders for
the year ended December 31, 1999, under the heading of "Management's
Discussion and Analysis," included in this Form 10-K Annual Report as Exhibit
13, is incorporated by reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The quantitative and qualitative disclosures about market risk which appear
in the Company's Annual Report to Stockholders for the year ended December
31, 1999, under the heading of "Quantitative and Qualitative Disclosures
About Market Risk," included in this Form 10-K Annual Report as Exhibit 13,
are incorporated by reference.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and the notes thereto which appear in
the Company's Annual Report to Stockholders for the year ended December 31,
1999, under the headings of "Consolidated Statements of Income" and
"Consolidated Balance Sheets," included in this Form 10-K Annual Report as
Exhibit 13, are incorporated by reference. Schedules containing certain
supporting information are also included. See Financial Statement Schedules
on page 14 hereof.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 of Form 10-K is incorporated by
reference from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders, to be held on June 20, 2000, which will be filed
with the Commission pursuant to Regulation 14A of the Securities and Exchange
Commission ("Regulation 14A") within 120 days from December 31, 1999.
Based solely upon its review of Forms 3, 4 and 5 furnished to the Company,
the Company believes that all reports required to be filed during 1999
pursuant to Section 16(b) of the Securities Exchange Act of 1934 were timely
filed, except that George S. Oki was late by 7 days in filing his Form 4 for
March 1999 to report a sale.
Item 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on June 20, 2000, which will be filed with
the Commission pursuant to Regulation 14A within 120 days from December 31,
1999.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by Item 12 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on June 20, 2000, which will be filed with
the Commission pursuant to Regulation 14A within 120 days from December 31,
1999.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 of Form 10-K is hereby incorporated by
reference from the Company's definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on June 20, 2000, which will be filed with
the Commission pursuant to Regulation 14A within 120 days from December 31,
1999.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Consolidated Financial Statements.
The consolidated financial statements listed below, together
with the report thereon of KPMG LLP, dated February 16, 2000,
which appear in the Company's Annual Report to Stockholders for
the year ended December 31, 1999, included in this Form 10-K
Annual Report as Exhibit 13, are hereby incorporated herein by
reference.
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity and
Comprehensive Income
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
The following schedule supporting the financial statements of
the Company is included herein:
Page
Schedule II Valuation and Qualifying Accounts 17
All other schedules and financial statements of the Company
are omitted because they are not applicable or not required or
because the required information is included in the
consolidated financial statements or notes thereto.
3. Index to Exhibits.
The list of exhibits filed as part of this report on Form 10-K
or incorporated by reference appears as Index to Exhibits on
page 18.
(b) Reports on Form 8-K filed in the Quarter Ended December 31, 1999.
Form 8-K, dated September 28, 1999 and filed on October 12,
1999, disclosing the adoption by the Board of Directors of a
new Stockholder Rights Plan that superseded the Company's
previous rights plan.
(c) Exhibits.
The exhibits required by Item 601 of Regulation S-K are filed
with this Form 10-K Annual Report or are incorporated by
reference and are listed in the Index to Exhibits on page 18.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 30, 2000 SYNCOR INTERNATIONAL CORPORATION
By /s/Robert G. Funari
Robert G. Funari
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/Monty Fu Chairman of the Board Date: March 30, 2000
Monty Fu and Director
/s/Robert G. Funari President, Chief Executive Date: March 30, 2000
Robert G. Funari Officer (Principal
Executive Officer) and
Director
/s/Michael E. Mikity Senior Vice President, Date: March 30, 2000
Michael E. Mikity Chief Financial Officer
and Treasurer (Principal
Financial and Accounting
Officer)
/s/George S. Oki Director Date: March 30, 2000
George S. Oki
/s/Arnold E. Spangler Director Date: March 30, 2000
Arnold E. Spangler
/s/Steven B. Gerber Director Date: March 30, 2000
Steven B. Gerber, M.D.
/s/Henry N. Wagner Director Date: March 30, 2000
Henry N. Wagner, Jr., M.D.
/s/Gail R. Wilensky Director Date: March 30, 2000
Dr. Gail R. Wilensky
/s/Ronald A. Williams Director Date: March 30, 2000
Ronald A. Williams
<TABLE>
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
Schedule II. Valuation and Qualifying Accounts
<CAPTION>
<S> <C> <C> <C> <C>
(In thousands)
_____________________________________________________________________________
Balance Costs Balance
at and at End
Beginning Expenses Deductions of
Description of Period (A) (B) Period
_____________________________________________________________________________
Year Ended
December 31, 1999
Allowance for doubtful
accounts $3,774 $ 942 $ 0 $4,716
Year Ended
December 31, 1998
Allowance for doubtful
accounts $1,040 $3,009 $ 275 $3,774
Year Ended
December 31, 1997
Allowance for doubtful
accounts $ 911 $ 0 $ (129) $1,040
<FN>
<F1> (A) Amount due to acquisition of medical imaging businesses and related
accounts receivable.
<F2> (B) Uncollectible accounts written-off, net of recoveries and change in
reserve.
</FN>
</TABLE>
INDEX TO EXHIBITS
Exhibit No.
3. Certificate of Incorporation and By-Laws
3.1 Restated Certificate of Incorporation of the Company filed as
Exhibit 3.1 to the Form 10-Q for the quarter ended June 30, 1999,
and incorporated herein by reference.
3.2 Restated By-Laws of the Company, filed as Exhibit 3.2 to the Form
10-K for the year ended December 31, 1995, and incorporated
herein by reference.
4. Instruments Defining the Rights of Security Holders
4.1 Stock Certificate for Common Stock of the Company filed as
Exhibit to the Form 10-K for the year ended May 31, 1986, and
incorporated herein by reference.
4.2 Rights Agreement dated as of September 28, 1999 between the
Company and American Stock Transfer & Trust Company filed as
Exhibit 4 to the Form 8-K dated September 28, 1999 and filed on
October 12, 1999, and incorporated herein by reference.
10. Material Contracts
10.1 Syncor International Corporation 1981 Master Stock Option Plan,
as amended, filed as part of the Company's Proxy Statement dated
November 5, 1985, for its Annual Meeting of Stockholders held
November 26, 1985, and incorporated herein by reference.*
10.2 Form of Indemnity Agreement substantially as entered into between
the Company and each Director and Officer, filed as Exhibit 3.2
Appendix A to the Form 10-K for the year ended December 31, 1995,
and incorporated herein by reference.*
10.3 Form of Benefits Agreement substantially as entered into between
the Company and each Director, filed as Exhibit 10.8 to the Form
10-K for the year ended December 31, 1995, and incorporated
herein by reference.*
10.4 Form of Benefits Agreement substantially as entered into between
the Company and certain employees, filed as Exhibit 10.8 to the
Form 10-K for the year ended December 31, 1995, and incorporated
herein by reference.*
10.5 Syncor International Corporation 1990 Master Stock Incentive
Plan, as amended and restated as of June 18, 1997, filed as
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended
June 30, 1997, and incorporated herein by reference.*
10.6 First Amendment to the Syncor International Corporation 1990
Master Stock Incentive Plan, as amended and restated dated as of
June 23, 1999, filed as Exhibit 10.4 to the Form 10-Q for the
quarter ended June 30, 1999, and incorporated herein by
reference.*
10.7 Form of Stock Option Agreement substantially as entered into
between the Company and certain employee Directors and employees
filed as Exhibit 10.15 to the Form 10-K for year ended December
31, 1993, and incorporated herein by reference.*
10.8 Form of Stock Option Agreement substantially as entered into
between the Company and certain non-employee Directors filed as
Exhibit 10.16 to the Form 10-K for the year ended December 31,
1993, and incorporated herein by reference.*
10.9 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and Arnold E.
Spangler, filed as Exhibit 10.17 to the Form 10-K for the year
ended December 31, 1995, and incorporated herein by reference.*
10.10 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and George S.
Oki, filed as Exhibit 10.18 to the Form 10-K for the year ended
December 31, 1995, and incorporated herein by reference.*
10.11 Non-Employee Director 1995 Stock Incentive Award Agreement dated
January 24, 1995 entered into between the Company and Henry
Wagner, Jr., filed as Exhibit 10.19 to the Form 10-K for the year
ended December 31, 1995, and incorporated herein by reference.*
10.12 Non-Employee Director 1995 Stock Incentive Award Agreement dated
April 29, 1996, entered into between the Company and Gail
Wilensky, filed as Exhibit 4.3(b) to the Registration Statement
on Form S-8 filed on December 20, 1996 to register the shares
underlying said Award Agreement, and incorporated herein by
reference.*
10.13 Non-Employee Director 1995 Stock Incentive Award Agreement dated
April 29, 1996, entered into between the Company and Steven
Gerber, filed as Exhibit 4.3(a) to the Registration Statement on
Form S-8 filed on December 20, 1996 to register the shares
underlying said Award Agreement, and incorporated herein by
reference.*
10.14 Subscription Agreement, dated July 15, 1996, executed by Syncor
Management Corporation in favor of American Tax Credit Corporate
Fund III, L.P., together with a Promissory Note, dated July 15,
1996, executed by Syncor Management Corporation in favor of John
Hancock Mutual Life Insurance Company, as assignee of Corporate
Credit, Inc., and the Guarantee of Parent Corporation, dated July
15, 1996, executed by the Company in favor of John Hancock Mutual
Life Insurance Company, as assignee of Corporate Credit, Inc.
These agreements were filed as Exhibit 10.15 to the Form 10-K for
the year ended December 31, 1996, and are incorporated herein by
reference.
10.15 The 1997 Management Incentive Plan of the Company, filed as
Exhibit 10.18 to the Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.*
10.16 The Office Lease, dated as of September 30, 1996, between
Massachusetts Life Insurance Company and the Company, relating to
the office lease for the Company's corporate headquarters in
Woodland Hills, California, filed as Exhibit 10.19 to the Form
10-K for the year ended December 31, 1996, and incorporated
herein by reference.
10.17 Lease, dated May 30, 1996, between the Company and Technology
Park/Atlanta, Inc., relating to the office lease for the
Company's administrative office in Duluth, Georgia, filed as
Exhibit 10.20 to the Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
10.18 Non-employee Director Stock Compensation Plan, dated August 27,
1996, filed as Exhibit 4.3 to the Form S-8 Registration Statement
filed by the Company with the SEC on December 20, 1996, and
incorporated herein by reference.*
10.19 Loan Agreement, dated March 31, 1997, among Syncor
Pharmaceuticals, Inc., as borrower, the Company, as guarantor,
and Bank One, NA (formerly The First National Bank of Chicago),
as lender, filed as Exhibit 10.1 to the Form 10-Q for the quarter
ended March 31, 1997, and incorporated herein by reference.
10.20 Credit Agreement, dated August 8, 1997, between Syncor
International Corporation and Mellon Bank, N.A., filed as Exhibit
10.2 to the Form 10-Q for the quarter ended September 30, 1997,
and incorporated herein by reference.
10.21 Syncor International Corporation Deferred Compensation Plan
effective January 1, 1998, filed as Exhibit 10.24 to the Form
10-K for the year ended December 31, 1997, and incorporated
herein by reference.*
10.22 Credit Agreement, dated as of January 5, 1998, among the Company,
as borrower, Bank One, NA (formerly The First National Bank of
Chicago), as lender and administrative agent, and Mellon Bank,
N.A., as lender, filed as Exhibit 10.26 to the Form 10-K for the
year ended December 31, 1997, and incorporated herein by
reference.
10.23 First Amendment to Credit Agreement, dated as of November 10,
1999, among the Company, as borrower, Bank One, NA, as lender and
administrative agent, and Mellon Bank, N.A., as lender.
10.24 Executive Long-Term Performance Equity Plan, effective as of
January 1, 1998, filed as Exhibit 10.1 to the Form 10-Q for the
quarter ended March 31, 1998, and incorporated herein by
reference.*
10.25 First Amendment to Executive Long-Term Performance Equity Plan,
dated as of November 17, 1998, filed as Exhibit 10.25 to the Form
10-K for the year ended December 31, 1998, and incorporated
herein by reference.*
10.26 Second Amendment to the Executive Long-Term Performance Equity
Plan, dated as of June 23, 1999, filed as Exhibit 10.1 to the
Form 10-Q for the quarter ended June 30, 1999, and incorporated
herein by reference.*
10.27 1998 Senior Management Stock Purchase Plan, effective as of June
16, 1998, filed as Exhibit 10.1 to the Form 10-Q for the quarter
ended June 30, 1998, and incorporated herein by reference.*
10.28 Universal Performance Equity Participation Plan, effective as of
June 16, 1998, filed as Exhibit 10.2 to the Form 10-Q for the
quarter ended June 30, 1998, and incorporated herein by
reference.*
10.29 First Amendment to the Universal Performance Equity Participation
Plan, dated as of June 16, 1998, filed together with the
Universal Performance Equity Plan that was filed as Exhibit 10.2
to the Form 10-Q for the quarter ended June 30, 1998, and
incorporated herein by reference.*
10.30 Second Amendment to the Universal Performance Equity
Participation Plan, dated as of June 23, 1999, filed as Exhibit
10.2 to the Form 10-Q for the quarter ended June 30, 1999, and
incorporated herein by reference.*
10.31 Third Amendment to the Universal Performance Equity Participation
Plan, dated as of June 23, 1999, filed as Exhibit 10.3 to the
Form 10-Q for the quarter ended June 30, 1999, and incorporated
herein by reference.*
10.32 New Employee Stock Option Plan, dated as of June 1, 1998, filed
as Exhibit 10.1 to the Form 10-Q for the quarter ended September
30, 1998, and incorporated herein by reference.*
10.33 Form of Stock Option Agreement under the New Employee Stock
Option Plan as entered into between the Company and certain
employees, filed as Exhibit 10.31 to the Form 10-K for the year
ended December 31, 1998, and incorporated herein by reference.*
10.34 Non-Qualified Stock Option Award Agreement, dated February 24,
1999, between the Company and Robert G. Funari, filed as Exhibit
10.1 to the Form 10-Q for the quarter ended March 31, 1999, and
incorporated herein by reference.*
10.35 Non-Employee Director 1999 Stock Incentive Plan, dated November
11, 1999.*
10.36 Form of Non-Employee Director 1999 Stock Incentive Award
Agreement, dated November 11, 1999, entered into between the
Company and each of the non-employee directors (excluding Ronald
Williams).*
10.37 Split Dollar Agreement between the Company and the Monty and
Wendy Fu 1998 Irrevocable Trust, dated January 8, 1999.*
10.38 2000 Corporate Management Incentive Plan.*
10.39 Amended and Restated Employment Agreement of Monty Fu, dated
January 1, 1997, and amended and restated as of December 31,
1997, filed as Exhibit 10.2 to the Form 10-Q for the quarter
ended March 31, 1998, and incorporated herein by reference.*
10.40 Amended and Restated Employment Agreement of Robert G. Funari,
dated January 1, 1997, and amended and restated as of December
31, 1997, filed as Exhibit 10.3 to the Form 10-Q for the quarter
ended March 31, 1998, and incorporated herein by reference.*
11. Statement Re: Computation of Per Share Earnings
Computation can be clearly determined from the material contained in
the Company's Annual Report to Stockholders for year ended December 31,
1999.
13. Annual Report to Security Holders
Syncor International Corporation Annual Report to Stockholders for the
year ended December 31, 1999, except for specific information in such
Annual Report expressly incorporated herein by reference, is furnished
for the information of the Commission and is not to be deemed "filed"
as part hereof.
