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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998.
--------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ________________________
(Amended by Exch Act Rel No. 312905. eff 4/26/93.)
Commission File Number. 000-21930
---------
BIOSOURCE INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 77-0340829
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
820 FLYNN ROAD, CAMARILLO, CALIFORNIA 93012
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (805)987-0086
None
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at May 15, 1998 8,454,638
1
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
<C> <S> <C>
PART I FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1998
AND DECEMBER 31, 1997 ................................................. 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997................................................. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 1998 AND 1997................................................. 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................ 6-10
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 11-14
PART II OTHER INFORMATION
1-6 OTHER INFORMATION, EXHIBITS AND REPORTS ON
FORM 8-K................................................................ 15
SIGNATURES................................................................ 16
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,111,553 $ 9,477,453
Short-term investments 3,444,418 4,968,684
Accounts receivable, less allowance for doubtful accounts
of $203,000 at March 31, 1998 and December 31, 1997 3,911,928 3,459,482
Inventories 7,881,555 7,883,402
Prepaid expenses and other current assets 1,739,222 1,599,353
Deferred income taxes 245,487 248,000
------------ ------------
Total current assets 26,334,163 27,636,374
Property and equipment, net 4,770,436 4,560,113
Other assets 881,606 737,583
Deferred income taxes 109,184 223,000
------------ ------------
$ 32,095,389 $ 33,157,070
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of notes payable $ 35,176 $ 34,511
Accounts payable 1,509,911 1,446,332
Accrued expenses 1,852,731 1,472,661
Income taxes payable 601,046 252,846
------------ ------------
Total current liabilities 3,998,864 3,206,350
------------ ------------
Notes payable, less current maturities 1,283,507 1,292,414
Stockholders' equity:
Preferred stock, $.001 par value. Authorized
1,000,000 shares; none issued -- --
Common stock, $0.001 par value. Authorized
20,000,000 shares; issued
8,448,981 shares at March 31, 1998 and
8,431,015 shares at December 31, 1997 8,449 8,431
Additional paid-in capital 29,083,853 29,048,905
Retained earnings 3,322,708 2,506,539
Accumulated other comprehensive income (1,323,300) (1,161,100)
Treasury stock at cost, 666,500 shares at March 31, 1998
and 283,300 shares at December 31, 1998 (4,278,692) (1,744,469)
------------ ------------
Net stockholders' equity 26,813,018 28,658,306
------------ ------------
$ 32,095,389 $ 33,157,070
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Revenue $ 5,300,964 $ 5,448,440
Cost of goods sold 1,780,882 1,985,138
----------- ------------
Gross profit 3,520,082 3,463,302
----------- ------------
Operating expenses:
Research and development 562,283 524,230
Sales & marketing 831,308 1,056,590
General and administrative 891,948 864,367
----------- ------------
Total operating expenses 2,285,539 2,445,187
----------- ------------
Operating income 1,234,543 1,018,115
----------- ------------
Other income (expense), net (31,701) 295,635
----------- ------------
Income before income taxes 1,202,842 1,313,750
Provision for income taxes 386,673 451,595
----------- ------------
Net income $ 816,169 $ 862,155
=========== ============
Net income per share:
Basic $ 0.10 $ 0.10
=========== ============
Diluted $ 0.10 $ 0.10
=========== ============
Weighted average number of shares outstanding:
Basic 8,011,367 8,341,042
=========== ============
Diluted 8,565,559 9,070,000
=========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 816,169 $ 862,155
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 192,204 156,545
Unrealized exchange loss 36,102 --
Changes in assets and liabilities:
Accounts receivable (516,093) (719,464)
Inventories (101,846) 26,331
Prepaid expenses and other current assets (148,968) (91,749)
Other assets (51,768) 42,493
Accounts payable 98,598 (195,671)
Accrued expenses and other liabilities 395,684 (418,803)
Income taxes payable 354,126 357,971
----------- -----------
Net cash provided by operating activities 1,074,208 19,808
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (432,572) (397,679)
Proceeds from sale of property and equipment 3,042 --
Purchase of investments (4,931,379) (1,354,653)
Proceeds from sale of investments 6,455,645 8,345,978
----------- -----------
Net cash provided by investing activities 1,094,736 6,593,646
----------- -----------
Cash flows from financing activities:
Proceeds from the exercise of options 34,961 69,755
Payments to acquire treasury stock (2,534,219) --
Repayments to bank (7,513) (6,904)
Payments of capital lease obligations (729) --
----------- -----------
Net cash provided by (used in) financing activities (2,507,500) 62,851
----------- -----------
Net increase (decrease) in cash and
cash equivalents (338,556) 6,676,305
Effect of exchange rate on cash (27,344) (53,178)
Cash and cash equivalents at beginning
of period 9,477,453 3,606,904
----------- -----------
Cash and cash equivalents at end
of period $ 9,111,553 $10,230,031
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
5
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements as of March 31, 1998
and for the three month periods ended March 31, 1998 and 1997 included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to prevent the information presented from
being misleading. These condensed consolidated financial statements should be
read in conjunction with the financial statements and the notes thereto included
in the Company's Form 10-K for the year ended December 31, 1997.
