<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, 1997
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 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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 REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN
SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X
---
NO .
---
NUMBER OF SHARES OUTSTANDING OF REGISTRANT'S COMMON STOCK AS OF MAY 12,
1997: 28,564,114
PAGE 1 OF 16
<PAGE> 2
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
INDEX
-----
<CAPTION>
PAGE
NUMBER
Part I - Financial Information ------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1996 and March 31, 1997 3
Condensed Consolidated Statements of Income -
three months ended March 31, 1996 and 1997 4
Condensed Consolidated Statements of Stockholders'
Equity - three months ended March 31, 1996 and 1997 5
Condensed Consolidated Statements of Cash Flows -
three months ended March 31, 1996 and 1997 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
Item 1. None 15
Signatures 16
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31, March 31,
1996 1997
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 52,171,684 $ 59,662,261
Accounts receivable, less allowance for doubtful accounts of
$388,109 at December 31, 1996 and $398,610 at March 31, 1997 11,301,251 16,105,675
Inventories 12,752,523 15,039,685
Income taxes receivable 1,763,864 --
Deferred income taxes 1,846,318 1,846,318
Prepaid expenses and other 715,165 992,401
------------ ------------
Total current assets 80,550,805 93,646,340
Net property, plant and equipment 24,170,353 24,469,498
Intangible assets, net 69,847,240 69,009,520
Other assets 2,664,990 2,763,883
------------ ------------
$177,233,388 $189,889,241
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 6,471,061 $ 8,139,914
Current portion of long-term debt 3,000,000 3,000,000
Income taxes payable -- 3,398,006
Dividends payable 560,298 571,181
------------ ------------
Total current liabilities 10,031,359 15,109,101
Deferred income taxes 5,282,307 5,282,307
Contingencies and commitments (Note 8) -- --
Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized, -- --
Common stock, $.04 par value; 30,000,000 authorized,
28,435,451 issued and outstanding at December 31, 1996 and
28,582,375 at March 31, 1997 1,137,418 1,143,295
Contributed capital (including effects of unearned compensation
and related amortization) 108,582,105 108,607,599
Retained earnings 52,200,199 59,746,939
------------ ------------
Total stockholders' equity 161,919,722 169,497,833
------------ ------------
$177,233,388 $189,889,241
============ ============
See accompanying notes.
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1997
---- ----
<S> <C> <C>
Sales $21,848,076 $29,775,682
Cost of sales 9,400,939 8,878,901
----------- -----------
Gross profit on sales 12,447,137 20,896,781
Selling, general and administrative expenses:
Selling 3,658,997 4,837,110
General and administrative 1,947,686 2,452,499
Research and development 86,357 --
Amortization 529,301 871,860
----------- -----------
Total selling, general and administrative
expenses 6,222,341 8,161,469
----------- -----------
Operating income 6,224,796 12,735,312
Other income (expense)
Interest income 100,277 678,027
Interest expense (262,118) (89,457)
Other income (expense) (22,305) (15,814)
----------- -----------
Income before income taxes 6,040,650 13,308,068
Income taxes 2,291,953 5,190,147
----------- -----------
Net income $ 3,748,697 $ 8,117,921
=========== ===========
Average shares outstanding 25,457,224 29,354,754
Earnings per share $ .15 $ .28
=========== ===========
See accompanying notes.
