Page 1 of 19
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
For quarter ended Commission file number 1-8593
June 30, 1997
Alpharma Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2095212
(State of Incorporation) (I.R.S. Employer Identification
No.)
One Executive Drive, Fort Lee, New Jersey 07024
(Address of principal executive offices) zip code
(201) 947-7774
(Registrant's Telephone Number Including Area Code)
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 requirements
for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of August 1, 1997:
Class A Common Stock, $.20 par value -- 13,576,675 shares;
Class B Common Stock, $.20 par value -- 9,500,000 shares.
ALPHARMA INC.
INDEX
______________
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet as of
June 30, 1997 and December 31, 1996 3
Consolidated Statement of Operations for the
Three and Six Months Ended June 30, 1997
and 1996 4
Consolidated Condensed Statement of Cash
Flows for the Six Months Ended June 30,
1997 and 1996 5
Notes to Consolidated Condensed Financial
Statements 6-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10-15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote
of Security Holders 16
Item 6. Exhibits and reports on Form 8-K 16
Signatures 17
Exhibit 11 - Computation of Earnings per Common Share 18-19
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
June 30,
1997 December 31,
(Unaudited) 1996
ASSETS
Current assets:
Cash and cash equivalents $ 10,505 $15,944
Accounts receivable, net 98,028 120,551
Inventories 127,645 123,585
Other 14,904 14,779
Total current assets 251,082 274,859
Property, plant and equipment, net 197,727 209,803
Intangible assets 113,389 119,918
Other assets and deferred charges 8,097 8,827
Total assets $570,295 $613,407
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,928 $ 4,966
Short-term debt 30,444 60,952
Accounts payable and accrued liabilities 72,599 88,288
Accrued and deferred income taxes 1,282 1,445
Total current liabilities 110,253 155,651
Long-term debt 226,070 233,781
Deferred income taxes 28,461 29,882
Other non-current liabilities 7,129 8,051
Stockholders' equity:
Class A Common Stock 2,770 2,762
Class B Common Stock 1,900 1,646
Additional paid-in-capital 142,862 122,252
Foreign currency translation
adjustment (1,753) 10,491
Retained earnings 58,708 54,996
Treasury stock, at cost (6,105) (6,105)
Total stockholders' equity 198,382 186,042
Total liabilities and
stockholders' equity $570,295 $613,407
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Total revenue $118,986 $121,219 $240,410 $249,029
Cost of sales 67,546 71,462 140,848 144,753
Gross profit 51,440 49,757 99,562 104,276
Selling, general and
administrative expenses 41,500 52,180 80,748 94,124
Operating income (loss) 9,940 (2,423) 18,814 10,152
Interest expense (4,490) (4,964) (9,332) (10,010)
Other income (expense),
net 130 128 (167) 304
Income(loss)before provision
for income taxes 5,580 (7,259) 9,315 446
Provision (benefit)
for income taxes 2,110 (2,757) 3,585 171
Net income (loss) $ 3,470 $ (4,502) $ 5,730 $ 275
Average common shares
outstanding:
Primary 21,868 22,045 21,824 22,232
Fully diluted 21,882 22,045 21,852 22,232
Earnings(loss)per common share:
Primary $ 0.16 $ (0.20) $ 0.26 $ 0.01
Fully diluted $ 0.16 $ (0.20) $ 0.26 $ 0.01
Dividends per common share $ 0.045 $ 0.045 $ 0.09 $ 0.09
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Six Months Ended
June 30,
1997 1996
Operating Activities:
Net income $ 5,730 $ 275
Adjustments to reconcile net
income to net cash provided
by operating activities, principally
depreciation and amortization 15,123 16,134
Non-current asset write-off - 4,316
Changes in assets and liabilities:
Decrease in accounts receivable 17,117 14,459
(Increase) in inventory (9,771) (6,145)
(Decrease) in accounts
payable and accrued expenses (11,810) (16,587)
Other, net 545 (4)
Net cash provided by
operating activities 16,934 12,448
Investing Activities:
Capital expenditures (11,697) (16,065)
Financing Activities:
Dividends paid (2,018) (1,965)
Net repayment under lines of credit (28,469) (1,609)
Proceeds from long-term debt 1,506 6,110
Reduction of long-term debt (2,031) (6,569)
Proceeds from issuance of common stock 20,872 926
Net cash used in
financing activities (10,140) (3,107)
Exchange Rate Changes:
Effect of exchange rate changes
on cash (1,270) (655)
Income tax effect of exchange rate
changes on intercompany advances 734 308
Net cash flows from exchange
rate changes (536) (347)
Decrease in Cash (5,439) (7,071)
Cash and cash equivalents at
beginning of year 15,944 18,351
Cash and cash equivalents at
end of period $10,505 $11,280
The accompanying notes are an integral part
of the consolidated condensed financial statements.
