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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2000
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 #0-4829-03
NABI
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(Exact name of registrant as specified in its charter)
DELAWARE 59-1212264
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5800 PARK OF COMMERCE BOULEVARD N.W., BOCA RATON, FL 33487
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (561) 989-5800
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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, and (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
The number of shares outstanding of registrant's common stock at May 8, 2000 was
35,716,295 shares.
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
NABI
INDEX
Page
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.............................................................................3
Consolidated Balance Sheets, April 1, 2000 and December 31, 1999..........................................3
Consolidated Statements of Operations for the three-month periods ended
April 1, 2000 and March 31, 1999.....................................................................4
Consolidated Statements of Cash Flows for the three-month periods ended
April 1, 2000 and March 31, 1999.....................................................................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
ITEM 1. LEGAL PROCEEDINGS...............................................................................11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................12
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PART I Financial Information
Item 1 Financial Statements
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CONSOLIDATED BALANCE SHEETS
(Unaudited)
---------------------------------
April 1, December 31,
In Thousands Except Per Share Data 2000 1999
- ---------------------------------- -------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,874 $ 806
Trade accounts receivable, net 22,763 34,019
Inventories, net 34,665 35,932
Prepaid expenses and other assets 6,528 8,149
--------- ---------
TOTAL CURRENT ASSETS 66,830 78,906
PROPERTY AND EQUIPMENT, NET 111,081 109,138
OTHER ASSETS:
Goodwill, net 13,054 13,236
Intangible assets, net 5,830 6,028
Other, net 7,280 7,256
--------- ---------
TOTAL ASSETS $ 204,075 $ 214,564
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 12,037 $ 16,025
Accrued expenses 16,004 26,178
Notes payable 917 704
--------- ---------
TOTAL CURRENT LIABILITIES 28,958 42,907
NOTES PAYABLE 111,738 112,294
OTHER 1,460 1,186
--------- ---------
TOTAL LIABILITIES 142,156 156,387
--------- ---------
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.10 per share:
5,000 shares authorized; no shares outstanding
Common stock, par value $.10 per share: 75,000 shares authorized;
35,715 and 34,961 shares issued and outstanding, respectively 3,572 3,496
Capital in excess of par value 141,060 138,071
Accumulated deficit (82,713) (83,390)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 61,919 58,177
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 204,075 $ 214,564
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended,
--------------------------------
Dollars in Thousands, Except Per Share Data April 1, 2000 March 31, 1999
- ------------------------------------------- ------------- --------------
SALES $ 55,840 $ 58,023
COSTS AND EXPENSES:
Costs of products sold 38,462 45,229
Selling, general and administrative expense 8,435 6,483
Research and development expense 3,995 3,193
Royalty expense 2,921 2,177
Other operating expense, principally freight and amortization 500 491
-------- --------
OPERATING INCOME 1,527 450
INTEREST INCOME 126 6
INTEREST EXPENSE (1,025) (1,311)
OTHER, NET 71 (41)
-------- --------
INCOME (LOSS) BEFORE (PROVISION) BENEFIT
FOR INCOME TAXES 699 (896)
(PROVISION) BENEFIT FOR INCOME TAXES (22) 382
-------- --------
NET INCOME (LOSS) $ 677 $($514)
======== ========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 0.02 $ (0.01)
======== ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 35,386 34,907
======== ========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 36,828 34,907
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended,
----------------------------------
Dollars in Thousands April 1, 2000 March 31, 1999
- -------------------- ------------- --------------
Cash flow from operating activities:
Net income (loss) $ 677 $ (514)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 2,528 2,689
Provision for doubtful accounts 224 30
Provision for slow moving or obsolete inventory 455 815
Deferred income taxes -- (382)
Other 14 28
Change in assets and liabilities:
Decrease in trade accounts receivable 11,032 6,304
Decrease in inventories 813 943
Decrease (increase) in prepaid expenses and other assets 1,620 (390)
(Increase) decrease in other assets (172) 16
(Decrease) increase in accounts payable and accrued liabilities (13,887) 1,520
-------- --------
Total adjustments 2,627 11,573
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,304 11,059
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (3,958) (4,212)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (3,958) (4,212)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Repayments under line of credit, net (306) (5,960)
Other debt (38) 140
Proceeds from the exercise of options 3,066 3
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,722 (5,817)
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,068 1,030
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 806 1,016
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,874 $ 2,046
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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NABI
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 GENERAL
Nabi (the "Company") is nearing completion of a multi-year transition from being
a leading provider of antibody products to other pharmaceutical manufacturers to
becoming a fully integrated biopharmaceutical company, developing, manufacturing
and marketing its own products for the prevention and treatment of infectious
diseases and immunological disorders. Nabi has a portfolio of marketed products
and significant research and development capabilities that are focused on the
development and commercialization of products that prevent and treat infectious
and autoimmune diseases. Nabi currently has several clinical trials underway in
these areas and has four marketed pharmaceutical products.
