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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2002
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-14820
IMMUCOR, INC.
(Exact name of registrant as specified in its charter)
Georgia 22-2408354
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
3130 GATEWAY DRIVE, 30091
P.O. BOX 5625 (Zip Code)
Norcross, Georgia
(Address of principal executive offices)
Registrant's telephone number, including area code, is (770) 441-2051
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE
(Title of Class)
COMMON STOCK PURCHASE RIGHTS
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
-------- --------
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of July 31, 2002, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $219,944,920.
As of July 31, 2002, there were 8,162,393 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on November 15, 2002, are incorporated by reference in Part III.
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.
Background and Developments During Fiscal Year 2002
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. The Company executed its plans through a series of
acquisitions.
o 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. Located in Houston,
Texas, Gamma manufactures and distributes a wide variety of in-vitro
diagnostic reagents to blood donation centers, transfusion departments of
hospitals and medical laboratories 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).
o Acquisition of the BCA blood bank division assets of Biopool International,
Inc. On April 30, 1999 the Company purchased certain assets, primarily
accounts receivable and inventory, of the BCA blood bank division of
Biopool International, Inc. for approximately $4.5 million. This
acquisition added five 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.
During fiscal 2002, the Company resolved the remaining performance issues
relating to its ABS2000 instrument and launched its Version 2 software for this
instrument. In December 2000, we lifted the safety notification for antibody
screening and crossmatch assay, and were able to lift the safety notification
for blood grouping and launch our Version 2 software on October 1, 2001. Before
we could lift the safety notification and install the new software, the Company
had to submit a corrective action plan to the U.S. Food and Drug Administration
("FDA"), and then service engineers had to complete field corrective action on
the ABS2000 and to accumulate clinical data.
In May 2002, the Company transferred all of its commercial activities in
France to Bio-Rad Laboratories under the terms of a five-year distribution
agreement. Over the life of the agreement, the Company expects revenue growth of
$9.0 million. Bio-Rad has a leading position in the French market, with a
dedicated sales force and established infrastructure capable of supporting the
Company's automation strategy.
In September 1999, the Company entered into a manufacturing and development
agreement with Stratec Biomedical AG ("Stratec"), headquartered 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. The Company has made some
initial sales to European distributors but plans the full launch of the Galileo
in selected European countries during the first quarter of fiscal 2003.
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 received on
June 11, 2001 and the second installment of $0.6 million was received on April
2, 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 transfused 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 $380 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 $575 million while decreasing the overall
cost of blood testing by reducing the labor component by approximately $500
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 for the hospital and clinical reference
laboratory markets. Several years ago Olympus America Inc. developed an
automated analyzer for the blood donor market. The instrument performs only
ABO/Rh testing and does not perform antibody screening. The Olympus instrument
users currently dilute commercial ABO and Rh reagents for the machine's use.
Gamma began developing diluted ready-for-use reagents for Olympus several years
ago. Gamma has received clearance from the FDA for six of the reagents and is
awaiting clearance for the seventh. Management does not believe the Olympus
instrument will have an effect on its instrument strategy. 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 $70,000 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, the
DIAS PLUS and the next generation Galileo automated analyzers, all of which
operate exclusively 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.
Product Group Principal Use (continued)
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 proficiency
Systems and provide continuing education for technical staff.
Fetal Bleed Screen Kit Used to detect excessive fetal-maternal hemorrhage in
Rh-negative women.
Capture-P(R) Used for the detection of platelet antibodies.
Capture-R(R) Used to detect and identify unexpected blood group
antibodies.
Capture-CMV(R) Used for the detection of antibodies to 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 after
(Human) 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 Detection of certain infectious diseases by the
methods of Capture, ELISA, Immunofluorescence and
Latex Slide Tests.
Clinical Chemistry Blood analysis and pathological testing.
Immunofluorescent Used in clinical research to identify rare cell
Monoclonal Antibodies surface antigens.
Automated Microtitration Instruments providing laboratories automated batch
Plate Processors 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.
ROSYS Plato System Semi-automated blood bank serology system targeting
medium and high volume testing facilities performing
up to 40 samples per hour.
DIAS PLUS System Addresses the needs of donor centers and the high-
volume lab markets processing more than 100,000
samples per year.
GALILEO System Currently launched in Europe, this fully automated
high volume analyzer will be the successor to the
ABS2000, ROSYS Plato and DIAS PLUS. It is capable of
performing 70 type and screen tests per hour.
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-S(R) products.
GALILEO: High Volume Microplate Processor. The system provides hospitals,
clinical reference laboratories and blood donor centers a fully automated
solution to the labor intensive process of blood compatibility testing. The
Galileo uses Immucor's proprietary Capture(R) reagent product technology and is
manufactured exclusively for Immucor by Stratec.
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 traditional 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 pre-market 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, 2002, 2001 and 2000, the Company spent approximately
$2.0 million, $1.9 million and $2.0 million, 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 ten-year period ending May 31, 2002
the Company has invested $7.2 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 was cleared for
market by the FDA on October 1, 2001. 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 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 completed these tasks and the safety
notification for blood grouping was lifted on September 26, 2001. On October 1,
2001, the Company launched its ABS2000 Version 2 software. This
second-generation software has a number of new features that help maximize
productivity of the instrument and the technologists, including:
o The ability to perform a 2-cell screen - increases productivity. The
2-cell screen product has been cleared by the FDA and is expected to
begin shipment during the second quarter of fiscal 2003.
o The availability of "mini batches" which allow for faster access to
results once the samples are processed.
o Less maintenance, which saves time and money.
o Customized Quality Control, which allows the technologist to only
perform QC for assays that are being tested.
In August 2002, Immucor placed an order, amounting to $3.3 million, for 50
additional ABS2000 to be delivered by February 2003.
On September 1, 1999, the Company entered into a manufacturing and
development agreement with Stratec Biomedical AG ("Stratec"), headquartered 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. The Company made some initial sales to European distributors in
fiscal 2002 but began the full launch of the Galileo in selected European
countries in June 2002. The Company expects to install 25 instruments in Europe
during fiscal 2003 through outright sales and reagent rental agreements.
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
2% of the Company's current annual sales volume. The Company believes there is a
slight amount of seasonality to its sales activity as fewer donations and
elective surgical procedures are performed in its first and third quarters.
There is no material backlog of reagent revenues. At May 31, 2002 the Company
had a backlog of installed but unrecorded instrument sales of approximately
$700,000.
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 104 sales, marketing and support personnel employed by the Company in
the U.S., Canada, Germany, Portugal, Italy, Spain, and Belgium. In addition, the
Company utilizes 14 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, 2002, 2001 and
2000, the Company had foreign net sales, including net domestic export sales to
unaffiliated customers, of approximately $31.3 million, $31.3 million and $35.1
million, respectively. These sales accounted for approximately 37%, 45% and 46%
of the Company's total net sales for the respective fiscal years. During the
years ended May 31, 2002, 2001 and 2000, the Company's U.S. operations made net
export sales to unaffiliated customers of approximately $5.3 million, $5.8
million and $6.7 million, respectively. Most of the Company's foreign sales
occurred in Europe and Canada where the Company maintains subsidiaries. The
Company's German operations made net export sales to unaffiliated customers of
approximately $2.3 million, $1.1 million and $1.5 million for the years ended
May 31, 2002, 2001, and 2000, respectively. The Company's Canadian operations
made net export sales to unaffiliated customers of approximately $2.1 million,
$2.4 million and $2.2 million for the years ending May 31, 2002, 2001, and 2000,
respectively. The Company's Italian operations made sales in Italy of $6.0
million, $5.6 million, and $6.7 million for the years ending May 31, 2002, 2001,
and 2000, respectively. Please refer to Note 13 to our consolidated 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 year ended May 31, 2002, foreign net sales
declined $0.30 million due to the exchange fluctuation of the Euro. Since the
end of the fiscal year, the Euro has strengthened against the dollar which
favorably affected foreign net sales for the two months ended July 31, 2002 by
$0.3 million.
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, QIAGEN N.V. for the ROSYS
Plato and Stratec Biomedical AG for the Galileo (see Note 12 to the Consolidated
Financial Statements), and Serologicals, Inc., the joint manufacturer of some of
the Company's monoclonal antibody-based products. The Company believes that its
business relationship with its 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.
In November 2001 the FDA inspected the Gamma Biologicals, Inc. facility in
Houston, Texas and reported several observations. The Company responded to these
observations and on February 25, 2002 the FDA requested additional information
regarding our response. On June 25, 2002 the FDA advised the Company that its
responses were acceptable and would be verified during the next inspection. The
FDA district office inspected the Gamma facility in July, 2002 and made two
observations. The Company plans to respond to these observations.
Also in November 2001 the FDA inspected the Immucor, Inc. facility in
Norcross, Georgia and reported several observations. The Company responded to
the observations. On February 14, 2002 the FDA advised the Company that the
responses appear adequate and would be verified at the next inspection.
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, 2002, 2001 and 2000 the Company paid royalties of approximately $517,000,
$435,000, and $409,000 under this agreement. See Note 11 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". The Company continues to distribute four products manufactured
by Biopool, Inc.
Competition
Competition is based on quality of product, price, 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.
Olympus America Inc. has developed an automated analyzer for the blood
donor market. The instrument performs only ABO/Rh testing and does not perform
antibody screening. The Olympus instrument users currently dilute commercial ABO
and Rh reagents for the machine's use. Gamma began developing diluted
ready-for-use reagents for Olympus several years ago. Gamma has received
clearance from the FDA for six of the reagents and is awaiting clearance for the
seventh. Management does not believe the Olympus instrument will have an effect
on its instrument strategy in North America.
Biotest AG, a German Pharmaceutical and Diagnostic company, presently has
FDA licenses for six reagent products. Since the product line is incomplete
there is no evidence that Biotest will be in a position, in the near term, to
market a complete commercially-viable product line.
European competitors for blood bank products include Biotest 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 completeness of its product line, 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, 2002, the Company and its subsidiaries had a total of 481
employees. The Company had 325 full time employees in the U.S., of whom 27 were
in sales and marketing, 258 were in manufacturing, research and distribution,
and 40 were in administration. In Germany, Portugal, Italy, Spain, Canada, and
Belgium, the Company had 156 full-time employees, of whom 77 were in sales and
marketing, 45 were in research, distribution and administration and 34 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.
Available Information
Immucor files reports, proxy statements and other information under the
Securities Exchange Act of 1934, as amended (the "1934 Act") with the Securities
and Exchange Commission (the "Commission"). The public may read and copy any
Company filings at the Commission's Public Reference Room at 450 Fifth Street
N.W., Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the Commission at 1-800-SEC-0330. Because the
Company makes filings to the Commission electronically, you may also access this
information at the Commission's Internet site (http://www.sec.gov). This site
contains reports, proxies and information statements and other information
regarding issuers that file electronically with the Commission.
Item 2.--Properties.
The Company leases approximately 67,000 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, 2002 were
approximately $678,000. 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, 2002 totaled approximately $159,000.
The term of the lease in Germany is through April 2009. In Italy rent expense
for the fiscal year ended May 31, 2002 totaled approximately $84,000 for 700
square meters. The Company has five separate lease agreements for the facility
in Italy with terms expiring between September 2004 and November 2007. In
Portugal, the Company leases 120 square meters of office space and rent expense
for the fiscal year ended May 31, 2002 was approximately $14,500. In Spain, the
Company leases 165 square meters of office space and rent expense for the fiscal
year ended May 31, 2002 was approximately $18,000. In Belgium, the Company owns
land and a 575 square meter building subject to a first lien mortgage. In
Canada, the Company owns a 15,000 square foot building on approximately one acre
of land. 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 as reported by NASDAQ. 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, 2002 $ 28.880 $ 16.260
Fiscal Year Ended May 31, 2002
First Quarter $5.000 $2.400
Second Quarter 8.150 2.500
Third Quarter 12.410 6.200
Fourth Quarter 19.750 10.310
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
As of July 31, 2002, there were 329 holders of record of the Company's
common stock. The last reported sales price of the common stock on such date was
$28.190.
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. In connection with the Company's 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 loan agreement contains certain financial and other
covenants which, among other things, limit annual capital expenditures, prevent
payment of cash dividends or the repurchase of stock, limit the incurrence of
additional debt, and require the maintenance of certain financial ratios. See
Note 3 of the Consolidated Financial Statements.
On July 24, 2002, the Board of Directors approved a 3-for-2 stock split,
which will be effected in the form of a 50% stock dividend to shareholders of
record as of the close of business on August 26, 2002. As of July 31, 2002, the
Company had 8,162,393 shares of common stock outstanding. The stock split will
increase the number of shares of common stock outstanding to approximately
12,243,590 shares. The expected date of distribution is September 13, 2002. The
stock split is the fourth for the Company since its initial public offering in
December 1985. Previously, the Company implemented a three-for-two split in
1991, a five-for-four split in 1990, and a five-for-four split in 1987. No
adjustments have been recorded in the financial statements to reflect the impact
on share information of the 3-for-2 stock split. See Note 17.
