UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1995 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-9860
BARR LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
New York 22-1927534
(State or Other Jurisdiction of (I.R.S. - Employer
Incorporation or Organization) Identification No.)
Two Quaker Road, P. O. Box 2900, Pomona, New York 10970-0519
(Address of principal executive offices)
914-362-1100
(Registrant's telephone number)
(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 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
Number of shares of Common Stock, par value $.01, outstanding as
of September 30, 1995: 9,302,088.
BARR LABORATORIES, INC.
INDEX PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
September 30, 1995 and June 30, 1995 3
Consolidated Statements of Earnings
for the three months ended
September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows
for the three months ended
September 30, 1995 and 1994 5
Notes to Consolidated Financial
Statements 6-7
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 8-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
BARR LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
(thousands of dollars, except share amounts)
(unaudited)
September 30, June 30,
1995 1995
ASSETS
Current assets:
Cash $ 52,812 $ 52,987
Accounts receivable, less allowances
of $2,230 and $2,100, respectively 27,791 27,307
Inventories 31,051 35,890
Deferred income taxes 3,634 3,601
Prepaid expenses 996 678
Total current assets 116,284 120,463
Property, plant and equipment, net 35,233 34,799
Other assets 755 691
Total assets $152,272 $155,953
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,669 $ 55,355
Accrued liabilities 5,748 5,495
Income taxes payable 2,527 1,249
Total current liabilities 55,944 62,099
Long-term debt 20,360 20,371
Other liabilities 230 253
Deferred income taxes 1,311 1,377
Commitments & Contingencies
Shareholders' Equity:
Common Stock $.01 par value per share
Authorized 30,000,000; issued
9,354,513 and 9,334,852, respectively 94 93
Additional paid-in capital 42,602 42,230
Retained earnings 31,744 29,543
74,440 71,866
Treasury stock at cost: 52,425 shares (13) (13)
Total shareholders' equity 74,427 71,853
Total liabilities and shareholders' equity $152,272 $155,953
<FN>
<F1> See accompanying notes to the consolidated financial statements.
</FN>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(thousands of dollars, except share amounts)
(unaudited)
Three Months Ended
September 30,
1995 1994
Net sales $ 54,176 $ 44,047
Cost of sales 43,459 34,103
Gross Profit 10,717 9,944
Costs and expenses:
Selling, general and administrative 5,060 4,192
Research and development 2,244 2,299
Earnings from operations 3,413 3,453
Interest income 684 316
Interest expense (472) (747)
Other (expense) income, net (17) 2
Earnings before income taxes 3,608 3,024
Income tax expense 1,407 1,179
Net earnings $ 2,201 $ 1,845
PER COMMON SHARE:
Earnings per common and common equivalent shares $ 0.23 $ 0.21
Earnings per common share assuming full dilution $ 0.23 $ 0.21
Weighted average number of common and common 9,509,033 8,737,701
equivalent shares
Weighted average number of shares assuming full 9,528,873 8,737,701
dilution
<FN>
<F1> See accompanying notes to the consolidated financial statements.
</FN>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended September 30, 1995 and 1994
(thousands of dollars; unaudited)
1995 1994
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net earnings $ 2,201 $ 1,845
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,225 995
Deferred income tax benefit (99) (791)
Loss on disposal of equipment 22 -
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (484) (1,456)
Inventories 4,839 (2,078)
Prepaid expenses (318) (498)
Other assets (64) 54
Increase (decrease) in:
Accounts payable and accrued (7,433) 2,297
liabilities
Income taxes payable 1,278 1,981
Net cash provided by operating activities 1,167 2,349
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment (1,857) (1,773)
Proceeds from sale of property, plant and 176 -
equipment
Net cash used in investing activities (1,681) (1,773)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on long-term debt (34) (24)
Proceeds from exercise of stock options
and employee stock purchases 373 222
Net cash provided by financing activities 339 198
Increase (decrease) in cash (175) 774
Cash and cash equivalents at beginning of period 52,987 36,499
Cash and cash equivalents at end of period $ 52,812 $ 37,273
Supplemental cash flow data-Cash paid during the period:
Interest, net of portion capitalized $ 38 $ 8
Income taxes $ 228 $ 4
<FN>
<F1> See accompanying notes to the consolidated financial statements.
</FN>
BARR LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The consolidated financial statements include the accounts
of Barr Laboratories, Inc. and its wholly-owned subsidiaries
(the "Company" or "Barr").
In the opinion of the Management of the Company, the interim
consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary
for a fair presentation of the financial position, results of
operations and cash flows for the interim periods. Interim
results are not necessarily indicative of the results that
may be expected for a full year. These financial statements
should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended June 30, 1995.
Certain amounts in prior years' financial statements have been
reclassified to conform with the current year presentation.
2. Inventories
Inventories consisted of the following (in thousands of dollars):
September 30, June 30,
1995 1995
Raw materials and supplies $13,555 $17,470
Work-in-process 6,079 4,520
Finished goods 11,417 13,900
$31,051 $35,890
Tamoxifen Citrate, purchased as a finished product, accounted
for approximately $6,899 and $9,966 of finished goods as of
September 30, 1995 and June 30, 1995, respectively.
3. Earnings Per Common Share and Common Share Equivalents
For the three month period ended September 30, 1995, earnings
per common and common equivalent shares were computed by
dividing the earnings applicable to common stock by the
weighted average number of common and dilutive common
equivalent shares outstanding during the period. For the
three month period ended September 30, 1994, earnings per
common share were computed by dividing the earnings
applicable to common stock by the weighted average number of
common shares outstanding during the period. In 1994, the
effects of stock options outstanding and the convertible
subordinated debt and related interest adjustment to earnings
were excluded as they resulted in less than 3% dilution.
