-----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, V6f+xpBucTy6lbRSUf0olIm890NAZoaT9UJ2q8bT0scTM/2XgvOJrgQ+fEsGhPHJ WE02oLkqKrmWvVs18pqzLA== 0000736822-98-000041.txt : 19981015 0000736822-98-000041.hdr.sgml : 19981015 ACCESSION NUMBER: 0000736822-98-000041 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMMUCOR INC CENTRAL INDEX KEY: 0000736822 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 222408354 STATE OF INCORPORATION: GA FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14820 FILM NUMBER: 98725589 BUSINESS ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: PO BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 BUSINESS PHONE: 4044412051 MAIL ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: P O BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 10-Q 1 8/31/98 FINANCIALS FORM 10-Q Securities and Exchange Commission Washington, D. C. 20549 (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended: August 31, 1998 OR _ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number: 0-14820 IMMUCOR, INC. (Exact name of registrant as specified in its charter) Georgia 22-2408354 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3130 Gateway Drive P.O. Box 5625 Norcross, Georgia 30091-5625 (Address of principal executive offices) (Zip Code) Registrant's telephone number: (770) 441-2051 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of October 2, 1998: Common Stock, $. 10 Par Value - 7,731,818 IMMUCOR, INC. Condensed Consolidated Balance Sheets August 31, May 31, ASSETS 1998 1998 (Unaudited) (Audited) ------------- ------------- Current assets: Cash and cash equivalents $12,700,154 $15,816,217 Accounts receivable, net 12,455,905 12,214,270 Accounts receivable, other 136,752 695,430 Inventories 8,377,012 8,462,850 Income taxes receivable 41,079 95,166 Deferred income taxes 377,875 370,029 Other assets 981,048 447,661 ------------- ------------- Total current assets 35,069,825 38,101,623 Long-term investment 1,000,000 1,000,000 Property and equipment, at cost 11,119,813 10,505,766 less accumulated depreciation (4,282,398) (4,486,974) ------------- -------------- 6,837,415 6,018,792 Other assets, net 737,345 801,779 Excess of cost over net tangible assets acquired, net 10,987,012 11,622,082 ------------- -------------- $54,631,597 $57,544,276 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Borrowings under bank line of credit agreements $350,995 $359,325 Accounts payable 3,839,557 3,069,973 Income taxes payable 323,301 359,598 Accrued salaries and wages 783,994 862,550 Other accrued liabilities 417,768 501,739 ------------- -------------- Total current liabilities 5,715,615 5,153,185 Long-term debt 7,821,608 8,911,727 Deferred income taxes 1,094,422 1,046,814 Shareholders' equity: Common stock, $.10 par value 776,307 807,881 Additional paid-in capital 19,104,120 22,079,468 Retained earnings 22,565,708 21,937,697 Accumulated other comprehensive loss (2,446,183) (2,392,496) ------------- -------------- Total shareholders' equity 39,999,952 42,432,550 ------------- -------------- $54,631,597 $57,544,276 ============= ============== See accompanying notes. IMMUCOR, INC. Condensed Consolidated Statements of Income (Unaudited) Three Months Ended August 31, August 31, 1998 1997 ---------------- --------------- Net sales $10,358,465 $9,273,479 Cost of sales 4,652,683 3,847,381 ---------------- --------------- Gross profit 5,705,782 5,426,098 Research and development 290,027 261,299 Selling, general and administrative 4,382,663 4,160,979 ---------------- --------------- Total operating expenses 4,672,690 4,422,278 ---------------- --------------- Income from operations 1,033,092 1,003,820 Interest income 175,032 212,796 Interest expense (134,087) (166,615) Other income (expense) 36,754 (23,098) ---------------- --------------- Total other 77,699 23,083 ---------------- --------------- Income before income taxes 1,110,791 1,026,903 Income taxes 482,780 469,248 ---------------- --------------- Net income $628,011 $557,655 ================ =============== Earnings per share: Basic and diluted $0.08 $0.07 ================ =============== Weighted average shares outstanding: Basic 8,002,063 8,080,324 ================ =============== Diluted 8,283,567 8,400,726 ================ =============== See accompanying notes. IMMUCOR, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended August 31, August 31, 1998 1997 ------------ ------------ OPERATING ACTIVITIES: Net income $628,011 $557,655 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 369,761 365,201 Amortization 140,496 151,725 Changes in assets and liabilities: Accounts receivable (241,635) 119,552 Accounts receivable, other 558,678 (22,588) Income tax receivable 54,087 2,045 Inventories 85,838 (1,055,950) Other current assets (479,273) (61,887) Accounts payable 769,584 306,145 Income taxes payable (36,297) 87,426 Other current liabilities (114,918) (76,869) ------------ ------------ Cash provided by operating activities 1,734,332 372,455 INVESTING ACTIVITIES: Purchase of/deposits on property and equipment (1,238,336) (465,906) Decrease in other assets 0 4,831 ------------ ------------ Cash used in investing activities (1,238,336) (461,075) FINANCING ACTIVITIES: Borrowings under line of credit agreements 0 67,147 Repayment of notes payable (564,041) (5,035) Exercise of stock options and warrants 1,231,444 11,250 Purchase and retirement of stock (478,700 shares) (4,238,366) 0 ------------ ------------ Cash provided by (used in) financing activities (3,570,963) 73,362 EFFECT OF EXCHANGE RATE CHANGES ON CASH (41,096) (483,303) ------------ ------------ DECREASE IN CASH AND CASH EQUIVALENTS (3,116,063) (498,561) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 15,816,217 15,718,234 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $12,700,154 $15,219,673 ============ ============ See accompanying notes. IMMUCOR, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, there has been no material change in the information disclosed in the Company's annual financial statements dated May 31, 1998, except as disclosed herein. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended August 31, 1998 are not necessarily indicative of the results that may be expected for the year ending May 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended May 31, 1998. 2. INVENTORIES Inventories are stated at the lower of first-in, first-out cost or market: As of As of August 31, 1998 May 31, 1998 ----------------- ---------------- Raw materials and supplies $2,653,718 $2,668,444 Work in process 726,264 762,475 Finished goods 4,997,030 5,031,931 ================= ================ $8,377,012 $8,462,850 ================= ================ 3. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, Earnings per Share ("Statement 128"). Statement 128 replaced the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to the Statement 128 requirements. The following table sets forth the computation of basic and diluted earnings per share. Three Months Ended August 31, August 31, 1998 1997 ------------- ------------- Numerator for basic and diluted earnings per share: Income available to common shareholders $628,011 $557,655 ============= ============= Denominator: For basic earnings per share - weighted average basis 8,002,063 8,080,324 Effect of dilutive stock options and warrants 281,504 320,402 ------------- ------------- Denominator for diluted earnings per share - adjusted weighted-average shares 8,283,567 8,400,726 ============= ============= Basic earnings per share $0.08 $0.07 ============= ============= Diluted earnings per share $0.08 $0.07 ============= ============= 4. DOMESTIC AND FOREIGN OPERATIONS Information concerning the Company's domestic and foreign operations is summarized below (in 000s):
Three Months Ended August 31, 1998 -------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $4,949 $2,422 $1,514 $1,186 $287 $ - $10,358 Affiliates 976 89 - 68 - (1,133) - ---------- ---------- ---------- ---------- --------- ------------ ------------ Total 5,925 2,511 1,514 1,254 287 (1,133) 10,358 Income from operations 262 336 122 340 7 (34) 1,033 Identifiable assets 29,850 8,825 10,305 8,977 1,602 (4,927) 54,632 Net assets 42,422 4,493 (1,043) 1,408 745 (8,025) 40,000
Three Months Ended August 31, 1997 -------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated customers $4,409 $2,271 $1,344 $1,071 $178 $ - $9,273 Affiliates 1,053 86 18 28 - (1,185) - ---------- ---------- ---------- ---------- --------- ------------ ------------ Total 5,462 2,357 1,362 1,099 178 1,185 9,273 Income from operations 320 220 134 340 20 (30) 1,004 Identifiable assets 31,916 8,508 9,412 10,200 1,091 (3,456) 57,671 Net assets 44,646 3,759 (1,327) 1,233 101 (7,402) 41,010
During the three months ended August 31, 1998 and 1997, the Company's U.S. operation made net export sales to unaffiliated customers of approximately $831,000 and $779,000, respectively. The Company's German operation made net export sales to unaffiliated customers of $288,000 and $275,000 for the three months ended August 31, 1998 and 1997, respectively. The Company's Canadian operation made export net sales to unaffiliated customers of $811,000 and $755,000 for the three months ended August 31, 1998 and 1997, respectively. Product sales to affiliates are valued at market prices. 5. COMPREHENSIVE INCOME In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes new standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. These new standards require that all items recognized as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Statement 130 is effective for fiscal years beginning after December 15, 1997. The Company adopted Statement 130 on June 1, 1998 and has not presented a statement of comprehensive income because the effect of the components of comprehensive income is not material to its consolidated financial statements. For the three months ended August 31, 1998 and 1997, total comprehensive income (loss) was $574,324 and ($222,579), respectively, which is comprised of net income and other comprehensive losses. Other comprehensive losses for the three months ended August 31, 1998 and 1997 were ($53,687) and ($780,234), respectively, and consisted of losses on foreign currency translation adjustments. Accumulated other comprehensive loss as of August 31, 1998 was ($2,446,183). The balance consists of net losses on foreign currency translation adjustments and has been disclosed in the shareholders' equity section of the condensed consolidated balance sheet. 