<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
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 #0-4829-03
NABI
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C>
DELAWARE 59-1212264
- --------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
</TABLE>
5800 PARK OF COMMERCE BOULEVARD N.W., BOCA RATON, FL 33487
---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (561) 989-5800
-------------------
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, and (2) has been subject to such filing requirements
for the past 90 days.
YES (X) NO ( )
The number of shares outstanding of registrant's common stock at August 10, 1998
was 34,897,420 shares.
<PAGE> 2
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
Nabi
[GRAPHIC OMITTED]
INDEX
-----
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS.............................................................................3
Consolidated Balance Sheets, June 30, 1998 and December 31, 1997..........................................3
Consolidated Statements of Operations for the three-month and six-month periods ended
June 30, 1998 and 1997...............................................................................4
Consolidated Statements of Cash Flows for the six-month periods ended
June 30, 1998 and 1997...............................................................................5
Notes to Consolidated Financial Statements................................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................................................9
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...............................................................................12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................13
10.30 Employment Agreement dated June 1, 1998 between
Thomas H. McLain and Nabi.................................................................. 15
10.31 Addendum to Employment Agreement dated August 19, 1996 between
David D. Muth and Nabi..................................................................... 22
27 Financial Data Schedule (for S.E.C. use only).............................................. 24
</TABLE>
2
<PAGE> 3
NABI
PART I Financial Information
Item 1 Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
-------------------------
(DOLLARS IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 1,802 $ 3,397
Trade accounts receivable, net 33,590 36,060
Inventories, net 36,552 43,387
Prepaid expenses and other assets 13,556 16,128
--------- ---------
Total current assets 85,500 98,972
Property and equipment, net 94,123 89,187
Other assets:
Excess of acquisition cost over net assets acquired, net 16,625 17,123
Intangible assets, net 7,565 8,104
Other, net 12,020 12,520
--------- ---------
TOTAL ASSETS $ 215,833 $ 225,906
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Trade accounts payable $ 9,966 $ 15,989
Accrued expenses 18,226 17,396
Notes payable 5,825 1,654
--------- ---------
TOTAL CURRENT LIABILITIES 34,017 35,039
NOTES PAYABLE 108,100 114,828
OTHER 384 376
--------- ---------
TOTAL LIABILITIES 142,501 150,243
--------- ---------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.10 per share:
5,000 shares authorized; no shares outstanding -- --
Common stock, par value $.10 per share: 75,000 shares authorized;
34,889 and 34,801 shares issued and outstanding, respectively 3,489 3,480
Capital in excess of par value 137,884 137,780
Accumulated deficit (67,412) (64,977)
Accumulated other comprehensive income (loss) (629) (620)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 73,332 75,663
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 215,833 $ 225,906
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE> 4
Nabi
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(UNAUDITED) (UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 61,178 $ 57,915 $ 119,792 $ 114,292
COSTS AND EXPENSES:
Costs of products sold 43,542 42,946 88,131 86,131
Selling, general and administrative expense 8,178 5,838 16,173 10,238
Research and development expense 5,621 4,045 10,388 7,843
Royalty expense 3,118 1,188 5,863 2,397
Other operating expense, principally
freight and amortization 577 686 1,159 1,620
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 142 3,212 (1,922) 6,063
INTEREST INCOME 3 27 12 212
INTEREST EXPENSE (1,401) (992) (3,177) (1,968)
OTHER, NET 187 (16) 47 (25)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE BENEFIT (PROVISION)
FOR INCOME TAXES (1,069) 2,231 (5,040) 4,282
BENEFIT (PROVISION) FOR INCOME TAXES 552 (218) 2,605 (919)
--------- --------- --------- ---------
NET INCOME (LOSS) ($ 517) $ 2,013 ($ 2,435) $ 3,363
========= ========= ========= =========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ($ 0.01) $ 0.06 ($ 0.07) $ 0.10
========= ========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE> 5
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
--------------------------
(DOLLARS IN THOUSANDS) 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ($ 2,435) $ 3,363
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 5,640 4,491
Provision for doubtful accounts (75) 35
Other 136 8
Deferred income taxes (2,605) --
Change in assets and liabilities:
Decrease (increase) in trade accounts receivable 2,544 295
Decrease (increase) in inventories 6,835 (13,679)
Decrease (increase) in prepaid expenses and other assets 5,178 149
Decrease (increase) in other assets 79 (3,408)
Increase (decrease) in accounts payable and accrued liabilities (5,194) (10,846)
-------- --------
Total adjustments 12,538 (22,955)
-------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 10,103 (19,592)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from maturity of short-term investments -- 8,850
Capital expenditures (9,227) (20,092)
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (9,227) (11,242)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowing (repayments) under line of credit, net (6,646) 13,700
Borrowings under term loan 5,000 --
Other debt (938) 3,600
Proceeds from the exercise of options and warrants 113 379
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (2,471) 17,679
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,595) (13,155)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,397 18,513
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,802 $ 5,358
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE> 6
NABI
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 GENERAL
Nabi is a fully integrated research and development driven biopharmaceutical
company that develops and commercializes products for the prevention and
treatment of infectious diseases and immunological disorders, and supplies
human-blood plasma.
