<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 1)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File NO. 0-15242
DURAMED PHARMACEUTICALS, INC.
Incorporated Under the IRS Employer I.D.
Laws of the State No. 11-2590026
of Delaware
7155 East Kemper Road
Cincinnati, Ohio 45249
(513) 731-9900
Indicate by checkmark 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
--- ---
Common Stock, $.01 par value per share:
Shares Outstanding as of May 12, 1999 21,416,597
<PAGE> 2
DURAMED PHARMACEUTICALS, INC.
Explanatory Note
This amended quarterly report is being filed to add Note 2 to the Notes to
Consolidated Financial Statements and to revise the Consolidated Statement of
Operations for the three months ended March 31, 1998 accordingly.
Other developments relating to Duramed Pharmaceuticals, Inc. since the date of
filing of the original Form 10-Q for the quarter ended March 31, 1999 are
reflected in Duramed's subsequent filings, to which reference is made.
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<PAGE> 3
Part I. Financial Information
- ------------------------------
Item 1. Financial Statements (unaudited)
- -----------------------------------------
DURAMED PHARMACEUTICALS, INC.
Consolidated Balance Sheets
Assets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,000 $ 3,500
Trade accounts receivable,
less allowance for doubtful accounts:
1999 - $884,000 1998 - $903,000 10,225,930 10,330,816
Inventories 20,981,251 19,786,705
Prepaid expenses and other assets 3,065,532 2,803,460
----------- -----------
Total current assets 34,276,713 32,924,481
Property, plant and equipment:
Land 1,000,000 1,000,000
Buildings and improvements 19,333,343 19,285,854
Equipment, furniture and fixtures 25,782,099 25,253,509
----------- -----------
46,115,442 45,539,363
Less accumulated depreciation
and amortization 18,937,178 18,309,535
----------- -----------
Property, plant and equipment - net 27,178,264 27,229,828
Deposits and other assets 1,014,189 1,051,575
----------- -----------
$62,469,166 $61,205,884
=========== ===========
</TABLE>
See accompanying notes.
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<PAGE> 4
DURAMED PHARMACEUTICALS, INC.
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 4,283,648 $ 4,370,181
Accrued liabilities 5,752,670 5,886,201
Current portion of long-term debt
and other liabilities 3,204,485 3,384,860
Current portion of capital lease obligations 739,581 708,891
------------ ------------
Total current liabilities 13,980,384 14,350,133
------------ ------------
Long-term debt, less current portion 25,198,526 22,138,315
Long-term capital leases, less current portion 471,687 441,632
------------ ------------
Total liabilities 39,650,597 36,930,080
------------ ------------
Mandatory redeemable convertible preferred stock 4,900,000 7,700,000
------------ ------------
Stockholders' equity:
Common stock - authorized 50,000,000
shares, par value $.01; issued and outstanding
21,369,002 and 19,811,178 shares in 1999 and 1998,
respectively 213,689 198,111
Additional paid-in capital 98,499,232 94,795,906
Accumulated deficit (80,794,352) (78,418,213)
------------ ------------
Total stockholders' equity 17,918,569 16,575,804
------------ ------------
$ 62,469,166 $ 61,205,884
============ ============
</TABLE>
See accompanying notes.
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<PAGE> 5
DURAMED PHARMACEUTICALS, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
------------ ------------
(Restated)
<S> <C> <C>
Net sales $ 13,249,507 $ 12,741,035
Cost of goods sold 10,417,537 10,287,468
------------ ------------
Gross profit 2,831,970 2,453,567
------------ ------------
Operating expenses:
Product development 1,302,723 1,939,716
Selling 895,986 613,089
General and administrative 2,326,601 2,093,017
------------ ------------
4,525,310 4,645,822
------------ ------------
Operating loss (1,693,340) (2,192,255)
Net interest expense 682,799 488,825
------------ ------------
Loss before income taxes
and preferred stock dividends (2,376,139) (2,681,080)
Income taxes -- --
------------ ------------
Net loss (2,376,139) (2,681,080)
Preferred stock dividends 68,292 91,662
Deemed dividend on convertible
preferred stock -- 890,415
------------ ------------
Net loss applicable to
common stockholders $ (2,444,431) $ (3,663,157)
============ ============
Basic and diluted loss per share $ (0.12) $ (0.21)
============ ============
Weighted average number of
common and common equivalent
shares outstanding 20,609,007 17,902,140
============ ============
</TABLE>
See accompanying notes.
