------------------------------------------------------------------------------
------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED JUNE 30, 2001 COMMISSION FILE NUMBER 0-8640
SYNCOR INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0229124
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6464 CANOGA AVENUE, WOODLAND HILLS, CALIFORNIA 91367
(Address of principal executive offices) (Zip Code)
(818) 737-4000
(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 __
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of June 30, 2001,
24,410,743 shares of $.05 par value common stock were outstanding.
------------------------------------------------------------------------------
------------------------------------------------------------------------------
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
INDEX
_____
PAGE
____
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Balance Sheets as of
June 30, 2001 and December 31, 2000 . . . . . . . . . . . 3
Statements of Income for Three Months
Ended June 30, 2001 and 2000 . . . . . . . . . . . . . . . 4
Statements of Income for Six Months
Ended June 30, 2001 and 2000 . . . . . . . . . . . . . . . 5
Statements of Cash Flows for Six Months
Ended June 30, 2001 and 2000 . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition . . . . . . . . . . . . . . . . . 11
Item 3. Quantitative and Qualitative Disclosures
about Market Risks . . . . . . . . . . . . . . . . . 13
Part II. Other Information . . . . . . . . . . . . . . . . . . 14
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
JUNE 30, DECEMBER 31,
2001 2000
_________ ____________
ASSETS
Current assets:
Cash and cash equivalents $ 28,907 $ 24,330
Short-term investments 11,855 4,156
Trade receivables, net 96,949 81,716
Patient receivables, net 48,362 37,686
Inventory 17,848 59,926
Prepaids and other current assets 29,644 16,023
________ ________
Total current assets 233,565 223,837
Marketable investment securities 1,193 1,190
Property and equipment, net 144,843 114,286
Excess of purchase price over net assets acquired, net 114,162 108,530
Other assets 19,416 22,728
________ ________
$513,179 $470,571
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 58,374 $ 83,683
Accrued liabilities 22,873 22,371
Accrued wages and related costs 13,279 19,796
Federal and state taxes payable 4,107 5,543
Current maturities of long-term debt 10,816 12,091
________ ________
Total current liabilities 109,449 143,484
Long-term debt, net of current maturities 184,452 137,886
Deferred taxes 5,456 3,321
Stockholders' equity:
Common stock, $.05 par value 1,396 1,376
Additional paid-in capital 115,671 107,268
Notes receivable-related parties (5,327) (16,796)
Employee stock ownership loan guarantee (843) (1,685)
Accumulated other comprehensive income (1,299) (1,245)
Retained earnings 135,208 114,019
Treasury stock, at cost; 3,483 shares at June 30,
2001 and 3,072 shares at December 31, 2000 (30,984) (17,057)
________ ________
Net stockholders' equity 213,822 185,880
________ ________
$513,179 $470,571
======== ========
See notes to condensed consolidated financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
THREE MONTHS ENDED JUNE 30,
___________________________
2001 2000
________ ________
Net sales $187,692 $154,366
Cost of sales 115,513 98,887
________ ________
Gross profit 72,179 55,479
Operating, selling and administrative expenses 41,807 32,944
Depreciation and amortization 9,041 6,489
________ ________
Operating income 21,331 16,046
Other expense, net (3,608) (911)
________ ________
Income before taxes 17,723 15,135
Provision for income taxes 6,741 6,057
________ ________
Net income $ 10,982 $ 9,078
======== ========
Net income per share - Basic $ .45 $ .38
======== ========
Weighted average shares outstanding - Basic 24,405 23,772
======== ========
Net income per share - Diluted $ .41 $ .34
======== ========
Weighted average shares outstanding - Diluted 26,936 26,328
======== ========
See notes to condensed consolidated financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(in thousands, except per share data)
SIX MONTHS ENDED JUNE 30,
_________________________
2001 2000
________ ________
Net sales $369,108 $303,324
Cost of sales 228,240 196,887
________ ________
Gross profit 140,868 106,437
Operating, selling and administrative expenses 80,818 64,952
Depreciation and amortization 17,700 11,771
________ ________
Operating income 42,350 29,714
Other expense, net (7,616) (2,108)
________ ________
Income before taxes 34,734 27,606
Provision for income taxes 13,545 11,048
________ ________
Net income $ 21,189 $ 16,558
======== ========
Net income per share - Basic $ 0.87 $ 70
======== ========
Weighted average shares outstanding - Basic 24,439 23,748
======== ========
Net income per share - Diluted $ 0.78 $ .64
======== ========
Weighted average shares outstanding - Diluted 27,008 25,838
======== ========
