SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number 0-15515
-------
APPLIED BIOSCIENCE INTERNATIONAL INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2734293
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4350 N. Fairfax Drive
Arlington, VA 22203-1627
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 516-2490
---------------
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---------- ----------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 28,175,048 shares of common
stock, par value $.01 per share, as of May 1, 1995.
<PAGE>
APPLIED BIOSCIENCE INTERNATIONAL INC.
AND SUBSIDIARIES
INDEX
Part I. FINANCIAL INFORMATION Page
Item 1. Financial Statements.
Consolidated Statements of Operations for the
Three Months Ended March 31, 1995 and
March 31, 1994........................................3
Consolidated Balance Sheets at
March 31, 1995 and December 31, 1994..................4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and
March 31, 1994........................................5
Notes to Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........8
Part II. OTHER INFORMATION
Item 1. Legal Proceedings ............................................10
Item 2. Changes in Securities.........................................10
Item 3. Defaults upon Senior Securities...............................10
Item 4. Submission of Matters to a Vote of Security Holders...........10
Item 5. Other Information.............................................10
Item 6. Exhibits and Reports on Form 8-K..............................10
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Applied Bioscience International Inc. and Subsidiaries
<TABLE><CAPTION>
Consolidated Statements of Operations
(in thousands, except share data)
Three months ended March 31,
1995 1994
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Pharmaco LSR revenues, net of subcontractor costs of
$6,860 and $5,077, respectively $ 33,354 $ 29,712
Environmental sciences revenues, net of subcontractor
costs of $1,358 and $764, respectively 12,419 10,483
------------ ------------
45,773 40,195
------------ ------------
Direct costs - Pharmaco LSR 24,049 21,767
Direct costs - Environmental sciences 8,689 6,681
Selling, general and administrative expenses 11,568 10,597
------------ ------------
44,306 39,045
------------ ------------
Operating income 1,467 1,150
Interest: (Expense) (829) (587)
Income 71 153
Other income, net 44 96
------------ ------------
Income from continuing operations before provision for
income taxes 753 812
Provision for income taxes 317 256
------------ ------------
Income from continuing operations 436 556
------------ ------------
Discontinued operations:
Operating losses from discontinued operations (net of
income tax benefit of $47) - (104)
------------ ------------
Net income $ 436 $ 452
============ ============
Weighted average number of common shares outstanding 28,430 28,386
============ ============
Earnings per common share:
Income from continuing operations $ 0.02 $ 0.02
Loss from discontinued operations 0.00 0.00
------------ ------------
Earnings per share $ 0.02 $ 0.02
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
Applied Bioscience International Inc. and Subsidiaries
<TABLE><CAPTION>
Consolidated Balance Sheets
(in thousands, except share data)
March 31, December 31,
ASSETS 1995 1994
(unaudited)
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,467 $ 7,944
Accounts receivable, net 61,091 63,585
Supply inventories 1,142 1,163
Income tax receivable 2,586 2,297
Prepaid expenses and other current assets 6,288 6,077
------------ ------------
Total current assets 75,574 81,066
PROPERTY AND EQUIPMENT, at cost less accumulated
depreciation and amortization 83,634 82,905
GOODWILL, less accumulated amortization 5,593 5,738
OTHER ASSETS 9,036 8,982
NET NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS 2,951 2,989
------------ ------------
Total assets $ 176,788 $ 181,680
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,259 $ 2,406
Accounts payable 4,472 6,156
Accrued liabilities 24,691 24,619
Advance billings 29,243 23,649
Net current liabilities of discontinued operations 826 553
------------ ------------
Total current liabilities 62,491 57,383
LONG-TERM DEBT 32,145 42,884
DEFERRED INCOME TAXES 11,806 11,348
DEFERRED RENT 1,281 1,357
------------ ------------
Total liabilities 107,723 112,972
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 40,000,000 shares
authorized, 29,520,000 shares issued and
outstanding 295 295
Paid-in capital 68,826 68,826
Retained earnings 12,498 12,062
Treasury stock, at cost, 1,347,000 shares (9,355) (9,355)
