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, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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THE SECURITIES EXCHANGE ACT OF 1934
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
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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 31, 2001, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $23,690,578.
As of July 31, 2001, there were 7,277,617 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 plans to
consolidate 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 to strengthen Immucor's direct presence in Europe and
Canada. The Company executed its plans 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. Immucor's wholly owned Canadian subsidiary, Dominion
Biologicals, Ltd. ("Dominion"), took over distribution of the entire range of
products. Dominion is currently the leader in the market for conventional
reagents in Canada.
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 $27.8 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 in the U.S. and internationally. Gamma was the third largest
domestic blood bank serology company before the acquisition. This acquisition
significantly strengthened the Company's competitive position in the U.S. market
and added to its customer base and product offerings, thereby extending the
Company's global marketing reach. Combining Immucor's Automated Product Family
and Capture(R) with Gamma's line of monoclonal reagents and red cell products
represents a natural fit and creates an enhanced selection of products for our
customers worldwide (see Products).
At the time of acquisition, Gamma Biologicals was a party to an existing
legal proceeding. On May 12, 1998, Gamma Biologicals received notification that
a claim of patent infringement had been filed on that date in U.S. District
Court, Southern District of Florida, Miami Division, by Micro Typing Systems,
Inc. and Stiftung fur Diagnostiche Forschung (the Foundation). Subsequently, in
February 1999 the Company received notification that a second claim was filed in
the U.S. District Court for the Northern District of Georgia, against Immucor,
Inc. and Gamma Biologicals for patent infringement on the first patent described
above and a second patent recently granted to the Foundation. The claim alleged
that the recently introduced Gamma ReACT Test System infringed U.S. patent No.
5,512,432 granted to the Foundation on April 30, 1996 and U.S. patent No.
5,863,802 granted to the Foundation on January 26, 1999. The plaintiffs sought a
preliminary and permanent injunction against the continued alleged infringement
by Gamma Biologicals and Immucor, and an award of treble damages, with interest
and costs and reasonable attorney's fees. On September 5, 2000 a third patent
was issued to the Foundation. The plaintiffs had asserted infringement of this
patent and sought to add this patent to the lawsuit. The Company, in light of
this new patent, evaluated its position and negotiated a settlement with the
Foundation. Effective February 28, 2001 the Company no longer markets the ReACT
Test System and its related reagents. The automated filling machine was turned
over to the Foundation and all related instruments and manufacturing materials
have been destroyed. The ReACT product line represented $1.3 million in sales
and $0.79 million in gross profit for the fiscal year ended May 31, 2001.
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, representing a total transaction value of approximately $1.8
million. 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.
This acquisition added three well-accepted products to the Company's reagent
portfolio.
As a result of the above acquisitions, Immucor became the North American
market leader in terms of sales and strengthened its market position worldwide.
See - Competition and Marketing and Distribution. The Company financed the
acquisitions with cash reserves and the proceeds of a loan from its 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 blood
bank system that fully automates blood compatibility tests currently performed
manually by blood bank technologists. The Company introduced the ABS2000 in the
U.S. market during the second quarter of fiscal 1999. See also, Business -
Products Under Development.
During the quarter ended August 31, 2000, isolated performance issues arose
at certain ABS2000 installations that resulted in mistypings not directly
affecting any patient transfusions. The Company issued a safety notification,
requesting customers to confirm ABS2000 results with manual backup testing until
the cause of the difficulty was identified and corrected. The Company believes
it has identified the factors that caused the performance issues and submitted
this information to the FDA. On December 6, 2000, with the FDA's approval, the
safety notification for antibody screening and crossmatch assays was removed.
Customers no longer have to perform manual backup tests for either of these
procedures. In addition, the Company's corrective action plan for blood grouping
was accepted by the FDA. In connection with the plan, a special 510(k) was
submitted to the FDA. The plan called for Company service engineers to complete
field corrective action on the ABS2000 and to accumulate clinical data for group
and type assays for selected customers. The Company has completed these tasks
and has submitted data to the FDA for expedited review. Upon clearance by the
FDA, the safety alert for group and type assays will be lifted. These
performance issues may result in further delays in customers accepting
instruments, and continue to affect sales of reagents used in the instruments,
and both of these factors will adversely impact sales and earnings. See Item
7--Management's Discussion and Analysis--Results of Operations. In addition, the
Company has received requests for refunds on instruments already placed in
service and requests for financial concessions attributable to inconveniences
associated with these performance issues. As of May 31, 2001, $0.76 million in
credits have been issued for instruments and the Company has an allowance of
$0.13 million remaining for potential future returns of instruments. A private
label leasing company that finances customer purchases of ABS2000 instruments
has advised the Company that it is not willing to provide financing for
additional purchases of this instrument while it is under the safety
notification. The Company expects that once the leasing company satisfies itself
that the performance issues related to the ABS2000 are resolved to the
satisfaction of the FDA, they will resume offering financing to instrument
customers. Instrument sales revenues declined from $10.4 million in fiscal 2000
to $3.5 million due primarily to this safety alert.
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 with
automated liquid and sample handling for processing microtitration plates and
also uses Immucor's proprietary solid phase Capture(R) assays. The Company
introduced the system in 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.
On September 1, 1999, the Company entered into a manufacturing and
development agreement with Stratec Biomedical AG ("Stratec") with headquarters
in Germany. Under the terms of the agreement, Stratec will manufacture and
develop a fully automated analyzer known as the Galileo that will be initially
targeted to the European community utilizing the Company's Capture(R)
technology. 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
European distribution rights the Company must purchase 250 instruments over the
five year initial term of the agreement. If the Company purchases less than 250
instruments over the period it will be allowed to negotiate a good faith
extension.
European results for fiscal 2001 were adversely affected by the interrupted
supply of IMAGN 2000 reagents produced by Becton, Dickinson and Company. These
products were on a backorder status for the majority of this fiscal year and
caused sales to decline by approximately $1.0 million. On December 28, 2000, the
Company initiated arbitration against Becton, Dickinson and Company with the
American Arbitration Association. The Company's claims against Becton, Dickinson
and Company relate to a Distributor Agreement between the Company and Biometric
Imaging, Inc., and Becton, Dickinson and Company became a party to this
agreement when they acquired Biometric Imaging, Inc. in 1999. The Company sought
specific performance by Becton, Dickinson and Company of the Distributor
Agreement or, in the alternative, compensatory and punitive damages. On June 11,
2001, the company reached a settlement of the arbitration proceeding it had
initiated against Becton, Dickinson and Company. The settlement called for
Becton to pay Immucor, Inc. a total of $1.8 million, payable in two
installments. The first payment of $1.2 million was made on June 11, 2001 with
the second installment of $0.6 million payable not later than April 1, 2002.
This settlement represents a reimbursement for asset impairment and lost
profits. In return, Immucor agreed to give up its right to distribute the IMAGN
instrument and associated reagents in Italy and Portugal and to cooperate with
Becton in the transition of customers and product re-launch.
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 patient's red
blood cells.
Because of the critical importance of matching patient and donor blood,
compatibility testing procedures are generally performed by highly educated
technologists in hospitals, blood banks and laboratories. At present, with few
exceptions, these tests are performed manually using procedures which the
Company believes can be significantly improved using its instrumentation and
solid phase system to automate the testing procedures. See Products -- Blood
Bank Automation and Solid Phase Technology.
The Company believes that the worldwide market for traditional blood bank
reagents is approximately $320 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 and solid phase
testing systems 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 Technology. The
Company anticipates that automation will increase the available market for
traditional and automated reagents to $425 million while decreasing the overall
cost of blood testing by reducing the labor component by approximately $400
million.
Immucor Strategy
The Company's strategy is to further strengthen its competitive position in
the blood bank testing market by restructuring the market through automation of
the transfusion laboratory and to firmly establish Immucor as the world leader
in blood bank automation. In order to implement this strategy, the Company
intends to:
Maximize Instrument Placements. The Company's market research has been
unable to find another company that has filed an application for FDA clearance
of an automated blood bank device. Management estimates that Immucor should have
a two-to-three year window of opportunity to establish itself as the leading
blood bank device company in the United States. The Company's strategy is to
strengthen its leadership position in the automation of blood bank testing by
establishing a large base of installed instruments that future market entrants
must overcome. To facilitate instrument placements, the Company offers customers
a selection of automated analyzers, which address the various needs of low-,
medium-, and high-volume testing facilities. In order to satisfy the broad
spectrum of customers' operational and financial criteria, the Company intends
to continue to offer several instrument procurement options, including
third-party financing leases, direct sales and reagent rentals and to expand the
range and price points of its instrument offerings.
Substantial Market Price Adjustment. Over the past several years
manufacturers have been facing increased costs of manufacturing while during the
same period market prices for blood bank products have decreased. The Company
has begun to utilize its market leadership position in the United States to
realign its prices with its costs. The Company expects this adjustment will have
significant favorable impact on the Company's financial performance while adding
only slightly to the cost of a patient transfusion.
Maximize Revenue Stream Per Placement. Each instrument placed typically
provides the Company with a recurring revenue stream through the sale of
reagents and supplies. Immucor's family of blood bank testing systems operates
exclusively with the Company's proprietary reagent lines and Capture(R)
technology. Because these reagents have been developed for automated technology,
they command a premium price over traditional products. The average annual
revenue per placement is $18,000 to $100,000, depending on facility testing
volume. The Company also continues to develop new reagent applications and
upgrade system software and hardware in order to expand instrument test menus,
thereby increasing consumable usage per placement.
Develop New and Enhanced Products. Immucor continually seeks to improve
existing products and develop new ones to enhance its market share. The Company
has successfully introduced and commercialized the ABS2000, the ROSYS Plato and
the DIAS PLUS automated analyzers, all of which operate with Immucor's
proprietary solid phase Capture(R) assays.
Expand Intellectual Property Position. The Company seeks to expand its
intellectual property position by entering into strategic alliances, acquiring
rights of first refusal on future commercial developments and licensing existing
technologies.
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,
Serums (Coombs Serums) and antibody detection and 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.
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
Antibody-based Reagents blood cells.
Technical Proficiency Reagent tests used to determine technical profici-
Systems ency 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 cytomegalo-
virus.
Capture-S(R) Used for the detection of antilipid antibodies for
syphilis screening.
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.
Rh (D) Immune Globulin Administered by injection once during and once
(Human) 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.
Infectious Diseases Diagnosis of certain infectious diseases by the
methods of ELISA, Immunofluorescence and Latex
Slide Tests.
Clinical Chemistry Blood analysis and pathological testing.
Product Group Principal Use (continued)
Immunofluorescent Used in clinical research to identify rare cell
Monoclonal Antibodies surface antigens.
Automated Microtitration Instruments providing laboratories automated batch
Plate Processors and processing and positive sample identification of
Liquid Handlers routine blood donor tests.
Microtitration Plate Instrument that reads and interprets test results of
Reader Immucor's proprietary Capture(R) products.
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, clinical reference laboratories and large
hospital transfusion laboratories with 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 with 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, large hospital transfusion laboratories and large
reference laboratories.
Laboratory Equipment. Immucor also distributes laboratory equipment
designed to automate certain blood testing procedures and used in conjunction
with the Company's Capture(R) product.
Proprietary Technology
Under current agglutination blood testing techniques, the technologist
mixes serum with red blood cells in a test tube, performs several additional
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, when the mixture remains in a fluid state, it is sometimes difficult
for the technologist to determine whether a 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 manual
agglutination 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 blood testing system
improves test results and reduces 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-S(R)
and the Company's ongoing research, the Company believes that solid phase test
results, in batch test mode, 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-S(R). 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.
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 in the U.S., whose specific duties are improving
existing products and developing new products for the Company's existing and
potential customers. The Company also has established relationships with other
individuals and institutions that provide similar services and the Company
expects that it will continue to form and maintain such relationships. The
Company intends to continue focusing its product development efforts primarily
in the areas of blood bank automation 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, 2001, 2000 and 1999, the Company
spent $1,893,600, $2,002,600 and $1,293,600, 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 nine-year period ending May 31, 2001
the Company has invested $6.6 million in instrument research and development
principally under research contracts with Bio-Tek, Stratec 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., combining Immucor's reagent
manufacturing expertise with Bio-Tek's medical instrumentation expertise to
develop an automated, "walk-away", blood bank analyzer, the ABS2000. Bio-Tek has
been responsible for engineering, software development and manufacturing. The
Company announced clearance to market the ABS2000 in the U.S. from the FDA on
July 6, 1998 and continues to develop system software/hardware upgrades to add
additional tests to its menu, increase ease of use, improve throughput and add
stat testing capabilities. Second generation ABS2000 software is currently under
review by the FDA. In June 2000 isolated performance issues arose at certain
ABS2000 installations that resulted in mistypings not directly affecting any
patient transfusions. The Company issued a safety notification, requesting
customers to confirm ABS2000 results with manual backup testing until the cause
of the difficulty was identified and corrected. The Company believes it has
identified the factors that caused the performance issues and submitted this
information to the FDA. On December 6, 2000, with the FDA's approval, the safety
notification for antibody screening and crossmatch assays was removed. Customers
no longer have to perform manual backup tests for either of these procedures. In
addition to this, the Company's corrective action plan for blood grouping was
accepted by the FDA and in connection with the plan, a special 510(k) was
submitted to the FDA. The plan called for Company service engineers to complete
field corrective action on the ABS2000 and to accumulate clinical data for group
and type assays for selected customers. The Company has completed these tasks
and has submitted data to the FDA for expedited review. Upon clearance by the
FDA, the safety alert for group and type assays will be lifted. We cannot
predict how long it will take to resolve these issues with the FDA. See also,
Management's Discussion and Analysis--Liquidity and Capital Resources.
On September 1, 1999, the Company entered into a manufacturing and
development agreement with Stratec Biomedical AG ("Stratec") with headquarters
in Germany. Under the terms of the agreement, Stratec will manufacture and
develop a fully automated analyzer known as the Galileo that will be initially
targeted to the European community utilizing the Company's Capture(R)
technology. 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
European distribution rights the Company must purchase 250 instruments over the
five year initial term of the agreement. If the Company purchases less than 250
instruments over the period it will be allowed to negotiate a good faith
extension. Planned capital expenditures for fiscal 2002 include approximately
$1,173,000 for final stage development and introduction of the Galileo fully
automated analyzer. The Company expects to launch the Galileo in the European
market late in calendar 2001.
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.
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 its
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 Dominion, the Company's Canadian
subsidiary.
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 single customer purchases in excess of
5% of the Company's current annual 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 increased its market share through the
successful implementation of its acquisition strategy (see Item 1. - Business).
The Company believes it is now the market leader in North America. In addition,
the Company seeks to continue to increase its worldwide 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 and solid phase technology.
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, and Belgium. 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 and/or individuals with
previous success in laboratory instrument reagent sales. To effect the smooth
transition to a systems company, the Company conducted extensive capital sales
training of its existing sales force and added specialized capital sales
representatives to the organization. Continuing technical support and service is
also provided to customers through the Company's Consultation Laboratory, which
was significantly strengthened with the acquisition of Gamma in October 1998.