The information provided in this report reflects all adjustments that are, in
the opinion of management, necessary to present fairly the results of operations
for these periods. The results for the three months ended March 31, 1998, are
not necessarily indicative of the results to be expected for the full year.
1. Summary of Significant Accounting Policies
Description of Business
BioSource International, Inc. (the Company) is engaged in the licensing,
development, manufacture, marketing and distribution of immunological
reagents, test kits and oglionucleotides used in biomedical research and
human diagnostics. The types of products supplied by the Company include a
range of bioactive proteins, enzymes, substrates, antibodies, human
cytokines, growth factors and a variety of assay systems for the detection of
biological molecules. These products focus on areas of research such as
immunology, cell biology, AIDS and cancer. The Company focusese its sales
efforts on academic, industrial and governmental laboratories.
Principles of Consolidation
The consolidated financial statements include the accounts of BioSource
International, Inc. and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents includes all cash balances and highly liquid
investments with an original maturity of three months or less.
Investments
The Company accounts for its investments using Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." At March 31, 1998, the Company has investments
in U.S. Treasury securities that are classified in the consolidated balance
sheet as short-term (mature in more than 91 days but no more than one year).
These investments are categorized as held to maturity when purchased and are
carried at cost as the Company has both the intent and the ability to hold
these investments until they mature.
6
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Financial Instruments
The carrying value of financial instruments such as cash and cash
equivalents, short-term investments, trade receivables, payables and
short-term debt approximates their fair value due to the short-term nature of
these instruments. The recorded values of the Company's long-term debt
instruments approximate fair value as their rates are similar to those
currently available to the Company for debt with similar terms and remaining
maturities.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value) for raw materials and work in process and the average-
cost method for finished goods.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives which range from three
to seven years. Leasehold improvements are amortized using the straight-line
method over the estimated useful life or the lease term, whichever is
shorter.
License Agreements
License agreements are recorded at cost and are amortized using the straight-
line method over the shorter of the estimated useful lives of the license or
the license term (generally five to ten years). These costs are included with
other assets in the accompanying consolidated balance sheet.
Revenue Recognition
Revenue and related cost of goods sold are recognized upon shipment of
products.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enacted date.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets and certain identifiable intangibles are reviewed for
impairment in value based upon undiscounted future operating cash flows, and
appropriate losses are recognized whenever circumstances indicate that the
carrying amount of an asset may not be recoverable.
7
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accounting for Stock Options
The Company measures stock-based compensation for employees using the
intrinsic-value method which assumes that options granted at market price at
the date of grant have no intrinsic value.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
This affects the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates
Foreign Currency Translation
The assets and liabilities of the Company's foreign subsidiary, whose
functional currency is Belgian francs, are translated at the rate of exchange
at the balance sheet date, and related revenues and expenses are translated
at the average exchange rate in effect during the period. Resulting
translation adjustments are recorded as a component of stockholders equity.
Gains and losses from foreign currency transactions are included in net
income.
