Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 10K 5/31/99 73± 350K
3: EX-10 Employment Agreements 41± 166K
2: EX-10.1-5 Building Lease Amendment 6± 25K
4: EX-10.24 First Modification of Loan Agreement 5± 25K
5: EX-21 Subs of Registrant 1 4K
6: EX-23 Consent 1 7K
7: EX-27 FDS--FY 99 1 6K
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended May 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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 Identification No.)
incorporation or organization)
3130 GATEWAY DRIVE, 30091
P.O. BOX 5625 (Zip Code)
Norcross, Georgia
(Address of principal executive offices)
Registrant's telephone number, including area code, is (770) 441-2051
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
COMMON STOCK PURCHASE RIGHTS
(Title of Class)
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 by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
[ X ]
As of July 30 1999, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $109,716,000.
As of July 30 1999, there were 7,690,031 shares of common stock
outstanding.
PART I
Item 1.--Business
Founded in 1982, Immucor, Inc., a Georgia corporation ("Immucor" or the
"Company"), develops, manufactures and sells a complete line of reagents and
automated systems used primarily by hospitals, clinical laboratories and blood
banks in a number of tests performed to detect and identify certain properties
of the cell and serum components of human blood prior to blood transfusion.
During fiscal 1999 the Company implemented its strategic plan of
consolidating the U.S. blood bank market leaving Immucor and Ortho Clinical
Diagnostics as the only two companies offering a complete line of blood banking
reagents in the U.S. and thereby strengthening its direct presence in Europe and
Canada. The Company achieved this through a series of acquisitions, which are
listed below:
Acquisition of Canadian Distribution Rights. On September 1, 1998 the
Company acquired the Canadian distribution rights for the Company's complete
line of reagents from its Canadian distributor for a total transaction value of
approximately $2.1 million. Distribution of the entire range of products was
taken over by Dominion Biologicals, Ltd. ("Dominion"), Immucor's wholly owned
Canadian subsidiary. Dominion is currently the market leader in Canada for
conventional reagents. See - Liquidity and Capital Resources.
Acquisition of Gamma Biologicals, Inc. On October 27, 1998, the Company
completed the acquisition of Gamma Biologicals, Inc. ("Gamma") for a total
transaction value of approximately $27.3 million (see - Note 3 to the
Consolidated Financial Statements). Located in Houston, Texas, Gamma
manufactures and distributes a wide variety of in-vitro diagnostic reagents to
blood donation centers, transfusion departments of hospitals, medical
laboratories and research institutions through a direct sales force and
distributor network. Gamma was the third largest domestic blood bank serology
company before the acquisition. Through this acquisition the Company
strengthened its competitive position in the U.S. market, added to its customer
base, and added to its product offerings, all of which extend the Company's
marketing reach both in the U.S. and internationally. Combining Immucor's
Automated Product Family and Capture with Gamma's line of monoclonal reagents,
red cell products and ReACT product represents a natural fit and creates an
ample selection of products for our customers worldwide (see - Products).
Acquisition of French and Belgian Distributor's Rights. On March 15,
1999, the Company acquired its former distributors in France (Immunochim
s.a.r.l.) and Belgium (Medichim S.A.), for a combination of cash, Immucor stock
options and an incentive earn out for a total transaction value of approximately
$1.8 million (see - Note 3 to the Consolidated Financial Statements). The
Company's direct presence will allow it to take advantage of the large potential
for blood bank automation installations in the French market, which the Company
believes is the second largest market in Europe.
Acquisition of the BCA blood bank division assets of Biopool
International, Inc. On April 30, 1999 the Company purchased certain assets of
the BCA blood bank division of Biopool International, Inc. for approximately
$4.5 million (see - Note 3 to the Consolidated Financial Statements). The
acquired product lines generated approximately $5.5 million in annual revenues
for Biopool, and the Company expects to maintain up to 90% of these sales.
The above acquisitions have allowed Immucor to become the market leader
in North America in terms of sales and has strengthened its position worldwide.
See - Competition and Marketing and Distribution. The acquisitions have been
financed through the use of the Company's cash and a loan agreement with the
Company's primary U.S. bank. See- Liquidity and Capital Resources and Note 3 to
the Consolidated Financial Statements.
Since 1992 the Company has worked with the medical instrument
manufacturer Bio-Tek Instruments, Inc., a wholly owned subsidiary of Lionheart
Technologies, Inc., to develop an automated, "walk-away", blood bank analyzer
called the ABS2000, using Immucor's proprietary Capture(R) technology. In March
1996, the Company filed a 510(k) application with the U.S. Food and Drug
Administration (the "FDA") for market clearance. On July 6, 1998, the Company
announced that the FDA cleared the ABS2000 for marketing in the U.S. The
instrument is designed for patient testing in hospital transfusion laboratories
and is the first fully automated blood bank system that performs blood
compatibility tests currently done manually by blood bank technologists. The
Company introduced the ABS2000 to the U.S. market during the second quarter of
fiscal 1999.
In March 1998, Immucor signed an exclusive distribution agreement with
IBG Systems Limited ("IBG") headquartered in England whereby Immucor assumed the
sale, marketing and service of all current and future IBG products in North
America. IBG presently has the only semi-automated microtitration plate reader
available for sale in the U.S., which interprets Immucor's proprietary solid
phase Capture(R) assays. With this agreement Immucor also obtained the North
American distribution rights for blood bank applications of the ROSYS Plato
system manufactured by ROSYS Anthos Ag of Switzerland. The system provides
medium sized donor centers and large hospital transfusion laboratories automated
liquid and sample handling for processing of microtitration plates and also uses
Immucor's proprietary solid phase Capture(R) assays. The Company introduced the
system to the U.S. and European markets during fiscal 1999. In July 1999 the
Company purchased the exclusive distribution rights of the Rosys Plato from IBG
for approximately $250,000 in cash. The Company has entered into a distribution
agreement directly with Rosys Anthos Ag for the distribution of the Rosys Plato
(marketed as ABS Precis in Europe) in North America and Europe.
In 1998, the Company began marketing an automated medical instrument,
previously referred to as the ABSHV, utilizing DYNEX Technologies, Inc.'s 510(k)
clearance for its product called the DIAS PLUS. The instrument, marketed as
ABSHV in Europe, provides large blood donor centers and clinical reference
laboratories automated batch processing and positive sample identification of
routine blood donor tests, and uses the Company's solid phase Capture(R) assays.
Industry
Immucor is part of the immunohematology industry, which generally seeks
to prevent or cure certain diseases or conditions through the transfusion of
blood and blood components. In the U.S., the FDA regulates human blood as a drug
and as a biological product, and it regulates the transfusion of blood as the
administration of a drug and of a biological product. The FDA regulates all
phases of the immunohematology industry, including donor selection and the
collection, classification, storage, handling and transfusion of blood and blood
components. The FDA requires all facilities that manufacture products used for
any of those purposes, and the products themselves, to be registered or licensed
by the FDA. See Regulation of Business.
The principal components of blood are plasma (the fluid portion) and
cells. Blood also contains antibodies and antigens. Antibodies are proteins that
are naturally produced by the human body in response to the introduction of
foreign substances (antigens). Antigens are substances that stimulate the
production of antibodies. Red blood cells, which transport oxygen from the lungs
to other parts of the body, and return carbon dioxide to the lungs, are
categorized by four blood groups (A, B, AB and O) and two blood types (Rh
positive and Rh negative), based on the presence or absence of certain antigens
on the surface of the cells. It is crucial that the health care provider
correctly identify the antibodies and antigens present in patient and donor
blood. For example, if a donor's red blood cells contain antigens that could
react with the corresponding antibody in the patient's plasma, the transfusion
of the red blood cells may result in the potentially life threatening
destruction of the red blood cells.
Because of the critical importance of matching patient and donor blood,
compatibility testing procedures are generally performed manually by highly
educated technologists in hospitals, blood banks and laboratories. At present,
with few exceptions, these tests are performed using procedures which the
Company believes can be significantly improved using its instrumentation and
solid phase and ReACT testing systems to automate the testing procedures. See
Products -- Blood Bank Automation and Solid Phase and Microcolumn Technology.
The Company believes that the worldwide market for traditional blood
bank reagents is approximately $265 million, and that this market is relatively
mature given current technology. The industry is labor-intensive and the Company
estimates worldwide industry labor costs approach $1 billion. Therefore, the
introduction of labor-saving products will provide additional growth in the
market. The Company believes that its blood bank automation, solid phase and
ReACT blood testing system improve test results and reduce the time necessary to
perform certain test procedures, thereby offering a cost-effective alternative
for its customers. See Products -- Blood Bank Automation and Solid Phase and
Microcolumn Technology. The Company anticipates that it will be able to increase
the available market for traditional and automated reagents to $575 million
while decreasing the overall cost of blood testing by reducing the labor
component of testing by approximately $450 million.
Products
Most of Immucor's current reagent products are used in tests performed
prior to blood transfusions to determine the blood group and type of patients'
and donors' blood, in the detection and identification of blood group
antibodies, in platelet antibody detection, in paternity testing and in prenatal
care. The FDA requires the accurate testing of blood and blood components prior
to transfusions using only FDA licensed reagents such as those manufactured and
sold by the Company.
The following table sets forth the products sold by or exclusively for
the Company, most of which are manufactured by or exclusively for the Company.
Product Group Principal Use
ABO Blood Grouping Detect and identify ABO antigens on red
blood cells in order to classify a specimen's blood
group as either A, B, AB or O.
Rh Blood Typing Detect Rh antigens in order to classify a
specimen as either Rh positive or Rh negative, and to
detect other Rh-hr antigens.
Anti-human Globulin Used with other products for routine
crossmatching, and antibody detection and Serums
(Coombs Serums) identification; allows a reaction to
occur by bridging between antibodies that by themselves
could not cause a reaction.
Reagent Red Blood Cells Detect and identify antibodies in
patient or donor blood, confirm ABO blood grouping
results and validate the performance of anti-human
serum in the test system.
Product Group (continued) Principal Use (continued)
Rare Serums Detect the presence or absence of rare antigens.
Antibody Potentiators Increase the sensitivity of antigen-antibody tests.
Quality Control Systems Daily evaluation of the reactivity of routine blood
testing reagents.
Monoclonal (Hybridoma) Detect and identify ABO and other antigens on red blood
Antibody-based Reagents cells.
Technical Proficiency Reagent tests used to determine technical proficiency
Systems and provide continuing education for technical staff.
Fetal Bleed Screen Kit Used to detect excessive fetal-maternal hemorrhage in
Rh-negative women.
Capture-P(R) Used for the detection of platelet antibodies.
Capture-R(R) Used to detect and identify unexpected blood group
antibodies.
Capture-CMV(R) Used for the detection of antibodies to
cytomegalovirus.
Capture(R)-S Used for the detection of antilipid antibodies for
syphilis screening.
ReACT-(TM)-Test System Microcolumn technology used to detect
and identify unexpected blood group antibodies.
SegmentSampler-(TM) Disposable blood handling safety device.
ABS2000 Fully automated blood bank system used for patient
ABO/Rh grouping, antibody screening, donor ABO/Rh
confirmation testing and crossmatching.
The following table includes additional products not manufactured by the Company
but sold by the Company:
Product Group Principal Use
Rh(D)Immune Globulin Administered by injection once during
(Human) and once after pregnancy to an Rh negative
woman who delivers an Rh positive infant to prevent
hemolytic disease of the newborn.
HLA Serums Transplant typing and paternity testing.
DNA Probes Transplant typing, paternity testing, forensic medicine
and genetic research.
Infectious Diseases Diagnosis of certain infectious diseases
by the methods of ELISA, Immunofluorescence and Latex
Slide Tests.
Clinical Chemistry Blood analysis and pathological testing.
Immunofluorescent Used in clinical research to identify rare cell
Monoclonal Antibodies surface antigens.
Automated Microtitration Instruments providing laboratories automated batch
Plate Processors processing and positive sample identification of
and Liquid Handlers routine blood donor tests.
Microtitration Plate Instrument that reads and interprets test results
Reader of Immucor's proprietary Capture(R) products.
I-TRAC Transfusion management system used to verify the
correct patient has been selected to receive a blood
component before administration.
Microvolume Fluorimetry Automated cell enumeration and characterization
for patients undergoing transfusion therapy.
Systems
The Company believes that the blood banking industry today is
labor-intensive, and that a market exists for further automation of blood
compatibility tests currently being performed manually by hospital and donor
center blood bank technologists. Based on the results of independent workflow
studies, the Company believes that its Blood Bank Automation products
significantly reduce the amount of blood bank technologist time required to
perform routine blood compatibility tests.
ABS2000: Fully Automated Blood Bank System. On July 6, 1998, the
Company announced it received FDA clearance to market the ABS2000 in the U.S.
This automated, "walk-away", blood bank analyzer uses Immucor's proprietary
Capture(R) reagent product technology to perform blood bank patient testing and
is manufactured exclusively for Immucor by Bio-Tek Instruments, Inc., a wholly
owned subsidiary of Lionheart Technologies, Inc. During fiscal 1999, the Company
began to implement its marketing plan for domestic sale of the product.
ROSYS Plato: Microplate Liquid Handler and Sample Processor. The system
provides medium sized donor centers and large hospital transfusion laboratories
automated liquid and sample handling for processing of microtitration plates and
also uses Immucor's proprietary solid phase Capture(R) assays.
DIAS PLUS: High Volume Microplate Processor. The instrument provides
large blood donor centers and clinical reference laboratories automated batch
processing and positive sample identification of routine blood donor tests, and
uses the Company's Capture-R(R), Capture-CMV(R) and Capture(R)-S products.
Multireader Plus: Microplate Reader. Semi-automated spectraphotometric
microtitration plate reader that reads and interprets test results of Immucor's
proprietary Capture(R) products. Together with the ROSYS Plato or the DIAS PLUS,
the Multireader Plus completes a semi-automated blood bank system ideally suited
for blood donor centers and large hospital transfusion laboratories, and large
reference laboratories.
I-TRAC: I-TRAC is a comprehensive transfusion management system that
documents and verifies information electronically and gives health care
professionals the tools to ensure that the right blood is administered to the
right patient. In an environment that demands accuracy, Immucor recognized the
need for a system that could verify information and catch potential mistakes,
before they are made. The solution was a closed-loop process of information
management. This electronic tracking system incorporates portable data
terminals, automated blood banking systems, and lab information management. The
system identifies each patient using barcoded wristbands, and uniquely
identifies each specimen drawn from a patient using barcoded labels produced at
the bedside. I-TRAC provides automated transfusion testing using any of
Immucor's products, verifies the correct patient has been selected to receive a
blood component before administration, and prints a transfusion report at the
bedside.
Laboratory Equipment. Immucor also distributes laboratory equipment
designed to automate certain blood test procedures and used in conjunction with
the Company's Capture(R) and ReACT products.
Microvolume Fluorimetry. Microvolume fluorimetry is a laser-based
imaging system, which detects fluorescently-tagged cells held in stasis in a
defined volume, enabling an automated cellular assay delivery system.
Proprietary Technology
Under current agglutination blood testing techniques, serum is mixed
with red blood cells in a test tube and the technologist performs several
procedures and then examines the mixture to determine whether there has been an
agglutination reaction. A positive reaction will occur if the cells are drawn
together in clumps by the presence of corresponding antibodies and antigens.
However, the mixture remains in a fluid state and it is sometimes difficult for
the technologist to determine whether the positive reaction has occurred.
Because of the critical importance of matching patient and donor blood,
testing procedures using agglutination techniques are usually performed manually
by highly educated technologists. Depending on the technical proficiency of the
person performing the test, the process can take from 30 minutes to one hour,
and if the test results are ambiguous the entire process may need to be
repeated. Thus, a significant amount of expensive labor is involved in such
testing. Based on industry sources, the Company believes that labor costs are
the largest component of the total cost of operating a hospital blood bank. The
Company believes that its solid phase and ReACT blood testing systems improve
test results and reduce the time necessary to perform certain blood testing
procedures related to the transfusion of blood and blood components.
Solid Phase Technology. In the Company's proprietary solid phase blood
test system, one of the reactants (either an antigen or an antibody) is applied
or bound to a solid support, such as a well in a microtitration plate. During
testing, the bound reactant captures other reactants in a fluid state and binds
those fluid reactants to the solid phase (the bound reactant). The binding of
the fluid reactants into the solid phase occurs rapidly and results in clearly
defined test reactions that are often easier to interpret than the subjective
results sometimes obtained from existing agglutination technology. Based on
results obtained with Capture-P(R), Capture-R(R), Capture-CMV(R), Capture(R)-S
and the Company's ongoing research, the Company believes that solid phase test
results can generally be obtained in substantially less time than by existing
techniques.
Immucor has obtained FDA clearance for sale of four test systems using
its solid phase technology: a Platelet Antibody Detection System, Capture-P(R);
a Red Cell Antibody Detection System, Capture-R(R); and two Infectious Disease
Tests, Capture-CMV(R) and Capture(R)-S (see below). In these four test systems,
antigens are applied and bound to the surface of a small well in a plastic
microtitration plate, and patient or donor serum or plasma is placed in the
well. After the addition of special proprietary indicator cells manufactured by
Immucor, positive reactions indicating the presence of blood group antibodies
adhere to the well as a thin layer and negative reactions do not adhere but
settle to the bottom as a small cell button.
Microcolumn Technology (ReACT-(TM)- Test System). Gamma Biologicals,
Inc., the Company's wholly owned subsidiary, has developed and received a
patent, in September 1997, on a microcolumn technology to be used for red cell
affinity testing. Products based on this technology should help Immucor compete
with other microcolumn tests marketed very successfully in Europe since 1988 and
recently introduced in the United States. The acronym ReACT (Red Cell Adherence
Technology) has been chosen as a commercial trade name for the product line. The
principle of ReACT is based on the affinity adherence of red cells to an
immunologically active matrix. The matrix consists of specially treated agarose
beads. Gamma received FDA clearance to market the first ReACT products in the
United States in September 1997, and the Company's first ReACT products are used
for antibody detection and identification. Since the purchase of Gamma in
October 1998, the Company has re-examined and modified the marketing strategy
for ReACT and has re-launched the product both internationally and domestically.
See "Item 3. - Legal Proceedings" regarding a claim of patent infringement
against the Company.
