UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 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: 0-26126
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SEROLOGICALS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 58-2142225
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
780 Park North Blvd.
Suite 110
Clarkston, Georgia 30021
(Address of principal (Zip Code)
executive offices)
(404) 296-5595
(Registrant's Telephone Number Including Area Code)
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:
Class Outstanding at April 30, 1997
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Common Stock, $.01 par value per share 14,567,142
INDEX
SEROLOGICALS CORPORATION AND SUBSIDIARIES
PART I.
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Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
December 29, 1996 and March 30, 1997 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income -
For the quarters ended March 31, 1996 and March 30, 1997 . . . . . . 4
Condensed Consolidated Statements of Cash Flows -
For the quarters ended March 31, 1996 and March 30, 1997 . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 9-12
PART II.
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Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 13
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
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PART I.
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Item 1. Financial Statements
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
December 29, March 30,
1996 1997
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $21,232 $11,632
Trade accounts receivable, net 5,235 7,162
Inventories 5,746 8,362
Other current assets 1,131 855
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Total current assets 33,344 28,011
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PROPERTY AND EQUIPMENT, net 9,800 11,188
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OTHER ASSETS:
Goodwill, net 33,541 44,697
Other 4,152 5,618
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Total other assets 37,693 50,315
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$80,837 $89,514
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital
lease obligations $3,567 $4,900
Accounts payable 2,795 2,464
Accrued liabilities 6,208 7,793
Deferred revenue 69 1,021
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Total current liabilities 12,639 16,178
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LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
less current maturities 147 2,801
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OTHER LIABILITIES 168 231
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STOCKHOLDERS' EQUITY:
Common stock 141 141
Additional paid-in capital 52,164 52,196
Retained earnings 15,368 17,894
Cumulative translation adjustment 210 73
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Total stockholders' equity 67,883 70,304
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$80,837 $89,514
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The accompanying notes are an integral part of these condensed consolidated
balance sheets.
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
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March 31, March 30,
1996 1997
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Net sales $14,779 $19,903
Costs and expenses:
Cost of sales 8,665 12,078
Selling, general and administrative expenses 2,293 2,940
Product development expenses 589 555
Other expense, net 426 481
Interest expense (income), net 163 (159)
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Income before income taxes 2,643 4,008
Provision for income taxes 1,015 1,482
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Net income $1,628 $2,526
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Net income per share $0.12 $0.17
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Weighted average common and common equivalent
shares outstanding - primary 13,457 15,081
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended
-------------
March 31, March 31,
1996 1997
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Operating activities:
Net income $1,628 $2,526
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 815 1,033
Deferred income tax (benefit) provision (11) 77
Changes in operating assets and liabilities,
net of acquisitions of businesses:
Trade accounts receivable, net (1,944) (1,906)
Inventories (163) (1,040)
Other current assets (500) 326
Accounts payable 199 (476)
Accrued expenses 407 527
Deferred revenue (76) 116
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Total adjustments (1,273) (1,343)
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Net cash provided by operating activities 355 1,183
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Investing activities:
Purchases of property and equipment (459) (506)
Acquisitions of businesses (4,639) (10,282)
Other (2) (31)
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Net cash used in investing activities (5,100) (10,819)
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Financing activities:
Net borrowings under revolving line of credit 4,693 --
Payments on long-term debt and capital
lease obligations (1,306) (13)
Other 62 33
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Net cash provided by financing activities 3,449 20
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Effect of changes in foreign exchange rate (21) 16
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Net decrease in cash and cash equivalents (1,317) (9,600)
Cash and cash equivalents, beginning of period 2,887 21,232
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Cash and cash equivalents, end of period $1,570 $11,632
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Supplemental Disclosures:
Interest Paid $1,337 $76
Taxes Paid 178 1,080
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Serologicals Corporation (the "Company") is a leading worldwide provider
of specialty human antibody-based products and services to major healthcare
companies. The Company's services, including donor recruitment, donor
management and clinical testing services, enable the Company to provide value-
added, antibody-based products that are used as the active ingredients in
therapeutic and diagnostic pharmaceutical products. The Company operates 58
donor centers, 14 of which specialize in specialty antibody collections and 44
of which primarily collect IVIG antibodies from which a number of products are
produced. The Company is also engaged in the development, manufacturing and
sale of monoclonal antibodies at its facilities in the United Kingdom.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The accompanying statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q. 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, the
accompanying unaudited condensed consolidated financial statements reflect all
adjustments, which are of a normal recurring nature, to present fairly the
Company's financial position, results of operations and cash flows at the dates
and for the periods presented. Interim results of operations are not
necessarily indicative of results to be expected for a 12-month period. The
interim financial statements should be read in conjunction with the audited
consolidated financial statements as of December 29, 1996 and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 29, 1996.
