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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Transferable Warrants to Purchase Shares of Common Stock
(Title of class)
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 filesuch reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
As of March 17, 1996, the aggregate market value of the voting stock
held by non-affiliates of the registrant (based on the closing sale price of
such stock on such date) was approximately $33,115,418.
The number of shares of common stock of the registrant outstanding at
March 17, 1996 was 7,759,291.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's definitive Proxy Statement to be filed
not later than 120 days after December 31, 1995 in connection with the Annual
Meeting of Stockholders to be held in 1996 - Part III.
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PART I
Item 1. Business
General
Hycor Biomedical Inc. ("Hycor" or the "Company") was incorporated as a
Delaware corporation on April 7, 1981. Hycor is engaged in the research,
development, manufacturing marketing of medical diagnostic products throughout
the United States and many foreign countries.
On January 14, 1994, the Company completed the acquisition of Melja
Diagnostik (Melja) of Kassel, Germany. Melja primarily manufactures and sells
allergy diagnostic products in Europe. The Company's name was subsequently
changed to Hycor Biomedical GmbH ("Hycor GmbH").
On October 3, 1994, the Company completed the acquisition of Medical
Specialties International, Inc. ("MSI") of South Plainfield, New Jersey. MSI
primarily manufactures and sells hematology controls in the U.S.
Sales of Hycor GmbH and MSI products have been recorded only since the
date of acquisition. Hycor and its subsidiaries are collectively referred to
herein as the Company.
During fiscal 1993, the Company closed its manufacturing facility in
Portland, Maine and consolidated such operations into the Company's California
manufacturing facility. The costs included in the accompanying consolidated 1993
statement of income were for the facility closure, severance and out placement
programs and the integration of the Portland, Maine operations into the
California facility.
Restructuring Plan
During fiscal 1995, the senior management and board of directors of the
Company determined that the business strategies that had successfully brought
the Company from a start-up research organization to a profitable $25 million
sales entity would no longer bring desired results in the changing diagnostic
marketplace of tomorrow. To realize a higher market valuation for its
shareholders, the Company adopted a plan designed to focus on sales growth and
divestitures of certain product lines (the "Restructuring Plan"). To start, the
Company undertook a comprehensive analysis of the worldwide health care
diagnostics
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market. Emerging technologies were investigated, payor trends researched and
competitors and products examined. This intensive scrutiny was followed by a
candid, independent analysis of Hycor's strengths and competitive posture. As a
result, on July 27, 1995 the Company announced the Restructuring Plan as part of
a strategic redirection. The Restructuring Plan focuses Hycor on high potential
clinical immunology sectors of the market, as well as urinalysis and hematology.
Associated with the implementation of the Restructuring Plan were costs of
$1,734,000 recorded in the fourth quarter. These costs arose from the
divestiture and discontinuance of several product lines outside the new
strategic direction. Under current reporting guidelines, $665,000 of these
expenses were allocated to Cost-of Sales or Expense categories. The balance of
these costs are reflected as a restructuring charge of $1,069,000. Consistent
with implementation of the Plan, while some product lines are being sold or
discontinued new product development efforts are being accelerated.
Additionally, marketing resources and sales programs are expanding with the goal
of becoming a major competitive force in the markets the Company intends to
focus on.
On December 1, 1995, the Company sold to ALK Laboratories, Inc. all of the
capital stock of its wholly-owned subsidiary, Meridian Biomedical, Inc., a
Colorado corporation ("Meridian")as part of this Restructuring Plan. The stock
was sold for $3,325,275, net of sales costs. The excess of the net sales price
over net assets sold resulted in a credit that was considered in determining the
full financial impact from this restructuring plan.
Products
The Company markets a variety of products. The KOVA(TM) Microscopic
Urinalysis System is its most important product line accounting for
approximately 35%, 35% and 37% of its total sales in 1995, 1994 and 1993,
respectively. The KOVA System provides laboratories with the capability to
perform reliable, uniform microscopic analyses of urine specimens. It is
composed of plastic collection containers, tubes and pipettes (suction devices
for transferring urine sediment from the bottom of a tube), patented microscopic
slides, and human urine-based control materials.
The Company's allergy diagnostic product line, which accounted for
approximately 25%, 27% and 18% of total sales in 1995, 1994 and 1993,
respectively, includes tests for general screening for the diagnosis of allergy
as well as a complete line
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of RIA ("radioimmunoassay") and EIA ("enzymatic immunoassays") procedures to
test for specific allergies to more than 500 different allergens such as
grasses, weeds, trees, epidermals (i.e. animal hair), dust, dust mites, molds
and foods. Unlike the traditional prick puncture and intradermal testing methods
of diagnosing allergies, the Company's products permit a physician to diagnose
allergies by testing a sample of the patient's blood for the presence of the
specific IgE or IgG antibody which reacts with the corresponding allergen. This
method has many advantages over the traditional methods of allergy diagnosis,
not the least of which is patient comfort. Additionally, in November 1993 the
Company, in a joint effort with Switzerland-based Tecan AG, introduced the
HY-TEC automated allergy diagnostic system. The HY-TEC instrument provides
clinical laboratories with significant productivity capabilities. Initial
marketing efforts were focused on Europe, which is the largest market for
in-vitro allergy tests. European shipments began in May 1994 and clearance for
domestic distribution was received from the U.S. Food and Drug Administration in
March 1995.
In 1991 the Company introduced a new test for the detection of
Helicobacter pylori, a bacterium associated with ulcer disease and stomach
cancer, and was granted a patent in November 1993 for the preparation used in
the Company's test.
Drug controls are a group of chemistry controls which are part of the
quality control system required to be in place in all clinical laboratories to
insure that the methodology being used is correct and the results are accurate,
precise and reproducible. In August 1993 the Company introduced a new line of
hematology controls and calibrators. These products are usable on all hematology
analyzers and have a shelf life twice as long as competitive products. In March,
1995 the Company received clearance from the Food and Drug Administration to
market the first commercially produced Erythrocyte Sedimentation Rate (ESR)
Control. This ESR Control, developed by MSI, can be used with most manual and
automated ESR methods in the market today.
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The following products have been divested or discontinued or will be
divested as part of the Restructuring Plan (See "Restructuring Plan" under Item
7, Management's Discussion and Analysis of Financial Condition and Results of
Operations):
- - The Company, through Meridian Bio-Medical, Inc. ("Meridian"), its
wholly owned subsidiary, manufactured and sold more than 400 different
allergenic extracts, which accounted for approximately 10%, 11% and 12%
of total sales in 1995, 1994 and 1993, respectively. The allergenic
extracts produced and sold by Meridian are, in general, highly
concentrated. Meridian manufactures and sells sterile glass containers
and diluting solutions for use in these procedures. Meridian was sold
on December 1, 1995.
- - Serology kits test for antibodies in serum that indicate the presence
of certain substances which may indicate disease. The tests identify
five types of diseases: rheumatoid factors, streptococcal infections,
certain inflammations characterized by C-reactive protein, infectious
mononucleosis and lupus erythematosus. This product line was sold in
February 1996.
- - Radial immunodiffusion (RID) kits provide qualitative and quantitative
measurements of levels of protein in serum that may indicate the
presence of disease. Currently the Company has RID tests to measure
approximately eleven different proteins. This product line was
discontinued in 1995.
- - The Company markets a number of drug controls as part of a quality
control system to insure laboratory results are accurate and
reproducible. This line includes a series of multi-level therapeutic
drug controls which contain over 30 therapeutic drugs in freeze-dried
human serum, ranging in concentration from low to toxic levels, and a
line of drugs of abuse multi-level controls and calibrators which
contain from one to ten drugs of abuse in liquid urine. Both of these
product lines are being marketed by the Company for sale and/or
discontinued as part of the Restructuring Plan.
- - The immunodiagnostic line includes screening assays, bioreagent and
media products. Screening assays provide a qualitative (yes-no) for
group A streptococcal antigen and urinary tract infection. Bioreagent
products are used primarily by immunodiagnostic manufacturers in the
development
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of new products and the manufacture of current products and include a
wide variety of monoclonal and polyclonal antibodies, as well as
purified proteins and viral antigens. Media products are used for the
production of cell cultures and are sold primarily to the research
laboratory and industrial markets. This product line was sold in March
1996.
Sales and Marketing
The Company's products, which are used primarily by two markets, the
clinical laboratory and certain specialty physicians, are sold through several
channels. In the United States, the Company's product lines are generally sold
through both independent and clinical laboratory distributors. The majority of
sales in the United States are to two major U.S. distributors, Baxter Scientific
Products and Curtin Matheson Scientific. These efforts are supported by a sales
and telemarketing force of ten employees. The bioreagents and allergy product
lines are sold directly to the end user utilizing a sales and service
organization of eighteen employees. Additional promotion of the Company's
products is accomplished by exhibitions at national and regional allergy and
laboratory products meetings, advertisements in laboratory and medical journals,
direct mail samples to laboratory directors and technologists and programs
designed to reach both clinical laboratory personnel and physician's offices.
