FORM 10-Q
Securities and Exchange Commission
Washington, D. C. 20549
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: February 28, 1998
OR
_ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-14820
IMMUCOR, INC.
(Exact name of registrant as specified in its charter)
Georgia 22-2408354
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3130 Gateway Drive P.O. Box 5625 Norcross, Georgia 30091-5625
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (770) 441-2051
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of April 10, 1998: Common Stock, $.10 Par Value - 8,119,469
IMMUCOR, INC.
Condensed Consolidated Balance Sheets
February 28, May 31,
ASSETS 1998 1997
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $14,579,575 $15,718,234
Accounts receivable, net 12,151,605 11,066,519
Accounts receivable, other 1,513,638 1,609,000
Inventories 7,853,433 7,662,764
Income tax receivable 40,012 38,066
Deferred income taxes 353,686 358,470
Other assets 843,015 677,017
Total current assets 37,334,964 37,130,070
Long-term investment 1,000,000 1,000,000
Property and equipment, at cost 10,267,924 8,985,729
less accumulated depreciation (4,464,825) (3,652,419)
5,803,099 5,333,310
Deferred income taxes 23,176 23,176
Other assets, net 697,717 1,401,164
Excess of cost over net tangible
assets acquired, net 11,734,187 12,837,926
$56,593,143 $57,725,646
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Borrowings-bank line of credit $362,706 $487,161
Accounts payable 2,179,441 3,136,117
Income taxes payable 455,823 391,616
Accrued salaries and wages 565,884 695,716
Other accrued liabilities 579,695 551,419
Total current liabilities 4,143,549 5,262,029
Long-term debt 9,551,984 10,665,658
Deferred income taxes 946,489 577,091
Shareholders' equity:
Common stock, $.10 par value 811,452 807,873
Additional paid-in capital 22,338,628 22,502,930
Retained earnings 21,438,209 19,868,924
Foreign currency translation adj. (2,637,168) (1,958,859)
Total shareholders' equity 41,951,121 41,220,868
$56,593,143 $57,725,646
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
Net sales $10,155,231 $9,639,697 $29,620,819 $25,953,819
Cost of sales 4,792,144 3,933,315 13,401,159 10,591,331
Gross profit 5,363,087 5,706,382 16,219,660 15,362,488
Research and development:
Instrument 89,638 131,220 246,105 182,732
General 169,550 156,206 482,461 415,704
Selling, general & admin. 4,187,992 4,534,505 12,600,302 12,353,208
Total operating expenses 4,447,180 4,821,931 13,328,868 12,951,644
Income from operations 915,907 884,451 2,890,792 2,410,844
Interest income 189,763 216,509 588,259 639,571
Interest expense (155,794) (181,760) (474,895) (327,145)
Other (94,630) (218,716) (104,602) (231,675)
Total other (60,661) (183,967) 8,762 80,751
Income before income taxes 855,246 700,484 2,899,554 2,491,595
Income taxes 390,023 356,259 1,330,269 1,067,482
Net income $465,223 $344,225 $1,569,285 $1,424,113
Earnings per share:
Basic $0.06 $0.04 $0.19 $0.18
Diluted $0.06 $0.04 $0.19 $0.17
Weighted average shares outstanding:
Basic 8,090,594 8,075,767 8,089,905 8,061,960
Diluted 8,408,038 8,518,645 8,459,165 8,588,320
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
February 28, February 28,
1998 1997
OPERATING ACTIVITIES:
Net income $1,569,285 $1,424,113
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 1,017,668 837,863
Amortization 443,364 154,402
Changes in assets and liabilities:
Accounts receivable (1,085,086) (1,241,780)
Accounts receivable, other 95,362 -
Income tax receivable (1,946) 77,163
Inventories (190,668) (330,485)
Other current assets (204,369) (301,886)
Accounts payable (956,678) 303,375
Income taxes payable 64,207 288,351
Other current liabilities 267,841 (307,154)
Cash provided by operating activities 1,018,980 903,962
INVESTING ACTIVITIES:
Purchase of property and equipment (974,703) (1,947,674)
Cash paid for acquisition, net of cash - (4,366,734)
Decrease in other assets 34,822 13,560
Cash used in investing activities (939,881) (6,300,848)
FINANCING ACTIVITIES:
Repayment-line of credit agreements (106,407) (62,413)
Proceeds from issuance of long term debt - 4,228,163
Repayment of notes payable (736,020) (995,748)
Exercise of stock options 328,911 115,090
Purchase and retirement of stock (151,615) -
Cash (used in) provided by financ. activ. (665,131) 3,285,092
EFFECT OF EXCHANGE RATE CHANGES ON CASH (552,627) (429,718)
DECREASE IN CASH
AND CASH EQUIVALENTS (1,138,659) (2,541,512)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 15,718,234 20,533,422
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $14,579,575 $17,991,910
Noncash investing and financing activities:
Fair value of assets acquired - $2,234,240
Cost in excess of assets acquired - 7,319,927
Liabilities assumed - (959,270)
Notes issued for assets acquired - (4,228,163)
Net cash paid for acquisition $ - $4,366,734
See accompanying notes.
