<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 23, 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
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 - 12,480,222 as of January 5, 1998.
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INTERMAGNETICS GENERAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
Item 1: Financial Statements:
<S> <C> <C>
Consolidated Balance Sheets - November 23, 1997 and May 25, 1997................................3
Consolidated Statements of Income - Three Months and Six Months Ended November 23, 1997
and November 24, 1996.........................................................................5
Consolidated Statements of Cash Flows - Six Months Ended November 23, 1997
and November 24, 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
</TABLE>
2
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INTERMAGNETICS GENERAL CORPORATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS Nov 23, 1997 May 25, 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 9,347 $ 12,667
Trade accounts receivable, less allowance
(November 23 - $287; May 25 - $302) 17,189 16,899
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,781 3,543
Inventories:
Finished products 837 811
Work in process 16,108 14,196
Materials and supplies 11,608 11,410
-------- --------
28,553 26,417
Prepaid expenses and other 3,922 3,272
-------- --------
TOTAL CURRENT ASSETS 63,792 62,798
PROPERTY, PLANT AND EQUIPMENT
Land and improvements 1,479 1,479
Buildings and improvements 16,425 16,425
Machinery and equipment 37,088 36,181
Leasehold improvements 35 35
-------- --------
55,027 54,120
Less allowances for depreciation and amortization 30,485 28,616
-------- --------
24,542 25,504
Equipment in process of construction 3,644 3,048
-------- --------
28,186 28,552
INTANGIBLE AND OTHER ASSETS
Available for sale securities 4,238 3,112
Other investments 8,807 8,932
Excess of cost over net assets acquired, less accumulated
amortization (November 23 - $495; May 25 - $169) 9,209 9,538
Other assets 4,161 3,057
-------- --------
TOTAL ASSETS $118,393 $115,989
======== ========
</TABLE>
3
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INTERMAGNETICS GENERAL CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(Dollars in Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY Nov 23, 1997 May 25, 1997
------------ -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Current portion of long-term debt $ 265 $ 259
Accounts payable 5,414 6,441
Salaries, wages and related items 2,886 2,660
Customer advances and deposits 1,029 811
Product warranty reserve 1,001 911
Accrued income taxes 1,662 1,453
Other liabilities and accrued expenses 1,132 917
-------- --------
TOTAL CURRENT LIABILITIES 13,389 13,452
LONG-TERM DEBT, less current portion 29,008 29,105
DEFERRED INCOME TAXES, on unrealized gain on
available for sale securities 750 345
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 - 40,000,000 shares
Issued and outstanding (including shares in treasury):
November 23, 1997 - 12,719,977 shares
May 25, 1997 - 12,642,508 shares 1,272 1,264
Additional paid-in capital 75,622 74,378
Retained earnings (deficit) (590) (1,643)
Unrealized gain on available for sale securities, net 1,333 613
Foreign currency translation adjustments 17 (16)
-------- --------
77,654 74,596
Less cost of Common Stock in treasury
(November 23, 1997 - 252,783 shares;
May 25, 1997 - 163,700 shares) (2,408) (1,509)
-------- --------
75,246 73,087
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $118,393 $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 Six Months Ended
-------------------------------- -----------------------------
Nov 23, 1997 Nov 24, 1996 Nov 23, 1997 Nov 24, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 22,215 $ 23,260 $ 43,235 $ 44,630
Other revenue 479 488 965 1,573
-------- -------- -------- --------
Total revenue 22,694 23,748 44,200 46,203
Costs and expenses:
Cost of products sold 14,608 16,168 27,743 31,109
Product research and development 1,953 1,633 4,066 3,196
Marketing, general and administrative 4,625 4,269 9,537 7,968
Interest and other expense 542 526 1,045 1,070
Equity in net loss (income)
of unconsolidated affiliate (4) (87) 83 (77)
-------- -------- -------- --------
21,724 22,509 42,474 43,266
-------- -------- -------- --------
Income before income taxes 970 1,239 1,726 2,937
Provision for income taxes 378 412 673 1,057
-------- -------- -------- --------
NET INCOME $ 592 $ 827 $ 1,053 $ 1,880
======== ======== ======== ========
NET INCOME PER SHARE (Primary and
Fully diluted) $ 0.05 $ 0.07 $ 0.08 $ 0.15
======== ======== ======== ========
</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)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------------------