Products Under Development
Immucor continually seeks to improve its existing products and to
develop new ones in order to enhance its market share. Prior to their sale, any
new products will require licensing or premarket approval by the FDA. The
Company employs several persons whose specific duties are to continue to improve
existing products and develop new products for the Company's existing and
potential customers. The Company also has established relationships with other
individuals and institutions who provide similar services and the Company
expects that it will continue to do so. The Company intends to continue its
product development efforts primarily in the area of blood bank automation,
microcolumn and solid phase technology and in several other areas that may also
be useful in connection with the development of these products. For the fiscal
years ended May 31, 1999, 1998 and 1997, the Company spent $1,293,600, $970,900,
and $907,100, respectively, for research and development. The Company may in the
future acquire related technologies and product lines, or the companies that own
them, to improve the Company's ability to meet the needs of its customers. For
the seven year period ending May 31, 1999 the Company has invested $5.2 million
in instrument research and development principally under research contracts with
Bio-Tek and DYNEX.
Blood Bank Automation. The Company believes that the blood banking
industry today is labor-intensive, and that a market exists for further
automation of blood compatibility tests currently being performed manually by
hospital and donor center blood bank technologists.
Since 1992 the Company has worked with Bio-Tek Instruments, Inc., a
wholly owned subsidiary of Lionheart Technologies, Inc., to combine the reagent
manufacturing expertise of Immucor with the medical instrumentation expertise of
Bio-Tek, to develop an automated, "walk-away", blood bank analyzer. Bio-Tek has
been responsible for engineering, software development and manufacturing. The
Company announced clearance to market the product in the U.S. from the FDA on
July 6, 1998 and continues to upgrade and develop system software/hardware
upgrades to add additional tests to its menu, to increase ease of use, to
improve throughput and to add stat testing capabilities.
The Company is working with Rosys Anthos AG of Switzerland to automate
its microcolumn applications on the Rosys Plato, known as the ABS Precis in
Europe. The Company expects this application to be ready for European market
introduction during fiscal 2000. See- Note 11.
Antibody Identification Website. During fiscal 1999 the Company began
to develop together with Sanguin International Limited, headquartered in
England, the industry's first dedicated Internet website for online assistance
with the identification of unexpected red cell antibodies, called
www.ready-id.com. Additionally, www.ready-id.com will provide customers access
to continuing education, guidance on serological techniques, industry related
topic searches and online consultation services. The Company believes that the
demand for the service will increase in the future as more accounts become
automated and the number of laboratory workers with a high level of technical
knowledge in the blood bank industry begins to decline. The Company expects that
the web service will be completely operational in fiscal 2000.
Additional Solid Phase Applications. The Company plans to continue to
develop and refine its patented, solid phase technology. Currently, the Company
is developing a screening test for the detection of weak D antigens on donor red
cells.
Additional Microcolumn Applications. Products to be used for red cell
antigen typing in the ReACT Test System are currently under development.
Monoclonal Antibodies. Monoclonal antibodies are derived by fusing an
antibody-producing cell with a tumor cell, resulting in a hybridoma cell that
manufactures the original antibody. The Company is actively engaged in the
development of additional monoclonal antibodies for a variety of uses, including
the detection of blood group and infectious disease antigens, and for use in the
solid phase test systems. Monoclonal antibodies are highly specific, a trait
which allows them to detect and identify antigens with greater efficiency than
other reagents. Product quality and consistency is maintained from production
lot to production lot. The Company continues to pursue the development of such
antibodies principally through Gamma and its Canadian subsidiary, Dominion.
Marketing and Distribution
Immucor's potential U.S. customers are approximately 6,000 blood banks,
hospitals and clinical laboratories. The Company maintains an active client base
of over 5,500 customers worldwide, and no one customer purchases annually in
excess of 5% of the Company's current sales volume. The Company believes there
is little seasonality to its sales activity and there is no material backlog of
orders.
During fiscal 1999, the Company has increased its market share through
the implementation of its acquisition strategy (see Item 1. Business). The
Company believes it is the market leader in North America. In addition, the
Company seeks to continue to increase its market share through the use of its
experienced direct sales force and through the expansion of its product line to
offer customers a full range of products for their reagent needs. The Company
believes it can increase its market share by marketing products based on its
blood bank automation strategy, solid phase and ReACT technologies.
The Company markets and sells its products to its customers directly
through 114 sales, marketing and support personnel employed by the Company in
the U.S., Canada, Germany, Portugal, Italy, Spain, France, Belgium and the
Netherlands. In addition, the Company utilizes 16 sales agents in Italy. The
Company has hired personnel whom the Company considers to be highly experienced
and respected for their knowledge of the blood bank diagnostic business. The
Company believes that it can more effectively market its products through
persons who specialize in blood testing reagents and related equipment, as
opposed to persons who generally sell a broader line of medical supplies but
without any expertise in blood testing products. To enable the smooth transition
to a systems company the company has conducted extensive capital sales training
of its existing sales force and has begun the process of adding additional
capital sales representatives to the organization to capitalize on its strategy.
Continuing technical support and service is also provided to customers through
the Company's Consultation Laboratory which was significantly strengthened
through its acquisition of Gamma in October 1998. It assists the Company's
customers in identifying certain blood group antibodies which are rare or
difficult to detect. Immucor also sponsors workshops in the U.S., Europe, Latin
America and Asia to which customers are invited to hear the latest developments
in the field.
The Company also markets its products internationally through
distributors located throughout the world. For the fiscal years ended May 31,
1999, 1998 and 1997, the Company had foreign net sales, including net domestic
export sales to unaffiliated customers, of approximately $30,241,000,
$24,101,000, and $22,130,000, respectively, and these sales accounted for
approximately 51%, 61%, and 62% of the Company's total net sales for the
respective fiscal years. See Note 14 to the Consolidated Financial Statements.
Most of the Company's foreign sales occurred in Europe and Canada where the
Company maintains subsidiaries.
Suppliers
The Company obtains raw materials from numerous outside suppliers. The
Company is not dependent on any single supplier except for certain
instrumentation manufacturers including Lionheart Technologies Inc. for the
ABS2000, Dynex Technologies Inc. for the DIAS Plus, and Rosys Anthos AG for the
Rosys Plato (see Note 12 to the Consolidated Financial Statements) and the joint
manufacturer of some of the Company's monoclonal antibody-based products. The
Company believes that its business relationship with suppliers is excellent.
Management believes that if the supply of instrumentation were interrupted,
alternate suppliers could be found, but the commencement of supply could take
one to two years.
Certain of the Company's products are derived from blood having
particular or rare combinations of antibodies and antigens, which are found in a
limited number of individuals. The Company to date has not experienced any major
difficulty in obtaining sufficient quantities of such blood for use in
manufacturing its products, but there can be no assurance that the Company will
always have available to it a sufficient supply of such blood.
Regulation of Business
The manufacture and sale of blood banking products is a highly
regulated business and is subject to continuing compliance with various federal
and state statutes, rules and regulations generally include, licensing, product
testing, facilities compliance, product labeling, and consumer disclosure (see
Industry). The Company operates under U.S. Government Establishment License No.
886 granted by the FDA in December 1982, U.S. Government Establishment License
No. 435, granted by the National Institutes of Health in 1971 to Gamma
Biologicals, Inc., and under U.S. Government Establishment License No. 1151
granted by the FDA in May 1992 to Dominion Biologicals Limited. An FDA license
is issued for an indefinite period of time, subject to the FDA's right to revoke
the license. As part of its overview responsibility, the FDA makes plant and
facility inspections on an unannounced basis. Further, a sample of each
production lot of many of the Company's products must be submitted to and
approved by the FDA prior to its sale or distribution.
In addition to its facilities license, the Company holds several
product licenses to manufacture blood grouping reagents. To obtain a product
license, the Company must submit the product manufacturing methods to the FDA,
perform a clinical trial of its product, and demonstrate to the satisfaction of
the FDA that the product meets certain efficacy and safety standards. There can
be no assurance that any future product licenses will be obtained by the
Company.
To sell its products in Germany, Immucor GmbH must license its products
with the Paul-Ehrlich-Institute prior to product introduction. In addition, an
import license for products purchased outside the European Economic Community is
required. To date, Immucor GmbH has been able to obtain licenses needed to
effectively promote its products in Germany and throughout Europe.
In North America, the Company has hired and retained several employees
who are highly experienced in FDA and other regulatory authority compliance, and
the Company believes that its manufacturing and on-going quality control
procedures conform to the required federal and state rules and regulations.
Patents, Trademarks and Royalties
Since 1986, the U.S. Patent Office has issued to Immucor six patents
pertaining to its solid phase technology.
Immucor's solid phase technology, including patent rights, was acquired
from five researchers at the Community Blood Center of Greater Kansas City
("Blood Center") pursuant to an agreement entered into on March 11, 1983, and
amended in 1985 and 1987. In 1987, one of the researchers joined the Company as
Director of Research and Development to continue to develop new products using
the solid phase technology. The agreement terminates on August 26, 2006, the
date on which the first patent issued on the technology expires. The Company has
agreed to pay the Blood Center royalties equal to 4% of the net sales from
products utilizing the solid phase technology. For the fiscal years ended May
31, 1999, 1998 and 1997 the Company paid the Blood Center royalties of
approximately $411,100, $389,900, and $368,800 under this agreement. (See - Note
11)
In May 1994, Gamma applied for United States and international patents
covering a new antigen/antibody detection procedure using an affinity adherence
technology (see Products). The U.S. patent was issued in September 1997. Gamma
was able to attain the patent rights by entering into a license agreement with
Pasteur Sanofi Diagnostics ("Sanofi"), a company with headquarters in France,
for the use and sale of their microcolumn test procedure for the detection of
antibodies called ReACT. Under the terms of the agreement the Company will pay
Sanofi royalties equal to 12% of the net sales from the ReACT products in six
countries in Europe.. The agreement expires on the expiration of the patent of
the technology. To date the Company has made insignificant payments as the
product is in the initial stages of its market launch. However, the Company
expects royalty payments to increase significantly as sales of the product
increase in fiscal 2000. In addition Gamma has five royalty agreements on
various reagent products with royalties being paid at rates between 2% and 5%.
During fiscal 1999 approximately $65,000 was paid under these royalty
agreements. See- Products- ReACT-TM- Test System and Item 3. - Legal
Proceedings, regarding a claim of patent infringement by the Company. An
additional patent application has been submitted covering the ReACT technology.
Through its development activities involving its solid phase and ReACT
technology, the Company has acquired expertise in such technology which it
considers trade secrets. While the Company will continue to seek patent
protection for its solid phase and ReACT technology and new applications
thereof, the Company believes that its acquired expertise and know-how,
including the above mentioned trade secrets, will provide more important
protection from competition.
The Company has registered the trademark "Immucor" and several product
names, such as "ABS2000", "ImmuAdd", "Capture", "Capture-P", "MCP", "Capture-R",
"Ready-Screen", "Ready-ID", "Capture-CMV" and "I-TRAC". Dominion Biologicals
Limited has registered the trademark "NOVACLONE". Gamma Biologicals, Inc. has
registered the trademark "Gamma" and several product names including "ReACT",
"RQC", "ELU-Kit", "Quinn", "EGA-Kit", "RiSE", "Tech-Chek", "PV-Plates",
"SegmentSampler", and "Saber".
Through the acquisition of the BCA blood bank division of Biopool
International, Inc., the Company acquired several registered trademarks but
plans to continue production of only one of the products with the registered
trademark "RESt".
Competition
Due to the Company's purchase of Gamma and the asset purchase of the
BCA blood bank division of Biopool International, Inc., the Company believes
that Ortho-Clinical Diagnostics, a Johnson & Johnson company, is its sole
competitor with licenses to manufacture a complete line of blood banking
reagents in the United States. The Company believes that during fiscal 1999 it
has become the North American market leader in terms of sales.
Additional European competitors for blood bank products include
Biotest, a German company; and Diamed, a Swiss company. Both of these companies
have been established longer, Diamed has a larger global market share than the
Company, and may have greater financial and other resources than the Company.
However, the Company believes that it is well positioned to compete favorably in
the business principally because of the quality and price of its products, the
sale of innovative products such as blood bank automation, the Company's
Capture(R) and ReACT products (see Products), continuing research efforts in the
area of blood bank automation (see Products Under Development), the experience
and expertise of its sales personnel (see Marketing and Distribution) and the
expertise of its technical and customer support staff.
Employees
At July 30, 1999 the Company and its subsidiaries had a total of 385
employees.
At July 30, 1999, the Company had 257 full time employees in the U.S.,
of whom 57 were in sales and marketing, 179 were in manufacturing, research and
distribution, and 21 were in administration.
At July 30, 1999 in Germany, Portugal, Italy, Spain, Canada, France,
Belgium, and the Netherlands, the Company had 128 full-time employees, of whom
57 were in sales and marketing, 50 were in research, distribution and
administration and 21 were in manufacturing.
The Company has experienced a low turnover rate among its technical and
sales staff and none of the Company's employees are represented by a union. The
Company considers its employee relations to be good.
Item 2.--Properties.
The Company leases approximately 67,500 square feet in Norcross,
Georgia, a suburb of Atlanta, as its executive offices, laboratories and
manufacturing facilities. Rent charges for the fiscal year ended May 31, 1999
were $446,900. The term of the lease is for a six-year period ending August 2005
with a right to renew for an additional five years. In northwest Houston, the
Company owns a 41,000 square foot building on a three-acre tract of land, which
is used primarily for manufacturing and shipping. The land and building are
subject to a first lien mortgage.
In Germany, the Company leases 1,566 square meters near Frankfurt. Rent
expense for the fiscal year ended May 31, 1999, totaled $189,000. The term of
the lease in Germany is through April 2009. In Italy rent expense for the fiscal
year ended May 31, 1999 totaled $107,900 for 805 square meters. The Company has
four separate lease agreements for the facility in Italy. The term of the first
lease is through April 2000, the second lease is through October 2000, the third
lease is through September 2002 and the fourth lease is through October 2003. In
the Netherlands, the Company leases 232 square meters of office and warehouse
space near Amsterdam. Rent expense for the fiscal year ended May 31, 1999,
totaled $30,400. In France, the Company leases 60 square meters and the term of
the lease is through October 2007. Rent expense for the fiscal year ended May
31, 1999 totaled $2,500. In Belgium, the Company owns land and a 575 square
meter building subject to a first lien mortgage. In Canada, the FDA approved
facility is owned by the Company. The Company believes all of its facilities and
lease terms are adequate and suitable for the Company's current and anticipated
business for the foreseeable future.
Item 3.--Legal Proceedings.
When the Company acquired Gamma in October 1998, Gamma was a party to
existing legal proceedings involving Gamma. On May 12, 1998, Gamma received
notice 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 notice that a second claim
was filed in the U.S. District Court for the Northern District of Georgia,
against the Company and Gamma 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 (See Products
- ReACT-TM- 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 and Immucor, an
award of treble damages, with interest and costs and reasonable attorney's fees.
Management believes that the ReACT technology does not infringe any claims made
in either of 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.
On January 23, 1998, a former employee of Gamma filed a suit in the
District Court of Harris County, Texas, alleging that Gamma breached a verbal
contract to provide certain post-employment benefits. The plaintiff sought
specific performance of the contract or, in the alternative, money damages in an
amount not less than $1,500,000. Management of Gamma denied that it had breached
any obligations to the plaintiff, and believed that it was unlikely that the
outcome of this case would have a material impact on the financial condition of
the Company. A settlement agreement for the case was finalized on October 23,
1998 and the case has been dismissed.
On November 16, 1998 the Company was notified that Vector Securities
International, Inc. ("Vector") filed a civil suit against Gamma for breach of
contract in the U.S. District Court for the Northern District of Illinois under
court file no. 98C 7334. Vector contended that as a result of the acquisition of
Gamma by Immucor, Gamma was liable to it for an investment banking fee of
$749,000. On April 30, 1999 the parties reached a settlement agreement and the
case has been dismissed.
Item 4.--Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5.--Market for Registrant's Common Equity and Related Stockholder Matters.
Immucor's Common Stock trades on The NASDAQ National Market System of
The NASDAQ Stock Market under the Symbol: BLUD. The following table sets forth
the quarterly high and low sale prices of the Common Stock for the fiscal
periods indicated. These prices represent inter-dealer quotations without retail
markups, markdowns or commissions and may not represent actual transactions.
High Low
---------------- ----------------
Period June 1 through July 30, 1999 $18.875 $11.500
Fiscal Year Ended May 31, 1999
First Quarter $11.188 $ 8.000
Second Quarter 10.250 7.375
Third Quarter 10.000 7.750
Fourth Quarter 14.375 7.750
Fiscal Year Ended May 31, 1998
First Quarter $10.875 $ 7.125
Second Quarter 12.000 7.750
Third Quarter 10.625 7.500
Fourth Quarter 10.000 7.063
As of July 30, 1999, there were 447 holders of record of the Company's
Common Stock. The last reported sales price of the Common Stock on such date was
$15.063.
Immucor has not declared any cash dividends with respect to its Common
Stock. The Company presently intends to continue to retain all earnings in
connection with its business.
Item 6.--Consolidated Selected Financial Data.
(All amounts are in thousands, except per share amounts)
[Enlarge/Download Table]
Year Ended May 31,
---------------------------------------------------------------------------------
1999 (2) 1998 1997 (1) 1996 1995
--------------- -------------- -------------- --------------- --------------
Statement of Income Data:
Net sales $59,525 $39,790 $35,653 $30,964 $28,892
Cost of sales 27,551 18,168 15,055 12,005 10,865
--------------- -------------- -------------- --------------- --------------
Gross profit 31,974 21,622 20,598 18,959 18,027
--------------- -------------- -------------- --------------- --------------
Operating expenses:
Research and development 1,294 971 907 998 1,130
Selling, general, and administrative 23,812 16,918 16,647 14,318 12,660
Merger-related expenses 559 - - - -
--------------- -------------- -------------- --------------- --------------
Total operating expenses 25,665 17,889 17,554 15,316 13,790
--------------- -------------- -------------- --------------- --------------
Income from operations 6,309 3,733 3,044 3,643 4,237
--------------- -------------- -------------- --------------- --------------
Other:
Interest income 313 789 848 868 805
Interest expense (1,416) (616) (486) (388) (534)
Other 202 (27) (264) 53 23
--------------- -------------- -------------- --------------- --------------
Total other (901) 146 98 533 294
--------------- -------------- -------------- --------------- --------------
Income before income taxes 5,408 3,879 3,142 4,176 4,531
Income taxes 1,847 1,810 1,302 1,403 1,641
--------------- -------------- -------------- --------------- --------------
Net income $ 3,561 $ 2,069 $ 1,840 $ 2,773 $ 2,890
=============== ============== ============== =============== ==============
Earnings per share:
Basic $ .47 $ .26 $ .23 $ .35 $ .38
=============== ============== ============== =============== ==============
Diluted $ .45 $ .25 $ .22 $ .32 $ .37
=============== ============== ============== =============== ==============
Weighted average shares outstanding
Basic 7,646 8,095 8,066 7,867 7,695
=============== ============== ============== =============== ==============
Diluted 7,959 8,443 8,535 8,653 7,809
=============== ============== ============== =============== ==============
Balance Sheet Data:
Working capital $21,141 $32,948 $31,868 $32,524 $29,101
Total assets 99,734 57,544 57,726 47,207 43,979
Long-term debt, less current portion 31,548 8,912 10,666 3,909 5,744
Retained earnings 25,499 21,938 19,869 18,029 15,256
Shareholders' equity 40,053 42,433 41,221 39,345 34,067
<FN>
(1) Includes results of Dominion Biologicals Limited since December 11, 1996.
