UNITED STATES
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 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 __________
Commission File Number 0-19278
OSTEOTECH, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3357370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
51 James Way, Eatontown, New Jersey 07724
(Address of principal executive offices) (Zip Code)
(732)542-2800
(Registrant's telephone number, including area code)
Not Applicable
(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 ___
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 par value - 8,776,224 shares as of July 31, 1998.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
OSTEOTECH, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $16,872 $13,884
Short-term investments 3,469 1,473
Accounts receivable, net 8,676 7,547
Inventories 1,209 792
Deferred income taxes 1,556 457
Prepaid expenses and other current assets 2,045 3,930
-------------------------------------
Total current assets 33,827 28,083
Property, plant and equipment, net 13,419 11,650
Excess of cost over net assets of business acquired,
less accumulated amortization of $1,575 in 1998 and
$1,449 in 1997 2,123 2,249
Other assets 1,256 1,070
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets $50,625 $43,052
=================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $8,796 $ 6,919
Notes payable 140 608
Current maturities of long-term debt and
obligations under capital leases 488 634
-------------------------------------
Total current liabilities 9,424 8,161
Long-term debt and obligations under capital leases 21 203
Other liabilities 399 396
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 9,844 8,760
- ---------------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 5,676,595 shares
authorized; no shares issued or outstanding
Common stock, $.01 par value; 20,000,000 shares
authorized; issued and outstanding 8,859,092
shares in 1998 and 8,686,346 shares in 1997 89 87
Additional paid-in capital 38,081 36,130
Accumulated other comprehensive loss (74) (75)
Retained earnings(deficit) 2,685 (1,850)
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 40,781 34,292
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $50,625 $43,052
=================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
OSTEOTECH, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------- -----------------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues:
Service $14,927 $ 9,887 $28,084 $19,365
Product 203 559 521 1,165
Licensing fee 124 257 124 257
------------------ ---------------- ----------------- ----------------
15,254 10,703 28,729 20,787
Costs and expenses:
Cost of services 4,461 3,526 8,514 6,946
Cost of products 178 410 352 862
Marketing, general and administrative 5,762 3,831 10,581 7,629
Research and development 1,077 890 2,206 1,826
------------------ ---------------- ----------------- ----------------
11,478 8,657 21,653 17,263
Operating income 3,776 2,046 7,076 3,524
Other income (expense):
Interest income 271 138 511 269
Interest expense (22) (31) (50) (79)
Other 100 35 140 44
------------------ ---------------- ----------------- ----------------
349 142 601 234
------------------ ---------------- ----------------- ----------------
Income before income taxes 4,125 2,188 7,677 3,758
Income tax provision 1,696 785 3,142 1,523
- ---------------------------------------------------------------------------------------------------------------------------------
Net income $ 2,429 $ 1,403 $ 4,535 $ 2,235
=================================================================================================================================
Net income per share:
Basic $ .27 $ .17 $ .51 $ .28
Diluted $ .26 $ .17 $ .48 $ .27
- ---------------------------------------------------------------------------------------------------------------------------------
Shares used in computing net income per share:
Basic 8,859,826 8,080,874 8,836,187 8,062,214
Diluted 9,390,855 8,479,063 9,415,058 8,426,663
=================================================================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
OSTEOTECH, INC. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended June 30, 1998 1997
- ----------------------------------------------------------------------------------------
Cash Flow From Operating Activities
Net income $ 4,535 $ 2,235
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,371 1,218
Deferred income taxes (1,099) (50)
Income tax benefit related to stock options 1,099
Changes in assets and liabilities:
Accounts receivable (1,130) 161
Inventories (451) (49)
Prepaid expenses and other current assets 1,882 321
Accounts payable and other liabilities 1,885 55
- ----------------------------------------------------------------------------------------
Net cash provided by operating activities 8,092 3,891
