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 the quarterly period ended December 31, 2001
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 0-23357
BIOANALYTICAL SYSTEMS, INC.
---------------------------
(Exact name of the registrant as specified in its charter)
INDIANA 35-1345024
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
2701 KENT AVENUE
WEST LAFAYETTE, IN 47906
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(Address of principal executive offices) (Zip code)
(765) 463-4527
--------------
(Registrant's telephone number, including area code)
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
As of December 31, 2001, 4,575,509 Common Shares of the registrant were
outstanding.
PAGE
PART I FINANCIAL INFORMATION NUMBER
Item 1 Financial Statements (Unaudited):
Consolidated Balance Sheets as of December 31, 2001 and
September 30, 2001 3
Consolidated Statements of Income for the Three Months 4
ended December 31, 2001 and 2000
Consolidated Statements of Cash Flows for the Three 5
Months Ended December 31, 2001 and 2000
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3 Quantitative and Qualitative Disclosures About Market Risk 10
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 10
SIGNATURES 11
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ITEM 1. FINANCIAL STATEMENTS
BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31, September 30,
2001 2001
(Unaudited) (Note)
----------- ------
ASSETS
Current Assets:
Cash and cash equivalents $ 636 $ 374
Accounts receivable, net 3,380 4,266
Inventories 2,960 2,391
Other current assets 193 71
Refundable income taxes 326 325
Deferred income taxes 443 443
-------- --------
Total Current Assets 7,938 7,870
Property and equipment:
Land and improvements 496 496
Buildings and improvements 13,507 13,508
Machinery and equipment 11,148 10,795
Office furniture and fixtures 1,091 1,092
Construction in process 306 113
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Total Property and Equipment 26,548 26,004
Less accumulated depreciation (7,443) (7,082)
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19,105 18,922
Goodwill, less accumulated amortization of $296 and $281 947 963
Other assets 209 222
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Total Assets $ 28,199 $ 27,977
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,992 $ 2,619
Income taxes payable 210 176
Accrued expenses 570 747
Customer advances 1,135 1,063
Revolving line of credit 883 236
Current portion of capital lease obligation 261 261
Current portion of long-term debt 233 233
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Total current liabilities 5,284 5,335
Capital lease obligation, less current portion 338 403
Long-term debt, less current portion 2,684 2,742
Deferred income taxes 1,798 1,667
Shareholders equity:
Preferred Shares:
1,000,000 shares authorized;
no shares issued
and outstanding --- ---
Common Shares: 19,000,000 shares
authorized; 4,575,509 and 4,569,416
shares issued and outstanding 1,014 1,012
Additional paid-in capital 10,515 10,506
Retained earnings 6,592 6,345
Accumulated other comprehensive loss (26) (33)
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Total shareholders' equity 18,095 17,830
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Total liabilities and shareholders' equity $ 28,199 $ 27,977
======== ========
<FN>
Note: The balance sheet at September 30, 2001 has been derived from the audited financial
statements at that date but does not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete financial statements.
See accompanying notes.
</FN>
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BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(Unaudited)
Three Months Three Months
Ended Dec 31, Ended Dec 31,
2001 2000
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Service revenue $ 3,569 $ 3,096
Product revenue 2,454 2,330
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Total revenue 6,023 5,426
Cost of service revenue 2,620 2,241
Cost of product revenue 847 763
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Total cost of revenue 3,467 3,004
Gross profit 2,556 2,422
Operating expenses:
Selling 778 776
Research and development 323 394
General and administrative 1,018 761
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Total operating expenses 2,119 1,931
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Operating income 437 491
Interest income 6 ---
Interest expense (59) (136)
Other income 36 1
Loss on sale of property and equipment (8) ---
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Income before income taxes 412 356
Income taxes 165 161
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Net income $ 247 $ 195
========== ==========
Basic net income per common share $ .05 $ .04
Diluted net income per common and common $ .05 $ .04
equivalent share
Basic weighted average common shares 4,569,772 4,563,242
outstanding
Diluted weighted average common and common 4,623,357 4,577,365
equivalent shares outstanding
<FN>
See accompanying notes.