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Three Months Ended March 31, 1996 and 1997
<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, 1995 1,056 24,227,423 $ 10 $ 969,097 $ 19,590,417 $35,379,001 $ 55,938,525
Exercise of stock options -- 234,825 -- 9,393 584,816 -- 594,209
Restricted Stock:
Amortization of unearned
compensation -- -- -- -- 7,500 -- 7,500
Conversion of preferred (775) 3,051 (8) 122 (114) -- --
Net income -- -- -- -- -- 3,748,697 3,748,697
Adjustment to increase
pooled companies
net income to conform
year end -- -- -- -- -- 701,925 701,925
Cash dividend declared
- common stock
($.015 per share) -- -- -- -- -- (357,786) (357,786)
Cash dividend declared
- preferred stock
($.04 per share) -- -- -- -- -- (11) (11)
------ ---------- ------- ---------- ------------ ----------- ------------
Balance at March 31, 1996 281 24,465,299 $ 2 $ 978,612 $ 20,182,619 $39,471,826 $ 60,633,059
===== ========== ====== ========== ============ =========== ============
Balance at December 31, 1996 -- 28,435,451 $ -- $1,137,418 $108,582,105 $52,200,199 $161,919,722
Exercise of stock options -- 159,799 -- 6,391 452,784 -- 459,175
Shares tendered in payment
of option exercise price -- (10,182) -- (407) (339,606) -- (340,013)
Return of escrowed shares -- (2,693) -- (107) (87,684) -- (87,791)
Net income -- -- -- -- -- 8,117,921 8,117,921
Cash dividend declared
- common stock
($.020 per share) -- -- -- -- -- (571,181) (571,181)
----- ---------- ------ ---------- ------------ ----------- ------------
Balance at March 31, 1997 -- 28,582,375 $ -- $1,143,295 $108,607,599 $59,746,939 $169,497,833
===== ========== ====== ========== ============ =========== ============
See accompanying notes.
</TABLE>
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<PAGE> 5
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, 1996 and 1997
<CAPTION>
Cash flow used from operating activities: 1996 1997
---- ----
<S> <C> <C>
Net income $3,748,697 $ 8,117,921
Adjustment to increase pooled companies net income
to conform year end 701,925 --
Non-cash adjustments:
Depreciation and amortization 924,973 1,376,795
Provision for uncollectibles 32,387 10,500
Loss on asset sales 14,043 17,686
Change in assets and liabilities:
Accounts receivable 449,315 (4,814,925)
Income tax receivable -- 1,763,864
Inventories (1,924,445) (2,287,162)
Prepaid expenses and other assets (1,236,308) (498,061)
Accounts payable and accrued expenses (687,323) 1,668,856
Income taxes payable 2,097,981 3,398,006
---------- -----------
Net cash from operating activities 4,121,245 8,753,480
========== ===========
Cash flows used for investing activities:
Proceeds from sale of assets 179,348 24,530
Acquisition of Tapazole(R) (8,041,750) --
Additions to property, plant and equipment (1,064,305) (846,297)
---------- -----------
Net cash used for investing activities (8,926,707) (821,767)
---------- -----------
Cash flows from (used for) financing activities:
Proceeds from debt 8,000,000 --
Repayment of long-term debt (3,019,963) --
Payment of dividends (283,605) (560,298)
Proceeds from exercise of stock options 594,209 119,162
---------- -----------
Net cash from (used for) financing activities 5,290,641 (441,136)
---------- -----------
Increase (decrease) in cash and cash equivalents 485,179 7,490,577
Cash and temporary investments, beginning of period 8,341,823 52,171,684
---------- -----------
Cash and temporary investments, end of period $8,827,002 $59,662,261
========== ===========
See accompanying notes.
</TABLE>
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<PAGE> 6
<TABLE>
JONES MEDICAL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CON'T)
(UNAUDITED)
Three Months Ended March 31, 1996 and 1997
<CAPTION>
Supplemental Disclosures of Cash Flow Information:
- -------------------------------------------------
1996 1997
Cash paid during the three months for: ---- ----
<S> <C> <C>
Interest $203,849 $ --
-------- -------
Income taxes $888,470 $28,227
======== =======
See accompanying notes.
</TABLE>
- 7 -
<PAGE> 7
JONES MEDICAL INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1997
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, 1996, included in the 1996 Annual
Report.
2. INVENTORIES
-----------
Inventories are valued at the lower of cost on a first-in, first-out basis
or market.