(2) Includes results of Gamma Biologicals, Inc. since October 27, 1998,
Medichim and Immunochim since March 15, 1999 and BCA, a division of
Biopool, since April 30, 1999.
</FN>
Item 7.--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 this Form 10-K and Quarterly Reports on Form 10-Q.
(a) Liquidity and Capital Resources
Net cash provided by operating activities totaled $5,985,000,
$3,783,000, and $510,000 for the fiscal years 1999, 1998 and 1997, respectively.
As of May 31, 1999, the Company's cash and cash equivalents balance totaled $2.8
million.
During fiscal 1999, the Company experienced an increase in trade
accounts receivable of $9,360,000 over the previous year principally due to
acquisitions during the year resulting in higher sales levels in the U.S. and
Europe. Accounts receivable from a former officer and director decreased
$554,000 primarily as a result of this former director repaying loans payable to
the Company. See Note 5 to the Consolidated Financial Statements and Item 13 -
Certain Relationships and Related Transactions.
In fiscal 1998, the Company authorized a program to repurchase up to
10% of its common stock in the open market. During fiscal 1999, the Company
repurchased 822,800 shares of its common stock for approximately $7.4 million.
At this time the Company does not plan to repurchase further shares.
On September 1, 1998 the Company acquired the Canadian distribution
rights for the Company's complete line of reagents from its Canadian distributor
for a total transaction value of approximately $2 million.
On October 30, 1998, the Company acquired Gamma Biologicals, Inc. for a
cash tender offer of $5.40 per share and certain transaction costs for a total
value of $27,348,700. In addition, as of May 31, 1999, the Company has made
severance payments related to the acquisition in the amount of $2,387,000.
On March 15, 1999, the Company acquired the distribution rights to
market its products in France and Belgium through the purchase of its former
distributors, Immunochim s.a.r.l. (France) and Medichim S.A. (Belgium), for a
combination of cash and Immucor stock options for a total transaction value of
approximately $1.8 million. The purchase price also contains an incentive
earnout (see Note 3 to the Consolidated Financial Statements).
On May 1, 1999 the Company purchased certain assets of the BCA blood
bank division of Biopool International, Inc. for approximately $4.5 million.
In connection with the acquisition of Gamma in October 1998, and the
subsequent acquisitions of Medichim S.A., Immunochim s.a.r.l., and the BCA
division assets of Biopool International, Inc., the Company obtained an
acquisition term note of $20,000,000 maturing in December 2005, an additional
term loan of $4,500,000 maturing in March 2004, and a line of credit of
$2,000,000 maturing in October 2001. On November 4, 1998, the Company entered
into an interest rate swap agreement with an effective date of December 1, 1998,
for a notional amount of $15,000,000, also maturing December 2005. This
transaction effectively converts the acquisition term loan's floating rate to a
fixed rate of 5.33% on the principal balance of $15,000,000. On April 30, 1999
the line of credit for $2,000,000 was canceled and a new line of credit was
executed for $5,000,000. These borrowings, other than the interest rate swap
notional amount, bear interest rates at LIBOR plus additional percentage points
based on certain calculations. The interest rates have ranged from 6% to 8% on
the Company borrowings. At May 31, 1999, the outstanding balance of the
acquisition term note was $19,625,000, the additional term loan was $4,500,000
and the line of credit was $5,000,000. The fair value of the interest rate swap
agreement of $328,000 at May 31, 1999 is not recognized in the financial
statements.
In connection with the acquisition of Dominion Biologicals Limited in
December 1996, the Company entered into a $4,566,200 long-term revolving line of
credit facility with the Company's primary U.S. bank maturing December 2001 and
bearing interest at LIBOR plus .4375%. At the same time, the Company entered
into an interest rate swap agreement with a notional amount of $2,374,600 also
maturing December 2001. This transaction effectively converts the revolving line
of credit's floating rate to a fixed rate on the principal balance of
$2,374,600. The interest rate on the remaining principal of $678,400 is adjusted
every 90 days. The balance of the acquisition of Dominion was financed from the
issuance to Dominion's former shareholders of subordinated promissory notes
totaling $3,894,800 due December 1999 and from the issuance of warrants (see
Notes 4 and 6 to the Consolidated Financial Statements). During fiscal 1999 the
Company repaid $477,300 under the long-term revolving line of credit facility
leaving a remaining principal balance at May 31, 1999 of $3,122,800.
In March 1995, the Company refinanced its remaining Deutsche Mark debt
with the proceeds of a note payable, and entered into an interest rate swap
agreement with a U.S. bank (see Note 4 to the Consolidated Financial
Statements). The note, which initially matured September 1998, has been extended
to September 2000 while the interest rate swap agreement expired September 1998.
At May 31, 1999, the outstanding balance of the note payable was $799,200.
During fiscal 1999 and 1998, the Company repaid $603,500 and $835,500,
respectively.
The Company's Italian and Spanish subsidiaries had approximately
$662,000 in borrowings under a line of credit as of May 31, 1999, with an
additional $1.9 million available.
On August 11, 1999, the Company signed an amendment to its lease for
the expansion of the facilities in the U.S. which will provide an additional
13,500 square feet of office and warehouse space. The Company plans to spend
approximately $250,000 related to the expansion. During fiscal 1999, the Company
spent approximately $750,000 to complete the expansion into an additional 6,000
square feet of laboratory, training facilities and office space and renovate its
Norcross manufacturing facility. Also, during fiscal 1999 the Company entered
into a capital lease related to the purchase and implementation of an
enterprise-wide software system with a cost of $435,400 (see Note 4 to the
Consolidated Financial Statements).
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.
(b) Results of Operations
Comparison of Years Ended May 31, 1999 and May 31, 1998
Net Sales
Net sales increased from $39,790,000 in fiscal 1998 to $59,525,000 in
fiscal 1999. Net sales from the operations of companies acquired during the year
accounted for $13,267,000 of the sales increase (Gamma acquired October 1998 of
$11,425,000, Medichim and Immunochim acquired March 15, 1999 of $1,359,000, and
BCA, a division of Biopool, acquired in April 1999 of $483,000). (See Liquidity
and Capital Resources). The remaining sales increase was caused by higher sales
in the U.S. of the Company's blood bank automation products and reagent products
used with automation. The Company's European operations increased sales by
$4,171,000, of which $2,536,000 was a result of the Company's acquisitions. The
increase was primarily due to reagents used with blood bank automation.
Gross profit
As a percent of sales revenue, the gross profit margin remained
constant at 54%. Instrumentation sales of approximately $6,400,000 at lower
gross profit margins were offset by increased reagent sales at higher gross
profit margins.
Operating expenses
When compared to the prior year, research and development costs
increased $323,000 with $308,000 year-to-date additional research expense
resulting from the acquisition of Gamma (see Liquidity and Capital Resources).
Selling and marketing expenses for the year increased $3,357,000 as
compared to last fiscal year. Part of the increase was due to acquisitions:
Gamma had $1,391,000 and Medichim and Immunochim had $152,000. 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,
increased expenses for the launch of the ABS2000, and expansion of the Company's
Spanish operations.
Distribution expenses increased $1,285,000 when compared to last fiscal
year of which Gamma accounts for $741,000. The remaining increase relates to
increased shipping activity.
General and administrative expenses increased $1,750,000 over the
previous year, with additional expenses of $674,000 resulting from the purchase
of Gamma and the remainder due to higher expenses as we expand operations
worldwide.
Merger-related expenses are one-time expenses related to the Gamma and
BCA acquisitions.
Amortization Expense
Amortization expense increased $503,000 due to the Company's
acquisition of Gamma, BCA, Medichim, Immunochim, and the Canadian distribution
rights.
Interest Income
Interest income decreased $476,000 for the year due to lower cash
balances as compared to last year caused by the Company's stock repurchases and
acquisitions of Gamma Biologicals, Inc., Medichim and Immunochim, and BCA which
were partially funded by the use of the Company's cash. (See Liquidity and
Capital Resources).
Interest Expense
Interest expense increased from $616,000 in fiscal 1998 to $1,416,000
in fiscal 1999 as a result of the financing of the acquisitions of Gamma,
Medichim and Immunochim, and BCA. The increase was partially offset by the
Company reducing its outstanding principal loan balance in Germany and Canada.
(See Liquidity and Capital Resources).
Other income(expense)
The increase in other income of $229,000 as compared to last year was
caused by reduced foreign currency transaction losses recorded in Europe.
Income Taxes
As a percent of pretax income, the provision for income taxes decreased
in fiscal 1999 from 47% to 34%. Lower taxes have been provided in Germany as
compared to the prior year as a result of the company's ongoing implementation
of tax planning strategies. Additionally, the Company reduced its deferred tax
valuation allowance due to the increased viability of anticipated future taxable
income in Italy combined with certain tax planning strategies.
Comparison of Years Ended May 31, 1998 and May 31, 1997
Net Sales
Net sales increased from $35,653,000 in fiscal 1997 to $39,790,000 in
fiscal 1998. Net sales from the operations of Dominion Biologicals Limited
acquired December 1996 accounted for $2,503,000 of the sales increase. (See
Liquidity and Capital Resources). The remaining sales increase was caused by
higher sales in the U.S. of the Company's blood bank automation products and
reagent products used with automation. The Company's European operations
increased sales in local currencies by 3%; however, unfavorable exchange rates
caused a 2% decline when translated into U.S. dollars.
Gross profit
As a percent of sales revenue, gross profit margin declined from 58% to
54%. This decline was primarily due to the Company's efforts to emphasize longer
term market share growth by focusing efforts on large national accounts which
demand lower product pricing due to increased purchasing volume, combined with
higher manufacturing costs which could not be passed on to customers in the form
of higher prices given current competitive market conditions. Other contributing
factors included unfavorable foreign exchange rates in Europe and U.S. sales of
the DIAS PLUS and IMAGN(R) 2000 which are sold at lower margins than the
Company's proprietary products.
Operating expenses
Selling, general and administrative expenses increased $335,000 over
the previous year. Dominion Biologicals Limited acquired in December 1996
accounted for $612,000 of increased selling, general and administrative costs.
This increase was offset by savings in Europe which are partially attributable
to the effect of unfavorable exchange rates. In the U.S., increases in selling,
general and administrative expenses over the prior year of $259,000 were caused
primarily by costs related to the Company's instrument programs.
Interest expense
Interest expense increased from $486,000 in fiscal 1997 to $616,000 in
fiscal 1998 as a result of the financing of the acquisition of Dominion
Biologicals Limited. The increase was partially offset by the Company reducing
its outstanding principal loan balance in Germany. See Liquidity and Capital
Resources.
Other income(expense)
The decrease in other expense of $236,000 as compared to last year was
caused by reduced foreign currency transaction losses recorded in Europe.
Income Taxes
As a percent of pretax income, the provision for income taxes increased
in fiscal 1998 from 41% to 47%, principally due to the earnings of Dominion
Biologicals Limited being subject to a higher income tax rate in Canada than the
U.S. tax rate. In addition, the provision increased because of the need to
provide for income taxes on increased profits in Germany, which are also taxed
at higher rates than income in the U.S.
(c) Impact of 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 September 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 autumn of 1999. In North America, since the Company had already planned to
implement a new enterprise wide internal business information software system
beginning in September 1999, the need to make software changes to the existing
system are for the most part not required. The Company has entered into an
agreement with a major software provider for an enterprise wide business
software system that is year 2000 compliant. The Company installed the software
in March 1999, and the remainder of the implementation plan is to test and
modify by November 1999 and be operating by December 31, 1999. The Company is
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 and is in the process of making program
modifications to the existing internal business software, which the Company
estimates will be completed by October 1999 at a cost of approximately $20,000,
which will be expensed as incurred. Other related 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.
(d) Impact of Recently Issued Accounting Standards
In June 1997, the FASB issued Statement No. 130, Reporting
Comprehensive Income. Statement 130 establishes new standards for the reporting
and display of comprehensive income and its components 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 for the fiscal year ended May 31,
1999, which had no significant impact on the consolidated financial statements.
In April 1998, the American Institute of Certified Public Accountants
(AICPA) issued SOP 98-5, "Reporting Costs of Start-Up Activities". This
statement establishes accounting and reporting standards for start-up costs and
organization costs. This SOP is effective for fiscal years beginning after
December 15, 1998. The adoption of SOP 98-5 will not have a significant impact
on the Company's consolidated financial statements.
In June 1997, the FASB issued Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information. Statement 131 changes the way
public companies report segment information in annual financial statements and
also requires those companies to report selected segment information in interim
financial reports. The Company has adopted Statement 131, and the effect of
adoption had no impact on the Company's consolidated financial statements.
In June 1998, the FASB issued Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities. Statement 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. Statement 133, as amended by Statement 137, is effective for fiscal
quarters of fiscal years beginning after June 15, 2000. The adoption of
Statement 133, as amended by Statement 137, will not have a significant impact
on the Company's consolidated financial statements.
(e) Effects of Inflation on Operations
Since the rate of inflation has slowed during the past few years, raw
material prices for the Company's products have not materially increased. The
Company believes that any increase in personnel-related expenses or material
costs would also be experienced by others in the industry.
Item 7A.--Quantitative and Qualitative Disclosures About Market Risk
Market Risk. The Company is exposed to various market risks, including
changes in foreign currency exchange rates and interest rates which could
adversely impact its results of operations and financial condition. To manage
the volatility relating to these typical business exposures, the Company may
enter into various derivative transactions when appropriate. We do not hold or
issue derivative instruments for trading or other speculative purposes.
Interest Rate Risk. Interest rate swap agreements are entered into with
the objective of managing exposure to interest rate changes. We have entered
into interest rate swaps to effectively convert a portion of our variable rate
bank debt into fixed rates. At May 31, 1999 the Company had interest rate swap
agreements, maturing in 2001 and 2005, with an aggregate notional principal
amount of $17.4 million. The fair value of the interest rate swap agreements
represent the estimated receipts or payments that would be made to terminate the
agreements. At May 31, 1999 the Company would have received $606,500 to
terminate the agreements. See - Note 4 to the Company's Consolidated Financial
Statements.
Foreign Currency. Operating income being generated outside the United
States was 54% in 1999, 79% in 1998 and 73% in 1997. Fluctuations in foreign
exchange rates could impact operating results when translations of our
subsidiaries' financial statements are made in accordance with current
accounting guidelines. It has not been the Company's practice to actively hedge
its foreign subsidiaries' assets or liabilities denominated in local currency
except for the occasional purchase of forward exchange contracts. Most of the
foreign currency exposures are managed locally by our foreign subsidiaries
through the hedging of purchase commitments with the advance purchase of the
required non-functional currencies. However, the Company believes that over time
weaknesses in one particular currency are offset by strengths in others. In
1999, 1998, and 1997 the Company recorded foreign currency transaction gains
(losses) of approximately $202,000, $(27,400), and $(263,700), respectively.
Item 8.--Financial Statements and Supplementary Data.