The consolidated financial statements include the accounts of Nabi and its
subsidiaries. All significant intercompany accounts and transactions were
eliminated during consolidation. These statements should be read in conjunction
with the consolidated financial statements and notes thereto included in Nabi's
Annual Report to Stockholders for the year ended December 31, 1999.
In the opinion of management, the unaudited consolidated financial statements
include all adjustments necessary to present fairly, Nabi's consolidated
financial position as of April 1, 2000 and the consolidated results of its
operations for the three month periods ended April 1, 2000 and March 31, 1999.
The interim results of operations are not necessarily indicative of the results
that may occur for the fiscal year.
NOTE 2 CHANGE IN FISCAL YEAR
Effective fiscal 2000, Nabi changed the date of its fiscal year end from
December 31, 1999 to the last Saturday in December. The Company's fiscal
quarters now correspond with a four, four, five week quarter with the quarters
ending on a Saturday.
NOTE 3 INVENTORIES
The components of inventories, stated at the lower of cost (FIFO) or market, are
as follows:
April 1, December 31,
Dollars in Thousands 2000 1999
- -------------------- -------- ------------
Finished goods $ 34,819 $ 35,547
Work in process 1,160 701
Raw materials 2,510 2,960
-------- --------
38,489 39,208
Allowances for slow moving and obsolete
inventory (3,824) (3,276)
-------- --------
TOTAL $ 34,665 $ 35,932
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NOTE 4 NON-RECURRING CHARGES
During the fourth quarter of 1998, Nabi recorded a non-recurring charge that
included $13.2 million related to a strategic plan to sell or close certain
antibody collection centers and actions to reduce pre-clinical product
development activities at the Company's Rockville, Maryland facility. During
1999, the Company reduced staff levels at its Rockville facility, closed or sold
seven U.S. antibody collection centers out of the eight centers specified in the
original plan, and transferred its German antibody collection operations to a
third party.
As of April 1, 2000, $3 million of the remaining restructuring accrual primarily
relates to non-cancelable lease obligations associated with the Rockville
facility and $0.9 million is associated with unpaid severance benefits and other
costs related to disposition of the remaining antibody collection center.
Resolution of the contemplated actions relating to the remaining antibody
collection center is expected to be completed by the end of the third quarter of
2000.
