1
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, 1997
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
- ------------------------------- -------------------------------
(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): (561) 989-5800
-------------------
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 9, 1997 was
34,743,416 shares.
2
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
NABI
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INDEX
PAGE
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PART I. FINANCIAL INFORMATION
----------------------
ITEM 1. FINANCIAL STATEMENTS..............................................................3
Consolidated Balance Sheet, March 31, 1997 and December 31, 1996...........................3
Consolidated Statement of Operations for the three-month periods ended
March 31, 1997 and 1996...............................................................4
Consolidated Statement of Cash Flows for the three-month periods ended
March 31, 1997 and 1996...............................................................5
Notes to Consolidated Financial Statements.................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.........................................................8
PART II. OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS................................................................10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................11
Exhibit 11 - Calculation of Earnings per Share........................................13
Exhibit 27 - Financial Data Schedule (for S.E.C. use only)............................14
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3
NABI
PART I Financial Information
Item 1 Financial Statements
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, December 31,
-----------------------------
(IN THOUSANDS) 1997 1996
- ----------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20,329 $ 18,513
Short-term investments -- 8,797
Trade accounts receivable, net 37,523 38,127
Inventories, net 34,258 28,395
Prepaid expenses and other assets 3,782 4,269
--------- ---------
TOTAL CURRENT ASSETS 95,892 98,101
PROPERTY AND EQUIPMENT, NET 66,668 60,587
OTHER ASSETS:
Excess of acquisition cost over net assets
acquired, net 17,799 18,072
Intangible assets, net 9,293 9,684
Other, net 17,502 15,698
--------- ---------
TOTAL ASSETS $ 207,154 $ 202,142
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 7,995 $ 9,800
Accrued expenses 15,750 22,484
Notes payable 4,525 2,187
--------- ---------
TOTAL CURRENT LIABILITIES 28,270 34,471
NOTES PAYABLE 91,158 81,278
OTHER 343 332
--------- ---------
TOTAL LIABILITIES 119,771 116,081
--------- ---------
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, 34,720 and 34,614 shares
issued and outstanding, respectively 3,472 3,461
Capital in excess of par value 136,385 136,424
Accumulated deficit (52,474) (53,824)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 87,383 86,061
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 207,154 $ 202,142
========= =========
The accompanying Notes are an integral part of these Financial Statements.
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4
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31,
-------------------------------
(In Thousands, Except Per Share Data) 1997 1996
- --------------------------------------------------------------------------------------------------
SALES $ 56,377 $ 58,552
COSTS AND EXPENSES:
Costs of products sold 43,185 44,839
Research and development expense 3,798 4,390
Selling, general and administrative expense 4,400 5,131
Royalty expense 1,209 1,248
Other operating expense, principally freight
and amortization 934 903
-------- --------
OPERATING INCOME 2,851 2,041
INTEREST AND OTHER INCOME 187 326
INTEREST AND OTHER EXPENSE (987) (891)
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY CHARGE 2,051 1,476
PROVISION FOR INCOME TAXES (701) (59)
-------- --------
INCOME BEFORE EXTRAORDINARY CHARGE 1,350 1,417
EXTRAORDINARY CHARGE -- (932)
-------- --------
NET INCOME $ 1,350 $ 485
======== ========
EARNINGS PER SHARE:
Income before extraordinary charge $ 0.04 $ 0.04
Extraordinary charge -- (0.03)
-------- --------
Net income $ 0.04 $ 0.01
======== ========
WEIGHTED AVERAGE NUMBER OF SHARES AND
COMMON SHARE EQUIVALENTS 35,613 35,710
======== ========
The accompanying Notes are an integral part of these Financial Statements.
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5
NABI
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
------------------------------------
(In Thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 1,350 $ 485
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,130 1,955
Provision for doubtful accounts 100 60
Extraordinary charge -- 932
Other (16) 21
Change in assets and liabilities:
Decrease (increase) in trade accounts receivable 505 (8,928)
Decrease (increase) in inventories (5,863) 890
Decrease (increase) in prepaid expenses and other assets 486 679
Decrease (increase) in other assets (2,049) (793)
Increase (decrease) in accounts payable and
accrued liabilities (8,863) (2,090)
-------- --------
Total adjustments (13,570) (7,274)
-------- --------
NET CASH USED BY OPERATING ACTIVITIES (12,220) (6,789)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of short-term investments -- (16,217)
Proceeds from maturity of short-term investments 8,850 --
Capital expenditures (7,332) (3,732)
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 1,518 (19,949)
-------- --------
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)
Borrowing (repayments) under line of credit, net 10,000 (6,760)
Other debt 2,209 (1,894)
Proceeds from the exercise of options and warrants 309 456
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,518 45,014
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,816 18,276
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 18,513 3,991
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,329 $ 22,267
======== ========
The accompanying Notes are an integral part of these Financial Statements.