Cash Flow From Investing Activities
Capital expenditures (2,941) (1,585)
Purchases of investments (5,441) (4,431)
Proceeds from sale of investments 3,445 2,973
Increase in other assets (230) (50)
- ----------------------------------------------------------------------------------------
Net cash used in investing activities (5,167) (3,093)
Cash Flow From Financing Activities
Proceeds from issuance of common stock 1,386 670
Repurchase of common stock (532)
Proceeds from issuance of notes payable 93
Principal payments on notes payable (468) (530)
Principal payments on long-term debt
and obligations under capital leases (325) (397)
- ----------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 61 (164)
Effect of exchange rate changes on cash 2 29
- ----------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,988 663
Cash and cash equivalents at beginning of period 13,884 7,290
- ----------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 16,872 $ 7,953
========================================================================================
Supplementary cash flow data:
Cash paid during the period for taxes $ 988 $ 1,071
Cash paid during the period for interest 49 87
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
OSTEOTECH, INC. and Subsidiaries
Notes To Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
reflect all adjustments (consisting only of normal recurring accruals)
considered necessary by management to present fairly the Company's
consolidated financial position as of June 30, 1998 and December 31, 1997,
and the consolidated results of operations for the three-month and
six-month periods ended June 30, 1998 and 1997, and the consolidated cash
flows for the six-month periods then ended. The results of operations for
the respective interim periods are not necessarily indicative of the
results to be expected for the full year. The condensed consolidated
financial statements should be read in conjunction with the audited
financial statements for the year ended December 31, 1997 which were
included as part of the Company's Report on Form 10-K.
2. Changes in Accounting Policies
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 established standards for reporting and display of comprehensive
income and its components in financial statements.
Comprehensive income was $2,440,000 and $4,536,000 in the three months and
six months ended June 30, 1998, respectively, compared to $1,408,000 and
$2,283,000 in the same periods last year. Other comprehensive income
consists solely of foreign currency translation adjustments.
3. Financing Arrangements
The Company has a Loan and Security agreement with a US bank which provides
for borrowings of up to $3,000,000 under a revolving line of credit and
$4,000,000 under an equipment line of credit. In July 1998, the Company
received a commitment from the same bank for a new credit facility which
will replace the current facilities which expire in August 1998. The new
credit facility will include a $5,000,000 revolving line of credit and a
$21,500,000 building mortgage loan and equipment line of credit which the
Company will use to fund the planned construction of a new processing
facility. Consummation of the new credit facility is subject to negotiation
and execution of a definitive agreement.
5
<PAGE>
4. Commitments and Contingencies
Acquisition
In June 1998, the Company acquired a 5% interest in OST Developpement S.A.
("OST"), a subsidiary of Transphyto S.A. of Clermont-Ferrand, France for an
aggregate purchase price of 496,662 French Francs ("FRF"), or approximately
$84,400. OST is a processor of bovine bone grafts for orthopaedic and
dental use. The Company will acquire an additional 85% interest no later
than March 1999, provided that certain milestones are achieved by OST. The
purchase price for the additional interest will be FRF 8,503,338, or
approximately $1,402,000 at the June 30, 1998 exchange rate. The Company
also has the option to purchase the remaining 10% of OST at a price to be
determined at the time of purchase.
In addition, the Company has agreed to provide interest bearing loans to
OST of up to FRF 10,000,000, or approximately $1,649,000 at the June 30,
1998 exchange rate, to support its capital expenditure and working capital
requirements. In July and August 1998, the Company made advances to OST
aggregating FRF 1,600,000 or $269,000.
Litigation
The Company remains a defendant in two lawsuits in which patients claim
that they have suffered damages from the implantation of allegedly
defective spinal fixation devices allegedly distributed by the Company.
Management believes that the suits and claims are without merit and
continues to defend against such actions vigorously.
The Company is involved in a patent infringement action against GenSci
Regeneration Laboratories, Inc. and GenSci Regeneration Sciences, Inc.
