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: August 31, 2000
---------------
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 October 3, 2000: Common Stock, $. 10 Par Value - 7,277,617
IMMUCOR, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
IMMUCOR, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
August 31, 2000 May 31, 2000
ASSETS (Unaudited) (Audited)
--------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,835,238 $ 3,505,926
Accounts receivable, net 22,144,030 21,726,062
Inventories 18,039,030 16,813,239
Income taxes receivable 1,291,291 752,470
Deferred income taxes 914,676 902,409
Prepaid expenses and other 1,955,889 1,321,363
--------------- ---------------
Total current assets 47,180,154 45,021,469
Long-term investment, at cost 1,000,000 1,000,000
Property and equipment, at cost 25,193,887 25,196,862
less accumulated depreciation (8,268,808) (7,720,980)
--------------- ---------------
16,925,079 17,475,882
Deferred income taxes 1,137,032 1,120,238
Other assets, net 2,641,303 2,251,293
Deferred licensing costs, net 1,977,039 2,044,850
Excess of cost over net tangible assets acquired, net 33,230,595 33,861,147
--------------- ---------------
$ 104,091,202 $ 102,774,879
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of borrowings
under bank line of credit agreements $ 1,845,658 $ 2,952,307
Current portion of long-term debt 4,163,570 4,277,598
Current portion of capital lease obligations 613,557 618,240
Accounts payable 10,807,346 9,442,977
Income taxes payable 107,181 74,715
Accrued salaries and wages 1,186,407 1,346,874
Deferred income taxes 408,263 164,243
Other accrued liabilities 4,597,670 4,276,554
--------------- ---------------
Total current liabilities 23,729,652 23,153,508
Long-term debt, including borrowings
under bank line of credit agreements 36,618,606 33,150,485
Capital lease obligations 1,623,558 1,664,165
Deferred income taxes 2,833,912 3,062,331
Other liabilities 821,862 825,592
Shareholders' equity:
Common stock, $.10 par value 727,762 746,212
Additional paid-in capital 15,382,541 16,848,804
Retained earnings 28,095,310 28,310,741
Accumulated other comprehensive loss (5,742,001) (4,986,959)
--------------- ---------------
Total shareholders' equity 38,463,612 40,918,798
--------------- ---------------
$ 104,091,202 $ 102,774,879
=============== ===============
</TABLE>
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
August 31, August 31,
2000 1999
--------------- ---------------
Net sales $17,081,242 $ 18,929,967
Cost of sales 8,567,954 8,954,427
--------------- ---------------
Gross profit 8,513,288 9,975,540
Research and development 473,025 358,688
Selling and marketing 3,181,462 3,007,097
Distribution 1,427,601 1,535,270
General and administrative 2,369,910 2,380,978
Amortization expense 484,092 460,900
--------------- ---------------
Total operating expenses 7,936,090 7,742,933
--------------- ---------------
Income from operations 577,198 2,232,607
Interest income 3,787 4,517
Interest expense (865,715) (649,334)
Other income 85,301 90,054
--------------- ---------------
Total other (776,627) (554,763)
--------------- ---------------
Income (loss) before income taxes (199,429) 1,677,844
Income taxes 16,002 458,698
--------------- ---------------
Net (loss) income $ (215,431) $ 1,219,146
=============== ===============
Earnings (loss) per share:
Basic $ (0.03) $ 0.16
=============== ===============
Diluted $ (0.03) $ 0.14
=============== ===============
Weighted average shares outstanding:
Basic 7,311,801 7,604,991
=============== ===============
Diluted 7,311,801 8,756,946
=============== ===============
See accompanying notes.