See notes to condensed consolidated financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
SIX MONTHS ENDED JUNE 30,
_________________________
2001 2000
________ ________
Cash flows from operating activities:
Net income $21,189 $16,558
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,700 11,771
Provision for losses on receivables 4,085 3,023
Amortization of ESSOP loan guarantee 842 843
Decrease (increase) in:
Accounts receivable, trade (15,723) (8,773)
Accounts receivable, patient (11,844) (9,366)
Inventory 42,151 4,653
Other current assets (11,771) (3,314)
Other assets 3,374 994
Increase (decrease) in:
Accounts payable (25,327) 1,041
Accrued liabilities 2,495 (676)
Accrued wages and related costs (6,543) (2,602)
Federal and state taxes payable 1,678 (1,877)
________ ________
Net cash provided by operating activities 22,306 12,275
________ ________
Cash flows from investing activities:
Purchase of property and equipment, net (27,477) (12,885)
Acquisitions of businesses, net of cash acquired (18,132) (11,471)
Net increase in short-term investments (7,672) (2,075)
Net increase in long-term investments (3) 1
Unrealized gain on investments 3 133
________ ________
Net cash used in investing activities (53,281) (26,297)
________ ________
Cash flow from financing activities:
Proceeds from long-term debt 39,362 9,884
Repayment of long-term debt (6,622) (1,140)
Note receivable-related parties 11,469 1,453
Issuance of common stock 5,320 9,373
Reacquisition of common stock for treasury (13,927) (3,431)
________ ________
Net cash provided by financing activities 35,602 16,139
________ ________
Net increase in cash and cash equivalents 4,627 2,117
Effect of exchange rate on cash (50) (89)
Cash and cash equivalents at beginning of period 24,330 13,352
________ ________
Cash and cash equivalents at end of period $28,907 $15,380
======== ========
See notes to condensed consolidated financial statements.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL. The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal
recurring accruals) considered necessary for a fair
presentation have been included. The results of the six months
ended June 30, 2001, are not necessarily indicative of the
results to be expected for the full year. For further
information, refer to the consolidated financial statements
and footnotes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2000. Certain line items in
the prior year's consolidated condensed financial statements
have been reclassified to conform to the current year's
presentation.
2. NEW ACCOUNTING STANDARDS. In July 2001, the FASB issued Statement
No. 141, Business Combinations, and Statement No. 142, Goodwill and
Other Intangible Assets. Statement 141 requires that the purchase
method of accounting be used for all business combinations initiated
after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also
specifies criteria intangible assets acquired in a purchase method
business combination must meet to be recognized and reported apart
from goodwill, noting that any purchase price allocable to an
assembled workforce may not be accounted for separately. Statement
142 will require that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of
Statement 142. Statement 142 will also require that intangible assets
with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of.
The Company is required to adopt the provisions of Statement 141
immediately, except with regard to business combinations initiated
prior to July 1, 2001, which it expects to account for using the
pooling-of-interests method, and Statement 142 effective January 1,
2002.* Furthermore, any goodwill and any intangible asset determined
to have an indefinite useful life that are acquired in a purchase
business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in
accordance with the appropriate pre-Statement 142 accounting
literature. Goodwill and intangible assets acquired in business
combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of Statement 142.
Statement 141 will require upon adoption of Statement 142, that the
Company evaluate its existing intangible assets and goodwill that
were acquired in a prior purchase business combination, and to make any
necessary reclassifications in order to conform with the new criteria
in Statement 141 for recognition apart from goodwill. Upon adoption of
Statement 142, the Company will be required to reassess the useful
lives and residual values of all intangible assets acquired in purchase
business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In
addition, to the extent an intangible asset is identified as having an
indefinite useful life, the Company will be required to test the
intangible asset for impairment in accordance with the provisions of
Statement 142 within the first interim period. Any impairment loss
will be measured as of the date of adoption and recognized as the
cumulative effect of a change in accounting principle in the first
interim period.
