[NOTIFY] 73164,3522
[TEXT]
<PAGE>
<PAGE> UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
Commission File Number 1-9934
ICN BIOMEDICALS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 33-0004340
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 Hyland Avenue, Costa Mesa, California 92626
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (714) 545-0113
------------------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
---------------------------- ------------------------
Common Stock, $.01 par value American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
None
(Title of Class)
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, 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, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
-----
The aggregate market value of the Registrant's voting stock held by
non-affiliates on March 29, 1994 was approximately $13,012,000.
The number of outstanding shares of Common Stock as of March 29, 1994
was 9,033,623.
Portions of the Registrant's definitive Proxy Statement for its 1994
Annual Meeting of Stockholders are incorporated into Part III of this report
by reference.
<PAGE>
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<TABLE> TABLE OF CONTENTS
<CAPTION>
Page
Item Number and Caption Number
----------------------- ------
PART I
<S> <C>
1. Business 3
2. Properties 11
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 13
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters 15
6. Selected Financial Data 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
8. Financial Statements and Supplementary Data 26
9. Changes in and Disagreements with Auditors on
Accounting and Financial Disclosure 56
PART III
10. Directors and Executive Officers of the Registrant 56
11. Executive Compensation 56
12. Security Ownership of Certain Beneficial
Owners and Management 56
13. Certain Relationships and Related Transactions 56
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K 57
</TABLE>
<PAGE>
<PAGE>3
PART I
ITEM 1. BUSINESS
ICN Biomedicals, Inc. and its subsidiaries (the "Company") develop,
manufacture and sell research chemical products, biomedical instrumentation,
diagnostic reagents, and radiation monitoring services. Major product lines
of the research chemical products group include biochemicals, radiochemicals
and cell biology products, and chromatography materials. Major product lines
of the biomedical instrumentation group include microplate instrumentation,
environmental technology products and precision liquid delivery instrumenta-
tion. The diagnostic reagents group provides reagents and instrumentation,
including enzyme-and radio-immunoassay kits and immunoassay systems. The
Company also purchases research chemicals from other manufacturers, in bulk,
for repackaging and distributes biomedical instrumentation manufactured by
others. The Company's principal customers are life science researchers,
including those engaged in molecular biology, genetic engineering and other
areas of biotechnology, biochemical research laboratories, and clinical
laboratories. Major markets are located in the United States, Canada,
Mexico, South America, Eastern and Western Europe, Australia and Japan. The
Company's products are sold through Company-produced catalogs, direct mail
advertising, direct sales force, and selected independent distributors and
agents.
The Company was incorporated in September 1983 as a Delaware corporation
by its parent, ICN Pharmaceuticals, Inc. ("ICN"), and has since operated as
an ICN subsidiary. Effective January 1, 1984, ICN transferred to the
Company, in exchange for all of the then outstanding shares of common stock
of the Company, certain assets and liabilities comprising the Life Sciences
Group of ICN. Some of the operations of that group had been conducted by ICN
since ICN's inception in 1960. Since 1984, several businesses and product
lines have been acquired by ICN on behalf of the Company and subsequently
transferred to the Company.
The Company changed its fiscal year end from November 30 to December 31,
effective for the twelve months ended December 31, 1991.
In November 1989, the Company acquired, for $37,700,000, all of the
issued and outstanding common shares of Flow Laboratories, Inc., and Flow
Laboratories B.V., from GRC International, Inc. (formerly Flow General,
Inc.). These companies, together with their respective subsidiaries ("Flow")
constituted the Biomedical Division of Flow General. Funds for the purchase
consisted of cash and bonds with a value of $35,700,000 (of which $27,000,000
was financed by bank borrowings, and 100,000 shares of the common stock of
the Company, with a guaranteed value of $20 per share on November 8, 1994.
Flow was a manufacturer and distributor of several thousand biomedical
products worldwide, including cell biology products, laboratory plastics,
enzyme linking immunosorbent assay (ELISA), diagnostic instrumentation and
environmental technology products.
At the time of the acquisition of Flow, the Company believed that
the distribution outlets acquired would substantially increase the Company's
ability to compete in international markets where it had no significant
direct representation. Following the acquisition, the Company attempted to
centralize the European marketing and distribution, discontinue certain low
margin product lines and shut down excess manufacturing and distribution
facilities. These efforts continued into 1992, at which time the Company
<PAGE>
<PAGE>4
completed a major restructuring plan. (See Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations, Restructuring
Costs and Special charges).
On August 30, 1993, the Company issued 300,000 shares of a new series
"A" of the Company's non-convertible, non-voting, preferred stock valued
pursuant to a fairness opinion, at $30,000,000 to ICN. In exchange, ICN
delivered 4,983,606 shares of the Company's common stock that ICN owned and
exchanged intercompany debt owed to ICN by the Company in the amount of
$11,000,000.
In addition, on August 30, 1993, the Company issued 390,000 shares of a
new series "B" of the Company's non-convertible, non-voting, preferred stock
valued pursuant to a fairness opinion, at $32,000,000 to ICN. In exchange,
ICN delivered to the Company 8,384,843 shares of the Company's common stock
that ICN owned.
As a result of the series "A" and "B" exchanges, ICN's ownership was
reduced from 88% to 69% of the outstanding common stock of the Company.
In addition to the business of the Company, ICN develops, manufactures,
distributes and sells pharmaceutical and related products and services.
ICN's pharmaceuticals group is composed of Viratek, Inc. ("Viratek", a
63%-owned subsidiary at March 26, 1994) and SPI Pharmaceuticals, Inc.
("SPI", a 39%-owned investment at March 26, 1994, which, effective from
January 1, 1993, is accounted for on the equity method of accounting by ICN.)
Viratek conducts research and develops compounds derived from nucleic
acids, the basic genetic material. Viratek's principal product is the
compound Virazole (registered trademark) (ribavirin), a broad spectrum
anti-viral agent. The Company has no financial interest in Virazole.
In addition, Viratek has initiated a new research program focused on the
detection and measurement of a group of human peptide hormones or regulators
and in vitro commercial diagnostics. Viratek also conducts certain
biomedical research and development for the Company (see Research and
Development).
SPI and its subsidiaries manufacture, distribute and sell pharmaceutical
and nutritional products, primarily in the United States, Yugoslavia, Mexico,
Western and Eastern Europe and Canada.
The Company's principal executive offices are located at 3300 Hyland
Avenue, Costa Mesa, California 92626, telephone (714) 545-0113.
Products
Research Chemical Products Group
Biomedical's research products group markets more than 55,000 chemical,
radiochemical, biochemical and immunochemical compounds. These compounds
result from chemical synthesis, biochemical (enzymatic) synthesis, and/or are
isolated from natural sources such as micro-organisms, plant, and animal
tissues. In addition, the biomedical group offers laboratory plasticware,
media for cell culture, and materials for chromatography.
BIOCHEMICALS. Biochemicals are chemicals that occur in or result from
any life process. The major biochemicals in the research laboratory market
<PAGE>
<PAGE>5
include proteins, peptides, amino acids, carbohydrates, enzymes, nucleic
acids and their derivatives. The Company repackages and sells, primarily
through a catalog, spot mailings and telephone solicitation, approximately
35,000 chemical items (including rare and fine chemicals) to customers in
approximately 1,500 laboratories worldwide who are largely engaged in
organic, inorganic and biochemical experimentation and synthesis. Major
products include ammonium sulfate, cesium chloride, guanidine hydrochloride,
L-glutamine and ultra-pure tris.
In recent years, there has been an increasing demand for ultra-pure
biochemicals, particularly for use in molecular biology and medically-
oriented research work. The Company has expanded its molecular biology line
through the addition of modifying and restriction enzymes, reagents for gel
electrophoresis and other chemicals used in various phases of genetic
engineering. This includes materials used in recombinant technology such as
growth factors, restriction endonucleases (enzymes which "cut" DNA material
at a specific point) and polynucleotide "linkers" which are used to rejoin
divided segments of DNA molecules.
Under the K&K Laboratories trade name the Company offers 23,000 rare and
fine chemicals consisting principally of organic chemicals, inorganic
chemicals, organometallics, rare earth metals and specialty intermediates.
These products are used in the chemical, pharmaceutical, aerospace,
electronic, and educational fields.
RADIOCHEMICALS. Radiochemicals are produced through the combination of
radioactive raw materials with non-radioactive chemical intermediates, the
resulting products, referred to as "labeled" or "tagged", possess one or more
radioactive atoms. These isotopes are used by researchers in conjunction
with sophisticated measuring instruments to follow or trace the chemical
through a biochemical system. Such work helps to determine the mechanisms by
which molecules are transformed within living systems, furthering knowledge
of genetic, biological and physiological disorders, including hormonal
deficiencies, physical abnormalities and a range of organ and
endocrinological disorders.
Using a variety of multi-step chemical and biochemical procedures, the
Company produces in excess of 800 different "radioactive" or "labeled"
compounds. The Irvine, California facility uses Phosphorus-32,
Sulfur-35, Tritium and Carbon-14 to produce organic molecules for use in a
large number of biomedical research applications. The Company offers
reactor-produced radionuclides but does not, at this time, refine such
products for human use as radiopharmaceuticals.
CELL BIOLOGY. The Company sells a wide range of components for the
culturing of cells in an artificial environment under specially controlled
conditions. Prior to the sale of the Irvine, Scotland manufacturing facility
in April 1993, the Company manufactured most cell biology products in-house.
The Company now procures these products at a lower cost from third party
suppliers. Cell culture has become an increasingly important technique for
the study of cell behavior, the study of viruses and viral infections, the
development and production of vaccines and the testing of new drugs,
chemicals, food and toxic substances.
The Company is a supplier of materials for cell culture and offers a
comprehensive range of media, growth factors and sera as well as a variety of
disposable plastic labware and ancillary equipment. The Company's chemically
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<PAGE>6
defined growth media, which nourish living cells, are used by customers in
maintaining or growing cells in the laboratory. The Company also markets
processed animal sera (used to enrich media) and uses both raw and processed
sera to formulate other products. The availability and costs of raw animal
sera varies and is largely beyond the Company's control.
Other cell biology products include the Titertek-Plus (registered
trademark) family of pipettes and disposable plastic labware.
CHROMATOGRAPHY PRODUCTS. Chromatography products include chemicals
known as adsorbents as well as other consumable products, such as nylon
membranes, which are used for chromatography (a scientific method employing
sophisticated instrumentation to separate chemical mixtures in order to
analyze their components). The Company distributes adsorbents worldwide
which are produced by its German subsidiary.
Biomedical Instrumentation Group
The Company's biomedical instrumentation group markets microplate
instruments, a wide range of precision liquid delivery systems and gamma
counters.
MICROPLATE INSTRUMENTATION. These products are laboratory instruments
serving the needs of all applications utilizing the microtitration plate
(microplate) format. Microplates are 96-well trays, about the size of a
postcard, that offer a convenient, economical space-saving alternative to
test tubes and have become the vessel of choice for biomedical tests. The
preeminent microplate application is immunoassays used in diagnostics, public
health screening, quality control and research. The Company's Titertek
(registered trademark) product lines offer instruments that address all steps
in using microplates including dispensing samples and reagents, reagent
displacement (known as microplate "washing"), and measurement of calori-
metric, fluorescent and luminescent test results. The products range from
hand operated pipettes to integrated analytical systems.
PRECISION LIQUID DELIVERY SYSTEMS. The Company's instrument
manufacturing facility in Huntsville, Alabama, produces high precision liquid
delivery systems starting with general purpose bench-top stations and
extending to customized automated systems incorporating process control, test
measurement and data reduction. The liquid delivery products are all
complimentary to, and compatible with, the microplate instruments, (both
those manufactured in Huntsville and own-label products obtained from third-
parties). This integration of the product lines enhances the Company's
ability to offer users a flexible system approach to meeting their evolving
laboratory equipment needs.
GAMMA COUNTERS. The Huntsville facility also produces gamma counters
(instruments that quantify the amount of radioactive "labels" incorporated
into a sample). Gamma counters are mainly used in diagnostics and research.
The Company offers a choice of automatic sample-feed and manually loaded
batch processing machines, all with a common data analysis and reduction
software package.
All instrumentation sold by the Company is supported by field and
factory service capability. Service contracts are actively sold to a large
customer base of long-term users of the Company's instruments.
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Diagnostic Reagents Group
The Company provides diagnostic reagents and instrumentation to
hospitals, clinics and biomedical research laboratories. Immunoassay is a
diagnostic technique used to determine the quantity of biological substances
present in very low concentrations in body fluids. In the United States
alone, more than 5,000 laboratories use the technique in routine clinical
diagnostic applications. The Company manufactures both Enzyme-Immunoassay
and Radio-Immunoassay kits at its Costa Mesa, California facility and markets
these kits under the IMMUCHEM product line. In 1993, the Company developed
a line of non-isotopic enzyme-immunoassay used for screening newborns for
inherited genetic diseases ("Neonatal line"). The Company's strategy is to
develop a complete line of reagents to address its strength in the
endocrinology and newborn screening product segments. The Company has
developed instruments which allow assays to be automated for moderate to
high volume applications in which ease of use and labor productivity are
competitive advantages. The Company will continue to add more internally
developed products to its Neonatal line in 1994 including a new fully-
automated analyzer.
Radiation Monitoring Services Group
The Company provides an analytical monitoring service to determine
personal occupational exposure to ionizing radiation.
Since 1973, ICN has provided dosimetry services to dentists, veterin-
arians, chiropractors, podiatrists, hospitals, universities, governmental
institutions and power plants. ICN's service include both film and Thermo
Luminescent ("TL") badges in several configurations to accommodate a broad
scope of users. This service includes the manufacture of badges,
distribution to and from clients, analysis of badges and a radiation report
indicating the exposure. The marketing strategy in 1993 was geared towards
the small office practitioner both domestically and in an initial entry into
the international market. Fiscal 1994 will be a year of intense effort to
upgrade and streamline internal operations and computer software related to
Dosimetry services. Two new badge configurations are planned to enhance
Dosimetry's product offering: A CR39 neutron monitor and a Thermo
Luminescent Dosimeter ("TLD") wallet card monitor. These new products,
coupled with the software enhancements will allow the Company to continue its
aggressive marketing campaign both in the domestic and international areas.
Marketing
The Company's marketing operations are headquartered at the corporate
offices in Costa Mesa, California. Sales and marketing methods vary
according to product group and include direct sales through a field sales
force, catalog sales, direct mail campaigns and independent agents/
distributors. The Company has a field sales and marketing organization
of 141 persons in the United States and Canada, 73 in Europe, 9 in Australia
and 6 in Japan.
Customers
The Company's customer group for research products is principally
composed of biomedical research institutions such as universities, the
National Institutes of Health, pharmaceutical companies, and, to a lesser
extent, hospitals. Customers for diagnostic reagents and instruments are
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<PAGE>8
generally clinics, medical offices and hospitals. Customers for the
Company's other biomedical instruments include both biomedical research
institutions and clinics, medical offices and hospitals. The Company is
not materially dependent upon any one customer or a small group of customers
and does not believe the loss of any one customer would have a material
adverse effect on the Company. However, since a large portion of medical
research in both the United States and other countries is funded by
governmental agencies, the Company's results of operations could be
adversely affected by cancellation or curtailment of governmental
expenditures for medical research.
