<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 February 25, 1996
-----------------
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
-------- --------
Commission file number 1-11344
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INTERMAGNETICS GENERAL CORPORATION
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(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 - 11,784,032 shares were outstanding as of March
31, 1996.
<PAGE>
INTERMAGNETICS GENERAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets - February 25, 1996 and May 28, 1995.....3
Consolidated Statements of Income - Three Months and Nine Months
Ended February 25, 1996 and February 26, 1995........................5
Consolidated Statements of Cash Flows - Nine Months Ended
February 25, 1996 and February 26, 1995..............................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 February 25, 1996 May 28, 1995
-------------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $18,229 $13,009
Trade accounts receivable, less allowance
(February 25 - $164; May 28 - $145) 17,434 20,267
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,230 1,144
Inventories:
Finished products 731 605
Work in process 16,981 16,960
Materials and supplies 8,963 8,828
-------------------- -----------------
26,675 26,393
Prepaid expenses and other 1,505 1,244
-------------------- -----------------
TOTAL CURRENT ASSETS 65,073 62,057
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,502 1,502
Buildings and improvements 16,610 16,214
Machinery and equipment 28,953 27,364
Leasehold improvements 233 233
-------------------- -----------------
47,298 45,313
Less allowances for depreciation and amortization 24,870 22,766
-------------------- -----------------
22,428 22,547
Equipment in process of construction 3,368 2,632
-------------------- -----------------
25,796 25,179
INTANGIBLE AND OTHER ASSETS
Available for sale securities 7,565 5,100
Other investments 7,922 8,502
Purchased technology, less accumulated amortization
(February 25 - $1,163; May 28 - $1,108) 428 483
Other assets 1,986 2,385
-------------------- -----------------
TOTAL ASSETS $108,770 $103,706
==================== =================
</TABLE>
3
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY February 25, 1996 May 28, 1995
----------------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $2,221 $238
Accounts payable 3,610 4,032
Salaries, wages and related items 2,573 2,402
Customer advances and deposits 1,314 496
Product warranty reserve 734 822
Accrued income taxes 1,253 367
Other liabilities and accrued expenses 1,311 1,045
---------------- ----------------
TOTAL CURRENT LIABILITIES 13,016 9,402
LONG-TERM DEBT, less current portion 29,407 39,807
DEFERRED INCOME TAXES, on unrealized gain on
available for sale securities 1,590 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):
February 25, 1996 - 11,783,532 shares
May 28, 1995 - 11,081,303 shares 1,178 1,108
Additional paid-in capital 64,075 55,166
Retained earnings (deficit) 80 (2,495)
Unrealized gain on available for sale securities 2,385 1,787
Foreign currency translation adjustments (218) (46)
---------------- ----------------
67,500 55,520
Less cost of Common Stock in treasury
(February 25, 1996 - 278,662 shares;
May 28, 1995 - 242,768 shares) (2,743) (2,215)
---------------- ----------------
64,757 53,305
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,770 $103,706
================ ================
</TABLE>
4
<PAGE>
INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------------------------------------------
Feb 25, 1996 Feb 26, 1995 Feb 25, 1996 Feb 26, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales $20,022 $21,653 $62,492 $56,341
Realized gain on sale of marketable securities 1,321
Other revenue 1,183 545 2,443 1,000
--------------- --------------- --------------- ---------------
Total revenue 21,205 22,198 66,256 57,341
Costs and expenses:
Cost of products sold 15,012 15,465 46,441 39,810
Product research and development 1,150 1,245 3,635 3,511
Marketing, general and administrative 3,048 2,938 9,285 8,340
Interest and other expense 569 722 1,968 2,060
Equity in net loss of unconsolidated affiliate 220 637
--------------- --------------- --------------- ---------------
19,999 20,370 61,966 53,721
--------------- --------------- --------------- ---------------
Income before income taxes 1,206 1,828 4,290 3,620
Provision for income taxes 481 731 1,715 1,448
--------------- --------------- --------------- ---------------
NET INCOME $ 725 $ 1,097 $ 2,575 $ 2,172
=============== =============== =============== ===============
NET INCOME PER SHARE (Primary and
Fully diluted) $0.06 $0.10 $0.21 $0.19
=============== =============== =============== ===============
</TABLE>
NOTE: Shares and earnings per share have been adjusted to reflect a 3% stock
dividend distributed June 15, 1995.
5
<PAGE>
INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
Feb 25, 1996 Feb 26, 1995
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $2,575 $2,172
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,339 2,499
Imputed interest on royalties receivable (22)
Imputed interest on unsecured notes 157 127
Equity in net loss of unconsolidated affiliate 637
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 2,747 (2,246)
(Increase) in inventories and prepaid expenses (543) (4,530)
Increase in accounts payable and accrued expenses 1,632 3,092
Other (172) (44)
----------------- ----------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,051 1,048
INVESTING ACTIVITIES
Proceeds from sale of equity securities 1,779
Investment in affiliate (2,047) (438)
Purchases of property, plant and equipment (2,721) (2,983)
Payments received on royalties receivable 80
----------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (2,989) (3,341)
FINANCING ACTIVITIES
Proceeds from sales of Common Stock 880 696
Purchase of Treasury Stock (523)
Principal payments on note payable and long-term debt (199) (336)
----------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 158 360
----------------- ----------------
INCREASE (DECREASE) IN CASH AND CASH 5,220 (1,933)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 13,009 13,196
----------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $18,229 $11,263
================= ================
</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 February 25, 1996
and the results of operations and cash flows for the nine-month periods ended
February 25, 1996 and February 26, 1995. The results for the three months and
nine months ended February 25, 1996 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 Nine Months Ended
------------------------------- ------------------------------
Feb 25, 1996 Feb 26, 1995 Feb 25, 1996 Feb 26, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary
- -------
Weighted average shares outstanding 11,493,909 10,855,952 11,213,205 10,814,005
Common stock equivalents 850,469 637,228 800,155 717,646
---------- ---------- ---------- ----------
Total 12,344,378 11,493,180 12,013,360 11,531,651
========== ========== ========== ==========
Fully Diluted
- -------------
Weighted average shares outstanding 11,493,909 10,855,952 11,213,205 10,814,005
Common stock equivalents 850,469 637,228 823,020 717,646
---------- ---------- ---------- ----------
Total 12,344,378 11,493,180 12,036,225 11,531,651
========== ========== ========== ==========
</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 on its investment of $220,000 and $637,000
for the three months and nine months ended February 25, 1996, respectively.