</FN>
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BIOANALYTICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Three Months
Ended Dec 31, Ended Dec 31,
2001 2000
------------- -------------
Operating activities:
Net income $ 247 $ 195
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 479 440
Loss on sale of property and equipment 8 ---
Deferred income taxes 131 135
Changes in operating assets and liabilities:
Accounts receivable 886 (367)
Inventories (569) (102)
Other assets (133) (81)
Accounts payable (963) (80)
Income taxes payable 33 (2)
Accrued expenses and customer advances (105) (202)
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Net cash provided (used) by operating activities 14 (64)
Investing activities:
Capital expenditures (294) (129)
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Net cash used by investing activities (294) (129)
Financing activities:
Payments of long-term debt (123) (117)
Borrowings on line of credit 870 481
Payments on line of credit (223) (252)
Net proceeds from the exercise of stock options 11 1
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Net cash provided by financing activities 535 113
Effects of exchange rate changes 7 (6)
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Net increase (decrease) in cash and cash equivalents 262 (86)
Cash and cash equivalents at beginning of period 374 477
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Cash and cash equivalents at end of period $ 636 $ 391
========== ==========
<FN>
See accompanying notes.
</FN>
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) DESCRIPTION OF THE BUSINESS
Bioanalytical Systems, Inc. and its subsidiaries (the "Company") engage in
supporting drug development with products and research services supplied
globally to pharmaceutical and biotechnology firms and research institutes. The
Company provides productivity tools, software and services required to obtain
numerical data supporting new drug and medical device applications. Company
personnel have special expertise for research on central nervous system
diseases, diabetes, in vivo sampling devices, veterinary instrumentation and
biosensors. Antidepressants, antipsychotics, chemotherapeutics,
antihypertensives, antibiotics and antivirals are among the drug programs in
which the Company has participated.
(2) INTERIM FINANCIAL STATEMENT PRESENTATION
The accompanying interim financial statements are unaudited and have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission ("SEC") regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements,
and therefore these consolidated financial statements should be read in
conjunction with the Company's audited consolidated financial statements, and
the notes thereto, for the year ended September 30, 2001. In the opinion of
management, the consolidated financial statements for the three month periods
ended December 31, 2001 and 2000 include all normal and recurring adjustments
which are necessary for a fair presentation of the results of the interim
periods. The results of operations for the three month period ended December 31,
2001 are not necessarily indicative of the results for the year ending September
30, 2002.
(3) INVENTORIES
Inventories consisted of (in thousands):
December 31, 2001 September 30, 2001
----------------- ------------------
Raw materials $ 1,539 $ 1,322
Work in progress 441 303
Finished goods 1,090 877
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3,070 2,502
LIFO reserve (110) (111)
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$ 2,960 $ 2,391
(4) DEBT
The Company has a revolving line of credit, which expires April 1, 2002 and
allows borrowings of up to $3,500,000. Interest accrues monthly on the
outstanding balance at the bank's prime rate minus 25 to plus 75 basis points
(4.50% at December 31, 2001) or at the London Interbank Offered Rate (LIBOR)
plus 200 to 300 basis points, as elected by the Company, depending upon certain
financial ratios. The line is collateralized by inventories and accounts
receivable and requires the Company to maintain certain financial ratios. The
Company pays a fee equal to 12.5 to 50 basis points, depending on certain
financial ratios, on the unused portion of the line of credit. As of December
31, 2001 and September 30, 2001, interest on the entire outstanding balance was
based on the prime rate minus 25 basis points. The balance outstanding on this
line of credit at December 31, 2001 was $883,487.
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On June 24, 1999, the Company obtained a $3,500,000 commercial mortgage
with a bank. The mortgage note requires 59 monthly principal payments of $19,444
plus interest, followed by a final payment for the unpaid principal amount of
$2,352,804 due June 24, 2004. Interest is charged at the one-month LIBOR rate
plus 200 basis points (4.08% at December 31, 2001).
(5) LITIGATION
The Company is currently not involved in any material litigation.