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6
NABI
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- GENERAL
NABI 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.
The consolidated financial statements include the accounts of NABI 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 NABI's
Annual Report to Stockholders for the year ended December 31, 1996.
In the opinion of management, the unaudited consolidated financial statements
include all adjustments necessary to present fairly NABI's consolidated
financial position at March 31, 1997 and the consolidated results of its
operations for the three months ended March 31, 1997 and 1996. The interim
results of operations are not necessarily indicative of the results which may
occur for the fiscal year.
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NOTE 2 -- INVENTORIES
The components of inventories, stated at the lower of cost (FIFO) or market, are
as follows:
MARCH 31, DECEMBER 31,
(In Thousands) 1997 1996
--------- ------------
Finished goods $ 30,026 $ 23,610
Work in process 1,692 1,836
Raw materials 8,680 8,504
-------- --------
40,398 33,950
Less: reserves (6,140) (5,555)
-------- --------
$ 34,258 $ 28,395
======== ========
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment and related allowances for depreciation and amortization
are summarized below:
MARCH 31, DECEMBER 31,
(In Thousands) 1997 1996
--------- ------------
Land and buildings $ 7,214 $ 7,155
Furniture and fixtures 4,788 4,907
Machinery and equipment 22,513 21,531
Leasehold improvements 15,279 15,106
Construction in progress 38,287 32,298
-------- --------
Total property and equipment 88,081 80,997
Less: accumulated depreciation and
amortization (21,413) (20,410)
-------- --------
$ 66,668 $ 60,587
======== ========
Construction in progress consists primarily of costs incurred in connection with
construction of NABI's biopharmaceutical facility and includes capitalized
interest of $3,263 and $2,757 at March 31, 1997 and December 31, 1996,
respectively.
NOTE 4 -- RECLASSIFICATIONS
Certain items in the consolidated financial statements for the 1996 period have
been reclassified for comparative purposes.
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ITEM 2. 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 March 31, 1997 and 1996. 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
MARCH 31,
------------------
1997 1996
----- -----
Sales 100.0% 100.0%
Cost of products sold 76.6 76.6
----- -----
Gross profit margin 23.4 23.4
Research and development expense 6.7 7.5
Selling, general and administrative expense 7.8 8.8
Royalty expense 2.1 2.1
Other operating expense 1.7 1.5
----- -----
Operating income 5.1 3.5
Interest and other income 0.3 0.5
Interest and other expense (1.8) (1.5)
----- -----
Income before provision for income taxes and
extraordinary charge 3.6 2.5
Provision for income taxes (1.2) (0.1)
----- -----
Income before extraordinary charge 2.4 2.4
Extraordinary charge -- (1.6)
----- -----
Net income 2.4% 0.8%
===== =====
Information concerning NABI's sales by industry segment, for the respective
periods, is set forth in the following table.
THREE MONTHS ENDED MARCH 31,
-----------------------------------------
1997 1996
------------------ ------------------
SEGMENT
Plasma -Source $33,896 60.2% $30,627 52.3%
-Specialty 16,256 28.8 21,661 37.0
------- ----- ------- -----
50,152 89.0 52,288 89.3
Immunotherapeutic products 4,908 8.7 4,797 8.2
Diagnostic products and services 1,317 2.3 1,467 2.5
------- ----- ------- -----
Total $56,377 100.0% $58,552 100.0%
======= ===== ======= =====
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THREE MONTHS ENDED MARCH 31, 1997 AND 1996
------------------------------------------
SALES. Sales for the first quarter of 1997 declined by $2.2 million to $56.4
million compared to $58.6 million for the first quarter of 1996. The decrease
was primarily attributable to a decline in the volume of specialty plasma
shipments, resulting from normal quarterly fluctuations in product deliveries to
customers.
