This conforming paper format document is being submitted pursuant to Rule 901(d)
of Regulation S-T.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
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/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the Period Ended December 31, 1993
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/ / 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.
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(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
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(address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code 212-421-7850
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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
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Number of shares outstanding of Registrant's Common Stock
as of February 14, 1994: 43,642,193. <PAGE>
Part I - Financial Information
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1993
(In thousands) (Unaudited) March 31, 1993
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ASSETS
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Current assets:
Cash (including cash equivalent investments
of $208,526 in December and $160,180 in
March) $215,706 $172,286
Accounts receivable, less allowances
of $5,368 in December and $4,630 in March 114,981 90,965
Inventories:
Raw materials 11,360 11,490
Work in process 3,711 2,664
Finished goods 23,818 24,067
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38,889 38,221
Deferred income taxes 7,891 9,039
Other current assets 4,880 4,125
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Total current assets 382,347 314,636
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Long-term marketable securities 12,617 20,058
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Property, plant and equipment 54,232 49,131
Less: Accumulated depreciation 20,631 19,320
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Net property, plant and equipment 33,601 29,811
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Other assets:
Excess of cost of investment in subsidiaries
over net assets acquired, less accumulated
amortization of $5,458 in December
and $4,988 in March 19,501 19,971
License agreements and other intangible assets,
less accumulated amortization of $28,000
in December and $23,349 in March 132,813 123,677
Deferred income taxes 6,673 6,520
Other 6,408 5,839
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Total other assets 165,395 156,007
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TOTAL ASSETS $593,960 $520,512
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See notes to condensed consolidated financial statements.
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1993
(In thousands, except for par values) (Unaudited) March 31, 1993
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 14,416 $ 7,958
Accrued expenses 26,244 21,191
Income taxes payable 6,254 11,996
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Total current liabilities 46,914 41,145
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Deferred income taxes 205 191
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Shareholders' equity:
Series A junior participating preferred
stock, $1.00 par; authorized 200 shares;
no shares issued or outstanding
Common stock, $.10 par; shares authorized
250,000 in December and 100,000 in March;
issued 46,095 shares in December and
45,515 shares in March 4,609 4,551
Capital in excess of par 268,899 253,257
Retained earnings 315,313 257,413
Cumulative foreign currency
translation adjustments ( 4,205) ( 2,658)
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584,616 512,563
Less common stock in treasury,
at cost (2,585 shares in December and
2,490 shares in March) 37,775 33,387
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Total shareholders' equity 546,841 479,176
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $593,960 $520,512
======== ========
See notes to condensed consolidated financial statements
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(In thousands, except Three Months Ended Nine Months Ended
per share amounts) December 31, December 31,
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1993 1992 1993 1992
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Net sales $96,996 $75,472 $259,062 $211,056
Other income 2,003 2,661 7,075 8,406
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98,999 78,133 266,137 219,462
------- ------- ------- -------
Costs and expenses:
Cost of sales 17,571 13,771 47,087 40,544
Selling, general and
administrative 40,553 31,721 107,737 88,185
Interest 595 1,783
Research and development 8,208 5,750 20,690 16,122
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66,332 51,837 175,514 146,634
------- ------- ------- -------
Income before income taxes 32,667 26,296 90,623 72,828
Income taxes 11,858 9,557 32,723 26,323
------- ------- ------- -------
Net income $20,809 $16,739 $ 57,900 $ 46,505
======= ======= ======== ========
Earnings per common
and common equivalent share:
Primary $.45 $.37 $1.27 $1.03
==== ==== ===== =====
Fully diluted $.45 $.37 $1.25 $1.02
==== ==== ===== =====
Weighted average number of
common and common equivalent
shares outstanding:
Primary 46,161 45,685 45,757 45,356
====== ====== ====== ======
Fully diluted 46,443 45,833 46,437 45,756
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Dividends per share $-0- $-0- $-0- $-0-
==== ==== ==== ====
See notes to condensed consolidated financial statements
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
(In thousands) December 31,
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1993 1992
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Cash flows from operating activities:
Net income $ 57,900 $ 46,505
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation 2,728 2,786
Amortization 5,121 4,988
Deferred income tax expense (benefit) 1,009 ( 614)
Foreign currency transactions gain ( 346) ( 240)
Net change in operating assets
and liabilities:
Decrease (increase) in:
Accounts receivable, net ( 24,016) ( 25,766)
Inventories ( 668) ( 6,849)
Other current assets ( 755) ( 545)
Increase (decrease) in:
Accounts payable 6,458 ( 234)
Accrued expenses 5,053 9,088
Income taxes payable ( 5,742) 310
Increase in other assets ( 569) ( 6,250)
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Net cash provided by operating activities 46,173 23,179
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Cash flows from investing activities:
Purchase of property, plant
and equipment, net ( 6,615) ( 3,917)
Redemption of long-term marketable
securities 7,439 398
Purchase of license agreements
and other intangible assets ( 13,787) ( 12,153)
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Net cash used in investing activities ( 12,963) ( 15,672)
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- - Continued -
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
- Continued -
Nine Months Ended
(In thousands) December 31,
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1993 1992
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Cash flows from financing activities:
Net proceeds from common stock options
exercised by employees under stock
option plans $ 4,109 $ 8,091
Tax benefit realized from the exercise of
stock options by employees 7,203 20,783
Payment of debt ( 14,543)
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Net cash provided by financing activities 11,312 14,331
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Effect of exchange rate changes on cash ( 1,102) ( 1,485)
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Increase in cash and cash equivalents 43,420 20,353
Cash and cash equivalents,
beginning of period 172,286 133,477
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Cash and cash equivalents, end of period $215,706 $153,830
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 3,030
Income taxes $ 30,282 5,845
Supplemental schedule of noncash
financing activities:
Tax benefit to be realized from the
exercise of stock options by employees $ 14,217
See notes to condensed consolidated financial statements.
