-----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, BsGRlo3BmUldJUGMW02Atbvyw6lVIJBVbHRrUjR04eSKJl0C+D9azVUlPTbgM761 h/AHnkvLcSwwzrO4fe+SBA== 0000950114-95-000195.txt : 19951119 0000950114-95-000195.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950114-95-000195 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KV PHARMACEUTICAL CO /DE/ CENTRAL INDEX KEY: 0000057055 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 430618919 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09601 FILM NUMBER: 95589690 BUSINESS ADDRESS: STREET 1: 2503 SOUTH HANLEY RD CITY: ST LOUIS STATE: MO ZIP: 63144 BUSINESS PHONE: 3146456600 MAIL ADDRESS: STREET 1: 2503 S HANLEY RD CITY: ST LOUIS STATE: MO ZIP: 63144 10-Q 1 KV PHARMACEUTICAL COMPANY FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE ------------------------------------------------------- SECURITIES EXCHANGE ACT OF 1934 ------------------------------- (X) Quarterly report for the quarterly period ended September 30, 1995 -------------------------- OR ( ) Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Commission file number 1-9601 ------------------------------------------------------- K-V PHARMACEUTICAL COMPANY - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 43-0618919 - --------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2503 SOUTH HANLEY ROAD, ST. LOUIS, MISSOURI 63144 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (314) 645-6600 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - ------------------------------------------------------------------------------- (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 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 ------ -------
Title of Class of Number of Shares Common Stock Outstanding as of this Report Date ----------------- ---------------------------------- Class A Common Stock, par value $.01 per share 6,792,531 Class B Common Stock, par value $.01 per share 4,692,694
2 PART I FINANCIAL INFORMATION 2 3 CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and Six Months Ended September 30, 1995 and 1994 (Unaudited)
For the Three For the Six Months Ended Months Ended ------------------------ --------------------------- 09/30/95 09/30/94 09/30/95 09/30/94 ---------- ---------- ---------- ---------- Revenues $11,207,601 $ 8,335,237 $ 23,427,704 $ 16,211,513 ----------- ------------ ------------ ------------ Costs and Expenses: Manufacturing costs 5,571,139 5,603,458 12,228,762 11,665,124 Research and development 1,074,310 1,066,120 2,119,814 2,365,661 Selling and administrative 2,998,444 2,680,929 6,154,547 5,736,039 Interest expense 411,386 306,215 727,931 562,209 Amortization of intangible assets 192,871 162,966 436,079 325,685 ----------- ------------ ------------ ------------ Total Costs & Expenses 10,248,150 9,819,688 21,667,133 20,654,718 ----------- ------------ ------------ ------------ Income (loss) before income taxes 959,451 (1,484,451) 1,760,571 (4,443,205) Provision for income taxes: Current 30,000 - 60,000 - Deferred - - - - ----------- ------------ ------------ ------------ Total 30,000 - 60,000 - ----------- ------------ ------------ ------------ Net Income (loss) $ 929,451 $ (1,484,451) $ 1,700,571 $ (4,443,205) =========== ============ ============ ============ Net Income (loss) per Common Share (after deducting preferred dividends: $105,438 for the three months ended September 30, 1995 and 1994 and $210,876 for the six months ended September 30, 1995 and 1994). $0.07 $(0.14) $0.13 $(0.42) ===== ======= ===== ======= See accompanying notes to financial statements.
