<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 December 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 December 31, 1997 was 13,099,284.
Page 1 of 9
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOCHEM INTERNATIONAL INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $11,575,071 $10,892,915
Accounts receivable, less $155,814 and $125,000 allowance
for doubtful accounts, respectively 3,704,854 4,158,002
Inventories 3,824,296 3,747,955
Deferred income taxes 320,000 320,000
Prepaid expenses 31,070 43,376
----------- -----------
Total Current Assets 19,455,291 19,162,248
Investment 1,845,000 1,847,739
Property, plant and equipment, net 3,690,546 1,599,679
Related party receivable 144,770 144,770
Other 18,823 5,987
----------- -----------
Total Assets $25,154,430 $22,760,423
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade $1,670,961 $1,813,985
Accrued liabilities:
Salaries, wages and commissions 828,502 754,165
Other 202,868 212,018
Income taxes 24,838 35,000
----------- -----------
Total Current Liabilities 2,727,169 2,815,168
Stockholders' Equity:
Common Stock, $.02 par value 261,986 261,826
Additional Paid-in Capital 11,730,230 11,707,975
Retained Earnings 10,622,545 8,162,954
Less: Treasury Stock (187,500) (187,500)
----------- -----------
Total Stockholders' Equity 22,427,261 19,945,255
----------- -----------
Total Liabilities and Stockholders' Equity $25,154,430 $22,760,423
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
Page 2 of 9
<PAGE> 3
BIOCHEM INTERNATIONAL INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Net sales $6,889,343 $6,428,079 $14,309,800 $12,452,766
Other income 194,820 132,937 373,210 314,362
Total Revenues 7,084,163 6,561,016 14,683,010 12,767,128
Costs and Expenses:
Cost of goods sold 2,997,684 2,953,714 6,219,033 5,499,358
Selling, general and administrative 1,638,843 1,705,307 3,340,467 3,166,325
Engineering, research and development 630,044 424,726 1,111,528 885,614
Total Costs and Expenses 5,266,571 5,083,747 10,671,028 9,551,297
Income Before Income Tax Expense 1,817,592 1,477,269 4,011,982 3,215,831
Income tax expense 683,493 609,701 1,552,391 1,198,420
Net Income $1,134,099 $867,568 $2,459,591 $2,017,411
Earnings per Share Data:
Basic and Diluted earnings per share $.09 $.07 $.19 $.15
Shares Outstanding Data:
Average shares outstanding 13,098,317 13,091,284 13,094,781 13,089,721
Dilutive stock options 83,629 104,231 83,615 107,255
Diluted Average Shares Outstanding 13,181,946 13,195,515 13,178,396 13,196,976
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3 of 9
<PAGE> 4
BIOCHEM INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31
1997 1996
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $2,459,591 $2,017,411
Adjustments to reconcile net cash provided
by operating activities:
Depreciation 177,306 182,507
Deferred income taxes -- --
Change in assets and liabilities:
Accounts and notes receivable 440,312 987,567
Inventories (76,341) (139,703)
Prepaid expenses and other 15,045 31,688
Accounts payable and accrued liabilities (87,999) (820,954)
----------- ----------
Net cash provided by operating activities 2,927,914 2,258,516
----------- ----------
Cash flows from investing activities:
Property, plant and equipment additions (2,292,396) (151,679)
Proceeds from disposal of property and equipment 24,223 --
----------- ----------
Net cash used for investing activities (2,268,173) (151,679)
Cash flows from financing activities:
Issuance of common stock 22,415 7,789
----------- ----------
Net increase in cash and equivalents 682,156 2,114,626
Cash and equivalents:
Beginning of period 10,892,915 6,034,286
----------- ----------
End of period $11,575,071 $8,148,912
=========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for income taxes $1,564,278 $1,319,500
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4 of 9
<PAGE> 5
BIOCHEM INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with the Company's 1997 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 financial statements. 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>
December 31 June 30
1997 1997
----------- ----------
<S> <C> <C>
Finished goods $ 351,775 $ 230,390
Loaner and demonstration 945,849 920,734
Work in process 903,584 1,070,564
Purchased material 1,623,088 1,526,267
----------- ----------
$3,824,296 $3,747,955
=========== ==========
</TABLE>
3. Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
December 31 June 30
1997 1997
----------- ----------
<S> <C> <C>
Land $ 581,647 $ 342,262
Building 2,463,030 724,699
Leasehold improvements 126,841 126,841
Machinery and equipment 1,869,386 1,605,481
Office furniture and equipment 186,624 184,295
----------- ----------
5,227,528 2,983,578
Less accumulated depreciation 1,536,982 1,383,899
----------- ----------
$3,690,546 $1,599,679
=========== ==========
</TABLE>
4. Income Per Share:
During the second quarter, the Company adopted Statement of Financial
Accounting Standards (FAS) 128 "Earnings Per Share," which established
new standards for reporting earnings per share. The standard was applied
retroactively to prior periods and had no effect on the earnings per
share previously reported.
Page 5 of 9
<PAGE> 6
BIOCHEM INTERNATIONAL INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
Working capital at December 31, 1997 was $16,728,000 as compared to $16,347,000
at June 30, 1997. The increase in working capital is primarily a function of
the positive cash flow from operating activities the Company experienced during
the first six months of fiscal 1998.
