-----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, EwCG4AotQHeaYg2NYi2ZRda1W1By+TpwjndiDGUZQsKzaekDiUt6Wkxqb+OPDr9h yA7eypIzPzPy/n/eqOMQOA== 0001011240-97-000101.txt : 19971114 0001011240-97-000101.hdr.sgml : 19971114 ACCESSION NUMBER: 0001011240-97-000101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 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: SEC FILE NUMBER: 001-09601 FILM NUMBER: 97713066 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 FORM 10-Q (9-30-97) 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, 1997 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 or 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 Number of Shares Title of Class of Outstanding as of Common Stock this Report Date Class A Common Stock, par value $.01 per share 7,757,349 Class B Common Stock, par value $.01 per share 4,306,125 PART I FINANCIAL INFORMATION KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months and Six Months Ended September 30, 1997 and 1996 (Unaudited)
For the Three For the Six Months Ended Months Ended 09/30/97 09/30/96 09/30/97 09/30/96 -------- -------- -------- -------- Revenues $21,887,067 $13,094,448 $40,091,929 $26,162,265 ----------- ----------- ----------- ----------- Costs and Expenses: Manufacturing costs and expenses 12,427,769 6,641,286 22,649,059 13,779,562 Research and development 1,461,396 1,193,710 2,969,117 2,356,984 Selling and administrative 4,243,114 3,546,399 7,832,632 6,833,821 Interest expense 131,724 36,522 206,676 151,285 Amortization of intangible assets 67,344 48,684 117,358 97,367 ---------- ---------- ---------- ---------- Total Costs and Expenses 18,331,347 11,466,601 33,774,842 23,219,019 ---------- ---------- ---------- ---------- Income before income taxes 3,555,720 1,627,847 6,317,087 2,943,246 Provision for income taxes 1,373,588 30,000 2,294,088 60,000 ---------- ---------- ---------- ---------- Net Income $ 2,182,132 $ 1,597,847 $ 4,022,999 $ 2,883,246 =========== =========== =========== =========== Net Income per Common Share (after deducting preferred dividends of $105,438 for the three months ended September 30, 1997 and 1996 and $210,876 for the six months ended September 30, 1997 and 1996): $0.17 $0.12 $0.31 $0.22 ===== ===== ===== =====
See Accompanying Notes to Financial Statements KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, 1997 and March 31, 1997 (Unaudited)
09/30/97 03/31/97 -------- -------- ASSETS Current Assets: Cash and equivalents $ 3,712,583 $ 7,627,523 Receivables 15,574,172 8,579,598 Inventories 16,527,739 12,785,588 Prepaid and other 955,120 1,230,193 -------------- ------------ Total Current Assets 36,769,614 30,222,902 Net Property and Equipment 13,798,927 8,117,809 Goodwill and other 3,364,131 3,021,009 ------------- ------------- TOTAL ASSETS $53,932,672 $41,361,720 =========== =========== LIABILITIES Current Liabilities: Current maturities of long-term debt $ 573,416 $ 351,316 Accounts payable 3,555,447 2,045,048 Accrued liabilities 6,493,805 2,809,571 ------------- ------------ Total Current Liabilities 10,622,668 5,205,935 Long-term debt 5,343,889 2,158,025 Other 991,727 913,319 -------------- ------------ Total Liabilities 16,958,284 8,277,279 ------------ ----------- Commitments and Contingencies SHAREHOLDERS' EQUITY Preferred stock 2,410 2,410 Class A common stock 77,811 77,175 Class B common stock 43,299 43,766 Additional paid-in capital 33,922,340 33,844,685 Retained earnings (deficit) 2,983,481 (828,642) Less cost of Class A and Class B common stock in treasury (54,953) (54,953) ------------- ------------- Total Shareholders' Equity 36,974,388 33,084,441 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $53,932,672 $41,361,720 =========== ===========
See Accompanying Notes to Financial Statements KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended September 30, 1997 and 1996 (Unaudited)
1997 1996 ---- ---- OPERATING ACTIVITIES Net Income $ 4,022,999 $ 2,883,246 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 912,210 792,467 Changes in operating assets and liabilities: (Increase) in receivables (6,994,574) (227,656) Net (increase) in inventories and other current assets (3,467,078) (1,710,648) Increase (decrease) in accounts payable and accrued liabilities 5,194,632 (43,842) Increase in other 78,408 1,045 -------------- -------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (253,403) 1,694,612 ------------- ----------- INVESTING ACTIVITIES Purchase of property and equipment, net (6,475,969) (582,143) Other, net (460,480) (562,807) ------------- -------------- NET CASH USED IN INVESTING ACTIVITIES (6,936,449) (1,144,950) ------------ -------------- FINANCING ACTIVITIES Proceeds from term loan 3,500,000 - Principal payments on long-term debt (92,036) (244,697) Dividends paid on preferred stock (210,876) - Exercise of common stock options 77,824 33,615 -------------- -------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,274,912 (211,082) ------------ ------------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,914,940) 338,580 Cash and cash equivalents at beginning of year 7,627,523 2,038,069 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,712,583 $ 2,376,649 =========== ===========