3 4 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1995 and March 31, 1995 (Unaudited)
09/30/95 03/31/95 -------- -------- ASSETS - ------ Current Assets: Cash and equivalents $ 219,953 $ 1,075,713 Receivables 9,040,615 7,893,585 Inventories 8,957,778 6,591,587 Prepaid and other 206,115 266,951 ----------- ----------- Total Current Assets 18,424,461 15,827,836 ----------- ----------- Property and equipment 20,408,371 19,995,369 Less accumulated depreciation and amortization (12,514,333) (11,827,495) ----------- ----------- Net Property and Equipment 7,894,038 8,167,874 ----------- ----------- Deferred Improved Drug Entities(TM) 2,621,103 2,962,827 Goodwill and other 2,324,283 2,069,245 ----------- ----------- TOTAL ASSETS $31,263,885 $29,027,782 =========== =========== LIABILITIES - ----------- Current Liabilities: Current maturities of long-term debt $ 1,948,576 $ 1,814,682 Accounts payable 2,606,692 2,565,247 Accrued liabilities 3,047,992 2,521,162 ----------- ----------- Total Current Liabilities 7,603,260 6,901,091 ----------- ----------- Long-term debt 10,795,587 11,233,418 Other long-term liabilities 990,161 919,091 ----------- ----------- Total Liabilities 19,389,008 19,053,600 ----------- ----------- Commitments and Contingencies SHAREHOLDERS' EQUITY - -------------------- Preferred stock 2,410 2,410 Class A common stock 68,162 67,629 Class B common stock 47,164 47,187 Additional paid-in capital 23,906,337 23,706,723 Retained deficit (12,094,243) (13,794,814) Less cost of Class A and Class B common stock in treasury (54,953) (54,953) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 11,874,877 9,974,182 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $31,263,885 $29,027,782 =========== =========== See accompanying notes to financial statements.
4 5 CONSOLIDATED STATEMENTS OF CASH FLOW For the Six Months Ended September 30, 1995 and 1994 (Unaudited)
1995 1994 ---- ---- OPERATING ACTIVITIES Net Income (Loss) $ 1,700,571 $(4,443,205) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 1,122,917 943,328 Changes in operating assets and liabilities: (Increase) decrease in receivables (1,147,030) 1,107,435 Net (increase) decrease in inventories and other current assets (2,305,355) 291,872 Increase in accounts payable and accrued liabilities 568,275 2,239,386 Increase (decrease) in other 71,070 - ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 10,448 138,816 ----------- ----------- INVESTING ACTIVITIES Purchase of property and equipment, net (413,002) (264,116) Other, net (349,393) (97,628) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (762,395) (361,744) ----------- ----------- FINANCING ACTIVITIES Proceeds from credit facilities 14,994,880 4,700,000 Repayment of credit facilities (21,473,311) (4,300,000) Proceeds from term loan facility 6,839,411 - Principal payments on long-term debt (664,917) (13,823) Exercise (repurchase) of common stock options 200,124 (1,707) ----------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (103,813) 384,470 ----------- ----------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (855,760) 161,542 Cash and cash equivalents at beginning of year 1,075,713 506,982 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 219,953 $ 668,524 =========== =========== See accompanying notes to financial statements.
5 6 NOTES TO SUMMARIZED FINANCIAL INFORMATION NOTE A -- BASIS OF PRESENTATION The interim financial statements presented here have been prepared in conformity with the accounting principles and practices and methods of applying the same (including consolidating practices) reflected in the Annual Report of the Company on Form 10-K for the year ended March 31, 1995 filed with the Securities and Exchange Commission, except that detailed footnotes and schedules are not included. Reference is hereby made to the footnotes and schedules contained in the Annual Report. All significant intercompany balances and transactions have been eliminated and, in the opinion of management, all adjustments, which are of a normal recurring nature only, necessary to present a fair statement of the results of the Company and its subsidiaries have been made. NOTE B -- EARNINGS PER SHARE Net income (loss) per common share is computed by dividing net income (loss), less/plus preferred dividends, by the weighted average number of common shares and common share equivalents (if dilutive) outstanding during the period. Preferred dividends used in this calculation for the three-month and six-month periods ended September 30, 1995 and 1994 were $105,438 and $210,876, respectively. Undeclared and unaccrued cumulative preferred dividends at September 30, 1995 and 1994 were $1,676,460 and $1,254,708, respectively. Common share equivalents consist of those common shares that would be issued upon the exercise of outstanding stock options. The weighted average number of shares used in the computations was 11,740,305 and 11,056,672 for the quarters ended September 30, 1995 and 1994, respectively, and 11,682,632 and 11,056,717 for the six-month periods ended September 30, 1995 and 1994, respectively. Primary and fully-diluted income (loss) per share are the same for each of the periods presented. 