Foreign Operations
The Company operates in the United States, Canada, Europe and Asia/-
Pacific. For financial information about domestic and foreign operations and
export sales, see Note 10 of Notes to Consolidated Financial Statements.
Foreign operations are subject to certain risks inherent to conducting
business abroad, including price and currency exchange control, fluctuations
in the relative value of currencies, political instability and restrictive
governmental actions. Changes in the relative value of currencies occur from
time to time and may, in certain instances, materially affect the Company's
results of operations. The Company does not hedge foreign currency risks.
The effects of these risks are difficult to predict.
Licenses, Patents, Trademarks and Proprietary Rights
The Company has 7 United States patents and 5 foreign patents expiring
from 1994 to 2008. Although no assurance can be given as to the breadth or
degree of protection which these patents will afford the Company, the
Company's business is not materially dependent on the protection afforded by
its patents.
Many of the Company's product names are registered trademarks in the
United States, Canada and other countries. Other organizations may in the
future apply for and be issued patents or may obtain proprietary rights
covering technology which may become useful to the Company's business. The
extent to which the Company may need, at some future date, to obtain licenses
from others is not known. In addition, the Company intends to rely on
unpatented proprietary know-how. However, there can be no assurance that
others will not independently develop such know-how or otherwise obtain
access to the Company's know-how. Each employee of the Company is required
to enter into an agreement holding proprietary information confidential and
agreeing that such obligation will survive the termination of his or her
employment with the Company.
Backlog
Backlog is not a significant factor since most orders received are
filled and shipped promptly after receipt. No single customer accounted for
more than 10% of the Company's net sales during the year ended December 31,
1993.
Raw Materials and Manufacturing
In general, raw materials used by the Company in the manufacture of its
products are obtainable from multiple sources in the quantities desired.
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However, the availability and costs of raw animal sera for distribution as
part of the Company's cell biology products may vary from time to time and is
largely beyond the Company's control. Additionally, in the last decade, the
number of reactor sites producing radioactive raw materials has diminished.
Product manufacturing is chiefly carried out by the Company in three
domestic facilities and one foreign facility: Costa Mesa, California
(radioimmunoassay kits and immunobiologic products); Huntsville, Alabama
(diagnostic and microplate instrumentation); Irvine, California
(radiochemicals) and Eschwege, Germany (chromatography products). Some
manufacturing and repackaging is also carried out at the Company's facility
in Aurora, Ohio.
Research and Development
The research and development group conducts its new product development
activities in its production departments, an approach that has proven most
effective in this specialized high technology segment of molecular biology.
The Company conducts research and development activities for diagnostic
reagents in Costa Mesa, California, and for the instrument product line in
Huntsville, Alabama.
Effective January 1, 1992, the Company entered into an agreement with
Viratek, whereby the Company transferred right, title and interest in
research and development projects related to the development of new assay
methods utilizing various non-isotopic and other immunoassay techniques as
well as universal immunohistology kits for specific immunogen localization
in cellular structures to Viratek. The Company retains the right of first
refusal to the marketing and distribution rights of any products developed
under this agreement.
Government Regulation
The Company is subject to licensing and other regulatory control by the
United States Food and Drug Administration, the Nuclear Regulatory
Commission, other Federal and state agencies and comparable foreign
governmental agencies. The Company has not in the past experienced any
significant difficulty in complying with the regulations of those agencies.
Provisions enacted or adopted by United States federal, state and
local agencies regulating the discharge of waste into the environment do not
currently have a material effect upon the Company's capital expenditures,
earnings or competitive position.
Competition
The industry in which the Company operates is highly competitive. The
Company's competitors, many of which have substantially greater capital
resources, marketing capabilities and larger staffs and facilities than the
Company, are actively engaged in marketing products similar to those of the
Company and developing new products similar to those being developed and sold
by the Company. Competitive factors vary by product line and customer and
include service, product availability and performance, price and technical
capabilities. Competitors of the Company's diagnostic reagent and
instrumentation group include LKB Instruments, Abbott Laboratories,
Diagnostic Products Corp. and Smith Kline/Beckman. Sigma Aldrich, Amersham
and New England Nuclear, a subsidiary of Dupont, are the market leaders in
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their segments of the research products business. Competitors of the
Company's cell biology products group include Life Technologies (Gibco/BRL)
and Whittaker/MBA. The Company's competitors in the biological
instrumentation group for its microplate instrumentation business include
Labsystems, Dynatech and Bio-tek Instruments. The possibility of product
obsolescence and product substitution is highest in the Company's
immunodiagnostic business where radioimmunoassay methods are being replaced
by assay techniques utilizing non-radioactive components such as enzymes or
fluorescent chemicals. Although the Company believes that the radio-
immunoassay technique is not under immediate threat, due to its superior
sensitivity and low cost, the Company has a research program in non-
isotopic based systems which could replace some of its radioimmunoassay kits
at some time in the future.
Employees
The Company employs approximately 505 persons, of whom 77 are engaged
in general and administrative matters, 229 in marketing and sales, 195 in
production and 4 in research and development. There are no collective
bargaining agreements between the Company and any of its employees, except
for approximately 39 employees of the Company's German subsidiary. The
Company considers its relations with its employees to be satisfactory.
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ITEM 2. PROPERTIES
All of the Company's facilities are leased except those in Eschwege,
Germany, Huntsville, Alabama and Opera, Italy. The Company believes its
existing facilities are adequate to support expected future growth. The
following are the principal facilities of the Company and its subsidiaries:
<TABLE>
<CAPTION> Approximate
Floor Space
Location Principal Operation (sq. ft.)
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<S> <C> <C>
Costa Mesa, California <F1> Corporate Headquarters
and Radiation Monitoring
Services, Diagnostic
Reagent and Immunological
Production 55,000
Huntsville, Alabama Diagnostic Instruments and
Immunodiagnostics
Instrumentation
Manufacturing 60,000
Opera, Italy <F2> Sales and Distribution Center 10,000
Aurora, Ohio Biochemical and Cell Biology
Product Distribution and
Research Diets Manufacturing 68,000
Irvine, California Radiochemical Manufacturing
and Distribution 27,000
Eschwege, Germany Chromatography Manufacturing 21,000
Covina, California <F3> Liquid Scintillation Cocktail
Manufacturing 17,000
Brussels, Belgium Sales Office 5,900
Bonn, Germany Sales and Distribution Center 25,500
Mississauga, Canada Sales and Distribution Center 18,500
Sydney, Australia Sales and Distribution Center 17,000
Thame, England Sales and Distribution Center 5,800
High Wycombe, England <F4> Sales Office 12,000
Paris, France Sales Office 900
Tokyo, Japan Sales and Distribution Center 1,000
<FN>
<F1> The Costa Mesa, California facility is currently leased from ICN at
a rental rate of $310,000 per year.
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<F2> During the fourth quarter of 1993, the Company moved its Italian
operation from Cassina de Pecchi, a leased facility, back to Opera,
an owned facility. The Opera facility was classified as a current
asset held for disposition for the year ended December 31, 1992 and
has been reclassified to Property, Plant and Equipment in December
1993.
<F3> The Covina, California facility was leased in 1993 from SPI at a rental
rate of $37,000 per year.
The Liquid Scintillation Cocktail manufacturing operations located at
the Covina facility were moved to the Aurora, Ohio, facility on
January 17, 1994.
<F4> The High Wycombe facility is currently vacant and available for sub-
lease (see Note 13 of Notes to Consolidated Financial Statements).
</TABLE>
It is management's belief that the methods used and amounts allocated
for related party leases are reasonable based upon the current usage by
the Company. For information regarding the Company's lease commitments
to non-affiliates, see Note 7 of Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries could be exposed to possible claims for
personal injury resulting from allegedly defective products. The Company and
its subsidiaries self-insure against potential product liability exposure
with respect to their marketed products. Until July 1985, the Company
maintained product liability insurance on an occurrence basis with respect to
its then marketed products, at which time certain policies were allowed to
lapse. After a review of the situation, based on cost and availability and
related factors, management decided not to continue to maintain any further
product liability insurance. Management reviews the Company's product
liability insurance requirements on a continuing basis. While the Company
has never experienced a material adverse claim for personal injury resulting
from allegedly defective products, a substantial claim, if successful, could
have a material adverse effect on the Company.
On September 27, 1993, ICN and the Company filed a complaint in the
California State Superior Court for Orange County, California, against GRC
International Inc., alleging fraud, negligent misrepresentation in the sale
of securities in California and violations of state and federal securities
laws. The precise amount of damages is unknown at this time. The lawsuit
arises out of the acquisition of all of the issued and outstanding shares of
Flow Laboratories, Inc. ("Flow") and Flow Laboratories B.V. by Biomedicals in
November 1989 from GRC International Inc., (formerly known as Flow General
Inc.). Defendant GRC's motion to compel arbitration was granted as to the
Company's claims. The action is stayed until April 7, 1994, as to ICN's
causes of action.
The Company is a party to a number of pending or threatened lawsuits
arising out of, or incident to, the ordinary course of business. In the
opinion of management, the resolutions of these matters will not have a
material adverse effect upon the consolidated financial position or
operations of the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company at December 31, 1993, were as
follows:
<TABLE>
<CAPTION>
Present Position
Name Age with The Company
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<S> <C> <C>
Milan Panic 64 Chairman of the Board and
Chief Executive Officer
Bill A. MacDonald 46 President
John E. Giordani 51 Senior Vice President and
Chief Financial Officer
Peter B. Coggins, Ph.D. 45 Vice President Marketing
Worldwide
M'Liss Jones Kane 41 Vice President Legal and
Corporate Secretary
</TABLE>
Executive officers are elected annually and serve at the pleasure of the
Board of Directors. The Company has adopted a charter provision which limits
the monetary liability of its directors under certain circumstances. The
Company enters into indemnification agreements with certain of its officers
and directors to the full extent permitted under Delaware law.
ICN has entered into employment agreements with certain senior
executives of ICN and its subsidiaries, including certain employees of the
Company. Mr. Milan Panic has an Employment Agreement with ICN which expires
in November 1994. Messrs. Bill A. MacDonald and John E. Giordani have
Employment Agreements which are intended to retain the services of these
executives for continuity of management in the event of any actual or
threatened change in control. Each agreement has an initial term of three
years and is automatically extended for one year terms unless either the
employee or the Company elects not to extend it.
Mr. Panic is Chairman of the Board of the Company. He is also Chairman
of the Board of ICN, Viratek and SPI. Mr. Panic is the founder of ICN and
has served as its Chairman of the Board since its inception in 1960. Prior
to July 1992, Mr. Panic also served as Chief Executive Officer of the
Company, and President and Chief Executive Officer of ICN, Viratek and SPI.
On July 14, 1992, Mr. Panic became Prime Minister of Yugoslavia and, with the
approval of the Company's Board of Directors, took a leave of absence from
all duties at the Company while retaining his title as Chairman of the Board.
Mr. Panic, with the approval of the respective Boards of Directors of those
companies, took similar leaves of absence from ICN, Viratek and SPI.
Mr. Panic and each of the companies, ICN, SPI, Viratek and Biomedicals
entered into an agreement providing for Mr. Panic's reemployment as Chief
Executive Officer upon termination of the leave of absence. Under a license
from the United States government, Mr. Panic, an American citizen, was
permitted to serve as Prime Minister of Yugoslavia without violating<PAGE>
<PAGE>14
applicable United States laws and regulations concerning sanctions imposed
against the Federal Republic of Yugoslavia (Serbia and Montenegro). The
license restricted Mr. Panic from engaging in any business with the Company
and its affiliates. On March 4, 1993, Mr. Panic completed his service as
Prime Minister and returned to the Company as Chief Executive Officer.
Mr. Bill A. MacDonald became President of the Company on March 18, 1993.
He joined ICN in March 1982 as Director of Taxes and Vice President of ICN.
In January 1992, Mr. MacDonald was promoted to Executive Vice President of
Corporate Development of ICN.
Mr. Giordani has been Chief Financial Officer of the Company since March
1992. He is ICN's Executive Vice President-Finance and Chief Financial
Officer. He joined ICN in June 1986 after serving as Vice President and
Corporate Controller of Revlon, Inc. in New York since February, 1982. From
1978 until February 1982 he held Deputy and Assistant Corporate Controller
positions with Revlon, Inc. He was with Peat, Marwick, Mitchell & Co. from
1969 to 1978.
Dr. Coggins has been Vice President-Marketing since December 1990 and
has been employed by the Company since April 1990. He held various sales
positions with Labsystems OY from 1985 through 1990 culminating in the
position of Vice President International Marketing and Diagnostics Division.
Prior to this experience, he was in various sales and international marketing
positions with Amersham where he was employed from 1973 through 1985.
Ms. Kane, Vice President-Legal and Secretary, rejoined the Company in
March 1990. She was Senior Counsel and Secretary of Countrywide Credit
Industries, Inc. and Countrywide Funding Corporation from 1988 until March
1990. Prior to that time she was Assistant General Counsel and Secretary of
ICN, holding various legal titles, from January of 1984 through January of
1988.
<PAGE>
<PAGE>15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The common stock is traded on the American Stock Exchange (Symbol: BIM).
The following table sets forth, for the periods shown, the high and low
closing sales prices on the American Stock Exchange.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
Fiscal 1993
First Quarter $ 5 1/4 $ 3 1/4
Second Quarter 4 3/8 3 1/8
Third Quarter 4 3/8 3
Fourth Quarter 5 1/2 3 5/8
Fiscal 1992
First Quarter $11 $ 6
Second Quarter 6 3/8 4 1/2
Third Quarter 5 1/4 3 3/4
Fourth Quarter 4 1/4 3 3/8
</TABLE>
As of March 29, 1994, there were approximately 386 holders of record of
the Company's common stock.
For the years ended December 31, 1993, 1992, and 1991, the Company
declared per share dividends of $.17, $.17 and $.15, respectively. Dividends
are generally declared and paid each quarter. The Company's Board of
Directors will continue to review the Company's dividend policy, and the
amount and timing of any future dividends will depend upon the profitability
of the Company, the need to retain earnings for use in the development of the
Company's business and other factors.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected consolidated financial
data for the years ended December 31, 1993, 1992 and 1991, the one-month
ended December 31, 1990, and for each of the years in the two-year period
ended November 30, 1990. This information should be read in conjunction with
the consolidated financial statements included elsewhere in this Form 10-K
(in thousands, except per share information).