The following consolidated financial statements of the Company are
included under this item:
-Report of Independent Auditors
-Consolidated Balance Sheets, May 31, 1999 and 1998
-Consolidated Statements of Income for the Years Ended May 31, 1999,
1998 and 1997
-Consolidated Statements of Shareholders' Equity for the Years Ended
May 31, 1999, 1998 and 1997
-Consolidated Statements of Cash Flows for the Years Ended May 31, 1999,
1998 and 1997
-Notes to Consolidated Financial Statements
-Consolidated Financial Statement Schedule
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
of Immucor, Inc.:
We have audited the accompanying consolidated balance sheets of Immucor, Inc. as
of May 31, 1999 and 1998 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended May 31, 1999. Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Immucor, Inc. at May 31, 1999 and 1998, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
May 31, 1999, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
Ernst & Young LLP
Atlanta, Georgia
July 21, 1999, except for paragraph 7 of Note 4 as to which
the date is August 24, 1999 and
paragraph 5 of Note 5 as to which
the date is August 9, 1999
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
[Enlarge/Download Table]
May 31,
------------------------------------------
ASSETS 1999 1998
CURRENT ASSETS:
Cash and cash equivalents $ 2,793,592 $15,816,217
Accounts receivable, trade (less allowance for doubtful accounts of $804,470 in
1999 and $502,372 in 1998) 21,573,846 12,214,270
Accounts receivable from former officer and director 140,946 695,430
Inventories 16,065,190 8,462,850
Income tax receivable 553,451 95,166
Deferred income taxes 907,530 370,029
Prepaid expenses and other 1,587,817 447,661
-------------------- --------------------
Total current assets 43,622,372 38,101,623
LONG-TERM INVESTMENT - At cost 1,000,000 1,000,000
PROPERTY, PLANT AND EQUIPMENT - Net 15,126,162 6,018,792
DEFERRED INCOME TAXES 1,108,279 -
OTHER ASSETS - Net 2,934,409 801,779
DEFERRED LICENSING COSTS - Net 2,307,837 -
EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED - Net 33,634,458 11,622,082
-------------------- --------------------
$99,733,517 $57,544,276
==================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(continued)
[Enlarge/Download Table]
May 31,
-------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
CURRENT LIABILITIES:
Current portion of borrowings under bank line of credit agreements $ 1,619,312 $ 359,325
Current portion of long-term debt 5,000,062 -
Note payable to related party 1,637,495 -
Current portion of capital lease obligations 194,476 -
Accounts payable 10,039,489 3,069,973
Income taxes payable 27,739 359,598
Accrued salaries and wages 1,125,216 862,550
Deferred income taxes 118,280 -
Other accrued liabilities 2,719,496 501,739
--------------------- --------------------
Total current liabilities 22,481,565 5,153,185
Borrowings under bank line of credit agreements 8,052,917 -
Long-term debt 22,694,938 7,255,126
Note payable to related party - 1,656,601
Capital lease obligations 800,117 -
Deferred income taxes 3,024,550 1,046,814
Other liabilities 2,626,763 -
SHAREHOLDERS' EQUITY:
Common stock - authorized 30,000,000 shares, $.10 par value; issued and
outstanding 7,488,411 in 1999 and 8,078,811 in 1998 748,841 807,881
Additional paid-in capital 16,945,885 22,079,468
Retained earnings 25,498,721 21,937,697
Accumulated other comprehensive loss (3,140,780) (2,392,496)
--------------------- --------------------
Total shareholders' equity 40,052,667 42,432,550
--------------------- --------------------
$99,733,517 $57,544,276
===================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
[Enlarge/Download Table]
Year Ended May 31,
-----------------------------------------------------------------
1999 1998 1997
NET SALES $59,524,539 $39,790,434 $35,653,617
COST OF SALES 27,550,548 18,167,840 15,055,254
-------------------- -------------------- ---------------------
GROSS PROFIT 31,973,991 21,622,594 20,598,363
OPERATING EXPENSES:
Research and development 1,293,576 970,924 907,141
Selling and marketing 10,612,516 7,255,579 6,727,431
Distribution 3,648,456 2,363,293 2,434,073
General and administrative 8,460,525 6,710,838 7,035,975
Merger-related expenses 558,973 - -
Amortization expense 1,091,278 588,555 449,982
-------------------- -------------------- ---------------------
25,665,324 17,889,189 17,554,602
-------------------- -------------------- ---------------------
INCOME FROM OPERATIONS 6,308,667 3,733,405 3,043,761
OTHER:
Interest income 313,219 788,870 847,916
Interest expense (1,416,179) (615,705) (485,799)
Other 202,093 (27,381) (263,674)
-------------------- -------------------- ---------------------
(900,867) 145,784 98,443
-------------------- -------------------- ---------------------
INCOME BEFORE INCOME TAXES 5,407,800 3,879,189 3,142,204
INCOME TAXES 1,846,776 1,810,416 1,302,290
-------------------- -------------------- ---------------------
NET INCOME $ 3,561,024 $ 2,068,773 $ 1,839,914
==================== ==================== =====================
INCOME PER SHARE
Basic
$ .47 $ .26 $ .23
==================== ==================== ====================
Diluted
$ .45 $ .25 $ .22
==================== ==================== =====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
[Enlarge/Download Table]
Accumulated
Additional Other Total
Common Stock Paid-In Retained Comprehensive Shareholders'
-----------------------------
Shares Amount Capital Earnings Loss Equity
------------- ------------- -------------- -------------- ----------------- --------------
BALANCE, JUNE 1, 1996 8,054,380 $ 805,438 $ 21,485,849 $ 18,029,010 $ (975,047) $ 39,345,250
Exercise of stock options 24,357 2,435 114,217 116,652
Issuance of warrants 800,000 800,000
Tax benefits related to stock options 102,864 102,864
Comprehensive income:
Foreign currency translation
adjustment (983,812) (983,812)
Net income 1,839,914 1,839,914
-------------- ----------------- -------------
Total comprehensive income 1,839,914 (983,812) 856,102
------------- ------------- -------------- -------------- ----------------- --------------
BALANCE, MAY 31, 1997 8,078,737 807,873 22,502,930 19,868,924 (1,958,859) 41,220,868
Exercise of stock options 119,774 11,978 602,419 614,397
Tax benefits related to stock options 177,551 177,551
Exchange of stock for cancellation of
non-compete agreement (16,500) (1,650) (336,369) (338,019)
Stock repurchase (103,200) (10,320) (867,063) (877,383)
Comprehensive income:
Foreign currency translation
adjustment (433,637) (433,637)
Net income 2,068,773 2,068,773
-------------- ----------------- --------------
Total comprehensive income 2,068,773 (433,637) 1,635,136
------------- ------------- -------------- -------------- ----------------- --------------
BALANCE, MAY 31, 1998 8,078,811 807,881 22,079,468 21,937,697 (2,392,496) 42,432,550
Exercise of stock options and warrants 232,400 23,240 1,661,232 1,684,472
Tax benefits related to stock options 188,855 188,855
Issuance of warrants 310,000 310,000
Stock repurchase (822,800) (82,280) (7,293,670) (7,375,950)
Comprehensive income:
Foreign currency translation
adjustment (748,284) (748,284)
Net income 3,561,024 3,561,024
------------- ------------- --------------
-------------- ----------------- -------------
Total comprehensive income 3,561,024 (748,284) 2,812,740
-------------- ----------------- -------------
BALANCE, MAY 31, 1999 7,488,411 $ 748,841 $16,945,885 $25,498,721 $(3,140,780) $40,052,667
============= ============= ============== ============== ================= ==============
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
[Enlarge/Download Table]
Year Ended May 31,
-----------------------------------------------------
1999 1998 1997
OPERATING ACTIVITIES:
Net income $3,561,024 $2,068,773 $1,839,914
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of property and equipment 2,215,848 1,392,534 1,198,699
Amortization of other assets and excess of cost over net
tangible assets acquired 1,091,278 588,555 449,982
Deferred tax provision 225,045 481,340 276,002
Changes in assets and liabilities:
Accounts receivable, trade (2,382,232) (1,147,751) (1,347,699)
Accounts receivable from former officer and director 554,484 913,570 (1,609,000)
Income taxes (34,608) 88,433 442,315
Inventories (2,749,627) (800,086) (1,241,278)
Other current assets (767,083) 146,934 31,559
Accounts payable 2,383,200 (66,145) 343,539
Other current liabilities 1,887,806 117,154 126,101
---------------- ----------------- ----------------
Total adjustments 2,424,111 1,714,538 (1,329,780)
---------------- ----------------- ----------------
Cash provided by operating activities 5,985,135 3,783,311 510,134
INVESTING ACTIVITIES:
Purchases of / deposits on property and equipment (2,993,638) (1,506,005) (2,930,330)
Cash paid for acquisition, net of cash acquired (32,571,040) - (4,366,734)
Acquisition-related severance (2,387,449) - -
Increase in other assets (3,280,765) (35,014) (481,715)
---------------- ----------------- ----------------
Cash used in investing activities $(41,232,892) $(1,541,019) $(7,778,779)
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
[Enlarge/Download Table]
Year Ended May 31,
-------------------------------------------------------------
1999 1998 1997
FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit agreements $ 5,379,103 $ (86,363) $ (57,367)
Proceeds from issuance of long term debt and capital lease 24,566,514 - 4,228,163
obligations
Repayment of long-term debt and capital lease obligations (1,737,409) (1,246,185) (1,300,293)
Exercise of stock options 1,684,472 614,397 116,652
Stock repurchases (7,375,950) (877,383) -
------------------- ------------------- -------------------
Cash provided by (used in) financing activities 22,516,730 (1,595,534) 2,987,155
EFFECT OF EXCHANGE RATE CHANGES ON CASH (291,598) (548,775) (533,698)
------------------- ------------------- -------------------
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS (13,022,625) 97,983 (4,815,188)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 15,816,217 15,718,234 20,533,422
------------------- ------------------- -------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $2,793,592 $15,816,217 $15,718,234
=================== =================== ===================
Noncash investing and financing activities:
Exchange of stock for cancellation of non-compete agreement $ - $ 338,019 $ -
Transfer of equipment deposit to property and equipment - 562,361 -
Capital lease obligations 435,400 - -
Fair value of assets acquired 25,463,127 - 2,234,241
Cost in excess of assets acquired 23,207,232 - 8,119,926
Liabilities assumed (15,789,319) - (959,270)
Notes and warrants / options issued for assets acquired (310,000) - (5,028,163)
=================== =================== ===================
Net cash paid for acquisition, net of cash acquired $ 32,571,040 $ - $ 4,366,734
=================== =================== ===================
CASH PAID DURING THE YEAR FOR:
Interest $ 1,270,147 $ 662,185 $ 325,686
Income taxes 1,459,500 1,143,802 596,492
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business - The Company's principal business activities are the
development, manufacture and marketing of immunological diagnostic medical
products. The Company operates facilities in North America and Europe.
Consolidation Policy - The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications - Certain prior year balances have been reclassified
to conform with the 1998 and 1999 presentation.
Concentration of Credit Risk - At May 31, 1999 the Company's entire cash
balance of $2,793,592 was on deposit with high quality U.S. financial
institutions. At May 31, 1998 approximately $2,467,000 of the Company's
cash balance was on deposit with high quality U.S. financial institutions
and $11,478,000 was invested in "AAA" rated municipal bonds and money
market funds.
The Company obtains raw materials from numerous outside suppliers. The
Company is not dependent on any single supplier other than certain
instrumentation manufacturers (see Note 12) and the joint manufacturer of
some of the Company's monoclonal antibody-based products. The Company
believes that its business relationship with suppliers is excellent.
Certain of the Company's products are derived from blood having particular
or rare combinations of antibodies and antigens which are found in a
limited number of individuals. The Company to date has not experienced any
major difficulty in obtaining sufficient quantities of such blood for use
in manufacturing its products, but there can be no assurance that the
Company will always have available to it a sufficient supply of such blood.
The Company generally does not require collateral from its customers.
Cash and Cash Equivalents - The Company considers all highly liquid
investments with an original maturity of three months or less when
purchased to be cash and cash equivalents.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation at each balance sheet
date. Available for sale securities are carried at fair value, with
unrealized gains and losses reported in a separate component of
stockholders' equity. Realized gains and losses are included in investment
income and are determined on a first-in, first-out basis.
At May 31, 1999 and 1998, the Company held $0 and $11,478,000,
respectively, in municipal bonds, overnight Eurodollar investments and
money market funds. All investments were classified as available for sale
as of May 31, 1998. The carrying amounts reported in the balance sheets for
cash and cash equivalents approximate their fair values.
Inventories - Inventories are stated at the lower of first-in, first-out
cost or market. Cost includes material, labor and manufacturing overhead.
Long-Term Investment - The long-term investment, representing a 3.4% Common
Stock investment in Lionheart Technologies, Inc., acquired in April 1992,
is accounted for using the cost method of accounting. Bio-Tek Instruments,
Inc. (see Note 12), is a wholly owned subsidiary of Lionheart Technologies,
Inc.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost less accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated lives of the related assets ranging
from three to 30 years.
Interest Rate Swap - The Company uses interest rate swaps to hedge interest
rate risk associated with its borrowings. Any differences paid or received
on interest rate swap agreements are recognized as adjustments to interest
expense over the life of each swap, thereby adjusting the effective
interest rate on the underlying obligation. The Company has established
strict counterparty credit guidelines and only enters into transactions
with financial institutions of investment grade or better. As a result, the
Company estimates the risk of counterparty default to be minimal.
Fair Value of Financial Instruments - The carrying amounts reported in the
consolidated balance sheets for cash and cash equivalents, accounts
receivable, long-term investment and accounts payable approximate their
fair values. The fair values of the Company's long-term debt approximate
the reported amounts in the accompanying consolidated balance sheets as
their interest rates approximate the May 31, 1999 and 1998 market rates for
similar debt instruments.
Intangible Assets
Deferred Licensing Costs - Deferred licensing costs primarily consist of
distribution rights for the Company's complete line of reagents purchased
from its Canadian distributor, Immucor Canada, Inc., on September 1, 1998,
which are being amortized using the straight-line method over ten years.
The remaining balance is attributed to license fees acquired in the
purchase of Gamma Biologicals, Inc. Once a product is developed, the
related license fee is amortized over the term of the respective agreement,
generally five years. Accumulated amortization related to deferred
licensing costs at May 31, 1999 and 1998 was $159,400 and $0, respectively.
Excess of Cost Over Net Assets Acquired - Excess of cost over net assets
acquired comprises the cost of purchased businesses in excess of values
assigned to net tangible assets received, and is being amortized using the
straight-line method over 20 to 30 years. Accumulated amortization at May
31, 1999 and 1998 was $2,937,600 and $2,214,000, respectively.
The Company evaluates long-lived assets for impairment when events and
circumstances indicate that the assets might be impaired and records an
impairment loss if the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amount of those assets. The
impairment loss recognized is equal to the difference between the
discounted cash flows and the carrying amount of the assets. The Company
believes that the carrying value of recorded intangibles is not impaired.
Foreign Currency Translation - The financial statements of foreign
subsidiaries have been translated into U.S. dollars in accordance with FASB
Statement No. 52, Foreign Currency Translation. All balance sheet accounts
have been translated using the exchange rates in effect at the balance
sheet dates. Income statement amounts have been translated using the
average exchange rates for each year. The gains and losses resulting from
the changes in exchange rates from year to year have been reported
separately as a component of comprehensive income. The effect of foreign
currency transaction gains and losses has been recorded in the accompanying
statements of income.
Revenue Recognition - Revenue from the sale of the Company's reagents is
recognized upon shipment, and revenue from the sale of the Company's
medical instruments is recognized based on the terms of the related
agreement (i.e. F.O.B. shipping point or installation and customer
acceptance).
Stock Based Compensation - The Company grants stock options for a fixed
number of shares to employees with an exercise price equal to the fair
value of the shares at the date of the grant. The Company accounts for
stock option grants in accordance with APB Opinion No. 25, Accounting for
Stock Issued to Employees, and accordingly does not recognize compensation
expense for the stock option grants. As required by FASB Statement No. 123,
Accounting for Stock-Based Compensation, the Company presents supplemental
information disclosing pro forma net income and net income per common share
as if the Company had recognized compensation expense on stock options
granted subsequent to December 31, 1994 under the fair value method of that
statement (see Note 7 of Notes to Consolidated Financial Statements).
Earnings per Share - In 1997, the FASB issued Statement No. 128, Earnings
per Share, changing the calculation and presentation of 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.
Impact of Recently Issued Accounting Standards - In June 1997, the FASB
issued Statement No. 130, Reporting Comprehensive Income, which establishes
new standards for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The
Company adopted Statement 130 for the fiscal year ended May 31, 1999, which
had no significant impact on the consolidated financial statements.
In June 1997, the FASB issued Statement No. 131, Disclosures About Segments
of an Enterprise and Related Information. Statement 131 changes the way
public companies report segment information in annual financial statements
and also requires those companies to report selected segment information in
interim financial reports. The Company has adopted Statement 131, and the
effect of adoption had no impact on the Company's consolidated financial
statements.
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. Statement 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Statement 133 is effective for fiscal quarters of fiscal years
beginning after June 15, 2000. The adoption of Statement 133, as amended by
Statement 137, is not expected to have a significant impact on the
Company's consolidated financial statements.
2. BALANCE SHEET DETAIL
May 31,
-----------------------------------
1999 1998
Inventories:
Raw materials and supplies $ 3,856,309 $ 2,668,444
Work in process 967,889 762,475
Finished goods and
goods purchased for resale 11,240,992 5,031,931
---------------- ----------------
$ 16,065,190 $ 8,462,850
================ ================
Property, Plant and Equipment:
Land $ 351,111 $ 44,612
Buildings and improvements 6,016,144 544,726
Leasehold improvements 749,738 926,894
Furniture and fixtures 1,407,133 873,447
Machinery and equipment 11,671,032 8,116,087
---------------- ----------------
20,195,158 10,505,766
Less accumulated depreciation (5,068,996) (4,486,974)
---------------- ----------------
Property and equipment - net $ 15,126,162 $ 6,018,792
================ ================
3. ACQUISITIONS
Gamma Biologicals, Inc.
Pursuant to a definitive merger agreement dated September 21, 1998, the
Company, through a newly formed subsidiary ("Gamma Acquisition
Corporation"), acquired on October 27, 1998 94.27% of the issued and
outstanding shares of Gamma Biologicals, Inc. ("Gamma"). The Company
purchased the shares from Gamma shareholders ("Shareholders") for a cash
tender offer of $5.40 per share for a total transaction value of
$24,831,841 plus acquisition costs of $2,516,875 for an aggregate of
$27,348,716 ("Purchase Price"), subject to certain adjustments. According
to the depository for the offer, 4,361,110 shares were tendered pursuant to
the offer and Immucor purchased all shares tendered. On October 30, 1998
all remaining shares were acquired by merging Gamma Acquisition Corporation
with and into Gamma which became a majority owned subsidiary of Immucor. As
a result of the merger, the 5.73% of the shares that had not been tendered
were cancelled and converted into a right to receive $5.40 per share. As of
May 31, 1999 Immucor had purchased or satisfied its obligation to pay $5.40
per share with respect to a total of 4,598,489 (99.4%) of the issued and
outstanding shares of Gamma. The total transaction value of $24,831,841 was
satisfied with $5,000,000 paid in cash and $19,831,841 funded by a
$20,000,000 loan from the Company's primary U.S. bank to Gamma Acquisition
Corporation. Included in the liabilities assumed was an accrual for
severance payments of $2,474,000 to Gamma employees of which $2,387,000 was
paid prior to May 31, 1999.
Located in Houston, Texas, Gamma manufactures and sells a wide variety of
in-vitro diagnostic reagents to blood donation centers, transfusion
departments of hospitals, medical laboratories and research institutions
through a direct sales force and distributor network. The Company accounted
for the transaction as a purchase business combination. The results of the
operations of Gamma since October 27, 1998 are included in the 1999
Consolidated Statement of Income. The excess of costs over net assets
acquired, including goodwill and customer lists, is being amortized using
the straight-line method over the related assets' useful life ranging from
20 to 30 years.
The preliminary purchase price allocation, which is subject to adjustment
when certain appraisals are completed, is as follows:
Current assets $ 9,832,812
Property, plant and equipment, net 7,535,909
Other assets 3,236,819
Excess of costs over net assets acquired 17,555,799
Less: Liabilities assumed (10,812,623)
----------------
$27,348,716
================
Medichim, S.A. and Immunochim, s.a.r.l.
On March 15, 1999, the Company, through a newly formed subsidiary ("Immucor
Acquisitions Inc., S.A."), acquired the available issued and outstanding
shares of Immunochim s.a.r.l. (France) ("Immunochim) and Medichim S.A.
(Belgium) ("Medichim") for a cash payment of $990,000, Company stock
options valued at $310,000, acquisition costs of $105,719 and an incentive
earnout of up to $501,000, which is earned over the course of three years
from the acquisition date based on attaining certain operating profit
goals, as defined. Amounts earned, if any, will be reflected as
compensation expense in the Statement of Income. In conjunction with the
acquisition, a non-compete agreement and intellectual property rights were
purchased for $100,000 and $257,148, respectively. Such amounts are being
amortized over the terms of the related agreements and are classified as
other assets.
The acquisition was accounted for as a purchase business combination. The
results of the operations of Medichim and Immunochim since March 15, 1999
are included in the 1999 Consolidated Statement of Income. Excess of costs
over net assets acquired is being amortized using the straight-line method
over 25 years.
