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UNITED STATES
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
September 30, 1998
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 October 23, 1998.
Class A Common Stock, $.20 par value - 15,988,433 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
September 30, 1998 and December 31, 1997 3
Consolidated Statement of Income for the
Three and Nine Months Ended September 30,
1998 and 1997 4
Consolidated Condensed Statement of Cash
Flows for the Nine Months Ended September 30,
1998 and 1997 5
Notes to Consolidated Condensed Financial
Statements 6-12
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13-22
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 23
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
(Unaudited)
September 30, December 31,
1998 1997
ASSETS
Current assets:
Cash and cash equivalents $ 15,853 $ 10,997
Accounts receivable, net 151,400 127,637
Inventories 140,077 121,451
Other 13,070 13,592
Total current assets 320,400 273,677
Property, plant and equipment, net 238,013 199,560
Intangible assets 307,680 149,816
Other assets and deferred charges 12,770 8,813
Total assets $878,863 $631,866
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,180 $ 10,872
Short-term debt 16,552 39,066
Accounts payable and accrued
liabilities 100,999 78,798
Accrued and deferred income taxes 19,173 5,190
Total current liabilities 142,904 133,926
Long-term debt:
Senior 244,838 223,975
Convertible subordinated notes 192,850 -
Deferred income taxes 29,925 26,360
Other non-current liabilities 9,284 9,132
Stockholders' equity:
Class A Common Stock 3,252 3,224
Class B Common Stock 1,900 1,900
Additional paid-in-capital 182,290 179,636
Accumulated other comprehensive
loss (2,293) (8,375)
Retained earnings 80,031 68,206
Treasury stock, at cost (6,118) (6,118)
Total stockholders' equity 259,062 238,473
Total liabilities and
stockholders' equity $878,863 $631,866
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ALPHARMA INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
Total revenue $164,337 $125,240 $430,412 $365,650
Cost of sales 97,642 73,681 251,138 214,529
Gross profit 66,695 51,559 179,274 151,121
Selling, general and
administrative expense 46,801 38,577 134,634 119,325
Operating income 19,894 12,982 44,640 31,796
Interest expense (7,454) (4,303) (18,433) (13,635)
Other income (expense), (377) (271) (195) (438)
net
Income before provision for
income taxes 12,063 8,408 26,012 17,723
Provision for income 4,512 3,151 10,754 6,736
taxes
Net income $ 7,551 $ 5,257 $ 15,258 $ 10,987
Earnings per common share:
Basic $ .30 $ .23 $ .60 $ .50
Diluted $ .28 $ .22 $ .59 $ .49
Dividends per common share $ .045 $ .045 $ .135 $ .135
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)
Nine Months Ended
September 30,
1998 1997
Operating Activities:
Net income $ 15,258 $ 10,987
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 27,250 22,713
Purchased in-process research & development 2,081 -
Changes in assets and liabilities,
net of effects from business
acquisitions:
(Increase)decrease in accounts receivable (3,699) 1,701
(Increase)decrease in inventories 2,299 (4,828)
Increase(decrease) in accounts
payable and accrued expenses 3,094 (4,382)
Other, net 5,964 2,417
Net cash provided by
operating activities 52,247 28,608
Investing Activities:
Capital expenditures (20,347) (19,119)
Purchase of Cox, net of cash acquired (197,044) -
Purchase of business and intangibles - (27,201)
Net cash used in investing activities (217,391) (46,320)
Financing Activities:
Dividends paid (3,433) (3,058)
Proceeds from sale of convertible
subordinated debentures 192,850 -
Proceeds from senior long-term debt 187,522 27,505
Reduction of senior long-term debt (182,494) (6,906)
Net repayment under lines of credit (22,649) (19,408)
Payments for debt issuance costs (4,175) -
Proceeds from issuance of common stock 2,682 21,355
Net cash provided by
financing activities 170,303 19,488
Exchange Rate Changes:
Effect of exchange rate changes
on cash 498 (1,400)
Income tax effect of exchange rate
changes on intercompany advances (801) 828
Net cash flows from exchange
rate changes (303) (572)
Increase in cash 4,856 1,204
Cash and cash equivalents at
beginning of year 10,997 15,944
Cash and cash equivalents at
end of period $ 15,853 $17,148
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 1997
Annual Report on Form 10-K. The reported results for the three
and nine month periods ended September 30, 1998 are not
necessarily indicative of the results to be expected for the full
year.
2. Inventories
Inventories consist of the following:
September 30, December 31,
1998 1997
Finished product $ 73,723 $ 68,525
Work-in-process 27,316 20,009
Raw materials 39,038 32,917
$140,077 $121,451
3. Long-Term Debt
In March 1998, the Company issued $125,000 of 5.75%
Convertible Subordinated Notes (the "Notes") due 2005. The Notes
may be converted into common stock at $28.594 at any time prior
to maturity, subject to adjustment under certain conditions. The
Company may redeem the Notes, in whole or in part, on or after
April 6, 2001, at a premium plus accrued interest.
Concurrently, A.L. Industrier A.S., the controlling
stockholder of the Company, purchased at par for cash $67,850
principal amount of a Convertible Subordinated Note (the
"Industrier Note"). The Note has substantially identical
adjustment terms and interest rate.
The Notes are convertible into Class A common stock. The
Industrier Note is automatically convertible into Class B common
stock if at least 75% of the Class A notes are converted into
common stock.
The net proceeds from the combined offering of $189,100 were
used to retire outstanding senior long-term debt. The Revolving
Credit Facility was used in the second quarter, along with an
amount of short term debt, to finance the acquisition of Cox
Pharmaceuticals. (See note 4.)
Long-term debt consists of the following:
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