-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TgWvzEaug+Anmn67s1Cw9+RGrLVhLsAjaaBGrA+QqGRtkT0B80bMmpylXrXMX+wx ia6s+JwK2zBAMSOQt3bMyg== 0000950148-98-001754.txt : 19980729 0000950148-98-001754.hdr.sgml : 19980729 ACCESSION NUMBER: 0000950148-98-001754 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980728 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIAGNOSTIC PRODUCTS CORP CENTRAL INDEX KEY: 0000702259 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 952802182 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09957 FILM NUMBER: 98672231 BUSINESS ADDRESS: STREET 1: 5700 W 96TH ST CITY: LOS ANGELES STATE: CA ZIP: 90045 BUSINESS PHONE: 2137760180 10-Q 1 FORM 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1998 [ ] 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 1-9957 Diagnostic Products Corporation (Exact name of registrant as specified in its charter) CALIFORNIA 95-2802182 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5700 WEST 96TH STREET LOS ANGELES, CALIFORNIA 90045 (Address of principal executive offices) Registrant's telephone number: (213) 776-0180 NO CHANGE (Former name, former address and former fiscal year, if changed since last report) 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 [ ] The number of shares of Common Stock, no par value, outstanding as of June 30, 1998, was 13,782,417. ================================================================================ 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
(In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ---------- ---------- ---------- ---------- SALES $ 49,278 $ 46,763 $ 95,382 $ 91,163 ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Cost of sales 21,429 20,169 41,824 39,851 Selling 9,094 9,961 18,106 18,620 Research and development 5,761 4,732 11,170 9,488 General and administrative 5,980 5,708 11,906 11,151 Equity in income of affiliates (280) (415) (624) (696) Interest income-net (90) (74) (208) (306) ---------- ---------- ---------- ---------- Total costs and expenses 41,894 40,081 82,174 78,108 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES 7,384 6,682 13,208 13,055 PROVISION FOR INCOME TAXES 2,190 1,790 3,910 3,500 ---------- ---------- ---------- ---------- NET INCOME $ 5,194 $ 4,892 $ 9,298 $ 9,555 ========== ========== ========== ========== EARNINGS PER SHARE: BASIC $ .38 $ .36 $ .68 $ .70 DILUTED .37 .35 .67 .69 AVERAGE SHARES OUTSTANDING: BASIC 13,779 13,622 13,762 13,614 DILUTIVE EFFECT OF STOCK OPTIONS 165 250 163 255 ---------- ---------- ---------- ---------- DILUTED 13,944 13,872 13,925 13,869 ========== ========== ========== ==========
1 3 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in Thousands) June 30, December 31, 1998 1997 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 16,972 $ 20,372 Accounts receivable-net of allowance for doubtful accounts of $110 and $131 52,502 45,798 Inventories 51,932 49,038 Prepaid expenses and other current assets 582 405 Deferred income taxes 3,303 3,303 ------------ ------------ Total current assets 125,291 118,916 PROPERTY, PLANT AND EQUIPMENT: Land and buildings 32,659 30,854 Machinery and equipment 54,425 50,005 Leasehold improvements 7,135 7,075 Construction in progress 1,017 736 ------------ ------------ Total 95,236 88,670 Less accumulated depreciation and amortization 45,407 41,576 ------------ ------------ Property, plant and equipment - net 49,829 47,094 SALES-TYPE AND OPERATING LEASES 28,064 26,875 DEFERRED INCOME TAXES 1,442 1,442 INVESTMENTS IN AFFILIATED COMPANIES 14,204 13,905 EXCESS OF COST OVER NET ASSETS ACQUIRED- Net of amortization of $7,920 and $7,368 14,908 13,948 ------------ ------------ TOTAL ASSETS $ 233,738 $ 222,180 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 16,931 $ 15,547 Accounts payable 16,101 14,562 Accrued liabilities 4,710 5,986 Income taxes payable 2,416 (210) ------------ ------------ Total current liabilities 40,158 35,885 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common Stock-no par value, authorized 30,000,000 shares; outstanding 13,782,417 shares and 13,717,072 shares. 39,839 38,527 Retained earnings 165,274 159,278 Foreign currency translation adjustment (11,533) (11,510) ------------ ------------ Total shareholders' equity 193,580 186,295 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 233,738 $ 222,180 ============ ============
2 4 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in Thousands) Six Months Ended June 30, ----------------------------- 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 9,298 $ 9,555 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 8,704 7,008 Equity in undistributed income of unconsolidated affiliates (299) (696) Accounts receivable (6,454) (5,423) Inventories (2,513) (5,065) Prepaid expenses and other current assets (177) (161) Accounts payable 1,289 1,603 Accrued liabilities (1,276) (1,651) Income taxes payable 2,456 (92) ---------- ---------- Net Cash Flows from Operating Activities 11,028 5,078 CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES: Additions to property, plant and equipment (4,493) (5,537) Sales-type and operating leases (6,215) (5,214) Investment in affiliated company (2,612) (46) ---------- ---------- Net Cash Flows from (used for) Investing Activities (13,320) (10,797) CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES: Borrowing 901 6,280 Proceeds from exercise of stock options 1,312 586 Cash dividends paid (3,302) (3,268) ---------- ---------- Net Cash Flows from (used for) Financing Activities (1,089) 3,598 EFFECT OF EXCHANGE RATE CHANGES ON CASH (19) (494) ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,400) (2,615) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,372 13,781 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 16,972 $ 11,166 ========== ==========
