<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(thousands, except per share information)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C>
Net sales $ 9,012 $ 8,221 $17,638 $15,338
Cost of sales 4,080 4,029 7,925 7,327
------- ------- ------- -------
Gross profit 4,932 4,192 9,713 8,011
Selling, general and
administrative
expenses 3,620 2,877 6,991 5,587
Research and
development expenses 517 357 1,055 701
Research revenues (40) (200) (40) (601)
------- ------- ------- -------
Operating profit 835 1,158 1,707 2,324
Interest expense, net 508 231 995 470
Other expense 174 - 165 -
------- ------- ------- -------
Income from continuing
operations before
provision for income
taxes 153 927 547 1,854
Provision for income
taxes 68 273 186 556
------- ------- ------- -------
Income from
continuing operations 85 654 361 1,298
Loss from discontinued
operations:
Spinoff of
biotechnology
business segment,
net of income tax
benefits:
Loss from
operations - (763) - (763)
Estimated loss on
disposal - (1,000) - (1,000)
------- ------- ------- -------
Net income (loss) $ 85 $(1,109) $ 361 $ (465)
======= ======= ======= =======
Income (loss) per
common and common
equivalent share:
From continuing
operations $ .01 $ .07 $ .04 $ .13
======= ======= ======= =======
From discontinued
operations $ - $ (.18) $ - $ (.18)
======= ======= ======= =======
Net income (loss) $ .01 $ (.11) $ .04 $ (.05)
======= ======= ======= =======
Average number of
common and common
equivalent shares 9,697,029 9,846,495 9,662,952 9,811,911
========= ========= ========= =========
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
June 30, December 31,
ASSETS 1996 1995
---- ----
<CAPTION>
<S> <C> <C>
Current assets:
Cash and equivalents $ 126 $ 169
Accounts receivable, less allowance
for doubtful accounts of $306 8,641 8,456
Inventories 8,890 9,000
Current deferred taxes 55 55
Prepaid expenses and other current
assets 1,241 763
------- -------
Total current assets 18,953 18,443
------- -------
Notes receivable, less current
maturities 183 285
------- -------
Property, plant and equipment - at cost:
Land 625 625
Buildings 9,257 9,054
Machinery and equipment 8,934 8,656
------- -------
18,816 18,335
Less accumulated depreciation (8,702) (8,225)
------- -------
10,114 10,110
------- -------
Deferred income taxes 2,791 2,791
Other assets 1,271 702
------- -------
$33,312 $32,331
======= =======
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, Continued
(Unaudited)
(Amounts in thousands)
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---- ----
<CAPTION>
<S> <C> <C>
Current liabilities:
Note payable to bank $ 7,850 $ 8,048
Current maturities of long-term debt 3,445 2,415
Accounts payable 2,659 2,447
Accrued payroll 32 461
Other accrued expenses 934 772
Income taxes payable 174 17
------- -------
Total current liabilities 15,094 14,159
------- -------
Long-term debt, less current maturities 8,586 9,624
------- -------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 30,000,000
shares authorized; 9,522,681 and
9,440,681 shares issued in 1996 and
1995, respectively 95 95
Stock subscribed 175 -
Additional paid-in capital 18,648 18,130
Deficit (6,517) (6,879)
------- -------
12,401 11,346
Less treasury stock; 171,096 and
176,356 shares, at cost, in
1996 and 1995, respectively (2,581) (2,609)
Stockholders' notes receivable (189) (189)
------- -------
Total stockholders' equity 9,631 8,548
------- -------
$33,312 $32,331
======= =======
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IGI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six months ended June 30,
1996 1995
------- -------
<CAPTION>
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 361 $ (465)
Reconciliation of net income to net
cash provided (used) by operating
activities:
Depreciation and amortizatio 515 418
Provision for loss on accounts
receivable and inventories 60 35
Accrual for estimated loss on
disposal - 1,000
Issuance of stock to 401(k) plan 28 21
Stock subscribed 175 -
Change in deferred income taxes - (74)
Changes in operating assets and
liabilities:
Accounts receivable (186) (1,154)
Inventories 50 (621)
Prepaid and other assets (478) (46)
Accounts payable and accrued
expenses (54) (202)
Income taxes payable (refundable) 157 (2)
------- -------
Net cash provided (used) by operating
activities 628 (1,090)
