SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of February, 2003
TRINITY BIOTECH PLC
-------------------
(Translation of registrant's name into English)
IDA BUSINESS PARK,
BRAY,
CO. WICKLOW, IRELAND
(Address of Principal Executive Officers)
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Trinity Biotech plc ("Trinity" or the "Company") develops, manufactures and
markets diagnostic test kits used for the clinical laboratory and point-of-care
("POC") segments of the diagnostic market. These test kits are used to detect,
primarily, infectious diseases, sexually transmitted diseases, blood coagulation
disorders and autoimmune disorders. The Company markets over 200 different
diagnostic products in over 80 countries.
Trinity was incorporated as a public limited company (plc) registered in Ireland
in 1992. The Company was organised to acquire, develop and market technologies
for rapid in-vitro blood and saliva diagnostics for HIV and other infectious
diseases. The Company commenced operations in 1992 and, in October 1992,
completed an initial public offering of its securities in the USA in which it
raised net proceeds in excess of US$5 million. In October 1993, Trinity took a
controlling interest in Disease Detection International Inc ("DDI") and, in
October 1994, merged Trinity's wholly owned US subsidiary into DDI so that DDI
became a wholly owned subsidiary of Trinity. DDI was the surviving entity in the
merger and was subsequently renamed Trinity Biotech Inc ("TBI"). In December
1994, Trinity acquired the remaining 50% of FHC Corporation ("FHC"), which its
subsidiary TBI did not own. In 1995, Trinity raised net proceeds of US$6 million
as a result of a private placement of the Company's shares. In February 1997,
Trinity purchased the entire share capital of Clark Laboratories Inc.,
("Clark"), which now trades as Trinity Biotech USA. In June 1997, Trinity
acquired Centocor UK Holdings Limited ("Centocor"), a company based in Guildford
in the U.K. Centocor was a 100% subsidiary of Centocor, Inc., a U.S.
biotechnology company. In 1998, the Company made four product line acquisitions.
The acquisition of the Microzyme and Macra Lp(a) product lines in June 1998 and
the acquisition of the MicroTrak and Cambridge Diagnostics HIV product lines in
September 1998. The manufacture of these product lines has been transferred to
the Company's Jamestown, NY and Bray, Co. Wicklow, Ireland manufacturing
facilities. Also, in September 1998, Trinity disposed of its interest in its
pregnancy sales contract with Warner Lambert to Applied Biotech Inc, a
subsidiary of Sybron International Corporation. In March 2000 the Company
purchased 100% of the share capital of Mardx Diagnostics Inc ("Mardx") and in
December 2000 the assets and goodwill of Bartels Inc were acquired. The Bartels
plant in Seattle closed in June 2001 and production has been transferred to the
Californian, New York and Irish factories. In October 2001, the Company
purchased the Amerlex hormone business of Ortho Clinical Diagnostics and, in
December 2001, the Company acquired the assets and goodwill of the Biopool
hemostasis business. In October 2001, Trinity established a direct sales
operation in Germany, Trinity Biotech GmbH. In August 2002, Trinity acquired the
hemostasis division of Sigma Diagnostics, part of Sigma-Aldrich. The Sigma
diagnostics hemostasis business comprises a comprehensive portfolio of reagents
manufactured in St Louis, Missouri and the Amelung range of automated and
semi-automated instruments manufactured in Lemgo, Germany. Upon completion of
the acquisition, Trinity intends to transfer the Sigma hemostasis test
manufacturing from St Louis to the Irish facility, with the transfer scheduled
for completion in Q3 2003. Trinity also acquired the speciality clinical
chemistry product line from Sigma Diagnostics in December 2002. This business
consists of several esoteric products that are clearly differentiated in the
marketplace.
In October 2000 Trinity subscribed for a 33.3% shareholding in HiberGen Limited
("HiberGen"). In July 2001 the Company subscribed for a further 300,000 Ordinary
Shares in HiberGen. This combined with certain share purchases from existing
shareholders resulted in an increase in Trinity's shareholding to 40%.
In May 1999 Trinity obtained a secondary listing on the Irish Stock Exchange
and in April 2000 raised US$13.4m by the issue of 4 million Class `A' Ordinary
Shares to institutional investors.
