<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from --------- to ---------
Commission File No. 0-15098
JONES MEDICAL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 43-1229854
(State or other jurisdiction of (I.R.S. EMPLOYER IDENTIFICATION NO.)
Incorporation or organization)
1945 Craig Road, St. Louis, Missouri 63146
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 576-6100
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
registrat was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes---- No----.
Number of shares outstanding of registrant's Common Stock as of May 2, 1995:
9,234,412
Page 1 of 16
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<TABLE>
JONES MEDICAL INDUSTRIES, INC.
INDEX
-----
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance
Sheets - December 31, 1994 and March 31, 1995 3
Condensed Consolidated Statements of
Income - three months ended March 31, 1994 and 1995 4
Condensed Consolidated Statements of
Stockholders' Equity - three months ended
March 31, 1994 and 1995 5
Condensed Consolidated Statements of Cash Flows -
three months ended March 31, 1994 and 1995 6- 7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11-14
Part II - Other Information
None 15
Signatures 16
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, March 31,
1994 1995
------------ -----------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and temporary investments $ 7,031,765 $ 4,791,457
Marketable securities 120,000 120,000
Accounts receivable, less allowance for doubtful accounts of
$64,794 at December 31, 1994 and $73,794 at March 31, 1995 4,242,356 4,712,081
Inventories 8,320,590 9,959,499
Deferred income taxes 652,805 652,805
Prepaid expenses and other 425,843 550,994
------------ ------------
Total current assets 20,793,359 20,786,836
Net property, plant and equipment 12,603,165 12,736,953
Intangible assets, net 20,674,206 20,360,289
Other assets 856,554 1,048,576
------------ ------------
$ 54,927,284 $ 54,932,654
============ ============
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 3,639,966 $ 4,646,043
Current portion of long-term debt 1,611,246 1,499,984
Income taxes payable 292,774 1,270,318
Dividends payable 234,758 234,799
------------ ------------
Total current liabilities 5,778,744 7,651,144
Long-term debt 3,799,978 -
Deferred income taxes 3,858,198 3,966,105
Contingencies and commitments (Note 8) - -
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized,
99,919 issued and outstanding at December 31, 1994 and 99,919
at March 31, 1995 999 999
Common stock, $.04 par value; 30,000,000 authorized, 9,231,012 issued and
outstanding at December 31, 1994 and 9,232,212 at March 31, 1995 369,240 369,288
Contributed capital (including effects of unearned compensation and
related amortization) 19,639,433 19,650,785
Retained earnings 21,480,692 23,294,333
------------ ------------
Total stockholders' equity 41,490,364 43,315,405
------------ ------------
$ 54,927,284 $ 54,932,654
============ ============
See accompanying notes.
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended March 31,
--------------------------
1994 1995
---- ----
<S> <C> <C>
Sales $12,141,904 $11,458,547
Cost of sales 6,197,281 5,267,494
----------- -----------
Gross profit on sales 5,944,623 6,191,053
Selling, general and administrative expenses:
Selling 2,040,625 1,901,290
General and administrative 901,902 827,751
Research and development 20,633 -
Amortization 349,061 313,920
----------- -----------
Total selling, general and administrative expenses 3,312,221 3,042,961
----------- -----------
Operating income 2,632,402 3,148,092
Other income (expense)
Interest income 14,934 50,373
Interest expense (116,102) (50,065)
Other income 19,150 (312)
----------- -----------
Income before income taxes 2,550,384 3,148,088
Income taxes 946,038 1,101,830
----------- -----------
Net income $ 1,604,346 $ 2,046,258
Average shares outstanding 9,559,134 9,514,566
Earnings per share $ .17 $ .22
See accompanying notes.
</TABLE>
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<PAGE> 5
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Three Months Ended March 31, 1994 and 1995
<CAPTION>
Number of shares Preferred Common Contributed Retained
Preferred Common Stock Stock Capital Earnings Total
-------------------- --------- ------ ----------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 227,706 8,952,039 $ 2,227 $358,081 $19,197,969 $16,677,833 $36,236,110
Exercise of stock options - 31,000 - 1,240 180,760 - 182,000
Restricted stock:
Amortization of unearned
compensation - - - - 7,500 - 7,500
Net income - - - - - 1,604,346 1,604,346
Cash dividend declared - common
stock ($.025 per share) - - - - - (224,551) (224,551)
Cash dividend declared -
preferred stock ($.04 per share) - - - - - ( 8,913) ( 8,913)
------- --------- -------- -------- ----------- ----------- -----------
Balance at March 31, 1994 227,706 8,983,039 $ 2,227 $359,321 $19,386,229 $18,048,715 $37,796,492
======= ========= ======== ======== =========== =========== ===========
Balance at December 31, 1994 99,919 9,231,012 $ 999 $369,240 $19,639,433 $21,480,692 $41,490,364
Exercise of stock options - 1,200 - 48 3,852 - 3,900
Restricted stock:
Amortization of unearned
compensation - - - - 7,500 - 7,500
Net income - - - - - 2,046,258 2,046,258
Cash dividend declared - common
stock ($.025 per share) - - - - - (228,621) (228,621)
Cash dividend declared -
preferred stock ($.04 per share) - - - - - ( 3,996) ( 3,996)
------- --------- -------- -------- ----------- ----------- -----------
Balance at March 31, 1995 99,919 9,232,212 $ 999 $369,288 $19,650,785 $23,294,333 $43,315,405
======= ========= ======== ======== =========== =========== ===========
See accompanying notes.
