** **

**United StatesSecurities and Exchange Commission**

**Washington,D. C. 20549**

**FORM 10-Q**

**(Mark One)**

**x**                              QuarterlyReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

**For the quarterly period ended:****February 28, 2007**

**OR**

**o**                                 TransitionReport Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

**Commission File Number:****0-14820**

**IMMUCOR, INC.**

(Exact name of registrantas specified in its charter)

| **Georgia**                      | ** ** | **22-2408354**       |
|----------------------------------|------------|----------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer     |
| incorporation or  organization)  |       | Identification  No.) |

 

| **3130 Gateway Drive P.O. Box 5625 Norcross, Georgia** |   | **30091-5625** |
|--------------------------------------------------------|--------|----------------|
| (Address of  principal executive offices)              |   | (Zip Code)     |

 

Registrant’stelephone number:  **(770) 441-2051**

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. 

Yes x  No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2 ofthe Exchange Act. (Check one):

| Large accelerated filer x |   | Accelerated  filer o |   | Non-accelerated  filer o |
|--------------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o  No x

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

As of March 31, 2007: Common Stock, $0.10 Par Value —68,882,044

 

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**IMMUCOR, INC. AND SUBSIDIARIES**

**FORM 10-Q**

**INDEX**
| **PART I.   FINANCIAL  INFORMATION** |
|------------------------------------------------|
| **Item 1.**                                    | ** ** | **Financial Statements** | ** ** | ** ** |
|                                           |   | Condensed  Consolidated Balance Sheets as of February 28, 2007 (unaudited) and May 31,  2006 |   |   |
|                                           |   | Condensed  Consolidated Statements of Income for the three and nine months ended  February 28, 2007 and 2006 (unaudited) |   |   |
|                                           |   | Condensed  Consolidated Statement of Shareholders’ Equity and Comprehensive Income for  the period June 1, 2006 through February 28, 2007 (unaudited) |   |   |
|                                           |   | Condensed  Consolidated Statements of Cash Flows for the nine months ended February 28,  2007 and 2006 (unaudited) |   |   |
|                                           |   | Notes  to Condensed Consolidated Financial Statements (unaudited) |   |   |
| **Item 2.**                                    | ** ** | **Management’s Discussion and Analysis of  Financial Condition and Results of Operations** | ** ** | ** ** |
| **Item 3.**                                    | ** ** | **Quantitative and Qualitative Disclosures about  Market Risk** | ** ** | ** ** |
| **Item 4.**                                    | ** ** | **Controls and Procedures** | ** ** | ** ** |
| **PART II.   OTHER INFORMATION**     |
| **Item 1.**                                    | ** ** | **Legal Proceedings** | ** ** | ** ** |
| **Item  1A.**                                  | ** ** | **Risk  Factors** | ** ** | ** ** |
| **Item 2.**                                    | ** ** | **Unregistered Sales of Equity Securities and Use  of Proceeds** | ** ** | ** ** |
| **Item  6.**                                   | ** ** | **Exhibits** | ** ** | ** ** |
|                                           |   | SIGNATURES |   |   |

 

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**PART IFINANCIAL INFORMATION**

