-----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, UcabnC7PFJmJdNKkEkXjNi3g2DAAZcJdbg+rNwXjz0oKkZ4mBcLkAnhCtOprWyEr APg/wVBqnccE+A3QN/zNmw== 0000736822-99-000054.txt : 19991018 0000736822-99-000054.hdr.sgml : 19991018 ACCESSION NUMBER: 0000736822-99-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990831 FILED AS OF DATE: 19991015 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: 99729195 BUSINESS ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: PO BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 BUSINESS PHONE: 7704412051 MAIL ADDRESS: STREET 1: 3130 GATEWAY DR STREET 2: P O BOX 5625 CITY: NORCROSS STATE: GA ZIP: 30091 10-Q 1 8/31/99 10Q 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, 1999 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 1, 1999: Common Stock, $. 10 Par Value - 7,718,606 IMMUCOR, INC. Condensed Consolidated Balance Sheets
August 31, 1999 May 31, 1999 ASSETS (Unaudited) (Audited) --------------- --------------- Current assets: Cash and cash equivalents $ 3,983,314 $ 2,793,592 Accounts receivable, net 20,846,263 21,573,846 Accounts receivable from former officer and director - 140,946 Inventories 17,166,090 16,065,190 Income taxes receivable 355,642 553,451 Deferred income taxes 915,234 907,530 Prepaid expenses and other 1,248,491 1,587,817 --------------- --------------- Total current assets 44,515,034 43,622,372 Long-term investment, at cost 1,000,000 1,000,000 Property and equipment, at cost 20,776,718 20,195,158 less accumulated depreciation (5,810,522) (5,068,996) --------------- --------------- 14,966,196 15,126,162 Deferred income taxes 1,271,370 1,108,279 Other assets, net 2,788,156 2,934,409 Deferred licensing costs, net 2,483,489 2,307,837 Excess of cost over net tangible assets acquired, net 33,341,137 33,634,458 --------------- --------------- $ 100,365,382 $ 99,733,517 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of borrowings under bank line of credit agreements $ 1,125,518 $ 1,619,312 Current portion of long-term debt 4,111,313 5,000,062 Note payable to related party 1,617,739 1,637,495 Current portion of capital lease obligations 194,476 194,476 Accounts payable 8,005,810 10,039,489 Income taxes payable 191,498 27,739 Accrued salaries and wages 1,065,043 1,125,216 Deferred income taxes 118,280 118,280 Other accrued liabilities 2,724,413 2,719,496 --------------- --------------- Total current liabilities 19,154,090 22,481,565 Long-term debt, including borrowings under bank line of credit agreements 31,183,647 30,747,855 Capital lease obligations 884,843 800,117 Deferred income taxes 3,079,093 3,024,550 Other liabilities 2,619,000 2,626,763 Shareholders' equity: Common stock, $.10 par value 770,441 748,841 Additional paid-in capital 18,706,767 16,945,885 Retained earnings 26,717,867 25,498,721 Accumulated other comprehensive loss (2,750,366) (3,140,780) --------------- --------------- Total shareholders' equity 43,444,709 40,052,667 --------------- --------------- $ 100,365,382 $ 99,733,517 =============== ===============
See accompanying notes. IMMUCOR, INC. Condensed Consolidated Statements of Income (Unaudited) Three Months Ended August 31, August 31, 1999 1998 --------------- --------------- Net sales $18,929,967 $ 10,358,465 Cost of sales 8,954,427 4,652,683 --------------- --------------- Gross profit 9,975,540 5,705,782 Research and development 358,688 290,027 Selling and marketing 3,007,097 1,947,747 Distribution 1,535,270 562,951 General and administrative 2,352,764 1,700,490 Merger-related expenses 28,214 - Amortization expense 460,900 142,136 --------------- --------------- Total operating expenses 7,742,933 4,643,351 --------------- --------------- Income from operations 2,232,607 1,062,431 Interest income 4,517 175,032 Interest expense (649,334) (134,087) Other income 90,054 7,415 --------------- --------------- Total other (554,763) 48,360 --------------- --------------- Income before income taxes 1,677,844 1,110,791 Income taxes 458,698 482,780 --------------- --------------- Net income $ 1,219,146 $ 628,011 =============== =============== Earnings per share: Basic $ 0.16 $ 0.08 =============== =============== Diluted $ 0.14 $ 0.08 =============== =============== Weighted average shares outstanding: Basic 7,604,991 8,002,063 =============== =============== Diluted 8,756,946 8,283,567 =============== =============== See accompanying notes. IMMUCOR, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended August 31, August 31, 1999 1998 --------------- ---------------- OPERATING ACTIVITIES: Net income $1,219,146 $628,011 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 535,372 368,121 Amortization 460,900 142,136 Changes in assets and liabilities: Accounts