-----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, HUy4yUP7XpaJDD/D3Yy3Q2Qa9T0a18+xk00JcXjuuVLEEyqmJ+SkIB/ke3Bw9uCl LkjDS8EDjdSt5DZ8Y4sR7Q== 0000729069-95-000003.txt : 19951127 0000729069-95-000003.hdr.sgml : 19951127 ACCESSION NUMBER: 0000729069-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95591111 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, DC 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 September 30, 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 and 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 October 27, 1995. Page 1 of 11 PUREPAC, INC. INDEX Page No. -------- PART I - FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements: Consolidated Balance Sheets September 30, 1995 and June 30, 1995. . . . . . . 3 Consolidated Statements of Operations Three months ended September 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows Three months ended September 30, 1995 and 1994. . . . . . . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements. . . . . 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 9 PART II - OTHER INFORMATION ITEMS 1 thru 6 . . . . . . . . . . . . . . . . . . . . . . 10 SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 11 Page 2 of 11 PUREPAC, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited) September 30, June 30, 1995 1995 ____________ ____________ Assets Current assets: Cash and cash equivalents $ 743,113 $ 1,156,109 Accounts receivable 9,756,128 9,702,889 Inventory (Note 3) 16,832,640 17,831,934 Due from affiliated companies --- 172,689 Other current assets 3,135,075 1,806,231 Deferred income taxes (Note 5) 3,513,038 3,513,038 ____________ ____________ Total current assets 33,979,994 34,182,890 ____________ ____________ Property, plant and equipment, net 26,509,150 26,603,069 Other assets 3,226,014 3,229,140 Deferred income taxes (Note 5) 724,346 914,346 ____________ ____________ Total Assets $64,439,504 $64,929,445 ============ ============ Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 5,493,784 $ 4,843,679 Due to affiliated companies 91,145 --- Loan payable to bank 3,000,000 2,000,000 Accrued expenses 4,269,699 5,008,267 Accrued preferred dividends 520,095 520,095 ____________ ____________ Total current liability 13,374,723 12,372,041 ____________ ____________ 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 12,581,223 at September 30, 1995 and June 30, 1995, respectively 125,812 125,812 Capital in excess of par value 24,387,800 24,804,252 Retained earnings 26,542,827 27,618,998 ____________ ____________ Total stockholders' equity 51,064,781 52,557,404 ____________ ____________ Total Liabilities and Stockholders' Equity $64,439,504 $64,929,445 ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
Page 3 of 11 PUREPAC, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30, _____________________________ 1995 1994 ____________ ____________ Net Sales $14,166,712 $16,876,313 Cost of sales 11,654,559 12,678,729 ____________ ____________ Gross profit 2,512,153 4,197,584 ____________ ____________ Expenses: Selling, general and administrative 2,255,102 2,471,463 Research and development 1,950,591 1,764,533 ____________ ____________ Total expenses 4,205,693 4,235,996 ____________ ____________ Income (Loss) from operations (1,693,540) (38,412) ____________ ____________ Other income (expense), net (40,631) (393) ____________ ____________ Income (Loss) before income taxes (1,734,171) (38,805) Provision (benefit) for income taxes (Note 5) (658,000) (14,000) ____________ ____________ Income (Loss) Before Preferred Stock Dividends (1,076,171) (24,805) Preferred stock dividends 520,095 520,095 ____________ ____________ Net Income (Loss), Available for Common Stock $(1,596,266) $ (544,900) ============ ============ Primary Earnings Per Common Share (Note 2): Net income (Loss) $ (.13) $ (.04) ____________ ____________ Weighted average number of common shares outstanding 12,581,223 12,510,098 ____________ ____________ Earnings Per Share, Assuming Full Dilution (Note 2) The accompanying notes are an integral part of these consolidated financial statements.