The Consultation Laboratory assists the Company's customers in identifying
certain blood group antibodies that 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, 2001, 2000 and
1999, the Company had foreign net sales, including net domestic export sales to
unaffiliated customers, of approximately $31,255,000, $35,147,000, $30,241,000,
respectively. These sales accounted for approximately 45%, 46%, and 51% of the
Company's total net sales for the respective fiscal years. During the years
ended May 31, 2001, 2000 and 1999, the Company's U.S. operations made net export
sales to unaffiliated customers of approximately $5,782,000, $6,712,000, and
$5,558,000, respectively. Most of the Company's foreign sales occurred in Europe
and Canada where the Company maintains subsidiaries. The Company's German
operation made net export sales to unaffiliated customers of $1,093,000,
$1,515,000 and $1,309,000 for the years ended May 31, 2001, 2000, and 1999,
respectively. The Company's Canadian operation made net export sales to
unaffiliated customers of $2,361,000, $2,224,000 and $2,542,000 for the years
ending May 31, 2001, 2000, and 1999, respectively. The Company's Italian
operation made sales in Italy of $5,600,000, $6,656,000, and $6,804,000 for the
years ending May 31, 2001, 2000, and 1999, respectively. Please refer to Note 14
to our audited financial statements for revenue and profit information for each
of our last three fiscal years attributable to the different geographic areas in
which we do business. Fluctuations in foreign exchange rates, principally with
the U.S. dollar versus the Euro, could impact operating results when
translations of the Company's subsidiaries' financial statements are made in
accordance with current accounting guidelines. For the two-year period ending
May 31, 2001 sales declined $4.8 million due to the exchange fluctuation of the
Euro.
Suppliers
The Company obtains raw materials from numerous outside suppliers. The
Company is not dependent on any single supplier, except for certain
manufacturers of instrumentation, including Lionheart Technologies Inc. for the
ABS2000, Dynex Technologies Inc. for the DIAS Plus, and ROSYS Anthos AG for the
ROSYS Plato (see Note 13 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 or 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 a sufficient
supply of such blood will always be available to the Company.
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 that generally include licensing, product
testing, facilities compliance, product labeling, and consumer disclosure (see
Industry). 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. The
Company operates under U.S. Government Establishment License No. 886 granted by
the FDA in December 1982 to the Company and U.S. Government Establishment
License No. 435, granted by the National Institutes of Health in 1971 to Gamma
Biologicals, Inc.
On March 9, 2000, Dominion Biologicals Limited received a letter from the
FDA detailing deficiencies found in the most recent inspection and providing
notice that unless the company demonstrated or achieved compliance with
applicable regulations the FDA would begin action to revoke the Establishment
License. In reviewing the cost of bringing the facility to current standard and
in view that the licensed product generated less than $200,000 in annual
revenues the Company, on March 20, 2000, voluntarily surrendered its U.S.
Government Establishment License No. 1151 granted by the FDA in May 1992. On
June 20, 2000, the FDA revoked said license.
On April 13, 2000, Gamma Biologicals, Inc. received a letter from the FDA
detailing deficiencies found in the most recent inspection and providing notice
that unless the company demonstrated or achieved compliance with applicable
regulations the FDA would begin action to revoke the Establishment License. The
Company responded to the FDA on May 15, 2000, with a detailed plan to bring the
Houston facility to current standard. The FDA advised the Company, on July 14,
2000 that its proposed corrective action plan was satisfactory. During fiscal
2001, the Company funded approximately $500,000 of capital improvements
necessary to meet FDA quality requirements and expand manufacturing operations
at its Houston facility. As a follow-up the FDA performed a non-voluntary
inspection beginning December 27, 2000, and reported only minor observations for
management consideration.
Immucor, Inc. received a warning letter dated May 3, 2000, detailing
deficiencies found during the January 10-25, 2000, FDA inspection of the
Norcross facility. The Company responded to the FDA on May 19, 2000 with a
detailed plan to bring the facility into compliance. The FDA advised the Company
on July 14, 2000, that its proposed corrective action plan was satisfactory. The
FDA performed a non-voluntary inspection beginning October 24, 2000, and
reported several observations. Management responded with corrective actions to
be taken to the FDA observations.
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 the 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, 2001, 2000 and 1999 the Company paid royalties of approximately $435,200,
$409,300, and $411,100 under this agreement. See Note 12 to the Consolidated
Financial Statements.
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", and "Capture-CMV". Dominion Biologicals, Limited has
registered the trademark "NOVACLONE". Gamma Biologicals, Inc. has registered the
trademark "Gamma" and several product names including "RQC", "ELU-Kit", "Quin",
"EGA-Kit", "RiSE", "Tech-Chek", and "SegmentSampler".
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
Competition is based on quality of product, price, the talent of sales
forces, ability to furnish a range of existing and new products, customer
services and continuity of product supply. During the past several years, the
industry has experienced aggressive price competition, particularly among
manufacturers that target large hospitals and institutions as key customers. In
spite of this competitive environment, the Company has maintained its worldwide
sales and increased its domestic reagent market share. Management believes that
this is due to the Company's emphasis on product quality, the introduction of
new products, specialty products, customer service and training. With the
Company's fiscal 1999 purchases of Gamma and the assets of the BCA blood bank
division of Biopool International, Inc., the Company believes that
Ortho-Clinical Diagnostics, a Johnson & Johnson company, is now its sole
competitor with licenses to manufacture a complete line of blood banking
reagents in the United States. The Company believes that it became the North
American market leader in terms of sales during fiscal 1999.
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 than the Company and may have greater financial and other
resources than the Company. Diamed has a larger global market share 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) 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 31, 2001, the Company and its subsidiaries had a total of 419
employees.
At July 31, 2001, the Company had 274 full time employees in the U.S., of
whom 40 were in sales and marketing, 200 were in manufacturing, research and
distribution, and 34 were in administration.
At July 31, 2001, in Germany, Portugal, Italy, Spain, Canada, France, and
Belgium, the Company had 145 full-time employees, of whom 74 were in sales and
marketing, 41 were in research, distribution and administration and 30 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 81,000 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, 2001 were $536,000.
The term of the lease is for a six-year period ending August 2005 with a right
to renew for an additional five years. The Company owns a 41,000 square foot
building on a three-acre tract of land in northwest Houston, which is used
primarily for manufacturing and shipping.
In Germany, the Company leases 1,566 square meters near Frankfurt. Rent
expense for the fiscal year ended May 31, 2001 totaled $165,000. The term of the
lease in Germany is through April 2009. In Italy rent expense for the fiscal
year ended May 31, 2001 totaled $51,000 for 650 square meters. The Company has
five separate lease agreements for the facility in Italy with terms expiring
between May 2002 and October 2006. In Portugal, the Company leases 120 square
meters of office space and rent expense for the fiscal year ended May 31, 2001
was $14,300. In Spain, the Company leases 165 square meters of office space and
rent expense for the fiscal year ended May 31, 2001 was $67,000. In the
Netherlands, the Company leased 232 square meters of office and warehouse space
near Amsterdam. Rent expense for the fiscal year ended May 31, 2001 totaled
$30,300. The Netherlands facility was officially closed as of May 31, 2001. 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, 2001 totaled
$13,000. In Belgium, the Company owns land and a 575 square meter building
subject to a first lien mortgage. In Canada, the Company owns the facility. 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.
No material proceedings are pending against the Company, and no similar
proceedings are known by the Company to be contemplated by governmental
authorities.
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 31, 2001 $ 4.800 $ 2.480
Fiscal Year Ended May 31, 2001
First Quarter $8.313 $3.438
Second Quarter 5.438 3.000
Third Quarter 4.406 2.688
Fourth Quarter 4.219 2.200
Fiscal Year Ended May 31, 2000
First Quarter $18.875 $11.500
Second Quarter 16.875 11.000
Third Quarter 15.313 11.250
Fourth Quarter 15.000 7.500
As of July 31, 2001, there were 366 holders of record of the Company's
Common Stock. The last reported sales price of the Common Stock on such date was
$3.470.
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)
Year Ended May 31,
---------------------------------------------------------------------------------
2001 2000 1999 (2) 1998 1997 (1)
Net sales $69,438 $76,541 $59,525 $39,790 $35,653
Cost of sales 38,086 36,408 27,551 18,168 15,055
--------------- -------------- -------------- --------------- --------------
Gross profit 31,352 40,133 31,974 21,622 20,598
--------------- -------------- -------------- --------------- --------------
Operating expenses:
Research and development 1,894 2,003 1,294 971 907
Selling, general, and administrative 33,582 30,771 23,812 16,918 16,647
Merger-related expenses - - 559 - -
--------------- -------------- -------------- --------------- --------------
Total operating expenses 35,476 32,774 25,665 17,889 17,554
--------------- -------------- -------------- --------------- --------------
(Loss) income from operations (4,124) 7,359 6,309 3,733 3,044
--------------- -------------- -------------- --------------- --------------
Other:
Interest income 58 31 313 789 848
Interest expense (3,747) (2,911) (1,416) (616) (486)
Other 229 231 202 (27) (264)
--------------- -------------- -------------- --------------- --------------
Total other (3,460) (2,649) (901) 146 98
--------------- -------------- -------------- --------------- --------------
(Loss) income before income taxes (7,584) 4,710 5,408 3,879 3,142
Income taxes 465 1,898 1,847 1,810 1,302
--------------- -------------- -------------- --------------- --------------
Net (loss) income $ (8,049) $ 2,812 $ 3,561 $ 2,069 $ 1,840
=============== ============== ============== =============== ==============
(Loss) income per share:
Basic $(1.10) $0.36 $0.47 $0.26 $0.23
=============== ============== ============== =============== ==============
Diluted $(1.10) $0.33 $0.45 $0.25 $0.22
=============== ============== ============== =============== ==============
Weighted average shares outstanding
Basic 7,286 7,713 7,646 8,095 8,066
=============== ============== ============== =============== ==============
Diluted 7,286 8,520 7,959 8,443 8,535
=============== ============== ============== =============== ==============
Balance Sheet Data:
Working capital $ 20,823 $ 21,868 $ 21,141 $ 32,948 $ 31,868
Total assets 95,813 102,775 99,734 57,544 57,726
Long-term debt, less current portion 39,738 34,815 31,548 8,912 10,666
Retained earnings 20,262 28,311 25,499 21,938 19,869
Shareholders' equity 29,843 40,919 40,053 42,433 41,221
(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.
Item 7.--Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Any statements contained anywhere herein that are not statements of
historical fact are forward-looking statements as that term is defined in the
Private Securities Reform Act of 1995, including, without limitation, statements
concerning the Company's expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this discussion
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.
Specifically, the statements regarding the Company's estimated return to
profitability, the effectiveness of the cost reduction plan, the Company's
ability to obtain junior capital, and the regulatory costs related to the
ABS2000 are forward-looking statements. A number of factors could adversely
affect our ability to achieve these things, such as delays in FDA clearance of
the ABS2000 safety notification for blood grouping, the decision of customers to
defer capital spending, increased competition in the sale of instruments and
reagents, our ability to maintain adequate working capital considering recent
Company performance, changes in interest rates and general economic conditions.
In addition, the strengthening of the dollar versus the Euro would adversely
impact reported European results.
(a) Liquidity and Capital Resources
Net cash provided by operating activities totaled $2,055,000, $6,024,100,
and $5,985,100 for the fiscal years 2001, 2000 and 1999, respectively. As of May
31, 2001, the Company's cash and cash equivalents balance totaled $3.1 million.
For the year the Company had a net increase in borrowings on long-term debt and
capital lease obligations of $5.8 million to fund capital improvements of
approximately $500,000 necessary to meet FDA quality requirements, to repay
approximately $3.1 million in U.S. and German debt and to repurchase $1.5
million of the Company's common stock.
During the third quarter the Company revised its loan agreement with its
primary lender, restructuring the loan covenants and debt repayment schedule.
Borrowings under the new loan agreement and related lines of credit which
totaled $29.4 million, including loan fees of $220,000, were used to retire
borrowings under the old loan of $26.0 million and repay $1.2 million on the
existing German subsidiary loan. The Company incurred higher borrowing costs to
renegotiate the loan. Interest rates have increased to LIBOR plus additional
percentage points ranging from 2.0% to 3.75% based on certain calculations as
defined in the Loan Agreement that were formerly LIBOR plus 0.5% to 1.4%. In
connection with the Company's new agreement with its principal lender, the
Company granted its principal lender a security interest in substantially all of
the Company's assets in addition to other security. Additionally, the new loan
agreement contains certain financial and other covenants which, among other
things, limit annual capital expenditures, prevent payment of dividends or the
repurchase of stock, limit the incurrence of additional debt, and require the
maintenance of certain financial ratios.
Under the new agreement Term Loan A (as such loan is described in the loan
agreement with our primary lender) for $20,000,000 will be repaid in quarterly
installments of increasing amounts through December 2005. The balance of the
Canadian term loan ($3,827,333 CDN$) will continue with equal quarterly
principal installments plus interest through December 2002. A temporary line of
credit of $2,000,000 is due October 2001. Retirement of the temporary line of
credit is expected to be funded by operating cash flows. Three lines of credit,
one for the US amounting to $7,000,000, one for Canada amounting to $4,035,670
($6,200,000 CDN$) and one for Germany amounting to $2,335,851 (5,400,000 DM)
mature in February 2003. These borrowings bear interest at LIBOR plus additional
percentage points ranging from 2.0% to 3.25% based on certain calculations as
defined in the Loan Agreement. At the inception of the original acquisition term
note, 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 Term Loan A's floating rate
to a fixed rate of 5.33% on the principal balance of $15,000,000. The fair value
of the interest rate swap agreement was $(87,321) at May 31, 2001. At the
inception of the original Canadian revolving line of credit, the Company
simultaneously entered into an interest rate swap agreement with a notional
amount of $2,338,166 ($3,500,000 CDN$). This transaction effectively converts
the revolver's floating rate to a fixed rate of 6.6375% on the principal balance
of $2,338,166. The fair value of the interest rate swap agreement was $(41,619)
at May 31, 2001. Term Loan B for $6,000,000 will be due in full in December
2005. Term Loan B bears interest at LIBOR plus additional percentage points
ranging from 2.5% to 3.75% based on certain calculations as defined in the Loan
Agreement.
As of May 31, 2001 the Company had paid all principal and interest payments
under the loan agreement. But as a result of the nonrecurring charges to
earnings, recent losses, and other factors, the Company was not in compliance
with covenants in its agreement with its principal lender requiring the Company
to maintain specified ratios of (i) fixed charge coverage, (ii) funded debt to
EBITDA (earnings before interest, taxes, depreciation, and amortization), (iii)
leverage, and (iv) interest coverage. The Company's non-compliance with the
leverage ratio covenant was also affected by the Company's write-down of
goodwill related to its Belgian and French operations--see Management's
Discussion and Analysis--Operating Expenses. These covenant violations impacted
all of the Company's outstanding term loans and lines-of-credit.
On September 6, 2001 the Company successfully completed negotiations with
its primary lender to issue a waiver of covenant defaults and to reset the loan
covenants for the next four quarters in the Loan Agreement dated February 23,
2001. A waiver fee of $750,000 will be paid in twelve equal monthly payments
beginning September 30, 2001. Any remaining balance will be paid upon receipt of
junior capital. The interest rate on the revolving lines of credit and Term Loan
A will be prime plus 0.50% and the interest rate on Term Loan B will be prime
plus 2.00%. The Company is required to meet quarterly and cumulative EBITDA
covenants in addition to quarterly senior funded debt to EBITDA ratios. Once the
Company's trailing twelve-month Senior Funded Debt to EBITDA reaches 2.50 to 1
or less the Company will revert back to the pricing matrix as stated in the Loan
Agreement.
