March 5, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, DC 20549
Re: BioWhittaker, Inc. (the "Company")
10-Q for the Quarterly Period Ended January 31, 1997
Dear Ladies and Gentlemen:
For filing with the Securities and Exchange Commission pursuant to
Instruction G of Form 10-Q is an electronically transmitted copy with exhibits
of the Company's Quarterly Report on Form 10-Q for the Quarterly period ended
January 31, 1997.
Please acknowledge receipt of this filing.
Sincerely,
/s/ F. Dudley Staples, Jr.
------------------------------
F. Dudley Staples, Jr.
Secretary and General Counsel
cc: Mr. Philip L. Rohrer, Jr. (w/encl.)
File
<PAGE>
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 January 31, 1997.
|_| 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 1-10870
-------
BIOWHITTAKER, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-3917176
------------------------------ -----------------
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8830 Biggs Ford Road, Walkersville, Maryland 21793-0127
- -------------------------------------------- ------------------
(Address of Principal Executive Offices) (zip code)
(301) 898-7025
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check 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.
|X| Yes |_| No
The number of shares outstanding of the Registrant's only class of
common stock as of January 31, 1997 was 10,759,199.
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Three Months
Ended January 31,
-----------------
1997 1996
------ -----
Sales ...................................... $ 13,031 $ 11,912
Costs and expenses
Cost of sales ........................... 6,670 6,478
Research and development ................ 686 585
Selling, general and administrative ..... 3,696 3,295
----- -----
11,052 10,358
------ ------
Income From Operations ..................... 1,979 1,554
Other (income)/expenses
Purchased research and development ...... -- 4,000
Gain on sale of product line ............ -- (1,322)
Other income ............................ (91) (91)
Interest ................................ 49 99
Loss on foreign currency transactions ... 6 36
------- ------
(36) 2,722
------- ------
Income/(Loss) Before Income Taxes .......... 2,015 (1,168)
Provision for income taxes ................. 748 791
--- ---
Net Income/(Loss) .......................... $ 1,267 $ (1,959)
======== ========
Net Income/(Loss) Per Share ................ $ 0.12 $ (0.18)
======== ========
Average common and common equivalent
shares outstanding (in thousands) ...... 10,903 10,877
====== ======
Unaudited
See Notes to Consolidated Financial Statements
1
<PAGE>
BIOWHITTAKER, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
January 31, October 31,
1997 1996
---- ----
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 611 $ 701
Accounts receivable ................................ 8,310 8,623
Other receivables .................................. 1,072 1,233
Inventories ........................................ 21,540 21,114
Prepaid expenses ................................... 1,868 1,687
Deferred income taxes .............................. 270 119
--- ---
Total Current Assets ........................... 33,671 33,477
------ ------
PROPERTY, PLANT AND EQUIPMENT ...................... 34,002 33,595
Less accumulated depreciation and amortization ..... 17,445 16,808
------ ------
16,557 16,787
------ ------
INTANGIBLE ASSETS .................................. 12,530 12,511
Less accumulated amortization ...................... 1,984 1,698
----- -----
10,546 10,813
------ ------
OTHER ASSETS ....................................... 82 78
-- --
$ 60,856 $ 61,155
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable ...................................... $ -- $ 300
Current portion of long-term debt .................. 291 291
Accounts payable ................................... 3,183 3,857
Accrued liabilities ................................ 5,251 6,483
Income taxes payable ............................... 1,039 321
----- ------
Total Current Liabilities ...................... 9,764 11,252
----- ------
LONG-TERM DEBT ..................................... 1,200 1,443
----- -----
DEFERRED INCOME TAXES .............................. 1,833 1,669
----- -----
STOCKHOLDERS' EQUITY
Common stock ....................................... 108 108
Additional paid-in capital ......................... 26,389 26,389
Retained earnings .................................. 21,580 20,313
Translation adjustment ............................. (18) (19)
--- ---
Total Stockholders' Equity ..................... 48,059 46,791
------ ------
$ 60,856 $ 61,155
======== ========
January 31, 1997 - Unaudited
See Notes to Consolidated Financial Statements
2
<PAGE>
BIOWHITTAKER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the Three Months
Ended January 31,
-----------------
1997 1996
---- ----
OPERATING ACTIVITIES
Net income/(loss) ...................................... $ 1,267 $ (1,959)
Adjustments to reconcile net income/(loss) to net cash
provided by operating activities:
Depreciation and amortization ....................... 936 807
Purchased research and development .................. -- 4,000
Gain on sale of product line ........................ -- (1,322)