In connection with the transitional goodwill impairment evaluation,
Statement 142 will require the Company to perform an assessment of
whether there is an indication that goodwill is impaired as of the
date of adoption. To accomplish this the Company must identify
its reporting units and determine the carrying value of each
reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting unit's as
of the date of adoption. The Company will then have up to six months
from the date of adoption to determine the fair value of each reporting
unit and compare it to the reporting unit's carrying amount. To the
extent a reporting unit's carrying amount exceeds its fair value, an
indication exists that the reporting unit's goodwill may be impaired
____________________________
* Companies with fiscal year ends beginning after March 15, 2001, who have
not yet issued financial statements for their first interim period may
early adopt Statement 142.
and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must
compare the implied fair value of the reporting unit's goodwill,
determined by allocating the reporting unit's fair value to all of it
assets (recognized and unrecognized) and liabilities in a manner similar
to a purchase price allocation in accordance with Statement 141, to its
carrying amount, both of which would be measured as of the date of
adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any
transitional impairment loss will be recognized as the cumulative effect
of a change in accounting principle in the Company's statement of
earnings.
As of the date of adoption, the Company expects to have unamortized
goodwill in the amount of $114,162, unamortized identifiable intangible
assets in the amount of $19,416, all of which will be subject to the
transition provisions of Statements 141 and 142. Amortization expense
related to goodwill was $3,220 and $3,083 for the year ended December
31, 2000 and the six months ended June 30, 2001, respectively. Because
of the extensive effort needed to comply with adopting Statements 141
and 142, it is not practicable to reasonably estimate the impact of
adopting these Statements on the Company's financial statements at the
date of this report, including whether any transitional impairment
losses will be required to be recognized as the cumulative effect of a
change in accounting principle.
3. COMPREHENSIVE INCOME. Other comprehensive income includes
foreign currency translation adjustments and net unrealized gains
and losses on investments in equity securities. Such amounts are
as follows:
THREE MONTHS ENDED
__________________
June 30, 2001 June 30, 2000
_____________ _____________
Tax Tax
Before-tax (expense) Net of Tax Before-Tax (expense) Net-of Tax
Amount or benefit Amount Amount or Benefit Amount
____________________________________________________________________
Foreign currency translation
adjustments 82 - 82 165 - 165
Unrealized gains (losses) on
investments:
Unrealized holding gains
(losses) arising during
period - - - 110 (44) 66
____________________________________________________________________
Other comprehensive income 82 - 82 275 (44) 231
Net income 17,723 (6,741) 10,982 15,135 (6,057) 9,078
____________________________________________________________________
Total comprehensive income $17,805 $(6,741) $11,064 $15,410 $(6,101) $9,309
====================================================================
SIX MONTHS ENDED
________________
June 30, 2001 June 30, 2000
_____________ _____________
Tax Tax
Before-tax (expense) Net of Tax Before-Tax (expense) Net-of Tax
Amount or benefit Amount Amount or Benefit Amount
____________________________________________________________________
Foreign currency translation
adjustments 57 - 57 91 - 91
Unrealized gains (losses) on
investments:
Unrealized holding gains
(losses) arising during
period 4 (1) 3 222 (89) 133
____________________________________________________________________
Other comprehensive income 61 (1) 60 313 (89) 224
Net income 34,734 (13,545) 21,189 27,606 (11,048) 16,558
____________________________________________________________________
Total comprehensive income $34,795 $(13,546) $21,249 $27,919 $(11,137) $16,782
====================================================================
4. SEGMENT INFORMATION. Syncor has identified three primary
operating segments: U.S. Pharmacy Services, U.S. Medical Imaging
and International Operations. Segment selection was based upon
internal organizational structures, the process by which these
operations are managed and evaluated, the availability of
separate financial results, and materiality considerations.
Segment detail is summarized as follows:
THREE MONTHS ENDED
__________________
U.S. Pharmacy Services Business June 30, 2001 June 30, 2000
_______________________________ _____________ _____________
Revenues $137,715 $123,802
Operating Income $ 20,356 $ 15,930
U.S. Medical Imaging Business
_____________________________
Revenues $ 39,169 $ 22,541
Operating Income $ 4,073 $ 3,124
International Operations
________________________
Revenues $ 10,808 $ 8,023
Operating Income $ 859 $ 101
Unallocated Corporate
_____________________
Operating Loss $ (3,957) $ (3,109)
SIX MONTHS ENDED
________________
U.S. Pharmacy Services Business June 30, 2001 June 30, 2000
_______________________________ _____________ _____________
Revenues $271,024 $246,012
Operating Income $ 40,160 $ 30,695
U.S. Medical Imaging Business
_____________________________
Revenues $ 76,811 $ 40,468
Operating Income $ 8,290 $ 4,810
International Operations
________________________
Revenues $ 21,273 $ 16,844
Operating Income $ 1,212 $ 885
Unallocated Corporate
_____________________
Operating Loss $ (7,312) $ (6,676)
5. NET INCOME PER SHARE. Basic earnings per share (EPS)
amounts are computed by dividing earnings applicable to common
stockholders by the average number of shares outstanding. Diluted
EPS amounts assume the issuance of common stock for all
potentially dilutive equivalents outstanding. Anti-dilutive
outstanding stock options have been excluded from the diluted
calculation.