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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 10-Q 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 and nine month periods
ended December 31, 1993 are not necessarily indicative of the results
that may be expected for the year ending March 31, 1994. 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, 1993.
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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 increase in cash and accounts receivable resulted
from the increase in sales and profits due to the continued strong growth of
the Company's principal promoted products and the launch of Flumadine , which
is used for the treatment and prophylaxis of Influenza A. The decrease in
long-term marketable securities was due to the maturity of long-term bonds of
the Commonwealth of Puerto Rico. The decrease in deferred income taxes resulted
from the Company utilizing a portion of tax benefit carryforwards. The increase
in property, plant and equipment was primarily the result of the Company's
expansion of its' facilities in St. Louis, Missouri and Dublin, Ireland.
Increases in accounts payable and accrued expenses were attributable to an
increase in the level of the Company's overall operations resulting primarily
from higher sales. The increase in license agreements was due principally to
the final license fee payment made by the Company at the time of the Flumadine
launch. The decrease in income tax payable resulted from the Company recording
a tax benefit from the exercise of employee stock options.
The Company is in the process of expanding its facilities in Long Island, New
York, and Dublin, Ireland. This expansion will increase the Company's
manufacturing and warehousing capacity for its existing and future products.
Management believes that current cash levels coupled with funds to be generated
by on-going operations will adequately support these capital expenditures and
should facilitate potential acquisitions of products or companies.
RESULTS OF OPERATIONS Net sales for the three and nine month periods ended
December 31,1993 increased $21,524,000 and $48,006,000, respectively, as
compared with the same periods last year. For the three months, the increase
was attributed principally to the introduction by the Company, during the
quarter, of Flumadine ($10,500,000 of such increase). Net volume growth of the
Company's principal promoted products and specialty release generic products
amounted to $7,643,000 and $30,339,000 for the three and nine months,
respectively. Sales volume of the Company's unpromoted product lines increased
$3,401,000 and $4,919,000 respectively. Foreign exchange translation rate
declines reduced net sales by $744,000 for the quarter and $5,919,000 for the
nine months. The remainder of the net sales increases were attributed to price
increases during both periods.
Cost of sales as a percentage of sales remained constant at 18% for the current
quarter compared with the same period last year. For the nine month period,
cost of sales decreased to 18% from 19% due principally to changes in product
mix and volume increases.
The increase in selling, general and administrative expense during the current
three and nine month periods as compared with the prior year resulted
principally from increased marketing activities related to the Company's
principal promoted products and the launch costs for the introduction of
Flumadine . As a percentage of sales, selling, general and administrative
expense did not change as compared with the same periods last year.
Research and development expense increased during the current quarter and nine
months over the same periods last year principally due to the cost of conducting
clinical trials for Synapton and Monurol . Synapton is the Company's controlled
release formulation of physostigmine, and is being tested for the treatment of
Alzheimer's Disease. Monurol is a single dose antibiotic used for the treatment
of uncomplicated urinary tract infections. The Company anticipates further
increases in research and development expense as a result of continued clinical
studies on these and other products in development.
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Part II - Other Information
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Item 1. Legal Proceedings
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In addition to the similar proceedings described in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993, the Company has been served in approximately 10 additional
actions in various federal district courts. In each case, the
actions were filed against many pharmaceutical manufacturers and
suppliers and allege price discrimination and conspiracy to fix
prices in the sale of pharmaceutical products in violation of
federal law. The actions were brought by various pharmacies and
seek injunctive relief and monetary damages. On February 4, 1994,
the Judicial Panel on Multi-District Litigation has ordered these
actions consolidated for coordinated proceedings in the Federal
District Court for the Northern District of Illinois (Chicago).
The Company believes the lawsuits are without merit and intends
to defend them vigorously.
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: February 14, 1994
Forest Laboratories, Inc.
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(Registrant)
/s/ Howard Solomon
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Howard Solomon
President and Chief
Executive Officer
/s/ Kenneth E. Goodman
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Kenneth E. Goodman
Vice President - Finance
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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: February 14, 1994
Forest Laboratories, Inc.
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(Registrant)
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Howard Solomon
President and Chief
Executive Officer
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Kenneth E. Goodman
Vice President - Finance
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