Back to GetFilings.com

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

(Mark One)

Commission File Number: 0-11647

HYCOR BIOMEDICAL INC.

7272 Chapman Avenue, Garden Grove, California 92841
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (714) 933-3000

No Change
(Former name, former address and former fiscal year, if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

Page 2

Table of Contents

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

Page 3

Table of Contents

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

Page 4

Table of Contents

HYCOR BIOMEDICAL INC. AND SUBSIDIARIES

1. Basis of Presentation

	In the opinion of the Company, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly the financial position of the Company as of June 30, 2002 and December 31, 2001, the results of its operations and the cash flows for the three and six-month periods ended June 30, 2002 and 2001.

	These statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements and may be subject to year-end adjustments.

	These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2001 annual report on Form 10-K as filed with the Securities and Exchange Commission. Certain items in the 2001 consolidated financial statements have been reclassified to conform to the 2002 presentation.

	The results of operations for any interim period are not necessarily indicative of results to be expected for the full year.

	Basic earnings per share is computed by dividing net income by the weighted-average number of shares outstanding, while diluted EPS additionally includes the dilutive effect of the Company’s outstanding options and warrants computed using the treasury stock method.

2. Inventories

	Inventories are valued at the lower of cost (first-in, first-out method) or market. Cost includes material, direct labor, and manufacturing overhead. Inventories at June 30, 2002 and December 31, 2001 consist of:

3. Long Term Debt

On May 7, 2002, the Company renewed its existing $2,000,000 line of credit on substantially the same terms with a maturity date of July 1, 2004. The loan is collateralized by the Company’s accounts receivable, inventories, and property and equipment. At June 30, 2002, $1,000,000 was outstanding. Due to the change in the maturity date, the balance sheet classification of amounts due under this line was changed from short-term at December 31, 2001, to long-term at June 30, 2002. Advances under the line bear interest at the prime rate or at LIBOR plus 2% (4.15% at June 30, 2002).

Page 5

Table of Contents

	The line of credit contains restrictive covenants, the most significant of which relate to the maintenance of minimum tangible net worth, debt-to-tangible net worth requirements, and liquid assets plus accounts receivable-to-current liabilities requirements. At June 30, 2002, the Company was in compliance with such covenants.

4. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). SFAS 142 addresses the financial accounting and reporting for acquired goodwill and other intangible assets. Under SFAS 142, the Company is no longer required to amortize goodwill and other intangible assets with indefinite lives but will be required to subject these assets to periodic testing for impairment. SFAS 142 supersedes APB Opinion No. 17, Intangible Assets, effective for fiscal years beginning after December 15, 2001. The Company adopted SFAS 142 effective December 31, 2001 and such adoption did not have a material impact on the Company’s consolidated financial statements.

Statement of Financial Accounting Standards No. 143, Accounting for Obligations Associated with the Retirement of Long-Lived Assets (“SFAS 143”) was issued by the FASB in August 2001. SFAS 143 establishes accounting standards for the recognition and measurement of an asset retirement obligation and its associated asset retirement cost. It also provides accounting guidance for legal obligations associated with the retirement of tangible long-lived assets. SFAS 143 is effective for fiscal years beginning after June 15, 2002, with early adoption permitted. The Company adopted SFAS 143 effective December 31, 2001 and such adoption did not have a material impact on the Company’s consolidated financial statements.

The FASB issued Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”) in October 2001. SFAS 144 establishes a single accounting model for the impairment or disposal of long-lived assets and new standards for reporting discontinued operations. SFAS 144 superseded Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and APB Opinion No. 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. The provisions of SFAS 144 are effective in fiscal years beginning after December 15, 2001 and, in general, are to be applied prospectively. The Company adopted SFAS 144 effective December 31, 2001 and such adoption did not have a material impact on the Company’s consolidated financial statements.

Page 6

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

     This Section and this entire report contain forward-looking statements and include assumptions concerning the Company’s operations, future results and prospects. These forward-looking statements are based on current expectations and are subject to a number of risks, uncertainties, and other factors. In connection with the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary statements identifying important factors which, among other things, could cause the actual results and events to differ materially from those set forth in or implied by the forward-looking statements and related assumptions contained in this Section and in this entire Report.