Earnings per share
Net income per share is computed using the weighted average number of
shares of common stock outstanding plus common equivalent shares. Common
equivalent shares from the Nations Note (Note 3) (using the "if-converted"
method) and stock options and warrants (calculated according to the treasury
stock method) have been included in the computation when dilutive. For the
periods presented, fully diluted earnings per share has not been presented as
the dilutive effect is not material. (Note 4).
Weighted average common and common equivalent shares outstanding for the
quarters ended March 31, 1996 and March 30, 1997 have been adjusted to reflect
the Company's 3-for-2 common stock split effected in the form of a stock
dividend paid February 28, 1997 to holders of record as of February 10, 1997.
2. ACQUISITION OF THE NATIONS GROUP
On March 6, 1997, the Company acquired Nations Biologics, Inc. and its
affiliates (the "Nations Group") for approximately $14.2 million (the "Nations
Acquisition"), before recording certain transaction costs and subject to
adjustment based primarily on the post-acquisition performance of the busi-
nesses acquired over the 14-month period subsequent to closing. The purchase
price consisted of approximately $10.2 million of cash and the issuance to one
of the sellers of a $4.0 million convertible subordinated promissory note
maturing on March 7, 2002 (the Nations Note as discussed in Note 3). The
Company financed the $10.2 million of cash paid at closing with cash on hand.
The Nations Acquisition was accounted for as a purchase in accordance with
APB No. 16, and accordingly, the purchase price has been preliminarily
allocated to the net tangible and identifiable intangible assets acquired based
on their estimated fair values as of the acquisition date. The excess of the
cost over the estimated fair values of the net tangible and identifiable
intangible assets acquired has been preliminarily allocated to goodwill.
The following unaudited data summarize the pro forma results of operations
for the quarters ended March 31, 1996 and March 30, 1997 as if the Nations
Acquisition had occurred on January 1 of each period. The unaudited pro forma
information has been prepared for comparative purposes only and does not
purport to represent what the results of operations would actually have been
had the transaction actually occurred on the dates indicated, or what the
results of operations may be in the future.
Quarter Ended
(In thousands, except per share data) -------------
March 31, March 30,
1996 1997
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Net sales $16,219 $23,025
Net income $1,477 $2,479
Net income per share $0.11 $0.16
3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at December 29, 1996 and
March 30, 1997 consisted of the following (in thousands):
December 29, 1996 March 30, 1997
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$4.0 million convertible subordinated
note payable, interest at 4.5% payable
quarterly commencing July 1, 1997;
maturing on March 7, 2002 (see the
Nations Note, as defined below) $ -- $4,000
$3.5 million convertible subordinated
note payable, interest payable monthly
at 5.25%; principal payable on
April 9, 1997 3,500 3,500
Capital lease obligations at varying
interest rates and terms, maturing
through 2001 200 189
Other notes at varying interest
rates and terms maturing through
March 2000 14 12
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3,714 7,701
Less current maturities 3,567 4,900
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$147 $2,801
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In connection with the Nations Acquisition, the Company issued one of the
sellers a $4.0 million convertible subordinated note (the "Nations Note")
maturing on March 7, 2002. The Nations Note bears interest at a rate of 4.5%
per annum through the earlier of the date of repayment, conversion or March 7,
2000. On or after March 7, 1998, 1999 and 2000, the payee may call for
repayment (or conversion into shares of the Company's common stock), subject
to certain restrictions, one-third, two-thirds and all, respectively, of the
then outstanding principal amount of the Nations Note, subject to certain
restrictions as to minimum amounts and frequency. The Nations Note is
convertible at the option of the holder at a conversion price of $18.76 per
share, the fair market value of the Company's common stock at the date of
issuance. The Company has the right to call the Nations Note at any time
commencing March 7, 2000, or earlier if certain events occur.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
per Share", which will be effective for the Company's fiscal year ending
December 28, 1997. This statement established new, simplified standards for
computing and presenting earnings per share. SFAS No. 128 replaces the
traditional presentations of primary earnings per share and fully diluted
earnings per share with basic earnings per share and diluted earnings per
share, respectively. Basic earnings per share excludes the dilutive effect of
stock options, warrants and similar instruments while diluted earnings per
share is computed similarly to fully diluted earnings per share. Had the
Company been required to adopt SFAS 128 currently, the first quarter basic
earnings per share for 1996 and 1997, would have been $0.13 and $0.18,
respectively, and diluted earnings per share would have equaled the current
and historically reported primary earnings per share.
5. SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
The following non-cash investing and financing transactions were entered
into during the quarters ended March 31, 1996 and March 30, 1997 (in thousands):
Quarter Ended
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March 31, March 30,
1996 1997
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Debt assumption $1,154 $ --
Forgiveness of note receivable in
connection with the acquisition of Am-Rho 500 --
Issuance of promissory note as
acquisition consideration -- 4,000
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward Looking Statements
This Form 10-Q contains certain "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, which
generally can be identified by the use of terms such as "may," "expect,"
"anticipate," "intend," "estimate," "believe", "continue" or similar variations
or the negative thereof. These forward looking statements include, without
limitation, statements regarding the effect of changing regulatory and industry
standards; the level of capital expenditures in 1997; the sufficiency of
capital and liquidity to fund operations, capital expenditures and the
Company's acquisition strategy; and the use of proceeds from the Company's
Revolver. These forward looking statements are subject to certain risks and un-
certainties, such as changes in the economy or market conditions, changes in
government policy or regulations and other factors discussed in Part I of the
Company's Annual Report on Form 10-K for the year ended December 29, 1996,
which could cause actual results to differ materially.
Overview and Recent Developments
The Company is a leading worldwide provider of specialty human antibody-
based products and services to major healthcare companies. As of May 1, the
Company operated 58 donor centers, 14 of which specialize in specialty antibody
collections and 44 of which primarily collect IVIG antibodies from which a
number of products are produced. The Company also operates two Food and Drug
Administration ("FDA") licensed monoclonal antibody manufacturing facilities in
Scotland.
On March 6, 1997, the Company acquired Nations Biologics, Inc. and its
affiliates (the "Nations Group"), which operated 16 non-specialty donor centers
(the "Nations Acquisition"). The Company paid approximately $14.2 million,
before recording certain transaction costs and subject to adjustment based
primarily on the post-acquisition performance of the businesses acquired over
the 14-month period subsequent to closing. The purchase price consisted of
approximately $10.2 million of cash and the issuance to one of the sellers of a
$4.0 million convertible subordinated promissory note maturing on March 7, 2002
(See Note 4). The Company financed the $10.2 million of cash paid at closing
with cash on hand.
In February 1997, the Company declared a 3-for-2 split of its common stock
effected in the form of a stock dividend paid on February 28, 1997 to holders
of record as of February 10, 1997. All share and per share amounts herein have
been retroactively adjusted to reflect such split.
Increasing regulatory scrutiny continues to be a significant factor
affecting the industry, resulting in more detailed and frequent inspections by
the FDA, a greater number of observations per inspection, deficiency notices
and warning letters. On occasion, the Company has received notifications and
deficiency notices from the FDA of possible deficiencies in the Company's
compliance with FDA regulations or its own internal standard operating
procedures. To date, the Company believes that it has adequately addressed or
corrected such deficiencies.
The Company is also subject to numerous industry- and customer-mandated
standards. Industry groups, such as the American Blood Resources Association
("ABRA"), and the Company's customers continually evaluate their practices and
procedures regarding new information or public concerns over blood safety and
diseases which may be transmitted from donors through their blood or blood
components. Based upon such evaluation, a certain portion of the population
may be prohibited from donating in the future, or certain new testing and
screening procedures may be required to be performed with respect to certain
donors. One specific concern currently facing the industry is Creutzfeld-Jakob
disease ("CJD"), a fatal disease occurring sporadically in the world at an
incidence of about one per million population per year and which has been
reportedly linked in some cases to bovine spongiform encephalopathy, also know
as "mad cow disease". While no acceptable testing or screening procedure
currently exists to detect CJD, it has generally been found to have a higher
incidence in the older population. In response to this concern, the Company
has been notified by one of its customers that commencing in the second quarter
of 1997, with respect to certain products, such customer will cease accepting
antibodies collected from donors over the age of 59. Another standard volun-
tarily accepted by the industry which is to be adopted during the third
quarter of 1997 relates to the acceptance of new donors. In an effort to
further minimize the potential that infected plasma may enter the manufacturing
process undetected, all new (i.e., first-time) donors' plasma would be excluded
from further manufacture unless a negative set of test results is also obtained
on a second donation within six months, essentially precluding one-time
donations. The Company does not believe that the loss of donors resulting from
these new standards will have a material impact on its operating results.