During the last fiscal year, approximately $210,000 was expended by the Company
for such promotional activities, compared to $122,000 in 1994.
In foreign countries the Company's products are sold primarily through
Bayer, the Boehringer Mannheim Group of companies, Sorin and other distributors.
With the acquisition of Melja in early 1994, the Company commenced selling its
allergy products directly to the German market. In addition, the Company
expanded its presence in Europe by establishing an office in the Brussels,
Belgium area to provide technical support for the launch of the HY-TEC system in
Europe. Export sales (all to unaffiliated customers) accounted for $4,231,000 or
17% of product sales in 1995; $4,778,000 or 18% of product sales in 1994 and
$4,671,000 or 19% of product sales in 1993. The primary geographical area was
Europe, which, including sales by the Company and German subsidiary, accounted
for sales of $6,909,000 in 1995, $6,826,000 in 1994 and $3,688,000 in 1993.
The Company's two largest distributors, Baxter Scientific Products and
Curtin Matheson Scientific, accounted for 18% and 12%
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of net product sales in 1995; 18% and 14% in 1994 and 20% and 15% in 1993. A
loss of one or more of these distributors could significantly affect sales.
However, there are other national, regional and foreign clinical laboratory
products distributors, as well as the Company's sales force, who could market
the Company's products.
The Company did not have a significant backlog of orders at December
31, 1995 and December 31, 1994. Because of the short time between order receipt
and expected delivery, the Company, consistent with industry practice, carries a
large inventory to meet the expected flow of orders; in addition, backlog is not
a significant factor in the Company's business.
The Company's business is not considered seasonal in nature but is
slightly affected in the third quarter by the general slowdown in Europe during
the traditional vacation months.
Raw Materials
Although a substantial amount of the Company's total purchases for raw
materials and finished products were from a limited number of suppliers during
the last fiscal year, a number of alternative sources are available to the
Company should they be required.
Research and Development
The Company maintains an ongoing research and development effort. The
purpose of this effort is to evaluate new technologies, improve the Company's
current product line, and develop new products. Current projects in progress are
focused on programs to support and enhance the HY-TEC system, develop new
urinalysis and allergy diagnostic products and to develop a line of products to
diagnose autoimmune disease.
Total research and development expenditures were $2,594,000,
$1,837,000, and $2,143,000 for 1995, 1994 and 1993, respectively.
Government Regulations
The Company is registered as a manufacturer of medical devices and a
licensed biological manufacturer with the Food and Drug Administration ("FDA").
To comply with FDA requirements, the Company must manufacture its products in
conformance with the FDA's medical device Good Manufacturing Practice
regulations. The
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Company's existing products are also subject to certain premarket notification
requirements of the FDA.
The receipt, use and disposal of radioactive materials is subject to
licensing requirements of the Nuclear Regulatory Commission ("NRC"). The Company
holds a radioactive materials license from the NRC for its radioactive labeling
activities and its facilities are inspected periodically by the NRC.
The Company would be adversely affected if it were unable to maintain
its governmental licenses or continue to comply with applicable federal and
state regulations, but the Company does not expect this to occur. The Company
cannot predict whether future changes in government regulations might
substantially increase compliance costs, adversely affect the time required to
develop and introduce products, or limit or preclude the sale of its new
products.
In September 1992, regulations implementing the Clinical Laboratories
Improvement Amendments of 1988 (CLIA), providing for certification procedures
and requirements for laboratories, became fully effective. The impact of CLIA
has reduced the sales of the Company's allergy diagnostic products to physician
office laboratories, as the testing has shifted toward the larger clinical
laboratory. The new HY-TEC system was designed to meet the needs of these larger
laboratories.
Compliance with federal, state and local regulations relating to
environmental matters is not expected to have a material effect upon capital
expenditures, earnings or the competitive position of the Company.
Competition
The Company competes in several segments of the diagnostic market. The
KOVA Microscopic Urinalysis System has significant competition from
approximately six national diagnostic product manufacturing and distribution
companies that market supplies that perform functions similar to the Company's
and from two companies that sell components with designs similar to the
Company's. Management believes that the Company is the leading supplier of
standardized microscopic urinalysis systems. The Hematology line of controls and
calibrators has four primary competitors. A substantial number of the Company's
competitors are larger and have greater resources than the Company.
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Pharmacia, Inc. and Kallestad Laboratories, Inc., a subsidiary of
Sanofi, whose products compete with the Company's allergy diagnostic products,
have substantially greater resources as well as established positions in the
allergy testing market.
The Company competes on the basis of price, promotion, quality of
products, design of product, strength of the Company's relationship with dealers
and other methods relevant to the business.
Patents
The Company has maintained an aggressive patent policy and currently
holds a number of domestic and foreign patents. The earliest patent was issued
in 1973 and the latest in 1994. While these patents offer some protection to its
product lines and related technology, management believes that continued
improvements to the product lines are more important for the protection of its
market position.
Employees
As of March 17, 1996, the Company had approximately 196 employees. None
of the employees are covered by collective bargaining agreements and management
believes that the Company's relations with its employees are satisfactory.
Item 2. Properties
At December 31, 1995, the Company had six separate facilities.
Corporate headquarters is located in a leased 18,000 square foot building at
18800 Von Karman Avenue, Irvine, California. This facility was leased on
November 11, 1992, and became the Company's new administrative headquarters in
June 1993. The initial term of the lease is seven and one-half years; the
initial base rent is $196,800 annually, commencing on October 1, 1993. In
subsequent years the annual rent is adjusted on July 1 of each year in specific
amounts as set in the lease agreement. The Company has the option to renew the
lease for an additional five years at market rental rates.
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The Company also leases the following facilities:
1) A two-story freestanding facility at 7272 Chapman Avenue,
Garden Grove, California. The lease has a ten-year term ending December 31,
2002. The initial rent is $455,000 annually. In subsequent years, the annual
rent will be adjusted on January 1 of every other year (the "Adjustment Date")
and will be based on the percentage difference between the Consumer Price Index
("CPI") for the preceding month of December and the CPI for the base year;
however, rent payable as of each Adjustment Date shall be increased by a minimum
of three percent per annum cumulative but may not exceed six percent per annum
cumulative. The Company has the option to extend the lease term for an
additional five-year period. The Company uses this facility, which contains
approximately 76,000 square feet, for laboratory, manufacturing and storage
purposes.
2) An office suite at "De Vunt" 17, 3220 Holsbeek, Belgium. The
lease has a nine year term commencing on April 1, 1994 and terminates on March
31, 2003. The initial rent is approximately $19,000 annually and is subject to
indexation at each anniversary date based on changes in the Belgium consumer
price index. This facility contains approximately 1,700 square feet and is used
as a marketing, sales and product support location for the European market.
3) A free standing building located at Otto-Hahn StraBe 16,
34123 Kassel, Germany. The lease has a ten year term ending March 31, 2005. The
initial annual rent is based on a fixed 8.5% of the mutually agreed construction
costs. In subsequent years, the annual rent will be adjusted based on changes to
the cost of living index as published by the Federal Statistics Office in
Wiesbaden, Germany. Adjustments will take place only if the index changes by
more than 10% from the commencement date of the lease. The Company has the
option to extend the term of the lease for an additional five years. The Company
uses this facility for the laboratory, manufacturing, warehousing, distribution
and administrative functions of Hycor GmbH.
4) A free standing building located at 3610 Kennedy Road, South
Plainfield, New Jersey. This lease was entered into as a result of the
acquisition of MSI. The original lease terminated shortly after the acquisition
was completed and, in order to secure operational continuity pending
finalization of an integration plan, the Company negotiated an extension ending
on December 31, 1995. The annual rent was approximately $54,000. The Company
relocated
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all MSI activity to California at the end of the lease and this facility was
closed as part of the Company's Restructuring Plan.
5) The Company owns a building located on approximately one acre
of land at 217 Read Street, Portland, Maine. The facility consists of three
connected brick buildings which were built approximately 35 years ago. The
buildings have an aggregate space of approximately 70,000 square feet which can
be used for office, laboratory, manufacturing and storage purposes. As discussed
earlier, this facility was closed in the second half of 1993. On June 30, 1993,
the Company executed a lease leasing the building to a third party commencing
August 1, 1993, and terminating October 31, 1998. The Company intends to sell
the facility when market conditions improve.
In management's opinion the Company's existing facilities are adequate
for the current level of operations and will support the anticipated growth of
its business without the addition of major facilities for the foreseeable
future.
Item 3. Legal Proceedings
To the best of Management's knowledge, there are no material pending
legal proceedings to which the Company is a party or to which the Company's
property is subject.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the fiscal year ended December 31, 1995,
there were no matters submitted to a vote of security holders.
