<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: MARCH 31, 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: 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 April 30, 1996
----- -----------------------------
Common Stock, $.01 Par Value 7,704,291
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
---------- ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 453,199 $ 1,033,459
Investments 6,277,035 6,365,995
Accounts Receivable, net of allowance for
doubtful accounts of $158,261 and $136,604 3,583,824 3,679,419
Inventories (Note 2) 3,700,940 3,948,564
Prepaid expenses and other current assets 618,291 685,399
Deferred income tax benefit 1,222,951 1,138,000
----------- -----------
Total current assets 15,856,240 16,850,836
----------- -----------
PROPERTY AND EQUIPMENT, at cost 10,680,275 10,469,775
Less accumulated depreciation (5,944,263) (5,742,459)
----------- -----------
4,736,012 4,727,316
----------- -----------
GOODWILL AND OTHER INTANGIBLES, net of
amortization of $1,088,214 and $1,015,082 4,588,554 4,773,904
DEFERRED INCOME TAX BENEFIT 877,000 877,000
OTHER ASSETS 334,739 346,316
----------- -----------
Total assets $26,392,545 $27,575,372
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 833,566 982,646
Accrued liabilities 806,255 1,252,718
Accrued payroll expenses 575,877 1,000,542
Accrued income taxes 7,929 -
----------- -----------
Total current liabilitIes 2,223,627 3,235,906
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 77,343 77,303
Paid-in capital 14,675,381 14,806,686
Retained earnings 9,270,352 9,215,989
Foreign currency translation adjustments 205,979 254,445
Unrealized losses on investments, net (60,137) (14,957)
----------- -----------
Total stockholders' equity 24,168,918 24,339,466
----------- -----------
Total liabilities and
stockholders' equity $26,392,545 $27,575,372
=========== ===========
</TABLE>
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
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<S> <C> <C>
NET SALES $5,306,880 $6,492,935
COST OF SALES 2,464,355 2,895,013
---------- ----------
Gross profit 2,842,525 3,597,922
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OPERATING EXPENSES
Selling, general and administrative 2,157,897 2,334,275
Research and development 700,427 634,560
---------- ----------
2,858,324 2,968,835
---------- ----------
OPERATING INCOME (LOSS) (15,799) 629,087
INTEREST INCOME, net 113,375 60,726
GAIN ON FOREIGN CURRENCY TRANSACTIONS 12,679 231,327
---------- ----------
INCOME BEFORE TAXES 110,255 921,140
PROVISION FOR INCOME TAXES 42,167 371,617
---------- ----------
NET INCOME $ 68,088 $ 549,523
========== ==========
NET INCOME PER SHARE $ .01 $ .07
AVERAGE COMMON SHARES OUTSTANDING 7,936,863 8,283,922
</TABLE>
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 68,088 $ 549,524
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 496,566 568,727
Deferred income tax provision (63,744) 42,017
Gain on foreign currency transactions (12,679) (231,327)
Change in assets and liabilities, net of effects of
foreign currency adjustments
Accounts receivable 85,620 (57,228)
Inventories 235,841 40,688
Prepaid expenses and other current assets 76,979 133,816
Accounts payable (142,577) (385,257)
Accrued liabilities (855,261) (511,087)
Accrued income taxes 55,701 (590,519)
---------- ----------
Total adjustments (123,554) (990,170)
---------- ----------
Net cash provided by (used in) operating activities (55,466) (440,646)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments - 336,808
Purchases of intangible assets - (20,567)
Purchases of property, plant and equipment (430,362) (207,555)
Proceeds from collection of notes receivable 1,527 6,734
---------- ----------
Net cash provided by (used in) investing activities (428,835) 115,420
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 74,880 191,370
Purchases of Hycor common stock (206,145) -
---------- ----------
Net cash provided by (used in) financing activities (131,265) 191,370
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 35,306 189,426
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (580,260) 55,570
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,033,459 1,366,956
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 453,199 $1,422,526
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - interest - -
- income taxes 82,587 965,863
</TABLE>
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HYCOR BIOMEDICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 March 31, 1996 and December 31, 1995, the results of
operations and the cash flows for the three-month periods ended March
31, 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 March 31, 1996 and December 31,
1995 consist of:
<TABLE>
<CAPTION>
3/31/96 12/31/95
----------- -----------
<S> <C> <C>
Raw materials $ 1,311,786 $ 1,325,973
Work in process 1,584,987 1,787,292
Finished goods 2,825,934 2,774,801
Allowance for discontinued
product lines and excess,
obsolete and short-dated
inventories (2,021,767) (1,939,502)
----------- -----------
$ 3,700,940 $ 3,948,564
=========== ===========
</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 $980,000 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.
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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.
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 increased its working capital $18,000 as of March 31, 1996,
compared to December 31, 1995. This increase was primarily a result of 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-month period ended March 31, 1996, sales decreased
18%, compared to the same period last year and gross profit as a percentage of
product sales for the three-month period decreased from approximately 55% to
54%. These decreases
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were caused primarily by the discontinuation of several product lines as part
of the Plan.
Selling, general and administrative expenses for the three-month period
ended March 31, 1996 have decreased approximately 8% over the prior year
period. This decrease is primarily due to the impact on expenses resulting
from the sale of Meridian, partially offset by costs related to the
implementation of the Plan which includes expanding marketing and R&D programs.
Research and development expenses for the three-month period ended March
31, 1996 have increased approximately 10% over the prior year period 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: May 13, 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 THREE MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 453,199
<SECURITIES> 6,277,035
<RECEIVABLES> 3,742,085
<ALLOWANCES> 158,261
<INVENTORY> 3,700,940
<CURRENT-ASSETS> 15,856,240
<PP&E> 10,680,275
<DEPRECIATION> 5,944,263
<TOTAL-ASSETS> 26,392,545
<CURRENT-LIABILITIES> 2,223,627
<BONDS> 0
0
0
<COMMON> 77,343
<OTHER-SE> 24,091,575
<TOTAL-LIABILITY-AND-EQUITY> 26,392,545
<SALES> 5,306,880
<TOTAL-REVENUES> 5,306,880
<CGS> 2,464,355
<TOTAL-COSTS> 2,464,355
<OTHER-EXPENSES> 2,858,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 110,255
<INCOME-TAX> 42,167
<INCOME-CONTINUING> 68,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,088
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