6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES AND RESULTS OF OPERATIONS (a) Liquidity and Capital Resources ------------------------------- 1. Working Capital: --------------- During the quarter ended September 30, 1995, working capital increased $2,312,876 or 27%, to $10,821,201, while cash decreased $147,145. Net cash used in operating activities for the six months included an increase in receivables of $1,147,030, principally from increased sales volume from ETHEX Corporation, an increase in inventories of $2,305,355 as a result of the increase in the number of products sold by ETHEX and in anticipation of continued growth, and an increase in accounts payable and accrued liabilities of $568,275. These increases in receivables and inventories were more than offset by increased accounts payable and other liabilities and by the level of net profit and non-cash charges totaling $2,823,488. Working capital for the six months ended September 30, 1995, increased $1,084,566, or 11%. Capital expenditures of $413,002 were provided by funds from available current assets. Financing activities reflect a slight increase in borrowing after the application of funds received from the exercise of stock options. The ratio of current assets to current liabilities was 2.4 to 1 as of September 30, 1995, compared to 2.3 to 1 as of March 31, 1995. 2. Profitability: ------------- The net profit for the second quarter of fiscal 1996 was $929,451, compared to a loss of $1,484,451 in the comparable three-month prior year period, an improvement of $2,413,902 for the three months. Year-to-date, the net profit for the first six months of fiscal 1996 was $1,700,571, compared to a loss of $4,443,205 for the same period of the prior year, an improvement of $6,143,776. This improvement was due primarily to increased revenues on higher margin products 7 8 related to sales of new and existing products by KV's ETHEX subsidiary and a reduction in the high level of costs associated with regulatory matters incurred in the prior year. 3. Leverage: -------- The ratio of total liabilities to equity improved to 1.63 to 1 from 1.91 to 1 at year-end, primarily due to the net income experienced for the first six months which was partially offset by additional indebtedness to support the current level of growth. (b) Results of Operations --------------------- 1. Revenues: -------- Consolidated revenues for the second quarter of fiscal 1996 totaled $11,207,601, compared to $8,335,237 for the second quarter of fiscal 1995, an increase of $2,872,364, or 34% greater than the same period last year. Year-to-date consolidated revenues were $23,427,704, an increase of $7,216,191, or 45%, compared to the same period last year. The increase in volume for both the quarter and year-to-date is primarily attributable to the continued growth being experienced by ETHEX from new and existing products. ETHEX revenues accounted for 72% of consolidated revenues during the second quarter as ETHEX revenues increased by $2,958,652, or 58% over the same period last year as a result of new products introduced in fiscal 1995 and the first and second quarter of fiscal 1996. Particle Dynamics and Contract Services revenues had modest decreases. 2. Costs and Expenses: ------------------ Manufacturing costs were 50% and 67% of net sales for the quarters ended September 30, 1995 and 1994, respectively. Year-to-date manufacturing costs as a percent of net sales were 52% and 72% for the six months ended September 30, 1995 and 1994, respectively. Manufacturing costs decreased as a percent of sales for the quarter and year-to-date due to the continued growth in sales of higher margin new and existing ETHEX products. ETHEX revenues accounted for 72% of consolidated net sales, compared to 61% in the comparable prior year period. 