DRAXIS Health Reports First Quarter Results; Earnings Per Share of 4 Cents from Continuing Operations Driven by Increased Product Sales.Business Editors MISSISSAUGA Mississauga (mĭsĭsaw`gə), city (1991 pop. 463,388), S Ont., Canada, 12 mi (20 km) W of Toronto on Lake Ontario. A residential suburb of Toronto and a growing transportation and industrial center, it is one of Canada's fastest-growing , Ontario--(BUSINESS WIRE)--May 13, 2004 DRAXIS Health Inc. (Nasdaq: DRAX Drax could refer to:
TSX Transfer from Stack Pointer to Index TSX True Space Extension : DAX) reported financial results for the first quarter of 2004 ended March 31, 2004. All amounts are expressed in U.S. dollars. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the in the first quarter of 2004 increased 40% to $14.1 million from $10.1 million in the first quarter of 2003. Revenues from product sales in the quarter were $12.2 million, up 76% over $7.0 million the first quarter of 2003. Royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. and licensing revenues in the quarter were down $1.2 million compared to the first quarter of 2003 but were up $0.2 million or 14.2% excluding the recognition of $1.4 million of deferred revenue in the first quarter of 2003, related to the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of a BrachySeed(R) distribution agreement. Net income from continuing operations in the first quarter of 2004 was $1.4 million or $0.04 per share versus $0.8 million or $0.02 per share for the first quarter of 2003.
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FINANCIAL HIGHLIGHTS
(in thousands of U.S. dollars except share related data
and in accordance with U.S. GAAP)
(unaudited)
Q1, 2004 Q4, 2003 Q3, 2003 Q2, 2003 Q1, 2003
REVENUES
Product sales $12,209 $12,440 $10,987 $10,153 $6,955
Royalty and
licensing (1) 1,927 1,945 1,978 1,612 3,123
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$14,136 $14,385 $12,965 $11,765 $10,078
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Research and
development
expense $461 $475 $430 $395 $294
EBITDA (1) (2) (3) $2,412 $2,589 $3,362 $2,016 $2,006
EBITDA
Margin (1) (2) (3) 17.1% 18.0% 25.9% 17.1% 19.9%
Cash and cash
equivalents $10,539 $10,563 $10,233 $1,904 $5,907
Total debt $10,156 $10,466 $10,202 $13,758 $11,550
Operating cash
flows (before
changes in working
capital) $1,401 $1,169 $1,679 $364 ($1,505)
Operating
cash flows ($128) $1,574 $1,045 ($3,653) ($2,186)
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Net Income (loss)
from continuing
operations $1,388 $1,409 $1,733 $723 $806
from discontinued
operations (9) 112 4,112 103 4,204
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$1,379 $1,521 $5,845 $826 $5,010
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Basic income (loss)
per share
from continuing
operations $0.037 $0.038 $0.047 $0.019 $0.022
from discontinued
operations - 0.003 0.111 0.003 0.113
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$0.037 $0.041 $0.158 $0.022 $0.135
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1 For Q1 2003, includes $1,436 of deferred revenue related to the termination of agreements for BrachySeed(R). 2 For Q3 2003, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become included $694 of insurance proceeds. 3 Non-GAAP Financial Measures. The terms EBITDA (earnings before financing expense, other income, income taxes, minority interest, depreciation and amortization) and EBITDA margin (EBITDA divided by total revenues) do not have a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by U.S. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). and therefore may not be comparable to similar measures used by other companies. DRAXIS defines EBITDA as operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before depreciation and amortization expense and EBITDA is presented on a basis that is consistent from period to period. DRAXIS uses EBITDA measures to assess the operating performance of its on-going Adj. 1. on-going - currently happening; "an ongoing economic crisis" ongoing current - occurring in or belonging to the present time; "current events"; "the current topic"; "current negotiations"; "current psychoanalytic theories"; "the ship's current position" businesses without the effects of amortization expense. Amortization expense is excluded because it substantially depends on the accounting methods and assumptions used as well as the historical cost of capital assets capital assets n. equipment, property, and funds owned by a business. (See: capital, capital account) . DRAXIS believes that certain shareholders and investors prefer such measures in evaluating the ability of a reporting company to service debt or as the basis for a valuation measurement. EBITDA should not be construed as the equivalent of net cash flows from operating activities. The most comparable U.S. GAAP earnings measure is operating income. "The first quarter of 2004 has delivered substantial 40% revenue growth over the same quarter last year as a result of significant increases in product sales in both our radiopharmaceutical radiopharmaceutical /ra·dio·phar·ma·ceu·ti·cal/ (-fahr?mah-soo´ti-k'l) a radioactive pharmaceutical, nuclide, or other chemical used for diagnostic or therapeutic purposes. and our contract manufacturing businesses," said Dr. Martin Barkin, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of DRAXIS. "Our manufacturing business had an exceptionally strong performance with product sales up 89% over the first quarter of 2003 with an EBITDA margin of 11.1%, while sales of radiopharmaceutical products were up 57% over the same period last year. These results bode bode 1 v. bod·ed, bod·ing, bodes v.tr. 1. To be an omen of: heavy seas that boded trouble for small craft. 