**ITEM 1.Financial Statements.**

**IMMUCOR, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS**(Amounts in thousands,except share data)
| ** **                                                                                                                                                                   | ** ** | **February 28, 2007** | ** ** | **May 31, 2006** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                   | ** ** | **(unaudited)**                 | ** ** | ** **                 | ** ** |
| **ASSETS**                                                                                                                                                                   |       |                            |       |                       |       |
| ** **                                                                                                                                                                   |       |                            |       |                       |       |
| CURRENT ASSETS:                                                                                                                                                              |       |                            |       |                       |       |
| Cash and cash  equivalents                                                                                                                                                   |       | $                               | 93,723     |                       | $          | 54,103 |   |
| Short-term  investments                                                                                                                                                      |       | —                          |       | 1,640                      |       |
| Trade accounts  receivable, net of allowance for doubtful accounts of $1,918 at February 28,  2007 and $1,950 at May 31, 2006                                                |       | 45,678                          |       | 37,199                     |       |
| Inventories                                                                                                                                                                  |       | 25,517                          |       | 20,651                     |       |
| Deferred income  tax assets, current portion                                                                                                                                 |       | 2,564                           |       | 2,041                      |       |
| Prepaid expenses  and other current assets                                                                                                                                   |       | 4,118                           |       | 5,158                      |       |
| Total current  assets                                                                                                                                                        |       | 171,600                         |       | 120,792                    |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| PROPERTY AND EQUIPMENT,  Net                                                                                                                                                 |       | 28,603                          |       | 25,684                     |       |
| GOODWILL                                                                                                                                                                     |       | 34,120                          |       | 34,691                     |       |
| OTHER INTANGIBLE  ASSETS, Net                                                                                                                                                |       | 5,936                           |       | 6,532                      |       |
| DEFERRED INCOME TAX  ASSETS                                                                                                                                                  |       | 4,581                           |       | 3,115                      |       |
| OTHER ASSETS                                                                                                                                                                 |       | 738                             |       | 873                        |       |
| Total assets                                                                                                                                                                 |       | $                               | 245,578    |                       | $          | 191,687 |   |
|                                                                                                                                                                         |       |                            |       |                       |       |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                               |       |                            |       |                       |       |
| ** **                                                                                                                                                                   |       |                            |       |                       |       |
| CURRENT LIABILITIES:                                                                                                                                                         |       |                            |       |                       |       |
| Accounts payable                                                                                                                                                             |       | $                               | 7,317      |                       | $          | 7,271 |   |
| Accrued expenses  and other current liabilities                                                                                                                              |       | 13,017                          |       | 9,470                      |       |
| Income taxes  payable                                                                                                                                                        |       | 2,906                           |       | 5,519                      |       |
| Deferred  revenue, current portion                                                                                                                                           |       | 6,122                           |       | 4,575                      |       |
| Current portion  of long-term liabilities                                                                                                                                    |       | 578                             |       | 1,074                      |       |
| Total current  liabilities                                                                                                                                                   |       | 29,940                          |       | 27,909                     |       |
|                                                                                                                                                                         |       |                            |       |                       |       |
| ACQUISITION LIABILITY                                                                                                                                                        |       | 3,557                           |       | 3,980                      |       |
| DEFERRED REVENUE                                                                                                                                                             |       | 12,335                          |       | 11,500                     |       |
| DEFERRED INCOME TAX  LIABILITIES                                                                                                                                             |       | 2,157                           |       | 2,232                      |       |
| OTHER LONG-TERM  LIABILITIES                                                                                                                                                 |       | 2,227                           |       | 2,195                      |       |
| Total  liabilities                                                                                                                                                           |       | 50,216                          |       | 47,816                     |       |
| Commitments and  contingencies (Note 8)                                                                                                                                      |       |                            |       |                       |       |
| SHAREHOLDERS’ EQUITY:                                                                                                                                                   |       |                            |       |                       |       |
| Common stock,  $0.10 par value; authorized 120,000,000 shares, issued and outstanding  68,874,371 and 67,926,206 shares at February 28, 2007 and May 31, 2006,  respectively |       | 6,887                           |       | 6,793                      |       |
| Additional  paid-in capital                                                                                                                                                  |       | 24,884                          |       | 14,752                     |       |
| Retained  earnings                                                                                                                                                           |       | 161,557                         |       | 119,700                    |       |
| Accumulated  other comprehensive income                                                                                                                                      |       | 2,034                           |       | 2,626                      |       |
| Total  shareholders’ equity                                                                                                                                             |       | 195,362                         |       | 143,871                    |       |
| Total liabilities and  shareholders’ equity                                                                                                                             |       | $                               | 245,578    |                       | $          | 191,687 |   |

 

The accompanying notes are anintegral part of these Condensed Consolidated Financial Statements.

3

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**IMMUCOR, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF INCOME**(Amounts in thousands,except per share data)(Unaudited)
| ** **                            | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                            | ** ** | **February 28,**            | ** ** | **February 28,**           | ** ** | **February 28,** | ** ** | **February 28,** | ** ** |
| ** **                            | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                  |       |                             |       |                            |       |   |   |   |   |
| NET SALES                             |       | $                                | 57,091     |                            | $          | 47,090 |   | $ | 162,557 |   | $ | 133,550 |   |
| COST OF SALES                         |       | 16,738                           |       | 14,956                          |       | 49,825 |   | 46,179 |   |
| GROSS PROFIT                          |       | 40,353                           |       | 32,134                          |       | 112,732 |   | 87,371 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| OPERATING  EXPENSES:                  |       |                             |       |                            |       |   |   |   |   |
| Research and development              |       | 1,624                            |       | 938                             |       | 4,658 |   | 3,401 |   |
| Selling and marketing                 |       | 6,850                            |       | 5,141                           |       | 19,164 |   | 15,550 |   |
| Distribution                          |       | 2,393                            |       | 1,971                           |       | 7,061 |   | 5,753 |   |
| General and administrative            |       | 6,271                            |       | 4,797                           |       | 16,784 |   | 15,507 |   |
| Restructuring expense                 |       | 72                               |       | 122                             |       | 641 |   | 2,579 |   |
| Amortization expense and other        |       | 86                               |       | 86                              |       | 259 |   | 254 |   |
| Total operating expenses              |       | 17,296                           |       | 13,055                          |       | 48,567 |   | 43,044 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| INCOME FROM  OPERATIONS               |       | 23,057                           |       | 19,079                          |       | 64,165 |   | 44,327 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| NON-OPERATING  INCOME (EXPENSES):     |       |                             |       |                            |       |   |   |   |   |
| Interest income                       |       | 682                              |       | 182                             |       | 1,845 |   | 598 |   |
| Interest expense                      |       | (106                             | )          | (93                             | )          | (334 | ) | (435 | ) |
| Other, net                            |       | 135                              |       | (280                            | )          | 231 |   | (352 | ) |
| Total non-operating income (expenses) |       | 711                              |       | (191                            | )          | 1,742 |   | (189 | ) |
|                                  |       |                             |       |                            |       |   |   |   |   |
| INCOME BEFORE  INCOME TAXES           |       | 23,768                           |       | 18,888                          |       | 65,907 |   | 44,138 |   |
| PROVISION FOR  INCOME TAXES           |       | 8,749                            |       | 7,167                           |       | 24,050 |   | 16,357 |   |
| NET INCOME                            |       | $                                | 15,019     |                            | $          | 11,721 |   | $ | 41,857 |   | $ | 27,781 |   |
|                                  |       |                             |       |                            |       |   |   |   |   |
| Earnings per  share:                  |       |                             |       |                            |       |   |   |   |   |
| Per common share - basic              |       | $                                | 0.22       |                            | $          | 0.17 |   | $ | 0.61 |   | $ | 0.41 |   |
| Per common share  - diluted           |       | $                                | 0.21       |                            | $          | 0.17 |   | $ | 0.59 |   | $ | 0.39 |   |

 

The accompanying notes are anintegral part of these Condensed Consolidated Financial Statements.