Unrealized loss on investments (778) (728)
Cumulative translation adjustment (1,709) (1,561)
Deferred compensation (712) (831)
------------ ------------
Total stockholders' equity 69,065 68,708
------------ ------------
Total liabilities and stockholders' equity $ 176,788 $ 181,680
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
Applied Bioscience International Inc. and Subsidiaries
<TABLE><CAPTION>
Consolidated Statements of Cash Flows
(in thousands)
Three months ended March 31,
1995 1994
(unaudited) (unaudited)
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 436 $ 452
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,950 1,677
Deferred income taxes 135 121
Deferred rent benefit (76) (76)
Deferred compensation expense 119 143
Change in assets and liabilities:
Decrease in accounts receivable, net 2,723 3,601
Increase in supply inventories, prepaid
expenses and other current assets (123) (490)
Decrease in other assets 100 280
Change in assets and liabilities of
discontinued operations, net 311 (2,594)
Decrease in accounts payable and accrued
liabilities (2,001) (2,781)
Increase in current income taxes 88 979
Increase (decrease) in advance billings 5,357 (3,133)
------------ ------------
Net cash provided by (used in)
operating activities 10,019 (1,821)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (2,636) (1,104)
------------ ------------
Cash flows from financing activities:
Short-term bank borrowings (repayments), net - (489)
Repayment of long-term debt (29,266) (1,123)
Other long-term borrowings 19,350 1,903
Proceeds from issuance of common stock - 214
------------ ------------
Net cash (used in) provided by
financing activities (9,916) 505
------------ ------------
Effect of exchange rate changes on cash (944) 204
------------ ------------
Net decrease in cash and cash equivalents (3,477) (2,216)
Cash and cash equivalents, beginning of the
period 7,944 10,549
------------ ------------
Cash and cash equivalents, end of the period $ 4,467 $ 8,333
============ ============
SUPPLEMENTAL INFORMATION
Cash Paid:
Interest expense, net of amount capitalized $ 854 $ 599
============ ============
Income Taxes $ 17 $ 130
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Applied Bioscience International Inc. and Subsidiaries
Notes To Consolidated Financial Statements
1. BASIS OF PRESENTATION
---------------------
The financial statements as of March 31, 1995, and for the three
months ended March 31, 1995, and 1994, are unaudited. In the opinion of
management of Applied Bioscience International Inc. (the "Company"), the
unaudited financial statements as of March 31, 1995, and for the three months
ended March 31, 1995, and 1994, include all adjustments consisting of normal
recurring accruals necessary for a fair presentation. The results of operations
for the interim periods are not necessarily indicative of the results expected
for the full year.
Certain amounts in the prior year have been reclassified to
conform to current year presentation.
2. SEGMENT RESULTS
---------------
Results of the continuing operations by business segment are as
follows (unaudited, dollars in thousands):
Three months ended March 31,
1995 1994 % Change
--------- --------- ---------
NET REVENUES
Pharmaco LSR $ 33,354 $ 29,712 12.3%
APBI Environmental Sciences 12,419 10,483 18.5%
--------- ---------
Total $ 45,773 $ 40,195 13.9%
========= =========
OPERATING INCOME
Pharmaco LSR $ 1,562 $ 1,068 46.3%
APBI Environmental Sciences 2,452 2,537 (3.4%)
Corporate and other (2,547) (2,455) (3.7%)
--------- ---------
Total $ 1,467 $ 1,150 27.6%
========= =========
3. DISCONTINUED OPERATIONS
-----------------------
As of December 31, 1993, APBI adopted a plan to divest ETC, its
analytical laboratory division. In connection with the plan, APBI wrote down its
investment in ETC to estimated net realizable value and provided for losses
until its expected disposition. On August 3, 1994, the Company's subsidiary APBI
Environmental Sciences Group, Inc. along with PACE, Inc. and Coast-to-Coast
Analytical Services, Inc. each contributed to PACE Incorporated, a newly formed
entity, substantially all of the assets used in their respective environmental
laboratory businesses. This is the first step in the ultimate disposition of
ETC. In the fourth quarter of 1994, the Company recorded additional writedowns
to reduce the carrying value of the investment to the current net realizable
value. In June 1994, the Company adopted a plan to sell, and completed the sale
of, Paragon. The prior year consolidated statements of operations have been
restated to reclassify ETC and Paragon as discontinued operations to conform to
the current year presentation.
