<PAGE> 1
CONFORMED COPY
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
_ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-10005
BIOCHEM INTERNATIONAL INC.
A DELAWARE CORPORATION IRS EMPLOYER IDENTIFICATION
NO. 39-1272816
Address Telephone Number
- ------- ----------------
W238 N1650 Rockwood Drive (414) 542-3100
Waukesha, WI 53188-1199
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
The number of shares outstanding of the Company's Common Stock, par value $.02,
on March 31, 1997 was 13,091,284.
Page 1 of 8
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOCHEM INTERNATIONAL INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 June 30
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 9,539,237 $ 6,034,286
Accounts receivable, less $155,527 and $140,000 allowance
for doubtful accounts, respectively 4,018,241 4,512,728
Note receivable - 448,090
Inventories 3,933,843 3,296,635
Deferred income taxes 362,400 362,400
Prepaid expenses 4,549 49,593
----------- -----------
Total Current Assets 17,858,270 14,703,732
Investment 1,851,775 1,863,882
Property, plant and equipment, net 1,667,020 1,711,920
Related party receivable 144,770 143,748
Other 5,987 5,483
----------- -----------
Total Assets $21,527,822 $18,428,765
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade $ 2,266,157 $ 1,959,992
Accrued liabilities:
Salaries, wages and commissions 492,315 677,968
Other 292,039 283,861
----------- -----------
Total Current Liabilities 3,050,511 2,921,821
Deferred income taxes 22,400 22,400
Stockholders' Equity:
Common Stock, $.02 par value 261,826 261,736
Additional Paid-in Capital 11,544,139 11,699,651
Retained Earnings (Deficit) 6,836,446 3,523,157
Less: Treasury Stock (187,500) -
----------- -----------
Total Stockholders' Equity 18,454,911 15,484,544
----------- -----------
Total Liabilities and Stockholders' Equity $21,527,822 $18,428,765
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
Page 2 of 8
<PAGE> 3
BIOCHEM INTERNATIONAL INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Net sales 7,174,004 7,566,499 $19,626,770 $21,414,410
Other income 199,575 88,664 513,937 280,982
---------- ---------- ----------- -----------
Total Revenues 7,373,579 7,655,163 20,140,707 21,695,392
Costs and Expenses:
Cost of goods sold 3,243,795 3,354,397 8,743,153 9,520,925
Selling, general and administrative 1,597,638 1,562,599 4,763,964 4,742,644
Engineering, research and development 542,288 568,431 1,427,902 1,339,569
---------- ---------- ----------- -----------
Total Costs and Expenses 5,383,721 5,485,428 14,935,019 15,603,138
---------- ---------- ----------- -----------
Income Before Income Tax Expense 1,989,858 2,169,735 $ 5,205,688 $ 6,092,254
Income tax expense:
Current 693,979 816,027 1,892,399 1,189,325
Deferred - - - 1,090,000
---------- ---------- ----------- -----------
Net Income 1,295,879 1,353,708 $ 3,313,289 $ 3,812,929
========== ========== =========== ===========
Net Income per Common Share $.10 $.10 $.25 $.29
========== ========== =========== ===========
Weighted Average Number of Common
Shares Outstanding 13,267,284 13,243,784 13,267,284 13,243,784
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 8
<PAGE> 4
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $3,313,289 $3,812,929
Adjustments to reconcile net cash provided
by operating activities:
Depreciation 273,490 284,325
Deferred income taxes - 1,320,000
Change in assets and liabilities:
Accounts receivable 754,054 (970,127)
Inventories (637,208) (362,820)
Prepaid expenses and other 56,648 (249,314)
Accounts payable and accrued liabilities 128,690 301,939
---------- ----------
Net cash provided by operating activities 3,888,963 4,136,932
---------- ----------
Cash flows from investing activities:
Property, plant and equipment additions (228,590) (285,023)
---------- ----------
Cash flows from financing activities:
Issuance of common stock 7,789 1,235
Cash paid for purchase of stock options (163,211) -
---------- ----------
Net cash provided (used) by financing activities (155,422) 1,235
---------- ----------
Net increase in cash and equivalents 3,504,951 3,853,144
Cash and equivalents:
Beginning of period 6,034,286 2,628,445
---------- ----------
End of period $9,539,237 $6,481,589
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $1,892,399 $1,189,325
========== ==========
Schedule of Non-cash Financing Activities:
Purchase of common stock at fair market
value in payment of account receivable $ 187,500 $ -
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 8
<PAGE> 5
BIOCHEM INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements should be read in
conjunction with the Company's 1996 Annual Report on Form 10-K. In the
opinion of management, all adjustments necessary to a fair statement of
operations and financial position of the Company have been included in the
accompanying statements of operations and balance sheets. All adjustments
made to the interim financial statements were of a normal, recurring
nature.
The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by
generally accepted accounting principles.
2. Inventories are comprised of:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996
---- ----
<S> <C> <C>
Finished goods $ 257,517 $ 286,067
Loaner and demonstration 863,431 951,472
Work in process 1,041,832 775,098
Purchased material 1,771,063 1,283,998
---------- ----------
$3,933,843 3,296,635
========== ==========
</TABLE>
3. Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
March 31 June 30
1997 1996
---- ----
<S> <C> <C>
Land $ 342,262 $ 342,262
Building 724,699 724,699
Leasehold improvements 126,841 126,841
Machinery and equipment 1,588,370 1,366,871
Office furniture and equipment 184,295 181,704
---------- ----------
2,966,467 2,742,377
Less accumulated depreciation 1,299,447 1,030,457
---------- ----------
$1,667,020 $1,711,920
========== ==========
</TABLE>
4. Net Income Per Share:
Net income per common and common equivalent share is computed based on
the weighted average common shares outstanding, including common stock
equivalents.
