<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1997
or
( ) 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: 0-12395
ALCIDE CORPORATION
-----------------------
Delaware 22-2445061
- -------------------------------- ------------------------------------
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
8561 154th Avenue North East, Redmond WA 98052
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code. . . . . . (425) 882-2555
-----------------
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 30, 1997: 2,616,018, net of Treasury Stock.
<PAGE>
ALCIDE CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . .PAGE
----
Condensed Balance Sheets - November 30, 1997 (Unaudited) and
May 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Unaudited Condensed Statements of Operations - For the three months
and six months ended November 30, 1997 and November 30, 1996. . . . . . . 4
Unaudited Condensed Statements of Cash Flows - For the six months
ended November 30, 1997 and November 30, 1996 . . . . . . . . . . . . . . 5
Notes to the Unaudited Condensed Financial Statements . . . . . . . . . . 6
Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 9
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . .11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .12
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2
<PAGE>
ALCIDE CORPORATION CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1997 MAY 31, 1997
------------------ ------------
ASSETS: (Unaudited)
-----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,776,257 $ 6,723,154
Short term investments 3,057,493 2,086,900
Accounts receivable - trade 3,232,034 2,498,981
Inventory 1,343,379 1,115,627
Prepaid expenses and other current assets 126,982 285,971
----------- -----------
Total Current Assets 15,536,145 12,710,633
----------- -----------
Equipment and leasehold improvements:
Office equipment 104,500 100,010
Laboratory and manufacturing equipment 142,267 132,404
Leasehold improvements 56,152 56,152
Less: Accumulated depreciation and amortization (173,280) (143,604)
----------- -----------
Total equipment and leasehold improvements, net 129,639 144,962
Deferred income tax asset 958,765 1,090,229
Other assets 649,622 1,167,848
----------- -----------
TOTAL ASSETS $17,274,171 $15,113,672
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $178,823 $329,808
Accrued expenses and taxes payable 443,477 493,046
----------- -----------
TOTAL LIABILITIES 622,300 822,854
----------- -----------
COMMITMENTS AND CONTINGENCIES:
Redeemable Class B Preferred Stock - noncumulative convertible
$.01 par value: authorized 1,664,581 shares;
issued and outstanding:
May 31, 1997 - 88,802
November 30, 1997 - 81,119 212,936 233,105
----------- -----------
Shareholders' equity:
Class "A" Preferred Stock - no par value authorized 1,000 shares;
issued and outstanding 1,000 shares 135,307 135,307
Common Stock $.01 par value; authorized 100,000,000 shares;
issued and outstanding:
May 31, 1997 - 2,799,408
November 30, 1997 - 2,857,737 28,577 27,994
Treasury stock at cost (3,247,237) (3,191,425)
Additional paid-in capital 19,220,623 18,302,377
Accumulated Surplus/(Deficit) 301,665 (1,216,540)
----------- -----------
Total Shareholders' Equity 16,438,935 14,057,713
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,274,171 $15,113,672
----------- -----------
----------- -----------
</TABLE>
See notes to Unaudited Condensed Financial Statements.
3
<PAGE>
ALCIDE CORPORATION UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------------------- ------------------------
November 30 November 30
----------- -----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $3,231,276 $2,744,874 $6,423,672 $4,787,096
Expenditures
Cost of goods sold 1,024,454 893,913 2,127,455 1,516,338
Royalty expense 77,253 103,496 157,065 176,642
Research and development expense 529,007 434,377 1,025,814 870,558
Depreciation and amortization 14,838 14,207 29,676 28,268
Consulting expense to the related parties 21,000 21,000 54,012 54,014
Other selling, general/administrative 520,645 474,237 1,038,487 867,703
---------- ---------- ---------- ----------
Total Expenditures 2,187,197 1,941,230 4,432,509 3.513,523
---------- ---------- ---------- ----------
Operating income 1,044,079 803,644 1,991,163 1,273,573
Royalty and other income 9,022 6,075 15,763 12,834
Interest income 151,679 103,368 293,384 197,691
---------- ---------- ---------- ----------
Total Non-Operating Income 160,701 109,443 309,147 210,525
Income before provision for income tax 1,204,780 913,087 2,300,310 1,484,098
Provision for income taxes 409,625 311,363 782,105 506,078
---------- ---------- ---------- ----------
Net income $ 795,155 $ 601,724 $1,518,205 $ 978,020
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per share $ .28 $ .22 $ .54 $ .35
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average Common Shares outstanding and
Common Share equivalents 2,852,066 2,793,802 2,837,734 2,793,334
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See Notes to Unaudited Condensed Financial Statements.