3 5 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1--BASIS OF PRESENTATION The information for the six months ended June 30, 1998 and 1997 has not been audited by independent accountants, but includes all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for such periods. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the requirements of the Securities and Exchange Commission, although the Company believes that the disclosures included in these financial statements are adequate to make the information not misleading. The consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1997 annual report on Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the six-month period ended June 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding. Diluted earnings per share includes the dilutive effect of stock options. NOTE 2--INVENTORIES Inventories by major categories are summarized as follows:
June 30, December 31, 1998 1997 ------------ ------------ Raw materials $ 18,799,000 $ 17,814,000 Work in process 18,045,000 18,073,000 Finished goods 15,088,000 13,151,000 ------------ ------------ Total $ 51,932,000 $ 49,038,000 ============ ============
NOTE 3--COMPREHENSIVE INCOME Comprehensive income is summarized as follows:
Three Months Ended Six Months Ended June 30, June 30, --------------------------------- ---------------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net income $ 5,194,000 $ 4,892,000 $ 9,298,000 $ 9,555,000 Foreign currency translation adjustment 394,000 (946,000) (23,000) (4,336,000) ------------ ------------ ------------ ------------ Comprehensive income $ 5,588,000 $ 3,946,000 $ 9,275,000 $ 5,219,000 ============ ============ ============ ============
The Company does not provide for U.S. income taxes on foreign currency translation adjustments because it does not provide for such taxes on undistributed earnings of foreign subsidiaries. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the second quarter and six months ended June 30, 1998, the Company's sales increased 5.4% to $49.3 million and 4.6% to $95.4 million, respectively, compared to the comparable periods in 1997. Unit sales of IMMULITE test kits increased 21% and 24% in the second quarter and first six months of 1998, respectively, over the comparable 1997 periods. The Company shipped 205 IMMULITE systems in the second quarter, including 51 of the new generation IMMULITE 2000 which was introduced in March 1998. For the six month period, the Company shipped 303 IMMULITE One systems and 99 IMMULITE 2000 systems, 4 6 bringing the total worldwide shipments of IMMULITE systems to over 3,500. Due to a longer than originally anticipated selling cycle for the IMMULITE 2000, the Company now expects to ship approximately 300 IMMULITE 2000 systems by year-end, rather than the 400 systems indicated in the Form 10-Q for the quarter ended March 31, 1998. This delay is expected to have only a short-term impact on sales growth, and should not significantly impact the long-term outlook since the Company continues to experience strong demand for the IMMULITE One. Sales of the Company's mature RIA products declined approximately 14% in the 1998 second quarter compared to the 1997 second quarter. The Company expects RIA revenues to account for less than 20% of the total sales for the 1998 fiscal year (compared to 30% in 1997), so further declines in sales of this product line will have less of an impact on overall reported sales in the future. Sales to Asia, which represent approximately 10% of total sales, declined approximately 6% and 10% in the second quarter and first six months of 1998, respectively, compared to the comparable periods in 1997, due to the economic instability of that region. Due to the significance of foreign sales, the Company is subject to currency risks based on the relative strength or weakness of the U.S. dollar. In periods when the U.S. dollar is strengthening, the effect of the translation of the financial statements of consolidated foreign affiliates is that of lower sales and net income. The U.S. dollar continued to strengthen in the second quarter of 1998. Had the value of the U.S. dollar relative to other currencies remained constant with the second quarter of 1997, sales for the 1998 second quarter would have increased 7% over the same period a year ago, and net income would have been unchanged. Due to intense competition, the Company's foreign distributors have been unable to increase prices to offset the negative effect of the strong U.S. dollar. Cost of sales remained at approximately 44% of sales in the second quarter and six month periods of 1998 and 1997. Selling expense as a percentage of sales decreased 13% from 21.3% of sales in the second quarter of 1997 to 18.5% of sales in the second quarter of 1998. For