Page 5 of 8
<PAGE> 6
BIOCHEM INTERNATIONAL INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Net sales for the three-month period ended March 31, 1997 decreased 5% to $7.2
million from $7.6 million for the corresponding prior year period. This
decrease results from a decrease in sales to both our domestic and
international OEM customers and our international dealers, primarily of our
handheld pulse oximeters and other oximetry products into the hospital and
specialty markets. Net sales for the nine-month period ended March 31, 1997
decreased 8% when comparing it to the same nine month period of fiscal 1996.
This decrease, felt in all markets of our business, is due to the above
mentioned factors. Of interest is sales are declining at a slower rate in the
third quarter of fiscal 1997 than they were for the first half of the fiscal
year. The year-to-date decrease in sales at March 31, 1997 was only 8%,
compared with the year-to-date decrease of 10% at December 31, 1996.
Other income for the three- and nine-month periods ended March 31, 1997
consists primarily of interest income. Increases in interest income is due to
the increasing cash balances resulting from the Company's positive cash flows.
Cost of goods sold as a percentage of net sales was approximately 45.2% and
44.5%, respectively, during the three- and nine-month periods ended March 31,
1997 compared to 44.3% and 44.5% for the corresponding periods ended March 31,
1996. These fluctuations are attributable to a changes in the product mix sold
among periods.
Selling, general and administrative expenses were 22.3% and 24.3%,
respectively, of net sales in the three- and nine-month periods ending March
31, 1997 compared to 20.7% and 22.1% during the same periods of the prior year.
The increased percentage of sales in the three- and nine-month periods ending
March 31, 1997 is due to the decrease in sales over the same periods. Out of
pocket costs for the comparable periods have remained fairly flat due to cost
containment measures put into place.
Engineering, research and development expenditures decreased during the
three-month period ended March 31, 1997 when comparing them to the same period
during the prior fiscal year. These same expenses increased during the
nine-month period ended March 31, 1997 by 7% when comparing them to the prior
year. These fluctuations are due to spending on new product development which
may fluctuate during the development process. Overall, BCI has committed to
spending more in this area to continue its new product introduction cycle. As a
result, staff has increased in the current year, who, with outside consultants,
continue to develop new products that BCI feels will meet the needs of the
marketplace.
The company began paying regular income taxes in the third quarter of fiscal
1996 when the net operating loss carryforward in which it had benefit was
depleted. Prior to this, the Company was incurring a deferred income tax
expense as is depleted a deferred income tax asset resulting from the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109.
All other costs and expenses of the Company remained relatively constant when
comparing the first nine months of fiscal 1997 to that of fiscal 1996.
Page 6 of 8
<PAGE> 7
Liquidity and Capital Resources
Working capital at March 31, 1997 was $14,808,000 as compared to $11,782,000 at
June 30, 1996. The increase in working capital is primarily a function of the
cash flow from operating activities. The cash and equivalents balance has
increased due to the positive cash flows the company experienced during the
first nine months of fiscal 1997.
Company management believes that sales revenues to be generated by current
products and anticipated new product introductions, and financing arrangements
currently in place will be sufficient to meet future liquidity and capital
needs.
Forward Looking Statements
Except for the historical information contained herein, this report contains
certain forward-looking statements that are subject to certain risks and
uncertainties that could cause actual future results and developments to differ
materially from those currently projected. Such risks and uncertainties
include, but are not limited to, the timing of new product introductions, the
current uncertainties surrounding the Company's principal industry segments
including the effect of consolidation of hospital groups and the move towards
managed care, and general economic conditions affecting the Company's market
segments.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 5. OTHER INFORMATION
During the quarter ended March 31, 1997, the Company accepted 50,000 shares of
its common stock owned by a major customer in of payment of a past due accounts
receivable balance in the amount of $187,500.
In March, 1997, the Company purchased from the President of the Company his
option rights to purchase 30,500 shares of the Company's stock. These rights
were granted to the President during the years 1989 through 1994. The value
paid for the options was $163,211, determined as the average between the prices
bid and asked for the stock on the date of authorization to purchase ($5.9375
per share) less the aggregate underlying option exercise price of $17,883.
After this transaction, the President owns options to purchase up to 20,000
shares of the Company's stock at exercise prices ranging from $3.3125 to $4.29
per share.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The company has not filed any reports on form 8-K for the quarter ended March
31, 1997.
SIGNATURES
Page 7 of 8
<PAGE> 8
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 9, 1997 By /s/ David H. Sanders
---------------------------
David H. Sanders
Chairman of the Board and
Chief Executive Officer
Dated: May 9, 1997 By /s/ Frank A. Katarow
---------------------------
Frank A. Katarow
President and Chief
Operating Officer
Dated: May 9, 1997 By /s/ Ann M. Johnson
---------------------------
Ann M. Johnson
Vice President of Finance
and Operations
Page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 9,539
<SECURITIES> 0
<RECEIVABLES> 4,018
<ALLOWANCES> 0
<INVENTORY> 3,934
<CURRENT-ASSETS> 17,858
<PP&E> 2,966
<DEPRECIATION> 1,299
<TOTAL-ASSETS> 21,528
<CURRENT-LIABILITIES> 3,051
<BONDS> 0
0
0
<COMMON> 262
<OTHER-SE> 18,193
<TOTAL-LIABILITY-AND-EQUITY> 21,528
<SALES> 7,174
<TOTAL-REVENUES> 7,174
<CGS> 3,244
<TOTAL-COSTS> 3,244
<OTHER-EXPENSES> 2,140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,990
<INCOME-TAX> 694
<INCOME-CONTINUING> 1,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,990
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
