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 29, 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 April 3, 2000: Common Stock, $. 10 Par Value - 7,867,617
<PAGE>
IMMUCOR, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
February 29, 2000 May 31, 1999
ASSETS (Unaudited) (Audited)
----------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,975,690 $ 2,793,592
Accounts receivable, net 24,571,119 21,573,846
Accounts receivable from former officer and director - 140,946
Inventories 16,976,203 16,065,190
Income taxes receivable 413,815 553,451
Deferred income taxes 915,234 907,530
Prepaid expenses and other 1,485,625 1,587,817
----------------- --------------
Total current assets 47,337,686 43,622,372
Long-term investment, at cost 1,000,000 1,000,000
Property and equipment, at cost 22,607,212 20,195,158
less accumulated depreciation (6,985,311) (5,068,996)
----------------- --------------
15,621,901 15,126,162
Deferred income taxes 1,257,192 1,108,279
Other assets, net 3,095,760 2,934,409
Deferred licensing costs, net 2,347,158 2,307,837
Excess of cost over net tangible assets acquired, net 32,781,936 33,634,458
----------------- --------------
Total Assets $ 103,441,633 $ 99,733,517
================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of borrowings under bank line of credit agreements $ 1,786,109 $ 1,619,312
Current portion of long-term debt 3,157,868 5,000,062
Note payable to related party - 1,637,495
Current portion of capital lease obligations 479,936 194,476
Accounts payable 7,607,997 10,039,489
Income taxes payable 1,105,826 27,739
Accrued salaries and wages 974,425 1,125,216
Deferred income taxes 118,280 118,280
Other accrued liabilities 2,438,267 2,719,496
----------------- --------------
Total current liabilities 17,668,708 22,481,565
Long-term debt, including borrowings under bank line of credit agreements 33,031,079 30,747,855
Capital lease obligations 1,323,362 800,117
Deferred income taxes 3,044,606 3,024,550
Other liabilities 2,585,062 2,626,763
Shareholders' equity:
Common stock, $.10 par value 786,199 748,841
Additional paid-in capital 19,801,460 16,945,885
Retained earnings 28,995,808 25,498,721
Accumulated other comprehensive loss (3,794,651) (3,140,780)
----------------- --------------
Total shareholders' equity 45,788,816 40,052,667
----------------- --------------
Total Liabilities and Shareholders' equity $ 103,441,633 $ 99,733,517
================= ==============
</TABLE>
See accompanying notes.
<PAGE>
IMMUCOR, INC.
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net sales $19,201,121 $16,758,106 $58,380,907 $40,782,061
Cost of sales 9,025,124 7,589,998 27,248,423 18,558,724
---------------- ---------------- ---------------- ---------------
Gross profit 10,175,997 9,168,108 31,132,484 22,223,337
Research and development 553,079 413,335 1,283,336 1,000,707
Selling and marketing 2,999,163 3,045,981 8,919,250 7,337,310
Distribution 1,422,632 964,498 4,421,592 2,262,647
General and administrative 2,732,826 2,348,759 7,972,114 6,118,292
Merger-related expenses 0 120,331 0 432,692
Amortization expense 453,352 329,543 1,353,600 710,777
---------------- ---------------- ---------------- ---------------
Total operating expenses 8,161,052 7,222,447 23,949,892 17,862,425
---------------- ---------------- ---------------- ---------------
Income from operations 2,014,945 1,945,661 7,182,592 4,360,912
Interest income 3,967 19,697 14,582 305,630
Interest expense (707,131) (516,843) (2,146,657) (903,322)
Other income 30,760 27,892 180,847 79,344
---------------- ---------------- ---------------- ---------------
Total other (672,404) (469,254) (1,951,228) (518,348)
---------------- ---------------- ---------------- ---------------
Income before income taxes 1,342,541 1,476,407 5,231,364 3,842,564
Income taxes 504,645 500,310 1,734,277 1,522,388
---------------- ---------------- ---------------- ---------------
Net income $837,896 $976,097 $3,497,087 $2,320,176
================ ================ ================ ===============
Earnings per share:
Basic $0.11 $0.13 $0.45 $0.30
================ ================ ================ ===============
Diluted $0.10 $0.13 $0.40 $0.29
================ ================ ================ ===============
Weighted average shares outstanding:
Basic 7,816,012 7,459,589 7,715,560 7,711,459
================ ================ ================ ===============
Diluted 8,671,191 7,720,680 8,685,157 7,981,352
================ ================ ================ ===============
</TABLE>
See accompanying notes.