<PAGE>
<PAGE>16
<TABLE>
<CAPTION> One
month
ended
Statement of Operations December 31, Dec. 31, November 30,
Data: ---------------------------- -------- ------------------
1993 1992 1991 1990 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 59,076 $ 75,648 $ 96,507 $ 7,473 $131,259 $ 61,442
Cost of sales 27,631 44,851 51,917 4,365 66,394 28,687
-------- -------- -------- -------- -------- --------
Gross profit 31,445 30,797 44,590 3,108 64,865 32,755
Selling, general and
administrative expenses 28,455 43,509 39,922 3,130 43,358 21,347
Research and
development costs 378 583 1,687 193 2,052 1,469
Amortization of goodwill
and other intangibles 502 1,486 1,829 144 1,609 1,130
Interest expense, net 2,250 4,567 7,073 848 3,773 84
Lease vacancy costs 1,436 -- -- -- -- --
Restructuring costs and
special charges <F1> -- 63,032 6,087 -- -- --
Other (income) expense, net (2,399) 4,731 1,268 235 160 322
-------- -------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes and extraordinary
income 823 (87,111) (13,276) (1,442) 13,913 8,403
Provision (benefit) for
income taxes (312) 309 (384) 66 5,111 2,762
-------- -------- -------- -------- -------- --------
Income (loss) before
extraordinary income 1,135 (87,420) (12,892) (1,508) 8,802 5,641
Extraordinary income 627 -- -- -- -- 506
-------- -------- -------- -------- -------- --------
Net income (loss) $ 1,762 $(87,420) $(12,892) $ (1,508) $ 8,802 $ 6,147
======== ======== ======== ======== ======== ========
Per Share Information <F2>:
Income (loss) before
extraordinary income $ .07 $ (4.80) $ (1.09) $ (.13) $ .80 $ .52
Extraordinary income <F3> .03 -- -- -- -- .05
-------- -------- -------- -------- -------- --------
Net income (loss) $ .10 $ (4.80) $ (1.09) $ (.13) $ .80 $ .57
======== ======== ======== ======== ======== ========
Average shares outstanding 17,464 18,224 11,790 11,400 10,963 10,697
======== ======== ======== ======== ======== ========
Shares outstanding at
end of period <F5> 9,034 19,183 15,305 11,251 11,250 10,538
======== ======== ======== ======== ======== ========
Dividends per common
share <F4> $ .17 $ .17 $ .15 $ -- $ .18 $ .13
======== ======== ======== ======== ======== ========
Balance Sheet Data:
Total assets $ 51,831 $ 63,342 $152,658 $178,233 $179,857 $177,913
Working capital 10,756 8,676 19,294 21,881 26,235 40,359
Long-term debt and capital
lease obligations, less
current maturities 10,567 11,709 18,315 33,635 40,076 51,322
Income taxes payable to ICN -- -- -- -- -- 8,789
Total stockholders'
equity <F5> 12,641 3,816 66,863 57,344 60,800 45,358
<FN>
<PAGE>
<PAGE>17
<F1> See Note 12 of Notes to Consolidated Financial Statements, for a
discussion of the 1991 and 1992 restructuring plans.
<F2> All per share information has been restated to reflect the 20% stock
dividend, accounted for as a six-for-five stock split, paid on July 31,
1989.
<F3> Extraordinary income in 1993 of $627,000 or $.03 per share results from
negotiated settlements with certain suppliers and banks. Extraordinary
income in 1989 pertains to gains resulting from the purchase of a
portion of the 5 1/2% Swiss Franc Exchangeable Certificates.
<F4> Reflects annual cash dividends for each of the years presented. During
the one-month ended December 31, 1990, the Company declared a one-time
special dividend of $.035, in addition to the regular quarterly
dividend. This dividend was actually paid in January 1991 and is
included in the annual total of $.15 at December 31, 1991.
<F5> On August 30, 1993, the Company issued 300,000 shares of a new series
"A" of the Company's non-convertible, non-voting, preferred stock
valued pursuant to a fairness opinion, at $30,000,000 to ICN. In
exchange, ICN delivered 4,983,606 shares of the Company's common stock
that ICN owned and exchanged intercompany debt owed to ICN by the
Company in the amount of $11,000,000.
In addition, on August 30, 1993, the Company issued 390,000 shares of
a new series "B" of the Company's non-convertible, non-voting,
preferred stock valued pursuant to a fairness opinion, at $32,000,000
to ICN. In exchange, ICN delivered to the Company 8,384,843, shares of
the Company's common stock that ICN owned.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Introduction. At the time of the 1989 acquisition of Flow
Laboratories, Inc. and Flow Laboratories B.V., together with their respective
subsidiaries ("Flow"), the Company believed that the distribution outlets
acquired would substantially increase the Company's ability to compete in
international markets where it had no significant direct representation.
Following the acquisition, the Company attempted to centralize the European
marketing and distribution, discontinue certain low margin product lines and
shut down excess manufacturing and distribution facilities. These efforts
continued into 1992, at which time the Company completed a major
restructuring plan. (See Restructuring Costs and Special Charges, below).
During the latter part of 1992 and throughout 1993, the Company
realigned its European operations including the distribution network and
manufacturing, resulting in reductions in selling, general and administrative
costs. Integration of the Company's higher margin "core" product lines and
elimination of lower gross margin products have contributed to the increase
in the overall gross profit margins; however, such actions have not fully
<PAGE>
<PAGE>18
mitigated the continuing decline in European sales. The Company's North
American sales have remained stable.
The Company is actively working on the introduction of new products,
primarily related to its diagnostic and instrumentation product lines and
will be introducing its Dosimetry product line in Europe and Canada. The
Company expects these strategies to contribute to increased sales in 1994 and
beyond. Absent improvements in the 1994 European operating results, the
Company will need to reassess its business strategy and prospects for its
European business.
Net Sales. Net sales were $59,076,000, $75,648,000 and $96,507,000 in
1993, 1992, and 1991, respectively. Net sales were 22% lower in 1993 than in
1992 and 22% lower in 1992 than in 1991. The continuing decline in sales can
be attributed primarily to the Company's European operations. This declining
trend is due to a variety of factors including the transition from a
marketing effort focused on an agency/distributor network to one based upon
catalog distribution, discontinuance of low gross profit margin product
lines, competitive pressures, delays in getting new products to markets, and
a continuing weakness in government funding for capital equipment purchases.
Cost of Sales. Product cost as a percentage of sales decreased to 47%
in 1993 from 59% in 1992 and 54% in 1991. The decrease in product costs in
1993 reflects actions taken by the Company to reduce costs beginning in the
latter part of 1992, as discussed further in Restructuring Costs and Special
Charges, below. Additionally during 1993, high cost products with lower
margins were eliminated, certain production facilities were consolidated or
sold, other excess manufacturing facilities were closed down and the Company
continued to focus on improving purchasing and manufacturing processes. The
increase in product costs in 1992 as compared to 1991 is the result of a
writedown of slow moving inventory due to lower than anticipated sales
volume. In addition, during 1992, the Company's production facilities and
warehousing costs were spread over a reduced sales volume thereby increasing
cost of sales as a percentage of sales.
Gross Profit. Gross profit as a percentage of sales was 53%, 41% and
46% in 1993, 1992 and 1991, respectively. Actions taken by the Company in
1992, as described above, resulted in an increase in gross profit as a
percentage of sales during 1993. The impact of declining sales, increasing
product costs, and a writedown of slow moving inventory, as described above,
reduced gross profit in 1992 as compared to 1991.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales was 48%, 58% and 41% in
1993, 1992 and 1991, respectively. The decrease in 1993 reflects manage-
ment's continuing efforts to reduce expenses through consolidation of
operations and distribution centers and other cost controls. Additionally,
during 1993, the Company renegotiated certain common services allocations
from ICN, which reduced selling, general and administrative expense by
$969,000 compared to 1992. The increase in expenses in 1992 over 1991 was
due, in part, to increased allowances for estimated uncollectible accounts
plus other costs related to increased level of catalog amortization and
accruals for legal expenses. The increase in these costs as a percentage of
sales was due primarily to a significantly greater decline in sales in the
markets related to the Flow acquisition than in the markets in which the
Company has traditionally done business. Although costs in 1994 will reflect
<PAGE>
<PAGE>19
increased catalog expenses of at least $2,295,000, the Company expects
selling, general and administrative expenses to remain stable.
Research and Development Costs. Research and development expenses were
$378,000, $583,000, and $1,687,000 during 1993, 1992 and 1991, respectively.
Effective January 1, 1992, the Company entered into an agreement with Viratek
whereby the Company transferred right, title and interest in certain of its
research and development projects. The Company retains a right of first
refusal to the marketing and distribution rights for any product developed in
accordance with the agreement. Viratek conducts biomedical research related
to the development of non-isotopic diagnostic test kits and associated hard-
ware. The Company continues to perform research and development activities
for diagnostic reagents and the instrument product line manufactured in
Huntsville, Alabama. The Company currently has four employees devoted to
research and development activities.
Amortization of Goodwill and Other Intangibles. Amortization expense
was $502,000, $1,486,000, and $1,829,000, in 1993, 1992, and 1991,
respectively. The reduction in goodwill amortization in 1993, reflects the
write-off of a major portion of the Company's goodwill during the fourth
quarter of 1992, as described below under Restructuring Costs and Special
Charges. The Company continually evaluates the continued carrying value and
amortization periods for goodwill and other intangibles.
Interest (income) expense, net. Interest (income) expense, net is
comprised of the following:
<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- ----------
<S> <C> <C> <C>
Interest expense $ 2,256,000 $ 4,779,000 $7,585,000
Interest income (6,000) (212,000) (512,000)
----------- ----------- ----------
Net interest expense $ 2,250,000 $ 4,567,000 $7,073,000
=========== =========== ==========
</TABLE>
The net interest expense decline in 1993 compared to 1992 and 1992
compared to 1991 results from a reduced level of outstanding debt both to
third parties and ICN.
Lease Vacancy Costs. During 1993, the Company vacated its High Wycombe
facility in England and moved to a facility more suitable to the Company's
operating needs in Thame, England. The Company pursued various subleasing
agreements for which none were consummated as of December 31, 1993.
Consequently, the Company accrued approximately $1,200,000 which represents
management's best estimate of the net present value of future leasing costs
to be incurred for High Wycombe. During 1993, the Company expensed an
additional $236,000 of leasing costs related to High Wycombe.
Other (Income) Expense, Net. Other (income) expense, net was
$(2,399,000), $4,731,000 and $1,268,000 in 1993, 1992 and 1991, respectively.
In 1993, Other (income) expense, net, includes a gain of $430,000
representing a favorable settlement of a foreign non-income tax related tax
dispute, a gain of $278,000 on the sale of the Company's Irvine, Scotland
<PAGE>
<PAGE>20
facility, a gain of $938,000 realized by the Company's Italian operation on
the favorable termination of certain leasing contracts, and a gain of
$1,250,000 relating to certain liabilities accrued during 1992 which were
settled for less than the original estimates. In 1992, the Company expensed
$2,187,000 for a non-exclusive license fee for the purpose of marketing
certain laboratory equipment in the U.S., Canada and South America. Other
charges in 1992 include certain foreign non-income related taxes and an
equity investment write-off totaling $2,202,000. Other (income) expense, net
in 1991 included $1,286,000 of costs relating to the introduction of the
Company's catalog.
Provision for Income Taxes. The Company's effective income tax rate was
(38)%, 1% and (3)% for 1993, 1992, and 1991, respectively. The Company's
effective rate of (38)% in 1993 was due primarily to a reduction in the
estimate of required U.S. and foreign tax contingency allowances. Such
contingency allowances were established in prior years to cover
certain tax exposures in the U.S. and certain foreign jurisdictions.
The Company's effective tax rate for 1992 and 1991 was significantly less
than the U.S. statutory rate due to limitations on the utilization of
net operating losses.
Restructuring Costs and Special Charges. During 1991, the Company
initiated a restructuring program designed to reduce costs and improve
operating efficiencies. Accordingly, restructuring program costs of
$6,087,000 were recorded in 1991. The program included, among other items,
the consolidation, relocation and closure of certain manufacturing and
distribution facilities, primarily in Milan, Italy and Costa Mesa,
California. Those measures, including a 15% reduction in work force, were
initiated in 1991 and continued through 1992.
Sales continued to decline during the first three quarters of 1992 over
the same periods in 1991 despite the restructuring program initiated in 1991.
The significant decreases were primarily due to operations in Italy and other
European subsidiaries acquired as part of the Flow acquisition. A further
decline in sales of 19.3% or $4,009,000, occurred in the fourth quarter of
1992 compared to the fourth quarter of 1991.
In prior years and the first three quarters of 1992, recoverability of
goodwill associated with the Flow acquisition was focused on the European
operations, as the Company had only a limited presence in Europe prior to the
Flow acquisition. Accordingly, the Company used the expected operating
income of the European operations in evaluating the recoverability of the
Flow goodwill.
During the fourth quarter of 1992, as a result of the continued
decline in sales and other factors, the Company reassessed their business
plan and prospects for 1993 and beyond which included, among other things,
the decision to sell the last remaining major European manufacturing facility
and to restructure the previously acquired distribution network and European
operations in line with the revised sales estimates. Consequently, based
upon the continuing decline in European revenue and profitability relating to
Flow, Flow facility closures and an ineffective distribution network,
management concluded that there was no current or expected future benefit
associated from the Flow acquisition. Accordingly, the Company wrote off
<PAGE>
<PAGE>21
goodwill and other intangibles, primarily from the Flow acquisition of
$37,714,000.
In addition, the Company determined that future benefit could be
realized if the distribution activities in Irvine, Scotland, Brussels,
Belgium, Cleveland, Ohio, and Horsham, Pennsylvania, were consolidated with
other distribution centers in Europe and the U.S., as these operations did
not support the costs of maintaining separate facilities. Estimated costs
included in the 1992 results associated with this consolidation effort were
included in lease termination costs of $1,434,000, employee termination costs
of $1,961,000, facility shut down costs of $357,000 and writedowns to net
realizable value totaling $1,106,000 of facilities held for disposition.
The Irvine, Scotland facility was vacated in March 1993 and subsequently
sold for a gain of $278,000. During the first quarter of 1993, the Horsham,
Pennsylvania, and Cleveland, Ohio facilities moved to Aurora, Ohio.
Additionally, the Company reviewed the ability of the Flow product lines
to be effectively integrated into the Company's "core" product lines and vice
versa. As a result, it was concluded that Flow's distribution network,
product lines and business operations were not effectively integrated into
the Company's global strategy. Low margin product lines such as cell biology
and instruments had become technologically obsolete given the other
competitive products on the market. As sales continued to decline, the
amount of slow moving and potentially obsolete inventory increased.
Accordingly, during the fourth quarter of 1992, the Company recorded a
provision for abnormal writedowns of inventory to estimated realizable value
of $9,924,000 and discontinued products of $3,377,000.
In addition, the Company determined that the unamortized costs of the
catalog marketing program would not be recovered within a reasonable period
of time, therefore, catalog costs totaling $6,659,000 were written off in the
fourth quarter of 1992. Despite the general shortfall in catalog related
sales, the catalog marketing approach has firmly established the Company's
"core" products in the European and Asian-Pacific markets. During 1993,
the Company's strategy to redefine the form and use of the catalog to
specifically customer focused or "product-line" catalogs is believed to be
more effective in light of current market conditions. Additionally,
radiochemical and cell biology "mini" catalogs have been developed. During
1993 and into 1994, the Company will continue to use general catalogs and
associated direct mail programs for sales activities in biochemical, enzyme
immunobiological products and reagents for electrophoresis, but with more
focus on product movement and customer needs. The diagnostic instrument and
reagent lines are promoted by media advertising and direct sales activities.