1. General
The accompanying consolidated condensed financial statements
include all adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, considered
necessary for a fair presentation of the results for the periods
presented. These financial statements should be read in
conjunction with the consolidated financial statements of
Alpharma Inc. and Subsidiaries included in the Company's 1996
Annual Report on Form 10-K. The reported results for the three
and six month periods ended June 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
2. Inventories
Inventories consist of the following:
June 30, December 31,
1997 1996
Finished product $71,925 $ 69,629
Work-in-process 20,884 17,126
Raw materials 34,836 36,830
$127,645 $123,585
3. Supplemental Cash Flow Information:
Six Months Ended
June 30, June 30,
1997 1996
Cash paid for interest $9,537 $9,864
Cash paid for taxes
(net of refunds) $(3,157) $5,746
4. 1996 Management Actions
In the first quarter of 1996, IPD severed approximately 30
sales, marketing, and other personnel based primarily in the
Nordic countries and incurred termination related costs of
approximately $1,900. The termination costs are included in
selling, general and administrative expenses.
In May 1996, the Board of Directors approved a production
rationalization plan which includes the transfer of all tablet,
ointment and liquid production from Copenhagen, Denmark to Lier,
Norway. The full transfer will be completed in 1998 and will
result in the reduction of approximately 175 employees (primarily
involved in production). The rationalization plan resulted in a
charge in the second quarter for severance for Copenhagen
employees, an impairment write-off for certain buildings and
machinery and equipment and other exit costs.
In addition in May 1996, the Board of Directors approved the
U.S. Pharmaceuticals Division ("USPD") plan to accelerate a
consolidation of manufacturing operations within USPD.
The plan included the discontinuing of all activities in two
USPD manufacturing facilities in New York and New Jersey and the
transfer of all pharmaceutical production from those sites to the
facility in Lincolnton, North Carolina. The plan provided for
complete exit by early 1997 and resulted in a reduction of
approximately 200 employees (i.e. all production, administration
and support personnel at the plants). The acceleration plan
resulted in a second quarter charge for severance of employees, a
write-off of leasehold improvements and machinery and equipment
and significant exit costs including estimated remaining lease
costs and refurbishment costs for the facilities being exited.
Due to the time necessary to achieve both transfers of
production the Company, as part of the severance arrangements,
has instituted stay bonus plans. The overall cost of the stay
bonus plans is estimated at $1,900, and is being accrued over the
periods necessary to achieve shut down and transfer. The stay
bonus plans generally require the employee remain until their
position is eliminated to earn the payment.
A summary of the 1996 second quarter charges and expenses
resulting from the approved plan which are included in selling
general and administrative expenses follows:
Pre-Tax
Amount Description
$4,400 Severance and employee termination benefits for
175 Copenhagen employees and 200 employees in the
United States. All employees were notified of the
plan after the approval by the Board in May 1996.
200 Stay bonus accrued, as earned.
4,300 Write-off of buildings, leasehold improvements and
machinery and equipment.
1,500 Accrual of the non cancelable term of the
operating leases and estimated refurbishment costs
for USPD facilities.
Exit costs for demolition of facilities, clean up
1,700 costs and other.
$12,100
5. Class B Common Stock Subscription and Planned Class A Rights
Offering
On February 10, 1997, the Company entered into a Stock
Subscription and Purchase Agreement with A.L. Industrier AS. A.L.
