-----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, D/1dnhB/BXjoM+OOdqnecoSchwbSMD9rH1aqn3xVpMDnndqBa1xg6EghA2OQLQ4z 9xRhthULbd84KJ4D1aTVNA== 0000950148-98-001047.txt : 19980430 0000950148-98-001047.hdr.sgml : 19980430 ACCESSION NUMBER: 0000950148-98-001047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980429 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: 98603812 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 March 31, 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 March 31, 1998, was 13,774,737. ================================================================================ 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 March 31, ------------------------ 1998 1997 -------- -------- SALES $ 46,104 $ 44,400 -------- -------- COSTS AND EXPENSES: Cost of sales 20,395 19,682 Selling 9,012 8,659 Research and development 5,409 4,756 General and administrative 5,926 5,443 Equity in income of affiliates (344) (281) Interest income-net (118) (232) -------- -------- Total costs and expenses 40,280 38,027 -------- -------- INCOME BEFORE INCOME TAXES 5,824 6,373 PROVISION FOR INCOME TAXES 1,720 1,710 -------- -------- NET INCOME $ 4,104 $ 4,663 ======== ======== EARNINGS PER SHARE: BASIC $ .30 $ .34 DILUTED .30 .34 AVERAGE SHARES OUTSTANDING: BASIC 13,746 13,605 DILUTIVE EFFECT OF STOCK OPTIONS 161 262 -------- -------- DILUTED 13,907 13,867 ======== ========
1 3 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollars in Thousands) March 31, December 31, 1998 1997 --------- --------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 17,589 $ 20,372 Accounts receivable-net of allowance for doubtful accounts of $142 and $131 48,466 45,798 Inventories 50,112 49,038 Prepaid expenses and other current assets 257 405 Deferred income taxes 3,303 3,303 --------- --------- Total current assets 119,727 118,916 PROPERTY, PLANT AND EQUIPMENT: Land and buildings 32,404 30,854 Machinery and equipment 52,659 50,005 Leasehold improvements 7,121 7,075 Construction in progress 944 736 --------- --------- Total 93,128 88,670 Less accumulated depreciation and amortization 43,519 41,576 --------- --------- Property, plant and equipment - net 49,609 47,094 SALES-TYPE AND OPERATING LEASES 26,466 26,875 DEFERRED INCOME TAXES 1,442 1,442 INVESTMENTS IN AFFILIATED COMPANIES 13,984 13,905 EXCESS OF COST OVER NET ASSETS ACQUIRED- Net of amortization of $7,644 and $7,368 15,368 13,948 --------- --------- TOTAL ASSETS $ 226,596 $ 222,180 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 16,271 $ 15,547 Accounts payable 13,221 14,562 Accrued liabilities 6,174 5,986 Income taxes payable 1,441 (210) Total current liabilities 37,107 35,885 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common Stock-no par value, authorized 30,000,000 shares; outstanding 13,774,737 shares and 13,717,072 shares 39,683 38,527 Retained earnings 161,733 159,278 Foreign currency translation adjustment (11,927) (11,510) --------- --------- Total shareholders' equity 189,489 186,295 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 226,596 $ 222,180 ========= =========
2 4 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in Thousands) Three Months Ended March 31, --------------------- 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 4,104 $ 4,663 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 3,762 3,026 Equity in undistributed income of unconsolidated affiliates (79) (281) Accounts receivable (2,673) (4,930) Inventories (740) (3,063) Prepaid expenses and other current assets 148 230 Accounts payable (1,505) 1,523 Accrued liabilities 188 (456) Income taxes payable 1,490 (277) -------- -------- Net Cash Flows from Operating Activities 4,695 435 CASH FLOWS FROM (USED FOR) INVESTING ACTIVITIES: Additions to property, plant and equipment (2,597) (2,761) Sales-type and operating leases (2,077) (2,354) Investment in affiliated company (2,612) (646) -------- -------- Net Cash from (used for) Investing Activities (7,286) (5,761) CASH FLOWS FROM (USED FOR) FINANCING ACTIVITIES: Borrowing 544 669 Proceeds from exercise of stock options 1,156 290 Cash dividends paid (1,649) (1,632) -------- -------- Net Cash from (used for) Financing Activities 51 (673) EFFECT OF EXCHANGE RATE CHANGES ON CASH (243) (357) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,783) (6,356) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 20,372 13,781 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 17,589 $ 7,425 ======== ========
3 5 DIAGNOSTIC PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1--BASIS OF PRESENTATION The information for the three months ended March 31, 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 three-month period ending March 31, 1998 are not necessarily indicative of the results to be expected for the year ended 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:
March 31, December 31, 1998 1997 ----------- ----------- Raw materials $17,226,000 $17,814,000 Work in process 19,315,000 18,073,000 Finished goods 13,571,000 13,151,000 ----------- ----------- Total $50,112,000 $49,038,000 =========== ===========
