FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
(Mark One)
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/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
For the Period Ended June 30, 1995
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/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
---- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _____________________________
Commission File No. 1-5438
FOREST LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-1798614
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 Third Avenue
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New York, New York 10022-4731
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(address of principal (Zip Code)
executive office)
Registrant's telephone number, including area code 212-421-7850
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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
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Number of shares outstanding of Registrant's Common Stock as of
August 10, 1995: 45,283,803.
PAGE
Part I - Financial Information
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1995
(In thousands) (Unaudited) March 31, 1995
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ASSETS
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Current assets:
Cash (including cash equivalent investments
of $163,438 in June and $103,847
in March) $174,059 $107,611
Marketable securities 107,197 34,570
Accounts receivable, less allowances of
$5,241 in June and $5,016 in March 142,606 149,655
Inventories:
Raw materials 15,995 14,912
Work in process 1,996 2,907
Finished goods 22,505 21,144
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40,496 38,963
Deferred income taxes 12,593 12,789
Other current assets 5,655 5,381
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Total current assets 482,606 348,969
Long-term marketable securities 52,325 136,674
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Property, plant and equipment 99,430 96,779
Less: Accumulated depreciation 24,650 23,751
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Net property, plant and equipment 74,780 73,028
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Other assets:
Excess of cost of investment in subsidiaries
over net assets acquired, less accumulated
amortization of $6,508 in June and $6,240
in March 18,451 18,719
License agreements, product rights
and other intangible assets,
less accumulated amortization of
$42,847 in June and $40,304 in March 159,657 162,174
Deferred income taxes 8,142 8,343
Other 10,062 9,298
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Total other assets 196,312 198,534
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TOTAL ASSETS $806,023 $757,205
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See notes to condensed consolidated financial statements.
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 30, 1995
(In thousands, except for par values) (Unaudited) March 31, 1995
------------------------------------- ------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
Accounts payable $ 15,664 $ 14,234
Accrued expenses 30,532 23,924
Income taxes payable 31,597 19,491
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Total current liabilities 77,793 57,649
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Deferred income taxes 221 222
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Shareholders' equity:
Series A junior participating preferred
stock, $1.00 par; shares authorized
1,000; no shares issued or outstanding
Common stock, $.10 par; shares authorized
250,000; issued 47,918 shares
in June and 47,824 shares in March 4,792 4,782
Capital in excess of par 299,097 296,925
Retained earnings 464,315 437,760
Cumulative foreign currency
translation adjustments 466 458
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768,670 739,925
Less common stock in treasury,
at cost (2,644 shares in June
and 2,643 shares in March) 40,661 40,591
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Total shareholders' equity 728,009 699,334
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $806,023 $757,205
======== ========
See notes to condensed consolidated financial statements
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
(In thousands, except per share amounts) June 30,
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1995 1994
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Net sales $106,943 $92,554
Other income 3,757 2,344
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110,700 94,898
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Costs and expenses:
Cost of sales 20,898 17,308
Selling, general and
administrative 39,900 35,134
Research and development 8,539 7,775
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69,337 60,217
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Income before income taxes 41,363 34,681
Income taxes 14,808 12,537
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Net income $26,555 $22,144
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Earnings per common and
common equivalent share:
Primary $.57 $.48
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Fully diluted $.57 $.48
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Weighted average number of
common and common equivalent
shares outstanding:
Primary 46,926 46,300
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Fully diluted 46,926 46,302
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Dividends per share $-0- $-0-
==== ====
See notes to condensed consolidated financial statements.
