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 June 30, 1995.
------- 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 August 11, 1995
---------------------------- ------------------------------
Common Stock, $.01 par value 14,175,329
<PAGE>
PART I
Item 1. Financial Statements
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, March 31,
1995 1995
--------- ---------
(Unaudited)
ASSETS:
Current assets:
Cash and cash equivalents $ 3,388 $ 2,744
Marketable securities 635 635
Receivables:
Trade 19,646 26,044
Income taxes 1,033 650
Other 194 171
Inventories 56,661 48,731
Other current assets 4,371 3,353
--------- ---------
Total current assets 85,928 82,328
Property and equipment, net 92,847 89,780
Other assets and deferred charges 983 837
--------- ---------
$ 179,758 $ 172,945
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Current installments of long-term obligations $ 26,347 $ 4,967
Accounts payable 19,678 12,875
Accrued expenses 6,553 4,309
--------- ---------
Total current liabilities 52,578 22,151
--------- ---------
Long-term obligations, excluding current installments 28,901 50,800
Deferred income taxes 5,447 6,013
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 14,224,005 at
June 30 and 14,223,547 at March 31 142 142
Additional paid in capital 43,449 43,456
Retained earnings 50,816 52,102
Unrealized gains on securities 8 7
Less deductions for treasury stock and
employee stock plans (1,583) (1,726)
--------- ---------
Net stockholders' equity 92,832 93,981
--------- ---------
Commitments and contingencies
$ 179,758 $ 172,945
========= =========
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended June 30,
----------------------
1995 1994
-------- --------
(In thousands, except
per share data)
Revenue:
Net sales $ 32,834 $ 31,158
Other operating income 38 37
Interest, dividend and other income 99 248
-------- --------
Total revenue 32,971 31,443
-------- --------
Costs and expenses:
Cost of sales 28,416 25,685
Research and development 2,298 2,519
Selling, general and administrative 3,406 3,587
Interest expense 1,087 1,136
-------- --------
Total costs & expenses 35,207 32,927
-------- --------
Earnings (loss) before income taxes (benefit) (2,236) (1,484)
Income taxes (benefit) (950) (590)
-------- --------
Net earnings (loss) ($ 1,286) ($ 894)
======== ========
Earnings (loss) per share ($ 0.09) ($ 0.06)
======== ========
Weighted average number of
shares outstanding 14,166 14,159
======== ========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BIOCRAFT LABORATORIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended June 30,
------------------
1995 1994
------- -------
(in thousands)
Cash flows from operating activities:
Net earnings (loss) $(1,286) $ (894)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 1,918 1,748
Imputed and non-cash interest expense 159 187
Non-cash compensation 124 86
Equity in net earnings of affiliates (4) (4)
Gain on sale of marketable securities -- (131)
Deferred income taxes (566) (412)
Changes in assets and liabilities:
Trade receivables 6,398 5,149
Income taxes receivables (383) (177)
Inventories (7,930) (4,150)
Accounts payable - trade 6,803 4,113
Accrued expenses 2,244 1,412
Other assets (1,201) (705)
------- -------
Net cash provided by operating activities 6,276 6,222
------- -------
Cash flows from investing activities:
Capital expenditures (4,977) (2,062)
Dispositions of marketable securities -- 234
------- -------
Net cash used in investing activities (4,977) (1,828)
------- -------
Cash flows from financing activities:
Proceeds from long-term obligations 1,300 --
Payments of long-term obligations (1,967) (1,967)
Issuance of common stock 14 1
Transactions related to stock plans (2) --
------- -------
Net cash used in financing activities (655) (1,966)
------- -------
Net increase in cash and cash equivalents 644 2,428
Cash and cash equivalents at beginning of period 2,744 6,020
------- -------
Cash and cash equivalents at end of period $ 3,388 $ 8,448
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 934 $ 216
Income taxes -- --
======= =======
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
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 June 30, 1995 and the consolidated
results of operations and cash flows for the three months ended June 30,
1995. The results of operations for the three months ended June 30, 1995
are not necessarily indicative of the results to be 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,
1995 filed with the Securities and Exchange Commission.