Page 4 of 11 PUREPAC, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended September 30, ____________________________ 1995 1994 ____________ ____________ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss), Available for Common Stock $(1,596,266) $ (544,900) Adjustments To Reconcile Net Income (Loss) To Net Cash Provided By (Used For) Operating Activities: Depreciation and amortization 519,543 520,404 Compensation expense - stock grants 66,946 96,316 Deferred income tax, assets 190,000 247,947 Increase (Decrease) in Cash From: Accounts receivable (53,239) (1,112,878) Inventory 999,294 575,816 Other current assets (444,147) (447,407) Accounts payable 650,105 (518,350) Accrued expenses (738,568) (569,294) Accrued income taxes (848,000) 57,403 Due to/from affiliates 263,834 (24,834) ____________ ____________ Total Adjustments 605,768 (1,174,877) ____________ ____________ Net Cash Provided By (Used For) Operating Activities (990,498) (1,719,777) ____________ ____________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (422,498) (725,325) ____________ ____________ Net Cash Provided By (Used For) Investing Activities (422,498) (725,325) ____________ ____________ CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings from bank 1,000,000 --- ____________ ____________ Net Cash Provided By (Used For) Financing Activities 1,000,000 --- ____________ ____________ Increase (Decrease) In Cash and Cash Equivalents $ (412,996) $(2,445,102) ============ ============ Cash and cash equivalents, beginning of period 1,156,109 3,153,844 ------------ ------------ Cash and Cash Equivalents, End of Period $ 743,113 $ 708,742 ============ ============ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 54,332 $ 6,764 Income Taxes $ --- $ --- ___________ ____________ The accompanying notes are an integral part of these consolidated financial statements. Page 5 of 11
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, 1995 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 September 30, 1995, the Consolidated Statements of Operations for the three months ended September 30, 1995 and 1994 and the Consolidated Statements of Cash Flows for the three months ended September 30, 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 not presented as the effect would be anti-dilutive. 3. Inventory September 30, June 30, 1995 1995 ____________ _____________ Raw materials $ 6,889,121 $ 4,813,344 Work-in-process 3,515,696 5,327,342 Finished goods 6,427,823 7,691,248 ____________ ____________ Total $16,832,640 $17,831,934 ============ ============ Page 6 of 11 4. Capital Stock During the quarter ended September 30, 1995, no additional shares were issued. A reconciliation of the change in total stockholders' equity is as follows: Par Value of Common and Capital in Total Preferred Excess of Retained Stockholders' Stock Par Value Earnings Equity __________ ___________ ___________ ___________ Balance, June 30, 1995 $134,154 $24,804,252 $27,618,998 $52,557,404 Class A preferred stock dividend (520,095) (520,095) Stock grant amortization 66,946 66,946 Reduction of income tax liability from issuance of stock grants 36,697 36,697 Net Income (Loss) (1,076,171) (1,076,171) _________ ____________ ____________ ____________ Balance, Sept. 30, 1995 $134,154 $24,387,800 $26,542,827 $51,064,781 ========= ============ ============ ============ 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. Beginning with the adoption of SFAS 109, 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. 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. Page 7 of 11 The provision (benefit) for income tax expense was comprised of the following: Three Months Ended September 30, ___________________________ 1995 1994 ___________ ___________ Current Federal $ (533,000) $ (6,000) State (63,000) (2,000) ____________ ___________ (596,000) (8,000) Deferred Federal (24,000) (5,000) State (38,000) (1,000) ____________ ____________ Total provision (benefit) $ (658,000) $ (14,000) 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 September 30, 1995, for federal tax purposes, the net operating loss and tax credit carryforwards amounted to $13,048,000 and $707,000, respectively; they expire through 2003. The future utilization of the net operating loss carryforwards is subject to limitation under provisions of the Internal Revenue Code. Page 8 of 11 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results Of Operations - Three Month Period Ended September 30, 1995 Compared with the Three Month Period Ended September 30, 1994 Net sales for the current three month period was $14,167,000 compared with $16,876,000 for the corresponding 1994 period. The decrease reflects lower sales of certain mature products including nifedipine. The nifedipine products accounted for 8% of net sales in the current quarter compared with 11% for the corresponding 1994 quarter. Gross profit for the current period was $2,512,000 compared with $4,198,000 for the corresponding 1994 period. Gross profit as a percent of net sales for the current period was 18% compared with 25% for the 1994 period. The decline