-----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, QAoXca2MMOzrK8yr6aPZZWmzB3p1irLFQ4wrr1vKFz7tV4cyPbVKGuwqpWiPKwqv ad9bXKGZn+XBbcSeoHKmIg== 0000950114-96-000184.txt : 19960801 0000950114-96-000184.hdr.sgml : 19960801 ACCESSION NUMBER: 0000950114-96-000184 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960731 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: 96602058 BUSINESS ADDRESS: STREET 1: 2503 S 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 K-V 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 June 30, 1996 -------------------------- 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 7,211,632 Class B Common Stock, par value $.01 per share 4,664,175
Page 1 of 11 Pages 2 PART I FINANCIAL INFORMATION 2 3 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ----------- ----------- Revenues: Net Revenues $13,067,817 $12,220,103 Costs and Expenses: Manufacturing costs 7,138,276 6,657,625 Research and development 1,163,274 1,045,504 Selling and administrative 3,287,422 3,156,103 Interest expense 114,763 316,543 Amortization of intangible assets 48,683 243,208 ----------- ----------- Total Costs and Expenses 11,752,418 11,418,983 ----------- ----------- Income before income taxes 1,315,399 801,120 Provision for income taxes 30,000 30,000 ----------- ----------- Net Income $ 1,285,399 $ 771,120 =========== =========== Net Income per Common Share (after preferred dividends payable of $105,438 in 1996 and 1995): $0.10 $0.06 ==== ==== See Accompanying Notes to Summarized Consolidated Financial Statements
3 4 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 1996 and March 31, 1996 (Unaudited)
06/30/96 03/31/96 ----------- ----------- ASSETS - ------ Current Assets: Cash and equivalents $ 1,616,318 $ 2,038,069 Receivables 9,744,704 8,502,714 Inventories 8,297,828 8,450,162 Prepaid and other 136,913 229,358 ----------- ----------- Total Current Assets 19,795,763 19,220,303 Net Property and Equipment 7,551,533 7,621,217 Goodwill and other 2,725,340 2,328,190 ----------- ----------- TOTAL ASSETS $30,072,636 $29,169,710 =========== =========== LIABILITIES - ----------- Current Liabilities: Current maturities of long-term debt $ 626,139 $ 712,328 Accounts payable 1,533,181 2,068,265 Accrued liabilities 2,607,004 2,386,761 ----------- ----------- Total Current Liabilities 4,766,324 5,167,354 Long-term debt 2,503,050 2,541,216 Other 949,252 911,230 ----------- ----------- Total Liabilities 8,218,626 8,619,800 ----------- ----------- Commitments and Contingencies SHAREHOLDERS' EQUITY - -------------------- Preferred stock 2,410 2,410 Class A common stock 71,793 71,207 Class B common stock 46,941 47,474 Additional paid-in capital 30,254,574 30,235,926 Retained deficit (8,466,755) (9,752,154) Less cost of Class A and Class B common stock in treasury (54,953) (54,953) ----------- ----------- TOTAL SHAREHOLDERS' EQUITY 21,854,010 20,549,910 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $30,072,636 $29,169,710 =========== =========== See Accompanying Notes to Summarized Consolidated Financial Statements
4 5 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ---- ---- OPERATING ACTIVITIES Net Income $ 1,285,399 $771,120 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 393,056 586,080 Changes in operating assets and liabilities: Increase in receivables (1,241,990) (530,934) Net decrease (increase) in inventories and other current assets 244,779 (224,751) Decrease (increase) in accounts payable and accrued liabilities (314,841) 258,252 Other 38,022 35,534 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 404,425 895,301 ----------- ----------- INVESTING ACTIVITIES Purchase of property and equipment, net (274,690) (163,025) Other, net (445,832) (296,857) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (720,522) (459,882) ----------- ----------- FINANCING ACTIVITIES Proceeds from credit facilities - 4,502,910 Repayment of credit facilities - (12,293,776) Proceeds from term loan facility - 6,839,411 Principal payments on long-term debt (124,355) (192,579) Exercise of common stock options 18,701 - ----------- ----------- NET CASH USED IN FINANCING ACTIVITIES (105,654) (1,144,034) ----------- ----------- DECREASE IN CASH AND CASH EQUIVALENTS (421,751) (708,615) Cash and cash equivalents at beginning of year 2,038,069 1,075,713 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,616,318 $ 367,098 =========== =========== See Accompanying Notes to Summarized Consolidated Financial Statements
