<PAGE>
This document consists
of 19 pages, of which
--
this page is number 1 .
---
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 June 30, 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 August 13, 1998 8,457,755
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 June 30,
1998 and December 31, 1997.......................... 3
Condensed Consolidated Statements of Operations for
the six months ended June 30, 1998 and 1997......... 4
Condensed Consolidated Statements of Operations for
the three months ended June 30, 1998 and 1997....... 5
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1998 and 1997......... 6
Notes to Condensed Consolidated Financial Statements.... 7-11
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 12-17
PART II OTHER INFORMATION
1-6 Other Information, Exhibits and Reports on
Form 8-K............................................ 18
SIGNATURES.............................................. 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,183.7 $ 9,477.5
Short-term investments 7,932.0 4,968.7
Accounts receivable, less allowance for doubtful accounts
of $203.0 at June 30, 1998 and December 31, 1997 4,306.0 3,459.5
Inventories 8,124.1 7,883.4
Prepaid expenses and other current assets 1,877.3 1,599.4
Deferred income taxes 245.5 248.0
--------- ---------
Total current assets 23,668.6 27,636.5
Property and equipment, net 4,798.5 4,560.1
Other assets 739.7 737.5
Deferred income taxes 203.2 223.0
--------- ---------
$29,410.0 $33,157.1
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,583.0 $ 1,446.5
Accrued expenses 1,515.2 1,472.7
Current maturities of notes payable 35.9 34.5
Income taxes payable 240.2 252.8
--------- ---------
Total current liabilities 3,374.3 3,206.5
--------- ---------
Long-term debt, excluding current maturities 1,275.2 1,292.4
Stockholders' equity:
Preferred stock, $.001 par value. Authorized
1,000.0 shares; none issued -- --
Common stock, $0.001 par value. Authorized
20,000.0 shares; issued
8,456.1 shares at June 30,1998 and
8,431.0 shares at December 31,1997 8.5 8.4
Additional paid-in capital 29,105.2 29,048.9
Retained earnings 4,124.0 2,506.5
Accumulated other comprehensive income (1,167.9) (1,161.1)
Treasury stock at cost, 1,116.5 shares at June 30, 1998
and 283.3 shares at December 31, 1997 (7,309.3) (1,744.5)
--------- ---------
Net stockholders' equity 24,760.5 28,658.2
--------- ---------
$29,410.0 $33,157.1
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Revenue $10,624.6 $10,492.9
Cost of goods sold 3,732.7 3,769.8
--------- ---------
Gross profit 6,891.9 6,723.1
--------- ---------
Operating expenses:
Research and development 1,240.6 1,048.3
Sales & marketing 1,824.0 2,073.9
General and administrative 1,804.0 1,703.7
--------- ---------
Total operating expenses 4,868.6 4,825.9
--------- ---------
Operating income 2,023.3 1,897.2
Other income, net 118.0 480.1
--------- ---------
Income before income taxes 2,141.3 2,377.3
Provision for income taxes 523.9 742.7
--------- ---------
Net income $ 1,617.4 $ 1,634.6
========= =========
Net income per share:
Basic $ 0.21 0.20
========= =========
Diluted $ 0.19 0.18
========= =========
Weighted average number of shares outstanding:
Basic $ 7,889.8 8,341.3
========= =========
Diluted 8,443.5 9,044.8
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements 4
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30
(In thousands, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenue $5,323.7 $5,044.4
Cost of goods sold 1,951.9 1,784.6
-------- --------
Gross profit 3,371.8 3,259.8
-------- --------
Operating expenses:
Research and development 678.3 524.1
Sales & marketing 992.6 1,017.5
General and administrative 912.0 839.1
-------- --------
Total operating expenses 2,582.9 2,380.7
-------- --------
Operating income 788.9 879.1
Other income, net 149.7 184.5
-------- --------
Income before income taxes 938.6 1,063.6
Provision for income taxes 137.2 291.1
-------- --------
Net income $ 801.4 $ 772.5
======== ========
Net income per share:
Basic $ 0.11 $ 0.09
======== ========
Diluted $ 0.10 $ 0.09
======== ========
Weighted average number of shares outstanding:
Basic 7,596.0 8,341.6
======== ========
Diluted 8,149.7 9,019.7
======== ========
</TABLE>
See accompanying notes to condensed financial statements 5
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,617.4 $ 1,634.6
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 409.3 314.3
Deferred income taxes 2.2 (45.8)
Loss on sale of fixed assets -- 8.7
Unrealized exchange loss 48.4 65.0
Changes in assets and liabilities:
Accounts receivable (852.0) (653.1)
Inventories (252.5) (301.1)
Prepaid expenses and other current assets (313.3) (509.9)
Other assets 38.1 173.7
Accounts payable 147.3 (153.7)
Accrued expenses and other liabilities 30.9 (651.9)