Results of Operations
The following table sets forth certain operating data of the Company as a
percentage of net sales for the periods indicated below:
Quarter Ended
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March 31, March 30,
1996 1997
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Net sales 100.0% 100.0%
Gross profit 41.4 39.3
Selling, general and administrative expenses 15.5 14.8
Product development 4.0 2.8
Net income 11.0 12.7
Quarters ended March 31, 1996 and March 30, 1997
Net sales increased 34.7%, or $5.1 million, from $14.8 million in 1996 to
$19.9 million in 1997. Of the increase, approximately $2.6 million was
attributable to the full-quarter effect of the acquisitions of Am-Rho
Laboratories, Inc. ("Am-Rho"), Southeastern Biologics, Inc. and its affiliates
("Southeastern") and Simi Biologicals, Inc. in February 1996, March 1996 and
December 1996, respectively (collectively, the "1996 Acquisitions") and the
Nations Acquisition in March 1997. The remainder of the increase, or
approximately $2.5 million, was attributable to additional net sales of IVIG
antibodies, monoclonal antibody products and anti-D. The Company's net sales
of therapeutic antibodies increased 37.1%, while net sales of diagnostic
antibodies increased 28.5%.
Gross profit increased 28.1%, or $1.7 million, from $6.1 million in 1996
to $7.8 million in 1997. Of the increase, $1.5 million was attributable to
increased net sales of, and higher margins on, anti-D and increased sales of
IVIG antibodies, while $332,000 was attributable to the full-quarter effect of
the 1996 Acquisitions and, to a lesser extent, the Nations Acquisition. Gross
profit, as a percentage of net sales ("gross margin") decreased from 41.4% to
39.3%, primarily attributable to an increase in net sales of generally lower-
margin IVIG antibodies as a percentage of total net sales from approximately
31% in 1996 to 40% in 1997. Gross margin from the Company's specialty antibody
products increased from 51.4% in 1996 to 54.5% in 1997 due primarily to a shift
in the product mix of shipments made in 1997.
Selling, general and administrative expenses increased 28.3%, or $648,000,
from $2.3 million in 1996 to $2.9 million in 1997. The increase was primarily
attributable to the larger corporate infrastructure needed to support the
Company's acquisitions and growth and an increased sales and marketing staff at
the Company's monoclonal antibody manufacturing subsidiary. However, selling,
general and administrative expenses, as a percentage of net sales, decreased
from 15.5% to 14.8%.
Product development expenses, which relate primarily to the development of
monoclonal antibodies for blood typing reagents and for therapeutic products,
were substantially unchanged, decreasing from $590,000 in 1996 to $555,000 in
1997.
Other expense, net increased 14.5%, or $61,000, from $420,000 in 1996 to
$481,000 in 1997, due primarily to the full-quarter effect of the amortization
of goodwill and other intangible assets acquired in the 1996 Acquisitions and,
to a lesser extent, the amortization of intangible assets acquired in the
Nations Acquisition in March 1997.
Interest expense (income), net decreased 197.5%, or $322,000, from net
expense of $163,000 in 1996 to net income of $159,000 in 1997, primarily as a
result of the retirement of approximately $7.9 million in debt in June 1996
with proceeds from a secondary stock offering and the subsequent investment of
the remaining proceeds in short term instruments.
Liquidity and Capital Resources
As of March 30, 1997, the Company had cash and cash equivalents and
working capital of $11.6 million and $11.8 million, respectively. Cash and
cash equivalents and working capital decreased $9.6 million and $8.9 million,
respectively, from December 29, 1996, primarily from the use of approximately
$10.2 million of cash on hand for the Nations Acquisition on March 6, 1997.
Pending further use, the Company currently invests all idle cash in highly
liquid, short term instruments with original maturities of three months or
less.
Net cash provided by operations for the quarters ended March 30, 1997 and
March 31, 1996 was approximately $1.2 million and $355,000, respectively, or an
increase of $828,000. The increase in cash flow from operations was primarily
attributable to increased net income of $898,000 and $218,000 of additional
non-cash depreciation and amortization expense, offset by a $376,000 higher
investment in working capital in 1997 versus 1996. The increased investment in
working capital in 1997 versus 1996 was primarily attributable to funding
higher levels of inventory due to the timing of shipments of the Company's non-
specialty products and to the Company's increased level of operations.
