-----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, TRv6IiGX40XeFCYjC3XsaKRKxUMp9Y29aK8FhPCWcDLIPlMgYbgoyzJUW9m2Nxn5 xKPrSpBvkKRAhAeOD3VlTQ== 0000892569-98-002283.txt : 19980814 0000892569-98-002283.hdr.sgml : 19980814 ACCESSION NUMBER: 0000892569-98-002283 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HYCOR BIOMEDICAL INC /DE/ CENTRAL INDEX KEY: 0000719447 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 581437178 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11647 FILM NUMBER: 98685404 BUSINESS ADDRESS: STREET 1: 7272 CHAPMAN AVE CITY: GARDEN GROVE STATE: CA ZIP: 92641 BUSINESS PHONE: 7148959558 MAIL ADDRESS: STREET 2: 18800 VON KARMAN AVE CITY: IRVINE STATE: CA ZIP: 92715-1517 FORMER COMPANY: FORMER CONFORMED NAME: HYBRIDOMA SCIENCES INC DATE OF NAME CHANGE: 19860813 10-Q 1 FORM 10-Q FOR PERIOD ENDED JUNE 30, 1988 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 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: 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: 0-11647 HYCOR BIOMEDICAL INC. --------------------- (Exact name of registrant as specified in its charter) Delaware 58-1437178 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7272 Chapman Avenue, Garden Grove, California 92841 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (714) 933-3000 -------------- 18800 Von Karman Avenue, Irvine, California 92612-1517 ------------------------------------------------------ (Former address of principal executive offices) (Zip 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 July 31, 1998 - ---------------------------- ---------------------------- Common Stock, $.01 Par Value 7,252,999 2 PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS HYCOR BIOMEDICAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
June 30, December 31, 1998 1997 ----------- ----------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 918,398 $ 814,908 Investments 1,276,327 1,490,192 Accounts receivable, net of allowance for doubtful accounts of $142,017 and $120,684 3,228,960 3,312,857 Income tax receivable 935,668 713,251 Inventories (Note 2) 3,826,983 3,772,777 Prepaid expenses and other current assets 455,708 562,879 Deferred income tax benefit 1,116,727 1,012,541 ----------- ----------- Total current assets 11,758,771 11,679,405 ----------- ----------- PROPERTY AND EQUIPMENT, at cost 13,276,822 12,602,155 Less accumulated depreciation (8,071,955) (7,358,809) ----------- ----------- 5,204,867 5,243,346 ----------- ----------- GOODWILL AND OTHER INTANGIBLES, net of amortization of $1,258,361 and $1,101,528 4,232,994 4,363,971 DEFERRED INCOME TAX BENEFIT 854,162 854,000 OTHER ASSETS 118,998 160,174 ----------- ----------- Total assets $22,169,792 $22,300,896 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,576,837 $ 1,247,642 Accrued liabilities 669,056 774,177 Accrued payroll expenses 607,233 613,698 Current portion - debt (Notes 4 & 5) 617,605 611,159 ----------- ----------- Total current liabilites 3,470,731 3,246,676 ----------- ----------- Long-Term Debt (Notes 4 & 5) 2,238,558 2,240,240 ----------- ----------- Total Liabilities 5,709,289 5,486,916 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock 72,303 71,570 Paid-in capital 12,357,461 12,271,207 Retained earnings 4,559,023 4,978,890 Accumulated other comprehensive income (loss) (528,284) (507,687) ----------- ----------- Total stockholders' equity 16,460,503 16,813,980 ----------- ----------- Total liabilities and stockholders' equity $22,169,792 $22,300,896 =========== ===========
Page 2 3 HYCOR BIOMEDICAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (unaudited)
Three Months Ended Six Months Ended June 30, June 30, ------------------------- ---------------------------- 1998 1997 1998 1997 ---------- ----------- ---------- ---------- NET SALES $4,652,058 $4,864,543 $9,343,965 $9,447,212 COST OF SALES 2,296,496 2,091,667 4,616,915 4,276,409 ---------- ---------- ---------- ---------- Gross profit 2,355,562 2,772,876 4,727,050 5,170,803 ---------- ---------- ---------- ---------- OPERATING EXPENSES Selling, general and administrative 2,178,640 2,244,792 4,256,104 4,275,294 Research and development 560,615 678,116 1,186,660 1,337,498 ---------- ---------- ---------- ---------- 2,739,255 2,922,908 5,442,764 5,612,792 ---------- ---------- ---------- ---------- OPERATING INCOME (LOSS) (383,693) (150,032) (715,714) (441,989) INTEREST EXPENSE 46,302 -- 91,383 -- INTEREST INCOME 29,396 70,845 57,373 144,142 FOREIGN EXCHANGE G/(L) (2,097) (4,184) (7,073) (1,998) ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES (402,696) (83,371) (756,797) (299,845) PROVISION (BENEFIT) FOR INCOME TAXES (174,346) (29,797) (336,930) (102,478) ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (228,350) $ (53,574) $ (419,867) $ (197,367) ========== ========== ========== ========== NET INCOME (LOSS) PER SHARE $ (0.03) $ (0.01) $ (0.06) $ (0.03) ========== ========== ========== ========== AVE. COMMON SHARES OUTSTANDING 7,206,948 7,137,623 7,188,727 7,149,937