IMMUCOR, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
2000 1999
--------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ($215,431) $1,219,146
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 792,486 535,372
Amortization 484,092 460,900
Changes in assets and liabilities:
Accounts receivable (417,968) 727,583
Accounts receivable from former officer and director - 140,946
Income tax receivable (538,857) 190,350
Inventories (1,196,548) (1,100,900)
Other current assets (1,063,711) 373,813
Accounts payable 1,364,369 (2,033,679)
Income taxes payable 32,466 153,061
Other current liabilities 155,726 (55,627)
--------------- ----------------
Cash (used in) provided by operating activities (603,376) 610,965
INVESTING ACTIVITIES:
Purchase of / deposits on property and equipment (406,203) (339,225)
Cash paid for acquisitions - (112,913)
Acquisition-related severance - (88,961)
Decrease in other assets (4,765) (261,131)
--------------- ----------------
Cash used in investing activities (410,968) (802,230)
FINANCING ACTIVITIES:
Payments under line of credit agreements (214,194) -
Borrowings of long term debt and capitalized leases 2,055,144 -
Borrowings/(payments) of notes payable 263,087 (883,735)
Purchase of stock, net of exercises (1,484,713) 1,782,482
--------------- ----------------
Cash provided by financing activities 619,324 898,747
EFFECT OF EXCHANGE RATE CHANGES ON CASH (275,668) 482,240
--------------- ----------------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (670,688) 1,189,722
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,505,926 2,793,592
--------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,835,238 $3,983,314
=============== ================
</TABLE>
See accompanying notes.
1. Basis of Presentation
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. However, there has been no material change in the
information disclosed in the Company's annual financial statements dated May 31,
2000, except as disclosed herein. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended August 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending May 31, 2001. 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, 2000.
2. INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market:
As of As of
August 31, 2000 May 31, 2000
------------------- ------------------
Raw materials and supplies $ 4,999,127 $4,983,303
Work in process 1,484,633 1,603,117
Finished goods 11,555,270 10,226,819
------------------- ------------------
$18,039,030 $16,813,239
=================== ==================
3. Earnings per share
The following table sets forth the computation of basic and diluted earnings per
share in accordance with Statement of Financial Accounting Standards No. 128,
Earnings per Share.
<TABLE>
<CAPTION>
Three Months Ended
August 31, August 31,
2000 1999
---------------- ---------------
<S> <C> <C>
Numerator for basic and diluted earnings per share:
Income (loss) available to common shareholders $(215,431) $1,219,146
================ ===============
Denominator:
For basic earnings per share - weighted
average basis 7,311,801 7,604,991
Effect of dilutive stock options and warrants - 1,151,955
---------------- ---------------
Denominator for diluted earnings per share -
adjusted weighted-average shares 7,311,801 8,756,946
================ ===============
Basic earnings (loss) per share $(0.03) $0.16
================ ===============
Diluted earnings (loss) per share $(0.03) $0.14
================ ===============
</TABLE>
<PAGE>
4. domestic and foreign operations
Information concerning the Company's domestic and foreign operations is
summarized below (in 000s):
<TABLE>
<CAPTION>
Three Months Ended August 31, 2000
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Unaffiliated customers $10,660 $2,031 $1,415 $1,241 $1,734 - $17,081
Affiliates 1,609 71 - 19 36 (1,735) -
---------- ---------- ---------- ---------- --------- ------------ -------------
Total 12,269 2,102 1,415 1,260 1,770 (1,735) 17,081
Income from operations (368) 366 177 313 89 - 577
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended August 31, 1999
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Unaffiliated customers $12,235 $2,118 $1,668 $1,082 $1,827 - $18,930
Affiliates 1,521 101 - 72 380 (2,074) -
---------- ---------- ---------- ---------- --------- ------------ -----------
Total 13,756 2,219 1,668 1,154 2,207 (2,074) 18,930
Income from operations 1,633 226 162 267 (47) (8) 2,233
</TABLE>
During the three months ended August 31, 2000 and 1999, the Company's U.S.
operation made net export sales to unaffiliated customers of approximately
$1,666,000 and $1,748,000, respectively. The Company's German operation made net
export sales to unaffiliated customers of $217,000 and $250,000 for the three
months ended August 31, 2000 and 1999, respectively. The Company's Canadian
operation made net export sales to unaffiliated customers of $545,000 and
$531,000 for the three months ended August 31, 2000 and 1999, respectively.
Product sales to affiliates are valued at market prices.
