SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) Quarterly report for the quarterly period ended September 30, 1999
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission file number 1-9601
-----------
K-V PHARMACEUTICAL COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 43-0618919
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2503 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63144
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(314) 645-6600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(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 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
----- ------
Title of Class of Number of Shares
Common Stock Outstanding as of this Report Date
----------------- ----------------------------------
Class A Common Stock, par value
$.01 per share 12,184,585
Class B Common Stock, par value
$.01 per share 6,576,641
1
<PAGE>
PART 1
FINANCIAL INFORMATION
2
<PAGE>
<TABLE>
<CAPTION>
KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN 000'S)
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
------------------------- --------------------------
9/30/99 9/30/98 9/30/99 9/30/98
------- -------- ------- --------
<S> <C> <C> <C> <C>
Net Revenues $36,011 $26,406 $68,805 $52,075
------- ------- ------- -------
Costs and Expenses:
Manufacturing costs and expenses 15,693 14,647 32,225 29,801
Research and development 2,076 1,662 3,904 3,305
Selling and administrative 10,401 5,330 18,447 10,187
Amortization of intangible assets 569 40 1,069 82
------ ------- ------ ------
Total costs and expenses 28,739 21,679 55,645 43,375
------ ------ ------ ------
Operating income 7,272 4,727 13,160 8,700
------ ------ ------ ------
Other income (expense):
Interest expense (503) (112) (1,084) (226)
Interest and other income 79 341 225 632
------ ------ ------- ------
Total other income (expense) (424) 229 (859) 406
------ ------ ------- ------
Income before income taxes 6,848 4,956 12,301 9,106
Provision for income taxes 2,601 1,894 4,674 3,474
------ ------ ------- -------
Net Income $ 4,247 $ 3,062 $ 7,627 $ 5,632
======= ======= ======= =======
Net Income per Common Share-Basic
(after deducting preferred dividends of $105
and $105 for the three month periods and $211
and $210 for the six-month periods of 1999
and 1998, respectively) $0.22 $0.16 $0.40 $0.30
===== ===== ===== =====
Net Income per Common Share-Diluted $0.21 $0.15 $0.38 $0.28
===== ===== ===== =====
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN 000'S)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
--------------------- ----------------------
9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $4,247 $3,062 $7,627 $5,632
------ ------ ------ ------
Other comprehensive income, net of tax:
Unrealized losses on securities:
Unrealized holding losses arising
during period (2) - (10) -
Reclassification adjustment for
losses included in net income 25 - 18 -
-------- ------- -------- ------
Other comprehensive income 23 - 8 -
------
Comprehensive income $4,270 $3,062 $7,635 $5,632
====== ====== ====== ======
</TABLE>
4
<PAGE>
KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND MARCH 31, 1999
(DOLLARS IN 000'S)
UNAUDITED
09/30/99 03/31/99
ASSETS --------- ---------
Current Assets:
Cash and equivalents $1,602 $ 2,617
Marketable securities,
available-for-sale 1,999 7,523
Receivables 24,088 18,988
Receivable, arbitration award - 13,253
Inventories 28,085 23,653
Deferred income taxes 3,390 3,379
Prepaid and other current assets 172 168
---------- -------------
Total Current Assets 59,336 69,581
Net property and equipment, less
accumulated depreciation 23,991 18,967
Intangibles and other assets, net
of amortization 47,305 39,442
---------- ----------
TOTAL ASSETS $130,632 $127,990
======== ========
LIABILITIES
Current Liabilities:
Accounts payable $ 9,508 $ 8,667
Accrued liabilities 13,444 17,090
Current maturities of long-term debt 1,644 712
---------- ----------
Total Current Liabilities 24,596 26,469
Long-term debt 22,297 31,490
Deferred income taxes 379 379
Other long-term liabilities 2,232 2,104
---------- ----------
TOTAL LIABILITIES 49,504 60,442
--------- --------
Commitments and Contingencies
SHAREHOLDERS' EQUITY
7% Cumulative Convertible Preferred
Stock, $.01 par value; $25.00
stated and liquidation value;
840,000 shares authorized;
issued and outstanding-240,000
and 241,000 shares as of
September 30, 1999 and
March 31, 1999, respectively
(convertible into Class A shares 2 2
at a ratio of 3.75 to one)
Class A and Class B Common Stock, $.01
par value; 150,000,000 and 75,000,000
shares authorized, respectively; Class
A-issued 12,220,204 and 11,941,776 as
of September 30, 1999 and March 31, 1999,
respectively 122 120
Class B-issued 6,612,260 and 6,525,180
as of September 30, 1999 and March 31,
1999, respectively (convertible into
Class A shares on a one-for-one basis) 66 64
Additional paid-in capital 40,682 34,531
Retained earnings 40,328 32,911
Accumulated comprehensive loss, net (17) (25)
Less: Treasury Stock 35,619 shares
each of Class A and Class B Common
Stock, at cost (55) (55)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 81,128 67,548
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $130,632 $127,990
======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
(DOLLARS IN 000'S)
1999 1998
-------- -------
OPERATING ACTIVITIES
Net Income $ 7,627 $ 5,632
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,019 872
Changes in deferred taxes (11) -
Changes in deferred compensation 128 259
Changes in operating assets and liabilities:
(Increase) decrease in receivables (5,100) 2,575
Decrease in receivable arbitration award 13,253 -
Increase in inventories (4,432) (2,040)
(Increase) decrease in prepaids and
other assets (471) 376
(Decrease) increase in accounts
payable and accrued liabilities (2,806) 583
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,207 8,257
--------- ---------
INVESTING ACTIVITIES
Purchase of property and equipment, net (5,973) (1,911)
Sale of marketable securities 5,532 -
Product acquisition (3,033) -
--------- -------
NET CASH (USED IN) INVESTING ACTIVITIES (3,474) (1,911)
--------- -------
FINANCING ACTIVITIES
Principal payments on long-term debt (9,193) (116)
Dividends paid on Preferred Stock (210) (211)
Exercise of Common Stock options 1,655 435
--------- ---------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (7,748) 108
--------- ---------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (1,015) 6,454
CASH AND CASH EQUIVALENTS AT:
BEGINNING OF YEAR 2,617 18,158
------- -------
END OF PERIOD $1,602 $24,612
====== =======
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Portion of product acquisition
acquired through issuance of:
Short-term debt $ 932 -
Common stock $4,500 -
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
NOTES TO SUMMARIZED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The interim financial statements presented here have been prepared in
conformity with the accounting principles and practices and methods of applying
the same (including consolidating practices) reflected in the Annual Report of
the Company on Form 10-K for the year ended March 31, 1999 filed with the
Commission, except that detailed footnotes and schedules are not included.
Reference is hereby made to the footnotes and schedules contained in the Annual
Report. All significant intercompany balances and transactions have been
eliminated and, in the opinion of management, all adjustments, which are of a
normal recurring nature only, necessary to present a fair statement of the
results of the Company and its subsidiaries have been made.