(6) SEGMENT INFORMATION
The Company operated in two principal segments - analytical services and
analytical products. The Company's analytical services unit provides chemistry
support on a contract basis directly to pharmaceutical companies. The Company's
products unit provides liquid chromatography, electrochemical and physiological
monitoring products to pharmaceutical companies, universities, government
research centers and medical research institutions. The Company evaluates
performance and allocates resources based on these segments.
Operating Income Three Months Ended Three Months Ended
(In thousands) December 31, 2001 December 31, 2000
------------------ ------------------
Services $ 157 $ 282
Products 280 209
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Total operating income 437 491
Corporate income (expenses) (25) (135)
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Income before income taxes $ 412 $ 356
(7) NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the FASB issued Statements of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and No. 142, "Goodwill and Other
Intangible Assets." Under the new rules, goodwill (and intangible assets deemed
to have indefinite lives) will no longer be amortized but will be subject to
annual impairment tests in accordance with the Statements. Other intangible
assets will continue to be amortized over their useful lives. The Company will
be required to apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of fiscal year 2003.
Application of the non-amortization provisions of the Statement is expected to
result in an increase in net income of $77,000 (approximately $.02 per share)
per year. The Company will perform the first of the required impairment tests of
goodwill and indefinite lived intangible assets as of October 1, 2002 and has
not yet determined what the effect of these tests will be on the earnings and
financial position of the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes FASB
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" and also supercedes the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for
segments of a business to be disposed of. Among its many provisions, SFAS No.
144 retains the fundamental requirements of both previous standards, however, it
resolves significant implementation issues related to FASB Statement No. 121 and
broadens the separate presentation of discontinued operations in the income
statement required by APB Opinion No. 30 to include a component of an entity
(rather than a segment of a business). The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001, with early application encouraged. The Company does not
believe, based on current circumstances, the effect of adoption of SFAS No. 144
will be material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-Q may contain "forward-looking statements," within the meaning
of Section 27A of the Securities Act of 1933, as amended, and/or Section 21E of
the Securities Exchange Act of 1934, as amended. Those statements may include,
but are not limited to, discussions regarding the Company's intent, belief or
current expectations with respect to (i) the Company's strategic plans; (ii) the
Company's future profitability; (iii) the Company's capital requirements; (iv)
industry trends affecting the Company's financial condition or results of
operations; (v) the Company's sales or marketing plans; or (vi) the Company's
growth strategy. Investors in the Company's Common Shares are cautioned that
reliance on any forward-looking statement involves risks and uncertainties,
including the risk factors contained in Exhibit 99.1 to the Company's annual
report on Form 10-K for the year ended September 30, 2001. Although the Company
believes that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate, and as a result, the forward-looking statements based upon those
assumptions also could be incorrect. In light of the uncertainties inherent in
any forward-looking statement, the inclusion of a forward-looking statement
herein should not be regarded as a representation by the Company that the
Company's plans and objectives will be achieved.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2001 COMPARED WITH THREE MONTHS ENDED DECEMBER
31, 2000
Total revenue for the three months ended December 31, 2001 increased 11.0%
to $6.0 million from $5.4 million for the three months ended December 31, 2000.
The net increase of $597,000 was primarily due to the addition of contracts in
the service group, which increased service revenue to $3.6 million for the three
months ended December 31, 2001 from $3.1 million for the three months ended
December 31, 2000.
Total cost of revenue for the three months ended December 31, 2001
increased 15.4% to $3.5 million from $3.0 million for the three months ended
December 31, 2000. Cost of services revenue increased to 73.4% of services
revenue for the three months ended December 31, 2001 from 72.4% for the three
months ended December 31, 2000. Cost of product revenue increased to 34.5% of
product revenue for the three months ended December 31, 2001 from 32.7% of
product revenue for the three months ended December 31, 2000, primarily due to a
change in product mix.
Selling expenses for the three months ended December 31, 2001 increased to
$778,000 from $776,000 for the three months ended December 31, 2000. Research
and development expenses for the three months ended December 31, 2001 decreased
18.0% to $323,000 from $394,000 for the three months ended December 31, 2000,
primarily as a result of an increase in grant reimbursements. General and
administrative expenses for the three months ended December 31, 2001 increased
33.8% to $1.0 million from $761,000 for the three months ended December 31,
2000, primarily from the organizational restructuring of our preclinical
operation.