Recent Sales of Unregistered Securities
From January 28, 2002 until June 4, 2002, the Company issued an aggregate
of 105,980 shares of its common stock to participants in its 1998 Employee Stock
Option Plan. Such shares were issued upon payment of the exercise price, which
ranged from a low of $8.75 per share to a high of $12.375 per share, and totaled
$1,059,644. The Company inadvertently issued such shares prior to the filing of
a registration statement on Form S-8 covering the shares to be issued under that
plan. The Company filed the required registration statement on Form S-8 on June
14, 2002.
In connection with the Company's acquisition of its Belgian and French
distribution rights in 1999, the Company issued the seller of such rights a
warrant to purchase 100,000 shares of Immucor's common stock in a transaction
exempt under Section 4(2) of the Securities Act. When the Company issued the
warrant, it intended for the issuance of shares upon exercise of the warrant to
be exempt under Section 4(2) of the Securities Act, and obtained the warrant
holder's agreement to not resell any of the shares received upon exercise of the
warrant except in compliance with the Securities Act. On June 7, 2002, Immucor
issued 50,000 shares of common stock upon a partial exercise of the warrant.
However, due to the Company's mistaken belief that either the Company's issuance
of those shares or the warrant holder's resale of those shares had been
registered under the Securities Act, when the warrant was exercised the Company
issued the shares without a restrictive legend or stop transfer order, thereby
allowing the warrant holder to resell the shares shortly after issuance.
Equity Compensation Plan Information
The following data reflects the effect of the recent 3-for-2 stock split. See Note 17.
Number of securities to Weighted average exercise Number of securities
be issued upon exercise price of outstanding remaining available
Plan category of outstanding options, options, warrants and for future issuance
warrants and rights rights
======================================= ========================= =========================== ========================
Equity compensation plans approved by
security holders 1,210,640 $5.15 157,296
======================================= ========================= =========================== ========================
Equity compensation plans not
approved by security holders * 1,503,037 $4.84 296,738
======================================= ========================= =========================== ========================
Total 2,713,677 $4.98 454,034
======================================= ========================= =========================== ========================
* For a description of the material features of our 1990 and 1995 Employee Stock
Option Plans, see Note 7 of the Consolidated Financial Statements.
Item 6.--Consolidated Selected Financial Data.
(All amounts are in thousands, except per share amounts)
Year Ended May 31,
---------------------------------------------------------------------------------
2002 2001 2000 1999 (1) 1998
--------------- -------------- -------------- --------------- --------------
Statement of Operations Data:
Net sales $84,144 $69,438 $76,541 $59,525 $39,790
Cost of sales 37,477 38,086 36,408 27,551 18,168
--------------- -------------- -------------- --------------- --------------
Gross profit 46,667 31,352 40,133 31,974 21,622
--------------- -------------- -------------- --------------- --------------
Operating expenses:
Research and development 1,997 1,894 2,003 1,294 971
Selling, general, and administrative 29,629 30,519 30,771 23,812 16,918
Loss on impairment of goodwill - 3,063 - - -
Merger-related expenses - - - 559 -
--------------- -------------- -------------- --------------- --------------
Total operating expenses 31,626 35,476 32,774 25,665 17,889
--------------- -------------- -------------- --------------- --------------
Income (loss) from operations 15,041 (4,124) 7,359 6,309 3,733
--------------- -------------- -------------- --------------- --------------
Other:
Interest income 41 58 31 313 789
Interest expense (4,454) (3,747) (2,911) (1,416) (616)
Other 1,356 229 231 202 (27)
--------------- -------------- -------------- --------------- --------------
Total other (3,057) (3,460) (2,649) (901) 146
--------------- -------------- -------------- --------------- --------------
Income (loss) before income taxes 11,984 (7,584) 4,710 5,408 3,879
Income taxes 3,189 465 1,898 1,847 1,810
--------------- -------------- -------------- --------------- --------------
Net income (loss) $ 8,795 $ (8,049) $ 2,812 $ 3,561 $ 2,069
=============== ============== ============== =============== ==============
Income (loss) per share:
Basic $1.20 $(1.10) $0.36 $0.47 $0.26
=============== ============== ============== =============== ==============
Diluted $1.15 $(1.10) $0.33 $0.45 $0.25
=============== ============== ============== =============== ==============
Weighted average shares outstanding
Basic 7,306 7,286 7,713 7,646 8,095
=============== ============== ============== =============== ==============
Diluted 7,635 7,286 8,520 7,959 8,443
=============== ============== ============== =============== ==============
Balance Sheet Data:
Working capital $ 27,070 $ 19,536 $ 21,868 $ 21,141 $ 32,948
Total assets 101,367 95,813 102,775 99,734 57,544
Long-term obligations, less current portion 31,581 39,951 34,815 31,548 8,912
Retained earnings 29,057 20,262 28,311 25,499 21,938
Shareholders' equity 43,953 29,843 40,919 40,053 42,433
(1) 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.
Certain statements that Immucor may make from time to time, including
statements contained in this report, constitute "forward-looking statements"
under the federal securities laws. Forward-looking statements may be identified
by words such as "plans," "expects," "believes," "anticipates," "estimates,"
"projects," "will" and other words of similar meaning used in conjunction with,
among other things, discussions of future operations, financial performance,
product development and new product launches, market position and expenditures.
Factors that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, Immucor
include the following, some of which are described in greater detail below: the
decision of customers to defer capital spending, increased competition in the
sale of instruments and reagents, changes in interest rates and general economic
conditions. In addition, the strengthening of the dollar versus the Euro would
adversely impact reported European results. Investors are cautioned not to place
undue reliance on any forward-looking statements. Immucor cautions that
historical results should not be relied upon as indications of future
performance. Immucor assumes no obligation to update any forward-looking
statements.
Critical Accounting Policies
General
We have identified the policies below as critical to our business
operations and the understanding of our results of operations. The impact and
any associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis of Financial Condition
and Results of Operations where such policies affect our reported and expected
financial results. For a detailed discussion on the application of these and
other accounting policies, see Note 1 to the Consolidated Financial Statements
in Item 14 of this Annual Report on Form 10-K. Note that our preparation of this
Annual Report on Form 10-K requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of our financial statements, and the reported
amounts of revenue and expenses during the reporting period. There can be no
assurance that actual results will not differ from those estimates.
Revenue Recognition
The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), as
amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must be
met before revenue can be recognized: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services rendered; (3) the fee is fixed and
determinable; and (4) collectibility is reasonably assured. Should changes in
conditions cause management to determine these criteria are not met for certain
future transactions, revenue recognized for any reporting period could be
adversely affected. Revenue from the sale of the Company's reagents is
recognized upon shipment since both title and risk of loss transfers to the
customer upon shipment. Revenue from the sale of the Company's medical
instruments is recognized upon shipment and completion of contractual
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.
Allowance for Doubtful Accounts
Immucor maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. The
allowance is approximately 5.2% of the accounts receivable balance. The Company
continually monitors the collectibility of its customer accounts and when
indications arise that amounts are not likely to be collected, the amount is
charged to the allowance for doubtful accounts. If the financial condition of
Immucor's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances could be required.
Inventory
Inventories are stated at the lower of first-in, first-out cost or market.
Cost includes material, labor and manufacturing overhead. The Company uses a
standard cost system that applies labor and manufacturing overhead factors to
inventory based on budgeted production levels, staffing levels and costs of
operation. Actual costs and production levels may vary from the standard and
will be charged to the consolidated statement of operations as a component of
cost of sales.
Goodwill and Other Long-lived Assets
In assessing the recoverability of the Company's goodwill and other
long-lived assets the Company must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets. If these estimates or their related assumptions change in the future,
the Company may be required to record impairment charges for these assets not
previously recorded. On June 1, 2002 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible Assets, and
will be required to analyze its goodwill and intangible assets for impairment on
an annual basis or more frequently if impairment indicators arise. In October
2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The Statement supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
however it retains the fundamental provisions of that statement related to the
recognition and measurement of the impairment of long-lived assets to be "held
and used." The Statement is effective for year-ends beginning after December 15,
2001. The Company is in the process of evaluating the impact SFAS No. 144 will
have upon adoption but does not anticipate it will have a significant impact on
its financial position or results of operations.
Income Taxes
Our income tax policy records the estimated future tax effects of temporary
differences between the tax bases of assets and liabilities and amounts reported
in the accompanying consolidated balance sheets, as well as operating loss and
tax credit carry-forwards. We follow very specific and detailed guidelines
regarding the recoverability of any tax assets recorded on the balance sheet and
provide any necessary allowances as required. Carrying value of the Company's
net deferred tax assets assumes that the Company will be able to generate
sufficient future taxable income in certain tax jurisdictions, based on
estimates and assumptions. If these estimates and related assumptions change in
the future, the Company may be required to record additional valuation
allowances against its deferred tax assets resulting in additional income tax
expense in the Company's consolidated statement of operations. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, carry back opportunities, and tax
planning strategies in making this assessment. Management evaluates the
realizability of the deferred tax assets and assesses the need for additional
valuation allowances quarterly.
(a) Liquidity and Capital Resources
Net cash provided by operating activities totaled approximately $13.1
million, $2.4 million, and $6.1 million for the fiscal years 2002, 2001 and
2000, respectively. As of May 31, 2002, the Company's cash and cash equivalents
balance totaled $4.0 million. The approximately 450% increase in cash provided
by operating activities from 2001 to 2002 resulted from the turnaround in
operating results of the Company. During fiscal 2002, the Company improved net
income by $16.8 million over fiscal 2001 including the one-time benefit of a
$1.8 million settlement with Becton, Dickinson and Company and the disgorgement
of $0.4 million of short-swing trading profits from the Kairos Group. The net
loss in fiscal 2001 included a $3.1 million loss on impairment of goodwill
related to the Company's Belgian and French subsidiaries, and $1.3 million in
nonrecurring expenses related to the implementation of the Company's cost
savings plan. The implementation of the price increases during fiscal year 2001
and 2002 and the cost savings plan in the fourth quarter of fiscal 2001 had a
materially beneficial effect on the Company's cash position which the Company
expects to continue in fiscal 2003.
In May 2002, the Company transferred all of its commercial activities in
France to Bio-Rad Laboratories under the terms of a five-year distribution
agreement. Over the life of the agreement, the Company expects revenue growth of
$9.0 million. Bio-Rad has a leading position in the French market, with a
dedicated sales force and established infrastructure capable of supporting the
Company's automation strategy. The assets related to the French operations were
minor to the total assets of the Belgian and French operations.
During fiscal 2002, $3.4 million of cash was used in investing activities
primarily for capital expenditures of $1.1 million for instruments at customer
sites on reagent rental agreements, $1.8 million for computer hardware and
software enhancements of the enterprise software system, and $0.5 million to
refurbish the German facility. Planned capital expenditures for fiscal 2003
total approximately $4.1 million, and include approximately $0.3 million for
U.S. clinical trial Galileo instruments and approximately $1.3 million for
Galileo reagent rental instruments installed in Europe. Additionally, the
Company has budgeted $1.3 million for manufacturing and quality system
improvements at its Norcross and Houston facilities during fiscal 2003.
Expansion of the Company's computer network capabilities, including foreign
subsidiaries, is budgeted at $1.2 million for fiscal 2003.
Net cash used in financing activities totaled $9.3 million. During fiscal
2002, the Company paid principal of $12.6 million of long-term debt, debt issue
costs and capital lease obligations. However, the Company received $2.8 million
in cash from the exercise of stock options. Most of these options were granted
in prior fiscal years and provide for exercise prices equal to the market value
of the Company's stock on the date granted. The Company has experienced a rise
in the value of its stock during the recently completed fiscal year and as a
result option holders have exercised a large number of options. See Note 7 and
Item 5--"Market for Registrant's Common Equity and Related Stockholder
Matters--Equity Compensation Plan Information."