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<PAGE> 6
DURAMED PHARMACEUTICALS, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(2,376,139) $ (2,681,080)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 714,929 678,459
Provision for doubtful accounts 51,080 48,628
Common stock issued in connection with
employee compensation plans 86,423 50,421
Changes in assets and liabilities:
Trade accounts receivable 53,806 (1,230,589)
Inventories (1,194,546) (4,583,772)
Prepaid expenses and other assets (301,735) 436,206
Accounts payable (86,533) 1,206,378
Accrued liabilities (109,899) 705,979
Other (29,624) 5,621
----------- ------------
Net cash used in operating activities (3,192,238) (5,363,749)
----------- ------------
Investing activities:
Capital expenditures (576,079) (140,841)
Refunds (deposits) on capital expenditures 11,574 (32,279)
----------- ------------
Net cash used for investing activities (564,505) (173,120)
----------- ------------
Cash flows from financing activities:
Payments of long-term debt,
including current maturities (468,770) (915,758)
Net increase (decrease) in revolving credit facility 3,168,398 (4,462,656)
Long-term borrowings 240,953 35,835
Issuance of preferred stock - net -- 11,399,376
Cash redemption of preferred stock -- (176,098)
Issuance of common stock 898,475 93,825
Preferred dividends paid (81,813) (100,444)
----------- ------------
Net cash provided by financing activities 3,757,243 5,874,080
----------- ------------
Net change in cash 500 337,211
Cash at beginning of period 3,500 3,500
----------- ------------
Cash and cash equivalents at end of period $ 4,000 $ 340,711
=========== ============
Supplemental cash flow disclosures:
Interest paid $ 554,932 $ 444,687
Income taxes paid -- --
</TABLE>
See accompanying notes.
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<PAGE> 7
DURAMED PHARMACEUTICALS, INC.
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1998 19,811,178 $198,111 $94,795,906 $(78,418,213) $16,575,804
Issuance of stock in connection
with benefit plans 16,154 161 86,262 86,423
Issuance of stock in connection
with stock options 548,890 5,489 892,986 898,475
Conversion of Series F
Preferred Stock 992,780 9,928 2,792,370 2,802,298
Net loss for 1999 (2,376,139) (2,376,139)
Preferred Stock dividends (68,292) (68,292)
----------- -------- ----------- ------------ -----------
BALANCE - MARCH 31, 1999 21,369,002 $213,689 $98,499,232 $(80,794,352) $17,918,569
=========== ======== =========== ============ ===========
</TABLE>
See accompanying notes.
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Interim Financial Data
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. For further information, refer to the consolidated
financial statements and notes thereto included in the Annual Report of Duramed
Pharmaceuticals, Inc. (the "Company" or "Duramed") on Form 10-K/A for the year
ended December 31, 1998, (the "1998 10-K/A").
Note 2: Loss Per Common Share
The following table presents the calculation of losses applicable to common
stockholders. The Company has restated its consolidated financial statements for
the quarter ended March 31, 1998 to conform its accounting for a beneficial
conversion feature, related to the issuance of mandatory redeemable convertible
preferred stock in February 1998 to Emerging Issues Task Force Topic No. D-60
("Topic No. D-60"). Topic No. D-60 requires that the intrinsic value of
beneficial conversion features of convertible preferred stock should be treated
as a return to the preferred stockholder over the period from issuance to the
first date that conversion can occur. The Company had not previously assigned a
value to the beneficial conversion feature of its Series F mandatory redeemable
convertible preferred stock which provided for maximum discount on conversion of
22%. The restated amount has been amortized over 300 days, the minimum period
which the preferred shareholders can realize the maximum beneficial conversion.
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<PAGE> 9
As a result of the aforementioned restatement, the net loss applicable to common
stockholders increased by $890,415 and basic and diluted loss per share
increased by $0.06 for the quarter ended March 31, 1998:
<TABLE>
<CAPTION>
March 31
1999 1998
---- ----
<S> <C> <C>
Net loss ..................................... $(2,376,139) $(2,681,080)
Less dividends on preferred shares ........... 68,292 91,662
----------- -----------
Net loss applicable to common stockholders
as previously reported ................. $(2,444,431) $(2,772,742)
Less deemed dividend on convertible preferred
stock -- 890,415
----------- -----------
Net loss applicable to common
stockholders as restated ............... $(2,444,431) $(3,663,157)
=========== ===========
Basic and diluted loss per share
as previously reported ................. $ (0.12) $ (0.15)
=========== ===========
Restated basic and diluted
loss per share .......................... $ (0.12) $ (0.21)
=========== ===========
</TABLE>
Weighted-average common shares outstanding for the computation of basic and
diluted loss per share were 20,609,007 and 17,902,140 for the periods ended
March 31, 1999 and 1998, respectively.
For the three month periods ended March 31, 1999 and 1998 outstanding options
and warrants covering 4,564,317 and 4,079,569 shares, respectively, were not
recognized in computing net loss per share as their effect would be
anti-dilutive.
Note 3: Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Components of inventories include:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials ...... $ 6,810,198 $ 6,841,241
Work-in-process .... 352,990 476,404
Finished goods ..... 16,600,165 14,914,588
Obsolescence reserve (2,782,102) (2,445,528)
------------ ------------
Net inventory $ 20,981,251 $ 19,786,705
============ ============
</TABLE>
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<PAGE> 10
The Company has $3.5 million in inventory of its synthetic conjugated estrogens
product, in raw material and finished dosage form, which has previously been
expensed. The product has been maintained and will be utilized in the sales
effort for Cenestin(TM) (synthetic conjugated estrogens, A) Tablets
("Cenestin").