6. ACCOUNTS RECEIVABLE, OTHER In fiscal 1997, Mr. Josef Wilms, the former president of the Company's German subsidiary, Immucor GmbH, borrowed, prior to his resignation, $300,000 from the Company at 6% interest, secured by his warrants to purchase 143,750 shares of the Company's Common Stock. At May 31, 1998 the loan receivable including interest totaled $167,000, and at August 31, 1998 the loan and all accrued interest was fully paid. In July 1997, management of the Company discovered that Mr. Wilms had caused Immucor GmbH to make unauthorized loans to him since 1994. The amounts advanced were documented in the records of Immucor GmbH, including interest rates ranging from 7.75% to 9.5%, and were generally paid down by the end of each accounting period, but were not disclosed to the Company's management. The largest aggregate amounts outstanding under the Immucor GmbH loans were $29,600 in fiscal 1994, $290,000 in fiscal 1995, $669,000 in fiscal 1996 and $1,311,000 in fiscal 1997. At May 31, 1998 the amount receivable was approximately $1,300,000 and at August 31, 1998 the loan receivable balance was approximately $137,000. Mr. Wilms and his family have granted liens on certain property owned by them to collateralize the loans from the Company. The Company believes it has adequate collateral to extinguish the remaining debt and, with Mr. Wilm's assistance, is arranging for the liquidation of this collateral. 7. SUBSEQUENT EVENTS On September 21, 1998 the Company announced it had entered into a definitive merger agreement with Gamma Biologicals Inc. under which Gamma Acquisition Corporation, an Immucor subsidiary, will commence a cash tender offer to acquire all the outstanding shares of Gamma Biologicals, Inc. for $5.40 per share followed by a cash merger at the same price. The transaction has been unanimously approved by the Board of Directors of each company. Upon completion of the transaction, Gamma Biologicals, Inc. will operate as a wholly owned subsidiary of Immucor, Inc. The cash tender offer of $5.40 for each Gamma Biologicals, Inc. share represents a total transaction value of approximately $25 million. The tender offer is not conditioned upon financing. Subject to satisfaction of customary closing conditions the Company expects the transaction to close by October 23, 1998. On September 1, 1998 the Company acquired the Canadian distribution rights for the Company's complete line of reagents from its Canadian distributor Immucor Canada, Inc. for cash consideration of $1.7 million. IMMUCOR, INC. ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Any statements contained herein that are not historical fact are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risks and uncertainties. All forward-looking statements included in this document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. Further risks are detailed in the Company's filings with the Securities and Exchange Commission, including those set forth in its Annual Report on Form 10-K for the fiscal year ended May 31, 1998. Financial Condition and Liquidity: During the quarter the Company increased its profitability, generated positive cash flow from operations, and maintained positive working capital. As of August 31, 1998, the Company's cash position totaled $12,700,154. For the three months ended August 31, 1998, the Company generated cash from operating activities of $1,734,332, repaid $564,041 of bank debt in Germany and Canada and purchased property and equipment of $1,238,336. In June 1997, the Company authorized a program to repurchase up to 10% of its common stock in the open market. During the three month period ended August 31, 1998 the Company repurchased approximately 478,700 shares of its common stock for $4,238,366 under the program. To date 582,000 shares have been purchased under the 1997 program. On August 26, 1998, the Board of Directors authorized the Company to repurchase up to an additional 800,000 shares of its common stock. The exercise of approximately 163,000 stock options and warrants provided $1,231,444 in cash. Management believes that the Company's current cash and cash equivalents balance, internally generated funds, and amounts available under the lines of credit should be more than sufficient to support operations to support planned product introduction and continued improvement and development of products during the next 12 months. Management also believes additional credit lines would be available should the need arise for capital improvements, acquisitions or other corporate purposes. Results of Operations: Net sales Net sales for the three months ended August 31, 1998 totaled $10,358,465, an increase of $1,084,986 over last year's $9,273,479. Sales increased by $463,565 in the United States primarily due to sales growth of traditional reagents to large national buying groups. Pursuing these groups was the Company's strategy to gain market share for traditional reagents and to provide the opportunity for future instrumentation sales. These buying groups demand most favorable pricing, and control over 80% of all purchasing decisions in the U.S. In addition, sales by the Company's Canadian and European subsidiaries increased 13% over last year's total. The strength of the U.S. Dollar against most major currencies during the quarter as compared to the same period last year caused a decrease in the Dollar equivalent product sales revenue. Recorded in their functional currencies, the increase was 15% and was also primarily due to traditional reagent sales. Gross profit As a percent of sales, gross profit for the three months ended August 31, 1998 totaled 55% versus 58.5% for the same period in 1997. In the U.S., the decline in gross profit margin was caused by increased national contract participation and product mix. In the Company's European and Canadian operations, the reduction in gross profit margin was principally caused by increased instrument sales. Due to the timing of the sales, the Company has not recognized the full benefit of the associated reagent sales during this quarter. The Company expects increased reagent sales in future quarters