</TABLE>
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<PAGE> 6
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, 1994 and 1995
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Cash flows used from operating activities:
Net income $ 1,604,346 $ 2,046,258
Non-Cash adjustments:
Depreciation and amortization 502,406 523,317
Provision for uncollectibles 9,000 9,000
Change in assets and liabilities:
Accounts receivable (227,866) (478,725)
Inventories (497,530) (1,638,909)
Prepaid expenses and other assets (14,011) (317,173)
Accounts payable and accrued expenses 221,208 1,006,077
Income taxes payable 923,600 1,085,452
----------- -----------
Net cash from operating activities 2,521,153 2,235,297
----------- -----------
Cash flows used for investing activities:
Purchase of marketable securities (89,057) -
Maturities of certificates of deposit 1,247,489 -
Additions to property, plant and equipment (1,600,690) (341,007)
----------- -----------
Net cash used for investing activities (442,258) (341,007)
----------- -----------
Cash flows from (used for) financing activities:
Repayment of long-term debt (403,426) (3,911,240)
Payment of dividends (234,106) (234,758)
Proceeds from exercise of stock options 182,000 11,400
----------- -----------
Net cash from (used for) financing activities (455,532) (4,134,598)
----------- -----------
Increase (decrease) in cash and temporary investments 1,623,363 (2,240,308)
Cash and temporary investments, beginning of period 948,713 7,031,765
----------- -----------
Cash and temporary investments, end of period $ 2,572,076 $ 4,791,457
=========== ===========
See accompanying notes
</TABLE>
- 6 -
<PAGE> 7
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CON'T)
(UNAUDITED)
Three Months Ended March 31, 1994 and 1995
<CAPTION>
Supplemental Disclosures of Cash Flow Information:
- --------------------------------------------------
1994 1995
---- ----
<S> <C> <C>
Cash paid during the three months for:
Interest $ 114,864 $ 50,065
=========== ===========
Income taxes $ 22,439 $ -
=========== ===========
See accompanying notes.
</TABLE>
- 7 -
<PAGE> 8
JONES MEDICAL INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994 and 1995
1. GENERAL
-------
The unaudited interim financial information reflects all adjustments
(consisting only of normal recurring accruals) which management
considers necessary for a fair presentation of the results of
operations for such periods and is subject to year end adjustments.
Certain footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the unaudited interim financial
information as permitted by rules and regulations of the Securities and
Exchange Commission. Management believes that the disclosures made are
adequate to make the information presented not misleading. The results
for the interim periods are not necessarily indicative of results for
the full year. It is suggested that these financial statements be read
in conjunction with the Company's audited financial statements and
notes thereto for the year ended December 31, 1994, included in the
1994 Annual Report.
RECLASSIFICATION
----------------
Certain reclassifications of prior year quarter presentations have
been made to conform to the 1995 presentation.
2. PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant inter-
company accounts and transactions have been eliminated.
3. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
-----------------------------------------------
Earnings per common and common equivalent share are based on the
weighted average number of shares of common stock and common stock
equivalents outstanding during the period (9,559,134 for the three
months ended March 31, 1994 and 9,514,566 for March 31, 1995.) The
computation assumes that outstanding stock options were exercised and
the proceeds used to purchase common shares. It also assumes that the
preferred stock was converted to shares of common stock.
8
<PAGE> 9
4. INVENTORIES
-----------
Inventories are valued at the lower of cost on a first-in, first-out
basis or market.