In November 1997, the Company purchased a new facility consisting of land and
building, near its current location for $1,979,000. The Company intends to
move all of its operations into the new building, which is approximately 55,600
square feet. The building is newly erected, and BCI estimates it will cost
approximately $900,000 to build out the interior to suit the Company's needs.
Cash and investment balances were used to fund the purchase of the facility and
will also be used to fund the build-out. The build-out will not be complete
until after the end of the current fiscal year, at which time operations will
move. In February 1998, BCI entered into a contract to sell its current
building for $785,000, with the closing scheduled for August 1998. The Company
will not sustain a loss on this sale. The property adjacent to our current
building is not part of this transaction. BCI will continue to entertain
offers for its purchase and intends to dispose of it after the move. The
Company does not anticipate a loss on the sale of this property. It is not
anticipated that there will be any disruption in the operations of BCI, and the
new building will allow BCI the space needed for growth and efficient
operations.
The Company has addressed the Year 2000 (Y2K) issue and does not expect that it
will have a material impact on its business, operations nor its financial
condition. BCI's products are already Y2K compliant. Many of the computer
software programs used by employees are also already compliant and it has been
determined that the costs of upgrading or replacing the ones that are not will
not be material. These upgrades or replacements are expected to be completed
by January 1, 1999. The Company is in the process of considering the impact of
this issue on customer and vendor relationships, but does not anticipate any
material consequences.
During the quarter, the Company established a subsidiary, SurgiVet, Inc.
SurgiVet was established to design and distribute monitoring equipment to the
veterinary market. The Subsidiary is currently operating out of their own
leased facility, but will move into BCI's new building when the facility is
complete. BCI will fund this new Subsidiary out of current cash and investment
balances.
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 cash needs.
Page 6 of 9
<PAGE> 7
Results of Operations
Net sales for the three-month period ended December 31, 1997 increased 7.2%
from the corresponding prior year period. This increase results from an
increase in sales to our direct domestic customers and to our international
dealers. These increases are primarily due to increased sales of our handheld
products in addition to sales of our new Clarity(R) line of products, which is
being very well received in the marketplace. The Clarity(R) series are a new
line of compact, tabletop oximeters, CO2 monitors and NIBP monitors.
Net sales for the six-month period ended December 31, 1997 increased 14.9%.
This increase is due to the above mentioned factors.
Other income for the three- and six-month periods ended December 31, 1997
consists primarily of interest income. The increase in the current periods
over prior years are a factor of higher investment balances in the current
year.
Cost of goods sold as a percentage of net sales was approximately 43.5% during
the three- and six-month periods ended December 31, 1997 compared to 45.9% and
44.2% for the corresponding periods ended December 31, 1996. These
fluctuations are attributable to changes in the mix of products sold among the
periods.
Selling, general and administrative expenses were 23.8% and 23.3%,
respectively, of net sales in the three- and six-month periods ending December
31, 1997 compared to 26.5% and 25.4% during the same periods of the prior year.
The decreased percentage in the three months ended December 31, 1997, is
largely due to the increase in sales, while actual expenses decreased slightly.
The decreased percentage in the six-month period ending December 31, 1997 is
solely due to the increase in sales, as actual expenses increased over the
period. This increase is due in part to increased commission expense resulting
from the increase in sales noted above. Additionally, BCI has increased
advertising and marketing expenses to better promote our products and travel
expenses have increased to support the sales territories.
The 48.3% increase in engineering, research and development expenditures noted
during the three-month period ended December 31, 1997 compared to the similar
period in the prior year reflects increases related to payroll expenses and new
project expenses. The 25.5% increase in these expenditures over the six-month
period ended December 31, 1997 when compared to the similar period in the prior
year also reflects increases in expenses related to payroll, and new projects
expenses. These increases are the result of additional staffing when comparing
the first half of fiscal 1998 to the same period in fiscal 1997.
All other costs and expenses of the Company remained relatively constant when
comparing the first six months of fiscal 1998 to that of fiscal 1997.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
Page 7 of 9
<PAGE> 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K for the quarter ended
December 31, 1997.
Page 8 of 9
<PAGE> 9
SIGNATURES
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.
By /s/ David H. Sanders
----------------------------
David H. Sanders
Chairman of the Board and
Chief Executive Officer
By /s/ Frank A. Katarow
----------------------------
Frank A. Katarow
President and Chief
Operating Officer
Dated: February 13, 1998 By /s/ Mary K. Hamkins
----------------------------
Mary K. Hamkins
Director of Finance
(Chief Accounting Officer)
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 11,575
<SECURITIES> 0
<RECEIVABLES> 3,705
<ALLOWANCES> 0
<INVENTORY> 3,824
<CURRENT-ASSETS> 19,455
<PP&E> 5,227
<DEPRECIATION> 1,537
<TOTAL-ASSETS> 25,154
<CURRENT-LIABILITIES> 2,727
<BONDS> 0
0
0
<COMMON> 262
<OTHER-SE> 22,165
<TOTAL-LIABILITY-AND-EQUITY> 25,154
<SALES> 6,889
<TOTAL-REVENUES> 7,084
<CGS> 2,998
<TOTAL-COSTS> 2,998
<OTHER-EXPENSES> 2,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,817
<INCOME-TAX> 683
<INCOME-CONTINUING> 1,134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,134
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