NOTE B - INVENTORIES
Inventories consist of ($ in 000's):
September 30, 1999 March 31, 1999
------------------ --------------
Finished products $12,661 $11,411
Work-in-process 3,307 2,282
Raw materials and supplies 12,117 9,960
--------- ---------
$28,085 $23,653
======= =======
<PAGE>
NOTE C - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
NUMERATOR: 9/30/99 9/30/98 9/30/99 9/30/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 4,247 $ 3,062 $ 7,627 $ 5,632
Preferred Stock dividends (105) (105) (210) (211)
-------- -------- -------- --------
Numerator for basic earnings per
Share-income available to common
Shareholders 4,142 2,957 7,417 5,421
Effect of dilutive securities:
Preferred Stock dividends 105 105 210 211
-------- -------- -------- --------
Numerator for diluted earnings per
Share-income available to
common Shareholders after
assumed conversions $4,247 $3,062 $7,627 $5,632
====== ====== ====== ======
DENOMINATOR:
Denominator for basic earnings per
Share-weighted-average shares 18,693 18,198 18,533 18,172
------- ------- ------- -------
Effect of dilutive securities:
Employee stock options 623 918 595 919
Convertible Preferred Stock 900 904 900 904
------ ------ --------- ---------
Dilutive potential Common Shares 1,523 1,822 1,495 1,823
----- ----- -------- --------
Denominator for diluted earnings
per share-adjusted weighted-average
shares and assumed conversions 20,216 20,020 20,028 19,995
====== ====== ====== ======
BASIC EARNINGS PER SHARE (1): $0.22 $0.16 $0.40 $0.30
===== ===== ===== =====
DILUTED EARNINGS PER SHARE (1) (2): $0.21 $0.15 $0.38 $0.28
===== ===== ===== =====
<FN>
(1) The two-class method for Class A and Class B Common Stock is not presented
because the earnings per share are equivalent to the if converted method
since dividends were not declared or paid and each class of common stock
has equal ownership of the Company.
(2) Employee stock options to purchase 179,250 shares at September 30, 1999
and 750 shares at September 30, 1998 of Class A and Class B Common Stock
are not included in the computation of diluted earnings per share because
their exercise price was greater than the average market price during the
quarter and as such are considered anti-dilutive.
</FN>
</TABLE>
<PAGE>
NOTE D - SEGMENT FINANCIAL INFORMATION
The reportable segments of the Company are specialty generics and
contract services. Segment operating results are measured based on income before
taxes.
<TABLE>
<CAPTION>
Corporate
Specialty Contract All Expenses and
Generics Services Other Eliminations Consolidated
--------- -------- -------- ------------ ------------
For the Three Months Ended
September 30, 1999 ($ in 000's)
- --------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $26,286 $10,934 $8,892 $(10,101) $36,011
Depreciation and amortization 22 439 34 569 1,064
Income before income taxes 12,139 513 1,280 (7,084) 6,848
Capital expenditures 202 3,543 39 - 3,784
For the Three Months Ended
September 30, 1998 ($ in 000's)
- --------------------------------
Revenues $22,294 $6,385 $3,447 $(5,720) $26,406
Depreciation and amortization 18 361 20 40 439
Income before income taxes 9,464 (595) 624 (4,537) 4,956
Capital expenditures 20 1,323 24 - 1,367
For the Six Months Ended
September 30, 1999 ($ in 000's)
- -------------------------------
Revenues $51,675 $21,743 $15,752 $(20,365) $68,805
Depreciation and amortization 63 792 68 1,096 2,019
Income before income taxes 22,782 344 2,295 (13,120) 12,301
Total assets 26,435 49,472 13,062 41,663 130,632
Capital expenditures 202 5,699 72 - 5,973
For the Six Months Ended
September 30, 1998 ($ in 000's)
- --------------------------------
Revenues $42,947 $12,870 $7,223 $(10,965) $52,075
Depreciation and amortization 36 712 41 83 872
Income before income taxes 17,389 (702) 1,308 (8,889) 9,106
Total assets 14,645 47,704 7,471 5,123 74,943
Capital expenditures 28 1,859 24 - 1,911
</TABLE>
<PAGE>
Any forward-looking statements set forth in this Report are necessarily
subject to significant uncertainties and risks. When used in this Report, the
words "believes," "anticipates," "intends," "expects," and similar expressions
are intended to identify forward-looking statements. Actual results could be
materially different as a result of various possibilities. Readers are cautioned
not to place undue reliance on forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS, AND
LIQUIDITY AND CAPITAL RESOURCES
(A) RESULTS OF OPERATIONS
REVENUES. Consolidated net revenues for the second quarter of fiscal
2000 ended September 30, 1999 increased $9.6 million, or 36.4%, to $36 million
from $26.4 million for the same period last year. Year-to-date consolidated net
revenues were $68.8 million, an increase of $16.7 million, or 32.1%, over the
same period last year. The increases in revenues for the quarter and
year-to-date were due primarily to higher sales of new brand-name products and
specialty generics.