5. COMPREHENSIVE INCOME
The components of comprehensive income (loss) for the three-month period ended
August 31, 2000 and 1999 are as follows:
Three Months Ended
August 31, August 31,
2000 1999
----------------- -----------------
Net income (loss) $ (215,431) $ 1,219,146
Net foreign currency translation (755,042) 390,414
----------------- -----------------
Comprehensive income (loss) $ (970,473) $ 1,609,560
================= =================
Accumulated comprehensive loss as of August 31, 2000 and May 31, 2000 was
($5,742,001) and ($4,986,959), respectively. The balance consists of net losses
on foreign currency translation adjustments and has been disclosed in the
shareholders' equity section of the condensed consolidated balance sheet.
<PAGE>
6. ACCOUNTS RECEIVABLE FROM OFFICER AND DIRECTOR
On June 6, 2000, Edward L. Gallup, President and CEO of Immucor, Inc., entered
into a loan agreement with Immucor, Inc. to borrow up to $400,000 in order to
meet margin calls related to loans made by brokerage companies. The Company
acknowledges that certain benefits would accrue to Immucor, Inc. and its
shareholders if such margin calls were satisfied by some means other than having
those shares sold by the broker. The interest rate on the loan is LIBOR plus 1%,
which is the Company's current borrowing rate. As of August 31, 2000, the amount
owed to Immucor, Inc. is $298,000 and is secured by 105,000 Immucor shares.
Additional borrowings of $60,000 were made in the second quarter, secured by the
same shares of stock.
7. CONTINGENCIES
During the quarter ended August 31, 2000, isolated performance issues arose at
certain ABS2000 installations that resulted in mistypings not directly affecting
any patient transfusions. The Company issued a safety notification, requesting
customers to confirm ABS2000 results until the cause of the difficulty is
identified and corrected. The Company believes it has identified the factors
that caused the performance issues and has submitted this information to the
FDA. If the FDA concurs, the Company will suspend the safety notification and
expects that customers may again use the ABS2000 without separate verification.
The Company cannot predict how long it will take to resolve these issues with
the FDA. In taking the prudent approach to recording revenues under its third
party leasing arrangement, the company deferred instrument sales of
approximately $1 million in the current quarter. These performance issues may
result in further delays in customers accepting instruments, and continue to
affect sales of reagents used in the instruments, and both of these factors will
adversely impact sales and earnings. In addition, the Company may receive
requests for refunds on instruments already placed in service or requests for
financial concessions attributable to inconveniences associated with these
performance issues, although no such requests have been received through the
date of this report. A private label leasing company that finances customer
purchases of ABS2000 instruments has advised the Company that it is not willing
to provide financing for additional purchases of this instrument until the
performance issues related to the ABS2000 are resolved to the satisfaction of
the FDA.
When the Company acquired Gamma Biologicals, Inc. ("Gamma Biologicals") in
October 1998, Gamma Biologicals was a party to an existing legal proceeding. On
May 12, 1998, Gamma Biologicals received notification that a claim of patent
infringement had been filed on that date in U.S. District Court, Southern
District of Florida, Miami Division, by Micro Typing Systems, Inc. and Stiftung
fur Diagnostiche Forschung (the Foundation). Subsequently, in February 1999 the
Company received notification that a second claim was filed in the U.S. District
Court for the Northern District of Georgia, against Immucor, Inc. and Gamma
Biologicals for patent infringement on the first patent described above and a
second patent recently granted to the Foundation. The claim alleges that the
recently introduced Gamma ReACT Test System infringes U.S. patent No. 5,512,432
granted to the Foundation April 30, 1996 and U.S. patent No. 5,863,802 granted
to the Foundation on January 26, 1999. The plaintiffs seek a preliminary and
permanent injunction against the continued alleged infringement by Gamma
Biologicals and Immucor, and an award of treble damages, with interest and costs
and reasonable attorney's fees. On September 5, 2000 a third patent was issued
to the Foundation. The plaintiffs have asserted infringement of this patent and
are seeking to add this patent to the lawsuit. The Company, in light of this new
patent, is evaluating its position. A reserve for the lawsuit was recorded with
the acquisition of Gamma Biologicals that should provide for contingent expenses
related to the resolution of the lawsuit.
European results were adversely affected by the interrupted supply of a
distributed product produced by a large multinational supplier. The backorder
situation escalated in the first quarter of 2001 and reduced sales by an
estimated $230,000. The Company believes that the backorder will continue and
has entered into discussions with the supplier. The Company believes that the
interruption of supply has given it a valid claim against the supplier.