21. Subsidiaries of the Registrant
<TABLE>
<CAPTION>
<S> <C>
State or Country
Name of Subsidiary of Organization
Syncor Management Corporation Delaware
Syncor Midland, Inc. Texas
Syncor Pharmaceuticals, Inc. Delaware
Comprehensive Medical Imaging, Inc. Delaware
Comprehensive Diagnostic Imaging, Inc.** Delaware
Medical Diagnostic Leasing, Inc.** Delaware
TME, Inc.** Delaware
Beijing Syncor Medicine Corporation, Ltd. People's Republic of China
Pharmatopes (Proprietary) Limited*** South Africa
Shanghai Syncor Medicine Corporation, Ltd. People's Republic of China
Syncor de Mexico, S.A. de C.V.*** Mexico
Syncor de Puerto Rico, Inc.*** Puerto Rico
Syncor Hong Kong Limited*** Hong Kong
Syncor International (Thailand) Co., Ltd. Thailand
Syncor Korea, Inc.*** South Korea
Syncor New Zealand Limited*** New Zealand
Syncor Pharmacies Australia Pty. Ltd.*** Australia
Syncor Overseas Ltd. British Virgin Islands
Syncor Philippines, Inc.*** Philippines
Syncor Taiwan, Inc.*** Taiwan
Syncor Radiofarmacos, S.L. *** Spain
Syncor de Colombia, S.A. *** Colombia
Syncor Italy, S.R.L. *** Italy
Sichuan Syncor Medicine Corporation, Ltd. *** People's Republic of China
Alva Nuclear S.A. de C.V. *** Mexico
Alsyn Corporativos S.A. de C.V. *** Mexico
<FN>
________________________
<F1>* Management contracts or compensatory plan
<F2>** Subsidiaries of Comprehensive Medical Imaging, Inc.
<F3>*** Subsidiaries of Syncor Overseas Ltd.
</FN>
</TABLE>
23. Independent Auditors' Consent and Report on Schedule
27. Financial Data Schedule
Exhibit 10.35
SYNCOR INTERNATIONAL CORPORATION
1999 NON-EMPLOYEE DIRECTOR
STOCK INCENTIVE PLAN
1. Purpose of the Plan. The purpose of this 1999 Non-Employee
Director Stock Incentive Plan (this "Plan") is to promote the success of
Syncor International Corporation (the "Corporation"): (a) by providing an
additional means to attract, motivate and retain non-employee directors
through the grant of options (each an "Option" or "Award") to purchase shares
of the Corporation's common stock ("Common Stock") that provide added long-
term incentives for high levels of performance and for significant efforts to
improve the financial performance of the Corporation, (b) by providing non-
employee directors with an opportunity to increase their stake in the
Corporation's future growth and to obtain direct benefits from future
appreciation of the Common Stock, and (c) by aligning the interests of non-
employee directors with the interests of stockholders.
2. Administration. The Plan shall be administered by the Officer
Director Committee of the Corporation's Board of Directors.
3. Participation. Awards may be granted only to non-employee
directors of the Corporation who have served the Corporation for at least one
year as of November 11, 1999.
4. Stock Subject to the Plan. The maximum aggregated number of shares
of Common Stock that may be granted under this Plan shall be 25,000 shares.
Each Option shall be a non-qualified stock option, and must be granted on or
before December 31, 1999.
5. Exercisability of Option. Except as otherwise provided in this
Plan or the Award Agreement, each Option shall become exercisable from time
to time as follows: (i) 25% of the Common Stock shall become purchasable
twelve months after the date the Option is granted (the "Award Date"); (ii)
an additional 25% of the Common Stock shall become purchasable twenty-four
months after the Award Date; (iii) an additional 25% of the Common Stock
shall become purchasable thirty-six months after the Award Date; and (iv) an
additional 25% of the Common Stock shall become purchasable forty-eight
months after the Award Date; 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 under
an installment of the Option. If the participant does not, in any given
installment period, purchase all of the shares which he or she is entitled to
purchase in such installment period, the participant's right to purchase any
shares not so purchased shall continue until ten years after the Award Date
(the "Expiration Date"), unless theretofore terminated in accordance with the
provisions hereof and of the Plan. The Option may be exercised only as to
whole shares.
6. Method of Exercise and Payment. 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 11 below and payment of the Price.
7. Effect of Termination of Directorship. The Option and all other
rights hereunder, to the extent such rights shall not have been exercised
prior thereto, shall terminate on the date the participant ceases to serve as
a director of the Corporation; provided, however, that the participant may,
to the extent the Option shall have become exercisable prior to such date,
exercise the Option at any time within (1) up to twelve months after such
termination; or (2) up to twelve months after the participant's death, if the
participant dies while serving as a director of the Corporation or during the
period referred to in clause (1) 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 Plan shall pass by will or by the applicable laws of
descent and distribution. Unless sooner terminated pursuant to this Plan,
the Option shall expire at the end of the applicable period specified in
clauses (1) or (2) above, to the extent not exercised within that period. In
no event may the Option be exercised by any person after the Expiration Date.
8. Non-Assignabilitv 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.
9. Acceleration. Upon the occurrence of an Event, as defined in the
Corporation's 1990 Master Stock Incentive Plan ("MSIP"), including a Change
of Control, the Option 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 Exchange Act.
10. 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.
11. 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, and any exchanges upon which the Common
Stock may be listed, shall have been fully satisfied. The participant must
represent, agree and certify 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 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 7 above shall be bound by and obligated under the provisions of this
Section 11 to the same extent as is the participant.
(c) The Officer Director Committee of the Corporation's Board of
Directors 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.
12. Notices. Any notice to be given to the Corporation pursuant to
this Plan 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 in the
Award Agreement, 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.
13. Tax Withholding. The provisions of Section 6.6 of the MSIP are
hereby incorporated and shall govern any withholding that the Corporation is
required to make with respect to an exercise of the Option, as well as the
Corporation's right to condition a transfer of Common Stock upon compliance
with the applicable withholding requirements of federal, state and local
authorities.
14. Law Applicable to Construction. The interpretation, performance
and enforcement of this Plan shall be governed by the laws of the State of
Delaware.
Exhibit 10.36
SYNCOR INTERNATIONAL CORPORATION
NON-EMPLOYEE DIRECTOR
1999 STOCK INCENTIVE
AWARD AGREEMENT
Name of Non-Employee
Director ("Participant") :
Address of Participant :
Social Security Number :
Number of Shares : 5,000
Exercise Price per Share : $34.75
Award Date : November 11, 1999
Expiration Date : November 11, 2009
WHEREAS, pursuant to the Corporation's 1999 Non-Employee Director Stock
Incentive Plan (the "Plan"), which is not exempt from the limitation of Rule
16b-3 promulgated by the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Participant has been granted a Non-Qualified 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 or
her status as a Non-Employee Director, and not in lieu of any salary or other
compensation for his or her services, the right and option to purchase, in
accordance with the Plan and on the terms and conditions of the Plan and
those hereinafter set forth, 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 the
Plan or this Award Agreement, the Option shall become exercisable from time
to time as follows: (i) 25% of the Common Stock shall become purchasable
twelve months after the Award Date; (ii) an additional 25% of the Common
Stock shall become purchasable twenty-four months after the Award Date; (iii)
an additional 25% of the Common Stock shall become purchasable thirty-six
months after the Award Date; and (iv) an additional 25% of the Common Stock
shall become purchasable forty-eight months after the Award Date; 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 under an installment of the Option. If the
Participant does not, in any given installment period, purchase all of the
shares which he or she is entitled to purchase in such installment period,
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 and of the Plan. The Option may be
exercised only as to whole shares.
3. Method of Exercise and Payment. 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 8 below and payment of the Price.
4. Effect of Termination of Directorship. The Option and all other
rights hereunder, to the extent such rights shall not have been exercised
prior thereto, shall terminate on the date the Participant ceases to serve as
a director of the Corporation; provided, however, that the Participant may,
to the extent the Option shall have become exercisable prior to such date,
exercise the Option at any time within (1) up to twelve months after such
termination; or (2) up to twelve months after the Participant's death, if the
Participant dies while serving as a director of the Corporation or during the
period referred to in clause (1) 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 the Plan and this Award Agreement shall pass by will or by the
applicable laws of descent and distribution. Unless sooner terminated
pursuant to the Plan, the Option shall expire at the end of the applicable
period specified in clauses (1) or (2) above, to the extent not exercised
within that period. In no event may the Option be exercised by any person
after the Expiration Date.
5. Non-Assignabilitv 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.
6. Acceleration. Upon the occurrence of an Event, as defined in
Syncor's 1990 Master Stock Incentive Plan ("MSIP"), including a Change of
Control, 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
Exchange Act.
7. 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.
8. 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, and any 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 4 above shall be bound by and
obligated under the provisions of this Section 8 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.
9. Notices. Any notice to be given to the Corporation under the
terms of the Award Agreement or pursuant to the Plan 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.
10. Tax Withholding. The provisions of Section 6.6 of the MSIP are
hereby incorporated and shall govern any withholding that the Corporation is
required to make with respect to an exercise of the Option, as well as the
Corporation's right to condition a transfer of Common Stock upon compliance
with the applicable withholding requirements of federal, state and local
authorities.
11. Law Applicable to Construction. The interpretation, performance
and enforcement of the Award and this Award Agreement shall be governed by
the laws of the State of Delaware.
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 or her hand as of the Award Date.
CORPORATION: PARTICIPANT:
SYNCOR INTERNATIONAL CORPORATION,
a Delaware corporation
By: _____________________________ _______________________________
Robert G. Funari
President and Chief Executive
Officer
Date: ________________________ Date: ________________________
CONSENT OF SPOUSE
I join with my spouse, the Participant herein named, in executing the
foregoing Non-Employee Director Stock Option Award Agreement and agree to be
bound by all of the terms and provisions thereof and of the Plan.
_________________________________
Signature of Participant's Spouse
Exhibit 10.37
SPLIT DOLLAR AGREEMENT
BETWEEN SYNCOR INTERNATIONAL CORPORATION AND
THE MONTY AND WENDY FU 1998 IRREVOCABLE TRUST
This Agreement, entered into this 8th day of January, 1999, by and between
Syncor International Corporation, (the "Corporation") organized and existing
under the laws of Delaware, and the Monty and Wendy Fu 1998 Irrevocable Trust
(the "Third Party Owner").
Witnesseth:
WHEREAS, Monty Fu (the "Employee") has rendered competent and faithful
services on behalf of the Corporation and the Corporation highly values the
services, abilities and accomplishments of the Employee; and
WHEREAS, the Corporation desires to encourage the Employee to continue to
render faithful and high quality services to the Corporation; and
WHEREAS, the Corporation is desirous of providing protection for the
beneficiaries of the Employee in the event of his untimely death; and
WHEREAS, the adoption of this Agreement is contingent upon the adoption by
the Employee and Wendy Fu (the "Spouse") of the agreement regarding all
current and future interests in the Syncor International Corporation Deferred
Compensation Plan (the "Plan"); and
WHEREAS, The Third Party Owner has applied for, and is the owner of Life
Insurance Policy Number 02002979-9 (the "Policy") in the specified face
amount of $16,300,000 from the John Hancock Variable Life Insurance Company;
and
WHEREAS, the Third Party Owner has assigned the Policy to the Corporation as
collateral for amounts to be advanced by the Corporation under this Agreement
by an instrument of assignment (the "Collateral Assignment") executed on
January 8, 1999, and
WHEREAS, it is understood and agreed that this Agreement is to be considered
effective as of the date on which the Policy was issued by the Insurance
Company or the date of execution of this Agreement whichever is later.
NOW THEREFORE, for value received and in consideration of the mutual
covenants and agreements contained herein, the sufficiency and receipt of
which is hereby acknowledged, the Corporation, for itself, its successors and
assigns, and the Third Party Owner for itself, its executors, administrators
and assigns, agree as follows:
Article I
Ownership Rights In the Policy
A. The Third Party Owner shall have all of the ownership rights, options
and privileges permitted by the Policy except those expressly granted to the
Corporation by the terms of this Agreement.
B. The Corporation's interest in the Policy shall be limited to the total
of the net premiums paid by the Corporation as described in Schedule A
attached hereto and incorporated herein by reference.
C. The Corporation may not take any action with respect to the Policy
that will impair any right or interest of the Third Party Owner in the
Policy.
Article II
Premium Payment Options
A. The Third Party Owner shall pay that portion of the premium which is
sufficient to offset all taxable income which, but for this paragraph, would
be deemed to be received by the Employee under Revenue Rulings 64-328, 1964-2
C.B. 11 and 66-110, 1966-1 C.B. 12, by reason of the insurance protection
afforded to the Employee.
B. The balance of the premium set forth in Schedule A, if any, shall be
paid by the Corporation no later than the due date of the policy each year.
C. The Corporation and the Third Party Owner shall each pay their
respective portion of the total amount of the premium payable on the policy.
The Corporation shall pay its portion of the premium directly to the
Insurance Company. Notwithstanding the foregoing, the Corporation may pay
the entire premium, but the Third Party Owner shall reimburse the Corporation
within one year for its said premium obligation.
D. The Corporation shall pay an annual bonus to the Employee equal to the
premiums paid by the Third Party Owner during that year under this Agreement
as well as an additional amount sufficient to cover any income tax liability
incurred by the Employee by virtue of the bonus.
Article III
Division of Death Proceeds of Policy
In the event that the Employee and the Spouse shall die while this Agreement
is in force, the Corporation shall be entitled to receive from the Policy
proceeds an amount equal to the Corporation's interest in the Policy, as
determined under Article I.B. of this Agreement. The portion of the Policy
proceeds which is in excess of the amount paid to the Corporation shall be
paid to the beneficiary named by the Third Party Owner in accordance with the
terms of the Policy as reflected in the records of the insurance company.
Article IV
Termination of Agreement
A. Unless otherwise altered by written agreement between the parties,
this Agreement will automatically terminate upon repayment by the Third Party
Owner to the Corporation of the amounts described in paragraph B of this
Article.
B. Prior to such termination, the Third Party Owner shall pay the
Corporation an amount equal to the Corporation's interest in the Policy under
Article I.B. Such payment will be due without additional interest or
penalties as long as it is paid within sixty days after the end of the
sixteenth year period described in Schedule A of this document. Should the
Third Party Owner be unable, due to the amounts available in the Policy, to
pay the entire balance due at that time, it may, at its option, extend the
payment period. The Third Party Owner may do so by providing a note payable
to the Corporation for a period of up to ten years with interest accruing at
rate of six percent per annum. Upon receipt of the premiums paid by the
Corporation under Article I.B plus interest, if applicable, the Corporation
shall release its claim to its interest in the policy.
C. If the Third Party Owner fails to pay the Corporation within the
required time frame, the Third Party Owner shall be deemed to have
relinquished all rights in the Policy and the Corporation will be free to
surrender or take any other action with respect to the Policy as it may
desire. As such, the Agreement will terminate and the Third Party Owner
agrees, upon request of the Corporation, to execute any and all instruments
that may be required to transfer all right, title, and interest in the Policy
to the Corporation.
D. Upon the division of death proceeds of the Policy pursuant to Article
III above, this Agreement shall terminate.
E. Upon a bankruptcy, insolvency, or sale of more than fifty percent of
the assets of the Corporation which precludes the Corporation from making any
or all of the premiums required by it under Schedule A, the Third Party Owner
will no longer be obligated to re-pay the Corporation its interest under
Article I.B. and the Agreement shall terminate. The Corporation agrees, upon
request of the Third Party Owner, to execute any and all instruments that may
be required to transfer all right, title and interest in the Policy to the
Third Party Owner.
F. Upon the Change of Control of the Corporation, as defined below, as
described in Schedule A, the Third Party may elect, in its sole discretion,
any of the following options:
1. To require the immediate payment of any and all unpaid premiums
described in Schedule A and continue the Agreement.
2. During years one through seven of the policy , to terminate the
Agreement. As such, the Third Party Owner will no longer be
obligated to re-pay the Corporation its interest under Article
I.B. and the Agreement shall terminate. The Corporation agrees,
upon request of the Third Party Owner, to execute any and all
instruments that may be required to transfer all right, title and
interest in the Policy to the Third Party Owner.