Brand product sales through the Company's Ther-Rx Corporation
subsidiary were $4.6 million for the quarter and $7.2 million year-to-date all
of which are incremental to the prior year given the start-up of Ther-Rx late in
the fourth quarter of last fiscal year. Sales benefited from the acquisition in
August 1999 of the PreCare(R) line of prenatal vitamins from UCB Pharma and the
subsequent introductions of Pre-Care(R) Chewables and PremesisRx(TM) under the
PreCare(R) line of women's health care pharmaceuticals. PreCare(R) Chewables is
the world's first prescription chewable prenatal vitamin. PremesisRx(TM) is a
prescription product designed to reduce pregnancy-related nausea when used in
conjunction with a physician-prescribed regimen to minimize nausea. The Company
plans to introduce additional products in the coming months.
Specialty generic sales through the Company's ETHEX Corporation
subsidiary increased $4 million, or 17.9%, for the quarter and were up $8.7
million, or 20.3%, year-to-date over the same periods of the prior year. The
increases in both periods were due to new products introduced this year and last
year ($3.9 million for the quarter and $6.3 million year-to-date) and selective
price increases ($2.7 million for the quarter and $3.9 million year-to-date).
COSTS AND EXPENSES. Manufacturing costs as a percent of revenue
declined for the quarter and year-to-date due to the effects of favorable
pricing and product mix. The improvement in product mix reflects the increase in
the relative contribution of higher margin branded sales to total sales. For the
quarter, manufacturing costs declined to 43.6% from 55.5% in the prior year and
for the year-to-date to 46.8% from 57.2% last year. The components of the change
are shown in the following table:
% Revenue
---------------------------
Quarter Year-to-Date
------- ------------
FY 99 Manufacturing Costs 55.5 57.2
Change due to:
Product Mix/Volume (11.7) (10.4)
Selling Pricing (3.5) (2.8)
Manufacturing Costs 3.3 2.8
------ ------
FY 00 Manufacturing Costs 43.6 46.8
====== ======
Research and development expense increased $.4 million, or 25%, for the
quarter and $.6 million, or 18%, for the year-to-date compared to the same
periods of the prior year. The increase in expense in both periods is due
primarily to higher research costs to support clinical testing programs in
support of the Company's new products.
Selling and administrative expenses increased $5.1 million, or 95%, for
the quarter and $8.3 million, or 81%, for the year-to-date compared to the same
periods of the prior year. The increase in both periods is due primarily to the
Company's continued investment in expanding the sales force for its Ther-Rx
brand-name marketing division. Selling expenses associated with this effort were
$3.3 million for the quarter and $5.1 million for the year-to-date. Marketing
expenses to support the continued growth of the specialty generics business
increased $.6 million and $1.1 million for the quarter and year-to-date,
respectively.
Amortization expense increased $.5 million for the quarter and $1
million for the year-to-date due to the amortization of product rights acquired
in March 1999 and August 1999.
<PAGE>
Interest expense, net of interest income, increased $.7 million in the
quarter and is up $1.3 million for the year-to-date on higher borrowings
incurred to finance product acquisitions and facilities expansion.
NET INCOME. As a result of the factors described above, net income
improved $1.2 million, or 38.7% to $4.2 million for the quarter ending September
30, 1999 compared to the same period last year. For the six months ended
September 30, 1999 net income improved $2 million, or 35.4% to $7.6 million
compared to the same period of the prior year.
