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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, 1996
[ ] 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: 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.
Class Outstanding at October 31, 1996
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Common Stock, $.01 Par Value 7,390,078
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 1996 1995
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CURRENT ASSETS: (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 138,233 $ 1,033,459
Investments 5,200,477 6,365,995
Accounts Receivable, net of allowance for
doubtful accounts of $207,390 and $136,604 3,045,780 3,679,419
Inventories (Note 2) 4,162,256 3,948,564
Prepaid expenses and other current assets 439,707 685,399
Deferred income tax benefit 1,219,224 1,138,000
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Total current assets 14,205,677 16,850,836
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PROPERTY AND EQUIPMENT, at cost 11,297,909 10,469,775
Less accumulated depreciation (6,615,392) (5,742,459)
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4,682,517 4,727,316
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GOODWILL AND OTHER INTANGIBLES, net of
amortization of $807,555 and $1,015,082 4,394,830 4,773,904
DEFERRED INCOME TAX BENEFIT 877,000 877,000
OTHER ASSETS 332,044 346,316
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Total assets $24,492,068 $27,575,372
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 835,983 $ 982,646
Accrued liabilities 582,794 1,252,718
Accrued payroll expenses 583,688 1,000,542
Accrued income taxes (96,408) -
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Total current liabilities 1,906,057 3,235,906
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STOCKHOLDERS' EQUITY:
Common stock 74,206 77,303
Paid-in capital 13,273,714 14,806,686
Retained earnings 9,231,360 9,215,989
Foreign currency translation adjustments 61,039 254,445
Unrealized losses on investments, net (54,308) (14,957)
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Total stockholders' equity 22,586,011 24,339,466
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Total liabilities and
stockholders' equity $24,492,068 $27,575,372
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</TABLE>
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<TABLE>
<CAPTION>
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ----------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NET SALES $4,736,927 $5,680,775 $15,215,194 $18,938,102
COST OF SALES 2,254,307 2,607,538 6,866,042 8,432,542
---------- ---------- ----------- -----------
Gross profit 2,482,620 3,073,237 8,349,152 10,505,560
---------- ---------- ----------- -----------
OPERATING EXPENSES
Selling, general and
administrative 2,096,017 2,348,314 6,602,541 7,018,422
Research and development 734,118 595,837 2,080,032 1,757,882
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2,830,135 2,944,151 8,682,573 8,776,304
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OPERATING INCOME (LOSS) (347,515) 129,086 (333,421) 1,729,256
INTEREST INCOME, net 93,141 93,199 310,476 208,573
FOREIGN EXCHANGE G/(L) 12,622 29,199 24,296 182,236
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INCOME (LOSS) BEFORE TAXES (241,752) 251,484 1,351 2,120,065
INCOME TAX PROVISION (BENEFIT) (110,696) 103,389 (14,020) 850,366
---------- ---------- ----------- -----------
NET INCOME (LOSS) $ (131,056) $ 148,095 $ 15,371 $ 1,269,699
========== ========== =========== ===========
NET INCOME (LOSS) PER SHARE $ (.02) $ .02 $ .00 $ .15
========== ========== =========== ===========
AVE. COMMON SHARES OUTSTANDING 7,698,527 8,286,333 7,817,794 8,315,209
</TABLE>
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<TABLE>
<CAPTION>
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: -------------- --------------
<S> <C> <C>
Net income $ 15,371 $1,269,699
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,417,804 1,752,700
Deferred income tax provision (205,654) 135,745
Gain on foreign currency transactions (24,296) (182,236)
(Gain) Loss on sale of assets (1,024) -
Change in assets and liabilities, net of effects of
foreign currency adjustments
Accounts receivable 611,951 618,400
Inventories (242,571) (193,607)
Prepaid expenses and other current assets 255,441 178,732
Accounts payable (133,525) (409,629)
Accrued liabilities (651,751) 8,188
Accrued payroll expenses (415,319) (14,872)
Accrued income taxes 101,591 592,640
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Total adjustments 712,647 2,486,061
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Net cash provided by (used in) operating activities 728,018 3,755,760
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments 1,044,298 310,650
Purchases of intangible assets (8,799) (42,266)
Purchases of property, plant and equipment (1,134,651) (987,014)
Proceeds from collection of notes receivable 4,222 20,620
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Net cash provided by (used in) investing activities (94,930) (698,010)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 130,204 245,746
Purchases of Hycor common stock (1,666,273) (713,673)
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Net cash provided by (used in) financing activities (1,536,069) (467,927)
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 7,755 233,583