An additional requirement of the waiver is that the Company successfully
obtain a minimum of $5.0 million in junior capital by December 31, 2001. If the
Company is not successful, the lender will earn an additional fee of $450,000
payable in twelve equal monthly installments beginning January 31, 2002. The
lender will also fully earn warrants to purchase 750,000 shares of Immucor, Inc.
stock issued at the then current market price of the stock. If the Company meets
all of its quarterly EBITDA covenants and no other events of default are then
occurring, the lender will return a portion of the warrants to the Company based
on when the Company raises the junior capital after December 31, 2001.
Specifically, 562,500 warrants would be returned if the $5.0 million of junior
capital is raised by January 31, 2002, 375,000 warrants would be returned if the
$5.0 million of junior capital is raised by February 28, 2002, and 187,500
warrants would be returned if the $5.0 million of junior capital is raised by
March 31, 2002. If the junior capital is not received by December 31, 2001, then
the revolving lines of credit and Term Note A would be re-priced at prime plus
2.0% and Term Note B would be re-priced at prime plus 4.0% until the junior
capital is received. If the junior capital is not received by April 30, 2002,
all existing credit facilities would be reset to mature on February 28, 2003.
The FDA agreed to lift the ABS2000 safety notification for antibody
screening and crossmatch assay in December 2000, but due to delays in the
completion of the corrective action plan for blood grouping assay on the ABS
2000, instrument sales have not increased as previously expected. Instead,
instrument sales were reduced the entire fiscal year. The Company's corrective
action plan for blood grouping has been accepted by the FDA. In connection with
the plan, a special 510(k) was submitted to the FDA. The plan called for Company
service engineers to complete field corrective action on the ABS2000 and to
accumulate clinical data for group and type assays for selected customers. The
Company has completed these tasks and has submitted data to the FDA for
expedited review. Reduced instrument sales together with costs relating to
additional safety procedures and customer concessions related to the FDA safety
notification have been a drain on the Company's working capital rather than a
source of working capital as in past periods. Before December, the Company
supplied product to the ABS2000 customers free of charge to perform their backup
tests. The Company expensed approximately $275,000 to cost of sales for these
product supplies. Since December, the Company has charged for these products
which is expected to improve cash flows for fiscal 2002. See Item I--Business.
For fiscal 2001, the Company experienced a $1.65 million, or 2.5%, increase
in sales of its core reagent products. The Company expects this trend to
continue for fiscal 2002 with the addition of a large purchasing group that will
bring an additional $2.5 million in revenues. The Company launched an aggressive
reagent price increase in the third quarter that improved revenues by
approximately $0.45 million for fiscal 2001, and is expected to continue
improving sales by $8.0 million, or 12%, and profits while only adding minor
increases to the overall cost of patient care. In fiscal 2002 the Company
expects a larger revenue effect as the cycle of contract renewal is completed.
These revenue improvements are expected to have a likewise effect on cash flow
from operations. However, unforeseen factors may cause revenues to be less than
expected.
In the fourth quarter, the Company implemented a cost savings plan to
generate liquidity and return to profitability in future quarters. The plan is
expected to reduce costs over $3.0 million annually through layoffs, the closure
of operations in the Netherlands and curtailed spending. Officers of the Company
agreed to a salary reduction, which approximated an average of eight percent of
their total base compensation. Layoffs are projected to provide approximately
$2.0 million in savings, while the remainder of the savings are to be achieved
through a reduction in programs and the closure of the Dutch operations. In the
third quarter the Company recorded approximately $1.3 million in nonrecurring
expenses related to the implementation of the plan. The balance of the fourth
quarter realized savings in operating expenses of approximately $180,000, or
2.3% over the third quarter, with the implementation of the plan.
In fiscal 1998, the Company authorized a program to repurchase up to 10% of
its common stock in the open market. During fiscal 2001, 2000 and 1999, the
Company repurchased 184,500, 415,500 and 822,800 shares of its common stock for
approximately $1.5, $3.5 and $7.4 million, respectively. The Company is
restricted from the repurchase of additional shares under debt covenants of the
current loan agreement.
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 27, 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 $27,859,500. The Company has made severance payments related to the
acquisition in the amount of $2,473,000.
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.
On April 30, 1999 the Company purchased certain assets of the BCA blood
bank division of Biopool International, Inc. for approximately $4.5 million.
During fiscal 2001, the Company funded approximately $500,000 of capital
improvements necessary to meet FDA quality requirements and expand manufacturing
operations at its Houston facility. See Item I, Business--Regulation of
Business. Also, the Company increased its investment in the enterprise software
system by implementing improvements on June 1, 2001 of $950,000, including
$135,000 in capitalized interest.
Planned capital expenditures for fiscal 2002 include approximately
$1,173,000 for final stage development and introduction of the Galileo fully
automated analyzer. The Company expects to launch the Galileo in the European
market late in calendar 2001. Additionally, the Company has budgeted $500,000
for manufacturing improvements at its Norcross and Houston facilities during
fiscal 2002.
The Company's Italian and Spanish subsidiaries had approximately $2,047,000
in borrowings under lines of credit as of May 31, 2001 with an additional
$436,000 available. The Belgian subsidiary had $667,000 in line of credit
agreements at May 31, 2001 with an additional $297,000 available. There are no
additional funds available under the U.S. and German lines of credit and $64,000
available under the Canadian line of credit. The Company has nearly exhausted
its borrowing capacity. Alternative sources of financing include the issuance of
various forms of equity and high-yield debentures. If additional capital is
raised through the issuance of equity or securities convertible into equity, our
stockholders may experience dilution, and such securities may have rights,
preferences or privileges senior to those of the holders of common stock.
However, Management expects that the projected savings from the cost savings
plan, revenue generated from reagent price increases, cash and cash equivalents
and internally generated funds will be sufficient to support operations and
planned capital expenditures for the next 12 months. In addition, Management
believes that most capital expenditures planned for the next 12 months can be
delayed in the event capital resources become inadequate.
(b) Results of Operations
Comparison of Years Ended May 31, 2001 and May 31, 2000
Net sales
Total sales declined to $69.4 million in fiscal 2001 from $76.5 million in
fiscal 2000. Instrument sales, $3.5 million compared to $10.4 million recorded
for the prior year, reflect delays in customers accepting instruments. During
June 2000 isolated performance issues were experienced by certain ABS2000
customers. The Company took a prudent approach and issued a safety notification,
requesting customers to confirm ABS2000 results until the cause of the
difficulty was corrected. On December 6, 2000, the Company removed the safety
alert for the antibody screening and crossmatch assays performed on the ABS2000,
however, the safety alert remains in place for blood grouping assays. The
Company's corrective action plan for blood grouping was accepted by the FDA and
the Company has implemented this plan. These performance issues may result in
further delays in customers accepting instruments, which would further adversely
impact sales and earnings. For the year, the Company has issued credits reducing
sales by $0.76 million for returned instruments and has a reserve of $0.13
million remaining for possible future returns. The Company has an installed
instrument backlog of $0.7 million of unbilled revenue awaiting customer
acceptance.
The strength of the U.S. dollar versus the Euro had the effect of reducing
reported European sales by approximately $2.4 million compared to the prior
year. Italian and Portuguese revenues were also adversely affected by the
interrupted supply of IMAGN 2000 reagents of approximately $1.0 million. See
Item 1, -- Business. The revenue fall was mitigated by $2.3 million in revenue
improvements. First, the Company experienced a $1.65 million, or 2.5%,
increase in sales of its core reagent products. The Company expects this trend
to continue for fiscal 2002. Secondly, the Company launched an aggressive
reagent price increase in the third quarter that improved revenues by
approximately $0.45 million for fiscal 2001, is expected to continue improving
sales by $8.0 million, or 12%, and profits while only adding minor increases to
the overall cost of patient care. The Company expects to experience a larger
revenue effect as the cycle of contract renewal is completed. Last of all, late
in the fiscal year the Company renewed important national account purchasing
agreements at higher prices and added a new national account with a significant
number of hospitals at prices that will bring an additional $2.5 million in
revenues. The Company realized $0.2 million in additional sales from the new
national account in fiscal 2001. Unforeseen factors may cause revenues to be
less than expected.
Gross profit
Gross profit, as a percentage of sales, totaled 45.2% for the year ended
May 31, 2001 versus 52.4% for the year ended May 31, 2000; a decline of 7.2%.
Cost of sales increased by $1.7 million as compared to the prior year, despite
the decrease in sales. There were additional expenditures of $637,000 incurred
to resolve the ABS2000 issue, instrument backlog installation costs of $30,000
incurred in advance of revenue recognition, under-absorption of fixed
instrumentation support costs of $924,000, and reagents provided free of charge
to customers performing backup testing amounting to $275,000 that all
contributed to the negative impact on gross profit. All of these expenditures,
except the reagents provided free of charge, likely will continue until the
ABS2000 issue is resolved. Additionally, approximately $0.3 million of the
increase was caused by higher production costs due to increased FDA regulatory
requirements. Also, biological contamination and other isolated manufacturing
problems with certain production lots in the third quarter resulted in
additional manufacturing costs of approximately $0.2 million. The strength of
the U.S. dollar versus the Euro reduced European gross profit by $1.2 million.
Gross profit should improve for fiscal year 2002 with the reagent price increase
and additional revenue improvements described above. Unforeseen factors may
cause gross profit to be less than expected.
Operating expenses
When compared to the prior year, research and development costs, as a
percentage of sales, remained relatively constant. Instrument development
initiatives for the Galileo for the European market continue. The project is on
track for a launch in late calendar year 2001. The Galileo is designed to
fulfill the need in Europe for a high throughput blood serology-testing device
with a test menu that includes antibody screening.
Selling and marketing expenses decreased over $530,000, as compared to last
year. The Company was developing an infrastructure to support an increased level
of instrument sales, but in light of the current issues with the ABS2000 and
continued customer migration to purchasing groups, the Company reevaluated the
focus of the sales and marketing efforts. Of the over $4.0 million in projected
cost savings mentioned in Liquidity and Capital Resources, $1.7 million, or
nearly 50% of the savings are expected to be seen in this area. The fourth
quarter benefited from the initial cost reduction. The remainder of the savings
is expected to be realized in fiscal 2002.
Distribution expenses as a percentage of sales have increased from 7.8% to
8.2% for fiscal 2001 as compared to the prior year, although costs decreased
approximately $300,000, due primarily to a $324,000 decrease in domestic
shipping expense. Approximately 40% of the domestic decrease was attributable to
volume discounts offered by carriers and reduced overnight shipments.
Consolidated shipments of core reagent products continued at or above historical
levels. The decrease in sales in the current period was due primarily to the
impact of the ABS2000 safety alert and the strength of the U.S. dollar. Neither
factor had a significant impact on distribution activities.
The major portion of the nonrecurring expenses related to the
implementation of the cost savings plan was classified as general and
administrative. Of the $1.3 million in nonrecurring expenses, $1.1 million was
charged to general and administrative and was primarily related to severance.
Amortization expense remained relatively constant with the prior period.
Due to continued operating losses and a reorganization at the Company's
French and Belgian operations, an impairment in value of the goodwill related to
these acquisitions caused a non-cash charge to earnings of approximately $3.1
million. This charge amounts to $0.42 per share of the loss recorded this year
and will not recur.
Interest expense
When compared to the prior year, interest expense increased $836,000. This
is the result of increased borrowings and increased borrowing costs on long-term
debt and capitalized leases as outlined in Financial Condition and Liquidity.
Other income
Other income for the current year remained relatively constant as compared
to the prior year, and it is comprised primarily of foreign currency transaction
gains.
Income taxes
Income tax expense decreased during the year, as compared to the prior
year, due to the operating losses outlined above. Operating losses, for tax
purposes, will be used to offset future earnings as the Company returns to
profitability. During the fourth quarter, the Company elected to record a
valuation allowance in an amount equal to the net deferred tax assets of the
Company, amounting to $1.1 million. Effectively, this non-cash allowance
reflects the elimination of domestic deferred taxes as a balance sheet asset and
will have no impact on Immucor's ability to utilize these amounts to reduce
future taxes in profitable periods. Without the valuation allowance, the
Company's net loss per share was $0.03, compared with a loss of $0.09 per share
in the same period last year. With the valuation allowance, the Company's net
loss for the fourth quarter of this year was $0.19 per share.
Comparison of Years Ended May 31, 2000 and May 31, 1999
Net Sales
Net sales realized a 29% increase from $59,525,000 in fiscal 1999 to
$76,541,000 in fiscal 2000. Net sales from the operations of companies acquired
during fiscal 1999 accounted for $10,091,000, or 59%, of the sales increase
($8,041,000 from Gamma, and $2,051,000 from Medichim, Immunochim, and BCA).
Gamma product sales, on a pro forma basis, realized a 9% increase, or
$1,300,000. Blood bank automation products and reagent products used with
automation had a 61% increase of approximately $4,000,000 reinforcing the
Company's strategy to differentiate itself in the marketplace via
instrumentation. The remaining increase in sales of approximately $13,000,000 in
traditional reagents represents a 25% increase over fiscal 1999. The Company's
European operations increased sales by $2,926,000, of which $1,581,000 was a
result of the Company's acquisitions. Revenues of the Company's European
affiliates were adversely affected by the strength of the U.S. Dollar versus the
Euro, which caused a decrease in reported sales of approximately $2,400,000.
Gross profit
As a percent of sales revenue, the gross profit margin decreased from 54%
to 52%. The decrease was related to the $6,400,000 increase in sales of
instruments and the $10,091,000 sales increase related to fiscal 1999
acquisitions. Such sales carry lower gross margins than sales of other
proprietary products marketed by the Company. Additionally, the strength of the
U.S. Dollar versus the Euro reduced European gross margins by approximately
$1,102,400.
Operating expenses
When compared to the prior year, research and development costs increased
$709,000. This increase is due to development work the Company undertook with
Stratec Biomedical Systems AG to develop a fully automated instrument designed
to allow the Company to effectively compete in the European market.
Selling and marketing expenses for the year increased $1,779,000 as
compared to the prior fiscal year. Part of the increase was due to fiscal 1999
acquisitions, with Medichim and Immunochim accounting for $534,000. The
remainder of the increase is primarily due to higher payroll expense for
additional personnel required for the Company's instrumentation strategy, the
reorganization of the marketing organization of the German affiliate and
increased expenses for the expansion of the Company's Spanish operations.
Distribution expenses increased $2,318,000 when compared to last fiscal
year of which Gamma accounts for $1,047,000, and Medichim and Immunochim account
for $213,000. The remaining increase relates to increased shipping activity.
General and administrative expenses increased $2,073,000 over the previous
year, with additional personnel expenses to support the growth of the Company
through acquisitions and implementation of the new enterprise wide resource
planning (ERP) system to give management more timely and extensive information
on sales and operations. The Company also experienced increases in operating
costs such as rent, utilities and depreciation in connection with the Company's
expansion at its U.S. headquarters.
Amortization Expense
Amortization expense increased $788,000 due to the Company's acquisition of
Gamma, BCA, Medichim, Immunochim, and the Canadian distribution rights during
fiscal 1999.