See Accompanying Notes to Financial Statements 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, 1997 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. Preferred dividends of $105,438 and $210,876 were paid for the three-month and six-month periods ended September 30, 1997, and used in the calculation but not paid for the three-month and six-month periods ended September 30, 1996. Undeclared and unaccrued cumulative preferred dividends at September 30, 1997 and 1996 were $2,203,650 and $2,098,212, 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 were 12,214,620 and 12,034,886 for the quarters ended September 30, 1997 and 1996, respectively, and 12,202,141 and 12,060,398 for the six-month periods ended September 30, 1997 and 1996, respectively. 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 second quarter of fiscal 1998 totaled $21.9 million, compared to $13.1 million for the second quarter of fiscal 1997, an increase of $8.8 million, or 67%. Year-to-date consolidated revenues were $40.1 million, an increase of $13.9 million, or 53%, compared to the same period last year. The increase in sales volume for both the quarter and year-to-date is primarily attributable to continued growth being experienced from sales of new and existing products. ETHEX sales increased by $8.7 million, or 95%, in the second quarter and were up $13.1 million, or 70%, year-to-date over the same periods of the prior year. Particle Dynamics and Contract Services revenues increased $.1 million, or 2%, and $.8 million, or 11%, respectively, for the three-month and six-month periods ended September 30, 1997. These increases were attributable to increased sales volume of existing products. Costs and Expenses. Manufacturing costs increased as a percentage of net sales to 57% in the quarter ended September 30, 1997 from 51% in the same period last year. Year-to-date manufacturing costs as a percent of net sales increased to 56% from 53% for the six months ended September 30, 1997 and 1996, respectively. These increases were primarily attributable to changes in the mix of products sold. Research and development costs increased $.3 million or 22% for the quarter ended September 30, 1997, compared to the same quarter of the prior year. Year-to-date, these costs increased $.6 million, or 26%, compared to the same period of the prior year. These increases were primarily due to increased personnel and supply costs to support higher levels of research activity and clinical studies in connection with new product and drug delivery development. Selling and administrative expenses increased $.7 million, or 20% for the quarter ended September 30, 1997, compared to the same period of the prior fiscal year but decreased to 19% from 27% as a percent of total revenues. Year-to-date selling and administrative expenses increased $1 million, or 15%, over the same period last year but decreased to 20% from 26% as a percent of total revenues. Increased expenditures were primarily related to higher marketing, selling and administrative costs associated with new product introductions and expansion of existing business. Interest expense increased $.1 million for the second quarter and $.1 million for the six-month period ended September 30, 1997, compared to the same periods of the prior fiscal year. The increase for the first two quarters of fiscal 1998 resulted from the long-term borrowing to purchase a facility that had previously been leased. Pretax income for the quarter ended September 30, 1997 was $3.6 million compared to $1.6 million in the prior year quarter, an increase of 125%. Year-to-date pretax income was $6.3 million compared to $2.9 million for the prior period, an increase of 115%. These improvements were the result of continued sales growth. For the six months ended September 30, 1997 and 1996, the Company had a current provision for income taxes of $2,294,088 and $60,000, respectively. The fiscal 1998 provision was based on the estimated federal and state statutory rates, while the fiscal 1997 provision was based on the alternative minimum tax, since no provision for income taxes was otherwise made as a result of available net operating loss carryforwards. No loss carryforwards are available for fiscal 1998. Net Income. As a result of the factors described above, net income improved $.6 million, or 37%, for the second quarter of fiscal 1998 and year-to-date improved $1.1 million, or 40%, compared to the same periods of the prior year. (b) Liquidity and Capital Resources The following table sets forth selected balance sheet ratios at September 30, 1997, March 31, 1997 and September 30, 1996.