     Such factors include, but are not limited to, product demand and market acceptance risks; the effect of economic conditions; the impact of competitive products and pricing; product development; commercialization and technological difficulties; capacity and supply constraints or difficulties; availability of capital resources; general business and economic conditions, including currency risks based on the relative strength or weakness of the U.S. dollar, euro conversions, and changes in government laws and regulations, including taxes.

New Accounting Pronouncements

     See Item 1, Notes to Consolidated Financial Statements.

Liquidity

     The Company has adequate working capital and sources of capital to carry on its current business and to meet its existing and expected future capital requirements. As of June 30, 2002, the Company increased its working capital approximately $1,933,000 when compared to December 31, 2001. This increase was a result of normal operations and the reclassification of $1,000,000 of current liabilities to long term debt.

     The Company’s principal capital commitments are to support the HY-TEC business, which requires the purchase of instruments. In many cases, the instruments are placed in use in laboratories of the Company’s direct customers and paid for over an agreed contract period by the purchase of test reagents. This “reagent rental” sales program, common to the diagnostic market, creates negative cash flows in the initial years. The Company has entered into a long-term product manufacturing and sales agreement to purchase certain minimum levels of HY-TEC instruments. Working capital, operating results, and the available line of credit are expected to be sufficient to satisfy this commitment and the needs of operations for the foreseeable future.

Results of Operations

     During the three and six-month periods ended June 30, 2002, sales increased approximately $405,000 or 9.4% and $613,000 or 7.1%, respectively, compared to the same periods last year. During the three and six-month periods ended June 30, 2002, sales of urinalysis and clinical immunology product lines increased $487,000 or 12.2% and $748,000 or 9.3%, while sales of other products decreased $82,000 or 26.5% and $135,000 or 22.7%, respectively, when compared to the same periods last year. In periods when the U.S. dollar is weakening, the translation impact on the financial statements of the consolidated foreign affiliates is that of higher sales, costs, and net income. During the three and six-month periods ended June 30,

Page 7

Table of Contents

2002, sales were affected by the weakening dollar resulting in a positive foreign currency translation impact on consolidated reported sales of approximately $56,000 or 1.2% and $1,300 or 0.1%, respectively, when compared to 2001. Continued pressures in the health care industry for cost controls affect the Company’s revenue and the Company anticipates that these pricing pressures will continue in the future.

     Gross profit as a percentage of product sales decreased for the three and six-month periods ended June 30, 2002 from approximately 55.7% to 54.5% and 54.9% to 52.9%, respectively, when compared to the same periods last year. This decrease was due primarily to changes in the product sales mix.

     Selling, general and administrative expenses increased for the three month period ended June 30, 2002, approximately $3,700 or 0.2% and decreased for the six-month period ended June 30, 2002, approximately $131,000 or 3.9%, when compared to the same period last year. This decrease is due primarily to temporary vacancies in two field sales positions, which were filled in the second quarter.

     Research and development costs decreased for the three and six-month periods ended June 30, 2002, approximately $49,000 or 10.2% and $32,000 or 3.0%, respectively, when compared to the same periods last year. This decrease is due to a reduced number of R&D projects as compared to the prior year.

     The Company currently has a 100% valuation allowance against net deferred tax assets. The tax provision for the six-month periods ended June 30, 2002 and June 30, 2001 reflects the provision for estimated federal, state, and foreign liabilities that are not offset by net operating loss carry-forwards.

Page 8

Table of Contents

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

     On June 13, 2002, Hycor Biomedical Inc. held its Annual Meeting of Stockholders. At such meeting, the following six persons were elected as directors of the Company to serve until the Annual Meeting of Stockholders in 2003 and until their successors are elected and qualified.

     The tabulation of the votes cast for the election of the directors was as follows:

Item 6. Exhibits and Reports on Form 8-K

	(a) Exhibit: Exhibit 10.1: Credit Agreement between United California Bank and Hycor Biomedical Inc.
	Exhibit 10.2: Employment Agreement of J. David Tholen

	(b) Reports on Form 8K: None

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Page 9

Table of Contents

CERTIFICATION

     Each of the undersigned hereby certifies in his capacity as an officer of Hycor Biomedical Inc. (the “Company”) that the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition of the Company at the end of such period and the results of operations of the Company for such period.

Page 10

Table of Contents

Exhibit List

Page 11