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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: MARCH 31, 2001
[ ] 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.
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(Exact name of registrant as specified in its charter)
Delaware 58-1437178
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7272 Chapman Avenue, Garden Grove, California 92841
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 933-3000
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No Change
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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 April 20, 2001
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Common Stock, $.01 Par Value 7,945,101
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 2001 2000
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CURRENT ASSETS: (unaudited)
Cash and cash equivalents $297,090 $694,764
Investments 1,672,013 1,616,587
Accounts receivable, net of allowance for
doubtful accounts of $158,603 (2001) and $138,208 (2000) 3,603,397 3,215,869
Inventories (Note 2) 4,859,276 4,719,050
Prepaid expenses and other current assets 315,634 355,712
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Total current assets 10,747,410 10,601,982
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PROPERTY AND EQUIPMENT, at cost 10,279,780 10,341,305
Less accumulated depreciation (7,409,773) (7,259,584)
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Property and equipment, net 2,870,007 3,081,721
GOODWILL AND OTHER INTANGIBLE ASSETS, net of
Accumulated amortization of $1,008,833 (2001) and $1,020,728 (2000) 1,061,614 1,147,987
OTHER ASSETS 36,180 36,180
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Total assets $14,715,211 $14,867,870
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 626,634 $ 584,629
Accrued liabilities 743,091 735,678
Accrued payroll expenses 678,200 995,122
Current portion of long-term debt (Note 3) 1,048,127 1,054,684
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Total current liabilities 3,096,052 3,370,113
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Long-term debt (Note 3) 17,783 28,925
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Total Liabilities 3,113,835 3,399,038
STOCKHOLDERS' EQUITY:
Common stock 79,268 77,389
Paid-in capital 12,760,902 12,640,536
Accumulated deficit (242,835) (390,505)
Accumulated other comprehensive loss (995,959) (858,588)
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Total stockholders' equity 11,601,376 11,468,832
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Total liabilities and stockholders' equity $14,715,211 $14,867,870
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
March 31,
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2001 2000
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NET SALES $ 4,280,090 $ 4,628,095
COST OF SALES 1,936,317 2,144,184
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Gross profit 2,343,773 2,483,911
OPERATING EXPENSES:
Selling, general, and administrative 1,604,187 1,732,177
Research and development 566,887 438,304
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Total operating expenses 2,171,074 2,170,481
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OPERATING INCOME 172,699 313,430
INTEREST EXPENSE (15,654) (23,392)
INTEREST INCOME 37,001 36,858
LOSS ON FOREIGN CURRENCY TRANSACTIONS (9,724) (38,080)
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INCOME BEFORE INCOME TAX PROVISION 184,322 288,816
INCOME TAX PROVISION 36,652 21,645
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NET INCOME $ 147,670 $ 267,171
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BASIC EARNINGS PER SHARE $ 0.02 $ 0.04
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DILUTED EARNINGS PER SHARE $ 0.02 $ 0.03
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AVERAGE COMMON SHARES OUTSTANDING:
Basic 7,814,111 7,348,677
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Diluted 8,254,947 8,051,360
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
Net Income $ 147,670 $ 267,171
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustments (194,543) (160,996)
Unrealized gains (losses) on securities 57,172 (15,257)
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OTHER COMPREHENSIVE LOSS, NET OF TAX (137,371) (176,253)
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COMPREHENSIVE INCOME $ 10,299 $ 90,918
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
March 31,
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2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 147,670 $ 267,171
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 278,342 296,681
Provision for doubtful accounts receivable 15,399 16,338
Provision for excess and obsolete inventories 62,490 201,740
Change in assets and liabilities, net of effects of foreign
currency adjustments
Accounts receivable (465,974) (44,666)
Inventories (268,544) (194,449)
Prepaid expenses and other current assets 16,968 (20,468)
Accounts payable 56,185 52,354
Accrued liabilities 131,196 (158,517)
Accrued payroll expenses (311,994) (126,385)
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Total adjustments (485,932) 22,628
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Net cash (used in) provided by operating activities (338,262) 289,799
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments -- (824,503)
Proceeds from sales of investments 20,000 800,000
Purchases of property, plant and equipment (72,860) (283,705)
Other (881) 1,057
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Net cash used in investing activities (53,741) (307,151)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (15,027) (18,058)
Proceeds from issuance of common stock 8,478 35,590
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Net cash (used in) provided by financing activities (6,549) 17,532
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EFFECT OF EXCHANGE RATE CHANGES ON CASH 878 (5,266)
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DECREASE IN CASH AND CASH EQUIVALENTS (397,674) (5,086)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 694,764 551,295
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 297,090 $ 546,209
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the period - interest $ 23,667 $ 31,563
- income taxes $ 9,495 $ 49,644
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HYCOR BIOMEDICAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited
consolidated financial statements include all adjustments necessary to
present fairly the financial position as of March 31, 2001 and December
31, 2000, the results of operations and the cash flows for the three-month
periods ended March 31, 2001 and 2000.