6
<PAGE>
4. FINANCING AGREEMENT
-------------------
On May 24, 1994 the Company completed a refinancing of its principal
credit facility. The new three-year facility consists of a term loan of
$25,000,000 and a secured revolving line of credit of $20,000,000. Approximately
84% or $21,111,000 of the term loan accrues interest at a fixed rate of 9.25%
per annum and the remainder bears interest at the prime rate plus 1.5%.
Repayment of principal is scheduled to begin on September 1, 1995 at $892,900
per quarter. The secured revolving line of credit accrues interest at the prime
rate plus 1.5%. The proceeds from the loan were used to repay in full the
Company's then existing bank facility and a portion of its other long-term debt
and working capital debt. The unused portion will be used to provide working
capital and for general corporate purposes.
5. NEW ACCOUNTING PRONOUNCEMENT
----------------------------
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS 115), issued in May
1993, changes the accounting treatment of certain equity investments. The
Company implemented SFAS 115 during the first quarter of 1994 with respect to
its investment in the common stock of EnSys. Under SFAS 115, the Company's
investment in EnSys is classified as "available for sale" and is carried at its
fair value of $2,918,000. Unrealized losses of $778,000 are reported as a
separate component of stockholders' equity.
6. EARNINGS PER COMMON SHARE
-------------------------
Earnings per common share were computed using the weighted average
number of common stock and common stock equivalents outstanding during the year.
Common equivalent shares are calculated using the treasury stock method and
consist primarily of shares issuable upon exercise of stock options.
7
<PAGE>
Applied Bioscience International Inc. and Subsidiaries
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
- ---------------------
General
- -------
Applied Bioscience International Inc. (the "Company") recorded net
revenues for the quarter ended March 31, 1995 of $45,773,000, a 13.9% increase
from the first quarter of 1994. Net revenues from Pharmaco LSR, the Company's
life sciences business, were up 12.3% from the first quarter of 1994. Net
revenues from APBI Environmental Sciences Group, the Company's environmental
sciences business, were up 18.5% versus the comparable period last year.
Net income from continuing operations for the first quarter of 1995
was $436,000, or $0.02 per share compared to $452,000, or $0.02 per share for
the first quarter of 1994. The first quarter net income compares favorably to
the net loss from continuing operations of $248,000, or $0.01 per share reported
in the fourth quarter of 1994.
The Company is continuing to evaluate the long-term strategic fit
of its life sciences and environmental sciences businesses, as well as the
individual business units within these groups. At this time, the Company is
actively reviewing divestiture plans with respect to its Astrix division,
which sells and licenses certain software products.
After evaluating various strategic alternatives with respect to
ENVIRON, the Company believes that retention of ENVIRON as one of the Company's
core businesses is in the best interests of the Company's stockholders. In view
of the role of ENVIRON senior management within this business, the Company has
engaged an outside compensation consulting firm to advise the Company with
respect to the development of an appropriate incentive compensation program for
this business unit. Such an incentive program might be in addition to, or in
lieu of, the Company's existing "Economic Value Added" compensation program but
would include certain enhanced retention features and the possible negotiation
of certain employment or retention agreements. The existing employment contracts
with the four original ENVIRON founders who continue to be active within ENVIRON
come up for renewal in September 1995.
Three Months Ended March 31, 1995 Versus Three Months Ended March 31, 1994
- --------------------------------------------------------------------------
Net revenues from continuing operations increased $5,578,000 (13.9%)
to $45,773,000 for the three months ended March 31, 1995, from $40,195,000 for
the three months ended March 31, 1994. Of such increase, $3,642,000 (65.3%) was
attributable to the Company's life sciences business, and $1,936,000 (34.7%) was
attributable to the Company's environmental sciences business.
The increase in net revenues of the life sciences business was
principally due to the continued increase in demand for the Company's clinical
development services. The clinical development services business in North
America and Europe, which also includes the Company's biostatistical services in
North America and Europe, reported a net revenue increase of $3,600,000 (33.3%)
to $14,402,000 for the three months ended March 31, 1995, from $10,802,000 for
the same period last year. Net revenues from the Company's clinics, labs, and
toxicology business reported a slight increase of $42,000 (0.2%) to $18,952,000
for the quarter as compared to $18,910,000 for the comparable period last year.
