<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 24, 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
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
---------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(518) 782-1122
--------------
(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 - 12,156,237 as of December 29, 1996.
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INTERMAGNETICS GENERAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements:
Consolidated Balance Sheets - November 24, 1996 and May 26, 1996 .... 3
Consolidated Statements of Income - Three Months and Six Months
Ended November 24, 1996 and November 26, 1995...................... 5
Consolidated Statements of Cash Flows - Six Months Ended
November 24, 1996 and November 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)
ASSETS Nov 24, 1996 May 26, 1996
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and short-term investments $ 15,084 $ 18,696
Trade accounts receivable, less allowance
(November 24 - $173; May 26 - $169) 20,084 20,587
Costs and estimated earnings in excess of
billings on uncompleted contracts 3,345 2,094
Inventories:
Finished products 548 477
Work in process 14,088 13,933
Materials and supplies 10,521 10,447
-------- --------
25,157 24,857
Prepaid expenses and other 1,804 1,581
-------- --------
TOTAL CURRENT ASSETS 65,474 67,815
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,479 1,479
Buildings and improvements 16,623 16,610
Machinery and equipment 33,607 31,321
Leasehold improvements -- 233
-------- --------
51,709 49,643
Less allowances for depreciation and amortization 26,946 25,648
-------- --------
24,763 23,995
Equipment in process of construction 2,606 2,381
-------- --------
27,369 26,376
INTANGIBLE AND OTHER ASSETS
Available for sale securities 5,000 7,500
Other investments 7,796 7,760
Purchased technology, less accumulated amortization
(November 24 - $1,216; May 26 - $1,180) 375 411
Other assets 2,450 2,535
-------- --------
TOTAL ASSETS $108,464 $112,397
======== ========
3
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY Nov 24, 1996 May 26, 1996
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Current portion of long-term debt $ 2,400 $ 2,277
Accounts payable 4,074 5,806
Salaries, wages and related items 2,610 2,373
Customer advances and deposits 471 539
Product warranty reserve 941 1,100
Accrued income taxes 599 1,203
Other liabilities and accrued expenses 1,248 875
-------- --------
TOTAL CURRENT LIABILITIES 12,343 14,173
LONG-TERM DEBT, less current portion 29,275 29,364
DEFERRED INCOME TAXES, on unrealized gain on
available for sale securities 564 1,564
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 24, 1996 - 12,140,789 shares
May 26, 1996 - 12,076,499 shares 1,214 1,208
Additional paid-in capital 69,469 69,040
Retained earnings (deficit) 149 (1,727)
Unrealized gain on available for sale securities,
net 846 2,346
Foreign currency translation adjustments (90) (96)
-------- --------
71,588 70,771
Less cost of Common Stock in treasury
(November 24, 1996 - 488,340 shares;
May 26, 1996 - 322,540 shares) (5,306) (3,475)
-------- --------
66,282 67,296
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $108,464 $112,397
======== ========
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. 24, 1996 Nov 26, 1995 Nov. 24, 1996 Nov 26, 1995
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $23,260 $21,745 $44,630 $42,470
Realized gain on sale of available for sale
securities 1,321 1,321
Other revenue 488 675 1,573 1,260
------- ------- ------- -------
Total revenue 23,748 23,741 46,203 45,051
Costs and expenses:
Cost of products sold 16,168 16,506 31,109 31,429
Product research and development 1,633 1,079 3,196 2,485
Marketing, general and administrative 4,269 3,358 7,968 6,237
Interest and other expense 526 714 1,070 1,399
Equity in net loss (income)
of unconsolidated affiliate (87) 205 (77) 417
------- ------- ------- -------
22,509 21,862 43,266 41,967
------- ------- ------- -------
Income before income taxes 1,239 1,879 2,937 3,084
Provision for income taxes 412 752 1,057 1,234
------- ------- ------- -------
NET INCOME $ 827 $ 1,127 $ 1,880 $ 1,850
======= ======= ======= =======
NET INCOME PER SHARE (Primary and
Fully diluted) $0.07 $0.09 $0.15 $0.15
======= ======= ======= =======
</TABLE>
NOTE: Shares and earnings per share have been adjusted to reflect a 2% stock
dividend distributed August 22, 1996.
5
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Six Months Ended
-------------------------------
Nov 24, 1996 Nov 26, 1995
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,880 $1,850
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,486 1,587
Imputed interest on unsecured notes 117 105
Equity in net loss (income) of unconsolidated affiliate (77) 417
Gain on sale of available for sale 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 (748) 5,120
(Increase) in inventories and prepaid expenses and other (523) (1,303)
Increase (decrease) in accounts payable and accrued expenses (1,953) 1,991
Other 6 41
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 188 8,487
INVESTING ACTIVITIES
Proceeds from sale of available for sale securities 1,779
Investment in unconsolidated affiliate (560)
Purchases of property, plant and equipment (2,291) (1,858)
Increase in other assets (26)
------- -------
NET CASH USED IN INVESTING ACTIVITIES (2,317) (639)
FINANCING ACTIVITIES
Proceeds from sales of Common Stock 431 660
Purchase of Treasury Stock (1,831) (426)
Principal payments on note payable and long-term debt (83) (83)
------- -------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (1,483) 151
------- -------
INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS (3,612) 7,999
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 18,696 13,009
------- -------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $15,084 $21,008
======= =======
</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 24, 1996
and the results of operations and cash flows for the six-month periods ended
November 24, 1996 and November 26, 1995. The results for the three months and
six months ended November 24, 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 26, 1996, filed on Form 10-K on August 23, 1996.