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, 2000.
Financial Condition and Liquidity:
As of August 31, 2000, the Company's cash position totaled $2,835,000.
During the quarter the Company increased borrowings on long-term debt and
capitalized leases to fund capital improvements and inventory purchases.
Additionally, the repurchase of 184,500 shares of common stock for approximately
$1,500,000 was financed with the proceeds of an additional term loan.
During the first quarter, the Company did not achieve the Funded Debt to
EBITDA and Liquidity ratios as specified in its loan agreement with its primary
bank. These covenant calculations deteriorated due to the Company's recent
reported losses. The Company has begun discussions to restructure the loan
covenants and debt repayment schedule. The bank has agreed to waive these loan
covenants for the next 12 months. Management believes based upon a timely
clearance by the FDA of the ABS2000 safety notification that the Company's
current cash and cash equivalents balance, internally generated funds, and
amounts available under the lines of credit should be more than sufficient to
support operations for planned product introduction and continued improvement
and development of products during the next 12 months. Management also believes
that should the need arise for additional capital for other corporate purposes
that these needs would be available through the issuance of various forms of
equity or debt.
Results of Operations:
Net sales
Net sales for the three months ended August 31, 2000 totaled $17,081,000, a
decrease of $1,849,000 (10%) from last year's $18,930,000. The decrease in sales
was due, in large part, to lower instrumentation sales in the U.S following the
ABS2000 safety notification issued this quarter (see Note 7 Contingencies). The
Company generated instrument revenues of $750,000 for the quarter compared to
$1,900,000 for the same period last year. Reagent sales were also affected by
the notification that resulted in the loss of $121,000 in revenue for reagents
provided free of charge to customers performing backup testing. The strength of
the US dollar versus the Euro had the effect of reducing reported European sales
by approximately $700,000, or 12%.
Gross profit
As a percent of sales, gross profit for the three months ended August 31,
2000 totaled 49.8% compared to 52.7% for the same period in 1999. The decrease
in gross profit margin was primarily caused by ABS2000 instrument installation
costs incurred in this quarter, in advance of revenue recognition. The Company
anticipates recognizing revenues in future quarters after the FDA lifts the hold
on the systems.
Operating expenses
When compared to the prior year, three-month period ended August 31, 2000
research and development costs increased $114,000 due to instrument development
initiatives for Europe.
<PAGE>
Selling and marketing expenses for the three-month period increased $174,000
as compared to the same period last year. The Company recorded $155,000 in
additional expense representing the impact of the interrupted reagent sales on
ABS customers who financed their instrument purchase through fee per use
arrangements.
Distribution expenses decreased $108,000 for the three-month period. The
decrease relates to decreased shipping activity and lower domestic shipping
rates.
General and administrative expenses and amortization expense for the
three-month period remained relatively constant as compared with the same period
last year.
Interest expense
When compared to the prior year three-month period, interest expense
increased $216,000. This is the result of increased borrowings due to prior
acquisitions, share buyback programs and new capital leases for equipment.
Other income
Other income decreased for the three-month period as compared to the prior
year due to lower foreign currency transaction gains in the current period.
Income taxes
Income tax expense decreased during the three month period ended August 31,
2000, as compared to the prior period, due to the domestic operating loss but
was offset by taxes on income provided in Germany and Canada as a result of the
Company's ongoing implementation of tax planning strategies.
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures On Market Risk
There have been no material changes regarding the Company's market risk position
from the information provided in its Annual Report on Form 10-K for the fiscal
year ended May 31, 2000. The quantitative and qualitative disclosures about
market risk are discussed in Item 7A- Quantitative and Qualitative Disclosures
About Market Risk, contained in the Company's Form 10-K.
PART 11 - 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.
(b) The Company did not file any reports on Form 8-K during the three
months ended August 31, 2000.
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: October 16, 2000
/s/ Edward L. Gallup
Edward L. Gallup, President
/s/ Steven C. Ramsey
Steven C. Ramsey, Senior Vice President - Finance
(Principal Accounting Officer)
