<PAGE>
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 November 26, 1995
-----------------
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to
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Commission file number 1-11344
INTERMAGNETICS GENERAL CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 14-1537454
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
450 Old Niskayuna Road, PO Box 461, Latham, NY 12110-0461
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(Address of principal executive offices)
(Zip Code)
(518) 782-1122
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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.
Common Stock, $.10 par value - 11,767,186 shares were outstanding as of December
31, 1995.
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INTERMAGNETICS GENERAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets - November 26, 1995 and May 28, 1995.... 3
Consolidated Statements of Income - Three Months and Six Months
Ended November 26, 1995 and November 27, 1994.................... 5
Consolidated Statements of Cash Flows - Six Months Ended November
26, 1995 and November 27, 1994.................................... 6
Notes to Consolidated Financial Statements.......................... 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 9
PART II - OTHER INFORMATION..................................................11
SIGNATURES...................................................................12
2
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INTERMAGNETICS GENERAL CORPORATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS Nov 26, 1995 May 28, 1995
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $21,008 $13,009
Trade accounts receivable, less allowance
(November 26 - $154; May 28 - $145) 14,721 20,267
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,570 1,144
Inventories:
Finished products 720 605
Work in process 16,648 16,960
Materials and supplies 9,808 8,828
----------------- -----------------
27,176 26,393
Prepaid expenses and other 1,764 1,244
----------------- -----------------
TOTAL CURRENT ASSETS 66,239 62,057
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,502 1,502
Buildings and improvements 16,603 16,214
Machinery and equipment 28,287 27,364
Leasehold improvements 233 233
----------------- -----------------
46,625 45,313
Less allowances for depreciation and amortization 24,163 22,766
----------------- -----------------
22,462 22,547
Equipment in process of construction 3,178 2,632
----------------- -----------------
25,640 25,179
INTANGIBLE AND OTHER ASSETS
Available for sale securities 6,225 5,100
Other investments 8,145 8,502
Purchased technology, less accumulated amortization
(November 26 - $1,145; May 28 - $1,108) 446 483
Other assets 1,992 2,385
----------------- -----------------
TOTAL ASSETS $108,687 $103,706
================= =================
</TABLE>
3
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY Nov 26, 1995 May 28, 1995
---------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $239 $238
Accounts payable 4,147 4,032
Salaries, wages and related items 2,427 2,402
Customer advances and deposits 845 496
Product warranty reserve 750 822
Accrued income taxes 1,225 367
Other liabilities and accrued expenses 1,760 1,045
---------------- ----------------
TOTAL CURRENT LIABILITIES 11,393 9,402
LONG-TERM DEBT, less current portion 31,453 39,807
DEFERRED INCOME TAXES, on unrealized gain on
available for sale securities 1,642 1,192
SHAREHOLDERS' EQUITY
Preferred Stock, par value $.10 per share:
Authorized - 2,000,000 shares
Issued and outstanding - None
Common Stock, par value $.10 per share:
Authorized - 20,000,000 shares
Issued and outstanding (including shares in treasury):
November 26, 1995 - 11,752,359 shares
May 28, 1995 - 11,081,303 shares 1,175 1,108
Additional paid-in capital 63,858 55,166
Retained earnings (deficit) (645) (2,495)
Unrealized gain on available for sale securities 2,462 1,787
Foreign currency translation adjustments (5) (46)
---------------- ----------------
66,845 55,520
Less cost of Common Stock in treasury
(November 26, 1995 - 272,134 shares;
May 28, 1995 - 242,768 shares) (2,646) (2,215)
---------------- ----------------
64,199 53,305
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,687 $103,706
================ ================
</TABLE>
4
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------------------------------------------
Nov 26, 1995 Nov 27, 1994 Nov 26, 1995 Nov 27, 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $21,745 $19,787 $42,470 $34,687
Realized gain on sale of marketable securities 1,321 1,321
Other revenue 675 240 1,260 449
--------------- --------------- --------------- ---------------
Total revenue 23,741 20,027 45,051 35,136
Costs and expenses:
Cost of products sold 16,506 13,676 31,429 24,346
Product research and development 1,079 1,448 2,485 2,265
Marketing, general and administrative 3,358 2,789 6,237 5,401
Interest and other expense 714 731 1,399 1,332
Equity in net loss of unconsolidated affiliate 205 417
--------------- --------------- --------------- ---------------
21,862 18,644 41,967 33,344
--------------- --------------- --------------- ---------------
Income before income taxes 1,879 1,383 3,084 1,792
Provision for income taxes 752 553 1,234 717
--------------- --------------- --------------- ---------------
NET INCOME $ 1,127 $ 830 $ 1,850 $ 1,075
=============== =============== =============== ===============
NET INCOME PER SHARE (Primary and
Fully diluted) $0.09 $0.07 $0.16 $0.09
=============== =============== =============== ===============
</TABLE>
NOTE: Shares and earnings per share have been adjusted to reflect a 3% stock
dividend distributed June 15, 1995.