Accounts receivable increased by $6.0 million from May 31, 2001 due to the
reagent price increases that had a significant positive impact on the second
half of the fiscal year, but remains at approximately 120 days sales
outstanding. Inventory levels stayed relatively constant for the year at
approximately 145 days sales in inventory. In August 2002, Immucor placed an
order, amounting to $3.3 million, for 50 additional ABS2000 instruments to be
delivered by February 2003. Income tax refund receivable, due from the German
fiscal authorities, increased due to a decrease in pretax income and
overpayments in the German subsidiary. Net deferred income tax liabilities
decreased by $0.5 million for fiscal 2002 as the Company adjusted its assessment
of estimated future tax effects of temporary differences between the tax bases
of assets and liabilities and amounts reported in the accompanying consolidated
balance sheets, as well as operating loss and tax credit carry-forwards. Prepaid
and other assets increased by $0.9 million due to prepayments for insurance
coverage and amounts due from financial institutions upon exercise of stock
options. Other long-term assets increased in fiscal 2002 over fiscal 2001
primarily as a result of loan fees to be paid in installments to the Company's
primary lender. See Note 3 of the Consolidated Financial Statements. Deferred
licensing costs and excess of cost over net tangible assets acquired declined in
fiscal 2002 over fiscal 2001 due to normal amortization.
Accounts payable decreased by $0.3 million as the Company's operating
cash-flows improved. The current income tax liability increased $3.1 million in
fiscal 2002 over fiscal 2001 as a result of the Company's return to
profitability and after fully utilizing net operating loss carry-forwards
generated in prior periods. Other accrued liabilities declined $0.6 million
mainly as the result of recognizing deferred instrument revenue as customer
training and other contractual requirements were completed. Accrued salaries and
wages include an accrual for approximately $0.7 million for executive bonuses to
be paid in fiscal 2003. Other long-term liabilities increased by $0.5 million
primarily due to the changes in value of the interest rate swap agreement. See
Item 7A. - Quantitative and Qualitative Disclosures About Market Risk.
Common stock and additional paid-in capital increased by an aggregate of
$4.1 million primarily due to the exercise of stock options, described above,
and the related tax benefit. Approximately $0.7 million of stock options were
exercised as of May 31, 2002 but are classified as a receivable until the
amounts due from financial institutions are received. Retained earnings and
(comprehensive loss) improved by $10 million due to the earnings for the year
and favorable changes in the net foreign exchange translation, offset by the
effect of the interest rate swaps. See Item 7A--Quantitative and Qualitative
Disclosures About Market Risk--Interest Rates. 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 (loss). The effect of foreign currency transaction gains
and losses has been recorded in the accompanying statements of operations. Since
the end of the fiscal year, the Euro has strengthened against the dollar, which
increased accounts receivable, inventory, net property, plant and equipment,
accounts payable and long-term debt for the period ended July 31, 2002 by $0.7
million, $0.1 million, $0.2 million, 0.1 million and $0.2 million, respectively.
The Company amended its loan agreement during fiscal 2002 and again in the
first quarter of fiscal 2003. In September 2001, the Company negotiated a waiver
from its primary lender of covenant defaults under the Loan Agreement dated
February 23, 2001 and obtained a relaxation of such loan covenants for four
quarters in exchange for a cash waiver fee, increased interest rates and other
conditions. As amended, the Company was required to meet quarterly and
cumulative Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") covenants and quarterly funded debt to EBITDA ratios. The interest
rates would revert back to the more favorable pricing provided in the original
Loan Agreement dated February 23, 2001 once the Company's ratio of trailing
twelve-month funded debt to EBITDA reached 2.50 to 1 or less. In order to obtain
the waiver, the Company agreed to seek a minimum of $5.0 million in junior
capital, in the form of either equity or subordinated debt investment. However,
the Company did not obtain such investment by December 31, 2001 and, as a
result, became obligated to pay the lender an additional fee of $450,000
(payable in twelve equal monthly installments beginning January 31, 2002). The
Company also became obligated to issue the lender a warrant to purchase 750,000
shares of Immucor, Inc. stock at the market price of the stock on December 31,
2001
subject to negotiations of terms. Additionally, since the junior capital
investment was not received by December 31, 2001, the revolving lines of credit
and Term Note A were re-priced at prime plus 2.0% and Term Note B was re-priced
at prime plus 4.0% until the junior capital was received. Because the junior
capital investment was not received by April 30, 2002, all existing revolving
lines of credit were reset to mature on February 28, 2003.
In March 2002, the Company agreed to pay the lender $500,000 in cash in
lieu of issuing any warrants. The fee is payable in four monthly installments of
$75,000 commencing September 30, 2002 followed by payments of $100,000 on
January 31, 2003 and February 28, 2003. During the third quarter of the fiscal
year the Company achieved the trailing twelve-month EBITDA required by the
original Loan Agreement dated February 23, 2001. On May 1, 2002 the Company was
notified by its senior lender that it would allow the pricing of the loans to
revert to LIBOR plus the applicable margin per the original Loan Agreement.
In July, 2002, the Company and its primary lender again amended the loan
agreement to extend the term of the existing revolving lines of credit from
February 28, 2003 to December 1, 2005. Borrowings under the senior credit
facility were re-priced according to a pricing grid that varies based upon the
Company's ratio of Funded Debt to EBITDA, as defined in the senior credit
facility. The current interest rate on the effective date of the amendment will
be LIBOR plus a spread of 200 basis points on the revolving lines of credit and
Term Loan A and LIBOR plus a spread of 250 basis points on the Term Loan B.
At May 31, 2002 there was approximately $27.3 million of outstanding debt
under the lines of credit and Term Loan A and approximately $6.0 million
outstanding under Term Loan B. In addition, as of May 31, 2002, the Company's
Italian and Spanish subsidiaries had outstanding debt of approximately $2.1
million under lines of credit and its Belgian subsidiary had outstanding debt of
approximately $0.5 million under line of credit agreements. The Company can
borrow an additional $2.5 million in funds under the U.S. line of credit, $1.2
million under the Canadian line of credit, and no additional funds are available
under the German line of credit. The Company's Italian and Spanish subsidiaries
have an ability to borrow an additional $475,000 and its Belgian subsidiary can
borrow an additional $320,000. The Company made a $4.5 million payment against
the line of credit in July 2002.
In fiscal 1998, the Company authorized a program to repurchase up to 10% of
its common stock in the open market. During fiscal 2001 and 2000, the Company
repurchased 184,500 and 415,500 shares of its common stock for approximately
$1.5 and $3.5 million, respectively. The Company is restricted from the
repurchase of additional shares under debt covenants of the current loan
agreement. The Company previously granted its principal lender a security
interest in substantially all of the Company's assets in addition to other
security. Additionally, the loan agreement contains certain financial and other
covenants which, among other things, limit annual capital expenditures, prevent
payment of cash dividends or the repurchase of stock, limit the incurrence of
additional debt, and require the maintenance of certain financial ratios. The
Canadian revolving line of credit and German line of credit are guaranteed by
the Company. The interest rate swap agreement with the U.S. bank is also
guaranteed by the Company. At May 31, 2002 and May 31, 2001, the Company had an
interest rate swap agreement in the Company's functional currency, maturing in
2005 with an initial notional principal amount of $15 million which amortizes
over the life of the instrument. The fair value of the interest rate swap
agreement represents the estimated receipts or payments that would be made to
terminate the agreement and is included with other long-term liabilities on the
balance sheet. At May 31, 2002 and May 31, 2001, the Company would have paid
$369,492 and $87,321, respectively, to terminate the agreement in the Company's
functional currency. See Item 7A--Quantitative and Qualitative Disclosures About
Market Risk--Interest Rates. There are no restrictions on the Company's foreign
subsidiaries in the matter of sending dividends, or making loans or advances to
the parent Company.
Management is focused on reducing the leverage on the Company's balance
sheet and does not anticipate that there will be a need for additional
borrowings. Management expects that cash and cash equivalents and internally
generated funds will be sufficient to support operations, scheduled debt
repayments and planned capital expenditures for the next 12 months, as well as
fund future long-term debt payments.
Contractual Obligations and Commercial Commitments
- ------------------------------------ -----------------------------------------------------------------------
Contractual Obligations Payments Due by Period
(in thousands)
- ------------------------------------ -----------------------------------------------------------------------
Total Less than 1 1-3 years 4 - 5 years After 5 years
year
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
Long Term Debt and Lines of Credit $35,986 $ 5,658 $29,918 $410 -
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
Capital Lease Obligations 2,228 975 1,253 - -
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
Operating Leases 4,312 1,211 2,599 502 -
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
Other Long Term Obligations 3,300 3,300 - - -
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
Total Contractual Cash Obligations $45,826 $11,144 $33,770 $912 -
- ------------------------------------ ------------- -------------- ------------ ------------ ----------------
(b) Results of Operations
For the fiscal year ended May 31, 2002 revenues totaled a record $84.1
million, a $14.7 million, or 21.2% increase over the prior year. The increase in
revenues occurred predominantly as a result of reagent price increases in the
United States. Income before income taxes reached $12.0 million for fiscal 2002
compared to a net loss before tax of $7.6 million for fiscal 2001. Net income
increased to $8.8 million versus a loss of $8.0 million in the same period last
year. Diluted earnings per share were $1.15 on 7.6 million weighted average
shares outstanding compared with $(1.10) on 7.3 million weighted average shares
outstanding for the same period last year. The rise in the Company's stock price
over the past year has increased the dilutive effect of stock options and
warrants by approximately 300,000 shares that are used to arrive at diluted
earnings per share. See Note 8 of the Consolidated Financial Statements. Year to
date EBITDA reached $22.7 million versus $2.3 million in the prior year.
In addition, the Company renewed or obtained new contracts with purchasing
groups during fiscal year 2002. These agreements generally reflected the
Company's new pricing structure, although in some cases the new prices were only
partially implemented in the first year of a contract and will not be fully
implemented until fiscal year 2003.
Net income also was favorably affected by the cost savings plan the Company
implemented in the fourth quarter of 2001. The Company reduced costs through
layoffs, the closure of operations in the Netherlands and curtailed spending.
Officers of the Company agreed to a salary reduction of approximately eight
percent of their total base compensation. In the third quarter of 2001 the
Company recorded approximately $1.3 million in nonrecurring expenses related to
the implementation of the plan. Other income for the year rose $1.1 million.
Other income for the first quarter of fiscal 2002 was favorably affected by the
settlement of the Becton, Dickinson arbitration. 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 received on June 11, 2001,
and the second installment of $0.6 million was received April 2, 2002. A loss on
disposal of assets of approximately $0.8 million related to IMAGN was netted
against the settlement from Becton, along with $51,000 in instrument financing
settlement fees. Other income for the second quarter was favorably affected by
the disgorgement of short-swing trading profits by the Kairos Group that
contributed $0.4 million to pre-tax income. These items of income do not arise
from the Company's ongoing business.
Results of German and Italian operations continue to suffer from the lack
of a competitive automated instrument. The Company expects operating results to
improve in these operations after the full European launch of its Galileo
instrument in the first quarter of fiscal 2003.
Comparison of Years Ended May 31, 2002 and May 31, 2001
Net sales
Revenues for the year ended May 31, 2002 rose by $14.7 million over the
prior fiscal year largely due to the aggressive price increase begun in the
third quarter of fiscal year 2001 and to new group contracts. Instrument sales
for the year ended May 31, 2002 were up $1.8 million to $5.3 million. Instrument
sales grew as a result of new placements and concentrated efforts to reduce the
backlog of instruments, currently $0.7 million, installed but not recorded as
revenue due to post installation criteria. The effect on revenues of the change
in the Euro exchange rate was a decrease of $295,000 for fiscal 2002. Since the
end of the fiscal year, the Euro has strengthened against the dollar which
favorably affected foreign net sales, for the two months ended July 31, 2002 by
$0.3 million.
Instrument sales also benefited from the lifting of the safety notification
on the ABS2000. In December 2000, we lifted the safety notification for antibody
screening and crossmatch assay, and were able to lift the safety notification
for blood grouping and launch our Version 2 software on October 1, 2001. Before
we could lift the safety notification and install the new software, the Company
had to submit a corrective action plan to the U.S. Food and Drug Administration
(FDA), and then service engineers had to complete field corrective action on the
ABS2000 and to accumulate clinical data. The cost of installing the new software
on instruments in the field was less than $50,000.
Gross profit
Gross profit, as a percentage of sales, totaled 55.5% versus 45.2% in the
prior year. Gross profit increased $15.3 million, as compared to the prior year,
due to the aggressive price increases mentioned above. Gross profits were also
enhanced by the discontinuance of significant costs incurred in the prior year
to resolve ABS2000 performance issues and the related costs of product
concessions provided to customers who were required to perform backup testing
during the safety notification. The effect on gross profit of the change in the
Euro exchange rate was a decrease of $139,000 for fiscal 2002. In fiscal 2002,
the Company evaluated the carrying value of the DIAS PLUS instruments and
estimated that the undiscounted cash flow indicated an impairment. An impairment
loss of approximately $270,000 was charged to depreciation expense on the
statement of operations.