8 9 Research and Development costs increased $8,190, or 1%, for the quarter ended September 30, 1995, compared to the same quarter of the prior year. Year-to-date, these costs decreased $245,847, or 10%, compared to the same period of the prior year. These decreases were primarily due to a reduction in validation costs. Selling and administrative expenses increased $317,515, or 12%, for the quarter ended September 30, 1995, compared to the same period of the prior year. Such costs were 27% and 32% of total revenues for the respective second quarters of fiscal 1996 and 1995. Year-to-date selling and administrative expenses increased $418,508, or 7%, over the same period last year and were 26% and 35% of total revenues for the six months ended September 30, 1995 and 1994, respectively. Increased expenditures are related to higher ETHEX selling and promotion expenses associated with the significant growth being experienced in new and existing ETHEX products. Interest expense increased $105,171 for the second quarter and $165,722 for the six-month period ended September 30, 1995, compared to the same period of the prior fiscal year. The increases resulted from higher levels of borrowing to support present growth. 3. Income Taxes: ------------ For the six-month period ended September 30, 1995, the Company has a current provision for income taxes of $60,000 based on the alternative minimum tax, but otherwise made no provision for income taxes due to a net operating loss carryforward position. For the comparable period ended September 30, 1994, the Company had no provision for income taxes because of the Company's net operating loss carryforward position. 4. Inflation and Changing Trends: ----------------------------- Although the Company generally has been able to pass along to its customers a portion of cost increases in labor, manufacturing and raw materials under its agreements, in certain instances no increases were effected due to market conditions. However, it is not meaningful to compare changing prices over the past three years because the products, product formulas, product mix and sources of raw materials have varied substantially. 9 10 The Company is continuing to transition its revenue base from one based on lower margin, highly competitive, short-term contract manufacturing to one based on higher margin, technology distinguished generic products, which it is focusing on marketing through ETHEX Corporation, as well as advanced technology drug delivery products to be marketed or co-marketed under long-term marketing agreements and ventures. These advanced technology products (Improved Drug Entities(TM)) are the subject of a number of long-term business arrangements and have differentiated and improved benefits derived from KV's drug delivery system technologies. The Company has implemented and is continuing to implement strategies to introduce additional products through its ETHEX subsidiary and to de-emphasize contract manufacturing services. This move to directly market its own technology distinguished generics has allowed the Company to become less dependent upon its pharmaceutical marketing clients for growth and to shift its revenue growth internally, principally through the growth in the number and level of sales of ETHEX Corporation products and the Company's licensing activities. During fiscal 1995, ETHEX introduced ten new products, and it plans to launch a similar number of new products in fiscal 1996. Management believes funds generated from operating activities and increased funds available from the Company's credit facility and related agreements will be adequate to meet the Company's requirements. 10 11 PART II. OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders. - ------ --------------------------------------------------- On August 11, 1995, at the annual meeting of shareholders of the Company, the shareholders elected Garnet E. Peck, Ph.D. as a Class C Director for a three-year term. The number of votes cast in favor of Garnet E. Peck, Ph.D. (taking into account the fact that each share of Class A common stock has one-twentieth of a vote per share and each share of Class B common stock has one vote per share) was 4,582,613. The number of votes as to which authority was withheld was 7,409. The other directors of the Company whose terms of office as directors continued after the meeting are: Marc S. Hermelin, Victor M. Hermelin and Alan G. Johnson. Item 6: Exhibits and Reports on Form 8-K. - ------ -------------------------------- a) Exhibits - See Exhibit Index on page 13 b) The Company did not file any reports on Form 8-K during the quarter ended September 30, 1995. 11 12 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. KV PHARMACEUTICAL COMPANY Date: November 10, 1995 /s/ Marc S. Hermelin --------------------------- -------------------------------- Marc S. Hermelin Vice Chairman of the Board Date: November 10, 1995 /s/ Gerald R. Mitchell --------------------------- -------------------------------- Gerald R. Mitchell Vice President - Finance Chief Financial Officer 12 13 EXHIBIT INDEX
Exhibit Number Description Page -------------- ----------- ---- 11 Computation of Earnings (Loss) 14-15 Per Share Calculation. Filed Herewith.