<TABLE>
<CAPTION>
2. INVENTORIES
MAR 31, 1998 DEC 31, 1997
------------ ------------
<S> <C> <C>
Raw materials............................................................. $ 1,155,486 $ 1,217,976
Work in process........................................................... 3,359,987 3,209,674
Finished goods............................................................ 3,366,172 3,455,752
------------ ------------
$ 7,881,555 $ 7,883,402
============ ============
3. PROPERTY AND EQUIPMENT
MAR 31, 1998 DEC 31, 1997
------------ ------------
<S> <C> <C>
Land...................................................................... $ 360,000 $ 360,000
Building and improvements................................................. 2,124,111 1,933,224
Machinery and equipment................................................... 2,941,602 2,899,486
Office furniture and equipment............................................ 1,251,807 1,115,000
------------ ------------
6,667,520 6,307,710
Less accumulated depreciation and amortization............................ 1,907,084 1,747,597
------------ ------------
$ 4,770,436 $ 4,560,113
============ ============
</TABLE>
8
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
4. Notes Payable
Long-term debt consists of the following:
MAR 31, 1998 DEC 31, 1997
------------ ------------
<S> <C> <C>
9.4% first mortgage note payable in monthly
installments of $6,896, including interest, with final
payment of $535,178 due April 2006................................ $ 717,129 $ 720,904
7.6% second mortgage note payable due June 2016,
payable in monthly installments of $5,369,
including interest................................................ 589,715 593,453
6.0% capital lease obligation payable in monthly installments
Of $290, including interest,with final payment due Feb 2001....... 11,839 12,568
----------- -----------
1,318,683 1,326,925
Less current portion................................................. 35,176 34,511
----------- -----------
$ 1,283,507 $ 1,292,414
=========== ===========
</TABLE>
5. Earnings per Share
In 1997, the Financial Accounting Standards Boards issued SFAS No. 128, Earnings
per Share (EPS). SFAS No. 128 replaced the calculation of primary and fully
diluted earnings per share with basis and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options. Diluted earnings per share is very similar to the previously
reported earnings per share. All earnings per share amounts for all periods have
been restated to conform to SFAS No. 128 requirements.
The reconciliations of the numerators and denominators of the basic and diluted
earnings per share computations are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
-------------------------------------------- --------------------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------------------------------------- --------------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Computation of basic EPS
net income $ 816,169 8,011,367 0.10 862,155 8,341,042 0.10
Effect of dilutive
securities:
Stock options -- 554,192 -- -- 702,097 --
Warrants -- -- -- -- 26,861 --
Compututation of diluted ------------- -------------
EPS net income $ 816,169 8,565,559 0.10 862,155 9,070,000 0.10
</TABLE>
9
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. New Accounting Standards
In 1997, the Financial Accounting Standards Boards issued SFAS No. 130,
"Reporting Comprehensive Income," which became effective for fiscal years
beginning after December 31, 1997. SFAS 130 requires that the components of
comprehensive income be disclosed. Such amounts are as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
------------------------------------------------- -------------------------------------------------
Tax Tax
Before-tax (expense) Net of Tax Before-tax (expense) Net of Tax
Amount or benefit Amount Amount or benefit Amount
-------------- -------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Foreign currency translation
Adjustments $ (162,300) $ -0- $ (162,300) $ (473,400) $ -0- $ (473,400)
-------------- -------------- --------------- -------------- --------------- -------------
Other comprehensive (loss) $ (162,300) $ -0- $ (162,300) $ (473,400) $ -0- $ (473,400)
============== ============== =============== ============== =============== =============
</TABLE>
In June 1997, SFAS No. 131-"Disclosure about Segments of an Enterprise and
Related Information" was issued and became effective for periods beginning
after December 15, 1997. SFAS No. 131 establishes standards for reporting
financial and descriptive information regarding and enterprise's operating
segments. In February 1998, SFAS No. 132-"Employers' Disclosure about Pensions
and Other Post Retirement Benefits" was issued and became effective for periods
beginning after December 15, 1997. These standards increase disclosure in the
financial statements, and will have no impact on the Company's financial
position or results of operations.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the
financial statements and the notes thereto included elsewhere herein.