Operating expenses
When compared to the prior year, research and development costs for fiscal
2002 rose 5% over fiscal 2001 and were primarily related to instrument
development initiatives for the Galileo for the European market. 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 $0.9 million for fiscal 2002 as
compared to the prior year. Until the fourth quarter of fiscal 2001, the Company
had been developing an infrastructure to support an increased level of
instrument sales. However, in light of the issues with the ABS2000 and continued
customer migration to purchasing groups, the Company reevaluated the focus of
its sales and marketing efforts. The domestic sales staff was significantly
reduced and the Netherlands facility was closed, resulting in a positive effect
on selling and marketing expenses. Travel expenses and commissions rose to
partially offset the previous cost savings due to renewed instrumentation
efforts and higher revenues, in the second half of fiscal year 2002,from the
domestic reagent price increases. Selling and marketing expenses for fiscal 2003
are likely to increase with the impact of a full year of these travel expenses
and commissions and sales effort in Europe to market the Galileo.
Distribution expenses for the year ended May 31, 2002 decreased slightly
compared to the prior year, but as a percentage of sales have decreased from
8.2% to 6.6%. Additional shipping expenses related to a new purchasing group
were offset by volume discounts offered by carriers. It is expected that
distribution expenses for fiscal 2003 will increase to approximately 7.5% as a
percentage of sales, with the implementation of a new shipping package
configuration designed to maintain acceptable environmental temperature and
preserve product quality during shipment.
General and administrative expenses for the year ended May 31, 2002
increased $0.4 million. Expenses in the prior year included $1.1 million of
nonrecurring expenses, primarily severance, related to the implementation of the
cost savings plan. The increase for the current year is due primarily to legal
expenses related to the proxy contest incurred in the second quarter, various
bank fees and professional fees incurred mainly for support of the enterprise
software system after the June 1, 2001 implementation. Fiscal 2003 general and
administrative expenses should decline as the Company begins the second year on
the enterprise software system.
Due to continued operating losses and 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 in fiscal 2001.
Amortization expense declined $0.3 million as compared with the prior
period due to the goodwill impairment mentioned above. In June of fiscal 2003
the Company adopted Statement of Financial Accounting Standards No.142, Goodwill
and Other Intangible Assets, which requires goodwill and indefinite lived
intangible assets to be reviewed annually for impairment, or more frequently if
impairment factors arise, instead of amortized. The Company does not currently
foresee any indications of impairment and expects amortization will be
approximately $1.2 million less in fiscal 2003 than in fiscal 2002.
Interest expense
When compared to fiscal 2001, interest expense increased $0.7 million in
fiscal 2002. The increase is the result of the increased borrowings on long-term
debt, bank fees related to the Company's inability to maintain the financial
covenants contained in its prior loan agreement due to past operating losses,
and leases capitalized in fiscal 2001. Fiscal 2003 interest expense is expected
to decline due to lower outstanding debt and a more favorable interest rate
pricing grid as discussed in Liquidity and Capital Resources.
Other income
Other income for the year rose $1.1 million. Other income for the first
quarter of fiscal 2002 was favorably affected by the settlement of the Becton,
Dickinson arbitration. 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 received on June 11, 2001, and the second installment of $0.6
million was received April 2, 2002. A loss on the disposal of assets valuing
approximately $0.8 million related to IMAGN was netted against the settlement
from Becton, along with $51,000 in instrument financing settlement fees. Other
income for the second quarter was favorably affected by the disgorgement of
short-swing trading profits by the Kairos Group that contributed $0.4 million to
pre-tax income. These items of income do not arise from the Company's ongoing
business.
Income taxes
Income tax expense increased for the year ended May 31, 2002 as compared to
the prior period due to higher income. During the fourth quarter of fiscal
2001, the Company elected to record a valuation allowance in an amount equal to
the net deferred tax assets of the Company, amounting to $1.2 million.
Effectively, this non-cash allowance reflected the elimination of domestic
deferred taxes as a balance sheet asset and was used to reduce domestic taxes in
the current year. The Net Operating Loss Carry-forwards generated in fiscal 2001
also reduced the current year United States tax provision and were fully
utilized by the quarter ended February 28, 2002. This effectively increased
reported net income for fiscal 2002 by approximately $2.3 million. Fiscal 2003
will bear the full United States tax burden. See Note 10 of the Consolidated
Financial Statements.
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, reflected delays in customers accepting instruments. During
June 2000 isolated performance issues were experienced by certain ABS2000
customers, as discussed under the heading "Comparison of Years Ended May 31,
2002 and May 31, 2001--Net sales." For the year, the Company had issued credits
reducing sales by $0.8 million for returned instruments and had a reserve of
$0.1 million remaining for possible future returns. The Company had 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. The
revenue fall was mitigated by $2.3 million in revenue improvements. First, the
Company experienced a $1.7 million, or 2.5%, increase in sales of its core
reagent products. Secondly, the Company launched an aggressive reagent price
increase in the third quarter that improved revenues by approximately $0.5
million for fiscal 2001. Finally, 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
should significantly improve sales and profits. The Company realized $0.2
million in additional sales from the new national account in fiscal 2001.
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. 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.
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 were continuing.
Selling and marketing expenses decreased over $530,000, as compared to the
prior year. The Company was developing an infrastructure to support an increased
level of instrument sales, but in light of the issues with the ABS2000 and
continued customer migration to purchasing groups, the Company reevaluated the
focus of the sales and marketing efforts. The fourth quarter of fiscal 2001
benefited from the implementation of the cost savings plan, discussed above. See
"Results of Operations."
Distribution expenses as a percentage of sales 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 fiscal 2001 was due primarily to the impact of
the ABS2000 safety notification 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 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.
Interest expense
When compared to the prior year, interest expense increased $836,000. This
was the result of increased borrowings and increased borrowing costs on
long-term debt and capitalized leases.
Other income
Other income for fiscal 2001 remained relatively constant as compared to
the prior year, and was comprised primarily of foreign currency transaction
gains.
Income taxes
Income tax expense decreased during fiscal 2001, as compared to the prior
year, due to the operating losses outlined above. 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 $1.2 million. Effectively, this
non-cash allowance reflected the elimination of domestic deferred taxes as a
balance sheet asset and had no impact on Immucor's ability to utilize these
amounts to reduce future taxes in profitable periods.
(c) Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 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 FASB issued SFAS No. 137,
which deferred the effective date of SFAS No. 133 for one year. In June 2000,
the FASB issued SFAS No. 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities-an amendment to FASB Statement No. 133. This
statement amended certain provisions of SFAS No. 133. Accordingly, the Company
adopted SFAS No. 133, as amended by SFAS No. 138, effective the first quarter of
fiscal 2002. The cumulative effect of the adoption of SFAS No. 133 on June 1,
2001 resulted in a comprehensive loss (a component of Shareholders' Equity on
the balance sheet) of approximately $103,000, net of $26,000 in income taxes,
relating to the Company's interest rate swap agreements. Since the swap
agreement related to the Canadian line of credit matured in December 2001, an
adjustment of approximately $15,000 was made to comprehensive loss and
reclassified to earnings as interest expense. Due to the ineffectiveness of the
swap related to the U. S. loan, approximately $16,000 was reclassified from
comprehensive loss to earnings as interest expense and approximately $267,000
was charged directly to interest expense. The remaining balance of approximately
$72,000 will be amortized over the remaining term of the loan. See Note 3 of the
Consolidated Financial Statements.
In June 2001, the FASB issued SFAS 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 will adopt Statement 142 effective June 1,
2002. Under SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of, the Company evaluates goodwill and
intangible assets for impairment, when events and circumstances indicate that
the assets might be impaired, and records an impairment loss if the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amount of those assets. The impairment loss recognized is equal to the
difference between the discounted cash flows and the carrying amount of the
assets. The Company does not currently foresee any indications of impairment and
believes amortization will be approximately $1.2 million less in fiscal 2003 due
to the adoption of Statement 142.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The Statement supercedes SFAS No.
121, however it retains the fundamental provisions of that statement related to
the recognition and measurement of the impairment of long-lived assets to be
"held and used." The Statement is effective for year-ends beginning after
December 15, 2001. The Company is in the process of evaluating the impact SFAS
No. 144 will have upon adoption but does not anticipate it will have a
significant impact on its financial position or results of operations.
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, 2002 and May 31, 2001, the Company had an
interest rate swap agreement in the Company's functional currency, maturing in
2005, with an initial notional principal amount of $15 million which amortizes
over the life of the instrument. At May 31, 2001, the Company had an interest
rate swap agreement in Canadian dollars with an aggregate notional principal
amount of $2.4 million, which matured in December 2001. The fair value of the
interest rate swap agreements represents the estimated receipts or payments that
would be made to terminate the agreements and are included with other long-term
liabilities on the balance sheet. At May 31, 2002 and May 31, 2001, the Company
would have paid $369,492 and $87,321, respectively, to terminate the agreement
in the Company's functional currency. At May 31, 2001, the Company would have
paid $41,619 to terminate the Canadian dollar agreement. See Note 3 to the
Consolidated Financial Statements. The Company had $36.0 million in outstanding
debt at May 31, 2002. A 100 basis point increase or decrease in interest rates
could decrease or increase annual net income by $0.4 million.
Foreign Currency. Operating income generated outside the United States as a
percentage of total operating income was 7% in 2002, 17% in 2001 and 44% in
2000. 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.
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 2002, 2001, and 2000 the Company recorded foreign
currency transaction (losses) gains of approximately $(445,000), $(10,000), and
$152,000, respectively. For fiscal 2002 the fluctuation of the Euro weighted
average exchange rate reduced net sales by approximately $295,000. A 10 percent
change in the year to date weighted average Euro exchange rate would have had
the effect of increasing or decreasing net sales by approximately $2.0 million.
Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. For derivatives
designated as hedges, the change in the fair value of the derivative will either
be offset against the change in the fair value of the hedged asset, liability,
or firm commitment through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The cumulative effect of the adoption of SFAS No. 133 on June 1, 2001 resulted
in a comprehensive loss (a component of Shareholders' Equity on the balance
sheet) of approximately $103,000, net of $26,000 in income taxes, relating to
the interest rate swap agreements. Since the swap agreement related to the
Canadian line of credit matured in December 2001, an adjustment of approximately
$15,000 was made to comprehensive loss and reclassified to earnings as interest
expense. Due to the ineffectiveness of the swap related to the U. S. loan,
approximately $16,000 was reclassified from comprehensive loss to earnings as
interest expense and approximately $267,000 was charged directly to interest
expense. The remaining balance of approximately $72,000 will be amortized over
the remaining term of the loan. See Note 3 of the Consolidated Financial
Statements.