(collectively "GenSci") alleging that GenSci has violated claims of one of
the patents involving the Company's Grafton(R) Demineralized Bone Matrix
(DBM) process. GenSci has filed a suit against the Company alleging patent
infringement of three patents assigned to GenSci in addition to tortious
interference with a business expectancy, negligent interference with a
prospective economic advantage and inducing breach of contract and seeking
a declaratory judgment of the invalidity of two of the Company's patents
covering Grafton(R) DBM. The Company intends to vigorously pursue its
claims against GenSci and also believes that GenSci's claims against the
Company are without merit.
6
<PAGE>
4. Commitments and Contingencies (Continued)
In July 1998, a complaint was filed against the Company in the Second
Judicial District Court, Bernallilo County, New Mexico, which alleges
negligence, strict liability, breach of warranty, negligent
misrepresentation, fraud, and violation of the New Mexico Unfair Trade
Practices Act arising from allegedly defective dental implant coating and
coating services provided to plaintiffs by a subsidiary of the Company, Cam
Implants BV. Although plaintiffs have demanded monetary damages, an amount
has not yet been specified. As this case is in its preliminary stages, the
Company has not yet filed an answer to or otherwise moved to dismiss the
complaint. The Company, however, believes that the claims against it are
without merit and will vigorously defend against such claims. The Company
maintains a general liability insurance policy with Lexington Insurance
Company ("Lexington"), and Lexington has been notified of this action.
Litigation is subject to many uncertainties and management is unable to
predict the outcome of the pending suits and claims. It is possible that
the results of operations or liquidity and capital resources of the Company
could be adversely affected by the ultimate outcome of the pending
litigation or as a result of the costs of contesting such suits. The
Company is unable to estimate the potential liability, if any, that may
result from any of the pending litigation and, accordingly, no provision
for any liability has been made in the consolidated financial statements.
5. Stock Repurchase Program
In June 1998, the Board of Directors of the Company authorized the
repurchase and retirement of up to $5,000,000 of the Company's common stock
through open market purchases. As of June 30, 1998, the Company had
repurchased and retired 30,000 shares of common stock at a cost of
$532,000. During July and August 1998, the Company repurchased and retired
an additional 215,000 shares of common stock at a cost of $4,426,000.
7
<PAGE>
6. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------------------------------------
(dollars in thousands
except per share data) 1998 1997 1998 1997
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income available to Common
Shareholders $ 2,429 $ 1,403 $ 4,535 $ 2,235
----------------------------------------------------------------------------------------------------------------------
Weighted average common shares 8,859,826 7,950,510 8,836,187 7,926,274
Nominal warrants outstanding (a) 130,364 135,940
----------------------------------------------------------------------
Denominator for basic earnings per share 8,859,826 8,080,874 8,836,187 8,062,214
Effect of dilutive securities:
Stock options 530,806 325,213 578,759 327,961
Warrants 223 72,976 112 36,488
----------------------------------------------------------------------
Denominator for diluted earnings per
share 9,390,855 8,479,063 9,415,058 8,426,663
----------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ .27 $ .17 $ .51 $ .28
----------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ .26 $ .17 $ .48 $ .27
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Nominal warrants are warrants with an exercise price of $.03.
7. Reclassifications
Certain prior year amounts have been reclassified to conform with the 1998
presentation.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information contained herein contains "forward-looking statements" (as such term
is defined in the Private Securities Litigation Reform Act of 1995) which can be
identified by the use of forward-looking terminology such as "believes",
"expects", "may", "will", "should", or "anticipates" or the negative thereof or
other variations thereon or comparable terminology. Certain statements contained
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections herein, including without limitation, statements
regarding the Company's liquidity and capital resources and other statements
contained herein regarding matters that are not historical facts, are
forward-looking statements. No assurance can be given that the future results
covered by the forward-looking statements will be achieved. The matters set
forth in Exhibit 99.0 to the Company's Form 10-K for the year ended December 31,
1997, constitute cautionary statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results indicated in such forward-looking statements.