receivable 727,583 (241,635) Accounts receivable from former officer and director 140,946 558,678 Income tax receivable 190,350 54,087 Inventories (1,100,900) 85,838 Other current assets 373,813 (479,273) Accounts payable (2,033,679) 769,584 Income taxes payable 153,061 (36,297) Other current liabilities (55,627) (114,918) --------------- ---------------- Cash provided by operating activities 610,965 1,734,332 INVESTING ACTIVITIES: Purchase of / deposits on property and equipment (339,225) (1,238,335) Cash paid for acquisitions (112,913) - Acquisition-related severance (88,961) - Decrease in other assets (261,131) - --------------- ---------------- Cash used in investing activities (802,230) (1,238,335) FINANCING ACTIVITIES: Repayment of notes payable (883,735) (564,041) Exercise of stock options and warrants 1,782,482 1,231,444 Purchase and retirement of stock (478,700 shares) - (4,238,366) --------------- ---------------- Cash provided by (used in) financing activities 898,747 (3,570,963) EFFECT OF EXCHANGE RATE CHANGES ON CASH 482,240 (41,096) --------------- ---------------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,189,722 (3,116,062) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,793,592 15,816,217 --------------- ---------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,983,314 $12,700,155 =============== ================
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, 1999, 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, 1999 are not necessarily indicative of the results that may be expected for the year ending May 31, 2000. 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, 1999. 2. INVENTORIES Inventories are stated at the lower of first-in, first-out cost or market: As of As of August 31, 1999 May 31, 1999 ------------------- ------------------ Raw materials and supplies $ 4,147,425 $3,856,309 Work in process 851,445 967,889 Finished goods 12,167,220 11,240,992 =================== ================== $17,166,090 $16,065,190 =================== ================== 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share. Three Months Ended August 31, August 31, 1999 1998 -------------- ------------- Numerator for basic and diluted earnings per share: Income available to common shareholders $1,219,146 $ 628,011 ============== ============= Denominator: For basic earnings per share - weighted average basis 7,604,991 8,002,063 Effect of dilutive stock options and warrants 1,151,955 281,504 ------------- ------------- Denominator for diluted earnings per share - adjusted weighted-average shares 8,756,946 8,283,567 ============= =============== Basic earnings per share $0.16 $0.08 ============= =============== Diluted earnings per share $0.14 $0.08 ============= =============== 4. DOMESTIC AND FOREIGN OPERATIONS Information concerning the Company's domestic and foreign operations is summarized below (in 000s):
Three Months Ended August 31, 1999 ---------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Unaffiliated $12,235 $2,118 $1,668 $1,082 $1,827 $18,930 customers $ - Affiliates 1,521 101 - 72 380 (2,074) - ---------- ---------- ---------- ---------- --------- ------------ -------------- Total 13,756 2,219 1,668 1,154 2,207 (2,074) 18,930 Income from operations 1,633 226 162 267 (47) (8) 2,233
Three Months Ended August 31, 1998 ---------------------------------------------------------------------------------------------------- U.S. Germany Italy Canada Other Eliminations Consolidated Net sales: Net sales: Unaffiliated $4,949 $2,422 $1,514 $1,186 $287 $10,358 customers $ - Affiliates 976 89 - 68 - (1,133) - ---------- ---------- ---------- ---------- --------- ------------ -------------- Total 5,925 2,511 1,514 1,254 287 (1,133) 10,358 Income from operations 262 360 122 339 13 (34) 1,062
During the three months ended August 31, 1999 and 1998, the Company's U.S. operation made net export sales to unaffiliated customers of approximately $1,748,000 and $831,000, respectively. The Company's German operation made net export sales to unaffiliated customers of $250,000 and $288,000 for the three months ended August 31, 1999 and 1998, respectively. The Company's Canadian operation made export net sales to unaffiliated customers of $531,000 and $811,000 for the three months ended August 31, 1999 and 1998, respectively. Product sales to affiliates are valued at market prices. 5. COMPREHENSIVE INCOME The components of comprehensive income for the three month periods ended August 31, 1999 and 1998 are as follows: Three Months Ended August 31, August 31, 1999 1998 ---------------- ---------------- Net income $ 1,219,146 $ 628,011 Net foreign currency translation 390,414 (53,687) ---------------- ---------------- Comprehensive income $ 1,609,560 $ 574,324 ================ ================ Accumulated comprehensive loss as of August 31, 1999 and May 31, 1999 was ($2,750,366) and ($3,140,780), respectively. 