Diagnostic product development activities are organized to provide an
enhanced range of non-isotopic tests, complementing the existing radio-immuno
assays and microplate instrumentation. The Company intends to remain a
leader in neonatal screening, and as a significant supplier of endocrinology
assay kits, test reagents and infectious disease diagnostics.
Extraordinary Income
During the second quarter of 1993, the Company's Italian operation
negotiated settlements with certain of its suppliers and banks resulting in
extraordinary income of $627,000 or $.03 per share.
<PAGE>
<PAGE>22
Liquidity and Capital Resources
Cash and cash equivalents decreased to $509,000 at December 31, 1993
from $2,204,000 at December 31, 1992.
Net cash used in operations increased to $6,676,000 in 1993 from
$6,207,000 in 1992. The slight increase in net cash used in operations can
be attributed primarily to the Company's payments of trade payables and
accrued liabilities in the normal course of business and an increase in
inventory available for sale, partially offset by a decrease in trade
receivables.
Net cash (used in) provided by investing activities was $2,308,000 in
1993 compared to $(821,000) in 1992. The increase in cash provided by
investing activities is a result of the sale of the Company's Irvine,
Scotland facility, which occurred in April 1993.
Net cash provided by financing activities was $2,627,000 in 1993
compared to $7,445,000 in 1992. The decrease is primarily attributed to less
cash received from ICN and less cash proceeds from issuance of long-term debt
and notes payable.
Cash and cash equivalents increased to $2,204,000 at December 31, 1992
from $2,005,000 at December 31, 1991.
Net cash (used in) provided by operations was $(6,207,000) in 1992 as
compared to $8,357,000 in 1991. The increase in cash used in operations in
1992 compared to 1991 can be attributed to a decrease in sales and higher
operating expenses. Additionally, lower collection on trade receivables in
1992 as compared to 1991 were partially offset by decreases in inventory over
the same periods.
Net cash (used in) provided by investing activities was $(821,000) in
1992 compared to $1,275,000 in 1991. During 1991, the Company sold ICN
debentures for approximately $3,503,000 which were acquired for investment
purposes.
Net cash (used in) provided by financing activities was $7,445,000 in
1992 compared to $(8,004,000) in 1991. During 1992, the Company made
principal payments on long-term debt and notes payable of $11,736,000 which
were offset by borrowings from ICN and issuance of other long-term debt and
note payable. During 1991, the Company made principal payments on long-term
debt and notes payable of $38,765,000 which were partially offset by
borrowings from ICN and issuance of other long-term debt and notes payable,
however, such borrowings did not fully fund total principal payments on long-
term debt and notes payable.
Management believes that cash generated from operations, reductions in
working capital, and, if needed, additional borrowings from ICN will provide
sufficient cash to meet its normal operating requirements.
The Company has obtained a written agreement from ICN that ICN is
prepared, if needed, to provide financial support to the Company in
order to meet its financial obligations through April 15, 1995.
<PAGE>
<PAGE>23
Other
Included in total debt is $8,441,000 of debt related to the issuance of
5 1/2% Swiss Franc Exchangeable Certificates (the "Certificates"). Each
Certificate is exchangeable into 334 shares of the Company's Common Stock at
an exchange price of $10.02 per share, based on a fixed exchange rate of SFr.
1.49 per $1.00. (These terms are as adjusted in April 1990. See Note 6 of
Notes to Consolidated Financial Statements.) The Certificates, if converted,
would result in the issuance of 2,608,241 shares of the Company's common
stock, and an increase in marketable securities of approximately $13,605,000,
resulting in an increase in stockholders' equity of approximately
$21,582,000.
Effective December 1, 1986, ICN and its affiliates adopted an investment
policy covering intercompany advances and interest rates, and the type of
investments (acquisitions, marketable equity securities, high yield bonds,
etc.) to be made by ICN and its affiliates. As a result of this policy,
excess cash held by the Company is transferred to ICN and, in turn, cash
advances have been made by ICN to the Company to fund acquisitions and other
transactions. ICN charges interest at the prime rate plus 1/2% and credits
interest at the prime rate less 1/2% on the amounts invested or advanced.
ICN provided $6,783,000 of cash to the Company during 1993. Total loans and
advances from ICN were $5,932,000 as of December 31, 1993. Such advances
have been classified as a long-term payable.
On August 30, 1993, the Company issued 300,000 shares of a new series
"A" of the Company's non-convertible, non-voting, preferred stock valued
pursuant to a fairness opinion, at $30,000,000 to ICN. In exchange, ICN
delivered 4,983,606 shares of the Company's common stock that ICN owned and
exchanged intercompany debt owed to ICN by the Company in the amount of
$11,000,000.
In addition, on August 30, 1993, the Company issued 390,000 shares of
a new series "B" of the Company's non-convertible, non-voting, preferred
stock valued pursuant to a fairness opinion, at $32,000,000 to ICN. In
exchange, ICN delivered to the Company 8,384,843 shares of the Company's
common stock that ICN owned.
Subsequent to the exchange, the Company had 9,033,623 common shares
issued and outstanding.
Subject to declaration by the Company's Board of Directors, the new
series "A" preferred stock pays an annual dividend of $8, noncumulative,
payable quarterly and the new series "B" preferred stock pays an annual
dividend of $10, noncumulative, payable quarterly. Both series "A" and "B"
preferred stock become cumulative in respect to dividends upon certain events
deemed to be a change in control, as defined by the certificates of
designation. The series "B" preferred dividends are subject to the prior
rights of the holders of the series "A" preferred stock and any other
preferred stock ranking prior to the series "B" preferred.
The series "A" preferred stock is senior in ranking to the series "B"
preferred stock and the series "B" preferred stock is senior to the Company's
common stock as to voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, after payment or provision for
payment of the debts and other liabilities of the Company. The holders of
the series "A" preferred shares are entitled to receive an amount in cash or
<PAGE>
<PAGE>24
in property, including securities of another corporation, equal to $100 per
share in involuntary liquidation or $106 per share in voluntary liquidation
prior to August 31, 1994 and declining ratably per year to $100 per share
after 1998, plus dividends, in the event dividends have become cumulative.
The holders of the series "B" preferred shares are entitled to receive an
amount in cash or in property, including securities of another corporation
equal to $100 per share in voluntary or involuntary liquidation, plus
dividends, in the event dividends have become cumulative.
The series "A" and "B" preferred shares are redeemable, for cash or
property, including securities of another corporation, in whole or in part,
at the option of the Company only, subject to approval by a vote of a
majority of the independent directors of the Company. The series "A"
preferred shares are redeemable at $106 per share prior to August 31, 1994
and declining ratably per year to $100 in 1998, plus dividends, in the event
dividends have become cumulative. The series "B" shares are redeemable at
$100 per share, plus dividends, in the event dividends have become
cumulative.
There were no dividends declared on the Series "A" or Series "B"
preferred stock during 1993.
Under the terms of the Flow purchase agreement, the Company issued
100,000 shares of common stock to the seller, which shares have a guaranteed
value of $20 per share on November 8, 1994. If the fair value, as defined,
of the Company's common stock is less than $20 per share on that date, the
Company must pay the difference in cash. The Company may redeem such shares
for the $20 guaranteed value prior to November 8, 1994. At December 31,
1993, the Company would have paid $1,575,000 to honor the guarantee.
The Company has a purchase commitment with a major supplier for which
the remaining purchase of inventory under agreement will be due June 1994 in
the amount of approximately $1,727,000 (Finnish Markka 10,000,000).
The Company is also a guarantor on a note payable to the same supplier
for which ICN is primarily liable. On June 30, 1993, ICN filed a claim in
arbitration alleging breach of agreement entered with such supplier and
withheld final payment due on that date of approximately $1,295,000 (Finnish
Markka 7,500,000). In addition, ICN is seeking declaration and award that
the Company is not obligated to honor the aforementioned purchase commitment
or installments on the note. Arbitration is set for October 4, 1994.
Net property, plant and equipment increased from $13,155,000 at
December 31, 1992 to $15,728,000 at December 31, 1993. The transfer of the
Italian Opera facility from assets held for disposition to property, plant
and equipment for $3,816,000 accounted for the increase which was partially
offset by depreciation of approximately $2,790,000. Capital expenditures
for property, plant and equipment totaled $2,235,000 in 1993, $911,000 in
1992, and $1,978,000 in 1991. The Company does not anticipate any
significant capital expenditures through the end of 1994.
Inflation and Changing Prices
Foreign operations are subject to certain risks inherent to conducting
business abroad, including price and currency exchange control, fluctuations
in the relative value of currencies, political instability and restrictive
governmental actions. Changes in the relative value of currencies occur from
<PAGE>
<PAGE>25
time to time and may, in certain instances, materially affect the Company's
results of operations. The Company does not hedge foreign currency risks.
The effects of these risks are difficult to predict.
The effects of inflation are experienced by the Company through
increases in the cost of labor, services and raw materials. In general,
these costs have been offset and/or anticipated, by periodic increases in the
prices of its products sold.
Selected Quarterly Financial Data (Unaudited)
Following is a summary of quarterly financial data for the years ended
December 31, 1993 and 1992 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1993
-----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- ---------
<S> <C> <C> <C> <C>
Net sales $15,809 $15,415 $14,607 $ 13,245
Gross profit 8,433 8,458 8,099 6,455
Net income (loss) before
extraordinary income 1,016 2,757 866 (3,504)
Extraordinary income -- 627 -- --
------- ------- ------- --------
Net income (loss) $ 1,016 $ 3,384 $ 866 $ (3,504)
======= ======= ======= ========
Per share information:
Income (loss) before
extraordinary income $ .05 $ .12 $ .05 $ (.38)
Extraordinary income -- .03 -- --
------ ------ ------ --------
Net income (loss) $ .05 $ .15 $ .05 $ (.38)
</TABLE> ====== ====== ====== ========
<TABLE>
<CAPTION>
1992
-----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net sales $21,222 $19,225 $18,382 $ 16,819
Gross profit 9,822 9,238 8,275 3,462
------- ------- ------- --------
Net (loss) $ (781) $ (669) $(7,550) $(78,420)
======= ======= ======= ========
Per share information:
Net (loss) per share $ (.05) $ (.03) $ (.39) $ (4.09)
====== ====== ====== =======
/TABLE
<PAGE>
<PAGE>26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
December 31, 1993
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of independent auditor 27
Financial statements:
Consolidated balance sheets at December 31, 1993 and 1992 28
For the years ended December 31, 1993, 1992 and 1991:
Consolidated statements of operations 29
Consolidated statements of stockholders' equity 30
Consolidated statements of cash flows 31
Notes to consolidated financial statements 33
Schedules supporting the financial statements for the years ended
December 31, 1993, 1992 and 1991:
V -- Property, plant and equipment 52
VI -- Accumulated depreciation and amortization of
property, plant and equipment 53
VIII -- Valuation and qualifying accounts 54
X -- Supplementary income statement information 55
</TABLE>
All other schedules are not submitted because they are not applicable,
not required or the information required is included in the Consolidated
Financial Statements, including the notes thereto.