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, 2002 and 2001
-Consolidated Statements of Operations for the Years Ended May 31, 2002, 2001
and 2000
-Consolidated Statements of Shareholders' Equity for the Years Ended May 31,
2002, 2001 and 2000
-Consolidated Statements of Cash Flows for the Years Ended May 31, 2002, 2001
and 2000
-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, 2002 and 2001 and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended May 31, 2002. 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, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
May 31, 2002, 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
July 19, 2002
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------------------------------
May 31,
------------------------------------------
ASSETS 2002 2001
CURRENT ASSETS:
Cash and cash equivalents $ 4,012,560 $ 3,124,517
Accounts receivable, trade (less allowance for doubtful accounts of $1,483,688 in
2002 and $1,244,488 in 2001) 27,182,566 21,167,490
Loan to officer - 395,826
Inventories 15,557,034 15,668,637
Income taxes receivable 592,097 402,243
Deferred income taxes 987,491 631,797
Prepaid expenses and other 1,834,521 891,356
-------------------- --------------------
Total current assets 50,166,269 42,281,866
LONG-TERM INVESTMENT - At cost 1,000,000 1,000,000
PROPERTY, PLANT AND EQUIPMENT - Net 17,027,024 18,333,952
DEFERRED INCOME TAXES 889,906 1,525,936
OTHER ASSETS - Net 2,977,130 2,104,845
DEFERRED LICENSING COSTS - Net 1,370,620 1,652,102
EXCESS OF COST OVER NET TANGIBLE ASSETS ACQUIRED - Net 27,936,514 28,913,981
-------------------- --------------------
$101,367,463 $95,812,682
==================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
- ----------------------------------------------------------------------------------------------------------------------------------
May 31,
-------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 2002 2001
CURRENT LIABILITIES:
Current portion of borrowings under bank line of credit agreements $ 1,995,630 $ 2,417,121
Current portion of long-term debt 3,662,304 5,494,829
Note payable to related party - 349,654
Current portion of capital lease obligations 975,506 848,632
Accounts payable 8,136,198 8,421,602
Income taxes payable 3,165,247 23,102
Accrued salaries and wages 1,821,452 1,530,772
Deferred income taxes 371,404 98,308
Other accrued liabilities 2,968,701 3,561,676
--------------------- --------------------
Total current liabilities 23,096,442 22,745,696
BORROWINGS UNDER BANK LINE OF CREDIT AGREEMENTS - Net of current portion 3,033,683 3,268,740
LONG-TERM DEBT - Net of current portion 27,294,082 34,839,576
CAPITAL LEASE OBLIGATIONS - Net of current portion 1,252,948 1,843,213
DEFERRED INCOME TAXES 2,035,387 3,119,402
OTHER LIABILITIES 702,047 152,588
SHAREHOLDERS' EQUITY:
Common stock - authorized 45,000,000 shares, $0.10 par value; issued and
outstanding 7,703,757 at May 31, 2002 and 7,277,617 at May 31, 2001 770,376 727,762
Additional paid-in capital 19,520,658 15,439,889
Retained earnings 29,056,538 20,261,628
Accumulated other comprehensive loss (5,394,698) (6,585,812)
--------------------- --------------------
Total shareholders' equity 43,952,874 29,843,467
--------------------- --------------------
$ 101,367,463 $ 95,812,682
===================== ====================
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-----------------------------------------------------------------
2002 2001 2000
NET SALES $ 84,144,374 $ 69,438,114 $ 76,540,476
COST OF SALES 37,477,187 38,086,270 36,407,764
-------------------- -------------------- ---------------------
GROSS PROFIT 46,667,187 31,351,844 40,132,712
OPERATING EXPENSES:
Research and development 1,996,742 1,893,580 2,002,597
Selling and marketing 10,993,957 11,854,242 12,391,837
Distribution 5,541,604 5,659,707 5,966,178
General and administrative 11,473,176 11,107,861 10,533,826
Loss on impairment of goodwill - 3,062,519 -
Amortization expense 1,620,935 1,897,582 1,879,049
-------------------- -------------------- ---------------------
31,626,414 35,475,491 32,773,487
-------------------- -------------------- ---------------------
INCOME (LOSS) FROM OPERATIONS 15,040,773 (4,123,647) 7,359,225
OTHER:
Interest income 40,700 57,530 30,801
Interest expense (4,453,802) (3,746,928) (2,911,029)
Other, net 1,356,143 229,383 230,658
-------------------- -------------------- ---------------------
(3,056,959) (3,460,015) (2,649,570)
-------------------- -------------------- ---------------------
INCOME (LOSS) BEFORE INCOME TAXES 11,983,814 (7,583,662) 4,709,655
INCOME TAXES 3,188,904 465,451 1,897,635
-------------------- -------------------- ---------------------
NET INCOME (LOSS) $ 8,794,910 $ (8,049,113) $ 2,812,020
==================== ==================== =====================
INCOME (LOSS) PER SHARE
Basic $1.20 $(1.10) $0.36
==================== ==================== =====================
Diluted $1.15 $(1.10) $0.33
==================== ==================== =====================
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, 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 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 (9,647,966)
---------------------------------------------------------------------------------------
BALANCE, MAY 31, 2001 7,277,617 727,762 15,439,889 20,261,628 (6,585,812) 29,843,467
Exercise of stock options and warrants 426,140 42,614 3,427,977 - - 3,470,591
Tax benefits related to stock options and
other - - 652,792 - - 652,792
Comprehensive income:
Foreign currency translation adjustment - - - - 1,263,026 1,263,026
Cumulative effect of the adoption of
SFAS 133 on June 1, 2001, net of taxes - - - - (102,721) (102,721)
Hedge loss reclassified into earnings - - - - 30,809 30,809
Net income - - - 8,794,910 - 8,794,910
---------------
Total comprehensive income 9,986,024
---------------------------------------------------------------------------------------
BALANCE, MAY 31, 2002 7,703,757 $770,376 $19,520,658 $29,056,538 $(5,394,698) $43,952,874
=======================================================================================
See notes to consolidated financial statements
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-----------------------------------------------------
2002 2001 2000
OPERATING ACTIVITIES:
Net income (loss) $8,794,910 $(8,049,113) $2,812,020
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization of property and equipment 4,494,661 4,228,545 2,936,615
Amortization of other assets and excess of cost over net
tangible assets acquired 1,620,935 1,897,582 1,879,049
Amortization of debt issue costs 620,857 33,338 10,538
Impairment of goodwill - 3,062,519 -
Disposal of assets in settlement 806,108 - -
Impairment of fixed assets 268,539 - -
Deferred tax provision (530,583) (143,950) 79,110
Provision for doubtful accounts 819,167 673,997 452,983
Changes in operating assets and liabilities, net of effects of
business acquisitions:
Accounts receivable, trade (6,995,826) (115,425) (680,156)
Accounts receivable from former officer and director - - 140,946
Loan to officer 395,826 (395,826) -
Income taxes 3,605,083 358,633 370,222
Inventories 111,603 1,144,602 (1,228,317)
Other current assets (288,671) 673,612 (307,185)
Other long-term assets (594,604) 146,448 111,950
Accounts payable (285,404) (795,911) (675,764)
Other current liabilities (302,295) 334,101 1,967,091
Other long-term liabilities 549,459 (673,004) (1,801,171)
---------------- ----------------- ----------------
Total adjustments 4,294,855 10,429,261 3,255,911
---------------- ----------------- ----------------
Cash provided by operating activities 13,089,765 2,380,148 6,067,931
INVESTING ACTIVITIES:
Purchases of / deposits on property and equipment (3,367,016) (5,522,107) (3,418,430)
Cash paid for acquisition, net of cash acquired - - (523,682)
Acquisition-related severance - - (85,960)
Increase in other assets - - (258,972)
---------------- ----------------- ----------------
Cash used in investing activities (3,367,016) (5,522,107) (4,287,044)
See notes to consolidated financial statements.
IMMUCOR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended May 31,
-------------------------------------------------------------
2002 2001 2000
FINANCING ACTIVITIES:
Borrowings, net of repayments under line of credit agreements $ (496,403) $ 2,058,297 $ 555,068
Proceeds from issuance of long-term debt 23,451 33,786,131 7,474,196
Repayment of long-term debt and capital lease obligations (11,001,830) (30,349,314) (5,362,814)
Borrowings (repayments) of long-term debt to related party-net (349,654) 349,654 (1,633,947)
Exercise of stock options 2,816,097 - 2,986,523
Payment of debt issue costs (763,862) (325,144) (43,830)
Stock repurchases - (1,484,713) (3,463,608)
------------------- ------------------- -------------------
Cash (used in) provided by financing activities (9,772,201) 4,034,911 511,588
EFFECT OF EXCHANGE RATE CHANGES ON CASH 937,495 (1,274,361) (1,580,141)
------------------- ------------------- -------------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 888,043 (381,409) 712,334
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 3,124,517 3,505,926 2,793,592
------------------- ------------------- -------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 4,012,560 $ 3,124,517 $ 3,505,926
=================== =================== ===================
Non-cash investing and financing activities:
Capital lease obligations $ 419,811 $ 710,129 $ 1,644,737
Fair value of assets acquired - - (1,019,453)
Cost in excess of assets acquired - - 1,576,920
Liabilities assumed - - (33,785)
------------------- ------------------- -------------------
Net cash paid for acquisition, net of cash acquired $ - $ - $ 523,682
=================== =================== ===================
CASH PAID DURING THE YEAR FOR:
Interest, net of amounts capitalized of $135,000 in 2001 $ 3,397,409 $ 3,981,977 $ 2,886,256
Income taxes 663,252 381,133 1,225,635
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
inter-company balances and transactions have been eliminated in
consolidation.
Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States 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, 2002 and 2001 the Company's
entire cash balance of $4,012,560 and $3,124,517, 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 12) and the joint manufacturer of
some of the Company's monoclonal antibody-based products. The Company
believes that its business relationships with its 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.
At May 31, 2002 and 2001 the Company's accounts receivable balance of
$27,182,566 and $21,167,490, respectively, was 54% and 57% of foreign
origin, predominantly European. Some European countries require longer
payment terms as a part of doing business. This may subject the Company to
a higher risk of uncollectiblity. Consideration of this risk is made when
the allowance for doubtful accounts is evaluated. 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 $1.0
million common stock investment in Lionheart Technologies, Inc. acquired in
April 1992, is accounted for using the cost method of accounting. Bio-Tek
Instruments, Inc. (see Note 12) is a wholly owned subsidiary of Lionheart
Technologies, Inc.
Interest Rate Swap - The Company uses interest rate swaps to hedge interest
rate risk associated with the cashflows of some of 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 counter-party credit guidelines and only
enters into transactions with financial institutions of investment grade or
better. As a result, the Company estimates the risk of counter-party
default to be minimal. Effective June 1, 2001, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities. SFAS No. 133 requires
the Company to recognize all derivatives on the balance sheet at fair
value, based on dealer quotes. For derivatives designated as hedges, the
change in the fair value of the derivative will either be offset against
the change in the fair value of the hedged asset, liability, or firm
commitment through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion,
as determined by comparing the terms of the interest rate swap agreements
and their designated debt instruments, of a derivative's change in fair
value will be immediately recognized in earnings. Prior to the adoption of
No. SFAS 133, the fair value of the interest rate swaps were not recognized
in the financial statements. As of May 31, 2002, the Company's swap balance
was $369,492 included in other liabilities. (See Note 3).
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, 2002 and 2001 market rates for
similar debt instruments.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost less accumulated depreciation. Expenditures for replacements are
capitalized, and the replaced items are retired. Normal maintenance and
repairs are charged to operations. Major maintenance and repair activities
that would significantly enhance the useful life of the asset would be
capitalized. Certain internal and external costs incurred in the
development of computer software for internal use are capitalized and
included in property, plant and equipment in accordance with Statement of
Position 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use. Gains and losses from the sale of plant assets
are included in income. Depreciation is computed using the straight-line
method over the estimated lives of the related assets ranging from three to
30 years.
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 was being amortized using the
straight-line method over 20 to 30 years. Accumulated amortization at May
31, 2002 and 2001 was $6,276,000 and $5,444,000 respectively. Effective
June 1, 2002, the Company will adopt SFAS No. 142, Goodwill and Other
Intangible Assets. 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. Intangible
assets that have finite lives will continue to be amortized over their
useful lives. The Company does not currently foresee any indications of
impairment and believes amortization will be approximately $1.2 million
less in fiscal 2003.
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. In fiscal 2002, the
Company evaluated the carrying value of the DIAS Plus instruments and
estimated that the undiscounted cash flow indicated an impairment. An
impairment loss of approximately $270,000 was charged to depreciation
expense on the statement of operations. The settlement of the Becton,
Dickinson arbitration resulted in impairment in asset value of
approximately $0.8 million related to IMAGN and was netted against the
settlement from Becton, along with $51,000 in instrument financing
settlement fees, in other income on the statement of operations. 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 received
on June 11, 2001, and the second installment of $0.6 million was received
April 2, 2002. The Company believes that the carrying value of the
remaining recorded long-lived assets is not impaired.
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. ("Gamma"). 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, 2002 and 2001
was $962,700 and $690,900, respectively.
Foreign Currency Translation - The financial statements of foreign
subsidiaries have been translated into U.S. dollars in accordance with SFAS
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 since both title and risk of loss transfers to the
customer 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 approximately $5.5 million, $5.7 million and $6.0 million
for the years ended May 31, 2002, 2001 and 2000, 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 SFAS 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 7).
Advertising Costs - The amounts for advertising are expensed as incurred
and are classified as selling and marketing operating expenses. Advertising
expense was $0.3 million, $0.3 million, and $0.2 million for the years
ended May 31, 2002, 2001 and 2000, respectively.
Impact of Recently Issued Accounting Standards - In June 1998, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 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 FASB issued SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities-an Amendment to FASB Statement
No. 133. This statement amended certain provisions of SFAS No. 133.
Accordingly, the Company adopted SFAS No. 133, as amended by SFAS No. 138,
effective the first quarter of fiscal 2002. The cumulative effect of the
adoption of SFAS No. 133 on June 1, 2001 resulted in a comprehensive loss
(a component of Shareholders' Equity on the balance sheet) of approximately
$103,000, net of $26,000 in income taxes, relating to the interest rate
swap agreements. Since the swap agreement related to the Canadian line of
credit matured in December 2001, an adjustment of approximately $15,000 was
made to comprehensive loss and reclassified to earnings as interest
expense. Due to the ineffectiveness of the swap related to the U. S. loan,
approximately $16,000 was reclassified from comprehensive loss to earnings
as interest expense and approximately $267,000 was charged directly to
interest expense. The remaining balance of approximately $72,000 will be
amortized over the remaining term of the loan. See Note 3.
In June 2001, the FASB issued SFAS 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.
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. The Company does not currently foresee any indications of impairment
and believes amortization will be approximately $1.2 million less in fiscal
2003.