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
--------------------------- ---------------------------
Nov 24, 1996 Nov 26, 1995 Nov 24, 1996 Nov 26, 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Primary
Weighted average shares outstanding 11,695,734 11,520,397 11,733,273 11,294,310
Common stock equivalents 538,522 789,279 597,994 761,467
---------- ---------- ---------- ----------
Total 12,234,256 12,309,676 12,331,267 12,055,777
========== ========== ========== ==========
Fully Diluted
Weighted average shares outstanding 11,695,734 11,520,397 11,733,273 11,294,310
Common stock equivalents 538,522 850,550 597,994 874,000
---------- ---------- ---------- ----------
Total 12,234,256 12,370,947 12,331,267 12,168,310
========== ========== ========== ==========
</TABLE>
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 August
22, 1996 as described in Note C.
NOTE C -
On May 21, 1996, the Company declared a 2% stock dividend which was
distributed on all outstanding shares, except Treasury Stock, on August 22, 1996
for all shareholders of record on August 1, 1996. 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
Revenues were higher during the first half and second quarter of fiscal
1997 and the Company experienced higher gross margin rates in the fiscal 1997
periods compared to the periods in fiscal 1996. Revenues in the first half and
second quarter of fiscal 1996 included a realized gain of $1,321,000 ($792,000
after taxes) on the sale of marketable securities, and revenues in the first
half of fiscal 1997 include the sale of a low volume defense-related product
line which resulted in an after-tax gain of $186,000. Increased revenues in the
Refrigeration Products segment more than offset declines in the Magnetic
Products segment. Continued improvements in production cost reduction programs
and an improved sales mix enabled the Company to achieve improved gross margin
rates despite continuing selling price decreases.
During the first half and second quarter of fiscal 1997, sales of
Magnetic Products were lower than in the same periods of fiscal 1996 principally
due to intensified competition and reduced demand for superconducting materials
for MRI. The Company is in final negotiations to extend its long-term supply
agreement with its largest customer for MRI magnets. The Company's long-term
supply agreement for superconducting materials has expired and will not be
extended. The Company expects this major customer for superconducting materials
to continue to purchase some of its requirements from the Company. As a
consequence, the Company expects future sales declines for superconducting
materials until it is able to secure new orders and additional customers for
this product line. The Company has initiated cost control programs, including a
moderate reduction in work force, to mitigate the lower level of this business.
Magnet sales were slightly lower in the first half of fiscal 1997, reflecting
decreased selling prices which occurred during the past year. Sales of
Refrigeration Products were higher in the first half and second quarter of
fiscal 1997 compared to the corresponding fiscal 1996 periods due to a higher
demand for such products. As a percentage of net sales, gross margins were
higher in the fiscal 1997 periods when compared to the previous year for both
Magnetic Products and Refrigeration Products due to a better sales mix and
effective cost reduction programs. Margin improvements occurred in almost all
major product lines except superconducting materials where margins were much
lower due to reduced sales volume, lower selling prices and reduced production
yields.
Total expenditures for research and development, both internally and
externally funded, increased approximately 21% in the first half of fiscal 1997
principally due to planned internal new product development programs. Marketing,
general and administrative expenses increased in fiscal 1997 due to the
9
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creation of separate organizations to develop and market FRIGC refrigerants,
(especially the planned introduction of FRIGC refrigerants into the broader
marketplace in the spring of 1997), and IMiG-MRI diagnostic imaging systems
which may also be useful for quality control inspections. Interest expense
declined due to the conversion of $8,375,000 of the Company's convertible
subordinated debentures in September, 1995.
During the first half of fiscal 1997 the Company used net cash of
$3,612,000, of which $2,317,000 was used in investing activities for machinery
and equipment and $1,483,000 in financing activities, principally for
repurchases of the Company's Common Stock under the previously-announced stock
buy-back program which is continuing.
The Company's capital resource commitments as of December 29, 1996
consist principally of capital equipment commitments of approximately $650,000
and maturing installment notes with a payment of $2,167,000 which was paid
December 30, 1996. 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 29, 1996.
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 or other business opportunities may
require the Company to seek additional financing in future years.
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 1996 Annual Meeting of Shareholders of the Company was held
on November 6, 1996.
(c) 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
Carl H. Rosner 10,488,993 140,800 -- --
Edward E. David, Jr. 10,486,648 143,145 -- --
J. E. Goldman 10,486,245 143,548 -- --
John M. Albertine 10,490,891 138,902 -- --
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 24, 1996.
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: January 6, 1997 By: /s/Carl H. Rosner
------------------------------------------
Carl H. Rosner, Chairman
President and Chief Executive Officer
Dated: January 6, 1997 By: /s/Michael C. Zeigler
------------------------------------------
Michael C. Zeigler
Senior Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-25-1997
<PERIOD-END> NOV-24-1996
<CASH> 15,084
<SECURITIES> 0
<RECEIVABLES> 23,256
<ALLOWANCES> 173
<INVENTORY> 25,157
<CURRENT-ASSETS> 65,474
<PP&E> 54,315
<DEPRECIATION> 26,946
<TOTAL-ASSETS> 108,464
<CURRENT-LIABILITIES> 12,343
<BONDS> 29,275
0
0
<COMMON> 1,214
<OTHER-SE> 65,068
<TOTAL-LIABILITY-AND-EQUITY> 108,464
<SALES> 44,630
<TOTAL-REVENUES> 46,203
<CGS> 31,109
<TOTAL-COSTS> 31,109
<OTHER-EXPENSES> 11,087
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,070
<INCOME-PRETAX> 2,937
<INCOME-TAX> 1,057
<INCOME-CONTINUING> 1,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,880
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