<PAGE>
<PAGE>27
REPORT OF INDEPENDENT AUDITORS
To ICN Biomedicals, Inc.:
We have audited the consolidated financial statements and financial statement
schedules of ICN Biomedicals, Inc. (a Delaware corporation) and subsidiaries
as listed in the index on page 26 of this Form 10-K. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
The Company has had certain transactions with its parent and affiliated
companies as more fully described in Notes 3, 4, 6, 7 and 11 to the
consolidated financial statements. Whether the terms of these transactions
would have been the same had they been between wholly unrelated parties
cannot be determined.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ICN Biomedicals, Inc. and subsidiaries as of December 31, 1993 and 1992
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles. In addition, in our opinion,
the financial statements schedules referred to above, when considered in
relation to the basic financial statements taken as a whole, present fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND
Los Angeles, California
March 30, 1994
<PAGE>
<PAGE>28
<TABLE> ICN BIOMEDICALS, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1993 and 1992
(Dollars in thousands, except per share data)
<CAPTION>
ASSETS 1993 1992
- ------------------------------------------ --------- ---------
<S> <C> <C>
Current assets:
Cash and equivalents $ 509 $ 2,204
Restricted cash 256 --
Receivables, net 11,574 16,270
Inventories, net 15,601 13,499
Prepaid expenses and other current assets 3,241 3,587
Assets held for disposition -- 8,959
-------- --------
Total current assets 31,181 44,519
Property, plant and equipment, net 15,728 13,155
Other assets and deferred charges, net 2,342 2,735
Excess of cost over net assets of purchased
subsidiaries, net 2,580 2,933
-------- --------
$ 51,831 $ 63,342
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------
Current liabilities:
Notes payable $ 1,926 $ 4,223
Current maturities of long-term debt
and capital lease obligations 1,379 2,064
Accounts payable 6,404 12,808
Accrued liabilities 10,716 16,748
-------- -------
Total current liabilities 20,425 35,843
Long-term debt and capital lease obligations,
less current maturities 10,567 11,709
Deferred income taxes and other liabilities 2,266 3,560
Payable to ICN 5,932 8,414
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized;
Series A, 300,000 shares ($30,000,000 3 --
involuntary liquidation preference)
Series B, 390,000 shares ($39,000,000
involuntary liquidation preference) 4 --
Common stock, $.01 par value:
30,000,000 shares authorized; 9,033,623 and
22,397,272 shares issued and outstanding at
December 31, 1993 and 1992, respectively 90 224
Additional capital: Preferred 61,928 --
Additional capital: Common 43,072 93,934
Deficit (89,540) (89,014)
Foreign currency translation adjustments (2,916) (1,328)
-------- --------
Total stockholders' equity 12,641 3,816
-------- --------
$ 51,831 $ 63,342
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>29
<TABLE>
ICN BIOMEDICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands, except per share data)
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales $ 59,076 $ 75,648 $ 96,507
Cost of sales 27,631 44,851 51,917
-------- -------- --------
Gross profit 31,445 30,797 44,590
Selling, general and
administrative expenses 28,455 43,509 39,922
Research and development costs 378 583 1,687
Amortization of goodwill and
other intangibles 502 1,486 1,829
Interest income (including $218
from ICN in 1991) (6) (212) (512)
Interest expense (including $420 and
$314 to ICN in 1993 and 1992),
respectively, 2,256 4,779 7,585
Lease vacancy costs 1,436 -- --
Restructuring costs and special charges -- 63,032 6,087
Other (income) expense, net (2,399) 4,731 1,268
-------- -------- --------
Income (loss) before provision
(benefit) for income taxes
and extraordinary income 823 (87,111) (13,276)
Provision (benefit) for income taxes (312) 309 (384)
-------- -------- --------
Income (loss) before
extraordinary income 1,135 (87,420) (12,892)
Extraordinary income 627 -- --
-------- -------- --------
Net income (loss) $ 1,762 $(87,420) $(12,892)
======== ======== ========
Per share information:
Net income (loss) before
extraordinary income $ .07 $ (4.80) $ (1.09)
Extraordinary income .03 -- --
-------- -------- --------
Net income (loss) $ .10 $ (4.80) $ (1.09)
======== ======== ========
Dividends per common share $ .17 $ .17 $ .15
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<PAGE>30
<TABLE> ICN BIOMEDICALS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands, except per share data)
<CAPTION>
Additional Receivable
Preferred Stock capital Foreign from
Series "A" and "B" Common stock Preferred Retained currency parent
Number of Number of and earnings translation for issuance
Shares Amount shares Amount Common (deficit) adjustments of stock Total
--------- ------ ---------- ------ --------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30,
1990 -- $ -- 11,249,913 $ 113 $ 38,882 $ 18,507 $ 3,298 $ -- $ 60,800
December 1990 net loss -- -- -- -- -- (1,508) -- -- (1,508)
Dividends declared ($.15
per share) -- -- -- -- -- (1,738) -- -- (1,738)
Translation adjustments -- -- -- -- -- -- (1,145) -- (1,145)
Exercise of stock options -- -- 89,083 1 343 -- -- -- 344
Conversion of debt into
common stock -- -- 3,984,464 39 25,816 -- -- (2,853) 23,002
Net loss -- -- -- -- -- (12,892) -- -- (12,892)
-------- ----- ----------- ----- ------- -------- -------- ------- --------
Balance at December 31,
1991 -- -- 15,323,460 153 65,041 2,369 2,153 (2,853) 66,863
Dividends declared ($.17
per share) -- -- -- -- -- (3,963) -- -- (3,963)
Translation adjustments -- -- -- -- -- -- (3,481) -- (3,481)
Exercise of stock options -- -- 54,040 1 245 -- -- -- 246
Conversion of debt into
common stock -- -- 7,019,772 70 28,648 -- -- 2,853 31,571
Net loss -- -- -- -- (87,420) -- -- (87,420)
-------- ----- ----------- ----- -------- -------- ------- ------ --------
Balance of December 31,
1992 -- -- 22,397,272 224 93,934 (89,014) (1,328) -- 3,816
Dividends declared
($.17 per share) -- -- -- -- -- (2,288) -- -- (2,288)
Translation adjustments -- -- -- -- -- -- (1,588) -- (1,588)
Exercise of stock options -- -- 4,800 -- 4 -- -- -- 4
Conversion of common
stock and debt into
Preferred stock
series "A" and "B"
690,000 7 (13,368,449) (134) 11,062 -- -- -- 10,935
Net income -- -- -- -- -- 1,762 -- -- 1,762
-------- ----- ----------- ----- ------- -------- -------- ------- --------
Balance at December 31,
1993 690,000 $ 7 9,033,623 $ 90 $105,000 $(89,540) $ (2,916) $ -- $ 12,641
======== ===== =========== ===== ======== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>31
<TABLE> ICN BIOMEDICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) before extra-
ordinary income $ 1,762 $(87,420) $(12,892)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Lease vacancy costs 1,200 -- --
Gain on settlements of certain
lease contracts (938) -- --
Gain on settlement of foreign
non-income tax related dispute (430) -- --
Gain on settlement of certain
liabilities for less than
original estimate (1,250) -- --
Extraordinary income (627) -- --
Depreciation and amortization 3,381 6,076 6,045
Allowance for losses on receivables 168 2,251 20
Loss (gain) on disposition of assets (271) 1,184 931
Foreign exchange gains, net (178) (730) (744)
Restructuring costs and special charges -- 63,032 6,087
Other non-cash gains (147) (125) (98)
Change in assets and liabilities, net:
Decrease in receivables 4,528 5,540 12,141
Decrease (increase) in inventories, net (2,102) 10,881 8,569
Decrease (increase) in prepaid expenses
and other 726 (3,615) (2,032)
Decrease in accounts payable
and accrued liabilities (12,498) (3,281) (9,670)
-------- -------- --------
Net cash (used in) provided by
operating activities (6,676) (6,207) 8,357
-------- -------- --------
Cash flows from investing activities:
Capital expenditures (2,235) (911) (1,978)
Proceeds from the sale of asset held
for disposition 4,543 -- --
Other, net -- 90 3,253
-------- -------- --------
Net cash (used in) provided by
investing activities $ 2,308 $ (821) $ 1,275
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<PAGE>32
<TABLE> ICN BIOMEDICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the years ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term
debt and notes payable $ 661 $ 2,733 $ 17,952
Principal payments on long-term
debt and notes payable (4,214) (11,736) (38,765)
Proceeds from exercise of stock options 4 246 344
Increase in restricted cash (256) -- --
Cash dividends paid (351) (537) (411)
Cash received from ICN, net 6,783 16,739 13,444
Other, net -- -- (568)
-------- -------- --------
Net cash provided by (used in)
financing activities 2,627 7,445 (8,004)
-------- ------- --------
Effect of exchange rate changes on cash 46 (218) 481
-------- -------- --------
Net increase (decrease) in cash
and equivalents (1,695) 199 2,109
Cash and equivalents at beginning of year 2,204 2,005 (104)
-------- -------- --------
Cash and equivalents at end of year $ 509 $ 2,204 $ 2,005
======== ======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
<PAGE>
<PAGE>33 ICN BIOMEDICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1993
1. Formation and History
ICN Biomedicals, Inc. (the "Company") was incorporated in September 1983
as a Delaware corporation by ICN Pharmaceuticals, Inc. ("ICN") and operated
as a wholly-owned subsidiary of ICN until the Company completed its initial
public offering during 1986. The Company is a 69%-owned subsidiary of ICN
at December 31, 1993. The Company conducts its business in research chemical
products, diagnostics products, biomedical instrumentation, and radiation
monitoring services.
2. Summary of Significant Accounting Policies
Reclassifications
Certain prior year items have been reclassified to conform with the
current year presentation.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company and its wholly-owned subsidiaries. All significant
intercompany account balances and transactions have been eliminated.
Cash Equivalents
The Company considers all highly liquid instruments purchased with a
maturity of less than three months to be cash equivalents.
Excess of Cost Over Net Assets of Purchased Subsidiaries
The difference between the purchase price and the fair value of net
assets at the date of acquisition is included in the consolidated balance
sheets as "Excess of cost over net assets of purchased subsidiaries, net"
("Goodwill"). Goodwill has been amortized primarily over forty years through
1992. The Company evaluates the carrying value of goodwill including the
amortization periods on a quarterly basis to determine whether events and
circumstances warrant revised estimates of useful lives. The recoverability
of goodwill is assessed based on the expected undiscounted future operating
income of the acquired entity. During the fourth quarter of 1992, the
Company wrote-off a substantial portion of its goodwill, primarily related to
its Flow acquisition, as more fully described in Note 12. Additionally, of
the remaining goodwill, the Company revised the remaining amortization period
to primarily five years, which reflects the estimated recovery period of the
remaining goodwill. Accumulated amortization totaled $2,901,000 and
$2,548,000 at December 31, 1993 and 1992, respectively.
Foreign Currency Translation
The assets and liabilities of the Company's foreign operations are
translated at the end of period exchange rates. Revenues and expenses are
translated at the average exchange rates prevailing during the period. The
effects of unrealized exchange rate fluctuations on translating foreign<PAGE>
<PAGE>34
currency assets and liabilities into U.S. dollars are accumulated in
stockholders' equity. The Company has included in operating income all
foreign exchange gains and losses arising from foreign currency transactions.
Gains included in other expenses, net from foreign exchange transactions for
1993, 1992 and 1991 were $178,000, $730,000 and $744,000, respectively.
Inventories
Inventories, which include material, direct labor and overhead, are
stated at the lower of cost or market. Cost is determined on a first-in,
first-out (FIFO) basis.
Catalog Costs
The initial costs of design, production and distribution of the
Company's product catalog are deferred and amortized over its estimated
service life, approximately one year. However, for the year ended
December 31, 1992, due to lower than expected sales results, the Company
wrote-off these costs in the fourth quarter of 1992 (See Note 12).
Property, Plant and Equipment
The Company primarily uses the straight-line method for depreciating
property, plant and equipment over their estimated useful lives. Buildings
and related improvements are depreciated over 20-40 years, machinery and
equipment over 2-10 years, furniture and fixtures over 3-10 years, and
leasehold improvements are amortized over their useful lives, limited to the
life of the lease.
The Company follows the policy of capitalizing expenditures that
materially extend the life or increase the value of the related assets.
Repair and maintenance costs are charged to expense. Upon sale or
retirement, the costs and related accumulated depreciation or amortization
are eliminated from the respective accounts, and the resulting gain or loss
is included in income.
Patents and Other Intangible Assets
The costs of patents, license rights and other intangible assets
acquired primarily through acquisitions are included in other assets and
deferred charges, net and are being amortized over approximately 5 to 10
years. Such costs totaled $871,000 and $1,024,000, net of accumulated
amortization of $803,000 and $654,000 as of December 31, 1993 and 1992,
respectively. In addition, certain patents and intangible assets which were
acquired in connection with the Flow and other acquisitions were re-evaluated
during the fourth quarter 1992. The Company wrote-off a portion of its
patents and intangible assets, as more fully described in Note 12.
Additionally, of the remaining patents and other intangible assets, the
Company revised the remaining amortization period to primarily five years
which reflects the estimated recovery period of the remaining patents and
other intangible assets.
Income Taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, (SFAS 109) "Accounting for Income Taxes". SFAS 109 is an
asset and liability approach that requires the recognition of deferred tax
<PAGE>
<PAGE>35
assets and liabilities for the expected future tax consequence of events that
have been recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactment of changes in the tax law or
rates. Previously, the Company used the SFAS 96 asset and liability approach
that gave no recognition to future events other than the recovery of assets
and settlement of liabilities at their carrying amounts. The adoption of
SFAS 109 did not result in a cumulative effect adjustment in the statement of
operations.
Notes Payable
The Company classifies bank borrowings with initial terms of one year or
less as Notes Payable. These notes, originating in the Italian subsidiary,
bear interest at average rates of 16%. The carrying amount of Notes Payable
approximates fair value due to the short-term maturity of these instruments.
Per Share Information
Per share information is based on the weighted average number of shares
outstanding and dilutive common share equivalents. Common share equivalents
represent shares issuable for outstanding options and warrants on the
assumption that the proceeds would be used to repurchase shares on the open
market. The Swiss Franc Exchangeable Certificates debt issue (see Note 6) is
not a common share equivalent. Fully dilutive earnings per share is not
shown because the computation was antidilutive or the difference from primary
earnings per share was not material. The number of shares used in the per
share computation was 17,964,000, 18,224,000 and 11,790,000 in 1993, 1992 and
1991, respectively.
Concentrations of Credit Risk
The Company has approximately $3,506,000 of accounts receivables related
to its Italian subsidiary for which a significant portion of the balance
relates to local government entities. The ability and timing to collect
these receivables is influenced by the general economics in that country.
3. Assets Held for Disposition
During January 1993, the Company transferred its Dublin, Virginia,
facility to ICN in exchange for a reduction in the intercompany amounts due
ICN of $586,000 representing the net book value at the date of transfer.
During April 1993, the Company sold certain assets of its manufacturing
business, producing liquid and powder media, located in Irvine, Scotland.
The resulting gain of approximately $278,000 is included in other (income)
expense, net. Additionally, the Company has deferred approximately $256,000
of the sales proceeds for certain environmental contingencies related to the
Irvine, Scotland property. This obligation is funded and included in
restricted cash and held in an escrow trust account. In the event such
contingencies do not utilize the escrow balance, remaining funds, if any,
will be remitted to the Company.
During the fourth quarter of 1993, the Company moved its Italian opera-
tion from Cassina de Pecchi, a leased facility, back to Opera, an owned
<PAGE>
<PAGE>36
facility. The Opera facility was transferred from assets held for
disposition to property, plant and equipment during December 1993.
4. Related Party Transactions
General
As of December 31, 1993, ICN owned 69% of the outstanding common stock
of the Company. ICN controls the Company through stock ownership, voting
control and board representation. The Company, ICN, SPI Pharmaceuticals,
Inc. (a 39%-owned equity investment of ICN at December 31, 1993- "SPI") and
Viratek, Inc. (a 69%-owned subsidiary of ICN at December 31, 1993-"Viratek")
have engaged in, and will continue to engage in, certain transactions with
each other.
The Company has obtained a written agreement from ICN that ICN is
prepared, if needed, to provide financial support to the Company in
order to meet its financial obligations through April 15, 1995.
An Oversight Committee of the Boards of Directors of ICN, SPI, Viratek
and the Company reviews transactions between or among the Company, ICN, SPI
and Viratek (collectively, the "Affiliated Corporations") to determine
whether a conflict of interest exists with respect to a particular
transaction and the manner in which such conflict can be resolved. The
Oversight Committee has advisory authority only and makes recommendations to
the Board of Directors of each of the Affiliated Corporations. The Oversight
Committee consists of one non-management director of each Affiliated
Corporation and a non-voting chairman. The significant related party
transactions have been reviewed and recommended for approval by the Oversight
Committee, and approved by the respective Boards of Directors.
Cost Allocations
The Company subleases space on a year-to-year basis in Costa Mesa,
California from ICN. The costs of common services used by the Company, SPI,
Viratek and ICN are allocated by SPI based upon various formulas. Effective
January 1, 1993, ICN reimburses the Company for those allocations which are
in excess of the amounts determined by management using competitive data, as
reviewed and recommended by the Oversight Committee, that would have been
incurred by the Company if it operated in a facility suited solely to its
requirements. It is management's belief that the methods used and amounts
allocated for facility costs and common services are reasonable based upon
the usage by the respective Companies.
Rent and common services charged to the Company were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Rent $ 310,000 $ 310,000 $ 310,000
Common services 528,000 1,497,000 1,475,000
---------- ---------- ----------
$ 838,000 $1,807,000 $1,785,000
========== ========== ==========
</TABLE>
<PAGE>
<PAGE>37
Investment Policy
Effective December 1, 1986, ICN and its affiliates have adopted an
investment policy covering intercompany advances and interest rates, and the
types of investment acquisitions (marketable equity securities, high-yield
bonds, etc.) to be made by ICN and its affiliates. As a result of this
policy, excess cash held by the Company is transferred to ICN and in turn,
invested by ICN and cash advances have been made by ICN to the Company to
fund acquisitions and certain other transactions. ICN charges interest at
the prime rate plus 1/2% and credits interest at the prime rate less 1/2% on
the amounts invested or advanced. Interest (income) expense, related to this
balance was $420,000, $314,000, and ($218,000) for 1993, 1992 and 1991,
respectively, at average interest rates of approximately 6.5%, 6.75%, and
7.9%, respectively.
During the year ended December 31, 1993 and 1992, the Company
reclassified its SPI intercompany payable of $2,333,000 and $3,631,000, and
its Viratek intercompany receivable of $272,000 and $536,000 to the Company's
ICN intercompany account resulting in a net increase in the Company's
liability to ICN of $2,061,000 and $3,095,000, respectively. Total loans and
advances from ICN were $5,932,000 and $8,414,000 as of December 31, 1993 and
1992, respectively. Such advances have been classified as a long-term
payable.
In accordance with this investment policy, the Company advanced the net
proceeds of the Company's Bio Capital Holding Swiss Franc public offering,
completed in February 1987, to ICN. These advances were payable to the
Company by ICN in Swiss Francs. At March 1, 1991 the Company converted an
advance due from ICN of SFr. 14,386,000 into $10,849,000. As a result of
this change, the Company removed the hedge from its Swiss franc liability and
recorded exchange gains of $159,000, $758,000 and $170,000 in 1993, 1992 and
1991, respectively.