<TABLE>
Inventories are comprised as follows:
<CAPTION>
December 31, March 31,
1994 1995
(Unaudited)
------------ -----------
<S> <C> <C>
Raw material $ 3,372,142 $ 4,276,661
Work-in-process 1,030,297 1,352,758
Finished goods 3,918,151 4,330,080
----------- -----------
$ 8,320,590 $ 9,959,499
=========== ===========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
<TABLE>
Property, plant and equipment are as follows:
<CAPTION>
December 31, March 31,
1994 1995
(Unaudited)
------------ -----------
<S> <C> <C>
Land $ 2,178,398 $ 2,178,398
Building and improvements 7,216,650 7,185,154
Equipment and furniture 5,258,169 5,513,425
Leasehold improvements 63,964 -
Automobiles 303,689 307,909
----------- -----------
15,020,870 15,184,886
Less accumulated depreciation and amortization 2,417,705 2,447,933
----------- -----------
$12,603,165 $12,736,953
=========== ===========
</TABLE>
9
<PAGE> 10
6. INTANGIBLE ASSETS
-----------------
<TABLE>
Intangible assets are as follows:
<CAPTION>
December 31, March 31,
1994 1995
(Unaudited)
------------ -----------
<S> <C> <C>
Distribution systems, trademarks and licenses $11,836,110 $11,836,110
Customer list 6,084,967 6,084,967
Restrictive covenants and other intangibles 2,208,710 2,208,710
Goodwill 4,636,813 4,636,813
----------- -----------
24,766,600 24,766,600
Less accumulated
amortization 4,092,394 4,406,311
----------- -----------
$20,674,206 $20,360,289
=========== ===========
</TABLE>
7. INCOME TAXES
------------
The provisions for income taxes at March 31, 1994 and 1995 of $946,038
and $1,101,830, respectively, are based on an estimated effective
annual income tax rate of 37.1% and 35.0%.
8. CONTINGENCIES
-------------
The Company currently carries product liability coverage of $5,000,000
per occurrence and $5,000,000 in the aggregate on a "claims made"
basis. There is no assurance that the Company's present insurance will
cover any potential claims that may be asserted in the future. In
addition, the Company is subject to legal proceedings and claims which
arise in the ordinary course of business.
10
<PAGE> 11
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
- ----------------------------------------------------------------------
AND FINANCIAL CONDITION
- -----------------------
<TABLE>
The following table sets forth, for the two interim periods indicated,
the percentages which certain components of the Consolidated Statements
of Income bear to product net sales and the percentage change of such
components (based on aggregate dollars) as compared to the prior year.
<CAPTION>
PERCENTAGE
INCREASE
THREE MONTHS ENDED (DECREASE)
MARCH 31, AGGREGATE
------------------- DOLLAR
1994 1995 AMOUNT
---- ---- ----------
<S> <C> <C> <C>
Sales 100.0 100.0 ( 5.6)
Cost of sales 51.0 46.0 ( 15.1)
Gross profit margin 49.0 54.0 4.1
Selling, general and administrative expenses:
Selling 16.8 16.6 ( 6.8)
General and administrative 7.4 7.2 ( 8.2)
Research and development 0.2 0.0 (100.0)
Amortization 2.9 2.7 ( 10.1)
Total selling, general and administrative expenses 27.3 26.6 ( 8.1)
Operating income 21.7 27.5 19.6
Interest income 0.1 0.4 237.3
Interest (expense) (0.9) (0.4) ( 56.9)
Other income 0.2 0.0 (101.6)
Income before income taxes 21.1 27.5 23.4
Provision for income taxes 7.8 9.6 16.5
Net income 13.3 17.9 27.5
</TABLE>
11
<PAGE> 12
RESULTS OF OPERATIONS
---------------------
SALES
- -----
The following summarizes approximate sales activity by product category
for the first quarter ended March 31;
<TABLE>
SALES BY PRODUCT CATEGORY
<CAPTION>
1994 % 1995 %
---- ----- ---- -----
<S> <C> <C> <C> <C>
Pharmaceutical products $ 5,295,000 43.6 $ 4,560,000 39.8
Vitamin and Nutritional Supplement products 6,847,000 56.4 6,899,000 60.2
----------- ----- ----------- -----
Total sales $12,142,000 100.0 $11,459,000 100.0
</TABLE>
Sales for the first quarter ended March 31, 1995 declined 5.6% compared
to the first quarter ended March 31, 1994. Sales declined due to lower
pharmaceutical sales resulting from the continuing shortage of the
supply of Thrombinar(R) from the Company's supplier.
Sales of pharmaceutical products declined 13.9% due to a 25.4% decline
in Thrombinar(R) sales. The Company ended the quarter with a backlog of
Thrombinar(R) sales of approximately $2.0 million, up from $1.1 million
at December 31, 1994. Sales of vitamin and nutritional supplement
products were essentially flat as a result of a 26.9% decline in sales
of the MD Pharmaceutical line to military commissaries, which was
offset by an increase of 8.1% in Bronson product line sales. MD
Pharmaceutical product sales to military commissaries continue to
decline, primarily, as a result of additional base closures. Contract
sales declined 13.2% due to a delay in completion of the Company's
annual production agreement with Johnson & Johnson for 1995. Agreement
was reached in March, 1995 whereby some shipments were made during the
first quarter.
