August 14, 1996
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
RE: FOREST LABORATORIES, INC. QUARTERLY
- -- -----------------------------------
REPORT ON FORM 10-Q FOR THE QUARTER
-----------------------------------
ENDED JUNE 30, 1996
-------------------
COMMISSION FILE NO. 1-5438
--------------------------
EXHIBIT 27 ARTICLE 5 OF REGULATION S-X
--------------------------------------
Gentlemen:
I have submitted via EDGAR for filing on behalf of the above-captioned
registrant, one (1) complete copy of its Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996 and Exhibit 27, Article 5 of Regulation
S-X.
Very truly yours,
/s/KENNETH E. GOODMAN
- ---------------------
Kenneth E. Goodman
KEG/kc
enclosure
<PAGE>
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, 1996
---
/ / 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
August 14, 1996: 44,387,240.
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1996
(In thousands) (Unaudited) March 31, 1996
-------------- -------------
ASSETS
- ------
<S> <C> <C>
Current assets:
Cash (including cash equivalent investments
of $228,293 in June and $78,818 in March) $236,380 $ 83,543
Marketable securities 21,359 40,164
Accounts receivable, less allowance for
possible losses of $5,400 in June and
$5,309 in March 140,542 254,708
Inventories 81,123 58,949
Deferred income taxes 22,319 20,411
Other current assets 10,929 12,837
-------- --------
Total current assets 512,652 470,612
Marketable securities 35,480 22,170
-------- --------
Property, plant and equipment 109,553 106,164
Less accumulated depreciation 28,725 26,807
-------- --------
80,828 79,357
-------- --------
Other assets:
Investment in unconsolidated affiliate 75,902
Excess of cost of investment in subsidiaries
over net assets acquired, less accumulated
amortization of $7,022 in June and $6,866
in March 17,937 18,093
License agreements, product rights
and other intangible assets, less
accumulated amortization of $52,124 in
June and $51,025 in March 213,125 216,078
Deferred income taxes 6,908 7,398
Other 10,416 9,751
-------- --------
Total other assets 248,386 327,222
-------- --------
TOTAL ASSETS $877,346 $899,361
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
-2-
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1996
(In thousands, except for par values) (Unaudited) March 31, 1996
-------------- --------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 27,881 $ 13,994
Accrued expenses 35,280 50,332
Income taxes payable 29,650 25,245
-------- --------
Total current liabilities 92,811 89,571
-------- --------
Deferred income taxes 277 273
-------- --------
Commitments and contingencies
Shareholders' equity:
Series A junior participating preferred
stock, $1.00 par; shares authorized 1,000;
no shares issued or outstanding
Common stock, $.10 par; shares authorized
250,000; issued 48,205 shares
in June and 48,133 shares in March 4,820 4,813
Capital in excess of par 308,711 306,635
Retained earnings 563,871 542,005
Other ( 2,251) ( 2,985)
-------- --------
875,151 850,468
Less common stock in treasury,
at cost (3,845 shares in June
and 2,650 shares in March) 90,893 40,951
-------- --------
Total shareholders' equity 784,258 809,517
-------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $877,346 $899,361
======== ========
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE>
<PAGE>
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES,
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
(In thousands, except per share amounts) June 30,
-------------------------
1996 1995
--------- --------
<S> <C> <C>
Net sales $ 90,316 $106,943
Non-recurring income, net (Note 2) 19,149
Other income 4,405 3,757
-------- --------
113,870 110,700
-------- --------
Costs and expenses:
Cost of sales 19,805 20,898
Selling, general and
administrative 55,270 39,900
Research and development 7,246 8,539
-------- --------
82,321 69,337
-------- --------
Income before income taxes 31,549 41,363
Income taxes 9,683 14,808
-------- --------
Net income $ 21,866 $ 26,555
======== ========
Earnings per common and
common equivalent share:
Primary $.47 $.57
==== ====
Fully diluted $.47 $.57
==== ====
Weighted average number of
common and common equivalent
shares outstanding:
Primary 46,656 46,926
====== ======
Fully diluted 46,656 46,926
====== ======
Dividends per share $-0- $-0-
==== ====
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
(In thousands) June 30,
-----------------------
1996 1995
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 21,866 $ 26,555
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,374 1,150
Amortization 3,139 2,811
Gain on sale of investment in unconsolidated
affiliate ( 26,399)
Deferred income tax (credit) expense ( 1,414) 396
Foreign currency transaction loss 64 73
Net change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 114,166 7,049
Inventories ( 22,174) ( 1,533)
Other current assets 1,908 ( 274)
Increase (decrease) in:
Accounts payable 13,887 1,430
Accrued expenses ( 15,052) 6,608
Income taxes payable 4,405 12,106
Increase (decrease) in other assets 665 ( 764)
-------- --------
Net cash provided by operating
activities 96,435 55,607
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment, net ( 2,565) ( 2,787)
Proceeds from sale of investment in
unconsolidated affiliate 102,301
Purchase of marketable securities
Available-for-sale ( 27,785) ( 33,389)
Redemption of marketable securities
Available-for-sale 33,279 45,111
-------- --------
Net cash provided by
investing activities 105,230 8,935
-------- --------
- Continued -
</TABLE>
-5-
</PAGE>
<PAGE>
<TABLE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
- Continued -
Three Months Ended
(In thousands) June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Net proceeds from common stock options
exercised by employees under stock
option plans $ 2,083 $ 2,112
Purchase of treasury stock, net ( 49,942)
-------- --------
Net cash provided by (used in)
financing activities ( 47,859) 2,112
-------- --------
Effect of exchange rate changes on cash ( 969) ( 206)
-------- --------
Increase in cash and cash equivalents 152,837 66,448
Cash and cash equivalents, beginning of
period 83,543 107,611
-------- --------
Cash and cash equivalents, end of period $236,380 $174,059
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $6,067 $2,306
See notes to condensed consolidated financial statements.