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ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Market Price of Common Stock
Hycor Biomedical Inc.'s common stock trades on the National Market
System under the symbol HYBD. The following table sets forth the range of high
and low trading prices for the common stock for the periods indicated as
reported. The prices do not include retail markups, markdowns or commissions.
<TABLE>
<CAPTION>
Year Ended High Low
- --------------------------------------------------------------------------------
<S> <C> <C>
December 31, 1994
1st Quarter 6-1/8 4
2nd Quarter 5-1/2 4-1/2
3rd Quarter 5-3/8 4-3/8
4th Quarter 5-1/8 3-3/4
December 31, 1995
1st Quarter 4-25/32 4
2nd Quarter 5-1/8 4-1/2
3rd Quarter 4-3/4 3-1/4
4th Quarter 4-5/8 3-7/8
December 31, 1996
1st Quarter (Through March 20, 1996) 5-1/4 4-3/8
</TABLE>
There were 1,210 shareholders of record as of March 20, 1996. No dividends have
been paid to stockholders since the Company was founded and the Company has no
current intentions of paying cash dividends in the foreseeable future.
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ITEM 6. Selected Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1995(a) 1994(b) 1993(c) 1992 1991
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<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $25,185 $25,897 $24,213 $27,384 $17,530
Net income $ 131 $ 2,833 $ 2,275 $ 3,598 $ 97
Net income per
common share $ .02 $ .34 $ .26 $ .41 $ .01
FINANCIAL POSITION
Working capital $13,615 $13,322 $15,736 $13,554 $ 8,603
Net property and
equipment $ 4,727 $ 6,419 $ 6,094 $ 5,268 $ 5,633
Total assets $27,575 $29,000 $27,061 $26,139 $22,439
Long-term debt $ -- $ -- $ -- $ -- $ 833
Total
stockholders' equity $24,339 $26,169 $24,316 $22,420 $18,064
Cash dividends
declared per
common share $ -- $ -- $ -- $ -- $ --
</TABLE>
(a) 1995 results include costs of implementing the Company's Restructuring
Plan amounting to $1,734,000. See note number 13 to the consolidated
financial statements.
(b) See note number 3 to the consolidated financial statements regarding
certain acquisitions completed in 1994.
(c) 1993 results include charges for plant closure costs amounting to
$1,113,393. See note 12 to the consolidated financial statements.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Except for the historical information contained herein, the matters
discussed in this annual 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, includes 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 aggregate costs of the Plan ($3,220,000) included $2,371,000 of
disposal costs and write-offs of inventories, the value of which have been
impaired by the Company's decision to discontinue the related product lines and
liquidate all remaining inventories, $514,000 of costs related to the write down
of fixed assets impaired by downsizing and discontinuance of related product
lines, and $335,000 related to facility closure and other costs. These costs
were offset by estimated gains on the sale of certain product lines amounting to
$1,486,000. The net $1,734,000 cost of implementing the Plan was allocated to
cost of sales ($473,000), selling, general and administrative expenses
($192,000), and restructuring charges ($1,069,000) in the accompanying
consolidated statements of income.
As part of the Plan, the Company has divested or will divest and has
discontinued the following product lines:
- - On December 1, 1995, the Company sold to ALK Laboratories all of the
capital stock of Meridian for $3,325,275, net of sales costs. Meridian
previously accounted for 10%, 11%, and 12% of the Company's total sales
in 1995, 1994, and 1993, respectively.
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- - On February 5, 1996, the Company sold its serology kit tests for
antibodies in Serum for $250,000 plus royalties to be earned against
sales over the next five years at a rate of 5%. Such products accounted
for approximately 2% of the Company's total sales in 1995.
- - The Company discontinued in 1995 its production of several
immunodiagnostic and radial immunodiffusion (RID) products. Such
products accounted for approximately 3% of the Company's total sales in
1995.
- - The Company discontinued to the extent possible and is currently
marketing for sale a number of drug controls including a series of
multi-level therapeutic drug controls. These products accounted for less
than 4% of the Company's total sales in 1995.
- - On March 8, 1996, the Company sold its media product line for $275,000
plus royalties to be earned against certain specific products over the
next 2 years on a sliding scale starting at 50%. Such product lines
accounted for less than 2% of total sales in 1995.
As of December 31, 1995, the Company discontinued all significant purchases and
production on the remaining discontinued product lines with the exception of
certain contractual supply commitments. Such products accounted for
approximately 9% of the Company's total sales in 1995. The Company anticipates
that the Plan will be primarily completed by the end of the second quarter of
1996 and will not require any significant cash outlays.
The total revenues related to the divested or discontinued product lines account
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 the expected decline in total revenues, the increased investment
in marketing and research and development
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provided for in the Plan will cause increased expense levels in 1996 over 1995.
The Company expects to remain profitable in 1996 but at reduced levels as
compared to prior years. The Company expects to be able to fund all operating
requirements from existing working capital resources and results from current
operations.
Financial Condition
In April 1993, January 1994, and September 1995 the Board of Directors
authorized the repurchase of up to an aggregate of 1,620,000 shares of the
Company's common stock. As of December 31, 1995, 1,273,200 shares had been
purchased at a cost of $5,461,000.
The Company increased its working capital $293,000 as of December 31,
1995 compared to December 31, 1994, due primarily to the proceeds from the sale
of Meridian, offset by cash used for the stock repurchase program and the asset
reductions resulting from the Plan. The Company expects to be able to fund
future 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 distributor's related payments to the
Company. As of December 31, 1995, investments increased $3,928,498 compared to
December 31, 1994, primarily because of the proceeds from the sale of Meridian.
The decrease in receivables of $583,916 was also caused by the sale of Meridian.
These fluctuations do not have a significant seasonal component.
Inventories decreased $2,777,000, or 41%, as of December 31, 1995
compared to December 31, 1994 due primarily to the divestiture and write-off of
inventories related to product lines which are being discontinued as part of the
Plan.
The deferred income tax benefit primarily reflects adjustments to the
net operating loss carryforwards of acquired businesses. See Note 7 to the
consolidated financial statements.
The Company's principal capital commitments are for lease payments under
noncancelable operating leases. Working capital and operating profits are
anticipated to be sufficient to satisfy these commitments.
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The Company is continuing to evaluate the acquisition of additional
product lines and companies in the medical diagnostics field. The Company
believes that such acquisitions could be financed through issuance of debt or
equity securities as well as its available cash. If such an acquisition were
completed, the Company's operating results and financial condition could change
significantly in future periods.
Results of Operations
1995 COMPARED TO 1994 Product sales decreased 3% compared to 1994. Revenues
were impacted by the fourth quarter sale of Meridian and the effects of the
restructuring announcement on planned discontinued products. This decline can
also be attributed to continued pressures in the health care industry for cost
controls and a decline in domestic allergy product sales as the market continues
to shift from the doctors office to larger laboratories. The Company's new
HY-TEC automated allergy system is designed for the larger testing laboratories
and received clearance from the U.S. Food and Drug Administration in March 1995.
Gross profit as a percentage of sales declined from 55.8% to 52.6% due
primarily to the allocation of a portion of the restructuring charge to cost of
sales ($473,000) and the lower margins of the German operation and the launch of
the new HY-TEC system in Europe.
Selling, general and administration expenses, and research and
development costs increased $1,253,000 and $758,000, respectively, primarily due
to the direct cost incurred as a result of the Plan which includes expanding
marketing and R&D programs.
Interest income declined as the cash balances decreased as described
above.
The gain on foreign currency transaction of $188,000 for the year ended
December 31, 1995 relates to intercompany balances amounting to approximately
$948,000 between Hycor and its German subsidiary which was acquired in January
1994. The company has hedged this foreign currency exchange rate position.
The provision for income taxes increased substantially from 39% to 51%
of income due to the higher tax rate for the German operation and the
utilization in prior years of net operating loss carryforwards and tax credits.
18
<PAGE> 19
1994 COMPARED TO 1993 Product sales increased 7% compared to 1993. Net of the
effects of the acquisitions completed in 1994, sales declined approximately
$566,000 or 2%. This decline was caused primarily by pressures in the health
care industry for cost controls and a decline in domestic allergy product sales
as the market continues to shift from the doctors office to larger laboratories.
Gross profit as a percentage of sales declined from 59.1% to 55.8% due
to the lower margins of the new German operation and the launch of the new
HY-TEC system in Europe.
Selling, general and administration expenses, and research and
development costs, net of the acquisitions, declined $583,000 and $340,000,
respectively, primarily as a result of the cost savings from the Portland, Maine
plant closure completed in the fourth quarter of 1993.
Interest income declined as the cash balances decreased as described
above.
The gain on foreign currency transaction of $209,000 for the year ended
December 31, 1994 relates to intercompany balances amounting to approximately
$1,613,000 between Hycor and its German subsidiary which was acquired in January
1994. The company has hedged this foreign currency exchange rate position.
The provision for income taxes increased substantially from 29% to 39%
of income due to the higher tax rate for the German operation and the
utilization in prior years of net operating loss carryforwards and tax credits.