2. well for the balance of this year and are consistent with the expectations for revenues and EBITDA margins that we have previously established for 2004 in both core operating businesses. Excluding the impact of the $1.4 million of deferred revenue recognized in 2003, consolidated revenues for the first quarter of 2004 were 64% ahead of the same quarter in 2003." Several positive developments during and subsequent to the first quarter have positioned the Company for further growth. DRAXIMAGE won U.S. Food and Drug Administration ("FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. ") approval for MDP-25 and established a new distribution agreement with Isotope isotope (ī`sətōp), in chemistry and physics, one of two or more atoms having the same atomic number but differing in atomic weight and mass number. The concept of isotope was introduced by F. Products Laboratories ("IPL (Initial Program Load) Same as boot. 1. IPL - Information Processing Language. 2. IPL - Internet Public Library. 3. IPL - Initial Program Load. 4. IPL - Initial Program Loader. ") and DRAXIS Pharma Pharma may be an abbreviation for:
SGF Société Générale de Financement (Quebec, Canada) SGF Smart Game Format SGF Simulated Gastric Fluid Sante Inc. ("SGF") its remaining 32.7% minority interest in DRAXIS Pharma and to repay $4.8 million (CDN$6.4 million) in third party debt owed by DRAXIS Pharma. As a result of this debt repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan and the subsequent restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of current credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities with its banker BANKER, com. law. A banker is one engaged in the business of receiving other persons money in deposit, to be returned on demand discounting other persons' notes, and issuing his own for circulation. One who performs the business usually transacted by a bank. , the Company has not only significantly reduced its overall debt, but it has increased its borrowing capacity and reduced the overall cost of borrowing on outstanding and future debt. There was continued progress in the new product pipeline during this quarter. Additional patients were recruited in both the Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA trial of FIBRIMAGE(R) and the Phase II trials of INFECTON(R). While spending on the trials was lighter than planned, this is expected to ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale as the FIBRIMAGE(R) trials enter the final stages over the next several months. Highlights from Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial Consolidated Operations - Product sales growth to $12.2 million for the quarter representing a 75.5% increase from $7.0 million in the first quarter of 2003. - Earnings before financing expense, other income, income taxes, minority interest, depreciation and amortization ("EBITDA") of $2.4 million for the quarter representing a 20.2% increase from $2.0 million in the first quarter of 2003. EBITDA increased $1.8 million in the first quarter of 2004 compared to 2003, excluding the recognition of $1.4 million of deferred revenue in 2003 related to the termination of the agreement with the Company's former BrachySeed(R) licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. in the U.S. - EBITDA divided by total revenues ("EBITDA margin") was 17.1% for the quarter compared with 19.9% for 2003 (6.6% for 2003 excluding the recognition of $1.4 million of deferred revenue related to the termination of the agreement with the Company's former BrachySeed(R) licensee in the U.S.). Subsequent to March 31, 2004 the Company completed: - An equity offering of 3,053,436 units, each unit consisting of one common share of the Company and one-half of one share purchase warrant, for proceeds of $14.7 million (CDN$20.0 million). - The acquisition from SGF of its 32.7% equity interest in the Company's contract manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. , DRAXIS Pharma Inc., for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $9.6 million (CDN$13.0 million). - The repayment of $4.8 million in third party debt owed by DRAXIS Pharma. - A bank financing arrangement which significantly increases the Company's debt capacity and reduces the Company's borrowing costs on outstanding and future debt. Radiopharmaceuticals - Product sales of $4.3 million for the quarter representing a 57.8% increase or $1.6 million over the first quarter of 2003. - EBITDA of $1.2 million representing a decrease of $0.7 million compared to 2003, but an increase of $0.8 million excluding the recognition of deferred revenues of $1.4 million and associated EBITDA related to BrachySeed(R) in 2003. - EBITDA margin of 28.5% in first quarter of 2004 compared to 44.7% (16.6% excluding the recognition of deferred revenues of $1.4 million and associated EBITDA related to BrachySeed(R) in 2003). - In March 2004, the radiopharmaceutical business received FDA