</TABLE>
-6-
<PAGE>
<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
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, 1996 are not necessarily
indicative of the results that may be expected for the year ending
March 31, 1997. 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, 1996.
2. Non-recurring Income, net
-------------------------
The quarter's results include a net non-recurring gain of $19,149,000
or $12,687,000 ($.27 per share) after taxes. The gain results from
the sale of Company's approximate 21% equity holding in Biovail
Corporation International which resulted in a gain of $26,399,000 or
$17,019,000 ($.36 per share) after taxes partially offset by
non-recurring charges of $7,250,000 or $4,332,000
($.09 per share) after tax for expenses relating to the closing of
certain of the Company's facilities and for a reserve for the
estimated cost of settlement of certain litigations.
-7-
<PAGE>
<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY Net current assets increased by $38,800,000
- ---------------------------------
from March 31, 1996. The increase resulted principally from the Company
selling its investment in Biovail Corporation International ("BCI") for
$102,301,000 (net of commissions and expenses). The balance in accounts
receivable declined approximately $114,000,000 from the balance at
March 31, 1996 due to collections of trade accounts resulted which were
previously granted with extended dating terms. The collections in an
improvement in the accounts receivable days sales outstanding from 208 days at
March 31, 1996 to 142 days at June 30, 1996. The cash generated from these
activities was invested in cash equivalent investments and is also being used to
repurchase from time to time in the open market, up to 4,500,000 shares
(approximately 10%) of the ompany's outstanding common stock. At June 30, 1996,
the Company had purchased 1,191,800 shares at a cost of $49,796,000.
Inventories increased $22,174,000 in connection with the Company's recent launch
of Tiazac-R- and from higher than normal inventory balances of the Company's
Lorcet product line as a result of generic competition. Management believes
that current cash levels, coupled with funds to be generated by on-going
operations, will continue to provide adequate liquidity to facilitate potential
acquisitions of products or companies, capital investments and the share
repurchase.
RESULTS OF OPERATIONS Net sales for the current quarter decreased $16,627,000
- ---------------------
as compared with the same period last year due principally to generic
competition for Lorcet. Net volume declines of the Company's principal
promoted products amounted to $15,392,000, of which $12,631,000
was attributed to Lorcet. The Company is experiencing aggressive pricing
competition for its generic product lines. As a result, sales of the Company's
generic product lines decreased by $3,757,000 of which $629,000 was the result
of volume declines and $3,128,000 was attributed to price decreases. In
addition, $3,400,000 of the sales decrease resulted from lower average
selling prices on increased sales of the Company's principal promoted
products to certain managed care customers. Sales increases of certain of
the Company's older unpromoted product lines amoutned to $2,439,000 and sales
of Tiazac were $3,483,000.
Non-recurring income, net is comprised of a non-recurring gain of $26,399,000 on
the sale of the Company's approximate 21% equity holding in BCI, offset by
non-recurring charges of $7,250,000 for expenses relating to the closing of
certain of the Company's facilities and for a reserve for the estimated cost of
settlement of certain litigations.
Cost of sales as a percentage of sales increased to 22% during the first quarter
of fiscal 1997 from 20% in the similar fiscal period of 1996 due to lower prices
received on certain products.
The increase in selling, general and administrative expense of $15,370,000
during the current quarter as compared with the prior year is principally due to
the cost of an expanding the Company's salesforce by 200 representatives and for
costs incurred in conjunction with the launch of Tiazac.
-8-
<PAGE>
FOREST LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
Research and development expenses decreased $1,293,000 during the current
quarter over the same period last year as work is concluding on the phase III
clinical trials on Synapton-TM-, the Company's acetylcholinesterase inhibitor
being developed for the treatment of Alzheimer's Disease.
Income taxes as a percentage of income before taxes was 31% for the current
quarter versus 36% in the similar period last year due principally to a decrese
in the proportion of the Company's operating profit derived from fully taxable
operations as compared to tax exempt operations and tax free interest income.
Inflation has not had a material effect on the Company's operations for the
periods presented.
-9-
<PAGE>
<PAGE>
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings
-----------------
Reference is made to the Company's Annual Report on Form 10-K for the
year ended March 31, 1996, for a description of certain legal
proceedings.
Item 6. (b) Reports on Form 8-K - None
-10-
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: August 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
-11-
</PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000038074
<NAME> JAMES A. BRAJA
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 236,380
<SECURITIES> 56,839
<RECEIVABLES> 145,942
<ALLOWANCES> 5,400
<INVENTORY> 81,123
<CURRENT-ASSETS> 512,652
<PP&E> 109,553
<DEPRECIATION> 28,725
<TOTAL-ASSETS> 877,346
<CURRENT-LIABILITIES> 92,811
<BONDS> 0
0
0
<COMMON> 4,820
<OTHER-SE> 779,438
<TOTAL-LIABILITY-AND-EQUITY> 877,346
<SALES> 90,316
<TOTAL-REVENUES> 113,870
<CGS> 19,805
<TOTAL-COSTS> 75,075
<OTHER-EXPENSES> 7,246
<LOSS-PROVISION> 105
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 31,549
<INCOME-TAX> 9,683
<INCOME-CONTINUING> 21,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,866
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