Trinity's financial statements include the attributable results of five trading
entities - Trinity Biotech Manufacturing Limited, Trinity Biotech USA, Trinity
Biotech Inc, MarDx Diagnostics Inc and Trinity Biotech GmbH. These entities are
engaged in the manufacture and sale of diagnostic test kits. A share of the loss
of the associate undertaking, HiberGen, is also included in the financial
statements. The following discussion should be read in conjunction with the
unaudited condensed interim financial statements and notes thereto. The
financial statements have been prepared in accordance with Irish generally
accepted accounting principles (except for the classification of cashflows set
out in the unaudited consolidated statement of cashflows), which conform in all
material respects to US GAAP except as indicated in the notes to the condensed
financial statements.
1
Results of Operations
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
-------------------------------------------------------------------------
Trinity's consolidated revenues for the six month period ended June 30, 2002
were US$23,173,560 an increase of US$5,449,561 compared to consolidated revenues
of US$17,723,999 for the six months ended June 30, 2001. This increase in
revenues is due to organic growth and the inclusion of the revenues of Biopool
for the six months to June 30, 2002.
The gross margin from product sales for the six month period ended June 30, 2002
was 49%.
Normal administrative expenses, including amortization, for the six month period
ended June 30, 2002 amounted to US$6,182,067 compared to US$4,458,179 for the
six month period ended June 30, 2001. The increase in administration expenses of
US$1,723,888 is due to increased costs arising on the expansion of the business
in addition to the inclusion of the administration expense of Biopool for the
six months to June 30, 2002. An exceptional charge of US$800,000 was recognized
in the six month period to June 30, 2001 relating to the closure of the Bartels
facility in Seattle. No comparable charge was recognized in the six month period
to June 30, 2002. Research and development expenditure increased to US$1,918,861
from US$1,559,025 during the same period last year. This was due to the
inclusion of the research and development costs of Biopool for the six months to
June 30, 2002. The increase in the taxation charge to US$435,754 for the period
ended June 30, 2002 from US$73,698 for the comparable period in 2001, reflects
the Company's progression to a tax paying environment which is in part due to
the near complete utilization of losses carried forward.
Net interest payable increased to US$243,019 for the six months to June 30, 2002
compared to US$183,196 for the comparable period in 2001. The increased level of
interest reflects the Company's higher level of net debt during the 2002 period.
The net profit for the six month period ended June 30, 2002 was US$2,360,283
compared to a net profit of US$1,992,471 for the same period last year.
Liquidity and Capital Resources
As of June 30, 2002 Trinity's consolidated cash and cash equivalents were
US$4,374,048. This compares to cash and cash equivalents of US$5,281,976 at
December 31, 2001. This decrease has been caused primarily by repayments due on
certain of the Company's bank borrowings and the purchase of fixed assets offset
in part by an increase in operating net cash inflows. The combination of these
factors has resulted in net cash outflows of US$907,928 during the six month
period.
Impact of Inflation
Although Trinity's operations are influenced by general economic trends, Trinity
does not believe that inflation had a material effect on its operations for the
periods presented. Management believes, however, that continuing national wage
inflation in Ireland and the impact of inflation on costs generally will result
in a sizeable increase in the Irish facility's operating costs in 2002.
Impact of Currency Fluctuation
Trinity's revenue and expenses are affected by fluctuations in currency exchange
rates especially the exchange rate between the US Dollar and the Euro. Trinity's
revenues are primarily denominated in US Dollars and its expenses are incurred
principally in Euros and US Dollars. The revenues and costs incurred by US
subsidiaries are denominated in US Dollars.
Trinity holds most of its cash assets in US dollars. As Trinity reports in US
Dollars, fluctuations in exchange rates do not result in exchange differences on
these cash assets.
Exchange Rates
Fluctuations in the exchange rate between the Euro and the US dollar may impact
the Company's Euro monetary assets and liabilities and expenses and,
consequently, the Company's earnings.