BARR LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
4. Cash and Cash Equivalents
As of September 30, 1995 and June 30, 1995, approximately
$34,029 and $41,143, respectively, of the Company's cash was
held in a cash collateral account to secure extension of
credit to it by the manufacturer of Tamoxifen Citrate. (See
Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital
Resources.)
5. Commitments and Contingencies
Litigation
The Company, at September 30, 1995, was involved in lawsuits
incidental to its business, including patent infringement
actions. Management, based on the advice of legal counsel,
believes that the ultimate disposition of these lawsuits will
not have any significant adverse effect on the Company's
consolidated financial statements.
BARR LABORATORIES, INC.
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Comparison of the Quarter Ended September 30, 1995
to the Quarter Ended September 30, 1994 - (thousands of dollars)
Net sales increased 23% to $54,176 from $44,047. The increase is
attributable to a continued increase in demand for Tamoxifen
Citrate ("Tamoxifen"), the breast cancer treatment distributed by
the Company.
Tamoxifen sales increased 35% to $39,890 from $29,628. The
growth primarily resulted from increases in the Company's market
share. Tamoxifen is a patented product manufactured for the
Company by the Innovator, and is distributed by the Company under
a non-exclusive license agreement with the Innovator. Currently,
Tamoxifen only competes against the Innovator's product, which is
sold under a brand name. Sales of Barr-manufactured products
were consistent with prior year's sales as additional volume of
several Barr products offset price reductions impacting certain
other products.
Gross profit increased to $10,717 from $9,944 due to increased
sales volume. However, the gross margin decreased as a
percentage of net sales to 19.8% from 22.6%. This decrease is
primarily attributed to lower gross margins earned on the
distribution of Tamoxifen compared to margins earned on
manufactured products, and by reduced prices on certain of the
Company's manufactured products due primarily to increased
competition.
Selling, general and administrative expenses increased to $5,060
from $4,192, yet remained relatively constant as a percentage of
net sales as was expected, due to the significant increase in net
sales. This increase of $868 is primarily attributed to
increased legal fees resulting from Barr's patent challenges, and
in particular preparation for the trial regarding the
Ciprofloxacin challenge; increased salaries resulting from
additions in headcount; and, additional depreciation resulting
from implementation of a new core computer system.
Total research and development expenses were virtually unchanged
from the prior year's levels, despite an increase in salaries and
related costs associated with the addition of scientists and
higher raw material costs associated with an increase in the
number of products under development when compared to the prior
year. These increases were offset by a decrease in amounts paid
to outside laboratories to conduct biostudies. Such a decrease
was expected since the prior year's amounts included biostudy
costs for conjugated estrogens. The number, complexity and
associated costs of biostudies for conjugated estrogens are
greater than those for most other products currently under
development.
Interest income more than doubled, increasing to $684 from $316,
due to a 40% increase in the average cash and cash equivalent
balance in comparison to the same period in the prior year as
well as an increase in the rate of return earned on those
investments.
Interest expense declined by $275 due primarily to the reduction
in long-term debt from the February 1995 conversion of $10
million in Convertible Subordinated Notes into Barr common stock.
The tax provisions for the quarters ended September 30, 1995 and
1994, were calculated at an effective tax rate of 39%.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $52,812 at September
30, 1995, down slightly compared to $52,987 at June 30, 1995.
However, the Company's unrestricted cash increased nearly $7
million to approximately $19 million from June 30, 1995, as the
cash held in a cash collateral account to secure credit extended
to the Company by the Innovator of Tamoxifen decreased to $34,029
from $41,143 at June 30, 1995. The decrease in the cash
collateral account reflects slightly lower Tamoxifen purchases
during the quarter ended September 30, 1995, compared to
purchases made in the last quarter of fiscal 1995 when the
Company increased purchases in order to even-out its inventory
levels. The Company continues to evaluate alternatives to using
cash to secure this payable, including obtaining a letter of
credit facility to provide standby letters of credit to secure
future Tamoxifen purchases. The Company believes that it has the
right to replace the cash collateral with letters of credit once
such a facility is obtained. The Company further believes that
such a line will allow the Company to utilize a portion of its
existing escrow funds to help fund operations and capital
expenditures.
Cash provided from operating activities was $1,167 for the three
months ended September 30, 1995, which included net earnings of
$2,201. Additionally, reductions in inventory of $4,839 as well
as non-cash charges (depreciation and amortization) of $1,225
offset reductions in payables, primarily due to payments for the
prior quarter's Tamoxifen purchases.
The Company purchased $1,857 in capital assets during the three
months ended September 30, 1995. An expansion of the Company's
manufacturing facilities and the purchase of new equipment
accounted for the majority of these expenditures. The Company
expects that its capital expenditures may increase significantly
during the remaining quarters of fiscal 1996. This anticipated
increase will be primarily associated with the continued
expansion of the Company's manufacturing facilities including the
acquisition or construction of a new multi-purpose facility. The
Company is currently evaluating alternatives for financing this
facility and the related machinery and equipment.
Management believes that existing capital resources, along with
the Company's ability to obtain additional capital, if required,
will be adequate to meet its needs for the foreseeable future.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit Number Exhibit
11 Computation of per share earnings
27 Financial data schedule
(b) There were no reports filed on Form 8-K in the quarter
ended September 30, 1995.
BARR LABORATORIES, INC.
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.
BARR LABORATORIES, INC.
Dated: October 25, 1995 /s/ Paul M. Bisaro
Paul M. Bisaro, Vice President
Dated: October 25, 1995 /s/ Paul M. Bisaro
Paul M. Bisaro, Chief Financial Officer
and General Counsel