FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1997
OR
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 0-14820
IMMUCOR, INC.
(Exact name of registrant as specified in its charter)
Georgia 22-2408354
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
3130 GATEWAY DRIVE, 30091
P.O. BOX 5625 30091 (Zip Code)
Norcross, Georgia
(Address of principal executive offices)
Registrant's telephone number, including area code, is (770) 441-2051
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
COMMON STOCK PURCHASE RIGHTS
(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 file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by a 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 ofregistrant'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 August 15 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $66,350,624.
As of August 15 1997, there were 8,078,737 shares of common stock
outstanding.
PART I
Item 1.-Business
Founded in 1982, Immucor, Inc., a Georgia corporation ("Immucor" or the
"Company"), develops, manufactures and sells a complete line of reagents and
systems used primarily by hospitals, clinical laboratories and blood banks
in a number of tests performed to detect and identify certain properties of
the cell and serum components of human blood prior to blood transfusion.
The Company is also developing two automated blood bank instruments to
perform blood compatibility tests currently done manually by blood bank
technologists. One instrument is designed for patient testing in hospital
transfusion laboratories while the second instrument is designed for donor
testing in blood donor centers. Both instruments utilize the Company's
proprietary Capture (registered trademark) product technology.
On December 11, 1996, Immucor acquired all of the common stock of
Dominion Biologicals Limited ("Dominion"). Located in Dartmouth, Nova Scotia,
Canada, Dominion develops, manufactures and sells products similar to those
produced by the Company. In addition, Dominion produces blood testing
reagents from genetically engineered and other biological source materials.
See Products Under Development - Monoclonal Antibodies.
In January 1997, Immucor signed an exclusive distribution agreement with
Biometric Imaging, Inc. to market their novel, proprietary cellular analysis
system known as the IMAGN (registerd trademark) 2000. This system provides
rapid, precise and easy-to-perform cell test procedures to monitor disease
progression and the efficacy of therapy for patients undergoing transfusion
therapy and for HIV+ patient monitoring.
Industry
Immucor is part of the immunohematology industry, which generally seeks to
prevent or cure certain diseases or conditions through the transfusion of
blood and blood components. In the U.S. the Food and Drug Administration
(the "FDA") treats human blood as a drug and as a biological product, and it
treats the transfusion of blood as the administration of a drug and of a
biological product. The FDA regulates all phases of the immunohematology
industry, including donor selection and the collection, classification,
storage, handling and transfusion of blood and blood components. The FDA
requires all facilities that manufacture products used for any of those
purposes, and the products themselves, to be registered or licensed by the
FDA. See Regulation of Business.
The principal components of blood are plasma (the fluid portion) and
cells. Blood also contains antibodies and antigens. Antibodies are proteins
that are produced in response to the introduction of foreign substances
(antigens). Antigens are substances that stimulate the production of
antibodies. Red blood cells, which transport oxygen from the lungs to other
parts of the body, and return the carbon dioxide to the lungs, are categorized
by four blood groups (A, B, AB and O) and two blood types (Rh positive and Rh
negative), based on the presence or absence of certain antigens on the surface
of the cells. It is crucial that the health care provider correctly identify
the antibodies and antigens present in patient and donor blood. For example,
if a donor's red blood cells contain antigens that could react with the
corresponding antibody in the patient's plasma, the transfusion of the red
blood cells may result in the potentially life threatening destruction of
the red blood cells.
Because of the critical importance of matching patient and donor blood,
compatibility testing procedures are generally performed manually by highly
educated technologists in hospitals, blood banks and laboratories. At
present, with few exceptions, these tests are performed using procedures
which the Company believes can be significantly improved using its solid
phase testing system to automate the testing procedures. See Products -
Solid Phase Technology and Products Under Development.
The Company believes that the worldwide market for traditional blood bank
reagents is approximately $250 million, and that this market is relatively
mature given current technology. However, because the industry is labor-
intensive, the introduction of labor-saving products may provide additional
growth in the market. The Company believes that its solid phase blood testing
system improves test results and reduces the time necessary to perform certain
test procedures, thereby offering a cost-effective alternative for its
customers. See Products - Solid Phase Technology and Products Under
Development.
Products
Most of Immucor's current reagent products are used in tests performed
prior to blood transfusions to determine the blood group and type of patients'
and donors' blood, in the detection and identification of blood group
antibodies, in platelet antibody detection, in paternity testing and in
prenatal care. The FDA requires the accurate testing of blood and blood
components prior to transfusions using only FDA licensed reagents such as
those manufactured and sold by the Company.
The following table sets forth the products sold by the Company, most of
which are manufactured by the Company.
Product Group Principal Use
ABO Blood Grouping Detect and identify ABO antigens on red blood
cells in order to classify a specimen's
blood group as either A, B, AB or O.
Rh Blood Typing Detect Rh antigens in order to classify a
specimen as either Rh positive or Rh
negative, and to detect other Rh-hr antigens.
Anti-human Globulin Used with other products for routine
Serums (Coombs Serum) crossmatching, and antibody detection and
identification; allows a reaction to occur by
bridging between antibodies that by themselves
could not cause a reaction.
Reagent Red Blood Cells Detect and identify antibodies in patient or
donor blood, confirm ABO blood grouping
results and validate the performance of
anti-human serum in the test system.
Rare Serums Detect the presence or absence of rare
antigens.
Antibody Potentiators Increase the sensitivity of antigen-antibody
tests.
Quality Control System Daily evaluation of the reactivity of routine
blood testing reagents.
Monoclonal (Hybridoma)
Antibody-based Reagents Detect and identify ABO and other antigens on
red blood cells.
Capture-P (registered Used for the detection of platelet antibodies.
trademark)
Capture-R (registered Used to detect and identify unexpected blood
trademark) group antibodies.
Capture-CMV (registered Used for the detection of antibodies to
trademark) cytomegalovirus.
The following table includes additional products not manufactured by the
Company but sold by the Company:
Product Group Principal Use
Microvolume Fluorimetry Automated cell enumeration and characterization
for patients undergoing transfusion therapy
and HIV+ patient monitoring
Rh (D) Immune Globulin
(Human) Administered by injection once during and once
after pregnancy to an Rh negative woman who
delivers an Rh positive infant to prevent
hemolytic disease of the newborn.
HLA Serums Transplant typing and paternity testing.
DNA Probes Transplant typing, paternity testing, forensic
medicine, and genetic research.
Infectious Diseases Diagnosis of certain infectious diseases by the
methods of ELISA, Immunofluorescence and
Latex Slide Tests.
Clinical Chemistry Blood analysis and pathological testing.
Solid Phase Technology. In the Company's proprietary solid phase blood
test system, one of the reactants (either an antigen or an antibody) is applied
or bound to a solid support, such as a well in a microtitration plate. During
testing, the bound reactant captures other reactants in a fluid state and binds
those fluid reactants to the solid phase (the bound reactant). The binding
of the fluid reactants into the solid phase occurs rapidly and results in
clearly defined test reactions that are easier to interpret than the subjective
results sometimes obtained from existing agglutination technology. Based on
results obtained with Capture-P (registered trademark), Capture-R (registered
trademark), Capture-CMV (registered trademark) and the Company's ongoing
research, the Company believes that solid phase test results can generally be
obtained in substantially less time than by existing techniques.
In contrast, under current agglutination blood testing techniques, serum
is mixed with red blood cells in a test tube and the technologist performs
several procedures and then examines the mixture to determine whether there has
been an agglutination reaction. A positive reaction will occur if the cells are
drawn together in clumps by the presence of corresponding antibodies and
antigens. The mixture remains in a fluid state and it is sometimes difficult
for the technologist to determine whether the positive reaction has occurred.
Because of the critical importance of matching patient and donor blood,
testing procedures using agglutination techniques are usually performed
manually by highly educated technologists. Depending on the technical
proficiency of the person performing the test, the process can take from 30
minutes to one hour, and if the test results are ambiguous the entire process
may be repeated. Thus, a significant amount of expensive labor is involved in
such testing. Based on industry sources, the Company believes that labor costs
are the largest component of the total cost of operating a hospital blood bank.
The Company believes that its solid phase blood testing system improves test
results and reduces the time necessary to perform certain blood testing
procedures related to the transfusion of blood and blood components.
Immucor has approved for sale three test systems using its solid phase
technology: a Platelet Antibody Detection System, Capture-P (registered
trademark); a Red Cell Antibody Detection System, Capture-R (registered
trademark; and an Infectious Disease Test, Capture-CMV (registered trademark)
(see below). In these three test systems, antigens are applied and bound to the
surface of a small well in a plastic microtitration plate, and patient or donor
serum or plasma is placed in the well. After the addition of special
proprietary indicator cells manufactured by Immucor, positive reactions
indicating the presence of blood group antibodies adhere to the well as a thin
layer and negative reactions do not adhere but settle to the bottom as a small
cell button.
Capture-P (registered trademark): Solid Phase Platelet Antibody Detection
System. A key component of plasma is platelets, small cell-like entities that
assist in the blood clotting process. A shortage of platelets in the blood can
significantly reduce the ability of a patient's body to control bleeding.
Certain multi- transfused patients, such as those on chemotherapy, often
develop antibodies to random donor platelets. Several techniques have been
designed by others to identify compatible platelets from random donors. Such
techniques are time consuming and technically difficult to perform, or require
expensive equipment, all of which limits their usefulness as routine test
procedures. The Company believes that its solid phase platelet antibody
detection test provides a simplified test with improved reliability over
existing techniques and thus will be suited for routine use in transfusion
services. The Company believes that the test provides a more accurate method
for matching donor and recipient platelets in order to reduce the probability
of an incompatible transfusion. Three products are currently approved for sale
in the Capture-P (registered trademark) system. The latest product, Capture-
P (registered trademark) Ready-Screen (registered trademark), a solid phase
assay for the detection of platelet IgG antibodies, incorporates Immucor's
proprietary dried platelet technology. Previous platelet antibody detection
tests required a source of freshly drawn platelet samples. Capture-P
(registered trademark) Ready-Screen (registered trademark) is supplied with
specially selected platelets dried onto the microtitration plate wells ready
for use.
Capture-R (registered trademark): Solid Phase Red Cell Antibody Detection
and Identification System. Unexpected blood group antibodies are found in
patients or donors who, through pregnancy, previous transfusion or injection,
have been exposed to foreign red blood cell antigens. Prior to blood
transfusions all patient and donor sera is tested for the presence of these
unexpected antibodies. In this solid phase method, reagent red blood cells
having known blood group antigens are immobilized onto microtitration plate
wells. Patient's or donor's serum is added to the wells. Following incubation,
the wells are washed to remove unbound immunoglobulins. Special indicator red
blood cells are added and the plates are centrifuged. Positive reactions adhere
as a thin layer while negative reactions do not adhere but settle to the bottom
as a small cell button. Three products are currently approved for sale in the
Capture-R (registered trademark) system. The two latest products are Capture-
R (registered trademark) Ready-Screen (registered trademark), for the detection
of unexpected IgG red cell antibodies, and Capture-R (registered trademark)
Ready-ID (registered trademark), for the identification of unexpected IgG red
cell antibodies. These two products utilize Immucor's proprietary dried red
cell technology. Test kits include microtitration plates containing specially
selected dried red cells supplied ready for use. This feature further reduces
the time necessary to perform these tests with improved test results.
Capture-CMV (registered trademark): Solid Phase Test for Cytomegalovirus.
CMV is a herpes virus which can be transmitted by blood and cause severe
problems in the transfusion of newborn infants and organ transplant patients.
The test procedure combines patented cell drying technology with other patented
technology to produce a test system suitable for use in large volume blood
donor centers as well as testing the blood of individual patients.
Equipment. Immucor also distributes laboratory equipment designed to
automate certain blood test procedures and used in conjunction with the
Company's Capture (registered trademark) products.
Microvolume Fluorimetry. Microvolume fluorimetry is a laser-based imaging
system which detects fluorescently-tagged cells held in stasis in a defined
volume, enabling an automated cellular assay delivery system.
Products Under Development
Immucor continually seeks to improve its existing products and to develop
new ones in order to enhance its market share. Prior to their sale, any new
products will require licensing or premarket approval by the FDA. The Company
employs several persons whose specific duties are to continue to improve
existing products and develop new products for the Company's existing and
potential customers. The Company also has established relationships with
other individuals and institutions who provide similar services and the Company
expects that it will continue to do so. The Company intends to continue its
product development efforts primarily in the area of solid phase technology and
in several other areas that may also be useful in connection with the
development of additional solid phase products. For the fiscal years ended
May 31, 1997, 1996 and 1995, the Company spent $907,100, $997,900, and
$1,129,600, respectively, for research and development. See Products Under
Development - Blood Bank Automation. The Company may in the future acquire
related technologies and product lines, or the companies that own them, to
improve the Company's ability to meet the needs of its customers.
