FORM 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended : February 28, 1997
OR
_ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number : 0-14820
IMMUCOR, INC.
(Exact name of registrant as specified in its charter)
Georgia 22-2408354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3150 Gateway Drive P.O. Box 5625 Norcross, Georgia 30091-5625
(Address of principal executive offices) (Zip Code)
Registrant's telephone number : (770) 441-2051
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.
As of April 10, 1997: Common Stock, $.10 Par Value - 8,078,484
IMMUCOR, INC.
Condensed Consolidated Balance Sheets
February 28, May 31,
ASSETS 1997 1996
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $17,991,910 $20,533,422
Accounts receivable, net 10,960,599 8,953,473
Inventories 6,751,972 5,932,923
Income tax receivable 73,640 37,119
Deferred income taxes 319,350 312,627
Other 1,271,913 707,623
Total current assets 37,369,384 36,477,187
Long-term investment 1,000,000 1,000,000
Prop., plant and equip., at cost 9,042,562 6,285,912
less accumulated depreciation (3,825,341) (3,029,388)
5,217,221 3,256,524
Other 722,013 646,994
Excess of cost over net tangible
assets acquired 12,388,176 5,826,153
$56,696,794 $47,206,858
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank loans $488,079 $283,335
Accounts payable 3,095,956 2,656,538
Income taxes payable 545,762 263,480
Accrued salaries and wages 510,491 594,853
Other accrued liabilities 368,487 154,607
Total current liabilities 5,008,775 3,952,813
Long-term debt 11,080,937 3,908,795
Deferred income taxes 463,260
Shareholders' equity:
Common stock, $.10 par value 807,848 805,438
Additional paid-in capital 21,598,528 21,485,849
Retained earnings 19,453,123 18,029,010
Cumulative translation adjustment(1,715,677) (975,047)
Total equity 40,143,822 39,345,250
$56,696,794 $47,206,858
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
1997 1996 1997 1996
Net sales $9,639,697 $8,073,228 $25,953,819 $22,831,459
Cost of sales 3,933,315 3,155,882 10,591,331 8,630,135
Gross profit 5,706,382 4,917,346 15,362,488 14,201,324
Research & development:
Instrument 131,220 133,143 182,732 373,798
General 156,206 124,056 415,704 367,788
Selling, general
and administrative 4,534,505 3,684,671 12,353,208 10,388,531
Total operating expenses 4,821,931 3,941,870 12,951,644 11,130,117
Income from operations 884,451 975,476 2,410,844 3,071,207
Other income 211,576 292,814 596,877 676,865
Interest expense (138,386) (68,650) (243,361) (237,978)
Other expense (257,157) (272,765) (250)
Total other (183,967) 224,164 80,751 438,637
Income before income taxes 700,484 1,199,640 2,491,595 3,509,844
Provision for income taxes 356,259 411,484 1,067,482 1,175,728
Net income $344,225 $788,156 $1,424,113 $2,334,116
Net income per common
and common equivalent s $0.04 $0.09 $0.17 $0.27
Weighted average number of common
and common equivalent shares
outstanding 8,518,645 8,884,564 8,588,320 8,801,288
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
February 28, February 29,
1997 1996
OPERATING ACTIVITIES:
Net income $1,424,113 $2,334,116
Adjustments to reconcile net income to
net cash provided by operations:
Depreciation 837,863 758,308
Amortization 154,402 170,423
Changes in assets and liabilities:
Accounts receivable (1,241,780) (700,801)
Inventories (330,485) (305,836)
Other assets (224,723) (143,213)
Accounts payable 303,375 (5,093)
Other current liabilities (18,803) (231,290)
Cash provided by operating activities 903,962 1,876,614
INVESTING ACTIVITIES:
Purchase of/deposits on property
and equipment (1,947,674) (1,224,209)
Cash paid for acquisition, net of
cash acquired (4,366,734)
Other 13,560 12,406
Cash used in investing activities (6,300,848) (1,211,803)
FINANCING ACTIVITIES:
Proceeds from (repayment of)
line of credit (62,413) 21,956
Proceeds from issuance of long term
debt 4,228,163
Repayment of bank loans (995,748) (1,065,191)
Exercise of stock options 115,090 1,168,080
Cash provided by financing activities 3,285,092 124,845
Effect of exchange rate changes on cash (429,718) (99,162)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,541,512) 690,494
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 20,533,422 18,741,681
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $17,991,910 $19,432,175
Noncash investing and financing activities:
Fair value of assets acquired $2,234,240
Cost in excess of assets acquired 7,319,927
Liabilities assumed (959,270)
Notes issued for assets acquired (4,228,163)
Net cash paid for acquisition $4,366,734
See accompanying notes.