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (895,226) 2,823,406
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,033,459 1,404,262
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 138,233 $4,227,668
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - interest - -
- income taxes $ 239,103 $1,461,771
</TABLE>
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HYCOR BIOMEDICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
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, 1996 and December 31, 1995, the results of
operations and the cash flows for the three and nine-month periods ended
September 30, 1996 and 1995. 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, 1995. Certain items in the 1995 consolidated
financial statements have been reclassified to conform with the 1996
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, 1996 and December
31, 1995 consist of:
<TABLE>
<CAPTION>
9/30/96 12/31/95
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<S> <C> <C>
Raw materials $1,258,261 $1,325,973
Work in process 1,732,004 1,787,292
Finished goods 2,555,500 2,774,801
Allowance for discontinued
product lines and excess,
obsolete and short-dated (1,383,509) (1,939,502)
inventories ---------- ----------
$4,162,256 $3,948,564
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</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 $1,412,000 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
Except for historical information contained herein, the matters discussed in
this report are forward-looking statements which involve risk and uncertainties,
including but not limited to economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices and other factors discussed in the Company's filings with
the Securities and Exchange Commission.
Restructuring Plan
On July 27, 1995, the Company announced plans for a major restructuring designed
to focus operations on high potential clinical immunology segments which
management believes to have the greatest potential for future growth. The
Restructuring Plan (the "Plan"), which was finalized in the fourth quarter of
1995, included the discontinuation of several product lines, the closure of the
Company's New Jersey facility, and the disposition or relocation of certain
fixed assets.
The total revenues related to the divested or discontinued product lines
accounted for approximately 31%, 36%, and 45% of the Company's total revenues in
1995, 1994 and 1993, respectively.
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Although the Company believes that the sales growth resulting from the focused
efforts in the clinical immunology markets will more than offset the decrease in
revenues resulting from the restructuring, this is not expected to occur until
after 1996. The Company therefore expects that 1996 revenues will show a decline
from 1995.
In addition to expected declines in total revenues, increased investment in
marketing and research and development provided for in the Plan will cause
increased expense levels in 1996 over 1995.
FINANCIAL CONDITION
The Company decreased its working capital $1,315,000 as of
September 30, 1996, compared to December 31, 1995. This decrease was primarily a
result of capital utilized in the stock repurchase program, offset by increases
from normal operations. 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.
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
During the three and nine-month periods ended September 30,
1996, sales decreased 17% and 20%, respectively, compared to the same period
last year, primarily due to the discontinuation of several product lines as part
of the Plan. Gross profit as a percentage of product sales decreased for the
quarter from approximately 54% to 52% and remained at 55% for the same period
year-to-date.
Selling, general and administrative expenses for the three
and nine-month periods ended September 30, 1996 have decreased approximately 11%
and 6% over the prior year periods. This decrease is primarily due to the impact
on expenses resulting from the sale of Meridian, partially offset by costs
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related to the implementation of the Plan which includes expanding marketing and
R&D programs.
Research and development expenses for the three and
nine-month periods ended September 30, 1996 have increased approximately 23% and
18%, respectively, over the prior year periods as the Company increased its
investment in new product development in the areas of clinical immunology.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8K: 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 14, 1996 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.)
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<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 138,233
<SECURITIES> 5,200,477
<RECEIVABLES> 3,253,170
<ALLOWANCES> 207,390
<INVENTORY> 4,162,256
<CURRENT-ASSETS> 14,205,677
<PP&E> 11,297,909
<DEPRECIATION> 6,615,392
<TOTAL-ASSETS> 24,492,068
<CURRENT-LIABILITIES> 1,906,057
<BONDS> 0
0
0
<COMMON> 74,206
<OTHER-SE> 22,511,805
<TOTAL-LIABILITY-AND-EQUITY> 24,492,068
<SALES> 15,215,194
<TOTAL-REVENUES> 15,215,194
<CGS> 6,866,042
<TOTAL-COSTS> 6,866,042
<OTHER-EXPENSES> 8,682,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,351
<INCOME-TAX> (14,020)
<INCOME-CONTINUING> 15,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,371
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