Inventories are comprised as follows:
<TABLE>
March 31,
December 31, 1997
1996 (Unaudited)
------------ -----------
<S> <C> <C>
Raw material $ 4,766,356 $ 5,425,432
Work-in-process 1,539,115 3,513,287
Finished goods 6,447,052 6,100,966
----------- -----------
$12,752,523 $15,039,685
=========== ===========
</TABLE>
- 8 -
<PAGE> 8
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(Unaudited)
------------ -----------
<S> <C> <C>
Land $ 2,419,676 $ 2,419,676
Building and improvements 11,710,066 11,862,742
Equipment and furniture 15,022,571 15,645,805
Automobiles 438,451 438,451
----------- -----------
29,590,764 30,366,674
Less accumulated depreciation and
amortization 5,420,411 5,897,176
----------- -----------
$24,170,353 $24,469,498
=========== ===========
</TABLE>
4. INTANGIBLE ASSETS
-----------------
Intangible assets are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(Unaudited)
----------- -----------
<S> <C> <C>
Distribution systems, trademarks
and licenses $48,409,609 $48,409,609
Customer list 6,084,967 6,084,967
Restrictive covenants and other
intangibles 5,602,768 5,702,709
Goodwill 17,249,968 17,162,176
----------- -----------
77,347,312 77,359,461
Less accumulated amortization 7,500,072 8,349,941
----------- -----------
$69,847,240 $69,009,520
=========== ===========
</TABLE>
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<PAGE> 9
5. CONTINGENCIES
-------------
The Company currently carries product liability coverage of
$20,000,000 per occurrence and $20,000,000 in the aggregate
on a "claims made" basis. In addition to this coverage, the
Company carries a $5,000,000 umbrella policy. 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> 10
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
- -----------------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
- ----------------------------------
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.
<TABLE>
<CAPTION>
PERCENTAGE OF
INCREASE
(DECREASE)
AGGREGATE
THREE MONTHS ENDED DOLLAR
MARCH 31, AMOUNT
------------------ -------------
1996 1997
---- ----
<S> <C> <C> <C>
Sales 100.0% 100.0% 36.3%
Cost of sales 43.0 29.8 (5.6)
Gross profit margin 57.0 70.2 67.9
Selling, general and administrative expenses:
Selling 16.7 16.2 32.2
General and administrative 8.9 8.2 25.9
Research and development 0.7 0.0 (100.7)
Amortization 2.4 2.9 64.7
Total selling, general and
administrative expenses 28.5 27.4 31.2
Operating income 28.5 42.8 104.6
Interest income 0.5 2.3 576.2
Interest (expense) (1.2) (0.3) (65.9)
Other (expense) (0.1) (0.1) (29.1)
Income before income taxes 27.6 44.7 120.3
Provision for income taxes 10.5 17.4 126.5
Net income 17.2 27.3 116.6
</TABLE>
- 11 -
<PAGE> 11
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>
1996 % 1997 %
---- ----- ---- -----
<S> <C> <C> <C> <C>
Pharmaceutical products $13,321,076 61.0 $22,467,704 75.5
Vitamin and Nutritional
Supplement products 8,527,000 39.0 7,307,978 24.5
----------- ----- ----------- -----
Total Sales $21,848,076 100.0 $29,775,682 100.0
=========== ===== =========== =====
</TABLE>
Sales for the first quarter ended March 31, 1997 increased 36.3%
compared to the first quarter ended March 31, 1996.
Sales of pharmaceutical products increased 68.7% for first quarter
of 1997. This increase is a combination of an 88.7% increase in
branded pharmaceuticals and a decrease of 54.1% in contract
manufacturing. Sales increased due to the addition of Abana
pharmaceutical product sales (acquired December 31, 1996), the
inclusion of a full quarter of Tapazole(R) sales (purchased March
18, 1996), and forward buying of wholesalers. Pharmaceutical
products accounted for 75% of total company sales reflecting strong
overall growth of both hospital pharmaceutical sales and physician
direct prescription pharmaceutical sales. Sales of vitamin and
nutritional supplement products decreased 14.3%. The Bronson
product line was down 8.1% with the MD Pharmaceutical product line
(sold exclusively in military commissaries) decreasing 20.2%.
Contract vitamin sales decreased 26.5%.
GROSS PROFIT
- ------------
Gross profit during the first quarter of 1997 in the aggregate,
increased 67.9% or $8,449,644 over the first quarter of 1996. As a
percentage of sales, margins increased from 57.0% in the 1996 first
quarter to 70.2% in the 1997 first quarter as a result of sales of
higher margin pharmaceutical products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling expenses increased 32.2% during the first quarter of 1997
compared to the same quarter of 1996, as a result of additional
royalties paid on Brevital(R) and Tapazole(R), catalogue costs due
to larger mailings, the additional 55 salesmen from the Abana
acquisition, attendance at various conventions and increasing the
support staff in the corporate office. As a percentage of sales
these expenses were essentially the same as first quarter, 1996.