19
<PAGE> 20
PART II
Item 8. Financial Statements and Supplementary Data
The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Independent Auditors' Reports 21-22
Consolidated Balance Sheets as of 23-24
December 31, 1995 and 1994
Consolidated Statements of Income 25
for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Stockholders' 26
Equity for the years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash 27-28
Flows for the years ended December 31,
1995, 1994 and 1993
Notes to Consolidated Financial Statements 29-40
</TABLE>
20
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Hycor Biomedical Inc.
Irvine, California
We have audited the accompanying consolidated balance sheets of Hycor
Biomedical Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. Our audit also included the financial statement
schedule listed in the index at Item 14(1). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and subsidiaries as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for the year then ended, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 29, 1996
21
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Directors of Hycor Biomedical Inc.:
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Hycor Biomedical Inc. (a Delaware
corporation) and subsidiaries for the year ended December 31, 1993. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of income, stockholders'
equity and cash flows are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the statements of income, stockholders' equity and cash flows. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the statements of income, stockholders' equity and cash flows
referred to above present fairly, in all material respects, the results of
operations and cash flows of Hycor Biomedical Inc. and subsidiaries for the
year ended December 31, 1993, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated statements of income, stockholder's equity and cash flows taken as
a whole. The schedule listed in Part IV, Item 14 is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated statements of income, stockholder's equity and cash
flows. This schedule has been subjected to the auditing procedures applied in
our audit of the basic consolidated statements of income, stockholder's equity
and cash flows for the period indicated above and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic consolidated statements of income,
stockholder's equity and cash flows taken as a whole.
ARTHUR ANDERSEN LLP
Orange County, California
February 15, 1994
22
<PAGE> 23
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,033,459 $ 1,404,537
Investments (Note 4) 6,365,995 2,437,497
Accounts receivable, net of allowance for
doubtful accounts of $136,604 and
$170,841 in 1995 and 1994, respectively 3,679,419 4,263,335
Inventories (Note 5) 3,948,564 6,725,565
Prepaid expenses and other current assets 685,399 711,586
Deferred income tax benefit (Note 7) 1,138,000 610,000
----------- -----------
Total current assets 16,850,836 16,152,520
----------- -----------
PROPERTY AND EQUIPMENT, at cost :
Land and buildings 1,428,258 2,304,048
Leasehold improvements 1,619,272 1,684,352
Machinery and equipment 5,115,424 5,796,601
Furniture, fixtures and office equipment 2,306,821 2,273,247
----------- -----------
10,469,775 12,058,248
Accumulated depreciation and amortization (5,742,459) (5,639,674)
----------- -----------
Property and equipment, net 4,727,316 6,418,574
----------- -----------
GOODWILL AND OTHER INTANGIBLE ASSETS, net of
accumulated amortization of $1,015,082 and
$741,543 in 1995 and 1994, respectively (Notes 3 and 7) 4,773,904 5,459,039
DEFERRED INCOME TAX BENEFIT (Note 7) 877,000 620,000
OTHER ASSETS 346,316 350,166
----------- -----------
Total assets $27,575,372 $29,000,299
=========== ===========
</TABLE>
See notes to consolidated financial statements
23
<PAGE> 24
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ---- ----
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 982,646 $ 1,104,520
Accrued liabilities 1,252,718 864,004
Accrued payroll expenses 1,000,542 862,457
----------- -----------
Total current liabilities 3,235,906 2,830,981
----------- -----------
COMMITMENTS (Note 9)
STOCKHOLDERS' EQUITY (Notes 6 and 8):
Preferred stock, $.01 par value;
authorized - 3,000,000 shares;
none outstanding -- --
Common stock, $.01 par value;
authorized - 20,000,000 shares;
issued and outstanding: 7,730,291
shares in 1995 and 8,226,895 shares in 1994 77,303 82,269
Paid-in capital 14,806,686 16,971,456
Retained earnings 9,215,989 9,084,739
Accumulated foreign currency translation adjustments 254,445 144,138
Unrealized losses on investments, net of tax benefit (14,957) (113,284)
----------- -----------
Total stockholders' equity 24,339,466 26,169,318
----------- -----------
Total liabilities and stockholders' equity $27,575,372 $29,000,299
=========== ===========
</TABLE>
See notes to consolidated financial statements
24
<PAGE> 25
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
NET SALES (Note 10) $25,184,742 $25,896,591 $24,212,567
COST OF SALES (Note 13) 11,947,276 11,450,936 9,900,454
----------- ----------- -----------
Gross profit 13,237,466 14,445,655 14,312,113
----------- ----------- -----------
OPERATING EXPENSES:
Selling, general and
administrative (Note 13) 9,812,090 8,558,752 8,350,318
Research and development 2,594,468 1,836,830 2,142,789
Restructure charge (Note 13) 1,069,301 -- --
Plant closure costs (Note 12) -- -- 1,113,393
----------- ----------- -----------
13,475,859 10,395,582 11,606,500
----------- ----------- -----------
OPERATING INCOME (LOSS) (238,393) 4,050,073 2,705,613
INTEREST INCOME, net 321,765 374,125 498,889
GAIN ON FOREIGN CURRENCY TRANSACTIONS 187,878 208,898 --
----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 271,250 4,633,096 3,204,502
PROVISION FOR INCOME TAXES (Note 7) 140,000 1,800,000 930,000
----------- ----------- -----------
NET INCOME $ 131,250 $ 2,833,096 $ 2,274,502
=========== =========== ===========
NET INCOME PER SHARE (Note 2) $ .02 $ .34 $ .26
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
25
<PAGE> 26
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Common Stock
------------------
Number of Par Paid-in Retained
Shares Value Capital Earnings
------ ----- ------- --------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 8,242,066 $82,421 $18,360,662 $3,977,141
ISSUANCE OF COMMON STOCK, including
related income tax benefits (Note 8) 167,909 1,679 495,804 --
COMMON STOCK PURCHASED (202,722) (2,027) (873,948) --
NET INCOME -- -- -- 2,274,502
--------- ------- ----------- ----------
BALANCE AT DECEMBER 31, 1993 8,207,253 82,073 17,982,518 6,251,643
ISSUANCE OF COMMON STOCK, PRINCIPALLY UNDER EMPLOYEE
BENEFIT PLANS, including related income tax benefits (Note 8) 301,342 3,013 311,346 --
ISSUANCE OF COMMON STOCK IN CONJUNCTION WITH
ACQUISITION OF MSI (Note 3) 200,000 2,000 730,000 --
COMMON STOCK PURCHASED (481,700) (4,817) (2,052,408) --
NET INCOME -- -- -- 2,833,096
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (Note 2) -- -- -- --
NET UNREALIZED INVESTMENT LOSSES, net of tax (Note 2) -- -- -- --
--------- ------- ----------- ----------
BALANCE AT DECEMBER 31, 1994 8,226,895 82,269 16,971,456 9,084,739
ISSUANCE OF COMMON STOCK, PRINCIPALLY UNDER EMPLOYEE
BENEFIT PLANS, including related income tax benefits (Note 8) 92,174 922 293,836 --
COMMON STOCK PURCHASED (588,778) (5,888) (2,508,216) --
TAX BENEFITS FROM EXERCISE OF COMMON STOCK OPTIONS -- -- 49,610 --
NET INCOME -- -- -- 131,250
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (Note 2) -- -- -- --
NET UNREALIZED INVESTMENT GAINS, net of tax (Note 2) -- -- -- --
--------- ------- ----------- ----------
BALANCE AT DECEMBER 31, 1995 7,730,291 $77,303 $14,806,686 $9,215,989
========= ======= =========== ==========
<CAPTION>
Accumulated
Foreign Currency Unrealized
Translation Investment
Adjustments Gains (Losses)
----------- --------------
<S> <C> <C>
BALANCE AT JANUARY 1, 1993 $ -- $ --
ISSUANCE OF COMMON STOCK, including
related income tax benefits (Note 8) -- --
COMMON STOCK PURCHASED -- --
NET INCOME -- --
-------- ---------
BALANCE AT DECEMBER 31, 1993 -- --
ISSUANCE OF COMMON STOCK, PRINCIPALLY UNDER EMPLOYEE
BENEFIT PLANS, including related income tax benefits (Note 8) -- --
ISSUANCE OF COMMON STOCK IN CONJUNCTION WITH
ACQUISITION OF MSI (Note 3) -- --
COMMON STOCK PURCHASED -- --
NET INCOME -- --
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (Note 2) 144,138 --
NET UNREALIZED INVESTMENT LOSSES, net of tax (Note 2) -- (113,284)
-------- ---------
BALANCE AT DECEMBER 31, 1994 144,138 (113,284)
ISSUANCE OF COMMON STOCK, PRINCIPALLY UNDER EMPLOYEE
BENEFIT PLANS, including related income tax benefits (Note 8) -- --
COMMON STOCK PURCHASED -- --
TAX BENEFITS FROM EXERCISE OF COMMON STOCK OPTIONS -- --
NET INCOME -- --
FOREIGN CURRENCY TRANSLATION ADJUSTMENT (Note 2) 110,307 --
NET UNREALIZED INVESTMENT GAINS, net of tax (Note 2) -- 98,327
-------- ---------
BALANCE AT DECEMBER 31, 1995 $254,445 $ (14,957)
======== =========
</TABLE>
See notes to consolidated financial statements
26
<PAGE> 27
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 131,250 $ 2,833,096 $ 2,274,502
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,168,151 1,745,123 1,559,424
Deferred income tax provision (569,000) 419,000 129,000
Loss on disposition of property, equipment, and other intangibles 522,092 -- --
Gain on sale of subsidiary (1,286,427) -- --
Gain on foreign currency transactions (187,878) (208,898) --
Change in assets and liabilities, net of effects of acquisitions,
dispositions and foreign currency adjustments