Other expense was $25,000 for the three months ended December 31, 2001, as
compared to other expense of $135,000 for the three months ended December 31,
2000, primarily as a result of decreased interest expense due to the decrease in
debt.
The Company's effective tax rate for the three months ended December 31,
2001 was 40.0% as compared to 45.1% for the three months ended December 31,
2000, primarily due to the utilization of the tax benefit of foreign net
operating losses.
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LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2001, the Company had cash and cash equivalents of $636,000
compared to cash and cash equivalents of $374,000 at September 30, 2001. The
increase in cash resulted primarily from the Company's financing activities.
The Company's net cash provided by operating activities was $14,000 for the
three months ended December 31, 2001 as compared to net cash used of $64,000 for
the first three months of fiscal 2000, primarily due to the decrease in accounts
receivable in the quarter ended December 31, 2001. The positive cash flow from
operations during the three months ended December 31, 2001, was the result of a
net income of $247,000 plus non-cash charges of $618,000 offset by a net change
of $(851,000) in operating assets and liabilities.
Cash used by investing activities was $294,000 for the three months ended
December 31, 2001 as compared to $129,000 for the three months ended December
31, 2000. This increase was primarily due to the increase of construction in
progress at the preclinical site in Evansville, Indiana in the quarter ended
December 31, 2001. Cash provided by financing activities for the three months
ended December 31, 2001 was $535,000, primarily due to the increased utilization
of the revolving line of credit.
Total expenditures by the Company for property and equipment were $294,000
and $129,000 for the three months ended December 31, 2001 and 2000,
respectively. Expenditures made in connection with the expansion of the
Company's operating facilities and purchases of laboratory equipment accounted
for the largest portions of these expenditures. The Company also expects to make
other investments to expand its operations through internal growth and, as
attractive opportunities arise, through strategic acquisitions, alliances and
joint ventures. During 2001, the Company signed a letter of intent to expand
facilities at its preclinical site in Evansville, Indiana. The commitment is for
approximately $2.5 million. Construction on the facilities expansion is expected
to be completed in December, 2002. The Company plans to obtain a mortgage with a
commercial lender to finance this construction.
Based on its current business activities, the Company believes that cash
generated from its operations and amounts available under its existing bank line
of credit will be sufficient to fund its anticipated working capital and capital
expenditure requirements.
The Company has a revolving line of credit, which expires April 1, 2002 and
allows borrowings of up to $3,500,000. Interest accrues monthly on the
outstanding balance at the bank's prime rate minus 25 to plus 75 basis points
(4.50% at December 31, 2001) or at the London Interbank Offered Rate (LIBOR)
plus 200 to 300 basis points, as elected by the Company, depending upon certain
financial ratios. The line is collateralized by inventories and accounts
receivable and requires the Company to maintain certain financial ratios. The
Company pays a fee equal to 12.5 to 50 basis points, depending on certain
financial ratios, on the unused portion of the line of credit. As of December
31, 2001 and September 30, 2001, interest on the entire outstanding balance was
based on the prime rate minus 25 basis points. The borrowing base on this line
of credit is limited to 80% of accounts receivable and 50% of inventory. The
balance outstanding on this line of credit at December 31, 2001 was $883,487.
On June 24, 1999 the Company obtained a $3,500,000 commercial mortgage with
a bank. The mortgage note requires 59 monthly principal payments of $19,444 plus
interest followed by a final payment for the unpaid principal amount of
$2,352,804 due June 24, 2004. Interest is charged at the one-month LIBOR rate
plus 200 basis points (4.08% at December 31, 2001).
The Company has capital lease arrangements to finance the acquisition of
equipment. Future minimum lease payments for the capital leases are $736,641
with $73,242 representing interest. The capital lease obligations will be paid
in full by fiscal year 2004.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Second Amended and Restated Articles of Incorporation of
Bioanalytical Systems, Inc. (Incorporated by reference to
Exhibit 3.1 to Form 10-Q for the quarter ended December 31,
1997).
