-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fmv7hJEHc9VxMETxoFNL+STyetHq5++mHFntgzYNFRT+oUJM21v1gLLMDUsselqp e0/hwHmc8A2MfFUTiTrQpQ== 0000729069-95-000002.txt : 19950613 0000729069-95-000002.hdr.sgml : 19950613 ACCESSION NUMBER: 0000729069-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUREPAC INC/ CENTRAL INDEX KEY: 0000729069 STANDARD INDUSTRIAL CLASSIFICATION: 2834 IRS NUMBER: 042769995 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13588 FILM NUMBER: 95539479 BUSINESS ADDRESS: STREET 1: 200 ELMORA AVE CITY: ELIZABETH STATE: NJ ZIP: 07207 BUSINESS PHONE: 9085279100 MAIL ADDRESS: STREET 1: 200 ELMORA AVENUE STREET 2: 200 ELMORA AVENUE CITY: ELIZABETH STATE: NJ ZIP: 07207 FORMER COMPANY: FORMER CONFORMED NAME: MOLECULON INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MOLECULON BIOTECH INC DATE OF NAME CHANGE: 19860417 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 For the Quarterly Period Ended March 31, 1995 Commission File Number 0-13588 PUREPAC, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-2769995 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Elmora Avenue, Elizabeth, New Jersey 07207 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908) 527-9100 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered None None ____________________________ _________________________________________ Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $.01 per share ___________________________________________________________________________ (Title of class) 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 twelve 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 _____ _____ 12,581,223 Number of shares outstanding of the Registrant's common stock as of May 5, 1995. Page 1 of 12 PUREPAC, INC. INDEX PART 1 - FINANCIAL INFORMATION Page No. ________ ITEM 1. Consolidated Financial Statements: Consolidated Balance Sheets March 31, 1995 and June 30, 1994 3 Consolidated Statements of Operations Three months ended March 31, 1995 and 1994 and nine months ended March 31, 1995 and 1994 4 Consolidated Statements of Cash Flows Nine months ended March 31, 1995 and 1994 5 Notes to Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation 9 PART II - OTHER INFORMATION Items 1 thru 6 11 SIGNATURES 12 Page 2 of 12 PUREPAC, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited) March 31, June 30, 1995 1994 ____________ _____________ Assets Current Assets: Cash and cash equivalents $ 614,558 $ 3,153,844 Accounts receivable 9,723,784 10,973,351 Inventory (Note 3) 18,144,861 19,189,435 Other current assets 753,479 504,766 Deferred income taxes (Note 5) 2,552,053 2,806,000 ___________ ___________ Total current assets 31,788,735 36,627,396 ___________ ___________ Property, plant and equipment, net 26,479,402 25,705,262 Other assets 3,232,266 3,241,644 Deferred income taxes (Note 5) 1,894,000 1,693,000 ___________ ___________ Total Assets $63,394,403 $67,267,302 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 4,941,628 $ 7,051,025 Due to affiliated companies 21,086 119,593 Loan payable to bank 1,000,000 --- Accrued expenses 3,455,368 4,411,866 Accrued income taxes (Note 5) 52,790 304,241 Accrued preferred dividends 520,095 520,095 ___________ ___________ Total current liabilities 9,990,967 12,406,820 ___________ ___________ Stockholders' equity (Note 4) Class A convertible preferred stock; par value $.01, authorized 1,834,188 shares; issued and outstanding 834,188 (liquidation value $24,995,171) 8,342 8,342 Common stock; par value $.01, authorized 25,000,000 shares; issued and outstanding 12,566,348 at March 31, 1995 and 12,510,098 at June 30, 1994 125,663 125,101 Capital in excess of par value 25,247,140 26,261,185 Retained earnings 28,022,291 28,465,854 ___________ ___________ Total stockholders' equity 53,403,436 54,860,482 ___________ ___________ Total Liabilities and Stockholder's Equity $63,394,403 $67,267,302 =========== =========== The accompanying notes are an integral part of these consolidated financial statements.