Interest Income
Interest income decreased $282,000 for the year due to lower cash
balances as compared to last year caused by the fiscal 1999 acquisitions of
Gamma, Medichim and Immunochim, and BCA, which were partially funded with the
Company's cash.
Interest Expense
Interest expense increased from $1,416,000 in fiscal 1999 to $2,911,000 in
fiscal 2000 as a result of financing the acquisitions of Gamma, Medichim and
Immunochim, and BCA.
Other income(expense)
The increase in other income of $29,000 as compared to prior 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 2000, as compared to 1999, from 34% to 40%. The increase was the result
of minimum tax charges in Europe. These minimums became relevant during the year
as the strength of the U.S. dollar compared to the Euro caused local operating
profits to decline.
(c) Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, (FAS 133), Accounting for Derivative
Instruments and Hedging Activities. This statement provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. In July 1999, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 137, which deferred the
effective date of FAS 133 for one year. In June 2000, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 138, (FAS
138), Accounting for Certain Derivative Instruments and Certain Hedging
Activities-an amendment to FASB Statement No 133. This statement amended certain
provisions of FAS 133. Accordingly, the Company will adopt FAS 133, as amended
by FAS 138, effective the first quarter of fiscal 2002. Management believes this
statement will not have a material impact on the Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, (SAB 101) Revenue Recognition in Financial
Statements. SAB 101 summarizes the SEC Staff's views regarding the recognition
and reporting of revenues and certain transactions. The effective date of this
pronouncement was the fourth quarter of the fiscal year beginning after December
15, 1999. The Company has evaluated its current revenue recognition policy and
found it in compliance with the Staff Accounting Bulletin.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, collectively, the Statements. These
Statements drastically change the accounting for business combinations, goodwill
and intangible assets. Statement 141 eliminates the pooling-of-interests method
of accounting for business combinations except for qualifying business
combinations that were initiated prior to July 1, 2001. Statement 141 also
changes the criteria to recognize intangible assets apart from goodwill. Under
Statement 142, goodwill and indefinite lived intangible assets are no longer
amortized but are reviewed annually for impairment, or more frequently if
impairment indicators arise. Separable intangible assets that have finite lives
will continue to be amortized over their useful lives. The amortization
provisions of Statement 142 apply to goodwill and intangible assets acquired
after June 30, 2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, the amortization provisions of Statement 142 are
effective upon adoption of Statement 142. Pre-existing goodwill and intangibles
will be amortized during the transition period until adoption. Companies are
required to adopt Statement 142 in their fiscal year beginning after December
15, 2001. Early adoption is permitted for companies with fiscal years beginning
after March 15, 2001. The Company plans to adopt Statement 142 effective June 1,
2002. Goodwill will be tested for impairment at least annually using a two-step
process that will start with an estimation of the fair value. The first step
will screen for potential impairment, and the second step will measure the
amount of impairment, if any.
(d) 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. The Company does
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. The Company has entered
into interest rate swaps to effectively convert a portion of variable rate bank
debt into fixed rates. At May 31, 2001 and May 31, 2000, the Company had an
interest rate swap agreement in the Company's functional currency, maturing in
2005 with an aggregate notional principal amount of $15 million. At May 31, 2001
and May 31, 2000, the Company had an interest rate swap agreement in Canadian
dollars, maturing in December 2001 with an aggregate notional principal amount
of $2.4 million. The fair value of the interest rate swap agreements represents
the estimated receipts or payments that would be made to terminate the
agreements. At May 31, 2001 and May 31, 2000, the Company would have (paid)
received $(87,321) and $767,700, respectively, to terminate the agreement in the
Company's functional currency. At May 31, 2001 and May 31, 2000, the Company
would have (paid) received $(41,619) and $600, respectively, to terminate the
Canadian dollar agreement. See Note 4 to the Consolidated Financial Statements.
Foreign Currency. Operating income generated outside the United States was
17% in 2001, 43% in 2000 and 54% in 1999. Fluctuations in foreign exchange
rates, principally with the U.S. dollar versus the Euro, could impact operating
results when translations of the Company's 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 the Company's 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 2001, 2000, and 1999 the Company
recorded foreign currency transaction gains (losses) of approximately $(10,000),
$152,000, and $202,000, 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, 2001 and 2000
-Consolidated Statements of Operations for the Years Ended May 31, 2001,
2000 and 1999
-Consolidated Statements of Shareholders' Equity for the Years Ended
May 31, 2001, 2000 and 1999
-Consolidated Statements of Cash Flows for the Years Ended May 31, 2001,
2000 and 1999
-Notes to Consolidated Financial Statements
-Consolidated Financial Statement Schedule
REPORT OF INDEPENDENT AUDITORS
To Board of Directors and Shareholders
Immucor, Inc.
We have audited the accompanying consolidated balance sheets of Immucor, Inc.
(the "Company") as of May 31, 2001 and 2000 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended May 31, 2001. 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 auditing standards generally accepted
in the United States. 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, 2001 and 2000, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
May 31, 2001, in conformity with accounting principles generally accepted in the
United States. 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.
/s/ Ernst & Young LLP
Atlanta, Georgia
August 29, 2001, except for paragraph 6
of Note 17 as to which the date is
September 11, 2001
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------------
May 31,
------------------------------------------
ASSETS 2001 2000
CURRENT ASSETS:
Cash and cash equivalents $ 3,124,517 $ 3,505,926
Accounts receivable, trade (less allowance for doubtful accounts of $1,244,488 in
2001 and $1,164,582 in 2000) 21,167,490 21,726,062
Loan to officer 395,826 -
Inventories 15,668,637 16,813,239
Income taxes receivable 402,243 752,470
Deferred income taxes 631,797 902,409
Prepaid expenses and other 891,356 1,321,363
-------------------- --------------------
Total current assets 42,281,866 45,021,469
LONG-TERM INVESTMENT - At cost 1,000,000 1,000,000
PROPERTY, PLANT AND EQUIPMENT - Net 18,333,952 17,475,882
DEFERRED INCOME TAXES 1,525,936 1,120,238
OTHER ASSETS - Net 2,104,845 2,251,293
DEFERRED LICENSING COSTS - Net 1,652,102 2,044,850
EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED - Net 28,913,981 33,861,147
-------------------- --------------------
$95,812,682 $102,774,879
==================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
May 31,
-------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 2001 2000
CURRENT LIABILITIES:
Current portion of borrowings under bank line of credit agreements $ 2,417,121 $ 2,952,307
Current portion of long-term debt 5,563,363 4,277,598
Note payable to related party 349,654 -
Current portion of capital lease obligations 768,142 618,240
Accounts payable 8,647,066 9,442,977
Income taxes payable 23,102 74,715
Accrued salaries and wages 1,530,772 1,346,874
Deferred income taxes 98,308 164,243
Other accrued liabilities 3,561,676 4,276,554
--------------------- --------------------
Total current liabilities 22,959,204 23,153,508
BORROWINGS UNDER BANK LINE OF CREDIT AGREEMENTS 3,268,740 8,006,213
LONG-TERM DEBT 34,839,576 25,144,272
CAPITAL LEASE OBLIGATIONS 1,629,705 1,664,165
DEFERRED INCOME TAXES 3,119,402 3,062,331
OTHER LIABILITIES 152,588 825,592
SHAREHOLDERS' EQUITY:
Common stock - authorized 45,000,000 shares and 30,000,000 shares at
May 31, 2001 and May 31, 2000, respectively, $0.10 par value; issued and
outstanding 7,277,617 at May 31, 2001 and 7,462,118 at May 31, 2000 727,762 746,212
Additional paid-in capital 15,439,889 16,848,804
Retained earnings 20,261,628 28,310,741
Accumulated other comprehensive loss (6,585,812) (4,986,959)
--------------------- --------------------
Total shareholders' equity 29,843,467 40,918,798
--------------------- --------------------
$ 95,812,682 $ 102,774,879
===================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-----------------------------------------------------------------
2001 2000 1999
NET SALES $ 69,438,114 $ 76,540,476 $ 59,524,539
COST OF SALES 38,086,270 36,407,764 27,550,548
-------------------- -------------------- ---------------------
GROSS PROFIT 31,351,844 40,132,712 31,973,991
OPERATING EXPENSES:
Research and development 1,893,580 2,002,597 1,293,576
Selling and marketing 11,854,242 12,391,837 10,612,516
Distribution 5,659,707 5,966,178 3,648,456
General and administrative 11,107,861 10,533,826 8,460,525
Merger-related expenses - - 558,973
Loss on impairment of goodwill 3,062,519 - -
Amortization expense 1,897,582 1,879,049 1,091,278
-------------------- -------------------- ---------------------
35,475,491 32,773,487 25,665,324
-------------------- -------------------- ---------------------
(LOSS) INCOME FROM OPERATIONS (4,123,647) 7,359,225 6,308,667
OTHER:
Interest income 57,530 30,801 313,219
Interest expense (3,746,928) (2,911,029) (1,416,179)
Other, net 229,383 230,658 202,093
-------------------- -------------------- ---------------------
(3,460,015) (2,649,570) (900,867)
-------------------- -------------------- ---------------------
(LOSS) INCOME BEFORE INCOME TAXES (7,583,662) 4,709,655 5,407,800
INCOME TAXES 465,451 1,897,635 1,846,776
-------------------- -------------------- ---------------------
NET (LOSS) INCOME $ (8,049,113) $ 2,812,020 $ 3,561,024
==================== ==================== =====================
(LOSS) INCOME PER SHARE
Basic $(1.10) $0.36 $0.47
==================== ==================== =====================
Diluted $(1.10) $0.33 $0.45
==================== ==================== =====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Total
Common Stock Paid-In Retained Comprehensive Shareholders'
-------------------------
Shares Amount Capital Earnings Loss Equity
---------------------------------------------------------------------------------------
BALANCE, JUNE 1, 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
and other - - 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
Exercise of stock options and warrants 389,207 38,921 2,947,602 - - 2,986,523
Tax benefits related to stock options
and other - - 377,375 - - 377,375
Stock repurchase (415,500) (41,550) (3,422,058) - - (3,463,608)
Comprehensive income:
Foreign currency translation adjustment - - - - (1,846,179) (1,846,179)
Net income - - - 2,812,020 - 2,812,020
---------------------------------------------------------------------------------------
Total comprehensive income - - - 2,812,020 (1,846,179) 965,841
---------------------------------------------------------------------------------------
BALANCE, MAY 31, 2000 7,462,118 746,212 16,848,804 28,310,741 (4,986,959) 40,918,798
Tax benefits related to stock options
and other - - 57,348 - - 57,348
Stock repurchase (184,501) (18,450) (1,466,263) - - (1,484,713)
Comprehensive income:
Foreign currency translation adjustment - - - - (1,598,853) (1,598,853)
Net loss - - - (8,049,113) - (8,049,113)
---------------------------------------------------------------------------------------
Total comprehensive loss - - - (8,049,113) (1,598,853) (9,647,966)
---------------------------------------------------------------------------------------
BALANCE, MAY 31, 2001 7,277,617 $ 727,762 $ 15,439,889 $ 20,261,628 $ (6,585,812) $ 29,843,467
=======================================================================================
See notes to consolidated financial statements
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-----------------------------------------------------
2001 2000 1999
OPERATING ACTIVITIES:
Net (loss) income $(8,049,113) $2,812,020 $3,561,024
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization of property and equipment 4,228,545 2,936,615 2,215,848
Amortization of other assets and excess of cost over net
tangible assets acquired 1,897,582 1,879,049 1,091,278
Impairment of goodwill 3,062,519 - -
Deferred tax provision (143,950) 79,110 36,190
Changes in operating assets and liabilities, net of effects of
business acquisitions:
Accounts receivable, trade 558,572 (227,173) (2,382,232)
Accounts receivable from former officer and director - 140,946 554,484
Loan to officer (395,826) - -
Income taxes 358,633 370,222 (34,608)
Inventories 1,144,602 (1,228,317) (2,749,627)
Other current assets 528,254 (231,492) (767,083)
Accounts payable (795,911) (675,764) 2,383,200
Other current liabilities (336,232) 91,979 1,887,806
---------------- ----------------- ----------------
Total adjustments 10,104,117 3,212,081 2,424,111
---------------- ----------------- ----------------
Cash provided by operating activities 2,055,004 6,024,101 5,985,135
INVESTING ACTIVITIES:
Purchases of / deposits on property and equipment (5,522,107) (3,418,430) (3,129,404)
Cash paid for acquisition, net of cash acquired - (523,682) (32,571,040)
Acquisition-related severance - (85,960) (2,387,449)
Increase in other assets - (258,972) (2,709,599)
---------------- ----------------- ----------------
Cash used in investing activities $(5,522,107) $(4,287,044) $(40,797,492)
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-------------------------------------------------------------
2001 2000 1999
FINANCING ACTIVITIES:
Borrowings net of repayments under line of credit agreements $ 2,058,297 $ 555,068 $ 5,379,103
Proceeds from issuance of long term debt 33,786,131 7,474,196 24,131,114
Repayment of long-term debt and capital lease obligations (30,349,314) (5,362,814) (1,737,409)
Borrowings (repayments) of long-term debt to related party-net 349,654 (1,633,947) -
Exercise of stock options - 2,986,523 1,684,472
Stock repurchases (1,484,713) (3,463,608) (7,375,950)
------------------- ------------------- -------------------
Cash provided by financing activities 4,360,055 555,418 22,081,330
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,274,361) (1,580,141) (291,598)
------------------- ------------------- -------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (381,409) 712,334 (13,022,625)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,505,926 2,793,592 15,816,217
------------------- ------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,124,517 $ 3,505,926 $ 2,793,592
=================== =================== ===================
Noncash investing and financing activities:
Capital lease obligations $ 710,129 $ 1,644,737 $ 435,400
Fair value of assets acquired - (1,019,453) 25,463,127
Cost in excess of assets acquired - 1,576,920 23,207,232
Liabilities assumed - (33,785) (15,789,319)
Notes and warrants / options issued for assets acquired - - (310,000)
------------------- ------------------- -------------------
Net cash paid for acquisition, net of cash acquired $ - $ 523,682 $ 32,571,040
=================== =================== ===================
CASH PAID DURING THE YEAR FOR:
Interest, net of amounts capitalized of $135,000 in 2001 $ 3,981,977 $ 2,886,256 $ 1,270,147
Income taxes 381,133 1,225,635 1,459,500
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 to the current year presentation.
Concentration of Credit Risk - At May 31, 2001 and 2000 the Company's
entire cash balance of $3,124,517 and $3,505,926, respectively, was on
deposit with high quality financial institutions, located primarily in the
U.S.
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 13) and the joint manufacturer of
some of the Company's monoclonal antibody-based products. The Company
believes that its business relationships with suppliers are excellent.
Certain of the Company's products are derived from blood having particular
or rare combinations of antibodies or antigens that 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.
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 13) 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, 2001 and 2000 market rates for
similar debt instruments. Prior to the adoption of Statement of Financial
Accounting Standards No. 133, (SFAS 133), the fair value of the interest
rate swaps are not recognized in the financial statements.