The purchase price allocation subject to certain adjustments is as follows:
Fair value of assets acquired $ 3,695,751
Excess of costs over net assets acquired 2,738,316
Less: Liabilities assumed (4,671,200)
---------------
$ 1,762,867
===============
BCA
On April 30, 1999, the Company acquired certain assets of the BCA blood
bank division of Biopool International, Inc. ("BCA") for a total purchase
price of approximately $4.5 million. The purchase price is subject to
adjustments for accounts receivable acquired by the Company but not
collected by October 30, 1999.
The acquisition was accounted for as a purchase business combination. The
results of the operations of BCA since April 30, 1999 are included in the
1999 Consolidated Statement of Income. Excess of costs over net assets
acquired, is being amortized using the straight-line method over 20 years.
The preliminary purchase price allocation, which is subject to adjustments
for accounts receivable, is as follows:
Fair value of assets acquired $ 1,851,000
Excess of costs over net assets acquired 2,913,117
Less: Liabilities assumed (305,496)
---------------
$ 4,458,621
===============
The pro forma unaudited results of operations for the year ended May 31,
1999 and May 31, 1998, assuming consummation of all of the above purchases
as of June 1, 1997, including financing from the proceeds of a bank loan
and ignoring any cost-saving initiatives are presented below:
Year Ended Year Ended
May 31, 1999 May 31, 1998
-------------------- -------------------
Net sales $75,214,000 $69,326,000
Net income 2,484,000 2,857,000
Net income per common share:
Basic .32 .35
Diluted .31 .34
4. BANK LINE OF CREDIT AGREEMENTS, DEBT AND CAPITAL LEASE OBLIGATIONS
Bank Line of Credit Agreements and Long-term Debt
The Company's Italian subsidiary has $1,605,000 in line of credit
agreements denominated in Lira with three Italian and one Spanish bank
bearing interest between 8.5% and 14.5%. The Company's Spanish subsidiary
has an additional $1,000,000 line of credit agreement denominated in
Pesetas with a Spanish bank bearing interest at 8.5%. This line of credit
is guaranteed by a letter of credit in the amount of $1 million with the
Company's primary U.S. bank. Outstanding borrowings were $662,000 and
$268,000 under these lines at May 31, 1999 and 1998, respectively. Such
lines mature in fiscal 2000 and are guaranteed by the Company. At May 31,
1999, the Company had $1,943,000 available under these line of credit
agreements.
In connection with the acquisition of Dominion Biologicals Limited in
December 1996, the Company entered into a $4,566,200 long-term revolving
line of credit facility with the Company's primary U.S. bank maturing
December 2001 and bearing interest at LIBOR plus .4375%. The Company
simultaneously entered into an interest rate swap agreement with a notional
amount of $2,374,600, also maturing December 2001. This transaction
effectively converts the revolver's floating rate to a fixed rate of
6.6375% on the principal balance of $2,374,600. At May 31, 1999, the
outstanding balance of the line of credit facility was $3,122,800. The
interest rate on the remaining principal balance of $678,400 is LIBOR plus
.4375%, which was 5.3125% at May 31, 1999, and is adjusted every 90 days.
The Company also issued subordinated promissory notes to the former
shareholders of Dominion totaling $4,228,200, bearing interest at 6%
payable semiannually with principal due in December 1999. The outstanding
balance of the subordinated promissory notes was $3,894,800 and $3,941,200
at May 31, 1999 and 1998, respectively (including $1,637,500 and $1,656,600
at May 31, 1999 and 1998, respectively owed to a related party). The fair
value of the interest rate swap agreement is $278,500 at May 31, 1999.
In March 1995, the Company refinanced its Deutsche Mark denominated debt
through the issuance of a note payable to the Company's primary U.S. bank
in Deutsche Marks, which initially matured September 1998 and has been
extended to September 2000 with interest of LIBOR plus .375%. At the same
time, the Company entered into an interest rate swap agreement with the
bank which expired September 1998, which effectively converted the note
payable's floating rate to a fixed rate of 6.915% per annum up to September
1998. At May 31, 1999 and 1998, the outstanding balance of the note payable
was $799,200 and $1,402,700, respectively, which 1998 amount corresponded
to the notional amount of the interest rate swap agreement.
In connection with the acquisition of Gamma in October 1998, and the
subsequent acquisitions of Medichim, Immunochim and BCA, the Company
entered into a bank loan agreement (the "Loan Agreement") with the
Company's primary U.S. bank including an acquisition term note of
$20,000,000 maturing in December 2005, an additional term loan of
$4,500,000 maturing in March 2004 and a line of credit of $2,000,000
maturing in October 2001. On November 4, 1998, the Company entered into an
interest rate swap agreement with an effective date of December 1, 1998,
for a notional amount of $15,000,000, also maturing December 2005. This
transaction effectively converts the acquisition term note's floating rate
to a fixed rate of 5.33% on the principal balance of $15,000,000. On April
30, 1999 the line of credit for $2,000,000 was canceled and a new line of
credit was executed for $5,000,000. These borrowings, other than the
interest rate swap notional amount, bear interest rates at LIBOR plus
additional percentage points ranging from .5% to 1.4% based on certain
calculations as defined in the Loan Agreement. At May 31, 1999 the interest
rates ranged from 6.2% to 8.0% on the Company's borrowings. Debt issue
costs of $56,250 for advisory fees were paid to an investment banker in
conjunction with the acquisition of Gamma. These debt issue costs have been
deferred and are being amortized over the life of the Loan Agreement. At
May 31, 1999, the outstanding balance of the acquisition term note was
$19,625,000, the additional term loan was $4,500,000 and the line of credit
was $5,000,000. The fair value of the interest rate swap agreement was
$328,000 at May 31, 1999.
When the Company acquired Gamma, it assumed a mortgage note which is
collateralized by a first lien on the Gamma Biologicals' land and building
located in northwest Houston. The mortgage note, which matures in November
2000, bears interest at the bank's base rate, but not less than 7% nor more
than 13%. At May 31, 1999, the note bore interest at 8.75% and the
outstanding balance was $145,300.
Upon the acquisition of Medichim, the Company assumed a mortgage note which
is collateralized by a first lien on Medichim's land and building. The
mortgage note, which matures in November 2007, bears interest at 6.15%. At
May 31, 1999, the outstanding balance was $280,000. Medichim has various
notes payable with a local bank bearing interest between 3.2% and 4.4% with
a total outstanding balance at May 31, 1999 of $88,000. Medichim also has
$1,164,600 in line of credit agreements denominated in Belgian Francs with
one Belgian bank bearing interest at rates ranging from 6.56% to 8.50%.
Outstanding borrowings were $887,700 under these lines at May 31, 1999.
Such lines mature in fiscal 2000 and are guaranteed by the Company. At May
31, 1999, the Company had $276,900 available under these line of credit
agreements.
The Loan Agreement, Dominion revolving line of credit and Deutsche Mark
note payable are guaranteed by the Company and require the maintenance of
certain income and other financial ratios, and place certain limited
restrictions on the Company's ability to acquire other entities. The
Company was not in compliance with certain covenants as of May 31, 1999 but
obtained appropriate waivers and amended its loan agreement with the U.S.
bank effective August 24, 1999. The interest rate swap agreements with the
U.S. bank are guaranteed by the Company. In addition, the Company has
pledged 66% of the shares of stock of the Company's subsidiaries, whereby,
in the event of default, the bank would gain control of the shares' voting
rights.
Capital lease obligations
The Company assumed a capital lease obligation with the acquisition of
Gamma for a filling and sealing machine for ReACT strips which bears
interest at 8.82% and matures in April 2003. At May 31, 1999, the
outstanding balance was $588,500. The net book value of the asset and
accumulated amortization were $691,700 and $69,200, respectively at May 31,
1999. The Company entered into another capital lease agreement for its new
enterprise wide resource planning (ERP) computer system which is scheduled
for implementation in December 1999. This obligation bears interest at
8.23% and matures in February 2004. At May 31, 1999, the outstanding
balance of this capital lease was $406,100. The net book value of the asset
was $435,400 at May 31, 1999 and no amortization expense has been
recognized as of May 31, 1999 as the system is not scheduled for
implementation until November 1999.
fties of all long-term obligations, including capital leases, for each of
the next five years and thereafter are as follows:
Year Ending May 31:
2000 $ 8,451,345
2001 4,020,196
2002 12,468,484
2003 4,778,348
2004 4,859,278
Thereafter 5,421,666
===============
$ 39,999,317
===============
5. 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 and $1,311,000 in fiscal 1997. At May 31, 1999 and 1998, the
aggregate amounts outstanding including interest were approximately
$141,000 and $528,000, respectively.
Mr. Wilms and his family granted liens on certain property owned by them in
Germany and Portugal to collateralize the loans from the Company and
Immucor GmbH, and Mr. Wilms has agreed to grant liens on additional
property owned by him and located in the United States.
Mr. Wilms had agreed to pay all amounts borrowed from the Company and
Immucor GmbH, plus interest at 8.25%. Although the loans had not been
repaid by October 31, 1997, the Company agreed to extend the date for
payment of these loans to December 31, 1997 based upon the Company's belief
that Mr. Wilms had been working diligently to liquidate the collateral to
obtain the funds. At December 31, 1997, as Mr. Wilms had not fully repaid
these amounts, the Company began to arrange the sale of some or all of the
collateral to the extent necessary to recover the unpaid balance of the
loan. Since December 31, 1997 and up to May 31, 1999 the Company had
arranged the sale of collateral reducing the debt to approximately
$141,000.
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, have 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.
6. COMMON STOCK
At May 31, 1999, the following shares of Common Stock are reserved for
future issuance:
Common stock options - directors and employees 2,724,761
Common stock warrants - other 889,918
---------
3,614,679
In connection with the acquisition of Medichim, S.A. and Immunochim,
s.a.r.l., the Company issued to the seller an option to acquire, in whole
or in part, 100,000 shares of Immucor stock at $8.938 per share. The
100,000 options become exercisable at the rate of 33% per year commencing
March 2001, expire in fiscal year 2010 and were valued at $310,000 at the
date of the acquisition.
As part of the acquisition of Dominion Biologicals Limited, the Company
issued to the sellers five and ten year warrants to acquire, in whole or in
part, 478,417 and 150,000 shares of Immucor stock at $12.00 and $11.98 per
share, respectively. These warrants became exercisable one year after the
issuance date, with the five-year warrants expiring in 2001 and the
ten-year warrants expiring in 2006. Immucor has submitted the required
registration to the Securities and Exchange Commission for approval of the
resale of the shares covered by both sets of warrants.
In connection with other prior years' business acquisitions, the Company
issued to the sellers warrants to acquire, in whole or in part, 150,000 and
375,000 shares of the Company's Common Stock at $26.95 and $7.75 per share,
respectively. The 150,000 warrants became exercisable at the rate of 20%
per year commencing August 1993, and expire in 2001. At May 31, 1999,
363,499 of the 375,000 warrants had been exercised. The remaining 11,501
warrants are currently exercisable and expire in 2008.
The Company has a Shareholders' Rights Plan under which one Common Stock
purchase right is presently attached to and trades with each outstanding
share of the Company's Common Stock. The rights become exercisable and
transferable apart from the Common Stock ten days after a person or group,
without the Company's consent, acquires beneficial ownership of, or the
right to obtain beneficial ownership of, 20% or more of the Company's
Common Stock or announces or commences a tender offer or exchange offer
that could result in at least 20% ownership. Once exercisable, each right
entitles the holder to purchase one share of the Company's Common Stock at
an exercise price of $16, subject to adjustment to prevent dilution. The
rights have no voting power and, until exercised, no dilutive effect on net
income per common share. The rights expired on April 20, 1999, and are
redeemable at the discretion of the Board of Directors at $.01 each. All
reservations of shares of Common Stock for purposes other than the rights
plan shall take precedence and be superior to any reservation of shares in
connection with or under the rights plan.
If a person or a group acquires at least 20% ownership, except in an offer
approved by the Company under the rights plan, then each right not owned by
the acquirer or related parties will entitle its holder to purchase, at the
right's exercise price, Common Stock or Common Stock equivalents having a
market value immediately prior to the triggering of the right of twice that
exercise price. In addition, after an acquirer obtains at least 20%
ownership, if the Company is involved in certain mergers, business
combinations, or asset sales, each right not owned by the acquirer or
related persons will entitle its holder to purchase, at the right's
exercise price, shares of Common Stock of the other party to the
transaction having a market value immediately prior to the triggering of
the right of twice that exercise price.
7. STOCK OPTIONS
The Company has various stock option plans which authorize the Company's
Compensation Committee to grant employees, officers and directors options
to purchase shares of the Company's Common Stock. Exercise prices of stock
options are determined by the Compensation Committee and have generally
been the fair market value at the date of the grant.
The Company's 1995 Non-Incentive Stock Option Plan authorizes the grant of
options to employees, officers and directors for up to 1,000,000 shares of
the Company's common stock. All options have 10 year terms and vest and
become fully exercisable 50% at the end of 2 years, 25% at the end of 3
years, and 25% at the end of 4 years of continued employment.
The Company's 1998 Non-Incentive Stock Option Plan authorizes the grant of
options to employees, officers and directors for up to 1,000,000 shares of
the Company's common stock. All options have 10 year terms and vest and
become fully exercisable 50% at the end of 2 years, 25% at the end of 3
years, and 25% at the end of 4 years of continued employment.
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No.
123, Accounting for Stock-Based Compensation, requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date
of grant, no compensation is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to June 1, 1995 under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted average assumptions: a risk-free interest rate of 5.34%, 6.22% and
6.36% in fiscal 1999, 1998 and 1997 respectively, no dividend yields; a
volatility factor of the expected market price of the Company's common
stock of .525 for 1999, .458 for 1998, and .473 for 1997 based on quarterly
closing prices since 1986; and an expected life of each option of eight
years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The
Company's pro forma information follows:
1999 1998 1997
---- ---- ----
Net income as reported $3,561,024 $2,068,773 $1,839,914
Pro forma net income $2,980,206 $1,646,037 $1,738,227
Earnings per share as reported:
Basic $ .47 $ .26 $ .23
Diluted $ .45 $ .25 $ .22
Pro forma earnings per share:
Basic $ .39 $ .20 $ .22
Diluted $ .37 $ .19 $ .20
Because Statement 123 is applicable only to options granted subsequent to
May 31, 1995, its pro forma effect will not be fully reflected until fiscal
year 2000.
The Company is authorized to issue up to 2,724,761 shares of its Common
Stock under various employee and director stock option arrangements. These
arrangements include employee incentive plans and various voluntary salary
reduction plans. Options granted under these plans become exercisable at
various times and unless exercised expire at various dates through 2009.
Transactions involving these stock option arrangements are summarized as
follows:
[Enlarge/Download Table]
Range Weighted Average
of Exercise Exercise
Shares Prices Price
------------------- ------------------------------------------
Outstanding at May 31, 1996 1,632,347 $3.00 - 15.375 $7.38
Granted 36,500 $9.375 - 10.50 $9.92
Exercised (24,357) $4.59 - 6.25 $4.79
Canceled -
-------------------
Outstanding at May 31, 1997 1,644,490 $3.00 - 15.375 $7.53
Granted 343,500 $8.00 - 12.00 $8.20
Exercised (119,774) $3.00 - 6.00 $5.13
Canceled (77,250) $6.00 - 12.00 $7.10
-------------------
Outstanding at May 31, 1998 1,790,966 $3.13 - 15.375 $7.84
Granted 779,750 $8.75 - 9.688 $9.35
Exercised (88,650) $3.13 - 9.33 $6.43
Canceled (27,144) $8.00 - 12.00 $8.41
-------------------
Outstanding at May 31, 1999 2,454,922 $3.33 - 15.375 $8.37
===================
At May 31, 1998 and 1997, options for 1,293,535 and 1,238,240 shares of
Common Stock, respectively, were exercisable, at weighted average exercise
prices of $7.87 and $7.80, respectively. At May 31, 1999 269,839 shares of
Common Stock were available for future grants.
The following table as of May 31, 1999 sets forth by group of exercise
price ranges, the number of shares, weighted average exercise prices and
weighted average remaining contractual lives of options outstanding, and
the number and weighted average exercise prices of options currently
exercisable.
[Enlarge/Download Table]
Options Outstanding Options Exercisable
------------------------------------------- -------------------------------
Weighted
Range of Number Weighted Average Number Weighted
Exercise of Average Contractual of Average
Prices Shares Exercise Life (Years) Shares Exercise Price
Price
--------------------- ------------- -------------- -------------- -------------- ----------------
$ 3.33 $ 5.50 112,935 $5.40 1.2 112,935 $5.40
6.00 9.88 2,293,987 8.46 6.1 1,208,487 7.96
10.00 15.38 48,000 10.85 6.3 34,375 10.91
============= ==============
3.33 15.38 2,454,922 8.37 5.9 1,355,797 7.82
============= ==============
8. EARNINGS PER SHARE
In 1997, the FASB issued Statement No. 128 which 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 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.
[Enlarge/Download Table]
Year Ended May 31,
----------------------------------------------------
1999 1998 1997
Numerator for basic and diluted earnings per share:
Income available to common shareholders $3,561,024 $2,068,773 $1,839,914
====================================================
Denominator:
For basic earnings per share - weighted average basis 7,645,769 8,095,254 8,066,137
Effect of dilutive stock options and warrants 312,844 347,847 468,947
----------------------------------------------------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 7,958,613 8,443,101 8,535,084
====================================================
Basic earnings per share $0.47 $0.26 $0.23
====================================================
Diluted earnings per share $0.45 $0.25 $0.22
====================================================
9. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases domestic office and warehouse facilities under an
operating lease agreement expiring in 2003 with a right to renew for an
additional five years. The Company leases foreign office and warehouse
facilities and automobiles under operating lease agreements expiring at
various dates through 2009. Total rental expense, principally for office
and warehouse space, was $776,800 in fiscal 1999, $690,400 in fiscal 1998
and $672,600 in fiscal 1997.
In Germany, the office facility is leased from a company owned by Mr. Josef
Wilms' family (see Note 5). Rental payments under this lease were $189,000,
$184,500 and $209,100 for fiscal 1999, 1998 and 1997, respectively.
The following is a schedule of approximate future annual lease payments
under all operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of May 31, 1999:
Year Ending May 31:
2000 $ 836,222
2001 796,887
2002 741,525
2003 664,275
2004 213,172
Thereafter 1,021,506
=============
$ 4,273,587
=============
The Company may, at its option, extend its office and warehouse facilities
lease terms through various dates.
Other Commitments
In connection with certain sales of the Company's automated systems, the
customers are committed to purchasing reagent products exclusively from the
Company based on the terms of the agreement. The Company is committed to
supplying its reagent products over the term of these commitments
(generally five years).