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 accounting principles
generally accepted in the United States of America 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 2000 annual report on Form 10-K as filed with the Securities
and Exchange Commission. Certain items in the 2000 consolidated financial
statements have been reclassified to conform to the 2001 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, while diluted EPS
additionally includes the dilutive effect of the Company's outstanding
options and warrants computed using the treasury stock method.
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 March 31, 2001 and December 31, 2000 consist of:
3/31/01 12/31/00
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Raw materials $1,465,230 $1,128,822
Work in process 2,119,389 2,181,753
Finished goods 1,274,657 1,408,475
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$4,859,276 $4,719,050
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3. LONG TERM DEBT
The Company has a line of credit that provides for borrowings up to
$2,000,000 and expires on July 31, 2001. The loan is collateralized by the
Company's accounts receivable, inventories, and property, plant, and
equipment. At March 31, 2001, $1,000,000 was outstanding. Advances under
the line bear interest at the prime rate or at LIBOR plus 2% (6.87% at
March 31, 2001).
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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 March 31,
2001, the Company was in compliance with such covenants.
In addition, the Company and one of its foreign subsidiaries has
long-term debt, payable to financial institutions, aggregating $65,910
with a weighted average interest rate of approximately 9.5%.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
This Section and this entire report contain forward-looking statements and
include assumptions concerning the Company's operations, future results and
prospects. These forward-looking statements are based on current expectations
and are subject to a number of risks, uncertainties, and other factors. In
connection with the Private Securities Litigation Reform Act of 1995, the
Company provides the following cautionary statements identifying important
factors which, among other things, could cause the actual results and events to
differ materially from those set forth in or implied by the forward-looking
statements and related assumptions contained in this Section and in this entire
Report.
Such factors include, but are not limited to, product demand and market
acceptance risks; the effect of economic conditions; the impact of competitive
products and pricing; product development; commercialization and technological
difficulties; capacity and supply constraints or difficulties; availability of
capital resources; general business and economic conditions, including currency
risks based on the relative strength or weakness of the U.S. dollar, euro
conversions, and changes in government laws and regulations, including taxes.
LIQUIDITY
The Company has adequate working capital and sources of capital to carry
on its current business and to meet its existing and expected future capital
requirements. As of March 31, 2001 the Company increased its working capital
$419,489 when compared to December 31, 2000, as a result of normal operations.
The Company's principal capital commitments are to support the HY-TEC
business, which requires the purchase of instruments. In many cases, the
instruments 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. The Company has entered into a
long-term product manufacturing and sales agreement to purchase certain minimum
levels of HY-TEC instruments. Working capital, operating results, and the
available line of credit are expected to be sufficient to satisfy this
commitment and the needs of operations for the foreseeable future.
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RESULTS OF OPERATIONS
During the three-month period ended March 31, 2001, sales decreased
approximately $348,000 or 7.5% compared to the same period last year. Sales of
urinalysis and clinical immunology product lines decreased $233,000 or 5.4%,
while sales of other non-core products decreased $115,000 or 35.9%, when
compared to the same period last year. In periods when the U.S. dollar is
strengthening, the translation impact on the financial statements of the
consolidated foreign affiliates is that of lower sales, costs, and net income.
The stronger U.S. dollar in the first quarter 2001 when compared to the
corresponding 2000 period resulted in lower reported sales of approximately
$104,000 or 2.4%. An additional contributing factor was related to the
implementation of a primary supplier agreement between the Company and a major
U.S. customer. In the first quarter 2000, the customer increased inventory
levels of Hycor's products and has since established an aggressive inventory
reduction program even though sales to their end-users continue to grow.
Continued pressures in the health care industry for cost controls affect the
Company's revenue and the Company anticipates that these pricing pressures will
continue in the future.
Gross profit as a percentage of product sales increased for three-month
period ended March 31, 2001 from approximately 53.7% to 54.8% compared to the
same period last year. This increase was due primarily to changes in the product
mix and improvements in manufacturing efficiencies.
Selling, general and administrative expenses decreased approximately
$128,000 or 7.4% when compared to the same period last year. The decrease is
primarily the result of non-recurring expenses in 2000 of approximately $50,000,
and a favorable foreign exchange impact of about $35,000.
Research and development costs increased approximately $129,000 or 29.3%
when compared to the same period last year. This increase is due to continuing
developmental efforts on the HY-TEC product line.
Effective with the fourth quarter of 1998, the Company adopted a position
wherein a 100% valuation allowance was taken against all deferred tax assets.
The tax provision for the three-month periods ended March 31, 2001 and March 31,
2000 reflects the provision for estimated federal, state, and foreign
liabilities that are not offset by net operating loss carry-forwards.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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: May 14, 2001 By: /s/ Armando Correa
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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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