A summary of the Company's restructuring activity for the first three months of
2000 is presented below:
Dollars in Thousands
- --------------------
Balance at December 31, 1999 $4,083
Activity during 2000:
Termination benefit payments (45)
Non-cancelable lease obligation payments
and other cash outflows (75)
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BALANCE AT APRIL 1, 2000 $3,963
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NOTE 5 EARNINGS PER SHARE
The following is a reconciliation between basic and diluted earnings per share
for the three months ended April 1, 2000 and March 31, 1999:
Effect of
Dilutive
Securites:
(Dollars in Thousands, Except Per Share Data) Basic EPS Stock Options Diluted EPS
- --------------------------------------------- --------- ------------- -----------
Three Months Ended April 1, 2000
- --------------------------------
Net income $677 -- $ 677
Shares 35,386 1,442 36,828
Per share $ 0.02 -- $ 0.02
------- ----- -------
Three Months Ended March 31, 1999
- ---------------------------------
Net loss $ (514) -- $ (514)
Shares 34,907 -- 34,907
Per share $ (0.01) -- $ (0.01)
======= ===== =======
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NOTE 6 COMPREHENSIVE INCOME
The components of comprehensive income for the three months ended April 1, 2000
and March 31, 1999 are as follows:
Quarter Ended,
------------------------------
Dollars in Thousands April 1, 2000 March 31, 1999
- -------------------- ------------- --------------
Net income (loss) $ 677 ($514)
Foreign currency translation loss -- (142)
----- -----
COMPREHENSIVE INCOME (LOSS) $ 677 ($656)
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NOTE 7 INDUSTRY SEGMENT INFORMATION
The following table presents information related to Nabi's two operating
business segments for the three months ended April 1, 2000 and March 31, 1999:
Quarter Ended,
--------------------------------
Dollars in Thousands April 1, 2000 March 31, 1999
- -------------------- ------------- --------------
Sales
Antibody products $ 39,619 $ 46,481
Pharmaceutical products 16,221 11,542
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TOTAL $ 55,840 $ 58,023
======== ========
Operating income
Antibody products $ (398) $ 716
Pharmaceutical products 1,925 (266)
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TOTAL $ 1,527 $ 450
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The following summary reconciles reportable segment operating profit (loss) to
income (loss) before (provision) benefit for income taxes:
Quarter Ended,
-------------------------------
Dollars in Thousands April 1, 2000 March 31, 1999
- -------------------- ------------- --------------
INCOME (LOSS) BEFORE (PROVISION)
BENEFIT FOR INCOME TAXES:
Reportable segment
operating income $ 1,527 $ 450
Unallocated interest expense (1,025) (1,311)
Unallocated other income
and expense, net 197 (35)
------- -------
Consolidated income (loss)
before (provision) benefit
for income taxes $ 699 ($ 896)
======= =======
NOTE 8 RECLASSIFICATONS
Certain items in the consolidated financial statements for the 1999 period have
been reclassified for comparative purposes.
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ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the major factors contributing to
Nabi's financial condition and results of operations for the three month periods
ended April 1, 2000 and March 31, 1999. The discussion and analysis should be
read in conjunction with the condensed consolidated financial statements and
notes thereto. All dollar amounts are expressed in thousands, except per share
amounts.
RESULTS OF OPERATIONS
The following table sets forth Nabi's results of operations expressed as a
percentage of sales:
Three Months Ended,
----------------------------------
April 1, 2000 March 31, 1999
------------- --------------
Sales 100.0 % 100.0 %
Costs of products sold 68.9 % 78.0 %
----- -----
GROSS PROFIT MARGIN 31.1 % 22.0 %
Selling, general and administrative expense 15.1 % 11.2 %
Research and development expense 7.2 % 5.5 %
Royalty expense 5.2 % 3.8 %
Other operating expense, principally
freight and amortization 0.9 % 0.8 %
----- -----
OPERATING INCOME 2.7 % 0.8 %
Interest income 0.2 % 0.0 %
Interest expense (1.8)% (2.2)%
Other, net 0.1 % (0.1)%
----- -----
Income (loss) before (provision) benefit
for income taxes 1.2 % (1.5)%
(Provision) benefit for income taxes (0.0)% 0.6 %
----- -----
NET INCOME (LOSS) 1.2 % (0.9)%
----- -----
Information concerning Nabi's sales by operating segments for the respective
periods, is set forth in the following table:
Three Months Ended,
---------------------------------------------
Segment April 1, 2000 March 31, 1999
- ------- -------------------- --------------------
Pharmaceutical Products $16,221 29.0% $11,542 19.9%
Antibody Products:
-Non-specific antibodies 25,410 45.5 32,094 55.3
-Specialty antibodies 14,209 25.5 14,387 24.8
------- ----- ------- -----
39,619 71.0 46,481 80.1
======= ===== ======= =====
TOTAL $55,840 100.0% $58,023 100.0%
======= ===== ======= =====
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THREE MONTHS ENDED APRIL 1, 2000 AND MARCH 31, 1999
SALES. Sales for the first quarter of 2000 were $55.8 million compared to $58.0
million for the first quarter of 1999, a decrease of $2.2 million. Nabi
continued to pursue its strategy of shifting the mix of revenues from low-margin
non-specific antibody products to higher margin pharmaceutical and specialty
antibody products. Pharmaceutical product sales increased in the first quarter
of 2000 by approximately 41% from the 1999 first quarter. Sales of Nabi-HB(TM)
[Hepatitis B Immune Globulin (Human)] were higher based on a full quarter of
sales in 2000, as compared to 1999 revenues which followed the late March
approval of the product by the FDA. In addition, sales of WinRho SDF(R) [Rho(D)
Immune Globulin Intravenous (Human)] were higher in the first quarter of 2000 as
compared to the first quarter of 1999 due to increased distributor demand.