3. To continue the Agreement.
For purposes of this Agreement, a Change in Control shall be defined as the
circumstance where (i) any person or company becomes the beneficial owner,
directly or indirectly, of more than fifty percent of the shares of the
Corporation, or of any entity resulting from a merger or consolidation
involving the Corporation representing more than fifty percent of the
combined voting power of the then outstanding shares of the Corporation or
such entity; or (ii) the Corporation ceases to exist due to a merger,
acquisition or consolidation of the Corporation with another entity or
person.
Article V
Conflict Between Collateral Assignment and Agreement
In the event that there shall be any conflict between this Agreement and the
Collateral Assignment, the Collateral Assignment shall take precedence over
this Agreement.
Article VI
Amendment
This Agreement may be amended at any time and from time to time, by a written
instrument signed by the Corporation and the Third Party Owner.
Article VII
Agreement Binding Upon Parties
This Agreement shall bind both the Corporation, the Employee and the Third
Party Owner, as well as their heirs, successors, personal representatives and
assigns.
Article VIII
Insurer Not a Party to Agreement
The Insurance Company shall not be deemed a party to this Agreement. Payment
or other performance of its contractual obligations in accordance with the
Policy provisions shall fully discharge the Insurance Company from any and
all liability.
Article IX
Named Fiduciary and Plan Administrator
The Corporation is hereby designated the Named Fiduciary. As Named
Fiduciary, the Corporation shall be responsible for the management
and administration of this Split Dollar Agreement. The Corporation's Board of
Directors may delegate to others the management and operating
responsibilities of the plan including the employment of advisors and may
exercise any other powers necessary for the discharge of its duties to the
extent not in conflict with the provisions of the Employee Retirement Income
Security Act of 1974.
Article X
Claims Procedure
A claim form or a request for claim information with respect to benefits
under the Plan may be obtained upon written request to the Plan
Administrator.
In the event that the claim is in whole or in part denied, the Plan
Administrator shall provide notification of such denial to the claimant
within ninety days. The notification shall contain the specific reasons for
the denial as well as specific reference to the pertinent Plan provision upon
which the denial is based. The claimant shall also be informed of the Plan's
claim review procedure and shall be provided with description of the method
by which the claim may be perfected.
A claimant seeking claims review may, within sixty days following receipt by
the claimant of a written claims denial, request a claim's review by written
application to the Named Fiduciary. In connection with the claim's review
the claimant shall be afforded an opportunity to review claims documents and
submit comments in writing. A final decision shall be rendered by the Named
Fiduciary within sixty days after receipt of request for review. The
decision on review shall be in writing and shall include, in the event the
claims for benefits are wholly or partially denied:
(1) The specific reasons for the denial;
(2) Specific reference to pertinent Plan provisions upon which the
denial or dispute is based;
(3) A description of any additional information necessary for the
claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(4) An explanation of the Plan's review procedures.
Article XI
Governing Law
This Agreement sets forth the entire agreement between the parties hereto,
and any and all prior agreements are hereby superseded. The law of the State
of California shall govern this Agreement.
IN WITNESS WHEREOF, the Parties hereto have set their hands on the day and
year first hereinabove written.
Monty and Wendy Fu 1998 Irrevocable Trust
/s/Druce Fu
Druce Fu, as Trustee for the Monty
and Wendy Fu 1998 Irrevocable Trust
Syncor International Corporation
By: /s/John S. Baumann
Name: John S. Baumann
Title: Vice President and General Counsel
<TABLE>
Schedule A
Payment Schedule
<CAPTION>
<S> <C> <C>
Policy Years Annual Premium to be Paid in Repayment to Corporation
Accordance with Article II of in Accordance with and
this Agreement Subject to Article IV.B
1-7 $411,996 0
8-16 0 0
End of Year 16 0 $2,866,459
</TABLE>
Exhibit 10.38
2000
Corporate Management
Incentive Plan
PURPOSE The 2000 Corporate Management Incentive Plan is designed
to support the achievement of Syncor's business profit
objectives. This is accomplished by providing incentive
opportunity to Syncor's Corporate Program Managers and
above who have direct influence on the accomplishment of
Syncor's business objectives. The plan also ensures
consistency with overall Company performance and
shareholder interests through an Earnings per Share (EPS)
measure.
OVERVIEW The 2000 Corporate Management Incentive Plan consists of
two key features:
1. Specific goals, or triggers, that must be met to
activate a payout under the plan
2. Targeted incentive opportunity for plan participants
3. Financial and Individual performance components used
to calculate the final incentive payout
Each of these features is outlined in the following
sections.
PLAN TRIGGERS A "trigger" is a goal that must be met to activate a
payout under the plan. The 2000 plan "trigger" is
Earnings per Share (EPS). To activate a payout through
this plan, Syncor must achieve EPS of $1.95 at year-end
for fiscal year 2000. Upon achievement of this goal, the
incentive is calculated as defined under Incentive
Components.
TARGET INCENTIVE Each plan participant is designated either as a target
incentive opportunity expressed as a percentage of base
salary or a flat dollar amount.
The target incentive opportunity for ________ is
____________.
INCENTIVE The plan is comprised of financial and MBO components
COMPONENTS used in the incentive calculation. Each component is
weighted to identify the value of the component within
the overall incentive calculation. The chart below
outlines the components, their weightings, and the basis
of payment that will be used to calculate your incentive.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Component Weighting Basis of Payment for the
Component
Financial ________ Achievement of budget
attainment results for the
applicable department cost
center(s). Budget
attainment must be met at
100% or less for payment of
the financial portion of
the incentive.
MBO ________ Achievement of individual
performance objectives.
</TABLE>
MBOs MBOs are individual performance objectives established in
conjunction with the plan participant's supervisor. They
are assessed are year-end by the supervisor to determine
the percentage of achievement.
It is your responsibility in conjunction with your
supervisor to track your performance throughout the year.
To simplify the tracking process, a MBO worksheet is
available from Human Resources or on the Syntranet. You
and your immediate supervisor's signature are required on
the form. After the end of the Plan Year, complete the
MBO Worksheet and give it to your manager for their
approval. Your final annual results must be turned in to
Corporate Compensation for processing no later than
January 19, 2001.
INCENTIVE The incentive calculation is based upon achievement of
CALCULATION both financial and MBO incentive components after the EPS
"trigger" has been met. The financial and MBO component
weightings are each multiplied by the target incentive
opportunity and your achievement results to determine the
total incentive payment. Please refer to the sample
calculation for further explanation of incentive
calculation.
SAMPLE CALCULATION
Assumptions
Syncor International achieves $1.95 EPS
The financial component is weighted at 40% and has been met at 100%.
The MBO component is weighted at 60% and has been met at 96%.
$65,000 Salary
x 15% Target
______________
$9,750 Incentive Opportunity
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Component Weighting Achievement Payment Calculation
Financial 40% 100% $9,750 x .40 x 1.0 = $3,900
MBO 60% 96% $9,750 x .60 x .96 = $5,616
TOTAL = $9,516
</TABLE>
DEFINITIONS
BUDGET ATTAINMENT Budget attainment is one possible component of the
Corporate Management incentive calculation. Budget
attainment assesses how well a business partner
manages his/her expenses. At the end of 2000, if
results are equal to or less than budget, then
budget attainment is considered to have been
achieved.
EARNINGS PER SHARE The net income of the Company divided by the number
(EPS) of shares of common stock outstanding as shown on
the Company's Annual Report to shareholders.
MANAGEMENT BY Also referred to as MBOs, it is a goal-oriented
OBJECTIVES method used to evaluate the performance of
management against established objectives. MBOs
include three stops: 1) establishing goals; 2)
setting performance standards for each goal; and 3)
comparing actual goal attainment against the
established goals.
PLAN YEAR The period of time in which this plan is in effect
beginning January 1 and ending December 31, 2000.
TARGET INCENTIVE Expressed as a percentage of base salary or as a
OPPORTUNITY flat dollar rate, specific for each plan participant
based on role and responsibility.
BASE SALARY The salary used in the final incentive calculation
is based upon the salary effective January 1, 2000.
If a plan participant's salary is adjusted during
the Plan Year, the base salary used is the average
2000 salary.
TRIGGER A company financial goal that must be met to
activate a payout under this plan.
ELIGIBLITY AND OTHER RULES GOVERNING THE PLAN
1. Eligible plan participants must be actively employed at Syncor on the last
calendar day of the year to receive an annual payout. Plan participants
that leave Syncor after the end of the plan year are still eligible to
receive a payout unless terminated for cause.
2. Eligible plan participants must have a current performance appraisal
rating of Successful* or above and not be in the progressive discipline
process at the time of payout. If a plan participant has a current
performance rating of less than Successful or is in the progressive
discipline process, he/she must develop a performance improvement plan
agreed upon with the employee's supervisor. When improvement plans have
been carried out (no later than 60 days after the original incentive
payment date), the plan participant's supervisor must reevaluate the plan
participant's performance. If the plan participant is rated Successful or
above at that time, he/she is eligible to participate in the Incentive
Plan. An incentive payment may or may not be prorated for the year, based
on performance issues, at the discretion of the supervisor with approval
of Human Resources.
3. Incentive payments for part-time employees are based on the salary earned
for hours less than 40 in a week.
4. Plan participants must begin employment with Syncor International
Corporation before October 1, 2000 to participate in this Incentive Plan.
Eligible plan participants whose first date of employment is between
January 1, 2000 and October 1, 2000 will participate on a prorated basis
based on their date of hire.
5. Plan participants that transfer or are promoted into incentive eligible
positions by December 1st of the plan year will be eligible to participate
in the plan on a prorated basis based on the effective date of the
transfer or promotion. Plan participants that transfer or are promoted
after December 1st will continue to participate in any previous plan
he/she was eligible for through December 31st.
6. Eligible plan participants who change positions or locations during the
year will participate in the Incentive Plan prorated to the positions or
locations held. In the event that a plan participant assumes a new
position and for a time fulfills the duties of the previous position until
it is filled, the incentive payment will be calculated based on the new
position. In the event the new position is not incentivized, the
incentive will be calculated based on the previous position according the
rules of the Plan. The prorating rule as described above in rule 5 will
apply based on the change in status date.
7. Payment of an incentive to eligible plan participants who take a leave of
absence for any reason during the year will be prorated based on the
effective date of the leave the return.
[FN]
<F1>* Based on 2000 performance appraisal ratings
</FN>
8. In the circumstance of a windfall (e.g. a result that was realized outside
the normal influencing role or function within the department or
division), management has the right to exclude the windfall from the
normal incentive calculation.
9. The payout for this plan is a one-time annual payment made before March
15th of the following year.
THE INCENTIVE PLAN, AS DESCRIBED, SHALL BE THE MECHANISM AND THE WAY TO
IMPLEMENT THE INTENTION OF MANAGEMENT. THIS INCENTIVE PLAN SHALL NOT
OBLIGATE THE COMPANY OR MANAGEMENT TO GRANT THE BENEFITS CONTEMPLATED
HEREUNDER. CURRENTLY, IT IS MANAGEMENT'S INTENTION AND BEST JUDGMENT THAT
THE PLAN SHOULD BE CARRIED OUT AS DESCRIBED. HOWEVER, MANAGEMENT RESERVES
THE RIGHT TO CHANGE THE PLAN AT ANY TIME, RETROACTIVE TO THE BEGINNING OF THE
PLAN YEAR. NO BENEFITS ARE VESTED OR COUPLED WITH INTEREST BEFORE PAYMENT IS
COMMENCED.
<TABLE>
2000 CORPORATE MANAGEMENT INCENTIVE PLAN FOR EXECUTIVE OFFICERS
<CAPTION>
<S> <C> <C> <C>
Name Position MBO% Fin%
Monty Fu Chairman of the Board 20% 80%
Robert G. Funari President and CEO 20% 80%
Haig S. Bagerdjian Exec VP and Secretary/CEO of Syncor 20% 80%
Overseas
David L. Ward Exec VP/President and CEO of CMI 20% 80%
Michael E. Mikity Sr VP, Treasurer and CFO 30% 70%
John (Jack) S. Baumann Sr VP and General Counsel 30% 70%
Michael L. Lach Sr VP and CIO 30% 70%
Jack L. Coffey VP - Q&R 30% 70%
Sheila H. Coop VP - HR 30% 70%
</TABLE>
SYNCOR INTERNATIONAL CORPORATION 1999 ANNUAL REPORT
Outside Front Cover:
[Photo of a Syncor Investor stating "I depend on my investments for income.
I've been showing my granddaughter how I select companies that are good
values because of their products, services and solid growth records.
We picked Syncor, based on the evidence, and feel sure this company will
be here as she's growing up."]
Inside Front Cover:
[Corporate Profile and Financial Highlights]
CORPORATE PROFILE
Syncor International Corporation, a high-technology healthcare
services company, is the world's leading provider of
radiopharmaceuticals and comprehensive nuclear pharmacy services
and also one of the nation's leading providers of medical imaging
services.
Syncor pioneered the outsourcing of radiopharmacy services in 1974.
Through its core specialized pharmacy services business, Syncor
compounds and dispenses radiopharmaceuticals for diagnostic and
therapeutic use by nuclear medicine departments in more than 7,000
hospitals and outpatient clinics. Syncor distributes these time-
critical products in patient-specific doses through an integrated
network of strategically located pharmacies: 123 domestic and 17
international. This network also provides nuclear medicine
management and information services.
Syncor entered the $48 billion medical imaging services market in
1997 and now owns or operates 42 medical imaging centers in
selected metropolitan areas in 11 states through Comprehensive
Medical Imaging, Inc. ("CMI"). In 1998, Syncor also began expanding
its medical imaging business into international markets, and now
owns or operates 7 medical imaging centers outside of the U.S.
through Syncor Overseas Ltd.
In 1997, Syncor's management committed to profitably grow revenues
from the Company's healthcare businesses from $381 million to $600
million by 2001. Management also committed to double earnings per
share over the same period. In late 1999 - more than halfway to
these goals - management extended its commitment by establishing
new sales and earnings growth objectives for the year 2003.
HERE'S WHAT AN EXPERT SAYS:
"Syncor is the only healthcare services company that has a 50
percent market share in its principal business, a 7 to 10 percent
pricing premium in that business, and a bottom line that's growing
faster than the top. Syncor continues to be a winning investment
story. It's as simple as that".
[Photo of Larry Marsh, Senior Analyst, Lehman Brothers, New York.]
<PAGE>
Syncor's sales are growing twice as fast as our industry sector.
There's a Bar Chart drawn on Syncor Net Sales 1995 - 1999
Syncor's net income is growing more than twice as fast as sales.
There's a Bar Chart drawn on Syncor Net Income from Continuing
Operations 1995 - 1999
<PAGE>
We are proud to be consistently increasing Syncor's value.
There's a Bar Chart drawn on Syncor Earnings per Diluted Share
Continuing Operations 1995 - 1999
Syncor's stock price reached our targets for 1998 and 1999.
There's a Bar Chart drawn on Syncor Stock Price Range 1995 - 1999
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
______________________________________________________________________________________________
<S> <C> <C> <C>
Net sales $520,309 $449,023 $380,563
Net income - continuing operations $ 19,221 $ 13,931 $ 10,032
Net income per basic share - continuing operations $ 1.65 $ 1.30 $ 1.00
Net income per diluted share - continuing operations $ 1.51 $ 1.23 $ 0.98
Cash, cash equivalents and marketable securities $ 23,073 $ 19,722 $ 29,301
Cash generated by operations $ 40,888 $ 33,604 $ 22,529
</TABLE>
TO OUR STOCKHOLDERS:
We are delighted to report that Syncor's results for 1999 were
outstanding, meeting or exceeding the commitments we made two years
ago. These commitments were to profitably grow Syncor from a $381
million business to a $600 million business by 2001 and to enhance
the Company's stockholder value by doubling earnings per share over
the same four-year period. We also committed to certain stock price
targets: $20 in 1998, $25 in 1999, $34 in 2000, and $43 in 2001.
By year-end 1999, Syncor had covered more than half the distance to
these goals. The Company's revenues topped $520 million, 10.6
percent of which were generated by our new business, medical
imaging services. As for stockholder value, 1999 earnings per
diluted share were $1.51, up 23 percent from $1.23 in 1998, and the
stock price at the December 31 market close was $29.13. In other
words, we have been keeping our commitments and then some.