3.2 Second Restated Bylaws of Bioanalytical Systems, Inc.
(Incorporated by reference to Exhibit 3.2 to Form 10-Q for the
quarter ended December 31, 1997).
4.1 Specimen Certificate for Common Shares (Incorporated by
reference to Exhibit 4.1 to Registration Statement on Form S-1,
Registration No. 333-36429).
10.2 Bioanalytical Systems, Inc. Outside Director Stock Option Plan
(Incorporated by reference to Exhibit 10.2 to Registration
Statement on Form S-1, Registration No. 333-36429).
10.3 Form of Bioanalytical Systems, Inc. Outside Director Stock
Option Agreement (Incorporated by reference to Exhibit 10.3 to
Registration Statement on Form S-1, Registration No. 333-36429).
10.4 Bioanalytical Systems, Inc. 1990 Employee Incentive Stock Option
Plan (Incorporated by reference to Exhibit 10.4 to Registration
Statement on Form S-1, Registration No. 333-36429).
10.5 Form of Bioanalytical Systems, Inc. 1990 Employee Incentive
Stock Option Agreement (Incorporated by reference to Exhibit
10.5 to Registration Statement on Form S-1, Registration No.
333-36429).
10.6 Bioanalytical Systems, Inc. 1997 Employee Incentive Stock Option
Plan (Incorporated by reference to Exhibit 10.26 to Registration
Statement on Form S-1, Registration No. 333-36429).
10.7 Form of Bioanalytical Systems, Inc. 1997 Employee Incentive
Stock Option Agreement (Incorporated by reference to Exhibit
10.27 to Registration Statement on Form S-1, Registration No.
333-36429).
10.8 1997 Bioanalytical Systems, Inc. Outside Director Stock Option
Plan (Incorporated by reference to Exhibit 10.28 to Registration
Statement on Form S-1, Registration No. 333-36429).
10.9 Form of Bioanalytical Systems, Inc. 1997 Outside Director Stock
Option Agreement (Incorporated by reference to Exhibit 10.29 to
Registration Statement on Form S-1, Registration No. 333-36429).
10.10 Business Loan Agreement by and between Bioanalytical Systems,
Inc., and Bank One, Indiana, N.A. dated April 1, 2001.
(Incorporated by reference to Exhibit 10.10 to Form 10-Q for the
quarter ended June 30, 2001).
10.11 Commercial Security Agreement by and between Bioanalytical
Systems, Inc. and Bank One, Indiana, N.A., dated March 1, 1998
(Incorporated by reference to Exhibit 10.15 to Form 10-Q for the
quarter ended March 31, 1998).
10.12 Negative Pledge Agreement by and between Bioanalytical Systems,
Inc. and Bank One, Indiana, N.A., dated March 1, 1998
(Incorporated by reference to Exhibit 10.16 to Form 10-Q for the
quarter ended March 31, 1998).
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10.13 Promissory Note by and between Bioanalytical Systems, Inc. and
Bank One, Indiana, NA, dated June 24, 1999 related to loan in
the amount of $3,500,000 (Incorporated by reference to Exhibit
10.18 to Form 10-Q for the quarter ended June 30, 1999).
10.14 Promissory Note for $3,500,000 executed by Bioanalytical
Systems, Inc. in favor of Bank One, Indiana, N.A. dated April 1,
2001. (Incorporated by reference to Exhibit 10.14 to Form 10-Q
for the quarter ended June 30, 2001).
11.1 Statement Regarding Computation of Per Share Earnings.
99.1 Risk factors (Incorporated by reference Exhibit 99.1 to Form
10-K for the year ended September 30, 2001).
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter for which this report is
filed.
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:
BIOANALYTICAL SYSTEMS, INC.
By /s/ PETER T. KISSINGER
---------------------------
Peter T. Kissinger
President and Chief Executive Officer
Date: February 6, 2002
By /s/ DOUGLAS P. WIETEN
---------------------------
Douglas P. Wieten
Vice President-Finance, Chief Financial Officer, and Treasurer
(Principal Financial and Accounting Officer)
Date: February 6, 2002
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