5 6 NOTES TO SUMMARIZED CONSOLIDATED FINANCIAL STATEMENTS 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, 1996 filed with the 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 per common share is computed by dividing net income, less preferred dividends, by the weighted average number of common shares and common share equivalents (if dilutive) outstanding during the period. No preferred dividends were paid for the three months ended June 30, 1996 and 1995. Undeclared and unaccrued cumulative preferred dividends at June 30, 1996 and 1995 were $1,992,769 and $1,571,019, 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 12,285,712 and 11,624,958 for the quarters ended June 30, 1996 and 1995, respectively. Primary and fully-diluted income per share was the same for each of the periods presented. 6 7 Item 2. Management's Discussion and Analysis of Results of Operations, -------------------------------------------------------------- and Liquidity and Capital Resources ----------------------------------- (a) Results of Operations --------------------- Revenues. Consolidated revenues for the first quarter of fiscal 1997 totaled $13.1 million compared to $12.2 million for the first quarter of fiscal 1996, an increase of $.9 million, or 7%. ETHEX revenues increased by $1.0 million, or 11% over the same period last year as a result of increased sales of existing products and new products introduced in fiscal 1996 and the first quarter of fiscal 1997. Costs and Expenses. Manufacturing costs remained relatively flat as a percentage of net sales increasing to 55% in the quarter ended June 30, 1996 from 54% in the same period last year. Research and development costs increased $.1 million, or 11%, compared to the same quarter of the prior year, due primarily to an increase in personnel costs to support continuing research into advanced drug delivery technologies. Selling and administrative expenses increased $.1 million, or 4% over the same period last year due to higher marketing, selling and administrative support costs associated with the new product introductions and expansion of ETHEX. Interest expense decreased $.2 million compared to the same period of the prior year. The decrease resulted from a lower level of borrowings during the first quarter of fiscal 1997. Amortization of intangible assets decreased $.2 million compared to the same period of the prior year. The decrease resulted from the $2.5 million reimbursement received for Deferred Improved Drug Entities(TM) in the fourth quarter of fiscal 1996. For the three months ended June 30, 1996 and 1995 the Company had a current provision for income taxes of $30,000 based on the alternative minimum tax, but otherwise made no provision for income taxes as a result of available net operating loss carryforwards. Net Income (Loss). As a result of the factors described above, net income improved $.5 million, or 67% to $1.3 million for the first quarter of fiscal 1997. (b) Liquidity and Capital Resources ------------------------------- The following table sets forth selected balance sheet ratios at March 31, 1996, June 30, 1996 and June 30, 1995.
6/30/96 3/31/96 6/30/95 --------------------------------------------- Working Capital Ratio 4.2 to 1 3.7 to 1 2.2 to 1 Debt to Debt Plus Equity .13 to 1 .14 to 1 .52 to 1 Total Liabilities to Equity .38 to 1 .42 to 1 1.7 to 1
Working capital for the quarter ended June 30, 1996 increased $1.0 million, or 7% to $15.0 million from March 31, 1996, while cash and equivalents decreased $.4 million. Net cash provided from operations of $.4 million included an increase in receivables of $1.2 million principally from increased sales volume from ETHEX Corporation, which was offset by non-cash items totaling $.4 million and net decreases in other operating assets and liabilities. Borrowings reflected a decrease of $.1 million, resulting from the application of existing cash and funds provided by profitable operations. The ratio of current assets to current liabilities was 4.2 to 1 as 7 8 of June 30, 1996, compared to 3.7 to 1 as of March 31, 1996. The debt to debt plus equity and total liabilities to equity ratios for the first quarter of fiscal 1997 decreased because of the impact of the net profit for the quarter. Investing activities for the first quarter of fiscal 1997 reflected capital expenditures of $.3 million and net expenditures for other assets of $.4 million, which were provided for through operations. The Company's cash and cash equivalents on hand at June 30, 1996 were $1.6 million. In addition, the Company currently has in place a credit facility with Foothill Capital Corporation under which it has the ability to borrow up to $17.5 million. This credit facility consists of a revolving loan, a term loan, a capital equipment loan facility and letters of credit to support the Company's outstanding industrial revenue bond and other requirements. Although the Company generally has been able to pass along to its customers at least a portion of cost increases in labor, manufacturing and raw material costs under its agreements, in certain instances no increases have been effected due to market conditions. It is not meaningful to compare changing prices over the past several years because the products, product formulas, product mix and sources of raw materials have varied substantially. 