SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________
FORM 10-Q
(mark one)
__X_ Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 for the Quarter Ended December 31, 1993.
Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934.
Commission File Number 1-8867
BIOCRAFT LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-1734359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18-01 River Road
Fair Lawn, NJ 07410
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 703- 0400
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes__X_ No
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of the latest practicable date.
Class Outstanding at February 8, 1994
----- -------------------------------
Common Stock, $.01 par value 14,129,217
PART I
Item 1. Financial Statements
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
Dec. 31, March 31,
1993 1993
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $8,409 $ 17,286
Marketable securities, at cost which
approximates market 735 739
Receivables:
Trade 22,104 20,794
Other 186 211
Inventories 48,050 42,487
Other 563 539
Total current assets 80,047 82,056
Property and equipment,net 86,689 87,178
Other assets and deferred charges 870 913
-------- --------
$167,606 $170,144
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current installments of long-term obligations $ 7,316 $4,818
Accounts payable-trade 13,062 11,444
Income taxes payable 82 1,565
Accrued expenses 4,536 3,587
Total current liabilities 24,996 21,414
Long-term obligations, excluding current 40,106 52,255
installments
Deferred income taxes 6,064 4,611
Stockholders' equity:
Preferred stock, $1.00 par value.
Authorized 2,000,000 shares; none issued - -
Common stock, $.01 par value. Authorized
30,000,000 shares; issued 14,185,442 at
December 31 and 14,154,415 at March 31 142 142
Additional paid-in capital 42,201 41,468
Retained earnings 55,203 51,217
Less deductions for treasury stock and
Employee stock plans (1,106) (960)
Net stockholders' equity 96,440 91,867
Commitments and contingencies $167,606 $170,147
See accompanying notes to condensed consolidated financial statements.
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Nine Months
Ended December 31 Ended December 31,
(In thousands, except per share data)
1993 1992 1993 1992
Revenue:
Net sales $36,605 $28,816 $108,663 $74,305
Other operating income 31 3,379 150 11,431
Interest, dividend &other income 122 122 436 383
Total revenue 36,758 32,317 109,249 86,119
Costs and expenses:
Cost of sales 27,949 23,501 82,834 63,155
Research and development 2,770 2,070 6,999 5,521
Selling, general and administrative
2,880 3,591 7,747 10,500
Interest expense 1,118 1,255 3,478 3,823
Total costs and expenses 34,717 30,417 101,058 82,999
Earnings before income taxes and
cumulative effect of change in method
of accounting for income taxe 2,041 1,900 8,191 3,120
Income taxes 603 609 2,823 1,041
Earnings before cumulative
effect of accounting change 1,438 1,291 5,368 2,079
Cumulative effect as of April 1,
1993 of change in method of
accounting for income taxes - - 30 -
Net earnings $1,438 $1,291 $5,398 $2,079
Earnings per share:
Earnings before cumulative effect
of accounting change $0.10 $0.09 $0.38 $0.15
Cumulative effect of accounting change - - - -
Net earnings $0.10 $0.09 $0.38 $0.15
Cash dividends $0. $0.10 $0.10 $0.10
Weighted average number of
shares outstanding 14,172 14,096 14,160 14,073
See accompanying notes to condensed consolidated financial statements.
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months ended December 31,
1993 1992
(in thousands)
Cash flows provided by operating activities:
Net earnings $5,398 $2,079
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 4,904 4,485
Imputed and non-cash interest expense 624 636
Non-cash compensation 307 68
Equity in net loss (earnings) of affiliate (32) 9
Deferred income taxes 1,557 533
Cumulative effect of accounting change (30) -
Loss (gain) on sale of assets 1 1
Changes in assets and liabilities:
Trade receivables (1,310) (6,693)
Income taxes receivable/payable (1,483) 4,242
Inventories (5,563) 3,577
Accounts payable-trade 1,618 3,394
Accrued expenses 949 228
Other assets and liabilities (6) (823)
Net cash provided by operating activities 6,934 11,736
Cash flows provided by (used in) investing activities:
Capital expenditures (4,297) (5,981)
Needs from sale of capital assets 5 1
Acquisitions of marketable securities - (336)
Net cash used in investing activities (4,292) (6,316)
Cash flows provided by (used in) financing activities:
Proceeds from long-term obligations 1,750 5,600
Payments of long-term obligations (12,063) (10,727)
Issuance of common stock 126 884
Dividends paid (1,412) (1,405)
Transactions related to employee stock plans 80 4
Net cash used in financing activities (11,519) (5,644)
Net decrease in cash and cash equivalent (8,877) (224)
Cash and cash equivalents at beginning of period 17,286 14,132
Cash and cash equivalents at end of period $8,409 $13,908
Supplemental cash flow information:
Non-cash investing activities:
Increase in marketable securities - ($72)
Decrease in trade receivables - 72
Cash paid during the period for:
Interest $2,202 $2,426
Income taxes 2,749 50
See accompanying notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) Basis of Presentation
The unaudited condensed consolidated financial statements include, in the
opinion of management, all adjustments (consisting of normal and recurring
adjustments) necessary for a fair presentation of the Company's consolidated
financial position as of December 31, 1993 and the consolidated results of
operations and cash flows for the three- month and nine-month periods ended
December 31, 1993 and 1992.