2
Trinity Biotech plc
Unaudited Consolidated Balance Sheet as at:
June 30, 2002 December 31, 2001
US$ US$
(Unaudited)
ASSETS
Cash and cash equivalents 4,374,048 5,281,976
Accounts receivable and prepayments 9,480,022 7,684,575
Inventories 17,491,247 16,342,308
----------- -----------
Total Current Assets 31,345,317 29,308,859
Property, plant & equipment, net 6,095,051 5,967,443
Intangible assets, net 39,283,558 40,402,394
Financial assets 1,158,322 1,350,517
----------- -----------
TOTAL ASSETS 77,882,248 77,029,213
----------- -----------
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts payable & accrued expenses 11,834,896 12,692,405
Long term liabilities 6,762,608 7,805,237
SHAREHOLDERS' EQUITY
Called up share capital
Class 'A' ordinary shares 591,165 591,165
Class 'B' ordinary shares 12,255 12,255
Share premium account 75,175,361 75,132,118
Currency adjustment (4,704,538) (5,054,186)
Retained deficit (12,099,445) (14,459,727)
Minority interest 309,946 309,946
----------- -----------
Total Shareholders' Equity 59,284,744 56,531,571
----------- -----------
Total Liabilities and Shareholders' Equity 77,882,248 77,029,213
----------- -----------
Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
Trinity Biotech plc
Unaudited Consolidated Profit and Loss Account
Six months ended June 30
2002 2001
US$ US$
(Unaudited) (Unaudited)
Revenues 23,173,560 17,723,999
----------- -----------
Costs and Expenses
Cost of goods sold (11,883,576) (8,597,430)
Selling, general and administrative - normal (4,985,386) (3,649,597)
Selling, general and administrative - exceptional -- (800,000)
Research and development (1,918,861) (1,559,025)
Amortisation (1,196,681) (808,582)
----------- -----------
Operating profit 3,189,056 2,309,365
Share of operating loss in associate (150,000) (60,000)
Interest and other income 24,715 43,200
Interest expense (267,734) (226,396)
----------- -----------
Profit on ordinary activities before taxation 2,796,037 2,066,169
Tax on profit on ordinary activities (435,754) (73,698)
----------- -----------
Net profit 2,360,283 1,992,471
----------- -----------
Net profit per ordinary share (US$) 0.058 0.049
Weighted average number of
ordinary shares outstanding 40,496,198 40,401,167
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES Six
months ended June 30
2002 2001
US$ US$
(Unaudited) (Unaudited)
Profit for the financial period attributable to group shareholders
excluding share of loss in associate 2,510,283 2,052,471
Share of operating loss in associate (150,000) (60,000)
Currency adjustment 349,648 --
----------- -----------
Total recognised gains and losses for the period 2,709,931 1,992,471
----------- -----------
4
Trinity Biotech plc
Unaudited Consolidated Statement of Cash Flows
Six months ended June 30
2002 2001
US$ US$
(Unaudited) (Unaudited)
Net cash flow from operating activities 1,867,328 (5,911)
Investing activities
Interest receivable 24,715 43,200
Purchase of fixed assets (632,041) (527,112)
Purchase of intangible assets (35,650) (337,156)
---------- ----------
(642,976) (821,068)
---------- ----------
Financing activities
Interest payable (309,781) (226,396)
Issue of ordinary shares 43,243 145,448
Capital element of loan repayments (1,865,742) (224,675)
Loans received -- 3,098,716
---------- ----------
(2,132,280) 2,793,093
---------- ----------
(Decrease) increase in cash and cash equivalents (907,928) 1,966,114
Balance at beginning of period 5,281,976 4,275,595
---------- ----------
Balance at end of period 4,374,048 6,241,709
---------- ----------
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TRINITY BIOTECH PLC
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES The unaudited results for
the six months to June 30, 2002 and June 30, 2001 have been prepared in
accordance with Irish generally accepted accounting principles with the
exception of the classification of cashflows in the unaudtied
consolidated statement of cashflows, which are presented in accordance
with the classifications required under US GAAP per SFAS 95. The
accounting policies and the basis of preparation of these unaudited
results is consistent with those used in the Company's annual financial
statements.
The information included in the interim consolidated financial
statements is unaudited but reflects all adjustments (consisting only
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of the results for the
interim periods presented. The results for the six months to June 30,
2002 are not necessarily indicative of the results for the full fiscal
year.
Companies Acts, 1963 to 2001
The financial information included in this document does not comprise
statutory financial statements as referred to in Section 19 of the
Companies (Amendment) Act, 1986. The auditors have made report without
qualification under Section 163 of the Companies Act, 1963 in respect
of such financial statements for the year ended 31 December 2001 which
have been annexed to the relevant annual return and filed with the
Companies Registration Office.
