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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-K/A-1
_X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the Fiscal Year Ended March 31, 1995
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, New Jersey 07410
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 703-0400
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange
Title of each class on which registered
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Common Stock, par value $.01 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, the definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates was approximately $101,950,000 as of June 22, 1995. The
computation includes as affiliates Harold Snyder, Beatrice Snyder, Beryl L.
Snyder, Brian S. Snyder and Jay T. Snyder, who are described in Item 12,
Security Ownership of Certain Beneficial Owners and Management, below, without
prejudice to a determination that such persons are non-affiliates of the
registrant for any other purpose under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of June 22, 1995.
Common Stock, par value $.01 14,166,127
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the Annual Meeting of Shareholders to
be held August 14, 1995 are incorporated by reference in Part III.
Index to Financial Statements and Schedules - Page F-1
Index to Exhibits - Page I-1
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This report hereby amends Item 7 of the Company's Annual Report on Form
10-K for the year ended March 31, 1995 in its entirety, by correcting two
percentages set forth in the percentage of net sales table in Results of
Operations, and as so amended Item 7 shall read as follows:
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The following table sets forth the Company's unaudited quarterly operating
results for the fiscal years ended March 31, 1994 and 1995.
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
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June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1993 1993 1993 1994 1994 1994 1994 1995
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales .................... $35,823 $36,235 $36,605 $34,486 $31,158 $39,055 $32,678 $37,903
Gross profit ................. 8,082 9,091 8,656 7,680 5,473 7,170 4,891 7,551
Net earnings (loss) .......... 1,943* 2,017 1,438 707 (894) 71 (1,710) 138
Earnings (loss) per share .... 0.14* 0.14 0.10 0.05 (0.06) .01 (0.12) .01
</TABLE>
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* Includes $30 (less than $.01 per share) cumulative effect of change in method
of accounting for income taxes. Net earnings for the quarter before the
cumulative effect of this accounting change were $1,913 ($.14 per share).
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The following table sets forth as a percentage of net sales certain items
appearing in the Company's consolidated statements of operations as well as the
percentage change in the dollar amount of these items as compared to the prior
period.
<TABLE>
<CAPTION>
Period to Period
Percentage of Sales Increase (Decrease)
Years Ended March 31, ---------------------
------------------------------- 1994 1995
vs. vs.
1993 1994 1995 1993 1994
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<S> <C> <C> <C> <C> <C>
Net sales ..................................... 100.0% 100.0% 100.0% 26.5% (1.6)%
Other operating income ........................ 11.5 0.1 0.1 (98.4) (50.7)
Interest, dividend and other income ........... 0.4 0.4 0.3 8.2 (10.0)
----- ----- -----
Total revenue ................................. 111.9 100.5 100.4 13.6 (1.7)
----- ----- -----
Cost of sales ................................. 78.8 76.6 82.2 23.0 5.5
Research and development ...................... 7.7 6.9 7.9 14.6 12.0
Selling, general and administrative ........... 13.0 7.9 10.3 (22.7) 27.8
Interest expense .............................. 4.4 3.2 3.0 (9.0) (8.5)
----- ----- -----
Total costs and expenses ...................... 103.9 94.6 103.4 15.3 7.4
----- ----- -----
Earnings (loss) before income taxes
(benefit) and cumulative effect
of accounting change ...................... 8.0 5.9 (3.0) (7.6) NM
Income taxes (benefit) ........................ 2.8 1.6 (1.2) (28.0) NM
----- ----- -----
Net earnings (loss) before cumulative
effect of accounting change ............... 5.2 4.3 (1.8) 3.7 NM
Cumulative effect of change in method
of accounting for income taxes ............. -- 0.0 -- NM NM
----- ----- -----
Net earnings (loss) ........................... 5.2 4.3 (1.8) 4.3 NM
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</TABLE>
Net Sales
Net sales declined by $2.4 million (1.6%) in the fiscal year ended March
31, 1995, after rising by $30 million (26%) in fiscal 1994. The fiscal 1995
decrease was attributable to reduced sales volume of Ketoprofen, introduced by
the Company in December 1992, as well as a decrease in net selling prices of
various products, including Ketoprofen. These decreases were partially offset by
increased sales volume on several products, principally Cephalexin. The increase
in fiscal 1994 resulted primarily from increased sales volume of Amoxicillin and
Cephalexin products including Amoxicillin chewable tablets introduced by the
Company in fiscal 1993. Increases of that magnitude are unlikely without further
product approvals from the Food and Drug Administration (FDA). New drug
approvals have been delayed pending resolution of issues under discussion with
the FDA (see Note 11 of notes to consolidated financial statements).