approval to produce and market a new formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation of MDP-25, a diagnostic product for preparing a skeletal skeletal /skel·e·tal/ (skel´e-t'l) pertaining to the skeleton. skeletal pertaining to the skeleton. See also skeletal muscle. imaging agent that is used to demonstrate areas of altered osteogenesis osteogenesis /os·teo·gen·e·sis/ (os?te-o-jen´e-sis) the formation of bone; the development of the bones.osteogenet´ic osteogenesis imperfec´ta or bone growth. It is anticipated that the new MDP-25 diagnostic imaging kit will be made available during the second quarter of 2004. - In March 2004 DRAXIMAGE concluded a distribution agreement with Isotope Products Laboratories (IPL), a California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). based producer of radioactive ra·di·o·ac·tive adj. Of or exhibiting radioactivity. radioactive characterized by radioactivity. radioactive decay sources for Nuclear Medicine and radiography radiography: see X ray. . DRAXIMAGE will market the full line of IPL medical products in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , including calibration calibration /cal·i·bra·tion/ (kal?i-bra´shun) determination of the accuracy of an instrument, usually by measurement of its variation from a standard, to ascertain necessary correction factors. references for imaging applications plus calibration sources for Positron Emission Tomography positron emission tomography: see PET scan. positron emission tomography (PET) Imaging technique used in diagnosis and biomedical research. and Single Photon photon (fō`tŏn), the particle composing light and other forms of electromagnetic radiation, sometimes called light quantum. The photon has no charge and no mass. About the beginning of the 20th cent. Emission EMISSION, med. jur. The act by which any matter whatever is thrown from the body; thus it is usual to say, emission of urine, emission of semen, &c. 2. Tomography tomography Radiological technique for obtaining clear X-ray images of internal structures by focusing on a specific plane within the body to produce a cross-sectional image. . Manufacturing - Revenues of $8.4 million for the quarter representing an increase of 89.8% or $4.0 million over the first quarter of 2003. - EBITDA for this segment increased $1.6 million in the first quarter of 2004 compared with 2003. The increase is related to the positive impact in the ramping up of sterile sterile /ster·ile/ (ster´il) 1. unable to produce offspring. 2. aseptic. ster·ile adj. 1. Not producing or incapable of producing offspring. 2. business which began in early 2003 and its impact on overall margins as a result in the change in product mix. First quarter 2003 results were also negatively affected by production disruptions in sterile operations due to equipment and related problems which were subsequently resolved. - EBITDA margin of 11.1% for the first quarter of 2004 compared to a negative margin in the first quarter of 2003. - In the quarter a new collective agreement was established, covering unionized hourly employees in the contract manufacturing operation. The 5-year agreement, which is retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a to May 1, 2003, includes provisions for additional weekend shifts that will effectively allow for an increase in productive capacity and the move toward operating 24 hours a day, 7 days a week in the sterile products area. Interim Financial Report This release includes by reference the first quarter interim financial report incorporating the full Management Discussion & Analysis (MD&A) as well as financial statements prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with both U.S. and Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. GAAP. The interim report, including the MD&A and financial statements, has been filed with applicable Canadian and U.S. securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities , is accessible on the Company's website at www.draxis.com in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section under Financial Reports, through SEDAR SEDAR System for Electronic Document Analysis and Retrieval SEDAR Southeast Data, Assessment, and Review and EDGAR Edgar or Eadgar (both: ĕd`gər), 943?–975, king of the English (959–75), son of Edmund, king of Wessex. In 957 the Mercians and Northumbrians rebelled against Edgar's brother Edwy and chose Edgar as their king. databases and is available upon request by contacting DRAXIS Investor Relations at 1-877-441-1984. Conference Call DRAXIS has scheduled a conference call to discuss first quarter 2004 financial results at 10:00 a.m. (ET) on May 13, 2004. This call can be accessed by dialing 1-800-296-1907 (no access code required) and will also be webcast live with access through the Company's website at www.draxis.com. The conference call will also be available in archived format on the Company's website for 90 days following the conference call. ABOUT DRAXIS HEALTH INC. DRAXIS Health Inc. (www.draxis.com) is a specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. pharmaceutical company involved in the development, production, marketing and distribution of therapeutic and diagnostic radiopharmaceuticals through DRAXIMAGE Inc. and in the provision of pharmaceutical contract manufacturing services, specializing in liquid and