The consolidated financial statements include the accounts of Nabi and its
subsidiaries. All significant intercompany accounts and transactions are
eliminated in consolidation. These statements should be read in conjunction with
the consolidated financial statements and notes thereto included in Nabi's
Annual Report to Stockholders for the year ended December 31, 1997.
In the opinion of management, the unaudited consolidated financial statements
include all adjustments necessary to present fairly Nabi's consolidated
financial position at June 30, 1998 and the consolidated results of its
operations for the three and six months ended June 30, 1998 and 1997. The
interim results of operations are not necessarily indicative of the results
which may occur for the fiscal year.
NOTE 2 INVENTORIES
The components of inventories, stated at the lower of cost (FIFO) or market, are
as follows:
JUNE 30, DECEMBER 31,
------------------------------------------
DOLLARS IN THOUSANDS 1998 1997
- -----------------------------------------------------------------------------
Finished goods $35,283 $40,029
Work in process 516 212
Raw materials 3,694 3,787
------------------ --------------------
39,493 44,028
Less: reserves (2,941) (641)
================== ====================
TOTAL $36,552 $43,387
================== ====================
6
<PAGE> 7
NOTE 3 PROPERTY AND EQUIPMENT
Property and equipment and related allowances for depreciation and amortization
are summarized below:
JUNE 30, DECEMBER 31,
------------------------------------
DOLLARS IN THOUSANDS 1998 1997
- --------------------------------------------------------------------------------
Information systems $19,934 $19,066
Leasehold improvements 19,535 18,077
Machinery and equipment 17,385 16,882
Land and buildings 8,722 8,634
Furniture and fixtures 4,884 4,568
Construction in progress 51,939 46,776
------------------ --------------
Total property and equipment 122,399 114,003
Less: accumulated depreciation and
amortization (28,276) (24,816)
================== ==============
TOTAL $94,123 $89,187
================== ==============
Construction in progress consists primarily of costs incurred in connection with
construction of Nabi's biopharmaceutical facility and includes capitalized
interest of $6,737 and $5,149 at June 30, 1998 and December 31, 1997,
respectively.
NOTE 4 EARNINGS PER SHARE
The following is a reconciliation between basic and diluted earnings per share
for the three and six months ending June 30, 1998 and 1997:
<TABLE>
<CAPTION>
EFFECT OF
BASIC DILUTIVE SECURITIES: DILUTED
EPS STOCK OPTIONS EPS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
THREE MONTHS ENDED JUNE 30, 1998
Net loss ($517) -- ($517)
Shares 34,889 -- 34,889 (1)
Per share ($0.01) ($0.01)
THREE MONTHS ENDED JUNE 30, 1997
Net income $2,013 -- $2,013
Shares 34,747 301 35,048
Per share $0.06 $0.06
- ---------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998
Net loss ($2,435) -- ($2,435)
Shares 34,870 -- 34,870 (1)
Per share ($0.07) ($0.07)
SIX MONTHS ENDED JUNE 30, 1997
Net income $3,363 -- $3,363
Shares 34,712 507 35,219
Per share $0.10 $0.10
===============================================================================================================
</TABLE>
(1) AT JUNE 30, 1998, STOCK OPTIONS FOR SHARES OF COMMON STOCK WERE NOT INCLUDED
IN THE CALCULATION OF DILUTED EARNINGS PER SHARE BECAUSE THE EFFECTS WERE
ANTI-DILUTIVE.
7
<PAGE> 8
NOTE 5 COMPREHENSIVE INCOME
Effective January 1, 1998, Nabi adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income" which establishes
new rules for the reporting of comprehensive income.