The reconciliation of the numerator and denominators of the
basic and diluted earnings per share computations are as
follows for the three and six months ended June 30, 2001 and
2000:
THREE MONTHS ENDED
__________________
June 30, 2001 June 30, 2000
__________________________________________________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
____________________________________________________________________________________________
Net income $10,982 $9,078
Basic EPS $10,982 24,405 $.45 $9,078 23,772 $.38
____ ____
Effect of Dilutive
Stock Options 2,531 2,556
_____ _____
Diluted EPS $10,982 26,936 $.41 $9,078 26,328 $.34
____ ____
SIX MONTHS ENDED
________________
June 30, 2001 June 30, 2000
__________________________________________________________________________
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
_____________________________________________________________________________________________
Net income $21,189 $16,558
Basic EPS $21,189 24,439 $.87 $16,558 23,748 $.70
____ ____
Effect of Dilutive
Stock Options 2,569 2,090
_____ _____
Diluted EPS $21,189 27,008 $.78 $16,558 25,838 $.64
____ ____
6. NOTES RECEIVABLE-RELATED PARTIES. We initiated a Senior
Management Stock Purchase Plan effective June 16, 1998,
pursuant to which our officers and key employees purchased
shares of Syncor stock. The shares were paid with a five-year
interest bearing promissory note payable to us. Interest on
each note is payable on each anniversary date, with the entire
outstanding principal and unpaid interest due on the fifth
anniversary date.
7. ACQUISITION OF BUSINESSES. During the second quarter of 2001,
we made two international division investments. We acquired the
exclusive right to provide management services to an oncology
center in Brazil in exchange for $1.95 million. We also acquired
a distributor and manufacturer of diagnostic radiopharmaceuticals
in Australia for a purchase price of $.7 million.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000
NET SALES
_________
Consolidated net sales for the three months ended June 30, 2001
increased 21.6% or $33.3 million to $187.7 million versus $154.4
million for the second quarter of 2000. Consolidated net sales
for the six months ended June 30, 2001 increased 21.7% or $65.8
million to $369.1 million versus $303.3 million for the same
period of the prior year.
U.S. PHARMACY SERVICES BUSINESS
Our Pharmacy Services business grew at a pace of 11.2% for the
current quarter and 10.2% year-to-date, which is a result of
continued growth in both the overall market place and the
Cardiology sector of the Company's business. Our overall year-
over-year growth rate for the Cardiology sector was approximately
12% for the quarter and year-to-date. Sales of Cardiolite(R), a
proprietary technetium-based heart imaging agent to which the
Company has preferential U.S. distribution rights, led the growth
in Cardiology with approximately a 15% growth rate for both the
quarter and year-to-date. We implemented price increases of
approximately 3.5% in both 2000 and 2001 which contributed to the
sales growth.
U.S. MEDICAL IMAGING BUSINESS
We continue to grow the medical imaging business both as a result
of the acquisition of sites and growth at existing sites.
Overall, sales have increased year-over-year 73.8% for the
quarter and nearly 90% year-to-date. Same-store sales growth for
the six months ended June 30, 2001 was approximately 15% or $4.5
million and represented 12% of the increase. Sales growth has
also been due to a large imaging center acquisition in late
September 2000 which accounts for $11.8 million or 52.2% for the
quarter and $23.4 million or 57.9% year-to-date. Quarterly
revenues associated with this acquisition are included in operating
results for the six months ended June 30, 2001 but not for the
corresponding period of the prior year. At quarter end, we had 63
domestic imaging centers compared to 42 for the comparable quarter
in 2000. We expect to continue to grow this business through a
combination of growth in existing sites and acquisitions in certain
strategic geographic regions. In order to accomplish these goals,
we continue to devote capital for key management positions,
strategic systems initiatives, equipment upgrades and replacements
at imaging centers, and the purchase of new imaging equipment such
as PET scanners.
INTERNATIONAL OPERATIONS
Our international operations continue to grow and sales for the
quarter increased 34.7% as compared to the prior year and
increased 26.7% on a year-to-date basis. Same-store growth was
8.3% for the quarter and was impacted by Taiwan sites, which
reported lower sales due to a slowdown in government health
funding. Excluding Taiwan, same-store sales growth was 18.4% for
the quarter. We generated $4.5 million of additional revenues
for the six months ended June 30, 2001 from sites that we opened
ourselves and acquired during 2000. We look for the continued
expansion of this segment as our existing operations mature and
we complete further strategic acquisitions.