<PAGE>
IMMUCOR, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
February 29, February 28,
2000 1999
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $3,497,087 $2,320,176
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 2,067,921 1,219,311
Amortization 1,353,600 710,777
Changes in assets and liabilities:
Accounts receivable (2,951,808) (3,755,190)
Accounts receivable from former officer and director 140,946 526,467
Income tax receivable 139,636 233,246
Inventories (911,013) (1,955,139)
Other current assets (198,781) 245,457
Accounts payable (2,476,959) 1,294,808
Income taxes payable 1,078,087 (89,989)
Other current liabilities (501,151) 385,006
---------------- ----------------
Cash provided by operating activities 1,237,565 1,134,930
INVESTING ACTIVITIES:
Purchase of / deposits on property and equipment (2,797,064) (2,344,313)
Cash paid for acquisitions (673,225) (25,658,125)
Acquisition-related severance (82,756) (1,957,640)
Decrease in other assets (15,028) (3,222,946)
---------------- ----------------
Cash used in investing activities (3,568,073) (33,183,024)
FINANCING ACTIVITIES:
Borrowings under line of credit agreements 5,642,883 25,200,000
Repayment of notes payable (5,853,757) (1,299,200)
Exercise of stock options and warrants (373,582 and 180,899 shares, respectively) 2,892,933 1,330,996
Purchase and retirement of stock (822,800 shares) - (7,354,007)
---------------- ----------------
Cash provided by (used in) financing activities 2,682,059 17,877,789
EFFECT OF EXCHANGE RATE CHANGES ON CASH (169,453) 75,162
---------------- ----------------
INCREASE IN CASH AND CASH EQUIVALENTS 182,098 (14,095,143)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,793,592 15,816,217
---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,975,690 $1,721,074
================ ================
Noncash investing and financing activities:
Fair value of assets acquired, net of cash $17,757,750
Cost in excess of assets acquired 17,078,722
Liabilities assumed (9,178,347)
----------------
Net cash paid for acquisition $25,658,125
</TABLE>
<PAGE>
IMMUCOR, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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,
1999, 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 nine month period
ended February 29, 2000 are not necessarily indicative of the results that may
be expected for the year ending May 31, 2000. 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, 1999.
2. INVENTORIES
Inventories are stated at the lower of first-in, first-out cost or market:
As of As of
February 29, 2000 May 31, 1999
------------------ --------------------
Raw materials and supplies $5,042,978 $3,856,309
Work in process 1,118,930 967,889
Finished goods 10,814,295 11,240,992
------------------ --------------------
$16,976,203 $16,065,190
================== ====================
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 Nine Months Ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Income available to common shareholders $ 837,896 $ 976,097 $3,497,087 $2,320,176
================ =============== ================ ===============
Denominator:
For basic earnings per share - weighted
average basis 7,816,012 7,459,589 7,715,560 7,711,459
Effect of dilutive stock options and warrants 855,179 261,091 969,597 269,893
---------------- --------------- ---------------- ---------------
Denominator for diluted earnings per share -
adjusted weighted-average shares 8,671,191 7,720,680 8,685,157 7,981,352
================ =============== ================ ===============
Basic earnings per share $0.11 $0.13 $0.45 $0.30
================ =============== ================ ===============
Diluted earnings per share $0.10 $0.13 $0.40 $0.29
================ =============== ================ ===============
</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 February 29, 2000
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Unaffiliated $12,140 $2,282 $1,601 $1,312 $1,866 $ - $19,201
customers
Affiliates 1,682 228 - 78 707 (2,695) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 13,822 2,510 1,601 1,390 2,573 (2,695) 19,201
Income from operations 973 242 83 442 265 10 2,015
Three Months Ended February 28, 1999
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $10,633 $2,619 $1,684 $937 $885 $ - $16,758
customers
Affiliates 1,366 88 16 30 - (1,500) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 11,999 2,707 1,700 967 885 (1,500) 16,758
Income from operations 1,136 470 172 198 (27) (3) 1,946
----------------------------------------------------------------------------------------------------
Nine Months Ended February 29, 2000
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $37,125 $7,156 $5,020 $3,809 $5,271 $ - $58,381
customers
Affiliates 4,935 476 - 230 2,034 (7,675) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 42,060 7,632 5,020 4,039 7,305 (7,675) 58,381
Income from operations 4,629 840 413 1,162 137 2 7,183
----------------------------------------------------------------------------------------------------
Nine Months Ended February 28, 1999
----------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $23,131 $7,697 $5,083 $3,153 $1,718 $ - $40,782
customers
Affiliates 3,413 255 16 123 - (3,807) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 26,544 7,952 5,099 3,276 1,718 (3,807) 40,782
Income from operations 1,675 1,271 558 821 68 (32) 4,361
</TABLE>
The Company's U.S. operation made net export sales to unaffiliated customers of
approximately $1,747,000 and $1,726,000 for the three months ended February 29,
2000, and February 28, 1999, respectively and $5,228,000 and $3,769,000 for the
nine months ended February 29, 2000 and February 28, 1999, respectively. The
Company's German operation made net export sales to unaffiliated customers of
approximately $624,000 and $618,000 for the three months ended February 29, 2000
and February 28,1999, respectively and $1,118,000 and $992,000 for the nine
months ended February 29, 2000 and February 28, 1999, respectively. The
Company's Canadian operation made net export sales to unaffiliated customers of
approximately $543,000 and $492,000 for the three months ended February 29, 2000
and February 28, 1999, respectively and $1,634,000 and $1,899,000 for the nine
months ended February 29, 2000 and February 28, 1999, respectively. Product
sales to affiliates are valued at market prices.