The components of comprehensive income for the three and six months ended June
30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------------ ------------------------------------
DOLLARS IN THOUSANDS 1998 1997 1998 1997
- ---------------------------------------------------------------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Net income (loss) ($517) $2,013 ($2,435) $3,363
Other comprehensive income (loss) 35 (56) (9) (392)
==================================== ================== =================
TOTAL ($482) $1,957 ($2,444) $2,971
==================================== ================== =================
</TABLE>
NOTE 6 RECENT PRONOUNCEMENTS
In April 1998, Statement of Position ("SOP") No. 98-5, "Reporting on the Costs
of Start-Up Activities" was issued. This SOP requires that all start-up or
pre-operating costs be expensed as incurred and is effective for fiscal years
beginning after December 15, 1998. Management believes that the adoption of the
SOP will not have a material impact on the financial statements.
NOTE 7 RECLASSIFICATIONS
Certain items in the consolidated financial statements for the 1997 period have
been reclassified for comparative purposes.
8
<PAGE> 9
ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the major factors contributing to
Nabi's financial condition and results of operations for the three and six month
periods ended June 30, 1998 and 1997. The discussion and analysis should be read
in conjunction with the condensed consolidated financial statements and notes
thereto. All dollar amounts are expressed in thousands, except per share
amounts.
RESULTS OF OPERATIONS
The following table sets forth Nabi's results of operations expressed as a
percentage of sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1998 1997 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales 100.0 % 100.0 % 100.0 % 100.0 %
Costs of products sold 71.2 % 74.2 % 73.6 % 75.4 %
------- ------- ------- -------
Gross profit margin 28.8 % 25.8 % 26.4 % 24.6 %
Selling, general and administrative expense 13.4 % 10.1 % 13.5 % 9.0 %
Research and development expense 9.2 % 7.0 % 8.7 % 6.8 %
Royalty expense 5.1 % 2.0 % 4.9 % 2.1 %
Other operating expense, principally
freight and amortization 0.9 % 1.2 % 0.9 % 1.4 %
------- ------- ------- -------
Operating income (loss) 0.2 % 5.5 % (1.6)% 5.3 %
Interest income 0.0 % 0.0 % 0.0 % 0.1 %
Interest expense (2.2)% (1.7)% (2.6)% (1.7)%
Other, net 0.3 % (0.0)% 0.0 % (0.0)%
------- ------- ------- -------
Income (loss) before benefit (provision)
for income taxes (1.7)% 3.8 % (4.2)% 3.7 %
Benefit (provision) for income taxes 0.9 % (0.3)% 2.2 % (0.8)%
------- ------- ------- -------
Net income (loss) (0.8)% 3.5 % (2.0)% 2.9 %
======= ======= ======= =======
</TABLE>
Information concerning Nabi's sales by operating segments for the respective
periods, is set forth in the following table:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
------------------------------------------------------------
DOLLARS IN THOUSANDS 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Segment
Plasma - Source $32,686 53.4% $34,923 60.3%
- Specialty 10,639 17.4% 14,296 24.7%
- Other (includes diagnostic products and services) 2,293 3.8% 1,113 1.9%
---------------------------- -------------- --------------
45,618 74.6% 50,332 86.9%
Drugs 15,560 25.4% 7,583 13.1%
============================ ============== ==============
TOTAL $61,178 100.0% $57,915 100.0%
============================ ============== ==============
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------
DOLLARS IN THOUSANDS 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Segment
Plasma - Source $66,694 55.7% $68,819 60.2%
- Specialty 21,339 17.8% 30,552 26.7%
- Other (includes diagnostic products and services 3,547 3.0% 2,430 2.1%
------------- -------------- -------------- --------------
91,580 76.5% 101,801 89.0%
Drugs 28,212 23.5% 12,491 11.0%
============= ============== ============== ==============
TOTAL $119,792 100.0% $114,292 100.0%
============= ============== ============== ==============
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
SALES. Sales for the second quarter of 1998 increased by $3.3 million to $61.2
million compared to $57.9 million for the second quarter of 1997. The increase
was primarily attributable to a substantial increase in the sales of drug
products based on a strong demand for all three of Nabi's marketed therapeutics.
This significant increase was partially offset by a decline in plasma product
sales.