Deferred income taxes ............................... 13 (156)
Loss on disposal of property, plant and equipment ... 6 16
Changes in operating assets and liabilities,
excluding the affect of acquisitions:
Accounts receivable .............................. 313 1,386
Inventories ...................................... (426) 9
Prepaid expenses and other assets ................ (175) (474)
Accounts payable and accrued liabilities ......... (1,188) (2,222)
------ ------
Net Cash Provided by Operating Activities .......... 746 85
--- --
INVESTING ACTIVITIES
Purchases of property, plant and equipment ............ (426) (395)
Proceeds from sale of product line .................... 151 10,410
Purchase of Clonetics, net of cash received ........... -- (8,226)
Advance royalty payments .............................. -- (1,100)
---- ------
Net Cash(Used in)/Provided by Investing Activities . (275) 689
---- ---
FINANCING ACTIVITIES
Net(repayments)/borrowings of notes payable ........... (300) 950
Payment of long-term debt ............................. (243) (1,415)
Other ................................................. (18) (4)
--- --
Net Cash Used in Financing Activities .............. (561) (469)
---- ----
Net Change In Cash and Cash Equivalents ............ (90) 305
Cash and Cash Equivalents At Beginning Of Year ..... 701 359
--- ---
Cash and Cash Equivalents At End Of Period ......... $ 611 $ 664
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period
for:
Interest ........................................ $ 127 $ 209
======== ========
Income taxes .................................... $ 16 $ 75
======== ========
Notes
1. In connection with the acquisition of all of the common stock of Clonetics
Corporation for $8,733 in cash, the Company acquired assets with a
value of $8,236, assumed liabilities of $3,503 and expensed $4,000 of
purchased research and development.
Unaudited
See Notes to Consolidated Financial Statements
3
<PAGE>
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands, Except Per Share Data)
Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months
ended January 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending October 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Annual Report on Form 10-K for the year ended October 31, 1996 for BioWhittaker,
Inc. and its subsidiaries ("the Company" or "BioWhittaker").
Reclassifications: Certain prior years' amounts in the Consolidated
Financial Statements have been reclassified to conform to the 1997 presentation.
Net Income Per Share: Net income per share is computed by dividing net
income by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares include the dilutive effect of outstanding
stock purchase options and Anasco's right to maintain its aggregate percentage
voting interest in the Company calculated, in each case, under the treasury
stock method. Net income per share determined on a fully diluted basis is not
materially different from the primary net income per share presented.
Inventories: Inventories consisted of the following:
January 31, October 31,
1997 1996
--------- ----------
Raw material........................... $ 4,475 $ 4,050
Work in process........................ 7,080 7,323
Finished goods......................... 9,985 9,741
---------- ---------
$ 21,540 $ 21,114
========= =========
Acquisitions and Divestitures: On January 17, 1996, the Company acquired
100% of the stock of Clonetics Corporation ("Clonetics"), a leading supplier of
normal human cells, for $8,733 in cash and the assumption of approximately
$3,500 in liabilities. The operations of Clonetics are included in the
Consolidated Statement of Income from the date of acquisition. The acquisition
was accounted for as a purchase transaction and resulted in the recording of
approximately $2,260 of goodwill, $3,350 of purchased technology and $1,480 of
other intangibles that will be amortized over periods ranging from 7 to 15
years. $4,000 of the purchase price was allocated to purchased research and
development and expensed on the Company's Consolidated Statement of Income for
the three months ended January 31, 1996.
On December 18, 1995, the Company sold to Carter-Wallace, Inc. ("Carter")
its diagnostic test kit business in the EIA format for $9,000 and on February 2,
1996 sold its related FIAX line for $1,000. Carter also purchased EIA and FIAX
finished goods inventory for approximately $1,400. BioWhittaker agreed to
continue to manufacture EIA and FIAX products for Carter for up to one and five
years, respectively. Under a separate agreement with one of Carter's contract
manufacturers, BioWhittaker agreed to sell certain raw material and work in
process inventory over a two year period
BioWhittaker also agreed to provide to Carter's customers certain
diagnostic testing instrumentation associated with the EIA and FIAX product
lines and to service the equipment for up to two years. The equipment surcharge
typically paid on each kit purchased by customers will be collected by Carter
and periodically remitted to the Company in the amount of approximately $1,585,
the book value of such diagnostic equipment owned by the Company at closing. As
of January 31, 1997, Carter owed the Company $0.8 million of such book value.