Gross Profit
Gross profit margins were 18% in fiscal 1995, 23% in fiscal 1994 and 21% in
fiscal 1993. The increase in fiscal 1994 resulted primarily from higher gross
profit margins associated with the Company's newly introduced products. Although
the Company initially obtains higher sales prices for new products, intensified
competition typically forces the Company to lower its sales price and reduce its
profit margin. As mentioned above, in fiscal 1995 sales of Ketoprofen, a
relatively new product for the Company on which the Company continues to
maintain a high profit margin, fell significantly resulting in a lower overall
gross profit margin.
As announced in December, 1994, the Company signed a three-year supply
agreement with Eli Lilly and Company. The agreement became effective January 1,
1995 and calls for the Company to supply Lilly with a product manufactured at
its Missouri facility. The Company expects this arrangement to double its
production of that product. The contract also calls for Lilly to supply the
Company with substantial quantities of a raw material at a fixed exchange ratio.
As a result of this contract, the Company anticipates improved gross profit
margins in fiscal 1996.
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Research and Development Expenses
Research and development expenditures increased by approximately $1.2
million and $1.3 million in fiscal 1995 and 1994, respectively, compared to the
corresponding prior periods. The increases resulted primarily from increased
activity and costs in connection with the development and approval process for
new generic drugs, as well as increased costs associated with FDA regulatory
requirements affecting new generic drugs.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by approximately
$3.1 million in fiscal 1995 after decreasing by approximately $3.3 million in
fiscal 1994 compared to the corresponding prior period. The increase in fiscal
1995 was primarily attributable to costs incurred in connection with the
resolution of regulatory matters with the FDA referred to above, as well as
costs incurred in connection with exploring strategic options to enhance the
value of the Company to its shareholders, including discussions regarding a
possible sale of the Company. The decrease in fiscal 1994 was primarily due to
decreased costs in connection with the manufacture of Cefixime (see "Other
Operating Income").
Other Operating Income
Other operating income decreased by approximately $100,000 and $12.8
million in fiscal 1995 and 1994, respectively, compared to the corresponding
prior periods. The decrease in fiscal 1994 was due to the expiration of the
Company's agreement with American Cyanamid Company (Cyanamid) under an agreement
which provided for the Company's exclusive manufacturing of Cefixime for
Cyanamid at the Company's Fairfield facility. The agreement expired on January
31, 1993.
Non-Operating Income and Interest Expense
Interest, dividend and other non-operating income was approximately
$500,000 in each of fiscal 1995, 1994 and 1993.
Interest expense decreased by approximately $400,000 and $500,000 in fiscal
1995 and 1994, respectively, compared to the corresponding prior periods. The
decrease in fiscal 1995 resulted primarily from the remarketing, in September
1994, of the Company's $30 million bond. The decrease in fiscal 1994 was due to
reduced rates, during most of the fiscal year, on the Company's credit
facilities, as well as reduced long-term debt.
Provision for Income Taxes
The Company's effective tax rate/benefit was 42% in fiscal 1995. The rate
fell to 28% in fiscal 1994, from 36% in fiscal 1993. In fiscal 1995, the Company
incurred a loss for income tax as well as financial accounting purposes and the
Company's tax exempt income and tax credits therefore increased rather than
decreased its income tax rate/benefit. The lower tax rate in fiscal 1994
resulted primarily from increased research and development credits as a result
of the retroactive reinstatement by Congress of this tax credit. In addition,
adjustments relating to the conclusion of tax examinations for the fiscal years
ended in 1987 through 1990 contributed to the lower rate. These items more than
offset the increase in deferred tax liability as a result of the increase in the
statutory tax rate to 35%. In April 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes." The cumulative effect of the change in
accounting method increased net earnings by $30,000 or less than $.01 per share
for the 1994 fiscal year.