Page 3 of 12 PUREPAC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, _______________________ ______________________ 1995 1994 1995 1994 __________ __________ ___________ _________ Net Sales $14,473,217 $16,314,349 $46,826,965 $53,699,923 Cost of sales 10,864,871 11,191,211 35,084,078 35,369,600 ___________ ___________ ___________ ___________ Gross profit 3,608,346 5,123,138 11,742,887 18,330,323 ___________ ___________ ___________ ___________ Expenses: Selling, general and administration 2,548,593 2,481,274 7,313,600 6,839,475 Reseach and Development 1,864,350 1,329,312 5,109,321 4,073,541 ___________ ___________ ___________ ___________ Total Expenses 4,412,943 3,810,586 12,422,921 10,913,016 ___________ ___________ ___________ ___________ Income (Loss) from operations (804,597) 1,312,552 (680,034) 7,417,307 ___________ ___________ ___________ ___________ Other income (expense), net (9,961) (848) (23,529) 54,358 ___________ ___________ ___________ ___________ Income (Loss) before income taxes (814,558) 1,311,704 (703,563) 7,471,665 Provision (benefit) for income taxes (Note 5) (301,000) 250,000 (260,000) 2,745,000 ____________ ___________ ___________ ___________ Income (Loss) Before Cumulative Effect of a Change in Accounting for Income Taxes (513,558) 1,061,704 (443,563) 4,726,665 Cumulative effect of a change in accounting for income taxes --- --- --- 4,149,000 ____________ __________ __________ __________ Net Income (Loss) $ (513,558) $1,061,704 $ (443,563) $8,875,665 ============ ========== =========== ========== Primary Earnings Per Common Share (Note 2): Income (Loss) before cumulative effect of a change in accounting for income taxes $ (.08) $ .04 $ (.16) $ .25 Cumulative effect of a change in accounting for income taxes --- --- --- .34 ___________ __________ __________ __________ Net income (Loss) $ (.08) $ .04 $ (.16) $ .59 =========== ========== ========== ========== Weighted average number of common shares outstanding 12,553,848 12,508,270 12,524,468 12,454,264 ____________ __________ __________ __________ Earnings Per Share, Assuming Full Dilution: Income before cumulative effect of a change in accounting for income taxes $ .27 Cumulative effect of a change in accounting for income taxes .24 ___________ Net income $ .51 =========== Weighted average number of fully diluted shares 17,563,286 ___________ The accompanying notes are an integral part of these consolidated financial statements.
Page 4 of 12 PUREPAC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended March 31, __________________________ 1995 1994 ___________ ___________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (443,563) $8,875,665 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By (Used For) Operating Activities: Depreciation and amortization 1,547,439 1,298,360 Compensation expense - stock grants 288,948 277,264 Deferred income tax, asset 52,947 (3,094,000) Deferred income tax, long term liability --- (153,000) Increase (Decrease) in Cash From: Accounts receivable 1,249,567 (833,142) Inventory 1,044,574 (4,860,539) Other current assets (248,713) (184,257) Accounts payable (2,109,397) (2,672,643) Accrued expenses (956,498) (1,815,214) Accrued income taxes 6,403 (64,560) Due to/from affiliates (98,507) (509,433) ____________ ____________ Total Adjustments 776,763 (12,611,164) ____________ ____________ Net Cash Provided By (Used For) Operating Activities 333,200 (3,735,499) ____________ ____________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (2,312,201) (3,784,317) ____________ ____________ Net Cash Provided by (Used For) Investing Activities (2,312,201) (3,784,317) ____________ ____________ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from bank 1,000,000 --- Preferred dividends paid (1,560,285) (1,560,285) ____________ ____________ Net Cash Provided by (Used For) Financing Activities (560,285) (1,560,285) ____________ ____________ Increase (Decrease) In Cash And Cash Equivalents $(2,539,286) $(9,080,101) ============ ============ Cash and cash equivalents, beginning of period 3,153,844 10,639,723 ____________ ____________ Cash And Cash Equivalents, End Of Period $ 614,558 $ 1,559,622 =========== =========== Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 56,279 $ 23,031 Income Taxes $ --- $ 1,907,560 ___________ ____________ The accompanying notes are an integral part of these consolidated financial statements. PUREPAC, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Notes to the Financial Statements included in Purepac, Inc.'s (the "Company") Form 10-K for the year ended June 30, 1994, contain information pertinent to the accompanying financial statements. There has been no material change in the information contained in such footnotes except as set forth below. The Consolidated Balance Sheet at March 31, 1995, the Consolidated Statements of Operations for the three and nine months ended March 31, 1995 and 1994 and the Consolidated Statements of Cash Flows for the nine months ended March 31, 1995 and 1994, have not been audited. In the opinion of management, all adjustments (consisting only of normal recurring entries) necessary for a fair presentation of such financial results have been included. 1. Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Purepac Pharmaceutical Co. ("Purepac"). 