Certain items in the prior period have been reclassified to conform with
current period classifications. The results of operations periods ended
December 31, 1993 are not necessarily indicative of the expected for the
entire year.
The statements are presented as permitted by Form 10-Q and do not contain
certain information included in the annual financial statements and notes of
the Company. The statements included herein should be read in conjunction
with the financial statements and notes included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993 filed with the
Securities and Exchange Commission.
(2) Inventories
Inventories at December 31, and March 31, 1993, consisted of:
December 31 March 31
Raw materials and supplies $ 18,862 $ 15,370
Work in process 21,385
Finished goods 6,593 9,110
LIFO adjustment 1,210 1,210
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$48,050 $42,487
The Company uses the dollar value LIFO method to cost inventories; therefore,
allocation of the LIFO adjustment among the components of inventory is
impractical.
(3) Change in Method of Accounting for Income Taxes
Effective April 1, 1993, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes." Under Statement 109, deferred tax assets and
liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected
to reverse. As permitted by Statement 109, the Company not to restate the
financial statements of any prior years. The change in a method had no
material effect on earnings before cumulative effect of acco
for the nine month period ended December 31, 1993. The cumulative effect of
the change increased net earnings by $30,000 or less than $.01 per share.
The nine month period ended December 31, 1993 was impacted by the enactment of
the Omnibus Budget Reconciliation Act of 1993, which, among other changes,
increased the Federal corporate income tax rate from 34 percent to 35 percent
and retroactively (as of July 1, 1992) reinstated the credit for research and
development.
(4) Earnings Per Share
Earnings per share is the Company's primary earnings per share using the
treasury stock method based on the weighted average number of common shares as
well as common share equivalents (stock options) to the extent dilutive,
outstanding during the three and nine month periods. Fully-diluted earnings
per share for all periods are not presented because the amount would not
differ from the amounts of primary earnings per share.
(5) Dividend on Common Stock
On November 18, 1993 the Company paid its fifth consecutive annual cash
dividend of $.10 per share on its common stock payable to on October 14, 1993.
(6) Contingencies
The Company is involved in certain litigation and other claims related to its
operations. At December 31, 1993, after consultations with legal counsel
representing the Company in such litigation, management of the Company believes
that it is unlikely that the ultimate resolution of such matters will have a
material adverse effect on the Company's consolidated financial condition.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth as a percentage of net sales certain items
appearing in the Company's condensed consolidated statements of earnings as well
as the percentage increase (or decrease) in the dollar amount of those items as
compared to the corresponding prior period.
Percentage Period to Period
of Net Sales Increase (Decrease)
Three Months Three Months
Ended December 31, Ended December 31,
1993 1992 1993 vs. 1992
Net sales 100.0% 100.0% 27.0%
Other operating income 0.1 11.7 (99.1)
Interest, dividend and other income
0.3 0.4 0.0
Total revenue 100.4 112.1 13.7
Cost of sale 76.3 81.5 18.9
Research and development 7.6 7.2 33.8
Selling, general and administrative
7.9 12.5 (19.8)
Interest expense 3.1 4.3 (10.9)
Total costs and expenses 94.9 105.5 14.1
Earnings before income taxes and
cumulative effect of accounting change
5.5 6.6 7.4
Income taxes 1.6 2.1 (1.0)
Earnings before cumulative
effect of accounting chang 3.9 4.5 11.4
Cumulative effect of accounting change
-- N/A N/A
Net earnings 3.9% 4.5% 11.4%
Nine Months Nine Months
Ended December 31, Ended December 31,
1993 1992 1993 vs. 1992
Net sales 100.0% 100.0% 46.2 %
Other operating income 0.1 15.4 (98.7)
"Interest, dividend and other income
0.4 0.5 13.8
Total revenue 100.5 115.9 26.9
Cost of sales 76.2 85.0 31.2
Research and development 6.4 7.4 26.8
Selling, general and administrative
7.1 14.1 (26.2)
Interest expense 3.2 5.2 (9.0)
Total costs and expenses 92.9 111.7 21.8
Earnings before income taxes and
cumulative effect of accounting change
7.6 4.2 162.5
Income taxes 2.6 1.4 171.2
Earnings before cumulative
effect of accounting change 5.0 2.8 158.2
Cumulative effect of accounting change
-- N/A N/A
Net earning 5.0% 2.8% 159.6%
RESULTS OF OPERATIONS
Net sales for the three-month and nine-month periods ended December 31, 1993
increased by approximately $8 million (27%) and $34 million (46%), respectively,
from the corresponding prior periods. The increase during the nine-month period
ended December 31, 1993 was primarily attributable to sales of various new
products introduced by the Company in fiscal 1993, especially Ketoprofen
capsules and Amoxicillin chewable tablets. The increase was attributable
to increased sales volume of Cephalexin products. The increased demands
ended December 31, 1993 was primarily attributable to increased sales volume
of Amoxicillin
chewable tablets and Amoxicillin capsules, Cephalexin products, and Minocycline
capsules. The Company's gross profit margin increased from 18% to 24% during
the quarter ended December 31, 1993 and from 15% to 24% during the nine month
period ended December 31, 1993 compared to the corresponding prior periods.
