-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, omA5LZVmh+0yVSf22w4TUbgi1MtVWFTC1GmJCwXBT3oloWltLHm4jvVCcbIWlYSd L8JhxkXf1f6YZEzqfrhHnw== 0000202763-94-000007.txt : 19940517 0000202763-94-000007.hdr.sgml : 19940517 ACCESSION NUMBER: 0000202763-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931130 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNCOR INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000202763 STANDARD INDUSTRIAL CLASSIFICATION: 5122 IRS NUMBER: 850229124 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08640 FILM NUMBER: 94528785 BUSINESS ADDRESS: STREET 1: 20001 PRAIRIE ST CITY: CHATSWORTH STATE: CA ZIP: 91311 BUSINESS PHONE: 8188867400 FORMER COMPANY: FORMER CONFORMED NAME: NUCLEAR PHARMACY INC DATE OF NAME CHANGE: 19860309 10-Q 1 ============================================================================= _____________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 __________________________ Form 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 __________________________ For Quarter Ended March 31, 1994 Commission File Number 0-8640 SYNCOR INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 85-0229124 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 20001 Prairie Street, Chatsworth, California 91311 (Address of principal executive offices) (Zip Code) (818) 886-7400 (Registrant's telephone number, including area code) 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. As of March 31, 1994 10,545,483 shares of $0.05 par value common stock were outstanding. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES INDEX Part I. Financial Information Item 1. Consolidated Condensed Financial Statements Page ____ Balance Sheets as of March 31, 1994 and December 31, 1993...........................2 Statements of Income for three months ended March 31, 1994 and 1993..................................3 Statements of Cash Flows for three months ended March 31, 1994 and 1993..................................4 Notes to Consolidated Condensed Financial Statements.............5 Item 2. Management's Discussion and Analysis of Financial Condition......7 Part II. Other Information................................................9 SIGNATURE..................................................................10 SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (in thousands, except per share data) March 31, December 31, 1994 1993 ____________ _______ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 18,456 $ 15,110 Short-term investments 1,599 3,590 Accounts receivable, net 45,055 35,052 Inventory 5,398 4,522 Prepaids and other current assets 6,831 5,415 ________ ________ Total current assets 77,339 63,689 Property and equipment, net 26,172 25,122 Excess of purchase price over net assets acquired, net 14,004 14,123 Other assets 10,199 11,652 ________ ________ $127,714 $114,586 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,996 $ 20,817 Accrued alliance development costs 1,083 4,066 Accrued liabilities 2,172 3,073 Accrued wages and related costs 4,167 5,332 Current maturities of long-term debt 1,946 3,280 ________ ________ Total current liabilities 46,364 36,568 ________ ________ Long-term debt, net of current maturities 6,142 6,837 Stockholders' equity: Common stock, $.05 par value 527 518 Additional paid-in capital 45,409 43,786 Employee stock ownership loan guarantee (2,659) (2,970) Foreign currency translation adjustment 125 131 Retained earnings 31,806 29,716 ________ ________ Net stockholders' equity 75,208 71,181 ________ ________ $127,714 $114,586 ======== ======== See notes to consolidated condensed financial statements. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Income (in thousands, except per share data) Three Months Ended March 31, ___________________________ 1994 1993 ____ ____ (Unaudited) Net sales $74,800 $59,749 Cost of sales 56,379 39,494 _______ _______ Gross profit 18,421 20,255 Operating, selling and administrative expenses 15,103 16,265 _______ _______ Operating income 3,318 3,990 Other income, net 126 285 _______ _______ Income from continuing operations before income taxes and discontinued operations 3,444 4,275 Provision for income taxes 1,354 1,686 _______ _______ Income from continuing operations before discontinued operations 2,090 2,589 Discontinued operations, net of taxes - (447) _______ _______ Net income $ 2,090 $ 2,142 ======= ======= Net income per share: Income from continuing operations $ .19 $ .24 Discontinued operations, net - (.04) _____ _____ Net income per share $ .19 $ .20 ===== ===== Weighted average shares outstanding 10,981 10,749 ====== ====== See notes to consolidated condensed financial statements. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (in thousands) Three Months Ended March 31, ____________________________ 1994 1993 ____ ____ (Unaudited) Cash flows from operating activities: Net income $ 2,090 $2,142 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,583 2,018 Amortization of ESSOP loan guarantee 311 230 Decrease (increase) in: Accounts receivables, net (10,003) 143 Inventory (876) 456 Other current assets (2,220) (354) Other assets 1,572 (1,412) Increase (decrease) in: Accounts payable 16,179 960 Accrued alliance development costs (2,983) - Accrued liabilities (901) (84) Accrued wages and related costs (1,165) 352 Foreign currency translation adjustment (6) (16) _______ ______ Net cash provided by operating activities 4,581 4,435 activities _______ ______ Cash flows from investing and financing activities: Purchase of property and equipment, net (2,829) (1,409) Decrease in short-term investments 1,991 239 Issuance of common stock 1,632 3 Repayment of long-term debt (2,029) (1,771) _______ ______ Net cash used in investing and financing activities (1,235) (2,938) _______ ______ Net increase in cash and cash equivalents 3,346 1,497 Cash and cash equivalents at beginning of period 15,110 4,108 _______ ______ Cash and cash equivalents at end of period $18,456 $5,605 ======= ====== See notes to consolidated condensed financial statements. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Notes to Consolidated Condensed Financial Statements 1. GENERAL. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to form 10-Q. 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 only of normal recurring accruals) considered necessary for a fair presentation have been included. The results of the three months ended March 31, 1994, are not necessarily indicative of the results to be expected for the full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report and Form 10K for the transition period ended December 31, 1993. 2. CHANGE IN FISCAL YEAR. The Company announced a change in its fiscal year-end to December 31 from May 31, beginning with the seven month transition period ended December 31, 1993. The calendar quarters of 1993 have been restated to reflect comparable periods. 3. DISCONTINUED OPERATIONS. On May 31, 1993, the Company completed the divestiture of a minor segment of its business, referred to as its Home Infusion business. The Company's consolidated statements of income reflected a net loss from discontinued operations of $.4 million for the three months ended March 31, 1993. 4. ACCRUED ALLIANCE DEVELOPMENT COSTS. On December 3, 1993, the Company entered into a long-term supplier distribution agreement (the Strategic Alliance) with its principal supplier of radiopharmaceutical products, the Radiopharmaceutical Division of the DuPont Merck Pharmaceutical Company (DuPont Merck). The agreement, which became effective February 1, 1994, replaced an existing supply agreement between the companies which has been in place since 1988. Under the terms of the new agreement, DuPont Merck will rely upon Syncor as the primary distribution channel for its radiopharmaceutical products in the United States. In connection with this agreement, the Company established a reserve for alliance development costs of $4.5 million during the seven months ended December 31, 1993. Included in these charges were $2.8 million of costs related to launch and implementation of the strategic alliance program, $1.1 million of employee-related expenses associated with the consoli- dation, relocation and reorganization of certain sales and service operations and $.6 million for incremental accounting, legal and regulatory fees. Cash outlays for the first calendar quarter of 1994 amounted to approxi- mately $2.9 million. The remaining reserve of $1.1 million at March 31, 1994 is expected to be used during 1994 as the strategic alliance is implemented. 5. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115. In May 1993, the Financial Accounting Standard Board issued Statement of Financial Account- ing Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" (Statement 115). This Statement supersedes Statement No. 12, "Accounting for Certain Marketable Securities". Statement 115 addresses the accounting and reporting for certain investments in debt and equity securities, and expands the use of fair value accounting for these securities. Statement 115 retains the use of the cost method for investment in debt securities when there is intent and ability to hold the securities to maturity. Statement No. 115 is effective for fiscal years beginning after December 15, 1993. The Company adopted Statement 115 in the first quarter of calendar 1994. However, the adoption of this Statement is determined to be immaterial and is not reported separately in the consolidated financial statements. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations Net Sales _________ Consolidated net sales for the first quarter of 1994 rose 25.2% or $15.1 million to $74.8 million versus $59.8 million for the first calendar quarter of 1993. The Company's net sales growth for the quarter is primarily the result of activity associated with the Strategic Alliance entered into with its principal supplier of radiopharmaceutical products, as discussed in Note 4 of Notes to Consolidated Condensed Financial Statements. Net sales growth also continues to be the result of an increase in the cardiology sector of nuclear medicine, the opening and acquisition of new pharmacies and increased market share, offset by aggressive price competition, including a strategic decision to reduce the price of the Company's largest single product. This price reduction was deemed necessary as part of a product penetration strategy prior to the expected introduction of a competing cardiac imaging agent later on this year. In addition, the Company has noticed a decline in the volume and pricing of some of its core (noncardiology) products due to what appears to be the result of changes in certain physician practice patterns. Gross Profit ____________ Gross profit for the first quarter of 1994 decreased to $18.4 million down from $20.3 million for the comparable 1993 period. Gross profit as a percentage of net sales also declined during the current quarter to 24.6% versus 33.9% in 1993. The decline in the gross profit percentage is attributable to a number of factors. These factors include aggressive price competition in many key markets, material cost increases and initial lower margins (as expected) as a result of the implementation of the Strategic Alliance with DuPont Merck. Material costs, as a percentage of pharmacy sales, have been rising due to price increases from suppliers. Current government focus on health care cost containment, as well as aggressive price competition, has made it difficult to cover these costs through price increases. In response to health care reform pressures and overall changes in the market, the Company made a strategic decision in the recent quarter to reduce the pricing of its largest single product in order to increase market penetration, as discussed above. The Company anticipates most of these trends to continue throughout the balance of the year. The Company continues to invest in the start-up and opening of new central radiopharmacies. These pharmacies have a dilutive effect on gross margin until they reach a certain level of net sales. Operating, Selling and Administrative Expenses ______________________________________________ Operating, selling and administrative expenses decreased 7.1% for the first quarter or $1.2 million to $15.1 million and declined as a percentage of sales to 20.2% from 27.2% for the same period of 1993. This decrease reflects the Company's continued success in its efforts to tightly control operating expenses. During the quarter, the Company was able to produce a significant increase in net sales without corresponding increases in operating expenses. The Company continues, as a part of its overall business strategy, to invest in developmental business opportunities. These opportunities require ongoing resources in the area of operating, selling and administrative expenses. Liquidity and Capital Resources _______________________________ The Company's balance sheet was significantly strengthened with the divestiture of the Home Infusion Services Division which was completed at the end of fiscal 1993 (May 31, 1993). The divestiture resulted in a cash infusion of $9.1 million. The Company had cash, cash equivalents and short-term investments of $ 20.1 million at March 31, 1994, compared with $18.7 million at December 31, 1993. Working capital increased $3.9 million to $31 million while the current ratio decreased to 1.67 from 1.74. Days Sales Outstanding increased to 54 days at March 31, 1994 compared to 52 days at December 31, 1993. The Company continues expenditures for the alliance implementation, acquisi- tion of independent radiopharmacies, start-up of new radiopharmacies, the re- equipping of existing radiopharmacies and information technology for both internal and customer uses. These programs are expected to continue through 1994 and will be funded with proceeds from operations. The Company expects its overall cash position to decline somewhat in the upcoming quarters as the Strategic Alliance is fully implemented. The nature of the Company's business is not capital intensive and, as new products become available, the capital requirement to accommodate these products will be minimal. The Company believes sufficient internal and external capital sources exist to fund operations and future expansion programs. The were no borrowings outstanding on the line of credit at March 31, 1994 and December 31, 1993. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Part II. OTHER INFORMATION None. SIGNATURE 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. SYNCOR INTERNATIONAL CORPORATION (Registrant) March 16, 1994 By: /s/ Michael A. Piraino ____________________________ Michael A. Piraino Senior Vice President and Chief Financial Officer (Principal Financial/Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----