($ in 000's) ------------- 9/30/97 3/31/97 9/30/96 ----------------------------------------------------------- Working Capital Ratio 3.5 to 1 5.8 to 1 5.5 to 1 Quick Ratio 1.8 to 1 3.1 to 1 2.7 to 1 Debt to Debt-Plus-Equity .14 to 1 .07 to 1 .11 to 1 Total Liabilities to Equity .46 to 1 .25 to 1 .30 to 1 Cash and Equivalents $ 3,713 $ 7,628 $ 2,377 Working Capital 26,147 25,017 16,574 Long-Term Liabilities 6,336 3,071 3,009 Stockholders' Equity 36,974 33,084 23,467
During the quarter ended September 30, 1997, working capital increased $1.3 million, or 5% to $26.1 million while cash and cash equivalents decreased $2.5 million. Working capital for the six months ended September 30, 1997 increased $1.1 million, or 5%. Net cash used in operations of $.3 million consisted of an increase in accounts receivable of $7 million, principally from increased sales volume, and an increase in inventories of $3.5 million, to support the additional sales volume and seasonal business requirements, partially offset by an increase in accounts payable and accrued liabilities of $5.2 million. Borrowings reflected an increase of $3.5 million as a result of purchasing a facility that had previously been leased. Investing activities for fiscal 1998 for property and equipment were $6.5 million and net expenditures for other assets of $.5 million, with funds being provided from cash and long-term borrowing. The debt to debt-plus-equity and total liabilities to equity ratios for the first six months increased primarily as a result of the debt created to finance the purchase of a leased facility and increased accrued liabilities incurred to finance increased sales and related operations. The Company's cash and cash equivalents on hand at September 30, 1997 were $3.7 million. In addition, the Company currently has in place a $20 million credit facility with LaSalle National Bank. This credit facility consists of a three year, unsecured revolving line of credit and letters of credit to support the Company's 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, 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 expects to continue to increase expenditures and investment for research, clinical and regulatory efforts relating to the development and commercialization of proprietary new products and advanced drug delivery technology products and their approval for marketing. The Company believes funds generated from operating activities and existing cash, together with the funds available under its credit facility and the funds provided from licensing agreements, will be adequate to fund the Company's current requirements arising from the continued sales growth being experienced. PART II. OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K. a) Exhibits - See Exhibit Index on page 13. 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 5, 1997 /s/ Marc S. Hermelin Marc S. Hermelin Vice Chairman of the Board Date: November 5, 1997 /s/ Gerald R. Mitchell Gerald R. Mitchell Vice President - Finance Chief Financial Officer EXHIBIT INDEX Exhibit Number Description 11 Computation of Earnings Per Share Calculation. Filed Herewith. EX-11 2 EXHIBIT 11 EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earning Per Share Calculation Primary Earnings Per Share
For the Three Months Ended For the Six Months Ended 09/30/97 09/30/96 09/30/97 09/30/96 -------- -------- -------- -------- Net income $ 2,182,132 $ 1,597,847 $ 4,022,999 $ 2,883,246 Less dividends on preferred stock (105,438) (105,438) (210,876) (210,876) ------------- ------------ ------------- ------------- Income Attributed to Common Stock $ 2,076,694 $ 1,492,409 $ 3,812,123 $ 2,672,370 =========== =========== =========== =========== Average Number of Common Shares and Common Share Equivalents Outstanding: Average common shares outstanding 12,056,391 11,825,999 12,049,988 11,824,814 Common share equivalents (after application of treasury stock method) 158,229 208,887 152,153 235,584 ------------ ------------- ------------- ------------ Average Common Shares and Common Share Equivalents Outstanding 12,214,620 12,034,886 12,202,141 12,060,398 ========== ========== ========== ========== Primary Income per Share (1) : $0.17 $0.12 $0.31 $0.22 ===== ===== ===== ===== (1) 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.
EXHIBIT 11 KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES Earning Per Share Calculation Fully-Diluted Earnings Per Share
For the Three Months Ended For the Six Months Ended 09/30/97 09/30/96 09/30/97 09/30/96 -------- -------- -------- -------- Net income $ 2,182,132 $ 1,597,847 $ 4,022,999 $ 2,883,246 Less 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 Attributed to Common Stock $ 2,182,132 $ 1,597,847 $ 4,022,999 $ 2,883,246 =========== =========== =========== =========== Average Number of Common Shares Outstanding on a Fully- Diluted Basis: Average common shares outstanding 12,056,391 11,825,999 12,049,988 11,824,814 Common share equivalents (after application of treasury stock method): Shares issuable upon conversion of stock options 233,495 223,296 196,232 246,208 Common equivalent shares for preferred stock 602,500 602,500 602,500 602,500 ------------ ------------ ------------- ------------ Average Number of Shares Outstanding on a Fully-Diluted Basis 12,892,386 12,651,795 12,848,720 12,673,522 ========== ========== ========== ========== Fully-Diluted Income per Share (1) (2) $0.17 $0.13 $0.31 $0.23 ==== ===== ===== ===== (1) 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) 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 FDS --
5 1 U.S. DOLLARS 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 1.00 3,712,583 0 15,574,172 0 16,527,739 36,769,614 13,798,927 0 53,932,672 10,622,668 0 0 2,410 121,110 0 53,932,672 40,091,929 0 0 22,649,059 10,919,107 0 206,676 6,317,087 2,294,088 4,022,999 0 0 0 4,022,999 .31 .31
-----END PRIVACY-ENHANCED MESSAGE-----