Debt and Equity Transactions
On August 30, 1993, the Company issued 300,000 shares of a new series
"A" of the Company's non-convertible, non-voting, preferred stock valued
pursuant to a fairness opinion, at $30,000,000 to ICN. In exchange, ICN
delivered 4,983,606 shares of the Company's common stock that ICN owned and
exchanged intercompany debt owed to ICN by the Company in the amount of
$11,000,000.
In addition, on August 30, 1993, the Company issued 390,000 shares of
a new series "B" of the Company's non-convertible, non-voting, preferred
stock valued pursuant to a fairness opinion, at $32,000,000 to ICN. In
exchange, ICN delivered to the Company 8,384,843 shares of the Company's
common stock that ICN owned.
As a result of the exchange, the Company had 9,033,623 common shares
issued and outstanding.
Subject to declaration by the Company's Board of Directors, the new
series "A" preferred stock pays an annual dividend of $8, noncumulative,
payable quarterly and the new series "B" preferred stock pays an annual
dividend of $10, noncumulative, payable quarterly. Both series "A" and "B"
preferred stock become cumulative in respect to dividends upon certain events
deemed to be a change in control, as defined by the certificates of <PAGE>
<PAGE>38
designation. The series "B" preferred dividends are subject to the prior
rights of the holders of the series "A" preferred stock and any other
preferred stock ranking prior to the series "B" preferred.
The series "A" preferred stock is senior in ranking to the series "B"
preferred stock and the series "B" preferred stock is senior to the Company's
common stock as to voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, after payment or provision for
payment of the debts and other liabilities of the Company. The holders of
the series "A" preferred shares are entitled to receive an amount in cash or
in property, including securities of another corporation, equal to $100 per
share in involuntary liquidation or $106 per share in voluntary liquidation
prior to August 31, 1994 and declining ratably per year to $100 per share
after 1998, plus dividends, in the event dividends have become cumulative.
The holders of the series "B" preferred shares are entitled to receive an
amount in cash or in property, including securities of another corporation
equal to $100 per share in voluntary or involuntary liquidation, plus
dividends, in the event dividends have become cumulative.
The series "A" and "B" preferred shares are redeemable, for cash or
property, including securities of another corporation, in whole or in part,
at the option of the Company only, subject to approval by a vote of a
majority of the independent directors of the Company. The series "A"
preferred shares are redeemable at $106 per share prior to August 31, 1994
and declining ratably per year to $100 in 1998, plus dividends, in the event
dividends have become cumulative. The series "B" shares are redeemable at
$100 per share, plus dividends, in the event dividends have become
cumulative.
No dividends were declared on the Series "A" or Series "B" preferred
stock during 1993.
On December 31, 1992, the Company exchanged $11,250,000 of debt owed to
ICN for 3,214,286 shares of the Company's common stock issued to ICN at a
price of $3.50 per share which represents the closing market price of the
stock on that date.
On April 1, 1992, the Company transferred $13,072,000 of debt with First
City Bank of Texas-Houston N.A., to ICN. The Company, in exchange, issued
2,412,449 shares of the Company's common stock at a price of $5.42 per share
which represents the closing market price of the stock at that date less a
discount of 15%. ICN became primarily liable for the debt. The Company's
domestic inventories and receivables remained as collateral. The outstanding
debt was repaid in full by ICN on December 3, 1992 and all pledges were
extinguished.
On March 31, 1992, the Company transferred $2,711,000 of debt owed to
Skopbank of Finland to ICN. The Company, in exchange, issued 500,334 shares
of the Company's common stock at a price of $5.42 per share which represents
the closing market price of the Company's stock on that date less a discount
of 15%. ICN became primarily liable for the debt and the Company became
guarantor.
On March 31, 1992, the Company exchanged $4,837,000 of debt owed to ICN
for 892,703 shares of the Company's common stock issued to ICN at a price of
$5.42 per share which represents the closing market price of the stock on
that date less a discount of 15%.
<PAGE>
<PAGE>39
On December 31, 1991, the Company issued 3,363,298 shares of the
Company's common stock to ICN at a price of $6.25 which represents the fair
market value of the Company's stock on that date in exchange for debt owed
ICN in the amount of $18,167,523.
On March 1, 1991, the Company exchanged $3,833,000 of advances due to
ICN into 538,000 shares of the Company's Common Stock, issued at a price of
$7.125 which represented the fair market value of the Company's stock on that
date less a discount of 22%.
In March 1987 and October 1988, the Company purchased ICN 12 7/8%
debentures due 1998 and ICN 12 1/2% debentures due 1999 on the open market.
The debentures had a book value of $3,567,250. On December 30, 1991 the
Company sold all the debentures to ICN for a loss of $64,250.
Research and Development
Effective January 1, 1992, the Company entered into an agreement with
Viratek, whereby the Company transferred right, title, and interest in
certain of its research and development projects to Viratek. The Company
retains a right of first refusal to the marketing and distribution rights for
any products developed. Viratek conducts biomedical research related to the
development of non-isotopic diagnostic test kits and associated hardware.
The Company continues to perform research and development in reagents and
instrumentation.
Other
During January 1993, the Company transferred its Dublin, Virginia,
facility to ICN in exchange for a reduction in the intercompany amounts due
ICN of $586,000 representing the net book value at the date of the transfer.
On December 31, 1992, the Company transferred $5,747,000 of debt owed to
a major supplier, to ICN. ICN became primarily liable for the debt and the
Company became guarantor. On June 30, 1993, ICN filed a claim in arbitration
alleging breach of agreement entered with such supplier and withheld final
payment due on that date of approximately, $1,295,000 (Finnish Markka
7,500,000). Arbitration is set for October 11, 1994.
5. Income Taxes
In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, (SFAS 109) "Accounting for Income Taxes". SFAS 109 is an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequence of events that
have been recognized in the Company's financial statements or tax returns.
In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactment of changes in the tax law or
rates. Previously, the Company used the SFAS 96 asset and liability approach
that gave no recognition to future events other than the recovery of assets
and settlement of liabilities at their carrying amounts. The adoption of
SFAS 109 did not result in a cumulative effect adjustment in the statement of
operations. Prior years' amounts are presented as previously reported.
<PAGE>
<PAGE>40
Income (loss) before provision for income taxes and extraordinary income
(1993) for the years ended December 31 consists of the following:
<TABLE>
<CAPTION> 1993 1992 1991
------------ ------------ -------------
<S> <C> <C> <C>
Domestic $ 2,753,000 $(51,267,000) $ (9,993,000)
Foreign (1,930,000) (35,844,000) (3,283,000)
------------ ------------ ------------
$ 823,000 $(87,111,000) $(13,276,000)
============ ============ ============
</TABLE>
The income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION> 1993 1992 1991
------------------- ------------------ -------------------
Current Deferred Current Deferred Current Deferred
--------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal $ -- $ -- $ -- $ -- $ -- $ 139,000
State -- -- -- -- 60,000 --
Foreign (312,000) -- 309,000 -- 263,000 (846,000)
--------- -------- -------- -------- -------- ---------
$(312,000) $ -- $309,000 $ -- $323,000 $(707,000)
========= ======== ======== ======== ======== =========
</TABLE>
The components of the deferred income tax provision relate primarily to
the net tax effects of the differences arising as the result of utilizing
different depreciation and amortization methods for income tax purposes than
for financial reporting purposes and establishing inventory allowances for
financial reporting purposes which are not currently deductible for income
tax purposes.
A reconciliation of the Federal statutory income tax rates to the
effective income tax rates is as follows:
<TABLE>
<CAPTION> 1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Statutory rate 35% (34%) (34%)
Goodwill amortization 15 15 2
Operating loss - no tax benefit -- 20 36
Net operating loss- tax benefit (50) -- --
Reduction--foreign income
tax liabilities (38) -- (7)
----- ----- -----
Effective rate (38%) 1% (3%)
===== ===== =====
</TABLE>
<PAGE>
<PAGE>41
The Company conducts business in a number of different tax juris-
dictions. Accordingly, losses sustained in one jurisdiction generally cannot
be applied to reduce taxable income in another jurisdiction. The income of
certain foreign subsidiaries is not subject to U.S. income taxes, except when
such income is paid to the U.S. parent company or one of its domestic
subsidiaries. No U.S. taxes have been provided on the Company's foreign
subsidiaries since management intends to reinvest those amounts in foreign
operations. Included in consolidated retained earnings (deficit) at
December 31, 1993 is approximately $1,820,000 of accumulated earnings of
foreign operations that would be subject to U.S. income taxes if and when
repatriated.
The Company has domestic and foreign operating loss carryforwards (NOL)
of approximately $39,000,000 and $38,000,000, respectively, at December 31,
1993. Such NOL's expire in varying amounts from 1994 until 2008. Of the
$77,000,000 NOL, $458,000 will be credited to additional paid in capital when
utilized. In connection with the acquisition of Flow, the Company acquired
Flow's net operating loss carryforwards of $9,771,000. The Company has
agreed to pay Flow the first $500,000 of any benefits realized. In the
event this amount is not realized by November 1994, it will become due and
payable to Flow including interest at 10%. Tax benefits related to the NOL
existing at the date of acquisition realized in excess of $500,000 will be
shared equally with Flow.
The primary temporary differences which give rise to the Company's
net deferred tax liability, at December 31, 1993 and January 1, 1993,
are as follows: (in thousands)
<TABLE>
<CAPTION>
December 31, January 1,
1993 1993
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory and other allowances $ 3,734 $ 4,789
Amortization differences 417 2,157
Compensation not currently deductible 363 533
Other 1,750 1,750
Domestic NOL 11,958 10,024
Foreign NOL 13,311 12,635
Valuation reserve (29,511) (29,924)
-------- --------
Total deferred tax asset 2,022 1,964
-------- --------
Deferred tax liabilities:
Depreciation (2,022) (1,964)
-------- --------
Total deferred tax liability (2,022) (1,964)
-------- --------
Net deferred tax liability $ -- $ --
======== ========
</TABLE>
<PAGE>
<PAGE>42
6. Debt
Long-term debt and obligations under capital leases due non-affiliates
consists of the following:
<TABLE>
<CAPTION> 1993 1992
------------ ------------
<S> <C> <C>
Zero Coupon Guaranteed Bonds with an
effective interest rate of 13.5%,
maturing in 2002 $ 8,441,000 $ 9,112,000
Notes payable to banks, collateralized
by land and buildings, due in various
installments through the year 2000
with interest at 5.75% to 10% 2,712,000 3,093,000
Bank loans from Italian Government
agency with interest rate of 2%
maturing in 2002 435,000 504,000
Loans from the Scottish Development Agency,
collateralized by real property, at an
average interest rate of 11.9% (paid upon
sale of underlying real property in 1993) -- 382,000
Obligations under capital leases 358,000 682,000
----------- -----------
Total long-term debt and capital leases 11,946,000 13,773,000
Less-current maturities 1,379,000 2,064,000
----------- -----------
Total $10,567,000 $11,709,000
=========== ===========
</TABLE>
All of the long-term debt noted above (other than $1,555,000 and
$1,670,000 of notes payable to banks, collateralized by land and buildings in
1993 and 1992, respectively), is denominated in currencies other than the
U.S. Dollar.
In 1987, Bio Capital Holding ("Bio Capital"), a trust established by ICN
and the Company, completed a public offering in Switzerland of Swiss Francs
(SFr.) 70,000,000 principal amount of 5 1/2% Swiss Franc Exchangeable
Certificates ("Old Certificates"). At the option of the certificate holders,
the Old Certificates are exchangeable into shares of common stock of the
Company. Net proceeds were used by Bio Capital to purchase SFr. 70,000,000
face amount of zero coupon Swiss Franc Debt Notes due 2002 of the Kingdom of
Denmark (the "Danish Bonds") for SFr. 33,772,000 and 15 series of zero
coupon Swiss Franc Guaranteed Bonds of the Company (the "Zero Coupon
Guaranteed Bonds") for SFr. 32,440,000, which are guaranteed by ICN. Each
series of the Zero Coupon Guaranteed Bonds are in an aggregate principal
amount of SFr. 3,850,000 maturing in February of each year through 2002. The
Company has no obligation with respect to the payment of the principal amount
of the Old Certificates since they will be paid upon maturity by the Danish
bonds.
During 1990, the Company offered, to all certificate holders, to
exchange the Old Certificates for newly issued certificates ("New
Certificates"), the terms of which remain the same except that 334 shares per
SFr. 5,000 principal certificate can be exchanged at $10.02 using a fixed
exchange rate of SFr. 1.49 to U.S. $1.00. Substantially all of the
<PAGE>
<PAGE>43
outstanding Old Certificates were exchanged for New Certificates (together
referred to as "Certificates"). The deferred loan costs associated with the
exchange are included in other assets and deferred charges, net in the
accompanying consolidated balance sheets. This exchange was accounted for as
an extinguishment of debt and the effect on net income was not material.
During 1992, the Company repurchased SFr. 5,640,000 of Certificates,
representing long-term debt of $1,859,000.
During 1991, SFr. 1,245,000 ($918,000) principal amount of New
Certificates were exchanged into 83,166 shares of common stock. These
transactions resulted in a reduction of debt of SFr. 434,000 ($312,000)
during 1991. There were no Certificates exchanged during 1992 or 1993.
As of December 31, 1993, the accompanying consolidated financial
statements include total outstanding debt of SFr. 12,534,000 ($8,441,000)
which represents the present value of the Company's obligation to pay the
Zero Coupon Guaranteed Bonds. When Certificates are exchanged into common
stock, the Company's obligation to pay the Zero Coupon Guaranteed Bonds is
reduced and the Danish Bonds are released by Bio Capital to the Company, both
on a pro rata basis. As of December 31, 1993, SFr. 39,615,000 ($26,677,000)
principal of Certificates were outstanding which, if exchanged for common
stock, would result in the issuance of 2,608,241 shares of common stock, a
reduction of long-term debt of SFr. 11,330,000 ($7,630,000), a reduction of
SFr. 1,204,000 ($811,000) of current maturities of long-term debt, and an
increase in marketable securities of SFr. 20,204,000 ($13,605,000) from the
release by Bio Capital of the Danish Bonds to the Company.
Annual aggregate maturities of long-term debt including obligations
under capital leases are as follows:
<TABLE>
<S> <C>
1994 $ 1,379,000
1995 1,344,000
1996 1,419,000
1997 1,510,000
1998 1,513,000
Thereafter 4,781,000
-----------
Total $11,946,000
===========
</TABLE>
The average month-end balances of aggregate short-term borrowings due to
non-affiliates were $2,933,000, and $6,059,000, at weighted average interest
rates of 16.2% and 20.9%, for 1993 and 1992, respectively. Maximum total
month-end borrowings during 1993 and 1992 were $4,204,000, and $7,712,000,
respectively. The weighted average interest rates of total short-term debt
due to non-affiliates at the end of 1993 and 1992, approximated the weighted
average rate on average month-end balances.