Note 4: Debt and Mandatory Redeemable Convertible Preferred Stock
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Debt
Revolving credit facility ................ $13,869,887 $10,701,489
Merrill Lynch note payable ............... 8,038,154 8,144,404
Equipment term note ...................... 5,363,727 5,564,866
Note payable to strategic alliance partner 1,103,678 1,081,146
Installment notes payable ................ 27,565 31,270
----------- -----------
28,403,011 25,523,175
Less amount classified as current ........ 3,204,485 3,384,860
----------- -----------
$25,198,526 $22,138,315
=========== ===========
Mandatory redeemable
convertible preferred stock ............. $ 4,900,000 $ 7,700,000
=========== ===========
</TABLE>
During the first quarter of 1999, the Company financed its operations and a $1.2
million increase in inventory with borrowings on its revolving credit facility
and proceeds from the exercise of stock options.
Debt
On November 9, 1998 the Company executed a new debt financing agreement with
NationsCredit Commercial Corporation, through its NationsCredit Commercial
Funding Division ("NationsCredit"). The term of the financing agreement is four
years with provisions for renewals. The financing agreement provides for a
revolving credit facility collateralized by the Company's receivables and
inventories and a $5,631,913 term note secured by the Company's equipment. The
Company's borrowing capacity under the revolving credit facility adjusts based
on the change in receivables and inventory and bears an interest rate of prime
plus 0.50% (8.75% at March 31, 1999). As of March 31, 1999 the Company's
available borrowing capacity under this revolving credit facility was $5.0
million based upon eligible collateral ($17.9 million as of March 31, 1999). The
$5,631,913 term note bears an interest rate of prime plus 0.75% (9.00% at March
31, 1999) and requires monthly principal payments of $67,047 plus interest for a
seven year period, subject to renewal of the financing agreement.
- 10 -
<PAGE> 11
The Company used the proceeds from the NationsCredit financing to pay off the
Company's existing revolving credit facility, as well as an equipment note held
by Ortho-McNeil Pharmaceutical Corporation and various equipment notes held by
its previous bank.
Additionally, the Company refinanced its existing mortgage loan on its
Cincinnati, Ohio manufacturing facility with a $8.1 million note payable to
Merrill Lynch, which is guaranteed by the Warner-Lambert Company
("Warner-Lambert"). Warner-Lambert holds a first mortgage on the Company's
Cincinnati, Ohio manufacturing facility. The note payable to Merrill Lynch bears
a variable interest rate based upon the average commercial paper dealer rate
plus 2.65% (7.52% on March 31, 1999). The monthly principal payment required is
$35,417 plus interest. Principal payments are based upon a twenty year
amortization with a balloon payment due on October 1, 2007 of $4,250,000.
The note payable to a strategic alliance partner is an unsecured note. The note
requires payments of $600,000 and $550,000 on April 30, 1999 and April 30, 2000,
respectively.
Other long-term debt also includes facilities of varying amounts and terms which
are generally collateralized by the assets financed.
The carrying value of the Company's debt approximates fair market value.
Mandatory Redeemable Convertible Preferred Stock
In February 1998, the Company issued $12.0 million in Series F Preferred Stock
to raise funds necessary to continue to execute the Company's business plan. The
Series F Preferred Stock is convertible into shares of common stock and pays a
dividend of 5% annually, payable quarterly in arrears, on all unconverted
shares. Any of the Series F Preferred Stock that remain outstanding will be
redeemed automatically on February 4, 2000. The terms of the Series F Preferred
Stock limit the number of shares of Common Stock that can be issued upon
conversion to 3,580,252, with an option for the Company to satisfy any remaining
unconverted Series F Preferred Stock in cash or stock. In November 1998, the
Company received a waiver of the Nasdaq requirement for shareholders approval
which permits the Company to issue, as required, 1,401,584 shares beyond the
original 3,580,252. The terms of the Series F Preferred Stock provide for a
conversion price based upon a trailing 20 day period and were structured such
that the Series F Preferred Shares were convertible into common shares at
varying discounts to the market price (as defined) depending on the date the
conversion occurred.
- 11 -
<PAGE> 12
At May 12, 1999 $7.1 million of the stated value of the Series F Preferred Stock
had been converted into 2,794,702 shares of Common Stock at an average price of
$2.54 per share. Per the terms of the Series F Stock, assuming that the stock
price remains above $4.88 and the Series F holder converts, the balance of the
Series F preferred shares will convert into common shares at $3.80 per share.
Based upon a $3.80 conversion price, the Company will be required to issue
approximately 1.3 million common shares upon the conversion of the remaining
Series F Preferred Stock. This would result in the Company issuing 4.1 million
common shares at an average price of $2.94 upon the complete conversion of the
Series F Stock.
- 12 -
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by the
undersigned, thereunto duly authorized, as of the 22nd day of November 1999.
DURAMED PHARMACEUTICALS, INC.
by: /s/ Timothy J. Holt
-------------------------------------
Timothy J. Holt
Senior Vice President - Finance,
Treasurer, Chief Financial Officer
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