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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 June 30, 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)
<TABLE>
<S> <C>
CALIFORNIA 95-2802182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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 June
30, 1995, was 13,103,065.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data) Three Months Ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
SALES $38,534 $30,132 $77,735 $57,905
------- ------- ------- -------
COSTS AND EXPENSES:
Cost of sales 16,971 13,266 34,233 25,083
Selling 6,803 5,635 13,406 11,221
Research and development 4,077 3,163 7,947 6,453
General and administrative 3,172 3,285 7,314 6,290
Equity in income of affiliates (295) (465) (615) (924)
Investment income (359) (52) (670) (206)
------- ------- ------- -------
Total costs and expenses 30,369 24,832 61,615 47,917
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 8,165 5,300 16,120 9,988
PROVISION FOR INCOME TAXES 2,060 1,400 4,210 2,620
------- ------- ------- -------
NET INCOME $ 6,105 $ 3,900 $11,910 $ 7,368
======= ======= ======= =======
NET INCOME PER SHARE OF COMMON STOCK:
Primary $ .44 $ .29 $ .86 $ .55
Fully Diluted .42 .28 .83 .53
AVERAGE COMMON SHARES OUTSTANDING:
Primary 13,986 13,403 13,834 13,466
Fully Diluted 14,387 13,844 14,340 13,867
</TABLE>
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,310 $ 14,833
Accounts receivable - net of allowance for
doubtful accounts of $90 and $76 38,630 32,076
Inventories 32,649 28,324
Prepaid expenses and other current assets 826 983
Deferred income tax benefit 2,123 2,123
-------- --------
Total current assets 90,538 78,339
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 27,150 26,224
Machinery and equipment 34,051 31,040
Leasehold improvements 6,179 6,175
Construction in progress 1,825 162
-------- --------
Total 69,205 63,601
Less accumulated depreciation and amortization 29,247 26,337
-------- --------
Property, plant and equipment - net 39,958 37,264
SALES-TYPE AND OPERATING LEASES 11,331 8,005
DEFERRED INCOME TAXES 2,537 2,537
INVESTMENTS IN AFFILIATED COMPANIES 12,748 12,775
EXCESS OF COST OVER NET ASSETS ACQUIRED -
Net of amortization of $4,897 and $4,453 13,371 13,815
-------- --------
TOTAL ASSETS $170,483 $152,735
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 13,347 $ 11,667
Accrued liabilities 3,669 5,124
Income taxes payable 3,795 844
-------- --------
Total current liabilities 20,811 17,635
SHAREHOLDERS' EQUITY:
Common Stock - no par value, authorized 30,000,000 shares;
outstanding 13,103,065 shares and 12,952,880 shares. 29,909 27,334
Retained earnings 122,086 113,041
Foreign currency translation adjustments (2,323) (5,275)
-------- --------
Total shareholders' equity 149,672 135,100
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $170,483 $152,735
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands) Six Months Ended
June 30,
-----------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $11,910 $ 7,368
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 2,683 2,584
Equity in undistributed income of
unconsolidated affiliates 27 (145)
Accounts receivable (5,405) (4,109)
Inventories (3,938) 1,449
Prepaid expenses and other current assets 157 (10)
Accounts payable 500 (176)
Accrued liabilities (1,455) (730)
Income taxes payable 2,930 (662)
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Net Cash Flows from Operating Activities 7,409 5,569
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,892) (2,239)
Sales-type and operating leases (2,650) (2,412)
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Net Cash from (used for) Investing Activities (6,542) (4,651)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Borrowing under credit agreement 3,000
Proceeds from exercise of stock options 2,575 114
Cash dividends paid (2,865) (2,607)
Repurchase of common stock (2,429)
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Net Cash from (used for) Financing Activities (290) (1,922)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 900 179
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,477 (825)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,833 12,884
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,310 $12,059
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The information for the six months ended June 30, 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 six-month period ending June 30, 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:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
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<S> <C> <C>
Raw materials $10,651,000 $ 9,259,000
Work in process 13,444,000 11,233,000
Finished goods 8,554,000 7,832,000
----------- -----------
Total $32,649,000 $28,324,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales of $38.5 million were achieved in the second quarter 1995, a 28% increase
over the second quarter 1994. Sales for the six months were a record $77.8
million, a 34% increase over 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 second quarter 1995
when compared to the second quarter 1994 resulted in increased sales of
approximately 7% and increased net income of approximately 3%. For the six
month period the weaker 1995 U.S. dollar resulted in increased sales of
approximately 7% and increased net income of approximately 4%.
Cost of sales as a percentage of sales in the 1995 second quarter and six
months was 44% compared to 44% and 43% in the corresponding 1994 periods. The
44% in 1995 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 approximately 20% in the 1995 second quarter and
six months compared to 1994 representing 17% of sales in 1995 and 19% of sales
in 1994. These increased costs are a result of the continued expansion of the
marketing and sales effort, especially for the IMMULITE system.
Research and development expenditures increased 29% in the 1995 second quarter
and 23% in the 1995 six months over the corresponding periods of the prior
year. These expenditures have increased to support the IMMULITE system.
General and administrative costs were approximately 8% and 9% of sales in the
1995 periods compared to 11% of sales in the 1994 periods. 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 37% in the 1995 second quarter
and decreased 33% in the 1995 six months when compared to the 1994 periods,
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 26% 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 $7.4 million in 1995 compared to $5.6 million in 1994.
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 was increased to $.12 per share. In March 1994, the Company
repurchased 129,200 shares of its Common Stock in the open market at a cost of
$2,429,000.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's Annual Meeting of Shareholders was held on May 3, 1995. The only
matter voted on was the election of directors. Each nominee received the
following votes:
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<CAPTION>
Nominee For Withheld
- ---------------------------------------------------
<S> <C> <C>
Sigi Ziering 10,927,744 27,137
Sidney A. Aroesty 10,929,744 25,137
Marilyn Ziering 10,929,594 25,287
Joseph Kleiman 10,929,744 25,137
Maxwell H. Salter 10,929,744 25,137
James D. Watson 10,930,094 24,787
Michael Ziering 10,928,144 26,737
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) 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.
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<S> <C>
DIAGNOSTIC PRODUCTS CORPORATION
(Registrant)
JULY 27, 1995 SIGI ZIERING
- --------------------------------------------- ---------------------------------------------
Date Sigi Ziering, Ph.D., Chairman of the Board
Chief Executive Officer
JULY 27, 1995 JULIAN R. BOCKSERMAN
- --------------------------------------------- ---------------------------------------------
Date Julian R. Bockserman, Vice President
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 16,310
<SECURITIES> 0
<RECEIVABLES> 38,630
<ALLOWANCES> 90
<INVENTORY> 32,649
<CURRENT-ASSETS> 90,538
<PP&E> 69,205
<DEPRECIATION> 29,247
<TOTAL-ASSETS> 170,483
<CURRENT-LIABILITIES> 20,811
<BONDS> 0
<COMMON> 29,909
0
0
<OTHER-SE> 122,086
<TOTAL-LIABILITY-AND-EQUITY> 170,483
<SALES> 77,735
<TOTAL-REVENUES> 77,735
<CGS> 34,233
<TOTAL-COSTS> 34,233
<OTHER-EXPENSES> 27,382
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,120
<INCOME-TAX> 4,210
<INCOME-CONTINUING> 11,910
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,910
<EPS-PRIMARY> .86
<EPS-DILUTED> .83
</TABLE>