In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The Statement supercedes SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, however it retains the fundamental
provisions of that statement related to the recognition and measurement of
the impairment of long-lived assets to be "held and used." The Statement is
effective for year-ends beginning after December 15, 2001. The Company is
in the process of evaluating the impact SFAS 144 will have upon adoption
but does not anticipate it will have a significant impact on its financial
position or results of operations.
2. BALANCE SHEET DETAIL
May 31,
-----------------------------------
2002 2001
Inventories:
Raw materials and supplies $ 5,725,149 $ 5,524,301
Work in process 1,532,821 2,095,363
Finished goods and goods purchased for resale 8,299,064 8,048,973
---------------- ----------------
$ 15,557,034 $ 15,668,637
================ ================
Property, plant and equipment:
Land $ 346,597 $ 344,447
Buildings and improvements 6,410,203 6,345,663
Leasehold improvements 1,034,506 935,159
Furniture and fixtures 1,596,696 1,413,073
Machinery and equipment 17,814,446 15,747,482
---------------- ----------------
27,202,448 24,785,824
Less accumulated depreciation (12,811,660) (9,236,232)
---------------- ----------------
Property, plant and equipment - net 14,390,788 15,549,592
---------------- ----------------
Assets under capital lease:
Furniture and fixtures 137,090 124,273
Machinery and equipment 3,888,286 3,481,292
---------------- ----------------
4,025,376 3,605,565
Less accumulated depreciation (1,389,140) (821,205)
---------------- ----------------
Assets under capital lease - net 2,636,236 2,784,360
---------------- ----------------
Property, plant and equipment - net $ 17,027,024 $ 18,333,952
================ ================
3. BANK LINE OF CREDIT AGREEMENTS AND DEBT OBLIGATIONS
May 31,
-----------------------------------
2002 2001
----------------- ----------------
Primary Obligations
Term Loan A (Acquisition term note) (interest rates ranging from LIBOR
plus 2.0% to LIBOR plus 3.25% maturing December 2005) $ 16,750,000 $ 19,625,000
Term Loan B (Additional term loan) (interest rate ranging from
LIBOR plus 2.5% to LIBOR plus 3.75% maturing December 2005) 6,000,000 6,000,000
Temporary line of credit (Fourth additional term loan) (interest
rate ranging from LIBOR plus 2.0% to LIBOR plus 3.25% matured - 1,934,921
October 2001)
Revolving Line of credit (Master note) (interest rate ranging from
LIBOR plus 2.00% to LIBOR plus 3.25% maturing December 2005) 4,500,000 7,000,000
CAD Term Loan (Third additional term loan) (interest rate ranging
from LIBOR plus 2.0% to LIBOR plus 3.25% maturing September 2002) 626,405 2,176,741
Revolving line of credit - Canadian subsidiary (denominated in
Canadian dollars with interest rate ranging from LIBOR plus 2.0%
to LIBOR plus 3.25% maturing December 2005) 2,880,524 3,971,782
Line of credit - German subsidiary (denominated in Deutsche Marks
at an interest rate ranging from LIBOR plus 2.0% to LIBOR plus
3.25% maturing December 2005) 2,574,817 2,335,851
Secondary Obligations
Lines of credit - Italian subsidiary (denominated in Lira with
interest rates ranging from 7.25% to 9.25% maturing in fiscal 465,496 659,252
2003)
Line of credit - Spanish subsidiary (denominated in Pesetas with
interest rates ranging from of 4.5 to 5.8% maturing March 2003) 1,530,134 1,388,124
Line of credit - Spanish subsidiary (denominated in Pesetas at an
interest rate of 5.25% maturing December 2002) 112,097 -
Mortgage note payable - Belgian subsidiary (denominated in Belgian
Francs at an interest rate of 6.25% maturing November 2007) 199,457 242,794
Line of credit - Belgian subsidiary (denominated in Belgian Francs
with interest rates ranging from 5.5% to 6.0% maturing in 346,769 369,745
November 2007)
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
----------------- ----------------
35,985,699 46,369,920
Less current portion (5,657,934) (8,261,604)
----------------- ----------------
$ 30,327,765 $ 38,108,316
================= ================
Primary Obligations
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 0.5% 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
("Dominion") 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
0.4375%. The interest rate on the remaining principal balance of $715,357
($1,000,000 CDN$) was LIBOR plus 0.4375%, 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 (CAD Term Loan) of $3,884,800 ($5,741,000
CDN$) to retire the Canadian subordinated promissory notes. Principal and
interest payments are 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 would be repaid in quarterly
installments of increasing amounts through December 2005. The balance of
the Canadian term loan ($3,827,333 CDN$) would continue with equal
quarterly principal installments plus interest through December 2002. A
temporary line of credit of $2,000,000 was 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) would mature in February 2003. These borrowings bore
interest at LIBOR plus additional percentage points ranging from 2.0% to
3.25% based on certain calculations as defined in the Loan Agreement. Term
Loan B for $6,000,000 would be due in full in December 2005. Term Loan B
bore interest at LIBOR plus additional percentage points ranging from 2.5%
to 3.75% 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 which amortizes over the life of
the instrument, also maturing December 2005. This transaction effectively
converted Term Loan A's floating rate to a fixed rate of 5.33% on a portion
of the principal balance of $15,000,000 at inception. The fair value of the
interest rate swap agreement was $(369,492) at May 31, 2002. The fair value
of the interest rate swap agreement represents the estimated receipts or
payments that would be made to terminate the agreement and are included
with other long-term liabilities on the balance sheet. 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 converted the
revolver's floating rate to a fixed rate of 6.6375% on the principal
balance of $2,338,166. The Canadian swap agreement matured in December
2001. Effective June 1, 2001, the Company adopted SFAS No. 133. SFAS No.
133 requires the Company to recognize all derivatives on the balance sheet
at fair value. For derivatives designated as hedges, the change in the fair
value of the derivative will either be offset against the change in the
fair value of the hedged asset, liability, or firm commitment through
earnings or recognized in other comprehensive income until the hedged item
is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The cumulative
effect of the adoption of SFAS No. 133 resulted in a comprehensive loss (a
component of Shareholders' Equity on the balance sheet) of approximately
$103,000, net of $26,000 in income taxes, relating to the interest rate
swap agreements. Since the swap agreement related to the Canadian line of
credit matured in December 2001, an adjustment of approximately $15,000 was
made to comprehensive loss and reclassified to earnings as interest
expense. Due to the ineffectiveness of the swap related to the U. S. loan,
approximately $16,000 was reclassified from comprehensive loss to earnings
as interest expense and approximately $267,000 was charged directly to
interest expense. The remaining balance of approximately $72,000 will be
amortized over the remaining term of the loan.
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 contained certain financial and other
covenants which, among other things, limit annual capital expenditures,
prevent payment of cash dividends or the repurchase of stock, limit the
incurrence of additional debt, and require the maintenance of certain
financial ratios. At May 31, 2002, there is $2.5 million in funds available
under the U.S. line of credit, $1.2 million available under the Canadian
line of credit and no additional funds available under the German line of
credit. The Dominion revolving line of credit and German line of credit are
guaranteed by the Company. The interest rate swap agreement with the U.S.
bank is also guaranteed by the Company.
In September 2001, the Company negotiated a waiver of covenant defaults
from its primary lender in the Loan Agreement dated February 23, 2001 and
obtained a relaxation of such loan covenants for four quarters in exchange
for a cash waiver fee, increased interest rates and other conditions. As
amended, the Company was required to meet quarterly and cumulative Earnings
Before Interest, Taxes, Depreciation and Amortization ("EBITDA") covenants
and quarterly funded debt to EBITDA ratios. As amended, the loan agreement
then provided that once the Company's trailing twelve-month ratio of funded
debt to EBITDA reached 2.50 to 1 or less, the interest rates on these loans
would revert to the more favorable pricing provided in the original Loan
Agreement dated February 23, 2001.
In order to obtain the waiver, the Company agreed to seek a minimum of $5.0
million in junior capital, in the form of either an equity or subordinated
debt investment. Because the Company did not obtain such investment by
December 31, 2001, the Company became obligated to pay the lender an
additional fee of $450,000 (payable in twelve equal monthly installments
beginning January 31, 2002). The Company also became obligated to issue the
lender a warrant to purchase 750,000 shares of Immucor, Inc. stock at the
market price of the stock on December 31, 2001. In March 2002, the Company
agreed to pay the lender $500,000 in cash in lieu of issuing any warrants.
The fee is payable in four monthly installments of $75,000 commencing
September 30, 2002 followed by payments of $100,000 on January 31, 2003 and
February 28, 2003. Additionally, since the junior capital investment was
not received by December 31, 2001, the revolving lines of credit and Term
Note A were re-priced at prime plus 2.0% and Term Note B was re-priced at
prime plus 4.0% until the junior capital was to be received. Additionally,
since the junior capital investment was not received by April 30, 2002, the
lines of credit were reset to mature on February 28, 2003.
On July 18, 2002, the Company again amended the loan agreement. The
amendment extended the term of the lines of credit from February 28, 2003
to December 1, 2005. Borrowings under the senior credit facility will be
priced subject to a pricing grid that varies based upon the Company's
Funded Debt to EBITDA, as defined in the senior credit facility. The
interest rate on the effective date of the amendment was LIBOR plus 200
basis points on the revolving lines of credit and Term Loan A and LIBOR
plus 250 basis points on Term Loan B. At May 31, 2002 there was
approximately $27.3 million outstanding under the revolvers and Term Loan A
and approximately $6.0 million outstanding under Term Loan B. The Company
made a $4.5 million payment against the revolving line of credit in July
2002. Pricing under the amendment did not change from the original loan
agreement.
Secondary Obligations
In December 2001, the Spanish subsidiary obtained a temporary line of
credit amounting to approximately $252,220 (45,000,000 Pesetas) for
short-term financing needs. The line of credit bears interest at 5.25% and
matures in December 2002.
The Company's Italian subsidiary has outstanding obligations of $465,000
under line of credit agreements denominated in Lira with three Italian
banks bearing interest between 7.25% and 9.25%. At May 31, 2002, this
subsidiary had an additional borrowing capacity of $475,000 available under
these line of credit agreements. The Company's Spanish subsidiary has
outstanding obligations of $1,500,000 under a line of credit agreement
denominated in Pesetas with a Spanish bank bearing interest at 4.5%. At May
31, 2002, the Company had no funds available under the Spanish line of
credit agreement.
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 $439,000. 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,
2002, the Company had $320,000 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 included a note
payable to Bio-Tek Instruments, Inc., a related party for $350,000. (See
Note 12) Interest rates ranged from 8.0% to 8.5% and maturity dates ranged
from August 2001 to January 2002. As of May 31, 2002 the notes payable had
been paid in full.
Aggregate maturities of all long-term obligations for each of the next five
years and thereafter are as follows:
Year Ending May 31:
2003 $ 5,657,934
2004 5,148,814
2005 5,033,657
2006 19,735,326
2007 31,271
Thereafter 378,697
----------------
$35,985,699
================
4. CAPITAL LEASE OBLIGATIONS
May 31,
-----------------------------------
2002 2001
----------------- ----------------
Manufacturing equipment, bearing interest at rates ranging from 5.46% to $ 541,762 $ 824,414
9.89% and with maturities ranging from April 2003 to September 2005.
Enterprise resource planning (ERP) computer system and related equipment,
bearing interest at rates ranging from 2.21% to 8.23% and with
maturities ranging from June 2001 to December 2005. 791,390 1,035,049
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. 135,825 253,602
Office equipment, bearing interest at rates ranging from 4.54% to 10.5%
and with maturities ranging from December 2003 to December 2005. 223,060 284,782
Instruments and computer equipment - Belgian subsidiary, denominated in
Belgian Francs bearing interest at rates ranging from 5.03% to 10.29%
and with maturity dates ranging from November 2002 to April 2004. 41,149 68,534
Instruments at customer sites - German subsidiary, bearing interest at
2.2% and with maturity dates ranging from April 2005 to October 2005. 202,376 225,464
Computer equipment and leasehold improvements - Spanish subsidiary,
bearing interest at 5.25% and maturing in November 2004. 23,451 -
Instruments at customer sites - Italian subsidiary, bearing interest
rates ranging from 4.45% to 4.47% and with maturities ranging from 269,441 -
July 2004 to March 2005.
----------------- ----------------
2,228,454 2,691,845
Less current portion (975,506) (848,632)
----------------- ----------------
$ 1,252,948 $ 1,843,213
================= ================
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:
2003 $ 975,506
2004 654,155
2005 465,281
2006 133,512
2007 -
----------------
$ 2,228,454
================
Total imputed interest to be paid out under existing capital leases as of
May 31, 2002 is $209,027.