IMMUCOR, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three and nine
month periods ended February 28, 1997 are not necessarily indicative of the
results that may be expected for the year ending May 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year
ended May 31, 1996.
2. Inventories are stated at the lower of first-in, first-out cost or market:
As of February 28, 1997 As of May 31, 1996
Raw materials and supplies $2,051,545 $2,104,677
Work in process 677,922 741,723
Finished goods 4,022,505 3,086,523
3. Net income per common share:
Net income per common share is computed using the weighted average number
of common shares and dilutive common share equivalents outstanding during the
respective periods. There is no significant difference between primary and
fully diluted per share amounts.
4. Purchase of Dominion Biologicals Limited
On December 11, 1996, the Company acquired all of the issued and
outstanding common stock of Dominion Biologicals Limited for $8,456,326
(CDN$11,482,000), plus acquisition costs and warrants to purchase 478,417
and 150,000 shares of the Company's common stock for $12.00 and $11.98,
respectively. The acquisition was financed from the proceeds of a bank loan
of $4,228,163 (CDN$5,741,000) and from the issuance of subordinated
promissory notes totaling $4,228,163 (CDN$5,741,000), due three years from
the closing date. The Company accounted for this transaction as a purchase
business combination. The results of the operations of Dominion Biologicals
Limited since December 11, 1996 are included in the 1997 Consolidated Statements
of Income.
The preliminary purchase price allocation is as follows:
Current assets $1,383,356
Property, plant & equipment, net 850,885
Intangible assets - goodwill 7,319,926
Less: Liabilities assumed (959,270)
Purchase price $8,594,897
The pro forma unaudited results of operations for the nine months
ended February 28, 1997 and February 29, 1996, assuming consummation of the
purchase as of June 1, 1995, including financing from the proceeds of a bank
loan and issuing subordinated promissory notes and warrants to purchase common
stock, are as follows:
Nine Months Ended
Feb. 28, Feb. 29,
1997 1996
Net sales $27,758,464 $25,481,851
Net income 1,394,610 2,225,268
Net income per
common share:
Primary .16 .26
Fully diluted .16 .25
5. In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on May 31, 1998.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect
of stock options will be excluded. The impact is expected to result in an
increase in primary earnings per share for the three months ended February
28, 1997 and February 29, 1996 of $.00 and $.01 per share, respectively, and
for the nine months ended February 28, 1997 and February 29, 1996 of $.01
and $.03 per share, respectively. The impact of Statement 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
IMMUCOR, INC.
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Any statements contained herein that are not historical fact are forward-
looking statements within the meaning of the new Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties. Information on the
potential factors which could affect the Company's actual results of
operations are included in its filings with the Securities and Exchange
Commission, including but not limited to its Annual Report on Form 10-K for
the fiscal year ended May 31, 1996.
Financial Condition and Liquidity:
As of February 28, 1997, the Company's cash position totaled $17,991,900.
For the nine months ended February 28, 1997, the Company generated cash from
operating activities of $904,000 and repaid $992,600 (1,500,000 DM)
of bank debt in Germany.
On December 11, 1996, the Company acquired all of the issued and
outstanding common stock of Dominion Biologicals Limited for $8,456,300
(CDN$11,482,000), plus acquisition costs and warrants to purchase 478,417 and
150,000 shares of the Company's common stock for $12.00 and $11.98,
respectively. The acquisition was financed from the proceeds of a bank loan
of $4,228,200 (CDN$5,741,000) and from the issuance of subordinated promissory
notes totaling $4,228,200 (CDN$5,741,000), due three years from the closing
date.
In December, the Company completed the first phase of its facilities
expansion at its U.S. offices in Norcross, Georgia. The expansion provides
an additional 10,000 square feet of manufacturing, laboratory and office
space. The planned expenditures include leasehold improvements and
furnishings totaling approximately $1,000,000. Through February 28, 1997,
the Company spent approximately $550,000.
Management believes that the Company's current cash balance, internally
generated funds, and amounts available under the lines of credit are
sufficient to support operations for the foreseeable future. Management also
believes additional credit lines would be available should the need arise.