Income taxes payable (11.9) 113.3
---------- ----------
Net cash provided by (used in) operating activities 863.9 (5.9)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (616.1) (518.1)
Proceeds from sale of property and equipment 3.5 --
Purchase of investments (17,080.1) (10,853.9)
Proceeds from sale of investments 14,116.8 11,613.9
---------- ----------
Net cash (used in) provided by investing activities (3,575.9) 241.9
---------- ----------
Cash flows from financing activities:
Proceeds from the exercise of options 56.3 100.1
Payments to acquire treasury stock (5,564.8) (311.6)
Repayments to bank (15.2) (14.0)
Payments of capital lease obligations (0.7) --
---------- ----------
Net cash used in financing activities (5,524.4) (225.5)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (8,236.4) 10.5
Effect of exchange rate on cash (57.4) (16.0)
---------- ----------
Cash and cash equivalents at beginning
of period 9,477.5 3,606.9
---------- ----------
Cash and cash equivalents at end
of period $ 1,183.7 $ 3,601.4
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements 6
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements as of June 30, 1998
and for the six month and three periods ended June 30, 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 six months and three months ended June
30, 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 focuses 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 June 30, 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.
7
<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.
8
<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.
2. INVENTORIES (IN THOUSANDS)
<TABLE>
<CAPTION>
JUN 30, 1998 DEC 31, 1997
------------ ------------
<S> <C> <C>
Raw materials................................... $ 1,218.0 $ 1,218.0
Work in process................................. 3,382.8 3,209.7
Finished goods.................................. 3,523.3 3,455.7
------------ ------------
$ 8,124.1 $ 7,883.4
============ ============
</TABLE>
3. PROPERTY AND EQUIPMENT (IN THOUSANDS)
<TABLE>
<CAPTION>
JUN 30, 1998 DEC 31, 1997
------------ ------------
<S> <C> <C>
Land............................................ $ 360.0 $ 360.0
Building and improvements....................... 2,180.2 1,933.2
Machinery and equipment......................... 3,055.0 2,899.5
Office furniture and equipment.................. 1,319.7 1,115.0
------------ ------------
6,914.9 6,307.7
Less accumulated depreciation and amortization.. 2,116.4 1,747.6
------------ ------------
$ 4,798.5 $ 4,560.1
============ ============
</TABLE>
9
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. NOTES PAYABLE (IN THOUSANDS)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUN 30, 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 $ 713.4 $ 720.9
7.6% second mortgage note payable due June 2016,
payable in monthly installments of $5,369,
including interest 585.9 593.4
6.0% capital lease obligation payable in monthly installments
Of $290, including interest,with final payment due Feb 2001 11.8 12.6
------------ ------------
1,311.1 1,326.9
Less current portion 35.9 34.5
------------ ------------
$ 1,275.2 $ 1,292.4
============ ============
</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>
Six Months Ended Six Months Ended
------------------------------------------- -------------------------------------------
June 30, 1998 June 30, 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 1,617.4 7,889.8 0.21 1,634.6 8,341.3 0.20
Effect of dilutive
securities:
Stock options -- 553.7 -- -- 676.9 --
Warrants -- -- -- -- 26.6 --
Computation of diluted
------------- -------------
EPS net income 1,617.4 8,443.5 0.19 1,634.6 9,044.8 0.18
</TABLE>
10
<PAGE>
BIOSOURCE INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
------------------------------------------- -------------------------------------------
June 30, 1998 June 30, 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 801.4 7,596.0 0.11 772.5 8,341.6 0.09
Effect of dilutive
securities:
Stock options -- 553.7 -- -- 651.5 --
Warrants -- -- -- -- 26.6 --
Computation of diluted
------------- -------------
EPS net income 801.4 8,149.7 0.10 772.5 9,019.7 0.09
</TABLE>
6. NEW ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Boards issued SFAS No. 130,
"Reporting Comprehensive Income," which became effecitve 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>
June 30, 1998 June 30, 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 $ (6.8) $ -- $ (6.8) $ (826.0) $ -- $ (826.0)
---------- ---------- ---------- ---------- ---------- ----------
Other comprehensive loss $ (6.8) $ -- $ (6.8) $ (826.0) $ -- $ (826.0)
========== ========== ========== ========== ========== ==========
</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.
