UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
AMENDED AND RESTATED
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 1993
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-7059
INTERNATIONAL RESEARCH AND DEVELOPMENT CORPORATION
(Exact Name of Registrant as Specified in Charter)
Delaware 38-1688261
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 North Main Street, Mattawan, Michigan 49071
(Address of principal executive offices) (Zip Code)
(616) 668-3336
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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 NO X
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $0.50 Par Value -- 5,606,706 shares as of October 29,
1993.
Quarterly Report on Form 10-Q
PART I FINANCIAL INFORMATION
Item 1, Financial Statements
Quarter Ended September 30, 1993
International Research and Development Corporation
Mattawan, Michigan
International Research and Development Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 30 DECEMBER 31
1993 1992
<S> <C> <C>
ASSETS
Current assets:
Cash $67,136 $191,414
Receivables 8,378,564 8,721,815
Inventories (Note B) 4,780,179 3,821,376
Prepaid expenses and other current assets 1,528,478 1,685,462
Total current assets 14,754,357 14,420,067
Property and equipment:
Land 512,500 512,500
Buildings 13,324,552 13,281,293
Equipment 15,878,106 14,735,574
29,715,158 28,529,367
Less accumulated depreciation 16,133,992 14,629,711
13,581,166 13,899,656
Other assets:
Trademarks, tradenames and other
intangible assets, less 16,792,899 17,495,569
accumulated amortization
Other 1,642,677 1,811,399
18,435,576 19,306,968
$46,771,099 $47,626,691
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit borrowings $7,450,000 $8,600,000
Accounts payable 3,329,425 2,594,409
Advance billings on studies in progress 3,762,058 2,567,440
Accrued expenses and other liabilities 859,191 1,709,822
Current maturities of long-term debt 924,851 943,826
Total current liabilities 16,325,525 16,415,497
Long-term debt, less current maturities 9,355,228 10,139,683
Deferred income taxes 5,881,000 5,881,000
Reserve for employee benefits 768,200 906,200
Stockholders' equity:
Common stock 2,803,353 2,803,353
Additional paid-in capital 2,627,429 2,627,429
Retained earnings 9,312,564 9,256,529
Less loan to Employee Stock Ownership (302,200) (403,000)
Plan
14,441,146 14,284,311
$46,771,099 $47,626,691
See notes to unaudited condensed consolidated financial statements.
</TABLE>
International Research and Development Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1993 1992 1993 1992
<S> <C> <C> <C> <C>
Operating revenues:
Research services $6,492,156 $5,535,122 $18,694,624 $15,934,809
Product sales and
services 2,750,122 3,024,537 9,725,508 8,707,294
9,242,278 8,559,659 28,420,132 24,642,103
Cost of services and
products sold:
Research services 4,942,169 4,244,647 14,019,182 12,720,499
Product sales and
services 1,387,404 1,456,762 4,757,959 4,264,309
Gross profit 2,912,705 2,858,250 9,642,991 7,657,295
Selling, general and
administrative expenses 2,882,514 2,464,652 8,473,519 7,496,472
Operating earnings (loss) 30,191 393,598 1,169,472 160,823
Other income (expense):
Interest expense (285,165) (334,993) (938,387) (1,162,844)
Interest and other
income 21,852 12,425 63,152 63,746
(263,313) (322,568) (875,235) (1,099,098)
Earnings (loss) before
income taxes and cumulative
effect of change in
accounting principle (233,122) 71,030 294,237 (938,275)
Income taxes (credit) (108,000) 21,00 70,000 (381,200)
Earnings (loss) before
cumulative effect of
change in accounting (125,122) 50,030 224,237 (557,075)
principle
Cumulative effect of
change in accounting (3,903,000)
principle
Net earnings (loss) $(125,122) $50,030 $224,237 $(4,460,075)
Earnings (loss) per share:
Before cumulative
effect of change in
accounting principle $(0.02) $0.01 $0.04 $(0.10)
Cumulative effect of
change in accounting
principle (0.70)
Net earnings (loss)
per share $(0.02) $0.01 $0.04 $(0.80)
Average number of
common and common
equivalent shares
outstanding 5,606,706 5,608,488 5,606,706 5,558,081
Dividends per share $0.01 $0.01 $0.03 $0.07
See notes to unaudited condensed consolidated financial statements.