GROSS PROFIT MARGIN. Gross profit and related margin for the second quarter of
1998 was $17.6 million, or 28.8% of sales, compared to $15 million, or 25.8% of
sales, in the second quarter of 1997. The increase in gross profit and related
margin resulted from increased sales of high-margin drug products, offset by the
effects of reduced margins on plasma product sales. Gross profits and related
margins on plasma product sales were adversely affected by under absorption of
fixed overhead as a result of reduced production levels in response to the
general disruption in the plasma industry as well as by certain expenses
associated with process improvement initiatives within plasma operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $8.2 million or 13.4% of sales for the second quarter of 1998
compared to $5.8 million, or 10.1% of sales, in the second quarter of 1997. The
increase resulted primarily from sales and marketing expenses associated with
increased drug product sales, costs associated with Nabi's restructuring
measures and expenses associated with the implementation and ongoing support of
new information systems.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $5.6
million, or 9.2% of sales, for the second quarter of 1998 compared to $4
million, or 7% of sales, in the second quarter of 1997. The increase in expense
related primarily to costs associated with the advancement of clinical trials
for Nabi-StaphVAX(TM) and Nabi-H-BIG(R).
INTEREST EXPENSE. Interest expense for the second quarter of 1998 was $1.4
million, or 2.2% of sales, compared to $1 million, or 1.7% of sales, in the
second quarter of 1997. The increase was primarily attributable to interest
expense associated with higher average outstanding borrowings in 1998 as
compared to 1997.
OTHER FACTORS. Benefit for income taxes was $0.6 million or an effective rate of
52%, in the second quarter of 1998 compared to a $0.2 million provision, or an
effective rate of 9.8%, in the second quarter of 1997. The effective tax rate
for the second quarter of 1998 differs from the statutory rate of 35% primarily
due to foreign losses, non-deductible goodwill and alternative minimum taxes.
The effective rate for the second quarter of 1997 reflects a cumulative
adjustment reducing the Company's expected effective tax rate for 1997,
principally due to foreign trade income and a reduction in tax reserves
established in prior periods.
10
<PAGE> 11
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
SALES. Sales for the first half of 1998 increased by $5.5 million to $119.8
million compared to $114.3 million for the first half of 1997. The increase was
primarily attributable to a substantial increase in the sales of drug products
based on a strong demand for all three of Nabi's marketed therapeutics. This
significant increase was partially offset by a decline in plasma product sales.
GROSS PROFIT MARGIN. Gross profit and related margin for the first half of 1998
was $31.7 million, or 26.4% of sales, compared to $28.2 million, or 24.6% of
sales, in the first half of 1997. The increase in gross profit and related
margin resulted from increased sales of high-margin drug products, offset by the
effects of reduced margins on plasma product sales. Gross profits and related
margins on plasma product sales were adversely affected by under absorption of
fixed overhead as a result of reduced production levels in response to the
general disruption in the plasma industry as well as by certain expenses
associated with process improvement initiatives within plasma operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $16.2 million, or 13.5% of sales, for the first half of 1998
compared to $10.2 million, or 9% of sales, in the first half of 1997. The
increase resulted primarily from sales and marketing expenses associated with
increased drug product sales, costs associated with Nabi's restructuring
measures and expenses associated with the implementation and ongoing support of
new information systems.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $10.4
million, or 8.7% of sales, for the first half of 1998 compared to $7.8 million,
or 6.8% of sales, in the first half of 1997. The increase in expenses related
primarily to costs associated with the advancement of clinical trials for
Nabi-H-BIG(R), Nabi-StaphVAX(TM) and Nabi-Altastaph(TM).
INTEREST EXPENSE. Interest expense for the first half of 1998 was $3.1 million,
or 2.6% of sales, compared to $2 million, or 1.7% of sales, in the first half of
1997. The increase was primarily attributable to interest expense associated
with higher average outstanding borrowings in the first half of 1998 when
compared to 1997.
OTHER FACTORS. Benefit for income taxes was $2.6 million or an effective rate of
52%, in the first half of 1998 compared to a $0.9 million provision, or an
effective rate of 21.5%, in the first half of 1997. The effective tax rate for
the first half of 1998 differs from the statutory rate of 35% primarily due to
foreign losses, non-deductible goodwill and alternative minimum taxes. The
effective tax rate for the first half of 1997 reflects a cumulative adjustment
reducing the Company's expected tax rate for 1997, principally due to foreign
trade income and a reduction in tax reserves established in prior periods.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, Nabi's credit agreement provided for a $45 million revolving
credit facility subject to certain borrowing base restrictions as defined in the
agreement which matures in September 2002, and a $5 million term loan due
March 1999. Borrowings under the agreement were $32.6 million and additional
availability was approximately $8.8 million at June 30, 1998. The credit
agreement is secured by substantially all of Nabi's assets, contains covenants
requiring the maintenance of certain financial covenants and prohibits the
payment of dividends.
