FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
(Mark One)
____
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
For the Period Ended June 30, 1994
____
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ---- SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ________________________________
Commission File No. 1-5438
FOREST LABORATORIES, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-1798614
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 East 58th Street
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New York, New York 10155-0015
- - -------------------- ----------
(address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code 212-421-7850
------------
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
---- ----
Number of shares outstanding of Registrant's Common Stock as of
August 13, 1994: 43,856,937.
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PART I - FINANCIAL INFORMATION
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<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<CAPTION>
June 30, 1994
(In thousands) (Unaudited) March 31, 1994
------------- --------------
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash (including cash equivalent investments
of $129,768 in June and $176,336 in March) $132,944 $181,094
Accounts receivable, less allowances of
$4,288 in June and $3,968 in March 128,320 111,670
Inventories:
Raw materials 12,432 13,250
Work in process 4,428 3,012
Finished goods 22,949 20,918
-------- --------
39,809 37,180
Deferred income taxes 11,382 12,172
Other current assets 6,333 5,424
-------- --------
Total current assets 318,788 347,540
Long-term marketable securities 107,533 47,953
-------- --------
Property, plant and equipment 80,904 73,715
Less: Accumulated depreciation 22,047 20,694
-------- --------
Net property, plant and equipment 58,857 53,021
Other assets:
Excess of cost of investment in subsidiaries
over net assets acquired, less accumulated
amortization of $5,770 in June and $5,614
in March 19,189 19,345
License agreements and other intangible assets,
less accumulated amortization of $31,286 in
June and $29,638 in March 129,513 131,824
Deferred income taxes 3,815 3,787
Other 17,112 15,741
-------- --------
Total other assets 169,629 170,697
-------- --------
TOTAL ASSETS $654,807 $619,211
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<CAPTION>
June 30, 1994
(In thousands, except for par values) (Unaudited) March 31, 1994
------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Accounts payable $ 12,837 $ 10,507
Accrued expenses 28,440 25,552
Income taxes payable 20,748 16,164
-------- --------
Total current liabilities 62,025 52,223
-------- --------
Deferred income taxes 217 206
-------- --------
Shareholders' equity:
Series A junior participating preferred
stock, $1.00 par; authorized 1,000 shares;
no shares issued or outstanding
Common stock, $.10 par; authorized
250,000 shares; issued 46,384 shares
in June and 46,276 shares in March 4,638 4,628
Capital in excess of par 268,027 266,233
Retained earnings 359,755 337,611
Cumulative foreign currency
translation adjustments ( 1,898) ( 3,817)
-------- -------
630,522 604,655
Less common stock in treasury,
at cost (2,589 shares in June
and 2,587 shares in March) 37,957 37,873
-------- --------
Total shareholders' equity 592,565 566,782
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $654,807 $619,211
======== ========
See notes to condensed consolidated financial statements
</TABLE>
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PAGE
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<TABLE> FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended
(In thousands, except per share amounts) June 30,
-----------------------
1994 1993
-------- -------
<S> <C> <C>
Net sales $92,554 $79,251
Other income 2,344 2,188
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94,898 81,439
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Costs and expenses:
Cost of sales 17,308 14,077
Selling, general and
administrative 35,134 33,478
Research and development 7,775 6,470
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60,217 54,025
------- -------
Income before income taxes 34,681 27,414
Income taxes 12,537 9,870
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Net income $22,144 $17,544
======= =======
Earnings per common and
common equivalent share:
Primary $.48 $.39
==== ====
Fully diluted $.48 $.39
==== ====
Weighted average number of
common and common equivalent
shares outstanding:
Primary 46,300 45,543
====== ======
Fully diluted 46,302 45,544
====== ======
Dividends per share $-0- $-0-
==== ====
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended
(In thousands) June 30,
-------------------------
1994 1993
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,144 $ 17,544
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 953 905
Amortization 1,804 1,657
Deferred income tax expense 773 901
Foreign currency transactions gain ( 30) ( 54)
Net change in operating assets
and liabilities:
Decrease (increase) in:
Accounts receivable, net ( 16,650) 6,676
Inventories ( 2,629) ( 2,851)
Other current assets ( 909) ( 770)
Increase (decrease) in:
Accounts payable 2,330 4,672
Accrued expenses 2,888 1,437
Income taxes payable 4,584 5,606
Increase in other assets ( 1,371) ( 335)
-------- --------
Net cash provided by operating
activities 13,887 35,388
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net ( 3,782) ( 1,558)
Redemption (purchase) of long-term marketable
securities ( 59,580) 455
Reduction (purchase) of license agreements and
intangible assets 663 ( 108)
-------- --------
Net cash used in investing activities ( 62,699) ( 1,211)
</TABLE>
- Continued -
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PAGE
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<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
- Continued -
Three Months Ended
(In thousands) June 30,
------------------------
1994 1993
-------- ---------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from common stock options exercised
by employees under stock option plans $ 1,720 $ 1,116
Tax benefit realized from the exercise of
stock options by employees 1,261
-------- --------
Net cash provided by financing activities 1,720 2,377
-------- --------
Effect of exchange rate changes on cash ( 1,058) ( 1,035)
-------- --------
Increase (decrease) in cash and cash equivalents ( 48,150) 35,519
Cash and cash equivalents, beginning of period 181,094 172,286
-------- --------
Cash and cash equivalents, end of period $132,944 $207,805
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 16,367 $ 2,146
See notes to condensed consolidated financial statements.