GROSS PROFIT MARGIN. Gross profit and related margin for the first quarter of
1997 was $13.2 million, or 23.4% of sales, compared to $13.7 million, or 23.4%
of sales, in the first quarter of 1996. Gross profit margins were consistent
with the prior quarter due to improved gross margins for immunotherapeutic
products, offset by the effects of lower margin plasma product sales.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $3.8
million, or 6.7% of sales, for the first quarter of 1997 compared to $4.4
million, or 7.5% of sales, in the first quarter of 1996. The decrease in
expense related primarily to the discontinuation of clinical trials for
HyperGam+CF during June 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and administrative
expense was $4.4 million, or 7.8% of sales, for the first quarter of 1997
compared to $5.1 million, or 8.8% of sales, in the first quarter of 1996. The
decrease resulted primarily from a reduction of personnel related expenses.
INTEREST AND OTHER EXPENSE, NET. Interest and other expense, net for the first
quarter of 1997 was $.8 million, or 1.4% of sales, compared to $.6 million, or
1.0% of sales, in the first quarter of 1996. The increase was primarily
attributable to higher average outstanding borrowings and less average
outstanding investments when compared to 1996.
OTHER FACTORS. Provision for income taxes was $.7 million or an effective rate
of 34% in the first quarter of 1997 compared to $59,000, or an effective rate of
4%, in the first quarter of 1996. The 34% effective tax rate for the first
quarter of 1997 differs from the statutory rate of 35% primarily due to foreign
trade income, offset by the effects of non-deductible goodwill and state income
taxes. The 4% effective tax rate for the first quarter of 1996 differs from the
statutory rate of 35% primarily due to the utilization of previously reserved
net operating loss carryforwards.
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 6.5% Convertible
Subordinated Notes issued during the first quarter of 1996.
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LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 1997, NABI's credit agreement, provided for a $20 million revolving
credit facility maturing on December 31, 1998. NABI had $10 million of
indebtedness outstanding as of March 31, 1997 under this facility which is
secured by substantially all of NABI's assets. The credit agreement contains
covenants requiring the maintenance of various financial ratios and prohibits
the payment of dividends.
As of March 31, 1997, NABI's current assets exceeded current liabilities by
$67.6 million as compared to a net working capital position of $63.6 million at
December 31, 1996.
Projected capital expenditures for 1997 include validation costs for
manufacturing facilities, development of financial and donor management systems,
and plasma center renovations. NABI believes that cash on hand, its available
bank line of credit and cash flow from operations will be sufficient to meet its
anticipated cash requirements for 1997.
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, 1996 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. There have
been no material developments in any of the legal proceedings reported in NABI's
Annual Report on Form 10-K for the year ended December 31, 1996. NABI does
not believe that any such litigation will have a material adverse effect on its
business, financial position or results of operations.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits
11 Calculation of Earnings Per Share...............................13
27 Financial Data Schedule (for S.E.C. use only)
b. Reports on Form 8-K:
None
11
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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.
NABI
DATE: May 12, 1997 By: /s/ ALFRED J. FERNANDEZ
-------------------------
ALFRED J. FERNANDEZ
Senior Vice President and
Chief Financial Officer
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1
EXHIBIT 11
NABI
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CALCULATION OF EARNINGS PER SHARE
Three Months Ended March 31,
----------------------------
(In Thousands, Except Per Share Data) 1997 1996
- -------------------------------------------------------------------------------------
Net income $ 1,350 $ 485
======= =======
Weighted average number of common shares
outstanding during the period 34,677 34,033
Add dilutive effect of common stock equivalents:
Stock options and warrants (as determined by the
application of the treasury stock method) 936 1,677
------- -------
Weighted average number of shares and common
share equivalents used in primary earnings
per share computations 35,613 35,710
======= =======
Earnings per share $ 0.04 $ 0.01
======= =======
5
1,000
3-MOS
DEC-31-1997
JAN-01-1997
MAR-31-1997
20,329
0
37,523
0
34,258
95,892
66,668
0
207,154
28,270
91,158
0
0
139,857
(52,474)
207,154
56,377
56,377
43,185
43,185
10,341
0
800
2,051
701
1,350
0
0
0
1,350
0.04
0
RECEIVABLES, INVENTORY AND PP&E REPRESENT NET AMOUNTS.
LOSS PROVISION INCLUDED IN OTHER EXPENSES.
