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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 September 30, 1995
[ ] 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 1-9957
Diagnostic Products Corporation
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2802182
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
September 30, 1995, was 13,357,203.
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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 Nine Months Ended
September 30, September 30,
------------------- --------------------
1995 1994 1995 1994
------- ------- -------- -------
<S> <C> <C> <C>
SALES $40,530 $30,643 $118,265 $88,548
------- ------- -------- -------
COSTS AND EXPENSES:
Cost of sales 19,066 13,275 53,299 38,358
Selling 6,951 5,589 20,357 16,810
Research and development 3,970 3,337 11,917 9,790
General and administrative 3,337 3,056 10,651 9,346
Equity in income of affiliates (125) (221) (740) (1,145)
Investment income (610) (141) (1,280) (347)
------- ------- -------- -------
Total costs and expenses 32,589 24,895 94,204 72,812
------- ------- -------- -------
INCOME BEFORE INCOME TAXES 7,941 5,748 24,061 15,736
PROVISION FOR INCOME TAXES 2,050 1,430 6,260 4,050
------- ------- -------- -------
NET INCOME $ 5,891 $ 4,318 $17,801 $11,686
======= ======= ======== =======
NET INCOME PER SHARE OF COMMON STOCK:
Primary $ .43 $ .32 $1.29 $ .87
Fully Diluted .41 .31 1.24 .84
AVERAGE COMMON SHARES OUTSTANDING:
Primary 13,846 13,572 13,838 13,501
Fully Diluted 14,251 13,936 14,326 13,933
</TABLE>
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30, December 31,
1995 1994
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,954 $ 14,833
Accounts receivable - net of allowance for
doubtful accounts of $85 and $76 38,656 32,076
Inventories 32,964 28,324
Prepaid expenses and other current assets 613 983
Deferred income taxes 2,123 2,123
-------- --------
Total current assets 90,310 78,339
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 27,376 26,224
Machinery and equipment 36,365 31,040
Leasehold improvements 6,179 6,175
Construction in progress 1,552 162
-------- --------
Total 71,472 63,601
Less accumulated depreciation and amortization 30,622 26,337
-------- --------
Property, plant and equipment - net 40,850 37,264
SALES-TYPE AND OPERATING LEASES 15,548 8,005
DEFERRED INCOME TAXES 2,537 2,537
INVESTMENTS IN AFFILIATED COMPANIES 12,532 12,775
EXCESS OF COST OVER NET ASSETS ACQUIRED -
Net of amortization of $5,127 and $4,453 16,699 13,815
-------- --------
TOTAL ASSETS $178,476 $152,735
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 15,717 $ 11,667
Accrued liabilities 3,973 5,124
Income taxes payable 1,922 844
-------- --------
Total current liabilities 21,612 17,635
SHAREHOLDERS' EQUITY:
Common Stock - no par value, authorized 30,000,000 shares;
outstanding 13,357,203 shares and 12,952,880 shares. 33,697 27,334
Retained earnings 126,389 113,041
Foreign currency translation adjustments (3,222) (5,275)
-------- --------
Total shareholders' equity 156,864 135,100
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $178,476 $152,735
======== ========
</TABLE>
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
(Dollars in Thousands) Nine Months Ended
September 30,
------------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $17,801 $11,686
Adjustments to reconcile net income to net cash
flows from operating activities (Net of effects from
1995 purchase of Brazilian distributor):
Depreciation and amortization 4,363 4,089
Equity in undistributed income of
unconsolidated affiliates 243 (354)
Accounts receivable (3,940) (4,889)
Inventories (3,957) (723)
Prepaid expenses and other current assets 370 48
Accounts payable (7,077) (372)
Accrued liabilities (1,151) (392)
Income taxes payable 1,052 (437)
------- -------
Net Cash Flows from Operating Activities 7,704 8,656
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant and equipment (5,264) (3,157)
Sales-type and operating leases (3,719) (1,888)
Purchase of Brazilian distributor (1)
------- -------
Net Cash from (used for) Investing Activities (8,984) (5,045)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Proceeds from exercise of stock options 6,363 184
Cash dividends paid (4,453) (3,905)
Repurchase of common stock (2,429)
------- -------
Net Cash from (used for) Financing Activities 1,910 (6,150)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 491 350
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,121 (2,189)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,833 12,884
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $15,954 $10,695
======= =======
</TABLE>
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 -- BASIS OF PRESENTATION
The information for the nine months ended September 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 nine-month period ending September 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>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Raw materials $10,697,000 $ 9,259,000
Work in process 13,807,000 11,233,000
Finished goods 8,460,000 7,832,000
----------- -----------
Total $32,964,000 $28,324,000
=========== ===========
</TABLE>
4
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Record sales of $40.5 million were achieved in the third quarter 1995, a 32%
increase over the third quarter 1994. Sales for the nine months were a record
$118.3 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
third quarter 1995 when compared to the third quarter 1994 resulted in higher
reported sales of approximately 5% and higher reported net income of
approximately 3%. For the nine month period, the weaker 1995 U.S. dollar
resulted in higher reported sales of approximately 7% and higher reported net
income of approximately 4%.
Cost of sales as a percentage of sales in the 1995 third quarter and nine
months was 47% and 45% compared to 43% in the corresponding periods in 1994.
These increases are due to higher cost of sales percentages derived from the
manufacture and sale of instruments at lower margins.
Selling expenditures increased approximately 24% and 21% in the 1995 third
quarter and nine months compared to 1994 representing 17% of sales in 1995 and
18% 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 19% in the 1995 third quarter
and 22% in the1995 nine 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 third quarter and nine months compared to approximately 10% 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 43% in the 1995 third quarter
and decreased 35% in the 1995 nine 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 current serious economic
problems and reductions in health care cost reimbursements.
As of September 1, 1995, the Company acquired a 56% equity interest in DPC
Medlab Produtos Hospitalares Ltda., the Company's Brazilian distributor.
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 $7.7 million in 1995 nine months compared to $8.7
million in 1994 period.
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.
5
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PART II. OTHER INFORMATION
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.
DIAGNOSTIC PRODUCTUS CORPORATION
(Registrant)
October 24, 1995 Sigi Ziering
- -------------------------------- ---------------------------------------
Date Sigi Ziering, Ph.D., Chairman of
the Board Chief Executive Officer
October 24, 1995 Julian R. Bockserman
- -------------------------------- ---------------------------------------
Date Julian R. Bockserman, Vice President
Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 15,954
<SECURITIES> 0
<RECEIVABLES> 38,656
<ALLOWANCES> 85
<INVENTORY> 32,964
<CURRENT-ASSETS> 90,310
<PP&E> 71,472
<DEPRECIATION> 30,622
<TOTAL-ASSETS> 178,476
<CURRENT-LIABILITIES> 21,612
<BONDS> 0
<COMMON> 33,697
0
0
<OTHER-SE> 123,167
<TOTAL-LIABILITY-AND-EQUITY> 178,476
<SALES> 118,265
<TOTAL-REVENUES> 118,265
<CGS> 53,229
<TOTAL-COSTS> 53,229
<OTHER-EXPENSES> 40,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,061
<INCOME-TAX> 6,260
<INCOME-CONTINUING> 17,801
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,801
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.24
</TABLE>