FOR THE THREE-MONTH AND SIX-MONTH PERIODS ENDED JUNE 30, 1998 AND 1997
Results of Operations
Net Income
Net income in the second quarter of 1998 increased to $2,429,000 or $.27 basic
earnings per share and $.26 diluted earnings per share compared to net income of
$1,403,000 or $.17 basic and diluted earnings per share in the second quarter of
1997. Net income in the first six months of 1998 was $4,535,000 or $.51 basic
earnings per share and $.48 diluted earnings per share compared to net income of
$2,235,000 or $.28 basic earnings per share and $.27 diluted earnings per share
in the first six months of 1997.
Following is a discussion of factors which affected results of operations for
the three-month and six-month periods ended June 30, 1998 and 1997.
Revenues
Consolidated revenues in the second quarter of 1998 increased 43% to $15,254,000
from $10,703,000 in the second quarter of 1997. Revenues in the first six months
of 1998 increased 38% to $28,729,000 from $20,787,000 in the first six months of
1997. During the second quarter and first six months of 1998, two of the
Company's major customers accounted for 56% and 39% and 55% and 39%,
respectively, of revenues.
9
<PAGE>
Results of Operations (continued)
Domestic revenues increased 51% to $14,666,000 in the second quarter of 1998
from $9,725,000 in the second quarter of 1997 and increased 43% to $27,439,000
in the first six months of 1998 from $19,129,000 in the first six months of
1997. The increase in domestic revenues resulted principally from increased
demand for the Company's proprietary Grafton(R) (DBM) allograft processing
services which increased 65% in the second quarter of 1998 and 61% in the first
six months of 1998 as compared to the same periods in 1997. Allograft tissue
processing services other than Grafton increased 35% and 25%, respectively, in
the second quarter and first six months of 1998.
Foreign non-allograft revenues decreased 40% in the second quarter of 1998 to
$588,000 from $978,000 in the second quarter of 1997 and decreased 22% in the
six months ended June 30, 1998 to $1,290,000 from $1,658,000 in the six months
ended June 30, 1997. The decrease in foreign revenues resulted principally from
lower ceramic product revenues and, in accordance with the license agreement
entered into in 1997, lower licensing fee revenues. Additionally, orthopaedic
coating revenues decreased due to a temporary closing of one of the Company's
major coating customer's facility in conjunction with the relocation of such
facility.
Cost of Services and Products
Cost of services as a percentage of service revenues was 30% in the second
quarter and first six months of 1998 compared to 36% in both periods last year.
The decline in costs as a percentage of revenues results from an increased
percentage of revenue coming from services with higher gross margins, operating
efficiencies resulting from increased volume and an increase in fees charged to
the Company's customers for certain allograft processing services.
Cost of products as a percentage of product revenues was 88% and 68% in the
second quarter and first six months of 1998, respectively, compared to 73% and
74% in the same periods last year. The changes in costs as a percentage of
product revenues during the second quarter and first six months of 1998 results
primarily from a shift in product mix.
Marketing, General and Administrative
Marketing, general and administrative expenses increased $1,931,000 or 50% in
the second quarter and $2,952,000 or 39% in the first six months of 1998,
compared to the same periods last year. The increases were primarily
attributable to expanded marketing and promotional activities, increased agent
commissions directly related to the increase in Grafton(R) DBM revenues and
increased administrative costs, principally outside professional services.
10
<PAGE>
Research and Development
Research and development expenses increased $187,000 or 21% and $380,000 or 21%
in the second quarter and first six months of 1998, respectively, compared to
the same periods last year. The increases result principally from increased
spending associated with the future expansion of the Company's viral
inactivation process to a broader range of allograft bone tissue and the
development of new allograft bone tissue products, certain of which are expected
to be introduced into the market before the end of 1998.
Other Income (expense)
In the second quarter and first six months of 1998, other income increased by
$207,000 and $367,000, respectively, compared to the same periods last year due
to higher invested cash and lower outstanding debt balances.