<PAGE>
<PAGE>44
7. Commitments and Contingencies
Commitments
At December 31, 1993, the Company was committed under noncancellable
leases with non-affiliates for minimum aggregate lease payments as follows:
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
---------- ----------
<S> <C> <C>
1994 $ 849,000 $ 155,000
1995 799,000 88,000
1996 625,000 88,000
1997 507,000 89,000
1998 534,000 --
Thereafter 4,782,000 --
---------- ----------
$8,096,000 420,000
==========
Less--amount representing interest 62,000
----------
Present value of net minimum
lease payments 358,000
Less--current maturities 129,000
----------
$ 229,000
==========
</TABLE>
Rental expense on operating leases was $870,000, $1,066,000 and
$1,426,000 in 1993, 1992 and 1991, respectively.
Purchase Commitment
The Company has a purchase commitment with a major supplier for which
the remaining purchase of inventory under agreement will be due June 1994 in
the amount of approximately $1,727,000 (Finnish Markka 10,000,000).
The Company is also a guarantor on a note payable to the same supplier
for which ICN is primarily liable. On June 30, 1993, ICN filed a claim in
arbitration alleging breach of agreement entered with such supplier and
withheld final payment due on that date of approximately $1,295,000 (Finnish
Markka 7,500,000). In addition, ICN is seeking declaration and award that
the Company is not obligated to honor the aforementioned purchase commitment
or installments on the note. Arbitration is set for October 4, 1994.
Acquisition Commitments
Under the terms of the Flow purchase agreement, the Company issued
100,000 shares of common stock to the seller, which shares have a guaranteed
value of $20 per share on November 8, 1994. If the fair value, as defined,
of the Company's common stock is less than $20 per share on that date, the
Company must pay the difference in cash. The Company may redeem such shares
<PAGE>
<PAGE>45
for the $20 guaranteed value prior to November 8, 1994. At December 31,
1993, the Company would have paid $1,575,000 to honor the guarantee.
Litigation
The Company is party to a number of pending or threatened lawsuits
arising out of, or incidental to, its ordinary course of business. In the
opinion of management, the resolution of these matters will not have a
material adverse effect upon the consolidated financial position of
the Company.
Product Liability Insurance
The Company is self-insured for potential product liability with respect
to currently marketed products. The Company could be exposed to possible
claims for personal injury resulting from allegedly defective products.
While to date no material adverse claim for personal injury resulting from
allegedly defective products has been successfully maintained against the
Company, a substantial claim, if successful, could have a material adverse
effect upon the consolidated financial position of the Company.
Benefit Plans
The Company has several benefit plans covering substantially all of
their employees.
All eligible U.S. employees may elect to participate in an ICN sponsored
401(k) plan. The Company partially matches employee contributions.
The Company's United Kingdom subsidiary has a defined benefit retirement
plan which covers all eligible U.K. employees. The plan is actuarially
reviewed approximately every three years. Annual contributions are based on
total pensionable salaries. It is estimated that the plan's assets exceeded
the actuarial computed value of vested benefits as of December 31, 1993 and
1992, respectively.
The total expense under the U.S. and U.K. plans was approximately
$452,000 in 1993, $260,000 in 1992, and $440,000 in 1991.
The Company also had deferred compensation agreements for certain of its
officers and certain key employees, with benefits commencing at death or
retirement. The present value of the benefits expected to be paid was
accrued from 1985 through 1989 at which time the agreements were terminated.
Interest continues to accrue on the amounts due until all payments are made.
8. Common Stock
The Company has reserved a total of 2,140,000 shares for issuance under
its 1983 Employee Incentive Stock Option Plan and its 1983 Non-Qualified
Stock Option Plan and 1,000,000 shares for issuance under its 1992 Employee
Incentive Stock Option Plan and 1992 Non-Qualified Stock Option Plan (the
"Plans"). Under the terms of the plans, participants may receive options to
purchase common stock in such amounts as may be established by the
Compensation Committee of the Board of Directors. Options are granted at a
price not less than 100 percent of the fair market value on the date of grant
and may be granted for a term of up to ten years. Options have been granted
<PAGE>
<PAGE>46
at prices ranging from $.83 to $10.50 per share. Options for 1,819,830,
1,192,130 and 1,137,258 shares were outstanding at December 31, 1993, 1992
and 1991, respectively. Shares available for grant under the Plans were
169,750, 789,120 and 343,860 at December 31, 1993, 1992 and 1991,
respectively. Shares remaining under grant were 1,819,830 and 1,192,130 at
December 31, 1993 and 1992, respectively. Shares of 843,135 and 592,310,
were exercisable as of December 31, 1993 and 1992, respectively. Options
totaling 4,800, 54,040, and 89,083 shares were exercised during 1993, 1992
and 1991, at average prices of $.83, $4.55 and $3.86, respectively. The
Company's 1983 Plans expired on September 1, 1993 and the Company's 1992
Plans expire in 2002.
At December 31, 1993, options for 600,000 shares at prices ranging from
$6.125 to $7.00 per share of the Company's common stock were outstanding,
which had been granted during 1988 and 1992 to Milan Panic, Chairman of the
Board of Directors and Chief Executive Officer of the Company.
The Company issued 83,166 shares of common stock upon the exchange of
Certificates in 1991. There were no certificates exchanged during 1992 or
1993.
9. Detail of Certain Accounts
<TABLE>
<CAPTION> 1993 1992
------------ -----------
<S> <C> <C>
Receivables:
Trade $ 13,527,000 $19,181,000
Other 447,000 442,000
------------ -----------
13,974,000 19,623,000
Allowance for doubtful accounts (2,400,000) (3,353,000)
------------ -----------
$ 11,574,000 $16,270,000
============ ===========
Inventories:
Raw materials and supplies $ 3,422,000 $ 3,898,000
Work-in-process 610,000 2,439,000
Finished goods 23,048,000 22,692,000
------------ ------------
27,080,000 29,029,000
Allowance for slow moving
and obsolete inventory (11,479,000) (15,530,000)
------------ -----------
$ 15,601,000 $13,499,000
============ ===========
Prepaid expenses and other current assets:
Prepaid inventory $ -- $ 2,874,000
Catalog costs 2,295,000 --
Other 946,000 713,000
------------ -----------
$ 3,241,000 $ 3,587,000
============ ===========
</TABLE>
<PAGE>
<PAGE>47
<TABLE>
<CAPTION> 1993 1992
------------ -----------
<S> <C> <C>
Property, plant and equipment, at cost:
Land $ 2,839,000 $ 995,000
Buildings 6,655,000 4,782,000
Machinery and equipment 19,612,000 19,149,000
Furniture and fixtures 2,163,000 2,704,000
Leasehold improvements 1,659,000 1,390,000
------------ -----------
32,928,000 29,020,000
Accumulated depreciation (17,200,000) (15,865,000)
------------ -----------
$ 15,728,000 $13,155,000
============ ===========
Other assets and deferred charges, net:
Deferred loan costs $ 1,118,000 $ 1,304,000
Patents, trademarks and other intangibles 871,000 1,024,000
Other 353,000 407,000
------------ -----------
$ 2,342,000 $ 2,735,000
============ ===========
Accrued liabilities:
Payroll and related items $ 1,027,000 $ 1,717,000
Deferred income 2,397,000 2,294,000
Restructuring accruals 478,000 4,509,000
Lease vacancy accrual 1,200,000 --
Professional services 1,133,000 1,620,000
Taxes other than income taxes 557,000 1,304,000
Interest 1,147,000 1,004,000
Commissions 477,000 831,000
Other 2,300,000 3,469,000
------------ -----------
$ 10,716,000 $16,748,000
============ ===========
</TABLE>
10. Geographical Data
The following tables set forth the amounts of net sales, income (loss)
before provision for income taxes and extraordinary income and identifiable
assets by geographical area for 1993, 1992 and 1991.
<PAGE>
<PAGE>48
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------- -------------
<S> <C> <C> <C>
Net sales:
United States $ 36,216,000 $ 39,668,000 $ 44,874,000
Canada 2,381,000 2,610,000 3,159,000
Europe 16,311,000 28,020,000 42,872,000
Asia/Pacific 4,168,000 5,350,000 5,602,000
------------ ------------ ------------
Total $ 59,076,000 $ 75,648,000 $ 96,507,000
============ ============ ============
Income (loss) before provision
for income taxes and extra-
ordinary income:
United States <F1> <F2> $ 2,753,000 $(51,267,000) $ (9,993,000)
Canada 157,000 (99,000) 386,000
Europe <F2> (2,831,000) (35,582,000) (3,859,000)
Asia/Pacific <F2> 744,000 (163,000) 190,000
------------ ------------ ------------
Total $ 823,000 $(87,111,000) $(13,276,000)
============ ============ ============
Identifiable assets:
United States $ 31,920,000 $ 31,957,000 $ 80,875,000
Canada 561,000 520,000 850,000
Europe 17,928,000 29,298,000 68,857,000
Asia/Pacific 1,422,000 1,567,000 2,076,000
------------ ------------ ------------
Total $ 51,831,000 $ 63,342,000 $152,658,000
============ ============ ============
<FN>
<F1> Includes net interest (income) expense related to the Company's
consolidated operations of $2,250,000, $4,567,000 and $7,073,000 for
1993, 1992 and 1991, respectively.
<F2> Amounts include restructuring charges of $63,032,000 and $6,087,000
for 1992 and 1991, respectively. These amounts consist of $38,064,000
and $2,296,000 for the U.S. for 1992 and 1991, respectively, and
$24,608,000 and $3,791,000 for Europe for 1992 and 1991, respectively
and $360,000 for Asia/Pacific for 1992.
Export sales made by United States operations amounted to $3,893,000
$4,033,000 and $4,458,000 for 1993, 1992 and 1991, respectively.
These sales were made primarily to Europe and Asia/Pacific.
</TABLE>
11. Supplemental Cash Flow Disclosures
The Company paid interest charges of $1,478,000, $3,168,000 and
$5,483,000 in 1993, 1992 and 1991, respectively. The Company also paid
income taxes of $164,000, $706,000 and $469,000 in 1993, 1992 and 1991,
respectively.
<PAGE>
<PAGE>49
On August 30, 1993, the Company issued 300,000 and 390,000 shares of
preferred stock series "A" and "B", respectively, to ICN. In exchange, ICN
retired $11,000,000 of debt owed to ICN by the Company and delivered
13,368,449 shares of the Company's common stock that ICN owned (see Note 3, -
"Preferred Stock").
During January 1993, the Company transferred its Dublin, Virginia,
facility to ICN in exchange for a reduction in the intercompany amounts due
ICN of $586,000 representing the net book value at the date of transfer.
See Note 4 regarding debt converted into the Company's common stock
during 1992 and 1991.
12. Restructuring Costs and Special Charges
The following is a summary regarding the Company's 1992 and 1991
Restructuring Costs and Special Charges.
In November 1989, the Company acquired for $37,700,000 all of the issued
and outstanding common shares of Flow Laboratories, Inc. and Flow
Laboratories B.V. from GRC International, Inc. (formerly Flow General Inc.).
These companies together with their respective subsidiaries ("Flow"),
constituted the Biomedical division of Flow General. The excess of the total
purchase price (including acquisition costs) over the fair value of net
assets acquired was $35,245,000, which was allocated to the excess of cost
over net assets of purchased subsidiaries and was being amortized over 40
years. Flow was a manufacturer and distributor of several thousand
biochemical products worldwide. At the time of the acquisition, the Company
had concluded that Flow was a significant complement to the Company, since
Flow had a major presence in the European markets, which the Company lacked
at the time. Therefore, more than products, the Company acquired an
international distribution network. Since 1990, the Company utilized this
distribution network to introduce ICN products. At the same time, it decided
to phase out or to eliminate Flow low margin products, certain other product
lines which did not fit the Company's long-term strategies and to close down
inefficient operations.
In prior years and the first three quarters of 1992, recoverability of
goodwill associated with the Flow acquisition was focused on the European
operations as Biomedicals had only a limited presence in Europe prior to the
Flow acquisition. Accordingly, Biomedicals used the expected future
operating income of the European operations in evaluating the recoverability
of the Flow goodwill.
During 1991, the Company initiated a restructuring program designed to
reduce costs, and improve operating efficiencies. The program included,
among other items, the consolidation, relocation and closure of certain
manufacturing and distribution facilities within the U.S. and Europe, which
were acquired in the Flow acquisition. Those measures, including a 15%
reduction in the work force, were largely enacted during 1991 and continued
in 1992. Costs incurred relating to this restructuring plan during 1991 were
$6,087,000.
During the fourth quarter 1992, as a result of a continued decline
in sales and other factors, the Company reassessed their business plan and
<PAGE>
<PAGE>50
prospects for 1993 and beyond which included, among other things, the
decision to sell the last remaining major European manufacturing facility and
to restructure the previously acquired distribution network and European
operations in line with the revised sales estimates. Consequently, based
upon the continuing decline in European revenue and profitability relating to
Flow, Flow facility closures and an ineffective distribution network,
management concluded that there was no current or expected future benefit
associated from the Flow acquisition. Accordingly, the Company wrote off
goodwill and other intangibles, primarily from the Flow acquisition of
$37,714,000.
The relocation of various U.S. and European operations was also
re-evaluated. It was determined that many of the operations did not support
the costs of maintaining separate facilities. Therefore, estimated costs
associated with lease termination, employee termination, facility shut-down
(of facilities held for disposition) were expensed primarily in the fourth
quarter of 1992 and amounted to $4,858,000.
During the fourth quarter of 1992, the Company reassessed the valuation
of inventory, given the decline in sales and lack of effective integration of
the Company's and Flow's product lines. Accordingly, the Company recorded a
provision for abnormal writedowns of inventory to estimated realizable value
of $9,924,000 and discontinued products of $3,377,000.
In addition, during the fourth quarter of 1992, the Company determined
that the unamortized costs of the catalog marketing program would not be
recovered within a reasonable period; therefore, costs totaling $6,659,000
were written off. In the future, specifically focused customer or "product
line" catalogs will be used for customer product lines and a more focused
general catalog for others.
Restructuring costs and special charges of $63,032,000 and $6,087,000
for the years ended December 31, 1992 and 1991, respectively, are shown as a
separate item in the Consolidated Statements of Operations and include the
following:
<TABLE>
<CAPTION> 1992 1991
----------- -----------
<S> <C> <C>
Goodwill and other intangibles $37,714,000 $ --
Catalog 6,659,000 --
Inventory allowances 9,924,000 --
Discontinued products 3,377,000 1,550,000
Employee termination costs 1,961,000 1,866,000
Lease termination costs 1,434,000 737,000
Facility relocation costs 357,000 724,000
Reduction to net realizable value of
vacant facilities held for disposition 1,106,000 800,000
Miscellaneous restructuring cost 500,000 410,000
----------- -----------
Total $63,032,000 $ 6,087,000
=========== ===========
</TABLE>
<PAGE>
<PAGE>51
13. Lease Vacancy Costs
During 1993, the Company vacated its High Wycombe facility in England
and moved to a facility more suitable to the Company's operating needs in
Thames, England. The Company pursued various subleasing agreements for which
none were consummated as of December 31, 1993. Consequently, the Company
accrued approximately $1,200,000 which represents management's best estimate
of the net present value of future leasing costs to be incurred for High
Wycombe. During 1993, the Company expensed an additional $236,000 of leasing
costs related to High Wycombe.