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**IMMUCOR, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME**(Unaudited, amounts inthousands)
| ** **                                        | ** ** | ** **            | ** ** | ** **  | ** ** | ** **     | ** ** | ** **        | ** ** | **Accumulated**        | ** ** | ** ** | ** ** |
|---------------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------|------------|-------------------|------------|------------------------|------------|------------|------------|
| ** **                                        | ** ** | ** **            | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **        | ** ** | **Other**              | ** ** | **Total**  | ** ** |
| ** **                                        | ** ** | **Common Stock** | ** ** | **Paid-In** | ** ** | **Retained**   | ** ** | **Comprehensive** | ** ** | **Shareholders’** | ** ** |
| ** **                                        | ** ** | **Shares**            | ** ** | **Amount**  | ** ** | **Capital**    | ** ** | **Earnings**      | ** ** | **Income***            | ** ** | **Equity** | ** ** |
| BALANCE, MAY 31, 2006                             |       | 67,926                |       | $           | 6,793      |           | $          | 14,752            |       | $                      | 119,700    |       | $          | 2,626 |   | $ | 143,871 |   |
| Shares issued under employee  stock plans         |       | 1,230                 |       | 122         |       | 2,558          |       | —            |       | —                 |       | 2,680      |       |
| Stock-based  compensation expense                 |       | —                |       | —      |       | 2,464          |       | —            |       | —                 |       | 2,464      |       |
| Stock repurchases and  retirements                |       | (282                  | )          | (28         | )          | (4,844         | )          | —            |       | —                 |       | (4,872     | )          |
| Tax benefits related to  stock-based compensation |       | —                |       | —      |       | 9,954          |       | —            |       | —                 |       | 9,954      |       |
| Comprehensive income  (net of taxes):             |       |                  |       |        |       |           |       |              |       |                   |       |       |       |
| Foreign currency  translation adjustments         |       | —                |       | —      |       | —         |       | —            |       | (592                   | )          | (592       | )          |
| Net income                                        |       | —                |       | —      |       | —         |       | 41,857            |       | —                 |       | 41,857     |       |
| Total comprehensive  income                       |       |                  |       |        |       |           |       |              |       |                   |       | 41,265     |       |
|                                              |       |                  |       |        |       |           |       |              |       |                   |       |       |       |
| BALANCE, FEBRUARY 28, 2007                        |       | 68,874                |       | $           | 6,887      |           | $          | 24,884            |       | $                      | 161,557    |       | $          | 2,034 |   | $ | 195,362 |   |

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*Accumulated OtherComprehensive Income balance primarily consists of foreign currency translationadjustments and has no tax effect.

The accompanying notes are anintegral part of these Condensed Consolidated Financial Statements.