Blood Bank Automation. The Company believes that the blood banking
industry today is labor-intensive, and that a market exists for further
automation of blood compatibility tests currently being performed manually by
hospital and donor center blood bank technologists.
Since 1992 the Company has worked with Bio-Tek Instruments, Inc., a wholly
owned subsidiary of Lionheart Technologies, Inc., to combine the reagent
manufacturing expertise of Immucor with the medical instrumentation expertise
of Bio-Tek, to develop an automated, "walk-away", blood bank analyzer. Bio-Tek
has been responsible for engineering, software development and manufacturing.
The instrument uses Immucor's proprietary Capture (registered trademark)
reagent product technology to perform blood bank patient testing. Known as the
ABS2000, Immucor plans to market the instrument worldwide. In March 1996, the
Company filed a 510(k) application with the US Food and Drug Administration for
market clearance. There is no assurance that the instrument will be approved
for sale by the FDA, or that it will gain market acceptance even if approved.
The Company received clearance to market the instrument in Belgium, Canada,
Italy, Sweden and the United Kingdom and has applied to other selected
countries for export approval.
In 1997, the Company decided to market a second automated medical
instrument, previously referred to as the ABSHV, utilizing DYNEX Technologies,
Inc.'s 510(k) approval for its product called the DIAS Plus. The instrument
provides large blood donor centers and clinical reference laboratories
automated batch processing and positive sample identification of routine blood
donor tests, and uses the Company's Capture-R (registered trademark) and
Capture-CMV (registered trademark) products.
For the five year period ending May 31, 1997 the Company invested $4.7
million in instrument research and development principally under research
contracts with Bio-Tek and DYNEX. See Management's Discussion and Analysis of
Financial Condition, Liquidity and Capital Resources. See Regulation of
Business.
Additional Solid Phase Applications. The Company plans to continue to
develop and refine its patented, solid phase technology. Currently, the
Company is developing Capture (registered trademark)-S, a solid phase screening
test for the detection of IgG and IgM antibodies in the serum or plasma of
blood donors with syphilis, which is pending FDA review.
Monoclonal Antibodies. Monoclonal antibodies are derived by fusing an
antibody-producing cell with a tumor cell, resulting in a hybridoma cell that
manufactures the original antibody. The Company is actively engaged in the
development of additional monoclonal antibodies for a variety of uses,
including the detection of blood group and infectious disease antigens, and for
use in the solid phase test systems. Monoclonal antibodies are highly
specific, which means that their sensitivity allows them to detect and identify
antigens with greater efficiency than other reagents. Product quality and
consistency is maintained from production lot to production lot. The Company
continues to pursue the development of such antibodies principally through its
Canadian subsidiary, Dominion Biologicals Limited.
Cell Drying Technology. Immucor has developed a proprietary method to
modify plastic or glass surfaces to immobilize platelets and red cells.
Additionally, the Company has developed a proprietary method to dry platelets
and red cells upon the modified surfaces. This technique is currently utilized
in several of the Company's Capture (registered trademark) products.
Marketing and Distribution
Immucor's potential U.S. customers are approximately 6,000 blood banks,
hospitals and clinical laboratories. The Company maintains an active client
base of over 4,000 customers worldwide, and no one customer purchases annually
in excess of 5% of the Company's current sales volume. The Company believes
there is no seasonality to its sales activity and there is no material backlog
of orders.
The Company has sought to increase its market share through the use of its
experienced direct sales force and through the expansion of its product line to
offer customers a full range of products for their reagent needs. The Company
believes it can increase its market share by marketing products based on its
solid phase technology.
The Company markets and sells its products to its customers directly
through 56 sales personnel employed by the Company in the U.S., Germany,
Portugal, Italy and Canada. In addition, the Company utilizes 17 sales agents
in Italy. The Company has hired personnel whom the Company considers to be
highly experienced and respected for their knowledge of the blood bank
diagnostic business. The Company believes that it can more effectively market
its products through persons who specialize in blood testing reagents and
related equipment, as opposed to persons who generally sell a broader line of
medical supplies but without any expertise in blood testing products.
Continuing technical support and service is also provided to customers through
the Company's Consultation Laboratory, which assists the Company's customers in
identifying certain blood group antibodies which are rare or difficult to
detect. Each year Immucor sponsors workshops in the U.S. and Europe to which
customers are invited to hear the latest developments in the field.
The Company also markets its products internationally through distributors
located throughout the world. For the fiscal years ended May 31, 1997, 1996
and 1995, the Company had foreign net sales, including net domestic export
sales to unaffiliated customers, of approximately $22,130,000, $18,168,000, and
$16,187,000, respectively, and these sales accounted for approximately 62.1%,
58.7%, and 56.0% of the Company's total net sales for the respective fiscal
years. See Note 12 to the Consolidated Financial Statements. Most of the
Company's foreign sales occurred in Germany and in Italy where the Company
maintains subsidiaries. See Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations concerning the impact of
recent changes in the management of the Company's German subsidiary.
Suppliers
The Company obtains raw materials from numerous outside suppliers. The
Company is not dependent on any single supplier other than the joint
manufacturers of some of the Company's monoclonal antibody-based products.
The Company believes that its business relationship with suppliers is
excellent.
Certain of the Company's products are derived from blood having particular
or rare combinations of antibodies and antigens which are found in a limited
number of individuals. The Company to date has not experienced any major
difficulty in obtaining sufficient quantities of such blood for use in
manufacturing its products, but there can be no assurance that the Company will
always have available to it a sufficient supply of such blood.
Regulation of Business
The manufacture and sale of blood banking products is a highly regulated
business and is subject to continuing compliance with various federal and state
statutes, rules and regulations regarding, generally, licensing, product
testing, facilities compliance, product labeling, and consumer disclosure (see
Industry). The Company operates under U.S.
Government Establishment License No. 886 granted by the FDA in December 1982
and under U.S. Government Establishment License No. 1151 granted by the FDA in
May 1992 to Dominion Biologicals Limited. An FDA license is issued for an
indefinite period of time, subject to the FDA's right to revoke the license.
As part of its overview responsibility, the FDA makes plant and facility
inspections on an unannounced basis. Further, a sample of each production lot
of many of the Company's products must be submitted to and approved by the FDA
prior to its sale or distribution.
In addition to its facilities license, the Company holds several product
licenses to manufacture blood grouping reagents. To obtain a product license,
the Company must submit the product manufacturing methods to the FDA, perform a
clinical trial of its product and demonstrate to the satisfaction of the FDA
that the product meets certain efficacy and safety standards. There can be no
assurance that any future product licenses will be obtained by the Company .
To sell its products in Germany, Immucor GmbH must license its products
with the Paul-Ehrlich-Institute prior to product introduction. In addition, an
import license for products purchased outside the European Economic Community
is required. To date, Immucor GmbH has been able to obtain licenses needed to
effectively promote its products in Germany and throughout Europe.
Both in the U.S. and Canada, the Company has hired and retained several
employees who are highly experienced in FDA and other regulatory authority
compliance, and the Company believes that its manufacturing and on-going
quality control procedures conform to the required federal and state rules and
regulations.
Patents, Trademarks and Royalties
Since 1986, the U.S. Patent Office has issued to Immucor six patents
pertaining to its solid phase technology.
Immucor's solid phase technology, including patent rights, was acquired
from five researchers at the Community Blood Center of Greater Kansas City
pursuant to an agreement entered into on March 11, 1983, and amended in 1985
and 1987. In 1987, one of the researchers joined the Company as Director of
Research and Development to continue to develop new products using the solid
phase technology. The agreement terminates on August 26, 2006, the date on
which the first patent issued on the technology expires. The Company has
agreed to pay the researchers royalties equal to 4% of the net sales from
products utilizing the solid phase technology. For the fiscal years ended
May 31, 1997, 1996 and 1995, the Company paid the researchers royalties of
approximately $368,800, $328,400, and $278,300 under this agreement.
Through its development activities involving its solid phase technology,
the Company has acquired expertise in such technology which it considers trade
secrets. While the Company will continue to seek patent protection for its
solid phase technology and new applications thereof, the Company believes that
its acquired expertise and know-how, including the above mentioned trade
secrets, will provide more important protection from competition.
The Company has registered the trademark "Immucor" and several product
names, such as "ImmuAdd", "Capture", "Capture-P", "MCP", "Capture-R",
"Ready-Screen", "Ready-ID" and "Capture-CMV". Dominion Biologicals Limited
has registered the trademark "NOVACLONE".
Competition
There are other competitors with licenses to manufacture blood banking
reagents in the United States. The Company's principal U.S. competitors for
blood bank reagents are Ortho-Clinical Diagnostics, a Johnson & Johnson
company, and Gamma Biologicals Inc. Additional European competitors for blood
bank products include Biotest, a German company; and Diamed, a Swiss company.
All of these companies have been established longer, some have larger market
shares than the Company, and some have substantially greater financial and
other resources than the Company. However, the Company believes that it is
properly positioned to compete favorably in the business principally because of
the quality and price of its products, the sale of innovative products such as
the Company's Capture(registered trademark) products (see Products), continuing
research efforts in the area of blood bank automation (see Products Under
Development), the experience and expertise of its sales personnel (see
Marketing and Distribution) and the expertise of its technical and customer
support staff.
Employees
At August 1, 1997, the Company had 141 full time employees in the U.S., of
whom 28 were in sales and marketing, 91 were in manufacturing, research, and
distribution, and 13 were in administration. The Company has experienced a low
turnover rate among its technical and sales staff, and none of the Company's
employees is represented by a union. The Company considers its employee
relations to be good.
At August 1, 1997, in Germany, Portugal, Italy and Canada, the Company had
88 full-time employees, of whom 34 were in sales and marketing, 32 were in
distribution and administration and 22 were in manufacturing.
Item 2.-Properties.
The Company leases approximately 48,000 square feet in Norcross, Georgia,
a suburb of Atlanta, as its executive offices, laboratories and manufacturing
facilities. Rent charges for the fiscal year ended May 31, 1997, were
$391,300. The term of the lease is for a five-year period ending April 2001
with a right to renew for an additional five years. In Germany, the Company
leases 1,566 square meters near Frankfurt. Rent expense for the fiscal year
ended May 31, 1997, totaled $209,100. The term of the lease in Germany is
through April 2009. In Italy rent expense for the fiscal year ended May 31,
1997 totaled $72,200 for 619 square meters. The Company has three separate
lease agreements for the facility in Italy. The term of the first lease is
through September 1998, the second lease is through April 2000 and the third is
through September 2002. In Canada, the FDA approved facility is owned by
Company. The Company believes all of its facilities and lease terms are
adequate and suitable for the Company's current and anticipated business for
the foreseeable future.
Item 3.-Legal Proceedings.
The Company is not currently a party to any existing or pending legal
proceedings.
Item 4.-Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5.-Market for Registrant's Common Equity and Related Stockholder Matters.
Immucor's Common Stock trades on The Nasdaq National Market System of The
Nasdaq Stock Market under the Symbol: BLUD. The following table sets forth the
quarterly high and low sale prices of the Common Stock for the fiscal periods
indicated. These prices represent inter-dealer quotations without retail
markups, markdowns or commissions and may not represent actual transactions.
High Low
Fiscal Year Ended May 31, 1996
First Quarter . . . . . . . . . . . . $ 15 1/2 $ 8 1/2
Second Quarter . . . . . . . . . . . . . 16 10 1/4
Third Quarter . . . . . . . . . . . . . . .16 9
Fourth Quarter . . . . . . . . . . . . . . 15 1/8 10 3/8
Fiscal Year Ended May 31, 1997
First Quarter . . . . . . . . . . . . . $ 14 $ 7 1/2
Second Quarter . . . . . . . . . . . . . 12 3/4 9 1/2
Third Quarter . . . . . . . . . . . . . 11 1/2 8 3/4
Fourth Quarter . . . . . . . . . . . .. 10 1/2 6 1/8
As of August 15, 1997, there were approximately 522 holders of record of
the Company's Common Stock. The last reported sales price of the Common Stock
on such date was $8 5/8.
Immucor has not declared any cash dividends with respect to its Common
Stock. The Company presently intends to continue to retain all earnings in
connection with its business.
Item 6.-Consolidated Selected Financial Data.
