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 December 31, 1995
---
/ / 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
- -------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 Third Avenue
- ----------------
New York, New York 10022-4731
- -------------------- --------------
(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
February 14, 1996: 45,425,940.
PAGE
<PAGE>
Part I - Financial Information
- ------------------------------
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1995
(In thousands) (Unaudited) March 31, 1995
------------------ --------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash (including cash equivalent investments
of $94,441 in December and $103,847 in
March) $104,172 $107,611
Marketable securities 30,468 34,570
Accounts receivable, less allowances
of $5,472 in December and $5,016 in March 197,467 149,655
Inventories:
Raw materials 23,562 14,912
Work in process 2,962 2,907
Finished goods 26,075 21,144
-------- --------
52,599 38,963
Deferred income taxes 12,355 12,789
Other current assets 6,278 5,381
-------- --------
Total current assets 403,339 348,969
-------- --------
Long-term marketable securities 71,167 136,674
-------- --------
Property, plant and equipment 103,997 96,779
Less: Accumulated depreciation 25,908 23,751
-------- --------
Net property, plant and equipment 78,089 73,028
-------- --------
Other assets:
Intangible assets and investments in
subsidiaries, net 293,599 180,893
Deferred income taxes 8,033 8,343
Other 10,751 9,298
-------- --------
Total other assets 312,383 198,534
-------- --------
TOTAL ASSETS $864,978 $757,205
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
December 31, 1995
(In thousands, except for par values) (Unaudited) March 31, 1995
------------------ --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 20,227 $ 14,234
Accrued expenses 42,806 23,924
Income taxes payable 17,888 19,491
-------- --------
Total current liabilities 80,921 57,649
-------- --------
Deferred income taxes 293 222
-------- --------
Shareholders' equity:
Series A junior participating preferred
stock, $1.00 par; authorized 1,000 shares;
no shares issued or outstanding
Common stock, $.10 par; shares authorized
250,000; issued 48,017 shares in
December and 47,824 shares in March 4,801 4,782
Capital in excess of par 302,507 296,925
Retained earnings 518,375 437,760
Cumulative foreign currency
translation adjustments and other ( 1,171) 458
-------- --------
824,512 739,925
Less common stock in treasury,
at cost (2,646 shares in December and
2,643 shares in March) 40,748 40,591
-------- --------
Total shareholders' equity 783,764 699,334
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $864,978 $757,205
======== ========
See notes to condensed consolidated financial statements
</TABLE>
-3-
<PAGE>
<TABLE>
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,
-------------------- -------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $122,870 $107,280 $339,498 $295,610
Other income 3,614 3,027 11,329 7,778
-------- -------- -------- --------
126,484 110,307 350,827 303,388
-------- -------- -------- --------
Costs and expenses:
Cost of sales 26,080 20,735 68,699 56,260
Selling, general and
administrative 52,335 40,309 129,719 109,152
Research and development 9,329 9,012 26,841 24,806
-------- -------- -------- --------
87,744 70,056 225,259 190,218
-------- -------- -------- --------
Income before income taxes 38,740 40,251 125,568 113,170
Income taxes 13,869 14,531 44,953 40,741
-------- -------- -------- --------
Net income $ 24,871 $ 25,720 $ 80,615 $ 72,429
======== ======== ======== ========
Earnings per common
and common equivalent share:
Primary $.53 $.55 $1.72 $1.56
==== ==== ===== =====
Fully diluted $.53 $.55 $1.72 $1.55
==== ==== ===== =====
Weighted average number of
common and common equivalent
shares outstanding:
Primary 46,855 46,863 46,880 46,571
====== ====== ====== ======
Fully diluted 46,943 46,863 46,920 46,642
====== ====== ====== ======
Dividends per share $-0- $-0- $-0- $-0-
==== ==== ==== ====
See notes to condensed consolidated financial statements
</TABLE>
-4-
PAGE
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
(In thousands) December 31,
--------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 80,615 $ 72,429
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 3,463 2,884
Amortization 8,167 7,569
Deferred income tax expense (benefit) 815 ( 5,287)
Foreign currency transactions (gain) loss 342 ( 8)
Net change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net ( 47,812) ( 31,347)
Inventories ( 13,636) ( 1,878)
Other current assets ( 897) ( 1,318)
Increase (decrease) in:
Accounts payable 5,993 5,192
Accrued expenses 18,882 5,028
Income taxes payable ( 1,604) 3,248
Increase in other assets ( 1,453) ( 1,287)
-------- --------
Net cash provided by operating activities 52,875 55,225
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net ( 8,899) ( 22,893)
Redemption (purchase) of marketable
securities, net 69,115 ( 61,907)
Purchase of intangible assets and investments
in subsidiaries ( 120,915) ( 18,089)
-------- --------
Net cash used in investing activities ( 60,699) ( 102,889)
-------- --------
- Continued -
</TABLE>
-5-
PAGE
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
- Continued -
Nine Months Ended
(In thousands) December 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from common stock options exercised
by employees under stock option plans $ 4,431 $ 13,933
Tax benefit realized from the exercise of
stock options by employees 1,100 9,256
-------- --------
Net cash provided by financing activities 5,531 23,189
-------- --------
Effect of exchange rate changes on cash ( 1,146) 1,440
-------- --------
Increase (decrease) in cash and cash equivalents ( 3,439) ( 23,035)
Cash and cash equivalents, beginning of period 107,611 181,094
-------- --------
Cash and cash equivalents, end of period $104,172 $158,059
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $45,741 $49,294
See notes to condensed consolidated financial statements.
