-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SuqWyLN4TKFRrPk1E3Uqf7KRJVohdBUJa7NqTVsq6nTUP3gpwu94lrutjBVzLNQM wgN0cHH8JzilbYqkNSJ33w== 0000202763-99-000013.txt : 19990817 0000202763-99-000013.hdr.sgml : 19990817 ACCESSION NUMBER: 0000202763-99-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYNCOR INTERNATIONAL CORP /DE/ CENTRAL INDEX KEY: 0000202763 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 850229124 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08640 FILM NUMBER: 99690794 BUSINESS ADDRESS: STREET 1: 6464 CANOGA AVENUE CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8187574000 MAIL ADDRESS: STREET 1: 6464 CANOGA AVENUE STREET 2: 20001 PRAIRIE ST CITY: WOODLAND HILLS STATE: CA ZIP: 91367 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 JUNE 30, 1999 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) 6464 CANOGA AVENUE, WOODLAND HILLS, CALIFORNIA 91367 (Address of principal executive offices) (Zip Code) (818) 737-4000 (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 June 30, 1999, 11,725,469 shares of $.05 par value common stock were outstanding. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES INDEX _____ Page ____ Part I. Financial Information Item 1. Consolidated Condensed Financial Statements Balance Sheets as of June 30, 1999 and December 31, 1998........................... 3 Statements of Income for Three Months Ended June 30, 1999 and 1998.................................. 4 Statements of Income for Six Months Ended June 30, 1999 and 1998.................................. 5 Statements of Cash Flows for Six Months Ended June 30, 1999 and 1998................................... 6 Notes to Consolidated Condensed Financial Statements............. 7 Item 2. Management's Discussion and Analysis of Financial Condition..... 10 Part II. Other Information............................................... 13 SIGNATURE.................................................................. 15
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Balance Sheets (in thousands, except per share data) June 30, December 31, 1999 1998 ____ ____ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 16,117 $ 13,824 Short-term investments 6,525 4,707 Trade receivables, net 71,754 65,055 Patient receivables, net 9,824 10,724 Inventory 9,667 11,495 Prepaids and other current assets 15,630 12,780 _________________________ Total current assets 129,517 118,585 Marketable investment securities 1,192 1,191 Property and equipment, net 57,723 49,103 Excess of purchase price over net assets acquired, net 61,899 62,654 Other assets 31,976 25,034 _________________________ $282,307 $256,567 ========================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 44,456 $ 44,578 Accrued liabilities 11,505 7,005 Accrued wages and related costs 10,070 12,563 Federal and state taxes payable 2,481 1,293 Current maturities of long-term debt 6,933 9,122 _________________________ Total current liabilities 75,445 74,561 Long-term debt, net of current maturities 77,525 70,322 Deferred compensation 1,346 311 Stockholders' equity: Common stock, $.05 par value 656 626 Additional paid-in capital 86,228 72,622 Notes receivable-related parties (18,962) (9,028) Employee stock ownership loan guarantee (4,213) (5,056) Accumulated other comprehensive income 130 (527) Retained earnings 76,676 65,260 Treasury stock, at cost; 1,356 shares at June 30, 1999 and at December 31, 1998 (12,524) (12,524) _________________________ Net stockholders' equity 127,991 111,373 _________________________ $282,307 $256,567 =========================
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 JUNE 30, ___________________________ 1999 1998 ____ ____ (Unaudited) Net sales $130,290 $113,245 Cost of sales 87,045 78,653 __________________________ Gross profit 43,245 34,592 Operating, selling and administrative expenses 27,436 22,336 Depreciation and amortization 4,343 4,065 __________________________ Operating income 11,466 8,191 Other expense, net (676) (506) __________________________ Income before taxes 10,790 7,685 Provision for income taxes 4,403 3,290 __________________________ Net income $ 6,387 $ 4,395 ========================== Net income per share - Basic $ .55 $.42 ========================== Weighted average shares outstanding - Basic 11,675 10,536 ========================== Net income per share - Diluted $ .50 $ .40 ========================== Weighted average shares outstanding - Diluted 12,757 11,057 ==========================
See notes to consolidated condensed financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Income (in thousands, except per share data) SIX MONTHS ENDED JUNE 30, _________________________ 1999 1998 ____ ____ (Unaudited) Net sales $254,158 $215,969 Cost of sales 172,331 154,222 ________________________ Gross profit 81,827 61,747 Operating, selling and administrative expenses 52,250 40,939 Depreciation and amortization 8,490 7,130 ________________________ Operating income 21,087 13,678 Other expense, net (1,558) (100) ________________________ Income before taxes 19,529 13,578 Provision for income taxes 8,113 5,825 ________________________ Net income $11,416 $ 7,753 ======================== Net income per share - Basic $ .99 $.74 ======================== Weighted average shares outstanding - Basic 11,515 10,420 ======================== Net income per share - Diluted $ .91 $ .71 ======================== Weighted average shares outstanding - Diluted 12,588 10,921 ========================