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
(In thousands) June 30,
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1995 1994
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Cash flows from operating activities:
Net income $ 26,555 $ 22,144
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,150 953
Amortization 2,811 1,804
Deferred income tax expense 396 773
Foreign currency transactions
(gain) loss 73 ( 30)
Net change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable, net 7,049 ( 16,650)
Inventories ( 1,533) ( 2,629)
Other current assets ( 274) ( 909)
Increase in:
Accounts payable 1,430 2,330
Accrued expenses 6,608 2,888
Income taxes payable 12,106 4,584
Increase in other assets ( 764) ( 1,371)
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Net cash provided by operating
activities 55,607 13,887
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Cash flows from investing activities:
Purchase of property, plant and equipment, net ( 2,787) ( 3,782)
Redemption (purchase) of marketable
securities 11,722 ( 59,580)
Reduction of license agreements, product rights
and intangible assets 663
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Net cash provided
by (used in) investing activities 8,935 ( 62,699)
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- Continued -
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FOREST LABORATORIES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
- Continued -
Three Months Ended
(In thousands) June 30,
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1995 1994
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Cash flows from financing activities:
Net proceeds from common stock options exercised
by employees under stock option plans $ 2,112 $ 1,720
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Net cash provided by financing activities 2,112 1,720
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Effect of exchange rate changes on cash ( 206) ( 1,058)
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Increase (decrease) in cash and cash equivalents 66,448 ( 48,150)
Cash and cash equivalents, beginning of period 107,611 181,094
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Cash and cash equivalents, end of period $174,059 $132,944
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $2,306 $16,367
See notes to condensed consolidated financial statements.
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PAGE
FOREST LABORATORIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form-10Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of Management, all adjustments (consisting of
only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three month period ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the year
ending March 31, 1996. For further information refer to the
consolidated financial statements and footnotes thereto
incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended March 31, 1995.
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PAGE
FOREST LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY The financial condition of the Company
---------------------------------
continues to be strong. The increase in cash and marketable securities,
as well as the corresponding decrease in long-term marketable securities,
was principally the result of certain of the Company's long-term
investments nearing maturity and the movement of funds to capture
optimum market yields. Also contributing to the increase in cash was the
collection of accounts receivable resulting from periodic dating terms
given to the Company's customers. Accounts payable and accrued expenses
increased principally due to the continued growth of the Company's principal
promoted products and an increase in the overall level of the Company's
operations. The increase in income taxes payable was due to the recording
of current period tax liabilities with corresponding payments to be made
in a subsequent quarter. Company operations have historically provided
a strong positive cash flow and management believes that on-going
operations, when combined with the Company's strong cash position, will
continue to provide adequate liquidity to facilitate potential acquisitions
of products or companies and capital investments.
RESULTS OF OPERATIONS Net sales for the current quarter increased
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$14,389,000 as compared with the same period last year, principally as a
result of the continued strong growth of the Company's principal promoted
products, and the introduction during the quarter of the product Cervidil-TM- .
Net volume growth of those products amounted to $21,771,000. Sales
decreases of certain of the Company's unpromoted product lines resulted in a
net volume decline of $7,610,000. The remainder of the net sales change
was attributed to price and foreign exchange rate fluctuations.
Cost of sales as a percentage of sales increased to 20% during the current
quarter as compared to 19% for the same period last year due mostly to
increases in overhead costs related to the Company's facilities expansion
and lower net prices received on certain products.
The increase in selling, general and administrative expense during the
current quarter as compared with the prior year resulted from expenses
related to the launch, during the current quarter, of the new product
Cervidil, as well as increased sales expenses related to several
co-promotion agreements entered into by the Company during the third
and fourth quarters of fiscal 1995.
Research and development expense increased during the current quarter over
the same period last year principally as a result of the cost of conducting
clinical trials in order to obtain approval of new products and the cost
of developing products using the Company's controlled release technology.
During the current quarter, there was particular emphasis on Methoxatone
and AF102B. Methoxatone is being developed for the treatment of brain
trauma and AF102B is an M1 agonist for the treatment of Alzheimer's Disease.
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PAGE
Part II - Other Information
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Item 1. Legal Proceedings
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Reference is made to the Company's Annual Report on Form 10-K for the
year ended March 31, 1995, for a description of certain legal
proceedings.
Item 6. (b) Reports on Form 8-K - None
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PAGE
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.
Date: August 10, 1995
Forest Laboratories, Inc.
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(Registrant)
/s/ Howard Solomon
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Howard Solomon
President and Chief
Executive Officer
/s/ Kenneth E. Goodman
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Kenneth E. Goodman
Vice President - Finance
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