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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 MARCH 31, 1996
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
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): (407) 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 13, 1996
was 34,216,934 shares.
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
NABI
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INDEX
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PART I. FINANCIAL INFORMATION ------
ITEM 1. FINANCIAL STATEMENTS.................................................................. 3
Consolidated Balance Sheet, March 31, 1996 and December 31, 1995............................... 3
Consolidated Statement of Operations for the three month periods ended
March 31, 1996 and 1995.................................................................... 4
Consolidated Statement of Cash Flows for the three month periods ended
March 31, 1996 and 1995.................................................................... 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..................................................... 11
Exhibit 10.24 - Amendment No. 5 to Third Amended and Restated Revolving Credit Term Loan
and Reimbursement Agreement between NationsBank and NABI dated March 31, 1996................. 14
Exhibit 11 - Calculation of Earnings per Share................................................ 23
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PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
NABI
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
March 31, December 31,
1996 1995
=========== ============
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,267 $ 3,991
Investments 16,240 --
Trade accounts receivable, net 37,081 28,213
Inventories, net 21,756 22,646
Prepaid expenses and other assets 1,698 2,380
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TOTAL CURRENT ASSETS 99,042 57,230
PROPERTY AND EQUIPMENT, NET 45,351 42,697
OTHER ASSETS:
Excess of acquisition cost over net assets acquired, net 18,654 18,882
Intangible assets, net 10,743 11,048
Other, net 10,239 8,118
-------- --------
TOTAL ASSETS $184,029 $137,975
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 5,046 $ 6,758
Accrued expenses 18,129 18,618
Notes payable 8,689 17,164
-------- --------
TOTAL CURRENT LIABILITIES 31,864 42,540
NOTES PAYABLE 81,370 25,730
OTHER 281 263
-------- --------
TOTAL LIABILITIES 113,515 68,533
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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,
34,126 and 33,942 shares issued and outstanding, respectively 3,413 3,394
Capital in excess of par value 133,668 133,100
Accumulated deficit (66,567) (67,052)
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TOTAL STOCKHOLDERS' EQUITY 70,514 69,442
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $184,029 $137,975
======== ========
The accompanying Notes are an integral part of these Financial Statements.
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NABI
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
------- -------
SALES $59,495 $48,128
COSTS AND EXPENSES:
Costs of products sold 44,839 37,010
Research and development expense 5,333 5,518
Selling, general and administrative expense 5,131 4,549
Royalty expense 1,248 449
Other operating expense, principally freight and amortization 903 644
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OPERATING INCOME (LOSS) 2,041 (42)
INTEREST AND OTHER INCOME 326 459
INTEREST AND OTHER EXPENSE (891) (374)
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INCOME BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY CHARGE 1,476 43
PROVISION FOR INCOME TAXES (59) (1,873)
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INCOME (LOSS) BEFORE EXTRAORDINARY CHARGE 1,417 (1,830)
EXTRAORDINARY CHARGE (932) ---
------- -------
NET INCOME (LOSS) $ 485 $(1,830)
======= =======
EARNINGS (LOSS) PER SHARE:
Income (loss) before extraordinary charge $ 0.04 $ (0.05)
Extraordinary charge (0.03) ---
------- -------
Net income (loss) $ 0.01 $ (0.05)
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WEIGHTED AVERAGE NUMBER OF SHARES AND
COMMON SHARE EQUIVALENTS 35,710 33,393
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The accompanying Notes are an integral part of these Financial Statements.
