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Highlights
"We had an exciting quarter with the European launch of our fourth generation automated instrument, the Neo," stated Dr. Gioacchino De Chirico, Immucor's President and Chief Executive Officer. "The introduction of the Neo demonstrates our commitment to bringing innovative automation to the market that improves our customers' operations and patient outcomes."
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Consolidated revenue was $80.5 million in the current year quarter, an increase of approximately $5.2 million or 7% over the third quarter of fiscal 2009. Revenue in the quarter benefited primarily from price contributions and currency. Volume contribution from reagents in the current year quarter was negatively impacted by fewer ship cycles in the current year as well as sales mix. Fluctuations in foreign currency exchange rates favorably impacted revenue in the quarter by approximately $1.8 million as compared with the third quarter of fiscal 2009.
Consolidated gross margin was $55.7 million, or 69.2% of revenue, in the current year quarter compared with $53.8 million, or 71.4% of revenue, in the prior year quarter. During the current year quarter, gross margin was negatively impacted by the costs related to the Company's Quality Process Improvement Project of approximately $1.8 million compared with expenses of approximately $0.6 million in the prior year quarter.
Remediation Portion of Quality Project Completed
The Company's Quality Process Improvement Project began during the third quarter of fiscal 2009. The remediation portion of the Project, which had the goal of addressing the deficiencies noted by the Food and Drug Administration (FDA) in its June 2009 administrative action, has been completed. These remediation efforts provide the foundation for the Project's longer term goal of establishing a world-class quality system.
Year-to-date in fiscal 2010, the Company spent approximately $5.9 million on the Project. The Project's efforts to establish a world-class quality system will continue using primarily internal resources. Future Project costs are not expected to be material to the financial statements.
"While completion of the remediation portion of our Quality Project is an important milestone in the process to regain compliance with the FDA, quality improvement is an ongoing process," stated Dr. De Chirico. "We will continue our work to meet our commitment of establishing a world-class quality system."
Operating Expenses
Operating expenses for the third quarter of fiscal 2010 increased by approximately $0.3 million, or 1%, over the prior year quarter. The increase was primarily attributable to increased research and development expenses related to the next generation automated instrument for molecular immunohematology.
As of February 28, 2010, the Company had an instrument backlog of 219 Echos and 35 Galileo/Neos. This backlog represents orders where either the instruments have not been installed or the customer validation process has not been completed so the instruments were not generating recurring revenue at the expected annualized run rate at the end of the fiscal third quarter.
"We continue to experience good order volume for our Echo instrument, which is targeted at medium- to low-volume hospitals as well as integrated delivery networks," stated Dr. De Chirico. "For fiscal 2010, we expect to be near the low end of our guidance range of 280 Echo orders for the full year."
The Neo Launched in Europe
During February 2010, the Company's new high volume instrument, the Neo, received CE (Conformite Europeenne) Mark approval in the European Union as well as regulatory approval from the Japanese Ministry of Health, Labor and Welfare. The 11 Neo orders received in the third fiscal quarter were in European and distributor markets where the instrument has been launched.
"We believe there is significant market opportunity for the Neo in Europe," stated Dr. De Chirico. "With a focus on functionality and reliability, the Neo is in a class of its own in its ability to meet the needs of high-volume laboratories and donor centers."
In early January 2010, the Company submitted the 510(k) for the Neo to the FDA and is currently waiting for marketing clearance for the U.S. market.
The Company has generated 65 orders on a year-to-date basis for its high volume instruments, which include the Galileo and the Neo. The Company expects total fiscal 2010 orders for its high volume instruments to be above the high end of the guidance range of 70 orders.
Nine-Month Results
For the first nine months of fiscal 2010, revenue was $246.1 million, up 11% compared with $221.5 million in the prior year period. Gross margin was 70.5%, down from 72.6% in the prior year period. Current year gross margins included approximately $5.9 million of expenses related to the Company's Quality Process Improvement Project compared with $0.6 million in the prior year. Net income was $61.1 million, or $0.86 per diluted share, compared with $56.8 million, or $0.80 per diluted share in the prior year period.
Fiscal 2010 Financial Guidance
The Company expects fiscal 2010 consolidated revenue in the range of $326 million to $330 million and consolidated gross margins in the middle of the previous guidance range of 70.0% to 71.5%. Expenses related to the Company's Quality Process Improvement Project are included in cost of goods sold.
The Company expects diluted earnings per share to be in the range of $1.14 to $1.16 for fiscal 2010, which includes the approximately $0.05 per share impact, net of tax, related to the Quality Process Improvement Project. The Company's fiscal 2010 guidance also includes a full year of BioArray expenses. BioArray was acquired on August 4, 2008.