On July 1, 1999 the Company entered into a purchase agreement with an
equipment manufacturer for an instrument product currently marketed by the
Company which requires the Company to purchase a minimum number of
instruments with an aggregate purchase price totaling $315,000 on or before
July 1, 2001.
Contingencies
When the Company acquired Gamma in October 1998, Gamma was a party to an
existing legal proceeding. On May 12, 1998, Gamma 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 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 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 or estimate the financial impact of an
unfavorable resolution. Management believes it has a meritorious defense
against the alleged infringement.
10. INCOME TAXES
Sources of income before income taxes are summarized below:
Year Ended May 31,
---------------------------------------------------
1999 1998 1997
Domestic Operations $2,799,843 $1,962,591 $2,122,795
Foreign Operations 2,607,957 1,916,598 1,019,409
-------------- ---------------- -----------------
Total $5,407,800 $3,879,189 $3,142,204
=============== ================ =================
The provision for income taxes is summarized as follows:
Year Ended May 31,
-------------------------------------------------------
1999 1998 1997
Current:
Federal $ 481,466 $652,941 $648,258
Foreign 1,083,622 645,914 327,647
State 56,643 30,221 50,383
----------------- ----------------- -----------------
1,621,731 1,329,076 1,026,288
----------------- ----------------- -----------------
Deferred:
Federal 181,162 10,394 (25,849)
Foreign 22,570 469,723 304,892
State 21,313 1,223 (3,041)
----------------- ----------------- -----------------
225,045 481,340 276,002
----------------- ----------------- -----------------
Income taxes $1,846,776 $1,810,416 $1,302,290
================= ================= =================
Deferred income taxes reflect the net tax effects of: (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and income tax purposes; and (b) operating
loss carryforwards. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. During
fiscal 1999 the Company reduced its valuation allowance by $493,086 due to
the increased viability of anticipated future taxable income in Italy
combined with certain tax planning strategies. Based on an assessment of
all available evidence including, but not limited to, the Spanish
subsidiary's operating history and lack of profitability, the Company is
uncertain as to the realizability of the Spanish subsidiary's net operating
loss carryforwards and, as a result, a 100% deferred tax valuation
allowance has been recorded against these deferred tax assets. The tax
effects of significant items comprising the Company's net deferred tax
liability at May 31, 1999 and 1998 are as follows:
[Enlarge/Download Table]
Year Ended May 31,
---------------------------------------
1999 1998
Deferred tax liabilities:
Amortization $(1,112,470) $(1,439,110)
Depreciation (1,487,692) (228,949)
Other (753,251) -
Deferred tax assets:
Reserves not currently deductible 1,307,655 75,767
Foreign operating loss carryforwards 469,161 1,358,556
Uniform capitalization 702,478 302,939
------------------ -----------------
(874,119) 69,203
Valuation allowance (252,902) (745,988)
------------------ -----------------
Net deferred tax liability $ (1,127,021) $ (676,785)
================== =================
The Company's effective tax rate differs from the federal statutory rate as
follows:
[Enlarge/Download Table]
Year Ended May 31,
-----------------------------------------------
1999 1998 1997
Federal statutory tax rate 34% 34% 34%
State income taxes, net of federal tax benefit 1 1 1
Interest on state municipal obligations (1) (2) (3)
Foreign Sales Corporation commissions (4) (5) (5)
Higher effective income tax rates of other countries 4 10 6
Excess of cost over tangible assets acquired - net 4 3 2
Reduction in deferred tax valuation allowance (9) - -
Research and development tax credits - (1) (1)
Other 5 7 7
-------- --------- ---------
34% 47% 41%
======== ========= =========
As a result of utilizing compensation cost deductions arising from the
exercise of nonqualified employee stock options for federal and state
income tax purposes, the Company realized income tax benefits of $133,713,
$122,409, and $47,722 in fiscal 1999, 1998 and 1997, respectively.
Additionally, the Company recorded income tax benefits of $55,142 in fiscal
1999, 1998 and 1997, caused by patent amortization expense deductions
resulting from a 1993 exercise of stock options previously issued in
connection with the acquisition of certain technology (Note 11). These
income tax benefits are recognized in the accompanying financial statements
as additions to additional paid-in capital rather than as reductions of the
respective income tax provisions because the related compensation
deductions are not recognized as compensation expense for financial
reporting purposes.
At May 31, 1999, the Company's Italian subsidiary had net operating loss
carryforwards for income tax purposes of $827,000, which expire in 2000 and
2001. The Company's Spanish subsidiary had net operating loss carryforwards
for income tax purposes of $441,000, which expire in 2002, 2003 and 2004.
11. TECHNOLOGY RIGHTS
In March 1983, the Company acquired rights to technology to be used in
developing diagnostic testing products. In connection with this
acquisition, the Company has agreed to pay to the Blood Center of Greater
Kansas City royalties equal to 4% of the net sales from products utilizing
the technology. Royalties under this agreement amounted to approximately
$411,100, $389,900 and $368,800 in fiscal 1999, 1998 and 1997,
respectively.
In May 1997 Gamma entered into a license agreement with Pasteur Sanofi
Diagnostics ("Sanofi") with headquarters in France for the use and sale of
their microcolumn test for the detection of antibodies called ReACT. Under
the terms of the agreement the Company will pay Sanofi royalties equal to
12% of the net sales from the ReACT products in six countries of Europe.
The agreement expires on the expiration of the patent of the technology.
To date the Company has made insignificant payments as the product is in
the initial stages of its market launch.
12. INSTRUMENT DEVELOPMENT AND MANUFACTURING AGREEMENTS
The Company has contracted with Bio-Tek Instruments, Inc. (see Note 1) for
the development of a fully automated, "walk-away", blood bank analyzer.
Known as the ABS2000, the analyzer utilizes the Company's patented
Capture(R) products technology and is being marketed in Europe and the
United States to hospital transfusion laboratories for patient testing.
Under the terms of the 15 year agreement, the Company reimburses Bio-Tek
Instruments, Inc. for its development costs, and the Company is granted
worldwide marketing rights to sell the instrument for use in the human
clinical diagnostic market for testing of human blood or blood components
with centrifugation. Bio-Tek Instruments, Inc. may sell the product in
other markets paying the Company up to a 4% royalty of the selling price.
In order to maintain the exclusive worldwide marketing rights the Company
must purchase 250 instruments over a 6 year period beginning with the
delivery of the first production instrument which occurred in fiscal 1997.
If the Company purchases less than 250 instruments over a 6 year period it
has the right to continue to purchase the instruments on a non-exclusive
basis. Based upon the Company's current projections, the Company presently
believes it will maintain its exclusivity rights for the term of the
agreement.
During fiscal 1996, the Company entered into a second development and
manufacturing agreement with DYNEX Technologies, Inc. ("DYNEX"). Under the
terms of the agreement, DYNEX will design and manufacture a second
analyzer known as the ABSHV utilizing the Company's Capture products
technology which will be marketed by the Company to blood donor centers
for donor testing. In exchange for reimbursing DYNEX for its development
costs and pursuing FDA 510(k) approval, the Company is granted exclusive
distribution rights to sell the instrument to blood banks and centralized
and hospital transfusion laboratories. In order to maintain exclusive
distribution rights the Company must purchase 240 instruments over a 3
year period beginning on the date FDA 510(k) clearance is granted. The
510(k) application has yet to be submitted. If the Company does not
purchase the minimum amount of instruments within the time period
specified the Company has the right to continue purchasing the instruments
on a non-exclusive basis. Based upon the Company's current projections, it
does not appear that these minimums will be met.
In April 1999 the Company entered into a manufacturing and development
agreement with Rosys Anthos AG ("Rosys") with headquarters in Switzerland.
Under the terms of the agreement, Rosys will manufacture and develop an
analyzer known as the Rosys Plato in the U.S. and the ABS Precis in Europe
utilizing the Company's Capture and ReACT technologies. The instrument
will be marketed exclusively by Immucor to hospital transfusion
laboratories and blood donor centers for patient and donor blood typing
and antibody screening and identification. In order to maintain exclusive
worldwide distribution rights the Company must purchase 120 instruments
over the three year initial term of the agreement. If the Company
purchases less than 120 instruments over the period it will be allowed to
continue purchasing the instrument on a non-exclusive basis for an
additional two year period. The Rosys Plato has been cleared by the FDA
for market in the United States and based on fiscal 1999 sales and
purchases the Company presently believes it will maintain its exclusivity
rights for the term of the agreement.
In fiscal 1999, 1998 and 1997, the Company incurred $161,480, $302,850 and
$342,040, respectively, in instrument research and development costs
principally under these contracts.
13. DOMESTIC AND FOREIGN OPERATIONS
Information concerning the Company's domestic and foreign operations is
summarized below (in 000s):
[Enlarge/Download Table]
Year Ended May 31, 1999
----------------------------------------------------------------------------------------------------
Note 1
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $34,842 $10,246 $6,804 $4,368 $3,265 - $59,525
customers
Affiliates 5,100 381 15 160 647 $(6,303) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 39,942 10,627 6,819 4,528 3,912 (6,303) 59,525
Income from operations 2,912 1,537 774 1,167 (96) 15 6,309
Interest expense (909) (44) (2) (436) (25) - (1,416)
Interest income 241 44 28 - - - 313
Income tax expense 740 750 (65) 388 33 1 1,847
Long-lived assets 53,259 3,917 2,409 7,965 4,263 (16,810) 55,003
Identifiable assets 85,366 8,180 10,064 9,616 9,334 (22,826) 99,734
Net assets 41,632 5,022 (1,286) 1,755 1,327 (8,397) 40,053
[Enlarge/Download Table]
Year Ended May 31, 1998
----------------------------------------------------------------------------------------------------
Note 2
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $19,207 $9,493 $5,834 $4,439 $817 - $39,790
customers
Affiliates 3,716 285 - 149 - $(4,150) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 22,923 9,778 5,834 4,588 817 (4,150) 39,790
Income from operations 756 1,015 567 1,290 84 21 3,733
Interest expense - (122) (1) (466) (27) - (616)
Interest income 621 137 31 - - - 789
Income tax expense 684 600 - 516 - 10 1,810
Long-lived assets 19,826 4,165 2,475 7,974 445 (15,442) 19,443
Identifiable assets 47,293 8,085 9,944 9,593 1,513 (18,884) 57,544
Net assets 45,060 4,282 (1,072) 1,404 758 (7,999) 42,433
[Enlarge/Download Table]
Year Ended May 31, 1997
----------------------------------------------------------------------------------------------------
Note 2
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated $17,184 $10,103 $5,750 $2,013 $604 - $35,654
customers
Affiliates 3,731 324 - 72 - $(4,127) -
---------- ---------- ---------- ---------- --------- ------------ --------------
Total 20,915 10,427 5,750 2,085 604 (4,127) 35,654
Income from operations 842 1301 396 590 (76) (9) 3,044
Interest expense - (226) (2) (216) (42) - (486)
Interest income 728 71 48 - 1 - 848
Income tax expense 674 409 - 222 - (3) 1,302
<FN>
Note 1: Included in "Other" are net sales, income from operations,
long-lived assets, identifiable assets and net assets of Spain,
Portugal, France, Belgium, and the Netherlands.
Note 2: Included in "Other" are net sales, income from operations,
long-lived assets, identifiable assets and net assets in Spain and
Portugal.
</FN>
During the years ended May 31, 1999, 1998 and 1997, the Company's U.S.
operations made net export sales to unaffiliated customers of approximately
$5,558,000, $3,518,000 and $3,660,000, respectively. The Company's German
operation made net export sales to unaffiliated customers of $1,309,000,
$1,191,000 and $1,189,000 for the years ended May 31, 1999, 1998, and 1997,
respectively. The Company's Canadian operation made net export sales to
unaffiliated customers of $2,542,010, $3,137,000 and $1,418,000 for the
years ending May 31, 1999, 1998, and 1997, respectively.
Product sales to affiliates are valued at market prices.
14. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan covering its domestic
employees who meet certain age and length of service requirements, as
defined. The Company matches a portion of employee contributions to the
plan. During the years ended May 31, 1999, 1998 and 1997, the Company's
matching contributions to the plan were $149,000, $88,000 and $101,000,
respectively. Vesting in the Company's matching contributions is based on
years of continuous service.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
[Enlarge/Download Table]
(In thousands, except per share amounts)
Basic Diluted
Net Gross Operating Net Earnings Earnings
Sales Margin Income Income Per Share Per Share
----------------- --------------- --------------- ------------ ----------- -----------
FISCAL 1999
First Quarter $10,358 $5,706 $1,033 $628 $.08 $.08
Second Quarter 13,665 7,349 1,358 716 .09 .09
Third Quarter 16,758 9,168 1,955 976 .13 .13
Fourth Quarter 18,744 9,751 2,032 1,241 .17 .16
================= =============== =============== ============ =========== ===========
$59,525 $31,974 $6,378 $3,561 $.47 $.45
================= =============== =============== ============ =========== ===========
FISCAL 1998
First Quarter $9,273 $5,426 $1,004 $558 $.07 $.07
Second Quarter 10,192 5,431 971 546 .07 .06
Third Quarter 10,155 5,363 916 465 .06 .06
Fourth Quarter 10,170 5,403 888 500 .06 .06
================= =============== =============== ============ =========== ===========
$39,790 $21,623 $3,779 $2,069 $.26 $.25
================= =============== =============== ============ =========== ===========
IMMUCOR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 1999, 1998 AND 1997
[Enlarge/Download Table]
Charged
Balance at Charged to to Other Balance
Beginning Costs and Accounts Deductions at End
of Period Expense (Note 1) (Note 2) of Period
1999:
Allowance for doubtful accounts $502,372 $116,031 $236,902 $(50,835) $804,470
======== ======== ======== ========= ========
1998:
Allowance for doubtful accounts $395,076 $114,334 $ 0 $(7,038) $502,372
======== ======== ======= ======== ========
1997:
Allowance for doubtful accounts $350,545 $75,521 $ 0 $(30,990) $395,076
======== ======= ======= ========= ========
<FN>
Note 1: "Charged to Other Accounts" represents allowance for doubtful accounts
of acquired businesses at date of acquisition.
Note 2: "Deductions" represent accounts written off during the period less
recoveries of accounts previously written off.
</FN>
Item 9.--Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10.--Directors and Executive Officers of the Registrant.
The following table sets forth certain information concerning the
directors and executive officers of the Company.
Name Age Position with Company
Edward L. Gallup 60 Chairman of the Board of Directors, President
and Chief Executive Officer
Ralph A. Eatz 55 Director and Senior Vice President--Operations
Dr. Gioacchino De Chirico 46 Director, Director of European Operations and
President of Immucor Italia S.r.l
Daniel T. McKeithan 75 Director
Didier L. Lanson 49 Director
G. Bruce Papesh 52 Director
Dennis M. Smith, Jr., MD 47 Director
Joseph E. Rosen 55 Dirctor
Steven C. Ramsey 50 Vice President--Chief Financial Officer and
Secretary
Patrick Waddy 42 President of Dominion Biologicals Limited and
European Finance Director
All members of the Board of Directors hold office until the next annual
meeting of shareholders or until their successors are duly elected and have
qualified or until their earlier death, resignation, or removal. All executive
officers serve at the pleasure of the Board of Directors.
Messrs. Gallup and Eatz founded Immucor in 1982, and have 34 and 30
years experience in the blood banking diagnostic reagent industry. In addition,
they worked together for approximately six years at Biological Corporation of
America ("BCA"), which later became the blood banking reagents division of
Biopool, Inc. Including the time they worked together as officers of BCA and
Immucor, they now have worked together as a management team for over 23 years in
the blood banking diagnostic reagent business.
Edward L. Gallup has been Chairman of the Board of Directors, President
and Chief Executive Officer of the Company since its founding. Mr. Gallup has
worked in the blood banking business for over 34 years.
Ralph A. Eatz, who has been working in the blood banking reagent field
for over 30 years, has been a director and Vice President - Operations of the
Company since its founding, and Senior Vice President - Operations since
December 1988.
Dr. Gioacchino De Chirico has been Director of European Operations
since May 1998 and President of Immucor Italia S.r.l. since February 1994. From
1989 until 1994, he was employed in the United States by Ortho Diagnostic
Systems, Inc., a Johnson and Johnson Company, as General Manager,
Immunocytometry, with worldwide responsibility. From 1979 until 1989, he was
with Ortho Diagnostic Systems, Inc., in Italy, where he began as a sales
representative and held several management positions, including Product Manager
and European Marketing Manager for Immunology and Infectious Disease products.
Immucor Italia S.r.l. was acquired by the Company on September 30, 1991.
Daniel T. McKeithan has been a director of the Company since February
28, 1983. Since 1986, he has served as a consultant to health care companies.
From April 1979 until March 1986 he was employed by Blood Systems, Inc., a
supplier of blood and blood products, as a general manager and as Executive Vice
President of Operations. Mr. McKeithan also has 30 years experience in
pharmaceutical and diagnostic products with Johnson and Johnson, Inc., including
Vice President - Manufacturing of the Ortho Diagnostic Systems Division.
Didier L. Lanson has been a director of the Company since October 24,
1989. Since September 1, 1999, he serves as CEO of a start up company HLA-G
Technologies in Paris, France. Based on proprietary discoveries on the role of
HLA in tolerance induction, HLA-G Technologies develops products in the field of
transplantation, cancer therapy and dermatology. From September 1992 until March
1999, he served as Vice President, Europe ('92-97) and Vice President Global
Operations and International Affairs ('97-'99) of SyStemix Inc., a Novartis
Company. SyStemix Inc. is primarily engaged in the development of cellular and
gene therapy products. He was a Director and the President and CEO of
Diagnostics Transfusion ("DT"), a French corporation which develops,
manufactures and distributes reagent products, and Vice President Business
Development of ESPACE VIE, a French corporation which develops and markets
pharmaceutical blood based products and biotech products, from 1987 until
December 1991.
G. Bruce Papesh is the co-founder of Dart, Papesh & Co., a Lansing,
Michigan based company that provides investment consulting and other financial
services. He has served as President of Dart, Papesh & Co. Inc., since 1987. Mr.
Papesh has over 28 years of experience in investment services while serving in
stock broker, consulting and executive management positions. Mr. Papesh also
serves as a Director and as Secretary of Neogen Corporation, an agricultural
biotechnology company.
Dennis M. Smith, Jr., M.D. currently is, and for the last five years
has been, the Chairman of the Section of Pathology and the Director of
Laboratories at Columbia Memorial Hospital in Jacksonville, Florida. In addition
to these duties, Dr. Smith is a member of the Board of Directors of Medical
Equity Partners, Jacksonville, Florida; Vice President of Laboratory Physicians,
St. Petersburg, Florida; and Managing Director, Florida Region of AmeriPath,
Inc. Dr. Smith is a past president of the American Association of Blood Banks
and is currently Chairman of the Board of Trustees of the National Blood
Foundation. He has over 19 years of experience in the medical field.