As of June 30, 1998, Nabi's current assets exceeded current liabilities by $51.5
million as compared to a net working capital position of $63.9 million at
December 31, 1997.
Projected capital expenditures for 1998 include deferred validation costs,
including capitalized interest for manufacturing facilities, development of
information systems, and plasma center renovations. Nabi believes that cash flow
from operations and its available bank credit facilities will be sufficient to
meet its anticipated cash requirements for the remainder of 1998.
YEAR 2000
Nabi is conducting an assessment of the extent to which the Company's software,
equipment and other systems are Year 2000 compliant. This assessment is ongoing,
but at this time, based on the work to date, the Company has no reason to
believe either that its software, equipment and other systems is not Year 2000
compliant or that it will not be able to modify or replace, in a timely manner,
any software equipment or other system which, if not Year 2000 compliant, could
be expected to affect adversely the Company's delivery of products and related
services in a significant manner.
FACTORS TO BE CONSIDERED
The parts of this Quarterly Report on Form 10-Q captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Legal Proceedings" contain certain forward-looking statements which involve
risks and uncertainties. Readers should refer to a discussion under "Factors to
be Considered" contained in Nabi's Annual Report on Form 10-K for the year ended
December 31, 1997 concerning certain factors that could adversely affect Nabi's
future operating performance or cause Nabi's actual results to differ materially
from the results anticipated in such forward-looking statements, including in
particular the risks described under the caption, "Dependence Upon Third Parties
to Manufacture Products." Said discussion is hereby incorporated by reference
into this Quarterly Report.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nabi is a party to litigation in the ordinary course of business. There have
been no material developments in any of the legal proceedings reported in Nabi's
Annual Report on Form 10-K for the year ended December 31, 1997. Nabi does not
believe that any such litigation will have a material adverse effect on its
business, financial position or results of operations.
12
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matter was approved at Nabi's annual stockholders' meeting, which
was held on May 29, 1998:
a) Election of the following Board of Directors:
<TABLE>
<CAPTION>
VOTES
----------------------------------------------------
For Withheld
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
John C. Carlisle 30,975,386 315,561
David L. Castaldi 30,995,869 295,078
Joseph C. Cook, Jr. 30,995,536 295,411
Brian H. Dovey 30,996,482 294,465
George W. Ebright 30,991,368 299,579
David J. Gury 30,896,273 394,674
Richard A. Harvey, Jr. 30,987,610 303,337
Linda Jenckes 30,983,310 307,637
David A. Thompson 30,993,947 297,000
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
a. Exhibit
<S> <C> <C> <C>
10.30 Employment Agreement dated June 1, 1998 between
Thomas H. McLain and Nabi............................................................ 15
10.31 Addendum to Employment Agreement dated August 19, 1996 between
David D. Muth and Nabi............................................................... 22
27 Financial Data Schedule (for S.E.C. use only)........................................ 24
b. Reports on Form 8-K:
None
</TABLE>
13
<PAGE> 14
NABI
- --------------------------------------------------------------------------------
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.
NABI
Date: August 13, 1998 By: /s/ Thomas H. Mclain
-------------------------
THOMAS H. MCLAIN
Senior Vice President, Corporate Services and
Chief Financial Officer
14
<PAGE> 1
EXHIBIT 10.30
EMPLOYMENT AGREEMENT
DATED JUNE 1, 1998
BETWEEN
THOMAS H. MCLAIN AND NABI
<PAGE> 2
NABI
- --------------------------------------------------------------------------------
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FL 33487
EFFECTIVE AS OF JUNE 1, 1998
Mr. Thomas H. McLain
37 Fall Meadow Drive
Pittsford, New York 14534
Dear Tom:
You have agreed to serve as Senior Vice President Corporate Services and Chief
Financial Officer of Nabi. The following are the terms of such employment:
1. TERM: You will serve as Senior Vice President Corporate Services and Chief
Financial Officer of Nabi, for a period beginning as of the date hereof and
ending on May 30, 2001, unless your employment is sooner terminated as provided
below (the "Employment Period").
