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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, 1996
[ ] 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.)
18800 Von Karman Avenue, Irvine, California 92715-1517
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 440-2000
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, 1996
----- ----------------------------
Common Stock, $.01 Par Value 7,575,630
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,176,533 $ 1,033,459
Investments 5,223,304 6,365,995
Accounts Receivable, net of allowance for
doubtful accounts of $178,990 and $136,604 2,800,951 3,679,419
Inventories (Note 2) 3,941,985 3,948,564
Prepaid expenses and other current assets 451,963 685,399
Deferred income tax benefit 1,239,726 1,138,000
----------- -----------
Total current assets 14,834,462 16,850,836
----------- -----------
PROPERTY AND EQUIPMENT, at cost 11,061,630 10,469,775
Less accumulated depreciation (6,287,074) (5,742,459)
----------- -----------
4,774,556 4,727,316
----------- -----------
GOODWILL AND OTHER INTANGIBLES, net of
amortization of $1,156,002 and $1,015,082 4,466,011 4,773,904
DEFERRED INCOME TAX BENEFIT 877,000 877,000
OTHER ASSETS 333,643 346,316
----------- -----------
Total assets $25,285,672 $27,575,372
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 558,820 $ 982,646
Accrued liabilities 569,923 1,252,718
Accrued payroll expenses 755,694 1,000,542
Accrued income taxes (69,431) -
----------- -----------
Total current liabilites 1,815,006 3,235,906
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock 75,990 77,303
Paid-in capital 14,039,717 14,806,686
Retained earnings 9,362,417 9,215,989
Foreign currency translation adjustments 78,918 254,445
Unrealized losses on investments, net (86,376) (14,957)
----------- -----------
Total stockholders' equity 23,470,666 24,339,466
----------- -----------
Total liabilities and
stockholders' equity $25,285,672 $27,575,372
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
NET SALES $5,171,387 $6,764,393 $10,478,267 $13,257,327
COST OF SALES 2,147,380 2,929,991 4,611,735 5,825,004
---------- ---------- ----------- -----------
Gross profit 3,024,007 3,834,402 5,866,532 7,432,323
---------- ---------- ----------- -----------
OPERATING EXPENSES
Selling, general and
administrative 2,348,627 2,335,835 4,506,524 4,670,108
Research and development 645,487 527,484 1,345,914 1,162,045
---------- ---------- ----------- -----------
2,994,114 2,863,319 5,852,438 5,832,153
---------- ---------- ----------- -----------
OPERATING INCOME 29,893 971,083 14,094 1,600,170
INTEREST INCOME, net 103,960 54,647 217,335 115,374
FOREIGN EXCHANGE G/(L) (1,005) (78,290) 11,674 153,037
---------- ---------- ----------- -----------
INCOME BEFORE TAXES 132,848 947,440 243,103 1,868,581
PROVISION FOR INCOME TAXES 54,508 375,358 96,675 746,976
---------- ---------- ----------- -----------
NET INCOME $ 78,340 $ 572,082 $ 146,428 $ 1,121,605
========== ========== =========== ===========
NET INCOME PER SHARE $ .01 $ .07 $ .02 $ .14
========== ========== =========== ===========
AVE. COMMON SHARES OUTSTANDING 7,852,399 8,345,901 7,886,020 8,289,609
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HYCOR BIOMEDICAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 146,428 $1,121,605
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 946,036 1,185,146
Deferred income tax provision (87,650) 80,962
Gain on foreign currency transactions (11,674) (153,037)
Loss on sale of assets 11,456 -
Change in assets and liabilities, net of effects of
foreign currency adjustments
Accounts receivable 857,122 (33,285)
Inventories (18,622) 33,828
Prepaid expenses and other current assets 243,017 159,000
Accounts payable (412,128) (567,447)
Accrued liabilities (664,873) (250,471)
Accrued payroll expenses (243,284) (59,928)
Accrued income taxes 10,856 832,411
---------- ----------
Total adjustments 630,256 1,227,179
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Net cash provided by (used in) operating activities 776,684 2,348,784
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments 984,298 325,275
Purchases of intangible assets (4,173) (32,273)
Purchases of property, plant and equipment (857,207) (465,033)
Proceeds from collection of notes receivable 2,623 13,606
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Net cash provided by (used in) investing activities 125,541 (158,425)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 76,440 202,470
Purchases of Hycor common stock (844,722) -
---------- ----------
Net cash provided by (used in) financing activities (768,282) 202,470
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 9,131 202,489
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 143,074 2,595,318
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,033,459 1,404,763
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $1,176,533 $4,000,081
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year - interest - -
- income taxes 204,409 1,171,137
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HYCOR BIOMEDICAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying financial
statements contain adjustments necessary to present fairly the financial
position as of June 30, 1996 and December 31, 1995, the results of
operations and the cash flows for the three and six-month periods ended
June 30, 1996 and 1995. The results of operations for any interim period
are not necessarily indicative of results for the full year.
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 financial information contained in
this report reflects all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the
interim periods. All adjustments are of a normal recurring nature
except for those costs described in the following Item 2. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
The consolidated financial statements include the accounts of
Hycor Biomedical Inc. and its wholly-owned subsidiaries. All material
intercompany amounts and transactions have been eliminated.
Reference is made to the audited financial statements and
related notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1995. Certain items in the 1995
consolidated financial statements have been reclassified to conform with
the 1996 presentation.