was attributable to both the reduced sales and to lower selling prices for nifedipine and several other products. Selling, general and administrative expense for the current period of $2,255,000 decreased from the corresponding prior period expense of $2,471,000 by $216,000 (9%). The expense as a percent of net sales was 16% compared with 15% for the 1994 period. The decrease in expense was primarily due to lower personnel expenses. Research and development expense for the current period remained relatively constant at $1,951,000 compared with $1,765,000 for the corresponding 1994 period. The expense as a percent of net sales was 14% compared with 10% for the 1994 period. The increase of $186,000 (11%) primarily reflects timing differences. The net loss before preferred stock dividends for the current three month period was $1,076,000 compared with a net loss before preferred stock dividends of $25,000 for the corresponding 1994 period. The first quarter result was adversely affected by strong pricing pressures within the oral generic pharmaceutical industry and some unexpected delays in new product regulatory approvals did not allow the Company to offset those pressures, even though expense levels generally did not increase. The continuation of such delays could materially adversely impact on fiscal 1996 results. Page 9 of 11 FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company had $743,000 in cash and cash equivalents at September 30, 1995, compared with $1,156,000 at June 30, 1995. The decrease in the current three month period of $413,000 resulted primarily from cash used for operating activities of $990,000, investments in property, plant and equipment of $423,000 offset by $1,000,000 borrowed from a bank. A comparison of the balance sheet accounts at September 30, 1995 to the June 30, 1995 balances shows the following to be noteworthy: Inventory decreased by $999,000 in response to lower sales volumes. Other current assets increased by $1,329,000 primarily due to the recording of a federal income tax receivable based on the Company carrying back the current period's net operating loss. The accrued preferred dividend, payable to the Company's principal stockholder, Faulding Holdings Inc., of $520,095 for the three month period ended September 30, 1995 was subsequently paid on October 2, 1995. In October 1995, the Company made the decision to restructure certain aspects of its business. This restructuring was considered necessary to make the Company more competitive in the oral generic pharmaceutical industry. Costs associated with this restructuring, including severance payments, will be incurred beginning in the second fiscal quarter and are expected to total less than $1 million. This restructuring will better position the Company to integrate the proposed acquisitions from Faulding Holdings Inc., which were announced in August 1995. These acquisitions are subject to approval by the Company's shareholders. 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 11 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS On September 11, 1995, the United States District Court for the District of New Jersey granted the Company's motion to dismiss the complaint filed against the Company and certain of its senior executives in a lawsuit entitled Dechter vs. Purepac, Inc., Robert H. Bur and Russell J. Reardon, 94 Civ. 6195. The complaint, which purported to be a class action on behalf of purchasers of Purepac, Inc. common stock, asserted, among other things, violations of Section 10(b) of the Securities Exchange Act of 1934 and certain common law claims. At that hearing, the court dismissed the complaint in its entirety, finding that the complaint failed to allege any actual violation of the U.S. securities laws on the part of Purepac, Inc. or its senior executives. Pursuant to the court's decision, the plaintiffs had the opportunity to consider filing a motion with the court for permission to submit a proposed amended complaint to address the deficiencies that led to the court's dismissal of the current action. The plaintiffs elected not to file such a motion, thereby terminating such litigation. Item 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 On August 17, 1995, the Company filed a current report on Form 8-K to report the execution of a letter of intent to acquire certain businesses from its principal stockholder. 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. PUREPAC, INC. Registrant Date: November 13, 1995 /s/ Richard F. Moldin ____________________________________ Richard F. Moldin President and Chief Executive Officer (Principal Executive Officer) Date: November 13, 1995 /s/ Lee H. Craker _____________________________________ Lee H. Craker Chief Financial Officer (Principal Accounting Officer) Page 11 of 11 EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QUARTER 10-Q
5 1,000 3-MOS JUN-30-1996 SEP-30-1995 743 0 9,756 0 16,833 33,980 26,509 0 64,440 13,375 0 126 0 8 51,065 64,440 14,167 14,167 11,655 4,206 0 0 (41) (1,734) (658) (1,076) 0 0 0 (1,076) (.13) (.13) -----END PRIVACY-ENHANCED MESSAGE-----