Moreover, we have achieved these results in a very difficult and
troubled healthcare services industry environment.
Syncor has performed so well that we recently extended our 1997
commitments through the year 2003. Our new objective is to make
Syncor a billion-dollar high-technology healthcare services company
by 2003 and to increase earnings per share by 357 percent over the
same period. Consequently, our theme for this annual report is
COMMITMENTS MADE, COMMITMENTS KEPT, COMMITMENTS RENEWED.
Sounds good, but can we deliver? Will our actions yield the results
we have committed to achieve? How do we know we can sustain
Syncor's winning performance in an industry whose recent
performance has ranged from lackluster to downright poor?
To begin with, we know we can deliver because our management is
exceptionally well motivated. Syncor is the only company in our
industry that has linked 60 percent of its management team's income
to the price performance of its stock. In other words, if Syncor's
stock price does not meet management's commitments, we do not
receive our long-term bonus - but that's only part of the story.
Our confidence also stems from having taken steps to ensure that
Syncor's corporate strategy is focused on the three actions that
enable a company to compete successfully for investor "mind-share"
and attract investment dollars:
1) choosing the right business opportunities,
2) building the right business model for each opportunity, and
3) attracting and retaining the right partners.
The focus of this annual report is on how Syncor measures up to
these criteria. We provide this information to illustrate that the
Company's success to date is no accident but rather the result of
careful planning and an unwavering commitment to results. We also
want you to know that we will never stop holding ourselves
accountable for Syncor's performance. That's just who we are. We
thank you for your continued support.
/s/ Monty Fu
Monty Fu, Chairman of the Board
/s/ Robert G. Funari
Robert G. Funari, President and Chief Executive Officer
March 30, 2000
THE RIGHT OPPORTUNITIES
To create stockholder value, a company needs to carefully select
the business opportunities that it will pursue. For Syncor, the
right kind of opportunity is a healthcare services market that is
both growing and in need of something that the Company is well
positioned to provide.
Our founder, nuclear pharmacist Monty Fu, identified the first of
Syncor's opportunities in 1974. At that time, hospital nuclear
medicine departments typically operated their own in-house
compounding and dispensing facilities. Monty's concept that time-
critical radiopharmaceuticals could be distributed more accurately
and economically through a network of independent, offsite
radiopharmacies launched what has become an $850 million services
industry. Today, more than 90 percent of nuclear medicine's patient
doses are compounded offsite - and Syncor enjoys an approximate 52
percent share of the market it pioneered.
[There's a Pie Chart drawn on Syncor Radiopharmacy Industry Revenue Sources]
Additional opportunities for Syncor arrive constantly via
technological advances that are expanding nuclear medicine's
applications. While diagnostic cardiac imaging continues to be the
leading application (currently accounting for approximately 60
percent of all radiopharmaceutical procedures), therapeutic
applications are gaining ground, chiefly in the area of oncology.
A good example is brachytherapy, the implantation of radioactive
"seeds" in close proximity to malignant tumors. Brachytherapy is
used as an alternative to surgical removal of the prostate gland in
certain stages of prostate cancer. In December 1999 and January
2000 respectively, Syncor received approval from the Food and Drug
Administration to market its Pharmaseed(TM) Iodine-125 and
Palladium-103 radioactive seeds for the localized treatment of
prostate cancer. In the United States, more than 180,000 cases of
prostate cancer are diagnosed annually.
Advancing technology is also playing a major role in the wider
acceptance and increasing availability of positron emission
tomography (PET), a highly sensitive nuclear imaging technique that
enables cancer patients to avoid unnecessary surgeries. Technical
advances have both broadened PET's capabilities and improved the
affordability of this technique. In a related development, the
Health Care Financing Administration (HCFA), the agency that sets
reimbursement policy for Medicare, began approving coverage for PET
indications in 1998. As a result of these technological and policy
developments, more than 200 sites nationwide are now offering PET,
compared with fewer than 80 in 1995.
In December 1999, Syncor became the exclusive distributor of PET
radiopharmaceuticals produced at the County USC Medical Center in
Los Angeles, thereby adding to Syncor's PET distribution
capabilities through existing arrangements with Massachusetts
General Hospital and PETNet Partners, LLC. This year, the Company
expects to announce similar arrangements with large medical
institutions across the nation as they introduce PET
radiopharmaceutical production and imaging capabilities. All of
these distribution arrangements will utilize and leverage Syncor's
tungsten based patented PETPig(TM) delivery systems. Imaging
centers owned or operated by CMI will also begin offering PET
imaging in selected markets later this year.
[There's a Pie Chart drawn on Syncor Sales by Business Segment]
Tremendous growth opportunities for both of the Company's current
businesses - radiopharmaceutical distribution services and medical
imaging - also exist overseas. Syncor's international subsidiary,
Syncor Overseas Ltd., continues to increase its radiopharmacy
network. Syncor is now the leading provider of radiopharmacy
services in Taiwan and is establishing radiopharmacy strongholds in
China and other locations throughout Asia as well as in Australia,
Colombia, Israel, Mexico, New Zealand, Puerto Rico and South
Africa. Syncor also provides medical imaging services in Puerto
Rico, New Zealand, and Taiwan and is manufacturing brachytherapy
seeds in Shanghai, China.
By the end of 2001, Syncor plans to have operations in 20 countries
and has committed to grow its overseas sales from $10 million to
$100 million by 2003.
THE RIGHT BUSINESS MODEL
A second essential step in creating stockholder value is having a
business model that provides superior value to the customer and
strongly differentiates the Company from its competitors. The right
business model must also be scalable and sustainable.
DIFFERENTIATION refers to a company's ability to be perceived as
different from and superior to its competition. We know that
Syncor's pharmacy services business is perceived as superior
because our customers are willing to pay premium prices for the
products and services we provide. Customers are willing to pay
premium prices because of our unconditional guarantee -- The
Service Difference(R) Guarantee -- that we will deliver the right
radiopharmaceutical dose to the right place at the right time. And
we do, more than six million times a year to more than 7,000
customers.
[There's a map of Syncor U.S. Radiopharmacy Locations]
Syncor's pharmacy services business also differentiates itself
through its proprietary patented SECURE(R) Safety Inserts, its
SYNtrac(TM) and UDM(TM) nuclear medicine department management
systems, and its radiopharmaceutical delivery systems such as the
PETPig(TM). Our commitment to improving the practice of nuclear
medicine has made Syncor the standard-setter in the healthcare
industry's most heavily regulated environment.
CMI also provides numerous opportunities for differentiation,
chiefly through operational and clinical standardization. CMI
intends to achieve technological superiority through investments in
both clinical equipment and an enterprise-wide operating and
information management system that will ensure consistency in the
Company's operational and clinical processes. The system, scheduled
to begin implementation by year's end, is expected to enable CMI to
increase efficiencies, significantly leveraging its overhead
infrastructure. As this business grows, CMI will also differentiate
itself on a market-by-market basis by selectively offering advanced
imaging techniques - such as PET procedures - in addition to the
more prevalent MRI and CT procedures currently provided at the
imaging centers.
SCALABILITY refers to a company's ability to expand its
opportunity-based business models and apply them in multiple
markets, both domestic and international. The best example of
Syncor's scalability is the way in which the same operational
discipline that has made the Company an industry leader is being
applied to our new medical imaging and overseas businesses. The
result: both of these operations became profitable in 1999 and
together are expected to be contributing one-third of Syncor's
bottom line by 2001.
SUSTAINABILITY is a company's ability to maintain its competitive
advantage by anticipating and adapting to changes in the
marketplace. Syncor is growing both larger and more sustainable
through carefully planned diversification and expansion. For
example, Syncor Overseas developed a leadership position as a
radiopharmacy services provider in Taiwan before branching into
related services, including managing nuclear medicine departments
for hospitals and producing PET radiopharmaceuticals. In China,
Syncor Overseas will manufacture brachytherapy seeds in the same
facility in Shanghai that houses its radiopharmacy operation.
[There's a map of Syncor U.S. Medical Imaging Locations]
Our medical imaging business, CMI, plans not only to sustain its
significant annual sales growth rate but more importantly to
strategically increase its share position in selected markets. CMI
expects to achieve its objectives through a combination of growth
in revenues from current operations and the balance through
strategic acquisitions. In 1999, CMI acquired eight imaging centers
in California and Arizona. Three of the new centers are located in
the high desert sector of Southern California's San Bernardino
County, which is part of Southern California's "Inland Empire" -
one of the nation's fastest-growing metropolitan areas. By the end
of the year, CMI expects to be the largest single provider of
outpatient diagnostic imaging services in this market.
CMI also intends to sustain its growth by leveraging Syncor's
existing relationships with hospitals into strategic alliances for
providing imaging services on an outsourced basis.
THE RIGHT PARTNERS
Syncor is a principled organization that does business by
collaborating with suppliers, customers, and employees in ways that
not only increase stockholder value but also create value for its
employees. We believe that the best way for us to attract and keep
the right business partners is to consistently demonstrate our
integrity in the way we do business.
Syncor collaborates with its largest supplier, DuPont, on a number
of levels ranging from supporting clinical trials of new products
to expanding the franchise for DuPont's Cardiolite(R), the world's
leading cardiology imaging agent and Syncor's best-selling
radiopharmaceutical. The results of this collaboration speak for
themselves: in 1999, Syncor increased its Cardiolite sales by 18
percent and enlarged its cardiology market share despite having
raised product prices and experiencing challenging competition.
[There's a map of Syncor International Locations]
Syncor's customer-partners include some of the country's largest
national and regional healthcare group purchasing organizations
(GPOs). In 1999, Syncor renewed long-term, sole-source
radiopharmacy services contracts with AmeriNet, which represents
more than 2,000 hospitals nationwide, and the Health Trust
Purchasing Group (formerly owned by Columbia/HCA), which operates
more than 300 hospitals and other healthcare facilities in 36
states, England and Switzerland. Both contracts are extensions of
mutually beneficial relationships that were initiated in 1992 and
1993, respectively. At year's end, Syncor also extended its
relationship with Kaiser, the nation's largest health maintenance
organization (HMO), increasing the term of the previous contract
from three to five years.
Each of these organizations entered into long-term commitments with
Syncor because of our unique ability to service their members.
Syncor not only has the industry's largest radiopharmacy network
but also offers the most comprehensive array of ancillary services
and innovations that enable customers to manage their nuclear
medicine operations more safely and efficiently.
Syncor has also recently entered into long-term partnering
agreements with several of the country's largest integrated
healthcare networks (IHNs), of which there are now more than 600
nationwide. These community-based networks link a variety of local
providers and offer integrated care services. Based on Syncor's
ability to provide radiopharmacy services programs that can enhance
overall network efficiency and enable effective patient management,
the Company has won contracts from leading IHNs, including: the
Advocate System in Chicago, Illinois; Barnes Jewish-Christian in
St. Louis, Missouri; Sisters of Providence in Seattle, Washington;
and Memorial Herman in Houston, Texas.
Ultimately, the creation of stockholder value requires the ability
to attract and retain the right business partners: namely, people who
are competent, credible, and committed. Syncor's values - customer
service, teamwork, professionalism, health and safety, employee
ownership, community service, accountability and bias for action -
reflect our shared belief as a Company of people. Our values are
our codes of conduct in working together, setting priorities and
making decisions. They guide us individually and as a team to make
the best decisions each day for our customers, stockholders and
fellow employees.
[There's a Bar Chart drawn on Syncor International Corporation
Quarter over Quarter Growth in EBIT]
Syncor's employees are also among the Company's most important
stockholders. Nearly 75 percent of our 2,900-person U.S. workforce
owns Syncor stock through an employees' savings and stock ownership
plan (ESSOP), to which the Company makes matching contributions.
The ESSOP is the largest holder of Syncor stock.
In 1998, stockholders approved a universal employee stock option
plan and a management stock purchase plan, and the Company
initiated a management stock compensation plan - actions that serve
to better align the interests of employees, management and
stockholders. All the plans are designed to ensure that every
eligible employee participates in Syncor's growing prosperity and
is motivated to make the Company's performance targets a reality.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Selected Financial Data 13
Managements Discussion and Analysis Results of Operations 14
Consolidated Balance Sheets 22
Consolidated Statements of Income 23
Consolidated Statements of Stockholders' Equity and
Comprehensive Income 24
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 26
Independent Auditors' Report 41
Management's Report 41
Selected Quarterly Results of Operations 42
Corporate and Stockholder Information Inside Back Cover
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Twelve months ended December 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998 1997 1996 1995
_________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $520,309 $449,023 $380,563 $366,447 $331,435
Gross profit 169,321 131,950 90,165 80,193 73,626
Income:
Continuing operations 19,221 13,931 10,032 6,900 4,984
Discontinued operations,
net of taxes - - 1,063 (2,264) (315)
Net income 19,221 13,931 11,095 4,636 4,669
_________________________________________________________________________________________
Earnings per basic share:
Continuing operations 1.65 1.30 1.00 0.66 0.48
Discontinued operations,
net of taxes - - 0.11 (0.22) (0.03)
Net income $ 1.65 $ 1.30 $ 1.11 $ .44 $ .45
_________________________________________________________________________________________
Earnings per diluted share:
Continuing operations 1.51 1.23 0.98 0.65 0.48
Discontinued operations,
net of taxes - - 0.10 (0.21) (0.03)
Net income $ 1.51 $ 1.23 $ 1.08 $ 0.44 $ 0.45
_________________________________________________________________________________________
Cash, cash equivalents and
marketable securities $ 23,073 $ 19,722 $ 29,301 $ 27,711 $ 26,559
Working capital $ 56,326 $ 44,024 $ 34,685 $ 35,515 $ 34,286
Total assets $312,642 $256,567 $164,563 $145,563 $133,680
Long-term debt $ 76,326 $ 70,322 $ 17,332 $ 7,595 $ 5,200
Stockholders' equity $140,337 $111,373 $ 87,367 $ 78,532 $ 78,262
Weighted average shares outstanding:
Basic 11,670 10,726 9,998 10,424 10,341
Diluted 12,739 11,339 10,282 10,629 10,481
Current ratio 1.61 1.59 1.60 1.62 1.69
_________________________________________________________________________________________
Number of domestic radiopharmacies 123 120 119 121 118
_________________________________________________________________________________________
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS CALENDAR YEAR 1999 AND 1998
NET SALES
Consolidated sales in fiscal year 1999 totaled $520 million, an
increase of 15.9 percent over fiscal year 1998. All of the
Company's operating groups contributed to this significant growth
rate. Different factors within each group combined to positively
affect sales. These factors included continued strong cardiac
imaging growth, increases in price for products and services,
acquisitions, improvement in product and service mix, and the
continued strong expansion of the medical imaging and international
markets.
U.S. PHARMACY SERVICES BUSINESS
Sales for this group were approximately $440 million, an increase
of 11 percent or $43 million over the 1998 results. Favorable
market trends and the Company's dedication to customer service
continue to have a positive impact on the Company's revenues. The
Company supplies radiopharmaceutical products that are used
primarily for diagnostic purposes in the fields of cardiology,
oncology, and neurology. The largest factor affecting the Company
is the continuing growth of diagnostic cardiac imaging. This
technology has been shown to be a cost-effective tool in the
management of cardiovascular disease. Annual revenue growth from
cardiac imaging continues at the rate of 13 percent. Two
proprietary and two generic agents represent the choices that
physicians have in performing cardiac imaging. The principal
imaging agent used for cardiac imaging is DuPont's proprietary
product Cardiolite(R), to which the Company has preferred
distribution rights. The other proprietary product is marketed by
a competing manufacturer/distributor. It is the Company's belief
that this competing product has not gained any significant market
share during fiscal year 1999. In general, the generic agents, to
which the Company also has access, continue to lose market share
and experienced price declines due to the switching to the newer
imaging agents. In 1998, the Company implemented a price increase
on Cardiolite and several other products. This price increase also
contributed to the sales growth for this group in 1999. A similar
price increase was announced in 1999 to become effective in January
2000.