5

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**IMMUCOR, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**(Unaudited, amounts inthousands)
| ** **                                                                          | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| ** **                                                                          | ** ** | **February 28,**           | ** ** | **February 28,** | ** ** |
| ** **                                                                          | ** ** | **2007**                        | ** ** | **2006** | ** ** |
| OPERATING ACTIVITIES:                                                               |       |                            |       |   |   |
| Net income                                                                          |       | $                               | 41,857     |   | $ | 27,781 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities:  |       |                            |       |   |   |
| Depreciation and amortization                                                       |       | 4,986                           |       | 4,950 |   |
| Accretion of acquisition liabilities                                                |       | 134                             |       | 123 |   |
| Loss on retirement of fixed assets                                                  |       | 113                             |       | 481 |   |
| Unrealized foreign exchange gain                                                    |       | —                          |       | (130 | ) |
| Impairment and other non-cash restructuring expenses                                |       | —                          |       | 2,574 |   |
| Provision for doubtful accounts                                                     |       | 148                             |       | 388 |   |
| Stock-based compensation expense                                                    |       | 2,464                           |       | 719 |   |
| Deferred income taxes                                                               |       | (1,920                          | )          | (301 | ) |
| Changes in operating assets and liabilities, net of  effects from acquired company: |       |                            |       |   |   |
| Accounts receivable, trade                                                          |       | (8,242                          | )          | (6,022 | ) |
| Income taxes                                                                        |       | 7,051                           |       | 5,574 |   |
| Excess tax benefit from stock-based compensation                                    |       | (9,954                          | )          | — |   |
| Inventories                                                                         |       | (4,808                          | )          | 1,090 |   |
| Other current assets                                                                |       | 1,214                           |       | (129 | ) |
| Other long-term assets                                                              |       | (15                             | )          | 738 |   |
| Accounts payable                                                                    |       | 1,516                           |       | (567 | ) |
| Deferred revenue                                                                    |       | 2,501                           |       | 5,952 |   |
| Accrued expenses and other current liabilities                                      |       | 1,978                           |       | (649 | ) |
| Other long-term liabilities                                                         |       | (3                              | )          | (10 | ) |
| Cash provided by  operating activities                                              |       | 39,020                          |       | 42,562 |   |
|                                                                                |       |                            |       |   |   |
| INVESTING  ACTIVITIES:                                                              |       |                            |       |   |   |
| Purchases of property and equipment                                                 |       | (7,660                          | )          | (7,304 | ) |
| Payment for net assets of acquired company                                          |       | —                          |       | (4,158 | ) |
| Proceeds from (purchase of) short-term investments,  net                            |       | 1,641                           |       | (15 | ) |
| Cash used in  investing activities                                                  |       | (6,019                          | )          | (11,477 | ) |
|                                                                                |       |                            |       |   |   |
| FINANCING  ACTIVITIES:                                                              |       |                            |       |   |   |
| Repayments of long-term debt, liabilities and  capital leases                       |       | (878                            | )          | (8,219 | ) |
| Repurchase of common stock                                                          |       | (4,872                          | )          | (22,255 | ) |
| Proceeds from exercise of stock options                                             |       | 2,639                           |       | 1,043 |   |
| Excess tax benefit from stock-based compensation                                    |       | 9,954                           |       | — |   |
| Cash provided by  (used in) financing activities                                    |       | 6,843                           |       | (29,431 | ) |
|                                                                                |       |                            |       |   |   |
| EFFECT OF  EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                              |       | (224                            | )          | (155 | ) |
| INCREASE IN CASH  AND CASH EQUIVALENTS                                              |       | 39,620                          |       | 1,499 |   |
| CASH AND CASH  EQUIVALENTS AT BEGINNING OF PERIOD                                   |       | 54,103                          |       | 37,108 |   |
| CASH AND CASH  EQUIVALENTS AT END OF PERIOD                                         |       | $                               | 93,723     |   | $ | 38,607 |   |
|                                                                                |       |                            |       |   |   |
| SUPPLEMENTAL  INFORMATION:                                                          |       |                            |       |   |   |
| Tax paid                                                                            |       | $                               | 18,240     |   | $ | 11,487 |   |
| Interest paid                                                                       |       | 173                             |       | 205 |   |
| Non-cash investing and financing activities:                                        |       |                            |       |   |   |
| Acquisition  obligation                                                             |       | —                          |       | 5,123 |   |

 

The accompanying notes are anintegral part of these Condensed Consolidated Financial Statements.

6

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**IMMUCOR, INC. AND SUBSIDIARIES**

**Notes toCondensed Consolidated Financial Statements**

(Unaudited)

**1.****              NATURE OF BUSINESSAND BASIS OF PRESENTATION**

***Nature of Business***

Immucor, Inc. (“Immucor” and, together with its whollyowned subsidiaries, the “Company”) is in the business of developing,manufacturing and marketing immunological diagnostic medical products. TheCompany operates facilities in the United States, Canada, Europe and Japan. Theunaudited condensed consolidated financial statements include the accounts ofthe Company and all of its subsidiaries.

***Basis of Presentation***

The accompanying condensed consolidated financialstatements are unaudited and have been prepared in accordance with U.S.generally accepted accounting principles (“U.S. GAAP”) for interim financialinformation, and the Securities and Exchange Commission’s (“SEC”) instructionsfor Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesrequired by U.S. GAAP for complete financial statements. In the opinion ofmanagement, all adjustments, consisting of normal recurring adjustments, unlessotherwise disclosed in a separate note, considered necessary for a fairpresentation of the unaudited condensed consolidated financial statements havebeen recorded in the interim periods presented. These unaudited, condensedconsolidated financial statements should be read in conjunction with theCompany’s audited, consolidated financial statements and related notes for theyear ended May 31, 2006, included in the Company’s Annual Report on Form 10-K.

The accompanying condensed consolidated financialstatements present results of operations for the three months and nine monthsended February 28, 2007. These results are not necessarily indicative of theresults that may be achieved for the year ending May 31, 2007, or any otherperiod.

Shares and per share amounts for the three-month andnine-month periods ended February 28, 2006 have been adjusted to reflect theimpact of a three-for-two stock split in May 2006.

***Basis of Consolidation***

The condensed consolidated financial statementsinclude the accounts of Immucor and all its subsidiaries. All significantinter-company balances and transactions have been eliminated in consolidation.

**2.****              INVENTORIES**

Inventories are stated at the lower of cost (first-in, first-out basis)or market (net realizable value):

|                 | ** ** | **February 28, 2007** | ** ** | **May 31, 2006** | ** ** |
|-----------------|------------|---------------------------------|------------|----------------------------|------------|
| ** **      | ** ** | **(in thousands)**         | ** ** |
| Raw materials   |       | $                               | 4,882      |                       | $          | 4,341 |   |
| Work in process |       | 3,937                           |       | 3,495                      |       |
| Finished goods  |       | 16,698                          |       | 12,815                     |       |
|            |       | $                               | 25,517     |                       | $          | 20,651 |   |

 

**3.****              STOCK-BASEDCOMPENSATION**

*Background*

In December 2004, the Financial Accounting StandardsBoard revised Statement of Financial Accounting Standards No. 123, “Accountingfor Stock-Based Compensation” (“SFAS 123R”), requiring companies to recordshare-based payments to employees as compensation expense at the grant datefair value. The Company adopted SFAS 123R in the fiscal year beginning June 1,2006, using the modified prospective transition method, which requires thatcompensation costs be recorded as earned for all unvested stock optionsoutstanding at the beginning of the first fiscal year of adoption of SFAS 123Rbased on the grant date fair value estimated in 

7

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accordance with the original provisions of SFAS 123,and for compensation costs for all share-based payments granted or modifiedsubsequent to the adoption to be recorded, based on fair value estimated inaccordance with the provisions of SFAS 123R. In accordance with the modifiedprospective transition method, the Company has not restated the financialstatements for prior periods and those statements do not include the impact ofSFAS 123R.