2. SALARY: Your salary will be $170,000.00 per year, payable bi-weekly during
the Employment Period. Your salary will be subject to discretionary annual
increases as determined by Nabi's Board of Directors.
3. BONUS: You will be entitled to participate in Nabi's VIP Management Incentive
Program.
Unless the Employment Period is terminated for "cause" pursuant to Section 7(B)
(b) below, bonus compensation shall be pro rated in respect of any calendar year
during which the Employment Period terminates based on the amount of bonus
compensation which would have been payable with respect to such year based on
your original VIP Management Incentive Program participation, divided by 12,
times the number of full calendar months during the relevant year you were
employed prior to the termination of the Employment Period. If the Employment
Period is terminated pursuant to Section 7 (B)(b) below, no bonus compensation
is payable with respect to the calendar year during which it is terminated.
Bonus payments shall be payable within 120 days after the end of the relevant
calendar year.
4. AUTO ALLOWANCE: You, while an employee under the terms of this Agreement,
shall receive an auto allowance of not less than $900.00 per month.
5. BENEFITS: You will be eligible to participate in Nabi's 401(k),
medical/dental insurance, life insurance, executive long term disability
program, Supplemental Executive Retirement Plan (SERP), and other benefit
programs upon the effective date of this Agreement. You will accrue Paid Leave
Bank (PLB) time at the rate of 15.33 hours per month.
<PAGE> 3
6. DUTIES AND EXTENT OF SERVICES:
(A) During the Employment Period, you agree to devote substantially all of your
working time, and such energy, knowledge, and efforts as is necessary to the
discharge and performance of your duties provided for in this Agreement and such
other reasonable duties and responsibilities consistent with your position as
are assigned to you from time to time by the person to whom you report. You
shall be located primarily in Nabi's Boca Raton, Florida, facilities, but shall
travel to other locations from time to time as shall be reasonably required in
the course of performance of your duties.
(B) During the Employment Period, you shall serve as Nabi's Senior Vice
President Corporate Services and Chief Financial Officer. You shall have such
duties as are delegated to you by the person to whom you report provided that
such duties shall be reasonably consistent with those duties assigned to
executive officers having similar titles in organizations comparable to Nabi.
7. TERMINATION:
(A) The Employment Period shall terminate upon your death. You may also
terminate the Employment Period upon 180 days' prior written notice to NABI. Any
termination pursuant to this Section 7(A) shall not affect any bonus
compensation applicable to the year of such termination, provided that any bonus
compensation payable pursuant to Section 3 of this Agreement shall be pro rated
as provided for in Section 3.
(B) Nabi may terminate the Employment Period in the event of (a) your disability
that prevents you from performing your obligations pursuant to this Agreement
for any three (3) consecutive months or (b) for "cause", which is defined as (i)
commission of fraud or embezzlement or other felonious acts by you, (ii) your
refusal to comply with reasonable directions in connection with the performance
of your duties as provided for in Section 6 of this Agreement after notice of
such failure is delivered to you, (iii) failure to comply with the provisions of
Section 8 or 9 of this Agreement or (iv) your gross negligence in connection
with the performance of your duties as provided for in this Agreement, which
gross negligence causes material damage to Nabi, provided that, in the event of
termination under this clause (B), you shall receive ten (10) days' notice of
such failure prior to termination and a determination must be made by Nabi's
Board of Directors or a duly appointed committee of the Board, after you are
afforded an opportunity to be heard, that it is, at the date of such
termination, reasonable to conclude that grounds for such termination under this
clause (B) still exists.
<PAGE> 4
(C) Nabi may otherwise terminate the Employment Period upon thirty (30) days'
prior notice to you. In the event of such termination based on the effective
date of such termination, Nabi will pay you severance pay of twelve (12) months
of your annual base salary as in effect at the time of such termination
("Severance Pay") and maintain in effect for a twelve (12) month period all then
existing benefits, (subject to the limitations of the applicable plans),
including but not limited to, the auto allowance, life insurance, short and long
term disability programs, health care coverages, and SERP benefits. Severance
Pay provided for in this paragraph shall be made in twelve (12) equal monthly
installments. If you terminate your employment with NABI within thirty (30) days
of the expiration of the Employment Period, you shall be entitled to receive
Severance Pay under Section 7C unless during the thirty (30) day period prior to
the expiration of the Employment Period, Nabi offered to renew this Agreement on
terms no less favorable to you than the terms then in effect.