4
<PAGE>
BIOWHITTAKER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in Thousands, Except Per Share Data)
As a result of this transaction, BioWhittaker recorded a pre-tax gain of
$2,261 on its Consolidated Statement of Income for fiscal 1996, which includes
the write-off of approximately $2,200 of unamortized cost of patents and
goodwill. A pre-tax gain of $1,322 was recognized in the Company's Consolidated
Statement of Income for the three months ended January 31, 1996.
The following table presents proforma consolidated results of operations
for the three months ended January 31, 1996 and 1997, assuming that the purchase
of Clonetics Corporation and the sale of the diagnostic test kit business to
Carter-Wallace, Inc. had occurred at the beginning of each of the respective
fiscal periods.
For the Three Months
Ended January 31,
-----------------
1997 1996
---- ----
Sales................................ $ 13,031 $ 11,741
Net Income.......................... $ 1,267 $ 705
Net Income Per Share................. $ 0.12 $ 0.06
The above proforma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results had both the
acquisition of Clonetics Corporation and the sale to Carter-Wallace, Inc.
occurred as of November 1, 1995 and November 1, 1996.
5
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Results of Operations
Comparison of the first three months of fiscal 1997 to the first three months of
fiscal 1996.
Sales for the first three months of fiscal 1997 of $13.0 million exceeded
sales in the comparable fiscal period of fiscal 1996 by $1.1 million, or 9.4%.
Fiscal year 1997 revenues reflect $1.7 million in lower sales volume due to the
sale of the Company's EIA and FIAX test kit product lines (the "EIA and FIAX
Product Lines") and the completion of a contract to supply botulinum antitoxin
and $1.5 million in increased sales volume due to the acquisition of Clonetics
Corporation ("Clonetics")
Cell culture product line sales increased by $2.2 million, or 36.0%, to
$8.2 million, due primarily to an additional $1.5 million in sales as a result
of the acquisition of Clonetics and to higher sales volume and prices for cell
culture products, including sales to a single, large customer and higher sales
volume for cell culture media.
Endotoxin detection product sales increased by $0.9 million, or 30.5%, to
$3.7 million, due to increased sales volume. This increase is the result of
unusually low sales for the first quarter of fiscal 1996 and higher sales for
the first quarter of fiscal 1997 as a result of changes in order patterns for
the Company's European distributors. Future growth is expected to resume at an
annual rate more closely resembling recent growth trends.
Clinical diagnostic testing product sales decreased by $1.9 million, or
63.6% to $1.1 million, primarily due to the sale of the EIA and FIAX Product
Lines. In addition, sales were adversely impacted by the completion of a
contract to produce botulinum antitoxin and to lower sales volume for the
Company's allergy detection products, primarily as a result of increased
competition. The Company expects clinical diagnostic testing product sales to
continue to decline in the foreseeable future for the reasons discussed above.
Gross margins were 48.8% of sales for the first three months of fiscal
1997 compared to 45.6% during the comparable period of fiscal 1996 reflecting
proportionally higher margins associated with Clonetics products and to improved
manufacturing efficiencies.
Research and development expenses as a percentage of sales increased to
5.3% for the first three months of fiscal 1997 from 4.9% for the comparable
period of fiscal 1996, primarily as a result of proportionally higher expenses
associated with Clonetics products.
Selling, general and administrative expenses as a percentage of sales
increased to 28.4% for the first three months of fiscal 1997 from 27.7% for the
comparable period of fiscal 1996, reflecting proportionally higher selling
expenses for Clonetics products.
"Other Income" is comprised of payments received from Boehringer Ingelheim
for technology assistance under the terms of its agreement with the Company.
For fiscal 1996, "Purchased research and development" represents the
expensing of in-process research and development acquired as a part of the
purchase of Clonetics. "Gain on the sale of product line" represents the gain,
before the effect of taxes, as a result of the sale of the EIA and FIAX Product
Lines.
"Provision for income taxes" as a percentage of Income Before Income Taxes
was 37.1% for the first quarter of fiscal 1997. For the first quarter of fiscal
1996, the "Provision for income taxes" reflects the lack of income tax benefit
associated with the expensing of purchased research and development and
favorable treatment of the gain associated with the sale of the Company's
diagnostic test kit business. Before the effect of these transactions, the
"Provision for income taxes" as a percentage of Income Before Income Taxes was
37.9% for the first three months of fiscal 1996.