The Company believes that with the progressive aging of the general
population in the United States and the prevalence of
cardiovascular disease within this age group, the market potential
for sustained growth of cardiac imaging remains favorable. Revenues
from the sales of cardiac imaging agents represent approximately 67
percent of the revenues generated by this operating group.
The Company believes that as a result of its superior full-service
business model, it has been able to show revenue gains in excess of
the 6 to 8 percent for the overall market growth rate. In addition,
the Company has also been able to retain and service a large
portion of its managed care business despite the loss of a formal
contract to supply some of the needs of these same managed care
groups. The Company believes that this trend will continue.
U.S. MEDICAL IMAGING BUSINESS
Sales for 1999 were $55.2 million and grew at an annual rate of 56
percent or $19.9 million over the 1998 results. This growth is a
combination of acquisitions and existing store growth. Syncor,
through CMI, provides services in computerized tomography (CT) and
magnetic resonance imaging (MRI) scans, which are used primarily in
diagnostic medicine. The Company has been successful in growing the
business with same store procedure volume increasing 7.5 percent
for MRI and 14 percent for CT compared to 1998. The Company has
focused its efforts in expanding its range of clinical applications
for MRI procedures and improving the quality of its payer mix, both
of which have increased the average value of the procedures
performed. As a result, the Company has been successful in
offsetting historical price erosion and ended the year with
increases in MRI and CT net reimbursement rates over the
corresponding rates in 1998. In addition, the Company continues to
benefit from 1999 additions to its California network and the
divestiture of three imaging centers in the second half of 1999 in
non-strategic markets.
INTERNATIONAL OPERATIONS
Sales for 1999 were $28.9 million and grew at an annual rate of 72
percent or $12.1 million over the 1998 results. This growth is a
combination of acquisitions, start-ups, existing store growth and
the expansion in the offering of its products and services. Year
over year same store revenue growth amounted to approximately 40
percent. Radiopharmacy services supporting cardiology and oncology
continue to represent a substantial portion of the revenues. In
addition, there has also been expansion into the radiology product
and service areas. Radiology includes the operation of nuclear
medicine departments and equipment, as well as the ownership and
operation of freestanding MRI centers. Revenues from radiology
account for approximately 14 percent of this group's 1999 revenues.
In 1999, this group received approval from the FDA to market
brachytherapy seeds. Beginning in the year 2000, brachytherapy
seeds will begin a new category of radiotherapy. Brachytherapy
seeds are used primarily in therapy for prostate cancer and will be
distributed both through direct sales from this group and the
pharmacy services group. The Company believes that a significant
market exists for this product. The Company expects to add
additional products and services in this category in the coming
year, which will be offered by this group.
GROSS PROFIT
The Company's gross profit increased in 1999 to $169.3 million, an
increase of 28.3 percent when compared to 1998. A number of factors
impacted this growth, including continued improvement in product
mix, and price increases. Margin expansion is also a result of
increased revenue share from the medical imaging and international
businesses, both of which have higher gross profit margins than the
traditional business.
U.S. PHARMACY SERVICES BUSINESS
The Pharmacy Services Group showed a year over year growth in gross
profits from $100 million to $117 million, a gain of 16.7 percent.
This gain resulted from a number of business decisions and trends.
The continued growth in cardiac imaging continues to shift revenues
into this profitable segment of the business. This continued shift,
when combined with the targeted cardiology price increase in late
1998, has been a factor in producing these favorable results. The
Company also continued with some of its favorable materials
acquisition pricing. In December 1999, the Company received a
combination of price increases and decreases on certain products
from one of its major suppliers. Assuming continued growth, the
Company estimates that the net effect of these price changes will
be approximately $3 million, which the Company has offset with
price increases mentioned above. The Company expects gains to
continue from both pricing and a continuation of the product mix
shift. The Company continues to leverage its percentage sales
increases (11 percent in 1999) into a relatively higher gross
profit growth (16.7 percent in 1999). This is due in part to the
Company's continuing focus on increasing efficiencies in the areas
of direct material and labor utilization. The Company believes that
these favorable trends will continue.
U.S. MEDICAL IMAGING BUSINESS
CMI's gross profit increased to $41.1 million in 1999. This
represents an increase of 57 percent when compared to 1998. The
increase in gross profit was principally derived from an
improvement in productivity of 14% and reductions in film and
contrast costs due to the benefit of national supply contracts.
INTERNATIONAL OPERATIONS
Syncor Overseas Ltd. showed a year over year growth in gross
profits from $5.7 million to $11.3 million, a gain of 99 percent.
The margin gains are due primarily to the strong sales growth from
existing pharmacies. In 1998, many of the international sites were
in their embryonic stages of development. The Company has always
believed that significant growth opportunities existed in the
overseas markets. In 1999, the sales levels contributed to more
efficient utilization of the direct materials and labor leading to
increased gross profit. The Company expects the growth
opportunities to continue.
OPERATING, SELLING AND ADMINISTRATIVE COSTS
Operating, selling and administrative expenses increased $18.2
million in 1999 over 1998 and as a percentage of net sales
increased to 22.1 percent in 1999 compared to 21.1 percent in 1998.
In general, the increase is associated with the start-up and
acquisition of certain businesses in 1999, the continued expansion
of existing services, labor-related costs to support the continued
expansion, and general corporate infrastructure costs including
information systems.
U.S. PHARMACY SERVICES BUSINESS
The increase in the Pharmacy Services Group was approximately 11.6
percent or $3.8 million. The change is primarily related to
increased expenditures for an expanded sales force and increased
labor-related expenses including annual merit increases and certain
bonuses.
U.S. MEDICAL IMAGING BUSINESS
The increase in the Comprehensive Medical Imaging Group was
approximately 41 percent or $8 million. Increased costs of
approximately $2.1 million, resulted from a full year's worth of
expenses in 1999 compared to approximately nine months in 1998.
Acquisition related expenses contributed approximately $3.2 million
of the increase in 1999.
INTERNATIONAL OPERATIONS
The increase in the Syncor Overseas Ltd. Group was approximately 77
percent or $3.5 million. Approximately $1.5 million is associated
with the start-up or acquisition of sites during 1999. In addition,
the remainder of the increase is attributable to the continued
expansion of existing sites and the addition of new management
resources to support the expansion of this group.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased $4.3 million in 1999 or 28
percent over 1998. The majority of the increase, or approximately
$2.7 million, is attributable to CMI, which incurred a full year's
worth of expense in 1999 and acquired certain facilities. The
balance of the increase relates to the expansion and growth of the
international operations and continued information systems related
expenses.
<PAGE>
RESULTS OF OPERATIONS CALENDAR YEAR 1998 AND 1997
NET SALES
Consolidated net sales in 1998 totaled $449 million, an increase of
18 percent or $68 million over the 1997 results. Syncor
International Corporation's 1998 sales were positively affected by
a number of factors, among which were strong growth in the
cardiology-imaging market and the addition of the Medical Imaging
business.
U.S. PHARMACY SERVICES BUSINESS
Pharmacy Services sales in 1998 were $412 million, an increase of
8 percent or $31 million over the 1997 results. Growth in this
market was estimated to be expanding at an annual rate of
approximately 16 percent. Although the Company primarily supplies
products for diagnostic purposes in the fields of oncology,
cardiology and neurology, it is the strong growth in the cardiology
marketplace that continues to drive sales. The principal
cardiology-imaging agent continues to be DuPont's cardiology
product, Cardiolite(R), for which Syncor has preferred distribution
rights. A competing radiopharmaceutical manufacturer/distributor is
currently marketing a rival product to Cardiolite. This competing
product continues to gain some market share in this rapidly growing
market. During 1998, several generic cardiology products (also
distributed by the Company and available through a variety of
sources) continued to experience volume declines as customers
switched to the newer available agents. In August 1998, the
Company instituted a price increase on Cardiolite and certain other
products. Pricing for the remaining cardiology agents remained
relatively flat during 1998. When all of the above factors are
combined, the Company showed an annual gain in overall cardiology
sales of approximately 14 percent. Cardiology sales constituted
approximately 65 percent of the Company's 1998 sales. Syncor
expects the trends discussed above to continue; however, the
Company also expects the growth in the cardiology marketplace
(particularly due to Cardiolite) to offset the negative factors.
The Company announced the loss of a contract to sell
radiopharmaceuticals to a Group Purchasing Organization. In the
announcement, the Company indicated the annual loss of sales volume
would be limited to approximately $10 to $15 million although the
contract award was for a significantly larger amount. The Company
also believes that the effect on earnings as a result of the loss
of this contract will not be material. This belief is based on the
Company's experience with the loss of a similar contract in a
competitive bidding process approximately two years ago. The
Company believes the strong customer loyalty and resulting business
retention, despite a contractual loss, are the results of its
ability to provide superior service to its customers.
U.S. MEDICAL IMAGING BUSINESS
In 1997, the Company entered into the medical diagnostic imaging
business with the planned start-up of ten "Open MRI" centers as
part of a joint venture. As of December 31, 1998, seven of those
ten centers were operational. During 1998, the Company acquired
three medical imaging companies for approximately $47 million and
the assumption of $34 million in various liabilities. These
acquisitions were all completed on or about the end of the first
quarter of 1998 and now operate, along with the open MRI business,
under a newly formed subsidiary, Comprehensive Medical Imaging,
Inc. ("CMI"). Revenues for 1998 amounted to approximately $37
million and are included in the consolidated operating results of
the Company. Revenues for the Medical Imaging business in 1997 were
negligible.
GROSS PROFIT
Syncor's gross profit increased in 1998 to $132 million, an
increase of 46 percent when compared to 1997. As a percentage of
net sales, gross profit increased to 29.4 percent, compared to 24
percent in 1997. Gross profit was affected by a number of factors,
including mix shift, price increases, a reduction in certain
material acquisition costs and the addition of the Medical Imaging
business, which generates substantially higher gross margins when
compared to the Pharmacy Services business.
U.S. PHARMACY SERVICES BUSINESS
The Pharmacy Services Business continues to experience a shift in
its sales mix as a result of growth in the cardiology sector.
Generally, servicing this sector produces higher margins than other
sectors. In addition, the Company received incentives from a
manufacturer for achieving certain sales volume levels plus some
cost decreases on selected products. In August 1998, the Company
instituted a price increase, primarily on cardiology products. This
price increase was phased in to correspond with contract renewal
dates and other issues. Labor costs in 1998 were targeted for
increased focus in order to ensure optimal utilization of resources
and the attainment of certain efficiencies. As a result, labor
costs for 1998 in the Pharmacy Services business were maintained at
approximately the 1997 levels. Labor costs will continue to be
targeted in 1999 for the express purpose of increasing efficiencies
and maximizing utilization.
U.S. MEDICAL IMAGING BUSINESS
The Medical Imaging business had gross margins which amounted to
$28 million or 74% of net sales for 1998, the first year of
operations. During 1998, certain actions were taken to eliminate
low-paying contracts and strengthen CMI's radiology affiliations to
provide better quality radiology services and greater geographic
coverage. The short-term impact of these decisions reduced revenues
and gross margins during the second and third quarter of 1998 until
new third-party payer contracts and radiology agreements were
established.
OPERATING, SELLING AND ADMINISTRATIVE COSTS
Operating, selling and administrative expenses increased $24.9
million in 1998 as compared to 1997, and as a percentage of 1998
net sales to 21 percent compared to 18 percent in 1997. Operating
expenses increased primarily as a result of the acquisition of the
Medical Imaging business. The Medical Imaging business acquisition
and subsequent operations accounted for approximately $25 million
or 82 percent of this increase. The Medical Imaging business
typically has less cost of goods sold and a greater proportion of
indirect operating costs related to salaries, equipment costs,
billing fees and expenses, and building leases.
In addition, increases were due to including a full year of
operation of certain manufacturing facilities and the expansion of
the international radiopharmacy business. Costs associated with the
conversion of the Company's systems (year-2000 compliance),
expansion of the information technology infrastructure, and
continued investment in re-engineering certain critical business
practices were also incurred. Programs that focus on the long-term
competitiveness of the Company continue to receive funding.
Operating, selling and administrative expenses are expected to
increase from their current levels although not as dramatically.
This expansion will occur as the Medical Imaging business is
expanded and has a full year of operations, new systems are
implemented as a result of our re-engineering efforts, new field
systems are designed, and expansion continues in the international
marketplace.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization in 1998 increased to $15 million from
$10 million in 1997. The majority of the increase is associated
with the purchase of the Medical Imaging business. Depreciation and
amortization expense for the Medical Imaging business amounted to
$5 million, which included approximately $1.5 million relating to
amortization of goodwill. In addition, the Company's depreciation
expense also increased with increased systems infrastructure.
LIQUIDITY
The successful execution of the Company's strategies has produced
improved operations in terms of both profitability and cash flow.
These improvements have led to greater liquidity for the Company.
The Company continues to see year over year improvements in its
cash flow from operations, long-term debt to equity ratios, and
current ratios. The Company has experienced growth in trade
receivables that is comparable to the sales growth while the growth
in patient receivables is primarily related to acquisitions. At
year-end the Company made a purchase of approximately one month's
worth of Cardiolite inventory at favorable terms and pricing. This
inventory was completely utilized by mid-February 2000. The
Company's growth in the medical imaging and international
businesses was a result of start-ups and acquisitions. In 1999, the
Company acquired additional stand-alone imaging centers or
consolidated ownership in existing centers for approximately $18
million of additional borrowings under the existing line of credit
and the assumption of approximately $5.2 million in debt. The
results of these acquisitions are partly reflected in the change in
the categories of "Property and Equipment", "Goodwill", and "Other"
assets. The Company expects to finance continuing growth in both
the medical imaging business and certain foreign operations through
additional borrowings. As a result of these decisions, the Company
increased its line of credit from $75 million in the prior year to
$100 million as of December 31, 1999. As of December 31, 1999
approximately $47 million was available for borrowing under the
line of credit. The Company also has the authority from its Board
of Directors to increase the amounts available under the line of
credit to $115 million. The Company believes that sufficient
resources are available through a combination of internal and
external sources to fund all of its operating and business
expansion needs in the coming year.
CAPITAL RESOURCES
The Company's medical imaging operations, both foreign and
domestic, are capital intensive. The Company may, from time to
time, purchase new equipment, update, or enhance existing
equipment. The costs of these purchases or enhancements can be
relatively minor or well over $1 million per piece of equipment.
The Company is constantly evaluating its needs for acquiring new
equipment or improving existing equipment.
YEAR 2000 TRANSITION
In prior years, we discussed the nature and progress of our plans
to ensure a smooth transition of the Company's information and
other systems into the Year 2000. As a result of those planning and
implementation efforts, the Company has not experienced any
significant adverse consequences as a result of the Year 2000
change. Virtually all of the information technology systems and
patient imaging equipment performed satisfactorily as the calendar
changed from December 31, 1999 to January 1, 2000. We expended
approximately $0.9 million in 1999 in connection with the
remediation of our systems. We are not aware of any material
problems resulting from Year 2000 issues, either with our products
and services, our internal systems, or products and services of
third parties. We will continue to monitor our mission critical
computer systems and those of our suppliers throughout the Year
2000 to ensure a timely response to any latent matters that might
arise.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest income earned on the Company's investment portfolio is
affected by changes in the general level of U.S. interest rates.