*Impact of adoption of SFAS 123R*

On adoption of SFAS 123R as of June 1, 2006, theunrecognized compensation expense associated with the remaining portion of theunvested outstanding awards was $4.5 million ($2.9 million, net of taxes). Thiscompensation expense is expected to be recognized through May 2010 on astraight-line basis over the weighted-average vesting period of approximately1.75 years.

Total share-based compensation expense included in theCondensed Consolidated Statements of Income for the three-month and nine-monthperiods ended February 28, 2007 was $0.8 million ($0.6 million, net of taxes)and $2.5 million ($1.7 million, net of taxes), respectively. As a result ofadopting SFAS 123R on June 1, 2006, the Company’s financial results were lowerthan under the Company’s previous accounting method for share-basedcompensation by the following amounts:
|                                        | ** ** | **Three Months**           | ** ** | **Nine Months**            | ** ** |
|----------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                             | ** ** | **Ended**                       | ** ** | **Ended**                       | ** ** |
| ** **                             | ** ** | **February 28, 2007** | ** ** | **February 28, 2007** | ** ** |
| ** **                             | ** ** | **(in thousands)**         | ** ** |
| Income before  income taxes            |       | $                               | 812        |                            | $          | 2,464 |   |
|                                   |       |                            |       |                            |       |
| Income after  income taxes             |       | $                               | 575        |                            | $          | 1,746 |   |
|                                   |       |                            |       |                            |       |
| Basic net  earnings per common share   |       | $                               | 0.01       |                            | $          | 0.03 |   |
|                                   |       |                            |       |                            |       |
| Diluted net earnings  per common share |       | $                               | 0.01       |                            | $          | 0.02 |   |

 

Prior to adopting SFAS 123R, the Company presented alltax benefits resulting from the exercise of stock options as operating cashflows in the Condensed Consolidated Statement of Cash Flows. SFAS 123R requirescash flows resulting from excess tax benefits to be classified as a part ofcash flows from financing activities. Excess tax benefits are realized taxbenefits from tax deductions for exercised options in excess of the deferredtax asset attributable to stock compensation costs for such options. As aresult of adopting SFAS 123R, $10.0 million of excess tax benefits for the ninemonths ended February 28, 2007 have been classified as a financing cash inflow.  Prior to the adoption of SFAS 123R, such taxbenefits were netted against income taxes payable and were disclosed in theworking capital section of operating activities.

The following table shows total stock-basedcompensation expense for the three-month and nine-month periods ended February28, 2007, included in the Condensed Consolidated Statements of Income:

|                                | ** ** | **Three Months**           | ** ** | **Nine Months**            | ** ** |
|--------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                     | ** ** | **Ended**                       | ** ** | **Ended**                       | ** ** |
| ** **                     | ** ** | **February 28, 2007** | ** ** | **February 28, 2007** | ** ** |
| ** **                     | ** ** | **(in thousands)**         | ** ** |
| Cost of sales                  |       | $                               | 111        |                            | $          | 348 |   |
| Research and  development      |       | 72                              |       | 216                             |       |
| Selling and marketing          |       | 217                             |       | 520                             |       |
| Distribution                   |       | 28                              |       | 89                              |       |
| General and  administrative    |       | 384                             |       | 1,291                           |       |
| Total stock-based compensation |       | $                               | 812        |                            | $          | 2,464 |   |

 

*Pro forma information under SFAS 123 for the priorperiods*

Had the Company adoptedthe fair value recognition provisions of SFAS Statement No. 123 “*Accounting for Stock-Based Compensation*”, as amended by SFASStatement No. 148 for the three-month and nine-month 

8

----

periods ended February28, 2006, the effect on the Company’s net income and earnings per share wouldhave been as follows (in thousands, except per share data): 
|                                                                                                                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                                                         | ** ** | **February 28,**            | ** ** | **February 28,**           | ** ** |
| ** **                                                                                                         | ** ** | **2006**                         | ** ** | **2006**                        | ** ** |
| Net income as  reported                                                                                            |       | $                                | 11,721     |                            | $          | 27,781 |   |
| Stock based  employee compensation included in reported net income, net of taxes                                   |       | 498                              |       | 562                             |       |
| Stock based  employee compensation expense determined under fair value based methods for  all awards, net of taxes |       | (2,460                           | )          | (3,276                          | )          |
| Pro forma net income                                                                                               |       | $                                | 9,759      |                            | $          | 25,067 |   |
|                                                                                                               |       |                             |       |                            |       |
| Earnings per  share as reported:                                                                                   |       |                             |       |                            |       |
| Per common share - Basic                                                                                           |       | $                                | 0.17       |                            | $          | 0.41 |   |
| Per common share - Diluted                                                                                         |       | $                                | 0.17       |                            | $          | 0.39 |   |
|                                                                                                               |       |                             |       |                            |       |
| Pro forma  earnings per share:                                                                                     |       |                             |       |                            |       |
| Per common share - Basic                                                                                           |       | $                                | 0.15       |                            | $          | 0.37 |   |
| Per common share  - Diluted                                                                                        |       | $                                | 0.14       |                            | $          | 0.35 |   |

