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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 June 30, 1996
[ ] 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
June 30, 1996, was 13,548,561.
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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,
-----------------------------------------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES $43,369 $38,534 $86,615 $77,735
--------- --------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 18,032 16,971 36,120 34,233
Selling 8,561 6,803 16,618 13,406
Research and development 4,484 4,077 8,868 7,947
General and administrative 4,102 3,172 8,751 7,314
Equity in income of affiliates (357) (295) (803) (615)
Investment income (357) (359) (764) (670)
--------- --------- --------- ---------
Total costs and expenses 34,465 30,369 68,790 61,615
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 8,904 8,165 17,825 16,120
PROVISION FOR INCOME TAXES 2,340 2,060 4,760 4,210
--------- --------- --------- ---------
NET INCOME $ 6,564 $ 6,105 $13,065 $11,910
========= ========= ========= =========
NET INCOME PER SHARE $ .47 $ .44 $ .94 $ .86
WEIGHTED AVERAGE SHARES
AND EQUIVALENTS OUTSTANDING 13,984 13,986 13,963 13,834
</TABLE>
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DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in Thousands) June 30, December 31,
1996 1995
--------- ---------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,744 $ 16,519
Accounts receivable-net of allowance for
doubtful accounts of $80 and $77 46,296 40,802
Inventories 40,754 35,521
Prepaid expenses and other current assets 526 358
Deferred income taxes 3,451 3,451
--------- ---------
Total current assets 98,771 96,651
PROPERTY, PLANT AND EQUIPMENT:
Land and buildings 27,734 27,553
Machinery and equipment 41,191 38,607
Leasehold improvements 6,690 6,635
Construction in progress 762 836
--------- ---------
Total 76,377 73,631
Less accumulated depreciation and amortization 33,964 31,707
--------- ---------
Property, plant and equipment - net 42,413 41,924
SALES-TYPE AND OPERATING LEASES 19,350 18,128
DEFERRED INCOME TAXES 3,200 3,200
INVESTMENTS IN AFFILIATED COMPANIES 14,562 13,279
EXCESS OF COST OVER NET ASSETS ACQUIRED-
Net of amortization of $5,865 and $5,373 15,567 16,280
--------- ---------
TOTAL ASSETS $193,863 $189,462
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 2,705
Accounts payable 12,019 $ 16,969
Accrued liabilities 3,998 5,708
Income taxes payable 2,764 3,435
--------- ---------
Total current liabilities 21,486 26,112
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock-no par value, authorized 30,000,000 shares;
outstanding 13,548,561 shares and 13,524,051 shares. 35,583 35,179
Retained earnings 140,952 131,136
Foreign currency translation adjustments (4,158) (2,965)
--------- ---------
Total shareholders' equity 172,377 163,350
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $193,863 $189,462
========= =========
</TABLE>
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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,
-------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 13,065 $ 11,910
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 3,305 2,683
Equity in undistributed income of
unconsolidated affiliates (802) 27
Accounts receivable (6,173) (5,405)
Inventories (5,432) (3,938)
Prepaid expenses and other current assets (168) 157
Accounts payable (4,360) 500
Accrued liabilities (1,710) (1,455)
Income taxes payable (633) 2,930
--------- ---------
Net Cash Flows from Operating Activities (2,908) 7,409
CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES:
Additions to property, plant and equipment (3,427) (3,892)
Sales-type and operating leases (1,659) (2,650)
Investment in affiliated company (481)
--------- ---------
Net Cash from (used for) Investing Activities (5,567) (6,542)
CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES:
Borrowing 2,737
Proceeds from exercise of stock options 404 2,575
Cash dividends paid (3,249) (2,865)
--------- ---------
Net Cash from (used for) Financing Activities (108) (290)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (192) 900
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,775) 1,477
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 16,519 14,833
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,744 $ 16,310
========= =========
</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 six months ended June 30, 1996 and 1995 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
1995 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, 1996 are not
necessarily indicative of the results to be expected for the year ended
December 31, 1996.
Net income per share has been computed using the weighted-average number of
common shares and common share equivalents outstanding during each period.
Common share equivalents represent the dilutive effect of outstanding stock
options.