------- -------
Cash flows from investing activities:
Capital expenditures (481) (1,482)
Decrease in notes receivable from
officer 102 137
Increase in other assets (604) (177)
Increase in net assets of
biotechnology segment - (1,005)
------- -------
Net cash used by investing activities (984) (2,527)
------- -------
Cash flows from financing activities:
Net (repayments) borrowings under
line of credit agreements (198) 731
Payments of long-term debt (8) (23)
Proceeds from exercise of common stock
options 518 328
Proceeds from sale of common stock - 2,500
------- -------
Net cash provided by financing
activities 313 3,536
------- -------
Net decrease in cash and equivalents (43) (81)
Cash and equivalents at beginning of
year 169 954
------- -------
Cash and equivalents at June 30, 1996
and 1995 $ 126 $ 873
======= =======
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
<PAGE>
IGI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The accompanying consolidated financial statements have been
prepared by IGI, Inc. without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and
reflect all adjustments which, in the opinion of management, are
necessary for a fair statement of the results for the interim
periods presented. All such adjustments are of a normal
recurring nature.
Certain information in footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles has been condensed or
omitted pursuant to such rules and regulations, although the
Company believes the disclosures are adequate to make the
information presented not misleading. These financial statements
should be read in conjunction with the financial statements and
the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
2. Net Income Per Common Share
---------------------------
Net income per share of common stock is computed by dividing
net income by the weighted average number of shares of common
stock and common stock equivalents, if dilutive, outstanding
during the three and six month periods ended June 30, 1996 and
1995. Common stock equivalents include shares issuable upon the
exercise of dilutive common stock options. Fully diluted
earnings per share approximate primary earnings per share.
3. Inventories
-----------
Inventories are valued at the lower of cost or market using
the last-in, first-out (LIFO) method and consist of the
following: (Amounts in thousands)
<TABLE>
June 30, 1996 December 31, 1995
------------- -----------------
<CAPTION>
<S> <C> <C>
Finished Goods $3,460 $3,103
Work-in-process 2,566 2,851
Raw Materials 2,864 3,046
------ ------
Total $8,890 $9,000
====== ======
</TABLE>
Inventory values computed under the first-in, first-out
(FIFO) method approximate the values determined using LIFO.
<PAGE>
IGI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued
4. Business Segments
-----------------
Summary operating results for the Company's Animal Health and
Cosmetic and Consumer Products segments for the three and six
month periods ended June 30, 1996 and 1995 appear below: (amounts
in thousands)
<TABLE>
3 months ended 6 months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<CAPTION>
<S> <C> <C> <C> <C>
Net Sales:
Animal Health $ 8,066 $ 7,679 $16,076 $14,384
Consumer Products 946 542 1,562 954
------- ------- ------- -------
Total $ 9,012 $ 8,221 $17,638 $15,338
======= ======= ======= =======
Gross Profit:
Animal Health $ 4,275 $ 4,070 $ 8,520 $ 7,623
Consumer Products 657 122 1,193 388
------- ------- ------- -------
Total $ 4,932 $ 4,192 $ 9,713 $ 8,011
======= ======= ======= =======
Operating profit (loss):
Animal Health $ 1,916 $ 1,726 $ 3,876 $ 3,450
Consumer Products (130) 225 (409) 373
Corporate (951) (793) (1,760) (1,499)
------- ------- ------- -------
Total $ 835 $ 1,158 $ 1,707 $ 2,324
======= ======= ======= =======
</TABLE>
5. Equity Transaction
------------------
In August 1993, the Company entered into an agreement with
an industry partner for the testing of the Novasome technology as
a microcarrier and adjuvant for various human vaccines. This
agreement was amended in December 1995 in connection with the
Spinoff of Novavax. Under the terms of the amended agreement,
the industry partner had the option to purchase up to
approximately $6.8 million of IGI Common Stock and $3.7 million
of Novavax Common Stock, concurrently, The agreement was
terminated in 1996.