OVERVIEW
BioSource International, Inc. ("BioSource") develops, manufactures,
markets and distributes products that are widely used in biomedical research and
are instrumental in the development of new medical diagnostic methods and
pharmaceutical products. The Company's products enable scientists to better
understand the biochemistry, immunology and cell biology of the human body,
aging and certain diseases such as cancer, arthritis and other inflammatory
diseases, AIDS and certain other infectious diseases. The Company's products
include immunological reagents, including bioactive proteins (cytokines, growth
factors and adhesion molecules) and monoclonal and polyclonal antibodies. The
Company also develops, manufactures, markets and distributes oligonucleotides
and ELISA test kits, and uses recombinant DNA technology to produce cytokines
and other proteins. Because the Company's products are currently sold in the
U.S. only to the research market, the Company is not subject to regulation by
the FDA, and therefore undertakes none of the risks associated with the research
and development of new drugs.
BioSource maintains manufacturing, laboratories and its executive offices
in Camarillo, California. The Company manufactures oligonucleotides at its
laboratory facilities located in Menlo Park, California.
BioSource Europe, S.A. ("BioSource Europe"), the Company's wholly owned
subsidiary is incorporated under Belgian law and maintained manufacturing
laboratories and administrative offices in Fleurus, Belgium, which lease expired
on March 31, 1998. In January 1998, the Company entered into a new lease for
approximately 30,000 square feet of manufacturing, laboratory and office space
located in Nivelles, Belgium which is approximately 20 miles north of the
Fleurus location. BioSource Europe also has wholly owned subsidiaries in France,
Germany, Italy and the Netherlands.
RESULTS OF OPERATIONS
REVENUE. Revenue for the quarter ended March 31, 1998 decreased $147,476 or
2.71% to $5,300,964 from $5,448,440 when compared to the quarter ended March 31,
1997. BioSource domestic revenue increased $57,524 or 1.8% to $3,171,064 for the
quarter ended March 31, 1998 when compared to $3,113,540 for the quarter ended
March 31, 1997. BioSource Europe revenue decreased $205,000 or 8.8% to
$2,129,900 for the quarter ended March 31, 1998 when compared to $2,334,900 for
the quarter ended March 31, 1997. The domestic revenues increase was limited to
only 1.8% due in part to a decline in sales into the Japanese market for the
quarter ended March 31, 1998. In the quarter ended March 31, 1997 an abnormally
large stocking order was placed in the first quarter. Since the acquisition of
BioSource Europe in June of 1996 the Company has sold directly into the German
market and a distributor is no longer required. Therefore, sales for the quarter
ended March 31, 1998 to Germany declined from the quarter ended March 31, 1997
due to the decreased revenue from a direct distributor being used in 1997.
BioSource Europe sales also declined due in part to the increased strength of
the U.S. dollar to the Belgian Franc and German Mark and to the loss of revenue
from a distribution service BioSource Europe provided to Coulter which
terminated on March 31, 1997. Although the revenue was eliminated from this
distribution agreement, the expenses associated with this agreement also were
eliminated.
Gross margins. Gross margins as a percentage of revenue of 66.4% for the quarter
ended March 31, 1998 increased 2.8 percentage points when compared to 63.6% for
the quarter ended March 31, 1997.
11
<PAGE>
Domestic gross margins for the quarter ended increased 4.5 percentage points to
71.5% when compared to 67% for the quarter ended March 31, 1997. BioSource
Europe margins for the quarter ended March 31, 1998 decreased 3.5 percentage
points to 47.3% when compared to 50.8% for the quarter ended March 31, 1997.
Domestic gross margins increased due to lower manufacturing costs due to larger
production volumes. BioSource Europe margins declined due to downward pricing
pressures on the Radioimmunoassay ("RIA") product line while manufacturing costs
and production volumes remained relatively flat. Management believes this trend
is likely to continue into the future at a slow rate of decline. The Company
plans to offset the loss of revenue from the RIA product lines by continuing to
introduce new research products worldwide.