Industrier AS is the beneficial owner of all issued and
outstanding shares of the Company's Class B Common stock and is
able to control the Company through its ability to elect more
than a majority of the Board of Directors and to cast a majority
of the votes in any vote of the Company's stockholders. The
agreement provided for the sale of 1,273,438 newly issued shares
of Class B Common stock for $16.34 per share. The shares of Class
B Common stock are convertible on a share for share basis into
shares of the Company's Class A Common stock. The agreement also
provided for the issuance of rights to the Class A shareholders
to purchase one share of Class A Common stock for $16.34 per
share for every six shares of Class A Common held. The Class A
rights distribution will be made with a prospectus. The final
details, terms and conditions have not been finalized, however,
they are expected to be transferable and have a term expiring on
November 25, 1997. The agreement required that the Class B shares
be purchased at the same time that the rights for the Class A
Common stock would expire and total consideration for the Class B
Common stock was agreed to be $20,808.
On June 26, 1997, the Company and A.L. Industrier entered
into Amendment No. 1 to the Subscription and Purchase Agreement
whereby A.L. Industrier agreed to purchase the 1,273,438 Class B
shares on June 27, 1997. The amendment provided that A.L.
Industrier pay the original agreed consideration and receive no
later than November 30, 1997 an early pay amount estimated to be
approximately $428. The early payment amount recognizes the
benefit to the Company in the A.L. Industrier purchase of the
stock on June 27, 1997 instead of November 25, 1997. The sale of
stock was completed for cash on June 27, 1997. Accordingly, at
June 30, 1997 stockholders' equity has increased by $20,380 to
reflect the issuance of the Class B shares. A.L. Industrier AS is
now the beneficial owner of 9,500,000 shares of Class B Common
stock.
In addition, upon issuance of the Class A rights, the
exercise price of the 3,600,000 warrants outstanding ($21.945 per
share) will be adjusted pursuant to the warrant agreement.
6. Long-term Debt
On April 10, 1997, the existing credit facility was amended
to increase the available credit from $170,000 to $180,000. At
June 30, 1997, the Company had $163,150 outstanding under the
facility.
7. Recent Accounting Pronouncements
In February 1997, Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share", was issued
which established standards for computing and presenting earnings
per share. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, including
interim periods.
The Company has evaluated the effect of this new
pronouncement on earnings per share and believes that adoption of
SFAS No. 128 would not have a material impact on reported
earnings per share for the periods ended June 30, 1997 and 1996.
In June 1997 SFAS No. 130, "Reporting Comprehensive Income,"
was issued and established standards for reporting and display of
comprehensive income and its components (revenues, expenses,
gains, and losses) in the financial statements. This Statement
requires that all items that are recognized under accounting
standards and components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as
other financial statements. SFAS No. 130 addresses disclosure
issues; and, therefore, will not have any effect on the financial
position or results of operations of the Company. The Company is
in the process of evaluating the statement's implementation. This
statement is effective for fiscal years beginning after
December 15, 1997.
Also in June 1997 the FASB issued Statement 131,
"Disclosures About Segments of an Enterprise and Related
Information." This Statement, which supersedes Statement 14,
"Financial Reporting for Segments of a Business Enterprise,"
changes the way public companies report information about
segments by moving to the management approach to segment
reporting. In addition, the statement has requirements relating
to disclosure of products, services, customers, and the material
countries in which the entity holds assets and reports revenues.
As with SFAS No. 130 this statement addresses disclosure issues
and therefore will not have an effect in the Company's financial
position or results of operations. The Statement is effective for
periods beginning after December 15, 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - Six Months Ended June 30, 1997
Total revenue decreased $8.6 million (3.5%) in the six
months ended June 30, 1997 compared to 1996. Operating income in
1997 was $18.8 million, an increase of $8.7 million, compared to
1996. Net income was $5.7 million ($.26 per share fully diluted)
compared to $.3 million ($.01 per share fully diluted) in 1996.
Net income in 1996 is reduced by approximately $8.7 million ($.39
per share) for severance incurred in the first quarter related to
the reorganization of the International Pharmaceuticals Division
("IPD") sales and marketing function in the Nordic countries and
for charges and expenses resulting from production
rationalization plans in the IPD and the U.S. Pharmaceuticals
Division ("USPD") in the second quarter. (See section "1996
Management Actions.")
Revenues increased in the Animal Health Segment and
decreased in the Human Pharmaceuticals Segment. Overall revenues
were approximately $6.0 million lower due to translation of sales
in foreign currency into the U.S. dollar.