4
<PAGE>
ALCIDE CORPORATION UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended November 30,
-------------------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $1,518,205 $978,020
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 29,676 28,268
Deferred income tax benefit 731,498 464,522
Decrease (increase) in assets:
Inventory (227,752) (263,858)
Accounts receivable - trade (733,053) 255,111
Prepaid expenses, other assets and security deposits 183,991 (6,729)
Increase (decrease) in liabilities:
Accounts payable (150,985) (41,978)
Accrued expenses and taxes payable (49,569) (594,982)
---------- ----------
Total adjustments (216,194) (159,646)
---------- ----------
Net cash generated by (used in) operating activities 1,302,011 818,374
---------- ----------
INVESTING ACTIVITIES:
Redemption/acquisition U.S. Treasury Instruments (449,712) 564
Acquisition of fixed and other assets (42,010) (26,417)
---------- ----------
Net cash used in investing activities (491,722) (25,853)
---------- ----------
FINANCING ACTIVITIES:
Exercise of Stock Options 318,795 70,044
Redemption of Class B Preferred Stock (20,169) (16,275)
Purchase of Alcide Common Stock (55,812) (123,116)
---------- ----------
Net cash generated by (used in) financing activities 242,814 (69,347)
---------- ----------
Net increase (decrease) in cash and cash equivalents 1,053,103 723,174
Cash and cash equivalents at beginning of period 6,723,154 5,365,895
---------- ----------
Cash and cash equivalents at end of period $7,776,257 $6,089,069
---------- ----------
---------- ----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest --- ---
Cash paid for income taxes 41,625 ---
</TABLE>
See notes to Unaudited Condensed Financial Statements.
5
<PAGE>
ALCIDE CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited financial statements of
Alcide Corporation (the "Company") for the six-month periods ended November 30,
1997 and 1996 have been prepared in accordance with the instructions to Form
10-Q. Certain information and disclosures normally included in notes to
financial statements have been condensed or omitted according to the rules and
regulations of the Securities and Exchange Commission, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. The accompanying unaudited condensed financial statements should be
read in conjunction with the financial statements contained in the Company's
Annual Report on Form 10-K for the year ended May 31, 1997. In the opinion of
management, the accompanying unaudited condensed financial statements contain
all adjustments (consisting of only normal recurring accruals) considered
necessary for a fair presentation. The results of operations for the six-month
period are not necessarily indicative of the results to be expected for the full
year.
2. Inventory consisted of the following:
NOVEMBER 30, 1997 MAY 31, 1997
Finished products $271,040 $141,720
Raw materials 1,072,339 973,907
---------- ----------
Total $1,343,379 $1,115,627
---------- ----------
---------- ----------
3. Accounts Receivable - Trade consisted of the following:
NOVEMBER 30, 1997 MAY 31, 1997
ABS Global, Inc. $1,937,112 $1,660,489
International Distributors 598,572 672,983
Novus International, Inc. 530,012 ---
Other Receivables 166,338 165,509
---------- ----------
Total Accounts Receivable $3,232,034 $2,498,981
---------- ----------
---------- ----------
4. Taxes
The income tax provision for the six-month period ended November 30, 1997
consists of:
TAXES PAYABLE REDUCTION OF TOTAL TAX PROVISION
DURING FISCAL YEAR DEFERRED TAX ASSET
Federal Income
Taxes $50,607 $731,498 $782,105
6
<PAGE>
During the first six months the Company's deferred tax asset increased $600,034
due to the exercise of non-qualified stock options. The exercise of
non-qualified options allows the Company to recognize a federal tax deduction
equal to the difference between the exercise price and the market value of the
stock on the day exercised.