(All amounts are in thousands, except per share amounts)
Year Ended May 31,
1997(1) 1996 1995 1994 1993
Statement of Income Data:
Net sales $35,653 $30,964 $28,892 $29,581 $30,070
Cost of sales 15,055 12,005 10,865 12,394 11,674
Gross profit 20,598 18,959 18,027 17,187 18,396
Operating expenses:
Selling, general, and admin. 16,714 14,367 12,575 12,179 13,302
Restructuring and other non-recurring
charges - - - 625 -
Research and development:
Instrument 342 493 644 2,005 1,245
General 565 505 486 478 466
Total operating expenses 17,621 15,365 13,705 15,287 15,013
Income from operations 2,977 3,594 4,322 1,900 3,383
Other:
Other income 819 877 677 507 556
Interest expense (367) (294) (463) (579) (773)
Other (287) (1) (5) (110) (168)
Total other 165 582 209 (182) (385)
Income before income taxes 3,142 4,176 4,531 1,718 2,998
Income taxes 1,302 1,403 1,641 992 1,165
Net income $ 1,840 $ 2,773 $ 2,890 $ 726 $ 1,833
Income per common and
common equivalent share: $ .22 $ .32 $ .37 $ .09 $ .25
Weighted average number of
common and common equiva-
lent shares outstanding 8,535 8,797 7,856 7,798 8,070
Balance Sheet Data:
Working capital $31,868 $32,524 $29,101 $21,219 $24,253
Total assets 57,726 47,207 43,979 41,311 40,421
Long-term debt, less current
portion 10,666 3,909 5,744 - 4,391
Retained earnings 19,869 18,029 15,256 12,367 11,641
Shareholders' equity 41,221 39,345 34,067 31,026 30,389
(1) Includes results of Dominion Biologicals Limited since December 11, 1996.
Item 7.-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 Private Securities Litigation
Reform Act of 1995, and involve risks and uncertainties. All forward-looking
statements included in this document are based on information available to the
Company on the date hereof, and the Company assumes no obligation to update any
such forward-looking statements. Further risks are detailed in the Company's
filings with the Securities and Exchange Commission, including those set forth
in this Form 10-K and Quarterly Reports on Form 10-Q.
In July 1997 Josef Wilms, the former president of the Company's German
subsidiary, Immucor GmbH, resigned. Mr. Wilms is expected to remain as a
consultant to the Company through December 31, 1997 on European sales and
marketing matters. Although management has reassigned Mr. Wilms' duties to
others, given Mr. Wilms' importance in the past to the Company's operations in
Europe, and the importance of the Company's European operations to its overall
results, his departure could have an adverse impact on the Company's
operations. See Note 5 to the Consolidated Financial Statements and Item 13 -
Certain Relationships and Related Transactions.
(a) Liquidity and Capital Resources
Net cash provided by operating activities totaled $510,000, $2,908,000,
and $2,740,000 for the fiscal years 1997, 1996 and 1995, respectively. As of
May 31, 1997, the Company's cash and cash equivalents balance totaled $15.7
million.
During fiscal 1997, the Company experienced an increase in trade accounts
receivable of $1,348,000 over the previous year principally due to higher sales
levels in the U.S. and Europe. Other accounts receivable totaling $1,609,000
were recorded during the fiscal year as a result of loans made to Mr. Wilms.
See Note 5 to the Consolidated Financial Statements and Item 13 - Certain
Relationships and Related Transactions.
In connection with the acquisition of Dominion Biologicals Limited in
December 1996, the Company borrowed $4,228,200 (CDN$5,741,000) under a long-
term revolving line of credit facility with a U.S. bank maturing December 2001.
At the same time, the Company entered into an interest rate swap agreement with
a notional amount of $2,577,700 (CDN$3,500,000) also maturing December 2001.
This transaction effectively converts the revolver's floating rate to a fixed
rate on the principal balance of $2,577,700 (CDN$3,500,000). The interest rate
on the remaining principal of $1,650,500 (CDN$2,241,000) is adjusted every 90
days. The balance of the acquisition of Dominion was financed from the issuance
to Dominion's former shareholders of subordinated promissory notes totaling
$4,228,200 (CDN$5,741,000) due December 1999 and from the issuance of warrants
(see Notes 3 & 4 to the Consolidated Financial Statements).
In March 1995, the Company refinanced its remaining Deutsche Mark debt
with the proceeds of a note payable, and entered into an interest rate swap
agreement with a U.S. bank (see Note 4 to the Consolidated Financial
Statements). At May 31, 1997, the note payable with a principal amount of
$2,348,400, and the interest rate swap agreement with a notional principal of
the same amount, were outstanding. During fiscal 1997 and 1996, the Company
repaid $1,290,200 and $1,404,100, respectively. In addition, the Company's
German subsidiary had $72,000 in borrowings on a $0.3 million Deutsche Mark
line of credit.
The Company's Italian subsidiary had approximately $0.3 million in
borrowings under an Italian lira line of credit as of May 31, 1997, with an
additional $1.0 million available.
During fiscal 1997 the Company completed the first phase of a facilities
expansion in the U.S. which provides an additional 10,000 square feet of
manufacturing, laboratory and office space. Through May 31, 1997 the Company
spent approximately $564,000 on leasehold improvements and furnishings, and the
Company anticipates spending an additional $650,000 in fiscal 1998 to complete
the expansion.
Management believes that the Company's current cash and cash equivalents
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 for capital improvements, acquisitions, or other corporate purposes.
(b) Results of Operations
Comparison of Years Ended May 31, 1997 and May 31, 1996
Net sales increased from $30,964,000 in fiscal 1996 to $35,654,000 in
fiscal 1997. Current year results include $2,085,000 in net sales from the
operations of Dominion Biologicals Limited acquired December 1996 (see
Liquidity and Capital Resources). The remaining sales increase was caused by
higher sales in both the U.S. and in the Company's European operations as a
result of increased marketing activity.
As a percent of sales revenue, gross profit margin declined from 61.2% to
57.8%. This decline was primarily due 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, combined
with higher manufacturing costs which could not be passed on to customers in
the form of higher prices given current competitive market conditions.
Selling, general and administrative expenses increased $2,346,900 over the
previous year. The acquisition of Dominion Biologicals Limited in December
1996 contributed $512,000 of selling, general and administrative costs. Other
increases in selling, general and administrative expenses over the prior year
were caused primarily by the addition of sales and marketing personnel both
in the U.S. and in Europe, higher trade show, marketing, advertising, and
distribution costs, and other costs related to the Company's instrument
programs, including the recent launch of the IMAGN (registered trademark) 2000
(see Item 1 - Business).
Interest expense increased from $294,000 in fiscal 1996 to $367,000 in
fiscal 1997 as a result of the financing of the acquisition of Dominion
Biologicals Limited. The increase was partially offset by the Company
reducing its outstanding principal loan balance in Germany. See Liquidity
and Capital Resources.
The increase in other expense of $287,000 over the previous year was
caused by currency transaction losses recorded in Europe. An increase in the
value of the U.S. dollar during the year required the recognition of a loss in
the value of the U.S. dollar liabilities converted from local European
currency.
As a percent of pretax income, the provision for income taxes increased in
fiscal 1997 from 33.6% to 41.4%, principally due to the earnings of Dominion
Biologicals Limited being subject to a higher income tax rate in Canada than
the U.S. tax rate. In addition, the provision increased because of the need to
provide for income taxes on increased profits in Germany, which are also taxed
at higher rates than income in the U.S.
Comparison of Years Ended May 31, 1996 and May 31, 1995
Net sales increased $2,073,000, or 7% during fiscal 1996 over fiscal 1995
primarily due to higher export sales from the Company's U.S. facilities sold
through distributors and increased sales in the Company's German and Italian
subsidiaries. The sales growth is principally due to higher sales of the
Company's Capture (registered trademark) products.
While gross profit increased $933,000 with higher sales levels, as a
percent of sales revenue, gross profit margin declined slightly. This decline
was primarily due to higher manufacturing costs which could not be passed on to
customers in the form of higher prices given current competitive market
conditions.
Operating expenses increased $1,661,000 in fiscal 1996 over fiscal 1995.
Selling, general and administrative expenses increased $1,793,000 over the
previous year, partially offset by a $151,000 decline in instrument research
and development charges. The increase was principally due to the Company's
decision to invest heavily in selling, marketing and advertising strategies,
which included increasing sales and marketing personnel both in the U.S. and in
Europe, attending additional conventions and trade shows, developing additional
journal advertising programs and other marketing costs related to the launch of
the ABS2000. These higher levels of spending are expected to continue as the
Company attempts to position itself as the industry leader in blood bank
automation. The Company believes current worldwide transfusion laboratory
trends of cost containment, group purchasing and centralization of laboratory
testing will increase the demand for automated solutions.
Other income for the year ended May 31, 1996 grew $200,000 over the prior
year principally due to higher amounts of cash invested during fiscal 1996 as
compared to last year and foreign exchange losses in the prior year period
which did not recur in the current year.
As compared to the prior year, interest expense declined $168,000 in
fiscal 1996, primarily due to the Company's decision to reduce its outstanding
principal loan balance in Deutsche Marks. See Liquidity and Capital Resources.
The provision for income taxes in fiscal 1996, as a percent of pretax
profit, declined from 36.2% to 33.6%, when compared to the prior year.
Although the Company's operations in Europe generated a much higher
contribution to pretax income in the current year compared to a year ago, no
income tax expense was recorded in the current year, as European operations had
sufficient net operating loss carryforwards to offset the potential tax
liability.
(c) Impact of Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted Statement 121
in the first quarter of fiscal 1997 and the effect of adoption was not
material.
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-
Based Compensation, which provides an alternative to APB Opinion No. 25,
Accounting for Stock Issued to Employees. However, the Company continues to
account for stock-based compensation in accordance with APB Opinion No. 25 and
disclose pro forma information regarding net income and earnings per share as
required by Statement 123.
In February 1997, the FASB issued Statement No. 128, Earning per Share,
which is required to be adopted by the Company for the year ending 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 years ended May 31,
1997 and 1996 of $.01 and $.03 per share, respectively. The impact of
Statement 128 on the calculation of fully diluted earnings per share is not
expected to be material.
In February 1997, the FASB issued Statement No. 129, Disclosure of
Information about Capital Structure, which establishes standards for disclosing
information about an entity's capital structure. The Company will adopt
Statement 129 for the year ending May 31, 1998 and will have no impact on the
consolidated financial statements.
(d) Effects of Inflation on Operations
Since the rate of inflation has slowed during the past few years, raw
material prices for the Company's products have not materially increased. The
Company believes that any increase in personnel-related expenses or material
costs would be experienced by others in the industry.
Item 8.-Financial Statements and Supplementary Data.
The following consolidated financial statements of the Company are
included under this item:
-Reports of Independent Auditors
-Consolidated Balance Sheets, May 31, 1997, and 1996
-Consolidated Statements of Income for the Years Ended May 31, 1997, 1996 and
1995
-Consolidated Statements of Shareholders' Equity for the Years Ended May 31,
1997, 1996 and 1995
-Consolidated Statements of Cash Flows for the Years Ended May 31, 1997, 1996
and 1995
-Notes to Consolidated Financial Statements
-Consolidated Financial Statement Schedule
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Immucor, Inc.:
We have audited the accompanying consolidated balance sheets of Immucor, Inc.
as of May 31, 1997 and 1996 and the related consolidated statements of income,
shareholders' equity, and cash flows for the years then ended. Our audits
also included the financial statement schedule listed in the Index at Item
14(a). 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 audits 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Immucor, Inc. at May 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for the years 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.