See notes to consolidated condensed financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (in thousands) SIX MONTHS ENDED JUNE 30, _________________________ 1999 1998 ____ ____ (Unaudited) Cash flows from operating activities: Net income $11,416 $7,753 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 8,490 7,130 Provision for losses on receivables 213 1,285 Amortization of ESSOP loan guarantee 843 843 Decrease (increase) in: Accounts receivable, trade (7,750) (7,228) Accounts receivable, patient 1,783 (262) Inventory 1,835 (1,555) Other current assets (2,935) (4,647) Other assets 971 388 Increase (decrease) in: Accounts payable (182) 6,537 Accrued liabilities 3,736 2,778 Accrued wages and related costs (1,059) (4,473) Federal and state taxes payable 1,817 952 Deferred compensation 1,034 - _____________________ Net cash provided by operating activities 20,212 9,501 _____________________ Cash flows from investing activities: Purchase of property and equipment, net (13,549) (5,339) Acquisitions of businesses, net of cash acquired (8,800) (45,338) Net increase in short-term investments (1,814) (2,160) Net increase in long-term investments (1) (11) Unrealized gain on investments 17 11 _____________________ Net cash used in financing activities (24,147) (52,837) _____________________ Cash flow from financing activities: Proceeds from long-term debt 13,031 40,031 Repayment of long-term debt (9,955) (1,995) Issuance of common stock 3,075 579 _____________________ Net cash provided by financing activities 6,151 38,615 _____________________ Net increase (decrease) in cash and cash equivalents 2,216 (4,721) Effect of exchange rate on cash 77 (87) Cash and cash equivalents at beginning of period 13,824 25,538 _____________________ Cash and cash equivalents at end of period $16,117 $20,730 =====================
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 six months ended June 30, 1999, 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 on Form 10-K for the year ended December 31, 1998. Certain line items in the prior year's consolidated condensed financial statements have been reclassified to conform to the current year's presentation. 2. NEW ACCOUNTING STANDARDS. In June 1998, the Financial Accounting and Standards Board issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," which became effective for fiscal years beginning after June 30, 2000. SFAS 133 requires that entities value all derivative instruments at fair value and record the instruments on the balance sheet. The Company believes that the adoption will not have an impact on its financial statements as the Company holds no derivative instruments. 3. COMPREHENSIVE INCOME. Other comprehensive income includes foreign currency translation adjustments and net unrealized gains and losses on investments in equity securities. Such amounts are as follows:
THREE MONTHS ENDED __________________ June 30, 1999 June 30, 1998 _____________ _____________ Tax Tax Before-tax (expense) Net of Tax Before-Tax (expense) Net-of Tax Amount or benefit Amount Amount or Benefit Amount ________________________________ _______________________________ Foreign currency translation adjustments 337 - 337 (60) - (60) Unrealized gains (losses) on investments: Unrealized holding gains (losses) arising during period 129 (59) 70 4 (2) 2 _________________________________________________________________ Other comprehensive income 466 (59) 407 (56) (2) (58) === ==== === ==== === ====
SIX MONTHS ENDED __________________ June 30, 1999 June 30, 1998 _____________ _____________ Tax Tax Before-tax (expense) Net of Tax Before-Tax (expense) Net-of Tax Amount or benefit Amount Amount or Benefit Amount ________________________________ _______________________________ Foreign currency translation adjustments 640 - 640 66 - 66 Unrealized gains (losses) on investments: Unrealized holding gains (losses) arising during period 42 (25) 17 19 (8) 11 _________________________________________________________________ Other comprehensive income 682 (25) 657 85 (8) 77 === ==== === == === ==
4. SEGMENT INFORMATION. Syncor has identified two primary operating segments: Pharmacy Services and Medical Imaging. Segment selection was based upon internal organizational structures, the way these operations are managed and evaluated, the availability of separate financial results, and materiality considerations. Segment detail is summarized as follows:
THREE MONTHS ENDED __________________ Pharmacy Services Business June 30, 1999 June 30, 1998 __________________________ _____________ _____________ Revenues $117,125 $101,633 Operating Income $ 14,841 $ 11,142 Medical Imaging Business ________________________ Revenues $ 13,165 $ 11,612 Operating Income $ 1,347 $ 1,200 Unallocated Corporate _____________________ Operating Loss $ (4,722) $ (4,151)
SIX MONTHS ENDED ________________ Pharmacy Services Business June 30, 1999 June 30, 1998 __________________________ _____________ _____________ Revenues $229,131 $201,308 Operating Income $ 27,866 $ 20,449 Medical Imaging Business ________________________ Revenues $ 25,027 $ 14,661 Operating Income $ 2,520 $ 1,283 Unallocated Corporate _____________________ Operating Loss $ (9,299) $ (8,054)
