<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------------------ --------------------
Commission File Number: 0-11647
HYCOR BIOMEDICAL INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-1437178
- ------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
7272 Chapman Avenue, Garden Grove, California 92841
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 933-3000
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 24, 2000
- ---------------------------- -----------------------------
Common Stock, $.01 Par Value 7,387,628
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 546,209 $ 551,295
Investments 1,756,587 1,757,599
Accounts receivable, net of allowance for
doubtful accounts of $291,600 (2000) and $335,000 (1999) 3,184,310 3,203,180
Inventories (Note 2) 4,203,321 4,269,301
Prepaid expenses and other current assets 334,502 306,769
------------ ------------
Total current assets 10,024,929 10,088,144
------------ ------------
PROPERTY AND EQUIPMENT, at cost 10,676,753 10,589,353
Less accumulated depreciation (7,127,401) (7,028,894)
------------ ------------
3,549,352 3,560,459
------------ ------------
GOODWILL AND OTHER INTANGIBLE ASSETS, net of
accumulated amortization of $940,100 (2000)
and $915,600 (1999) 1,255,606 1,329,861
OTHER ASSETS 60,598 60,598
------------ ------------
Total assets $ 14,890,485 $ 15,039,062
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 812,357 $ 776,844
Accrued liabilities 1,154,800 1,314,547
Accrued payroll expenses 598,815 731,755
Current portion of long-term debt (Note 3) 1,584,465 1,586,341
------------ ------------
Total current liabilities 4,150,437 4,409,487
------------ ------------
Long-term debt (Note 3) 71,354 87,389
------------ ------------
Total Liabilities 4,221,791 4,496,876
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 73,783 73,487
Paid-in capital 12,579,299 12,544,005
Accumulated deficit (1,104,762) (1,371,933)
Accumulated other comprehensive loss (879,626) (703,373)
------------ ------------
Total stockholders' equity 10,668,694 10,542,186
------------ ------------
Total liabilities and stockholders' equity $ 14,890,485 $ 15,039,062
============ ============
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
NET SALES $ 4,628,095 $ 4,761,727
COST OF SALES 2,144,184 2,383,388
----------- -----------
Gross profit 2,483,911 2,378,339
----------- -----------
OPERATING EXPENSES:
Selling, general, and administrative 1,732,177 1,882,953
Research and development 438,304 538,597
----------- -----------
2,170,481 2,421,550
----------- -----------
OPERATING INCOME (LOSS) 313,430 (43,211)
INTEREST EXPENSE (23,392) (34,289)
INTEREST INCOME 36,858 26,796
(LOSS) GAIN ON FOREIGN CURRENCY TRANSACTIONS (38,080) 6,158
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX PROVISION 288,816 (44,546)
INCOME TAX PROVISION 21,645 12,000
----------- -----------
NET INCOME (LOSS) $ 267,171 $ (56,546)
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE $ 0.04 $ (0.01)
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.01)
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 7,348,677 7,283,456
=========== ===========
Diluted 8,051,360 7,283,456
=========== ===========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Net Income (Loss) $ 267,171 $ (56,546)
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments (160,996) (311,407)
Unrealized losses on securities (15,257) (756)
----------- -----------
OTHER COMPREHENSIVE LOSS, NET OF TAX (176,253) (312,163)
----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 90,918 $ (368,709)
=========== ===========
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 267,171 $ (56,546)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 296,681 338,640
Provision for doubtful accounts receivable 16,338 47,130
Provision for excess and obsolete inventories 201,740 366,678
Change in assets and liabilities, net of effects of
foreign currency adjustments
Accounts receivable (44,666) (335,562)
Inventories (194,449) (333,571)
Prepaid expenses and other current assets (20,468) 74,380
Accounts payable 52,354 (284,710)
Accrued liabilities (158,517) (53,949)
Accrued payroll expenses (126,385) 135,606
--------- ---------
Total adjustments 22,628 (45,358)
--------- ---------
Net cash provided by (used in) operating activities 289,799 (101,904)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (824,503) --
Proceeds from sales of investments 800,000 --
Purchases of intangible assets (9,221) (15,522)
Purchases of property, plant and equipment (283,705) (210,646)
Proceeds from collection of notes receivable 10,278 14,735
--------- ---------
Net cash used in investing activities (307,151) (211,433)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (18,058) (102,691)
Proceeds from issuance of common stock 35,590 --
--------- ---------
Net cash provided by (used in) financing activities 17,532 (102,691)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (5,266) (5,329)
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (5,086) (421,357)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 551,295 655,716
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 546,209 $ 234,359
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the year - interest $ 31,563 $ 38,842
- income taxes $ 49,644 $ 14,446
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited financial
statements include all adjustments necessary to present fairly the financial
position as of March 31, 2000 and December 31, 1999, the results of
operations and the cash flows for the three-month periods ended March 31,
2000 and 1999.
These statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and do not include all
the information and note disclosures required by generally accepted
accounting principles for complete financial statements and may be subject
to year-end adjustments.
The consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's 1999 annual report on Form 10-K as filed with the Securities and
Exchange Commission. Certain items in the 1999 consolidated financial
statements have been reclassified to conform to the 2000 presentation.
The results of operations for any interim period are not necessarily
indicative of results to be expected for the full year.
Basic earnings per share is computed by dividing net income by the
weighted-average number of shares outstanding, while diluted EPS
additionally includes the dilutive effect of the Company's outstanding
options and warrants computed using the treasury stock method. Common stock
equivalents have been excluded from the calculation of diluted EPS in loss
periods as the impact is anti-dilutive.
2. INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Cost includes material, direct labor, and manufacturing
overhead. Inventories at March 31, 2000 and December 31, 1999 consist of:
3/31/00 12/31/99
---------- ----------
Raw materials $ 957,316 $ 868,876
Work in process 1,526,619 1,392,527
Finished goods 1,719,387 2,007,898
---------- ----------
$4,203,321 $4,269,301
========== ==========
3. LONG TERM DEBT
The Company has a line of credit that provides for borrowings up to
$2,000,000 and expires on July 31, 2001. The loan is collateralized by the
Company's accounts receivable, inventories, and property, plant, and
equipment. At March 31, 2000, $1,000,000 was outstanding. Advances under the
line bear interest at the prime rate or at LIBOR plus 2% (8.39% at March 31,
2000).
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The line of credit contains restrictive covenants, the most significant
of which relate to the maintenance of minimum tangible net worth,
debt-to-tangible net worth requirements, and liquid assets plus accounts
receivable-to-current liabilities requirements. At March 31, 2000, the
Company was in compliance with such covenants.
The Company has outstanding notes in the amount of $525,000. These
notes were issued to the seller group in executing the acquisition of Cogent
Diagnostics LTD in July 1997. Interest on the notes accrues at a rate of
6.85% and is payable quarterly. The principal balance of the note is due in
July 2000. In addition, the Company and one of its foreign subsidiaries has
long-term debt, payable to financial institutions, aggregating approximately
$131,000 with weighted average interest rate of approximately 9%.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
This Section and this entire report contain forward-looking statements
and include assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to a number of risks, uncertainties, and other factors. In
connection with the Private Securities Litigation Reform Act of 1995, the
Company provides the following cautionary statements identifying important
factors which, among other things, could cause the actual results and events to
differ materially from those set forth in or implied by the forward-looking
statements and related assumptions contained in this Section and in this entire
Report.
Such factors include, but are not limited to, product demand and market
acceptance risks; the effect of economic conditions; the impact of competitive
products and pricing; product development; commercialization and technological
difficulties; capacity and supply constraints or difficulties; availability of
capital resources; general business and economic conditions, including currency
risks based on the relative strength or weakness of the U.S. dollar, euro
conversions, and changes in government laws and regulations, including taxes.
LIQUIDITY
The Company has adequate working capital and sources of capital to carry
on its current business and to meet its existing and expected future capital
requirements. As of March 31, 2000 the Company increased its working capital
$195,800 when compared to December 31, 1999, as a result of normal operations.
The Company's principal capital commitments are for lease payments under
non-cancelable operating leases and note payments related to the acquisition of
Cogent. Additionally, the HY-TEC(TM) business requires the purchase of
instruments that in many cases are placed in use in laboratories of the
Company's direct customers and paid for over an agreed contract period by the
purchase of test reagents. This "reagent rental" sales program, common to the
diagnostic market, creates negative cash flows in the initial years.
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RESULTS OF OPERATIONS
During the three-month period ended March 31, 2000, sales decreased
approximately $134,000 or 2.8% compared to the same period last year. In periods
when the U.S. dollar is strengthening, the translation impact on the financial
statements of the consolidated foreign affiliates is that of lower sales, costs,
and net income. The stronger U.S. dollar in the first quarter 2000 when compared
to the corresponding 1999 period resulted in lower reported sales of
approximately $93,000 or 2%. Additionally, sales of our non-core product lines
decreased $43,000 or 11.8% compared to the same period last year. Continued cost
control pressures in the health care industry also affect the Company's revenue.
The Company anticipates that these pricing pressures will continue in the
future.
Gross profit as a percentage of product sales increased for three-month
period ended March 31, 2000 from approximately 50.0% to 53.7% compared to the
same period last year. This increase was due primarily to changes in the product
mix and improved manufacturing efficiencies.
Selling, general and administrative expenses decreased approximately
$151,000 or 8% when compared to the same period last year. Approximately $90,000
of this reduction is a result of restructuring the European sales and marketing
organization. The remaining decrease is a result of non-recurring expenses
during 1999.
Research and development costs decreased approximately $100,000 or 19%
when compared to the same period last year. This decrease is primarily due to
the completion of several projects related to the HY-TEC 288 instrument system
and related diagnostic tests.
Effective with the fourth quarter of 1998, the Company adopted a
position wherein a 100% valuation allowance was taken against all deferred tax
assets. The tax provision for the three-month periods ended March 31, 2000 and
March 31, 1999 of $21,645 and $12,000, respectively, reflects the provision for
estimated state tax liabilities that are not offset by operating losses.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 -- Financial Data Schedule
(b) Reports on Form 8-K -- None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HYCOR BIOMEDICAL INC.
Date: May 12, 2000 By: /s/ Armando Correa
----------------------------------
Armando Correa, Director of Finance
(Mr. Correa is the Principal Accounting
Officer and has been duly authorized to
sign on behalf of the registrant.)
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EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FNANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 546,209
<SECURITIES> 1,756,587
<RECEIVABLES> 3,475,943
<ALLOWANCES> 291,633
<INVENTORY> 4,203,321
<CURRENT-ASSETS> 10,024,929
<PP&E> 10,676,753
<DEPRECIATION> 7,127,401
<TOTAL-ASSETS> 14,890,485
<CURRENT-LIABILITIES> 4,150,437
<BONDS> 0
0
0
<COMMON> 73,783
<OTHER-SE> 10,594,911
<TOTAL-LIABILITY-AND-EQUITY> 14,890,485
<SALES> 4,628,095
<TOTAL-REVENUES> 4,628,095
<CGS> 2,144,184
<TOTAL-COSTS> 2,144,184
<OTHER-EXPENSES> 2,170,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,392
<INCOME-PRETAX> 288,816
<INCOME-TAX> 21,645
<INCOME-CONTINUING> 267,171
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,171
<EPS-BASIC> 0.04
<EPS-DILUTED> 0.03
</TABLE>