Revenues in the Human Pharmaceutical Segment ("HPS") were
lower than 1996 and accounted for the consolidated revenue
decline. Revenues declined in the USPD as a result of reductions
in net prices due to a fundamental shift in generic
pharmaceutical industry distribution, purchasing and stocking
patterns while overall volume was approximately equal to 1996.
(See "U.S. Generic Pharmaceutical Industry".) In the IPD revenues
were lower as a result primarily of the effect of translation of
sales in Scandinavian currencies into the U.S. dollar. For the
first six months of 1997 average exchange rates for Scandinavian
currencies where IPD conducts a substantial portion of its
business have declined by approximately 6%-11% compared to the
comparable period in 1996. Sales of Fine Chemicals increased due
principally higher volume.
Within the Animal Health Segment, Animal Health Division
revenues increased primarily due to increased volume of most
major products including BMDr within the poultry, swine and
international markets. Aquatic Animal Health division revenues
increased compared to 1996 due to increased sales in the
Norwegian fish vaccine market.
On a consolidated basis, gross profit decreased $4.7 million
and the gross margin percent decreased to 41.4 % in 1997 compared
to 41.9% in 1996.
The decrease resulted from lower net sales prices in the
USPD which directly lowered margins offset only partially by
lower overall manufacturing expenses resulting from the
production rationalization plan which consolidated USPD
production in two locations. IPD experienced lower gross profits
and margins due mainly to translation effects. Animal Health had
higher gross profits and margins due to increased volume of most
products including BMD offsetting lower prices in certain
markets.
Operating expenses on a consolidated basis decreased $13.4
million or 14.2%. Included in operating expenses in 1996 are
charges incurred in the first quarter for severance of $1.9
million relating to the reorganization of the sales and marketing
function for IPD in the Nordic countries. In the second quarter
of 1996 charges and expenses of $12.1 million were incurred in
connection with production rationalization plans implemented by
IPD and USPD. Without the charges and expenses totaling $14.0
million, expenses were approximately $80.1 million in 1996
compared to $80.7 million in 1997. The minor growth reflects a
continued emphasis on cost control, a reduction of expenses
resulting from prior year management actions which reduced
payroll and translation effects on expenses incurred in foreign
currencies offset by planned increases in certain expenses and
increases in administrative expenses resulting from personnel
changes and employee incentive programs.
Operating income as reported increased $8.7 million as a
result of decreased gross profit in dollars being completely
offset by lower operating expenses.
Interest expense decreased $.7 million due to lower debt
levels and generally lower interest rates in 1997.
Other, net in 1997 was a $.2 million loss compared to $.3
million income in 1996. Foreign exchange transaction losses
included in other, net in 1997 and 1996 were approximately $.4
million and $.1 million, respectively. The loss in 1997 was
primarily the result of the strengthening of the U.S. dollar in
the first half of 1997.
Results of Operations - Three Months Ended June 30, 1997
Total revenue decreased $2.2 million (1.8%) in three months
ended June 30, 1997 compared to 1996. Operating income was $9.9
million in 1997 compared to a loss of $2.4 million in 1996. Net
income in 1997 was $3.5 million ($.16 per share) compared to a
loss of $4.5 million ($.20 loss per share). The net loss in 1996
is the result of charges and expenses of approximately $.34 per
share, due to the approval and commencement of plans for
production rationalization by IPD and USPD in the second quarter.
(See section "1996 Management Actions.")
Revenues decreased in the Human Pharmaceuticals Segment and
increased in the Animal Health Segment. Overall revenues were
approximately $3.0 million lower due to translation of sales in
foreign currency into the U.S. dollar.
Revenues in the Human Pharmaceuticals Segment declined
primarily due to lower USPD sales. USPD revenues were adversely
affected by lower prices and volumes resulting from the
fundamental shift in generic industry distribution, purchasing
and stocking patterns which commenced in the third quarter of
1996. (i.e. The second quarter of 1996 was prior to the change in
the industry. See "U.S. Generic Pharmaceutical Industry.") IPD
sales were marginally lower as increased volume for current and
new products was offset by the translation effects of a
strengthening U.S. dollar. Fine Chemicals sales increased due to
increased sales volume.