Accounts receivable 348,390 893,080 88,779
Inventories 1,634,932 (1,491,133) (748,747)
Prepaid expenses and other current assets 7,763 47,515 (359,268)
Other assets 2,125 86,156 45,469
Accounts payable (27,676) (357,903) (78,393)
Accrued liabilities 666,740 (265,702) (58,592)
Accrued payroll expenses 198,279 152,495 (188,897)
----------- ----------- -----------
Total adjustments 3,477,491 1,019,733 388,775
----------- ----------- -----------
Net cash provided by operating activities 3,608,741 3,852,829 2,663,277
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (4,119,291) (1,893,632) (1,976,424)
Proceeds from sales of investments 313,279 6,105,132 1,198,946
Purchases of property, plant and equipment (1,496,707) (1,420,115) (2,195,295)
Purchases of intangible assets (71,550) (23,704) (60,554)
Proceeds from sale of property and equipment -- 40,544 111,262
Proceeds from collection of notes receivable 26,006 24,215 178,450
Business acquisitions, net of cash acquired -- (4,272,405) --
Proceeds from sale of business 3,325,275 -- --
----------- ----------- -----------
Net cash used in investing activities (2,022,988) (1,439,965) (2,743,615)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 344,368 314,359 497,483
Purchases of Hycor common stock (2,514,104) (2,057,225) (875,975)
----------- ----------- -----------
Net cash used in financing activities (2,169,736) (1,742,866) (378,492)
----------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 212,905 50,966 --
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (371,078) 720,964 (458,830)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,404,537 683,573 1,142,403
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,033,459 $ 1,404,537 $ 683,573
=========== =========== ===========
</TABLE>
27
<PAGE> 28
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - income taxes $1,811,199 $ 1,306,547 $872,735
SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
During 1994, the Company acquired certain businesses in noncash
transactions summarized as follows:
Fair value of assets acquired $ -- $ 5,797,842 $ --
Value of common stock issued in transaction -- (732,000) --
Cash paid net of cash acquired -- (4,272,405) --
---------- ----------- --------
Liabilities assumed, including costs of acquisition $ -- $ 793,437 $ --
========== =========== ========
Reduction of goodwill and accrued income taxes payable due to utilization
of Ventrex acquired net operating losses, credit carryforwards and other
timing differences $ 287,385 $ -- $647,653
========== =========== ========
Reduction of goodwill and increase in deferred income tax benefit due to
change in valuation allowance $ 269,843 $ 1,079,372 $ --
========== =========== ========
</TABLE>
See notes to consolidated financial statements
28
<PAGE> 29
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
NOTE 1: DESCRIPTION OF BUSINESS
Hycor Biomedical Inc. ("Hycor" or the "Company") is engaged in developing,
manufacturing and marketing medical and diagnostic products. The Company's
products are primarily used in the clinical laboratory and specialty physician
markets in the United States and Europe. The majority of sales are through
independent and clinical laboratory distributors.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION 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.
FOREIGN CURRENCY ISSUES The financial position and results of operations
of the Company's foreign subsidiary are measured using the local currency as the
functional currency. Assets and liabilities of this subsidiary are translated at
the exchange rate in effect at each year end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Translation adjustments arising from differences in exchange rates from period
to period are included in the accumulated foreign currency translation
adjustments account in stockholders' equity. Realized gains or losses from
foreign currency transactions are included in operations as incurred and relate
to intercompany balances amounting to $948,000 between Hycor and its German
subsidiary. Beginning in May, 1995, the Company began entering into forward
foreign exchange contracts as a hedge against certain effects of fluctuating
currency exchange rates on the intercompany note payable from its German
subsidiary. The Company is exposed to market risk on the forward exchange
contracts as a result of changes in foreign exchange rates; however, the market
risk should be substantially offset by changes in the valuation of the
underlying exposures. Gains and losses on these contracts, which equal the
difference between the forward contract rate and the prevailing market spot rate
at the time of valuation, are recognized in the consolidated statement of
operations. The counterparties to these instruments are major financial
institutions. The Company uses commercial rating agencies to
29
<PAGE> 30
evaluate the credit quality of the counterparties, and the Company does not
anticipate a loss resulting from any credit risk of these institutions.
At December 31, 1995, the Company had forward currency sales contracts open in
the aggregate amount of $952,000, with maturities ranging from 5 months to 20
months, which represents the expected payment dates against the intercompany
note. The unrealized gains and losses from these contracts were immaterial at
December 31, 1995.
CASH EQUIVALENTS Cash equivalents are deemed to be highly liquid investments
with an original maturity of three months or less.
INVESTMENTS The Company adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities,"
effective January 1, 1994. Financial statements from prior years have not been
restated, and there was no material cumulative effect from the change in
accounting principle in determining net income for the year ended December
31,1994.
At December 31, 1995 and 1994, marketable equity and debt securities
have been categorized as available for sale and, as a result, are stated at fair
value. Marketable equity and debt securities available for current operations
are classified in the balance sheet as current assets. Unrealized holding gains
and losses are included as a component of stockholders' equity, net of tax,
until realized.
CREDIT RISK Most of the Company's business activity is with distributors of
medical products which are primarily located in the United States and Europe.
The Company grants normal trade credit to customers without requiring collateral
or other security. The Company maintains reserves for potential credit losses
and those losses have been within management's expectations.
INVENTORIES Inventories are valued at the lower of cost (first-in,first-out
method) or market. Cost includes material, direct labor and manufacturing
overhead.
PROPERTY AND EQUIPMENT Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from three to twenty years. Leasehold
improvements are amortized over the life of the lease. Maintenance, repairs and
minor renewals are charged to expense as incurred. Additions and improvements
are capitalized.
GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of
purchase price over the fair market value of tangible assets resulting from
business acquisitions. Other intangible assets include patents, trademarks and
license fees which are recorded at cost. Goodwill is amortized over 15 to 20
years on a
30
<PAGE> 31
straight-line basis. Other intangible assets are amortized on a straight-line
basis over the estimated useful lives of the assets, which range from 10 to 15
years. The Company assesses the recoverability of Goodwill and other intangible
assets at each balance sheet date by determining whether the amortization of the
balance over its remaining useful life can be recovered through projected
undiscounted future operating cash flows.
OTHER ASSETS Other assets consist primarily of notes receivable and long-term
deposits.
INCOME TAXES The Company accounts for income taxes pursuant to Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Accordingly, income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and tax reporting purposes. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future income taxes.
REVENUE RECOGNITION Revenue on product sales is recognized when products
are shipped.
NET INCOME PER SHARE The number of shares used in computing net income per
share is the weighted average number of shares outstanding during the year plus
common stock equivalents relating to options and warrants. 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 for each year. The numbers of shares used in computing net
income per share are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Weighted average number
of shares outstanding 8,208,218 8,233,867 8,237,020
Common stock equivalents 49,805 218,939 453,588
- --------------------------------------------------------------------------------
8,258,023 8,452,806 8,690,608
================================================================================
</TABLE>
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the
31
<PAGE> 32
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RECLASSIFICATIONS Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform with the 1995 presentation.
NEW ACCOUNTING PRONOUNCEMENT The Financial Accounting Standards Board has
recently issued Financial Accounting Standards No. 123, Accounting for
Stock-based Compensation, which requires the determination and disclosure of
compensation costs implicit in stock option grants. The Company is required to
adopt the standard beginning fiscal 1996. The Company does not plan to implement
this standard until that time and has not been able to quantify the effect of
this standard at the present time.