Conference Call
Immucor, Inc. will host a conference call Thursday, April 1, 2010 at 8:30 AM (Eastern Time) to review these results. To participate in the telephone conference call, dial 1-888-324-9321 (Passcode: BLUD). The Company will also provide a live audio broadcast of the call via webcast. The webcast can be accessed at www.immucor.com in the "Investor Relations" section. For those unable to listen to the live broadcast of the call, a replay will be available shortly after completion of the call and will be archived on Immucor's website for approximately 60 days. Additionally, a replay of the call will be available for one week beginning at noon on April 1st by dialing 1-888-296-6945 (Passcode: 3585).
About Immucor
Founded in 1982, Immucor manufactures and sells a complete line of reagents and systems used by hospitals, reference laboratories and donor centers to detect and identify certain properties of the cell and serum components of blood prior to transfusion. Immucor markets a complete family of automated instrumentation for all of its market segments. For more information on Immucor, please visit our website at www.immucor.com.
Safe Harbor Statement
This press release contains statements that are "forward-looking statements" as that term is defined under federal securities laws. Forward-looking statements contained in this press release include the intent, belief or current expectations of the Company and members of its management team with respect to the Company's future business operations as well as the assumptions upon which such statements are based. Forward-looking statements include specifically, but are not limited to: fiscal 2010 revenue projections, gross margin projections and fully diluted earnings per share projections; future costs related to the Quality Process Improvement Project; and instrument order projections. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, and involve risks and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements. In addition, results for one fiscal quarter are not necessarily indicative of results for any future period. Factors that could cause actual results to differ materially from those expressed in any forward-looking statement include, but are not limited to: the outcome of the administrative action ("notice of intent to revoke our biological license") received from the Food and Drug Administration ("FDA"); customer reaction to the FDA action and the subsequent impact on the business; lower than expected demand for the Company's instruments, including the new Galileo Neo; the decision of customers to defer capital spending; the unexpected change in the mix of instruments being purchased instead of acquired through other means, which could significantly change costs recognized in the period; the failure of customers to efficiently integrate the Company's instruments into their blood banking operations; increased competition in the sale of instruments and reagents, particularly in the United States; unanticipated operational problems that result in non-compliance with FDA regulations; the failure to effectively integrate BioArray operations into the Company's overall operations; product development obstacles including obstacles related to the development of the next generation automated instrument for the molecular immunohematology products; regulatory obstacles including obstacles in securing regulatory approval of the Galileo Neo as well as the molecular immunohematology products; the inability to hire and retain, and the unexpected loss of, key managers; changes in interest rates; the strengthening of the U.S. Dollar versus any of the functional currencies in which the Company operates and its adverse impact on reported results; the inability of the Company's Japanese and French subsidiaries as well as our molecular immunohematology operations to attain expected revenue, gross margin and net income levels; the outcome of any legal claims or regulatory investigations known or unknown, including the ongoing investigations by the Department of Justice and the Federal Trade Commission, and the related customer and shareholder lawsuits; the Company's inability to protect its intellectual property, particularly as to the molecular immunohematology products, or its infringement of the intellectual property of others; lower than expected market acceptance of the molecular immunohematology products; the unexpected application of different accounting rules; general economic conditions; and adverse developments with respect to the operation or performance of the Company, its products and its affiliates or the market price of its common stock. Additional factors that could cause actual results to differ materially from those contemplated within this Press Release can be found in the Company's Risk Factor disclosures in its Form 10-Q for the quarter ended November 30, 2009 and its Form 10-K for the year ended May 31, 2009. Investors are cautioned not to place undue reliance on any forward-looking statements. Immucor assumes no obligation to update any forward-looking statements.
-- Revenue for the third quarter of fiscal 2010 was $80.5 million, up 7% from $75.3 million in the prior year quarter. A significant portion of the Company's products ship in cycles. The current year quarter had fewer ship cycles than the prior year quarter. -- Gross margin was 69.2% in the quarter compared with 71.4% in the prior year quarter. Current quarter gross margin included expenses of approximately $1.8 million related to the Quality Process Improvement Project compared with expenses of approximately $0.6 million in the prior year quarter. -- Diluted earnings per share totaled $0.28 in the quarter compared with $0.27 for the same period last year. The impact from the Quality Process Improvement Project was approximately $0.02 per diluted share, net of tax, in the current year quarter compared with approximately $0.01 per diluted share, net of tax, in the prior year quarter. -- Cash flow from operations for the nine months ended February 28, 2010 was $55.5 million compared with $54.0 million in the prior year. -- The Galileo Neo(TM), the Company's new high volume instrument, was launched in Europe and distributor markets in the fiscal third quarter. -- Worldwide instrument orders received in the fiscal third quarter were 71 Echo® orders, 13 Galileo® orders and 11 Neo orders. -- The remediation portion of the Company's Quality Process Improvement Project has been completed. Year-to-date fiscal 2010 project costs were approximately $5.9 million or $0.05 per diluted share, net of tax.
SOURCE Immucor, Inc.