5
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------
Nov 26, 1995 Nov 27, 1994
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,850 $1,075
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,587 1,643
Imputed interest on royalties receivable (14)
Imputed interest on unsecured notes 105 84
Equity in net loss of unconsolidated affiliate 417
Gain on sale of equity securities (1,321)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable and
costs and estimated earnings in excess of billings
on uncompleted contracts 5,120 (696)
(Increase) in inventories and prepaid expenses (1,303) (2,764)
Increase in accounts payable and accrued expenses 1,991 1,316
Other 41 99
---------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,487 743
INVESTING ACTIVITIES
Proceeds from sale of equity securities 1,779
Acquisition of equity securities (560) (12)
Purchases of property, plant and equipment (1,858) (2,164)
Payments received on royalties receivable 74
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (639) (2,102)
FINANCING ACTIVITIES
Proceeds from sales of Common Stock 660 600
Purchase of Treasury Stock (426)
Principal payments on note payable and long-term debt (83) (240)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 151 360
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INCREASE (DECREASE) IN CASH AND CASH 7,999 (999)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 13,009 13,196
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $21,008 $12,197
================ ================
</TABLE>
6
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INTERMAGNETICS GENERAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -
In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments, which are of a normal recurring
nature, necessary to present fairly the financial position at November 26, 1995
and the results of operations and cash flows for the six-month periods ended
November 26, 1995 and November 27, 1994. The results for the three months and
six months ended November 26, 1995 are not necessarily indicative of the results
to be expected for the entire year. The Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with the Company's financial statements for the year
ended May 28, 1995, filed on Form 10-K on August 25, 1995.
NOTE B -
Net income per share amounts are based on the weighted average number
of common shares outstanding during the periods plus common stock equivalents as
shown below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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Nov 26, 1995 Nov 27, 1994 Nov 26, 1995 Nov 27, 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary
- -------
Weighted average shares outstanding 11,294,507 10,827,778 11,072,853 10,793,031
Common stock equivalents 773,803 742,010 746,537 764,838
---------- ---------- ---------- ----------
Total 12,068,310 11,569,788 11,819,390 11,557,869
========== ========== ========== ==========
Fully Diluted
- -------------
Weighted average shares outstanding 11,294,507 10,827,778 11,072,853 10,793,031
Common stock equivalents 833,873 742,010 856,863 764,838
---------- ---------- ---------- ----------
Total 12,128,380 11,569,788 11,929,716 11,557,869
========== ========== ========== ==========
</TABLE>
7
<PAGE>
Both primary and fully diluted shares include the dilutive effect (common stock
equivalents) of outstanding stock options based on the treasury stock method
using average market price for primary and closing market price (unless the
average market price is higher) for fully diluted. Shares for the periods
presented have been adjusted to reflect a 3% stock dividend distributed June 15,
1995 as described in Note D.
NOTE C -
During the first quarter of fiscal 1996, the Company made an additional
investment in Surrey Medical Imaging Systems Limited ("SMIS"), bringing its
ownership to approximately 23%. SMIS is a UK Company engaged in the manufacture
and sale of electronics and software for magnetic resonance imaging and nuclear
magnetic resonance spectroscopy applications. Due to its increased ownership,
the Company adopted the equity method of accounting for its investment. As a
result, the Company recorded losses of $205,000 and $417,000 for the three
months and six months ended November 26, 1995, respectively.
NOTE D -
On March 20, 1995, the Company declared a 3% stock dividend which was
distributed on all outstanding shares, except Treasury Stock, on June 15, 1995
for all shareholders of record on May 31, 1995. The financial statements have
been adjusted retroactively to reflect this stock dividend in all numbers of
shares, prices per share and earnings per share.
8
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INTERMAGNETICS GENERAL CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
While revenues and profits were higher during the first half and second
quarter of fiscal 1996, the Company experienced lower gross margin rates in the
fiscal 1996 periods compared to the periods in fiscal 1995. Revenues were
approximately 28% and 18% higher, respectively, than the first half and second
quarter of fiscal 1995 due to continued demand for products related to the MRI
market, a sale of FRIGC(R) FR-12(TM) refrigerants to Pennzoil Products Company
and a realized gain of $1,321,000 on the sale of marketable securities.
During the first half of fiscal 1996, sales of Magnetic Products were
higher than in the same period of fiscal 1995 due to increased shipments of the
new line of MRI magnets and continued demand for superconducting materials for
MRI. However, in the second quarter of fiscal 1996, sales of Magnetic Products
were slightly lower than the second quarter of fiscal 1995 principally due to
reduced demand for superconducting materials. Sales of Cryogenic Products were
substantially higher in the first half and second quarter of fiscal 1996
compared to the corresponding fiscal 1995 periods due to a much higher demand
for shield coolers for MRI magnets and cryopumps. As a percentage of net sales,
gross margins were lower in the fiscal 1996 periods when compared to the
previous year for both Magnetic Products and Cryogenic Products due to
reductions in selling prices for magnets and superconducting wire, reduced
yields in wire production and a change in the mix of sales and substantial
rework costs for Cryogenic Products.