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 FROM FORMER OFFICER AND DIRECTOR 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 amount outstanding under the loan was $167,000, and as of July 14, 1998 the loan including 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, $1,311,000 in fiscal 1997 and $528,000 in fiscal 1998. At May 31, 1999 the amount receivable was approximately $141,000 and at August 31, 1999 the loan including accrued interest was fully paid. As of August 9, 1999 the entire unauthorized loan balance owed to the Company by Mr. Wilms, plus accrued interest and amounts of incidental collection expenses allowable under German law, had been paid to the Company. In addition, Mr. Wilms agreed to pay and has paid an amount equal to Immucor's outstanding trade receivable totaling approximately $320,000 from Diag Human, a company Mr. Wilms owed monies to, on behalf of Diag Human. The remaining collateral has been released to Mr. Wilms. Mr. Wilms has had no continuing employment or consulting relationships with Immucor, Inc. or Immucor GmbH since December 31, 1997. 7. CONTINGENCIES When the Company acquired Gamma Biologicals, Inc. ("Gamma Biologicals") in October 1998, Gamma Biologicals was a party to an existing legal proceeding. On May 12, 1998, Gamma Biologicals received notification that a claim of patent infringement had been filed on that date in U.S. District Court, Southern District of Florida, Miami Division, by Micro Typing Systems, Inc. and Stiftung fur Diagnostiche Forschung (the Foundation). Subsequently, in February 1999 the Company received notification that a second claim was filed in the U.S. District Court for the Northern District of Georgia, against Immucor, Inc. and Gamma Biologicals for patent infringement on the first patent described above and a second patent recently granted to the Foundation. The claim alleges that the recently introduced Gamma ReACT Test System infringes U.S. patent No. 5,512,432 granted to the Foundation April 30, 1996 and U.S. patent No. 5,863,802 granted to the Foundation on January 26, 1999. The plaintiffs seek a preliminary and permanent injunction against the continued alleged infringement by Gamma Biologicals and Immucor, and an award of treble damages, with interest and costs and reasonable attorney's fees. Management is confident that ReACT technology does not infringe the Foundation's patents; however, an unfavorable outcome in this action could have a material adverse effect upon the business and the results of operations in a given reporting period. Since this matter is in the earliest stage of proceedings and due to uncertainties involved in litigation, management cannot predict the likelihood of a particular outcome. Management believes it has a meritorious defense against the alleged infringement. 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, 1999. 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, 1999, the Company's cash position totaled $3,983,000. For the three months ended August 31, 1999, the Company generated cash from operating activities of $611,000, repaid $884,000 of bank debt in France, Belgium and the U.S. and purchased property and equipment of $339,000. The exercise of approximately 216,000 stock options and warrants provided $1,782,000 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, 1999 totaled $18,930,000, an increase of $8,572,000 (83%) over last year's $10,358,000. Current year three month results included $5,052,000 in net sales from Gamma Biologicals acquired on October 27, 1998 and $676,000 in net sales from Medichim and Immunochim acquired on March 15, 1999. The remaining increase in sales was generated in the U.S. and was primarily due to instrumentation sales. The Company generated instrument revenues of $1,900,000 for the quarter compared to $200,000 for the same period last year. Sales by the Company's Italian, Spanish and Portugal subsidiaries combined increased 24% over last year's total which offset the decrease in sales at the Company's German and Canadian subsidiaries of 13% and 10%, respectively. Gross profit As a percent of sales, gross profit for the three months ended August 31, 1999 totaled 52.7% versus 55.1% for the same period in 1998. The decrease in gross profit margin was primarily caused by increased instrument sales at lower gross margins and the sales increase due to prior year acquisitions which are at lower gross profit margins than Immucor's product lines. Operating expenses When compared to the prior year, three