Net revenues in the clinics, labs, and toxicology business were impacted by
several project delays and cancellations at the analytical laboratory in
Richmond, Virginia and at the toxicology laboratory in Europe.
The $1,936,000 increase in net revenues in the Company's
environmental sciences business was generated by increased volume of consulting
services provided by its ENVIRON division. ENVIRON's net revenues increased
$2,166,000 (21.1%) to $12,411,000 in the first quarter of 1995 as compared to
the first quarter of 1994. Offsetting ENVIRON's net revenue increase versus last
year was $230,000 of miscellaneous net revenue reported in the first quarter
last year without corresponding revenue in the first quarter of 1995.
Direct costs increased in the first quarter by $4,290,000 (15.1%)
over the first quarter last year. Of such increase, $2,282,000 was attributable
to Pharmaco LSR and $2,008,000 was attributable to the Company's Environmental
Sciences Group. The increase in the direct costs of Pharmaco LSR relates to the
overall increase in business. The 10.5% increase in direct costs, primarily
higher physician costs and depreciation expense at Pharmaco LSR, compares
favorably to the net revenue increase of 12.3% previously mentioned.
8
<PAGE>
Consequently, as a percentage of net revenue, direct costs of the life sciences
group decreased to 72.1% in the first quarter of 1995 as compared to 73.3%
during the first quarter last year. In the environmental sciences business, the
percentage of direct costs to net revenues increased to 70.0% from 63.7%. The
increase was attributable to start up of the new air sciences office in Novato,
California, and increased payroll related taxes and benefits.
Selling, general and administrative expenses increased $971,000
(9.2%) to $11,568,000 in the first quarter of 1995 compared to $10,597,000 for
the same period last year. As a percentage of net revenues, selling, general and
administrative expenses decreased to 25.3% in 1995 compared to 26.4% in 1994.
The dollar increase was due in part to expenses related to the Company's
investment in information technology. The investment, in the form of computer
and systems personnel, higher depreciation and amortization of hardware and
software as well as higher communications costs allow the Company to better
manage data flow and collection to improve the overall speed and quality of
service to our clients.
Operating income increased $317,000 (27.6%) to $1,467,000 in the
first three months of 1995 as compared to $1,150,000 for the first three months
of 1994. As a percentage of net revenue, operating income increased to 3.2% in
1995 compared to 2.9% in 1994.
Interest expense, net of interest income, increased to $758,000 in
the first quarter of 1995 from $434,000 in the first quarter of 1994 due
principally to an increase in the prime rate by approximately three hundred
basis points.
Liquidity
- ---------
During the three months ended March 31, 1995, the Company expended
$2,636,000 for capital additions. Expenditures included $951,000 for expansion
and improvement of offices and laboratory testing facilities and $1,685,000 for
new laboratory, office, and computer equipment.
On May 24, 1994, the Company completed a refinancing of its
principal credit facility. The new three-year facility consists of a term loan
of $25,000,000 and a secured revolving line of credit of $20,000,000.
Approximately 84% or $21,111,000 of the term loan accrues interest at a fixed
rate of 9.25% per annum and the remainder bears interest at the prime rate plus
1.5%. Repayment of principal is scheduled to begin on September 1, 1995 at
$892,900 per quarter. The secured revolving line of credit accrues interest at
the prime rate plus 1.5%. The rate is subject to reduction at March 31, 1995,
and each quarter thereafter if certain covenants related to financial
performance are met. The Company's financial performance in the first quarter
did not result in an interest rate reduction. The proceeds from the loan were
used to repay in full the Company's then existing bank facility and a portion of
its other long-term debt and working capital debt. The unused portion will be
used to provide working capital and for general corporate purposes. As of March
31, 1995, the Company has $4,467,000 cash and cash equivalents on hand and has
$17,710,000 available under its lines of credit.
The Company believes that cash flow generated by its own operating
activities, together with its current borrowing capacity, is adequate to finance
its world-wide operations and normal growth of its business. Further growth of
the Company's business also may be funded through additional borrowings, the
sale of non-strategic assets or through issuance of shares of common stock by
the Company.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
------------------
None.