Research and development. The Company's research and development expenses were
$562,283 for the quarter ended March 31, 1998, an increase of $38,053 or 7.3%,
when compared to $524,230 for the quarter ended March 31, 1997. Domestic
research and development were $370,783 for the quarter ended March 31, 1998, an
increase of $82,153 or 28.5%, when compared to $288,630 for the quarter ended
March 31, 1997. BioSource Europe research and development expenses were $191,500
for the quarter ended March 31, 1998, a decrease of $44,100 or 18.7%, when
compared to $235,600 for the quarter ended March 31, 1997. Domestic research and
development expenses increased due to the addition of personnel and associated
expenditures to continue to develop the Company's core product line and to
expand into other product areas such as chemokines and other animal model assays
such as monkey and swine. BioSource Europe expenditures declined due to the
Company's focus on controlling costs in this area. Management believes BioSource
Europe can continue to be productive without incurring additional expenses.
Sales and marketing. Sales and marketing expenses were $831,308 for the quarter
ended March 31, 1998, a decrease of $225,282 or 21.3% when compared to
$1,056,590 for the quarter ended March 31, 1997. Domestic sales and marketing
expenses were $367,708 for the quarter ended March 31, 1998, a decrease of
$90,582 or 19.8%, when compared to $458,290 for the quarter ended March 31,
1997. BioSource Europe sales and marketing expenses were $463,600 for the
quarter ended March 31, 1998, a decrease of $134,700 or 22.5%, when compared to
$598,300 for the quarter ended March 31, 1997. Domestic sales and marketing
expenses declined in the areas of wages and commission expense due to open sales
territories for the quarter ended March 31, 1998 and decreases in advertising
and trade show attendance due to changes in the mix, timing and types of
promotional ad and campaign literature the Company had placed for the quarter
ended March 31, 1997. BioSource Europe expenses declined due to overall cost
control efforts in Europe and lower expenses in France from lower staffing due
to attrition and lower expenses in Italy due to the closure of that office in
May of 1997.
General and administrative. General and administrative expenses were $891,948
for the quarter ended March 31, 1998, an increase of $27,581 or 3.2%, when
compared to $864,367 for the quarter ended March 31, 1997. Domestic general and
administrative expenses were $532,048 for the quarter ended March 31, 1998, an
increase of $97,081 or 22.3%, when compared to $434,967 for the quarter ended
March 31, 1997. BioSource Europe general and administrative expenses were
$359,900 for the quarter ended March 31, 1998, a decline of $69,500 or 16.2%,
when compared to $429,400 for the quarter ended March 31, 1997. Domestic
expenses increased in the area of compensation and directors and officers
insurance which was effective beginning May 31, 1997. BioSource Europe expenses
declined due to the cost savings from the closure of the Italian sales office in
May of 1997 and continued focus of contolling overall expenses.
Other income (expense), net. Other income (expenses), net were $(31,701) for the
quarter ended March 31, 1998, a decrease of $327,336 or 110.7%, when compared to
$295,635 for the quarter ended March 31, 1997. One material factor for the
decrease includes a $159,000 moving expense charge for the move of BioSource
Europe's manufacturing, sales and administrative offices from Fleurus, Belgium,
which lease expired on March 31, 1998. The Company moved it's facilities to
Nivelles, Belgium. The Nivelles location is approximately 20 miles north of
Fleurus and has approximately 30,000 square feet of space. The new lease is for
a period of 9 years beginning on
12
<PAGE>
March 1, 1998 and management believes the new facility will be able to meet the
current and future needs of the Company. In March 1997, BioSource Europe
included a one-time $200,000 signing payment received from Bouty, an Italian
distributor.
Provision for income taxes. The provision for income taxes for the quarter ended
March 31, 1998 was provided at the effective rate of approximately 32.1% of
pretax earnings when compared to 34.4% for the quarter ended March 31, 1997.
U.S. corporate taxes reflect the tax benefits of a foreign sales corporation,
credits for increased research and development expenditures and the California
manufacturers tax credit. The decrease in the effective tax rate is due to the
fact BioSource Europe incurred no tax provision for the quarter ended March 31,
1998.
