<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 August 24, 1997
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________
Commission file number 1-11344
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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)
- -------------------------------------------------------------------------------
(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 - 12,715,073 as of October 6, 1997.
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INTERMAGNETICS GENERAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
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Item 1: Financial Statements:
Consolidated Balance Sheets - August 24, 1997 and May 25, 1997..................................3
Consolidated Statements of Income - Three Months Ended August 24, 1997
and August 25, 1996...........................................................................5
Consolidated Statements of Cash Flows - Three Months Ended August 24, 1997
and August 25, 1996.............................................................................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
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2
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INTERMAGNETICS GENERAL CORPORATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
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<CAPTION>
ASSETS August 24, 1997 May 25, 1997
-------------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 9,311 $ 12,667
Trade accounts receivable, less allowance
(August 24 - $309; May 25 - $302) 17,294 16,899
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,854 3,543
Inventories:
Finished products 962 811
Work in process 15,313 14,196
Materials and supplies 11,779 11,410
---------- ---------
28,054 26,417
Prepaid expenses and other 3,989 3,272
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TOTAL CURRENT ASSETS 63,502 62,798
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,479 1,479
Buildings and improvements 16,425 16,425
Machinery and equipment 36,932 36,181
Leasehold improvements 35 35
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54,871 54,120
Less allowances for depreciation and amortization 29,594 28,616
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25,277 25,504
Equipment in process of construction 3,056 3,048
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28,333 28,552
INTANGIBLE AND OTHER ASSETS
Available for sale securities 4,458 3,112
Other investments 8,823 8,932
Excess of cost over net assets acquired, less accumulated
amortization (August 24 - $332; May 25 - $169) 9,372 9,538
Other assets 3,611 3,057
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TOTAL ASSETS $118,099 $ 115,989
========== =========
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3
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
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<CAPTION>
August 24, 1997 May 25, 1997
--------------------- ----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 262 $ 259
Accounts payable 5,224 6,441
Salaries, wages and related items 2,705 2,660
Customer advances and deposits 1,073 811
Product warranty reserve 957 911
Accrued income taxes 1,482 1,453
Other liabilities and accrued expenses 1,293 917
---------- ---------
TOTAL CURRENT LIABILITIES 12,996 13,452
LONG-TERM DEBT, less current portion 29,058 29,105
DEFERRED INCOME TAXES, on unrealized gain on
available for sale securities 829 345
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):
August 24, 1997 - 12,702,051 shares
May 25, 1997 - 12,642,508 shares 1,270 1,264
Additional paid-in capital 75,489 74,378
Retained earnings (deficit) (1,182) (1,643)
Unrealized gain on available for sale securities 1,474 613
Foreign currency translation adjustments 133 (16)
---------- ---------
77,184 74,596
Less cost of Common Stock in treasury
(August 24, 1997 - 206,140 shares;
May 25, 1997 - 163,700 shares) (1,968) (1,509)
---------- ---------
75,216 73,087
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $118,099 $115,989
========== ========
</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
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Aug 24, 1997 Aug 25, 1996
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<S> <C> <C>
Net sales $21,020 $21,370
Other revenue 486 1,085
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Total revenue 21,506 22,455
Costs and expenses:
Cost of products sold 13,135 14,941
Product research and development 2,113 1,563
Marketing, general and administrative 4,912 3,699
Interest and other expense 503 544
Equity in net loss of unconsolidated affiliate 87 10
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20,750 20,757
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Income before income taxes 756 1,698
Provision for income taxes 295 645
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NET INCOME $ 461 $ 1,053
========= ========
NET INCOME PER SHARE (Primary and
Fully Diluted) $0.04 $0.08
========= ========
</TABLE>
NOTE: Shares and earnings per share have been adjusted to reflect a 2% stock
dividend distributed September 16, 1997.
5
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
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<CAPTION>
Three Months Ended
---------------------------------------
Aug 24, 1997 Aug 25, 1996
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 461 $ 1,053
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,219 908
Cost of warrants issued 150
Imputed interest on unsecured notes 59
Equity in net loss of unconsolidated affiliate 87 10
Gain on sale of assets (306)
Change in operating assets and liabilities:
Increase in accounts receivable and costs
and estimated earnings in excess of billings
on uncompleted contracts (1,706) (3,060)
Increase in inventories and prepaid expenses and other (1,904) (2,633)
Decrease in accounts payable and accrued
expenses (459) (1,452)
Other 150 (46)
---------- --------
NET CASH USED IN OPERATING ACTIVITIES (2,002) (5,467)
INVESTING ACTIVITIES
Investment in unconsolidated affiliate (609)
Purchases of property, plant and equipment (759) (1,199)
Proceeds from sale of assets 725
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NET CASH USED IN INVESTING ACTIVITIES (1,368) (474)
FINANCING ACTIVITIES
Proceeds from sales of Common Stock 397 274
Proceeds from sale of warrants 120
Purchase of Treasury Stock (459) (1,126)
Principal payments on long-term debt (44) (41)
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 14 (893)
---------- --------
DECREASE IN CASH AND SHORT-TERM
INVESTMENTS (3,356) (6,834)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 12,667 18,696
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CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 9,311 $11,862
========== ========
</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
August 24, 1997 and the results of operations and cash flows for the
three-month periods ended August 24, 1997 and August 25, 1996. The results for
the three months ended August 24, 1997 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 25, 1997, filed on Form 10-K on August 25,
1997.