Net Earnings (Loss)
For the various reasons noted above, the Company incurred a net loss in
fiscal 1995. The ratios of net earnings to net sales and net earnings to
operating revenue, decreased from 5.2% and 4.6%, respectively, in fiscal 1993 to
4.3% (for both ratios) in fiscal 1994.
Liquidity and Capital Resources
Net cash from operating activities was approximately $6.9 million in
fiscal 1995. Funds were primarily used to finance $10 million of capital
expenditures. In addition, the Company paid a $1.4 million dividend. As a
result, cash and cash equivalents decreased by approximately $3.3 million during
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fiscal 1995. The Company maintained $60 million of working capital and a current
ratio of 3.7:1 as of March 31, 1995, compared to $63 million of working capital
and a current ratio of 4.7:1 as of March 31, 1994. The Company's inventory fell
by $1.7 million, and continues to include approximately $5 million of costs,
principally raw materials, for which the Company is awaiting FDA approval. Such
approvals have been delayed pending resolution of issues under discussion with
FDA (see Note 11 of notes to consolidated financial statements). In the opinion
of management, such inventory's fair market value equals or exceeds its cost.
The Company had total long-term obligations at March 31, 1995 of $56
million compared to $54 million at March 31, 1994, and its long-term obligations
as a percentage of total capitalization increased to 37% at March 31, 1995
compared to 36% at March 31, 1994.
Most of the Company's long-term obligations are comprised of its $30
million bond ($27.8 million outstanding as of March 31, 1995) issued in
September 1989 in connection with the construction of its facility in Mexico,
Missouri. The bonds, due September 1, 2004, were issued by the Missouri Economic
Development, Export and Infrastructure Board and are secured by a Letter of
Credit issued by the Bank of Tokyo, Ltd., New York Agency. The Letter of Credit
agreement provides for a mortgage on the Mexico, Missouri facility. Principal
amortization installments are in varying amounts, with an initial payment of
$2.2 million made in fiscal 1995. The Company remarketed the bonds in September
1994 resulting in reduced interest expense in the second half of fiscal 1995.
In addition to the bonds, the Company has a $10 million revolving credit
line ($9 million outstanding as of March 31, 1995) with NatWest Bank N.A.
(NatWest), as well as a $2 million unsecured term loan and a $2 million
mortgage. The Company also has a $10 million revolving credit line with Commerce
Bank National Association (Commerce Bank) and had $7.75 million outstanding as
of March 31, 1995.
The Company's other outstanding long-term obligations include (i) $363,000
in connection with 15-year New Jersey Economic Development Authority Revenue
bonds (NJEDA bonds) issued in December 1983, used to finance the Company's
Paterson, New Jersey plant and which is secured by a mortgage on that plant and
the Company's Elmwood Park plant; (ii) a $210,000 term loan agreement with the
Missouri Department of Economic Development (MODED) and the City of Mexico,
payable in 40 equal quarterly installments of $10,000 beginning September 1,
1990; and (iii) $7.5 million ($6.6 million present value) due pursuant to a 1990
litigation settlement agreement. (See Note 5 of notes to consolidated financial
statements.)
The credit facilities with NatWest and Commerce Bank, as well as the Letter
of Credit Agreement with Bank of Tokyo and the NJEDA bonds require, among other
matters, that the Company maintain certain financial covenants. The Company is
in compliance with all required financial covenants.
The Company currently has no other significant long-term commitments and
anticipates that it can satisfy its fiscal 1996 operating requirements and
capital expenditure needs from its existing credit facilities as well as from
internally generated funds.
Other
Effective April 1, 1994, the Company adopted FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." The change
in accounting method increased stockholders' equity as of April 1, 1994 by
approximately $87,000 (net of $53,000 of deferred income taxes) to reflect the
net unrealized holding gains on securities classified as available-for-sale
previously carried at the lower of amortized cost or market. In accordance with
the Statement, prior period financial statements were not restated. During
fiscal 1995, securities accounting for substantially all of the unrealized gain
as of April 1, 1994 were sold and the gain was recognized.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: April , 1996
/S/ HAROLD SNYDER
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(Harold Snyder)
Chairman, President and
Chief Executive Officer