Page 3 4 HYCOR BIOMEDICAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended June 30, 1998 1997 --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $(419,867) $ (197,367) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 891,998 789,624 Deferred income tax provision (116,238) (129,575) (Gain) Loss on foreign currency transactions -- 1,998 (Gain) Loss on sales of assets -- 36,127 Change in assets and liabilities, net of effects of foreign currency adjustments Accounts receivable 73,127 (57,740) Income tax receivable (222,428) 21,411 Inventories (54,493) 114,089 Prepaid expenses and other current assets 112,688 (34,156) Accounts payable 327,184 (235,292) Accrued liabilities (106,276) (197,224) Accrued payroll expenses (6,039) 174,293 ---------- ---------- Total adjustments 899,523 483,555 ---------- ---------- Net cash provided by (used in) operating activities 479,656 286,188 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of investments 205,247 1,415,105 Purchases of intangible assets (22,911) (23,462) Direct costs of acquisition (12,850) (164,478) Purchases of property, plant and equipment (688,090) (881,530) Proceeds from sale of property and equipment 1,100 54,453 Proceeds from collection of notes receivable 48,010 18,523 ---------- ---------- Net cash provided by (used in) investing activities (469,494) 418,611 ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 46,718 -- Principal payments on long-term debt (44,468) -- Proceeds from issuance of common stock 86,988 40,604 Purchases of Hycor common stock -- (467,580) ---------- ---------- Net cash provided by (used in) financing activities 89,238 (426,976) ---------- ---------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,090 (24,605) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 103,490 253,218 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 814,908 631,404 ---------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 918,398 $ 884,622 ========== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year - interest $ 102,334 $ -- - income taxes $ 8,483 $ 13,106
Page 4 5 HYCOR BIOMEDICAL INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 1. BASIS OF PRESENTATION In the opinion of the Company, the accompanying unaudited financial statements include all adjustments necessary to present fairly the financial position as of June 30, 1998 and December 31, 1997, the results of operations and the cash flows for the three and six-month periods ended June 30, 1998 and 1997. These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and do not include all the information and note disclosures required by generally accepted accounting principles for complete financial statements and may be subject to year-end adjustments. 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. Certain items in the 1997 consolidated financial statements have been reclassified to conform with the 1998 presentation. The results of operations for any interim period are not necessarily indicative of results to be expected for the full year. Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding. Common stock equivalents have been excluded from the calculation of diluted EPS in loss periods as the impact is anti-dilutive. 2. INVENTORIES Inventories are valued at the lower of cost (first-in, first-out method) or market. Cost includes material, direct labor and manufacturing overhead. Inventories at June 30, 1998 and December 31, 1997 consist of: 6/30/98 12/31/97 ---------- ---------- Raw materials $1,067,761 $1,141,205 Work in process 1,336,545 1,280,960 Finished goods 1,422,677 1,350,612 ---------- ---------- $3,826,983 $3,772,777 ========== ========== Page 5 6 3. COMPREHENSIVE INCOME (LOSS) 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: Statement of Comprehensive Income (Loss)
Three Months Ended June 30, ------------------------------------------- 1998 1997 ------------------- ------------------ Net loss $(228,350) $ (53,574) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 92,860 (152,131) Unrealized gains (losses) on securities (342) 36,225 ------------------- ------------------ Other comprehensive income (loss) 92,518 (115,906) ------------------- ------------------ Comprehensive Income (loss) $(135,832) $(169,480) =================== ==================
Statement of Comprehensive Income (Loss)