(D) If your employment terminates pursuant to Section 7B(a) or Section 7C, all
non-vested stock options, restricted stock or similar incentive equity
instruments pursuant to the Company's 1990 Equity Incentive Plan and/or
successor plans (the "Options") shall immediately vest. All such "Options" shall
be exercisable for one (1) year past termination date, except that no "Options"
shall be exercisable beyond the original "Option" expiration date. To the extent
the terms of any "Options" are inconsistent with this Agreement, the terms of
this Agreement shall control.
(E) Your confidentiality and non-competition agreements set forth in Sections 8
and 9 below shall survive the termination of your employment regardless of the
reasons therefor.
8. CONFIDENTIALITY: You acknowledge that your duties as described in Section 6
of this Agreement will give you access to trade secrets and other confidential
information of Nabi and/or its affiliates, including but not limited to
information concerning production and marketing of their respective products,
customer lists, and other information relating to their present or future
operations (all of the foregoing, whether or not it qualifies as a "trade
secret" under applicable law, is collectively called "Confidential
Information"). You recognize that Confidential Information is proprietary to
each such entity and gives each of them significant competitive advantage.
<PAGE> 5
Accordingly, you shall not use or disclose any of the Confidential Information
during or after the Employment Period, except for the sole and exclusive benefit
of the relevant company. Upon any termination of the Employment Period, you will
return to the relevant company's office all documents, computer tapes, and other
tangible embodiments of any Confidential Information. You agree that Nabi would
be irreparably injured by any breach of your confidentiality agreement, that
such injury would not be adequately compensable by monetary damages, and that,
accordingly, the offended company may specifically enforce the provisions of
this Section by injunction or similar remedy by any court of competent
jurisdiction without affecting any claim for damages.
9. NON-COMPETITION:
(A) You acknowledge that your services to be rendered are of a special and
unusual character and have a unique value to Nabi the loss of which cannot
adequately be compensated by damages in an action at law. In view of the unique
value of the services, and because of the Confidential Information to be
obtained by or disclosed to you, and as a material inducement to Nabi to enter
into this Agreement and to pay to you the compensation referred to above and
other consideration provided, you covenant and agree that you will not, during
the term of your employment by Nabi and for a period of one (1) year after
termination of such employment for any reason whatsoever, you will not, directly
or indirectly, (a) engage or become interested, as owner, employee, consultant,
partner, through stock ownership (except ownership of less than five percent of
any class of securities which are publicly traded), investment of capital,
lending of money or property, rendering of services, or otherwise, either alone
or in association with others, in the operations, management or supervision of
any type of business or enterprise engaged in any business which is competitive
with any business of Nabi (a "Competitive Business"), (b) solicit or accept
orders from any current or past customer of Nabi for products or services
offered or sold by, or competitive with products or services offered or sold by,
Nabi, (c) induce or attempt to induce any such customer to reduce such
customer's purchase of products or services from Nabi, (d) disclose or use for
the benefit of any Competitive Business the name and/or requirements of any such
customer or (e) solicit any of Nabi's employees to leave the employ of Nabi or
hire or negotiate for the employment of any employee of Nabi.
(B) You have carefully read and considered the provisions of this Section and
Section 8 and having done so, agree that the restrictions set forth (including
but not limited to the time period of restriction and the world wide areas of
restriction) are fair and reasonable (even if termination is at our request and
without cause) and are reasonably required for the protection of the interest of
Nabi, its officers, directors, and other employees. You acknowledge that upon
termination of this Agreement for any reason, it may be necessary for you to
relocate to another area, and you agree that this restriction is fair and
reasonable and is reasonably required for the protection of the interests of
Nabi, its officers, directors, and other employees.
<PAGE> 6
(C) In the event that, notwithstanding the foregoing, any of the provisions of
this Section or Section 8 shall be held to be invalid or unenforceable, the
remaining provisions thereof shall nevertheless continue to be valid and
enforceable as though invalid or unenforceable parts had not been included
therein. In the event that any provision of this Section relating to time period
and/or areas of restriction shall be declared by a court of competent
jurisdiction to exceed the maximum time period or areas such court deems
reasonable and enforceable, said time period and/or areas of restriction shall
be deemed to become, and thereafter be, the maximum time period and/or area
which such court deems reasonable and enforceable.