Within the Animal Health Segment, Animal Health Division
("AHD") revenues increased due to sales volume of BMDr and other
feed additives offset in part by some price erosion. In the
second quarter of 1996, the AHD was negatively impacted by higher
U.S. grain prices which lowered use and prices of feed additives
particularly to the U.S. poultry market. In 1997 grain prices
have returned to more normal levels.
On a consolidated basis, gross profit increased $1.7 million
and the gross margin percent increased to 43.2% in 1997 compared
to 41.0% in 1996. The increase resulted from increased volume of
sales in the higher margin Animal Health Segment and increased
gross margin percent for USPD where price and volume declines
were offset by cost reductions resulting mainly from production
rationalizations which were implemented in 1996.
Operating expenses on a consolidated basis decreased $10.7
million. Included in operating expenses in 1996 are charges and
expenses of $12.1 million relating to the production
rationalization approved for IPD and USPD. Without the charges
for production rationalization, expenses increased by $1.4
million. The increase reflects additional selling and marketing
and administrative expenses for 1997 employee incentive programs
and additional expenses incurred for personnel changes offset by
a continued emphasis on cost control, a reduction of expenses
resulting from prior year management actions which reduced
payroll and translation effects of expenses incurred in foreign
currencies.
As a result of increased gross profits and the absence of
charges for management actions, 1997 operating income was $9.9
million compared to a $2.4 million operating loss in 1996.
Interest expense decreased $.5 million due to generally
lower interest rates in 1997 and to a lesser extent decreased
average debt levels in 1997.
1996 Management Actions
Selling and Marketing Reorganization
In the first quarter of 1996 IPD reorganized its sales and
marketing organization in the Nordic countries and severed
approximately 30 personnel at a cost of $1.9 million. IPD
estimates the annual expense reduction by 1997 from this action
at over $1.0 million.
Production Rationalization
In May 1996, the Board of Directions approved a production
rationalization plan which includes the transfer of all tablet,
ointment and liquid production from Copenhagen, Denmark to Lier,
Norway. The full transfer will be completed in 1998 and will
result in the net reduction of approximately 100 employees. The
rationalization plan resulted in a charge in the second quarter
for severance for Copenhagen employees, write-off for certain
buildings and machinery and equipment and other exit costs.
In May 1996, the Board of Directors approved the
acceleration of a plan by USPD to move all suppositories and
cream and ointment production from two present locations to the
Lincolnton, N.C. location.
The acceleration plan included the discontinuing of all
activities in two USPD manufacturing facilities in New York and
New Jersey and the transfer of all pharmaceutical production from
those sites to the facility in Lincolnton, North Carolina. The
plan provided for complete exit by early 1997 and resulted in a
net reduction of over 150 employees. The acceleration plan
resulted in a second quarter of charge for severance of
employees, a write-off for leasehold improvements and machinery
and equipment and significant exit costs including estimated
remaining lease costs and facility refurbishment costs.
Because of the time necessary to complete the transfers, the
production rationalization plans included stay bonus plans to
keep the production work force in tact until the transfer is
complete. The stay bonus plans generally require the employee
remain until their position is eliminated to earn a payment. The
overall cost of these plans is estimated at $1.9 million and is
being accrued over the periods necessary to achieve the shut
downs.
The production rationalization plans required charges and
expenses in the second quarter of $12.1 million which includes
$4.4 million for severance, $4.3 million for facilities write-
offs, $1.5 million for lease and refurbishment costs, $1.7
million for other exit costs and $.2 million for accrued stay
bonus.
The production rationalization plans have begun to benefit
operations in 1997 for USPD and are expected to benefit
operations beginning in the second half of 1998 for IPD.
The Company believes the dynamic nature of its business may
present additional opportunities to rationalize personnel
functions and operations to increase efficiency and
profitability. Accordingly, similar management actions may be
considered in the future.