</TABLE>
-6-
PAGE
<PAGE>
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, 1995 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 1996. 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, 1995.
2. During fiscal 1996, the Company acquired 1,800,000 shares of Biovail
Corporation International and an exclusive product license for an
aggregate cost of $95,600,000.
3. Due to certain changes in management's investment philosophy during
the quarter ended December 31, 1995, the Company has transferred
investment securities from the held-to-maturity to the
available-for-sale category. The effect of this change was
immaterial.
-7-
<PAGE>
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, marketable securities and
long-term marketable securities as well as the increase in intangible assets
and investments in subsidiaries, net was principally the result of the
acquisition of a minority interest in the common stock of Biovail Corporation
International which was done in connection with the acquisition of
an exclusive license for the product Tiazac-TM-, a once daily calcium channel
blocker and the acquisition of certain product rights from Berlex
Laboratories for Climara-R-. The increase in accounts receivable, inventories,
accounts payable and accrued expenses were due to the continued growth of the
Company's principal promoted products and an increase in the Company's overall
level of operations. Company operations have historically provided a
strong positive cash flow and management believes that on going operations,
when combined with the Company's strong cash position, will continue to
provide adequate liquidity to facilitate potential acquisitions of products or
companies and other capital investments.
RESULTS OF OPERATIONS Net sales for the three and nine month periods ended
- ---------------------
December 31, 1995 increased $15,590,000 and $43,888,000 respectively, as
compared with the same periods last year. This was primarily due to the
continued growth of the Company's principal promoted products, the launch of
Cervidil-TM-, the Company's prostaglandin E2 insert used to ripen the cervix in
induced childbirth and Tiazac. Net volume growth of those products amounted to
$13,516,000 for the quarter and $46,151,000 for the nine months. Net volume
growth of the Company's older unpromoted products amounted to $1,624,000 for
the quarter but declined $4,888,000 for the nine months. The remainder of the
net sales change was primarily due to price and foreign exchange fluctuations.
Cost of sales as a percentage of sales increased to 21% during the three month
period and 20% during the nine-month period from 19% for the same periods last
year due mostly to increases in overhead costs related to the Company's
facilities expansion and lower net prices received on certain generic
products.
Selling, general and administrative expenses of the current quarter and nine
month periods increased over the same periods last year due primarily to costs
incurred in connection with the launch of Cervidil and Tiazac, which included
a substantial increase in the sales force, and to support co-promotion
agreements previously entered into by the Company. It is anticipated that such
increases will continue into the 1997 fiscal year
Research and development expense increased during the current quarter and
nine month periods over the same periods last year principally as a result of
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 and nine month period, there
was particular emphasis on Methoxatone, AF102B and Synapton-TM-. Methoxatone is
being developed for the treatment of brain trauma and AF102B is an M1
agonist for the treatment of Alzheimer's Disease. Synapton is the Company's
controlled release formulation of physostigmine being tested for the treatment
of Alzheimer's Disease.
-8-
<PAGE>
Part II - Other Information
- ---------------------------
Item 1 Legal Proceedings
On January 4, 1996, the Federal District Court for the Southern
District of New York granted summary judgment to Forest and
dismissed the complaint against Forest in Wilson et. al., v. Forest
-------------------------
Laboratories, Inc. et. al., 91 Civ. 5815 (S.D.N.Y.), a putative class
---------------------------------------------------
action alleging that Forest failed to make timely disclosures of
certain developments related to Micturin. The action had been
pending since 1991.
Item 6 Exhibits and Reports on Form 8-K.
(b) A Current Report on Form 8-K was filed by the registrant on
November 13, 1995 as amended on Form 8-K/A on January 12, 1996,
reporting the acquisition by the registrant of an exclusive
license to Tiazac-TM-, a once daily formulation of diltiazem, and
the acquisition of 1,800,000 common shares of Biovail
Corporation International.
Exhibit 27. Financial Data Schedule.
-9-
PAGE
<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: February 14, 1996
Forest Laboratories, Inc.
---------------------------
(Registrant)
/s/ Howard Solomon
----------------------------
Howard Solomon
President and Chief
Executive Officer
/s/ Kenneth E. Goodman
----------------------------
Kenneth E. Goodman
Vice President - Finance
-10-
PAGE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000038074
<NAME> JAMES A BRAJA
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 104,172
<SECURITIES> 30,468
<RECEIVABLES> 202,939
<ALLOWANCES> 5,472
<INVENTORY> 52,599
<CURRENT-ASSETS> 403,339
<PP&E> 103,997
<DEPRECIATION> 25,908
<TOTAL-ASSETS> 864,978
<CURRENT-LIABILITIES> 80,921
<BONDS> 0
0
0
<COMMON> 4,801
<OTHER-SE> 778,963
<TOTAL-LIABILITY-AND-EQUITY> 864,978
<SALES> 339,498
<TOTAL-REVENUES> 350,827
<CGS> 68,699
<TOTAL-COSTS> 198,418
<OTHER-EXPENSES> 26,841
<LOSS-PROVISION> 298
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 125,568
<INCOME-TAX> 44,953
<INCOME-CONTINUING> 80,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,615
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
</TABLE>