freeze-dried freeze-dry tr.v. freeze-dried, freeze-dry·ing, freeze-dries To preserve (food, for example) by rapid freezing and drying in a high vacuum. Adj. 1. injectables and other sterile products, through DRAXIS Pharma Inc. DRAXIS Health employs over 400 staff and reported revenues in 2003 of US$49.2 million. Except for historical information, this news release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , which involve risk and uncertainties that may cause actual results to differ materially from the statements made. Such factors include, but are not limited to, timely regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approval of the Company's products, the ability to obtain and enforce effective patents, the establishment and maintenance of new corporate alliances, compliance with appropriate governmental regulations, and other risks detailed from time-to-time in the Company's filings with the US Securities and Exchange Commission and Canadian securities regulatory authorities. The Company does not undertake to update such forward-looking statements to reflect new information, later events or developments.
DRAXIS HEALTH INC.
Consolidated Statements of Operations
In Accordance with U.S. GAAP
----------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited)
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
REVENUES
Product sales $12,209 $6,955
Royalty and licensing (Note 3) 1,927 3,123
----------------------------------------------------------------------
14,136 10,078
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EXPENSES
Cost of goods sold 7,971 5,800
Selling, general and administration 3,292 1,978
Research and development 461 294
Depreciation and amortization 961 742
----------------------------------------------------------------------
12,685 8,814
----------------------------------------------------------------------
Operating income 1,451 1,264
Financing expense, net (125) (594)
Other income 96 -
----------------------------------------------------------------------
Income before undernoted 1,422 670
Income tax expense (30) (145)
Minority interest (4) 281
----------------------------------------------------------------------
Income from continuing operations 1,388 806
(Loss) income from discontinued
operations, net of tax (9) 4,204
----------------------------------------------------------------------
Net income $1,379 $5,010
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic income (loss) per share
from continuing operations $0.037 $0.022
from discontinued operations - 0.113
----------------------------------------------------------------------
$0.037 $0.135
----------------------------------------------------------------------
----------------------------------------------------------------------
Diluted income (loss) per share
from continuing operations $0.036 $0.022
from discontinued operations - 0.113
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$0.036 $0.135
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Weighted-average number of shares outstanding
- basic 37,537,205 37,098,690
- diluted 38,778,477 37,098,690
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----------------------------------------------------------------------
See the accompanying notes to the Consolidated Financial Statements.
These interim financial statements should be read in conjunction with
the annual Consolidated Financial Statements.
DRAXIS HEALTH INC.
Consolidated Balance Sheets
In Accordance with U.S. GAAP
----------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited)
March 31, December 31,
2004 2003
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ASSETS
CURRENT
Cash and cash equivalents $10,539 $10,563
Restricted cash 970 976
Accounts receivable, net 10,368 9,898
Inventories 7,208 6,096
Prepaid expenses 779 688
Deferred income taxes, net 2,777 2,806
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32,641 31,027
Property, plant and equipment, net 32,517 32,917
Goodwill, net 670 677
Intangible assets, net 1,794 1,974
Other assets 635 565
Deferred income taxes, net 9,486 9,393
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$77,743 $76,553
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LIABILITIES
CURRENT
Accounts payable and accrued liabilities $7,437 $6,708
Current portion of deferred revenues 4,982 5,309
Current portion of long-term debt 971 981
Customer deposits 601 591
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13,991 13,589
Deferred revenues 6,675 7,593
Long-term debt 9,185 9,485
Minority interest 4,204 4,239
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$34,055 $34,906
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SHAREHOLDERS' EQUITY
Common stock, without par value of
unlimited shares authorized $62,552 $61,175
Additional paid-in capital 15,546 15,667
Employee participation shares; 2,000,000
shares authorized - 86
Less: loans receivable - (86)
Deficit (34,102) (35,481)
Accumulated other comprehensive
(loss) income (308) 286
----------------------------------------------------------------------
43,688 41,647
----------------------------------------------------------------------
----------------------------------------------------------------------
$77,743 $76,553
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See the accompanying notes to the Consolidated Financial Statements.