Liquidity and Capital Resources
At March 31, 1998 cash and cash equivalents and short term investments in
marketable securities amount to $12.6 million when compared to $14.4 million at
December 31, 1997. The Company invests its cash on hand in low risk short and
long term commercial paper and U.S. treasury strips. The Company's policy is to
maintain liquidity in its investments to provide working capital and have the
ability to react to future potential long term investment opportunities in
complementary business, products or technologies.
Management of the Company expects to be able to meet its future cash and working
capital requirements for operations and capital additions through currently
available funds and cash generated from operations.
Cash flows provided by operating activities
The Company generated $1,074,208 and $19,808 for the quarters ended March 31,
1998 and 1997, respectively. The increase is a result of positve net earnings
after adjustment for noncash expenses, partially offset by increases and
decreases in current assets and liabilities from quarter to quarter.
Cash flows from investing activities
Capital expenditures were $432,572 and $397,679 for the quarters ended March 31,
1998 and 1997, respectively. Capital expenditures included the purchase of
laboratory, manufacturing and computer equipment.
The Company invested $4,931,379 and $1,354,653 to purchase short-term
investments during the quarter ended March 31, 1998 and 1997, respectively.
Maturities of short-term investments were $6,455,645 and $8,345,978 during the
quarters ended March 31, 1998 and 1997, respectively. The Company's policy is to
obtain the highest possible return, maintain liquidity in its investments,
provide working capital and have the ability to react to future potential long
term investment opportunities in complimentary business, products or
technologies.
Cash flow from financing activities.
The Company received $34,961 and $69,755 for the exercise of options for 17,966
and 34,302 shares of common stock during the quarters ended March 31, 1998 and
1997, respectively.
In April 1997, the Board of Directors authorized the Company to repurchase up to
200,000 shares of its outstanding common stock at market price. In December
1997, the Board of Directors authorized the Company to repurchase up to
1,000,000 additional shares of the outstanding common stock at market price. As
of March 31, 1998 the Company had purchased 666,500 shares of Company common
stock for $4,278,692.
13
<PAGE>
The Company has never paid dividends and has no plans to do so in fiscal 1998.
The Company's earnings will be retained for reinvestment in the business.
FORWARD-LOOKING STATEMENTS
Certain statements contained in the Quarterly Report on Form 10-Q,
including without limitation, statements containing the words "believes,"
"anticipates," "expects," and words of similar import, constitute forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the actual results,
performance or achievements of the Company or industry results to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on such forward-
looking statements and are encouraged to review the risk factors contained in
the Company's annual report on Form 10-K for the year ended December 31, 1997.
14
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
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) Exhibits
Copies of the press releases are attached to Form 8-K.
(b) Reports on Form 8-K
Reference is made to the press releases of Registrant, issued on April 9, 1998
which contain information meeding the requirements of Item 5, and which are
incorporated herein by this reference.
15
<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.
BIOSOURCE INTERNATIONAL, INC.
By: /s/ Anna Anderson
------------------------------------------
Anna Anderson
May 15, 1998 Vice President and Chief Financial Officer
/s/ James H. Chamberlain
-------------------------------------------
James H. Chamberlain
May 15, 1998 President and Chief Executive Officer
16
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,111,553
<SECURITIES> 3,444,418
<RECEIVABLES> 4,114,928
<ALLOWANCES> 203,000
<INVENTORY> 7,881,555
<CURRENT-ASSETS> 26,334,163
<PP&E> 6,667,520
<DEPRECIATION> 1,907,084
<TOTAL-ASSETS> 32,095,389
<CURRENT-LIABILITIES> 3,998,864
<BONDS> 0
0
0
<COMMON> 8,449
<OTHER-SE> 32,086,940
<TOTAL-LIABILITY-AND-EQUITY> 32,095,389
<SALES> 5,300,964
<TOTAL-REVENUES> 5,300,964
<CGS> 3,520,082
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,285,539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,878
<INCOME-PRETAX> 1,202,842
<INCOME-TAX> 386,673
<INCOME-CONTINUING> 0
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<NET-INCOME> 816,169
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