(B) LIQUIDITY AND CAPITAL RESOURCES
CASHFLOW. Cash provided by operations was $10.3 million for the first
six months of fiscal 2000, an increase of $2.2 million, or 27%, over the first
six months of fiscal 1999. The increase in operating cash flow compared with
last year was due to higher net income, depreciation, amortization and other
non-cash charges ($3 million) and the collection of an arbitration award ($13.3
million). These increases were largely offset by a $14. 1 million increase in
the net use of working capital over the same period last year. This net increase
in the use of working capital consisted of increases in trade accounts
receivable ($7.7 million), inventories ($2.4 million) and other current assets
($.6 million) to support business growth, and decreases in accounts payable and
accrued expenses ($3.4 million). The increase in trade accounts receivable
reflects the $16.7 million growth in net sales over the same period last year,
and includes the impact of the new products launched by Ther-Rx and ETHEX.
Inventories increased in anticipation of customer needs during the upcoming
cough cold season and in support of the recent new product launches. The
decreases in accounts payable and accrued liabilities were due primarily to a
decrease in accrued income taxes paid during the first quarter in connection
with the arbitration award recorded in fiscal 1999.
Investing activities for the first six months of fiscal 2000 included
cash outlays for capital expenditures of $6 million and product acquisitions of
$3 million, partially offset by cash provided by the sale of $5.5 million of
marketable securities. Capital expenditures were primarily for production
equipment, laboratory improvements and the upgrade of the Company's business
software and network systems. During the second quarter, the Company acquired
the worldwide rights to PreCare(R) for approximately $8.5 million, consisting of
$3 million cash, $4.5 million Class A Common Stock and a $1 million note.
Marketable securities were sold to pay down long-term debt.
The Company paid down long-term debt totaling $9 million during the
first six months of fiscal 2000.
The Company believes that existing cash and securities balances,
together with cash generated from operating activities and funds available under
its credit facility, will be adequate to fund operating activities for the
presently foreseeable future, including the payment of short-term and long-term
obligations, capital improvements, product development activities and the
expansion of marketing capabilities for the brand pharmaceutical business.
BALANCE SHEET AND RATIOS. The following table sets forth selected
balance sheet data and financial ratios as of September 30 and year-end March
31, 1999:
- --------------------------------------------------------------------------------
($ in 000's)
September 99 March 99
------------ ----------
Working capital................................ $ 34,740 $ 43,112
Long-term debt................................. 22,297 31,490
Shareholders' equity........................... 81,128 67,548
Working capital ratio.......................... 2.4 2.6
Long-term debt to equity....................... 0.27 0.47
- --------------------------------------------------------------------------------
<PAGE>
Working capital decreased $8.4 million during the first six months of
fiscal 2000 compared with the balance at the end of fiscal 1999. Current assets
decreased $10.3 million, or 15%, while current liabilities decreased $1.9
million, or 7%. The decrease in current assets was due primarily to the
collection of the $13.3 million arbitration award included in receivables at
year-end, the proceeds of which were used to pay income taxes ($6 million),
capital expenditures ($2.2 million) and long-term debt ($9.2 million). Current
liabilities decreased due to a $5.3 million reduction in accrued income taxes,
partially offset by a $.9 million increase in short-term debt related to the
PreCare(R) acquisition, a $.9 million increase in accounts payable from higher
inventory levels, and a $1.6 million increase in marketing and promotional
accruals in connection with new product launches. The working capital ratio
dipped slightly to 2.4 to 1 from 2.6 to 1 at year-end as current assets declined
at a faster rate than current liabilities.
The long-term debt to equity ratio improved during the first six months
of fiscal 2000 due to the repayment of $9.2 million in long-term debt and the
increase in shareholders' equity attributable to the Company's net income for
the period.
INFLATION. Although at reduced levels in recent years, inflation
continues to apply upward pressure on the cost of goods and services used by the
Company. However, the Company believes that the net effect of inflation on its
operations was minimal during the first six months of fiscal 2000 and fiscal
1999. In addition, changes in the mix of products sold and the effect of
competition have made a comparison of changes in selling prices less meaningful
relative to changes in the overall rate of inflation during the first six months
of fiscal 2000 and fiscal 1999.
YEAR 2000 PROJECT. The Company utilizes computer technologies
throughout its business to effectively carry out its day-to-day operations.