Pharmaceutical sales in 2000 also reflected sales of Aloprim(TM) [(Allopurinol
sodium) for injection] which was launched in June 1999.
Total antibody sales decreased by 15% from the comparable quarter in 1999. While
sales of specialty antibodies remained essentially flat, non-specific antibody
sales decreased 21%, reflecting lower production volumes, due primarily to the
sale of six of the Company's U.S. collection centers in April 1999 and the
transfer of its German antibody collection operations to a third party in the
fourth quarter of 1999. In addition, the Company continued to face industry-wide
production challenges which led to a decline in antibody collections on a same
store basis.
GROSS PROFIT MARGIN. Gross profit and related margin for the first quarter of
2000 was $17.4 million, or 31.1% of sales, compared to $12.8 million, or 22% of
sales, in the first quarter of 1999. Substantially all of the increase in gross
profit and related margin reflects the Company's success in shifting the sales
mix toward higher-margin pharmaceutical products. The Company also benefited
from a non performance penalty arising from contractual production and delivery
shortfalls by the supplier of Autoplex(R) T [Anti-Inhibitor Coagulant Complex,
Heat Treated].
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $8.4 million, or 15.1% of sales, for the first quarter of 2000
compared to $6.5 million, or 11.2% of sales, in the first quarter of 1999. The
increase is primarily attributable to higher advertising, marketing and sales
force expenses associated with increasing pharmaceutical product sales.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $4.0
million, or 7.2% of sales, for the first quarter of 2000 compared to $3.2
million, or 5.5% of sales, in the first quarter of 1999. The increase is
primarily due to additional expenditures associated with the development of
Hepatitis B immune globulin (Human) for post-exposure prophylaxis of hepatitis B
virus ("HBV") and in preventing the reinfection of transplanted livers in HBV
positive patients. Overall, research and development expense in the first
quarter of 2000 reflected continued support for Nabi(R) StaphVAX(R)
(STAPHYLOCOCCUS AUREUS Type 5 and Type 8 Capsular Polysaccharide Conjugate
Vaccine) pivotal Phase III clinical trial. The Company has recently completed
data collection for the trial and is in the process of compiling the results
which are anticipated to be announced around the end of the third quarter of
2000.
ROYALTY EXPENSE. Royalty expense is directly related to pharmaceutical sales.
The Company incurred $2.9 million of royalty expense, or 18% of pharmaceutical
sales, in the first quarter of 2000, compared to $2.2 million, or 18.9% of
pharmaceutical sales, in the first quarter of 1999. Royalty expense decreased as
a percentage of pharmaceutical sales due to an agreement in the third quarter of
1999 limiting the amount of royalties to be paid on sales of Nabi-HB in 1999 and
2000.
INTEREST EXPENSE. Interest expense for the first quarter of 2000 was $1.0
million, or 1.8% of sales, compared to $1.3 million, or 2.2% of sales, in the
first quarter of 1999. The decrease is primarily attributable to higher amounts
of interest capitalized during the first quarter of 2000. Capitalized interest
relating primarily to construction of Nabi's biopharmaceutical manufacturing
facility in Boca Raton, Florida was approximately $1.3 million and $1.1 million
for the quarters ending April 1, 2000 and March 31, 1999, respectively.
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OTHER FACTORS. Provision for income taxes was $22,000 for 2000 compared to a
benefit of $382,000 in 1999. The 3.1% effective tax rate in the first quarter of
2000 differs from the statutory rate of 35% due to Nabi's expectation of
realizing a current year benefit from the use of a portion of its net operating
loss carryforwards from prior years.