(2) Inventories
Inventories at June 30, and March 31, 1995, consisted of:
June 30 March 31
------- --------
(in thousands)
Raw materials and supplies $23,535 $17,731
Work in process 20,918 19,219
Finished goods 7,808 7,461
LIFO adjustment 4,400 4,320
------- -------
$56,661 $48,731
======= =======
The Company uses the dollar value LIFO method to cost inventories;
therefore, allocation of the LIFO adjustment among the components of
inventory is impractical. As of June 30, and March 31, 1995, inventories
include approximately $8 million and $5 million, respectively, of inventory
costs, principally raw materials, relating to products for which the
Company is awaiting regulatory approval.
(3) Long-Term Obligations
The Company amended certain bank loans, which amendments, among other
changes, accelerated the maturity dates of the loans. As a result, certain
debt classified as a long-term liability at March 31, 1995 is classified as
a current liability at June 30, 1995. See "Managment's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
5
<PAGE>
(4) Earnings (Loss) Per Share
Earnings (loss) per share is the Company's primary earnings (loss) 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 month periods. Fully-diluted
earnings (loss) per share for both periods are not presented because the
amount would not differ from the amounts of primary earnings (loss) per
share.
(5) Contingencies
The Company is involved in certain litigation and other claims related to
its operations. At June 30, 1995, 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.
6
<PAGE>
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 operations as
well as the percentage increase (or decrease) in the dollar amount of those
items as compared to the corresponding prior period.
<TABLE>
<CAPTION>
Percentage Period to Period
of Net Sales Increase (Decrease)
------------------ ------------------
Three Months Three Months
Ended June 30, Ended June 30,
------------------ ------------------
1995 1994 1995 vs. 1994
----- ----- ------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 5.4%
Other operating income 0.1 0.1 2.7
Interest, dividend and other income 0.3 0.8 (60.1)
----- -----
Total revenue 100.4 100.9 4.9
----- -----
Cost of sales 86.5 82.4 10.6
Research and development 7.0 8.1 (8.8)
Selling, general and administrative 10.4 11.5 (5.0)
Interest expense 3.3 3.7 (4.3)
----- -----
Total costs and expenses 107.2 105.7 6.9
----- -----
Earnings (loss) before
income taxes (benefit) (6.8) (4.8) 50.7
Income taxes (benefit) (2.9) (1.9) 61.0
----- -----
Net earnings (loss) (3.9)% (2.9)% 43.8%
===== =====
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
Net sales for the quarter ended June 30, 1995 increased by approximately
$1.7 million (5%) from the corresponding period in the prior fiscal year. The
increase was attributable to increased sales of bulk pharmaceuticals, as well as
increased sales volume of Amoxicillin capsules. These increases were partially
offset by significantly decreased sales volume of a dosage form product. The
decrease in sales resulted primarily from the Company's inability to obtain
supply of the active ingredient for this product. Although the Company has not
yet received such supply it expects to obtain the active ingredient for this
product by the end of the September 30 fiscal quarter.
The Company's gross profit margin decreased from 17.6% to 13.5% in the
quarter ended June 30, 1995 compared to the corresponding prior quarter. The
decrease resulted from the change in the Company's product mix and the relative
profitability of different products sold by the Company. Bulk products are
generally sold at a lower profit margin than dosage form products.
Research and development expenses during the three-month period ended June
30, 1995 decreased by approximately $200,000 from the corresponding prior period
due to reduced research and development activity during the current quarter.
Selling, general and administrative expenses also decreased by approximately
$200,000 compared to the corresponding period in the prior fiscal year, in which
the Company incurred additional expenses in connection with the resolution of
certain regulatory matters with the Food and Drug Administration ("FDA"). Such
expenses would have increased from the prior quarter if such FDA related
expenses were not considered.