ITEM 2. Changes in Securities.
----------------------
Not Applicable.
ITEM 3. Defaults upon Senior Securities.
--------------------------------
Not Applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
None.
ITEM 5. Other Information.
------------------
None.
ITEM 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit 10.34 Interim Employment Agreement by and between
Pharmaco LSR International Inc. and Charles L. Defesche
dated as of March 1, 1995
Exhibit 11. Computation of Earnings Per Share
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APPLIED BIOSCIENCE INTERNATIONAL INC.
-------------------------------------
(Registrant)
By /s/ Kenneth H. Harper
----------------------------------
President
(Chief Executive Officer)
By /s/ Jamie G. Donelan
----------------------------------
Controller
(Chief Accounting Officer)
Date: May 12, 1995
11
<PAGE>
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Number
- ----- ------
10.34 Interim Employment Agreement by and between Pharmaco
LSR International Inc. and Charles L. Defesche
dated as of March 1, 1995 13
11. Computation of Earnings Per Share 18
27. Financial Data Schedule 19
12
EXHIBIT No. 10.34
INTERIM EMPLOYMENT AGREEMENT
----------------------------
AGREEMENT made effective as of March 1, 1995 between Pharmaco LSR
International Inc., a Texas corporation f/k/a Pharmaco Dynamics Research, Inc.
(hereinafter, "Employer" or the "Company") and Charles L. Defesche, M.D., FCP
(hereinafter, "Employee").
RECITALS
--------
A. Employer is engaged in the business of pharmaceutical research;
B. Employer and Employee previously entered into an Amended Employment
Agreement dated as of February 29, 1992 (the "Employment Agreement"); and
C. Employer and Employee desire to modify the terms of the Employment
Agreement as provided herein.
THEREFORE, in consideration of $250.00, the receipt and adequacy of which
are acknowledged by Employee, and in consideration of the mutual covenants set
forth herein, the parties agree as follows:
1. During the period from March 1, 1995 through June 30, 1995 (the
"Interim Period"), Employee will remain in the employ of the Company subject to
the terms of this Agreement. All obligations set forth in the Employment
Agreement, save and except those which are expressly incorporated into this
Agreement by reference, are hereby suspended -- and inapplicable -- during the
Interim Period.
2. During the Interim Period, Employee will be paid a base salary
equivalent to $240,000 per annum in accordance with the Company's standard
payroll schedule.
3. Effective as of February 23, 1995, Employee confirms his resignation
from his position as President and Chief Executive Officer of the Company.
4. Effective immediately, Employee resigns from his position as a member
of the Board of Directors of Applied Bioscience International Inc. ("APBI"), and
at the request of the Company at any time from any directorships that he may
hold in the Company and all other subsidiaries of APBI or the Company.
5. Employee shall, during the Interim Period, hold the position of
Chairman of Pharmaco LSR International Inc., and shall report to and take
direction from, and perform the duties assigned to him by, the President and
Chief Executive Officer of the Company. It is understood that the title of
Chairman of the
<PAGE>
Company shall not entitle Employee to exercise executive authority over other
employees of the Company, except to the extent expressly delegated by the
President or Chief Executive Officer of the Company.
6. Employee's employment during the Interim Period shall be subject to
termination immediately upon the death of Employee, or effective immediately
upon written notice to Employee for Disability (as that term is defined in
Article VII, paragraph D of the Employment Agreement). Employee's employment
may be terminated effective immediately upon written notice for "Cause" (as that
term is defined in Article VII, paragraph E of the Employment Agreement),
provided that the Company shall give written notice to Employee specifying the
facts which are the basis for such termination within three (3) days after the
Company acquires knowledge of the circumstances establishing Cause for
termination, and in the event of termination for Cause or in the event of
Employee's resignation from employment, Employee shall not be entitled to any
severance pay.