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 for cell lines acquired
in the purchase of Gamma Biologicals, Inc. Once a product is developed from
a cell line, 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, 2001 and 2000 was $690,900
and $445,600, 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, 2001 and 2000 was $5,444,000 and $4,471,300 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. In February
2001, due to continued operating losses and a reorganization of the
Company's French and Belgian operations, an impairment in value of the
goodwill related to these acquisitions caused a non-cash, nonrecurring
impact on earnings of approximately $3.1 million. The Company believes that
the carrying value of the remaining recorded long-lived assets 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 operations.
Revenue Recognition - Revenue from the sale of the Company's reagents is
recognized upon shipment. Revenue from the sale of the Company's medical
instruments is recognized upon shipment and completion of contract
obligations relating to training and/or installation based on terms of the
related agreements. Revenue from rentals of the Company's medical
instruments is recognized over the life of the rental agreement.
Shipping and Handling Revenues and Costs - The amounts charged customers
for shipping and handling of orders are classified as revenue and reported
in the statement of operations as net sales as invoiced. The cost of
handling customer orders and the cost of shipments are reported in the
operating cost section of the statement of operations as distribution
expense as incurred. The cost of handling customer orders and the cost of
shipments were $5,659,000, $5,966,000 and $3,648,000 for the years ended
May 31, 2001, 2000 and 1999, respectively.
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 May 31, 1995 under the fair value method of that
statement (see Note 8).
Impact of Recently Issued Accounting Standards - In June 1998, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, (FAS 133), Accounting for Derivative
Instruments and Hedging Activities. This statement provides a comprehensive
and consistent standard for the recognition and measurement of derivatives
and hedging activities. In June 2000, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 138, (FAS
138), Accounting for Certain Derivative Instruments and Certain Hedging
Activities-an Amendment to FASB Statement No 133. This statement amended
certain provisions of FAS 133. Accordingly, the Company will adopt FAS 133,
as amended by FAS 138, effective the first quarter of fiscal 2002.
Management believes this statement will not have a material impact on the
Company's financial statements.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, (SAB 101) Revenue Recognition in Financial
Statements. SAB 101 summarized the SEC Staff's views regarding the
recognition and reporting of revenues and certain transactions. The
effective date of this pronouncement was the fourth quarter of the fiscal
year beginning December 15, 1999. The Company has evaluated its current
revenue recognition policy and found it in compliance with SAB 101.
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, collectively, the Statements. These
Statements drastically change the accounting for business combinations,
goodwill and intangible assets. Statement 141 eliminates the
pooling-of-interests method of accounting for business combinations except
for qualifying business combinations that were initiated prior to July 1,
2001. Statement 141 also changes the criteria to recognize intangible
assets apart from goodwill. Under Statement 142, goodwill and indefinite
lived intangible assets are no longer amortized but are reviewed annually
for impairment, or more frequently if impairment indicators arise.
Separable intangible assets that have finite lives will continue to be
amortized over their useful lives. The amortization provisions of Statement
142 apply to goodwill and intangible assets acquired after June 30, 2001.
With respect to goodwill and intangible assets acquired prior to July 1,
2001, the amortization provisions of Statement 142 are affective upon
adoption of Statement 142. Pre-existing goodwill and intangibles will be
amortized during the transition period until adoption. Companies are
required to adopt Statement 142 in their fiscal year beginning after
December 15, 2001. Early adoption is permitted for companies with fiscal
years beginning after March 15, 2001. The Company plans to adopt Statement
142 effective June 1, 2002.
2. BALANCE SHEET DETAIL
May 31,
-----------------------------------
2001 2000
Inventories:
Raw materials and supplies $ 5,524,301 $ 4,983,303
Work in process 2,095,363 1,603,117
Finished goods and goods purchased for resale 8,048,973 10,226,819
---------------- ----------------
$ 15,668,637 $ 16,813,239
================ ================
Property, Plant and Equipment:
Land $ 344,447 $ 347,579
Buildings and improvements 6,345,663 5,822,161
Leasehold improvements 935,159 951,420
Furniture and fixtures 1,537,346 1,453,071
Machinery and equipment 19,228,774 16,622,631
---------------- ----------------
28,391,389 25,196,862
Less accumulated depreciation (10,057,437) (7,720,980)
---------------- ----------------
Property and equipment - net $ 18,333,952 $ 17,475,882
================ ================
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 $3,027,615 for an aggregate of
$27,859,456 ("Purchase Price"). 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, 2001 Immucor had
purchased or satisfied its obligation to pay $5.40 per share with respect
to a total of 4,603,112 (99.5%) 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, with the remainder paid during the year ended May 31, 2000. During
the years ended May 31, 1999 and 2000, the Company paid out $2,516,875 and
$510,740 in acquisition costs, respectively.
Located in Houston, Texas, Gamma manufactured and sold 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 Consolidated
Statements of Operations. 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,
for the customer lists, to 30 years.
The final purchase price allocation is as follows:
Current assets $ 9,773,473
Property, plant and equipment, net 7,535,909
Other assets 2,584,253
Excess of costs over net assets acquired 18,798,691
Less: Liabilities assumed (10,832,870)
-----------------
$27,859,456
=================
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 was to be earned over the course of three
years from the acquisition date based on attaining certain operating profit
goals, as defined. Amounts earned, if any, would have been reflected as
compensation expense in the Statement of Operations. In light of the
continued operating losses being generated, it is unlikely that any of the
incentive will be earned. 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 Consolidated Statements of Operations. Excess of costs
over net assets acquired was amortized using the straight-line method over
25 years until February 2001. At that time, due to continued operating
losses and a reorganization of the French and Belgian operations, an
impairment was recorded writing off the value of the goodwill for these
acquisitions.
The final purchase price allocation was 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. During the years ended May 31, 1999
and 2000, the Company paid out $6,621 and $12,942 in acquisition costs,
respectively.
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
Consolidated Statements of Operations. Excess of costs over net assets
acquired is being amortized using the straight-line method over 20 years.
The final purchase price allocation is as follows:
Fair value of assets acquired $ 1,543,452
Excess of costs over net assets acquired 3,247,146
Less: Liabilities assumed (319,034)
-----------------
$ 4,471,564
=================
The pro forma unaudited results of operations for the year ended May 31,
1999, assuming consummation of all of the above purchases as of June 1,
1998, including financing from the proceeds of a bank loan and ignoring any
cost-saving initiatives are presented below:
Year Ended
May 31, 1999
-----------------------
Net sales $75,214,000
Net income 2,484,000
Net income per common share:
Basic $0.32
Diluted $0.31
4. BANK LINE OF CREDIT AGREEMENTS AND DEBT OBLIGATIONS
May 31,
-----------------------------------
2001 2000
Term Loan A (Acquisition term note) ($15,000,000 at 5.33% and remaining
balance at rates ranging from LIBOR rate plus 5.25% to LIBOR rate
plus 6.5% maturing December 2005) $ 19,625,000 $ 18,125,000
Term Loan B (Additional term loan) (interest rate ranging from LIBOR rate
plus 6.25% to LIBOR rate plus 7.5% maturing December 2005) 6,000,000 4,250,000
Temporary line of credit (Fourth additional term loan) (interest rate
ranging from LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing
October 2001) 1,934,921 3,200,000
Revolving Line of credit (Master note) (interest rate ranging from LIBOR
rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 7,000,000 5,000,000
CAD Term Loan (Third additional term loan) (interest rate ranging from
LIBOR rate plus 5.25% to LIBOR rate plus 6.5% maturing February 2003) 2,176,741 3,515,655
Revolving line of credit - Canadian subsidiary (denominated in Canadian
dollars with interest rate ranging from LIBOR rate plus 5.25% to LIBOR
rate plus 6.5% maturing February 2003) 3,971,782 3,053,523
Line of credit - German subsidiary (denominated in Deutsche Marks at
an interest rate ranging from LIBOR rate plus 5.25% to LIBOR rate plus
6.5% maturing February 2003) 2,335,851 -
Lines of credit - Italian subsidiary (denominated in Lira with
interest rates ranging from 5.650% to 8.625% maturing in fiscal 2002) 659,252 369,785
Line of credit - Spanish subsidiary (denominated in Pesetas with an
interest rate of 5.8% maturing in fiscal 2002) 1,388,124 1,313,268
Note payable - German subsidiary (denominated in Deutsche Marks at an
interest rate of 4.14% maturing September 2000) - 719,217
Mortgage note payable - Belgian subsidiary (denominated in Belgian Francs
at an interest rate of 6.25% maturing November 2007) 242,794 247,133
Notes payable - Belgian subsidiary (denominated in Belgian Francs at
interest rates ranging from 5.03% to 10.29%) 68,534 36,570
Line of credit - Belgian subsidiary (denominated in Belgian Francs with
interest rates ranging from 5.5% to 6.0% maturing in November 2007) 369,745 502,727
Note Payable - Biotek (interest rate 8.5% maturing January 2002) 349,654 -
Notes payable - Various vendors (interest rates ranging from 8.0% to 8.5%
with maturity dates ranging from August 2001 to November 2001) 316,056 -
Mortgage note payable (interest rate of 10.50%) - 47,512
----------------- ----------------
46,438,454 40,380,390
Less current portion (8,330,138) (7,229,905)
----------------- ----------------
$ 38,108,316 $ 33,150,485
================= ================
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 that included 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 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 bore interest rates at LIBOR plus additional
percentage points ranging from .5% to 1.4% based on certain calculations as
defined in the Loan Agreement. 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.
In connection with the acquisition of Dominion Biologicals Limited in
December 1996, the Company entered into a $4,566,200 ($6,200,000 CDN$)
long-term revolving line of credit facility with the Company's primary U.S.
bank that bore interest charges at LIBOR plus .4375%. The interest rate on
the remaining principal balance of $715,357 ($1,000,000 CDN$) was LIBOR
plus .4375%, and was adjusted every 90 days. The Company also issued
subordinated promissory notes to the former shareholders of Dominion
bearing interest at 6% payable semiannually with principal due in December
1999. On December 17, 1999 the Company entered into an additional term loan
of $3,884,800 ($5,741,000 CDN$) to retire the Canadian subordinated
promissory notes. Principal and interest payments were due quarterly
commencing March 1, 2000 and continuing through September 1, 2002.
On April 20, 2000 the Company entered into an additional term loan of
$5,000,000 to finance the repurchase of 415,500 shares common stock.
Principal and interest payments were due quarterly commencing September 1,
2001 and continuing through June 1, 2006.
In February 2001, the Company revised its loan agreement covering the
above-mentioned debt with its primary lender, restructuring the loan
covenants and debt repayment schedule. Borrowings under the new loan
agreement and related lines of credit totaled $29.4 million, including loan
fees of $220,000, retired borrowings under the old loan of $26.0 million
and repayment of $1.2 million on the existing German subsidiary loan. Under
the new agreement Term Loan A for $20,000,000 will be repaid in quarterly
installments of increasing amounts through December 2005. The balance of
the Canadian term loan ($3,827,333 CDN$) will continue with equal quarterly
principal installments plus interest through December 2002. A temporary
line of credit of $2,000,000 is due October 2001. Three lines of credit,
one for the U.S. amounting to $7,000,000, one for Canada amounting to
$4,035,670 ($6,200,000 CDN$) and one for Germany amounting to $2,335,851
(5,400,000 DM) mature in February 2003. These borrowings bear interest at
LIBOR plus additional percentage points ranging from 2.0% to 3.25% based on
certain calculations as defined in the Loan Agreement. At the inception of
the original acquisition term note, 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 Term Loan A's floating rate to a fixed
rate of 5.33% on the principal balance of $15,000,000. The fair value of
the interest rate swap agreement was $(87,321) at May 31, 2001. At the
inception of the original Canadian revolving line of credit, the Company
simultaneously entered into an interest rate swap agreement with a notional
amount of $2,338,166 ($3,500,000 CDN$). This transaction effectively
converts the revolver's floating rate to a fixed rate of 6.6375% on the
principal balance of $2,338,166. The fair value of the interest rate swap
agreement was $(41,619) at May 31, 2001. Term Loan B for $6,000,000 will be
due in full in December 2005. Term Loan B bears interest at LIBOR plus
additional percentage points ranging from 2.5% to 3.75% based on certain
calculations as defined in the Loan Agreement. There are no additional
funds available under the U.S. and German lines of credit and $64,000
available under the Canadian line of credit.
In connection with the Company's new agreement with its principal lender,
the Company granted its principal lender a security interest in
substantially all of the Company's assets in addition to other security.
Additionally, the new loan agreement contains certain financial and other
covenants which, among other things, limit annual capital expenditures,
prevent payment of dividends or the repurchase of stock, limit the
incurrence of additional debt, and require the maintenance of certain
financial ratios. The Dominion revolving line of credit and German line of
credit are guaranteed by the Company. The interest rate swap agreements
with the U.S. bank are also guaranteed by the Company.
On September 6, 2001 the Company reached a new agreement with its principal
lender that substantially affects the terms of such agreement. See Note 17,
Subsequent Events.
The Company's Italian subsidiary has $983,000 in line of credit agreements
denominated in Lira with three Italian banks bearing interest between
5.650% to 8.625%. At May 31, 2001, the Company had $324,000 available under
these line of credit agreements. The Company has an additional $1,500,000
line of credit agreement for the Spanish subsidiary denominated in Pesetas
with a Spanish bank bearing interest at 5.8%. At May 31, 2001, the Company
had $112,000 available under the Spanish line of credit agreement.
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 with interest of LIBOR plus .375%. At the same time, the
Company entered into an interest rate swap agreement with the bank that
expired September 1998, which effectively converted the note payable's
floating rate to a fixed rate of 4.14% per annum up to September 1998. The
note was retired in September 2000.
Upon the acquisition of Medichim, the Company assumed a mortgage note that
is collateralized by a first lien on Medichim's land and building. The
approximate carrying value of the land and building is $397,000. Medichim
has various notes payable with a local bank bearing interest between 5.03%
and 10.29%. Medichim also has $666,667 in line of credit agreements
denominated in Belgian Francs with one Belgian bank bearing interest
between 5.5% and 6.0%. Such lines are guaranteed by the Company. At May 31,
2001, the Company had $296,922 available under these line of credit
agreements.
The Company entered into various notes payable totaling $666,000 as a
means of financing certain obligations in fiscal year 2001. This includes a
note payable to Bio-tek Instruments, Inc., a related party. (See Note 13)
Interest rates range from 8.0% to 8.5% and maturity dates range from August
2001 to January 2002.
When the Company acquired Gamma, it assumed a mortgage note that was
collateralized by a first lien on Gamma Biologicals' land and building
located in northwest Houston. The mortgage note matured in November 2000
and bore interest at the bank's base rate, but not less than 7% nor more
than 13%.
Aggregate maturities of all long-term obligations for each of the next five
years and thereafter are as follows:
Year Ending May 31:
2002 $ 8,330,138
2003 18,186,046
2004 5,057,838
2005 5,030,124
2006 9,778,976
Thereafter 55,332
-----------------
$ 46,438,454
=================
On September 6, 2001 the Company reached a new agreement with its principal
lender which could affect the maturity dates of the Company's long term
obligations. See Note 17, Subsequent Events.