Income Tax Provision
The Company's effective income tax rate was 41% in the second quarter and first
six months of 1998 compared to 36% and 41%, respectively, in the same periods
last year. In the second quarter of 1997, higher foreign income reduced the
overall effective tax rate since corresponding taxes were offset by utilization
of net operating loss carryforwards.
Liquidity and Capital Resources
At June 30, 1998, the Company had cash and short-term investments of $20,341,000
compared to $15,357,000 at December 31, 1997. Working capital increased
$4,481,000 to $24,403,000 at June 30, 1998 from $19,922,000 at December 31,
1997.
Net cash provided by operations was $8,092,000 in the first six months of 1998,
compared to $3,891,000 in the first six months of 1997. The increase resulted
primarily from improved earnings in 1998 and a reduction in prepaid income
taxes.
Cash used in investing activities increased to $5,167,000 in the first six
months of 1998 from $3,093,000 in the first six months of 1997. The increase
results principally from capital expenditures which increased to $2,941,000 from
$1,585,000 as the Company continues to invest in facilities and equipment needed
for current and future business requirements. The Company plans to commence
construction of a new processing facility which it expects to occupy by the end
of 1999 at an aggregate anticipated cost of approximately $25 million. The
Company plans to fund the construction of this facility primarily from the new
credit facility described below.
Net cash provided by financing activities increased by $225,000 in the first six
months of 1998, principally from an increase in cash proceeds received from
stock option exercises net of cash used to repurchase 30,000 shares of the
Company's common stock. In June 1998, the Board of Directors of the Company
authorized the repurchase and retirement of up to $5,000,000 of the Company's
common stock through open market purchases. As of June 30, 1998, the Company had
repurchased and retired 30,000 shares of common stock at a cost of $532,000.
During July and August 1998, the Company repurchased and retired an additional
215,000 shares of common stock at a aggregate cost of $4,426,000.
11
<PAGE>
Liquidity and Capital Resources (continued)
The Company has a loan and security agreement with a US bank which provides for
borrowings of up to $3,000,000 under a revolving line of credit and $4,000,000
under an equipment line of credit. At June 30, 1998, $427,000 was outstanding
under the equipment line of credit and there were no borrowings outstanding
under the revolving line of credit. In July 1998, the Company received a
commitment from the same bank for a new credit facility which will replace the
current facilities which expire in August 1998. The new credit facility will
include a $5,000,000 revolving line of credit and a $21,500,000 building
mortgage loan and equipment line of credit which the Company will use to fund
the planned construction of a new processing facility. Consummation of the new
credit facility is subject to negotiation and execution of a definitive
agreement. The Company also has a line of credit with a Dutch bank which
provides for borrowings of up to 5,000,000 Dutch Guilders ("dfl"), or
approximately $2,452,000 at the June 30, 1998 exchange rate. Analysis of the
Company's cash position and anticipated cash flow indicated that it most likely
would not be necessary to utilize a significant portion of the line of credit
and, therefore, the Company agreed with the bank to limit its borrowings, if
any, to no more than dfl 3,000,000, or approximately $1,471,000 at the June 30,
1998 exchange rate. There were no borrowings under this credit line as of June
30, 1998.
The Company believes that its cash and cash equivalents, short-term investments
and available lines of credit, together with anticipated future cash flow from
operations, will be sufficient to meet its near-term requirements. From time to
time the Company may seek additional funds through equity or debt financing.
However, there can be no assurances that such additional funds will be available
to the Company, or if available, that such funds will be available on terms
favorable to the Company.
Impact of Inflation and Foreign Currency Exchange Fluctuations
The results of the Company's operations for the periods discussed above have not
been significantly affected by inflation or foreign currency fluctuations.
12
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
"O" Company, Inc. v. Osteotech, Inc., Civ-98-06655 (Second Judicial Dist.
Ct., Bernallilo County, N.M.)
On July 16, 1998, the Company received a complaint that was filed against
it in the Second Judicial District Court, Bernallilo County, New Mexico.