Six Months Ended June 30, ------------------------------------------- 1998 1997 ------------------- ------------------ Net loss $(419,867) $(197,367) Other comprehensive income (loss), net of tax: Foreign currency translation adjustments (23,623) (457,618) Unrealized gains (losses) on securities 3,026 11,265 ------------------- ------------------ Other comprehensive income (loss) (20,597) (446,353) ------------------- ------------------ Comprehensive Income (loss) $(440,464) $(643,720) =================== ==================
Page 6 7 4. ACQUISITION On July 21, 1997, the Company acquired from unrelated third parties all of the outstanding stock of Cogent Diagnostics Limited ("Cogent") for approximately $1,453,000 in cash and $1,574,000 in three year notes to the seller group. The acquisition was accounted for using the purchase method of accounting, and Cogent's operating results have been included in the accompanying consolidated statements of operations from the date of acquisition. Cogent is based in Edinburgh, Scotland and develops, manufactures and markets a broad line of test kits for diagnosis of autoimmune disease. 5. LONG TERM DEBT The Company has a line of credit which provides for borrowings up to $2,000,000 and expires in July, 1999. The loan is collateralized by the Company's accounts receivable, inventories, and property, plant and equipment. At June 30, 1998, $1,000,000 was outstanding. Advances under the line bear interest at the prime rate or at LIBOR plus 2%, payable monthly, with the principal due at maturity. At June 30, 1998 the Company's interest rate was 7.80%. The line of credit contains restrictive covenants, the most significant of which relate to the maintenance of minimum tangible net worth, debt-to-tangible net worth requirements and liquid assets plus accounts receivable-to-current liabilities requirements. At June 30, 1998, the Company was in compliance with such covenants. The Company has outstanding notes in the amount of $1,574,000. These notes were issued to the seller group in executing the acquisition of Cogent Diagnostics LTD (Cogent). Interest on the notes accrues at a rate of 6.85% and is payable quarterly. Principal payments are due in three equal annual installments commencing in July, 1998. In addition, one of the Company's foreign subsidiaries has long term debt, payable to financial institutions, aggregating $277,000 with weighted average interest rate of approximately 9%. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained herein, the matters discussed in this report are forward-looking statements which involve risk and uncertainties that could cause actual results to differ materially from the results anticipated in the forward looking statements. These risks and uncertainties include, but are not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices and other factors discussed in the Company's filings with the Securities and Exchange Commission. Page 7 8 The year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Company is currently engaged in a comprehensive project to upgrade its information, technology, and manufacturing computer software to programs that will consistently and properly recognize the year 2000. Many of the Company's systems include new hardware and packaged software recently purchased from vendors who have represented that these systems are already Year 2000 compliant. The Company is in the process of obtaining assurances from vendors that timely updates will be made available to make all remaining purchased software Year 2000 compliant, and the Company expects to complete the project in early 1999. Management believes that the year 2000 issue will not pose significant operational problems or have a material adverse impact on the Company's financial position or results of operations. On September 30, 1996, the Company formed Hycor Biomedical SAS ("Hycor SAS") as a wholly owned subsidiary. Located in Paris, France, Hycor SAS markets allergy diagnostic products in France. Hycor SAS commenced direct commercial activities during the quarter ended September 30, 1997. On July 21, 1997, the Company acquired from unrelated third parties all of the outstanding stock of Cogent Diagnostics Limited ("Cogent") for approximately $1,453,000 in cash and $1,574,000 in three year notes to the seller group. The acquisition was accounted for using the purchase method of accounting, and Cogent's operating results have been included in the accompanying consolidated statements of operations from the date of acquisition. Cogent is based in Edinburgh, Scotland and develops, manufactures and markets a broad line of test kits for diagnosis of autoimmune disease. The Company has adequate working capital and sources of capital to carry on its current business and to meet its existing capital requirements. The