14. Other (Income) Expense, Net.
Other (income) expense, net was $(2,399,000), $4,731,000 and $1,268,000
in 1993, 1992 and 1991, respectively. In 1993, Other (income) expense, net,
includes a gain of $430,000 representing a favorable settlement of a foreign
non-income related tax dispute, a gain of $278,000 on the sale of the
Company's Irvine, Scotland facility, a gain of $938,000 realized by the
Company's Italian operation on the favorable termination of certain leasing
contracts, and a gain of $1,250,000 relating to certain liabilities accrued
during 1992 which were settled for less than the original estimates. In
1992, the Company expensed $2,187,000 for a non-exclusive license fee for the
purpose of marketing certain laboratory equipment in the U.S., Canada and
South America. Other charges in 1992 include certain non-income related
taxes and an equity investment write-off totaling $2,202,000. Other (income)
expense, net in 1991 included $1,286,000 of one-time costs relating to the
introduction of the Company's catalog.
15. Extraordinary Income
During the second quarter of 1993, the Company's Italian operation
negotiated settlements with certain of its suppliers and banks resulting in
an extraordinary income of $627,000 or $.03 per share.
<PAGE>
<PAGE>52 ICN BIOMEDICALS, INC.
Schedule V -- Property, Plant and Equipment
(In thousands)
<TABLE>
<CAPTION>
Balance at Sales Transfers Balance
Beginning Additions and and at end
of period at cost retirements other <F1> of period
--------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Land $ 995 $ -- $ -- $1,844 $ 2,839
Buildings 4,782 -- 8 1,881 6,655
Machinery and equipment 19,149 1,696 986 (247) 19,612
Furniture and fixtures 2,704 107 267 (381) 2,163
Leasehold improvements 1,390 432 104 (59) 1,659
------ ------ ------ ------ -------
Total $29,020 $2,235 $1,365 $3,038 $32,928
======= ====== ====== ====== =======
<FN>
<F1> Transfers and other include the reclassification of the Opera, Italy, facility
previously classified as an asset held for disposition (See Note 3) and the effect
of translating foreign currency financial statements in accordance with Statement
of Financial Accounting Standards No. 52.
</TABLE>
<PAGE>
<PAGE>53 ICN BIOMEDICALS, INC.
<TABLE>
Schedule VI -- Accumulated Depreciation and Amortization
of Property, Plant and Equipment
(In thousands)
<CAPTION>
Additions
Balance at charged to Sales Transfers Balance
Beginning costs and and and at end
of period expenses retirements other <F1> of period
--------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Buildings $ 1,024 $ 96 $ 4 $ 102 $ 1,218
Machinery and equipment 11,168 2,189 478 38 12,917
Furniture and fixtures 2,548 326 613 (380) 1,881
Leasehold improvements 1,125 179 88 (32) 1,184
------- ------ ------ ------ -------
Total $15,865 $2,790 $1,183 $ (272) $17,200
======= ====== ====== ====== =======
<FN>
<F1> Transfers and other include the reclassification of the Opera, Italy facility
previously classified as an asset held for disposition (see Note 3) and the effect
of translating foreign currency financial statements in accordance with Statement of
Financial Accounting Standards No. 52.
</TABLE>
<PAGE>
<PAGE>54 ICN BIOMEDICALS, INC.
Schedule VIII--Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Charged to Deductions Balance
Beginning costs and other from at end
of period expenses accounts reserves of period
--------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993:
Allowance for doubtful
accounts $ 3,353 $ 168 $ -- $ 1,121 $ 2,400
======= ======= ======= ======= =======
Allowance for inventory
obsolescence $15,530 $ (454) $ -- $ 3,597 $11,479
======= ======= ======= ======= =======
Year ended December 31, 1992:
Allowance for doubtful
accounts $ 2,025 $ 2,251 $ -- $ 923 $ 3,353
======= ======= ======= ======= =======
Allowance for inventory
obsolescence $ 5,635 $11,444 $ -- $ 1,549 $15,530
======= ======= ======= ======= =======
Year ended December 31, 1991:
Allowance for doubtful
accounts $ 2,357 $ 20 $ -- $ 352 $ 2,025
======= ======= ======= ======= =======
Allowance for inventory
obsolescence $ 8,510 $ 1,614 $ -- $ 4,489 $ 5,635
======= ======= ======= ======= =======
</TABLE>
<PAGE>
<PAGE>55
<TABLE>
ICN BIOMEDICALS, INC.
Schedule X--Supplementary Income Statement Information
(In thousands)
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs $ 909 $1,847 $1,820
====== ====== ======
Advertising $1,813 $2,486 $2,633
====== ====== ======
</TABLE>
<PAGE>
<PAGE>56
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required under this item is incorporated by reference to
the Company's definitive Proxy Statement to be filed in connection with the
Company's 1994 annual meeting of stockholders. Reference is made to that
portion of the Proxy Statement entitled "Information Concerning Nominees and
Directors." Information regarding the Company's executive officers is
included in Part I of this Form 10-K under the caption "Executive Officers of
the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required under this item is incorporated by reference to
the Company's definitive Proxy Statement to be filed in connection with the
Company's 1994 Annual Meeting of Stockholders. Reference is made to that
portion of the Proxy Statement entitled "Executive Compensation."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required under this item is incorporated by reference to
the Company's definitive Proxy Statement to be filed in connection with the
Company's 1994 Annual Meeting of Stockholders. Reference is made to that
portion of the Proxy Statement entitled "Ownership of the Company's
Securities."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required under this item is incorporated by reference to
the Company's definitive Proxy Statement to be filed in connection with the
Company's 1994 Annual Meeting of Stockholders. Reference is made to those
portions of the Proxy Statement entitled "Executive Compensation" and
"Certain Transactions."
<PAGE>
<PAGE>57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Financial Statements of the Registrant are listed in the index to
Consolidated Financial Statements and filed under Item 8, "Financial
Statements and Supplementary Data", included elsewhere in this Form 10-K.
2. Financial Statement Schedules
Financial Statement Schedules of the Registrant are listed in the index
to Consolidated Financial Statements and filed under Item 8, "Financial
Statements and Supplementary Data," included elsewhere in this Form 10-K.
3. Exhibits.
3.1 Certificate of Incorporation of Registrant, including all Amendments
through March 13, 1987.*
3.2 Bylaws of Registrant, including all Amendments through September 23,
1986.*
10.1 Exchange Agreement dated as of January 1, 1984 between Registrant
and ICN (Exhibit 10.1 to Registration Statement No. 33-7613).*
10.2 Tax Sharing Agreement dated as of November 30, 1983 between
Registrant and ICN (Exhibit 10.2 to Registration Statement
No. 33-7613).*
10.3 1983 Employee Incentive Stock Option Plan (Exhibit 10.3 to
Registration Statement No. 33-7613).*
10.4 1983 Non-Qualified Stock Option Plan (Exhibit 10.4 to Registration
Statement No. 33-7613).*
10.5 Asset Purchase Agreement dated as of October 1, 1985 between
Micromedic Systems, Inc. and ICN Pharmaceuticals, Inc (Exhibit 10.5
to Registration Statement No. 33-7613).*
10.6 Lease Agreement between Pennsylvania Business Campus Delaware, Inc.
(Landlord) and ICN Micromedic Systems, Inc. (Tenant) dated April 9,
1986 (Exhibit 10.8 to Registration Statement No. 33-7613).*
10.7 Loan Agreement, dated as of July 1, 1986, between ICN
Pharmaceuticals, Inc. and ICN Biomedicals, Inc. (Exhibit 10.9 to
Registration Statement No. 33-7613).*
10.8 Amendment No. 1 to Loan Agreement, dated as of September 11, 1986,
between ICN Pharmaceuticals, Inc. and ICN Biomedicals, Inc (Exhibit
10.10 to Registration Statement No. 33-7613).*
10.9 Bio Capital Holding Trust Instrument between ICN Biomedicals, Inc.,
Ansbacher (C.I.) Limited and ICN Pharmaceuticals, Inc. dated as of
January 26, 1987; Subscription Agreement between ICN Biomedicals,
Inc., Ansbacher (C.I.) Limited, ICN Pharmaceuticals, Inc., Banque
<PAGE>
<PAGE>58
Gutzwiller, Kurz, Bungener S.A. and the other financial institutions
named therein dated as of January 26, 1987; Exchange Agency
Agreement between ICN Biomedicals, Inc., Banque Gutzwiller, Kurz,
Bungener S.A. and the other financial institutions named therein
dated as of January 26, 1987; and Guaranty between ICN
Pharmaceuticals, Inc., and ICN Biomedicals, Inc. dated as of
February 17, 1987 (Exhibit 10.1 to the Company's Form 10-Q for the
quarter ended February 28, 1987).*
10.10 Exchange Agreement effective as of December 1, 1986 between ICN
Biomedicals, Inc. and ICN Pharmaceuticals, Inc. (Exhibit 10.2 to the
Company's Form 10-Q for the quarter ended February 28, 1987).*
10.11 1983 Employee Incentive Stock Option Plan, as amended (Exhibit 19.1
to the Company's Form 10-Q for the quarter ended May 31, 1989)*.
10.12 1983 Non-Qualified Stock Option Plan, as amended.*
10.13 Purchase and Sale Agreement between ICN Biomedicals, Inc. and Flow
General, Inc. dated as of September 28, 1989 (Exhibit 2.1 to the
Company's Form 10-Q for the quarter ended August 31, 1989)*.
10.14 Credit Agreement between ICN Biomedicals, Inc., Flow Laboratories,
Inc., Flow Laboratories B.V. and First City, Texas-Houston, N.A.
dated as of November 8, 1989.*
10.15 Amended and Restated Credit Agreement between ICN Biomedicals, Inc.
and First City, Texas-Houston, N.A. dated as of November 30, 1990.*
10.16 Commitment Letter between ICN Biomedicals, Inc., ICN
Pharmaceuticals, and First City, Texas-Houston, N.A. dated March 30,
1992.
10.17 Research and Development Agreement between ICN Biomedicals, Inc. and
Viratek, Inc. dated January 1, 1992.*
10.18 1992 Employee Incentive Stock Option Plan.*
10.19 1992 Employee Non-Qualified Stock Option Plan.*
11 Statement re computation of per share earnings.
21 Subsidiaries of Registrant.
23 Consent of Coopers & Lybrand, Independent Auditor.
* Incorporated by reference.
<PAGE>
<PAGE>59 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.
March 30, 1994
ICN BIOMEDICALS, INC.
By /s/ MILAN PANIC
------------------------------
Milan Panic,
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Date Signature Title
- -------------- --------------------------- --------------------------
<S> <C> <C>
March 30, 1994 /s/ MILAN PANIC Chairman of the Board
--------------------------- and Chief Executive
Officer
Milan Panic
March 30, 1994 /s/ JOHN E. GIORDANI Senior Vice President
--------------------------- and Chief Financial
Officer
John E. Giordani
March 30, 1994 /s/ JEAN-FRANCOIS KURZ Director
---------------------------
Jean-Francois Kurz
March 30, 1994 /s/ ADAM JERNEY Director
--------------------------
Adam Jerney
March 30, 1994 /s/ THOMAS LENAGH Director
--------------------------
Thomas Lenagh
</TABLE>
<PAGE>
<PAGE>60
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
11 Statement re Computation of Per Share Earnings
21 Subsidiaries of Registrant
23 Consent of Coopers & Lybrand, Independent Auditor
</TABLE>
<PAGE>
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
The computations of net income (loss) per share for the years ended
December 31, 1993, 1992 and 1991, respectively, are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Primary:
Net income (loss) $ 1,762,000 $(87,420,000) $(12,892,000)
=========== ============ ============
Average common shares outstanding 17,895,000 18,224,000 11,790,000
Dilutive common equivalent shares
issuable upon the exercise of
options and warrants currently
outstanding to purchase common
shares <F1> 69,000 -- --
----------- ------------ ------------
17,964,000 18,224,000 11,790,000
----------- ------------ ------------
Net income (loss) per share $ .10 $ (4.80) $ (1.09)
=========== ============ ============
Fully Diluted:
Net income (loss) $ 1,762,000 $(87,420,000) $(12,892,000)
Add back: Interest expense,
net of tax, applicable to
convertible debt 668,000 778,000 831,000
Accretion, net of tax, on Danish
bonds acquired if debt converted 552,000 662,000 1,667,000
----------- ------------ ------------
$ 2,982,000 $(85,980,000) $(10,394,000)
=========== ============ ============
Average common shares outstanding 17,895,000 18,224,000 11,790,000
Dilutive common equivalent shares
issuable upon the exercise of
options and warrants currently
outstanding to purchase common
shares 82,000 55,000 118,000
Shares issuable upon conversion
of debt 2,608,000 2,778,000 3,003,000
----------- ------------ -----------
20,585,000 21,057,000 14,911,000
=========== ============ ===========
Net income (loss) per share $ .14 $ (4.08) $ (.70)
======== ========= =========
<FN>
<F1> Share amounts are not included in 1992 and 1991 because their effect
is antidilutive.
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
ICN Biomedicals, Inc. is incorporated in the State of Delaware. The
following table shows the Company's significant subsidiaries as of March 30,
1994, the percentages of their voting securities (including directors'
qualifying shares) owned by the Company, and the jurisdiction under which
each subsidiary is incorporated.
<TABLE>
<CAPTION> Percentage
of
Voting
Securities
Jurisdiction Owned by
of Company or
Name Incorporation Subsidiary
- ---- ------------- ----------
<S> <C> <C>
ICN Biomedicals GmbH--Eschwege Germany 100
ICN Biomedicals Canada, Ltd. Canada 100
Flow Laboratories, Inc. Maryland, U.S.A. 100
ICN Biomedicals Australasia Pty Ltd. Australia 100
ICN Biomedicals Japan Co. Ltd. Japan 100
Amstelstad A.G. Switzerland 100
ICN Biomedicals B.V. Netherlands 100
ICN Biomedicals California, Inc. California, U.S.A. 100
ICN Biomedicals, S.L. Spain 95
(Laboratorios Hubber, S.A., owns 5%)
Labsystems Benelux B.V. Netherlands 100
Labsystems Benelux N.V. Belgium 100
ICN Biomedicals, Ltd. Scotland 100
ICN Biomedicals, GmbH Germany 100
Labsystems GmbH Germany 100
ICN France SARL France
Flow Laboratories B.V. Netherlands 100
Flow Laboratories (International) S.A. Switzerland 100
Flow Trading A.G. Switzerland 100
ICN Biomedicals S.R.L. Italy 95
(Flow Laboratories, B.V. owns 5%)
ICN Biomedicals N.V./S.A. Belgium 100
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated
March 30, 1994 into the Company's previously filed Registration Statements on
Form S-8 (File No.33-26170, 33-34943, and 33-60862), Form S-1 (File No.
33-14479), and Form S-3 (File No. 33-63162) on our audits of the consolidated
financial statements and financial statement schedules of ICN Biomedicals,
Inc. as of December 31, 1993 and 1992 and for the years ended December 31,
1993, 1992 and 1991, which report is included in this Annual Report on Form
10-K.
COOPERS & LYBRAND
Los Angeles, California
March 30, 1994