7. (a) The Company may elect not to retain Employee in its employ after
the Interim Period by giving written notice of termination to Employee at any
time prior to July 1, 1995 (a "Company Termination Notice"). In such event
Employee shall be entitled to continue to receive, as severance pay, his base
salary for a period of twelve months, commencing July 1, 1995; provided that if
the Employee accepts a position with, or begins providing consulting services
to, a Designated Competitor (as hereinafter defined) during the last six months
of such period (i.e., January 1, 1996 - June 30, 1996), then subsequent to the
----
date such employment or engagement begins the Company shall be released and
otherwise discharged from making any further severance or other payments to the
Employee during the remaining balance of such period. Employee may elect not to
continue in the employ of the Company after the Interim Period by giving written
notice of termination to the Company at any time prior to July 1, 1995 (an
"Employee Termination Notice") (collectively, the Company Termination Notice and
Employee Termination Notice are referred to as a "Termination Notice"). In such
event Employee shall be entitled to continue to receive, as severance, his base
salary for a period of six months, commencing July 1, 1995. The foregoing
amounts shall be in lieu of any severance pay that the Employee would otherwise
be entitled to receive pursuant to Article VII of the Employment Agreement. In
the event Employee completes his employment during the Interim Period, and no
Termination Notice has been given by either the Company or the Employee,
Employee's Employment Agreement will be reinstated, with the sole modifications
therein being that (i) Employee shall continue to occupy the position assigned
to him in this Agreement, and shall continue to report and take direction as
provided in paragraph 5 above during the remaining term of the Employment
Agreement, (ii) the remaining term of such Employment Agreement will expire on
the last day of June, 1996 and (iii) in
-2-
<PAGE>
connection with the transfer of the Company car to the Employee as contemplated
by Section 11 hereof, the Employee shall no longer be entitled to any automobile
allowance or other wise eligible for reimbursement for automobile expenses.
(b) "Designated Competitor" as used herein shall mean any of the
companies identified on Exhibit A hereto, including any of their subsidiaries or
affiliates.
8. During the Interim Period, all insurance and other benefits to which
Employee is entitled under Employee's Employment Agreement shall be continued in
effect. Such benefits shall include participation in the executive bonus plan
as such plan presently exists within the Company and at the level that Employee
formerly was entitled to in his capacity as President and Chief Executive
Officer of the Company. At the conclusion of the Interim Period, if Employee's
Employment Agreement is not reinstated as provided herein, and Employee has not
then been discharged for Cause, the Company shall continue to provide for
Employee (and his dependents to the extent presently covered) the same level of
coverage benefits now applicable under the Company's health, dental, short and
long term disability and life insurance policies until the sooner to occur of
(a) June 30, 1996 or (b) such date as Employee may accept other employment.
9. Except as expressly modified herein, the parties hereby incorporate by
reference and continue in effect during the Interim Period, the provisions of
the Employment Agreement set forth in Article I, paragraphs B and C; Article II,
paragraphs A (as same is modified herein) through G; Articles III through V;
Article VI, paragraphs A, B, C, D, G, I, J, K; Article VII, paragraphs D and E;
and Articles VIII through X. Articles VI, VIII, IX, and X of the Employment
Agreement shall survive the termination of Employee's employment with the
Company, to the extent contemplated by such provisions. A copy of the
Employment Agreement may be attached hereto for reference.
10. During the Interim Period, Employee will be provided with a suitable
office (but not the office suite occupied by Employee during the past three
years), secretarial assistance as needed for Company purposes, and the use, at
the Company's expense and in furtherance of the Company's business, of cellular
phones, home office fax and portable computer.
11. Employee shall be entitled during the Interim Period to continue use
of the Company car that has presently been assigned to him. At the expiration
of the Interim Period, such car will be transferred to Employee without further
charge, provided that Employee shall pay all applicable taxes that are due as a
result of such transfer.
-3-
<PAGE>
12. During any period that Employee is receiving any salary or severance
payments pursuant to paragraph 7 above, Employee shall not (i) (in any capacity)
engage in any activity directly or on behalf of any person or entity in
competition with the Company or its affiliates, nor lend assistance directly or
indirectly to any person or entity, nor engage in any activity that is adverse
to the interests of the Company or its affiliates in the United States, Europe
(including, without limitation, the United Kingdom and Scandinavia), Japan and
Canada, (ii) contact or solicit for any competitive purpose, either directly or
indirectly, any sponsor for whom the Company sponsor, or any co-investigator who
has performed services for the Company within a twelve-month period immediately
prior to the termination of the Employee's employment, nor (iii) solicit, or
seek to cause any potential competitor of the Company to solicit, the employment
or engagement of any present employee of the Company, or any former employee of
the Company. A "co-investigator" or "sponsor" shall have the meanings set forth
in the Employment Agreement. The foregoing is in lieu of the provisions of the
Employment Agreement set forth in Article VI, paragraphs E, F, and L which do
not apply in the context of the Employee's employment termination under
paragraph 7 hereof.