2. Earnings Per Common Share Primary earnings per common share is calculated by (i) dividing income before the cumulative effect of a change in accounting for income taxes less preferred dividends by the weighted average number of common shares outstanding during the period and (ii) by dividing the cumulative effect of a change in accounting for income taxes, if any, by such average number of common shares. Common stock equivalents are excluded as the effect is either not material or anti-dilutive. Earnings per share, assuming full dilution, is also presented for the three and nine months ended March 31, 1994 and is based on the assumption that all contingently issuable shares were outstanding from the beginning of the period to the extent dilution results. For the current three and nine month periods ended March 31, 1995 and prior three month period, fully diluted earnings per share is not presented as the effect would be anti-dilutive. 3. Inventory March 31, June 30, 1995 1994 ___________ ___________ Raw materials $ 7,283,747 $ 7,734,277 Work-in-process 3,427,646 3,676,862 Finished goods 7,433,468 7,778,296 ___________ ___________ Total $18,144,861 $19,189,435 =========== =========== Page 6 of 12 Notes to Financial Statements (Continued) 4. Capital Stock During the quarter ended March 31, 1995 the Company issued 56,250 shares of common stock to employees pursuant to the Company's 1991 Restricted Stock Incentive Plan. The Company received no proceeds from this transaction. As a result of the issuance of these shares, the Company will have an income tax deduction of $610,313 in the fiscal year ending June 30, 1996. The deduction will result in a reduction in the taxes payable of approximatley $232,000. In the same fiscal year, for financial reporting purposes, the tax benefit will be recorded as a reduction of the deferred tax asset to the extent previously provided and the remainder of the benefit will be recorded as additional capital in excess of par value. It will not be reflected in the reported earnings or the earnings per share calculations. A reconciliation of the change in total stockholders' equity for the nine month period ended March 31, 1995 is as follows: Par Value of Common and Capital in Total Preferred Excess of Retained Stockholders' Stock Par Value Earnings Equity __________ ___________ ___________ ___________ Balance, June 30, 1994 $133,443 $26,261,185 $28,465,854 $54,860,482 Common stock issued pursuant to stock grant plan 562 (562) Class A preferred stock dividend (1,560,285) (1,560,285) Stock grant amortization 288,948 288,948 Reduction of income tax liability from issuance of stock grants 257,854 257,854 Net Income (443,563) (443,563) __________ ___________ ___________ ___________ Balance, March 31, 1995 $134,005 $25,247,140 $28,022,291 $53,403,436 ========== =========== =========== =========== 5. Accounting for Income Taxes The Company adopted Statement of Financial Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes," effective July 1, 1993. The cumulative effect of adopting SFAS 109 on the Company's financial statements, for the nine months ended March 31, 1994, was to increase income by $4,149,000 ($.34 per primary common share and $.24 per share on a fully diluted basis) with a corresponding increase in the deferred tax asset. Page 7 of 12 Notes to Financial Statements (Continued) Deferred income tax assets, both current and non-current, reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating loss and tax credit carryforwards. Beginning with the adoption of SFAS 109 on July 1, 1993, the income tax expense provision will not include the benefit of recognizing available loss carryforwards to the extent they have already been recognized as a deferred tax asset. Instead, there will be a reduction in the deferred tax asset when such benefits are utilized to reduce taxes payable. The provision (benefit) for income tax expense was comprised of the following: Three Months Ended Nine Months Ended March 31, March 31, ______________________ _______________________ 1995 1994 1995 1994 __________ __________ __________ __________ Current Federal $(24,000) $ 400,000 $ (20,000) $2,306,000 State (45,000) (150,000) (39,000) 439,000 __________ __________ __________ __________ (69,000) 250,000 (59,000) 2,745,000 Deferred Federal (232,000) --- (201,000) --- __________ __________ __________ __________ Total (benefit) provision $(301,000) $ 250,000 $(260,000) $2,745,000 ========== ========== ========== ========== The Company has net operating losses and tax credits available as carryforwards to reduce future payments of federal income taxes. State tax losses are also available as carryforwards. At March 31, 1995, for federal tax purposes, the net operating loss and tax credit carryforwards amounted to $13,048,000 and $707,000, respectively, and expire through 2003. The Company believes it will achieve sufficient taxable income to realize the tax benefit of the net operating loss. The utilization of the net operating loss carryforwards to reduce future tax payments is subject to limitation under provisions of the Internal Revenue Code. Page 8 of 12 PUREPAC, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS Results Of Operations - Three and Nine Month Periods Ended March 31, 1995 Compared With The Three and Nine Month Periods Ended March 31, 1994 Net sales for the three and nine month periods ended March 31, 1995 were $14,473,000 and $46,827,000, respectively, compared with $16,314,000 and $53,700,000 for the corresponding 1994 periods. The declines in both periods reflect lower sales of certain mature products, including nifedipine, partially offset by increased volumes for several new products. The nifedipine products accounted for 12% of net sales for both the current three and nine month periods compared with 11% and 13% respectively, for the corresponding prior periods. Gross profits for the three and nine month periods were $3,608,000 and $11,743,000, respectively, compared with $5,123,000 and $18,330,000 for the corresponding 1994 periods. Gross profits as a percent of net sales were 25% for both the current three and nine month periods compared with 31% and 34% for the corresponding prior periods. The gross profit declines are attributable to higher raw material costs and to lower selling prices. Selling, general and administrative expenses for the current three and nine month periods of $2,549,000 and $7,314,000, respectively, increased over the corresponding prior period expenses of $2,481,000 and $6,839,000, respectively. The expenses as a percent of net sales for the three and nine month periods were 18% and 16%, respectively, compared with 15% and 13% for the corresponding 1994 periods. The increases are due primarily to higher personnel expenses. Research and development expenses for the curren three and nine month periods were $1,864,000 and $5,109,000, respectively, compared with $1,329,000 and $4,074,000 for the corresponding prior periods. The expenses as a percent of net sales for the current three and nine month periods were 13% and 11%, respectively, compared with 8% for both corresponding prior periods. The increases in both periods reflect higher clinical expenses and additions of scientific personnel. Loss before cumulative effect of a change in accounting for income taxes for the three and nine month periods ended March 31, 1995 was ($514,000) and ($444,000), respectively, compared with income of $1,062,000 and $4,727,000 for the corresponding 1994 periods. Page 9 of 12 Net loss for the current nine month period was ($440,000). Net income for the corresponding 1994 nine month period of $8,876,000 included the cumulative effect of a change in accounting for income taxes of $4,149,000 as a result of the adoption of SFAS 109, effective July 1, 1993. Refer to Note 5 of the Notes to Consolidated Financial Statements. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company had $615,000 in cash and cash equivalents at March 31, 1995 compared with $3,154,000 at June 30, 1994. The decrease in the current nine month period of $2,539,000 resulted primarily from cash used for investments in property, plant and equipment of $2,312,000 and the preferred dividend payment of $1,560,000, partially offset by $333,000 of cash provided by operating activities and $1,000,000 borrowed from a bank on October 3, 1994, under the Company's revolving credit and loan agreement. In comparing the balance sheet amounts at March 31, 1995 to the June 30, 1994 balances, the following are noteworthy: Accounts receivable decreased by $1,250,000 due to the lower sales levels. Inventory decreased by $1,045,000 due in part to the discontinuance of certain products. Accounts payable decreased by $2,109,000 due in part to timing differences in the purchase of materials and the lower inventory level. The accrued preferred dividend, payable to the Company's principal stockholder, Faulding Holdings Inc., of $520,095 for the three month period ended March 31, 1995 was subsequently paid on April 3, 1995. The Company believes current cash resources, anticipated operating cash flows and funds available under a revolving credit and loan arrangement with a bank will be sufficient to fund its working capital needs for the foreseeable future. Page 10 of 12 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On December 20, 1994, an action was commenced against the Company and two officers of the Company in the United States District Court for the District of New Jersey entitled Dechter vs. Purepac, Inc., Robert H. Bur and Russell J. Reardon, 94 Civ. 6195. The plaintiff alleges, on behalf of all persons who purchased common stock during the period from August 12, 1994 through November 16, 1994 that, among other things, the Company and the named officers materially misled the financial community and artifically inflated the price of the Company's common stock in violation of Section 10(b) of the Securities and Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, by failing to disclose until December 16, 1994 the Company's lack of compliance with certain federal regulations for manufacturing generic drugs, as alledged in a warning letter from the Food and Drug Administration to the Company, dated November 23, 1994, and received by the Company on November 28, 1994. A second stockholder action, containing substantially similar allegations, was commenced on January 5, 1995 in the United States District Court for the District of New Jersey. The two actions have been consolidated. Defendants have made a motion to dismiss and are awaiting a reponse by plaintiffs. Items 2 through Item 4. Not Applicable. Item 5. OTHER EVENTS Not Applicable. Item 6. (a). EXHIBITS Not Applicable. Item 6. (b). REPORTS ON FORM 8-K Not Applicable. Page of 11 of 12 PUREPAC, INC. SIGNATURES Pursuant to the requirments of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PUREPAC, INC. Registrant Date: May 15, 1995 /s/ Michael R.D. Ashton ------------------------------------- Michael R.D. Ashton President and Chief Executive Officer (Principal Executive Officer) Date: May 15, 1995 /s/ Russell J. Reardon ------------------------------------- Russell J. Reardon Chief Financial Officer and Treasurer (Principal Accounting Officer) Page 12 of 12
EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3RD QUARTER 10-Q
5 1,000 9-MOS JUN-30-1995 MAR-31-1995 615 0 9,724 0 18,145 31,789 26,479 0 63,394 9,991 0 126 0 8 53,269 63,394 46,827 46,827 35,084 12,423 0 0 24 (704) (260) (444) 0 0 0 (444) (.16) (.16)
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