These interim financial statements should be read in conjunction
with the annual Consolidated Financial Statements.
DRAXIS HEALTH INC.
Consolidated Statements of Shareholders' Equity
In Accordance with U.S. GAAP
----------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited)
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Common Stock (Number of Shares)
Balance, beginning of period 37,297,817 37,098,690
Exercise of options 402,532 -
Exercise of employee
participation shares 54,896 -
----------------------------------------------------------------------
Balance, end of period 37,755,245 37,098,690
----------------------------------------------------------------------
Common Stock
Balance, beginning of period $61,175 $60,652
Exercise of options 1,173 -
Exercise of employee
participation shares 204 -
----------------------------------------------------------------------
Balance, end of period $62,552 $60,652
----------------------------------------------------------------------
Additional Paid In Capital
Balance, beginning of period $15,667 $15,550
Stock compensation (121) -
----------------------------------------------------------------------
Balance, end of period $15,546 $15,550
----------------------------------------------------------------------
Employee Participation Shares
Balance, beginning of period $86 $140
Exercise of employee participation shares (86) -
----------------------------------------------------------------------
Balance, end of period $- $140
----------------------------------------------------------------------
Employee Participation
Shares-Loans Receivable
Balance, beginning of period $(86) $(140)
Exercise of employee participation shares 86 -
----------------------------------------------------------------------
Balance, end of period $- $(140)
----------------------------------------------------------------------
Deficit
Balance, beginning of period $(35,481) $(48,683)
Net income 1,379 5,010
----------------------------------------------------------------------
Balance, end of period $(34,102) $(43,673)
----------------------------------------------------------------------
Accumulated Other Comprehensive
(Loss) Income
Balance, beginning of period $286 $(7,292)
Other comprehensive (loss) income (594) 2,302
----------------------------------------------------------------------
Balance, end of period (308) (4,990)
----------------------------------------------------------------------
Total shareholders' equity $43,688 $27,539
----------------------------------------------------------------------
Comprehensive (Loss) Income
Foreign currency translation adjustments $(594) $2,302
----------------------------------------------------------------------
Other comprehensive (loss) income (594) 2,302
Net income 1,379 5,010
----------------------------------------------------------------------
Total comprehensive income $785 $7,312
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----------------------------------------------------------------------
See the accompanying notes to the Consolidated Financial Statements.
These interim financial statements should be read in conjunction
with the annual Consolidated Financial Statements.
DRAXIS HEALTH INC.
Consolidated Statements of Cash Flows
In Accordance with U.S. GAAP
----------------------------------------------------------------------
(in thousands of U.S. dollars)
(unaudited)
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
CASH FLOWS (USED IN) FROM OPERATING ACTIVITIES
Net income from continuing operations $1,388 $806
Adjustments to reconcile net income
from continuing operations to net cash
(used in) from operating activities
Amortization of deferred revenues (1,318) (2,741)
Depreciation and amortization 961 742
Stock compensation 83 -
Deferred income taxes (73) (85)
Minority interest 4 (281)
Other 356 54
Changes in operating assets and operating
liabilities
Accounts receivable (654) 2,263
Inventories (1,128) (646)
Income taxes 118 137
Prepaid expenses (190) (60)
Accounts payable and accrued liabilities 325 (2,375)
----------------------------------------------------------------------
(128) (2,186)
----------------------------------------------------------------------
CASH FLOWS (USED IN) FROM INVESTING ACTIVITIES
Expenditures for property,
plant and equipment (591) (342)
Increase in intangible assets (150) -
Increase in deferred revenues 98 -
Proceeds from disposition of product right 96 -
----------------------------------------------------------------------
(547) (342)
----------------------------------------------------------------------
CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES
Repayment of bank loan - (402)
Repayment of long-term debt (241) (2,580)
Proceeds from customer deposits 85 -
Repayment of customer deposits (69) (347)
Exercise of options and employee
participation shares 1,173 -
Issue of common shares by subsidiary
to minority interest - 365
----------------------------------------------------------------------
948 (2,964)
----------------------------------------------------------------------
Effect of foreign exchange rate changes on
cash and cash equivalents (284) (116)
----------------------------------------------------------------------
Net cash used in continuing operations (11) (5,608)
Net cash (used in) from discontinued
operations (13) 6,616
----------------------------------------------------------------------
Net (decrease) increase in cash and
cash equivalents (24) 1,008
----------------------------------------------------------------------
Cash and cash equivalents, beginning
of period 10,563 4,899
----------------------------------------------------------------------
Cash and cash equivalents,
end of period $10,539 $5,907
----------------------------------------------------------------------
----------------------------------------------------------------------
Additional Information
Interest paid $71 $198
Income taxes paid $154 $13
----------------------------------------------------------------------
----------------------------------------------------------------------
See the accompanying notes to the Consolidated Financial Statements.