13. The Company will reimburse Employee for documented legal fees and
related expenses incurred in connection with the negotiation, preparation and
execution of this Agreement in an amount not to exceed $5,000.
14. In the event of any inconsistency between the Employment Agreement (as
adopted herein) and this Agreement, the terms of this Agreement shall prevail.
EXECUTED in multiple original counterparts as of the first date written
above.
PHARMACO LSR INTERNATIONAL INC.
By: /s/
-------------------------------
Its Duly Authorized
Representative
/s/ Charles L. Defesche
----------------------------------
Charles L. Defesche, M.D., FCP
-4-
<PAGE>
EXHIBIT A
Designated Competitors
----------------------
Corning Pharmaceutical Services and any of its subsidiaries
Quintiles Transnational Corp.
ClinTrials Research Inc.
Parexel International Inc.
BRI, Inc.
IBAH, Inc.
-5-
EXHIBIT No. 11
Applied Bioscience International Inc. And Subsidiaries
Computation Of Earnings Per Share
(in thousands, except share data)
Three Months Ended March 31,
----------------------------
1995 1994
----------- -----------
Primary Earnings per Share
Income from continuing operations $ 436 $ 556
Loss from discontinued operations - (104)
----------- -----------
Net Income $ 436 $ 452
=========== ===========
Weighted average number of shares of
common stock outstanding during the period 28,173 28,123
Common stock equivalents assuming
exercise of stock options (a) 257 263
----------- -----------
Weighted average common and common
equivalent shares outstanding 28,430 28,386
=========== ===========
Primary earnings per common share:
Continuing Operations $ 0.02 $ 0.02
Discontinued Operations (0.00) (0.00)
----------- -----------
Primary earnings per share $ 0.02 $ 0.02
=========== ===========
Fully Diluted Earnings per Share
Income from continuing operations $ 436 $ 556
Loss from discontinued operations - (104)
----------- -----------
Net Income $ 436 $ 452
=========== ===========
Weighted average number of shares of
common stock outstanding during the period 28,173 28,123
Common stock equivalents assuming
exercise of stock options (a) 261 291
----------- -----------
Weighted average common and common
equivalent shares outstanding 28,434 28,414
=========== ===========
Fully diluted earnings per common share:
Continuing Operations $ 0.02 $ 0.02
Discontinued Operations (0.00) (0.00)
----------- -----------
Fully diluted earnings per share $ 0.02 $ 0.02
=========== ===========
(a) In the calculation of common stock equivalents, stock options are assumed to
be exercised at the beginning of the period. The proceeds from the options
exercised are assumed to be used to purchase common stock at (i) the average
market price during the period for primary earnings per share and (ii) the
higher of the average or last market price during the period for fully diluted
earnings per share.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT No. 27
This schedule contains summary financial information extracted from the
Applied Bioscience International Inc. Consolidated Balance Sheet and Statement
of Operations included within this Form 10-Q and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 4,467
<SECURITIES> 0
<RECEIVABLES> 64,546
<ALLOWANCES> 3,455
<INVENTORY> 1,142
<CURRENT-ASSETS> 75,574
<PP&E> 139,477
<DEPRECIATION> 55,843
<TOTAL-ASSETS> 176,788
<CURRENT-LIABILITIES> 62,491
<BONDS> 32,145
<COMMON> 295
0
0
<OTHER-SE> 68,770
<TOTAL-LIABILITY-AND-EQUITY> 176,788
<SALES> 0
<TOTAL-REVENUES> 45,773
<CGS> 0
<TOTAL-COSTS> 32,738
<OTHER-EXPENSES> 11,568
<LOSS-PROVISION> 273
<INTEREST-EXPENSE> 829
<INCOME-PRETAX> 753
<INCOME-TAX> 317
<INCOME-CONTINUING> 436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
