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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 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.
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(Exact name of registrant as specified in its charter)
Delaware 58-1437178
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(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
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(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 July 24, 2000
----- ----------------------------
Common Stock, $.01 Par Value 7,443,637
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 972,398 $ 551,295
Investments 1,774,793 1,757,599
Accounts receivable, net of allowance for
doubtful accounts of $155,800 (2000)
and $335,000 (1999) 2,899,316 3,203,180
Inventories (Note 2) 4,349,525 4,269,301
Prepaid expenses and other current assets 355,805 306,769
------------ ------------
Total current assets 10,351,837 10,088,144
------------ ------------
PROPERTY AND EQUIPMENT, at cost 10,803,527 10,589,353
Less accumulated depreciation (7,339,850) (7,028,894)
------------ ------------
3,463,677 3,560,459
------------ ------------
GOODWILL AND OTHER INTANGIBLE ASSETS, net of
accumulated amortization of $959,300 (2000)
and $915,600 (1999) 1,218,930 1,329,861
OTHER ASSETS 60,598 60,598
------------ ------------
Total assets $ 15,095,042 $ 15,039,062
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 607,719 $ 776,844
Accrued liabilities 1,208,900 1,314,547
Accrued payroll expenses 618,147 731,755
Current portion of long-term debt (Note 3) 1,582,175 1,586,341
------------ ------------
Total current liabilities 4,016,941 4,409,487
------------ ------------
Long-term debt (Note 3) 54,155 87,389
------------ ------------
Total liabilities 4,071,096 4,496,876
------------ ------------
STOCKHOLDERS' EQUITY:
Common stock 74,368 73,487
Paid-in capital 12,657,815 12,544,005
Accumulated deficit (882,081) (1,371,933)
Accumulated other comprehensive loss (826,156) (703,373)
------------ ------------
Total stockholders' equity 11,023,946 10,542,186
------------ ------------
Total liabilities and stockholders' equity $ 15,095,042 $ 15,039,062
============ ============
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 4,303,482 $ 4,641,107 $ 8,931,577 $ 9,402,834
COST OF SALES 1,807,966 2,237,837 3,952,150 4,621,225
----------- ----------- ----------- -----------
Gross profit 2,495,516 2,403,270 4,979,427 4,781,609
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling, general, and administrative 1,828,222 1,899,028 3,560,399 3,781,981
Research and development 443,918 577,479 882,222 1,116,076
----------- ----------- ----------- -----------
2,272,140 2,476,507 4,442,621 4,898,057
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 223,376 (73,237) 536,806 (116,448)
INTEREST EXPENSE 25,249 35,045 48,641 69,334
INTEREST INCOME 46,726 21,361 83,584 48,157
LOSS ON FOREIGN CURRENCY TRANSACTIONS (5,257) (7,737) (43,337) (1,579)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX PROVISION 239,596 (94,658) 528,412 (139,204)
INCOME TAX PROVISION 16,915 2,000 38,560 14,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 222,681 $ (96,658) $ 489,852 $ (153,204)
=========== =========== =========== ===========
BASIC EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.01) $ 0.07 $ (0.02)
=========== =========== =========== ===========
DILUTED EARNINGS (LOSS) PER SHARE $ 0.03 $ (0.01) $ 0.06 $ (0.02)
=========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 7,386,946 7,283,456 7,369,374 7,283,456
=========== =========== =========== ===========
Diluted 8,093,773 7,283,456 8,066,917 7,283,456
=========== =========== =========== ===========
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
Net Income (Loss) $ 222,681 $ (96,658) $ 489,852 $ (153,204)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustments 57,271 (176,763) (103,725) (488,170)
Unrealized (losses) on securities (3,801) (1,874) (19,058) (2,630)
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 53,470 (178,637) (122,783) (490,800)
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME (LOSS) $ 276,151 $ (275,295) $ 367,069 $ (644,004)
=========== =========== =========== ===========
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 489,852 $ (153,204)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 596,180 689,894
Provision for doubtful accounts receivable 19,970 59,604
Provision for excess and obsolete inventories 257,691 568,804
Change in assets and liabilities, net of effects
of foreign currency adjustments
Accounts receivable 222,238 (515,939)
Inventories (406,661) (476,536)
Prepaid expenses and other current assets (40,554) 93,719
Accounts payable (148,475) (231,944)
Accrued liabilities (97,214) (76,287)
Accrued payroll expenses (105,683) 290,384
--------- -----------
Total adjustments 297,492 401,699
--------- -----------
Net cash provided by operating activities 787,344 248,495
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (848,964) --
Proceeds from sales of investments 800,000 700,000
Purchases of intangible assets (11,571) (22,772)
Purchases of property, plant and equipment (485,800) (389,116)
Proceeds from sale of property, plant, and equipment 5,951 --
Proceeds from collection of notes receivable 17,288 29,763
--------- -----------
Net cash (used in) provided by investing activities (523,096) 317,875
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (32,926) (124,493)
Proceeds from issuance of common stock 114,691 --
--------- -----------
Net cash provided by (used in) financing activities 81,765 (124,493)
--------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 75,090 (25,279)
--------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 421,103 416,598
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 551,295 655,716
--------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 972,398 $ 1,072,314
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the year - interest $ 63,198 $ 79,881
- income taxes $ 50,550 $ 12,766
</TABLE>
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 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 June 30, 2000 and December 31, 1999, the results of
operations and the cash flows for the three and six-month periods ended June
30, 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 June 30, 2000 and December 31, 1999 consist of:
6/30/00 12/31/99
---------- ----------
Raw materials $ 932,814 $ 868,876
Work in process 1,576,023 1,392,527
Finished goods 1,840,688 2,007,898
---------- ---------
$4,349,525 $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 June 30, 2000, $1,000,000 was outstanding. Advances under the
line bear interest at the prime rate or at LIBOR plus 2% (8.4% at June 30,
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 June 30, 2000, the
Company was in compliance with such covenants.