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NABI
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
(UNAUDITED)
THREE MONTHS END
MARCH 31,
-----------------------
1996 1995
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ 485 $(1,830)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,955 1,558
Gain on market value of trading securities -- (93)
Provision for doubtful accounts 60 (5)
Purchase of trading securities -- (4,036)
Sales and redemptions of trading securities -- 6,912
Extraordinary charge 932 --
Other 21 28
Change in assets and liabilities:
Decrease (increase) in accounts receivable (8,928) (1,385)
Decrease (increase) in inventories 890 434
Decrease (increase) in prepaid expenses and other assets 679 (1,187)
Decrease (increase) in other assets (793) (472)
Increase (decrease) in accounts payable and accrued liabilities (2,090) (832)
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Total adjustments (7,274) 922
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NET CASH USED BY OPERATING ACTIVITIES (6,789) (908)
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CASH FLOW FROM INVESTING ACTIVITIES:
Net purchase of investments held to maturity (16,217) --
Collection on note receivable from stockholder -- 126
Capital expenditures (3,732) (4,032)
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NET CASH USED BY INVESTING ACTIVITIES (19,949) (3,906)
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CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from issuance of convertible subordinated
debentures 77,884 --
Repayments of flexible term notes (14,500) --
Repayments of term debt (10,172) (702)
Repayments under line of credit, net (6,760) (585)
Other debt (1,894) 1,589
Proceeds from the exercise of options and warrants 456 84
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NET CASH PROVIDED BY FINANCING ACTIVITIES 45,014 386
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 18,276 (4,428)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,991 12,132
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $22,267 $ 7,704
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The accompanying Notes are an integral part of these Financial Statements.
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NABI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- GENERAL
NABI (formerly North American Biologicals, Inc.) is a vertically integrated
biopharmaceutical company that supplies human blood plasma and develops and
commercializes therapeutic products for the prevention and treatment of
infectious diseases and immunological disorders.
On November 29, 1995, Univax Biologics, Inc. ("Univax"), a publicly traded
biopharmaceutical company, was merged with and into NABI. Under the terms of
the agreement and plan of merger, Univax's common stockholders received .79 of
NABI common stock for each Univax share. Additionally, Univax's preferred
stockholders received 1.047 shares of NABI common stock for each preferred
share. NABI issued an aggregate of 14,173,508 shares of its common stock for
the outstanding shares of Univax common and preferred stock. The merger was
accounted for as a pooling of interests and accordingly, the prior period
financial statements have been combined.
The consolidated financial statements include the accounts of NABI (formerly
North American Biologicals, Inc.) (the "Company") and its subsidiaries. All
significant intercompany accounts and transactions are eliminated in
consolidation. These statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report to Stockholders for the year ended December 31, 1995.
In the opinion of management, the unaudited consolidated financial statements
include all adjustments necessary to present fairly the Company's consolidated
financial position at March 31, 1996 and the consolidated results of its
operations for the three months ended March 31, 1996 and 1995. The interim
results of operations are not necessarily indicative of the results which may
occur for the fiscal year.
NOTE 2 -- INVESTMENTS
At March 31, 1996, the Company had approximately $16.2 million in investments.
The investments consist of securities issued or guaranteed by the U.S. Treasury
and debt instruments including US Government Agency securities and high-quality
commercial paper.
All the investments are classified as held to maturity and are stated at
amortized cost. The carrying value of these investments approximates fair
value.
(In Thousands) MARCH 31, DECEMBER 31,
1996 1995
========= ============
U.S. Treasury Bill $ 4,761 --
U.S. agencies 9,524 --
Corporate debt securities 1,955 --
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Total $16,240 --
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NOTE 3 -- INVENTORIES
The components of inventories, stated at the lower of cost (FIFO) or market,
are as follows:
MARCH 31, DECEMBER 31,
(In Thousands) 1996 1995
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Finished goods $18,849 $19,054
Work in process 1,562 1,255
Raw materials 6,685 6,405
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27,096 26,714
Less: valuation allowance (5,340) (4,068)
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$21,756 $22,646
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NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment and related allowances for depreciation and amortization
are summarized below:
MARCH 31, DECEMBER 31,
(In Thousands) 1996 1995
========== ============
Land and buildings $ 5,573 $ 5,551
Furniture and fixtures 3,802 3,691
Machinery and equipment 20,290 19,443
Leasehold improvements 12,137 12,055
Construction in progress 20,890 18,311
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Total property and equipment 62,692 59,051
Less: accumulated depreciation and
amortization (17,341) (16,354)
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$45,351 $42,697
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Interest capitalized in connection with construction of NABI's
biopharmaceutical facility was $1,463 and $932 at March 31, 1996 and December
31, 1995, respectively.