due to the placement of these instruments which will positively affect the gross profit margin. Operating expenses As compared to the prior year, research and development costs increased $28,728 for the three month period due to increased instrument related development costs. Selling, general and administrative expenses increased $221,684 for the three month period as compared to the same period last year. The increase is primarily due to the effect of higher payroll expense due to additional personnel required for the Company's instrumentation strategy. Interest income Interest income decreased $37,764 for the quarter due to lower cash balances as compared to last year. Interest expense When compared to the prior year three month period, interest expense declined $32,528 which was caused by the repayment of bank debt in Germany and Canada. Other income(expense) Other income increased for the three month period as compared to the prior year due to a gain on sale of certain assets in Europe during the current period compared to higher currency transaction losses incurred in Europe last year. Income taxes Income tax expense as a percent of pretax income, decreased during the three month period ended August 31, 1998 due to lower taxes provided in Germany as compared to the prior period as a result of the Company's ongoing implementation of tax planning strategies. Year 2000 The Company is aware of the issues that many companies will face as the year 2000 approaches. In order to become year 2000 compliant, the Company has set up a project team to address the issue and has taken the following steps: Impact Assessment- Instances where electronics are used in the Company and the associated potential risks have been identified. The Company believes that non-information technology systems and its products are not significantly impacted. However, internal business information software is affected and will require program changes in order to become year 2000 compliant. Third Party Impact Assessment - The Company has begun to verify the readiness of its significant suppliers and customers through the distribution of a questionnaire. Although this process is not complete, based on information available, the Company has no reason to believe that any year 2000 problems encountered by customers and suppliers will have a significant effect on the Company's operations. The Company estimates that this assessment will be completed by February 1999. Project Plan - Based on the impact assessment, the need to make software program changes to the Company's internal business information software has been identified. In Europe, minor software program changes to existing systems are being made at a nominal cost making them year 2000 compliant before the summer of 1999. In North America, since the Company had already planned to implement a new enterprise wide internal business information software system by September 1999, the need to make software changes to the existing system are for the most part not required. The Company is currently identifying which software package to implement and ensuring that the system is year 2000 compliant. The Company had originally planned to identify a software package by September 1998 and has decided to delay the decision until November 1998 due to a potential acquisition. This delay has caused the rescheduling of the Company's implementation plan. The software should be installed by February 1999, tested and modified by October 1999 and be operating by November 1999. The Company will set milestone completion dates during the implementation period of the new software and be monitoring progress closely. Contingency Plan - The risk the Company faces is a delay in the implementation of the new internal business information software. The Company is uncertain what the costs associated with a delay would be or the related impact on operations, liquidity and financial condition. Because of this, the Company has in place a contingency plan which would be put into effect should implementation milestones not be met. If by April 1999, it is determined that an October testing and modification milestone cannot be completed, the Company will begin to make program modifications to the existing internal business software. The Company estimates that all modifications and testing can be completed within two months at a cost of less than $20,000 which will be expensed as incurred. Expenses to date are nominal. The Company believes that it is diligently addressing the year 2000 issue and expects that through its actions year 2000 problems are not reasonably likely to have a material adverse effect on the Company's operations. There can be no assurance that such problems will not arise. PART 11 - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The Company has filed the following exhibits with this report: 27 Financial data schedule. (b) The Company did not file any reports on Form 8-K during the three months ended August 31, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. IMMUCOR, INC. (Registrant) Date: October 13, 1998 Edward L. Gallup Edward L. Gallup, President Steven C. Ramsey Steven C. Ramsey, Senior Vice President - Finance (Principal Accounting Officer) EX-27 2 FDS -- 8/31/98 10Q FINANCIALS
5 3-MOS MAY-31-1999 AUG-31-1998 12700154 0 12455905 0 8377012 35069825 11119813 4282398 54631597 5715615 7821608 0 0 776307 39223645 54631597 10358465 10358465 4652683 4652683 4672690 0 134087 1110791 482780 628011 0 0 0 628011 0.08 0.08
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