13 14 EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earnings (Loss) Per Share Calculation Primary Earnings Per Share
For the Three Months Ended For the Six Months Ended 09/30/95 09/30/94 09/30/95 09/30/94 -------- -------- -------- -------- Net income (loss) $ 929,451 $(1,484,451) $ 1,700,571 $(4,443,205) Less/plus dividends on preferred stock (105,438) (105,438) (210,876) (210,876) ------------ ----------- ------------ ----------- Income (Loss) Attributed to Common Stock $ 824,013 $(1,589,889) $ 1,489,695 $(4,654,081) ============ =========== ============ =========== Average Number of Common Shares and Common Share Equivalents Outstanding: Average common shares outstanding 11,457,512 11,056,672 11,445,814 11,056,717 Common share equivalents (after application of treasury stock method): Shares issuable upon conversion of stock options 282,793 N/A 236,818 N/A ------------ ----------- ------------ ----------- Average Common Shares and Common Share Equivalents Outstanding 11,740,305 11,056,672 11,682,632 11,056,717 ============ =========== ============ =========== Primary Income (Loss) per Share : $ 0.07 $(0.14) $ 0.13 $(0.42) ====== ====== ====== ====== The two-class method for Class A and Class B common stock is not presented because the earnings (loss) per share are equivalent to the if converted method since dividends were not declared or paid and each class of common stock has equal ownership of the Company.
14 15 EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earnings (Loss) Per Share Calculation Fully-Diluted Earnings Per Share
For the Three Months Ended For the Six Months Ended 09/30/95 09/30/94 09/30/95 09/30/94 -------- -------- -------- -------- Net income (loss) $ 929,451 $(1,484,451) $ 1,700,571 $(4,443,205) Less/plus dividends on preferred stock (105,438) (105,438) (210,876) (210,876) Plus dividends not payable due to preferred stock conversion 105,438 105,438 210,876 210,876 ----------- ----------- ----------- ----------- Income (Loss) Attributed to Common Stock $ 929,451 $(1,484,451) $ 1,700,571 $(4,443,205) =========== =========== =========== =========== Average Number of Shares Outstanding on a Fully- Diluted Basis: Average common shares outstanding 11,457,512 11,056,672 11,445,814 11,056,717 Common share equivalents (after application of treasury stock method): Shares issuable upon conversion of stock options 301,476 N/A 296,908 N/A Common equivalent shares for preferred stock 301,250 301,250 301,250 301,250 ----------- ----------- ----------- ----------- Average Number of Shares Outstanding on a Fully-Diluted Basis 12,060,238 11,357,922 12,043,972 11,357,967 =========== =========== =========== =========== Fully-Diluted Income (Loss) per Share : $ 0.08 $(0.13) $ 0.14 $(0.39) ====== ====== ====== ====== The two-class method for Class A and Class B common stock is not presented because the earnings (loss) per share are equivalent to the if converted method since dividends were not declared or paid and each class of common stock has equal ownership of the Company. This calculation is submitted although it is contrary to Paragraph 40 of APB Opinion No. 15 as it produces an anti-dilutive result. Also, the preferred stock would not qualify as a common share equivalent because the cash yield at issuance was not less than 66 2/3% of the then current average Aa corporate bond yield.
15 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from SEC Form 10-Q for the quarterly period ended September 30, 1995, and is qualified in its entirety by reference to such financial statements. 6-MOS MAR-31-1996 APR-30-1995 SEP-30-1995 219,953 0 9,040,615 0 8,957,778 18,424,461 20,408,371 12,514,333 31,263,885 7,603,260 0 115,326 0 2,410 11,812,094 31,263,885 23,427,704 23,427,704 12,228,762 21,667,133 0 0 727,931 1,760,571 60,000 1,700,571 0 0 0 1,700,571 .13 .14 Allowances are not reported as a separate item on interim statements.
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