5. NET INCOME PER SHARE. Basic earnings per share (EPS) amounts are computed by dividing earnings applicable to common stockholders by the average number of shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive equivalents outstanding. Anti-dilutive outstanding stock options have been excluded from the diluted calculation. The reconciliation of the numerator and denominators of the basic and diluted earnings per share computations are as follows for the three and six months ended June 30, 1999 and 1998:
THREE MONTHS ENDED __________________ June 30, 1999 June 30, 1998 _________________________________________________________________________ Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ___________________________________________________________________________________________________ Net income $6,387 $4,395 Basic EPS $6,387 11,675 $.55 $4,395 10,536 $.42 ---- ____ Effect of Dilutive Stock Options 1,082 521 _____ ___ Diluted EPS $6,387 12,757 $.50 $4,395 11,057 $.40 ____ ____
SIX MONTHS ENDED __________________ June 30, 1999 June 30, 1998 _________________________________________________________________________ Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ___________________________________________________________________________________________________ Net income $11,416 $7,753 Basic EPS $11,416 11,515 $.99 $7,753 10,420 $.74 ____ ____ Effect of Dilutive Stock Options 1,073 501 _____ ___ Diluted EPS $11,416 12,588 $.91 $7,753 10,921 $.71 ____ ____
6. NOTES RECEIVABLE-RELATED PARTIES. The Company initiated a Senior Management Stock Purchase Plan effective June 16, 1998. During the second quarter of 1999, officers and key employees of the Company purchased shares of Syncor stock pursuant to this plan. The shares were paid with a five-year interest bearing promissory note payable to the Company. Interest on each note is payable on each anniversary date, with the entire outstanding principal and unpaid interest due on the fifth anniversary date. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations For the Months Ended June 30, 1999 and 1998 NET SALES Consolidated net sales for the three months ended June 30, 1999 increased 15.1% or $17.0 million to $130.3 million versus $113.2 million for the second quarter of 1998. For the six months ended June 30, 1999 net sales increased 17.7% or $38.2 million to $254.2 million compared to $216.0 million for the same period in 1998. PHARMACY SERVICES The Pharmacy Services revenue grew in excess of 15% for the quarter and 13.8% for the six months ended June 30, 1999. The Company's sales growth continues to outpace the overall growth in the marketplace estimated by the Company to be between 6-8%. However, the primary source of growth continues to be from cardiology. Within the cardiology sector the Company's sales growth of 18% for the quarter continued to outpace this sector's growth which is estimated by the Company to be growing from between 14-16%. Sales of Cardiolite(R), a proprietary heart imaging agent to which the Company has preferential distribution rights, increased approximately 26% in the second quarter as compared to the second quarter of 1998 and 24% for the six months ended June 30, 1999, when compared to the corresponding period in 1998. Pricing within this sector has remained stable despite competition from a competing cardiac agent. While this competition continues, it is the Company's belief that Cardiolite(R) continues to gain market share and is outpacing this competing agent. In 1998, the Company announced the loss of a contract to provide radiopharmaceuticals to a large hospital-buying group as a result of a competitive bidding process. The Company announced at that time the estimated lost revenue would range from $10 to $15 million in 1999. The Company believes that it has secured a substantial portion of the overall revenue associated with this group through alternative means and as result, the estimated lost revenue will range from $1 to $2 million in 1999. The Company believes the ultimate impact on earnings will be negligible. MEDICAL IMAGING Sales from the Medical Imaging businesses contributed $13.2 million to the Companies total sales for the quarter, compared to $11.6 million for same period in 1998 or a 13.8% increase. For the six months ended June 30, 1999, sales were $25.0 million compared to $14.7 million for the same period in 1998. Sales growth was attributed to a combination of internal growth and acquisitions. GROSS PROFIT Gross profit for the three months ended June 30, 1999 increased $8.7 million to $43.3 million, and as percentage of net sales reached 33.2% in this quarter as compared to 30.5% of net sales for the second quarter of 1998. The gross profit for the six months ended June 30, 1999 increased by $20.1 million to $81.8 million or 32.5% and as percentage of net sales to 32.2%, compared to 28.6% for the comparable period in 1998. PHARMACY SERVICES Both the dollar value and gross profit margin percentage continues to increase in this area. The gross profit margin increased in the quarter ended June 30, 1999 