ERNST & YOUNG LLP
Atlanta, Georgia
July 16, 1997, except for the third paragraph of Note 5
as to which the date is August 7, 1997
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Immucor, Inc.:
We have audited the accompanying consolidated statements of income,
shareholders' equity, and cash flows of Immucor, Inc. and subsidiaries for the
year ended May 31, 1995. Our audit also included the financial statement
schedule listed in the Index at Item 14. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the results of operations and cash flows of Immucor, Inc.
and subsidiaries for the year ended May 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
Deloitte & Touche LLP
Atlanta, Georgia
July 21, 1995
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31,
ASSETS 1997 1996
CURRENT ASSETS:
Cash and cash equivalents $15,718,234 $20,533,422
Accounts receivable (less allowance
for doubtful accounts of $395,076
in 1997 and $350,545 in 1996) 11,066,519 8,953,473
Accounts receivable, other 1,609,000 -
Inventories 7,662,764 5,932,923
Income tax receivable 38,066 37,119
Deferred income taxes 358,470 312,627
Other assets 677,017 707,623
Total current assets 37,130,070 36,477,187
LONG-TERM INVESTMENT 1,000,000 1,000,000
PROPERTY AND EQUIPMENT - Net 5,333,310 3,256,524
DEFERRED INCOME TAXES 23,176 40,128
OTHER ASSETS - Net 1,401,164 606,866
EXCESS OF COST OVER TANGIBLE ASSETS
ACQUIRED - Net 12,837,926 5,826,153
$57,725,646 $47,206,858
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings under bank line of
credit agreements $ 487,161 $ 283,335
Accounts payable 3,136,117 2,656,538
Income taxes payable 391,616 171,623
Accrued salaries and wages 695,716 594,853
Other accrued liabilities 551,419 246,464
Total current liabilities 5,262,029 3,952,813
LONG-TERM DEBT 10,665,658 3,908,795
DEFERRED INCOME TAXES 577,091 -
SHAREHOLDERS' EQUITY:
Common stock - authorized 30,000,000 shares,
$.10 par value; issued and outstanding
8,078,737 in 1997 and 8,054,380 in 1996 807,873 805,438
Additional paid-in capital 22,502,930 21,485,849
Retained earnings 19,868,924 18,029,010
Foreign currency translation adjustment (1,958,859) (975,047)
Total shareholders' equity 41,220,868 39,345,250
$57,725,646 $47,206,858
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended May 31,
1997 1996 1995
NET SALES $35,653,617 $30,964,057 $28,891,538
COST OF SALES 15,055,254 12,004,831 10,865,349
GROSS PROFIT 20,598,363 18,959,226 18,026,189
OPERATING EXPENSES:
Selling, general and admin. 16,714,390 14,367,537 12,574,880
Research and development:
Instrument 342,040 493,010 643,839
General 565,101 504,902 485,799
17,621,531 15,365,449 13,704,518
INCOME FROM OPERATIONS 2,976,832 3,593,777 4,321,671
OTHER:
Other income 819,453 877,081 677,186
Interest expense (366,525) (294,322) (462,803)
Other expense (287,556) (250) (5,392)
165,372 582,509 208,991
INCOME BEFORE INCOME TAXES 3,142,204 4,176,286 4,530,662
INCOME TAXES 1,302,290 1,403,651 1,640,875
NET INCOME $ 1,839,914 $ 2,772,635 $ 2,889,787
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ .22 $ 32 $ .37
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
Foreign
Additional Currency Total
Common Stock Paid-In Retained Translation Shareholders'
Shares Amount Capital Earnings Adjustment Equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MAY 31, 1994 7,691,809 $ 769,181 $18,744,480 $12,366,588 $(853,850) $ 31,026,399
Exercise of stock options 13,593 1,359 23,820 25,179
Foreign currency translation adjustment 106,559 106,559
Tax benefits related to stock options 19,090 19,090
Net income 2,889,787 2,889,787
BALANCE, MAY 31, 1995 7,705,402 770,540 18,787,390 15,256,375 (747,291) 34,067,014
Exercise of stock options 349,887 34,989 2,276,993 2,311,982
Foreign currency translation adjustment (227,756) (227,756)
Tax benefits related to stock options 440,029 440,029
Other (909) (91) (18,563) (18,654)
Net income 2,772,635 2,772,635
BALANCE, MAY 31, 1996 8,054,380 805,438 21,485,849 18,029,010 (975,047) 39,345,250
Exercise of stock options 24,357 2,435 114,217 116,652
Foreign currency translation adjustment (983,812) (983,812)
Issuance of warrants 800,000 800,000
Tax benefits related to stock options 102,864 102,864
Net income 1,839,914 1,839,914
BALANCE, MAY 31, 1997 8,078,737 $ 807,873 $22,502,930 $19,868,924 $ (1,958,859) $ 41,220,868
See notes to consolidated financial statements.
</TABLE>
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended May 31,
1997 1996 1995
OPERATING ACTIVITIES:
Net income $1,839,914 $2,772,635 $2,889,787
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 1,198,699 1,087,692 776,440
Amortization 449,982 328,314 299,024
Changes in assets and liabilities:
Accounts receivable (1,347,699) (943,506) (1,028,898)
Accounts receivable, other (1,609,000) - -
Income tax receivable 115,352 39,336 61,489
Inventories (1,241,278) (462,957) (311,846)
Other current assets 6,775 (96,352) (110,739)
Accounts payable 343,539 231,028 (123,143)
Income taxes payable 322,857 120,554 187,079
Other current liabilities 430,993 (168,425) 101,073
Total adjustments (1,329,780) 135,684 (149,521)
Cash provided by operating
activities 510,134 2,908,319 2,740,266
INVESTING ACTIVITIES:
Purchases of / deposits on
property and equipment (2,930,330) (1,890,488) (1,035,412)
Cash paid for acquisition,
net of cash acquired (4,366,734) - -
(Increase) decrease in
other assets (481,715) 36,729 (15,000)
Cash used in investing activities (7,778,779) (1,853,759) (1,050,412)
FINANCING ACTIVITIES:
Borrowings (repayments) under
line of credit agreements $ (57,367) $ 41,696 $ (307,633)
Proceeds from issuance
of long term debt 4,228,163 - 5,744,238
Repayment of notes payable (1,300,293) (1,404,060) (6,921,758)
Exercise of stock options 116,652 2,311,982 25,179
Other - (18,654) -
Cash provided by (used in)
financing activities 2,987,155 930,964 (1,459,974)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (533,698) (193,783) 208,549
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS (4,815,188) 1,791,741 438,429
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 20,533,422 18,741,681 18,303,252
CASH AND CASH EQUIVALENTS
AT END OF YEAR $15,718,234 $20,533,422 $18,741,681
Noncash investing and financing
activities:
Fair value of assets acquired $ 2,234,241
Cost in excess of assets
acquired 8,119,926
Liabilities assumed (959,270)
Notes and warrants issued for
assets acquired (5,028,163)
Net cash paid for acquisition $ 4,366,734
CASH PAID DURING THE YEAR FOR:
Interest $ 325,686 $ 387,799 $ 574,908
Income taxes 596,492 1,362,320 1,528,127
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company's principal business activities are the
development, manufacturing, and marketing of immunological diagnostic medical
products which constitute one business segment. The Company operates
facilities in North America and Europe.
Consolidation Policy - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications - Certain prior year balances have been reclassified to
conform with the 1997 presentation.
Concentration of Credit Risk - At May 31, 1997 approximately $13,050,649 of the
Company's cash balance was on deposit with a high quality U.S. financial
institution and $2,050,000 of the Company's cash balance was invested in a
"AAA" rated security which matured June 10, 1997. At May 31, 1996,
substantially all of the Company's cash balances were on deposit with a high
quality U.S. financial institution.
The Company obtains raw materials from numerous outside suppliers. The Company
is not dependent on any single supplier other than the joint manufacturers of
some of the Company's monoclonal antibody-based products. The Company believes
that its business relationship with suppliers is excellent.
Certain of the Company's products are derived from blood having particular or
rare combinations of antibodies and antigens which are found in a limited
number of individuals. The Company to date has not experienced any major
difficulty in obtaining sufficient quantities of such blood for use in
manufacturing its products, but there can be no assurance that the Company will
always have available to it a sufficient supply of such blood.
Cash and Cash Equivalents - The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash and cash
equivalents.
Inventories - Inventories are stated at the lower of first-in, first-out cost
or market. Cost includes material, labor, and manufacturing overhead for
manufactured goods and material only for goods purchased for resale.
Long-Term Investment - The long-term investment, representing a 3.4% Common
Stock investment in Lionheart Technologies, Inc., acquired in April 1992, is
accounted for using the cost method of accounting (see Note 11). Bio-Tek
Instruments, Inc., is a wholly owned subsidiary of Lionheart Technologies, Inc.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated lives of the related assets.
Fair Value of Financial Instruments - The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents, accounts receivable,
long-term investment, and accounts payable approximate their fair values. The
fair values of the Company's long-term debt approximate the reported amounts in
the accompanying consolidated balance sheets as their interest rates
approximate the May 31, 1997 and 1996 market rates for similar debt
instruments.
Excess of Cost Over Net Tangible Assets Acquired - Goodwill comprises the cost
of purchased businesses in excess of values assigned to net tangible assets
received, and is being amortized using the straight-line method over 20 to 30
years. The Company periodically assesses the recoverability of goodwill based
on judgments as to the future profitability of its operations. Accumulated
amortization at May 31, 1997 and 1996 was $1,754,344 and $1,465,050,
respectively.
Management continuously monitors and evaluates the realizability of recorded
intangibles to determine whether their carrying values have been impaired. In
evaluating the value and future benefits of the intangible assets, their
carrying value would be reduced by the excess, if any, of their carrying value
over management's best estimate of undiscounted future cash flows over the
remaining amortization period. The Company believes that the carrying value of
recorded intangibles is not impaired.
Foreign Currency Translation - The financial statements of foreign subsidiaries
have been translated into U.S. dollars in accordance with FASB Statement No.
52, Foreign Currency Translation. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet dates.
Income statement amounts have been translated using the average exchange rates
for each year. The gains and losses resulting from the changes in exchange
rates from year to year have been reported separately as a component of
shareholders' equity. The effect of foreign currency transaction gains and
losses has been recorded in the accompanying statements of income.
Revenue Recognition - Revenue from the sale of the Company's reagents is
recognized upon shipment, and revenue from the sale of the Company's medical
instruments is recognized upon the customers' acceptance of such instruments.
Stock Based Compensation - The Company grants stock options for a fixed number
of shares to employees with an exercise price equal to the fair value of the
shares at the date of grant. The Company accounts for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognizes no compensation expense for such grants.
Income Per Common and Common Equivalent Share - Income per common and common
equivalent share is computed using the weighted average number of common shares
and common share equivalents outstanding during the respective periods. Common
share and common share equivalents were 8,535,084 in 1997, 8,653,365 in 1996,
and 7,808,665 in 1995. There is no significant difference between primary and
fully diluted per share amounts.
Impact of Recently Issued Accounting Standards - In March 1995, the FASB issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of, which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amount. Statement 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 effective June 1, 1996, and the effect of such
adoption was not material.
In October 1995, the FASB issued Statement No. 123, Accounting for Stock-Based
Compensation, which provides an alternative to APB Opinion No. 25, Accounting
for Stock Issued to Employees. However, the Company plans to continue to
account for stock-based compensation in accordance with APB Opinion No. 25 and
disclose pro forma information regarding net income and earnings per share as
required by Statement 123.
In February 1997, the FASB issued Statement No. 128, Earnings per Share, which
is required to be adopted by the Company for the year ending 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 years ended May 31, 1997 and
1996 of $.01 and $.03 per share, respectively. The impact of Statement 128 on
the calculation of fully diluted earnings per share is not expected to be
material.
In February 1997, the FASB issued Statement No. 129, Disclosure of Information
about Capital Structure, which establishes standards for disclosing information
about an entity's capital structure. The Company will adopt Statement 129 for
the fiscal year ending May 31, 1998, and it will have no impact on the
consolidated financial statements.
2. BALANCE SHEET DETAIL
May 31,
1997 1996
Inventories:
Raw materials and supplies $2,278,107 $2,104,677
Work in process 669,112 741,723
Finished goods and goods purchased for resale 4,715,545 3,086,523
$7,662,764 $5,932,923
Property and Equipment:
Machinery and equipment $7,263,108 $5,183,448
Leasehold improvements 864,772 587,732
Furniture and fixtures 857,849 514,732
8,985,729 6,285,912
Less accumulated depreciation (3,652,419) (3,029,388)
Property and equipment - net $ 5,333,310 $ 3,256,524
3. 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 $9,256,326 (CDN$12,568,240),
plus acquisition costs. The acquisition was principally financed from the
proceeds of a bank loan of $4,228,163 (CDN$5,741,000) and by the issuance of:
(a) subordinated promissory notes totaling $4,228,163 (CDN$5,741,000), due
three years from the closing date; and (b) warrants to purchase 478,417 and
150,000 shares of the Company's common stock for $12.00 and $11.98,
respectively. 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 purchase price allocation is as follows:
Current assets $1,383,356
Property and equipment, net 850,885
Intangible asset - goodwill 8,119,926
Less: Liabilities assumed (959,270)
$9,394,897
The pro forma unaudited results of operations for the years ended May 31, 1997
and 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:
Twelve Months Ending
May 31, 1997 May 31, 1996
Net sales $37,458,262 $34,604,574
Net income 1,810,411 2,664,386
Net income per common share:
Primary .21 .31
Fully diluted .21 .30
4. BANK CREDIT AGREEMENTS, NOTES PAYABLE, AND LONG-TERM DEBT
The Company's Italian subsidiary has $1,696,000 in line of credit agreements
denominated in Lira with three Italian and one Spanish bank bearing interest
between 8.5% and 14.5%. Outstanding borrowings were $298,396 and $283,335
under these lines at May 31, 1997 and 1996, respectively, and were guaranteed
by the Company. At May 31, 1997, the Company had $1,397,600 available under
these line of credit agreements.
The Company's German subsidiary has a $380,274 line of credit agreement, as
amended, denominated in Deutsche Marks with a German bank bearing interest at
7.75%. Outstanding borrowings under this line were $72,048 at May 31, 1997.