GROSS PROFIT
____________
Gross profit for the three months ended June 30, 2001 increased
$16.7 million or 30.1% to $72.2 million. Year to date gross
profit increased $34.4 million or 32.3% to $140.9 million. As a
percentage of net sales, gross margins reached 38.5% for the
second quarter ended June 30, 2001 and 38.2% year-to-date
compared to 35.9% and 35.1% for the respective periods in 2000.
U.S. PHARMACY SERVICES BUSINESS
The gross profit for the pharmacy services business continues to
improve. Our margin increased from 28.8% in the second quarter of
2000 to 29.8% in 2001. Year to date, this margin increased from
28.7% in 2000 to 29.6% in 2001. These improvements are due to
price increases on products, the shift from lower margin products
to Cardiolite(R) and continued leverage of our labor and delivery
resources.
U.S. MEDICAL IMAGING BUSINESS
The gross profit margin for this group decreased from 72.3% to
67.1% for the second quarter of 2001 as compared to the prior
year and has declined from 71.2% to 66.8% on a year to date
basis. This decline is principally from two factors. The first
is the increase in the number of full modality sites as compared
to the previous year. We increased the number of full modality
sites from nine at June 30, 2000 to twenty at June 30, 2001
because many local insurance groups prefer to contract with
imaging centers that offer all modalities. Consequently,
insurance groups do not have to enter into multiple contracts.
Our full modality sites generally have a lower gross profit
margin due to lower average scan fees and higher operating costs.
The second reason for the margin decline is that we experienced
an increase in reading fees that we pay to our contracted
radiologists.
INTERNATIONAL OPERATIONS
The gross profit margin for this segment increased to 45.2% from
43.2% in the second quarter of 2001 as compared to the second
quarter of 2000 and to 44.1% from 42.2% on a year-to-date basis.
These margins have improved as volumes increase and efficiencies
improve at our pharmacy sites. Our overall mix of revenues from
imaging centers has also contributed to higher margins, as
imaging margins are traditionally higher than pharmacy margins.
OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
______________________________________________
Operating, Selling and Administration costs increased 27.1% or
$11.4 million for the second quarter 2001 as compared to the
prior year. These costs increased 21.9% or $27.3 million on a
year-to-date basis. The ratio of these expenses to sales
increased slightly to 22.3% from 21.3% in the comparative quarter
in 2000. Year-to-date, these costs increased from 21.4% in 2000
to 21.9% in 2001. The primary reason this percentage remained
relatively flat in the quarter and year-to-date was that we
accrued bonuses, which are linked to reaching certain stock price
levels, and certain other performance bonuses at a higher rate
during 2000 than in 2001.
DEPRECIATION AND AMORTIZATION
_____________________________
Depreciation and amortization increased by $2.6 million or 39.3%
to $9.0 million for the quarter ended June 30, 2001, compared to the
second quarter of 2000 and $5.9 million or 50.4% to $17.7 million
year-to-date. These increases were primarily the result of
depreciation, goodwill and non-compete costs associated with our
imaging business acquisitions, which accounts for $1.9 million of
this increase for the quarter and $4.4 million year-to-date.
Additionally, we have invested capital in international sites
(primarily imaging equipment), which contributed about $.6
million additionally of this increase on a year-to-date basis.
OTHER EXPENSE, Net
___________________
The change in Other Expense, Net was primarily the result of
increased interest expense for acquisition debt incurred since
the second quarter of 2000.
ACQUISITION OF BUSINESSES
_________________________
During the second quarter of 2001, we made two international
division investments. We acquired the exclusive right to provide
management services to an oncology center in Brazil in exchange
for $1.95 million. We also acquired a distributor and
manufacturer of diagnostic radiopharmaceuticals in Australia for
a purchase price of $.7 million.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
We had cash, cash equivalents and investments of $41.3 million at
June 30, 2001 compared with $29.7 million at December 31, 2000.
Our total debt of $195.3 million at June 30, 2001 reflects an
increase of $45.3 million when compared to the balance of $150.0
million at December 31, 2000. The increase for the six months
ended June 30, 2001 results primarily from the financing of
acquisitions, which required approximately $18.1 million and
capital additions which exceeded cash provided by operations by
$5.1 million. In addition, since December 31, 2000, we repurchased
411,000 shares of our stock at a value of $13.9 million for treasury
stock. Working capital increased by $43.8 million to $124.1 million
at June 30, 2001 compared to $80.3 million at December 31, 2000.