Total expenditures for research and development, both internally and
externally funded, increased approximately 10% in the first half of fiscal 1996
but declined in the second quarter as additional internal engineering efforts
were devoted to manufacturing and marketing support. Also, during the second
quarter the Company's average employment level increased to the point where it
no longer qualifies as a small business and thus is no longer eligible for
future Small Business Innovation Research awards. Although existing grants and
contracts are not affected, this source of externally-funded research and
development contracts will no longer be available and the Company must look to
other external sources or increase its use of internal funds to maintain its
commitment to a high level of research and development activity. Marketing,
general and administrative expenses increased in fiscal 1996 due to increased
marketing expenditures, the addition of administrative personnel and higher
costs associated with the increased levels of business.
9
<PAGE>
In the first quarter of fiscal 1996 the Company increased its
investment in Surrey Medical Imaging Systems Limited ("SMIS") and adopted the
equity method of accounting for its investment. As a result, the Company
recognized losses of $205,000 and $417,000 in the second quarter and first half
of fiscal 1996, respectively. In December, the Company made an additional
investment in SMIS of approximately $1,5000,000.
During the first half of fiscal 1996 the Company used net cash of
$639,000 in investing activities, principally for machinery and equipment and an
additional investment in SMIS, which was funded from operating cash and by
financing activities. In September 1995, the Company sold 76,000 shares of
Ultralife Batteries, Inc. for approximately $1,780,000 and recognized a gain of
approximately $1,321,000 on the sale. The Company may make similar sales in the
future as market conditions warrant. In March 1995, the Company announced a
stock buy-back program under which the Company may, from time-to-time through
December 31, 1995, repurchase up to 1,000,000 shares of its Common Stock
depending on market conditions. As of December 31, 1995, the Company had
repurchased 117,200 shares for approximately $1,460,000. The repurchases were
financed from working capital and will be used, among other things, to meet
future obligations under stock option plans and outstanding convertible
securities.
In September 1995, the holders of $8,375,000 of the Company's
Convertible, Subordinated Debentures due 2003 converted those Debentures into
552,967 shares of Common Stock. In connection with the conversion, the Company
paid these holders a payment of 2% of the face amount of the converted
Debentures to induce early conversion and in lieu of all accrued interest due.
The Company's capital expenditure commitments at December 31, 1995 were
approximately $370,000. The Company has an unsecured line of credit of
$10,000,000 which expires in November 1997, none of which was in use on December
31, 1995. The Company believes that it will have sufficient working capital to
meet its needs for the foreseeable future. However, pursuit of large scale
applications in superconductivity and new refrigerants may require the Company
to seek additional financing.
10
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INTERMAGNETICS GENERAL CORPORATION
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The November 1995 Annual Meeting of Shareholders of the Company was
held on November 1, 1995.
(c)(i) At the Annual Meeting, the Shareholders of the Company approved an
increase of 515,000 shares in the number of shares of Common Stock of
the Company available for issuance under the Company's 1990 Stock
Option Plan. The vote was 9,313,530 FOR; 537,337 AGAINST; 86,831
ABSTAIN; and -0- BROKER NON-VOTES.
(c)(ii) At the Annual Meeting, the Shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation to broaden the
purposes for which the Company is organized. The vote was 9,781,766
FOR; 69,206 AGAINST; 86,726 ABSTAIN; and -0- BROKER NON-VOTES.
(c)(iii) At the Annual Meeting, the Shareholders of the Company elected to the
Board of Directors all four nominees for director with the following
vote:
BROKER
DIRECTOR FOR AGAINST ABSTAIN NON-VOTES
Joseph C. Abeles 9,876,457 61,241 -- --
Thomas L. Kempner 9,882,132 55,566 -- --
Sheldon Weinig 9,880,031 57,667 -- --
Stuart A. Shikiar 9,880,728 56,970 -- --
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None filed during the quarter ended November 26, 1995.
11
<PAGE>
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.
INTERMAGNETICS GENERAL CORPORATION
Dated: January 8, 1996 By: /s/ Carl H. Rosner
-------------------------------------
Carl H. Rosner, Chairman
President and Chief Executive Officer
Dated: January 8, 1996 By: /s/ Michael C. Zeigler
--------------------------------------
Michael C. Zeigler
Senior Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-END> NOV-26-1995
<CASH> 21,008
<SECURITIES> 0
<RECEIVABLES> 14,875
<ALLOWANCES> 154
<INVENTORY> 27,176
<CURRENT-ASSETS> 66,239
<PP&E> 49,803
<DEPRECIATION> 24,163
<TOTAL-ASSETS> 108,687
<CURRENT-LIABILITIES> 11,393
<BONDS> 31,453
0
0
<COMMON> 1,175
<OTHER-SE> 63,024
<TOTAL-LIABILITY-AND-EQUITY> 108,687
<SALES> 42,470
<TOTAL-REVENUES> 45,051
<CGS> 31,429
<TOTAL-COSTS> 31,429
<OTHER-EXPENSES> 9,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,399
<INCOME-PRETAX> 3,084
<INCOME-TAX> 1,234
<INCOME-CONTINUING> 1,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,850
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