</TABLE>
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PAGE
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form-10Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Management, all adjustments (consisting of only normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended
June 30, 1994 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1995. For further information
refer to the consolidated financial statements and footnotes thereto
incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended March 31, 1994.
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PAGE
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company
- - ---------------------------------
continues to be strong. The decrease in cash was principally the result of
the Company reinvesting a portion of its cash in long-term marketable
securities maturing over a period of one to two years. Accounts receivable
and inventories, as well as accounts payable and accrued expenses increased
due to the continued strong growth of the Company's principal promoted
products and an increase in the level of the Company's overall operations.
The increase in income taxes payable was due to the recording of current
period tax liabilities with corresponding payments to be made in a subsequent
quarter.
Property, plant and equipment increased during the period principally from
the expansion of the Company's United States and Irish facilities. This
expansion will continue through fiscal 1995 in order to adequately meet the
Company's needs for the manufacturing, warehousing and distribution of its
existing and future products. Management believes that current cash levels,
coupled with funds to be generated by on-going operations, will sufficiently
support these capital expenditures and should facilitate potential
acquisitions of products or companies.
RESULTS OF OPERATIONS Net sales in the current quarter increased $13,303,000
- - ---------------------
as compared with the prior year due principally to the continued growth of
the Company's principal promoted products and specialty controlled release
generic products. Net volume growth of those products, including Flumadine-R-,
which was launched during the third quarter of fiscal 1994, amounted to
$14,464,000. Sales volume of the Company's unpromoted product lines
increased $3,442,000. The remainder of the net sales change was due to price
and was the result of increases in the volume of sales to contract customers,
the timing of when chargebacks are paid to contract customers and changes
in promotional programs.
Cost of sales as a percentage of sales increased to 19% during the current
quarter as compared to 18% for the same period last year due mostly to
increases in costs related to the Company's facilities expansion and the
absence of corresponding price increases.
The increase in selling, general and administrative expense during the
current quarter as compared with the prior year resulted primarily from
costs related to the consolidation of the Company's Jackson, Mississippi and
St. Louis, Missouri facilities in St. Louis, which will result in future
savings. As a percentage of sales, selling, general and administrative
expense decreased as compared with the same period last year which
included substantial marketing and salesforce expenses related to the launch
of Flumadine.
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FOREST LABORATORIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Research and development expense increased during the current quarter over
the same period last year due to the cost of conducting clinical trials in
order to obtain approval of new products and the cost of developing products
using the Company's controlled release technology. During the current
quarter, there was particular emphasis on Synapton-TM-. Synapton is the
Company's controlled release formulation of physostigmine and is being
tested for the treatment of Alzheimer's Disease. The Company anticipates
further increases in research and development expense as a result of
continued clinical studies on Synapton and other products in development.
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Part II - Other Information
- - ---------------------------
Item 6. (b) Reports on Form 8-K - None
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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.
Date: August 13, 1994
Forest Laboratories, Inc.
-------------------------
(Registrant)
/s/ Howard Solomon
-------------------------
Howard Solomon
President and Chief
Executive Officer
/s/ Kenneth E. Goodman
--------------------------
Kenneth E. Goodman
Vice President - Finance
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<PAGE>
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.
Date: August 13, 1994
Forest Laboratories, Inc.
-------------------------
(Registrant)
Howard Solomon
-------------------------
President and Chief
Executive Officer
Kenneth E. Goodman
-------------------------
Vice President - Finance
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