SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
Mark One
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 0-15515
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APPLIED BIOSCIENCE INTERNATIONAL INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-2734293
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4350 N. Fairfax Drive
Arlington, VA 22203-1627
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (703) 516-2490
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Indicate by checkmark 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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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 28,175,048 shares of common
stock, par value $.01 per share, as of May 1, 1995.
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APPLIED BIOSCIENCE INTERNATIONAL INC.
AND SUBSIDIARIES
The Form 10-Q for the quarterly period ended March 31, 1995
(the "Form 10-Q") of Applied Bioscience International Inc. is being
amended to revise Item No. 2 of Part I in response to the comments
of the staff of the Division of Corporation Finance of the
Securities and Exchange Commission regarding the Form 10-Q, which
comments were set forth in a letter to Kenneth H. Harper dated June
30, 1995.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS
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General
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Applied Bioscience International Inc. (the "Company")
recorded net revenues for the quarter ended March 31, 1995 of
$45,773,000, a 13.9% increase from the first quarter of 1994. Net
revenues from Pharmaco LSR, the Company's life sciences business,
were up 12.3% from the first quarter of 1994. Net revenues from
APBI Environmental Sciences Group, the Company's environmental
sciences business, were up 18.5% versus the comparable period last
year.
Net income from continuing operations for the first quarter
of 1995 was $436,000, or $0.02 per share compared to $452,000, or
$0.02 per share for the first quarter of 1994. The first quarter net
income compares favorably to the net loss from continuing operations
of $248,000, or $0.01 per share reported in the fourth quarter of
1994.
The Company is continuing to evaluate the long-term strategic
fit of its life sciences and environmental sciences businesses, as
well as the individual business units within these groups. At this
time, the Company is actively reviewing divestiture plans with
respect to its Astrix division, which sells and licenses certain
software products.
After evaluating various strategic alternatives with respect
to ENVIRON, the Company believes that retention of ENVIRON as one of
the Company's core businesses is in the best interests of the
Company's stockholders. In view of the role of ENVIRON senior
management within this business, the Company has engaged an outside
compensation consulting firm to advise the Company with respect to
the development of an appropriate incentive compensation program for
this business unit. Such an incentive program might be in addition
to, or in lieu of, the Company's existing "Economic Value Added"
compensation program but would include certain enhanced retention
features and the possible negotiation of certain employment or
retention agreements. The existing employment contracts with the
four original ENVIRON founders who continue to be active within
ENVIRON come up for renewal in September 1995.
Three Months Ended March 31, 1995 Versus Three Months Ended March
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31, 1994
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Net revenues from continuing operations increased $5,578,000
(13.9%) to $45,773,000 for the three months ended March 31, 1995,
from $40,195,000 for the three months ended March 31, 1994. Of such
increase, $3,642,000 (65.3%) was
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attributable to the Company's life sciences business, and $1,936,000
(34.7%) was attributable to the Company's environmental sciences business.
The increase in net revenues of the life sciences business
was principally due to the continued increase in demand for the
Company's clinical development services. The clinical development
services business in North America and Europe, which also includes
the Company's biostatistical services in North America and Europe,
reported a net revenue increase of $3,600,000 (33.3%) to $14,402,000
for the three months ended March 31, 1995, from $10,802,000 for the
same period last year. Net revenues from the Company's clinics, labs,
and toxicology business reported a slight increase of $42,000 (0.2%)
to $18,952,000 for thequarter as compared to $18,910,000 for the
comparable period last year. Net revenues in the clinics, labs, and
toxicology business were impacted by several project delays and
cancellations at the analytical laboratory in Richmond, Virginia and at the
toxicology laboratory in Europe.
The $1,936,000 increase in net revenues in the Company's
environmental sciences business was generated by increased volume of
consulting services provided by its ENVIRON division. ENVIRON's net
revenues increased $2,166,000 (21.1%) to $12,411,000 in the first
quarter of 1995 as compared to the first quarter of 1994.
Offsetting ENVIRON's net revenue increase versus last year was
$230,000 of miscellaneous net revenue reported in the first quarter
last year without corresponding revenue in the first quarter of
1995.