5. Orders for Future Delivery
At November 30, 1997 and 1996 the Company had orders for future delivery of
$2,373,926 and $2,626,879 respectively, of which $1,586,850 is from ABS Global,
Inc. and $718,016 is from Heemskerk B.V. at November 30, 1997. The $2,373,926
orders are scheduled for shipment during the period December, 1997 through June,
1998.
6. Marketable Securities
On September 19, 1997 the Company invested $504,961 to purchase a U.S. Treasury
Note having a redemption value of $500,000 at August 31, 2002 maturity, yielding
6.01%.
On October 16, 1997 the Company redeemed for cash $1,107,000 U.S. Treasury Bills
which it had purchased on October 18, 1996 for $1,049,436.
On October 16, 1997 the Company invested $1,051,751 to purchase U.S. Treasury
Bills having a redemption value of $1,110,000 at October 15, 1998 maturity,
yielding 5.48%.
7. Series 2 Redeemable Class B Preferred Stock
On September 15, 1997 the Company redeemed 7,683 shares of Series 2 stock for
$20,169 in cash out of a sinking fund equal to 0.7% of the Company's FY 1997 net
income, as required by the terms of the stock issue.
7
<PAGE>
ALCIDE CORPORATION
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class "A" Preferred Common Stock Additional
Stock Paid in
Capital
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance May 31, 1997 1,000 $135,307 2,799,408 $27,994 $18,302,377
Exercise of Stock Options 40,906 409 178,918
Tax Benefit from Exercise of
Non-Qualified Stock Options 313,841
Net Income
- -----------------------------------------------------------------------------------------------------------------------------------
Balance August 31, 1997 1,000 $135,307 2,840,314 $28,403 $18,795,136
Exercise of Stock Options 17,423 174 139,294
Purchase Treasury Stock
Tax Benefit from Exercise of 286,193
Non-Qualified Stock Options
Net Income
- -----------------------------------------------------------------------------------------------------------------------------------
Balance November 30, 1997 1,000 $135,307 2,857,737 $28,577 $19,220,623
----- -------- --------- ------- -----------
----- -------- --------- ------- -----------
<CAPTION>
Common Treasury Stock Accumulated Total Shareholders'
Surplus/ Equity
(Deficit)
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance May 31, 1997 (240,719) ($3,191,425) ($1,216,540) $14,057,713
Exercise of Stock Options 179,327
Tax Benefit from Exercise of Non-Qualified
Stock Options 313,841
Net Income 723,050 723,050
- -----------------------------------------------------------------------------------------------------------------------------------
Balance August 31, 1997 (240,719) ($3,191,425) ($493,490) $15,273,931
Exercise of Stock Options 139,468
Purchase Treasury Stock (1,000) (55,812) (55,812)
Tax Benefit from Exercise of Non-Qualified 286,193
Stock Options
Net Income 795,155 795,155
- -----------------------------------------------------------------------------------------------------------------------------------
Balance November 30, 1997 (241,719) ($3,247,237) $301,665 $16,438,935
--------- ------------ -------- -----------
--------- ------------ -------- -----------
</TABLE>
8
<PAGE>
PART I.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the three month period ended Novemeber 30, 1997 were
$3,231,276, an increase of 18% over the equivalent period one year ago.
Net sales for the six month period ended November 30, 1997 were $6,423,672, an
increase of 34% over the equivalent period one year ago. Alcide's established
udder care and surface disinfectant business recorded sales of $5,158,477, an
increase of $371,381 or 8% over the first half last year. In addition, the
Company sold $1,265,195 of Sanova-TM-, its new antimicrobial for poultry
processing plants, to Novus International, Inc. for use by Novus to support
commercial plant testing necessary for United States Department of Agriculture
(USDA) approval.
On January 9, 1998, the United States Department of Agriculture approved
Alcide's request for the use of Sanova in poultry processing. This approval
is the final regulatory step and will lead to commercial introduction of the
product during the Company's fiscal third quarter.
Cost of goods as a percentage of net sales increased to 33% during the six month
period ended November 30, 1997 from 32% for the same six month period last year.