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 and co-marketed under long term marketing agreements and ventures. These advanced technology products 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. For the most part, these products can be produced with existing manufacturing processes. The Company expects to continue a relatively high level of expenditures and investment for research, clinical and regulatory efforts relating to the development and commercialization of proprietary new products and advanced technology products and their approval for marketing. The Company has and is continuing to implement strategies to introduce additional products through its ETHEX subsidiary and de-emphasize contract services. This move to directly market its own technology distinguished generics has allowed the Company to rely less upon the dependence of its pharmaceutical marketing clients for growth and to shift its revenue growth internally, principally through ETHEX and the Company's licensing activities. The Company believes funds generated from operating activities and existing cash will be adequate to fund the Company's requirements for short term needs due to continued sales growth being experienced. 8 9 PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. --------------------------------- a) Exhibits - See Exhibit Index on page 11. b) The Company filed a report on Form 8-K dated May 21, 1996 and amendments thereto during the quarter ended June 30, 1996 regarding a change in independent certified accountants. 9 10 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: July 31, 1996 /s/ Marc S. Hermelin ---------------------------- ------------------------------ Marc S. Hermelin Vice Chairman of the Board (Principal Executive Officer) Date: July 31, 1996 /s/ Gerald R. Mitchell ---------------------------- ------------------------------ Gerald R. Mitchell Vice President - Finance (Principal Financial and Accounting Officer) 10 11 EXHIBIT INDEX
Exhibit Number Description - -------------- ----------- 11 Computation of Earnings Per Share Calculation. Filed Herewith. 27 Financial Data Schedule. Filed Herewith.
11 EX-11 2 EARNINGS PER SHARE CALCULATION 1 EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earnings Per Share Calculation Primary Earnings Per Share
For the Three Months Ended 06/30/96 06/30/95 ---------- ----------- Net income $1,285,399 $ 771,120 Less dividends on preferred stock (105,438) (105,438) --------- ---------- Income Attributed to Common Stock $1,179,961 $ 665,682 --------- ---------- Average Number of Common Shares and Common Share Equivalents Outstanding: Average common shares outstanding 11,823,627 11,434,115 Common share equivalents (after application of treasury stock method) 462,085 190,843 --------- ---------- Average Common Shares and Common Share Equivalents Outstanding 12,285,712 11,624,958 ========== ========== Primary Income per Share $0.10 $0.06 ==== ==== The two-class method for Class A and Class B Common Stock is not presented because the earnings 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.
2 EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earnings Per Share Calculation Fully-Diluted Earnings Per Share
For the Three Months Ended 06/30/96 06/30/95 ----------- ----------- Net income $ 1,285,399 $ 771,120 Less dividends on preferred stock (105,438) (105,438) Plus dividends not payable due to preferred stock conversion 105,438 105,438 ---------- ---------- Income Attributed to Common Stock $ 1,285,399 $ 771,120 ========== ========== Average Number of Shares Outstanding on a Fully-Diluted Basis: Average common shares outstanding 11,823,627 11,434,115 Common share equivalents (after application of treasury stock method): Shares issuable upon conversion of stock options 472,136 292,340 Common equivalent shares for preferred stock 301,250 301,250 --------- ---------- Average Number of Shares Outstanding on a Fully-Diluted Basis 12,597,013 12,027,705 ========== ========== Fully-Diluted Income per Share: $0.10 $ 0.06 ==== ===== The two-class method for Class A and Class B Common Stock is not presented because the earnings 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.
EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the Company's financial statements for and as of the period ending June 30, 1996 and is qualified in its entirety by reference to such financial statements. 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 1,616,318 0 9,744,704 0 8,297,828 19,795,763 7,551,533 0 30,072,636 4,766,324 0 118,734 0 2,410 0 30,072,636 0 13,067,817 0 7,138,276 4,499,379 0 114,763 1,315,399 30,000 1,285,399 0 0 0 1,285,399 .10 .10
-----END PRIVACY-ENHANCED MESSAGE-----