<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[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: 0-11647
HYCOR BIOMEDICAL INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1437178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18800 Von Karman Avenue, Irvine, California 92715-1517
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 440-2000
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 the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at October 31, 1995
----- -------------------------------
<S> <C>
Common Stock, $.01 Par Value 8,060,074
</TABLE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1995 1994
------------- ------------
CURRENT ASSETS: (unaudited)
<S> <C> <C>
Cash and cash equivalents 4,227,668 1,404,262
Investments 2,122,694 2,293,644
Accounts Receivable, net of allowance for
doubtful accounts of $187,314 and $170,841 3,684,183 4,263,335
Income Tax Receivable 0 90,170
Inventories (Note 2) 6,941,339 6,725,565
Deposits and other prepaids 553,984 765,544
Deferred income tax benefit 745,745 610,000
---------- ----------
Total current assets 18,275,613 16,152,520
---------- ----------
PROPERTY AND EQUIPMENT, at cost 12,632,799 12,058,248
Less accumulated depreciation (6,881,158) (5,639,674)
---------- ----------
5,751,641 6,418,574
---------- ----------
GOODWILL AND OTHER INTANGIBLES, net of
amortization of $1,162,724 and $741,543 5,276,696 5,459,039
DEFERRED INCOME TAX BENEFIT 620,000 620,000
OTHER ASSETS, net 386,810 350,166
---------- ----------
Total assets 30,310,760 29,000,299
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 698,236 1,104,520
Accrued income tax payable 686,220 0
Accrued liabilities 1,756,665 1,726,461
---------- ----------
Total current liabilites 3,141,121 2,830,981
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock 81,241 82,269
Paid-in capital 16,504,557 16,971,456
Retained earnings 10,340,712 9,084,739
Foreign currency translation adjustments 265,886 144,138
Unrealized losses on investments, net (22,757) (113,284)
---------- ----------
Total stockholders' equity 27,169,639 26,169,318
---------- ----------
Total liabilities and
stockholders' equity 30,310,760 29,000,299
========== ==========
</TABLE>
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
1995 1994 1995 1994
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES 5,680,775 5,708,550 18,938,102 19,319,674
COST OF SALES 2,607,538 2,588,777 8,432,542 8,567,065
--------- --------- ---------- ----------
Gross profit 3,073,237 3,119,773 10,505,560 10,752,609
--------- --------- ---------- ----------
OPERATING EXPENSES
Selling, general and
administrative 2,348,314 2,075,705 7,018,422 6,487,671
Research and development 595,837 358,297 1,757,882 1,320,397
--------- --------- ---------- ----------
2,944,151 2,434,002 8,776,304 7,808,068
--------- --------- ---------- ----------
OPERATING INCOME 129,086 685,771 1,729,256 2,944,541
INTEREST INCOME, net 93,199 84,258 208,573 307,811
FOREIGN EXCHANGE G/(L) 29,199 191,881 182,236 191,881
--------- --------- ---------- ----------
INCOME BEFORE TAXES 251,484 961,910 2,120,065 3,444,233
PROVISION FOR INCOME TAXES 103,389 402,263 850,366 1,294,381
--------- --------- ---------- ----------
NET INCOME 148,095 559,647 1,269,699 2,149,852
========= ========= ========== ==========
NET INCOME PER SHARE $.02 $.07 $.15 $.26
==== ==== ==== ====
AVE. COMMON SHARES OUTSTANDING 8,286,333 8,455,717 8,315,209 8,417,616
</TABLE>
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 1,269,699 2,149,852
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,752,700 1,095,155
Deferred income tax benefit 135,745 (21,858)
Gain on foreign currency transactions (182,236) (191,881)
Change in assets and liabilities, net of effects of
foreign currency adjustments and noncash transactions:
Accounts receivables 618,400 908,972
Inventories (193,607) (1,474,142)
Prepaid expenses and other assets 178,732 334,989
Accounts payable (409,629) (162,874)
Accrued liabilities 8,188 (278,767)
Accrued payroll expenses (14,872) (34,386)
Accrued income taxes 592,640 337,024
--------- ---------
Total adjustments 2,486,061 512,232
--------- ---------
Net cash provided by (used in) operating activities 3,755,760 2,662,084
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sales of marketable securities 310,650 2,089,549
Business acquisition net of cash acquired 0 (1,989,488)
Purchases of property, plant and equipment (991,093) (943,460)
Purchases of tangible and intangible assets, net (42,266) (355,813)
Net book value of property and equipment sold 4,079 24,045
Proceeds from collection of notes receivable 20,620 17,618
--------- ---------
Net cash provided by (used in) investing activities (698,010) (1,157,549)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 245,746 290,359
Purchases of common stock (713,673) (1,173,475)
--------- ---------
Net cash provided by (used in) financing activities (467,927) (883,116)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 233,583 319,686
INCREASE IN CASH AND CASH EQUIVALENTS 2,823,406 941,105
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,404,262 683,573
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD 4,227,668 1,624,678
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - interest - -
- income taxes 1,461,771 824,142
</TABLE>
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HYCOR BIOMEDICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying financial statements
contain adjustments necessary to present fairly the financial position as
of September 30, 1995 and December 31, 1994, the results of operations and
the cash flows for the three and nine month periods ended September 30,
1995 and 1994. The results of operations for any interim period are not
necessarily indicative of results for the full year.
These statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and do not include
all the information and note disclosures required by generally accepted
accounting principles for complete financial statements and may be subject
to year-end adjustments. The financial information contained in this
report reflects all adjustments which, in the opinion of management, are
necessary for a fair statement of the results of the interim periods. All
adjustments are of a normal recurring nature except for those costs
described in the following Item 2. "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
The consolidated financial statements include the accounts of Hycor
Biomedical Inc. and its wholly-owned subsidiaries. All material
intercompany amounts and transactions have been eliminated.
Reference is made to the audited financial statements and related
notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994. Certain items in the 1994 consolidated financial
statements have been reclassified to conform with the 1995 presentation.
Net income per share is based upon the weighted average number of
shares outstanding during the periods plus common stock equivalents
relating to warrants and options. The number of common stock equivalents
relating to options and warrants is determined using the treasury stock
method. Common stock equivalents are not included when their effect is
antidilutive. Fully diluted net income per share approximates primary net
income per share in each period.
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2. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Cost includes material, direct labor and manufacturing
overhead. Inventories at September 30, 1995 and December 31, 1994 consist
of:
<TABLE>
<CAPTION>
9/30/95 12/31/94
---------- ----------
<S> <C> <C>
Raw materials $1,619,044 $2,122,387
Work in process 2,603,168 2,836,388
Finished goods 3,285,796 2,536,877
Allowance for excess,
obsolete, and short
dated inventory (566,669) (770,087)
---------- ----------
$6,941,339 $6,725,565
========== ==========
</TABLE>
3. FOREIGN CURRENCY
Realized gains or losses from foreign currency transactions are
included in operations as incurred and relate to intercompany balances
amounting to approximately $932,000 between Hycor and its German
subsidiary. The Company has hedged the majority of this foreign currency
exchange rate position.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
The Company increased its working capital $1,813,000 as of September
30, 1995, compared to December 31, 1994. This was primarily as a result of
continued profitability. The Company expects to be able to fund operations from
current working capital and profits generated from operations.
Cash and cash equivalents, marketable securities and receivables
fluctuate throughout the year based upon the sales of products through
distributors and the timing of the distributors related payments to the
Company. These fluctuations do not have a significant seasonal component.
Income taxes have gone from a net receivable of $90,170 at
December 31, 1994 to a net payable of $686,220 at September 30, 1995. This was
due primarily to the standard accrual of estimated income taxes which have been
offset by the utilization of net operating loss carry forwards in the
computation of estimated quarterly tax deposits.
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The Company's principal capital commitments are for lease payments
under non-cancelable operating leases and leasehold improvements. Working
capital and operating profits are anticipated to be sufficient to satisfy these
commitments.
The Company is continuing to evaluate for acquisition additional
product lines and companies in the medical diagnostics field. The Company could
use sources other than cash from operations, such as issuance of debt or equity
securities, to finance any such acquisition. If such an acquisition were
completed, the Company's operating results and financial condition could change
significantly in future periods.
RESULTS OF OPERATIONS
On July 27, 1995, the Company announced plans for a major
restructuring designed to focus operations on high potential clinical
immunology segments. Included in the strategy is the discontinuation of several
product areas in which the company currently participates. As part of this
restructuring, Hycor had anticipated recording a one-time, extraordinary,
pre-tax charge in the third quarter of 1995 ranging from $1.0 to $2.0 million.
Several parties have expressed interest in product lines that are being
divested. These developments, along with recent SEC directives on the
recognition of various restructuring charges and the advice of our auditors,
lead us to postpone recording the one-time charge announced on July 27th. We
currently anticipate that this action, combined with ongoing developments, will
result in our posting a charge in the fourth quarter of this year lower than
previously announced.
During the three and nine month periods ended September 30, 1995,
sales decreased .5% and 2%, respectively, compared to the same periods last
year. The increase in international allergy product was offset by lower sales
in certain product lines that are being discontinued. Gross profit as a
percentage of product sales for the three and nine month periods decreased from
approximately 55% to 54% and from 56% to 55%, respectively, compared to the
same periods last year.
Selling, general and administrative expenses for the three and nine
month periods ended September 30, 1995 have increased approximately 13% and 8%,
respectively, over the prior year period due to the additional expenses from
the activities of Medical Specialties International (MSI), acquired in October
1994, and the expanded marketing and sales programs related to the
implementation of the Company's restructuring plan.
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For the three and nine month periods ended September 30, 1995,
research and development costs increased approximately 66% and 33%,
respectively. This increase is also primarily due to the implementation of the
restructuring plan.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: None
SIGNATURE
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.
HYCOR BIOMEDICAL INC.
Date: November 8, 1995 By: /s/ ARMANDO CORREA
---------------------------------
Armando Correa, Director of Finance
(Mr. Correa is the Principal
Accounting Officer and has been duly
authorized to sign on behalf of the
registrant.)
Page 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,227,668
<SECURITIES> 2,122,694
<RECEIVABLES> 3,871,497
<ALLOWANCES> 187,314
<INVENTORY> 6,941,339
<CURRENT-ASSETS> 18,275,613
<PP&E> 12,632,799
<DEPRECIATION> 6,881,158
<TOTAL-ASSETS> 30,310,760
<CURRENT-LIABILITIES> 3,141,121
<BONDS> 0
<COMMON> 81,241
0
0
<OTHER-SE> 27,088,398
<TOTAL-LIABILITY-AND-EQUITY> 30,310,760
<SALES> 18,938,102
<TOTAL-REVENUES> 18,938,102
<CGS> 8,432,542
<TOTAL-COSTS> 8,432,542
<OTHER-EXPENSES> 8,776,304
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,120,065
<INCOME-TAX> 850,366
<INCOME-CONTINUING> 1,269,699
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,269,699
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