from 25.8% in 1998 to 28.4% in 1999. For the six months ended June 30, 1999, the gross margin increased from 25.3% to 27.4%. Material costs have decreased slightly as a percentage of sales due to better contracted rates and mix changes which have resulted in sales of higher margin products. Direct labor costs have declined as a percentage of sales due to more efficient staffing levels and higher efficiency with the increased volumes. MEDICAL IMAGING The gross profit margin of this group increased in the quarter ended June 30, 1999 from 71.8% in 1998 to 75.7% in 1999. For the six months ended June 30,1999 the gross margin increased from 74.2% to 75.9%. Volume continues to increase from a combination of increased site growth and site acquisitions. This segment contributed $8.1 million of the $20.1 million increase in gross profit. OPERATING, SELLING AND ADMINISTRATIVE EXPENSES Operating, Selling and Administrative costs for the quarter ended June 30, 1999 increased by $5.1 million or 22.8% to $27.4 million as compared to $22.3 million for the comparable quarter in 1998. For the six months ended June 30, 1999 these expenses increased by $11.3 million or 27.6% to $52.2 million as compared to $40.9 million for the same period in 1998. The ratio of these expenses to sales increased from 19.7% in 1998 to 21.1% in 1999 for the comparable quarters and from 19.0% to 20.6% for the comparable six month periods. The Medical Imaging business, which traditionally has higher cost to sales ratio, contributed the majority of the six months change. This business showed an increase in costs of $1.3 million for the quarter and $5.6 million for the six month period. The Pharmacy Services business expenses in this area were affected by increased labor and associated costs of expanded systems applications, certain bonuses associated with the achievement of much higher sales levels and profit margins and the expansion of international operations via new sites. DEPRECIATION Depreciation increased by $.2 million to $4.3 million or 6.8% in the three months ended June 30, 1999 as compared to the same period in 1998. For the six months ended June 30, 1999 depreciation expense increased by $1.4 million to $8.5 million or 19.1%. The Medical Imaging business contributed all of the increase in the quarter and $1.2 million of the increase for the six month period. The Company expects these trends to continue as this segment of the Company is very capital intensive and as further expansion of this segment is undertaken. LIQUIDITY AND CAPITAL RESOURCES The Company had cash, cash equivalents and investments of $23.8 million at June 30, 1999 compared with $19.7 million at December 31, 1998. The Company's total debt position of $84.5 million at June 30, 1999 reflects an increase of $5.1 million when compared to the balance of $79.4 million at December 31, 1998. The increase in debt for the six months ended June 30, 1999, results primarily from the financing of the continued expansion of the Medical Imaging business. Working capital increased by $10.1 million to $54.1 million at June 30, 1999, compared to $44.0 million at December 31,1998. The Company believes sufficient internal and external sources exist to fund operations and future expansion plans. Of the $75 million credit line facility initiated on January 5, 1998, $21.1 million is available at June 30, 1999. ACQUISITION OF BUSINESSES In April, the Company acquired two imaging center sites in the expansion of its Medical Imaging business. The first of these sites was in Tempe, Arizona for a total purchase price of $1.5 million. The second was the acquisition of a site in Bakersfield, California. The purchase price was $1.0 million plus the assumption of $.2 million in debt. In addition, the Company completed the purchase of the minority interests in certain open MRI sites for $6.1 million. The Company acquired the remaining minority interests in the open MRI sites in July, 1999 for $.7 million. YEAR 2000 Like many other companies, the Year 2000 computer issue creates risk for the Company. If the Company's computer systems do not correctly recognize date information when the year changes to 2000, there could be an adverse impact on the Company's operations. The Company has therefore initiated a comprehensive project to prepare its computer systems for the year 2000. CORPORATE SYSTEMS MIGRATION & LEGACY SYSTEMS. The Company's financial information systems include an SAP system implemented in 1997. This system has been vendor certified to be "Year 2000" compliant. The Company has conducted and continues to conduct periodic tests of this system. The Company analyzed its remaining computer systems to identify any potential Year 2000 issues, and took appropriate corrective action based on the results of such analysis. This effort was completed in February 1999. PHARMACY SERVICES FIELD-BASED IT SYSTEMS AND RELATED COMPANY-SUPPLIED CUSTOMER IT SYSTEMS. The Company's domestic field based pharmacy system has been modified, tested, and fully deployed as of late February 1999. This system is believed to be Year 2000 compliant. The Company's international field-based system is being replaced by a newer Year 2000 compliant system. Development efforts have been completed and system