Nov 23, 1997 Nov 24, 1996
----------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,053 $ 1,880
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,479 1,813
Cost of warrants issued 300
Imputed interest on unsecured notes 117
Equity in net loss (income) of unconsolidated affiliate 83 (77)
Gain on sale of assets (91) (306)
Change in operating assets and liabilities:
Increase in accounts receivable and costs
and estimated earnings in excess of billings
on uncompleted contracts (1,528) (748)
Increase in inventories and prepaid expenses and other (2,486) (928)
Increase (decrease) in accounts payable and accrued expenses 158 (1,953)
Other 44 6
-------- --------
NET CASH PROVIDED (USED) BY OPERATING 12 (196)
ACTIVITIES
INVESTING ACTIVITIES
Investment in unconsolidated affiliate (1,219)
Purchases of property, plant and equipment (1,631) (2,632)
Proceeds from sale of assets 93 725
Increase in other assets (26)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (2,757) (1,933)
FINANCING ACTIVITIES
Proceeds from sales of Common Stock 504 431
Proceeds from sale of warrants 120
Purchase of Treasury Stock (1,108) (1,831)
Principal payments on long-term debt (91) (83)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (575) (1,483)
-------- --------
DECREASE IN CASH AND SHORT-TERM
INVESTMENTS (3,320) (3,612)
CASH AND SHORT-TERM INVESTMENTS AT
BEGINNING OF PERIOD 12,667 18,696
-------- --------
CASH AND SHORT-TERM INVESTMENTS AT END
OF PERIOD $ 9,347 $ 15,084
======== ========
</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 23, 1997 and the results of operations and cash flows for the
six-month periods ended November 23, 1997 and November 24, 1996. The results
for the three months and six months ended November 23, 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:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
Nov 23, 1997 Nov 24, 1996 Nov 23, 1997 Nov 24, 1996
------------ ------------ ------------ ------------
Primary
<S> <C> <C> <C> <C>
Weighted average shares outstanding 12,503,573 11,929,648 12,498,447 11,967,938
Common stock equivalents 308,175 549,292 333,158 609,953
---------- ---------- ---------- ----------
Total 12,811,748 12,478,940 12,831,605 12,577,891
========== ========== ========== ==========
Fully Diluted
Weighted average shares outstanding 12,503,573 11,929,648 12,498,447 11,967,938
Common stock equivalents 308,175 549,292 333,158 609,953
---------- ---------- ---------- ----------
Total 12,811,748 12,478,940 12,831,605 12,577,891
========== ========== ========== ==========
</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
September 16, 1997 as described in Note D.
NOTE C -
On November 24, 1997, the Company completed its acquisition of
Polycold Systems International, Inc. of San Rafael, CA, a manufacturer of
low-temperature refrigeration systems including water vapor cryopumps,
cryocoolers, cold trap chillers and gas chillers. The agreement provides for a
negotiated price of approximately $16,500,000, consisting of a promissory note
of $6,820,000 and the balance in the Company's Preferred and Common Stock.
This transaction will be accounted for as a purchase in the third quarter of
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
The Company achieved higher gross margin rates in the first half and
second quarter of fiscal 1998 compared to the periods in fiscal 1997, even
though total sales were slightly lower. Other revenue was higher in the first
half of fiscal 1997 due to 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. Continued extension of product cost reduction programs and an
improved sales mix together with the results of Medical Advances, Inc.
("MAI"), which was acquired in March 1997, enabled the Company to achieve
improved gross margin rates despite continuing selling price decreases.
During the first half and second quarter of fiscal 1998, sales of
Magnetic Products were higher than in the same periods of fiscal 1997
principally due to a higher volume of magnet sales and sales by MAI, the total
of which was somewhat offset by reduced demand for superconducting materials
for MRI. Sales of Refrigeration Products were lower in the first half and
second quarter of fiscal 1998 compared to the corresponding fiscal 1997
periods due to a somewhat lower demand for cryogenic products and
substantially lower sales of refrigerants due to a relatively cool summer. As
a percentage of net sales, gross margins were higher in the fiscal 1998
periods when compared to the previous year for Magnetic Products due to a
better sales mix and effective cost reduction programs while gross margin
rates for Refrigeration Products were about the same as fiscal 1997.