In addition, the Company purchased 980,000 SMIS redeemable preference
shares during the third quarter of fiscal 1996 at a cost of $1,511,000. These
shares are non-voting unless SMIS is unable to attain certain specified
financial targets, are redeemable on the earlier of October 31, 1997 or the date
of a public offering and carry a cumulative redemption premium of 15% per annum.
The purchase of the preference shares included the acquisition of an option to
purchase 2.5% of SMIS' common stock at a price of approximately $6 per share.
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
<PAGE>
INTERMAGNETICS GENERAL CORPORATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
During the first nine months of fiscal 1996, revenues increased
approximately 16%, compared to fiscal 1995 due principally to increased demand
for products related to the MRI market, higher interest and royalty income and a
realized gain of $1,321,000 on the sale of marketable securities. Revenues
declined approximately 5% in the third quarter of fiscal 1996 compared to the
third quarter of fiscal 1995 when the Company experienced an unusually high
level of shipments of the new line of MRI magnets. Also in the current quarter,
sales were adversely impacted by delayed deliveries from certain vendors. The
Company experienced slightly lower gross margin rates in the fiscal 1996 periods
compared to the periods in fiscal 1995, reflecting reductions of selling prices
and higher production costs.
During the first nine months of fiscal 1996, sales of Magnetic Products
were significantly higher than in the same periods of fiscal 1995 due to
increased shipments of the new line of MRI magnets and continued strong demand
for superconducting materials for MRI, but were lower for the third quarter
because of some delayed shipments and the high shipping levels in the third
quarter of fiscal 1995. Sales of Cryogenic Products were higher in the first
nine months and the third quarter of fiscal 1996 compared to the corresponding
fiscal 1995 periods due to increased demand for cryopumps and shield coolers for
MRI magnets. As a percentage of net sales, gross margins were lower in the
fiscal 1996 periods due principally to reductions in selling prices for magnets
and superconducting wire (reflecting increased competitive pressures in the
market for MRI products), reduced yields in wire production and a change in the
mix of sales and substantial rework costs for Cryogenic Products. Looking
forward, the Company expects some improvement in sales and gross margins in the
fourth quarter, assuming that further price erosion does not occur, cost
improvement programs proceed as expected and that anticipated significant sales
of the Company's new environmentally attractive FRIGC(R) refrigerant take place
as scheduled.
Total expenditures for research and development, both internally and
externally funded, increased approximately 4% in the third quarter of fiscal
1996 due to increased external funding, but declined in the first nine months as
additional internal engineering efforts were devoted to manufacturing and
marketing support. 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. Interest expense declined in fiscal 1996 due to the conversion of
$8,375,000 of the Company's convertible subordinated debentures in September
1995.
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 on this investment, amounting to $220,000 and $637,000 in the
third quarter and nine months of fiscal 1996, respectively. In December, the
Company made an additional investment in SMIS of approximately $1,500,000.
During the first nine months of fiscal 1996 the Company used net cash
of $2,989,000 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.
The Company's capital expenditure commitments at February 25, 1996 were
approximately $950,000. The Company has an unsecured line of credit of
$10,000,000 which expires in November 1997, none of which was in use on February
25, 1996. The Company believes that it will have sufficient working capital to
meet its needs for the foreseeable future. However, pursuit of possible large
scale applications in superconductivity and new refrigerants may require the
Company to seek additional financing.
9
<PAGE>
INTERMAGNETICS GENERAL CORPORATION
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None filed during the quarter ended February 25, 1996.
<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: April 9, 1996 By: /s/Carl H. Rosner
-----------------
Carl H. Rosner, Chairman
President and
Chief Executive Officer
Dated: April 9, 1996 By: /s/Michael C. Zeigler
---------------------
Michael C. Zeigler
Senior Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-END> FEB-25-1996
<CASH> 18,229
<SECURITIES> 0
<RECEIVABLES> 18,828
<ALLOWANCES> 164
<INVENTORY> 26,675
<CURRENT-ASSETS> 65,073
<PP&E> 50,666
<DEPRECIATION> 24,870
<TOTAL-ASSETS> 108,770
<CURRENT-LIABILITIES> 13,016
<BONDS> 29,407
0
0
<COMMON> 1,178
<OTHER-SE> 63,579
<TOTAL-LIABILITY-AND-EQUITY> 108,770
<SALES> 62,492
<TOTAL-REVENUES> 66,256
<CGS> 46,441
<TOTAL-COSTS> 46,441
<OTHER-EXPENSES> 13,557
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,968
<INCOME-PRETAX> 4,290
<INCOME-TAX> 1,715
<INCOME-CONTINUING> 2,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,575
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