installation is underway. To date, four installations have been completed. The remaining installations are scheduled to be complete in late October 1999. All IT systems supplied by the Company for use by customers in their locations were either designed as year 2000 compliant, or customers have been offered the opportunity to convert to a Year 2000 compliant system. The customer system conversion effort was completed in July 1999. RESIDUAL SYSTEMS & MEDICAL IMAGING BUSINESS. The effort to determine the Year 2000 compliance of residual systems (i.e., software supplied by external vendors and other "embedded" systems), including medical imaging equipment and systems, is estimated to be completed prior to year-end 1999. The imaging systems are critical to the Medical Imaging business and may require replacement of certain equipment or systems or hardware upgrades, in addition to those scheduled and budgeted for upgrade/replacement in the ordinary course of business. Many of the vendor-supplied residual systems are small (e.g., alarm systems, postage meters, etc.), while some are more sophisticated (e.g., desktops, desktop applications, and LAN applications). The estimated cost of such Year 2000 driven modifications/replacements to residual systems and the Medical Imaging business's systems, including amounts spent to date, is not expected to exceed $750,000. This effort is scheduled to be completed in the third quarter of 1999. RISK ASSESSMENT; CONTINGENCY PLANNING. The Company is also in contact with suppliers, customers, other vendors and fiscal payers, including federal and state governments, Medicare fiscal intermediaries, insurance companies and managed care companies to determine the state of their Year 2000 compliance and to assess the potential impact on the Company's operations if key third parties are not successful in converting their systems in a timely manner. Risk assessment, readiness evaluation, action planning, testing with business partners, and contingency planning activity is currently underway and is expected to be completed by early September 1999. Notwithstanding the foregoing, there can be no assurance that another entity's failure to ensure year 2000 capability would not have an adverse effect on the Company. The Company's risk management program includes emergency backup and recovery procedures to be followed in event of failure of a business-critical system. These procedures will be expanded to include specific procedures for potential Year 2000-related interruptions. These plans will be completed by middle of calendar 1999. These plans have been drafted and will be finalized in September 1999. The costs of the Company's Year 2000 readiness and the dates on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes, unforeseen circumstances causing the Company to allocate its resources elsewhere, and similar uncertainties. Additionally, as testing of Year 2000 functionality of the Company's systems must occur in a simulated environment, the Company will not be able to test full system Year 2000 interfaces and capabilities prior to Year 2000. The Company believes that the cost of its Year 2000 compliance projects over the next two years will not have a material effect on the Companys financial position or overall trends of operations. SAFE HARBOR STATEMENT Statements which are not historical facts, including statements about our confidence, strategies and expectations, opportunities, industry and market growth, demand and acceptance of new and existing products and return on investments are forward looking statements that involve risks and uncertainties, including without limitation, the effect of general economic and market conditions, supply and demand for the Company's products, competitor pricing, maintenance of the Company's current market position and other factors. Given these uncertainties, undue reliance should not be placed on such forward looking statements. SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders On June 23, 1999, the Company held its annual meeting of stockholders. Five proposals were presented to the stockholders for their approval. The following summarizes the proposals and the results of the voting: 1. Election of Directors The first proposal was to elect Monty Fu, Henry N. Wagner and Ronald A. Williams as directors for an additional three-year term. The stockholders voted to re-elect the three directors: FOR AGAINST Monty Fu 10,236,806 37,519 Henry N. Wagner, Jr. 10,235,928 38,397 Ronald A. Williams 10,237,829 36,496 2. Selection of Independent Auditors The second proposal was to ratify the selection of KPMG LLP as the Company's independent auditors for the 1999 fiscal year. The stockholders ratified the selection: FOR AGAINST ABSTAIN 10,248,629 16,434 9,262 3. Increase the Number of Authorized Shares of Common Stock The third proposal was to amend the Company's Restated Certificate of Incorporation to increase the number of authorized shares of the Company's common stock from 20,000,000 to 200,000,000. The stockholders approved the amendment: FOR AGAINST ABSTAIN 7,624,661 2,607,385 14,779 4. The fourth proposal was to approve the use of unused option shares under the Company's Universal Performance Equity Participation Plan for