Approximately 60% of the increase is due to a change in product mix and a
reduction in finance fees charged to distributors for extended payment terms.
The balance of the increase is due primarily to warehousing and materials
handling charges related to storage of critical/long lead time inventories and
to increases in manufacturing costs from contract manufacturers.
Research and development expenses of $1,025,814 for the six months ended
November 30, 1997 were $155,256, 18% higher than the corresponding six months
last year, entirely as a result of commercial plant testing related to Sanova.
Other selling general and administrative expenses of $1,038,487 for the six
months ended November 30, 1997 were $170,784, 20% higher than for the first half
last year. The increase primarily reflects the impact of higher salaries and
executive bonuses consistent with improved sales performance.
Interest income of $293,384 for the six months ended November 30, 1997 was
$95,693, 48% higher than interest income for the equivalent period last year.
The increase is attributable to the Company's improved cash and marketable
securities position.
LIQUIDITY
Management believes that the Company will continue to operate profitably in
fiscal 1998 and that this coupled with the Company's cash, cash equivalents,
short term investments and U.S. Treasury instruments will be sufficient to
meet its anticipated operating needs.
9
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128),
which is effective for periods beginning after December 15, 1997. SFAS 128
establishes new standards for computing and presenting earnings per share
(ESP). In the future, Alcide will report Basic EPS and Diluted EPS as
contrasted with "Fully Diluted EPS" which is currently reported. Under the
new standard, the Company's Basic EPS for the three months ended November 30,
1997, would be $.30 per share. For the six months ended November 30, 1997,
Basic EPS would be $.59 per share. Under the new standard Diluted EPS for
Alcide would be the same as the Fully Diluted EPS currently reported.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Shareholders voted on two proposals at the Annual Meeting of stockholders on
October 14, 1997, as described in the Company's proxy statement.
1. Votes for election of Directors of the Corporation for the ensuing
year were as follows:
FOR WITHHELD
--- --------
AUTHORITY
---------
Thomas L. Kempner 2,379,327 7,258
Kenneth N. May 2,379,602 6,983
Joseph A. Sasenick 2,379,231 7,356
William G. Spears 2,379,612 6,973
2. Votes for the ratification of the Board's selection of Arthur Andersen
LLP as independent auditors of the Company for the fiscal year ending
May 31, 1998, were as follows:
FOR AGAINST ABSTAIN
--- ------- -------
2,379,937 2,919 3,730
11
<PAGE>
PART II.
OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 11
(a) Computation of Earnings Per Common Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------- ----------------
November 30, November 30,
------------ ------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number of Common Shares outstanding 2,607,807 2,601,186 2,593,475 2,600,718
Assuming exercise of options reduced by the number of
shares which could have been purchased with the
proceeds from exercise of such options 244,259 192,616 244,259 192,616
--------- --------- --------- ---------
Weighted average Common Shares outstanding and
Common Share equivalents 2,852,066 2,793,802 2,837,734 2,793,334
--------- --------- --------- ---------
--------- --------- --------- ---------
Net Income per share $.28 $.22 $.54 $.35
</TABLE>
REPORTS ON FORM 8-K
None.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
ALCIDE CORPORATION
The Registrant
Date: January 12, 1998 By /s/
--------------------------------
John P. Richards
Executive Vice President
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 7,776,257
<SECURITIES> 0
<RECEIVABLES> 3,232,034
<ALLOWANCES> 0
<INVENTORY> 1,343,379
<CURRENT-ASSETS> 15,536,145
<PP&E> 302,919
<DEPRECIATION> 173,280
<TOTAL-ASSETS> 17,274,171
<CURRENT-LIABILITIES> 622,300
<BONDS> 0
0
212,936
<COMMON> 28,577
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,274,171
<SALES> 3,231,276
<TOTAL-REVENUES> 3,391,977
<CGS> 1,024,454
<TOTAL-COSTS> 2,187,197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,204,780
<INCOME-TAX> 409,625
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 795,155
<EPS-PRIMARY> .30
<EPS-DILUTED> .28
</TABLE>