The increases were primarily due to higher gross profit margins associated
with the Company's newly introduced products. Although the Company initially
obtains higher sales prices for new products, intensify typically forces
the Company to lower its sales price and reduce its profit margin.
Other operating income for the three-month and nine-month periods ended
December 31, 1993 decreased by $3.3 million and $11.3 million, respectively,
from the corresponding prior periods primarily due to the termination of the
Company's arrangement with American Cyanamid to manufacture Cefixime, Cyanamid's
brand name product. In addition, in the nine-month period ended
December 31, 1992 the Company received $1.3 million from Merck & Co.
in connection with a litigation settlement concerning Amiloride Hydrochloride
with Hydrochlorthiazide, which amount was included in other operating income
Research and development expenses during the three-month and nine- month periods
ended December 31, 1993 increased by approximately $700,000 and $1.5 million,
respectively, compared to the corresponding prior periods due to increased
research activity as well as increased costs associated with FDA regulatory
requirements affecting new products. Selling, general and administrative
expenses decreased by approximately $700,000 during the three-month and $2.8
million during the nine-month period compared to the corresponding prior periods
primarily in connection with the termination of the Cyanamid arrangement, as
well as generally reduced expenses.
Interest expense for the three-month and nine-month periods ended December 31,
1993 decreased by approximately $100,000 and $300,000, respectively, from the
corresponding prior periods, as a result of the Company's reduced debt as
well as generally prevailing lower interest rates and more favorable terms
under the Company's credit facilities.
Effective April 1, 1993, the Company adopted FASB Statement 109, "Accounting for
Income Taxes." Under Statement 109, the liability method is used in accounting
for income taxes and deferred tax assets and liabilities are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse (see Note 3 of Notes to Condensed Consolidated Financial
Statements). The adoption of Statement 109 resulted in increased net
earnings of $30,000 (less than $.01 per share). Pursuant to the Omnibus Budget
Reconciliation
Act of 1993, the Company adjusted its net deferred tax liability to reflect the
increased federal statutory corporate income tax rate. The adjustment for the
increased rate was substantially offset by the retroactive reinstatement of the
research and development tax credit. The Company's effective tax rate for the
three-month and nine-month periods ended December 31, 1993 was 30% and 34%,
respectively, compared to 32% and 33%, respectively, for the corresponding prior
period.
For the various reasons noted above, net earnings for the three-month and
nine-month periods ended December 31, 1993 increased from approximately $1.3
million and $2.1 million, respectively,in the corresponding period of the prior
year to $1.4 million and $5.4 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by approximately $8.9 million
during the nine months ended December 31, 1993 as a result of the net repayment
of approximately $10 million of debt. During the nine- month period the
Company generated $6.9 million of cash from operating activities after using
$5.6 million to finance its increased inventories.
Operating cash flow was used by the Company to finance its capital expenditures,
as well as the payment of its dividend.
The Company has available $6.8 million under its $10 million line of credit with
Commerce Bank of St. Louis and its entire $10 million line of credit with
National Westminster Bank, NJ.
PART II - OTHER INFORMATION
Item 5. Other Information
On November 18, 1993, the Company paid its fifth consecutive annual dividend of
$.10 per share of common stock to stockholders of record on October 14, 1993.
Item 6. Exhibits and Reports on Form 8-K
The Company filed a report on Form 8-K on December 21,1993, reporting on actions
brought by alleged stockholders of the Company against the Company and certain
officers of the Company.
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.
BIOCRAFT LABORATORIES, INC.
(registrant)
Date: February 9, 1994 /s/ Harold Snyder
---------------------------
Harold Snyder
President, Chairman and
Chief Executive Officer
Date: February 9, 1994 /s/ Steven J. Sklar
----------------------------
Steven J. Sklar
Vice President, Treasurer and
Chief Financial Officer