There were no outstanding borrowings at May 31, 1996. At May 31, 1997, the
Company had $308,000 available under this agreement.
In connection with the acquisition of Dominion Biologicals Limited in December
1996, the Company entered into a $4,566,200 (CDN$6,200,000) long-term revolving
line of credit facility with a U.S. bank maturing December 2001 and bearing
interest at LIBOR plus .4375%. The Company borrowed $4,228,163 (CDN$5,741,000)
under this line of credit facility. At May 31, 1997, $332,400 (CDN$459,000) is
available for future borrowings. The Company simultaneously entered into an
interest rate swap agreement with a notional amount of $2,577,699
(CDN$3,500,000), also maturing December 2001. This transaction effectively
converts the revolver's floating rate to a fixed rate of 6.6375% on the
principal balance of $2,577,699 (CDN$3,500,000). The interest rate on the
remaining principal balance of $1,650,464 (CDN$2,241,000) is LIBOR plus .4375%,
which was 3.625% at May 31, 1997, and is adjusted every 90 days. At May 31,
1997, the outstanding balance of the line of credit facility was $4,158,608,
and the notional amount of the interest rate swap agreement was $2,535,313.
The fair value of the interest rate swap agreement (which is nominal at May 31,
1997) is not recognized in the financial statements. The Company also issued
subordinated promissory notes to the former shareholders of Dominion totaling
$4,228,163 (CDN$5,741,000), bearing interest at 6% payable semiannually with
principal due in December 1999.
In March 1995, the Company refinanced its Deutsche Mark denominated debt
through the issuance of a note payable to a U.S. bank in Deutsche Marks which
matures September 1998 with interest of Libor plus .375%. At the same time,
the Company entered into an interest rate swap agreement with the bank,
maturing September 1998, which effectively converts the note payable's floating
rate to a fixed rate of 6.915% per annum provided the Company makes periodic
payments. If these payments are not made, future interest rates could vary.
At May 31, 1997 and 1996, the outstanding balance of the note payable was
$2,348,382 and $3,908,795, respectively, which corresponds to the notional
amount of the interest rate swap agreement. The fair value of the interest
rate swap agreement (which is nominal at May 31, 1997) is not recognized in the
financial statements.
The notes payable require the maintenance of certain income and other financial
ratios, and place certain limited restrictions on the Company's ability to
acquire other entities.
The notes payable and interest rate swap agreements with the U.S. Bank are
guaranteed by the Company.
5. ACCOUNTS RECEIVABLE, OTHER
In fiscal 1997, Mr. Josef Wilms, the former president of the Company's German
subsidiary, Immucor GmbH, borrowed, prior to his resignation, $300,000 from the
Company at 6% interest, secured by his warrants to purchase 143,750 shares of
the Company's Common Stock. At May 31, 1997, the amount outstanding under
this loan was $309,000 including accrued interest.
In July 1997, management of the Company discovered that Mr. Wilms had caused
Immucor GmbH to make unauthorized loans to him since 1994. The amounts
advanced were documented in the records of Immucor GmbH, including interest
rates ranging from 7.75% to 9.5%, and were generally paid down by the end of
each accounting period, but were not disclosed to the Company's management.
The largest aggregate amounts outstanding under the Immucor GmbH loans were
$29,560 in fiscal 1994, $290,422 in fiscal 1995, $669,398 in fiscal 1996 and
$1,310,730 in fiscal 1997. At May 31, 1997, the aggregate outstanding amount
under the Immucor GmbH loan was approximately $1,300,000.
Mr. Wilms, his wife and son have granted liens on certain property owned by
them in Germany and Portugal to collateralize the loans from the Company and
Immucor GmbH, and Mr. Wilms has agreed to grant liens on additional property
owned by him and located in the United States. Management believes that the
value of the collateral significantly exceeds the outstanding loan amounts.
Mr. Wilms has agreed to pay all amounts borrowed from the Company and Immucor
GmbH, plus interest at 8.25%, plus the Company's expenses in securing the
loans, by October 31, 1997. If these amounts are not fully repaid by that
date, the Company intends to arrange for the sale of some or all of the
collateral to the extent necessary to recover the unpaid balance.
Mr. Wilms is expected to remain as a consultant to the Company through
December 31, 1997 on European sales and marketing matters.
6. COMMON STOCK
At May 31, 1997, the following shares of Common Stock are reserved for future
issuance:
Common stock options - directors and employees 1,953,643
Common stock warrants - other 933,668
2,887,311
In connection with the acquisition of Dominion Biologicals Limited, the Company
issued to the sellers five and ten year warrants to acquire, in whole or in
part, 478,417 and 150,000 shares of Immucor stock at $12.00 and $11.98 per
share, respectively. These warrants are exercisable one year after the
issuance date, with the five-year warrants expiring in 2001 and the ten-year
warrants expiring in 2006. Immucor has agreed to register the resale of the
shares covered by both sets of warrants upon the sellers' request after the
exercise date or in connection with another registered public offering by the
Company.
In connection with prior years' business acquisitions, the Company issued to
the sellers warrants to acquire, in whole or in part, 150,000 and 375,000
shares of the Company's Common Stock at $26.95 and $7.75 per share,
respectively. The 150,000 warrants became exercisable at the rate of 20% per
year commencing August 1993, and expire in 2001. Through May 31, 1997,
219,749 of the 375,000 warrants had been exercised. The remaining 155,251
warrants are currently exercisable and expire in 2008.
The Company has a Shareholders' Rights Plan under which one Common Stock
purchase right is presently attached to and trades with each outstanding share
of the Company's Common Stock. The rights become exercisable and transferable
apart from the Common Stock ten days after a person or group, without the
Company's consent, acquires beneficial ownership of, or the right to obtain
beneficial ownership of, 20% or more of the Company's Common Stock or announces
or commences a tender offer or exchange offer that could result in at least 20%
ownership. Once exercisable, each right entitles the holder to purchase one
share of the Company's Common Stock at an exercise price of $16, subject to
adjustment to prevent dilution. The rights have no voting power and, until
exercised, no dilutive effect on net income per common share. The rights
expire on April 20, 1999, and are redeemable at the discretion of the Board of
Directors at $.01 each. All reservations of shares of Common Stock for
purposes other than the rights plan shall take precedence and be superior to
any reservation of shares in connection with or under the rights plan.
If a person or a group acquires at least 20% ownership, except in an offer
approved by the Company under the rights plan, then each right not owned by the
acquirer or related parties will entitle its holder to purchase, at the right's
exercise price, Common Stock or Common Stock equivalents having a market value
immediately prior to the triggering of the right of twice that exercise price.
In addition, after an acquirer obtains at least 20% ownership, if the Company
is involved in certain mergers, business combinations, or asset sales, each
right not owned by the acquirer or related persons will entitle its holder to
purchase, at the right's exercise price, shares of Common Stock of the other
party to the transaction having a market value immediately prior to the
triggering of the right of twice that exercise price.
7. STOCK OPTIONS
The Company has various stock option plans which authorize the Company's
Compensation Committee to grant employees, officers and directors options to
purchase shares of the Company's Common Stock. Exercise prices of stock
options are determined by the Compensation Committee and have been the
estimated fair market value at the date of the grant.
The Company's 1995 Non-Incentive Stock Option Plan authorizes the grant of
options to employees, officers and directors for up to 1,000,000 shares of the
Company's common stock. All options have 10 year terms and vest and become
fully exercisable 50% at the end of 2 years, 25% at the end of 3 years, and 25%
at the end of 4 years of continued employment.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, (APB 25) and related Interpretations
in accounting for its employee stock options because the alternative fair value
accounting provided for under FASB Statement No. 123, Accounting for Stock-
Based Compensation, requires use of option valuation models that were not
developed for use in valuing employee stock options. Under APB 25, because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock on the date of grant, no compensation is recognized.
Pro forma information regarding net income and earnings per share is required
by Statement 123, which also requires that the information be determined as if
the Company has accounted for its employee stock options granted subsequent to
June 1, 1995 under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions: a risk-free
interest rate of 6.36% and 6.27% in fiscal 1997 and 1996, respectively, no
dividend yields; a volatility factor of the expected market price of the
Company's common stock of .473 based on quarterly closing prices since 1986;
and an expected life of each option of 8 years.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting periods. The Company's pro
forma information follows:
1997 1996
Net income as reported $1,839,914 $2,772,635
Pro forma net income $1,738,227 $2,749,562
Pro forma earnings per share:
Primary $ .20 $ .32
Because Statement 123 is applicable only to options granted subsequent to
May 31, 1995, its pro forma effect will not be fully reflected until 1999.
The Company is authorized to issue up to 1,953,643 shares of its Common Stock
under various employee and director stock option arrangements. These
arrangements include employee incentive plans and various voluntary salary
reduction plans. Options granted under these plans become exercisable at
various times and unless exercised expire at various dates through 2007.
Transactions involving these stock option arrangements are summarized as
follows:
Weighted
Range Average
of Exercise Exercise
Shares Prices Price
Outstanding at May 31, 1994 1,117,741 $.10 - $10.00
Granted 688,500 5.38 - 6.00
Exercised (13,594) .10 - 3.13
Canceled (17,381) 3.00 - 8.125
Outstanding at May 31, 1995 1,775,266 3.00 - 10.00 $7.11
Granted 29,000 9.00 - 15.375 10.60
Exercised (144,200) 3.00 - 9.33 4.98
Canceled (27,719) 3.00 - 9.33 7.63
Outstanding at May 31, 1996 1,632,347 3.00 - 15.375 7.38
Granted 36,500 9.375 - 10.50 9.92
Exercised (24,357) 4.59 - 6.25 4.79
Canceled -
Outstanding at May 31, 1997 1,644,490 3.00 - 15.375 7.53
At May 31, 1997 and 1996, options for 1,238,240 and 918,347 shares of Common
Stock, respectively, were exercisable, and 309,153 and 345,654 shares of Common
Stock, respectively, were available for future grants.
The following table as of May 31, 1997 sets forth by group of exercise price
ranges, the number of shares, weighted average exercise prices, and weighted
average remaining contractual lives of options outstanding, and the number and
weighted average exercise prices of options currently exercisable.
Options Outstanding Options Exercisable
Weighted
Range of Number Weighted Avg. Number Weighted
Exercise of Avg. Contract. of Avg.
Prices Shares Exer.Price Life(Years) Shares Exercise Price
$ 3.00 $ 5.50 167,978 $4.81 2.61 160,478 $4.78
6.00 9.88 1,425,512 7.73 5.61 1,067,762 8.24
10.00 15.38 51,000 10.86 8.35 10,000 10.00
3.00 15.38 1,644,490 7.53 5.38 1,238,240 7.80
8. OPERATING LEASE COMMITMENTS
The Company leases domestic office and warehouse facilities under an operating
lease agreement expiring in 2001 with a right to renew for an additional five
years. The Company leases foreign office and warehouse facilities and
automobiles under operating lease agreements expiring at various dates through
2009. Total rental expense, principally for office and warehouse space, was
$672,614 in fiscal 1997, $630,287 in fiscal 1996, and $720,040 in fiscal 1995.
In Germany, the office facility is leased from a related party. Rental
payments under this lease were $209,127, $260,338, and $355,136 for fiscal
1997, 1996, and 1995, respectively.
The following is a schedule of approximate future annual lease payments under
operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of May 31, 1997:
Year Ending May 31:
1998 $ 658,074
1999 629,196
2000 649,558
2001 601,287
2002 257,655
Thereafter 1,644,827
The Company may, at its option, extend its office and warehouse facilities
lease terms through various dates.