The Company's line of credit borrowings effectively bear interest
at variable rates and therefore, changes in U.S. interest rates
affect interest expense incurred thereon. Changes in interest rates
do not affect interest expense incurred on the Company's fixed rate
debt. The following table provides information about the Company's
financial debt instruments that are sensitive to changes in
interest rates. The table presents principal cash flows and related
weighted-average interest rates by expected maturity dates. The
Company did not engage in any interest rate swaps during this
period. The fair value of these instruments approximate the
carrying value.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
(IN THOUSANDS) 2000 2001 2002 2003 2004 Thereafter Total
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term debt
Fixed rate $6,927 $5,475 $4,175 $2,303 $ 1,425 $3,288 $23,593
Average interest rate 7.59% 7.36% 6.90% 6.26% 5.72% 6.25%
Variable rate $2,385 2,385 $4,575 $ 0 $52,700 $ 0 $62.045
Average interest rate 7.09% 7.10% 7.11% 7.13% 7.13%
_______________________________________________________________________________________________________________
</TABLE>
RECENT DEVELOPMENTS IN MEDICARE REIMBURSEMENT
Changes to the current framework by which the Federal government
reimburses healthcare providers for healthcare services could have
an impact on the Company's revenues. In June 1998, the Health Care
Financing Administration (HCFA), acting pursuant to the Balanced
Budget Act of 1997, published a proposed reimbursement schedule
that, if implemented, would have resulted in reductions in Medicare
reimbursement for medical imaging services over a four-year phase-
in period. The proposed schedule was not implemented because the
data from which HCFA prepared the proposed reimbursement schedule
was not complete. As of March 2000, HCFA was still in the process
of analyzing data to determine what reductions, if any, should be
made in medical imaging reimbursement. The final outcome to the
proposed fee restructuring and the impact on diagnostic facilities,
and on the Company, cannot be predicted at this time.
HCFA also announced that in mid-year 2000, changes will be made in
the reimbursement framework through the introduction of ambulatory
payment classifications (APCs). Since APCs apply only to outpatient
services performed by hospital-based medical providers, the
Company's management does not expect the changes to affect the
Company's medical imaging centers, which are not hospital-based.
The Company's pharmacy services business does not get reimbursement
from HCFA; however, the introduction of APCs could have an impact
on the hospitals that purchase their radiopharmaceuticals from
Syncor, and that impact, in turn, could affect the Company's
revenues. The Company cannot predict at this time what impact those
changes will have on the Company's radiopharmacy business, but
based on information currently available to it, the Company's
management believes that those changes will have a favorable impact
on the pharmacy services business.
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 our products, competitor pricing, maintenance
of our current market position and other factors. Given these
uncertainties, under reliance should not be placed on such forward-
looking statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998
_____________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 13,352 $ 13,824
Short-term investments 8,536 4,707
Trade receivables, less allowance for doubtful
accounts of $1,449 and $765, respectively 73,962 65,055
Patient receivables, less allowance for doubtful
accounts of $3,199 and $3,009, respectively 15,924 10,724
Inventory 21,727 11,495
Prepaids and other current assets 14,446 12,780
_____________________________________________________________________________
Total current assets 147,947 118,585
_____________________________________________________________________________
Marketable investment securities 1,185 1,191
Property and equipment, net 66,640 49,103
Excess of purchase price over net assets acquired,
net of accumulated amortization of $11,577 and
$7,642, respectively 75,308 62,654
Other 21,562 25,034
_____________________________________________________________________________
$312,642 $256,567
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 53,205 $ 44,578
Accrued liabilities 9,682 7,005
Accrued wages and related costs 16,997 12,563
Federal and state taxes payable 2,425 1,293
Current maturities of long-term debt 9,312 9,122
______________________________________________________________________________
Total current liabilities 91,621 74,561
______________________________________________________________________________
Long-term debt, net of current maturities 76,326 70,322
Deferred taxes 4,358 -
Deferred compensation - 311
Stockholders' Equity:
Common stock $.05 par value; authorized 20,000
shares; issued 13,306 and 12,517 shares
at December 31, 1999 and 1998, respectively 665 626
Additional paid-in capital 91,269 72,622
Notes receivables from related parties (18,692) (9,028)
Accumulated other comprehensive income (loss) (410) (527)
Employee savings and stock ownership loan guarantee (3,370) (5,056)
Retained earnings 84,481 65,260
Treasury stock, at cost, 1,393 and 1,356 shares
at December 31, 1999 and 1998, respectively (13,606) (12,524)
______________________________________________________________________________
Total stockholders' equity 140,337 111,373
______________________________________________________________________________
$312,642 $256,567
==============================================================================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998 1997
_________________________________________________________________________________
<S> <C> <C> <C>
Net sales $520,309 $449,023 $380,563
Cost of sales 350,988 317,073 290,398
_________________________________________________________________________________
Gross profit 169,321 131,950 90,165
Operating, selling and administrative expenses 110,308 92,146 67,214
Depreciation and amortization 19,515 15,254 9,939
_________________________________________________________________________________
Operating income 39,498 24,550 13,012
Other income (expense):
Interest income 2,188 1,643 1,324
Interest expense (7,014) (5,291) (1,207)
Other, net (756) 3,283 3,826
_________________________________________________________________________________
Other income (expense), net (5,582) (365) 3,943
Income from continuing operations before income taxes 33,916 24,185 16,955
Provision for income taxes 14,695 10,254 6,923
_________________________________________________________________________________
Income from continuing operations 19,221 13,931 10,032
Discontinued operations, net of taxes - - 1,063
_________________________________________________________________________________
Net income $ 19,221 $ 13,931 $ 11,095
=================================================================================
Net income per share - basic:
Income from continuing operations $ 1.65 $ 1.30 $ 1.00
Discontinued operations, net of taxes - - .11
_________________________________________________________________________________
Net income $ 1.65 $ 1.30 $ 1.11
=================================================================================
Weighted average shares outstanding 11,670 10,726 9,998
=================================================================================
Net income per share - diluted:
Income from continuing operations $ 1.51 $ 1.23 $ .98
Discontinued operations, net of tax benefit - - .10
_________________________________________________________________________________
Net income $ 1.51 $ 1.23 $ 1.08
=================================================================================
Weighted average shares outstanding 12,739 11,339 10,282
=================================================================================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
Accumulated Other
Comprehensive Income
________________________
Employee
Savings & Notes
Stock Foreign Receivable
Additional Ownership Unrealized Currency From Total
Common Stock Paid-In Loan loss on Translation Retained Treasury Related Stockholders'
________________
(IN THOUSANDS) Shares Amount Capital Guarantee Investments Adjustment Earnings Stock Parties Equity
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 10,215 $567 $53,072 $(4,544) $ (27) $(157) $40,234 $(10,613) $ - $ 78,532
Issuance of common stock 94 5 1,754 1,759
Issuance of treasury stock 250 2,599 2,599
Tax benefit from the exercise
of stock options 235 235
Reacquisition of common stock
for treasury (480) (4,510) (4,510)
ESSOP loan guarantee 1,366 1,366
Amortization of loan guarantee (3,563) (3,563)
Comprehensive Income:
Unrealized gain on investments 10
Foreign currency translation
adjustment (156)
Net income 11,095
Total Comprehensive Income: 10,949
____________________________________________________________________________________________________________________________________
Balance at December 31, 1997 10,079 $572 $55,061 $(6,741) $ (17) $(313) $51,329 $(12,524) $ - $ 87,367
Issuance of common stock 1,082 54 17,116 (9,028) 8,142
Tax benefit from the exercise
of stock options 445 445
Amortization of loan guarantee 1,685 1,685
Comprehensive Income:
Unrealized loss on investments (300)
Foreign currency translation
adjustment 103
Net income 13,931
Total Comprehensive Income: 13,734
____________________________________________________________________________________________________________________________________
Balance at December 31, 1998 11,161 $626 $72,622 $(5,056) $ (317) $(210) $65,260 $(12,524) $ (9,028) $111,373
Issuance of common stock 789 39 15,904 (9,664) 6,279
Tax benefit from the exercise
of stock options 2,743 2,743
Reacquisition of common
stock for treasury (37) (1,082) (1,082)
Amortization of loan guarantee 1,686 1,686
Comprehensive Income:
Unrealized loss on investments 172
Foreign currency translation
adjustment (55)
Net income 19,221
Total Comprehensive Income: 19,338
____________________________________________________________________________________________________________________________________
Balance at December 31, 1999 11,913 $665 $91,269 $(3,370) $ (145) $(265) $84,481 $(13,606) $(18,692) $140,337
====================================================================================================================================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(IN THOUSANDS EXCEPT PER SHARE DATA) 1999 1998 1997
__________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $19,221 $13,931 $11,095
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 19,515 15,254 9,939
Provision for losses on receivables 466 2,734 129
Amortization of loan guarantee 1,686 1,685 1,366
Decrease (increase) in:
Accounts receivable - trade (9,592) (9,459) (3,237)
Accounts receivable - patient (1,348) (1,401) -
Inventory (10,219) (5,935) 2,336
Prepaids and other current assets (2,369) (2,223) 1,699
Net assets of discontinued operations - - 1,198
Other assets (9,032) (4,846) (8,368)
Increase (decrease) in:
Accounts payable 8,647 5,566 (4,012)
Accrued liabilities 1,597 (456) 998
Accrued wages and related costs 4,427 (1,110) 2,927
Federal and state taxes payable 4,001 630 (931)
Deferred compensation (312) (1,658) (2)
_________________________________________________________________________________________
Net cash provided by operating activities 26,688 12,712 15,137
Cash flows from investing activities:
Purchase of property and equipment, net (24,463) (15,986) (10,889)
Payments for acquisitions (18,031) (45,338) (6,550)
Net increase in short-term investments (3,823) (2,124) (1,323)
Net decrease (increase) in long-term investments 6 (11) 59
Unrealized gain (loss) in investments 171 (300) 10
_________________________________________________________________________________________
Net cash used in investing activities (46,140) (63,759) (18,693)
Cash flows from financing activities:
Issuance of common stock 6,279 3,142 1,759
Issuance of treasury stock - - 2,599
Reacquisition of common stock (1,082) - (4,510)
Increase in ESSOP loan guarantee - - (3,563)
Proceeds from long-term debt 23,643 46,271 10,634
Repayment of long-term debt (9,955) (10,070) (2,807)
Net cash provided by financing activities 18,885 39,343 4,112
- -----------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (567) (11,704) 556
Effect of exchange rate on cash 95 (10) (232)
Cash and cash equivalents at beginning of period 13,824 25,538 25,214
_________________________________________________________________________________________
Cash and cash equivalents at end of period $13,352 $13,824 $25,538
=========================================================================================
See accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The Company's business is primarily
concentrated in three business segments. The first is the
compounding, dispensing and distributing of radiopharmaceuticals to
hospitals and clinics located within the United States. The second
is the management and provision of medical diagnostic imaging
services located within the United States. The third is providing
both radiopharmaceuticals and radiology services outside of the
United States. The consolidated financial statements include the
assets, liabilities and operations of the Company and its
subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company
considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Short-term
investments consist principally of time deposits and tax-exempt
municipal securities and are carried at cost, which approximates
market value.
FINANCIAL INSTRUMENTS: The carrying value of financial instruments
such as cash and cash equivalents, trade receivables, payables and
floating rate short and long-term debt, approximate fair value.
PATIENT RECEIVABLES: The Company receives payment for services
rendered from federal and state agencies (under the Medicare,
Medicaid and Champus programs), managed health care plans,
commercial insurance companies, employers and patients. During the
year ended December 31, 1999 approximately 9.1 percent of the
Company's patient revenues related to patients participating in the
Medicare and Medicaid programs. The Company does not believe that
there are any other significant concentrations of revenues from any
particular payer that would subject the Company to any significant
credit risk in the collection of its patient accounts receivable.
INVENTORY: Inventories, consisting of purchased products, are
stated at the lower of cost (first-in, first-out) or market.
PROPERTY AND EQUIPMENT: Property and equipment are stated at cost
and depreciated or amortized on a straight-line basis over
estimated useful lives ranging from two to fifteen years.
SELF INSURANCE: The Company historically has purchased insurance in
excess of self-insured retentions or deductibles for losses and
liabilities related to vehicle claims, medical claims and general
product liability claims. Losses accrued under self-insured and
deductible plans are based upon the Company's estimates of
aggregated liability claims incurred using certain actuarial
assumptions followed in the insurance industry and the Company's
own experience.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED: The cost in
excess of net assets of acquired businesses is being amortized on
a straight-line basis over periods of 15 to 40 years. The Company
periodically evaluates the carrying value of these assets and,
accordingly, considers the ability to generate positive cash flow
through projected undiscounted future operating cash flows from the
related operation as the key factor in determining whether the
assets have been impaired. The Company's accounting treatment is
consistent with Statement of Financial Accounting Standard (SFAS)
No.121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of."
MARKETABLE INVESTMENT SECURITIES: Marketable investment securities
consist primarily of corporate debt and United States government
obligations. The Company classifies debt and marketable equity
securities in one of three categories: trading, available-for-sale
or held-to-maturity. Trading securities are bought and held
principally for the purpose of selling them in the near term. Held-
to-maturity securities are those securities that the Company has
the ability and intent to hold until maturity. All other securities
not included in trading or held-to-maturity are classified as
available-for-sale.
Held-to-maturity securities are recorded at amortized cost,
adjusted for the amortization or accretion of premiums or
discounts. Unrealized holding gains and losses on trading
securities are included in earnings. Unrealized holding gains and
losses, net of the related tax effect, on available-for-sale
securities are excluded from earnings and are reported as a
component of accumulated other comprehensive income until realized.
FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign
operations are translated into U.S. dollars based upon the
prevailing exchange rates in effect at the balance sheet date.
Foreign exchange gains and losses resulting from these translations
are included as a component of accumulated other comprehensive
income. Actual gains or losses incurred on currency transactions in
other than the country's functional currency are included in net
income currently.
STOCK OPTIONS: The Company measures stock-based compensation using
the intrinsic value method which assumes that options granted at
market price at the date of grant have no intrinsic value. Proforma
net income and earnings per share are presented in Note 9 as if the
fair value method had been applied.
INCOME TAXES: Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date.
REVENUES: The Company's medical imaging facilities have entered
into agreements with third-party payers, including government
programs and managed care health care plans, under which the
facilities are paid based upon established charges, predetermined
rates per service or discounts from established charges.
Revenues are recorded at estimated amounts due from patients and
third-party payers for the services provided. Management believes
that adequate provisions have been made for any potential
adjustments.
USE OF ESTIMATES: Management of the Company has made a number of
estimates and assumptions relating to the reporting of assets and
liabilities, the reporting of sales and expenses and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS: Certain items in the prior years' consolidated
financial statements have been reclassified to conform to the
current year's presentation.
NOTE 2. ACQUISITIONS AND DISCONTINUED OPERATIONS
During 1998 and 1999, the Company acquired multiple medical
imaging businesses all of which operate under the subsidiary CMI.
During 1998, the Company acquired three companies in the medical
imaging business. The first occurred in January when Syncor acquired
the medical imaging business from National Diagnostic Services, Inc.
and an affiliate ("NDS"). The purchase price for the acquisition was
$12 million including the assumption of $4.3 million in debt. The
acquired business included nine medical imaging centers owned or
managed by NDS.
Also in January 1998, a subsidiary of Syncor merged with and into
TME, Inc., a company based in Houston, Texas, pursuant to which
TME, Inc. became a wholly owned subsidiary of Syncor. TME owned,
operated and/or managed free-standing medical imaging centers
through joint ventures and partnerships. It has 20 facilities in
its network. As consideration for the merger, Syncor paid $14.5
million in cash to TME's stockholders and assumed $5.2 million in
TME liabilities.
The third was the medical imaging business of International Magnetic
Imaging, Inc., a subsidiary of Consolidated Technology Group Ltd.
in March 1998. The acquired business included ten outpatient
medical imaging centers and an imaging referral network operating
in 35 states. The purchase price for the acquisition was $20.4
million, plus the assumption of $24.3 million in liabilities and
trade payables.
The Company accounted for these transactions as purchases and the
purchase prices were allocated to fixed assets, non-compete and
consulting agreements and goodwill. Goodwill for the NDS and IMI
acquisitions is being amortized over a period of 20 years while the
TME acquisition is being amortized over 30 years. The results of
operations related to the above 1998 transactions are included in
the Company's consolidated financial statements from the effective
acquisition dates.