grants under the Company's other stock incentive plans. The stockholders approved the proposal: FOR AGAINST ABSTAIN 7,984,529 1,300,077 62,219 5. The fifth proposal was to approve the cash and stock awards for officers upon the attainment of the $34, $43, $53 and $65 stock price targets under the Executive Long-Term Performance Equity Plan. The stockholders approved the proposal: FOR AGAINST ABSTAIN 8,222,529 1,954,851 31,025 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1 Restated Certificate of Incorporation 10. Material Contracts 10.1 Second Amendment to Executive Long-Term Performance Equity Plan, dated as of June 23, 1999 10.2 Second Amendment to the Universal Performance Equity Participation Plan, dated as of June 23, 1999 10.3 Third Amendment to Universal Performance Equity Participation Plan, dated as of June 23, 1999 10.4 First Amendment to Syncor International Corporation 1990 Master Stock Incentive Plan, As Amended and Restated, dated as of June 23, 1999 11. Statement re: Computation of Per Share Earnings Computation can be clearly determined from the material contained in Part I of this Form 10-Q. 27. Financial Data Schedule (filed electronically) 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) August 16, 1999 By: /s/ Michael E. Mikity Michael E. Mikity Senior Vice President and Chief Financial Officer (Principal Financial / Accounting Officer) Exhibit 3.1 RESTATED CERTIFICATE OF INCORPORATION OF SYNCOR INTERNATIONAL CORPORATION SYNCOR INTERNATIONAL CORPORATION, a corporation organized and existing under the Laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is Syncor International Corporation and the name under which the corporation was originally incorporated was Nuclear Pharmacy Incorporated. The date of filing its original Certificate of Incorporation was October 15, 1985. 2. This Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. The amendment to Article SECOND, which changes the name and address of the registered agent, was approved by the Corporation's Board of Directors pursuant to Section 133 of the General Corporation Law of the State of Delaware. The amendment to Article FOURTH, which increases the number of authorized shares of Common Stock from 20,000,000 to 200,000,000, was made pursuant to a vote of the stockholders as prescribed by Section 242 of the General Corporation Law of the State of Delaware. 3. The text of the Restated Certificate of Incorporation reads as follows: FIRST: The name of the Corporation is Syncor International Corporation. SECOND: The address of the Corporation's registered office in the State of Delaware is 9 East Loockerman Street in the City of Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is The National Registered Agents, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares which the Corporation shall have authority to issue is 200,000,000 shares of Common Stock, par value $.05 per share. FIFTH: The Board of Directors shall have power to make, alter, amend and repeal the by-laws (except so far as the by-laws adopted by the stockholders shall otherwise provide). Any by-laws made by the Directors under the powers conferred hereby may be altered, amended or repealed by the Directors or by the stockholders. Notwithstanding the foregoing and anything contained in this Certificate of Incorporation to the contrary, Sections 2, 3 and 11 of Article II (as amended), Sections 2, 3, 12 and 13 of Article III (as amended) and Article VIII (as amended) of the by-laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 75% of the voting power of the outstanding Voting Stock, voting together as a single class. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 75% of the voting power of the Outstanding Voting Stock, voting together as a single class, shall be required to alter, amend, or adopt any provision inconsistent with or repeal this Article FIFTH. SIXTH: SECTION 1. Election of Directors. Election of Directors need not be by written ballot unless and to the extent the by-laws of the Corporation so provide. SECTION 2. Number, Election and Terms. Except as otherwise fixed pursuant to the provisions of this Certificate of Incorporation, relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, the number of Directors of the Corporation shall be fixed from time to time by or pursuant to the by-laws. The Directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in the by- laws, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1987, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1988, and another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1989, with the members of each class to hold office until their successors are elected and qualified. At each annual meeting of the stockholders of the Corporation, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. SECTION 3. Stockholder Nomination of Director Candidates. Advance notice of stockholder nominations for the election of Directors and of any stockholder proposals to be considered at an annual stockholder meeting shall be given in the manner provided in the by-laws. SECTION 4. Newly Created Directorships and Vacancies. Except as otherwise fixed in the provisions of this Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional Directors under specified circumstances, newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new Director was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director. SECTION 5. Removal of Directors. Subject to the rights of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any Director may be removed from office, without cause, only by the affirmative vote of the holders of 75% of the combined voting power of the then outstanding Voting Stock, voting together as a single class. SECTION 6. Amendment or Repeal of this Article SIXTH. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 75% of the voting power of the outstanding Voting Stock, voting together as a single class, shall be required to alter, amend, or adopt any provision inconsistent with or to repeal this Article SIXTH. SEVENTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, by the President or by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 75% of the voting power of the outstanding Voting Stock, voting together as a single class, shall be required to alter, amend, or adopt any provision inconsistent with, or to repeal this Article SEVENTH. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors, and/or on all of the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. TENTH: Except as provided below, a Director shall have no personal liability to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a Director; however, the foregoing provision shall not limit the liability of a Director (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware Corporation Law, (iv) for any transaction from which the Director derived an improper personal benefit, or (v) for any act or omission occurring prior to the date when this Section TENTH becomes effective. IN WITNESS WHEREOF, said SYNCOR INTERNATIONAL CORPORATION, has caused its corporate seal to be hereunto affixed and this Certificate to be signed by Robert G. Funari, its President, and attested by Haig S. Bagerdjian, its Secretary, this 23rd day of July, 1999. SYNCOR INTERNATIONAL CORPORATION By: /s/ Robert G. Funari President ATTEST: By: /s/ Haig S. Bagerdjian Secretary Exhibit 10.1 SECOND AMENDMENT TO EXECUTIVE LONG-TERM PERFORMANCE EQUITY PLAN This Second Amendment to Executive Long-Term Performance Equity Plan, dated as of June 23, 1999 (this "Amendment"), hereby amends that certain Executive Long-Term Performance Equity Plan, dated as of January 1, 1998 and amended as of November 17, 1998 (the "Plan"), for Syncor International Corporation, a Delaware corporation (the "Company"), and is made pursuant to the approval of the stockholders of the Company during the stockholders' meeting held on June 23, 1999. 1. In addition to the stock price targets of $20, $25, $34 and $43, the following stock price targets will be added: $53 by June 30, 2003, and $65 by June 30, 2004. 2. Awards may be granted under the Plan at any time up to June 30, 2004; thereafter, no awards may be granted under the Plan. 3. Options that do not vest on an accelerated basis for the $53 and $65 targets will vest on June 30, 2008. The same options will expire on June 23, 2009. 4. In the event that there are insufficient shares under the 1990 Master Stock Incentive Plan to allocate the awards required under the Plan, the Board of Directors will have discretion to grant cash in lieu of the stock and option components under the Plan. 5. This Amendment is effective as of the date first set forth above. Except as amended hereunder, all other terms and conditions of the Plan shall remain in full force and effect. Exhibit 10.2 SECOND AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN This SECOND AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN is made as of June 23, 1999 pursuant to resolutions passed by the Board of Directors of Syncor International Corporation, a Delaware corporation (the "Company"), during a meeting held on June 23, 1999, and amends that certain Universal Performance Equity Participation Plan, dated as of June 16, 1998 and amended as of June 17, 1998 (as amended, the "Plan"). The purpose of this Second Amendment is to change the references to the June 30 date to July 1. 1. Section 2.1(b)(ii) of the Plan is hereby deleted in its entirety, and in substitution thereof shall be the following: (ii) For each Optionee, the Maximum Shares will be adjusted depending on the date in which the Optionee becomes an Eligible Employee. If the Optionee becomes an Eligible Employee on or before July 1, 1999, the Optionee will be entitled to receive the maximum Shares available to the Optionee. For any Optionee who becomes an Eligible Employee during the following dates, the number of Option shares that may be granted to that Optionee will be a percentage of the Maximum Shares, calculated as follows: % of Date Maximum Shares ____ ______________ After July 1, 1999 but on or before January 1, 2000 85% After January 1, 2000 but on or before July 1, 2000 66% After July 1, 2000 but on or before January 1, 2001 50% After January 1, 2001 but on or before July 1, 2001 33% After July 1, 2001 0% 2. The definition of "Eligible Employee" as set forth in Section 4.1(o) of the Plan shall be deleted in its entirety, and in substitution thereof shall be the following: (o) "Eligible Employee" shall mean any employee of the