Direct costs increased in the first quarter by $4,290,000
(15.1%) over the first quarter last year. Of such increase,
$2,282,000 was attributable to Pharmaco LSR and $2,008,000 was
attributable to the Company's Environmental Sciences Group. The
increase in the direct costs of Pharmaco LSR relates to the overall
increase in business. The 10.5% increase in direct costs, primarily
higher physician costs and depreciation expense at Pharmaco LSR,
compares favorably to the net revenue increase of 12.3% previously
mentioned. Consequently, as a percentage of net revenue, direct
costs of the life sciences group decreased to 72.1% in the first
quarter of 1995 as compared to 73.3% during the first quarter last
year. In the environmental sciences business, the percentage of
direct costs to net revenues increased to 70.0% from 63.7%. The
increase was attributable to start up of the new air sciences office
in Novato, California, and increased payroll related taxes and
benefits.
Selling, general and administrative expenses increased
$971,000 (9.2%) to $11,568,000 in the first quarter of 1995 compared
to $10,597,000 for the same period last year. As a percentage of
net revenues, selling, general and administrative expenses decreased
to 25.3% in 1995 compared to 26.4% in 1994. The dollar increase was
due in part to expenses related to the Company's investment in
information technology. The investment, in the form of computer and
systems personnel, higher depreciation and amortization of hardware
and software as well as higher communications costs allow the
Company to better manage data flow and collection to improve the
overall speed and quality of service to our clients.
Operating income increased $317,000 (27.6%) to $1,467,000 in
the first three months of 1995 as compared to $1,150,000 for the
first three months of 1994. As a percentage of net revenue,
operating income increased to 3.2% in 1995 compared to 2.9% in 1994.
Interest expense, net of interest income, increased to
$758,000 in the first quarter of 1995 from $434,000 in the first
quarter of 1994 due principally to an increase in the prime rate by
approximately three hundred basis points.
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Liquidity
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During the three months ended March 31, 1995, the Company
expended $2,636,000 for capital additions. Expenditures included
$951,000 for expansion and improvement of offices and laboratory
testing facilities and $1,685,000 for new laboratory, office, and
computer equipment. Capital expenditures are continuing a trend
from the prior year with less spent on building additions than the
previous comparable period. A larger proportion of expenditures is
for computers and scientific equipment upgrades.
On May 24, 1994, the Company completed a refinancing of its
principal credit facility. The new three-year facility consists of
a term loan of $25,000,000 and a secured revolving line of credit of
$20,000,000. Approximately 84% or $21,111,000 of the term loan
accrues interest at a fixed rate of 9.25% per annum and the
remainder bears interest at the prime rate plus 1.5%. Repayment of
principal is scheduled to begin on September 1, 1995 at $892,900 per
quarter. The secured revolving line of credit accrues interest at
the prime rate plus 1.5%. The rate is subject to reduction at March
31, 1995, and each quarter thereafter if certain covenants related
to financial performance are met. The Company's financial
performance in the first quarter did not result in an interest rate
reduction. The proceeds from the loan were used to repay in full
the Company's then existing bank facility and a portion of its other
long-term debt and working capital debt. The unused portion will be
used to provide working capital and for general corporate purposes.
As of March 31, 1995, the Company has $4,467,000 cash and cash
equivalents on hand and has $17,710,000 available under its lines of
credit. During the first quarter of 1995 the Company arranged a
$3,000,000 master lease agreement to provide a means to lease rather
than acquire certain equipment for use in the United States without
drawing on its principal credit facility.
The Company believes that cash flow generated by its own
operating activities, together with its current borrowing capacity,
is adequate to finance its world-wide operations and normal growth
of its business. Further growth of the Company's business also may
be funded through additional borrowings, the sale of non-strategic
assets or through issuance of shares of common stock by the Company.
The Company expects to repay its outstanding indebtedness through
cash generated by its operations, refinancing of its outstanding
indebtedness or some combination thereof.
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SIGNATURES
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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.
APPLIED BIOSCIENCE INTERNATIONAL INC.
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(Registrant)
By /s/ Kenneth H. Harper
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President
(Chief Executive Officer)
By /s/ Jamie G. Donelan
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Controller
(Chief Accounting Officer)
Date: August 8, 1995
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