9. INCOME TAXES
Sources of income before income taxes are summarized below:
Year Ended May 31,
1997 1996 1995
Domestic Operations $2,122,795 $4,014,011 $4,524,194
Foreign Operation 1,019,409 162,275 6,468
Total $3,142,204 $4,176,286 $4,530,662
The provision for income taxes is summarized as follows:
Year Ended May 31,
1997 1996 1995
Current:
Federal $648,258 $1,378,290 $1,536,798
Foreign 327,647 (8,585) 271
State 50,383 112,764 163,372
1,026,288 1,482,469 1,700,441
Deferred:
Federal (25,849) (70,521) (53,295)
Foreign 304,892 - -
State (3,041) (8,297) (6,271)
276,002 (78,818) (59,566)
Income taxes $1,302,290 $1,403,651 $1,640,875
Deferred income taxes reflect the net tax effects of: (a) temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and income tax purposes; and (b) operating loss
carryforwards. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. The tax effects of
significant items comprising the Company's net deferred tax asset at May 31,
1997 and 1996 are as follows:
Year Ended May 31,
1997 1996
Deferred tax liabilities:
Amortization $(1,568,309) $(1,457,012)
Depreciation (199,377) -
Deferred tax assets:
Depreciation - 63,425
Reserves not currently deductible 69,166 8,654
Foreign operating loss carryforwards 1,967,222 2,293,091
Uniform capitalization 282,608 235,771
551,310 1,143,929
Valuation allowance (746,755) (791,174)
Net deferred tax asset (liability) $ (195,445) $ 352,755
The Company's effective tax rate differs from the federal statutory rate as
follows:
Year Ended May 31,
1997 1996 1995
Federal statutory tax rate 34% 34% 34%
State income taxes, net of federal tax benefit 1 2 2
Interest on state municipal obligations (3) (3) (2)
Foreign Sales Corporation commissions (5) - -
Higher effective income tax rates of other
countries 6 - -
Excess of cost over tangible assets acquired
- net 2 - -
Research and development tax credits (1) (1) (1)
Other 7 2 3
41% 34% 36%
As a result of utilizing compensation cost deductions arising from the exercise
of nonqualified employee stock options for federal and state income tax
purposes, the Company realized income tax benefits of $47,722, $384,887, and
$19,090 in fiscal 1997, 1996, and 1995, respectively. Additionally, the
Company recorded income tax benefits of $55,142, both in fiscal 1997 and 1996,
caused by patent amortization expense deductions resulting from a 1993 exercise
of stock options previously issued in connection with the acquisition of
certain technology (Note 10). These income tax benefits are recognized in the
accompanying financial statements as additions to additional paid-in capital
rather than as reductions of the respective income tax provisions because the
related compensation deductions are not recognized as compensation expense for
financial reporting purposes.
At May 31, 1997, the Company's German subsidiary had net operating loss
carryforwards for income tax purposes of approximately $2,230,754 which do not
expire. The net operating loss carryforwards result primarily due to
differences in the timing of amortization deductions. At May 31, 1997, the
Company's Italian subsidiary had net operating loss carryforwards for
income tax purposes of approximately $1,721,741 which expire in 2000 and 2001.
10. TECHNOLOGY RIGHTS
In March 1983, the Company acquired rights to technology to be used in
developing diagnostic testing products. In connection with this acquisition,
the Company has agreed to pay to the inventors royalties equal to 4% of the net
sales from products utilizing the technology. Royalties under this agreement
amounted to approximately $368,800, $328,400, and $278,300 in fiscal 1997,
1996, and 1995, respectively.
11. INSTRUMENT DEVELOPMENT AND MANUFACTURING AGREEMENTS
The Company has contracted with Bio-Tek Instruments, Inc. (Note 1) for the
development of a fully automated, "walk-away", blood bank analyzer. Known as
the ABS2000, the analyzer utilizes the Company's patented Capture(registered
trademark) products technology and will be marketed by the Company to hospital
transfusion laboratories for patient testing.
During fiscal 1996, the Company entered into a second development and
manufacturing agreement with DYNEX Technologies, Inc. Under the terms of the
agreement, DYNEX will design and manufacture a second analyzer known as the
ABSHV utilizing the Company's Capture products technology which will be
marketed by the Company to blood donor centers for donor testing.
In fiscal 1997, 1996 and 1995, the Company incurred $342,040, $493,010 and
$643,839, respectively, in instrument research and development principally
under these contracts.
12. DOMESTIC AND INTERNATIONAL OPERATIONS
Information concerning the Company's domestic and foreign operations is
summarized below:
Year Ended May 31, 1997
U.S. Int'l(1) Eliminat. Consolid.
Net Revenues:
Unaffiliated customers $17,183,643 $18,469,974 - $35,653,617
Affiliates 3,731,682 153,005 $(3,884,687) -
Total 20,915,325 18,622,979 (3,884,687) 35,653,617
Income from operations 860,059 2,122,972 (6,199) 2,976,832
Identifiable assets 31,581,176 29,286,077 (3,141,607) 57,725,646
Year Ended May 31, 1996
U.S. Europe Eliminat. Consolid.
Net Revenues:
Unaffiliated customers $15,953,635 $15,010,422 - $30,964,057
Affiliates 3,432,611 89,820 $(3,522,431) -
Total 19,386,246 15,100,242 (3,522,431) 30,964,057
Income from operations 2,777,277 814,871 1,629 3,593,777
Identifiable assets 31,700,867 18,451,729 (2,945,738) 47,206,858
Year Ended May 31, 1995
U.S. Europe Eliminat. Consolid.
Net Revenues:
Unaffiliated customers $15,224,035 $13,667,503 - $28,891,538
Affiliates 3,292,370 145,294 (3,437,664) -
Total 18,516,405 13,812,797 (3,437,664) 28,891,538
Income from operations 3,872,959 443,142 5,570 4,321,671
Identifiable assets 27,557,450 18,346,520 (1,924,728) 43,979,242
(1) Includes results from Canadian subsidiary: Income from operations of
$589,457 and Identifiable assets of $10,318,988.
Net revenues are not considered significant.
Product sales to affiliates are valued at market prices.
During the years ended May 31, 1997, 1996, and 1995, the Company had net
domestic export sales to unaffiliated customers of approximately $3,660,000,
$3,158,000, and $2,519,000, respectively.
14. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan covering its domestic employees
who meet certain age and length of service requirements, as defined. The
Company matches a portion of employee contributions to the plan. During the
years ended May 31, 1997, 1996, and 1995, the Company's matching contributions
to the plan were $100,688, $92,700, and $84,300, respectively. Vesting in the
Company's matching contributions is based on years of continuous service.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)
Net Gross Operating Net Net Income
Sales Margin Incom Income Per Share
FISCAL 1997
First Quarter $7,957 $4,819 $831 $597 $.07
Second Quarter 8,357 4,837 695 483 .06
Third Quarter 9,640 5,706 884 344 .04
Fourth Quarter 9,700 5,236 566 416 .05
$35,654 $20,598 $2,976 $1,840 $.22
FISCAL 1996
First Quarter $7,476 $4,714 $1,134 $796 $.09
Second Quarter 7,282 4,570 962 750 .09
Third Quarter 8,073 4,917 975 788 .09
Fourth Quarter 8,133 4,758 523 439 .05
$30,964 $18,959 $3,594 $2,773 $.32
IMMUCOR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1995, 1996, AND 1997
Balance at Charged to Balance
Beginning Costs and Deductions at End
of Period Expense (Note 1) of Period
1995:
Allowance for doubtful accts $178,094 $61,092 $(5,989) $233,197
1996:
Allowance for doubtful accts $233,197 $118,682 $(1,334) $350,545
1997:
Allowance for doubtful accts $350,545 $75,521 $(30,990) $395,076
Note 1: "Deductions" represent accounts written off during the period less
recoveries of accounts previously written off.
Item 9.-Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10.-Directors and Executive Officers of the Registrant.
The following table sets forth certain information concerning the directors
and executive officers of the Company.
Name Age Position with Company
Edward L. Gallup 58 Chairman of the Board of Directors, President and
Chief Executive Officer
Ralph A. Eatz 53 Director and Senior Vice President - Operations
Richard J. Still 48 Director, Senior Vice President - Finance, Treasurer
and Secretary
Daniel T. McKeithan 73 Director
Didier L. Lanson 47 Director
Dr. Gioacchino De
Chirico 44 Director, President of Immucor Italia S.r.l.
G. Bruce Papesh 50 President, Dart, Papesh & Co.
All members of the Board of Directors hold office until the next annual
meeting of shareholders or until their successors are duly elected and have
qualified or until their earlier death, resignation, or removal. All
executive officers serve at the pleasure of the Board of Directors.
Messrs. Gallup, Eatz and Still founded Immucor in 1982, and have from 25 to 33
years experience in the blood banking diagnostic reagent industry. In addition,
such officers worked together for approximately six years at Biological
Corporation of America ("BCA"), now the blood banking reagents division of
Biopool, Inc. Including the time they worked together as officers of BCA and
Immucor, they now have worked together as a management team for over 22 years
in the blood banking diagnostic reagent business.
Edward L. Gallup has been Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since its founding. Mr. Gallup has
worked in the blood banking business for over 33 years.
Ralph A. Eatz, who has been working in the blood banking reagent field for
over 29 years, has been a director and Vice President - Operations of the
Company since its founding, and Senior Vice President - Operations since
December 1988.
Richard J. Still has been a director of the Company since August 1982, Vice
President - Finance (August 1982 to November 1988) and now Senior Vice
President - Finance (since December 1988), and Secretary and Treasurer since
February 1983. He has worked in the blood banking reagent business for over
25 years.
Daniel T. McKeithan has been a director of the Company since February 28, 1983.
Since 1986, he has served as a consultant to health care companies. From April
1979 until March 1986 he was employed by Blood Systems, Inc., a supplier of
blood and blood products, as a general manager and as Executive Vice President
of Operations. Mr. McKeithan also has 29 years experience in pharmaceutical
and diagnostic products with Johnson and Johnson, Inc., including Vice
President - Manufacturing of the Ortho Diagnostic Systems division.
Didier L. Lanson has been a director of the Company since October 24, 1989.
Since September 1992, he has served as Vice President, Europe, of SyStemix
International, subsidiary of SyStemix, Inc., a publicly traded biotechnology
company recently acquired by Novartis Biotech Holding Corporation, a wholly
owned subsidiary of Novartis Inc., and primarily engaged in the development
of cellular processes and cellular products. He was an Administrator and the
President and CEO of Diagnostics Transfusion ("DT"), a French corporation
which manufactures and distributes reagent products, and President and CEO of
ESPACE VIE, a French corporation which develops and markets pharmaceutical
blood based products and biotech products, from 1987 until December 1991.
Dr. Gioacchino De Chirico has been President of Immucor Italia S.r.l. since
February 1994. From 1989 until 1994, he was employed in the United States by
Ortho Diagnostic Systems, Inc., a Johnson and Johnson Company, as General
Manager, Immunocytometry, with worldwide responsibility. From 1979 until 1989,
he was with Ortho Diagnostic Systems, Inc., in Italy, where he began as a
sales representative and held several management positions, including Product
Manager and European Marketing Manager for Immunology and Infectious Disease
products. Immucor Italia S.r.l. was acquired by the Company on September 30,
1991.
G. Bruce Papesh is the co-founder of Dart, Papesh & Co., a Lansing, Michigan
based company that provides investment consulting and other financial services.
He has served as President of Dart, Papesh & Co. Inc., since 1987. Mr. Papesh
has over 27 years of experience in investment services while serving in stock
broker, consulting and executive management positions. He provides investment
services to Kenneth B. Dart and Robert C. Dart and their affiliates. Mr.
Papesh also serves as a Director and as Secretary of Neogen Corporation, an
agricultural biotechnology company.
There are no family relationships among any of the directors or executive
officers of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a) of
the Securities Exchange Act of 1934 and regulations of the Securities and
Exchange Commission thereunder require the Company's executive officers and
directors and persons who own more than ten percent of the Company's Common
Stock, as well as certain affiliates of such persons, to file initial reports
of ownership and changes in ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers. Executive
officers, directors and persons owning more than ten percent of the Company's
Common Stock are required by Securities and Exchange Commission regulation to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of the copies of such forms received by it and written
representations that no other reports were required for those persons, the
Company believes that, during the fiscal year ended May 31, 1997, all filing
requirements applicable to its executive officers, directors, and owners of
more than ten percent of the Company's Common Stock were complied with.
Item 11.-Executive Compensation
The following table sets forth the compensation earned by the Company's Chief
Executive Officer and all of the Company's other executive officers for
services rendered in all capacities to the Company for the last three fiscal
years.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Other Securities All Other
Name and Annual Underlying Compensa-
Principal Position Year Salary Bonus (1) Comp(2) Options(3) tion(4)
Edward L. Gallup 1997 $183,993 $ - $33,415 - $4,812
Chairman of the 1996 $176,587 $ - $31,633 - $4,945
Board, President, 1995 $170,180 $10,000 $28,778 60,000 $4,906
and Chief Executive Officer
Ralph A. Eatz 1997 $178,593 $ - $28,108 - $4,782
Director and Senior 1996 $170,913 $ - $26,738 - $4,975
Vice President - 1995 $164,780 $10,000 $24,586 60,000 $4,911
Operations
Richard J. Still 1997 $178,593 $ - $24,639 - $4,778
Director, Senior 1996 $170,981 $ - $23,058 - $5,038
Vice President - 1995 $164,780 $10,000 $21,816 60,000 $4,808
Finance, Treasurer and Secretary
Josef Wilms (5) 1997 $193,548 $ - $16,093 - -
President, Immucor 1996 $202,131 $ - $17,663 - -
GmbH 1995 $192,714 $10,000 $18,709 60,000 -
Dr. Gioacchino De
Chirico (6) 1997 $177,188 $ - $13,021 - -
President, Immucor 1996 $180,073 $ - $11,731 - -
Italia, S.r.l. and 1995 $163,336 $10,000 $11,350 60,000 -
Director
(1) Represents for 1995 a bonus which was accrued for the year ended May 31,
1995, and was paid in August 1995.