<PAGE>
5. COMPREHENSIVE INCOME
The components of comprehensive income for the three-month and nine-month
periods ended February 29, 2000 and February 28, 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
---------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Net income $837,896 $976,097 $3,497,087 $2,320,176
Net foreign currency translation (308,383) (877,995) (653,871) (153,950)
---------------- ---------------- -----------------
------------------
Comprehensive income $529,513 $ 98,102 $2,843,216 $2,166,226
================ ================ ================== =================
</TABLE>
Accumulated comprehensive loss as of February 29, 2000 and May 31, 1999 was
($3,794,651) and ($3,140,780), 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.
6. CONTINGENCIES
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. Management is confident that ReACT technology
does not infringe the Foundation's patents; however, an unfavorable outcome in
this action could have a material adverse effect upon the business and the
results of operations in a given reporting period. Since this matter is in the
earliest stage of proceedings and due to uncertainties involved in litigation,
management cannot predict the likelihood of a particular outcome. Management
believes it has a meritorious defense against the alleged infringement.
<PAGE>
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, 1999.
Financial Condition and Liquidity:
During the nine months ended February 29, 2000, the Company increased its
profitability, generated positive cash flow from operations, and maintained
positive working capital. As of February 29, 2000, the Company's cash position
totaled $2,976,000. For the nine months ended February 29, 2000, the Company
generated cash from operating activities of $1,238,000 and purchased property
and equipment of $2,797,000. In December 1999, the Company repaid promissory
notes owed to the former owners of Dominion Biologicals Limited of $3,886,000
($5,471,000 in Canadian dollars) and acquired debt of the same amount to be
repaid over the next three years. The exercise of approximately 374,000 stock
options and warrants provided $2,893,000 in cash.
Management believes 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 to support planned
product introduction and continued improvement and development of products
during the next 12 months. Management also believes additional credit lines
would be available should the need arise for capital improvements, acquisitions
or other corporate purposes.
Results of Operations:
Net sales
Net sales for the three months ended February 29, 2000 totaled
$19,201,000 an increase of $2,443,000 (15%) over last year's $16,758,000.
Current year three-month results included an increase in net sales of $558,000
related to Gamma Biologicals, Inc. ("Gamma Biologicals") acquired on October 27,
1998 and $857,000 from Medichim and Immunochim acquired on March 15, 1999 and
from BCA, a division of Biopool, acquired on April 30, 1999. The remaining
increase in sales was primarily due to instrumentation sales. The Company
generated instrument revenues of $2,800,000 for the quarter compared to
$2,200,000 for the same period last year. Sales by the Company's European
subsidiaries combined increased 11% over last year's total excluding the effect
of the acquisitions. However, when translated into US dollars, there was a
decrease of 3% due to unfavorable exchange rates in Europe. For the nine months
ended February 29, 2000, net sales were $58,381,000 (including $19,353,000 from
acquisitions) compared to $40,782,000 (which includes $6,354,000 from
acquisitions) in the prior year. Year to date instrument sales increased
approximately $4,000,000 over prior year.