5. CAPITAL LEASE OBLIGATIONS
May 31,
-----------------------------------
2001 2000
----------------- ----------------
Manufacturing equipment, bearing interest at rates ranging from 5.46% to
9.89% and with maturities ranging from April 2003 to September 2005. $ 824,414 $ 985,666
Enterprise resource planning (ERP) computer system and related equipment,
bearing interest at rates ranging from 5.52% to 8.23% and with
maturities ranging from June 2001 to December 2005. 1,035,049 782,227
Office furniture and build-outs for facility expansion, bearing interest at
rates ranging from 5.6% to 7.63% and with maturities ranging from
January 2003 to December 2004. 253,602 357,351
Office equipment, bearing interest at rates ranging from 4.54% to 10.5%
and with maturities ranging from December 2003 to December 2005. 284,782 157,161
----------------- ----------------
2,397,847 2,282,405
Less current portion (768,142) (618,240)
----------------- ----------------
$ 1,629,705 $ 1,664,165
================= ================
All of the above capital lease obligations are collateralized by the
indicated assets. Amortization on related assets is included in
depreciation expense.
Aggregate maturities of capital leases for each of the next five years and
thereafter are as follows:
Year Ending May 31:
2002 $ 768,142
2003 742,553
2004 455,977
2005 326,092
2006 105,083
-----------------
$ 2,397,847
=================
Total imputed interest to be paid out under existing capital leases as of
May 31, 2001 is $295,693.
6. LOANS TO OFFICERS AND DIRECTORS
On June 6, 2000, Edward L. Gallup, President and CEO of Immucor, Inc.
entered into a loan agreement with Immucor, Inc. to borrow up to $400,000
in order to meet margin calls related to loans made by brokerage companies.
The Company acknowledges that certain benefits would accrue to Immucor,
Inc. and its shareholders if such margin calls were satisfied by some means
other than having those shares sold by the broker. The interest rate on the
loan is LIBOR plus 1%, which was the Company's current borrowing rate. As
of May 31, 2001, the amount owed to Immucor, Inc. is $396,000 and is
included in Loan to officer on the Balance Sheet.
7. COMMON STOCK
At May 31, 2001, the following shares of Common Stock are reserved for
future issuance:
Common stock options - directors and employees 1,531,875
Common stock warrants - other 878,417
---------
2,410,292
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 became 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 December 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 September 2001. At May 31,
2001, 375,000 warrants had been exercised.
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, 15% or more of the Company's
Common Stock or announces or commences a tender offer or exchange offer
that could result in at least 15% ownership. Once exercisable, each right
entitles the holder to purchase one share of the Company's Common Stock at
an exercise price of $45, 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 expire on April 20, 2009, and in most
cases 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 15% 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 15%
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.
8. STOCK OPTIONS
The Company has various stock option plans that 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 two years, 25% at the end of
three years, and 25% at the end of four 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 two years, 25% at the end of
three years, and 25% at the end of four 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 certain weighted
average assumptions. The assumptions include a risk-free interest rate of
5.83%, 6.27% and 5.34% in fiscal 2001, 2000 and 1999 respectively, no
dividend yields; a volatility factor of the expected market price of the
Company's common stock of 1.023 for 2001, .584 for 2000, and .525 for 1999
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:
2001 2000 1999
---- ---- ----
Net (loss) income as reported $(8,049,113) $2,812,020 $3,561,024
Pro forma net (loss) income $(8,845,439) $1,753,101 $2,980,206
(Loss) earnings per share as reported:
Basic $(1.10) $ 0.36 $ 0.47
Diluted $(1.10) $ 0.33 $ 0.45
Pro forma (loss) earnings per share:
Basic $(1.21) $ 0.23 $ 0.39
Diluted $(1.21) $ 0.21 $ 0.37
Because Statement 123 is applicable only to options granted subsequent to
May 31, 1995, its pro forma effect is not fully reflected until fiscal year
2000.
The Company is authorized to issue up to 1,531,875 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:
Weighted
Range Average
of Exercise Exercise
Shares Prices Price
------------------- ------------------------------------------
Outstanding at May 31, 1998 1,790,966 $3.130 - 15.375 $ 7.84
Granted 779,750 $8.750 - 9.688 $ 9.35
Exercised (88,650) $3.130 - 9.330 $ 6.43
Canceled (27,144) $8.000 - 12.000 $ 8.41
-------------------
Outstanding at May 31, 1999 2,454,922 $3.330 - 15.375 $ 8.37
Granted 114,400 $8.375 - 14.500 $11.93
Exercised (377,706) $3.330 - 12.000 $ 7.67
Canceled (97,025) $8.000 - 14.500 $ 9.32
-------------------
Outstanding at May 31, 2000 2,094,591 $5.400 - 15.375 $ 8.65
Granted 101,000 $2.550 - 5.625 $ 4.26
Exercised - - - - $ -
Canceled (663,716) $3.750 - 15.375 $ 9.29
-------------------
Outstanding at May 31, 2001 1,531,875 $2.550 - 14.500 $ 8.09
===================
At May 31, 2000 and 1999, options for 1,140,716 and 1,355,797 shares of
Common Stock, respectively, were exercisable, at weighted average exercise
prices of $7.95 and $7.82, respectively. At May 31, 2001, 1,381,871 shares
of Common Stock were available for future grants.
The following table as of May 31, 2001 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.
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
--------------------- ------------- -------------- -------------- -------------- ----------------
$ 2.55 $ 5.63 107,000 $4.38 8.7 11,000 $5.50
6.00 9.99 1,319,200 8.08 6.1 947,525 7.65
10.00 14.50 105,675 11.91 6.8 34,625 10.62
------------- --------------
1,531,875 8.09 6.3 993,150 7.73
============= ==============
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted (loss)
earnings per share.
Year Ended May 31,
----------------------------------------------------
2001 2000 1999
Numerator for basic and diluted earnings per share:
Net (loss) income $(8,049,113) $2,812,020 $3,561,024
====================================================
Denominator:
For basic earnings per share - weighted average shares 7,286,163 7,713,229 7,645,769
Effect of dilutive stock options and warrants - 806,992 312,844
----------------------------------------------------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 7,286,163 8,520,221 7,958,613
====================================================
Basic (loss) earnings per share $(1.10) $0.36 $0.47
====================================================
Diluted (loss) earnings per share $(1.10) $0.33 $0.45
====================================================
10. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases domestic office and warehouse facilities under an
operating lease agreement expiring in 2005 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 $920,600 in fiscal 2001, $945,300 in fiscal 2000
and $776,800 in fiscal 1999.
In Germany, the office facility is leased from a company owned by the
family of a former officer. Rental payments under this lease were $165,000,
$172,000 and $189,000 for fiscal 2001, 2000 and 1999, respectively.
The following is a schedule of approximate future annual lease payments
under all operating leases that have initial or remaining non-cancelable
lease terms in excess of one year as of May 31, 2001:
Year Ending May 31:
2002 $ 1,160,783
2003 1,135,323
2004 1,025,298
2005 938,637
2006 353,103
Thereafter 531,990
-----------------
$ 5,145,134
=================
The Company may, at its option, extend its office and warehouse facilities
lease terms through various dates.
Other Commitments
In order to satisfy the broad spectrum of customers' operational and
financial criteria, the Company offers several instrument procurement
options, including third-party financing leases, direct sales and reagent
rentals. In connection with certain sales of the Company's automated
systems, the customers are committed to purchasing reagent products
exclusively from the Company and the Company is committed to supply such
products based on the terms of the agreements.
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. The Company has purchased approximately $289,000 and $121,000
for the fiscal years ended May 31, 2001 and May 31, 2000, respectively, and
thus has met this requirement.
Contingencies
During the quarter ended August 31, 2000, isolated performance issues arose
at certain ABS2000 installations that resulted in mistypings not directly
affecting any patient transfusions. The Company issued a safety
notification, requesting customers to confirm ABS2000 results until the
cause of the difficulty is identified and corrected. The Company believes
it has identified the factors that caused the performance issues and
submitted this information to the FDA. On December 6, 2000, with the FDA's
approval, the safety notification for antibody screening and crossmatch
assays was removed. Customers no longer have to perform manual backup
testing for either of these procedures. In addition to this, the Company's
corrective action plan for blood grouping was accepted by the FDA and in
connection with the plan, a special 510(k) was submitted to the FDA. The
plan called for Company service engineers to complete field corrective
action on the ABS2000 and to accumulate clinical data for group and type
assays for selected customers. The Company has completed these tasks and
has submitted data to the FDA for expedited review. Upon clearance by the
FDA, the safety alert for group and type assays will be lifted. These
performance issues may result in further delays in customers accepting
instruments, and continue to affect sales of reagents used in the
instruments, and both of these factors will adversely impact sales and
earnings. In addition, the Company has received requests for refunds on
instruments already placed in service or requests for financial concessions
attributable to inconveniences associated with these performance issues. As
of May 31, 2001, $0.76 million in credits have been issued for ABS 2000
instruments. In the third quarter, the Company recorded an allowance of
$0.3 million for potential future returns of ABS 2000 instruments. These
costs were treated as warranty costs and are included in cost of sales. The
balance of the reserve at May 31, 2001 was $0.13 million. A private label
leasing company that finances customer purchases of ABS2000 instruments has
advised the Company that it is not willing to provide financing for
additional purchases of this instrument until it satisfies itself that the
performance issues related to the ABS2000 are resolved to the satisfaction
of the FDA.
When the Company acquired Gamma Biologicals, Inc. ("Gamma Biologicals") in
October 1998, Gamma Biologicals was a party to an existing legal
proceeding. On May 12, 1998, Gamma Biologicals received notification that a
claim of patent infringement had been filed on that date in U.S. District
Court, Southern District of Florida, Miami Division, by Micro Typing
Systems, Inc. and Stiftung fur Diagnostiche Forschung (the Foundation).
Subsequently, in February 1999 the Company received notification that a
second claim was filed in the U.S. District Court for the Northern District
of Georgia, against Immucor, Inc. and Gamma Biologicals for patent
infringement on the first patent described above and a second patent
recently granted to the Foundation. The claim alleged that the recently
introduced Gamma ReACT Test System infringed U.S. patent No. 5,512,432
granted to the Foundation on April 30, 1996 and U.S. patent No. 5,863,802
granted to the Foundation on January 26, 1999. The plaintiffs sought a
preliminary and permanent injunction against the continued alleged
infringement by Gamma Biologicals and Immucor, and an award of treble
damages, with interest and costs and reasonable attorney's fees. On
September 5, 2000 a third patent was issued to the Foundation. The
plaintiffs had asserted infringement of this patent and sought to add this
patent to the lawsuit. The Company, in light of this new patent, evaluated
its position and negotiated a settlement with the Foundation. Effective
February 28, 2001 the Company no longer markets the ReACT Test System and
its related reagents. The automated filling machine was turned over to the
Foundation and all related instruments and manufacturing materials have
been destroyed. The reserve for the lawsuit that was recorded with the
acquisition of Gamma Biologicals offset the majority of the costs to exit
the ReACT market. Remaining charges of $166,500 of exit costs were recorded
in the quarter ended February 28, 2001.
11. INCOME TAXES
Sources of (loss) income before income taxes are summarized below:
Year Ended May 31,
------------------------------------------------------
2001 2000 1999
Domestic Operations $(3,877,674) $2,629,676 $2,799,843
Foreign Operations (3,705,987) 2,079,979 2,607,957
----------------- ---------------- -----------------
Total $(7,583,661) $4,709,655 $5,407,800
================= ================ =================
The provision for income taxes is summarized as follows:
Year Ended May 31,
-------------------------------------------------------
2001 2000 1999
Current:
Federal $(34,169) $ 448,706 $ 481,466
Foreign 934,472 1,317,178 1,083,622
State (290,902) 52,641 56,643
----------------- ----------------- -----------------
609,401 1,818,525 1,621,731
----------------- ----------------- -----------------
Deferred:
Federal (471,516) 123,913 181,162
Foreign 85,196 (59,340) 22,570
State 242,370 14,537 21,313
----------------- ----------------- -----------------
(143,950) 79,110 225,045
----------------- ----------------- -----------------
Income taxes $465,451 $1,897,635 $1,846,776
================= ================= =================
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. Based on
an assessment of all available evidence including, but not limited to, the
operating history and lack of profitability of certain subsidiaries, the
Company is uncertain as to the realizability of these net operating loss
carryforwards and, as a result, a 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, 2001
and 2000 are as follows:
Year Ended May 31,
---------------------------------------
2001 2000
Deferred tax liabilities:
Amortization $ (895,400) $ (902,368)
Depreciation (1,431,273) (1,558,230)
Other (847,103) (768,023)
Deferred tax assets:
Reserves not currently deductible 1,030,915 1,411,319
Operating loss carryforwards 2,452,814 740,563
Uniform capitalization 576,967 594,958
------------------ -----------------
886,920 (481,781)
Valuation allowance (1,946,897) (722,146)
------------------ -----------------
Net deferred tax liability $ (1,059,977) $ (1,203,927)
================== =================
The Company's effective tax rate differs from the federal statutory rate as
follows:
Year Ended May 31,
-----------------------------------------------
2001 2000 1999
Federal statutory tax rate 34% 34% 34%
State income taxes, net of federal tax benefit 2 1 1
Interest on state municipal obligations - - (1)
Foreign Sales Corporation commissions 3 (5) (4)
Higher effective income tax rates of other countries (26) 9 4
Excess of cost over tangible assets acquired - net (4) 6 4
Change in deferred tax valuation allowance (15) - (9)
Research and development tax credits - - -
Change in entity classification for Spanish subsidiary (1) (7) -
Other 1 2 5
-------- --------- ---------
(6%) 40% 34%
======== ========= =========
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 $0,
$320,027, and $133,713 in fiscal 2001, 2000 and 1999, respectively.
Additionally, the Company recorded income tax benefits of $57,348 in fiscal
2001 and 2000 and $55,142 in 1999, caused by patent amortization expense
deductions resulting from a 1993 exercise of stock options previously
issued in connection with the acquisition of certain technology (see Note
12). 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.
In the U.S., the Company recorded a valuation allowance of $1,109,139 as a
reserve against its net deferred tax assets. The Company has domestic net
operating loss carryforwards of $8,790,787. The Company's Spanish
subsidiary had net operating loss carryforwards for income tax purposes of
$710,934, which expire in 2002, 2003 and 2004. The Company's French
subsidiary had net operating loss carryforwards for income tax purposes of
$380,395, which expire in 2002, 2003 and 2004. The Company's Belgian
subsidiary had net operating loss carryforwards for income tax purposes of
$932,918, which do not expire.
12. 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
$435,200, $409,300 and $411,100 in fiscal 2001, 2000 and 1999,
respectively.
In May 1997 Gamma Biologicals 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 paid Sanofi a license
fee of $200,000 and royalties equal to 12% of the net sales from the ReACT
products in six countries of Europe. The agreement would have expired on
the expiration of the patent of the technology. At the time of acquisition,
Gamma Biologicals was a party to an existing legal proceeding. On May 12,
1998, Gamma Biologicals received notification that a claim of patent
infringement had been filed on that date in U.S. District Court, Southern
District of Florida, Miami Division, by Micro Typing Systems, Inc. and
Stiftung fur Diagnostiche Forschung (the Foundation). During the course of
the litigation, an additional patent was issued to the Foundation. After
this, the Company evaluated its position and negotiated a settlement with
the Foundation. Effective February 28, 2001 the Company no longer markets
the ReACT Test System and its related reagents. The automated filling
machine was turned over to the Foundation and all related instruments and
manufacturing materials have been destroyed. The license agreement is no
longer in effect with the settlement of the ReACT lawsuit. The license was
being amortized over 10 years and the remaining balance of $138,000 was
written off with the settlement of the suit. See Note 10. Commitments and
Contingencies.
