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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-9957
DIAGNOSTIC PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
CALIFORNIA 95-2802182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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5700 WEST 96TH STREET
LOS ANGELES, CALIFORNIA 90045
(Address of principal executive offices)
Registrant's telephone number: (213) 776-0180
NO CHANGE
(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 ]
The number of shares of Common Stock, no par value, outstanding as of
March 31, 1995, was 13,061,242.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
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<CAPTION>
(In thousands, except per share data) Three Months Ended
March 31,
----------------------
1995 1994
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<S> <C> <C>
SALES $39,201 $27,773
COSTS AND EXPENSES:
Cost of sales 17,262 11,817
Selling 6,603 5,586
Research and development 3,870 3,290
General and administrative 4,142 3,005
Equity in income of affiliates (320) (459)
Investment income (311) (154)
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Total costs and expenses 31,246 23,085
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INCOME BEFORE INCOME TAXES 7,955 4,688
PROVISION FOR INCOME TAXES 2,150 1,220
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NET INCOME $ 5,805 $ 3,468
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NET INCOME PER SHARE OF COMMON STOCK:
Primary $ .42 $ .26
Fully Diluted .41 .25
AVERAGE COMMON SHARES OUTSTANDING:
Primary 13,683 13,529
Fully Diluted 14,224 13,832
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<CAPTION>
(Dollars in Thousands) March 31, December 31,
1995 1994
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ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,489 $ 14,833
Accounts receivable - net of allowance for
doubtful accounts of $84 and $76 38,480 32,076
Inventories 30,678 28,324
Prepaid expenses and other current assets 689 983
Deferred income tax benefit 2,123 2,123
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Total current assets 88,459 78,339
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 27,294 26,224
Machinery and equipment 33,170 31,040
Leasehold improvements 6,175 6,175
Construction in progress 951 162
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Total 67,590 63,601
Less accumulated depreciation and amortization 28,516 26,337
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Property, plant and equipment - net 39,074 37,264
SALES-TYPE AND OPERATING LEASES 9,923 8,005
DEFERRED INCOME TAXES 2,537 2,537
INVESTMENTS IN AFFILIATED COMPANIES 12,763 12,775
EXCESS OF COST OVER NET ASSETS ACQUIRED -
Net of amortization of $4,675 and $4,453 13,593 13,815
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TOTAL ASSETS $166,349 $152,735
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,221 $ 11,667
Accrued liabilities 6,022 5,124
Income taxes payable 2,431 844
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Total current liabilities 21,674 17,635
SHAREHOLDERS' EQUITY:
Common Stock - no par value, authorized 30,000,000 shares;
outstanding 13,061,242 shares and 12,952,880 shares. 28,886 27,334
Retained earnings 117,549 113,041
Foreign currency translation adjustments (1,760) (5,275)
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Total shareholders' equity 144,675 135,100
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $166,349 $152,735
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
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<CAPTION>
(Dollars in Thousands) Three Months Ended
March 31,
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1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,805 $ 3,468
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 1,684 1,124
Equity in undistributed income of
unconsolidated affiliates 12 282
Accounts receivable (5,307) (3,092)
Inventories (1,875) 248
Prepaid expenses and other current assets 294 178
Accounts payable 324 (384)
Accrued liabilities 898 292
Income taxes payable 1,579 690
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Net Cash Flows from Operating Activities 3,414 2,806
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,936) (598)
Sales-type and operating leases (1,292) (904)
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Net Cash from (used for) Investing Activities (3,228) (1,502)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,552 99
Cash dividends paid (1,297) (1,310)
Repurchase of common stock (2,429)
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Net Cash from (used for) Financing Activities 255 (3,640)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,215 (51)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,656 (2,387)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,833 12,884
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,489 $10,497
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The information for the three months ended March 31, 1995 and 1994 has not been
audited by independent accountants, but includes all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
to a fair statement of the results for such periods.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the requirements of the Securities and Exchange
Commission, although the Company believes that the disclosures included in
these financial statements are adequate to make the information not misleading.
The consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1994 annual report on Form 10-K as filed with the Securities and Exchange
Commission.
The results of operations for the three-month period ending March 31, 1995 are
not necessarily indicative of the results to be expected for the year ended
December 31, 1995.
Net income per share - primary is based upon the weighted average number of
common shares outstanding, including stock options when dilutive. Net income
per share - fully diluted is based upon the weighted average number of common
shares outstanding and the assumed exercise of all dilutive stock options,
including the effect of contingent options.
NOTE 2 -- INVENTORIES
Inventories by major categories are summarized as follows:
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<CAPTION>
March 31, December 31,
1995 1994
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<S> <C> <C>
Raw materials $ 9,302,000 $ 9,259,000
Work in process 11,955,000 11,233,000
Finished goods 9,421,000 7,832,000
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Total $30,678,000 $28,324,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Record sales of $39.2 million were achieved in the first quarter 1995, a 41%
increase over the first quarter 1994. The sales increases are principally a
result of the continuing increased worldwide acceptance of the fully automated,
random access IMMULITE system. The system is expected to account for the
greatest amount of growth of all the Company's product lines for the foreseeable
future. In periods when the U.S. dollar is weakening, the effect of translation
of the financial statements of the consolidated foreign affiliates is that of
higher sales, costs and net income. The weaker U.S. dollar in the first
quarter 1995 when compared to the first quarter 1994 resulted in increased
sales of approximately 8% and increased net income of approximately 5%.