NOTE 5 -- SUBORDINATED CONVERTIBLE NOTES
During the first quarter of 1996, NABI issued $80.5 million of 6.5% convertible
subordinated notes due February 1, 2003 ("Notes") in a private placement. The
Notes are convertible into NABI common stock at a conversion price of $14 per
share at any time after 60 days following the date of original issuance and
prior to maturity, unless previously redeemed or repurchased. At any time on
or after February 4, 1999, the Notes may be redeemed at NABI's option without
premium. A total of 5,750,000 shares of common stock have been reserved for
issuance upon conversion of the Notes. NABI utilized a portion of the net
proceeds of the offering to repay a $10 million term loan, approximately $12.2
million under a revolving credit facility and $14.5 million of an $18 million
flexible term notes facility.
In connection with the early extinguishment of the bank debt through the
application of the net proceeds of the Notes, NABI incurred an extraordinary
charge of approximately $932,000 in the first quarter of 1996.
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NOTE 6 -- INCOME TAXES
For the quarter ended March 31, 1996, the provision for income taxes is
comprised solely of state income taxes since NABI has recognized net deferred
tax benefits equal to its current federal income tax provision.
NOTE 7 -- RECLASSIFICATIONS
Certain items in the consolidated financial statements for the 1995 periods
have been reclassified for comparative purposes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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The following is a discussion and analysis of the major factors contributing to
the Company's financial condition and results of operations for the three month
periods ended March 31, 1996 and 1995. The discussion and analysis should be
read in conjunction with the condensed consolidated financial statements and
notes thereto. All amounts are expressed in thousands of dollars, except per
share amounts.
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations expressed as
a percentage of sales:
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1995
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Sales 100.0% 100.0%
Cost of products sold 75.4 76.9
----- -----
Gross profit margin 24.6 23.1
Research and development expense 9.0 11.5
Selling, general and administrative expense 8.6 9.5
Royalty expense 2.1 0.9
Other operating expense 1.5 1.3
----- -----
Operating income (loss) 3.4 (0.1)
Interest and other income 0.6 1.0
Interest and other expense (1.5) (0.8)
----- -----
Income before provision for income taxes and
extraordinary charge 2.5 0.1
Provision for income taxes (0.1) (3.9)
----- -----
Income (loss) before extraordinary charge 2.4 (3.8)
Extraordinary charge (1.6) ---
----- -----
Net income (loss) 0.8% (3.8)%
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Information concerning NABI's sales by industry segment, for the respective
periods, is set forth in the following table. All dollar amounts set forth in
the table are expressed in thousands.
THREE MONTHS ENDED MARCH 31,
---------------------------------------------
1996 % 1995 %
------- ----- ------- -----
Segment
- -------
Plasma -Source $30,627 51.5% $28,271 58.7%
-Specialty 21,661 36.4 13,661 28.4
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52,288 87.9 41,932 87.1
Immunotherapeutic products 4,797 8.1 2,601 5.4
Diagnostic products and services 1,467 2.4 1,770 3.7
Research and development 943 1.6 1,825 3.8
------- ----- ------- -----
Total $59,495 100.0% $48,128 100.0%
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THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The Company achieved record sales for the quarter ended March 31, 1996.
Operating income rose to $2 million in the first quarter of 1996 compared to an
operating loss of $42,000 in the comparable 1995 quarter. Net income for the
first quarter of 1996 was approximately $.5 million or $0.01 per share, versus
a net loss of $1.8 million or $0.05 per share in the first quarter of 1995.
Sales. Sales for the first quarter of 1996 rose 24% to $59.5 million compared
to $48.1 million for the first quarter of 1995. The increase was primarily
attributable to increased volume of plasma shipments, primarily specialty
plasmas.
Gross profit margin. Gross profit and related margin for the first quarter of
1996 was $14.7 million, or 24.6% of sales, compared to $11.1 million, or 23.1%
of sales, in the first quarter of 1995. An improved sales mix, primarily from
increased sales of higher margin specialty plasmas, and increased
immunotherapeutic sales, accounted for the improved profitability.
Selling, general and administrative expense. Selling, general and
administrative expense was $5.1 million, or 8.6% of sales, for the first
quarter of 1996 compared to $4.5 million, or 9.5% of sales, in the first
quarter of 1995. While expenses decreased as a percentage of sales, the dollar
increase resulted primarily from additional personnel and sales and marketing
expenses related to the product launch of WinRho SD in mid 1995.