On December 31, 1998 the Company entered into an agreement to sell
its partnership interest in the Imaging Center of Orlando ("ICO")
for a secured note of $1.25 million. This transaction resulted in
a pre-tax gain, recorded in "Other - income, Other - net," on sale
of $1.1 million and an after tax gain of $.6 million, or $.05 per
share on a diluted basis in the fourth quarter.
During 1999, the Company acquired eight imaging center sites in the
expansion of its Medical Imaging business, and the remaining
interest that the Company does not already own in certain sites for
$18 million and the assumption of $5.2 million in debt. In April
1999, the Company acquired two imaging centers for a total purchase
price of $2.5 million plus the assumption of $1.0 million in debt.
The Company also purchased the minority interests in certain open MRI
sites for $6.8 million in 1999.
During September 1999, the Company acquired a three site operation
in the Victorville, California area for $3.4 million plus the
assumption of $1.7 million in debt. In addition, the Company completed
the purchase of the remaining interest that the Company does not
already own in two sites for $2.7 million plus the assumption of $2.5
million in debt. The remaining site acquisition was in Santa Maria,
California for a total purchase price of $2.8 million.
The Company accounted for these transactions as purchases and the
purchase prices were allocated to accounts receivable, fixed assets
and goodwill. Goodwill for these acquisitions is being amortized
over 20 years. The results of operations related to the above 1999
transactions are included in the Company's consolidated financial
statements from the effective acquisition dates.
The following unaudited pro forma information presents a summary of
our consolidated results of operation as if the acquisitions had
occurred on January 1, 1998:
<TABLE>
<CAPTION>
FISCAL YEAR
(IN MILLIONS, EXCEPT PER SHARE) 1999 1998
______________________________________________________________________________
<S> <C> <C>
Sales $524,676 $464,444
Net Earnings $ 19,931 $ 14,285
Net Earnings per diluted share (continuing operations) $ 1.56 $ 1.26
______________________________________________________________________________
</TABLE>
These unaudited proforma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of
operations that would have occurred or the future results of
operations of the consolidated entities.
NOTE 3. PROPERTY AND EQUIPMENT, NET
The major classes of property were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998
________________________________________________________________________
<S> <C> <C>
Land and buildings $ 7,785 $ 6,098
Furniture and equipment 96,383 74,866
Leasehold improvements 18,411 17,077
Construction in progress 4,161 -
________________________________________________________________________
126,740 98,041
Less accumulated depreciation and amortization (60,100) (48,938)
________________________________________________________________________
$66,640 $49,103
========================================================================
</TABLE>
NOTE 4. MARKETABLE INVESTMENT SECURITIES
Marketable investment securities consist of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998
______________________________________________________________________________
<S> <C> <C>
Available-for-sale, at fair value, net of tax effect $ 685 $ 691
Held-to-maturity, at amortized cost 500 500
______________________________________________________________________________
$1,185 $1,191
==============================================================================
</TABLE>
The amortized cost, gross unrealized holding gains and losses and
fair value for available-for-sale and held-to-maturity securities
by major security type at December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
1999 UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
(IN THOUSANDS) COST GAINS LOSSES VALUE
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Available-for-sale:
Corporate debt securities $ 697 $ 55 $(67) $ 685
Held-to-maturity:
U.S. Treasury securities 500 - - 500
______________________________________________________________________________
$1,197 $ 55 $(67) $1,185
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
1998 UNREALIZED
AMORTIZED HOLDING HOLDING FAIR
(IN THOUSANDS) COST GAINS LOSSES VALUE
______________________________________________________________________________
<S> <C> <C> <C> <C>
Available-for-sale:
Corporate debt securities $ 697 $ 44 $(50) $ 691
Held-to-maturity:
U.S. Treasury securities 500 - - 500
______________________________________________________________________________
$1,197 $ 44 $(50) $1,191
==============================================================================
</TABLE>
The unrealized holding losses on held-to-maturity securities have
not been recognized in the accompanying consolidated financial statements.
Maturities of investment securities classified as available-for-
sale and held-to-maturity at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
_______________________________________________________________________________
AMORTIZED FAIR AMORTIZED FAIR
(IN THOUSANDS) COST VALUE COST VALUE
_______________________________________________________________________________
<S> <C> <C> <C> <C>
Available-for-sale:
Due after one year through five years $499 $493 $499 $490
Due after five years through ten years $198 $192 $198 $201
Held-to-maturity
Due within one year $500 $500 $500 $500
===============================================================================
</TABLE>
NOTE 5. LINE OF CREDIT
At December 31, 1999, the Company had an unsecured revolving line
of credit for short-term borrowings aggregating $100,000,000. The
line of credit was increased from $75,000,000 to $100,000,000
effective December 15, 1999. The terms of this revolving credit
line include two interest rate borrowing options, the Eurodollar
rate plus an applicable margin or the bank's Prime rate (8.50
percent at December 31, 1999). As of December 31, 1999, the
availability of the line of credit was reduced by $50,000 as a
result of outstanding standby letters of credit resulting in
available credit of $47.3 million. To maintain this line of credit,
the Company is required to pay a quarterly commitment fee of 1/4 of
one percent per annum on the unused portion.
The line of credit agreement specifies that certain covenants
(including limitations on investments and acquisitions, new
borrowings and issuance of new stock) be maintained. Certain
financial ratios (including EBITDA ratio and Fixed Charge Coverage
ratio) also need to be maintained under this agreement. As of
December 31, 1999, the Company was in compliance with all debt
covenants under the credit line agreement.
NOTE 6. LONG TERM DEBT
The Company's long-term debt was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1999 1998
________________________________________________________________________________
<S> <C> <C>
Notes payable, unsecured, payable in installments through 2012,
with effective interest rates ranging from 6.95% to 9.00% $ 919 $ 508
________________________________________________________________________________
Note payable, unsecured, payable in installments through 2001,
with a floating interest rate of either the lower of prime or
LIBOR plus .75%, 6.57% and 5.91% at December 31, 1999 and 1998,
respectively 3,371 5,056
________________________________________________________________________________
Notes payable, secured, payable in installments through 2003,
with a non-interest bearing rate, net of unamortized discount
at 6% to 10% of $110 and $212 at December 31, 1999
and 1998, respectively 1,575 2,554
________________________________________________________________________________
Note payable, unsecured, payable in installments through 2002,
with a floating interest rate of LIBOR plus .95%, 6.95% and
6.20% at December 31, 1999 and 1998, respectively 5,975 6,500
________________________________________________________________________________
Note payable, unsecured, payable in lump sum on November 1,
2004 with a floating interest rate of LIBOR plus 1.25% or
prime rate, with interest rates ranging from 6.31% to 7.44% 52,700 46,000
________________________________________________________________________________
Notes payable, payable in varying installments through 2005
with effective interest rates ranging from 5.28% to 11.5% 7,878 10,703
________________________________________________________________________________
Non-Compete agreements paid in varying installments through
2004, with effective interest rates of 6% to 7.12% 668 856
________________________________________________________________________________
Capital Lease obligations, payable in installments through
2005, with effective interest rates from 4.63% to 13.18% 12,552 7,267
________________________________________________________________________________
Total debt 85,638 79,444
________________________________________________________________________________
Less current maturities of long-term debt 9,312 9,122
________________________________________________________________________________
Long-term debt, net of current maturities $76,326 $70,322
================================================================================
</TABLE>
At December 31, 1999, long-term debt maturing over the next five years is as
follows: 2000, $9,312; 2001, $7,860; 2002, $8,750; 2003, $2,303; 2004, $54,125
and $3,288 thereafter.
Interest paid was $6,945, $5,392, and $1,205 for the years ended December 31,
1999, 1998 and 1997, respectively.
NOTE 7. INCOME TAXES
Total income tax expense for the years ended December 31, 1999 and 1998 was
allocated as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998
____________________________________________________________________________
<S> <C> <C>
Income from continuing operations $14,695 $10,254
Stockholders' equity for compensation expense
for tax purposes in excess of amounts
recognized for financial reporting (2,748) (444)
____________________________________________________________________________
$11,947 $ 9,810
============================================================================
</TABLE>
Income tax expense (benefit) attributable to income from continuing
operations consisted of:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998 1997
______________________________________________________________________
<S> <C> <C> <C>
Current:
Federal $10,062 $ 8,022 $ 6,839
State 2,324 1,715 1,262
______________________________________________________________________
12,386 9,737 8,101
Deferred:
Federal 2,163 625 (916)
State 146 (108) (262)
______________________________________________________________________
2,309 517 (1,178)
______________________________________________________________________
$14,695 $10,254 $ 6,923
======================================================================
</TABLE>
The amounts differed from the amounts computed by applying the
federal income tax rate of 35 percent to pretax income from
continuing operations as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS) 1999 1998 1997
_________________________________________________________________________________
<S> <C> <C> <C>
Federal income taxes at "expected" rate $11,871 $ 8,465 $5,935
Increase (reduction) in income taxes resulting from:
Meals and entertainment 221 205 213
Tax exempt interest (50) (95) (109)
Amortization of intangible assets 365 343 143
Foreign losses and foreign tax rate differential 1,027 789 370
State taxes, net of Federal benefit 1,606 1,045 650
Utilization of general business credits (631) (578) (235)
Other 287 80 (44)
_________________________________________________________________________________
$14,695 $10,254 $6,923
=================================================================================
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1999 and 1998, are presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) 1999 1998
_________________________________________________________________________________
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 232 $ 394
Compensated absences, principally due to accrual
for financial reporting purposes 1,799 1,376
Accounts receivable, due to allowance for doubtful accounts 1,490 1,758
Accrued liabilities, primarily due to self-insurance and
other contingency accruals for financial reporting purposes 1,881 2,169
Deferred compensation, due to accrual for financial reporting
purposes 3,159 3,100
Covenant not to compete due to difference in amortization 602 644
Other 481 592
_________________________________________________________________________________
Total gross deferred tax asset $9,644 $10,033
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS) 1999 1998
_________________________________________________________________________________
<S> <C> <C>
Deferred tax liabilities:
Plant and equipment, due to difference in depreciation $1,203 $ 522
Partnership basis, due to book to tax differences at
partnership level 501 1,110
Deferred expenses 150 120
Goodwill due to difference in amortization 2,420 424
Other 45 129
_________________________________________________________________________________
Total gross deferred tax liabilities 4,319 2,305
=================================================================================
Net deferred tax asset $5,325 $7,728
=================================================================================
</TABLE>
Management has reviewed the recoverability of deferred income tax
assets and has determined that it is more likely than not that the
deferred tax assets will be fully realized through future taxable
earnings.
Income tax payments amounted to $7,704, $9,613, and $7,622 for the
years ended December 31, 1999, 1998 and 1997, respectively.
NOTE 8. COMMITMENTS
The Company leases facilities, vehicles and equipment with terms
ranging from three years to fifteen years. The majority of property
leases contain renewal options and some have escalation clauses for
increases in property taxes, Consumer Price Index and other items.
The Company leases a building and certain items of equipment under
capital leases which had an approximate cost of $17,144, $13,148,
and $6,891, at December 31, 1999, 1998 and 1997 respectively, and
accumulated depreciation of $5,603, $4,702, and $2,181,
respectively. The Company was not utilizing this building and,
accordingly, sublet it to a third party for the balance of the
lease term. The cost increase over the prior year was due to the
acquisition of the medical imaging businesses of CMI and their
related capital leases.
Future minimum lease payments under capital leases and ending
noncancelable operating leases with terms greater than one year and
related sublease income at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING SUBLEASE
(IN THOUSANDS) LEASES LEASES INCOME
_____________________________________________________________________________
<S> <C> <C> <C>
Year December 31,
2000 $ 4,575 $ 8,064 $117
2001 3,924 6,297 24
2002 3,387 5,528 5
2003 1,963 4,420 -
2004 954 3,176 -
Thereafter 205 4,647 -
_____________________________________________________________________________
$15,008 $32,132 $146
=============================================================================
Less amount representing interest (2,456)
_____________________________________________________________________________
Present value of net minimum lease payments $12,552
=============================================================================
</TABLE>
Rental expense under operating leases was $10,173, $8,199, and $7,528
for the years ended December 31, 1999, 1998 and 1997, respectively.
NOTE 9. STOCK OPTIONS AND RIGHTS
Options to purchase common stock have been granted under various
plans to officers, directors and other employees at prices equal to
the market prices at date of grant. An aggregate of 3,723,546
shares have been authorized for issuance under the various plans as
of December 31, 1999. Options are generally exercisable at a rate
of 25 percent per year beginning one year from the date of grant
and expire ten years after the date of grant. At December 31, 1999,
446,633 shares were reserved for issuance under the various plans.
The per share weighted-average fair value of stock options granted
during 1999, 1998 and 1997 was $21.47, $11.34, and $5.74,
respectively, on the date of grant using the Black Scholes option-
pricing model with the following weighted-average assumptions: 1999
expected dividend yield of 0%, risk-free interest rate of 5.62%,
expected volatility of 58.7% and an expected life of 5.21 years.
1998 expected dividend yield of 0%; risk-free interest rate of
4.8%; expected volatility of 60.4% and an expected life of 5.19
years; 1997 expected dividend yield of 0%; risk-free interest rate
of 5.71%; expected volatility of 61.1% and an expected life of 5.26
years.
The Company applies APB Opinion No. 25 in accounting for its plans
and, accordingly, no compensation cost has been recognized for its
stock options in the Consolidated Statements of Operations. Had the
Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's
net income would have been reduced to the pro forma amounts
indicated in the following table:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1999 1998 1997
_______________________________________________________________________________
<S> <C> <C> <C>
Net income
As reported $19,221 $13,931 $11,095
Pro forma $15,545 $11,343 $10,802
Earnings per share
Basic:
As reported $ 1.65 $ 1.30 $ 1.11
Pro forma $ 1.33 $ 1.06 $ 1.08
Diluted:
As reported $ 1.51 $ 1.23 $ 1.08
Pro forma $ 1.22 $ 1.00 $ 1.05
===============================================================================
</TABLE>
A summary of employee stock options is as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
(IN THOUSANDS, EXCEPT SHARE PRICE) SHARES EXERCISE PRICE
_____________________________________________________________________________
<S> <C> <C>
Outstanding at December 31, 1996 1,146 $10.03
Granted 401 $ 9.80
Exercised (94) $ 8.47
Cancelled (42) $10.68
_____________________________________________________________________________
Outstanding at December 31, 1997 1,411 $10.22
Granted 1,685 $16.57
Exercised (204) $12.04
Cancelled (43) $10.21
_____________________________________________________________________________
Outstanding at December 31, 1998 2,849 $13.77
Granted 1,072 $31.21
Exercised (403) $ 9.27
Cancelled (241) $17.37
_____________________________________________________________________________
Outstanding at December 31, 1999 3,277 $19.30
=============================================================================
</TABLE>
At December 31, 1999, the range of exercise prices and weighted
average remaining contractual life of outstanding options was $8.40
to $38.56 and eight years, respectively.
At December 31, 1999, 1998, and 1997, the number of options
exercisable was approximately 988,000, 1,004,000, and 590,000,
respectively, and the weighted average price of those options was
$12.80, $11.16, and $10.12, respectively.
The Company derives a tax benefit from the options exercised and sold
by employees and the benefit is credited to additional paid-in capital.