GROSS PROFIT
- ------------
Gross profit during the first quarter of 1995 increased 4.1% over the
first quarter of 1994. As a percentage of sales, margins increased
from 49.0% in the 1994 first quarter to 54.0% in the 1995 first quarter
as a result of improved manufacturing efficiencies and price increases
on Bronson sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling expenses declined 6.8% during the first quarter of 1995
compared to the same quarter of 1994 as a result of lower variable
expenses on lower sales. As a percentage of sales, these expenses were
also down modestly due to lower sales commissions and royalties.
12
<PAGE> 13
General and administrative expenses declined 8.2% during the first
quarter of 1995 due to efficiencies achieved through the Company's 1994
consolidation of manufacturing and distribution in St. Louis and
through better controls on expenses. For the same reason, these
expenses were down modestly, as a percentage of sales, during the first
quarter of 1994 from the 1995 first quarter.
Amortization expenses associated with intangible assets included in
selling, general and administrative expenses declined 10.1% during the
first quarter of 1995 as compared to the first quarter of 1994 as a
result of the expiration of the amortization of certain intangible
assets.
OPERATING INCOME
- ----------------
Operating income during the first quarter of 1995 increased 19.6% over
the first quarter of 1994 as a result of an increase in gross profits
and a reduction of operating expenses. For the same reason operating
income increased, as a percentage of sales, during the 1995 first
quarter over the 1994 first quarter.
OTHER INCOME (EXPENSES)
- -----------------------
Interest income was up 237.3% during the first quarter of 1995 due to
larger cash balances on hand as compared to those of the 1994 first
quarter. Interest expense was down 56.9% due to the reduction in short
and long term debt.
INCOME TAXES
- ------------
The provision for income taxes for the first quarter of 1995 increased
however, the effective tax rate decreased to 35.0% from 37.1% for the
same period of 1994 due to better forecasting and the consolidation of
moving certain operations and corresponding taxable incomes into
Missouri where a lower state income tax prevails.
NET INCOME
- ----------
Earnings per share increased 29.4% during the first quarter of 1995 to
$.22 per share on 9,515,000 average shares outstanding compared to $.17
for the first quarter of 1994, on 9,559,000 average shares outstanding
during the 1994 first quarter.
13
<PAGE> 14
FINANCIAL CONDITION
- -------------------
Balance Sheet Information
- -------------------------
At March 31, 1995, the Company's current ratio declined to 2.7:1 from
3.6:1 at December 31, 1994 due to the use of cash to pay down long term
debt and due to an increase in current liabilities. For the same
reason working capital declined from $15.0 million at December 31, 1994
to $13.0 million at March 31, 1995. However, during the first quarter
of 1995, debt as a percentage of equity decreased from 13.0% at
December 31, 1994 to 3.5% at March 31, 1995.
Inventories were up at March 31, 1995 over December 31, 1994
principally from the build up of JMI Thrombin inventories for shipments
to be released during the second quarter, and due to an increase in raw
materials required for increases in the backlog of contract sales.
Accounts receivable increased due to unusually large shipments of
Thrombinar(R) during the last week of March, 1995.
14
<PAGE> 15
PART II - OTHER INFORMATION
---------------------------
NONE
- ----
15
<PAGE> 16
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.
JONES MEDICAL INDUSTRIES, INC.
Date: May 12, 1995 By: /s/ Dennis M. Jones, President
------------ ---------------------------------
Dennis M. Jones, President
Date: May 12, 1995 By: /s/ Judith A. Jones
------------ ---------------------------------
Judith A. Jones,
Executive Vice President and
Principal Financial and
Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,791,457
<SECURITIES> 120,000
<RECEIVABLES> 4,785,875
<ALLOWANCES> 73,794
<INVENTORY> 9,959,499
<CURRENT-ASSETS> 20,786,886
<PP&E> 15,184,886
<DEPRECIATION> 2,447,933
<TOTAL-ASSETS> 54,932,654
<CURRENT-LIABILITIES> 7,651,144
<BONDS> 0
<COMMON> 369,288
0
999
<OTHER-SE> 42,945,118
<TOTAL-LIABILITY-AND-EQUITY> 54,932,654
<SALES> 11,458,547
<TOTAL-REVENUES> 11,508,608
<CGS> 5,267,494
<TOTAL-COSTS> 2,729,041
<OTHER-EXPENSES> 313,920
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 50,065
<INCOME-PRETAX> 3,148,088
<INCOME-TAX> 1,101,830
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,046,258
<EPS-PRIMARY> .22
<EPS-DILUTED> 0
</TABLE>