6
<PAGE>
Liquidity and Financial Condition
During the first quarter of fiscal 1997, the Company financed its
operations, capital expenditures and product development activities with cash
provided by operations and funds available under the Company's revolving credit
facility. For the first three months of fiscal year 1997, the Company generated
$0.7 million in cash from operating activities compared to $0.1 million for the
comparable period of fiscal 1996 primarily as a result of increases in net
income and higher charges for depreciation and amortization.
Total current assets of $33.7 million at January 31, 1997 were essentially
unchanged when compared to total current assets of $33.5 million at October 31,
1996. Total current liabilities at January 31, 1997 were $9.8 million compared
to $11.3 million at October 31, 1996, such decline due mainly to reductions in
accrued salaries and related expenses and accounts payable.
The Company's investing activities consumed cash of $0.3 million in the
first three months of fiscal 1997, primarily as a result of purchases of
property, plant and equipment totaling $0.4 million. The Company's investing
activities generated cash of $0.7 million in the first three months of fiscal
1996, primarily due to the receipt of $10.4 million in proceeds from the sale of
its EIA and FIAX Product Lines offset by the use of $8.2 million to acquire
Clonetics. Purchases of property, plant and equipment totaled $0.4 million for
the first quarter of fiscal 1996.
Financing activities consumed cash of $0.6 and $0.5 million for the first
three months of fiscal years 1997 and 1996 respectively, reflecting primarily
the repayment of amounts outstanding under the Company's various debt
facilities.
At January 31, 1997, the Company's principal short-term cash
requirements were to fund the Company's normal working capital needs, consisting
primarily of inventories and receivables, to fund capital expenditures and to
fund potential acquisitions. At January 31, 1997, the Company had outstanding
capital commitments of approximately $1.2 million and $9.0 million was available
under the terms of the Company's revolving credit facility. In addition, the
Company expects to receive $0.8 million in diagnostic testing instrumentation
surcharges as a result of the sale of its EIA and FIAX Product Lines.
7
<PAGE>
BIOWHITTAKER, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11. Statement regarding Computation of Per Share Net Income for
the three months ended January 31, 1997.
27. Summary financial information from interim consolidated
statement of income and consolidated balance sheet for the
three months ended January 31, 1997.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the quarter ended
January 31, 1997.
8
<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.
BIOWHITTAKER, INC.
Date: By /S/PHILP L. ROHRER, JR.
- ------------------------ ------------------------------
Philip L. Rohrer, Jr., Vice President
(Principal Financial Officer)
9
<PAGE>
BIOWHITTAKER, INC.
EXHIBIT INDEX
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
11 Computation of Per Share Net Income 11
27 Financial Data Schedule 12
10
<PAGE>
Exhibit 11
BIOWHITTAKER, INC.
COMPUTATION OF PER SHARE NET INCOME
(Dollars in thousands, except per share data)
For the Three Months
Ended January 31,
-----------------
1997 1996
---- ----
Earnings
Net Income/(Loss)..................................... $ 1,267 $ (1,959)
======= ========
Average Common and Common Equivalent Shares (in 000)
Weighted average number of common
shares outstanding................................ 10,759 10,759
Dilutive Effect of Options and Warrants:
Stock options included under treasury stock method... 122 96
Proportional interest rights of Anasco GmbH.......... 22 22
------- ------
Total.................................................. 10,903 10,877
======== =======
Net Income/(Loss)Per Share............................. $ 0 .12 $ (0.18)
======== =======
Unaudited
Note:Net income per share determined on a fully diluted basis is not
materially different from primary net income per share shown above.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
BioWhittaker's interim consolidated statement of income for the three months
ended January 31, 1997 and it's consolidated balance sheet as of January 31,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 611
<SECURITIES> 0
<RECEIVABLES> 8,372
<ALLOWANCES> 62
<INVENTORY> 21,540
<CURRENT-ASSETS> 33,671
<PP&E> 34,002
<DEPRECIATION> 17,445
<TOTAL-ASSETS> 60,856
<CURRENT-LIABILITIES> 9,764
<BONDS> 0
0
0
<COMMON> 108
<OTHER-SE> 47,951
<TOTAL-LIABILITY-AND-EQUITY> 60,856
<SALES> 13,031
<TOTAL-REVENUES> 13,031
<CGS> 6,670
<TOTAL-COSTS> 11,052
<OTHER-EXPENSES> (85)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> 2,015
<INCOME-TAX> 748
<INCOME-CONTINUING> 1,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,267
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