 

*Valuation method used and assumptions*

The Company estimates the fair value of stock optionsusing a Black-Scholes valuation model, consistent with the provisions of SFAS123R, Securities and Exchange Commission Staff Accounting Bulletin 107 (“SAB107”) and the Company’s prior pro forma disclosures of net earnings, includingthe fair value of stock-based compensation.

Key input assumptions used to estimate the fair valueof stock options include the expected term until the exercise of the option,the expected volatility of the Company’s stock, risk-free rates of return,option forfeiture rates, and dividend yields, if any. The fair value of eachoption grant in the first, second and third quarter of fiscal year 2007 was estimatedon the date of grant using the Black-Scholes option-pricing model with thefollowing weighted-average assumptions:

|                               | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                    | ** ** | **February 28, 2007**  | ** ** | **February 28, 2006** | ** ** | **February 28, 2007** | ** ** | **February 28, 2006** | ** ** |
| Risk-free  interest rate (1)  |       |                             | 4.53       | %                               |       |   | 4.39 | % |   |   | 4.92 | % |   |   | 4.26 | % |   |
| Expected  volatility (2)      |       |                             | 44.14      | %                               |       |   | 68.06 | % |   |   | 47.51 | % |   |   | 68.15 | % |   |
| Expected life  (years) (3)    |       |                             | 4.25       |                            |       |   | 8.00 |   |   |   | 4.25 |   |   |   | 8.00 |   |   |
| Expected  forfeiture rate (4) |       |                             | 0.81       | %                               |       |   | n/a |   |   |   | 0.81 | % |   |   | n/a |   |   |
| Expected dividend yield  (5)  |       |                             | —     |                            |       |   | — |   |   |   | — |   |   |   | — |   |   |

----

1.             Based on the U.S. Treasury yield curve in effect at thetime of grant.

2.                                       Expectedstock price volatility is based on the average historical volatility of theCompany’s shares during the period corresponding to the expected life of theoptions.

3.                                       Representsthe period of time options are expected to remain outstanding. The weightedaverage expected option term was determined using the “simplified method” asallowed by SAB 107. The “simplified method” calculates the expected term as theaverage of the vesting term and original contractual term of the options.Beginning June 1, 2006, the contractual life of awards granted was reduced from10 years to 6 years which, besides the impact of adoption of the simplifiedmethod, accounted for the reduction in expected life in fiscal year 2007.

4.                                       Infiscal year 2007, the expected forfeiture rate is based upon historicalexperience. Before the adoption of SFAS 123R, the Company used actual forfeiturerates to calculate 

9

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compensation expense asallowed by SFAS 123 for the disclosure footnote required under SFAS 148.Management estimates that the impact of this change, from the actual forfeiturerates to the estimated forfeiture rates as required under SFAS 123R, is notlikely to be material as it is expected that the Company will continue toexperience low staff turnover.

5.                                       TheCompany has not paid dividends on its common stock and does not expect to paydividends on its common stock in the near future.

*Plan summary*

At an annual meeting ofthe Company’s shareholders held on December 13, 2005, the shareholders approvedestablishment of the Immucor, Inc. 2005 Long-Term Incentive Plan (the “2005Plan”). The 2005 Plan replaced the Company’s preexisting stock option planswhich have been frozen and remain in effect only to the extent of awardsoutstanding under these plans. Under the 2005 Plan, besides granting stockoptions, management is able to award stock appreciation rights, restrictedstock, deferred stock, and other performance-based awards as incentive andcompensation to employees. The maximum number of shares of the Company’s commonstock as to which awards may be granted under the 2005 Plan is 3,600,000. Themaximum number of shares that may be used for awards other than stock optionsis 1,800,000, and the maximum number of shares that may be used for grants ofincentive stock options is 1,800,000. Options are granted at the closing market price on the date of thegrant. Option awards generally vest equally over a four-year period and have a6-year contractual term. Restricted stock awards generally vest equally over afive-year period.  The 2005 Plan providesfor accelerated vesting of option and restricted stock awards if there is achange in control, as defined in the plan.

*Stock option activity*

The options granted underthe 2005 Plan have a six year term with vesting of 25% at the end of each ofthe first four years; the restricted shares vest 20% at each anniversary of theissuance date. Compensation costs for stock options with tiered vesting termsare recognized evenly over the vesting periods.