(2) Includes the value of life insurance premiums and an allowance for
automobile expenditures for each of the above named executive officers as
follows: For 1997 - for Mr. Gallup, Eatz, Still, Wilms, and De Chirico, life
insurance premiums of $23,815, $18,508 $15,039, $1,898 and $3,421,
respectively, and an allowance for automobile expenditures for Mr. Gallup,
Eatz, and Still of $9,600 each, for Mr. Wilms $14,195, and for Dr. De Chirico
$9,600. For 1996 - for Mr. Gallup, Eatz, Still, Wilms, and De Chirico, life
insurance premiums of $22,033, $17,138, $13,458, $2,059, and $2,131,
respectively, and an allowance for automobile expenditures for Mr. Gallup, Eatz
and Still of $9,600 each, for Mr. Wilms $15,604, and for Dr. De Chirico
$9,600. For 1995 - for Mr. Gallup, Eatz, Still, Wilms, and De Chirico, life
insurance premiums of $19,178, $14,986, $12,216, $2,009 and $1,750,
respectively, and an allowance for automobile expenditures for Mr. Gallup,
Eatz and Still of $9,600 each, and for Mr. Wilms $16,700 and for Dr. De Chirico
$9,600. (3) Represents options granted under the 1995 Stock Option Plan to
purchase shares of the Company's Common Stock at an exercise price of $6.00.
50% of the options are exercisable beginning January 2, 1997, and 25% per
year thereafter.
(4) Represents amounts the Company contributed to the 401(k) retirement plan
on behalf of the named executive officers.
(5) Mr. Wilms resigned as President of Immucor GmbH in July 1997.
(6) Dr. De Chirico became an executive officer and director of the Company on
December 1, 1994.
Stock Options.
Options Granted. No options were granted during the fiscal year ended
May 31, 1997.
Option Holdings
The table below presents the value of unexercised options held as of the end
of the fiscal year by each of the Company's executive officers.
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
May 31, 1997 May 31, 1997 (1)
Exercisable Unexercisable Exercisable Unexercisable
Edward L. Gallup 119,250 30,000 $ 86,250 $86,250
Ralph A. Eatz 119,250 30,000 86,250 86,250
Richard J. Still 119,250 30,000 86,250 86,250
Dr. Gioacchino
De Chirico 37,500 37,500 118,594 97,031
Josef Wilms(2) 263,000 30,000 247,969 86,250
(1) Based on the difference between the exercise price and the closing price
for the Common Stock on May 31, 1997, of $8.875 as reported by NASDAQ.
(2) Includes warrants to purchase 143,750 shares of Common Stock at an
exercise price of $7.75, issued in connection with the acquisition of
Immucor GmbH.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee has responsibility for determining the types and
amounts of executive compensation, including setting the number of stock
options that can be granted to executive officers as a group. Messrs. Eatz,
McKeithan, Papesh, and Lanson are members of the Compensation Committee. The
Stock Option Committee determines the number of shares to be granted to
individual executive officers. Messrs. Gallup, Eatz, and Still are members
of the Stock Option Committee. Ralph A. Eatz has been a director and Vice
President - Operations of the Company since its founding, and Senior Vice
President - Operations since December 1988 and participates in decisions on
executive compensation. Neither Mr. McKeithan, Mr. Papesh nor Mr. Lanson
are, nor have they ever been, officers or employees of the Company. Edward
L. Gallup, Ralph A. Eatz, and Richard J. Still are the founders of the
Company, have been directors and executive officers of the Company since its
inception, and each of them participates in decisions on all stock options
granted.
Compensation of Directors
Members of the Board of Directors, who are not also executive officers of the
Company, receive $500 per meeting and are reimbursed for all travel expenses to
and from meetings of the Board.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
The Company has in effect employment agreements (the "Agreements") with three
of its executive officers: Edward L. Gallup, Ralph A. Eatz and Richard J. Still
(individually, "the Employee") entered into on January 1, 1986. Each of the
Agreements renews for a period of five years from each anniversary date
unless sooner terminated. If the Company terminates the employment of the
Employee "without cause", the Employee would receive his base annual
salary for the remainder of the five year period as renewed in a single lump
sum payment upon such termination. "Without cause" is defined in the
Agreements to include (i) the sale, exchange, or other disposition, in one
transaction, or in a series of related transactions, of at least 20% of the
Company's outstanding shares of capital stock (but not including a purchase
and sale of the Company's Common Stock by an underwriter in a public offering),
(ii) the sale of substantially all of the Company's assets to a purchaser or a
group of associated purchasers, whether in a single transaction or a series of
related transactions, (iii) under certain circumstances, the merger or
consolidation of the Company, or (iv) the occurrence of any change in control
of the Company within the meaning of the federal securities law. "Without
cause" also includes the relocation of the Employee without the Employee's
consent.
Immucor GmbH had in effect an employment agreement with Josef Wilms, prior to
his resignation, effective for an indefinite period and subject to termination
by either party at the end of each calendar half year upon six months prior
notice. A termination by Immucor GmbH required a decision by the Company as
its sole shareholder. Under the terms of the employment agreement, Mr. Wilms
agreed to refrain from competition with Immucor GmbH for a period of two years
following the termination of the agreement, and Immucor GmbH agreed to pay Mr.
Wilms monthly installments of 1/16 of his annual compensation for such
forbearance. Immucor GmbH had the right to release Mr. Wilms from his
noncompetition obligations, in which case Mr. Wilms would not have been paid.
The Company is currently discussing with Mr. Wilms matters relating to this
agreement as a result of his resignation. Currently, Mr. Wilms is expected
to remain as a consultant to the Company through December 31, 1997, on
European sales and marketing matters. See Item 13 - Certain Relationships
and Related Transactions.
The Company has in effect employment agreements (the "Agreement") with Dr.
Gioacchino De Chirico entered into on December 31, 1993. The Agreement
renews for a period of five years from each anniversary date unless sooner
terminated based upon sales performance of Immucor Italia. The Company may
only terminate the employment agreement "for cause", as defined in the
agreement. If the Company terminates the employment of the Employee "without
cause", the Employee would receive his base annual salary for the remainder
of the five year period as renewed upon such termination. Dr. De Chirico has
agreed to refrain from competition with Immucor Italia, S.r.l. following the
termination of the agreement for a period of two years if he is terminated
without cause, and for a period of four years if he is terminated for cause
or if he voluntarily terminates the agreement.
Item 12.-Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of August 15, 1997, the number of shares of
Common Stock of Immucor beneficially owned by each director of the Company,
and by each person known to the Company to own more than 5% of the outstanding
shares of Common Stock, and by all of the executive officers and directors of
the Company as a group.
Name of Beneficial Owner
(and address for those Shares Percent
owning more than five percent) Owned(1) of Class(1)
Edward L. Gallup 231,357(2) 2.8%
Ralph A. Eatz 307,526(2) 3.8%
Richard J. Still 159,250(2) 1.9%
Dr. Gioacchino De Chirico 37,500(3) *
Didier L. Lanson 8,750(4) *
Daniel T. McKeithan 53,778(4) *
G. Bruce Papesh 500(5) *
Kenneth B. Dart
P.O. Box 31300-SMB
Grand Cayman,
Cayman Islands, BWI 472,675(6) 5.9%
All directors and executive officers
as a group (seven persons) 798,661 8.9%
* less than 1%.
(1) Except as otherwise noted herein, percentages are determined on the basis
of 8,078,737 shares of Common Stock issued and outstanding plus securities
deemed outstanding pursuant to Rule 13-3(d)(1) of the Securities Exchange
Act of 1934, as amended. As a result, the percentage of shares of Common
Stock is calculated assuming that the beneficial owner has exercised any
options held by such beneficial owner that are currently exercisable, or
exercisable within 60 days of August 15, 1997, and that no other options
have been exercised by anyone else. Unless otherwise indicated, the Company
believes the beneficial owner has sole voting and investment power over such
shares.
(2) Includes for each person an option to acquire 89,250 shares at an exercise
price of $9.33 and an option to acquire 30,000 shares at an exercise price of
$6.00.
(3) Includes a currently exercisable option to acquire 7,500 shares of Common
Stock at an exercise price of $6.00 and an option to acquire 30,000 shares of
Common Stock at an exercise price of $6.00.
(4) Includes a currently exercisable option to acquire 3,750 shares at $5.40
per share and a currently exercisable option to acquire 5,000 shares at $6.00
per share.
(5) Includes 400 shares over which Mr. Papesh shares investment power in his
role as an investment advisor.
(6) Pursuant to SEC Form 13D/A filed on December 19, 1996 (filed on
May 15, 1997 electronically), 236,338 shares (2.93%) were owned by
Kenneth B. Dart, P.O. Box 31300-SMB, Grand Cayman, Cayman Islands,
BWI, and 236,337 shares (2.93%) were owned by Robert C. Dart, c/o Dart
Management Limited, P.O. Box 31363-SMB, Grand Cayman, Cayman Islands, BWI.
All such shares (472,675 total, or 5.9%) are deemed under common control of
Kenneth B. Dart as a result of an oral understanding by and between Kenneth
B. Dart and Robert C. Dart.
Item 13.-Certain Relationships and Related Transactions.
The Company's German subsidiary, Immucor Mediziniche Diagnostik GmbH
("Immucor GmbH"), leases approximately 1,566 square meters of space from the
son of Josef Wilms, who formerly was the President of Immucor GmbH and a
director of the Company. Rental payments for the 1997 fiscal year totaled
$209,127, and the lease term extends through April 2009.
In fiscal year 1997, the Company loaned Mr. Wilms $300,000 at 6% interest,
secured by his warrants to purchase 143,750 shares of the Company's Common
Stock. At May 31, 1997 and July 31, 1997, the amount outstanding under the
loan was $309,000 and $312,000 including accrued interest.
In July 1997, management of the Company discovered that Mr. Wilms had caused
Immucor GmbH to make unauthorized loans to him since 1994. The amounts advanced
were documented in the records of Immucor GmbH, including interest rates
ranging from 7.75% to 9.5%, and were generally paid down by the end of each
accounting period, but were not disclosed to Company's management. The
largest aggregate amounts outstanding were $29,560 in fiscal 1994, $290,422
in fiscal 1995, $669,398 in fiscal 1996 and $1,310,730 in fiscal 1997. At
July 31, 1997, the aggregate outstanding amount payable was approximately
$1,232,973.
Mr. Wilms, his wife and son have granted liens on certain property owned by
them in Germany and Portugal to collateralize the loans from the Company and
Immucor GmbH, and Mr. Wilms has agreed to grant liens on additional property
owned by him and located in the United States. Management believes that the
value of the collateral significantly exceeds the outstanding loan amounts.
Mr. Wilms has agreed to pay all amounts borrowed from the Company and Immucor
GmbH, plus interest at 8.25%, plus the Company's expenses in securing the
loans, by October 31, 1997. If these amounts are not fully repaid by that
date, the Company intends to arrange for the sale of some or all of the
collateral to the extent necessary to recover the unpaid balance of the
loans at that date.
Mr. Wilms has resigned as a director of the Company and as an employee of
Immucor GmbH, but will remain a Managing Director of Immucor GmbH, with
limited authority, through December 31, 1997. Mr. Wilms is expected to
remain as a consultant to the Company through December 31, 1997 on European
sales and marketing matters. If the outstanding loans are not repaid by
October 31, 1997, Mr. Wilms will be terminated as a Managing Director of
Immucor GmbH and a consultant to the Company.
PART IV
Item 14.-Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
1. Consolidated Financial Statements
The Consolidated Financial Statements, Notes thereto, and Independent Auditors'
Reports thereon are included in Part II, Item 8 of this report.
2. Consolidated Financial Statement Schedule included in Part II, Item 8 of
this report
Schedule II - Valuation and Qualifying Accounts
Other financial statement schedules are omitted as they are not required or
not applicable.
3. Exhibits
3.1 Articles of Incorporation (composite as of December 22, 1989) (incorporated
by reference to Exhibit 3.1 to Immucor, Inc.'s Quarterly Report on Form 10-Q
for the fiscal quarter ended November 30, 1989).
3.2 Bylaws (amended and restated as of August 28, 1991) (incorporated by
reference to Exhibit 19 to Immucor, Inc.'s Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1991).
4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 7, 1989 (incorporated
by reference to Exhibit 4.1 to Immucor, Inc.'s Current Report on Form 8-K
dated April 7, 1989).
10.1 Standard Industrial Lease, dated July 21, 1982, between the Company and
Colony Center, Ltd. (incorporated by reference to Exhibit 10.2 to Immucor,
Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1985).