(D) With respect to the provisions of this Section, you agree that damages, by
themselves, are an inadequate remedy at law, that a material breach of the
provisions of this Section would cause irreparable injury to the aggrieved
party, and that provisions of this Section 9 may be specifically enforced by
injunction or similar remedy in any court of competent jurisdiction without
affecting any claim for damages.
10. MISCELLANEOUS: This Agreement and the rights and obligations of the parties
pursuant to it and any other instruments or documents issued pursuant to it
shall be construed, interpreted and enforced in accordance with the laws of the
State of Florida, exclusive of its choice-of-law principles. This Agreement
shall be binding upon and inure to the benefit of the parties hereto, and their
respective successors and assigns. The provisions of this Agreement shall be
severable and the illegality, unenforceability or invalidity of any provision of
this Agreement shall not affect or impair the remaining provisions hereof, and
each provision of this Agreement shall be construed to be valid and enforceable
to the full extent permitted by law. In any suit, action or proceeding arising
out of or in connection with this Agreement, the prevailing party shall be
entitled to receive an award of the reasonable related amount of attorneys' fees
and disbursements incurred by such party, including fees and disbursements on
appeal. This Agreement is a complete expression of all agreements of the parties
relating to the subject matter hereof, and all prior or contemporaneous oral or
written understandings or agreements shall be null and void except to the extent
set forth in this Agreement.
This Agreement cannot be amended orally, or by any course of conduct or dealing,
but only by a written agreement signed by the party to be charged therewith. All
notices required and allowed hereunder shall be in writing, and shall be deemed
given upon deposit in the Certified Mail, Return Receipt Requested, first-class
postage and registration fees prepaid, and correctly addressed to the party for
whom intended at its address set forth under its name below, or to such other
address as has been most recently specified by a party by one or more
counterparts, each of which shall constitute one and the same agreement. All
references to genders or number in this Agreement shall be deemed
interchangeably to have a masculine, feminine, neuter, singular or plural
meaning, as the sense of the context required.
<PAGE> 7
If the foregoing confirms your understanding of our agreements, please so
indicate by signing in the space provided below and returning a signed copy to
us.
NABI
5800 Park of Commerce Boulevard, N.W.
Boca Raton, Florida 33487
BY: /s/ David J. Gury
--------------------------------
David J. Gury
Chief Executive Officer
Accepted and agreed:
/s/ Thomas H. Mclain
- -----------------------------
Thomas H. McLain
37 Fall Meadow Drive
Pittsford, New York 14534
<PAGE> 1
EXHIBIT 10.31
ADDENDUM
TO
EMPLOYMENT AGREEMENT
DATED AUGUST 19, 1996
BETWEEN
DAVID D. MUTH AND NABI
<PAGE> 2
Nabi
- --------------------------------------------------------------------------------
5800 PARK OF COMMERCE BOULEVARD, N.W.
BOCA RATON, FL 33487
Addendum to Employee Agreement dated August 19, 1996
Mr. David D. Muth
Effective May 15, 1998, the above referenced Employee Agreement is hereby
amended as follows:
Section 7 (C) ".... Nabi will pay you severance pay of twelve (12)
months of your annual base salary..."
/s/ David D. Muth 5/18/98
- ------------------------------- -----------------------------
DAVID D. MUTH DATE
Approved:
/s/ David J. Gury 5/15/98
- ------------------------------- -----------------------------
DAVID J. GURY DATE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 (UNAUDITED) AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,802
<SECURITIES> 0
<RECEIVABLES> 33,590<F1>
<ALLOWANCES> 0
<INVENTORY> 36,552
<CURRENT-ASSETS> 85,500
<PP&E> 94,123<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 215,833
<CURRENT-LIABILITIES> 34,017
<BONDS> 108,100
0
0
<COMMON> 3,489
<OTHER-SE> 137,255
<TOTAL-LIABILITY-AND-EQUITY> 215,833
<SALES> 119,792
<TOTAL-REVENUES> 119,792
<CGS> 88,131
<TOTAL-COSTS> 88,131
<OTHER-EXPENSES> 33,583
<LOSS-PROVISION> 0<F2>
<INTEREST-EXPENSE> 3,177
<INCOME-PRETAX> (5,040)
<INCOME-TAX> (2,605)
<INCOME-CONTINUING> (2,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,435)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
<FN>
<F1>RECEIVABLES, INVENTORY, AND PP&E REPRESENT NET AMOUNTS.
<F2>LOSS PROVISION INCLUDED IN OTHER EXPENSES.
</FN>
</TABLE>