The following is asummary of the changes in outstanding options for the first three quarters offiscal year 2007 ended February 28, 2007:

|                                                          | ** ** | ** **         | ** ** | ** **              | ** ** | **Weighted**          | ** ** | ** **               | ** ** |
|----------------------------------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------------|------------|--------------------------|------------|
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | **Average**           | ** ** | ** **               | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | **Weighted**            | ** ** | **Remaining**         | ** ** | **Aggregate**            | ** ** |
| ** **                                               | ** ** | **Number of** | ** ** | **Average**             | ** ** | **Contractual**       | ** ** | **Intrinsic Value** | ** ** |
| ** **                                               | ** ** | **Shares**         | ** ** | **Exercise Price** | ** ** | **Life (years)** | ** ** | **(1)**                  | ** ** |
| ** **                                               | ** ** | ** **         | ** ** | ** **              | ** ** | ** **            | ** ** | **(in thousands)**       |       |
| Outstanding May  31, 2006                                |       | 4,892,957          |       | $                       | 4.14       |                  |       |                     |       |   |
| Granted                                                  |       | 166,280            |       | $                       | 17.56      |                  |       |                     |       |   |
| Exercised                                                |       | (69,459            | )          | $                       | 3.22       |                  |       |                     |       |   |
| Forfeited                                                |       | (8,045             | )          | $                       | 7.62       |                  |       |                     |       |   |
| Expired                                                  |       | (34,369            | )          | $                       | 11.37      |                  |       |                     |       |   |
| Outstanding at  August 31, 2006                          |       | 4,947,364          |       | $                       | 4.55       |                  | 5.2        |                     | $          | 80,294 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Granted                                                  |       | 2,596              |       | $                       | 22.50      |                  |       |                     |       |   |
| Exercised                                                |       | (1,102,709         | )          | $                       | 1.97       |                  |       |                     |       |   |
| Forfeited                                                |       | (228               | )          | $                       | 22.94      |                  |       |                     |       |   |
| Expired                                                  |       | (15,910            | )          | $                       | 6.87       |                  |       |                     |       |   |
| Outstanding at  November 30, 2006                        |       | 3,831,113          |       | $                       | 5.29       |                  | 5.4        |                     | $          | 82,773 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Granted                                                  |       | 15,017             |       | $                       | 29.33      |                  |       |                     |       |   |
| Exercised                                                |       | (57,966            | )          | $                       | 4.83       |                  |       |                     |       |   |
| Forfeited                                                |       | (1,450             | )          | $                       | 22.91      |                  |       |                     |       |   |
| Expired                                                  |       | (38,906            | )          | $                       | 1.32       |                  |       |                     |       |   |
| Outstanding at  February 28, 2007                        |       | 3,747,808          |       | $                       | 5.43       |                  | 5.2        |                     | $          | 91,115 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Exercisable at  February 28, 2007                        |       | 2,862,418          |       | $                       | 3.79       |                  | 4.7        |                     | $          | 74,268 |   |
|                                                     |       |               |       |                    |       |                  |       |                     |       |
| Shares available for  future grants at February 28, 2007 |       | 1,536,452          |       |                    |       |                  |       |                     |       |

----

1)              The aggregateintrinsic value in the above table represents the total pre-tax intrinsic value(the difference between the Company’s closing stock price on the last tradingday of the respective quarter of fiscal year 2007 and the exercise price,multiplied by the number of options.) The amount of aggregate intrinsic valuewill change based on the fair market value of the Company’s stock.

2)              The weighted-averagegrant-date fair value of share options granted during the first nine months offiscal years 2007 and 2006 was $8.18 and $13.21, respectively.  The total intrinsic value of share optionsexercised during the first nine months of fiscal years 2007 and 2006 was $29.3million and $15.3 million, respectively.

10

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*Restricted stock activity*

The following is asummary of the changes in unvested restricted stock for the first threequarters of fiscal year 2007 ended February 28, 2007:

|                                                         | ** ** | ** **                     | ** ** | **Weighted-Average**     | ** ** |
|---------------------------------------------------------|------------|--------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | ** **                     | ** ** | **Grant-Date Fair** | ** ** |
| ** **                                              | ** ** | **Number of Shares** | ** ** | **Value**                | ** ** |
| Nonvested stock  outstanding at May 31, 2006            |       | —                         |       | $                        | —     |   |
| Granted                                                 |       | 127,105                        |       | 17.51                    |       |
| Vested                                                  |       | —                         |       | —                   |       |
| Forfeited                                               |       | (1,135                         | )          | 17.51                    |       |
| Expired                                                 |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at August 31, 2006         |       | 125,970                        |       | $                        | 17.51      |   |
|                                                    |       |                           |       |                     |       |
| Granted                                                 |       | —                         |       | —                   |       |
| Vested                                                  |       | —                         |       | —                   |       |
| Forfeited                                               |       | (865                           | )          | 17.51                    |       |
| Expired                                                 |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at November 30, 2006       |       | 125,105                        |       | $                        | 17.51      |   |
|                                                    |       |                           |       |                     |       |
| Granted                                                 |       | —                         |       | —                   |       |
| Vested                                                  |       | (8,860                         | )          | 17.51                    |       |
| Forfeited                                               |       | (295                           | )          | 17.51                    |       |
| Expired                                                 |       | —                         |       | —                   |       |
| Nonvested stock  outstanding at February 28, 2007       |       | 115,950                        |       | $                        | 17.51      |   |
|                                                    |       |                           |       |                     |       |
| Shares available for future grants at February 28, 2007 |       | 1,675,190                      |       |                     |       |

 

As of February 28, 2007, there was $5.4 million oftotal unrecognized compensation cost related to non-vested share-basedcompensation arrangements. This compensation cost is expected to be recognizedthrough June 6, 2011 based on existing vesting terms with the weighted averageremaining expense recognition period being approximately 2.92 years fromFebruary 28, 2007.