LIQUIDITY AND CAPITAL RESOURCES
At April 1, 2000, Nabi's credit agreement provided for a revolving credit
facility of up to $45 million subject to certain borrowing base restrictions,
and a $5 million term loan. The credit agreement matures in September 2002.
Borrowings under the agreement totaled $32.2 million at April 1, 2000 as
compared to $32.5 million at December 31, 1999, and additional availability was
approximately $7.4 million at April 1, 2000. The credit agreement is secured by
substantially all of Nabi's assets, requires the maintenance of certain
financial covenants and prohibits the payment of dividends.
As of April 1, 2000, Nabi's current assets exceeded current liabilities by $37.9
million as compared to a net working capital position of $36 million at December
31, 1999. Cash and cash equivalents at April 1, 2000 were $2.9 million compared
to $0.8 million at December 31, 1999. Cash provided from operations was $3.3
million, reflecting reductions in accounts receivable, inventory and other
current assets, offset by a reduction of accounts payables and accrued
liabilities. In addition, the Company realized $3.1 million of proceeds from the
exercise of stock options. The primary uses of cash during the three months
ended April 1, 2000 were capital expenditures, principally associated with the
Company's manufacturing facility in Boca Raton, Florida, and a $0.3 million
reduction of borrowings under the revolving credit agreement.
Projected capital expenditures for the remainder of 2000 include costs
associated with the Boca Raton manufacturing facility, including capitalized
interest, the validation of a Nabi StaphVAX manufacturing capability through a
third-party contract-manufacturer or partner, the development of information
systems and related expenditures, and antibody collection center renovations.
Nabi believes that cash flow from operations and its available bank credit
facilities will be sufficient to meet its anticipated cash requirements for the
remainder of 2000. The Company is also in the process of seeking additional cash
to fund the development of its pharmaceutical product pipeline from strategic
alliances and may seek additional funding from new or existing credit facilities
and equity placements.
YEAR 2000
Prior to December 31, 1999, Nabi completed its Year 2000 readiness efforts for
business critical processes including the Desktop Computer Installation and
Donor Management System (DMS) implementation referenced in the Company's Form
10-K, filed in March 2000. The total project cost to achieve Year 2000 readiness
is estimated at $3 million dollars, including expense and capital expenditures,
not all of which were incremental to the Company's operations. These
expenditures were primarily incurred during 1998 and 1999, however, some cost
has been expended in 2000. These costs have been funded by a combination of
operating cash flows, bank credit facilities, and operating lease agreements.
Year 2000 related expenditures were approximately $124,000 in the first quarter
of 2000.
Nabi will continue to communicate with business critical suppliers and customers
as necessary and monitor new developments throughout year 2000. At this time the
company is not aware of any negative impact on its operations from the Year 2000
problem. However, given the nature of the Year 2000 problem, there can be no
absolute assurance that the Company's efforts have been fully successful. If
they have not, the Company's operations or financial condition may be materially
and adversely affected in the future.
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FACTORS TO BE CONSIDERED
The parts of this Quarterly Report on Form 10-Q captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Legal Proceedings" contain certain forward-looking statements, which involve
risks and uncertainties. Readers should refer to a discussion under "Factors to
be Considered" contained in Nabi's Annual Report on Form 10-K for the year ended
December 31, 1999 concerning certain factors that could cause Nabi's actual
results to differ materially from the results anticipated in such
forward-looking statements. Said discussion is hereby incorporated by reference
into this Quarterly Report.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nabi is a party to litigation in the ordinary course of business. In addition,
Nabi is a co-defendant with various other parties in one suit filed in the U.S.
by, or on behalf of, individuals who claim to have been infected with HIV as a
result of either using HIV-contaminated products made by the defendants other
than Nabi or having familial relations with those so infected. The claims made
against Nabi are based on negligence and strict liability. Several similar suits
previously pending against Nabi, including a purported class action, have been
dismissed. Nabi does not believe that any such litigation will have a material
adverse effect on its business, financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Exhibit 27 Financial Data Schedule (for SEC use only)
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NABI
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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.
NABI
Date: May 10, 2000 By: /s/ Thomas H. McLain
---------------------------------------------
Thomas H. McLain
Senior Vice President, Corporate Services and
Chief Financial Officer
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