Results of Operations:
Net sales
Net sales for the three months ended February 28, 1997, totaled $9,639,700,
an increase of 19% over last year's $8,073,200. Current year results include
$1,014,000 in net sales from the operations of Dominion Biologicals Limited
(see Financial Condition and Liquidity). Most of the remaining increase was
generated by the Company's European operations. For the nine months ended
February 28, 1997, net sales were $25,953,800 (including Dominion's $1,014,000)
compared to $22,831,500 in the prior year. The Company believes higher levels
of marketing activity in the US and in Europe have generated increased market
share.
Gross profit
As a percent of sales, gross profit declined for the three and nine month
periods ended February 28, 1997, when compared to the same three and nine month
periods in 1996. The decline in gross profit margin is principally attributable
to the Company's efforts to emphasize longer term market share growth by
focusing efforts on large national accounts which demand lower product
pricing due to increased purchasing volume.
Operating expenses
When compared to the prior year three and nine month periods, general
research and development costs increased $32,200 and $47,900, respectively,
with $26,900 of the additional research expense resulting from the
acquisition of Dominion Biologicals Limited (see Financial Condition and
Liquidity).
Selling, general and administrative expense for the three and nine month
periods ended February 28, 1997, increased $849,800 and $1,964,700,
respectively, compared to the 1996 periods. Part of the increase was caused
by the inclusion of Dominion Biologicals Limited ($258,800). The remaining
increase was principally due to the addition of sales, marketing and other
support personnel both in the US and in Europe, higher trade show, advertising
and other costs related to the company's instrument development programs,
including the recent launch of the IMAGN(registered trademark) 2000.
Other income and expense
Other income declined during the quarter ended February 28, 1997,
principally due to a decrease in the Company's cash and short term investing
activities since the beginning of the fiscal year.
Interest expense grew $69,700 during the three months ended February 28,
1997, as a result of the acquisition of Dominion Biologicals Limited. This
increase was partially offset by the Company reducing its outstanding principal
loan balance in Germany (see Financial Condition and Liquidity).
The increase in other expense of $257,200 in the current year three month
period was caused by currency transaction losses recorded in Europe. An
increase in the value of the US dollar during the period required the
recognition of a loss in value of US dollar liabilities converted from local
European currency.
Provision for Income Taxes
As a percent of pretax income, the provision for income taxes increased
during the three and nine month periods ended February 28, 1997, principally
due to the earnings of Dominion Biologicals Limited being subject to a higher
income tax rate in Canada than the US tax rate. In addition, the provision
increased because of the need to provide for income taxes on increased
profits in Germany, which are taxed at higher rates than income in the U.S.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The Company has filed the following exhibits with this report:
11.1 Statement re computation of per share earnings.
(b) On December 16, 1996, the Company filed a Form 8-K dated December 11,
1996, relating to Item 2, the acquisition of Dominion Biologicals Limited.
SIGNATURES
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.
IMMUCOR, INC.
(Registrant)
Date: April 14, 1997
\s\Edward L. Gallup_____________Edward L. Gallup, President
\s\Richard J. Still_______________ Richard J. Still, Senior Vice President -
Finance
(Principal Accounting Officer)
IMMUCOR, INC.
EXHIBITS
Exhibit 11.1 Statement re computation of per share earnings.
Primary income per share calculations:
Three Months Ended Nine Months Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
1997 1996 1997 1996
Net income $344,225 $788,156 $1,424,113 $2,334,116
Weighted average number of common
shares and common share
equivalents are as follows:
Weighted average common shares
outstanding 8,075,767 7,907,620 8,061,960 7,830,203
Shares issued from assumed exercise of
dilutive options and warrants 442,878 745,471 526,360 780,028
Weighted average number of shares
outstanding (as adjusted) 8,518,645 8,653,091 8,588,320 8,610,231
Net income per common
and common equivalent share $0.04 $0.09 $0.17 $0.27
Fully diluted income per share calculations:
Three Months Ended Nine Months Ended
Feb. 28, Feb. 29, Feb. 28, Feb. 29,
1997 1996 1997 1996
Net income $344,225 $788,156 $1,424,113 $2,334,116
Weighted average number of common
shares and common share
equivalents are as follows:
Weighted average common shares
outstanding 8,075,767 7,907,620 8,061,960 7,830,203
Shares issued from assumed exercise of
dilutive options and warrants 442,878 976,944 537,223 971,085
Weighted average number of shares
outstanding (as adjusted) 8,518,645 8,884,564 8,599,183 8,801,288
Net income per common
and common equivalent share $0.04 $0.09 $0.17 $0.27
Note: shares issued from assumed exercise of options and warrants include the
numberof incremental shares which result from applying the "treasury stock
method" for options and warrants.
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<COMMON> 807,848
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