U.S. Generic Pharmaceutical Industry
The U.S. Generic Pharmaceutical industry has historically
been characterized by intense competition which is evidenced by
eroding prices for products as additional market participants
receive approvals for these products. Growth has historically
occurred through new product approvals and subsequent sales
exceeding declines in the base product line due to price
reductions and/or volume decreases. Generic pharmaceutical market
conditions were further exacerbated in the second half of 1996 by
a rapidly emerging fundamental shift in industry distribution,
purchasing and stocking patterns. The shift resulted in a
substantial drop in the USPD's 1996 volume and in particular to
generic drug distributors who represent an important but
declining part of the Company's base business. Programs initiated
by major wholesalers accelerated the changes and forced prices to
decline. Wholesaler programs generally require lower prices on
products sold, lower inventory levels kept at the wholesaler and
fewer manufacturers selected to provide products to the
wholesalers. The USPD was affected by lower sales as distributors
reduced business and as wholesalers reduced inventories and
prices. The Company has made agreements with major wholesalers to
provide product but cannot predict the effect on future volume
and prices. USPD has been and will continue to be affected by the
competitive and changing nature of this industry. Accordingly,
because of competition, the significance of relatively few major
customers (i.e. large wholesalers, distributors and chain
stores), a rapidly changing market and uncertainty of timing of
new product approvals, USPD sales volume and prices are subject
to unforeseen fluctuation. The generic industry in general is
subject to similar fluctuations.
In the first quarter of 1997 the USPD's volume increased
relative to 1996 with increases in wholesaler volume being only
partially offset by declines in volume to distributors and other
accounts overall. Prices declined substantially relative to the
first quarter of 1996 but appear to have declined marginally
relative to the second half of 1996. As a result of the effects
of lower pricing the USPD had an operating loss in the first
quarter of 1997.
In the second quarter of 1997 USPD volume decreased relative
to 1996 with an increase in wholesaler volume being completely
offset by overall declines in volume to drug chains and
distributors compared to 1996. Prices have declined substantially
compared to the second quarter of 1996, but have stabilized
relative to the second half of 1996 and the first quarter of
1997. There is however, continued pressure on pricing by major
customers. The stabilization of pricing and lower manufacturing
costs resulted in USPD achieving an operating profit in the
second quarter although on a year to date basis USPD has incurred
an operating loss.
European Operations
The fluctuations of European currencies have and will
continue to impact the Company's European operations which
comprise approximately 45% of total revenues. In addition, many
European governments have enacted or are in the process of
enacting mechanisms aimed at lowering the cost of
pharmaceuticals. Currency fluctuations and governmental actions
to reduce or not allow increases of prices have affected revenue.
The Company cannot predict future currency fluctuations or future
governmental pricing actions or their impact on the Company's
results.
Financial Condition
Working capital at June 30, 1997 was $140.8 million
compared to $119.2 million at December 31, 1996. The current
ratio was 2.27:1 at June 30, 1997 compared to 1.77:1 at year end.
Long-term debt to stockholders' equity was 1.14:1 at June 30,
1997 compared to 1.26:1 at December 31, 1996.
The improvement in the ratios relative to December 31, 1996,
is primarily the result of the sale in June 1997 of approximately
1.3 million shares of Class B Common stock for approximately
$20.4 million. The proceeds of the sale were used to repay short
term debt. At June 30, 1997, short term debt was $30.4 million
compared to $61.0 million at December 31, 1996.
The Company's Class B Common stock was sold to the Company's
principal shareholder, A.L. Industrier AS pursuant to an amended
agreement. The agreement also provided for the issuance of rights
to the Class A shareholders to purchase one share of Class A
Common stock for $16.34 per share for every six shares of Class A
Common held. The Class A rights distribution will be made with a
prospectus. The final details, terms and conditions have not been
finalized, however, they are expected to be transferable and have
a term expiring on November 25, 1997. The Company cannot predict
whether the rights will be exercised, however, if all rights are
exercised the Company will receive proceeds of approximately
$37.0 million.
Most balance sheet captions decreased as of June 30, 1997
compared to December 1996 in U.S. Dollars as the functional
currencies of the Company's principal foreign subsidiaries, the
Norwegian Krone and Danish Krone, depreciated versus the U.S.
Dollar in the six months of 1997 by approximately 12% and 13%,
respectively. The decreases do impact to some degree the above
mentioned ratios. The approximate decrease due to currency
translation of selected captions was: accounts receivable $5.5
million, inventories $5.8 million, accounts payable and accrued
expenses $3.7 million, long term debt $6.2 million, and total
stockholders' equity $12.2 million.
___________
Statements made in this Form 10Q, are forward-looking statements
made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. Such statements involve certain
risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements.