13. INSTRUMENT DEVELOPMENT AND MANUFACTURING AGREEMENTS
The Company has contracted with Bio-Tek Instruments, Inc. 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)
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. To date, Bio-Tek has not
exercised this option. In order to maintain the exclusive worldwide
marketing rights the Company must purchase 250 instruments over a six-year
period beginning with the delivery of the first production instrument that
occurred in fiscal 1997. If the Company purchases less than 250 instruments
over a six -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 does not believe 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(R) 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 three-year period beginning on
the date FDA 510(k) clearance is granted. 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(R) 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. Based on fiscal 2001 sales and purchases the Company presently
believes it will maintain its exclusivity rights for the term of the
agreement.
On September 1, 1999, the Company entered into a manufacturing and
development agreement with Stratec Biomedical AG ("Stratec") with
headquarters in Germany. Under the terms of the agreement, Stratec will
manufacture and develop a fully automated analyzer known as the Galileo
which will be initially targeted to the European community utilizing the
Company's Capture(R) technology. 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 European distribution rights
the Company must purchase 250 instruments over the five-year initial term
of the agreement. If the Company purchases less than 250 instruments over
the period it will be allowed to negotiate a good faith extension.
In fiscal 2001, 2000 and 1999, the Company incurred $677,118, $753,786 and
$161,480, respectively, in instrument research and development costs
principally under these contracts.
14. DOMESTIC AND FOREIGN OPERATIONS
Information concerning the Company's domestic and foreign operations is
summarized below (in 000s):
Year Ended May 31, 2001
---------------------------------------------------------------------------------------------------
Note 1
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated customers $43,965 $8,502 $5,600 $5,367 $6,004 - $69,438
Affiliates 7,036 384 - 85 206 $(7,711) -
--------- ---------- ---------- ---------- --------- ------------ --------------
Total 51,001 8,886 5,600 5,452 6,210 (7,711) 69,438
(Loss) income from (2,528) 698 248 1,135 (4,812) (1,135) (4,124)
operations
Interest expense (3,163) (172) (44) (278) (90) - (3,747)
Interest income 28 19 7 - 3 - 57
Income tax (benefit)
expense (536) 267 210 426 116 (18) 465
Long-lived assets 60,916 3,181 2,427 7,236 2,692 (24,421) 52,031
Identifiable assets 91,462 9,332 10,259 9,819 7,861 (32,920) 95,813
Net assets 38,461 3,953 46 2,461 (2,013) (13,065) 29,843
Year Ended May 31, 2000
---------------------------------------------------------------------------------------------------
Note 1
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated customers $48,105 $9,302 $6,656 $5,195 $7,283 - $76,541
Affiliates 6,695 548 - 262 2,663 $(10,168) -
--------- ---------- ---------- ---------- --------- ------------ --------------
Total 54,800 9,850 6,656 5,457 9,946 (10,168) 76,541
Income from operations 4,303 836 559 1,596 105 (40) 7,359
Interest expense (2,354) (32) (26) (345) (154) - (2,911)
Interest income - 4 24 - 3 - 31
Income tax expense 640 470 147 580 78 (17) 1,898
Long-lived assets 63,477 3,340 2,415 7,551 4,826 (24,976) 56,633
Identifiable assets 94,406 7,526 10,386 10,052 12,683 (32,278) 102,775
Net assets 43,965 4,482 802 2,284 2,730 (13,344) 40,919
Year Ended May 31, 1999
---------------------------------------------------------------------------------------------------
Note 1
U.S. Germany Italy Canada Other Eliminations Consolidated
Net sales:
Unaffiliated customers $34,842 $10,246 $6,804 $4,368 $3,265 - $59,525
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
---------------------------------------------------------------------------------------------------
Note 1: Included in "Other" are net sales, income from operations, interest
expense, interest income, income tax expense, long-lived assets,
identifiable assets and net assets of Spain, Portugal, France, Belgium,
and the Netherlands.
During the years ended May 31, 2001, 2000 and 1999, the Company's U.S.
operations made net export sales to unaffiliated customers of approximately
$5,782,000, $6,712,000, and $5,558,000, respectively. The Company's German
operation made net export sales to unaffiliated customers of $1,093,000,
$1,515,000 and $1,309,000 for the years ended May 31, 2001, 2000, and 1999,
respectively. The Company's Canadian operation made net export sales to
unaffiliated customers of $2,361,000, $2,224,000 and $2,542,000 for the
years ending May 31, 2001, 2000, and 1999, respectively.
Product sales to affiliates are valued at market prices.
15. 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, 2001, 2000 and 1999, the Company's
matching contributions to the plan were $284,000, $184,000 and $149,000,
respectively. Vesting in the Company's matching contributions is based on
years of continuous service.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)
Basic Diluted
Net Gross Operating Net (Loss) Earnings (Loss) Earnings
Sales Margin (Loss) Income (Loss) Income Per Share Per Share
--------------- -------------- ----------------- ----------------- ---------------- ------------------
FISCAL 2001
First Quarter $17,081 $ 8,513 $ 577 $ (215) $(0.03) $(0.03)
Second Quarter 16,813 7,974 393 (612) $(0.08) $(0.08)
Third Quarter 16,861 7,036 (5,570) (5,834) $(0.80) $(0.80)
Fourth Quarter 18,683 7,829 476 (1,388) $(0.19) $(0.19)
-------------- ------------- ----------------- -----------------
$69,438 $31,352 $ (4,124) $ (8,049) $(1.10) $(1.10)
============== ============= ================= =================
FISCAL 2000
First Quarter $18,930 $ 9,976 $ 2,233 $ 1,219 $0.16 $0.14
Second Quarter 20,250 10,981 2,935 1,440 0.19 0.17
Third Quarter 19,201 10,176 2,015 838 0.11 0.10
Fourth Quarter 18,160 9,000 176 (685) (0.09) (0.09)
-------------- ------------- ----------------- -----------------
$76,541 $40,133 $ 7,359 $ 2,812 $0.36 $0.33
============== ============= ================= =================
17. SUBSEQUENT EVENTS
On December 28, 2000 the Company initiated arbitration against Becton,
Dickinson and Company with the American Arbitration Association to take
place in Santa Clara County, California. The Company's claims against
Becton, Dickinson and Company related to a Distributor Agreement between
the Company and Biometric Imaging, Inc., and Becton, Dickinson and Company
became a party to this agreement when they acquired Biometric Imaging, Inc.
in 1999. The Company alleged that Becton, Dickinson and Company either
intentionally, recklessly or negligently failed to supply medical testing
instruments and assay test kits and either intentionally, recklessly or
negligently supplied defective assay test kits in violation of its
obligations under this Distributor Agreement. On June 12, 2001, the Company
announced that it had reached a settlement with Becton, Dickinson and
Company. The settlement calls for Becton to pay Immucor, Inc. a total of
$1.8 million, payable in two installments. The first payment of $1.2
million was made on June 11, 2001, with the second installment of $0.6
million payable not later than April 1, 2002. This settlement represents a
reimbursement for asset impairment and lost profits. In return, Immucor,
Inc. agrees to give up its right to distribute the IMAGN instrument and
associated reagents in Italy and Portugal and to cooperate with Becton,
Dickinson and Company in the transition of the Italian and Portuguese IMAGN
customers. Assets related to IMAGN that will be written off approximate
$1.0 million.
As of May 31, 2001 the Company had paid all principal and interest payments
under the Loan Agreement. But as a result of the nonrecurring charges to
earnings, recent losses, and other factors, the Company was not in
compliance with covenants in its agreement with its principal lender
requiring the Company to maintain specified ratios of (i) fixed charge
coverage, (ii) funded debt to EBITDA (earnings before interest, taxes,
depreciation, and amortization), (iii) leverage, and (iv) interest
coverage. The Company's non-compliance with the leverage ratio covenant was
also affected by the Company's write-down of goodwill related to its
Belgian and French operations--see Management's Discussion and
Analysis--Operating Expenses. These covenant violations impacted all of the
Company's outstanding term loan and lines-of-credit.
On September 6, 2001 the Company successfully completed negotiations with
its primary lender to issue a waiver of covenant defaults and to
temporarily reset the loan covenants to the Loan Agreement dated February
23, 2001. A waiver fee of $750,000 will be paid in twelve equal monthly
payments beginning September 30, 2001. Any remaining balance will be paid
upon receipt of junior capital. The interest rate on the revolving lines of
credit and Term Loan A will be prime plus .50% and the interest rate on
Term Loan B will be prime plus 2.00%. The Company is required to meet
quarterly and cumulative EBITDA covenants in addition to quarterly senior
funded debt to EBITDA ratios. Once the Company's trailing twelve-month
Senior Funded Debt to EBITDA reaches 2.50 to 1 or less the Company will
revert back to the pricing matrix as stated in the Loan Agreement.
An additional requirement of the waiver is that the Company successfully
obtain a minimum of $5.0 million in junior capital by December 31, 2001. If
the Company is not successful, the lender will earn an additional fee of
$450,000 payable in twelve equal monthly installments beginning January 31,
2002. The lender will also fully earn warrants of 750,000 shares of
Immucor, Inc. Common Stock issued at the then current market price of the
stock. If the Company meets all of its quarterly EBITDA covenants and no
other events of default are then occurring, the lender will return a
portion of the warrants to the Company based on when the Company raises the
junior capital after December 31, 2001. Specifically, 562,500 warrants
would be returned if the $5.0 million of junior capital is raised by
January 31, 2002, 375,000 warrants would be returned if the $5.0 million of
junior capital is raised by February 28, 2002, and 187,500 warrants would
be returned if the $5.0 million of junior capital is raised by March 31,
2002. If the junior capital is not received by December 31, 2001, then the
revolving lines of credit and Term Note A would be re-priced at prime plus
2.0% and Term Note B would be repriced at prime plus 4.0% until the junior
capital is received. If the junior capital is not received by April 30,
2002 all existing credit facilities would be reset to mature on February
28, 2003.
IMMUCOR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 2001, 2000 AND 1999
- -------------------------------------------------------------------------------------------------------------------------
Charged
Balance at Charged to to Other Balance
Beginning Costs and Accounts Deductions at End
of Period Expense (Note 1) (Note 2) of Period
---------------------------------------------------------------------------------
2001:
Allowance for doubtful accounts $1,164,582 $673,997 $ 0 $(594,091) $1,244,488
========== ======== ======== ========== ==========
Valuation reserve for deferred
income tax assets $722,146 $1,224,751 $ 0 $ 0 $1,946,897
======== ========== ======== ======== ==========
2000:
Allowance for doubtful accounts $804,470 $452,983 $ 0 $(92,871) $1,164,582
======== ======== ======== ========= ==========
Valuation reserve for deferred
income tax assets $589,623 $132,523 $ 0 $ 0 $722,146
======== ======== ======== ======== ========
1999:
Allowance for doubtful accounts $502,372 $116,031 $236,902 $(50,835) $804,470
======== ======== ======== ========= ========
Valuation reserve for deferred
income tax assets $745,988 $ 0 $ 0 $(156,365) $589,623
======== ======== ======== ========== ========
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 and exchange
differences generated.
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.
Director
Name Age Position with Company Since
Edward L. Gallup 62 Chairman of the Board of Directors, President and 1982
Chief Executive Officer
Didier L. Lanson 51 Director 1989
Dennis M. Smith, Jr., M.D. 49 Director 1998
Ralph A. Eatz 57 Director and Senior Vice President-- Operations 1982
G. Bruce Papesh 54 Director 1995
Joseph E. Rosen 57 Director 1998
Dr. Gioacchino De Chirico 48 Director, Director of European Operations and 1994
President of Immucor Italia S.r.l
Daniel T. McKeithan 77 Director 1983
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 35 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 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 1989.
Since April 1, 2000, he has served as CEO of a start up company GenOdyssee S.A.
in Paris, France. GenOdyssee provides to the pharmaceutical, diagnostic and
biotech industry a full range of post-genomics services: Single Nucleotide
Polymorphism (SNP) discovery, high throughput SNP genotyping, and proteomic
services dedicated to the characterization of chemical and physical
modifications of mutant proteins active sites. 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. He was a Director and the President and CEO of Diagnostics Transfusion
("DT"), a French corporation which develops, manufactures and distributes
reagent products from 1987 until April 1991.
G. Bruce Papesh has been a director of the Company since December 1995. He
is a co-founder of Dart, Papesh & Co., an East 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 30
years of experience in investment services while serving in stockbroker,
consulting and executive management positions. Mr. Papesh also serves as a
Director and Stock Option Committee Member of Neogen Corporation, a maker of
products dedicated to food and animal safety.
Dennis M. Smith, Jr., M.D. has been a director of the Company since April
1998. He currently is, and for the last six 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
Senior Vice President and Medical Director 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
23 years of experience in the medical field.
Joseph E. Rosen has been a director of the Company since April 1998. He has
been employed by 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 30 years of experience in
the blood banking industry.
Executive Officers
Name Age Position with Company Since
Edward L. Gallup 62 President and Chief Executive Officer 1982
Ralph A. Eatz 57 Senior Vice President-- Operations 1982
Dr. Gioacchino De Chirico 48 Director of European Operations and 1994
President of Immucor Italia S.r.l
Steven C. Ramsey 52 Vice President-- Chief Financial Officer and Secretary 1998
Patrick Waddy 44 President of Dominion Biologicals Limited and 1996
European Finance Director
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 than 26 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 six 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
initial reports of ownership and changes in ownership 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 regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on its review of the copies of
such reports 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, 2001, all filing requirements applicable to its executive
officers, directors and owners of more than ten percent of the Company's Common
Stock were met.
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.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------- ----------------
Securities
Name and Other Annual Underlying
Principal Position Year Salary Bonus (1) Compensation (2) Options (3)
- ------------------------------------ ------- ---------- ------------------- ------------------ ----------------
Edward L. Gallup 2001 $225,008 $ 0 $40,626 -
Chairman of the Board, President 2000 218,743 4,875 44,053 -
and Chief Executive Officer 1999 206,601 55,209 29,609 80,000
Ralph A. Eatz 2001 218,562 3,511 32,306 -
Director and Senior Vice 2000 212,316 5,482 32,061 -
President - Operations 1999 200,579 55,177 20,830 80,000
Dr. Gioacchino De Chirico (4) 2001 205,746 - 16,624 -
President, Immucor Italia, S.r.l. and 2000 197,833 - 16,624 -
Director of European Operations 1999 175,565 - 13,100 80,000
Steven C. Ramsey (5) 2001 181,712 3,449 2,500 -
Vice President - Chief Financial 2000 179,649 4,342 2,000 -
Officer and Secretary 1999 178,946 - - 30,500
Patrick Waddy (6) 2001 78,000 - -
President of Dominion Biologicals 2000 81,505 4,075 2,500 -
Limited and European Finance 1999 69,260 25,719 2,500 30,500
Director
(1) 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.