The complaint alleges negligence, strict liability, breach of warranty,
negligent misrepresentation, fraud, and violation of the New Mexico Unfair
Trade Practices Act arising from allegedly defective dental implant coating
and coating services provided to plaintiffs by a subsidiary of the Company,
Cam Implants BV. Although plaintiffs have demanded monetary damages, an
amount has not yet been specified. As this case is in its preliminary
stages, the Company has not yet filed an answer to or otherwise moved to
dismiss the complaint. The Company, however, believes that the claims
against it are without merit and will vigorously defend against those
claims. The Company maintains a general liability insurance policy with
Lexington Insurance Company ("Lexington"), and Lexington has been notified
of this action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) An annual meeting of stockholders was held on June 4, 1998.
(b) The directors elected at the annual meeting to serve a term of
one year or until the next annual meeting of stockholders were:
Richard W. Bauer, Kenneth P. Fallon, III, Michael J. Jeffries,
Donald D. Johnston, John Phillip Kostuik, M.D., FRCS(C), and
Stephen J. Sogin, Ph.D. They constitute the entire board of
directors of the Company.
(c) The matters voted upon at the annual meeting and the results of
the voting are set forth below.
i) With respect to the election of Directors of the Company,
the persons named below received the following number of
votes:
Director For Withheld
------------------------------------------------------------
Richard W. Bauer 7,465,308 413,940
Kenneth P. Fallon, III 7,468,773 410,475
Michael J. Jeffries 7,465,005 414,243
Donald D. Johnston 7,464,213 415,035
John Phillip Kostuik, M.D. 7,461,498 417,560
Stephen J. Sogin, Ph.D. 7,461,688 417,560
13
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Continued)
ii) With respect to a proposal to ratify amendments to the Company's
1991 Stock Option Plan, as amended (the "Plan"), to increase the
number of shares of common stock reserved for issuance under the
Plan by 818,624 shares to 2,813,765 shares, the stockholders
voted 2,939,328 shares in favor, 2,494,623 against and 19,465
abstained. Broker non-votes were not applicable. This proposal
received the vote required by Delaware General Corporation Law
("DGCL") and the Company's by-laws for approval (i.e. affirmative
vote of a majority of the outstanding shares present at the
meeting, by proxy or in person, and entitled to vote at the
annual meeting).
iii) With respect to a proposal to ratify amendments to the Plan to
conform the Plan with the current provisions of Rule 16b-3 under
the Securities Exchange Act of 1934, the stockholders voted
7,611,923 shares in favor, 172,267 against and 16,336 abstained.
Broker non-votes were not applicable. This proposal received the
vote required by DGCL and the Company's by-laws for approval.
iv) With respect to a proposal to ratify the selection of Coopers &
Lybrand LLP as the Company's independent auditors for the fiscal
year ending December 31, 1998; the stockholders voted 7,862,518
shares in favor, 9,734 against and 6,996 abstained. Broker
non-votes were not applicable. This proposal received the vote
required by DGCL and the Company's by-laws for approval.
Effective July 1, 1998, Coopers & Lybrand LLP merged with Price
Waterhouse. The newly formed firm is known as
PricewaterhouseCoopers LLP.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
Exhibit Page
Number Description Number
27.0 Financial Data Schedule E-1
(b) Reports on Form 8-K
None.
14
<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.
Osteotech, Inc.
--------------------------
(Registrant)
Date: August 13, 1998 By: /s/RICHARD W. BAUER
--------------------------
Richard W. Bauer
President, Chief
Executive Officer
Date: August 13, 1998 By: /s/MICHAEL J. JEFFRIES
--------------------------
Michael J. Jeffries
Executive Vice President
Chief Operating Officer
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Osteotech, Inc. and Subsidiaries Consolidated Balance Sheet as of June 30, 1998
and the Condensed Consolidated Statement of Operations for the six months ended
June 30, 1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 16,872,000
<SECURITIES> 3,469,000
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0
0
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<EPS-PRIMARY> .51
<EPS-DILUTED> .48
</TABLE>