Royalty expense. Royalty expense for the first quarter of 1996 was $1.2
million, or 2.1% of sales, compared to $.4 million or .9% of sales, in the
first quarter of 1995. The increase resulted primarily from royalties
associated with sales of WinRho SD in the first quarter of 1996.
Interest and other expense. Interest and other expense for the first quarter
of 1996 was $.9 million, or 1.5% of sales, compared to $.4 million, or .8% of
sales, in the first quarter of 1995. The increase was primarily attributable
to interest expense associated with the convertible subordinated notes issued
during the first quarter of 1996.
Other factors. Provision for income taxes was $59,000 or an effective rate of
4% in the first quarter of 1996, compared to $1.9 million in the first quarter
of 1995. The effective tax rate differs from the statutory rate of 35%
primarily due to the reversal of a portion of the valuation allowance
associated with NOL carryforwards. The provision for income taxes in the first
quarter of 1995 reflects income taxes on NABI's stand-alone pre-tax income
which could not be offset by pre-merger losses.
The first quarter of 1996 reflects an extraordinary charge of $.9 million, or
$.03 per share, due to the immediate recognition and expense of debt issue
costs associated with NABI's early extinguishment of its bank debt through the
application of a portion of the net proceeds of the convertible subordinated
notes issued during the first quarter of 1996.
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LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1996, NABI issued $80.5 million of 6.5% convertible
subordinated notes due 2003 ("Notes") in a private placement. A portion of the
net proceeds was used to repay a majority of NABI's outstanding bank
indebtedness aggregating approximately $22.2 million. NABI also intends to use
the net proceeds for the repayment and cancellation of $18 million of flexible
term notes as they mature at varying dates through May 15, 1996. As of March
31, 1996, $14.5 million of flexible term notes have been repaid.
As of March 31, 1996, the Company's current assets exceeded current liabilities
by $67.2 million as compared to a net working capital position of $14.7 million
at December 31, 1995. The increase in working capital was principally due to
the net proceeds from the issuance of the Notes. In addition, NABI's bank
credit agreement, as amended through March 31, 1996, provides for a $20 million
revolving credit facility. At March 31, 1996, NABI had no amounts outstanding
under this credit facility.
The Company believes that cash on hand, available bank line of credit and cash
flow from operations will be sufficient to meet its anticipated cash needs for
the remainder of fiscal 1996.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NABI is a party to litigation in the ordinary course of business. NABI does
not believe that any such litigation will have a material adverse effect on its
business, financial position or results of operations.
In addition, NABI is a co-defendant with various other parties in numerous
suits filed in the U.S. and Canada brought by individuals or their
representatives 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 against NABI
generally are based on either or both negligence and strict liability. One of
the suits, filed in the Circuit Court for the Eleventh Judicial Circuit of Dade
County, Florida on May 23, 1995 (Case No. 95-10489 CA 02), purports to be a
class action. The defendants in this suit, other than NABI, include Bayer,
Armour Pharmaceutical Company, Rhone-Poulenc Rorer, Inc., Baxter, Alpha
Therapeutic Corporation and The National Hemophilia Foundation. The suits
filed in Canada seek to impose liability on NABI as the successor to a company
acquired by NABI in 1986.
NABI denies all claims against it in these suits and intends to vigorously
defend the cases. Although NABI does not believe that any such litigation will
have a material adverse effect on its business, financial position or results
of operations, the defense of these lawsuits can be expensive and
time-consuming, regardless of the outcome, and an adverse result in one or more
of these lawsuits could have a material adverse effect on NABI's business,
financial condition and results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.24 Amendment No. 5 to Third Amended and Restated Revolving Credit Term Loan
and Reimbursement Agreement between NationsBank and NABI dated March 31, 1996.... 14
11 Calculation of Earnings Per Share................................................ 23
27 Financial Data Schedule (For SEC use only)
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b. Reports on Form 8-K:
On January 22, 1996, NABI filed a current report on Form 8-K, reporting under
Item 5 thereof, the proposed issuance of convertible subordinated notes and the
announcement of the Company name change and trading symbol.
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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 13, 1996 By: /s/ Alfred J. Fernandez
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ALFRED J. FERNANDEZ
Senior Vice President and
Chief Financial Officer
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