IMMUCOR, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the nine month period ended February 28, 1998 are not necessarily indicative
of the results that may be expected for the year ending May 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for
the year ended May 31, 1997.
2. Inventories are stated at the lower of first-in, first-out cost or
market:
As of February 28, 1998 As of May 31, 1997
Raw materials and supplies $2,355,391 $2,278,107
Work in process 748,384 669,112
Finished goods 4,749,658 4,715,545
3. Earnings per share:
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share
("Statement 128"). Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have
been presented, and where appropriate, restated to conform to the
Statement 128 requirements. The following table sets forth the computation
of basic and diluted earnings per share.
Three Months Ended Nine Months Ended
February 28, February 28, February 28, February 28,
1998 1997 1998 1997
Numerator for basic and diluted earnings per
share:
Income available to common shareholders
$465,223 $344,225 $1,569,285 $1,424,113
Denominator:
For basic earnings per share - weighted
average basis 8,090,594 8,075,767 8,089,905 8,061,960
Effect of dilutive stock options
and warrant 317,444 422,878 369,260 526,360
Denominator for diluted earnings per share -
adjusted weighted-average shares
8,408,038 8,518,645 8,459,165 8,588,320
Basic earnings per share $0.06 $0.04 $0.19 $0.18
Diluted earnings per share $0.06 $0.04 $0.19 $0.17
IMMUCOR, INC.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Any statements contained herein that are not historical fact are
forward-looking statements within the meaning of the 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 its Annual Report
on Form 10-K for the fiscal year ended May 31, 1997.
Financial Condition and Liquidity:
As of February 28, 1998, the Company's cash position totaled
$14,579,575. During the nine months ended February 28, 1998, the Company
generated cash from operating activities of $1,018,980, repaid $564,300
(1,000,000 DM) of bank debt in Germany, repaid $171,700 (241,000 CAD) of
bank debt in Canada and purchased property and equipment of $974,703.
Also, under an authorized program announced on June 2, 1997, the
Company purchased 18,500 shares of its common stock in the open market for
$151,615.
Management believes that the Company's current cash balance, internally
generated funds and amounts available under the lines of credit are
sufficient to support operations for the foreseeable future. Management
also believes additional credit lines would be available should the need
arise.
Results of Operations:
Net sales
Net sales for the three months ended February 28, 1998 totaled
$10,155,231, an increase of $515,534 over last year's $9,639,697.
Domestic sales increased $660,517 of which $290,500 is attributed to
instrumentation product sales. In addition, sales of the Company's
European subsidiaries, recorded in their functional currencies, increased
7% over last year's total. However, due to unfavorable rates of foreign
exchange in Europe, when translated into U.S. dollars, European
subsidiaries sales declined 6%.
For the nine months ended February 28, 1998, net sales were
$29,620,819, including $ 3,314,449 in net sales from the operations of
Dominion Biologicals Limited acquired in December 1996, compared to
$25,953,819 in the prior year. For the nine month period domestic sales
increased $2,093,500, of which $1,137,000 is attributed to instrumentation
product sales. As stated above, European sales in functional currency
increased, but unfavorable rates of foreign exchange held back sales growth
in U.S. dollars.
Gross profit
As a percent of sales, gross profit declined for the three and nine
month periods ended February 28, 1998, when compared to the same periods in
1997. In the U.S., the decline in gross profit in the current quarter was
partially caused by increased manufacturing costs of $115,000 due to a one
time rework of certain products, as well as planned new instrumentation
product sales of the IMAGN 2000 and the DIAS PLUS of $290,500 which were
sold at lower gross profit margins than the Company's reagent products. In
addition, the Company's decision to participate in national account
contracts in order to have a strong domestic presence prior to the release
of the ABS2000 contributed to declining gross profit margins.