Company decreased its working capital $144,689 as of June 30, 1998, compared to December 31, 1997 primarily from the investment in facility modifications necessary to consolidate the Irvine, California administrative office into the Garden Grove, California facility. This move was completed in July 1998. The Irvine facility was sub-leased for the remainder of the lease term with no material net impact to operating results. The Company's principal capital commitments are for lease payments under non-cancelable operating leases and note payments related to the acquisition of Cogent. Additionally, the HY-TEC(TM) business requires the purchase of instruments which in many cases are placed in use in laboratories of the Company's direct customers and paid for over an agreed contract period by the purchase of test reagents. This "reagent rental" sales program, common to the diagnostic market, creates negative cash flows in the initial years. Working capital, operating results, and the available line of credit are expected to be sufficient to satisfy these commitments and the needs of operations for the foreseeable future. During the three and six-month periods ended June 30, 1998, sales decreased 4% and 1%, respectively, compared to the same periods last year. The revenue decline for the quarter was due primarily to the delay in the launch of the new HY-TEC 288 instrument system which was expected during the second quarter. In addition, in periods when the U.S. dollar is strengthening, the effect of the translation of the financial statements of the consolidated Page 8 9 foreign affiliates is that of lower sales, higher costs on U.S. sourced raw materials, and lower net income. The stronger U.S. dollar in the three and six-month periods when compared to the corresponding 1997 periods resulted in lower reported sales of approximately 1% in both periods. Gross profit as a percentage of product sales decreased for the three and six-month periods from approximately 57% to 51% and 55% to 51%, respectively, compared to the same periods last year. The decrease in gross profit percentage is due primarily to the Company's aggressive product pricing strategy. Selling, general and administrative expenses decreased approximately 3% for the second quarter and were basically unchanged year-to-date when compared to the same periods last year. Research and development costs for the three and six-month periods decreased approximately 17% and 11%, respectively, compared to the same periods last year. The decrease in research and development is primarily due to the completion of several projects related to the HY-TEC 288 instrument system as it approaches its commercial launch. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS On June 10, 1998, Hycor Biomedical Inc. held its Annual Meeting of Stockholders. At such meeting, the following seven persons were elected as directors of the Company to serve until the Annual Meeting of Stockholders in 1999 and until their successors are elected and qualified. The tabulation of the votes cast for the election of the directors was as follows:
Nominee Votes For Votes Withheld - ------- --------- -------------- Richard D. Hamill 5,417,036 1,081,816 Samual D. Anderson 5,531,997 966,855 David S. Gordon 5,481,204 1,080,648 Reginald P. Jones 5,530,920 967,932 James R. Phelps 5,531,955 966,897 Richard E. Schmidt 6,343,697 155,155 David A. Thompson 6,345,390 153,462
ITEM 5. OTHER INFORMATION On July 17, 1998, J. David Tholen assumed the duties of President and Chief Executive Officer of the Company replacing Dr. Richard D. Hamill who has chosen to retire. Also effective on July 17, 1998, Samual D. Anderson was elected to serve as Chairman of the Board. Dr. Hamill has resigned from the Board of Directors but will be available as needed for consultation. Page 9 10 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 : Financial Data Schedule (b) Reports on Form 8K : None SIGNATURE --------- 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. HYCOR BIOMEDICAL INC. --------------------- Date: August 12, 1998 By: /s/ Armando Correa ----------------------------------- Armando Correa, Director of Finance (Mr. Correa is the Principal Accounting Officer and has been duly authorized to sign on behalf of the registrant.) Page 10 11 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION ------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 918,398 1,276,327 3,370,977 142,017 3,826,983 11,758,771 13,276,822 (8,071,955) 22,169,792 3,470,731 0 0 0 72,303 16,460,503 22,169,792 9,343,965 9,343,965 4,616,915 4,616,915 5,442,764 0 91,383 (756,797) (336,930) (419,867) 0 0 0 (419,867) (0.06) (0.06)
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