2. ANALYSIS OF REVENUE AND OPERATING INCOME
Trinity operates in one business segment, the market for rapid
diagnostic tests for infectious diseases and other medical conditions,
and in two reportable segments, which are based on a geographical
split. The information presented below relates to these operating
segments and is presented in a manner consistent with information
presented to the Company's chief operating decision maker. The basis of
accounting for each segment is the same basis as used in the
preparation of the consolidated financial statements.
a) The distribution of revenue by customers' geographical area was as
follows:
Six months ended
June 30 June 30
2002 2001
US$ US$
U.S.A. 15,686,368 12,108,029
Europe 3,738,863 3,475,506
Middle East/Africa/Asia 3,251,868 2,140,464
Other 496,461 --
---------- ----------
23,173,560 17,723,999
---------- ----------
b) The distribution of revenue by geographical area was as follows:
Six months ended
June 30 June 30
2002 2001
US$ US$
Ireland 9,143,473 5,373,085
United States 14,030,087 12,350,914
---------- ----------
23,173,560 17,723,999
---------- ----------
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TRINITY BIOTECH PLC
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
c) The distribution of operating income by geographical area was as
follows:
Six months ended
June 30 June 30
2002 2001
US$ US$
Ireland 1,853,000 1,497,768
United States 1,336,056 811,597
---------- ----------
Total operating income 3,189,056 2,309,365
---------- ----------
d) The distribution of intersegmental sales is as follows:
Six months ended
June 30 June 30
2002 2001
US$ US$
Ireland 9,104,401 5,110,057
Ireland - Intersegmental Sales 5,379,528 5,544,750
United States 14,030,087 12,350,914
Less Intercompany Sales (5,340,456) (5,281,722)
----------- -----------
23,173,560 17,723,999
----------- -----------
3. INVENTORIES
As at
June 30 December 31
2002 2001
US$ US$
Raw materials 6,383,809 5,120,345
Work in progress 5,510,326 7,014,487
Finished goods 5,597,112 4,207,476
----------- -----------
17,491,247 16,342,308
----------- -----------
The replacement cost of inventory is not materially different from the
cost stated above.
4. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The Consolidated Financial Statements are prepared in accordance with
accounting principles generally accepted in the Republic of Ireland
("Irish GAAP"), which differ in certain significant respects from
accounting principles generally accepted in the United States ("US
GAAP"). These differences relate principally to the following items and
the material adjustments are shown in the table set out below:
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TRINITY BIOTECH PLC
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) Goodwill:
In prior years under Irish GAAP, goodwill was either written
off immediately on completion of the acquisition against
shareholders' equity, or capitalised in the balance sheet and
amortised through the income statement on a systematic basis
over its useful economic life. From 1998, goodwill must be
capitalised and amortised over the period of its expected
useful life, however, historic goodwill continues to remain an
offset against shareholders' equity. Under US GAAP, accounting
for goodwill as an offset against shareholders' equity was not
permitted; rather, goodwill had to be amortised over the
period of its expected useful life, subject to a maximum write
off period of 40 years, through the income statement. A useful
life of 10 years has been adopted for the purposes of the
reconciliation in previous periods.
Under US GAAP, following the introduction of SFAS No. 142,
"Goodwill and Intangible Assets", which is effective for
accounting periods starting 15 December 2001 and,
transitionally, for acquisitions completed after 30 June 2001,
goodwill is capitalised and not amortised, but tested for
impairment, at least annually, in accordance with SFAS No.
142. No impairment charges have been recorded under US GAAP
for the periods presented.
(2) Share Capital Not Paid:
Under Irish GAAP, unpaid share capital is classified as a
receivable under current assets. Under US GAAP, share capital
receivable should be reported as a reduction to Shareholders'
Equity. Unpaid share capital at June 30, 2002 is US$279,751
(December 31, 2001 : US$291,211).
(3) Statement of Comprehensive Income:
The Company prepares a "Statement of Total Recognised Gains
and Losses" which is essentially the same as the "Statement of
Comprehensive Income" required under US GAAP. SFAS 130
requires disclosure of the cumulative amounts of other
comprehensive income.
(4) Sale and Leaseback:
Under Irish GAAP, the Company's sale and leaseback transaction
which took place in December 1999 was treated as a disposal of
assets with the gain on the disposal of US$1,014,080 being
credited to the profit and loss account in the period of the
transaction. Under US GAAP, this amount is deferred and
released to the profit and loss account over the period of the
lease (20 years).