the six month periods, selling expense as a percentage of sales declined from 20.4% of 1997 sales to 19% of 1998 sales. The $867,000 (8.7%) decrease in selling expense in the 1998 second quarter was due to start-up costs of the French affiliate which were reflected only in the 1997 second quarter and more efficient marketing efforts at the Los Angeles headquarters. Other operating expenses (research and development; general and administrative) as a percentage of sales remained stable. Included in general and administrative expenses is the amortization of the excess of cost over net assets acquired and minority interest. Equity in income of affiliates represents the Company's share of earnings of non-consolidated affiliates, principally the 45%-owned Italian distributor. Net interest income represents the excess of interest income and interest on equipment contracts over interest expense. The Company's effective tax rate includes Federal, state and foreign taxes. The consolidated tax rate increased from 26.8% in the second quarter and first six months of 1997 to about 29.7% in the comparable 1998 periods due to net operating loss carryforwards and foreign tax credits which are not available in 1998. Net income for the second quarter of 1998 increased 6.2% over the second quarter of 1997 due to the increase in sales and reduced selling expenses. For the first six months of 1998, however, net income declined by 2.7% over the first six months of 1997 due to the 12% decline in 1998 first quarter net income over the 1997 first quarter. The Company has adequate working capital and sources of capital (including an unused $20 million unsecured line of credit) to carry on its current business and to meet its existing capital requirements. Net cash flow from operating activities was $11 million in the first six months of 1998 compared to $5 million in 1997. Additions to property, plant and equipment in 1998 were $4.5 million compared to $5.5 million in 1997. Cash used for the placement of IMMULITE systems under sales-type and operating leases (for periods of generally three to five years) increased 19% from $5.2 million for the first six months of 1997 to $6.2 million for the first six months of 1998. The Company's foreign consolidated subsidiaries had outstanding bank loans of $16.9 million at June 30, 1998 $15.6 million at December 31, 1997. The Company's current quarterly cash dividend is $.12 per share. 5 7 The Company has conducted a review of its computer systems to identify those areas that could be affected by the "Year 2000" issue and is developing an implementation plan to resolve the issue. The Company presently believes, with modification to existing software and converting to new software, the Year 2000 problem will not pose significant operational problems and is not anticipated to be material to its financial position or results of operations in any given year. FORWARD LOOKING STATEMENTS Except for the historical information contained herein, this report contains forward looking statements (identified by the words "estimate," "project," "anticipate," "plan," "expect," "intend," "believe," "hope" and similar expressions) which are based upon Management's current expectations and speak only as of the date made. These forward looking statements are subject to risks, uncertainties and factors that could cause actual results to differ materially from the results anticipated in the forward looking statements. These risks and uncertainties include the degree of customer demand for the Company's products, customer acceptance of the IMMULITE 2000 and other new products, the Company's ability to keep abreast of technological innovations, the risks inherent in the development and release of new products (such as delays, unforeseen costs and technical difficulties), competitive pressures, currency risks based on the relative strength or weakness of the U.S. dollar, health care regulation and cost containment measures, and political and economic instability in certain foreign markets. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The Company's Annual Meeting of Shareholders was held on May 6, 1998. In connection with the election of directors, each nominee received the following votes:
NOMINEE FOR WITHHELD - ------- --- -------- Sigi Ziering 11,639,381 106,908 Sidney A. Aroesty 11,648,435 97,854 Maxwell H. Salter 11,641,570 104,719 James D. Watson 11,644,131 102,158 Michael Ziering 11,645,185 101,104 Frederick Frank 11,532,208 214,081
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K. None. 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. DIAGNOSTIC PRODUCTS CORPORATION (Registrant) JULY 28, 1998 /s/ SIGI ZIERING - ---------------------------------- ------------------------------------------- Date Sigi Ziering, Ph.D., Chairman of the Board Chief Executive Officer JULY 28, 1998 /s/ JULIAN R. BOCKSERMAN - ---------------------------------- ------------------------------------------- Date Julian R. Bockserman, Vice President Chief Financial Officer 6 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 1 16,972 0 52,502 110 51,932 125,291 95,236 45,407 233,738 40,158 0 0 0 39,839 153,741 233,738 95,382 95,382 41,824 41,824 40,350 0 0 13,208 3,910 9,298 0 0 0 9,298 .68 .67
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