These interim financial statements should be read in conjunction
with the annual Consolidated Financial Statements
DRAXIS HEALTH INC.
Notes to the Consolidated Financial Statements
In Accordance with U.S. GAAP
----------------------------------------------------------------------
(in thousands of U.S. dollars except share related data)
(unaudited)
1. Significant Accounting Policies These consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge have been prepared in accordance with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP"). The functional currency of the Company is the Canadian dollar Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents however its reporting currency Reporting Currency The currency used in published reports and financial documents. Notes: All annual and quarterly reports state the currency in which their results are listed. is the U.S. dollar. For the current and prior periods, the financial statements of the Company's operations whose reporting currency is other than the U.S. dollar are translated from such reporting currency to U.S. dollars using the current rate method. Under the current rate method, assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Revenues and expenses, including gains and losses on foreign exchange transactions, are translated at average rates for the period. Where the current rate method is used, the unrealized translation gains and losses on the Company's net investment in these operations, including long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. intercompany advances, are accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. in a separate component of shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. , described in the consolidated balance sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. as accumulated other comprehensive (loss) income. The disclosures contained in these unaudited interim consolidated financial statements do not include all requirements of GAAP for annual financial statements. The unaudited interim consolidated financial statements should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the audited consolidated financial statements for the year ended December December: see month. 31, 2003. The unaudited interim consolidated financial statements are based upon accounting principles consistent with those used and described in the audited consolidated financial statements for the year ended December 31, 2003, other than as noted herein. The unaudited interim consolidated financial statements reflect all adjustments, consisting only of normal recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. , which are, in the opinion of management, necessary to present fairly the financial position of the Company as of March 31, 2004 and the results of operations and cash flows for the quarters ended March 31, 2004 and 2003. 2. Discontinued Operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. In 2001, the Company adopted a formal plan to dispose of To determine the fate of; to exercise the power of control over; to fix the condition, application, employment, etc. of; to direct or assign for a use. See also: Dispose its Canadian sales and marketing division ("DRAXIS Pharmaceutica"). Pursuant to APB APB See Accounting Principles Board (APB). No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently in·fre·quent adj. 1. Not occurring regularly; occasional or rare: an infrequent guest. 2. Occurring Events and Transactions," the results of operations of DRAXIS Pharmaceutica have been reported as discontinued operations and the consolidated financial statements and notes thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. for the year ended December 31, 2001 and all subsequent periods presented have been reclassified. On March 31, 2003, the Company amended its License, Distribution and Supply Agreement with Elan (Emulated LAN) A virtual LAN in the ATM world. See LANE and virtual LAN. Elan - ["Top-down Programming with Elan", C.H.A. Koster, Ellis Horwood 1987]. Corporation, plc ("Elan") to return the Canadian rights for several of Elan's neurology neurology (n  rŏl`əjē, ny–), study of the morphology, physiology, and pathology of the human nervous system. products
in exchange for a cash payment of $6,500 and realized an after tax gain
of $4,286 on this transaction.On July July: see month. 