At June 30, 2000 the Company had 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
accrued at a rate of 6.85% and was payable quarterly. The principal balance
on these notes was paid in July 2000. In addition, the Company and one of
its foreign subsidiaries has long-term debt, payable to financial
institutions, aggregating approximately $111,000 at June 30, 2000 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.
While the Company has returned to profitability it still needs
additional sales and marketing resources. To help in managing the opportunities
ahead of us, the Company engaged the services of investment banking firm
Prudential Vector Healthcare Group to act as an intermediary in negotiations
involving the Company and potential strategic partnerships or M&A opportunities.
Prudential Vector Healthcare Group, a unit of Prudential Securities
Incorporated, is one of the largest investment banking groups focused
exclusively on the healthcare industry.
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 June 30, 2000 the Company increased its working
capital approximately $656,000 when compared to December 31, 1999, as a result
of normal operations.
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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.
RESULTS OF OPERATIONS
During the three and six-month periods ended June 30, 2000, sales
decreased approximately $338,000 or 7.3% and $471,000 or 5.0%, respectively,
compared to the same periods 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 three and six-month periods ended June 30, 2000
resulted in lower reported sales of approximately $108,000 or 2.5% and $200,000
or 2.2%, respectively, when compared to the corresponding 1999 periods. In
addition, a new reimbursement system in Germany has affected our customers there
and resulted in what we expect to be a temporary decrease in sales. Also,
continued cost control pressures in the health care industry 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 the three
and six-month periods ended June 30, 2000 from approximately 51.8% to 58.0% and
50.9% to 55.8%, respectively, compared to the same periods last year. This
increase was due primarily to changes in the product mix and improved
manufacturing efficiencies.
Selling, general and administrative expenses decreased for the three
and six-month periods ended June 30, 2000 approximately $71,000 or 3.7% and
$222,000 or 5.9%, respectively, compared to the same periods last year. The
reductions are due primarily as a result of restructuring the European sales and
marketing organization. Additional decreases are the result of non-recurring
expenses during 1999.
Research and development costs decreased for the three and six-month
periods ended June 30, 2000 approximately $134,000 or 23.1% and $234,000 or
21.0%, respectively, when compared to the same periods 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 and six-month periods ended June 30,
2000 reflects the provision for estimated federal and state tax liabilities that
are not offset by operating losses.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 14, 2000, Hycor Biomedical Inc. held its Annual Meeting of
Stockholders. At such meeting, the following seven persons were elected as
directors of the Company to serve until the Annual Meeting of Stockholders in
2001 and until their successors are elected and qualified.
The tabulation of the votes cast for the election of the directors was
as follows:
Nominee Votes For Votes Withheld
------- --------- --------------
J. David Tholen 6,140,398 301,795
Samual D. Anderson 6,137,723 304,470
David S. Gordon 6,139,930 302,263
Reginald P. Jones 6,139,819 302,374
James R. Phelps 6,140,137 302,056
Richard E. Schmidt 6,138,416 303,777
David A. Thompson 6,140,923 301,270
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27: Financial Data Schedule
(b) Reports on Form 8K: None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HYCOR BIOMEDICAL INC.
Date: August 10, 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
INDEX DESCRIPTION
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27 Financial Data Schedule