NOTE 3: ACQUISITIONS
On January 14, 1994, the Company acquired Melja Diagnostik (Melja) for cash of
approximately $2,145,000, net of cash acquired. Melja primarily manufactures and
sells allergy diagnostic products in Europe. The acquisition was accounted for
using the purchase method of accounting, and Melja's operating results have been
included in the Company's consolidated financial statements from the date of
acquisition. Total goodwill and other intangible assets resulting from the
acquisition amounted to approximately $1,879,000. The impact of including
Melja's operation in the Company's financial statements for the year ended
December 31, 1993 would not have been significant.
On October 3, 1994, the Company completed the acquisition of Medical Specialties
International, Inc. (MSI) of So. Plainfield, New Jersey, for a combination of
cash and Hycor common stock of approximately $2,859,000, net of cash acquired.
Under the terms of the acquisition agreement, the Company may be obligated to
issue up to 150,000 additional common shares if MSI achieves specified revenue
levels prior to December 31, 1997. As of December 31, 1995, no additional shares
have been issued under this agreement. MSI primarily manufactures and sells
hematology controls in domestic markets. The acquisition was accounted for using
the purchase method of accounting, and MSI's operating results have been
included in the Company's consolidated financial statements
32
<PAGE> 33
from the date of acquisition. Total goodwill and other intangible assets
resulting from the acquisition amounted to approximately $2,829,000.
The unaudited consolidated results of operations through December 31, 1994 on a
pro forma basis as though the MSI acquisition had been consummated on January 1,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Net sales $26,763,000 $25,019,000
Net income 2,072,000 1,503,000
Net income per common share .24 .17
- --------------------------------------------------------------------------------
</TABLE>
The pro forma financial information presented is not necessarily indicative
either of results of operations that would have occurred had the acquisition
been effected on January 1, 1994 or 1993 or of future results of operations.
NOTE 4: INVESTMENTS
Investments consist principally of corporate debt securities, categorized as
available for sale, with scheduled maturities at December 31, 1995 as follows:
<TABLE>
<CAPTION>
Fair
Value Cost
- --------------------------------------------------------------------------------
<S> <C> <C>
Due after one year through five years $6,365,995 $6,390,515
- --------------------------------------------------------------------------------
</TABLE>
Gross unrealized holding gains and losses at December 31, 1995 were $32,756 and
$57,276, respectively. For the purpose of determining gross realized gains and
losses, the cost of securities sold is based upon specific identification.
During 1995, the Company sold investments with an aggregate book value of
$322,113 for total cash proceeds of $313,279, resulting in a net realized loss
of $8,834.
33
<PAGE> 34
NOTE 5: INVENTORIES
Inventories at December 31, 1995 and 1994 consisted of:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 1,325,973 $2,122,387
Work in process 1,787,292 2,836,388
Finished goods 2,774,801 2,536,877
Allowance for discontinued
product lines and excess, obsolete
and short-dated inventories (1,939,502) (770,087)
- --------------------------------------------------------------------------------
$ 3,948,564 $6,725,565
================================================================================
</TABLE>
NOTE 6: STOCKHOLDERS' EQUITY
At December 31, 1995 the Company had warrants outstanding to purchase 624,232
shares of common stock, all of which are exercisable. Each warrant represents
the right to purchase one share of the Company's common stock at prices ranging
from $5.00 to $9.21 with expiration dates ranging from April 1996 to August
1998. In 1994, warrants for 279 shares of common stock were exercised.
NOTE 7: INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 307,000 $ 817,000 $546,000
State 181,000 341,000 255,000
Foreign 221,000 223,000 --
- --------------------------------------------------------------------------------
Total 709,000 1,381,000 801,000
- --------------------------------------------------------------------------------
Deferred:
Federal (395,000) 396,000 110,000
State (174,000) 23,000 19,000
- --------------------------------------------------------------------------------
Total (569,000) 419,000 129,000
- --------------------------------------------------------------------------------
$ 140,000 $1,800,000 $930,000
================================================================================
</TABLE>
34
<PAGE> 35
A reconciliation of the Company's effective tax rate compared to the federal
statutory tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Provision computed at federal
statutory rate $ 93,000 $1,574,000 $1,090,000
Increase (reduction)resulting from:
State taxes, net 5,000 237,000 190,000
Foreign tax rate differential 54,000 82,000 --
Change in valuation allowance -- -- 151,000
Utilization of loss carryforwards -- -- (205,000)
Research and development credits (58,000) (122,000) (335,000)
Foreign sales corporation (26,000) (50,000) (56,000)
Amort.of goodwill and trademarks 57,000 27,000 --
Meals and entertainment 15,000 17,000 --
Other -- 35,000 95,000
- --------------------------------------------------------------------------------
$140,000 $1,800,000 $ 930,000
================================================================================
</TABLE>
The components of the provision for deferred income taxes for the years ended
December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Inventory reserves $(491,000) $ (6,000)
Operating loss carryforwards 269,000 269,000
Credit carryforwards (29,000) 57,000
Change in valuation allowance -- --
Deferred state taxes 59,000 37,000
State tax provision 15,000 (84,000)
Allowance for doubtful accounts 19,000 61,000
Vacation accrual 49,000 (9,000)
Restructuring Reserve (484,000) --
Depreciation (32,000) 77,000
Unrealized foreign exchange gain 56,000 --
Other -- 17,000
- --------------------------------------------------------------------------------
$(569,000) $419,000
================================================================================
</TABLE>
35
<PAGE> 36
The components of the Company's deferred income tax benefit as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Allowance for doubtful accounts $ 53,000 $ 72,000
Inventory reserves 815,000 323,000
Depreciation (157,000) (190,000)
Currently non-deductible accruals 120,000 168,000
Net operating loss carryforwards 7,592,000 7,862,000
Valuation allowance (6,782,000) (7,052,000)
Deferred state taxes (96,000) (37,000)
State tax provision 68,000 84,000
Restructuring reserve 484,000 --
Capital loss carryforwards 29,000 --
Unrealized foreign exchange gain (57,000) --
Bond market valuation (54,000) --
- --------------------------------------------------------------------------------
$ 2,015,000 $ 1,230,000
================================================================================
</TABLE>
The financial statement benefit from the utilization of acquired net
operating losses and credit carryforwards is being accounted for as a
reduction of goodwill in the year utilized until goodwill is reduced to
zero, at which point any additional benefit will be accounted for as a
reduction of income tax expense. Effective January 1, 1994, the Company
reduced the valuation allowance on acquired net operating losses projected
to be utilized over the next three years, as it is more likely than not
that such amounts will be utilized. Thus, the corresponding tax benefit of
$270,000 has been reflected by a reduction of the valuation allowance and a
corresponding reduction to goodwill. In 1995, the Company utilized $793,000
of these net operating losses, resulting in a reduction of the goodwill by
$270,000. In addition, during the current year, the Company utilized
otherwise expiring net operating losses by offsetting built-in gains upon
the sale of assets which also resulted in a reduction in goodwill by
approximately $290,000.
The components of the Company's deferred income tax benefit as of December
31, 1995 also reflect $1,925,000 of the net operating loss carryforwards
and valuation allowance related to the MSI acquisition. Utilization of the
MSI net operating loss carryforward can only be offset against future MSI
taxable income.
36
<PAGE> 37
NOTE 8: EMPLOYEE BENEFIT PLANS
STOCK OPTION PLANS At December 31, 1995, the Company had reserved 1,712,837
shares of common stock for issuance to employees and directors under five stock
option plans, of which, options to purchase 1,098,816 shares were outstanding
with exercise prices ranging from $0.00 to $6.63 per share. Both incentive and
nonqualified options can be granted under the plans. The following is a summary
of stock option activity for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
Shares Price Shares Price Shares Price
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding,
Beginning of year 1,035,373 $0.00-$6.63 1,254,737 $0.00-$6.63 1,148,661 $0.56-$6.63
Granted 218,500 $0.00-$4.69 111,500 $4.50-$4.75 247,500 $0.00-$6.63
Exercised (55,557) $0.56-$2.47 (254,500) $0.56-$2.47 (58,000) $0.59-$1.56
Canceled (99,500) $4.13-$6.50 (76,364) $4.25-$6.63 (83,424) $4.88-$6.50
--------- --------- ---------
Outstanding,
End of year 1,098,816 $0.00-$6.63 1,035,373 $0.00-$6.63 1,254,737 $0.00-$6.63
========= ========= =========
</TABLE>
Options are generally granted at fair market value and become exercisable over
periods of up to ten years. The Company has also granted options to purchase
approximately 100,000 shares at $0.00 which become exercisable based on the
achievement of certain performance criteria. At December 31, 1995, options to
acquire 729,317 shares were exercisable at prices ranging from $1.13 to $6.63
per share, and options to acquire 614,000 shares were available for grant.
STOCK PURCHASE PLAN The Company has reserved 260,488 shares of its common stock
for issuance to employees under an employee stock purchase plan. The plan allows
employees to contribute up to ten percent (to a maximum of $25,000) of their
salary. The employees purchase the Company's common stock at 85 percent of the
lower of the fair market value of the common stock on June 30 or December 31.