- 12 -
<PAGE> 12
General and administrative expenses increased 25.9% in the aggregate
during the first quarter of 1997 due to annual salary increases and
additional support staff. However, these expenses were down
modestly, as a percentage of sales, during the first quarter of 1997
from the 1996 first quarter.
Amortization expenses associated with intangible assets included in
selling, general and administrative expenses increased 64.7% during
the first quarter of 1997 as compared to the first quarter of 1996
as a result of additional amortization on intangible assets acquired
in connection with the Tapazole(R), Brevital(R) and Abana
acquisitions.
OPERATING INCOME
- ----------------
Operating income during the first quarter of 1997 increased 104.6%,
in the aggregate, or $6,510,516 over the first quarter of 1996 as a
result of an increase in gross profits. For the same reason
operating income increased 104.6%, as a percentage of sales, during
the 1997 first quarter over the 1996 first quarter.
OTHER INCOME (EXPENSES)
- -----------------------
Interest income was up 576.2% during the first quarter of 1997 due
to larger cash balances on hand as compared to those of the 1996
first quarter, as a result of the cash received in April, 1996 from
the secondary offering. Interest expense decreased to 65.9% due to
the decrease in both short and long term debt.
INCOME TAXES
- ------------
The provision for income taxes for the first quarter of 1997
increased due to the effective tax rate increasing to 39% from 38%
for the same period of 1996. The increase in the effective tax rate
is expected due to the additional percent on profits over
$10,000,000.
NET INCOME
- ----------
Earnings per share increased 86.7% during the first quarter of 1997
to $.28 per share on 29,354,754 average shares outstanding compared
to $.15 for the first quarter of 1996, on 25,457,224 average shares
outstanding during the 1996 first quarter.
FINANCIAL CONDITION
- -------------------
Balance Sheet Information
- -------------------------
At March 31, 1996 the Company's current ratio declined to 6.2:1 from
8.0:1 at December 31, 1996 due to the income taxes payable opposed
as a receivable at year-end, 1996. Working capital increased from
$70.5 million at December 31, 1996 to $78.5 million at March 31,
1997. Debt as a percentage of equity remained at 1.8% from
December 31, 1996 to March 31, 1997.
- 13 -
<PAGE> 13
Accounts receivable increased $4,804,000 from December 31, 1996 to
March 31, 1997 due to increased sales brought about by a price
increase effective April 1, 1997. In days outstanding, however,
accounts receivable increased to 49 days at March 31, 1997 from 39
days at December 31, 1996.
Inventories were up at March 31, 1997 over December 31, 1996 in
preparation for second quarter projected sales.
- 14 -
<PAGE> 14
PART II - OTHER INFORMATION
---------------------------
None.
- 15 -
<PAGE> 15
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 15, 1997 By: /s/ Dennis M. Jones
--------------------------- ---------------------------
Dennis M. Jones, President
Date: May 15, 1997 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 59,662,261
<SECURITIES> 0
<RECEIVABLES> 16,504,285
<ALLOWANCES> 398,610
<INVENTORY> 15,039,685
<CURRENT-ASSETS> 93,646,340
<PP&E> 30,366,674
<DEPRECIATION> 5,897,176
<TOTAL-ASSETS> 189,889,241
<CURRENT-LIABILITIES> 15,109,101
<BONDS> 0
<COMMON> 1,143,295
0
0
<OTHER-SE> 168,354,538
<TOTAL-LIABILITY-AND-EQUITY> 189,889,241
<SALES> 29,775,682
<TOTAL-REVENUES> 29,775,682
<CGS> 8,878,901
<TOTAL-COSTS> 8,878,901
<OTHER-EXPENSES> (15,814)
<LOSS-PROVISION> 10,501
<INTEREST-EXPENSE> 89,457
<INCOME-PRETAX> 13,308,068
<INCOME-TAX> 5,190,147
<INCOME-CONTINUING> 8,117,921
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,117,921
<EPS-PRIMARY> .28
<EPS-DILUTED> .28
</TABLE>