Joseph E. Rosen has been with Sera-Tec Biologicals since its inception
in 1969 and has served as its President for the past fifteen years. Mr. Rosen is
currently serving as Chairman of the Board of the American Blood Resources
Association, the plasma industry trade group, and has been a member of the Board
of Directors of several public and private health care companies. He has over 25
years of experience in the blood banking industry.
Steven C. Ramsey has been Vice President and Chief Financial Officer
since March 1998. Prior to such time, Mr. Ramsey worked for six years at
International Murex Technologies Corporation, the last three as Chief Financial
Officer. He has more the 25 years of financial management experience.
Patrick Waddy has been the European Finance Director since March 1999.
Mr. Waddy has been with Dominion Biologicals Limited since March 1988 and has
served as President for the past five years. The Company acquired Dominion
Biologicals in December 1996.
There are no family relationships among any of the directors or
executive officers of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934 and regulations of the Securities and
Exchange Commission thereunder require the Company's executive officers and
directors and persons who own more than ten percent of the Company's Common
Stock, as well as certain affiliates of such persons, to file reports of
initial, annual, and changes in such person's ownership of Immucor's Common
Stock with the Securities and Exchange Commission. Executive officers, directors
and persons owning more than ten percent of the Company's Common Stock are
required by Securities and Exchange Commission regulation to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on its review of
the copies of such forms received by it and written representations that no
other reports were required for those persons, the Company believes that, during
the fiscal year ended May 31, 1999, all filing requirements applicable to its
executive officers, directors, and owners of more than ten percent of the
Company's Common Stock were complied with.
Item 11.--Executive Compensation.
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and all of the Company's other executive officers for
services rendered in all capacities to the Company for the last three fiscal
years.
[Enlarge/Download Table]
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------- ----------------
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Compensation (1) Options (2) Compensation (3)
------------------------------------ ------- ---------- ------------------- ---------------- ------------------
Edward L. Gallup 1999 $206,601 $29,609 80,000 $55,209
Chairman of the Board, President 1998 190,253 35,619 - 4,752
and Chief Executive Officer 1997 183,993 33,415 - 4,812
Ralph A. Eatz 1999 200,579 20,830 80,000 55,177
Director and Senior Vice 1998 185,091 29,628 - 4,726
President - Operations 1997 178,593 28,108 - 4,782
Dr. Gioacchino De Chirico 1999 175,565 13,100 80,000 -
President, Immucor Italia, S.r.l. 1998 150,575 12,752 - -
and
Director of European Operations 1997 177,188 13,021 - -
Steven C. Ramsey (4) 1999 178,946 - 30,500 -
Vice President - Chief Financial 1998 14,385 - 30,000 -
Officer and Secretary
Patrick Waddy (5) 1999 69,260 2,500 30,500 25,719
President of Dominion Biologicals 1998 70,822 - - 3,541
Limited and European Finance 1997 34,438 - 251,139 1,722
Director
Josef Wilms (6) 1999 - - - -
Former President, Immucor GmbH 1998 29,156 2,408 - 75,461
1997 193,548 16,093 - -
<FN>
(1) Includes the value of life insurance premiums and an allowance for
automobile expenditures for each of the above named executive officers
as follows: For 1999 - for Mr. Gallup, Eatz, De Chirico and Waddy, life
insurance premiums of $20,009, $11,230, $3,500 and $2,500 respectively,
and an allowance for automobile expenditures for Mr. Gallup, Eatz and
Dr. De Chirico of $9,600 each. For 1998 - for Mr. Gallup, Eatz, Wilms,
and De Chirico, life insurance premiums of $26,019, $20,028, $317 and
$3,152, respectively, and an allowance for automobile expenditures for
Mr. Gallup, Eatz and Dr. De Chirico of $9,600 each, and for Mr. Wilms
$2,091. For 1997 - for Mr. Gallup, Eatz, Wilms, and De Chirico, life
insurance premiums of $23,815, $18,508, $1,898, and $3,421,
respectively, and an allowance for automobile expenditures for Mr.
Gallup, Eatz, and Dr. De Chirico of $9,600 each and for Mr. Wilms
$14,195.
(2) Includes stock options granted for each of the above named officers as
follows: For 1999 - for Mr. Gallup, Eatz, and De Chirico 25,000 shares
each and 7,500 shares for Mr. Ramsey and Waddy under the 1995 Stock
Option Plan to purchase shares of the Company's Common Stock at an
exercise price of $9.6875. 50% of the options are exercisable beginning
July 31, 2000, and 25% per year thereafter. For Mr. Gallup, Eatz, and
De Chirico 55,000 shares each and 23,000 shares for Mr. Ramsey and
Waddy under the 1998 Stock Option Plan to purchase shares of the
Company's Common Stock at an exercise price of $9.375. 50% of the
options are exercisable beginning April 9, 2001, and 25% per year
thereafter. For 1998 - represents options granted to Mr. Ramsey under
the 1995 Stock Option Plan to purchase shares of the Company's Common
Stock at an exercise price of $8.38. 50% of the options are exercisable
beginning April 20, 2000, and 25% per year thereafter. For 1997 -
represents warrants issued in connection with the acquisition of
Dominion Biologicals Limited with 201,139 5-year warrants at an
exercise price of $12.00 and 50,000 10-year warrants at an exercise of
$11.98.
(3) Represents amounts the Company contributed to the 401(k) retirement
plan on behalf of the named executive officers, a bonus for Mr. Gallup
and Eatz of $50,000 and Mr. Waddy of $22,256, in 1999, and Mr. Wilms'
consulting fees for August 1 through December 31, 1997.
(4) Mr. Ramsey assumed the position of Vice President and Chief Financial
Officer in April 1998.
(5) Mr. Waddy became an employee of the Company upon acquisition of
Dominion Biologicals Limited in December 1996.
(6) Mr. Wilms resigned as President of Immucor GmbH in July 1997 and was
retained as a consultant until December 31, 1997.
</FN>
Stock Options
Options Granted. During the fiscal year ended May 31, 1999, stock
options were granted to Mr. Gallup, Eatz, De Chirico, and Ramsey under the 1995
Stock Option Plan and the 1998 Stock Option Plan.
The table below sets forth information regarding the options granted
during the fiscal year ended May 31, 1999 to the executive officers listed in
the Summary Compensation Table.
[Enlarge/Download Table]
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
-------------------------------------------------------------------------------------- ----------------------------
Number of % of Total Potential Realizable Value
Securities Options at Assumed Annual Rates of
Underlying Granted to Exercise Stock Price Appreciation
Options Employees in or Base Expiration for Option Term
Price
----------------------------
Name Granted (#) Fiscal Year ($/share) Date 5% 10%
------------------------------ ------------- -------------- ------------ ------------ ------------- -------------
Edward L. Gallup (1) 25,000 3.2% $9.6875 07/31/08 $ 152,300 $ 386,000
Edward L. Gallup (2) 55,000 7.0% $9.3750 04/09/09 324,300 821,800
Ralph A. Eatz (1) 25,000 3.2% $9.6875 07/31/08 152,300 386,000
Ralph A. Eatz (2) 55,000 7.0% $9.3750 04/09/09 324,300 821,800
Dr. Gioacchino De Chirico (1) 25,000 3.2% $9.6875 07/31/08 152,300 386,000
Dr. Gioacchino De Chirico (2) 55,000 7.0% $9.3750 04/09/09 324,300 821,800
Steven C. Ramsey (1) 7,500 1.0% $9.6875 07/31/08 45,700 115,800
Steven C. Ramsey (2) 23,000 2.9% $9.3750 04/09/09 135,600 343,700
Patrick Waddy (1) 7,500 1.0% $9.6875 07/31/08 45,700 115,800
Patrick Waddy (2) 23,000 2.9% $9.3750 04/09/09 135,600 343,700
<FN>
(1) Stock options granted under the 1995 Stock Option Plan with 50% of the options exercisable beginning July
31, 2000, and 25% per year thereafter.
(2) Stock options granted under the 1998 Stock Option Plan with 50% of the options are exercisable beginning
April 9, 2001, and 25% per year thereafter.
</FN>
Option Holdings
The table below presents information concerning option exercises during the past
fiscal year and the value of unexercised options held as of the end of the
fiscal year by each of the individuals listed in the Summary Compensation Table.
[Enlarge/Download Table]
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired On Value May 31, 1999 May 31, 1999 (1)
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
------------- ---------- ------------------------------ -----------------------------
Edward L. Gallup - - 149,250 80,000 $654,266 $232,188
Ralph A. Eatz - - 149,250 80,000 654,266 232,188
Dr. Gioacchino De Chirico - - 75,000 80,000 478,125 232,188
Steven C. Ramsey - - - 60,500 - 209,156
Patrick Waddy - - 251,139 30,500 95,177 89,153
<FN>
(1) Based on the difference between the exercise price and the closing
price for the Common Stock on May 31, 1999, of $12.375 as reported by
NASDAQ.
</FN>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee has responsibility for determining the types and
amounts of executive compensation, including setting the number of stock options
that can be granted to executive officers as a group. Messrs. McKeithan, Papesh
and Lanson are members of the Compensation Committee. The Stock Option Committee
determines the number of shares to be granted to individual executive officers.
Messrs. Gallup, Eatz, Rosen and Smith are members of the Stock Option Committee.
Mr. Ramsey serves on the Compensation Committee at the request of the Board of
Directors. Neither Mr. McKeithan, Mr. Papesh, Mr. Lanson, Mr. Rosen nor Dr.
Smith are, nor have they ever been, officers or employees of the Company. Edward
L. Gallup and Ralph A. Eatz are the founders of the Company, have been directors
and executive officers of the Company since its inception, and each of them
participates in decisions on all stock options granted.
Compensation of Directors
Members of the Board of Directors, who are not also executive officers
of the Company, receive $500 per meeting and are reimbursed for all travel
expenses to and from meetings of the Board. In addition, the Company provides
each of the non-employee directors a grant of an option to purchase shares of
the Company's common stock upon their election as a director at the stock's then
current fair market value, and at the direction of the Board, they may receive
additional options. The amount of shares subject to the option is determined at
the time of the grant. Messrs. McKeithan and Lanson hold 13,750 options each and
Messrs. Papesh, Smith and Rosen hold 10,000 options each to purchase shares of
the Company's common stock.
Employment Contracts, Termination of Employment and Change of Control
Arrangements
The Company has in effect employment agreements (the "Agreements") with
five of its executive officers and certain key managers: The Company entered
into written employment agreements with Edward L. Gallup and Ralph A. Eatz on
October 13, 1999. Each agreement is for a five-year term and automatically
renews for a five-year term, unless sooner terminated. The agreements provide
base salaries for Mr. Gallup and Mr. Eatz of $211,219 and $205,041,
respectively. The agreements also contain covenants prohibiting Mr. Gallup and
Mr. Eatz from disclosing confidential information and from competing with the
Company, both during and for specified periods after the termination of their
employment.
The agreements with Mr. Gallup and Mr. Eatz obligate the Company to
make certain payments to them in certain circumstances if their employment is
terminated. If the Company terminates the employment of Mr. Gallup or Mr. Eatz
"without cause", then Mr. Gallup or Mr. Eatz would continue to be compensated at
a rate equal to their average annual compensation (that is, their base salary
plus their average bonus over the last two years) for the remainder of the five
year period as renewed, and such amounts would be paid over such period of time
rather than in a lump sum. "Cause" is defined in the agreements generally to
include dishonesty, embezzlement, continuing inability or refusal to perform
reasonable duties assigned to him, and moral turpitude. If the Company
terminates the employment of Mr. Gallup or Mr. Eatz within two years after a
change of control, or if Mr. Gallup or Mr. Eatz terminate their own employment
within 60 days after a change of control, then the Company instead must pay Mr.
Gallup or Mr. Eatz a lump sum equal to five times their average annual
compensation, plus certain additional amounts to compensate Mr. Gallup or Mr.
Eatz if such payments subject Mr. Gallup or Mr. Eatz to a federal excise tax
under Section 4999 of the Internal Revenue Code. The Company's agreement to
compensate these executives in connection with a change of control is designed
to secure for the Company such executives' full time and attention to negotiate
the best deal for the Company and its shareholders in the event of a change of
control without such executives being distracted by the effects of such change
of control upon their own financial interest.
The Company has in effect employment agreements (the
"Agreement") with Dr. Gioacchino De Chirico entered into on December 31, 1993.
The Agreement renews for a period of five years from each anniversary date
unless sooner terminated based upon sales performance of Immucor Italia. The
Company may only terminate the employment agreement "for cause", as defined in
the agreement. If the Company terminates the employment of the Employee "without
cause", the Employee would receive his base annual salary for the remainder of
the five year period as renewed upon such termination. On October 13, 1998 the
company entered into a Severance Agreement with Dr. De Chirico which clarifies
the rights and obligations of the parties in the event of a change of control.
If the Company terminates the employment of Dr. De Chirico within two years
after a change of control, or if he terminates his own employment within 60 days
after a change of control, then the Company instead must pay Dr. De Chirico a
lump sum equal to five times his average annual compensation. Dr. De Chirico has
agreed to refrain from competition with Immucor Italia, S.r.l. following the
termination of the agreement for a period of two years if he is terminated
without cause, and for a period of four years if he is terminated for cause or
if he voluntarily terminates the agreement.
The Company has in effect an employment agreement (the "Agreement")
with Mr. Steven C. Ramsey entered into on October 13, 1998 which clarifies the
rights and obligations of the parties in the event of a change of control. If
the Company terminates the employment of Mr. Ramsey within two years after a
change of control, or if he terminates his own employment within 60 days after a
change of control, then the Company instead must pay Mr. Ramsey a lump sum equal
to two times his average annual compensation. The Agreement renews for a period
of twelve months from each anniversary date unless sooner terminated. Mr. Ramsey
has agreed to refrain from competition with Immucor for a period of two years
after his employment has terminated and for any additional period that he is
compensated by the Company.
The Company has in effect an employment agreement (the "Agreement")
with Mr. Patrick Waddy entered into on October 13, 1998 which clarifies the
rights and obligations of the parties in the event of a change of control. If
the Company terminates the employment of Mr. Waddy within two years after a
change of control, or if he terminates his own employment within 60 days after a
change of control, then the Company instead must pay Mr. Waddy a lump sum equal
to two times his average annual compensation. The Agreement renews for a period
of twelve months from each anniversary date unless sooner terminated. Mr. Waddy
has agreed to refrain from competition with Immucor for a period of two years
after his employment has terminated and for any additional period that he is
compensated by the Company.
Item 12.--Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of July 30, 1999, the number of
shares of Common Stock of Immucor beneficially owned by each director of the
Company, and by each person known to the Company to own more than 5% of the
outstanding shares of Common Stock, and by all of the executive officers and
directors of the Company as a group.
Name of Beneficial Owner
(and address for those Shares Percent
owning more than five percent) Owned(1) of Class(1)
Edward L. Gallup 259,357 (2) 3.4%
Ralph A. Eatz 337,526 (2) 4.4%
Dr. Gioacchino De Chirico 75,000 (3) *
Steven C. Ramsey 5,000 *
Patrick Waddy 271,139 (4) *
Didier L. Lanson 13,750 (5) *
Daniel T. McKeithan 58,778 (5) *
G. Bruce Papesh 5,500 (6) *
Dennis M. Smith 35,312 *
Joseph E. Rosen 5,750 (7) *
Wellington Management Co. LLP 405,000 (8) 5.3%
75 State Street
Boston, MA 02109
All directors and executive officers
as a group (nine persons) 1,067,112 13.9%
* less than 1%.
(1) Except as otherwise noted herein, percentages are determined on the
basis of 7,690,031 shares of Common Stock issued and outstanding plus
securities deemed outstanding pursuant to Rule 13-3(d)(1) of the
Securities Exchange Act of 1934, as amended. As a result, the
percentage of shares of Common Stock is calculated assuming that the
beneficial owner has exercised any options held by such beneficial
owner that are currently exercisable, or exercisable within 60 days of
July 30, 1999, and that no other options have been exercised by anyone
else. Unless otherwise indicated, the Company believes the beneficial
owner has sole voting and investment power over such shares.
(2) Includes for Messrs. Gallup and Eatz an option to acquire 89,250 shares
at an exercise price of $9.33 andan option to acquire 60,000 shares at
an exercise price of $6.00.
(3) Includes a currently exercisable option to acquire 15,000 shares of
Common Stock at an exercise price of $6.00 and an option to acquire
60,000 shares of Common Stock at an exercise price of $6.00.
(4) Includes warrants issued in connection with the acquisition of Dominion
Biologicals Limited with 201,139 5-year warrants at an exercise price
of $12.00 and 50,000 10-year warrants at an exercise of $11.98.
(5) Includes a currently exercisable option to acquire 3,750 shares
at $5.40 per share and a currently exercisable option to acquire 10,000
shares at $6.00 per share.
(6) Includes 400 shares over which Mr. Papesh shares investment power in
his role as an investment advisor and a currently exercisable option to
acquire 5,000 shares at $8.00 per share.
(7) Includes a currently exercisable option to acquire 3,750 shares at
$5.40 per share.
(8) Wellington Management Co. LLP ("WMC") reported in a Schedule 13G dated
February 9, 1999, that WMC in its capacity as an investment adviser may
be deemed to beneficially own 405,000 shares or 5.3% of the Company,
which are held of record by clients of WMC. WMC indicated that it had
the shared power to vote or direct the vote of 361,000 shares and
shared power to dispose or to direct the disposition of 405,000 shares
and that it had no sole power to vote or dispose of the shares.
Item 13.--Certain Relationships and Related Transactions.
The Company's German subsidiary, Immucor Mediziniche Diagnostik GmbH
("Immucor GmbH"), leases approximately 1,566 square meters of space from a
corporation of which Josef Wilms' son is a majority stakeholder. Josef Wilms was
formerly the President of Immucor GmbH and a director of the Company. Rental
payments for the 1998 fiscal year totaled $184,500, and the lease term extends
through April 2009.
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 at 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 and $1,311,000
in fiscal 1997. At May 31, 1998, the outstanding amount under the Immucor GmbH
loan was approximately $528,000 and at May 31, 1999 the aggregate amounts
receivable were approximately $141,000.
Mr. Wilms and his family granted liens on certain property owned by them in
Germany and Portugal to collateralize the loans from the Company and Immucor
GmbH, and Mr. Wilms has agreed to grant liens on additional property owned by
him and located in the United States.