</TABLE>
International Research and Development Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
1993 1992
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $224,237 $(4,460,075)
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,259,549 2,322,295
Cumulative effect of change in accounting 3,903,000
principle
Changes in operating assets and
liabilities:
Receivables 343,251 (247,450)
Inventories (958,803) (224,854)
Other operating assets 187,236 (534,883)
Accounts payable 750,380 (320,008)
Advance billings on studies in progress 1,194,618 272,154
Accrued expenses and other operating (940,522) (682,566)
liabilities
Net cash provided by (used in) operating 3,059,946 27,613
activities
INVESTING ACTIVITIES
Property and equipment acquisitions (1,204,970) (1,090,454)
Other 41,578 16,440
Net cash used in investing activities (1,163,32) (1,074,14)
FINANCING ACTIVITIES
Line of credit borrowings (payments) (1,150,000) 2,453,000
Payments on long-term debt (803,430) (1,280,102)
Cash dividends paid (168,202) (385,837)
Receipts from Employee Stock Ownership Plan 100,800 78,000
Proceeds from exercise of stock options 2,875
Net cash provided by (used in) financing (2,020,832) 867,936
activities
Net decrease in cash (124,278) (178,465)
Cash at beginning of period 191,414 284,938
Cash at end of period $67,136 $106,473
( ) Denotes use of cash.
See notes to unaudited condensed consolidated financial statements.
</TABLE>
International Research and Development Corporation and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 1993
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Corporation and its wholly owned
subsidiaries, Carme', Inc., IRAD Corporation, and Medical Surgical
Specialties, Ltd., and reflect all adjustments, consisting of normal
recurring accruals, which management considers necessary for a fair
presentation of the results of operations for the periods shown.
The financial statements have been prepared in accordance with the
instructions to Form 10-Q. Therefore, they do not include all of the
information and footnotes required for a fair presentation of financial
position, results of operations, and cash flows in conformity with
generally accepted accounting principles for complete financial
statements.
The results of operations of any interim period are not necessarily
indicative of results of operations for the year.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Corporation's annual report on
Form 10-K for the year ended December 31, 1992.
NOTE B - INVENTORIES
Inventories consist of the following:
SEPTEMBER 30 DECEMBER 31
1993 1992
Finished goods $2,376,000 $1,390,000
Components and packaging 1,668,000 1,511,000
Raw materials and supplies 736,000 920,000
$4,780,000 $3,821,000
NOTE C - LITIGATION
The Corporation and its subsidiaries are subject to lawsuits and claims
arising out of their business. However, in management's opinion, the
liability, if any, from these matters would not materially affect the
consolidated financial position of the Corporation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Consolidated operating revenues for the periods of three and nine
months ended September 30, 1993 increased $683,000 (8%) and $3,778,000
(15%), respectively, over the corresponding periods in 1992. This
marks the fifth consecutive quarter that consolidated quarterly
operating revenues have increased over the comparable prior year
period.
Research revenues increased 17% ($957,000 and $2,760,000) for the
periods of three and nine months ended September 30, 1993,
respectively, over the corresponding periods in 1992. This growth
resulted primarily from an increase in the number of ongoing studies
over comparable 1992 levels.
Product sales and service revenues for the three months ended September
30, 1993 decreased $274,000 (9%) from the comparable 1992 period,
including a decrease in the skin care products segment of $532,000
(22%). For the nine month period ended September 30, 1993, product
sales and services revenues increased $1,018,000 (12%) over the
comparable 1992 period, including a modest $75,000 (1%) increase in the
skin care products segment. Although management attempted to stimulate
skin care product revenues during the 1993 third quarter through the
aggressive use of promotion discounts (up $202,000 (92%) over the
levels expended during the 1992 third quarter), the market did not
respond immediately with a corresponding increase in skin care products
sales. However, it is management's opinion that the use of such
promotional techniques and its continued new product development could
result in new and expanded repeat sales of skin care products in future
quarters.
Growth in revenues in the specialty medical products and services
segment continues to be very impressive, with 1993 three and nine
months revenues up 46% ($258,000) and 77% ($943,000), respectively,
over 1992 levels. The increase in the specialty medical products and
services revenue stems primarily from increased distribution and
expansion of medical specialty repairs, as well as continued steady
growth in sales of the Door-Aid(TM) power door opener.
Cost of product sales and services in the combined skin care and
specialty medical products segment for the three and nine month periods
ended September 30, 1993, represented approximately 50% and 49%,
respectively, of the related revenue, as compared to 48% and 49%,
respectively, for the same periods in 1992. The increase in the ratio
of the cost of product sales and services to revenues for the third
quarter of 1993 was primarily the result of the variation in the
absorption of fixed costs that resulted from the decrease in revenues
in the quarter.
The cost of research services for the three and nine month periods
ended September 30, 1993 have increased 16% ($698,000 ) and 10%
($1,299,000), respectively, over 1992 levels. These increases are the
direct result of the increased research revenues discussed above.