5. 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 believed 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 was LIBOR plus 1%, which was then the Company's current borrowing
rate. As of May 31, 2002, the loan has been repaid in full. Upon repayment
of the loan, the Company's Board of Directors adopted a policy prohibiting
loans to officers or directors.
6. COMMON STOCK
At May 31, 2002, the following shares of common stock are reserved for
future issuance:
Common stock options - directors and employees 2,582,217
Common stock warrants - other 210,000
---------
2,792,217
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 in a
transaction exempt under Section 4(2) of the Securities Act. 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 and included in goodwill. Due to continued operating
losses and 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 in fiscal 2001.
On June 7, 2002, Immucor issued 50,000 shares of common stock upon a
partial exercise of the warrant.
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
unexercised and the ten-year warrants expiring in 2006. At May 31, 2002,
40,000 of the ten-year warrants had been exercised and 110,000 are
outstanding. Immucor filed a registration statement on Form S-3 in May
1999 with the Securities and Exchange Commission covering the issuance of
the shares to be issued upon exercise of these 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 expired unexercised in September 2001.
The 375,000 shares were exercised as follows: 14,062 in fiscal 1992,
205,687 in fiscal 1996, 143,750 in fiscal 1999, and 11,501 in fiscal 2000.
At May 31, 2002, all 375,000 warrants had been exercised and none are
outstanding.
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. If a person or a group
acquires at least 15% ownership, except in a transaction 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. 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 $0.01
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.
In fiscal 1998, the Company authorized a program to repurchase up to 10% of
its common stock in the open market. During fiscal 2001 and 2000, the
Company repurchased 184,501 and 415,500 shares of its common stock for
approximately $1.5 and $3.5 million, respectively. The Company is
restricted from the repurchase of additional shares under debt covenants of
the current loan agreement. Additionally, the loan agreement contains
certain financial and other covenants which, among other things, limit
annual capital expenditures, prevent payment of cash dividends, limit the
incurrence of additional debt, and require the maintenance of certain
financial ratios.
7. 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 1990 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 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 SFAS 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 SFAS No. 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
5.37%, 5.83% and 6.27% in fiscal 2002, 2001 and 2000 respectively, no
dividend yields; a volatility factor of the expected market price of the
Company's common stock of 0.749 for 2002, 1.023 for 2001, and 0.584 for
2000 based on quarterly closing prices since 1986; and an expected life of
each option of 8 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:
2002 2001 2000
---- ---- ----
Net income (loss) as reported $8,794,910 $(8,049,113) $2,812,020
Pro forma net income (loss) $7,780,842 $(8,845,439) $1,753,101
Earnings (loss) per share as reported:
Basic $1.20 $(1.10) $ 0.36
Diluted $1.15 $(1.10) $ 0.33
Pro forma earnings (loss) per share:
Basic $1.06 $(1.21) $ 0.23
Diluted $1.02 $(1.21) $ 0.21
The Company is authorized to issue up to 2,582,217 shares of its Common
Stock under various employee and director stock option arrangements. These
arrangements include employee incentive plans discussed above and various
voluntary salary reduction plans. Options granted under these plans become
exercisable at various times and, unless exercised, expire at various dates
through fiscal 2012. Transactions involving these stock option arrangements
are summarized as follows:
Range Weighted Average
of Exercise Exercise
Shares Prices Price
------------------- ------------------------------------------
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
Forfeited (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 - - - - $ -
Expired (493,300) $7.830 - 9.330 $ 9.32
Forfeited (170,416) $3.750 - 15.375 $ 9.49
-------------------
Outstanding at May 31, 2001 1,531,875 $2.550 - 15.375 $ 8.09
Granted 718,000 $2.690 - 16.920 $ 6.46
Exercised (386,143) $6.000 - 14.500 $ 7.73
Forfeited (54,614) $2.690 - 14.500 $ 8.94
-------------------
Outstanding at May 31, 2002 1,809,118 $2.550 - 16.920 $ 7.46
===================
At May 31, 2002, 2001 and 2000, options for 847,025, 993,150 and 1,140,716
shares of common stock, respectively, were exercisable, at weighted average
exercise prices of $8.16, $7.73 and $7.95, respectively. At May 31, 2002,
302,689 shares of Common Stock were available for future grants. The
weighted average grant date fair value of options granted during fiscal
2002, 2001 and 2000 were $6.46, $3.76 and $8.16, respectively.
The following table as of May 31, 2002 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 Price Life (Years) Shares Exercise Price
--------------------- ------------- -------------- -------------- -------------- ----------------
$ 2.55 $ 5.63 205,500 $3.60 8.4 11,000 $5.50
6.00 9.98 1,520,668 7.70 6.9 801,600 8.04
10.00 16.92 82,950 12.72 7.3 34,425 11.90
------------- --------------
1,809,118 7.46 7.1 847,025 8.16
============= ==============
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings (loss) per share.
Year Ended May 31,
----------------------------------------------------
2002 2001 2000
Numerator for basic and diluted earnings per share:
Net income (loss) $8,794,910 $(8,049,113) $2,812,020
====================================================
Denominator:
For basic earnings per share - weighted average shares 7,306,179 7,286,163 7,713,229
Effect of dilutive stock options and warrants 329,259 - 806,992
----------------------------------------------------
Denominator for diluted earnings per share -
Adjusted weighted-average shares 7,635,438 7,286,163 8,520,221
====================================================
Basic earnings (loss) per share $1.20 $(1.10) $0.36
====================================================
Diluted earnings (loss) per share $1.15 $(1.10) $0.33
====================================================
The effect of 1,300,069 out-of-the-money options and warrants were excluded
from the above calculation as inclusion of these securities would be
anti-dilutive for the year ended May 31, 2002.
9. 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 $1,154,000 in fiscal 2002, $920,600 in fiscal 2001
and $945,300 in fiscal 2000.
In Germany, the office facility is leased from a company owned by the
family of a former officer. Rental payments under this lease were $159,000,
$165,000 and $172,000 for fiscal 2002, 2001 and 2000, respectively and are
believed to be at fair market value.
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, 2002:
Year Ending May 31:
2003 $1,210,527
2004 1,141,035
2005 1,010,178
2006 447,985
2007 173,202
Thereafter 328,700
----------------
$ 4,311,627
================
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 third party financing leases of the
Company's automated systems, the third party lessor's customers are
committed to purchasing reagent products exclusively from the Company. If
the Company is unable to supply such products, this could represent a
breach of the Company's agreement with the third party financing company.
See additional commitments in Note 12.
Contingencies
From time to time, the Company is involved in certain legal proceedings and
claims which arise in the normal course of business, none of which, in the
opinion of management and its counsel, is expected to have a material
adverse effect on the Company's consolidated operations or financial
position.
10. INCOME TAXES
Sources of income (loss) before income taxes are summarized below:
Year Ended May 31,
------------------------------------------------------
2002 2001 2000
Domestic Operations $11,826,961 $(3,877,675) $2,629,676
Foreign Operations 156,853 (3,705,987) 2,079,979
----------------- ---------------- ----------------
Total $11,983,814 $(7,583,662) $4,709,655
================= ================ ================
The provision for income taxes is summarized as follows:
Year Ended May 31,
-------------------------------------------------------
2002 2001 2000
Current:
Federal $2,953,976 $(34,169) $ 448,706
Foreign 489,441 934,472 1,317,178
State 276,070 (290,902) 52,641
----------------- ----------------- -----------------
3,719,487 609,401 1,818,525
----------------- ----------------- -----------------
Deferred:
Federal (633,102) (471,516) 123,913
Foreign 53,745 85,196 (59,340)
State 48,774 242,370 14,537
----------------- ----------------- -----------------
(530,583) (143,950) 79,110
----------------- ----------------- -----------------
Income taxes $3,188,904 $465,451 $1,897,635
================= ================= =================
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 carry-forwards. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. The
Company's Spanish subsidiary had net operating loss carry-forwards for
income tax purposes of $786,420, which expire in 2003 and 2004. The
Company's Belgian subsidiary had net operating loss carry-forwards for
income tax purposes of $1,740,500, which do not expire. 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 ability to realize certain of their foreign
net operating loss carry-forwards and tax credits 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, 2002 and 2001 are as follows:
Year Ended May 31,
-----------------------------------
2002 2001
Deferred tax liabilities:
Amortization $(1,652,831) $(1,786,438)
Depreciation (512,518) (1,431,272)
Other (241,442) -
Deferred tax assets:
Reserves not currently deductible 1,610,561 710,846
Operating loss carry-forwards 881,261 3,893,422
Uniform capitalization 539,611 576,967
------------------ ---------------
624,642 1,963,525
Valuation allowance (1,154,036) (3,023,502)
------------------ ---------------
Net deferred tax liability $(529,394) $(1,059,977)
================== ===============
The Company's effective tax rate differs from the federal statutory rate as
follows:
Year Ended May 31,
-----------------------------------------------
2002 2001 2000
Federal statutory tax rate 34% 34% 34%
State income taxes, net of federal tax benefit 3 2 1
Foreign Sales Corporation commissions (1) 3 (5)
Higher effective income tax rates of other countries 3 (26) 9
Excess of cost over tangible assets acquired - net 3 (4) 6
Change in deferred tax valuation allowance (16) (15) -
Change in entity classification for Spanish subsidiary 1 1 (7)
Other - (1) 2
-------- --------- ---------
27% (6%) 40%
======== ========= =========
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 $596,953,
$0, and $320,027 in fiscal 2002, 2001 and 2000, respectively. Additionally,
the Company recorded income tax benefits of $55,839 in fiscal 2002 and
$57,348 in fiscal 2001 and 2000, caused by patent amortization expense
deductions resulting from a 1993 exercise of stock options previously
issued in connection with the acquisition of certain technology. 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.
11. TECHNOLOGY RIGHTS
In March 1983, the Company acquired rights to technology to be used in
developing diagnostic testing products. In connection with this
acquisition, the Company has agreed to pay to the Blood Center of Greater
Kansas City royalties equal to 4% of the net sales from products utilizing
the technology. Royalties under this agreement amounted to approximately
$472,800, $435,200 and $409,300 in fiscal 2002, 2001 and 2000,
respectively.
12. 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. The loss of exclusivity
is not viewed as detrimental due to the fact that the ABS2000 is designed
to work solely with the Company's proprietary reagents.
In April 1999 the Company entered into a manufacturing and development
agreement with Rosys Anthos AG ("Rosys"), headquartered 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. As of May 31, 2002, the Company has purchased a total of 137
Rosys instruments and thus has met this purchase requirement.
On September 1, 1999, the Company entered into a manufacturing and
development agreement with Stratec Biomedical AG ("Stratec"), headquartered
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 2002, 2001 and 2000, the Company incurred and expensed
approximately $625,000, $680,000 and $750,000, respectively, in instrument
research and development costs principally under these contracts.
13. DOMESTIC AND FOREIGN OPERATIONS
Information concerning the Company's domestic and foreign operations is summarized below (in 000s):
Year Ended May 31, 2002
---------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Note 1 Other Eliminations Consolidated
Net reagent sales:
Unaffiliated customers $54,180 $8,751 $5,861 $5,317 $4,687 - $78,796
Affiliates 7,150 139 28 44 245 $(7,606) -
Net instrument sales:
Unaffiliated customers 3,980 710 112 - 546 - 5,348
Affiliates 165 928 - - 46 (1,139) -
--------- ---------- ---------- ---------- --------- ------------ --------------
Total 65,475 10,528 6,001 5,361 5,524 (8,745) 84,144
Depreciation 3,105 340 590 110 350 - 4,495
Amortization 1,111 117 77 257 59 - 1,621
Income(loss)from operations 14,078 102 (20) 1,281 (295) (105) 15,041
Interest expense (3,832) (206) (52) (330) (34) - (4,454)
Interest income 17 20 2 - 2 - 41
Income tax expense 2,700 71 20 390 62 (54) 3,189
Capital expenditures 1,132 801 807 75 774 - 3,589
Long-lived assets 58,386 3,845 2,916 6,989 2,942 (23,877) 51,201
Identifiable assets 96,581 12,209 12,728 9,140 8,799 (38,090) 101,367
Net assets 51,889 4,278 455 2,885 (2,290) (13,264) 43,953
Year Ended May 31, 2001
---------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Note 1 Other Eliminations Consolidated
Net reagent sales:
Unaffiliated customers $41,288 $7,636 $5,600 $5,367 $5,954 - $65,845
Affiliates 6,835 291 - 85 139 $(7,350) -
Net instrument sales:
Unaffiliated customers 2,677 866 - - 50 - 3,593
Affiliates 201 93 - - 67 (361) -
--------- ---------- ---------- ---------- --------- ------------ --------------
Total 51,001 8,886 5,600 5,452 6,210 (7,711) 69,438
Depreciation 3,031 299 430 96 373 - 4,229
Amortization 1,263 119 78 267 171 - 1,898
Loss on impairment of goodwill - - - - (3,063) - (3,063)
(Loss)income from operations (2,528) 698 248 1,135 (4,812) 1,135 (4,124)
Interest expense (3,163) (172) (44) (278) (90) - (3,747)
Interest income 28 19 7 - 4 - 58
Income tax (benefit) expense (536) 267 210 426 116 (18) 465
Capital expenditures 3,103 578 975 245 621 - 5,522
Long-lived assets 62,416 3,181 2,427 7,236 2,692 (24,421) 53,531
Identifiable assets 91,463 9,332 10,259 9,819 7,861 (32,921) 95,813
Net assets 38,461 3,953 46 2,461 (2,013) (13,065) 29,843
Year Ended May 31, 2000
---------------------------------------------------------------------------------------------------
U.S. Germany Italy Canada Note 1 Other Eliminations Consolidated
Net reagent sales:
Unaffiliated customers $39,752 $8,605 $6,317 $5,029 $6,185 - $65,888
Affiliates 6,569 330 - 262 2,626 $(9,787) -
Net instrument sales:
Unaffiliated customers 8,353 697 339 166 1,098 - 10,653
Affiliates 126 218 - - 37 (381) -
--------- ---------- ---------- ---------- --------- ------------ --------------
Total 54,800 9,850 6,656 5,457 9,946 (10,168) 76,541
Depreciation 1,997 184 466 61 229 - 2,937
Amortization 1,155 134 108 293 189 - 1,879
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
Capital expenditures 1,994 122 811 53 438 - 3,418
Long-lived assets 64,597 3,340 2,415 7,551 4,826 (24,976) 57,753
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
Note 1: Information relating to Spain, Portugal, France, Belgium, and the Netherlands is included in "Other".