11
<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 and services that are widely used in biomedical
research. The Company's products and services 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 develops,
manufactures, markets and distributes a wide variety of immunoassay and ELISA
test kits; immunological reagents, including bioactive proteins (cytokines,
growth factors and adhesion molecules) and monoclonal and polyclonal antibodies.
The Company also develops, manufactures, markets and distributes a variety
oligonucleotides and manufactures custom oligonucleotides to the specifications
of its customers. The Company 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.
RESULTS OF OPERATIONS
SALES
Sales for the quarter ended June 30, 1998 increased $279,300 or 5.5% to
$5,323,700 from $5,044,400 for the quarter ended June 30, 1997. Sales for the
six months ended June 30, 1998 increased $131,700 or 1.3% to $10,624,600 from
$10,492,900 for the six months ended June 30, 1997.
The increase in sales for the quarter ending June 30, 1998 was due to
strong sales from our U.S. operations with significant increases in sales of
ELISA kits, Oligonucleotides and
12
<PAGE>
the introduction of a line of Cytoset kits. These sales increases were offset by
declines in sales from the Company's European operations, due in large part to
the increased strength of the U.S. dollar relative to certain European
currencies. Had European currency exchange rates remained constant for the three
months ended June 30, 1998, when compared with the same period in 1997, overall
sales growth would have been 8.6%.
The increase in sales for the six months ended June 30, 1998 was due to
sales from our U.S. operations with increases in ELISA kits, Oligonucleotides
and the introduction of a line of Cytoset kits. Sales of the U.S. Operations in
comparison to the same period in 1997, was somewhat diminished as the result of
large stocking orders received from certain distributors in the first quarter of
1997 which were not repeated in 1998. These sales increases were offset by
declines in sales from the Company's European operations, due in large part to
the increased strength of the U.S. dollar relative to certain European
currencies. Had European currency exchange rates remained constant for the six
months ended June 30, 1998, when compared with the same period in 1997, overall
sales growth would have been 5.1%.
GROSS MARGINS
Gross margins as a percentage of Sales of 63.3% for the quarter
ended June 30, 1998 decreased 1.3 percentage points when compared to 64.6% for
the quarter ended June 30, 1997. Gross margins for the six months ended June 30,
1998 of 64.9%, increased 0.8 percentage points when compared to 64.1% for the
quarter ended June 30, 1997. Gross margins of the US Operations for the quarter
ended June 30, 1998 remained stable at 69.9% when compared to 69.5% for the
quarter ended June 30, 1997 and increased 1.0 percentage points to 71.5% for the
six months ended June 30, 1998 from 70.5% for the six months ended June 30,
1997. Gross margins of the European operations, for the quarter ended June 30,
1998, decreased 5.3 percentage points to 53.2% when compared to 58.5% for the
quarter ended June 30, 1997 whereas margins for the six months ended June 30,
1998 decreased 0.9 percentage points to 54.8% from 55.7% when compared to the
six months ended June 30, 1997.
Gross margins for the US operations slightly increased due to efficiencies
in the Company's US manufacturing operations. Gross margins for the European
operations declined primarily due to excess capacity. The Company expects the
cost of excess.
13
<PAGE>
capacity to continue to effect operating results until sales of products
manufactured in Europe increase or costs of the manufacturing operation are
appropriately reduced.
RESEARCH AND DEVELOPMENT
The Company's research and development expenses increased $154,200 or 29.4%
and $192,300 or 18.3% for the quarter and six months ended June 30 1998 when
compared to the quarter and six months ended June 30 1997, respectively.
Research and development expenses increased due to the addition of personnel and
associated expenditures related to the development of new product lines as well
as the development of additions to the Company's existing product lines.
SALES AND MARKETING
The Company's sales and marketing expenses decreased $24,900 or 2.4% and
$249,900 or 12.1% for the quarter and six months ended June 30, 1998 when
compared to the quarter and six months ended June 30, 1997, respectively. In
general, the Company's sales and marketing operations are expanding and costs
are increasing but these increases are offset by expense reductions primarily as
a result of the closure of certain European operations in the last half of 1997.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased $72,900 or 8.7% and $100,300
or 5.9% for the quarter and six months ended June 30, 1998 when compared to the
quarter and six months ended June 30, 1997. General and administrative expenses
increased due to increases in staffing costs offset by reduction in costs
resulting from the closure of certain European operations.