We believe that sufficient internal and external sources exist to
fund operations and future expansion plans. We have $41.9
million in available credit on the $190 million credit line
available at June 30, 2001. We increased our credit line
facility to $200 million on July 25, 2001.
RECENT DEVELOPMENTS
___________________
In June 2001, the Company and DuPont announced that they agreed to
forego the automatic renewal provision in their current distribution
agreement, which remains in effect through 2003. The automatic renewal
provision would have caused the distribution agreement to automatically
renew in 2004. Both companies announced that they are working together
to explore the development of an extended distribution agreement that
would take effect after the expiration of the existing distribution
agreement at the end of 2003. Under the distribution agreement, we
have preferred distribution rights for Cardiolite(R) from DuPont.
Cardiolite(R) accounted for 44.8% of our net sales in 2000.
FORWARD LOOKING STATEMENTS
__________________________
Except for the historical information and discussions contained
herein, statements contained in this Report on Form 10-Q may
constitute "forward looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These
statements involve a number of risks, uncertainties and other
factors that could cause actual results to differ materially,
including: changes in the regulation of the healthcare industry
at either or both of the federal and state levels; changes or
delays in reimbursement for our services by governmental or
private payers; our failure to continue to develop and market new
products and services and to keep pace with technological change;
competitive pressures; failure to obtain or protect intellectual
property rights; quarterly fluctuations in revenues and
volatility of our stock price; our ability to attract and retain
key personnel; currency risks; dependence on certain suppliers;
our ability to successfully manage acquisitions and alliances;
legal, political and economic changes; and other risks,
uncertainties and factors discussed in the "Risk Factors"
section in the Annual Report on Form 10-K and elsewhere herein,
in our other filings with the SEC or in materials incorporated by
reference. Given these uncertainties, undue reliance should not
be placed on such forward-looking statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
___________________________________________________________
Interest income earned on our investment portfolio is affected by
changes in the general level of U.S. interest rates. Our line of
credit borrowings effectively bear interest at variable rates and
therefore, changes in U.S. interest rates affect interest expense
incurred thereon. Changes in interest rates do not affect interest
expense incurred on our fixed rate debt. There have been no
significant changes in the debt instruments from the table as filed
on December 31, 2000.
SYNCOR INTERNATIONAL CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 19, 2001, the Company held its annual meeting of stockholders.
Three proposals were presented to the stockholders for their approval.
The following summarizes the proposals and the results of the voting:
1. Election of Directors
The first proposal was to elect Robert G. Funari, George S. Oki, and
Bernard Puckett as directors for an additional three-year term. The
stockholders voted to re-elect the three directors:
FOR AGAINST
Robert G. Funari 17,645,928 5,217,520
George S. Oki 21,405,279 1,458,169
Bernard Puckett 21,427,592 1,435,856
2. Selection of Independent Auditors
The second proposal was to ratify the selection of KPMG LLP as the
Company's independent auditors for the 2001 fiscal year. The
stockholders ratified the selection:
FOR AGAINST
22,689,594 93,645
3. The third proposal was to approve an amendment to the formula plan for
non-employee directors unter the 2000 Master Stock Incentive Plan. The
proposal was approved as follows:
FOR AGAINST
10,986,794 9,406,037
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Material Contracts
10.1 First Amended and Restated Credit Agreement, dated as of
May 10, 2001, among Syncor Management Corporation, the
Company, Bank One, NA, as Administrative Agent, LC Issuer
and Lender, The Bank of Nova Scotia, as Document Agent and
Lender, Fleet National Bank, as Lender, Mellon Bank, as
Lender, The Northern Trust Company, as Lender, Sanwa Bank
California, as Lender, and Union Bank of California, NA,
as Lender
10.2 2001 Syncor Officer Incentive Plan
10.3 First Amendement to Syncor International Corporation 2000
Master Stock Incentive Plan
11. Statement re: Computation of Per Share Earnings
Computation can be clearly determined from the material contained
in Part I of this Form 10-Q.
SIGNATURE
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.
SYNCOR INTERNATIONAL CORPORATION
(Registrant)
August 14, 2001 By: /s/ William P. Forster
_________________________________________________
William P. Forster
Senior Vice President and Chief Financial Officer
(Principal Financial/Accounting Officer)