Mr. Wilms had agreed to pay all amounts borrowed from the Company and
Immucor GmbH, plus interest at 8.25%, by October 31, 1997. Although the loans
had not been repaid by October 31, 1997, the Company agreed to extend the date
for payment of these loans to December 31, 1997 based upon the Company's belief
that Mr. Wilms had been working diligently to liquidate the collateral to obtain
the funds. At December 31, 1997, as Mr. Wilms had not fully repaid these
amounts, the Company began to arrange the sale of some or all of the collateral
to the extent necessary to recover the unpaid balance of the loan. Since
December 31, 1997 and up to May 31, 1999 the Company had arranged the sale of
collateral reducing the debt to approximately $141,000.
As of August 9, 1999 the entire unauthorized loan balance owed to the
Company by Mr. Wilms plus accrued interest as well as amounts of incidental
collection expenses allowable under German law have 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.
In connection with the acquisition of Dominion Biologicals Limited in
December 1996, the Company issued subordinated promissory notes to the former
shareholders of Dominion totaling $4,228,200, bearing interest at 6% payable
semiannually with principal due in December 1999. The outstanding balance of the
subordinated promissory notes was $3,894,800 and $3,941,200 at May 31, 1999 and
1998, respectively, including $1,637,500 and $1,656,600 owed to the President of
Dominion Biologicals Limited at May 31, 1999 and 1998, respectively.
PART IV
Item 14.--Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Documents filed as part of this report:
1. Consolidated Financial Statements
The Consolidated Financial Statements, Notes thereto, and Report of
Independent Auditors thereon are included in Part II, Item 8 of this
report.
2. Consolidated Financial Statement Schedule included in Part II, Item 8 of this
report
Schedule II -- Valuation and Qualifying Accounts
Other financial statement schedules are omitted as they are not
required or not applicable.
3. Exhibits
3.1 Articles of Correction to the Articles of Incorporation
(incorporated by reference to Exhibit 3.2 to Immucor, Inc.'s
Registration statement of Form S-3 filed on May 20, 1999).
3.2 Amended and Restated Bylaws (amended and restated as of
April 16, 1999) (incorporated by reference to Immucor,
Inc.'s Registration statement of Form S-3 filed on May 20,
1999).
4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 16,
1999 (incorporated by reference to Exhibit 1 to Immucor,
Inc.'s Current Report on Form 8-K dated April 16, 1999).
10.1 Standard Industrial Lease, dated July 21, 1982, between the
Company and Colony Center, Ltd. (incorporated by reference
to Exhibit 10.2 to Immucor, Inc.'s Annual Report on Form
10-K for the fiscal year ended May 31, 1985).
10.1-1 Lease Amendment dated June 28, 1989, between the Company and
Colony Center, Ltd. (incorporated by reference to Exhibit
10.1-1 to Immucor's Annual Report on Form 10-K for the
fiscal year ended May 31, 1989).
10.1-2 Lease Amendment dated November 8, 1991, between the Company
and Colony Center, Ltd. (incorporated by reference to
Exhibit 10.1-1 to Immucor's Annual Report on Form 10-K for
the fiscal year ended May 31, 1992).
10.1-3 Lease Agreement, dated February 2, 1996, between the Company
and Connecticut General Life Insurance Company.
(incorporated by reference to Exhibit 10.1-3 to Immucor's
Annual Report on Form 10-K for the fiscal year ended May 31,
1996).
10.1-4 Lease Amendment, dated March 8, 1998, between the Company
and Connecticut General Life Insurance Company.
10.1-5 Lease Amendment, dated August 11, 1999, between the Company
and Connecticut General Life Insurance Company.
10.2 Agreement, dated March 11, 1983, between the Company and The
Kansas City Group, as amended through January 21, 1985
(incorporated by reference to Exhibit 10.2 to Registration
Statement No. 33-16275 on Form S-1).
10.3 Agreement dated August 27, 1987, between the Company and the
Kansas City Group amending Exhibit 10.2 (incorporated by
reference to Exhibit 10.3 to Immucor's Annual Report on Form
10-K for the fiscal year ended May 31, 1989).
10.4 United States Department of Health and Human Services
Establishment License dated December 28, 1982, for the
manufacture of biological products (incorporated by
reference to Exhibit 10.12 to Registration Statement No.
33-966 on Form S-1).
10.5 United States Department of Health and Human Services
Product License dated December 28, 1982, for the manufacture
and sale of reagent red blood cells (incorporated by
reference to Exhibit 10.13 to Registration Statement No.
33-966 on Form S-1).
10.6 United States Department of Health and Human Services
Product License dated May 20, 1983, for the manufacture and
sale of blood grouping sera (incorporated by reference to
Exhibit 10.14 to Registration Statement No. 33-966 on Form
S-1).
10.7 United States Department of Health and Human Services
Product License date November 18, 1983, for the manufacture
and sale of anti-human serum (incorporated by reference to
Exhibit 10.15 to Registration Statement No. 33-966 on Form
S-1).
10.8* Employment Agreement dated October 13, 1998, between the
Company and Edward L. Gallup.
10.9* Employment Agreement dated October 13, 1998, between the
Company and Ralph A. Eatz.
10.10* Employment Agreement dated September 12, 1990, between
Immucor GmbH and Josef Wilms (incorporated by reference to
Exhibit 10.11 to Immucor, Inc. Annual Report on Form 10-K
for the fiscal year ended May 31, 1991).
10.11* Agreement dated December 31, 1993, between Immucor Italia,
S.r.l. and Dr. Gioacchino De Chirico (incorporated by
reference to Exhibit 10.12 to Immucor, Inc. Annual Report on
Form 10-K for the fiscal year ended May 31, 1995).
10.12* Agreement dated December 31, 1993, between Immucor Italia,
S.r.l. and Dr. Gioacchino De Chirico (incorporated by
reference to Exhibit 10.13 to Immucor, Inc. Annual Report on
Form 10-K for the fiscal year ended May 31, 1995).
10.13* Severance Agreement dated October 13, 1998, between Immucor
Inc. and Dr. Gioacchino De Chirico.
10.14* 1999 Stock Option Plan, including form of Stock Option
Agreement used thereunder.
10.15* 1995 Stock Option Plan, including form of Stock Option
Agreement used thereunder (incorporated by reference to
Exhibit 10.14 to Immucor, Inc. Annual Report on Form 10-K
for the fiscal year ended May 31, 1995).
10.16* 1990 Stock Option Plan, including form of Stock Option
Agreement used thereunder (incorporated by reference to
Exhibit 10.15 to Immucor, Inc. Annual Report on Form 10-K
for the fiscal year ended May 31, 1995).
.
10.17* Description of 1983 and 1984 Salary Reduction Plans
(incorporated by reference to Exhibit 10.9 to Immucor,
Inc.'s Annual Report on Form 10-K for the fiscal year ending
May 31, 1985).
10.18* Description of 1983 Stock Option Plan (incorporated by
reference to Exhibit 10.10 to Immucor, Inc.'s Annual Report
on Form 10-K for the fiscal year ending May 31, 1985).
10.19* 1986 Incentive Stock Option Plan, amended July 29, 1987,
including form of Stock Option Agreement used thereunder
(incorporated by reference to Exhibit 10.9 to Registration
Statement No. 33-16275 on Form S-1).
10.20* Employment Agreement dated October 13, 1998, between the
Company and Steven C. Ramsey.
10.21* Agreement dated July 26, 1997 between the Company and Josef
Wilms (incorporated by reference to Exhibit 10.20 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year
ended May 31, 1998).
.
10.22* Employment Agreement dated October 13, 1998, between the
Company and Patrick Waddy.
10.23 Loan Agreement between Immucor, Inc. and Wachovia Bank,
National Association dated October 27, 1998 (incorporated by
reference to Exhibit 10.1 to Immucor, Inc. Quarterly Report
on Form 10-Q for the fiscal quarter ended November 30,
1998).
10.24 First Modification of Loan Agreement dated April 30, 1999.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
27 Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K April 19,1999 relating
to its adoption of a Shareholder Rights Agreement on April 16, 1999.
(c) Exhibits
The exhibits required to be filed with this Annual Report on Form 10-K
pursuant to Item 601, of Regulation S-K are listed under "Exhibits" in
Part IV, Item 14(a)(3) of this Annual Report on Form 10-K, and are
incorporated herein by reference.
(d) Financial Statement Schedule
The Financial Statement Schedule required to be filed with this Annual
Report on Form 10-K is listed under "Financial Statement Schedule" in
Part IV, Item 14(a)(2) of this Annual Report on Form 10-K, and is
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ EDWARD L. GALLUP
Edward L. Gallup, Chairman of the Board of Directors,
President and Chief Executive Officer
August 30, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ EDWARD L. GALLUP
Edward L. Gallup, Director, Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
August 30, 1999
/s/ STEVEN C. RAMSEY
Steven C. Ramsey, Vice President - Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
August 30, 1999
/s/RALPH A. EATZ
Ralph A. Eatz, Director, Senior Vice President - Operations
August 30, 1999
/s/ PATRICK WADDY
Patrick Waddy, European Finance Director and President of Dominion
Biologicals Limited
August 30, 1999
/s/DANIEL T. MCKEITHAN
Daniel T. McKeithan, Director
August 30, 1999
/s/G. BRUCE PAPESH
G. Bruce Papesh, Director
August 30, 1999
/s/ DIDIER L. LANSON
Didier L. Lanson, Director
August 30, 1999
/s/ DR. GIOACCHINO DE CHIRICO
Dr. Gioacchino De Chirico, Director, Director of European Operations and
President of Immucor Italia S.r.l.
August 30, 1999
/s/ DENNIS M. SMITH
Dennis M. Smith, Jr., M.D., Director
August 30, 1999
/s/JOSEPH E. ROSEN
Joseph E. Rosen, Director
August 30, 1999
| 10-K405 | Last “Page” of 26 | TOC | 1st | Previous | Next | ↓Bottom | Just 26th |
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EXHIBIT INDEX
Number Description
3.1 Articles of Incorporation (composite as of December 22, 1989)
(incorporated by reference to Exhibit 3.1 to Immucor, Inc.'s
Quarterly Report on Form 10-Q for the fiscal quarter ended November
30, 1989).
3.2 Bylaws (amended and restated as of August 28, 1991) (incorporated by
reference to Exhibit 19 to Immucor, Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter ended August 31, 1991).
4.1 Immucor, Inc. Shareholder Rights Plan, adopted April 7, 1989
(incorporated by reference to Exhibit 4.1 to Immucor, Inc.'s Current
Report on Form 8-K dated April 7, 1989).
10.1 Standard Industrial Lease, dated July 21, 1982, between the Company
and Colony Center, Ltd. (incorporated by reference to Exhibit 10.2 to
Immucor, Inc.'s Annual Report on Form 10-K for the fiscal year ended
May 31, 1985).
10.1-1 Lease Amendment dated June 28, 1989, between the Company and Colony
Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May
31, 1989).
10.1-2 Lease Amendment dated November 8, 1991, between the Company and
Colony Center, Ltd. (incorporated by reference to Exhibit 10.1-1 to
Immucor's Annual Report on Form 10-K for the fiscal year ended May
31, 1992).
10.1-3 Lease Agreement dated February 2, 1996, between the Company and
Connecticut General Life Insurance Company. (incorporated by
reference to Exhibit 10.1-3 to Immucor's Annual Report on Form 10-K
for the fiscal year ended May 31, 1996).
10.1-4 Lease Amendment dated March 8, 1998, between the Company and
Connecticut General Life Insurance Company.
10.1-5 Lease Amendment dated August 11, 1999, between the Company and
Connecticut General Life Insurance Company.
10.2 Agreement, dated March 11, 1983, between the Company and The Kansas
City Group, as amended through January 21, 1985 (incorporated by
reference to Exhibit 10.2 to Registration Statement No. 33-16275 on
Form S-1).
10.3 Agreement dated August 27, 1987, between the Company and the Kansas
City Group amending Exhibit 10.2 (incorporated by reference to
Exhibit 10.3 to Immucor's Annual Report on Form 10-K for the fiscal
year ended May 31, 1989).
10.4 United States Department of Health and Human Services Establishment
License dated December 28, 1982, for the manufacture of biological
products (incorporated by reference to Exhibit 10.12 to Registration
Statement No. 33-966 on Form S-1).
10.5 United States Department of Health and Human Services Product License
dated December 28, 1982, for the manufacture and sale of reagent red
blood cells (incorporated by reference to Exhibit 10.13 to
Registration Statement No. 33-966 on Form S-1).
10.6 United States Department of Health and Human Services Product License
dated May 20, 1983, for the manufacture and sale of blood grouping
sera (incorporated by reference to Exhibit 10.14 to Registration
Statement No. 33-966 on Form S-1).
10.7 United States Department of Health and Human Services Product License
date November 18, 1983, for the manufacture and sale of anti-human
serum (incorporated by reference to Exhibit 10.15 to Registration
Statement No. 33-966 on Form S-1).
10.8* Employment Agreement dated October 13, 1998, between the Company
and Edward L.Gallup.
10.9* Employment Agreement dated October 13, 1998, between the Company
and Ralph A. Eatz.
10.10* Employment Agreement dated September 12, 1990, between Immucor GmbH
and Josef Wilms (incorporated by reference to Exhibit 10.11 to
Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1991).
10.11* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.12
to Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.12* Agreement dated December 31, 1993, between Immucor Italia, S.r.l. and
Dr. Gioacchino De Chirico (incorporated by reference to Exhibit 10.13
to Immucor, Inc. Annual Report on Form 10-K for the fiscal year ended
May 31, 1995).
10.13* Severance Agreement dated October 13, 1998, between Immucor,
Inc. and Dr. Gioacchino De Chirico.
10.14* 1999 Stock Option Plan, including form of Stock Option Agreement used
thereunder.
10.15* 1995 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.14 to Immucor,
Inc. Annual Report on Form 10-K for the fiscal year ended May 31,
1995).
10.16* 1990 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.15 to Immucor,
Inc. Annual Report on Form 10-K for the fiscal year ended May 31,
1995).
10.17* Description of 1983 and 1984 Salary Reduction Plans (incorporated by
reference to Exhibit 10.9 to Immucor, Inc.'s Annual Report on Form
10-K for the fiscal year ending May 31, 1985).
10.18* Description of 1983 Stock Option Plan (incorporated by reference to
Exhibit 10.10 to Immucor, Inc.'s Annual Report on Form 10-K for the
fiscal year ending May 31, 1985).
10.19* 1986 Incentive Stock Option Plan, amended July 29, 1987, including
form of Stock Option Agreement used thereunder (incorporated by
reference to Exhibit 10.9 to Registration Statement No. 33-16275 on
Form S-1).
10.20* Employment Agreement dated October 13, 1998, between the Company and
Steven C. Ramsey.
10.21* Agreement date July 26, 1997, between the Company and Josef Wilms
(incorporated by reference to Exhibit 10.20 to Immucor, Inc. Annual
Report on Form 10-K for the fiscal year ended May 31, 1998).
10.22* Employment Agreement dated October 13, 1998, between the Company and
Patrick Waddy
10.23 Loan Agreement between Immucor, Inc. and Wachovia Bank, National
Association dated October 27, 1998 (incorporated by reference to
Exhibit 10.1 to Immucor, Inc. Quarterly Report on Form 10-Q for the
fiscal quarter ended November 30, 1998).
10.24 First Modification of Loan Agreement dated April 30, 1999.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
*Denotes a management contract or compensatory plan or arrangement.
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
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| This ‘10-K405’ Filing | | Date | | First | | Last | | | Other Filings |
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| |  |
| | 8/26/06 | | 2 |
| | 7/1/01 | | 17 |
| | 4/9/01 | | 24 |
| | 7/31/00 | | 24 |
| | 6/15/00 | | 6 | | 14 |
| | 4/20/00 | | 24 |
| | 12/31/99 | | 6 |
| | 10/30/99 | | 14 |
| | 10/13/99 | | 24 |
| | 9/1/99 | | 23 |
| Filed on: | | 8/30/99 | | 25 |
| | 8/24/99 | | 7 | | 16 |
| | 8/11/99 | | 4 | | 26 |
| | 8/9/99 | | 7 | | 24 |
| | 7/30/99 | | 2 | | 24 |
| | 7/21/99 | | 7 |
| | 7/1/99 | | 17 |
| For Period End: | | 5/31/99 | | 1 | | 24 | | | 5, DEF 14A, PRE 14A |
| | 5/20/99 | | 24 | | | | | S-3 |
| | 5/1/99 | | 4 |
| | 4/30/99 | | 2 | | 26 |
| | 4/20/99 | | 16 |
| | 4/16/99 | | 24 | | | | | 8-K |
| | 3/15/99 | | 2 | | 14 |
| | 2/9/99 | | 24 | | | | | SC 13G/A |
| | 1/26/99 | | 2 | | 17 |
| | 12/15/98 | | 6 |
| | 12/1/98 | | 4 | | 15 |
| | 11/30/98 | | 24 | | 26 | | | 10-Q |
| | 11/16/98 | | 2 |
| | 11/4/98 | | 4 | | 15 |
| | 10/30/98 | | 4 | | 14 |
| | 10/27/98 | | 2 | | 26 | | | 8-K, 8-K/A |
| | 10/23/98 | | 2 |
| | 10/13/98 | | 24 | | 26 | | | DEF 14A |
| | 9/21/98 | | 14 |
| | 9/1/98 | | 2 | | 14 |
| | 7/14/98 | | 16 | | 24 | | | 5 |
| | 7/6/98 | | 2 |
| | 5/31/98 | | 2 | | 26 | | | 10-K405, 10-K405/A, 5, DEF 14A |
| | 5/12/98 | | 2 | | 17 |
| | 3/8/98 | | 24 | | 26 |
| | 1/23/98 | | 2 |
| | 12/31/97 | | 16 | | 24 |
| | 12/15/97 | | 6 |
| | 10/31/97 | | 16 | | 24 |
| | 7/26/97 | | 24 | | 26 |
| | 6/1/97 | | 14 |
| | 5/31/97 | | 2 | | 21 | | | 10-K405, 5, DEF 14A |
| | 12/11/96 | | 3 | | | | | 8-K |
| | 5/31/96 | | 24 | | 26 | | | 10-K405, 4, DEF 14A |
| | 4/30/96 | | 2 | | 17 |
| | 2/2/96 | | 24 | | 26 |
| | 6/1/95 | | 16 |
| | 5/31/95 | | 16 | | 26 | | | 10-K, DEF 14A, PRE 14A |
| | 12/31/94 | | 14 |
| | 12/31/93 | | 24 | | 26 |
| | 5/31/92 | | 24 | | 26 |
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