(2) Includes the value of life insurance premiums and an allowance for
automobile expenditures for each of the above named executive officers
as follows: For 2001 - for Mr. Gallup, Eatz, De Chirico, Ramsey and
Waddy, life insurance premiums of $31,026, $22,706, $7,024, $2,500 and
$0 respectively, and an allowance for automobile expenditures for Mr.
Gallup, Eatz and Dr. De Chirico of $9,600 each. For 2000 - for Mr.
Gallup, Eatz, De Chirico, Ramsey and Waddy, life insurance premiums of
$34,453, $22,460, $7,024, $2,000 and $2,500 respectively, and an
allowance for automobile expenditures for Mr. Gallup, Eatz and Dr. De
Chirico of $9,600 each. 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.
(3) Includes stock options granted for each of the above named officers as
follows: For 2001 and 2000 - No options were granted to executive
officers during the fiscal year. For 1999 - for Mr. Gallup, Eatz, and
Dr. 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 Dr. 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.
(4) For 1999 - includes a bonus of $50,000 for Dr. De Chirico, which is
included in the Annual Compensation of Salary.
(5) For 1999 - includes a bonus of $8,000 for Mr. Ramsey, which is included
in the Annual Compensation of Salary. Mr. Ramsey assumed the position
of Vice President and Chief Financial Officer in April 1998.
(6) Mr. Waddy became an employee of the Company upon the acquisition of
Dominion Biologicals Limited in December 1996.
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.
FISCAL YEAR-END OPTION VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
May 31, 2001 May 31, 2001 (1)
------------ ----------------
Exercisable Unexercisable Exercisable Unexercisable
------------------------------ -----------------------------
Edward L. Gallup 100,000 40,000 0 0
Ralph A. Eatz 100,000 40,000 0 0
Dr. Gioacchino De Chirico 115,000 40,000 0 0
Steven C. Ramsey 37,750 22,750 0 0
Patrick Waddy 266,389 15,250 0 0
(1) Based on the amount that the closing price exceeds the exercise price
for the Common Stock on May 31, 2001. None of the stock option exercise
prices exceeded the May 31, 2001 closing price of $2.55, as reported by
NASDAQ. Consequently there was no value related to these stock options.
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. The Company entered into written employment
agreements with Edward L. Gallup and Ralph A. Eatz on October 13, 1998. 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 $219,668 and $213,243, 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 an employment 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, S.r.l. 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 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 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.
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. There were no stock option grants to directors during the fiscal year
ended May 31, 2001.
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 attends the meetings of 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.
Item 12.--Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of July 31, 2001, the number of shares of
Common Stock of Immucor beneficially owned by each director and other reporting
insiders 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 Amount and Nature
(and address for those of Beneficial Percent
owning more than five percent) Ownership of (1) of Class(1)
- ------------------------------ ---------------- -----------
Edward L. Gallup 216,357 (2) 3.0%
Ralph A. Eatz 294,526 (2) 4.1%
Dr. Gioacchino De Chirico 124,250 (3) 1.7%
Steven C. Ramsey 44,625 (4) *
Patrick D. Waddy 299,264 (5) 4.1%
Didier L. Lanson 15,000 (6) *
Daniel T. McKeithan 54,778 (7) *
G. Bruce Papesh 15,100 (8) *
Dennis M. Smith, Jr., M.D. 70,l00 (9) *
Joseph E. Rosen 11,000 (9) *
Kairos Partners LP 728,170 (10) 10.0%
Kairos Partners GP, LLC
Aim High Enterprises, Inc.
Stone Gate Partners, LLC
c/o Aim High Enterprises, Inc.
600 Longwater Dr., Suite 204
Norwell, MA 02061
Dimensional Fund Advisors, Inc. 715,562 (11) 9.8%
1299 Ocean Ave. 11th Floor
Santa Monica, CA 90401-1038
All directors and executive officers 1,145,000 15.7%
as a group (ten persons)
* less than 1%.
(1) Pursuant to Rule 13-3(d)(1) of the Securities Exchange Act of 1934, the
persons listed are deemed to beneficially own shares of the Company's
Common Stock if they have a right to acquire such stock within the next
sixty days, such as by the exercise of stock options, and any such
common stock not presently outstanding shall be deemed to be
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by such person but shall not be deemed to
be outstanding for the purpose of computing the percentage of the class
owned by any other person.
(2) Includes for Messrs. Gallup and Eatz an option to acquire 60,000
shares at an exercise price of $6.00, an option to acquire 18,750
shares at an exercise price of $9.69, and an option to acquire 27,500
shares at an exercise price of $9.38.
(3) Includes a currently exercisable option to acquire 15,000 shares of
Common Stock at an exercise price of $6.00, an option to acquire 60,000
shares of Common Stock at an exercise price of $6.00, an option to
acquire 18,750 shares of Common Stock at an exercise price of $9.69,
and an option to acquire 27,500 shares at an exercise price of $9.38.
(4) Includes a currently exercisable option to acquire 22,500 shares at
$8.38 per share, a currently exercisable option to acquire 5,625 shares
at $9.69 per share and an option to acquire 11,500 shares at an
exercise price of $9.38.
(5) Includes 201,139 5-year warrants at an exercise price of $12.00 and
50,000 10-year warrants at an exercise price of $11.98 issued in
connection with the acquisition of Dominion Biologicals Limited, a
currently exercisable option to acquire 5,625 shares at $9.69 per
share, and an option to acquire 11,500 shares at an exercise price of
$9.38.
(6) Includes a currently exercisable option to acquire 10,000 shares
at $6.00 per share and an option to acquire 5,000 shares at $12.38 per
share.
(7) Includes a currently exercisable option to acquire 5,000 shares at
$12.38 per share.
(8) Includes a currently exercisable option to acquire 10,000 shares
at $8.00 per share and a currently exercisable option to acquire 5,000
shares at $12.38 per share.
(9) Includes a currently exercisable option to acquire 7,500 shares
at $8.88 per share and a currently exercisable option to acquire 1,500
shares at $12.38 per share.
(10) A group consisting of Kairos Partners LP, Kairos Partners GP, LLC, Aim
High Enterprises, Inc., and Stone Gate Partners, LLC reported in its
Schedule 13D dated August 9, 2001 that it had sole power to vote and
dispose of 728,170 shares, or 10.0% of outstanding shares.
(11) Dimensional Fund Advisors, Inc ("DFA") reported in a Schedule 13G dated
February 16, 2001, that in its capacity as an investment adviser may be
deemed to beneficially own 715,562 shares or 9.8% of the Company, which
are held of record by clients of DFA. DFA indicated that it had the
sole power to vote or to dispose of 715,562 shares.
Item 13.--Certain Relationships and Related Transactions.
On June 6, 2000 Edward L. Gallup, President and CEO of Immucor, Inc., and a
member of the board of directors, entered into a loan agreement with Immucor,
Inc. to borrow up to $400,000 in order to meet margin calls related to loans
made by brokerage companies. The Company believes that certain benefits would
accrue to Immucor, Inc. and its shareholders if such margin calls were satisfied
by some means other than having those shares sold by the broker. The interest
rate on the loan is LIBOR plus 1%, which was the Company's current borrowing
rate. The largest aggregate amount due during the fiscal year ended May 31, 2001
was $396,000. As of July 31, 2001 the amount owed to Immucor, Inc. is $396,000.
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 Amended and Restated Articles of Incorporation (incorporated
by reference to Exhibit 3.1 to Immucor, Inc.'s quarterly
report on Form 10-Q filed on January 16, 2001).
3.2 Amended and Restated Bylaws (amended and restated as of
November 29, 2000) (incorporated by reference to Exhibit 3.2
to Immucor, Inc.'s quarterly report on Form 10-Q filed on
January 16, 2001).
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).
4.2 Amendment No. 1 dated as of November 29, 2000 to Shareholder
Rights Agreement between Immucor, Inc. and EQUISERVE Trust
Company, N.A. (incorporated by reference to Exhibit 4.2 to
Immucor Inc.'s quarterly report on Form 10-Q filed on
January 16, 2001.
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, Inc.'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, Inc.'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, Inc.'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 (incorporated
by reference to Exhibit 10.1-4 to Immucor, Inc.'s Annual
Report on Form 10-K for the fiscal year ended May 31, 1998).
10.1-5 Lease Amendment, dated August 11, 1999, between the Company
and Connecticut General Life Insurance Company (incorporated
by reference to Exhibit 10.1-5 to Immucor, Inc.'s Annual
Report on Form 10-K for the fiscal year ended May 31, 1999).
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, Inc.'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 s era (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 (incorporated by reference to
Exhibit 10.8 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1999).
10.9* Employment Agreement dated October 13, 1998, between the
Company and Ralph A. Eatz (incorporated by reference to
Exhibit 10.9 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1999).
10.10* 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.'s Annual Report
on Form 10-K for the fiscal year ended May 31, 1995).
10.11* 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.'s Annual Report
on Form 10-K for the fiscal year ended May 31, 1995).
10.12* Severance Agreement dated October 13, 1998, between Immucor
Inc. and Dr. Gioacchino De Chirico (incorporated by
reference to Exhibit 10.13 to Immucor, Inc.'s Annual Report
on Form 10-K for the fiscal year ended May 31, 1999).
10.13* 1998 Stock Option Plan, including form of Stock Option
Agreement used thereunder.
10.14* 1995 Stock Option Plan, including form of Stock Option
Agreement used thereunder (incorporated by reference to
Exhibit 10.14 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1995).
10.15* 1990 Stock Option Plan, including form of Stock Option
Agreement used thereunder (incorporated by reference to
Exhibit 10.15 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1995).
.
10.16* 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).
10.17* 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).
10.18* Employment Agreement dated October 13, 1998, between the
Company and Steven C. Ramsey (incorporated by reference to
Exhibit 10.20 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1999).
10.19* Employment Agreement dated October 13, 1998, between the
Company and Patrick Waddy (incorporated by reference to
Exhibit 10.22 to Immucor, Inc.'s Annual Report on Form 10-K
for the fiscal year ended May 31, 1999).
10.20 Loan Agreement among Immucor, Inc., Dominion Biologicals
Limited, and Immucor Medizinische Diagnostik GmbH, as
borrowers, and Wachovia Bank, National Association, as
lender, dated as of February 23, 2001 (incorporated by
reference to Exhibit 10.23 to Immucor, Inc.'s quarterly
report on form 10-Q filed April 23, 2001).
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
*Denotes a management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
On November 29, 2000, the Company filed a Form 8-K, relating to Item 9.
Regulation FD Disclosure, the annual meeting of shareholders.
(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
September 13, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behal f 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)
September 13, 2001
/s/ STEVEN C. RAMSEY
- -----------------------------------------------------------------------
Steven C. Ramsey, Vice President - Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
September 13, 2001
/s/RALPH A. EATZ
- -----------------------------------------------------------------------
Ralph A. Eatz, Director, Senior Vice President - Operations
September 13, 2001
/s/ PATRICK WADDY
- -----------------------------------------------------------------------
Patrick Waddy, European Finance Director and President of Dominion
Biologicals Limited
September 13, 2001
/s/DANIEL T. MCKEITHAN
- -----------------------------------------------------------------------
Daniel T. McKeithan, Director
September 13, 2001
/s/G. BRUCE PAPESH
- -----------------------------------------------------------------------
G. Bruce Papesh, Director
September 13, 2001
/s/ DIDIER L. LANSON
- -----------------------------------------------------------------------
Didier L. Lanson, Director
September 13, 2001
/s/ DR. GIOACCHINO DE CHIRICO
- -----------------------------------------------------------------------
Dr. Gioacchino De Chirico, Director, Director of European Operations and
President of Immucor Italia S.r.l.
September 13, 2001
/s/ DENNIS M. SMITH
- -----------------------------------------------------------------------
Dennis M. Smith, Jr., M.D., Director
September 13, 2001
/s/JOSEPH E. ROSEN
- -----------------------------------------------------------------------
Joseph E. Rosen, Director
September 13, 2001
EXHIBIT INDEX
Number Description
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 to Immucor, Inc.'s Quarterly Report on Form
10-Q for the fiscal quarter filed on January 16, 2001).
3.2 Amended and Restated Bylaws (amended and restated as of November 29,
2000) (incorporated by reference to Exhibit 3.2 to Immucor, Inc.'s
Quarterly Report on Form 10-Q filed on January 16, 2001).
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).
4.2 Amendment No. 1 dated as of November 29, 2000 to Shareholder Rights
Agreememt between Immucor, Inc. and EQUISERVE Trust Company, N.A.
(incorporated by reference to Exhibit 4.2 to Immucor Inc.'s quarterly
report on Form 10-Q filed on January 16, 2001.
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,
Inc.'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, Inc.'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, Inc.'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 (incorporated by reference
to Exhibit 10.1-4 to Immucor, Inc.'s Annual Report on Form 10-K for
the fiscal year ended May 31, 1998).
10.1-5 Lease Amendment dated August 11, 1999, between the Company and
Connecticut General Life Insurance Company (incorporated by reference
to Exhibit 10.1-5 to Immucor, Inc.'s Annual Report on Form 10-K for
the fiscal year ended May 31, 1999).
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, Inc.'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. (incorporated by reference to Exhibit 10.8 to
Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended
May 31, 1999.
10.9* Employment Agreement dated October 13, 1998, between the Company and
Ralph A. Eatz. (incorporated by reference to Exhibit 10.9 to Immucor
Inc.'s Annual Report on Form 10-K for the fiscal year ended May
31, 1999).
10.10* 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.'s Annual Report on Form 10-K for the fiscal year
ended May 31, 1995).
10.11* 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.'s Annual Report on Form 10-K for the fiscal year
ended May 31, 1995).
10.12* Severance Agreement dated October 13, 1998, between Immucor, Inc.
and Dr. Gioacchino De Chirico.(incorporated by reference to Exhibit
10.13 to Immucor Inc.'s Annual Report on Form 10-K for the fiscal
year ended May 31, 1999).
10.13* 1998 Stock Option Plan, including form of Stock Option Agreement used
thereunder.
10.14* 1995 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.15 to Immucor,
Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31,
1995).
10.15* 1990 Stock Option Plan, including form of Stock Option Agreement used
thereunder (incorporated by reference to Exhibit 10.15 to Immucor,
Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31,
1995).
10.16* Description of 1983 Stock Option Plan (incorporated by reference to
Exhibit 10.10 to Immucor, Inc.'s Annual Repor t on Form 10-K for the
fiscal year ending May 31, 1985).
10.17* 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).
10.18* Employment Agreement dated October 13, 1998, between the Company and
Steven C. Ramsey. (incorporated by reference to Exhibit 10.20 to
Immucor Inc.'s Annual Report on Form 10-K for the fiscal year ended
May 31, 1999).
10.19* Employment Agreement dated October 13, 1998, between the Company and
Patrick Waddy. (incorporated by reference to Exhibit 10.22 to Immucor
Inc.'s Annual Report on Form 10-K for the fiscal year ended May 31,
1999).
10.20 Loan Agreement among Immucor, Inc., Dominion Biologicals Limited, and
Immucor Medizinische Diagnostik GmbH, as borrowers, and Wachovia
Bank, National Association, as lender, dated as of February 23, 2001
(incorporated by reference to Exhibit 10.23 to Immucor, Inc.'s
quarterly report on form 10-Q filed April 23, 2001).
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP
*Denotes a management contract or compensatory plan or arrangement.