However, for the three and nine month periods ended September 30, 1993,
cost of research services as a percentage of the related revenues
decreased 1% and 5%, respectively, compared to the same periods in
1992. Management attributes these reductions to its strategic program
to provide enhanced study quality at lower cost.
Consolidated selling, general and administrative expenses increased
$418,000 (17%) in the third quarter of 1993 over the third quarter of
1992. For the first nine months of 1993, consolidated selling, general
and administrative expenses were $977,000 higher (13%) than in the same
period in 1992. These increases resulted directly from the increases
in product sales and services discussed above and relate principally to
increased product promotion, advertising and selling commissions.
Selling, general and administrative expenses have continued to decline
as a percentage of operating revenues as a result of the Corporation's
ongoing cost containment program. Selling, general and administrative
expenses as a percentage of operating revenues were 31% and 30% for the
three and nine month periods ended September 30, 1993, as compared to
29% and 30% in the comparable periods of 1992.
As compared to the corresponding period in 1992, operating earnings
decreased $363,000 (comprised of a $182,000 increase in the research
segment and a $545,000 decrease in the combined product sales/services
segments) for the three months ended September 30, 1993. However,
operating earnings for the period of nine months ended September 30,
1993 increased $1,009,000 (comprised of an increase of $1,315,000 in
the research segment and a decrease of $306,000 in the combined product
sales/services segments), as compared to the first nine months of 1992.
These fluctuations are primarily the result of the changes outlined
above.
In June 1992, the Corporation finalized arrangements for a $9,500,000
line of credit with a bank and refinanced $10,199,000 of fixed rate
mortgage-based borrowings with lower variable interest rate borrowings
tied to the bank's base lending rate. As a result of this,
significantly all bank debt now accrues interest at lower variable
interest rates than in effect during the first nine months of 1992.
Accordingly, interest expense for the three and nine month periods
ended September 30, 1993 has decreased $50,000 (15%) and $224,000
(19%), respectively, over 1992 levels. The Corporation is currently in
final discussions with its principal lender concerning the renewal of
its line of credit at an even lower variable interest rate.
The Corporation incurred a $233,000 loss before income taxes for the
1993 third quarter and realized earnings before income taxes in the
amount of $294,000 for the nine month period ended September 30, 1993.
This compares with earnings of $71,000 and a loss of $938,000 before
income taxes and a mandated change in accounting principle, for the
same respective periods in 1992. For the three months ended September
30, 1993, the Corporation incurred a net loss of $125,000, compared to
net income of $50,000 for the 1992 third quarter. Net income for the
nine months ended September 30, 1993, was $224,000, compared with a net
loss of $4,460,000 (an operating loss of $557,000 and a one-time
cumulative charge against earnings in the amount of $3,903,000 re:
FAS No. 109) for the nine months ended September 30, 1992.
Liquidity and Sources of Capital
The ratio of the Corporation's current assets to current liabilities
has increased from .88 at December 31, 1992 to .90 at September 30,
1993, including $2,567,000 and $3,762,000, respectively, of advance
billings on studies in progress at those dates.
Cash flow from operations was $3,060,000 for the nine months ended
September 30, 1993, contrasted to the generation of only $28,000 of
cash by operations for the same period in 1992. This $3,032,000
increase in cash flow resulted primarily from the increases in
earnings, accounts payable, and advance billings on studies in
progress.
During the nine-month period ended September 30, 1993, the Corporation
spent approximately $1,205,000 on equipment acquisitions primarily
related to quality control, additional computerization, and
enhancements in automation for the research business. The Corporation
spent $1,090,000 for similar equipment acquisitions during the
comparable period in 1992.
During the nine months ended September 30, 1993, the Corporation
utilized $1,953,000 of the cash generated from operations to decrease
its line of credit and long-term bank debt. This has directly
contributed to the decrease in interest expense, discussed above. By
comparison, the Corporation increased its bank debt by $1,173,000
during the comparable nine month period in 1992.
Current financial resources (including $1,750,000 available on the
existing line of credit with banks and approximately $325,000 of
available borrowings against cash surrender value of life insurance
policies), plus anticipated revenues from operations for the year are
expected to be adequate to fund working capital needs for 1993.
PART II. OTHER INFORMATION
Items 1 through 5 are inapplicable and have been omitted.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - not applicable.
(b) Reports on Form 8-K - The Corporation did not
file any reports on Form 8-K during the three
months ended September 30, 1993.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this amendment to report to be
signed on its behalf by the undersigned thereunto duly authorized.
INTERNATIONAL RESEARCH AND
DEVELOPMENT CORPORATION
(Registrant)
Date: September 25, 1995 /s/ Curtis L. Dally
Curtis L. Dally,
Treasurer