Information on other significant potential risks and
uncertainties not discussed herein may be found in the Company's
filings with the Securities and Exchange Commission including its
Form 10K for the year ended December 31, 1996.
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Alpharma Inc. annual meeting was held on May 28, 1997.
(b) Proxies were solicited by Alpharma Inc. and there was no
solicitation in opposition to the nominees listed in the proxy
statement. All such nominees were elected to the classes
indicated in the proxy statement pursuant to the vote of the
stockholders as follows:
Votes
Class A Directors For Withheld
Thomas G. Gibian 11,997,243 685,794
Peter G. Tombros 11,998,243 684,794
Class B Directors
I. Roy Cohen 32,906,248 0
Glen E. Hess 32,906,248 0
Gert W. Munthe 32,906,248 0
Einar W. Sissener 32,906,248 0
Erik G. Tandberg 32,906,248 0
(c) An Amendment to the Company's 1983 Incentive Stock Option
Plan was approved by a vote of:
For 41,482,470
Against 3,054,570
Abstain 34,088
No Vote 1,018,157
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11. Computation of Earnings per Common Share for the three
and six months ended June 30, 1997 and 1996.
(b) Reports on Form 8-K
On July 3, 1997, the Company filed a report on Form 8-K
dated June 27, 1997 reporting Item 9. "Sales of Equity Securities
pursuant to Regulation S".
The event reported was an amendment to the Stock
Subscription Agreement signed with A.L. Industrier and the sale
of 1,273,438 shares of Class B Common stock to A.L. Industrier on
June 27, 1997.
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.
Alpharma Inc.
(Registrant)
Date: August 8, 1997 /s/ Jeffrey E. Smith
Jeffrey E. Smith
Vice President, Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 10505
<SECURITIES> 0
<RECEIVABLES> 98028
<ALLOWANCES> 0
<INVENTORY> 127645
<CURRENT-ASSETS> 251082
<PP&E> 339880
<DEPRECIATION> 142153
<TOTAL-ASSETS> 570295
<CURRENT-LIABILITIES> 110253
<BONDS> 226070
0
0
<COMMON> 4670
<OTHER-SE> 193712
<TOTAL-LIABILITY-AND-EQUITY> 570295
<SALES> 240410
<TOTAL-REVENUES> 240410
<CGS> 140848
<TOTAL-COSTS> 140848
<OTHER-EXPENSES> 80748
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9332
<INCOME-PRETAX> 9315
<INCOME-TAX> 3585
<INCOME-CONTINUING> 5730
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5730
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
Exhibit 11
ALPHARMA INC.
Computation of Earnings per Common Share
Primary and Fully Diluted
(Dollars in thousands, except for per share data)
Six Months Ended
June 30,
1997 1996
Computation for Statement of Income
Primary earnings per share:
Net income $ 5,730 $ 275
Average common shares outstanding 21,796,000 21,697,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method - 379,000
Dilutive effect of outstanding
options determined by treasury
stock method 28,000 156,420
21,824,000 22,232,420
Earnings per common share - Primary $0.26 $0.01
Fully diluted earnings per share:
Net income $ 5,730 $ 275
Average common shares outstanding 21,796,000 21,697,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method - 379,000
Dilutive effect of outstanding
options determined by treasury
stock method 56,000 156,420
21,852,000 22,232,420
Earnings per common share - Fully diluted $0.26 $0.01
Exhibit 11
ALPHARMA INC.
Computation of Earnings per Common Share
Primary and Fully Diluted
(Dollars in thousands, except for per share data)
Three Months Ended
June 30,
1997 1996
Computation for Statement of Income
Primary earnings per share:
Net income (loss) $ 3,470 $ (4,502)
Average common shares outstanding 21,826,000 21,708,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method - 200,000
Dilutive effect of outstanding
options determined by treasury
stock method 42,000 136,975
21,868,000 22,044,975
Earnings (loss) per common share - Primary $0.16 $(0.20)
Fully diluted earnings per share:
Net income (loss) $ 3,470 $ (4,502)
Average common shares outstanding 21,826,000 21,708,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method - 200,000
Dilutive effect of outstanding
options determined by treasury
stock method 56,000 136,975
21,882,000 22,044,975
Earnings (loss) per common share -
Fully diluted $0.16 $(0.20)