Internal research and development expenses were 27.2% higher in the
current half (which included MAI) compared to the first half of fiscal 1997,
and externally-funded programs declined by approximately 20%. Marketing,
general and administrative expenses increased approximately 20% in the first
half of fiscal 1998 compared to the same period in fiscal 1997 principally due
to the inclusion of MAI, an increased effort to develop and market FRIGC
refrigerants, and higher marketing costs for APD Cryogenics.
During the second quarter, the Company signed a Letter of Intent to
acquire Polycold Systems International, Inc. ("Polycold") of San Rafael, CA, a
manufacturer of low-temperature refrigeration systems including water vapor
cryopumps, cryocoolers, cold trap chillers and gas chillers. The acquisition
of Polycold was completed in the third quarter of fiscal 1998 for an aggregate
consideration of approximately $16,500,000 consisting of a 90-day promissory
note for $6,820,000, 276,050 shares of the Company's Common Stock and
9
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approximately 70,000 shares of Series A Preferred Stock, which is redeemable
in cash or Common Stock at the option of the Company.
During the first half of fiscal 1998 the Company used net cash of
$3,320,000, of which $2,757,000 was used in investing activities, $1,631,000
for machinery and equipment and an additional investment of $1,219,000 in
Surrey Medical Imaging Systems Limited and $575,000 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 28, 1997
consist principally of capital equipment commitments of approximately
$1,100,000 and a short-term promissory note of approximately $6,820,000 due in
February, 1998. The Company has an unsecured line of credit of $25,000,000
which expires in November, 2000, none of which was in use on December 28,
1997. 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 1997 Annual Meeting of Shareholders of the Company was
held on November 11, 1997.
(c)(i) At the Annual Meeting, the Shareholders of the Company approved an
amendment to the Company's Certificate of Incorporation to increase
the number of shares of Common Stock authorized to be issued by the
Company from 20 million to 40 million. The vote was 10,272,680 FOR;
944,435 AGAINST; 88,555 ABSTAIN; and -0- BROKER NON-VOTES.
(c)(ii) At the Annual Meeting, the Shareholders of the Company elected to the
Board of Directors all five nominees for director with the following
vote:
BROKER
DIRECTOR FOR AGAINST ABSTAIN NON-VOTES
Joseph C. Abeles 10,797,693 456,528 -- --
James S. Hyde. 11,089,616 421,850 -- --
Thomas L. Kempner 10,828,767 425,454 -- --
Stuart A. Shikiar 10,830,171 424,050
Sheldon Weinig 10,830,986 423,235 -- --
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
On October 24, 1997 the Company filed a Form 8-K/A to provide
additional financial information regarding the acquisition of Medical
Advances, Inc.
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, 1998 By: /s/Carl H. Rosner
-----------------
Carl H. Rosner, Chairman
Chairman and Chief Executive Officer
Dated: January 6, 1998 By: /s/Michael C. Zeigler
---------------------
Michael C. Zeigler
Senior Vice President, Finance
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<C>
<S>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> May-31-1998
<PERIOD-END> Nov-23-1997
<CASH> 9,347
<SECURITIES> 0
<RECEIVABLES> 17,476
<ALLOWANCES> 287
<INVENTORY> 28,553
<CURRENT-ASSETS> 63,792
<PP&E> 58,671
<DEPRECIATION> 30,485
<TOTAL-ASSETS> 118,393
<CURRENT-LIABILITIES> 13,389
<BONDS> 29,008
0
0
<COMMON> 1,272
<OTHER-SE> 73,974
<TOTAL-LIABILITY-AND-EQUITY> 118,393
<SALES> 43,235
<TOTAL-REVENUES> 44,200
<CGS> 27,743
<TOTAL-COSTS> 27,743
<OTHER-EXPENSES> 13,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,045
<INCOME-PRETAX> 1,726
<INCOME-TAX> 673
<INCOME-CONTINUING> 1,053
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,053
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