Company who is eligible to participate in the ESSOP as of July 1, 2001 and who works for the Company at least 30 hours per week. "Eligible Employee" does not include any officer or other employee of the Company who participates in any of the Company's Performance Equity Plans for executive officers and key employees. Exhibit 10.3 THIRD AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN This THIRD AMENDMENT TO THE UNIVERSAL PERFORMANCE EQUITY PARTICIPATION PLAN is made as of June 23, 1999 pursuant to a vote taken by the stockholders of Syncor International Corporation, a Delaware corporation (the "Company"), during its annual meeting held on June 23, 1999, and amends that certain Universal Performance Equity Participation Plan, dated as of June 16, 1998 and amended as of June 17, 1998 and as of June 23, 1999 (as amended, the "Plan"). During that annual meeting, the stockholders approved a proposal that grants the Company's Board of Directors discretion to use projected unused option shares under the Plan for awards under the Company's other stock incentive plans. The purpose of this Third Amendment is to amend the Plan to provide such discretion to the Board of Directors. 1. The following Section 2.8 is hereby added to the Plan: 2.8 Awards Under Other Company Plans. Notwithstanding any term in this Plan to the contrary, including the definition of "Eligible Employee," the Board shall have the discretion to use the projected unused option shares (the "Unused Shares") that would otherwise have been available for grants under this Plan for awards under the Company's other stock incentive plans, including the 1990 Master Stock Incentive Plan, As Amended and Restated. The Unused Shares may be used for any type of award that the Board is authorized to grant under those other stock incentive plans, and to whomever is eligible to receive awards under such plans. In no event, however, shall the sum of (i) the number of Unused Shares made available for awards under other stock incentive plans plus (ii) the number of outstanding option shares under this Plan, exceed the 1,800,000 shares authorized for issuance under this Plan. Exhibit 10.4 FIRST AMENDMENT TO THE SYNCOR INTERNATIONAL CORPORATION 1990 MASTER STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED This FIRST AMENDMENT TO THE SYNCOR INTERNATIONAL CORPORATION 1990 MASTER STOCK INCENTIVE PLAN, AS AMENDED AND RESTATED, is made as of June 23, 1999, pursuant to a vote taken by the stockholders of Syncor International Corporation, a Delaware corporation (the "Company"), during its annual meeting held on June 23, 1999, and amends that certain Syncor International Corporation 1990 Master Stock Incentive Plan, As Amended and Restated, dated as of June 18, 1997 (the "1990 Plan"). During that annual meeting, the stockholders approved a proposal that grants the Company's Board of Directors discretion to use projected unused option shares under the Company's Universal Performance Equity Participation Plan (the "Universal Plan") for awards under the Company's other stock incentive plans, including the 1990 Plan. The purpose of this First Amendment is to amend the 1990 Plan to increase the number of shares available for awards under the 1990 Plan by such number of option shares that are available for issuance under the Universal Plan but are projected to remain unused after July 1, 2001, the last date on which grants may be made under the Universal Plan. 1. Section 1.4 of the 1990 Plan is hereby deleted in its entirety and in replacement thereof shall be the following: 1.4 Stock Subject to the Plan. The maximum aggregated number of Common Stock that may be issued after June 18, 1997 pursuant to Awards granted under this Plan shall not exceed the sum of: (i) 2,417,506 shares; plus (ii) up to 785,000 shares which were authorized and subject to options then outstanding under the 1981 Master Stock Option Plan of the Corporation (the "1981 Plan") but are not issued under the 1981 Plan because of the expiration, cancellation or termination of such options without having been exercised in full; plus (iii) up to such number of option shares that are available for issuance under the Corporation's Universal Performance Equity Participation Plan but are projected to remain unused after July 1, 2001; in each case subject to adjustment as set forth in or pursuant to Section 6.2 (and corresponding provisions of the 1981 Plan, as the case may be). EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1,000 EXHIBIT 27 Financial Data Schedule Period type 6 mos Fiscal year end Dec 31, 1999 Period start Jan 1, 1999 Period end June 30, 1999 Cash 16,117 Securities 6,525 Receivables 85,565 Allowances (3,987) Inventory 9,667 Current assets 129,517 PP&E 111,416 Depreciation (53,693) Total assets 282,307 Current liabilities 75,445 Bonds 0 Preferred mandatory 0 Preferred 0 Common 656 Other SE 127,335 Total Liability and Equity 282,307 Sales 254,158 Total Revenue 254,158 CGS 172,331 Total costs 172,331 Other expenses 60,740 Loss provision 770 Interest expense 3,212 Income pre tax 19,529 Income tax 8,113 Income continuing 11,416 Discontinued 0 Extraordinary 0 Changes 0 Net income 11,416 EPS basic .99 EPS diluted .91
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