OTHER INCOME (EXPENSE), NET
Other income, net was $149,700 and $118,000 for the quarter and six months
ended June 30, 1998, a decrease of $34,800 or 18.9% and $362,100 or 75.4% when
compared to the quarter and six months ended June 30, 1997, respectively. This
was a direct result of moving expense charges from the relocation of the
Company's manufacturing and sales and administrative offices in Fleurus, Belgium
to Nivelles, Belgium. In March of 1997, the Company realized a one-time $200,000
signing payment received from a distributor pursuant to a distribution agreement
with such distributor.
14
<PAGE>
PROVISION FOR INCOME TAXES
The provision for income taxes for the quarter and six months ended June
30, 1998 of $137,200 and $523,900 respectively reflects the utilization of
certain net operating losses that we acquired in the acquisition of Medgenix
Diagnostics. Management expects future benefit from these net-operating losses
with effective tax rates ranging between 28% and 31%. In addition, 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.
YEAR 2000
The Company has developed a plan to address issues related to the impact on
its computer systems of the year 2000. Financial and operational systems have
been assessed and plans have been developed to address systems modification
requirements which are expected to be completed in 1999. The financial impact of
making the required systems changes is not expected to be material to the
Company's consolidated financial position, results of operations or cash flow.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 cash and cash equivalents and short term investments in
marketable securities amount to $9,115,700 when compared to $14,446,200 at
December 31, 1997. 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. The reduction in cash resulted primarily from the purchase of
the Company's stock under the stock repurchase program.
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. However, the
Company may raise additional capital from time to time to take advantage of
favorable conditions in the market or in connection with the Company's corporate
development activities.
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES
The Company generated $863,900 and used $5,900 for the six months ended
June 30, 1998 and 1997, respectively. The increase in the six months ended June
30, 1998 is a result of positive net earnings after adjustment for noncash
expenses, partially offset by increases and decreases in current assets and
liabilities from period to period.
15
<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures were $616,100 and $518,100 for the six months ended
June 30, 1998 and 1997, respectively. Capital expenditures included the purchase
of laboratory, manufacturing and computer equipment.
CASH FLOW FROM FINANCING ACTIVITIES
The Company received $56,300 and $100,100 from the exercise of stock
options for 25,114 and 48,142 shares of common stock during the six months ended
June 30, 1998 and 1997, respectively. The Company paid out $5,564,800 and
$311,600 for the repurchase of stock for 833,200 and 43,000 shares of common
stock during the six months ended June 30, 1998 and 1997, respectively, under
the Company's stock repurchase program.
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 June 30, 1998 the Company had purchased a total of 1,116,500 shares of
Company common stock for $7,309,300.
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
16
<PAGE>
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.
17
<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
On July 17, 1998 the Proposals below were submitted to a vote of security
holders at the Annual Meeting of the Shareholders of BioSource International,
Inc.:
Proposal 1. The election of the following persons to serve as directors of
BioSource International, Inc., a Delaware corporation, until the next regular
Annual Meeting of the Shareholders of BioSource International, Inc. and until
their successors have been duly elected and qualified:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
<S> <C> <C> <C> <C>
James H. Chamberlain 6,779,850 9,529 13,277 0
Leonard M. Hendrickson 6,780,150 9,529 12,977 0
David S. Moffa, Ph.D. 6,780,150 9,529 12,977 0
Robert D. Weist 6,779,050 9,529 14,077 0
John R. Overturf, Jr. 6,779,150 9,529 13,977 0
</TABLE>
Proposal 2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the year ending December 31, 1998:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN NON-VOTES
<S> <C> <C> <C>
6,782,899 2,892 16,865 0
</TABLE>
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Copies of the press release 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.
18
<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.
Larry A. May
------------------------------------------
Larry A. May
August 13, 1998 Vice President and Chief Financial Officer
James H. Chamberlain
------------------------------------------
James H. Chamberlain
August 13, 1998 President and Chief Executive Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,184
<SECURITIES> 7,932
<RECEIVABLES> 4,509
<ALLOWANCES> 203
<INVENTORY> 8,124
<CURRENT-ASSETS> 23,669
<PP&E> 6,915
<DEPRECIATION> 2,116
<TOTAL-ASSETS> 29,410
<CURRENT-LIABILITIES> 3,374
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 24,752
<TOTAL-LIABILITY-AND-EQUITY> 29,410
<SALES> 10,625
<TOTAL-REVENUES> 10,625
<CGS> 3,733
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,869
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,553
<INCOME-PRETAX> 2,141
<INCOME-TAX> 524
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,617
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.19
</TABLE>