Interest, dividend and other income decreased by approximately $150,000 in
the three-month period ended June 30, 1995 compared to the corresponding period
in the prior fiscal year. During the quarter ended June 30, 1994 the Company
recognized a gain of $131,000 from the sale of certain marketable securities.
The Company's effective tax rate/benefit for the three-month periods ended
June 30, 1995 and June 30, 1994 was 42% and 40%, respectively. The Company
incurred a loss in each quarter and its tax exempt income and tax credits
therefore increased its income tax rate/benefit.
For the various reasons noted above, the Company incurred net losses of
approximately $1.3 million and $900,000 in the three-month periods ended June
30, 1995 and June 30, 1994, respectively.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased by approximately $600,000
during the three months ended June 30, 1995. During that period the Company
generated $6.3 million of cash from operating activities which it used to
finance approximately $5.0 million of capital expenditures and the net repayment
of approximately $700,000 of long-term debt.
The Company has fully utilized its credit lines with NatWest Bank and
Commerce Bank. Because of operating results, these credit lines as well as other
term loans by these banks have been amended to accelerate the maturity date to
November 10, 1995, grant a security interest in certain assets, and to provide
for monthly amortization of $1 million on each of the credit lines. The Company
is in the process of seeking alternate financing for its working capital and
related needs. Such financing is needed by the Company to satisfy its fiscal
1996 operating requirements and capital expenditure needs. Although management
believes that the Company will be able to obtain financing, there can be no
assurance that the Company will be able to do so.
PART II - OTHER INFORMATION
Item 5. Other Information
In August 1995 the Company was notified by the Food and Drug Administration
(the "FDA") that the FDA has completed its recent inspections of the Company's
dosage form facilities and quality control laboratories, and has found that the
Company is in substantial compliance with current Good Manufacturing Practices.
The Company is now eligible to receive new drug approvals, Certificates of Free
Trade and government contracts. The inspections were conducted in accordance
with a consent decree entered into between the Company and the FDA in July 1994.
The FDA is currently inspecting the Company's research and development
laboratories in connection with new product submissions including certain
products which have not previously been inspected by the FDA. A satisfactory
inspection of this type, which cannot be assured, is also necessary to receive
approval of new generic drug products.
The Company has been evaluating certain of its Waldwick plant's operations
and process equipment to ensure that the Company is in, and is capable of
maintaining, compliance with current and anticipated federal and state air
quality emission standards and requirements. In that regard, the Company
anticipates that it will need to implement certain process and equipment
modifications and upgrades and install control technology equipment to bring the
facility's air emissions to acceptable, permitted levels. The costs for this are
not expected to have a material adverse effect on the Company's consolidated
financial condition.
Item 6. Exhibits and Reports on Form 8-K
NONE
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOCRAFT LABORATORIES, INC.
(registrant)
Date: August 14, 1995 /s/ Harold Snyder
-----------------------------
Harold Snyder
President, Chairman and
Chief Executive Officer
Date: August 14, 1995 /s/ Brian S. Snyder
------------------------------
Brian S. Snyder
Vice President and
Controller
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 3,388
<SECURITIES> 635
<RECEIVABLES> 20,096
<ALLOWANCES> 450
<INVENTORY> 56,661
<CURRENT-ASSETS> 85,928
<PP&E> 136,330
<DEPRECIATION> 43,483
<TOTAL-ASSETS> 179,758
<CURRENT-LIABILITIES> 52,578
<BONDS> 28,901
<COMMON> 142
0
0
<OTHER-SE> 92,690
<TOTAL-LIABILITY-AND-EQUITY> 179,758
<SALES> 32,834
<TOTAL-REVENUES> 32,971
<CGS> 28,416
<TOTAL-COSTS> 28,416
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,087
<INCOME-PRETAX> (2,236)
<INCOME-TAX> (950)
<INCOME-CONTINUING> (1,286)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,286)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