22, 2003, the Company completed the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of DRAXIS Pharmaceutica with the sale to Shire Shire or Shiré (both: shē`rā), river, c.250 mi (400 km) long, flowing from the southern end of Lake Nyasa, Malawi, SE Africa, to the Zambezi River in central Mozambique. It is navigable to Nsanje. BioChem Inc. ("Shire"), of substantially all remaining products of the division. The Company has received $9,600 in cash from Shire and could receive up to $2,900 in market driven milestones over the next several years. The Company realized an after tax gain of $4,054 net of transaction and related charges. In addition, the Company will receive royalty payments based on the continuing Canadian sales of the products. The Company also received the value of acquired inventories and Shire is now responsible for all financial provisions of the license agreement related to Permax Per·max A trademark for the drug pergolide mesylate. (R). Commencing in the second quarter of 2002, the Company resolved to retain ownership of the Canadian rights to Alertec(R) and continue to market and sell Alertec(R) in Canada itself. Accordingly, discontinued operations did not include revenues and expenses directly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Alertec(R) up until such time that third party approval was obtained. As a result of the ability to obtain third party approval upon closing with Shire, management decided to dispose of Alertec(R) through the sale of the Canadian rights to Shire and at that time included Alertec(R) as part of discontinued operations on a prospective basis. Interest expense directly attributable to license obligations included in the transaction has been allocated to the discontinued operations. The results of discontinued operations, presented in the accompanying ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. Consolidated Statements of Operations, were as follows:
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Revenues $73 $1,584
----------------------------------------------------------------------
Operating loss from discontinued
operations - net of tax (9) (82)
Net gain on disposal of product rights - net of tax - 4,286
----------------------------------------------------------------------
Net (loss) income from discontinued
operations - net of tax $(9) $4,204
----------------------------------------------------------------------
----------------------------------------------------------------------
3. Deferred Revenue In January January: see month. 2003, DRAXIMAGE's agreements with its BrachySeed(R) licensee in the U.S. were effectively terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: with no further transactions taking place under the agreements. A formal agreement was subsequently reached with its licensee for terminating both the License and Distribution Agreement and Product Manufacturing and Supply Agreement for BrachySeed(R) implants in the U.S. Under the terms of the original agreement, non-refundable milestone “Milemarker” redirects here. For the American indie rock band, see Milemarker (band). A milestone or kilometre sign is one of a series of numbered markers placed along a road at regular intervals, typically at the side of the road or in a median. payments received from the licensee were deferred and amortized into income over the contractual period of the agreement to December 31, 2010. As a result of the termination of the agreements in January, the unamortized portion of the non-refundable milestone payments of $1,436 was included in income for the three month period ended March 31, 2003 as royalty and licensing revenue. 4. Shareholders' Equity (a) Stock Option Plan The following is a summary of common shares issuable pursuant to outstanding stock options:
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Balance, beginning of period 3,097,942 3,314,109
Increase (decrease) resulting from:
Granted 125,000 280,000
Exercised (400,032) -
Cancelled (68,333) (5,000)
Expired (1,700) (80,000)
----------------------------------------------------------------------
Balance, end of period 2,752,877 3,509,109
----------------------------------------------------------------------
----------------------------------------------------------------------
(b) Stock-based Compensation Costs
The following outlines the impact and assumptions used if the
compensation cost for the Company's stock options was determined
under the fair value based method of accounting.
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Net income, as reported $1,379 $5,010
Pro forma impact (167) (196)
----------------------------------------------------------------------
Pro forma net income $1,212 $4,814
----------------------------------------------------------------------
----------------------------------------------------------------------
Basic net income per share, as reported $0.037 $0.135
Pro forma impact per share (0.004) (0.005)
----------------------------------------------------------------------
Pro forma net income per share (Basic) $0.033 $0.130
Pro forma net income per share (Diluted) $0.031 $0.130
----------------------------------------------------------------------
----------------------------------------------------------------------
Dividend yield 0.0% 0.0%
Expected volatility 60%-62% 60%-62%
Risk-free interest rate 4.0% 4.0-4.1%
Expected option life 5yrs 5yrs
----------------------------------------------------------------------
----------------------------------------------------------------------
5. Segmented Information
Industry Segmentation
For purposes of decision-making and assessing performance,
management considers that it operates in three segments:
Radiopharmaceuticals, Manufacturing, and Corporate and Other.