<PAGE>
IGI, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Three months ended June 30, 1996 compared to June 30, 1995
- ----------------------------------------------------------
The Company's Animal Health segment had operating profits of
$1,916,000, an increase of $190,000 or 11% over the second
quarter of 1995. This increase was offset by operating losses of
the Company's Cosmetic and Consumer Products segment of $130,000
(which had operating profits of $225,000 during the second
quarter of 1995) and corporate expenses of $951,000, an increase
of $158,000 or 20% over 1995. The operating loss of the
Cosmetic and Consumer Products segment was due to costs
associated with the market introduction of the Nova Skin Care
product line. These costs offset profits generated from the
increased sales of cosmetic products for Estee Lauder.
Consolidated operating profit decreased $323,000 or 28% during
the second quarter of 1996. (See Note 4 of Notes to Consolidated
Financial Statements).
Sales increased $791,000 or 10%. All of the Company's
animal health sales divisions had increases over the second
quarter of 1995. Sales of animal health products, which include
poultry vaccines and companion pet products, increased $387,000
or 5%. International sales of these products increased by
$238,000 or 7% and accounted for $3,460,000 or 43% of animal
health product sales and 38% of the Company's total sales,
compared to 42% and 39%, respectively, for the same period a year
ago. Sales of cosmetic and consumer products were $946,000, an
increase of $404,000 or 75% compared to 1995. Sales in this
segment consisted principally of products manufactured for Estee
Lauder and the Company's own Nova Skin Care products. Gross
profit increased $740,000 or 18% due principally to the higher
sales volume. As a percentage of sales, gross profit was 55%, up
from 51% for the second quarter of 1995. This improvement was
due to increased sales of higher margin cosmetic products.
Selling, general and administrative expenses increased
$743,000 or 26%. Selling and marketing expenses related to the
Nova Skin Care product line accounted for $379,000 of the
increase. Variable costs associated with the higher sales volume
of animal health products are the principal component of the
remaining expense increases. Research and development expenses
increased $160,000 or 45%. This increase was the result of
stepped-up product development in both of the Company's business
segments. The Company had $40,000 of research revenues during
the second quarter of 1996 compared to $200,000 during the same
period in 1995.
Net interest expense increased $277,000 or 120% due to
higher borrowing required during 1995 to fund the operations of
the Company's former biotechnology business segment (Novavax)
and to fund the $5,000,000 license payment that was made in
connection with the spinoff of Novavax in December 1995. In
connection with settlement of a lawsuit brought against the
Company related to employment contracts of certain IGI
employees with their former employer, the Company has incurred
charges of $175,000, for which the Company will issue shares of
IGI common stock. Such charges are reported as other expense.
As a result of this payment, the Company will have the right to
continue to use these employees for the selling, marketing and
product development of its Nova Skin Care products. The former
employer has agreed to drop all claims against the Company
related to its Nova Skin Care product line. The Company intends
to seek reimbursement for these charges under its insurance
policy.
During the second quarter of 1995, the Company incurred
expenses of $1,055,000 for its biotechnology business segment
(Novavax), of which $763,000 was in excess of the balance of the
$1,000,000 estimate for these expenses that was established at
December 31, 1994. Due to delays in the Spinoff of the
biotechnology business segment the Company established an
additional reserve of $1,000,000 at June 30, 1995 for losses of
this operation. The Spinoff was completed in December 1995.
<PAGE>
IGI, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Six months ended June 30, 1996 compared to June 30, 1995
- --------------------------------------------------------
The Company's Animal Health segment had operating profits of
$3,876,000, an increase of $426,000 or 12% over the first six
months of 1995. This increase was offset by operating losses of
the Company's Cosmetic and Consumer Products segment of $409,000
(which had operating profits of $373,000 during the first six
months of 1995) and corporate expenses of $1,760,000, an increase
of $261,000 or 17% over 1995. The operating loss of the
Cosmetic and Consumer Products segment was due to costs
associated with the market introduction of the Nova Skin Care
product line. These costs offset profits generated from the
increased sales of cosmetic product sales for Estee Lauder.