The Company issued 20,894, 34,785 and 36,922 shares of its common stock under
this plan in 1995, 1994 and 1993, respectively.
401(k) PLAN The Company has established a profit sharing plan under Internal
Revenue Code section 401(k). The 401(k) plan allows employees to contribute up
to fifteen percent of their salary to the plan. The Company matches 50 percent
of the first two percent of an employee's contribution and 100 percent of the
next one percent of contribution. A portion of the Company's contribution is
made in the Company's common stock. The Company issued 15,723, 11,778 and 11,169
shares of its common stock under this plan in 1995, 1994 and 1993, respectively.
Compensation expense related to
37
<PAGE> 38
these plans was $249,324, $156,701 and $183,697 in 1995, 1994 and 1993,
respectively.
NOTE 9: COMMITMENTS
The Company leases office, laboratory and warehouse space and laboratory
equipment under noncancelable operating leases. Rental expense under operating
leases for the years ended December 31, 1995, 1994 and 1993 was approximately
$1,069,000, $723,000 and $521,000, respectively. Future annual minimum lease
payments under the noncancelable operating leases as of December 31, 1995 are:
<TABLE>
<CAPTION>
Year Amount
- --------------------------------------------------------------------------------
<S> <C>
1996 $ 859,000
1997 859,000
1998 883,000
1999 942,000
2000 960,000
Thereafter 1,626,000
- --------------------------------------------------------------------------------
$6,129,000
================================================================================
</TABLE>
NOTE 10: MAJOR CUSTOMERS AND INTERNATIONAL SALES
The Company sells its products primarily through distributors. Sales to the
Company's two largest distributors accounted for 18% and 12% of net product
sales in 1995; 18% and 14% in 1994 and 20% and 15% in 1993. A decision by a
significant customer to substantially decrease or delay purchases from the
Company or the Company's inability to collect receivables from these customers
could have a material adverse effect on the Company's financial condition and
results of operations. Export sales accounted for $4,231,000 or 17% of product
sales in 1995; $4,778,000 or 18% in 1994; and $4,671,000 or 19% in 1993. The
primary geographical area was Europe, which, including sales by the Company and
its German subsidiary, accounted for sales of $6,909,000 in 1995, $6,826,000
in 1994 and $3,688,000 in 1993.
38
<PAGE> 39
NOTE 11: RESULTS BY QUARTER (UNAUDITED)
The unaudited results by quarter for the years ended December 31, 1995 and 1994
are shown below.
<TABLE>
<CAPTION>
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $6,492,935 $6,764,392 $5,680,775 $ 6,246,640
Gross profit 3,597,922 3,834,401 3,073,237 2,731,906
Net income (loss) 549,523 572,081 148,095 (1,138,449)
Net income (loss)
per share $ 0.07 $ 0.07 $ 0.02 $ (0.14)
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $6,553,111 $7,058,068 $5,708,495 $6,576,917
Gross profit 3,786,994 3,845,897 3,119,718 3,693,046
Net income 776,547 813,713 559,592 683,244
Net income
per share $ .09 $ .10 $ .07 $ .08
</TABLE>
NOTE 12: PLANT CLOSURE COSTS
During fiscal 1993, the Company closed its manufacturing facility in Portland,
Maine and consolidated such operations into the Company's California
manufacturing facility. The costs included in the accompanying consolidated 1993
statement of income were for the facility closure, severance and outplacement
programs, and the integration of Portland operations into the California
facility.
NOTE 13: RESTRUCTURING CHARGE
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, includes 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 aggregate costs of the Plan included $2,371,000 of disposal costs and
write-offs of inventories, the value of which have been impaired by the
Company's decision to discontinue the related product lines and liquidate all
remaining inventories, $514,000 of costs related to the write down of fixed
assets impaired by downsizing and discontinuance of related product lines, and
$335,000 related to facility closure and other costs. These costs were offset by
estimated gains on the sale of certain product lines amounting to $1,486,000.
The net $1,734,000 cost of implementing the restructure plan was allocated to
cost of sales ($473,000), selling, general and administrative expenses
($192,000), and
39
<PAGE> 40
restructuring charges ($1,069,000) in the accompanying consolidated statements
of income.
As of December 31, 1995, the Company had sold one product line, produced by its
Meridian Subsidiary, with net assets of $2,039,000 for net cash proceeds of
$3,325,000, and discontinued all significant purchases and production on
discontinued product lines with the exception of certain contractual supply
commitments.
The Company anticipates that the restructuring plan will be primarily
completed by the end of the second quarter of 1996 and will not require a
significant net cash outlay.
40
<PAGE> 41
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On September 21, 1994, Hycor Biomedical Inc. ("the Company") informed
Arthur Andersen LLP ("Arthur Andersen") that they had not been selected as the
principal independent public accountants for the audit of the Company's
financial statements for the fiscal year ending December 31, 1994. On September
22, 1994, the Company engaged Deloitte & Touche LLP as principal independent
accountants for the audit of the Company's financial statements for the fiscal
year ending December 31, 1994.
In connection with the audits of the fiscal year ended December 31, 1993
and the subsequent interim period through September 21, 1994, there were no
disagreements with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to their satisfaction would have caused
them to make reference in connection with their report to the subject matter of
their disagreement.
The auditor's report of Arthur Andersen on the consolidated financial
statements of the Company for the year ended December 31, 1993, did not contain
an adverse opinion or a disclaimer of opinion, modification or qualification,
and was not qualified or modified as to uncertainty, audit scope or accounting
principles.
Arthur Andersen has furnished a letter indicating agreement with the
foregoing.
The decision to change accountants was recommended by Management and
approved by the Audit Committee of the Board of Directors.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item is included under the captions
"Election of Directors," "Executive Officers," and "Executive Compensation -
Compliance with Section 16(a) of the Exchange Act" of the Company's Proxy
Statement for the 1996 Annual Meeting of Stockholders and is incorporated herein
by reference.
Item 11. Executive Compensation
The information required by this Item is included under the caption
"Executive Compensation" of the Company's Proxy Statement for the 1996 Annual
Meeting of Stockholders and is incorporated herein by reference; provided,
however, that the Compensation Committee Report on Executive Compensation and
the Performance
41
<PAGE> 42
Graph (I) shall not be deemed incorporated by reference in this Annual Report on
Form 10-K and (ii) shall not otherwise be deemed "filed" as part of this Annual
Report on Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item is included under the caption
"Stock Ownership of Management and Certain Beneficial Owners" of the Company's
Proxy Statement for the 1996 Annual Meeting of Stockholders and is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
1. Financial Statement Schedules
The following financial schedule, together with the
Independent Auditors Reports on Schedule, are filed as part
of this Report:
<TABLE>
<CAPTION>
Schedule Page
Number Description Number
------ ----------- ------
<S> <C> <C>
II Valuation and Qualifying S-1
Accounts
</TABLE>
Schedules other than those listed above have been omitted
because they are not applicable or the required information is
included in the financial statements or notes thereto.
42
<PAGE> 43
2. Exhibits
<TABLE>
<S> <C>
3(1). Restated Certificate of
Incorporation of Hycor Biomedical
Inc., previously filed with the
Secretary of State of Delaware on
December 29, 1993, previously filed
as Exhibit 3(1). to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1993,
and incorporated herein by
reference.
3(2). By-Laws of Hycor Biomedical Inc. as
amended, previously filed as Exhibit
3(2). to the Company's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1991, and
incorporated herein by reference.
4(1) Warrant Agreement, previously filed
as Exhibit 4.1 to the Company's
Registration Statement on Form S-4,
File no. 33-40475, and incorporated
herein by reference.
Material Contracts - Relating to Management Compensation
Plans or Arrangements
10(1). Employment Agreement of Richard D.
Hamill, dated December 20, 1990,
previously filed as Exhibit 10(1).
to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1990, and incorporated
herein by reference.
10(2). Employment Agreement of Reginald P.
Jones, dated December 1, 1991,
previously filed as Exhibit 10(2).
to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1991, and incorporated
herein by reference.
10(4). Employment Agreement of Nelson F.
Thune, dated December 1, 1991,
previously filed as Exhibit 10(4).
to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1991, and incorporated
herein by reference.
</TABLE>
43
<PAGE> 44
<TABLE>
<CAPTION>
Exhibit No. Name of Exhibit
----------- ---------------
<S> <C>
10(6). Employment Agreement of W. Barry
McDonald, dated May 4, 1992,
previously filed as Exhibit 10(6).
to the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1992, and incorporated
herein by reference.
10(10). 1981 Incentive Stock Option Plan,
as amended, previously filed as
Exhibit 4(1). to the Company's
Registration Statements on Form S-8
(No. 33-25429 and No. 33-32767), and
incorporated herein by reference.