Executive management assesses the performance of each segment based
on segment income before financing expense, income taxes and
minority interest. The accounting policies used to determine
segmented results and measure segmented assets are the same as
those described in the summary of significant accounting policies
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
PRODUCT SALES REVENUES
Radiopharmaceuticals $4,332 $2,745
Manufacturing 8,363 4,407
Corporate and Other (486) (197)
----------------------------------------------------------------------
$12,209 $6,955
----------------------------------------------------------------------
ROYALTY AND LICENSING REVENUES
Radiopharmaceuticals $- $1,521
Manufacturing - -
Corporate and Other 1,927 1,602
----------------------------------------------------------------------
$1,927 $3,123
----------------------------------------------------------------------
TOTAL REVENUES
Radiopharmaceuticals $4,332 $4,266
Manufacturing 8,363 4,407
Corporate and Other 1,441 1,405
----------------------------------------------------------------------
$14,136 $10,078
----------------------------------------------------------------------
SEGMENT INCOME (LOSS)(1)
Radiopharmaceuticals $1,234 $1,907
Manufacturing 927 (683)
Corporate and Other 251 782
----------------------------------------------------------------------
$2,412 $2,006
----------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION
Radiopharmaceuticals $227 $189
Manufacturing 466 313
Corporate and Other 268 240
----------------------------------------------------------------------
$961 $742
----------------------------------------------------------------------
OPERATING INCOME (LOSS)(2)
Radiopharmaceuticals $1,007 $1,718
Manufacturing 461 (996)
Corporate and Other (17) 542
----------------------------------------------------------------------
$1,451 $1,264
----------------------------------------------------------------------
----------------------------------------------------------------------
March 31, December 31,
2004 2003
----------------------------------------------------------------------
IDENTIFIABLE ASSETS
Radiopharmaceuticals $11,497 $11,424
Manufacturing 42,588 40,953
Corporate and Other 23,658 24,176
----------------------------------------------------------------------
$77,743 $76,553
----------------------------------------------------------------------
----------------------------------------------------------------------
1 Segment income (loss) from continuing operations before
depreciation and amortization, financing expense, other income,
income taxes and minority interest.
2 Segment income (loss) from continuing operations before financing
expense, other income, income taxes and minority interest.
Geographic Segmentation
For the Three Month Period
Ended March 31,
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
REVENUES (1)
Canada $6,586 $4,780
United States 7,440 5,234
Other 110 64
----------------------------------------------------------------------
$14,136 $10,078
----------------------------------------------------------------------
----------------------------------------------------------------------
March 31, December 31,
2004 2003
----------------------------------------------------------------------
LONG-LIVED ASSETS (2)
Canada $34,981 $35,568
United States - -
----------------------------------------------------------------------
$34,981 $35,568
----------------------------------------------------------------------
----------------------------------------------------------------------
March 31, March 31,
Expenditures for Property,
Plant and Equipment 2004 2003
----------------------------------------------------------------------
Radiopharmaceuticals $11 $2
Manufacturing 371 285
Corporate and Other 209 55
----------------------------------------------------------------------
$591 $342
----------------------------------------------------------------------
----------------------------------------------------------------------
1 Revenues are attributable to countries based upon the location
of the customer.
2 Represents property, plant and equipment, goodwill and intangible
assets that are identified with each geographic region.
6. Subsequent Events On April 22, 2004, the Company closed its offering of 3,053,436 units at a price of $4.82 (CDN$6.55) per unit for gross proceeds of approximately $14,704 (CDN$20,000). Each unit consists of one common share of the Company and one-half of one share purchase warrant. Each whole warrant will entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: the holder to acquire one common share of the Company at a price of CDN$8.50 at any time prior to April 24, 2006. The underwriters have an over-allotment option to purchase up to an additional 458,016 units, exercisable at the issue price any time up to 30 days following closing of the offering, representing additional gross proceeds to the Company of up to $2,206 (CDN$3,000). The proceeds of the offering were used to finance the $9,557 (CDN$13,000) cash purchase of the 32.7% interest in the Company's manufacturing subsidiary, DPI (Dots Per Inch) The measurement of the resolution of display and printing systems. A typical CRT screen provides 96 dpi, which provides 9,216 dots per square inch (96x96). Flat panel displays from 110 to 200 dpi have also been developed. , that was previously owned by SGF and to repay approximately $4,714 (CDN$6,412) of outstanding loans in DPI. 7. Comparative Information The Company has reclassified certain prior period's information to conform with the current presentation format. |
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