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:
Quarter Ended
------------------------------
Aug 24, 1997 Aug 25, 1996
------------ ------------
Primary
Weighted average shares outstanding 12,493,322 12,006,227
Common stock equivalents 405,015 673,507
---------- ----------
Total 12,898,337 12,679,734
========== ==========
Fully Diluted
Weighted average shares outstanding 12,493,322 12,006,227
Common stock equivalents 405,015 673,507
---------- ----------
Total 12,898,337 12,679,734
========== ==========
7
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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 2% stock dividend
distributed September 16, 1997 as described in Note D.
NOTE C -
In June, 1997, the Company, as part of a long-term strategic
alliance, entered into a Warrant Agreement with a distributor under which the
distributor could purchase up to 1,200,000 shares of Common Stock. The
distributor paid $120,000 for the rights to the warrants and an initial
warrant (which expires on November 16, 1998) to purchase 500,000 shares at
$12.50 per share was issued. Future warrants are conditioned on the
distributor meeting specified performance levels and would be issued at market
prices at that time. In connection with the initial warrant, the Company
incurred a non-cash marketing charge of $600,000 which is being recognized in
quarterly installments of $150,000 during fiscal 1998.
NOTE D -
On July 22, 1997, the Company declared a 2% stock dividend which was
distributed on all outstanding shares, except Treasury Stock, on September 16,
1997 for all shareholders of record on August 26, 1997. 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
During the first quarter of fiscal 1998, revenues were 4.2% lower
than the first quarter of fiscal 1997. Increased sales of Magnetic Products,
including Medical Advances, Inc. ("MAI"), were more than offset by declines in
sales of Refrigeration Products. Gross margin rates improved in spite of
further reductions in selling prices due to the success of continuing cost
reduction programs and a more favorable product mix, including MAI. Other
revenue in fiscal 1997 included higher royalty income and a $299,000 sale of a
low volume, defense-related product line which resulted in an after-tax gain
of $186,000.
In the first quarter of fiscal 1998 sales were higher in the Magnetic
Products segment due to increased demand for MRI magnets and inclusion of MAI,
despite much lower sales of superconducting materials for MRI. Sales were
lower in the Refrigeration Products segment with declines in almost all
cryogenic product lines due to reduced demand and lower than expected sales of
FRIGC(R) refrigerants due to unseasonably cool temperatures and an apparently
adequate, although diminishing, supply of R-12. Gross margins improved for
Magnetic Products due to a better sales mix and continued cost reduction
efforts. Gross margins for Refrigeration Products increased due to continuing
cost reduction programs.
Internal research and development expenses were 35.2% higher in the
current quarter compared to the first quarter of fiscal 1997 as
externally-funded programs declined by approximately 34%. Marketing, general
and administrative expenses increased approximately 33% in the first quarter
of fiscal 1998 compared to the same period in fiscal 1997 principally due to
the inclusion of MAI and the creation of separate organizations to develop and
market FRIGC refrigerants and IMiG-MRI systems.
During the first quarter of fiscal 1998 the Company used net cash of
$3,356,000, of which $2,002,000 was used to fund operating activities,
principally increases in receivables and inventories, and $1,368,000 was used
in investing activities for machinery and equipment and an additional
investment of $609,000 in Surrey Medical Imaging Systems Limited.
9
<PAGE>
In June, 1997, the Company announced that, as part of a long-term
strategic alliance, it entered into a Warrant Agreement with Sumitomo
Corporation of America, the recently appointed distributor of FRIGC FR-12 in
the Asia-Pacific market, under which Sumitomo could purchase up to 1,200,000
shares of Common Stock. Sumitomo paid $120,000 for the rights to the warrants.
The Company issued an initial warrant (which expires on November 16, 1998) to
purchase 500,000 shares at $12.50 per share. The issuance of future warrants
depends on Sumitomo meeting specified performance levels. Additional warrants
would be issued at market prices at the time the warrants were issued. In
connection with the initial Warrant, the Company will incur non-cash,
quarterly charges of $150,000 throughout fiscal 1998 to be recorded as
marketing expenses.
The Company's capital resource commitments as of September 28, 1997
consist principally of capital equipment commitments of approximately
$1,130,000. The Company has an unsecured line of credit of $10,000,000 which
expires in November, 1997, none of which was in use on September 28, 1997. The
Company is negotiating a new line of credit. 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 in future
years.
10
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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 August 24, 1997.
11
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERMAGNETICS GENERAL CORPORATION
Dated: October 6, 1997 By: /s/Carl H. Rosner
-----------------
Carl H. Rosner
Chairman and Chief Executive Officer
Dated: October 6, 1997 By: /s/Michael C. Zeigler
---------------------
Michael C. Zeigler
Senior Vice President, Finance
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-24-1997
<CASH> 9,311
<SECURITIES> 0
<RECEIVABLES> 22,457
<ALLOWANCES> 309
<INVENTORY> 28,054
<CURRENT-ASSETS> 63,502
<PP&E> 57,927
<DEPRECIATION> 29,594
<TOTAL-ASSETS> 118,099
<CURRENT-LIABILITIES> 12,996
<BONDS> 29,058
0
0
<COMMON> 1,270
<OTHER-SE> 73,946
<TOTAL-LIABILITY-AND-EQUITY> 118,099
<SALES> 21,020
<TOTAL-REVENUES> 21,506
<CGS> 13,135
<TOTAL-COSTS> 13,135
<OTHER-EXPENSES> 7,112
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 503
<INCOME-PRETAX> 756
<INCOME-TAX> 295
<INCOME-CONTINUING> 461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 461
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