NOTE 3--COMPREHENSIVE INCOME In June of 1997, the financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 130 "Reporting Comprehensive Income." The statement, which the Company adopted in the first quarter of 1998, establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is summarized as follows:
Three Months Ended March 31, ----------------------------- 1998 1997 ----------- ----------- Net income $ 4,104,000 $ 4,663,000 Foreign currency translation adjustment (417,000) (3,390,000) ----------- ----------- Comprehensive income $ 3,687,000 $ 1,273,000 =========== ===========
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. 4 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's sales increased 4% in the first quarter of 1998 to $46.1 million compared to sales of $44.4 million in the first quarter of 1997. Sales of IMMULITE instruments and assays have been the principal factor in sales growth. Unit sales of IMMULITE test kits increased 21% over the 1997 first quarter, offsetting the continuing decline in sales of RIA kits. The Company commenced commercial shipments of its next generation IMMULITE 2000 system in early March 1998 and anticipates shipping 400 of the systems to customer sites during 1998. These shipments did not make a meaningful contribution to first quarter results. The Company has received FDA marketing clearance for 31 tests for this system and expects increased demand for these kits for the remainder of the year as customers begin to ramp-up their use of the systems. 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 first quarter of 1998. Had the value of the U.S. dollar relative to other currencies remained constant with the first quarter of 1997, sales for the 1998 first quarter would have increased 7% over the same period a year ago, and net income would have been marginally higher. 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. In February 1998, the Company acquired its distributor in Norway. This firm had 1997 sales of approximately $3 million. The Company also recently appointed new independent distributors in Russia, India and Malaysia. Cost of sales increased 4% in the first quarter of 1998 compared to the first quarter of 1997, but as a percentage of sales remained level at approximately 44% of sales. Selling expense as a percentage of sales remained at 19.5% for the first quarter of both 1997 and 1998. The expenditures increased by 4.1% in 1998 primarily to support the expansion of the IMMULITE product line and the launch of the IMMULITE 2000. Research and development expenditures increased 13.7% in the first quarter of 1998 compared to the prior year period. As a percentage of sales, research and development expenditures were 11.7% in 1998 and 10.7% in 1997. The dollar amount of these expenditures increased to support the continuing development of the IMMULITE 2000, the expansion of the IMMULITE assay menu, and the development of a new point-of-care analyzer, the ImmuGold, which is planned for market introduction in late 1999. General and administrative expenses increased 8.9% in the first quarter of 1998 over the prior year period, representing 12.9% and 12.3% of sales, respectively. 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 first quarter of 1997 to 29.5% in the first quarter of 1998. In the prior year the Company benefited from net operating loss carryforwards from a foreign subsidiary which were fully utilized during 1997. Net income decreased by 12% in the first quarter of 1998, representing 8.9% of sales compared to 10.5% of sales in 1997 due primarily to the effects of the strong U.S. dollar on the operating results of foreign subsidiaries, continuing losses at the French distributor and increased investments in R&D. 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. Cash flow from operating activities was $4.7 million in the first quarter of 1998 compared to $.4 million in 1997. Additions to property, plant and equipment in 1998 were $2.6 million compared to $2.8 million in 1997. The Company has no material commitments for capital expenditures in 1998. 5 7 The Company's foreign consolidated subsidiaries had outstanding bank loans of $16.3 million at March 31, 1998 and $15.5 million at March 31, 1997. During 1997 and 1998 the Company paid a quarterly cash dividend of $.12 per share. FORWARD LOOKING STATEMENTS Except for the historical information contained herein, this report contains forward looking statements (identified by the words "estimate," "project," "anticipate," "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 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) APRIL 29, 1998 /s/ SIGI ZIERING - ------------------------------- ------------------------------- Date Sigi Ziering, Ph.D., Chairman of the Board Chief Executive Officer APRIL 29, 1998 /s/ JULIAN R. BOCKSERMAN - ------------------------------- ------------------------------- Date Julian R. Bockserman, Vice President Chief Financial Officer 6 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 17,589 0 48,466 142 50,112 119,727 93,128 43,519 226,596 37,107 0 0 0 39,683 149,806 226,596 46,104 46,104 20,395 20,395 19,885 0 0 5,824 1,720 0 0 0 0 4,104 .30 .30
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