Computer technologies include both information technology in the form of
hardware and software, as well as embedded technology in the Company's
facilities and equipment. Similar to other companies, the Company must determine
whether its systems are capable of recognizing and processing date-sensitive
information properly as the year 2000 approaches. The Company is utilizing a
multi-phased concurrent approach to address this issue. The phases included in
the Company's approach are the awareness, assessment, validation, remediation
and implementation phases. The Company has completed the awareness, assessment
and validation phases and has a few remaining tasks in the remediation and
implementation phases.
The costs associated with the project are not expected to exceed
$766,000 (of which approximately $699,000 had been incurred as of September 30,
1999), and are not deemed to materially impact the Company's consolidated
financial position, results of operations or cash flows in future periods. The
Company has scheduled the remediation and testing of the remaining software or
machinery tasks which are not Year 2000 ready in order to ensure the Company's
ability to continue to meet its internal needs and those of its customers and
suppliers.
The Company is finalizing formal communications with all of its
significant suppliers and critical business partners to determine year 2000
compliance of its dependents and has developed contingency plans to minimize
interruptions in business in the event a third party is unable to perform. An
interruption of the Company's ability to conduct its business due to a Year 2000
readiness problem could have a material adverse effect on the Company. The
Company is not presently aware of any such significant exposure, however, there
can be no guarantee that the systems of third parties on which the Company
relies will be converted in a timely manner or that a failure to properly
convert by another company would not have a material adverse effect on the
Company.
The Company presently believes that the most reasonably likely
worst-case scenarios that the Company might confront with respect to Year 2000
issues have to do with third parties not being Year 2000 compliant. The Company
is presently evaluating vendor and customer compliance and has developed
contingency plans after obtaining compliance evaluations.
Based upon the planning completed to date, the Company believes that,
with modifications to existing software, conversions to new software, and
appropriate remediation of embedded chip equipment, the Year 2000 issue is not
reasonably likely to pose significant operational problems for the Company's
information technology systems and embedded chip equipment as so modified and
converted.
The Company expects to complete the few remaining tasks in the
remediation and implementation phases of its Year 2000 compliance program by the
end of the calendar year. However, the costs and results of the Company's Year
2000 program and the extent of any impact on the Company's operations could vary
materially from those stated herein.
<PAGE>
PART II. OTHER INFORMATION
ITEM 2: CHANGE IN SECURITIES
On August 2, 1999, the Company issued 259,110 shares of Class A Common
Stock to UCB PHIP, Inc. ("UCB") in connection with the Company's
acquisition of the Precare(R) product line from UCB and UCB Pharma,
Inc. The shares were issued under the exemption from registration in
Section 4(2) of the Securities Act of 1933, as amended.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of Shareholders of the Company held July 1,
1999, the Shareholders re-elected Marc S. Hermelin to serve a
three-year term as a Class A Director. The vote tabulation was as
follows:
Votes in Favor 5,072,921
Votes Withheld 995
Abstentions 101,550
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
None.
<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: November 15, 1999 /s/ Marc S. Hermelin
----------------------- ------------------------------------------
Marc S. Hermelin
Vice Chairman of the Board and
Chief Executive Officer
Date: November 15, 1999 /s/ Gerald R. Mitchell
----------------------- ------------------------------------------
Gerald R. Mitchell
Vice President-Finance
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,602
<SECURITIES> 1,999
<RECEIVABLES> 25,089
<ALLOWANCES> 1,001
<INVENTORY> 28,085
<CURRENT-ASSETS> 59,336
<PP&E> 23,991
<DEPRECIATION> 0
<TOTAL-ASSETS> 130,632
<CURRENT-LIABILITIES> 24,596
<BONDS> 22,297
0
2
<COMMON> 188
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 130,632
<SALES> 68,805
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 32,225
<OTHER-EXPENSES> 23,420
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,084
<INCOME-PRETAX> 12,301
<INCOME-TAX> 4,674
<INCOME-CONTINUING> 7,627
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,627
<EPS-BASIC> .40
<EPS-DILUTED> .38
</TABLE>