Consolidated operating profit decreased $617,000 or 27% during
the six month period ended June 30, 1996 compared to the same
period a year ago. (See Note 4 of Notes to Consolidated
Financial Statements).
Sales increased $2,300,000 or 15%. All of the Company's
animal health sales divisions had increases over the first six
months of 1995. Sales of animal health products increased
$1,692,000 or 12%. International sales of these products
increased by $1,017,000 or 17% and accounted for $7,145,000 or
44% of animal health product sales and 41% of the Company's total
sales, compared to 43% and 40%, respectively, for the same period
a year ago. Sales of cosmetic and consumer products were
$1,562,000, an increase of $608,000 or 64% compared to 1995.
Sales in this segment consisted principally of products
manufactured for Estee Lauder and the Company's own Nova Skin
Care products. Gross profit increased $1,702,000 or 21% due
principally to the higher sales volume. As a percentage of
sales, gross profit was 55%, up from 52% for the first six
months of 1995. This improvement was due to increased sales of
higher margin cosmetic products.
Selling, general and administrative expenses increased
$1,404,000 or 25%. Selling and marketing expenses related to the
Nova Skin Care product line accounted for $736,000 of the
increase. Variable costs associated with the higher sales volume
of animal health products are the principal component of the
remaining expense increases. Research and development expenses
increased $354,000 or 50%. This increase was the result of
stepped-up product development in both of the Company's business
segments. The Company had $40,000 of research revenues during
the first six months of 1996 compared to $601,000 during the same
period in 1995.
Net interest expense increased $525,000 or 112% due to
higher borrowing required during 1995 to fund the operations of
the Company's former biotechnology business segment (Novavax)
and to fund the $5,000,000 license payment that was made in
connection with the spinoff of Novavax in December 1995.
<PAGE>
IGI, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
The Company provided $628,000 from operating activities.
Accounts receivable turnover ratio was 4.13 compared to 3.89 for
the year ended December 31, 1995. Accounts receivable balances
due from Mexico and Latin America were 29% of the total
receivable balance compared to 30% at December 31, 1995 and the
Company believes the net amounts are fully collectible. Mexico
and certain Latin American countries are important markets for
the Company's poultry vaccines and other products. These
countries have historically experienced varying degrees of
political unrest and economic and currency instability.
Because of the volume of business transacted by the Company in
those countries, continuation or the recurrence of such unrest or
instability could adversely affect the businesses of its
customers in those countries or the Company's ability to collect
its receivables from such customers, which in either case would
have a material adverse effect on the Company's future operating
results. The inventory turnover ratio for 1996 was 1.77,
compared to 1.81 for the year ended December 31, 1995. The
Company believes its reserves for inventory obsolescence and
accounts receivable are adequate. The Company used $984,000
in investing activities principally for capital expenditures and
other deferred costs associated with the Nova Skin Care division.
Funding for the Company's investing activities were provided by
operating activities and borrowings under the Company's working
capital line of credit.
Certain terms and financial covenants of the Company's loan
agreement have been amended. The $12 million revolving credit
facility has been adjusted so that the amount available under
this facility reduces by $857,000 (formerly $800,000) on the last
day of each quarter from September 30, 1996 (formerly June 30,
1996) through December 31, 1999. At June 30, 1996 the Company
had $2,150,000 of available borrowing capacity under its $10
million working capital line of credit and no borrowings
available under its $12 million revolving line of credit. Funds
generated from operations and existing bank credit facilities are
expected to be sufficient to meet the Company's short-term cash
requirements. The Company has current maturities of long-term
debt of $857,000 per quarter commencing September 30, 1996. The
Company believes that cash generated from operations as well as
available borrowings under its credit facilities will be
sufficient to meet its short-term obligations. However, over the
long term the Company will require additional funds to finance
its expected expansion of operations. The Company currently is
seeking to obtain such funds from additional borrowing
arrangements and/or a sale of debt or equity securities. There
can be no assurance that funds required by the Company in the
future will be available to the Company on terms satisfactory to
the Company, if at all. The inability to obtain needed funding
on satisfactory terms may require the Company to reduce certain
of its planned expenditures, scale back its operations or enter
into financing arrangements on terms which it would not otherwise
accept and would have a material adverse effect on the Company's
business and financial results.