NOTE 2--INVENTORIES
Inventories by major categories are summarized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Raw materials $13,970,000 $11,414,000
Work in process 16,410,000 14,567,000
Finished goods 10,374,000 9,540,000
----------- -----------
Total $40,754,000 $35,521,000
=========== ===========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Record sales of $43.4 million were achieved in the second quarter of 1996, a
13% increase over the second quarter 1995. Sales for the six months were a
record $86.6 million, an 11% increase over 1995. 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 strengthening,
the effect of translation of the financial statements of the consolidated
foreign affiliates is that of lower sales, costs and net income. The stronger
U.S. dollar in the second quarter 1996 when compared to the second quarter 1995
resulted in lowered reported sales of approximately 3% and lower reported net
income of 1%. The stronger U.S. dollar in the six months 1996 when compared to
the 1995 six-month period resulted in lower reported sales of approximately 2%
and lower reported net income of 1%.
Cost of sales as a percentage of sales was 42% in the 1996 second quarter and
six months as compared to 44% in the corresponding 1995 periods. The 1996
results continue the improvement trend set in the 1995 fourth quarter
principally resulting from increased utilization at the Wales manufacturing
facility and at the New Jersey IMMULITE instrument manufacturing facility.
Selling costs as a percent of sales were 20% in the 1996 second quarter and 19%
in the 1996 six-month period compared to 18% and 17% in the corresponding 1995
periods. These increased costs are a result of the continual expansion of the
marketing and sales effort, especially for the IMMULITE system. Research and
development expenses increased 10% in 1996 second quarter over 1995. In the
1996 six-month period, the expenses increased 12% over 1995. These expenditures
have increased to support the IMMULITE system. In the 1996 and 1995 second
quarters and six-month periods, the research and development costs as a
percentage of sales were 10%.
General and administrative costs were 9% of sales in the 1996 second quarter
compared to 8% in the 1995 quarter. In the 1996 six-month period, the general
and administrative costs were 10% compared to 9% in the 1995 period. Included
in general and administrative expenses is the amortization of the excess of
cost over net assets acquired and minority interest.
Equity in income of affiliates, which increased 21% in the 1996 second quarter
compared to the 1995 quarter and increased 31% in the 1996 six-month period
over the 1995 period, represents the Company's share of earnings of
nonconsolidated affiliates, principally the 45%-owned Italian affiliate.
Profitability in Italy which in prior quarters had declined was modestly higher
in the 1996 second quarter and six months when compared to 1995. The other
affiliates reported increases in their second quarter and six months net
income.
The Company's effective tax rate includes Federal, state and foreign taxes. The
1996 rate of 27% approximates the 1995 rate of 26%.
The Company has adequate working capital and sources of capital (including an
unused $10 million unsecured line of credit) to carry on its current business
and to meet its existing capital requirements. Cash flow used for operating
activities was $2.9 million in the 1996 six months as compared to cash flow
from operating activities of $7.4 million in the 1995 period. Cash flow in the
1996 period was primarily used for increases in accounts receivables and
inventories and reduction of accounts payable.
During 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.
5
<PAGE> 7
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 8, 1996. The only
matter voted on was the election of directors. Each nominee received the
following votes:
<TABLE>
<CAPTION>
Nominee For Withheld
- ---------------------------------------------------
<S> <C> <C>
Sigi Ziering 12,014,025 17,462
Sidney A. Aroesty 11,905,645 125,842
Marilyn Ziering 12,008,780 22,707
Maxwell H. Salter 12,006,555 24,932
James D. Watson 11,901,700 129,787
Michael Ziering 12,010,750 20,737
Frederick Frank 12,011,015 20,472
</TABLE>
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 PRODUCTS CORPORATION
(Registrant)
<TABLE>
<S> <C>
JULY 24, 1996 SIGI ZIERING
- ------------------------ --------------------------------
Date Sigi Ziering, Ph.D., Chairman
of the Board
Chief Executive Officer
JULY 24, 1996 JULIAN R. BOCKSERMAN
- ------------------------ --------------------------------
Date Julian R. Bockserman,
Vice President
Chief Financial Officer
</TABLE>
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 7,744
<SECURITIES> 0
<RECEIVABLES> 46,296
<ALLOWANCES> 80
<INVENTORY> 40,754
<CURRENT-ASSETS> 98,771
<PP&E> 76,377
<DEPRECIATION> 33,964
<TOTAL-ASSETS> 193,863
<CURRENT-LIABILITIES> 21,486
<BONDS> 0
0
0
<COMMON> 35,583
<OTHER-SE> 140,952
<TOTAL-LIABILITY-AND-EQUITY> 172,377
<SALES> 86,615
<TOTAL-REVENUES> 86,615
<CGS> 36,120
<TOTAL-COSTS> 36,120
<OTHER-EXPENSES> 32,670
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,825
<INCOME-TAX> 4,760
<INCOME-CONTINUING> 13,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,065
<EPS-PRIMARY> .94
<EPS-DILUTED> 0
</TABLE>