(5) Deferred Income Taxes:
Under Irish GAAP deferred tax is provided in full on timing
differences that result in an obligation at the balance sheet
date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based
on current tax rates and law. Under SFAS 109 - "Accounting for
Income Taxes", deferred taxation is computed using the
liability method under which deferred income tax liabilities
are fully provided and deferred tax assets are recognised to
the extent that their realisation is more likely than not. In
addition, deferred taxation would also be provided under US
GAAP on the difference between the accounting and tax bases of
assets and liabilities of subsidiaries acquired.
(6) Minority Interests:
Under Irish GAAP, Minority Interests are included as a portion
of Shareholders' Equity. Under US GAAP, Minority Interests are
excluded from Shareholders' Equity.
(7) Restructuring Costs:
Under Irish GAAP, certain provisions made for restructuring
costs (principally payments to employees) incurred as a result
of acquisitions would not be recognisable under US GAAP,
because EITF 95-3, "Recognition of Liabilities in Connection
with a Purchase Business Combination", would also not permit
such costs to be included in the purchase price allocation but
contains more stringent criteria for expense recognition, and
such restructuring costs will be expensed in the subsequent
period.
8
TRINITY BIOTECH PLC
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) Research and Development:
Under US GAAP, SFAS 2, "Accounting for Research and
Development Costs", requires development costs to be
written-off in the year of expenditure. Under Irish GAAP,
development expenditure on projects whose outcome can be
assessed with reasonable certainty as to technical
feasibility, commercial viability and recovery of costs
through future revenues, are capitalised at cost within
intangible assets.
(9) Derivatives and financial instruments:
In June 1998, the FASB issued SFAS No 133 "Accounting for
Derivative Instruments and Hedging Activities". SFAS 133
requires that (for US GAAP purposes only) all derivatives be
recognised on the balance sheet at fair value. Derivatives
which are not hedges or where hedge correlation cannot be
demonstrated must be adjusted to fair value through income.
(10) Sales on Extended Credit Terms:
In 2000 the Company made certain sales on extended credit
terms. Under US GAAP, SAB 101 "Revenue Recognition in
Financial Statements", such sales on extended credit terms
would not be recognisable as revenue. No similar provisions
exist under Irish GAAP to preclude revenue recognition. Sales
were not made on extended credit terms in 2001.
CUMULATIVE EFFECT ON 30 June 31 December
SHAREHOLDERS' EQUITY 2002 2001
US$ US$
Total shareholders' equity before
Minority Interests under Irish GAAP 58,974,798 56,221,625
US GAAP adjustments:
Goodwill 9,295,463 8,098,782
Share capital not paid (279,751) (291,211)
Adjustment for sale and leaseback (887,320) (912,672)
Adjustment for restructuring costs 1,644,363 2,850,000
Adjustment for research and development costs (2,134,850) (1,910,083)
Adjustment for fair value of derivative instruments 519,595 14,585
Other 127,567 293,876
----------- -----------
Shareholders' equity under US GAAP 67,259,865 64,364,902
----------- -----------
9
TRINITY BIOTECH PLC
NOTES TO THE UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (Continued)
EFFECT ON NET PROFIT 30 June 30 June
2002 2001
US$ US$
Profit on ordinary activities after taxation
under Irish GAAP 2,360,283 1,992,471
US GAAP adjustments:
Goodwill amortisation 1,196,681 (1,088,834)
Adjustment for sale and leaseback 25,352 25,352
Adjustment for sales on extended credit -- 35,000
Adjustment for restructuring costs (1,205,637) (1,222,203)
Adjustment for research and development costs (224,767) (131,889)
Adjustment for fair value of derivative instruments 519,595 (743,733)
Other 461,455 (72)
----------- -----------
Profit under US GAAP 3,132,962 (1,133,908)
----------- -----------
Profit per ordinary share (US$) 0.077 (0.028)
Diluted profit per ordinary share (US$) 0.076 (0.028)
Weighted average number of ordinary shares used
in computing basic earnings per ordinary share 40,496,198 40,401,167
Diluted weighted average number of ordinary shares
used in computing diluted profit per ordinary share 41,051,754 40,401,167
STATEMENT OF COMPREHENSIVE INCOME
Estimated income under US GAAP 3,132,962 (1,133,908)
Currency adjustment 349,648 --
----------- -----------
Comprehensive income for the period 3,482,610 (1,133,908)
----------- -----------
10
Signatures
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 authorised.
TRINITY BIOTECH PLC
/s/ Rory Nealon
-----------------------------------
Rory Nealon
Chief Financial Officer
February 7, 2002
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