During the years ended May 31, 2002, 2001 and 2000, the Company's U.S.
operations made net export sales to unaffiliated customers of approximately
$5,289,000, $5,782,000, and $6,712,000, respectively. The Company's German
operations made net export sales to unaffiliated customers of $2,301,000,
$1,093,000 and $1,515,000 for the years ended May 31, 2002, 2001, and 2000,
respectively. The Company's Canadian operations made net export sales to
unaffiliated customers of $2,102,000, $2,361,000 and $2,224,000 for the
years ending May 31, 2001, 2000, and 1999, respectively.
Product sales to affiliates are valued at market prices.
14. RETIREMENT PLAN
The Company maintains a 401(k) retirement plan covering its domestic
employees who meet certain age and length of service requirements, as
defined in the Plan document. The Company matches a portion of employee
contributions to the plan. During the years ended May 31, 2002, 2001 and
2000, the Company's matching contributions to the plan were approximately
$180,000, $284,000 and $184,000, respectively. Vesting in the Company's
matching contributions is based on years of continuous service.
15. QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share amounts)
Basic Diluted
Net Gross Operating Net Earnings (Loss) Earnings (Loss)
Sales Margin Income (Loss) Income (Loss) Per Share Per Share
--------------- -------------- ---------------- --------------- ---------------- -----------------
FISCAL 2002
First Quarter $18,640 $ 9,262 $ 1,955 $ 1,253 (1) $0.17 $0.17
Second Quarter 20,918 11,825 3,748 2,231 (2) $0.31 $0.30
Third Quarter 21,125 11,926 3,910 2,510 $0.34 $0.32
Fourth Quarter 23,461 13,654 5,428 2,801 $0.38 $0.34
--------------- -------------- ---------------- ---------------
$84,144 $46,667 $15,041 $ 8,795 $1.20 $1.15
=============== ============== ================ ===============
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) (3) $(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)
=============== ============== ================ ===============
(1) includes $1.8 million of income, net of $0.8 million of asset impairment
costs from Becton, Dickinson arbitration settlement.
(2) includes $0.4 million of income from disgorgement of short-swing trading
profits by the Kairos Group.
(3) includes a $1.3 million charge for implementation of the cost savings
plan and a $3.1 million charge for impairment in value of the goodwill
related to the French and Belgian operations.
16. COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) for the periods ended May 31,
2002, 2001 and 2000 are as follows:
Balance Activity Activity Activity Balance
May 31, 1999 FY 2000 FY 2001 FY 2002 May 31, 2002
--------------------- --------------- --------------- -------------- ----------------
Retained earnings/net income (loss) $ 25,498,721 $ 2,812,020 $(8,049,113) $ 8,794,910 $ 29,056,538
Net foreign currency translation (3,140,780) (1,846,179) (1,598,853) 1,263,026 (5,322,786)
Cumulative effect of the adoption of SFAS
No. 133 on June 1, 2001, net of taxes - - - (102,721) (102,721)
Hedge loss reclassified to interest expense - - - 30,809 30,809
--------------------- --------------- --------------- --------------- ----------------
Comprehensive income (loss) $ 22,357,941 $ 965,841 $(9,647,966) $ 9,986,024 $ 23,661,840
===================== =============== =============== =============== ================
As a result of the adoption of SFAS No. 133 on June 1, 2001, the Company
recorded an income tax benefit of $26,220 in fiscal 2002. This income tax
benefit was recognized, netted against the cumulative effect, in the
accompanying financial statements as a component of comprehensive income.
See Note 3. The remaining balance of cumulative unrecognized hedging losses
is $71,912 and will be reclassified into earnings at approximately $20,500
per year until the expiration of the loan in December 2005.
17. SUBSEQUENT EVENTS (unaudited)
On July 24, 2002, the Board of Directors approved a 3-for-2 stock split,
which will be effected in the form of a 50% stock dividend. As of July 31,
2002, the Company had 8,162,393 shares of common stock outstanding. The
stock split will increase the number of shares of common stock outstanding
to approximately 12,243,560 shares. The expected date of distribution is
September 13, 2002 to the shareholders of record at the close of business
on August 26, 2002. No adjustments have been recorded in the financial
statements to reflect the impact of the split on share information
In August 2002, Immucor placed an order, amounting to $3.3 million, for 50
additional ABS2000 to be delivered by February 2003.
IMMUCOR, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MAY 31, 2002, 2001 AND 2000
- --------------------------------------------------------------------------------------------------------
Balance at Charged to Balance
Beginning Costs and Deductions at End
of Period Expense (Note 1) of Period
----------------------------------------------------------------
2002:
Allowance for doubtful accounts $1,244,488 $819,167 $(579,967) $1,483,688
========== ======== ========== ==========
2001:
Allowance for doubtful accounts $1,164,582 $673,997 $(594,091) $1,244,488
========== ======== ========== ==========
2000:
Allowance for doubtful accounts $804,470 $452,983 $(92,871) $1,164,582
======== ======== ========= ==========
Note 1: "Deductions" for the "Allowance for doubtful accounts" 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.
The information contained under "Proposal One - The Election of Eight
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement related to its 2002 annual meeting of
shareholders which the Company will file with the Securities and Exchange
Commission no later than September 30, 2002, is incorporated herein by
reference.
Item 11.--Executive Compensation.
The information contained under "Executive Compensation" (except for the
Compensation Committee Report and Performance Graph therein) in the Company's
definitive proxy statement related to its 2002 annual meeting of shareholders
which the Company will file with the Securities and Exchange Commission no later
than September 30, 2002, is incorporated herein by reference.
Item 12.--Security Ownership of Certain Beneficial Owners and Management.
The information contained under "Security Ownership of Certain Beneficial
Owners and Management" in the Company's definitive proxy statement related to
its 2002 annual meeting of shareholders which the Company will file with the
Securities and Exchange Commission no later than September 30, 2002, is
incorporated herein by reference.
Item 13.--Certain Relationships and Related Transactions.
The information contained under "Certain Relationships and Related
Transactions" in the Company's definitive proxy statement related to its 2002
annual meeting of shareholders which the Company will file with the Securities
and Exchange Commission no later than September 30, 2002, is incorporated herein
by reference.
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 February
12, 2002) (incorporated by reference to Exhibit 3.2 to Immucor,
Inc.'s quarterly report on Form 10-Q filed on April 11, 2002).
4.1 Amended and Restated Shareholder Rights Agreement dated as of
November 20, 2001 between Immucor, Inc. and EquiServe Trust
Company, N.A. as Rights Agent (incorporated by reference to
Exhibit 4.1 to Immucor, Inc.'s quarterly report on Form 10-Q
filed on January 14, 2002).
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 (incorporated by reference to Exhibit
4.4 to Immucor's Registration Statement on Form S-8 as filed on
June 14, 2002).
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).
10.21 Loan Modification No. 1 dated as of September 11, 2001 between
Immucor, Inc., Dominion Biologicals Limited, Immucor Medizinische
Diagnostik GmbH and Wachovia Bank, National Association
(incorporated by reference to Exhibit 10.21 to Immucor, Inc.'s
quarterly report on Form 10-Q filed January 14, 2002).
10.22* Form of indemnification agreement between the Company and
certain directors (incorporated by reference to Exhibit 10.22 to
Immucor, Inc.'s quarterly report on Form 10-Q filed January 14,
2002).
10.23 Loan Modification No. 2 dated as of July 18, 2002 between
Immucor, Inc., Dominion Biologicals Limited, Immucor Medizinische
Diagnostik GmbH and Wachovia Bank, National Association.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
99.1 Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
*Denotes a management contract or compensatory plan or arrangement.
(b) No current reports on Form 8-K were filed during the quarter ended May 31,
2002.
(c) See Exhibits listed under Item 14(a)(3).
(d) Not applicable. See Item 14(a)(2).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMMUCOR, INC.
By: /s/ EDWARD L. GALLUP
--------------------------------------------------------------
Edward L. Gallup, Chairman of the Board of Directors,
President and Chief Executive Officer
August 29, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ EDWARD L. GALLUP
- -----------------------------------------------------------------------
Edward L. Gallup, Director, Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
August 29, 2002
/s/ STEVEN C. RAMSEY
- -----------------------------------------------------------------------
Steven C. Ramsey, Vice President - Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
August 29, 2002
/s/RALPH A. EATZ
- -----------------------------------------------------------------------
Ralph A. Eatz, Director, Senior Vice President - Operations
August 29, 2002
/s/ PATRICK WADDY
- -----------------------------------------------------------------------
Patrick Waddy, European Finance Director and President of Dominion
Biologicals Limited
August 29, 2002
/s/DANIEL T. MCKEITHAN
- -----------------------------------------------------------------------
Daniel T. McKeithan, Director
August 29, 2002
/s/ROSWELL S. BOWERS
- -----------------------------------------------------------------------
Roswell S. Bowers, Director
August 29, 2002
/s/ DIDIER L. LANSON
- -----------------------------------------------------------------------
Didier L. Lanson, Director
August 29, 2002
/s/ DR. GIOACCHINO DE CHIRICO
- -----------------------------------------------------------------------
Dr. Gioacchino De Chirico, Director, Director of European Operations and
President of Immucor Italia S.r.l.
August 29, 2002
/s/ MARK KISHEL
- -----------------------------------------------------------------------
Mark Kishel, M.D., Director
August 29, 2002
/s/JOSEPH E. ROSEN
- -----------------------------------------------------------------------
Joseph E. Rosen, Director
August 29, 2002
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 filed on January 16, 2001).
3.2 Amended and Restated Bylaws (amended and restated as of February
12, 2002) (incorporated by reference to Exhibit 3.2 to Immucor,
Inc.'s quarterly report on Form 10-Q filed on April 11, 2002).
4.1 Amended and Restated Shareholder Rights Agreement dated as of
November 20, 2001 between Immucor, Inc. and EquiServe Trust
Company, N.A. as Rights Agent (incorporated by reference to
Exhibit 4.1 to Immucor, Inc.'s quarterly report on Form 10-Q
filed on January 14, 2002).
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 (incorporated by reference to Exhibit
4.4 to Immucor's Registration Statement on Form S-8 as filed on
June 14, 2002).
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).
10.21 Loan Modification No. 1 dated as of September 11, 2001 between
Immucor, Inc., Dominion Biologicals Limited, Immucor Medizinische
Diagnostik GmbH and Wachovia Bank, National Association
(incorporated by reference to Exhibit 10.21 to Immucor, Inc.'s
quarterly report on Form 10-Q filed January 14, 2002).
10.22* Form of indemnification agreement between the Company and
certain directors (incorporated by reference to Exhibit 10.22 to
Immucor, Inc.'s quarterly report on Form 10-Q filed January 14,
2002).
10.23 Loan Modification No. 2 dated as of July 18, 2002 between
Immucor, Inc., Dominion Biologicals Limited, Immucor Medizinische
Diagnostik GmbH and Wachovia Bank, National Association.
21 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
99.1 Certification of Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
*Denotes a management contract or compensatory plan or arrangement.