Cost of sales as a percentage of sales was 44% as compared to 43% in the
corresponding 1994 quarter. The 44% in the 1995 quarter was an improvement from
the 46% reported in the fourth quarter 1994 principally resulting from
increased utilization at the Wales manufacturing facility and at the New Jersey
IMMULITE instrument manufacturing facility.
Selling expenditures increased 18% in the 1995 quarter compared to the 1994
quarter representing 17% of sales in 1995 and 20% of sales in 1994. These
increased costs are a result of the continual expansion of the marketing and
sales effort, especially for the IMMULITE system.
Research and development expenditures increased 18% in 1995 over 1994. These
expenditures have increased to support the IMMULITE system.
General and administrative costs were about 11% of sales in both 1995 and 1994.
Included in general and administrative expenses is the amortization of the
excess of cost over net assets acquired.
Equity in income of affiliates, which decreased 30% in the 1995 first quarter
compared to the 1994 quarter, represents the Company's share of earnings of
nonconsolidated affiliates, principally the 45%-owned Italian affiliate.
Profitability in Italy continued to be adversely effected by reduced sales
caused by the current serious economic problems and reductions in health care
cost reimbursements.
The Company's effective tax rate includes Federal, state and foreign taxes. The
1995 rate of 27% approximates the 1994 rate of 26%.
The Company has adequate working capital and sources of capital to carry on its
current business and to meet its existing capital requirements. Cash flow from
operating activities was $3.4 million in the first quarter 1995 compared to
$2.8 million in the 1994 quarter.
During 1994 and the first quarter of 1995, the Company paid a quarterly cash
dividend of $.10 per share. Commencing with the second quarter of 1995, the
quarterly dividend will be increased to $.12 per share. In the 1994 first
quarter, the Company repurchased 129,200 shares of its Common Stock in the open
market at a cost of $2,429,000.
5
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS AND ITEM 5. OTHER INFORMATION.
The Company has a supply contract with Lumigen, Inc. for chemical compounds
which are key components in the IMMULITE system. For several years Lumigen was
involved in multiple legal proceedings both domestically and internationally
with Tropix, Inc., which challenged Lumigen's patent and other rights to these
compounds and other technology. Effective as of February 9, 1995, the parties
involved in this litigation and the Company entered into various agreements to
resolve their disputes and to set forth various supply and other arrangements
relating to the technology. Pursuant to the agreements, the Company has the
right for ten years to purchase the chemical compounds currently in use from
Lumigen or, in certain circumstances, from Tropix. The Company has guaranteed
Lumigen's minimum payment obligations to Tropix in the amount of $1,000,000 in
each of 1995 and 1996 and $600,000 in each of the next eight years, and Tropix
has agreed not to sue the Company or its customers for their sale or use of
certain technology for a period of ten years. Tropix also agreed to supply the
Company with certain other chemical compounds for use in veterinary kits for
ten years.
Pursuant to an agreement between Lumigen and the Company, Lumigen has agreed to
reimburse the Company for any amounts the Company may be required to pay Tropix
under its guaranty. To secure such agreement, in certain events Lumigen will be
required to grant the Company a security interest in all of its assets.
Furthermore, the Company will from time to time deposit into an escrow account
certain of the payments it owes Lumigen under their supply contract and such
escrow proceeds will be used to pay Lumigen's obligations to Tropix. The
Company has also purchased an 8% equity interest in Lumigen.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. NONE.
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.
DIAGNOSTIC PRODUCTS CORPORATION
(Registrant)
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APRIL 25, 1995 SIGI ZIERING
- - ---------------------------------------------- ------------------------------------------
Date Sigi Ziering, Ph.D., Chairman of the Board
Chief Executive Officer
APRIL 25, 1995 JULIAN R. BOCKSERMAN
- - ---------------------------------------------- ------------------------------------------
Date Julian R. Bockserman, Vice President
Chief Financial Officer
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<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 16,489
<SECURITIES> 0
<RECEIVABLES> 38,480
<ALLOWANCES> 84
<INVENTORY> 30,678
<CURRENT-ASSETS> 88,459
<PP&E> 67,590
<DEPRECIATION> 28,516
<TOTAL-ASSETS> 166,349
<CURRENT-LIABILITIES> 21,674
<BONDS> 0
<COMMON> 28,886
0
0
<OTHER-SE> 117,549
<TOTAL-LIABILITY-AND-EQUITY> 166,349
<SALES> 39,201
<TOTAL-REVENUES> 39,201
<CGS> 17,262
<TOTAL-COSTS> 17,262
<OTHER-EXPENSES> 13,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 7,955
<INCOME-TAX> 2,150
<INCOME-CONTINUING> 5,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,805
<EPS-PRIMARY> .42
<EPS-DILUTED> .41
</TABLE>