10.1-1 Lease Amendment dated June 28, 1989, between the Company and Colony
Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor's Annual
Report on Form 10-K for the fiscal year ended May 31, 1989).
10.1-2 Lease Amendment dated November 8, 1991, between the Company and Colony
Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor's Annual
Report on Form 10-K for the fiscal year ended May 31, 1992).
10.1-3 Lease Agreement, dated February 2, 1996, between the Company and
Connecticut General Life Insurance Company.
10.2 Agreement, dated March 11, 1983, between the Company and The Kansas City
Group, as amended through January 21, 1985 (incorporated by reference to
Exhibit 10.2 to Registration Statement No. 33-16275 on Form S-1).
10.3 Agreement dated August 27, 1987, between the Company and the Kansas City
Group amending Exhibit 10.2 (incorporated by reference to Exhibit 10.3 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May 31, 1989).
10.4 United States Department of Health and Human Services Establishment
License dated December 28, 1982, for the manufacture of biological products
(incorporated by reference to Exhibit 10.12 to Registration Statement
No. 33-966 on Form S-1).
10.5 United States Department of Health and Human Services Product License
dated December 28, 1982, for the manufacture and sale of reagent red blood
cells (incorporated by reference to Exhibit 10.13 to Registration Statement
No. 33-966 on Form S-1).
10.6 United States Department of Health and Human Services Product License
dated May 20, 1983, for the manufacture and sale of blood grouping sera
(incorporated by reference to Exhibit 10.14 to Registration Statement
No. 33-966 on Form S-1).
10.7 United States Department of Health and Human Services Product License
date November 18, 1983, for the manufacture and sale of anti-human serum
(incorporated by reference to Exhibit 10.15 to Registration Statement
No. 33-966 on Form S-1).
10.8* Employment Agreement, dated January 1, 1986, between the Company and
Edward L. Gallup (incorporated by reference to Exhibit 10.15 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.8-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Edward L. Gallup (incorporated by reference to Exhibit 10.12-1
to Immucor's Annual Report on Form 10-K for the fiscal year ended
May 31, 1989).
10.9* Employment Agreement, dated January 1, 1986, between the Company and
Ralph A. Eatz (incorporated by reference to Exhibit 10.16 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.9-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Ralph A. Eatz (incorporated by reference to Exhibit 10.13-1 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May 31, 1989).
10.10* Employment Agreement, dated January 1, 1986, between the Company and
Richard J. Still (incorporated by reference to Exhibit 10.17 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.10-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Richard J. Still (incorporated by reference to Exhibit 10.14-1
to Immucor's Annual Report on Form 10-K for the fiscal year ended
May 31, 1989).
10.11* Employment Agreement dated September 12, 1990, between Immucor GmbH and
Josef Wilms (incorporated by reference to Exhibit 10.11 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1991).
10.12* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.12 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.13* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.14* 1995 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.14 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1995).
10.15* 1990 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.15 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1995).
10.16* Description of 1983 and 1984 Salary Reduction Plans (incorporated by
reference to Exhibit 10.9 to Immucor, Inc.'s Annual Report on Form 10-K for
the fiscal year ending May 31, 1985).
10.17* Description of 1983 Stock Option Plan (incorporated by reference to
Exhibit 10.10 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal
year ending May 31, 1985).
10.18* 1986 Incentive Stock Option Plan, amended July 29, 1987, including
form of Stock Option Agreement used thereunder (incorporated by reference
to Exhibit 10.9 to Registration Statement No. 33-16275 on Form S-1).
11.1 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company did not file a Current Report on Form 8-K during the quarter ended
May 31, 1997.
(c) Exhibits
The exhibits required to be filed with this Annual Report on Form 10-K
pursuant to Item 601, of Regulation S-K are listed under "Exhibits" in Part
IV, Item 14(a)(3) of this Annual Report on Form 10-K, and are incorporated
herein by reference.
(d) Financial Statement Schedule
The Financial Statement Schedule required to be filed with this Annual Report
on Form 10-K is listed under "Financial Statement Schedule" in Part IV,
Item 14(a)(2) of this Annual Report on Form 10-K, and is incorporated herein
by reference.
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.
IMMUCOR, INC.
By: /s/ EDWARD L. GALLUP
Edward L. Gallup, Chairman of the Board of Directors,
President and Chief Executive Officer
August 22, 1997
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.
/s/ EDWARD L. GALLUP
Edward L. Gallup, Director, Chairman of the Board of
Directors, President and Chief Executive Officer (Principal
Executive Officer)
August 22, 1997
/s/ RICHARD J. STILL
Richard J. Still, Senior Vice President-Finance, Secretary,
Treasurer, and Director (Principal Financial and
Accounting Officer)
August 22, 1997
/s/RALPH A. EATZ
Ralph A. Eatz, Director
August 22, 1997
/s/DANIEL T. MCKEITHAN
Daniel T. McKeithan, Director
August 22, 1997
/s/G. BRUCE PAPESH
G. Bruce Papesh, Director
August 22, 1997
Didier L. Lanson, Director
Dr. Gioacchino De Chirico, Director
EXHIBIT INDEX
Sequential
Number Description Page Number
3.1 Articles of Incorporation (composite as of December 22, 1989) (incorporated
by reference to Exhibit 3.1 to Immucor, Inc.'s Quarterly Report on Form 10-Q
for the fiscal quarter ended November 30, 1989).
3.2 Bylaws (amended and restated as of August 28, 1991) (incorporated by
reference to Exhibit 19 to Immucor, Inc.'s Quarterly Report on Form 10-Q for
the fiscal quarter ended August 31, 1991).
4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 7, 1989 (incorporated
by reference to Exhibit 4.1 to Immucor, Inc.'s Current Report on Form 8-K
dated April 7, 1989).
10.1 Standard Industrial Lease, dated July 21, 1982, between the Company and
Colony Center, Ltd. (incorporated by reference to Exhibit 10.2 to Immucor,
Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31, 1985).
10.1-1 Lease Amendment dated June 28, 1989, between the Company and Colony
Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor's Annual
Report on Form 10-K for the fiscal year ended May 31, 1989).
10.1-2 Lease Amendment dated November 8, 1991, between the Company and Colony
Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to Immucor's Annual
Report on Form 10-K for the fiscal year ended May 31, 1992).
10.1-3 Lease Agreement, dated February 2, 1996, between the Company and
Connecticut General Life Insurance Company.
10.2 Agreement, dated March 11, 1983, between the Company and The Kansas City
Group, as amended through January 21, 1985 (incorporated by reference to
Exhibit 10.2 to Registration Statement No. 33-16275 on Form S-1).
10.3 Agreement dated August 27, 1987, between the Company and the Kansas City
Group amending Exhibit 10.2 (incorporated by reference to Exhibit 10.3 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May 31, 1989).
10.4 United States Department of Health and Human Services Establishment
License dated December 28, 1982, for the manufacture of biological products
(incorporated by reference to Exhibit 10.12 to Registration Statement
No. 33-966 on Form S-1).
10.5 United States Department of Health and Human Services Product License
dated December 28, 1982, for the manufacture and sale of reagent red blood
cells (incorporated by reference to Exhibit 10.13 to Registration Statement
No. 33-966 on Form S-1).
10.6 United States Department of Health and Human Services Product License
dated May 20, 1983, for the manufacture and sale of blood grouping sera
(incorporated by reference to Exhibit 10.14 to Registration Statement
No. 33-966 on Form S-1).
10.7 United States Department of Health and Human Services Product License
date November 18, 1983, for the manufacture and sale of anti-human serum
(incorporated by reference to Exhibit 10.15 to Registration Statement
No. 33-966 on Form S-1).
10.8* Employment Agreement, dated January 1, 1986, between the Company and
Edward L. Gallup (incorporated by reference to Exhibit 10.15 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.8-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Edward L. Gallup (incorporated by reference to Exhibit 10.12-1 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May 31, 1989).
10.9* Employment Agreement, dated January 1, 1986, between the Company and
Ralph A. Eatz (incorporated by reference to Exhibit 10.16 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.9-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Ralph A. Eatz (incorporated by reference to Exhibit 10.13-1 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May 31, 1989).
10.10* Employment Agreement, dated January 1, 1986, between the Company and
Richard J. Still (incorporated by reference to Exhibit 10.17 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1986).
10.10-1* Amendment to Employment Agreement dated April 7, 1989, between the
Company and Richard J. Still (incorporated by reference to Exhibit 10.14-1
to Immucor's Annual Report on Form 10-K for the fiscal year ended
May 31, 1989).
10.11* Employment Agreement dated September 12, 1990, between Immucor GmbH and
Josef Wilms (incorporated by reference to Exhibit 10.11 to Immucor, Inc. Annual
Report on Form 10-K for the fiscal year ended May 31, 1991).
10.12* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.12 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.13* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.14* 1995 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.14 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1995).
10.15* 1990 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.15 to Immucor, Inc.
Annual Report on Form 10-K for the fiscal year ended May 31, 1995).
10.16* Description of 1983 and 1984 Salary Reduction Plans (incorporated by
reference to Exhibit 10.9 to Immucor, Inc.'s Annual Report on Form 10-K for
the fiscal year ending May 31, 1985).
10.17* Description of 1983 Stock Option Plan (incorporated by reference to
Exhibit 10.10 to Immucor, Inc.'s Annual Report on Form 10-K for the fiscal
year ending May 31, 1985).
10.18* 1986 Incentive Stock Option Plan, amended July 29, 1987, including
form of Stock Option Agreement used thereunder (incorporated by reference
to Exhibit 10.9 to Registration Statement No. 33-16275 on Form S-1).
11.1 Statement re: computation of per share earnings.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Deloitte & Touche LLP
27 Financial Data Schedule
* Denotes a management contract or compensatory plan or arrangement.
IMMUCOR, INC. AND SUBSIDIARIES
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended May 31,
1997 1996 1995
Primary income per common and common
equivalent share:
Net income $1,839,914 $2,772,635 $2,889,787
Weighted average number of common shares and common
share equivalents are as follows:
Weighted average common shares
outstanding 8,066,137 7,867,354 7,695,252
Shares issued from assumed exercise
of options and warrants 468,947 786,011 113,413
Weighted average number of shares
outstanding, as adjusted 8,535,084 8,653,365 7,808,665
Primary income per common and common equivalent share:
Net income $ .22 $ .32 $ .37
Note: Shares issued from assumed exercise of options and warrants include the
number of incremental shares which result from applying the "treasury stock
method" for dilutive options and warrants in 1997, 1996 and 1995, per APB
15, paragraph 38.
Year Ended May 31,
1997 1996 1995
Fully diluted income per common and common
equivalent share:
Net income $1,839,914 $2,772,635 $2,889,787
The weighted average number of common
shares are as follows:
Weighted average common shares
outstanding 8,066,137 7,867,354 7,695,252
Shares issued from assumed exercise
of options and warrants 482,462 929,304 160,588
Weighted average number of shares
outstanding, as adjusted 8,548,599 8,796,658 7,855,840
Fully diluted income per common
and common equivalent share:
Net income $ .22 $ .32 $ .37
Note: Shares issued from assumed exercise of options and warrants include the
number of incremental shares which result from applying the "treasury stock
method" for dilutive options and warrants in 1997, 1996 and 1995, per APB
15, paragraph 38.
EXHIBIT 21
Subsidiaries of Registrant
Subsidiary Jurisdiction of Organization
Immucor GmbH Federal Republic of Germany
Immucor Italia Srl Italy
Immucor Portugal, Lda. Portugal
Immucor, S.L. Spain
Dominion Biologicals Limited Canada
The Company owns 100% of the outstanding stock of each of the above.
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
33-35863 and 33-42261 on Form S-3 and Registration Statement Nos. 33-4636,
33-24199, 33-36554, 33-41406, 33-49882, and 33-62097 on Form S-8, of our
report dated July 16, 1997, except for the third paragraph of Note 5 as to
which the date is August 7, 1997, with respect to the consolidated financial
statements of Immucor, Inc. in this Annual Report (Form 10-K).
Ernst & Young LLP
Atlanta, Georgia
August 21, 1997
EXHIBIT 23.2
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
33-35863 and 33-42261 on Form S-3 and Registration Statement Nos. 33-4636,
33-24199, 33-36554, 33-41406, 33-49882, and 33-62097 on Form S-8, of
Immucor, Inc. of our report dated July 21, 1995 appearing in this Annual Report
on Form 10-K of Immucor, Inc. for the year ended May 31, 1997.
Deloitte & Touche LLP
Atlanta, Georgia
August 21, 1997
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 15,718,234
<SECURITIES> 0
<RECEIVABLES> 11,461,595
<ALLOWANCES> 395,076
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0
0
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