Gross profit
As a percent of sales, gross profit for the three months ended February
29, 2000 totaled 53.0% versus 54.7% for the same period in 1999. The decrease in
gross profit margin was primarily caused by higher instrument sales at lower
gross margins than other products and the sales increase due to prior year
acquisitions which are at lower gross profit margins than Immucor's product
lines. Gross profit for the nine months ended February 29, 2000 totaled 53.3%
versus 54.5% for the same period in 1999, and decreased for substantially the
same reasons.
<PAGE>
Operating expenses
When compared to the prior year, research and development costs increased
$140,000 and $283,000 for the three and nine month periods, respectively. The
increase is primarily due to higher costs related to instrument development
projects.
For the quarter ended February 29, 2000, selling and marketing expenses
decreased $47,000, or 1.5%, when compared to the same quarter last year. With
the acquisition of Gamma Biologicals, the sales force was realigned resulting in
a reduction of certain positions due to duplication of efforts offset by the
addition of personnel required for the Company's instrumentation strategy.
Selling and marketing expense increased $1,582,000 year to date with $498,000
attributable to Medichim and Immunochim; and, higher payroll expense for the
increase in personnel as the Company has continued to focus its efforts on the
instrument side of the business.
Distribution expenses increased $458,000 for the three month period and
$2,159,000 for the nine month period when compared to the same periods in the
prior year. The increase relates to a temporary shift in shipping methods from
ground to overnight, change in shipping specifications for certain products
resulting in higher costs per shipment, increase in personnel and overall
increase in shipping activity.
General and administrative expenses for the three and nine month periods
increased $384,000 and $1,854,000, respectively, for additional expenses
resulting from the growth of the Company with acquisitions. The Company has also
experienced an increase in operating costs such as rent, utilities and
depreciation expense with the Company's expansion at its U.S. operations.
Merger-related expenses for the prior year are one-time expenses related
to the Gamma Biologicals and BCA acquisitions.
Amortization expense for the three and nine months periods ended February
29, 2000, increased $124,000 and $643,000 due to goodwill recorded in the
acquisitions of Gamma Biologicals on October 27, 1998, Medichim and Immunochim
on March 15, 1999 and BCA, a division of Biopool, on April 30, 1999.
Interest income
Interest income decreased $16,000 for the quarter and $291,000 for the
nine month period due to lower cash balances as compared to last year caused by
the purchase of treasury stock and the purchase of Gamma Biologicals and other
acquisitions which were partially funded by the use of the Company's cash.
Interest expense
When compared to the prior year three and nine month periods, interest
expense increased $190,000 and $1,243,000. This is a result of the purchase of
Gamma Biologicals and other acquisitions which were primarily financed with the
proceeds of a bank loan.
Other income
Other income increased $3,000 for the three month period and $102,000 for
the nine month period as compared to the same periods last year. The year to
date increase is primarily due to foreign currency transaction gains realized
earlier in the fiscal year versus losses in the same period last year.
<PAGE>
Income taxes
Income tax expense as a percent of pretax income is evaluated and
adjusted on an ongoing basis as the Company continues implementation of tax
planning strategies. For the nine months ended February 29, 2000, the Company's
effective tax rate was 33.2% compared to 39.6% for the same period last year.
Year 2000
The Company and its subsidiaries have not experienced any material
problems with network infrastructure, software, hardware and computer systems
relating to the inability to recognize appropriate dates and computer related to
the year 2000. The Company and its subsidiaries do not anticipate incurring
material expenses or experiencing any material operational disruptions as a
result of any Year 2000 issues.
ITEM 3. Quantitative and Qualitative Disclosures about 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, 1999. 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 February 29, 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMMUCOR, INC.
(Registrant)
Date: April 14, 2000
/s/ Edward L. Gallup Edward L. Gallup, President
- -------------------------
/s/ Steven C. Ramsey Steven C. Ramsey, Senior Vice President - Finance
- ------------------------- (Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 2975690
<SECURITIES> 0
<RECEIVABLES> 24571119
<ALLOWANCES> 0
<INVENTORY> 16976203
<CURRENT-ASSETS> 47337686
<PP&E> 22607212
<DEPRECIATION> 6985311
<TOTAL-ASSETS> 103441633
<CURRENT-LIABILITIES> 17668708
<BONDS> 34354441
0
0
<COMMON> 786199
<OTHER-SE> 45002617
<TOTAL-LIABILITY-AND-EQUITY> 103441633
<SALES> 58380907
<TOTAL-REVENUES> 58380907
<CGS> 27248423
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<OTHER-EXPENSES> 23949892
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<EPS-BASIC> 0.45
<EPS-DILUTED> 0.40
</TABLE>