month period ended August 31, 1999 research and development costs increased $69,000 with $53,000 additional research expense resulting from the acquisition of Gamma Biologicals. Selling and marketing expenses for the three month period increased $1,059,000 as compared to the same period last year. Approximately $536,000 of the increase was due to the inclusion of prior year acquisitions of Gamma Biologicals and Medichim and Immunochim. The remainder of the increase is primarily due to the effect of higher payroll expense due to additional personnel required for the Company's instrumentation strategy and expansion of its Spanish operation. Distribution expenses increased $972,000 for the three month period of which prior year acquisitions account for $604,000 for the quarter. The remaining increase relates to increased shipping activity. General and administrative expenses for the three month period increased $652,000 with additional expenses of $188,000 for three months resulting from the purchase of Gamma Biologicals and Medichim and Immunochim and the remainder due to higher expenses as we expand operations worldwide. Merger-related expenses are one-time expenses related to the Gamma Biologicals and BCA acquisitions. Amortization expense for the three months ended August 31, 1999 increased $319,000 due to goodwill recorded in the acquisitions of Gamma Biologicals on October 27, 1998, Medichim and Immunochim on March 15, 1999 and BCA, a division of Biopool, on April 30, 1999. Interest income Interest income decreased $171,000 for the quarter due to lower cash balances as compared to last year caused by the purchase of treasury stock and the purchase of Gamma Biologicals which was partially funded by the use of the Company's cash. Interest expense When compared to the prior year three month period, interest expense increased $515,000. This is a result of the purchase of Gamma Biologicals which was primarily financed with the proceeds of a bank loan. Other income Other income increased for the three month period as compared to the prior year due to foreign currency transaction gains in the current period versus losses in the same period last year. Income taxes Income tax expense as a percent of pretax income, decreased during the three month period ended August 31, 1999 due to lower taxes provided in Germany and the United States 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 substantially completed the verification of 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 November 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 December 1999. In North America, the Company had planned to complete implementation of a year 2000 compliant enterprise wide internal business information software system by December 31, 1999. The Company is continuing to implement the system but has decided to reschedule the operational date of the new enterprise wide internal business information software system for February 2000. Therefore, the Company's initial contingency plan is now in effect under which changes to the existing internal business software are being made to make it year 2000 compliant and should be completed by November 1999 at a cost of approximately $20,000 which is being expensed as incurred. The Company is monitoring progress closely. Contingency Plan - The risk the Company faces is that program modifications making the existing internal business software year 2000 compliant would not be completed by December 31, 1999. 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 that would allow it to continue daily business until program modifications were complete. 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. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes regarding the Company's market risk position from the information provided in its Annual Report on Form 10-K for the fiscal year ended May 31, 1999. The quantitative and qualitative disclosures about market risk are discussed in Item 7A- Quantitative and Qualitative Disclosures About Market Risk, contained in the Company's Form 10-K. 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, 1999. 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 15, 1999 /s/ Edward L. Gallup Edward L. Gallup, President - ---------------------- /s/ Steven C. Ramsey Steven C. Ramsey, Senior Vice President - Finance - ---------------------- (Principal Accounting Officer) EX-27 2 FDS -- 08/31/99 10Q FINANCIALS
5 3-MOS MAY-31-2000 AUG-31-1999 3983314 0 20846263 0 17166090 44515034 20776718 5810522 100365382 19154090 32068490 0 0 770441 45424634 100365382 18929967 18929967 8954427 8954427 7742933 0 649334 1677844 458698 1219146 0 0 0 1219146 0.16 0.14
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