<PAGE>
IGI, INC. AND SUBSIDIARIES
Part II OTHER INFORMATION
Item 1 - Legal Proceedings
- --------------------------
There were no material developments in the litigation
previously described in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.
Item 2 - Changes in Securities
- ------------------------------
The constituent instruments defining the rights of the
holders of any class of securities were not modified nor were the
rights evidenced by any class of registered securities materially
limited or qualified during the period covered by this report.
Item 3 - Defaults Upon Senior Securities
- ----------------------------------------
No defaults occurred during the period covered in this
report.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At the Company's Annual Meeting of Stockholders held on May
8, 1996, the following proposals were adopted by the vote
specified below:
Proposal For Withheld Authority
-------- --- ------------------
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors:
John P. Gallo 7,333,969 74,182
Edward B. Hager, M.D. 7,333,769 74,382
Jane E. Hager 7,321,769 86,382
Constantine L. Hampers, M.D. 7,333,969 74,182
John O. Marsh, Jr. 7,333,769 74,382
Terrence O'Donnell 7,333,869 74,282
David G. Pinosky, M.D. 7,333,969 74,182
</TABLE>
2. Ratification of Coopers & Lybrand as independent auditors
for the 1996 fiscal year.
Number of Shares:
-----------------
<TABLE>
<CAPTION>
<S> <C>
For 7,370,394
Against 29,487
Abstain 8,270
<PAGE>
IGI, INC. AND SUBSIDIARIES
Part II OTHER INFORMATION, continued
Item 5 - Other Information
- --------------------------
None
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits:
---------
Exhibit 11 - Computation of Net Income Per Common Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
<PAGE>
IGI, INC. AND SUBSIDIARIES
SIGNATURES
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.
IGI, INC.
(Registrant)
Date: August 8, 1996
By:
Donald J. MacPhee
Vice President
Principal Financial
and Accounting Officer)
</TABLE>
<TABLE>
EXHIBIT 11
IGI, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
(thousands, except per share information)
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income from continuing
operations $ 85 $ 654 $ 361 $ 1,298
Loss from discontinued
operations - (1,763) - (1,763)
------- ------- ------- -------
Net income (loss for
primary earnings per
share $ 85 $(1,109) $ 361 $ (465)
======= ======= ======= =======
Weighed average
shares outstanding 9,301,794 9,161,546 9,283,764 9,136,327
Common stock
equivalents (net of
common stock deemed
reacquired) based
on average market
price 395,235 684,949 379,188 675,584
--------- --------- --------- ---------
Total equivalent
shares for primary
computation 9,697,029 9,846,495 9,662,952 9,811,911
========= ========= ========= =========
Per Share Amounts:
Primary:
Income from
continuing
operations $ .01 $ .07 $ .04 $ .13
========= ========= ========== =========
Loss from
discontinued
operations $ - $ (.18) $ - $ (.18)
========= ========== ========== =========
Net (loss) income $ .01 $ (.11) $ .04 $ (.05)
========= ========== ========== =========
Fully diluted earnings per share have been omitted as they
approximate primary earnings per share.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 126
<SECURITIES> 0
<RECEIVABLES> 8,641
<ALLOWANCES> 306
<INVENTORY> 8,890
<CURRENT-ASSETS> 18,953
<PP&E> 18,816
<DEPRECIATION> 8,702
<TOTAL-ASSETS> 33,312
<CURRENT-LIABILITIES> 15,094
<BONDS> 0
<COMMON> 95
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,312
<SALES> 17,638
<TOTAL-REVENUES> 17,638
<CGS> 7,925
<TOTAL-COSTS> 8,006
<OTHER-EXPENSES> 165
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 995
<INCOME-PRETAX> 547
<INCOME-TAX> 186
<INCOME-CONTINUING> 361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 361
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