Net cash used in investing activities for the quarter ended March 30, 1997
was $10.8 million as compared to $5.1 million for the quarter ended March 31,
1996. Cash used in investing activities in the first quarter of 1996 was
primarily related to the February 1996 acquisition of Am-Rho for approximately
$1.1 million in cash and the March 1996 acquisition of Southeastern for
approximately $3.6 million in cash. Cash used in investing activities in 1997
primarily consisted of approximately $10.2 million in cash used for the Nations
Acquisition.
Net cash provided by financing activities, including the effects of
changes in foreign currency rates, for the quarter ended March 30, 1997 was
$36,000 as compared to $3.4 million for the comparable period of 1996. Net cash
provided by financing activities in 1996 was primarily related to borrowings
under the Revolver to finance the acquisitions of Am-Rho and Southeastern. The
Company had no significant cash financing activities during the first quarter
of 1997.
Capital expenditures relate primarily to the Company's facilities and
related equipment, the Company's information system and the development of
additional specialty and non-specialty antibody donor centers. During the
first quarter of 1997, capital expenditures were $506,000, consisting primarily
of expenditures related to the expansion of the Company's monoclonal production
facility, which was substantially completed during the first quarter, and
expenditures related to upgrading the Company's information system.
During 1997, the Company anticipates increased levels of capital
expenditures. The major factors affecting this increase include (i) the
expansion of the Company's laboratory testing facility and international
headquarters in Clarkston (Atlanta), Georgia; (ii) the re-engineering and
upgrading of the Company's information systems to support its planned growth;
and (iii) the development, relocation and upgrading of specialty and non-
specialty donor centers to increase production capabilities and efficiencies.
The Company has a revolving credit facility with a bank providing for
maximum borrowings of $20 million, of which $15 million may be used for
acquisitions (the "Revolver"). The Company anticipates using the proceeds from
the Revolver to fund capital expenditures, acquisitions and any increased
working capital needs. There were no amounts outstanding under the Revolver at
December 29, 1996 or March 30, 1997.
The Company believes that existing cash balances, cash generated from
operations and the borrowing capacity available under the Revolver are
sufficient to fund operations and anticipated capital expenditures for at least
12 months. As the Company continues to evaluate acquisition and growth
opportunities, it anticipates that additional funding may be necessary. The
Company is evaluating alternative strategies to raise additional capital,
including increasing the borrowing capacity under the Revolver and the issuance
and sale of securities.
The Company is in the third year of two five-year supply contracts with
Bayer Corporation ("Bayer") for the sale of antibodies for IVIG. The contracts
provide for successive one-year renewals, unless notice is given by either
party, and commitments from Bayer to purchase specified amounts on an
escalating basis over the five-year term. The revenues provided under the
contracts are significant and represented approximately 35% of the Company's
revenues for the quarter ended March 30, 1997. Early termination of the
contracts could adversely affect the Company.
On January 21, 1996, the Company entered into an amended agreement with
the holders of a 9% convertible subordinated note issued in the principal
amount of $3.5 million in connection with one of its acquisitions. Under the
terms of the amendment, the interest rate was decreased to 5.25%. Concurrent
with the amendment, the Company called the note for prepayment on April 9, 1997
and the holders of the note exercised their conversion rights, resulting in the
issuance of 375,000 shares of the Company's common stock on April 2, 1997.
In connection with the Nations Acquisition, the Company issued one of the
sellers a $4.0 million convertible subordinated note maturing on March 7, 2002.
The Nations Note bears interest at a rate of 4.5% per annum through the earlier
of the date of repayment, conversion or March 7, 2000. On or after March 7,
1998, 1999 and 2000, the payee may call for repayment (or conversion into
shares of the Company's common stock), subject to certain restrictions, one-
third, two-thirds and all, respectively, of the then outstanding principal
amount of the Nations Note, subject to certain restrictions as to minimum
amounts and frequency. The Nations Note is convertible at the option of the
holder at a conversion price of $18.76 per share, the fair market value of the
Company's common stock at the date of issuance. The Company has the right to
call the Nations Note at any time commencing March 7, 2000, or earlier if
certain events occur.
PART II.