In September 1999, the Company adopted a new Rights Plan and
declared a dividend distribution of one right for each outstanding
share of the Company's common stock. The new Rights Plan replaced
the Company's original rights plan, which was set to expire in
September 1999. The rights under the new Rights Plan are set to
expire in September 2009, unless redeemed earlier by the Board. At
least once every three years, an independent committee of the Board
will review the Rights Plan and, if the committee deems it
appropriate, recommend to the entire Board that the Rights Plan be
modified or terminated. Each right represents the right to
purchase, if and when the right becomes exercisable, a unit
consisting of one share of Syncor common stock at a per unit price
of $180 (the "Purchase Price"). The rights generally will be
exercisable only if a person or group (an "Acquiring Person")
acquires beneficial ownership of 15% or more of Syncor's common
stock or commences a tender or exchange offer upon consummation of
which such person or group would beneficially own 15% or more of
Syncor's common stock (other than as a result of repurchases of
stock by Syncor, or certain purchases by institutional or similar
stockholders so long as they do not own 20% or more). In the event
any person becomes an Acquiring Person (other than pursuant to an
offer for all shares that the majority of the independent directors
not associated or affiliated with the Acquiring Person determines
to be adequate and otherwise in the best interest of the Company
and its stockholders), each of the rights becomes a discount right
entitling the holder (other than the Acquiring Person) upon payment
of the Purchase Price, to common stock having a value equal to twice
the Purchase Price (i.e., $360 worth of Syncor stock for a purchase
price of $180). If following someone becoming an Acquiring Person,
the Company engages in a merger or other business combination in
which the Company does not survive or the common stock is changed
or exchanged, or transfers more than 50% of its assets, cash flow
or earning power in one transaction or a series of related
transactions, each right becomes a right (except for the Acquiring
Person) to acquire common shares of the other party to the
transaction having a value equal to twice the Purchase Price.
NOTE 10. EMPLOYEE BENEFIT PLANS
The Company's 401(k) plan is open to all employees who are at least
21 years of age and have a minimum of twelve consecutive months of
service. In 1989, the Company's Board of Directors amended the plan
to an Employees' Savings and Stock Ownership Plan (ESSOP) to allow
the plan to acquire one million of the Company's shares through a
leveraged employee stock ownership plan transaction. In June 1995,
September 1996, and August 1997, an additional 750,000 shares, in
total, which were purchased in the open market, were contributed to
the plan. These shares were originally classified as "treasury
stock." The contributions totaled $8,657 and reflected the fair
market value at the time of contribution. In connection with these
transactions, the Company made a loan to the ESSOP. The ESSOP loan
had an outstanding balance of $3,370,496 at December 31, 1999.
Under the ESSOP, participants may contribute one percent to
fourteen percent of their compensation to 401(k) investment options
and an additional two percent of their compensation to purchase
Company stock. The Company makes matching contributions to 50
percent of the employees' 401(k) investment contributions up to a
maximum of four percent of the employees' compensation and to 100
percent of the employees' Company stock purchases up to two percent
of the employees' compensation. The Company's matching contribution
is made in Company stock and reflects the ESSOP loan payment. The
number of shares of stock available to match employee contributions
is directly related to the amount of principal payments made on the
ESSOP loan. Once the number of available shares is determined, the
Company matches the employees' contributions as described above by
determining the fair market value of the available stock. The
remainder of any shares not allocated after all matching is
complete will be allocated to all eligible employees based on
relative compensation.
Participants are fully and immediately vested in their
contributions and vest in employer contributions over a five-year
period of continuous employment. After five years of continuous
employment, any further employer contributions are fully and
immediately vested. The Company's contributions for the years ended
December 31, 1999, 1998 and 1997 amounted to $1,957, $2,091, and
$1,625, respectively, of which $1,686, $1,685, and $1,366,
respectively, were used to pay down principal on the ESSOP loan and
$271, $406, and $259 respectively, to pay interest.
NOTE 11. NET INCOME PER SHARE
The following table presents the computation of basic earnings per
share (EPS):
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
(IN THOUSANDS Income Shares Per Share Income Shares Per Share Income Shares Per Share
EXCEPT PER SHARE DATE) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
___________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income from continuing
Operations $19,221 $13,931 $10,032
Basic EPS $19,221 11,670 $1.65 $13,931 10,726 $1.30 $10,032 9,998 $1.00
===== ===== =====
Effect of Dilutive
Stock Options 1,069 613 284
_____ ___ ___
Diluted EPS $19,221 12,739 $1.51 $13,931 11,339 $1.23 $10,032 10,282 $0.98
===== ===== =====
</TABLE>
Options to purchase 245 shares of common stock at prices ranging
from $32.63 to $38.36 were outstanding during 1999, but were not
included in the computation of diluted EPS at December 31, 1999
because the options' exercise prices were greater than the average
market price of the common shares.
NOTE 12. LITIGATION AND CONTINGENCIES
There are various litigation proceedings in which the Company and
its subsidiaries are involved. Many of the claims asserted against
the Company in these proceedings are covered by insurance. The
results of litigation proceedings cannot be predicted with
certainty. However, in the opinion of the Company's general
counsel, such proceedings either are without merit or do not have
a potential liability which would materially affect the financial
condition of the Company and its subsidiaries on a consolidated basis.
NOTE 13. BUSINESS SEGMENTS
The Company is currently in three different business segments: The
first segment is the compounding, dispensing, and distribution of
radiopharmaceuticals in the United States. The second segment is
the management and provision of medical diagnostic imaging services
in the United States. The third segment is the compounding,
dispensing, and distribution of radiopharmaceuticals and the
provision of radiology services outside of the United States. Prior
to 1998, the Company had only minimal participation in segments
other than the radiopharmaceuticals segment.
<TABLE>
<CAPTION>
(IN THOUSANDS)
__________________________________________________________________________
<S> <C> <C>
U.S. PHARMACY SERVICES BUSINESS 1999 1998
__________________________________________________________________________
Revenues $440,322 $396,910
Operating Income $ 48,090 $ 37,893
Total Assets $106,010 $ 86,766
Capital Expenditures $ 3,714 $ 3,009
Depreciation/Amortization $ 4,256 $ 4,946
U.S. MEDICAL IMAGING BUSINESS 1999 1998
__________________________________________________________________________
Revenues $ 55,187 $ 35,309
Operating Income $ 5,881 $ 2,328
Total Assets $122,020 $ 93,772
Capital Expenditures $ 5,961 $ 2,717
Depreciation/Amortization $ 7,674 $ 4,651
INTERNATIONAL OPERATIONS 1999 1998
__________________________________________________________________________
Revenues $ 24,800 $ 16,804
Operating Income $ 55 $ (1,096)
Total Assets $ 38,478 $ 29,148
Capital Expenditures $ 8,002 $ 5,164
Depreciation/Amortization $ 2,742 $ 2,244
UNALLOCATED CORPORATE 1999 1998
__________________________________________________________________________
Operating Loss $(14,528) $(14,575)
Total Assets $ 46,134 $ 46,881
Capital Expenditures $ 6,786 $ 5,096
Depreciation/Amortization $ 4,843 $ 3,413
OPERATING TOTAL
GEOGRAPHIC SEGMENTS REVENUES INCOME ASSETS
__________________________________________________________________________
United States
1999 $495,509 $ 39,443 $274,164
1998 $432,219 $ 25,646 $227,419
Rest of World
1999 $ 24,800 $ 55 $ 38,478
1998 $ 16,804 $ (1,096) $ 29,148
===========================================================================
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS, SYNCOR INTERNATIONAL CORPORATION
We have audited the accompanying consolidated balance sheets of
Syncor International Corporation and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity and comprehensive income and cash
flows for each of the years in the three-year period ended December
31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Syncor International Corporation and subsidiaries as of
December 31, 1999 and 1998, and the results of their operations and
their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Los Angeles, California
February 16, 2000
MANAGEMENT'S REPORT
The Management of Syncor International Corporation is responsible
for the consolidated financial statements and all other information
presented in this report. The consolidated financial statements
have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and, therefore,
included in the consolidated financial statements are certain
amounts based on management's informed estimates and judgments.
Management is responsible for establishing and maintaining a system
of internal control designed to provide reasonable assurance as to
the integrity and reliability of financial reporting. The concept
of reasonable assurance is based on the recognition that there are
inherent limitations in all systems of internal control, and that
the cost of such systems should not exceed the benefits to be
derived therefrom. Other financial information in this report is
consistent with that in the consolidated financial statements. The
consolidated financial statements have been examined by Syncor
International Corporation's independent certified public
accountants and have been reviewed by the Audit Committee of the
Board of Directors.
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The unaudited quarterly operating results in the Selected Quarterly
Results of Operations have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of
management, include all adjustments necessary for a fair
presentation for the periods presented.
Unaudited calendar quarterly information is summarized below:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1999
_________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $123,868 $130,290 $131,508 $134,643 $520,309
Gross profit $ 38,582 $ 43,245 $ 42,705 $ 44,789 $169,321
Net income from continuing operations $ 5,029 $ 6,387 $ 3,194 $ 4,611 $ 19,221
Net income per share
from continuing operations:
Basic $ .44 $ .55 $ .27 $ .39 $ 1.65
Diluted $ .41 $ .50 $ .25 $ .36 $ 1.51
Net income $ 5,029 $ 6,387 $ 3,194 $ 4,611 $ 19,221
Net income per share:
Basic $ .44 $ .55 $ .27 $ .39 $ 1.65
Diluted $ .41 $ .50 $ .25 $ .36 $ 1.51
Weighted average shares outstanding:
Basic 11,363 11,675 11,805 11,846 11,670
Diluted 12,393 12,757 12,937 12,841 12,739
_________________________________________________________________________________________________________
Market price per share:
High $ 34.50 $ 36.00 $ 40.00 $ 40.72 $ 40.72
Low $ 24.50 $ 25.91 $ 29.00 $ 26.75 $ 24.50
_________________________________________________________________________________________________________
(IN THOUSANDS, EXCEPT PER SHARE DATA) MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, 1998
_________________________________________________________________________________________________________
Net sales $102,724 $113,245 $114,102 $118,952 $449,023
Gross profit $ 27,155 $ 34,592 $ 34,866 $ 35,337 $131,950
Net income from continuing operations $ 3,358 $ 4,395 $ 2,726 $ 3,452 $ 13,931
Net income per share from
continuing operations:
Basic $ 0.33 $ 0.42 $ 0.25 $ 0.31 $ 1.30
Diluted $ 0.31 $ 0.40 $ 0.24 $ 0.29 $ 1.23
Net income $ 3,358 $ 4,395 $ 2,726 $ 3,452 $ 13,931
Net income per share:
Basic $ 0.33 $ 0.42 $ 0.25 $ 0.31 $ 1.30
Diluted $ 0.31 $ 0.40 $ 0.24 $ 0.29 $ 1.23
Weighted average shares outstanding:
Basic 10,304 10,536 10,982 11,073 10,726
Diluted 10,786 11,057 11,504 11,960 11,339
_________________________________________________________________________________________________________
Market price per share
High $ 18.94 $ 18.38 $ 19.88 $ 27.25 $ 27.25
Low $ 13.81 $ 15.50 $ 14.00 $ 14.50 $ 13.81
_________________________________________________________________________________________________________
</TABLE>
<PAGE>
CORPORATE INFORMATION
BOARD OF DIRECTORS
Monty Fu
Chairman of the Board
Director since 1985
Governance Committee
Robert G. Funari
President and
Chief Executive Officer
Director since 1995
Quality Committee,
Governance Committee
George S. Oki
Chairman of the Board,
Meta Information Services, Inc.
Director since 1985
Compensation Committee,
Governance Committee
Arnold E. Spangler
Managing Director,
Mancuso & Company
Director since 1985
Audit Committee,
Compensation Committee
Steven B. Gerber, MD
Managing Director,
CIBC World Markets
Director since 1990
Audit Committee,
Quality Committee
Henry N. Wagner, Jr., MD
Professor of Radiological Science
Director of Nuclear Medicine
The Johns Hopkins Medical Institutions
Director since 1992
Quality Committee
Gail R. Wilensky, PhD
Senior Fellow, Project HOPE,
former HCFA Administrator and
Deputy Assistant to President Bush
Director since 1993
Audit Committee,
Quality Committee
Ronald A. Williams
President,
Blue Cross of California
Director since 1998
Compensation Committee,
Governance Committee
<PAGE>
OFFICERS
Monty Fu
Chairman of the Board
Robert G. Funari
President and
Chief Executive Officer
Haig S. Bagerdjian
Executive Vice President
and Secretary;
President and
Chief Executive Officer
Syncor Overseas Ltd.
David L. Ward
Executive Vice President;
Prsident and Chief Executive Officer
Comprehensive Medical Imaging, Inc.
Michael E. Mikity
Senior Vice President and
Chief Financial Officer
John S. Baumann
Senior Vice President and
General Counsel
Michael L. Lach
Senior Vice President and
Chief Information Officer
Jack L. Coffey
Corporate Vice President,
Quality and Regulatory
Sheila H. Coop
Corporate Vice President,
Human Resources
<PAGE>
STOCKHOLDER INFORMATION
INQUIRIES
Stockholders, interested investors and investment professionals are
invited to contact the Company for further information throughout
the year.
The Company also has available a news-on-demand service whereby
individuals can obtain information via facsimile. Individuals may
call (800) 546-8172 to obtain press releases and other related
information via facsimile.
WEB SITE
www.syncor.com
ANNUAL MEETING
The Company's Annual Meeting of Stockholders will be held at 1:00
pm, Tuesday, June 20, 2000, at the Warner Center Hilton Hotel, 6360
Canoga Avenue, Woodland Hills, California 91367. Stockholders of
record on April 24, 2000, are invited to attend and vote at that meeting.
FORM 10-K
To receive a copy of the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission, contact the Corporate
Headquarters, Syncor International Corporation, Attn: Investor Relations
Department, 6464 Canoga Avenue, Woodland Hills, California 91367.
INDEPENDENT AUDITORS
KPMG LLP, 355 South Grand Avenue, Los Angeles, California 90017
STOCK DATA
The Company's common stock is quoted on the National Association of
Securities Dealers Automated Quotation System (NASDAQ) under the symbol SCOR.
TRANSFER AGENT AND REGISTRAR
Stockholders wishing to report a change of address, may forward
details, including both the old and new addresses, to:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10015
(212) 936-5100
STOCK MARKET INFORMATION
Stock price quotations are printed daily in major newspapers,
including the Wall Street Journal.
As of March 24, 2000, there were 11,834,719 shares of common stock
outstanding. Stockholders of record at that date numbered to 824.
The Company has not paid cash dividends on its stock and has no
current intention of paying cash dividends in the foreseeable
future.
Exhibit 23
Independent Auditors' Consent and Report on Schedule
The Board of Directors
Syncor International Corporation:
We consent to incorporation by reference in the Registration Statements (No.
33-7325, 33-39251, 33-57762, 33-52607, 333-18373, 333-18375, 333-18377, 333-
9999, 333-40117, 333-62091, 333-62093, 333-68277 and 333-78681) on Form S-8,
of Syncor International Corporation of our report dated February 16, 2000,
relating to the consolidated balance sheets of Syncor International
Corporation as of December 31, 1999 and 1998, and the related consolidated
statements of income, stockholders' equity and comprehensive income, and cash
flows for each of the years in the three-year period ended December 31, 1999,
which report appears in the December 31, 1999 annual report on Form 10-K of
Syncor International Corporation.
/s/KPMG LLP
Los Angeles, California
March 29, 2000
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
Exhibit 27
Financial Data Schedule
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> 12-31-99
<PERIOD-START> 01-01-99
<PERIOD-END> 12-31-99
<CASH> 21,888
<SECURITIES> 1,185
<RECEIVABLES> 94,534
<ALLOWANCES> (4,648)
<INVENTORY> 21,727
<CURRENT-ASSETS> 147,947
<PP&E> 126,740
<DEPRECIATION> (60,100)
<TOTAL-ASSETS> 312,642
<CURRENT-LIABILITIES> 91,621
<BONDS> 0
0
0
<COMMON> 665
<OTHER-SE> 139,672
<TOTAL-LIABILITY-AND-EQUITY> 312,642
<SALES> 520,309
<TOTAL-REVENUES> 520,309
<CGS> 350,988
<TOTAL-COSTS> 350,988
<OTHER-EXPENSES> 129,823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,014)
<INCOME-PRETAX> 33,916
<INCOME-TAX> 14,695
<INCOME-CONTINUING> 19,221
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,221
<EPS-BASIC> 1.65
<EPS-DILUTED> 1.51
</TABLE>