10(12). 1984 Nonqualified Stock Option Plan,
as amended, previously filed as
Exhibit 4(1). to the Company's
Registration Statement on Form S-8
(No. 33-25428), and incorporated
herein by reference.
10(13). 1988 Employee Stock Purchase Plan,
previously filed as Exhibit 4(1). to
the Company's Registration Statement
on Form S-8 (No. 33-25427), and
incorporated herein by reference.
10(14). Hycor Biomedical Incentive Profit
Sharing Plan, previously filed as
Exhibit 4(1). to the Company's
Registration Statement on Form S-8
(No. 33-25430), and incorporated
herein by reference.
10(15). Long Term Executive Incentive Plan -
1988, previously filed as Exhibit
4(1). to the Company's Registration
Statement on Form S-8 (No. 33-43280)
and incorporated herein by
reference.
10(16). Annual Executive Incentive Plan,
previously filed as Exhibit 10(16).
to the Company's Annual Report on
10-K for fiscal year ended December
31, 1990, and incorporated herein by
reference.
</TABLE>
44
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit No. Name of Exhibit
----------- ---------------
<S> <C>
10(17). 1992 Incentive Stock Plan,
previously filed as Exhibit 10(17).
to the Company's 10-Q for June 30,
1992, and incorporated herein by
reference.
10(18). Nonqualified Stock Option Plan for
Non-Employee Directors, previously
filed as Exhibit 10(18). to the
Company's 10-Q for June 30, 1992,
and incorporated herein by
reference.
Other Material Contracts
10(21). Lease Agreement for the Company's
Garden Grove, California facility
dated December 1, 1990, previously
filed as Exhibit 10(8). to the
Company's Annual Report on Form 10-K
for the fiscal year ended December
31, 1991, and incorporated herein by
reference.
10(22). Lease Agreement for the Company's
Irvine, California facility, dated
November 11, 1992, previously filed
as Exhibit 10(22). to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1992,
and incorporated herein by
reference.
10(23). Agreement of Purchase and Sale of
Melja Diagnostik GmbH Shares, dated
December 20, 1993, previously filed
as Exhibit 10(23). to the Company's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1993,
and incorporated herein by
reference.
10(24) Share Purchase Agreement, dated as
of August 19, 1994, as amended
September 27, 1994, by and among
Hycor Biomedical Inc. and Medical
Specialties International, Inc.,
previously filed as Exhibits 2(1).
and 2(2). to the Company's Current
</TABLE>
45
<PAGE> 46
<TABLE>
<CAPTION>
Exhibit No. Name of Exhibit
----------- ---------------
<S> <C>
Report on Form 8-K, dated October 3,
1994, and incorporated herein by
reference.
10(25) Registration Rights Agreement, dated
as of October 3, 1994, by and among
Hycor Biomedical Inc. and Medical
Specialties International, Inc.
shareholders, previously filed as
Exhibit 4(1). to the Company's
Current Report on Form 8-K dated
October 3, 1994, and incorporated
herein by reference.
10(26) Lease agreement for the Company's
Kassel, Germany facility, dated
January 13, 1994, previously filed
as Exhibit 10(26). to the Company's
Annual Report on 10-K for fiscal
year ended December 31, 1994, and
incorporated herein by reference
10(27) Stock Purchase Agreement dated
November 30, 1995, previously filed
as Exhibit 10.01 to the Company's
Current Report on Form 8-K dated
December 1, 1995 and incorporated
herin by reference.
16. Letter from Arthur Andersen LLP
regarding Changes in Registrant's
Certifying Accountants, previously
filed as Exhibit 16. to the
Company's Current Report on Form 8-K
dated September 21, 1994, and
incorporated herein by reference.
21. Subsidiaries of Hycor Biomedical
Inc.
23(1). Consent of Deloitte & Touche LLP,
dated March 29, 1996.
23(2). Consent of Arthur Andersen LLP,
dated March 29, 1996.
27. Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
Acquisition or disposition of assets, Meridian Bio-Medical, Inc.
divesture, December 1, 1995.
46
<PAGE> 47
SIGNATURES
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.
Hycor Biomedical Inc.
(Registrant)
Date: 3/29/96 By: /s/ Richard D. Hamill
-------------------------- --------------------------------------
Richard D. Hamill
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: 3/29/96 By: /s/ Richard D. Hamill
-------------------------- --------------------------------------
Richard D. Hamill
Chairman of the Board, President,
Chief Executive Officer and Director
Date: 3/29/96 By: /s/ Dick P. Allen
-------------------------- --------------------------------------
Dick P. Allen
Director
Date: 3/29/96 By: /s/ Samuel D. Anderson
-------------------------- --------------------------------------
Samuel D. Anderson
Director
Date: 3/29/96 By: /s/ David S. Gordon
-------------------------- --------------------------------------
David S. Gordon
Director
Date: 3/29/96 By: /s/ Reginald P. Jones
-------------------------- --------------------------------------
Reginald P. Jones
Senior Vice President, Chief Financial
Officer, Secretary, Treasurer,
Director and Principal Financial
Officer
Date: 3/29/96 By: /s/ James R. Phelps
-------------------------- --------------------------------------
James R. Phelps
Director
Date: 3/29/96 By: /s/ David A. Thompson
-------------------------- --------------------------------------
David A. Thompson
Director
Date: 3/29/96 By: /s/ Armando Correa
-------------------------- --------------------------------------
Armando Correa
Director of Finance and
Principal Accounting Officer
</TABLE>
47
<PAGE> 48
Schedule II
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS (1)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
(1)
Acquired
Balance at and or Charged to
Beginning Divested Costs and Balance at
of Year Allowance Expenses Deductions End of Year
------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable
1993 287,281 -- 14,500 (15,474) 317,255
1994 317,255 62,280 (145,000) 63,694 170,841
1995 170,841 -- 50,512 84,749 136,604
Allowance for excess, obsolete,
and short-dated inventory
balance sheet
1993 912,635 -- 300,443 456,563 756,515
1994 756,515 23,993 330,806 341,227 770,087
1995 770,087 (76,121) 1,755,001 509,465 1,939,502
</TABLE>
(1) Medical Specialties International Inc. acquired on October 3, 1994.
Meridian Biomedical Inc. sold on December 1, 1995.
S-1
48
<PAGE> 49
Exhibit List
<TABLE>
<CAPTION>
Exhibit No. Name of Exhibit Page Number
- ----------- --------------- -----------
<S> <C> <C>
21. Subsidiaries of Hycor Biomedical Inc. 50
23(1). Consent of Deloitte & Touche LLP,
dated March 29, 1996. 51
23(2). Consent of Arthur Andersen LLP,
dated March 29, 1996. 52
27. Financial Data Schedule 53
</TABLE>
49
<PAGE> 1
Exhibit 21.
Subsidiaries of Hycor Biomedical Inc.
<TABLE>
<CAPTION>
State of
Name Incorporation
---- -------------
<S> <C>
Hycor Biomedical GmbH Germany
Melja Diagnostik GmbH Germany
Medical Specialties Inc. New Jersey
</TABLE>
50
<PAGE> 1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration
Statements of Hycor Biomedical Inc. and subsidiaries on Form S-8 Nos. 33-25427,
33-25428, 33-25429, 33-25430, 33-32767, 33-43280, 33-63798 and 33-63800 and
Form S-3 No. 33-40475 of our report dated February 29, 1996, appearing in this
Annual Report on Form 10-K of Hycor Biomedical Inc. and subsidiaries for the
year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Costa Mesa, California
March 29, 1996
51
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 Numbers 33-25427, as
amended, filed on January 10, 1989; 33-25428, as amended, filed on January 19,
1989; 33-25429, as amended, filed on January 19, 1989; 33-25430, filed on
November 10, 1988; 33-32767, filed on January 3, 1990; 33-40475, filed on
November 5, 1991; 33-43280, filed on October 10, 1991; 33-63798 and 33-63800,
filed on June 3, 1993; and Form S-3 Number 33-40475, filed April 29, 1992. It
should be noted that we have not audited any financial statements of the
Company subsequent to December 31, 1993 or performed any audit procedures
subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Orange County, California
March 29, 1996
52
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1033459
<SECURITIES> 6365995
<RECEIVABLES> 3816023
<ALLOWANCES> 136604
<INVENTORY> 3948564
<CURRENT-ASSETS> 16850836
<PP&E> 10469775
<DEPRECIATION> 5742459
<TOTAL-ASSETS> 27575372
<CURRENT-LIABILITIES> 3235906
<BONDS> 0
0
0
<COMMON> 77303
<OTHER-SE> 24262163
<TOTAL-LIABILITY-AND-EQUITY> 27575372
<SALES> 25184742
<TOTAL-REVENUES> 25184742
<CGS> 11947276
<TOTAL-COSTS> 11947276
<OTHER-EXPENSES> 13475859
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 271250
<INCOME-TAX> 140000
<INCOME-CONTINUING> 131250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131250
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