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Item 2. Changes in Securities
c. On March 6, 1997, in connection with the Nations Acquisition, the
Company issued the Nations Note, as fully described in Note 3 of
the Notes to Consolidated Financial Statements (Unaudited)
contained elsewhere herein. The Nations Note was issued to one of
the sellers who made certain investment representations. This
transaction was made in reliance upon the exemption from
registration provisions under the Securities Act of 1933, as
amended, contained in Section 4(2) thereof.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit 11: Statement Re: Computation of Per Share Earnings
Exhibit 27: Financial Data Schedule
b. Reports on Form 8-K:
The Company filed a Current Report on Form 8-K on March 21, 1997,
in which it announced under Item 2-Acquisition or Disposition of
Assets, the purchase of Nations Biologics, Inc. and its
affiliates. An amended Form 8-K/A including the requisite
financial information related to the Nations Acquisition was filed
on May 2, 1997.
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.
SEROLOGICALS CORPORATION
------------------------
(Registrant)
Date: May 9, 1997 By: /s/ Russell H. Plumb//
-----------------------
Russell H. Plumb
Vice President/Chief Financial
Officer (Principal Financial and
Accounting Officer)
Exhibit 11
SEROLOGICALS CORPORATION AND SUBSIDIARIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (1)
(in thousands, except per share data)
Quarter Ended
-------------
March 31, March 30,
1996 1997
---------- ----------
NET INCOME PER SHARE - PRIMARY
Weighted average number of common
shares outstanding 12,632 14,127
Shares issued upon assumed conversion
of 4.5% convertible note -- 54
Shares issued upon assumed exercise of
outstanding stock options and warrants (2) 825 900
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Weighted average number of common and common
equivalent shares outstanding 13,457 15,081
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Net income $1,628 $2,526
Add back interest, net of tax, assuming
conversion of 4.5% convertible note -- 8
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Net income, assuming conversion of
4.5% convertible note $1,628 $2,534
------- -------
------- -------
Net income per common share-primary $0.12 $0.17
------- -------
------- -------
NET INCOME PER SHARE -- FULLY DILUTED
Weighted average number of common shares
outstanding 12,632 14,127
Shares issued upon assumed exercise of
outstanding stock options and warrants (2) 825 900
Shares issued upon assumed conversion of
4.5% convertible note -- 54
Shares issued upon assumed conversion of
5.25% convertible note 375 375
------- -------
Weighted average number of fully diluted
shares outstanding 13,832 15,456
------- -------
------- -------
Net income $1,628 $2,526
Add back interest, net of tax, assuming
conversion of 4.5% convertible note -- 8
Add back interest, net of tax, assuming
conversion of 5.25% convertible note 67 34
------- -------
Net income, assuming conversion of notes $1,695 $2,568
------- -------
------- -------
Net income per common share-fully diluted $0.12 $0.17
------- -------
------- -------
- -----------
(1) All numbers of shares in this exhibit are weighed on the basis of the
number of days the shares were outstanding or assumed to be outstanding
during each period. All information included herein gives retroactive
effect to a 3-for-2 stock split effective February 28, 1997.
(2) Based on the treasury stock method using an average market price of $18.66
for 1996 and $18.98 for 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The condensed consolidated Financial Statements of Seorlogicals Corporation
for the quarter ended March 30, 1997, as set forth in its Form 10-Q for
such quarter and is qualified in its entirety by the reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 11,632
<SECURITIES> 0
<RECEIVABLES> 7,404
<ALLOWANCES> 242
<INVENTORY> 8,362
<CURRENT-ASSETS> 28,011
<PP&E> 16,927
<DEPRECIATION> 5,739
<TOTAL-ASSETS> 89,514
<CURRENT-LIABILITIES> 16,178
<BONDS> 0
0
0
<COMMON> 141
<OTHER-SE> 70,163
<TOTAL-LIABILITY-AND-EQUITY> 89,514
<SALES> 19,903
<TOTAL-REVENUES> 19,903
<CGS> 12,078
<TOTAL-COSTS> 12,078
<OTHER-EXPENSES> 3,976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (159)
<INCOME-PRETAX> 4,008
<INCOME-TAX> 1,482
<INCOME-CONTINUING> 2,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,526
<EPS-PRIMARY> $0.17 <F1>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Primary earnings per share reflects the Company's 3-for-2 split of its
common stock, paid February 28, 1997.
<F2> Fully diluted EPS is not presented as dilution is less than 3%
</FN>
</TABLE>