In the Company's European operations, the reduction in gross profit
margin was principally caused by unfavorable rates of foreign exchange in
Europe which increased the cost of goods purchased in U.S. dollars and
sold in local currencies.
Operating expenses
As compared to the prior year, research and development costs decreased
$28,238 for the three month period due to reduced instrument related
development costs and increased $130,130 for the nine month period. The
increase for the nine month period is primarily a result of the inclusion of
Dominion Biologicals Limited's operating results in the current year. Also,
in the prior year's nine month period, two ABS2000 automated analyzers
previously expensed as contract research and development were sold to the
Company's Canadian distributor, and the sale ($70,000) was recorded as a
reduction of research and development costs. No comparable offset of
contract research and development occurred in the current year.
Selling, general and administrative expenses decreased $346,513 for the
three month period as compared to the same period last year. This is a
result of reduced functional currency spending levels in Europe, lower U.S.
dollar translated functional currency expenditures due to unfavorable rates
of foreign exchange and reduced marketing expenditures in the U.S. as
compared to the prior year. For the nine month period, selling, general and
administrative expenses increased $247,094 as compared to the prior year.
The inclusion of Dominion Biologicals Limited's selling, general and
administrative expenses of $798,620 for the current nine month period
compared to $258,827 in the prior year is offset by lower expense levels in
Europe when translated into U.S. dollars due to unfavorable rates of foreign
exchange. Also, U.S. selling, general and administrative expenses increased
for the nine month period due to staff additions in sales and marketing,
higher shipping charges resulting from increased sales levels and additional
shareholder-related costs.
Interest Income
Interest income decreased $26,476 for the quarter and $51,312 year to
date due to lower cash balances as compared to last year.
Interest expense
When compared to the third quarter last year, interest expense declined
$25,966. This was partially caused by repayment of bank debt in Germany and
Canada, as well as the translation of functional currency interest at
unfavorable exchange rates resulting in lower U.S. dollar interest expense.
When compared to year to date 1997 interest expense grew $147,750 due to the
acquisition of Dominion Biologicals Limited in December 1996 which
was financed with the proceeds of a bank loan and the issuance of subordinated
promissory notes.
Other Expense
Other expense decreased for the three and nine month periods as compared
to the prior year because of higher currency transaction losses in Europe
last year.
Income taxes
Income tax expense as a percent of pretax income, decreased during the
three month period ended February 28, 1998 due to higher taxes provided in
Germany in the prior period. As a percent of pretax income, income tax
expense increased for the nine month period due to the earnings of Dominion
Biologicals Limited being subject to a higher income tax rate in Canada
than the U.S. tax rate.
Year 2000
The Company is aware of the issue that many computer systems will face as
the millennium (year 2000) approaches. In order to become year 2000
compliant, the Company is currently making software program changes to
internal software, at a nominal cost, to be completed by March 1999. The
Company believes that its own internal software and hardware will be year
2000 compliant after making these program changes. The Company believes
that any year 2000 problems encountered by hospitals and other customers and
vendors are not likely to have a material adverse effect on the Company's
operations. The Company anticipates no other year 2000 problems which are
reasonably likely to have a material adverse effect on the Company's
operations. There can be no assurance, however, that such problems will
not arise.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 130, Reporting Comprehensive Income ("Statement 130").
Statement 130 establishes new standards for the reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. These new standards require that all items recognized
as components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Statement 130 is effective for fiscal years beginning after December 15,
1997. The adoption of Statement 130 will not have a significant impact
on the Company's Consolidated Financial Statements.
In June 1997, the FASB issued Statement 131, Disclosures About Segments of
an Enterprise and Related Information ("Statement 131"). Statement 131
changes the way public companies report segment information in annual
financial statements and also requires those companies to report selected
segment information in interim financial reports. Statement 131 is
effective for years beginning after December 15, 1997. The adoption of
Statement 131 will not have a significant impact on the Company's
Consolidated Financial Statements.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The Company has filed the following exhibits with this report:
27 Financial data schedule.
27.1 Restatement of prior financial data schedule.
(b) The Company did not file any reports on Form 8-K during the nine months
ended February 28, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMUCOR, INC.
(Registrant)
Date: April 15, 1998
\s\Edward L. Gallup Edward L. Gallup, President
\s\Claudio Grossi Claudio Grossi, Principal Accounting Officer
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