Net income per share is based upon the weighted average number
of shares outstanding during the periods plus common stock equivalents
relating to warrants and options. The number of common stock
equivalents relating to options and warrants is determined using the
treasury stock method. Common stock equivalents are not included when
their effect is antidilutive. Fully diluted net income per share
approximates primary net income per share in each period.
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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, 1996 and December 31,
1995 consist of:
6/30/96 12/31/95
----------- -----------
Raw materials $ 1,292,490 $ 1,325,973
Work in process 1,464,970 1,787,292
Finished goods 2,620,269 2,774,801
Allowance for discontinued
product lines and excess,
obsolete and short-dated (1,435,744) (1,939,502)
inventories ----------- -----------
$ 3,941,985 $ 3,948,564
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FOREIGN CURRENCY
Realized gains or losses from foreign currency transactions
are included in operations as incurred and relate to intercompany
balances amounting to approximately $1,263,000 between Hycor and its
German subsidiary. The Company has hedged the majority of this foreign
currency exchange rate position.
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, including but 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.
Restructuring Plan
On July 27, 1995, the Company announced plans for a major restructuring
designed to focus operations on high potential clinical immunology segments
which management believes to have the greatest potential for future growth.
The Restructuring Plan (the "Plan"), which was finalized in the fourth quarter
of 1995, included the discontinuation of several product lines, the closure of
the Company's New Jersey facility, and the disposition or relocation of certain
fixed assets.
The total revenues related to the divested or discontinued product lines
accounted for approximately 31%, 36%, and 45% of the Company's total revenues
in 1995, 1994 and 1993, respectively.
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Although the Company believes that the sales growth resulting from the focused
efforts in the clinical immunology markets will more than offset the decrease
in revenues resulting from the restructuring, this is not expected to occur
until after 1996. The Company therefore expects that 1996 revenues will show
a decline from 1995.
In addition to expected declines in total revenues, increased investment in
marketing and research and development provided for in the Plan will cause
increased expense levels in 1996 over 1995.
FINANCIAL CONDITION
The Company decreased its working capital $595,000 as of June
30, 1996, compared to December 31, 1995. This decrease was primarily a result
of capital utilized in the stock repurchase program, offset by increases from
normal operations. The Company expects to be able to fund operations from
current working capital and profits generated from operations.
Cash and cash equivalents, marketable securities and
receivables fluctuate throughout the year based upon the sales of products
through distributors and the timing of the distributors related payments to the
Company. These fluctuations do not have a significant seasonal component.
The Company's principal capital commitments are for lease
payments under non-cancelable operating leases and leasehold improvements.
Working capital and operating profits are anticipated to be sufficient to
satisfy these commitments.
The Company is continuing to evaluate for acquisition
additional product lines and companies in the medical diagnostics field. The
Company could use sources other than cash from operations, such as issuance of
debt or equity securities, to finance any such acquisition. If such an
acquisition were completed, the Company's operating results and financial
condition could change significantly in future periods.
RESULTS OF OPERATIONS
During the three and six-month periods ended June 30, 1996,
sales decreased 24% and 21%, respectively, compared to the same period last
year, primarily due to the discontinuation of several product lines as part of
the Plan. Gross profit as a percentage of product sales increased for the
quarter from approximately 57% to 58% and remained at 56% for the same period
year-to-date.
Selling, general and administrative expenses for the three
and six-month periods ended June 30, 1996 have decreased approximately 1% and
4% over the prior year periods. This decrease is primarily due to the impact
on expenses resulting from the sale of Meridian, partially offset by costs
related to
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the implementation of the Plan which includes expanding marketing and R&D
programs.
Research and development expenses for the three and six-month
periods ended June 30, 1996 have increased approximately 22% and 16%,
respectively, over the prior year periods as the Company increased its
investment in new product development in the areas of clinical immunology.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 30, 1996, 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
1997 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 6,243,897 254,567
Samual D. Anderson 6,360,053 138,411
David S. Gordon 6,360,553 137,911
Reginald P. Jones 6,361,736 136,728
James R. Phelps 6,362,267 136,197
Richard E. Schmidt 6,359,707 138,757
David A. Thompson 6,362,267 136,197
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 3(ii) - By-Laws, As Amended Thru May 30, 1996
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8K: None
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SIGNATURE
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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.
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Date: August 14, 1996 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.)
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Exhibit List
Page
Exhibit No. Name of Exhibit No.
- ----------- --------------- ----
3(ii). By-Laws, As Amended Thru May 30, 1996 11-19
27. Financial Data Schedule
(Electronic Filing Only)
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EXHIBIT 3(ii)
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BY-LAWS, AS AMENDED THRU MAY 30, 1996
BYLAWS
OF
HYCOR BIOMEDICAL INC.
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation will be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice-Chairman of the Board of Directors,
if any, or by the President or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation certifying the number of shares owned by him in the corporation.
If such certificate is countersigned by a transfer agent other than the
corporation or its employee or by a registrar other than the corporation or its
employee, any other signature on the certificate may be a facsimile. In case
any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate will have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Whenever the corporation will be authorized to issue more than
one class of stock or more than one series of any class of stock, and whenever
the corporation will issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock will set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series will be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of
any certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost,
stolen, or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any claim
that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new
certificate.
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