**4.****              EARNINGS PER SHARE**

The following table sets forth the computation ofbasic and diluted earnings per share in accordance with SFAS No. 128, *Earnings per Share*.

Basic earnings per common share are calculated bydividing net income by weighted-average common shares outstanding during theperiod. Diluted earnings per common share are calculated by dividing net incomeby weighted-average common shares outstanding during the period plus dilutivepotential common shares, which are determined as follows (in thousands, exceptper share data):

11

----

 
|                                                                                      | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                                                           | ** ** | **February 28,**            | ** ** | **February 28,**           | ** ** | **February 28,** | ** ** | **February 28,** | ** ** |
| ** **                                                                           | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Numerator for  basic and diluted earnings per share:                                 |       |                             |       |                            |       |   |   |   |   |
| Net Income                                                                           |       | $                                | 15,019     |                            | $          | 11,721 |   | $ | 41,857 |   | $ | 27,781 |   |
|                                                                                 |       |                             |       |                            |       |   |   |   |   |
| Denominator:                                                                         |       |                             |       |                            |       |   |   |   |   |
| For basic earnings per share   - weighted average shares basis                       |       | 68,838                           |       | 67,482                          |       | 68,257 |   | 68,028 |   |
| Effect of dilutive stock options and restricted  stock                               |       | 2,134                            |       | 3,167                           |       | 2,350 |   | 3,312 |   |
| Denominator for diluted earnings per share   -adjusted weighted average shares basis |       | 70,972                           |       | 70,649                          |       | 70,607 |   | 71,340 |   |
|                                                                                 |       |                             |       |                            |       |   |   |   |   |
| Earnings per  common share — basic                                              |       | $                                | 0.22       |                            | $          | 0.17 |   | $ | 0.61 |   | $ | 0.41 |   |
| Earnings per common  share — diluted                                            |       | $                                | 0.21       |                            | $          | 0.17 |   | $ | 0.59 |   | $ | 0.39 |   |

 

**5.****              SEGMENT AND GEOGRAPHICINFORMATION**

The Company’s operations and segments are organizedaround geographic areas. Immucor’s “Other” segment includes the operations ofBelgium, Portugal and Spain. The foreign locations principally function asdistributors of products developed and manufactured by the Company in theUnited States and Canada. The accounting policies applied in the preparation ofthe Company’s consolidated financial statements are applied consistently acrossthe segments. Intersegment sales are recorded at market price and areeliminated in consolidation.

12

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##### Segment information for the three-month andnine-month periods ended February 28, 2007 and 2006 is summarized below (inthousands).

| ** **                     | ** ** | **For the Three Months Ended February 28, 2007** | ** ** |
|--------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:          |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | $                                                                                   | 38,918     |   | $ | 2,821 |   | $ | 3,333 |   | $ | 2,473 |   | $ | 1,862 |   | $ | 2,230 |   | $ | — |   | $ | 51,637 |   |
| Affiliates                     |       | 2,621                                                                               |       | 1,142 |   | — |   | 68 |   | — |   | 2 |   | (3,833 | ) | — |   |
| Total                          |       | 41,539                                                                              |       | 3,963 |   | 3,333 |   | 2,541 |   | 1,862 |   | 2,232 |   | (3,833 | ) | 51,637 |   |
| Net instrument revenues:       |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 2,654                                                                               |       | 795 |   | 307 |   | 139 |   | 5 |   | 507 |   | — |   | 4,407 |   |
| Affiliates                     |       | 1,329                                                                               |       | 1,555 |   | — |   | — |   | — |   | — |   | (2,884 | ) | — |   |
| Total                          |       | 3,983                                                                               |       | 2,350 |   | 307 |   | 139 |   | 5 |   | 507 |   | (2,884 | ) | 4,407 |   |
| Net collagen revenues:         |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 1,047                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,047 |   |
| Affiliates                     |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 1,047                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | 1,047 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 46,569                                                                              |       | 6,313 |   | 3,640 |   | 2,680 |   | 1,867 |   | 2,739 |   | (6,717 | ) | 57,091 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from  operations |       | 21,866                                                                              |       | 185 |   | 222 |   | 1,055 |   | (135 | ) | 31 |   | (167 | ) | 23,057 |   |
|                           |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 875                                                                                 |       | 170 |   | 345 |   | 47 |   | 40 |   | 210 |   | — |   | 1,687 |   |
| Amortization                   |       | 70                                                                                  |       | — |   | — |   | — |   | 16 |   | 2 |   | — |   | 88 |   |
| Restructuring expenses         |       | 72                                                                                  |       | — |   | — |   | — |   | — |   | — |   | — |   | 72 |   |
| Income tax (benefit)  expense  |       | 8,094                                                                               |       | 96 |   | 208 |   | 426 |   | — |   | (13 | ) | (62 | ) | 8,749 |   |
| Capital expenditures           |       | 2,412                                                                               |       | 38 |   | 290 |   | 6 |   | 15 |   | 170 |   | — |   | 2,931 |   |
|                                |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                    | ** ** | **For the Three Months Ended February 28, 2006** | ** ** |
|-------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                    | ** ** | **U.S.**                                                                            | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:         |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers       |       | $                                                                                   | 30,731     |   | $ | 2,729 |   | $ | 3,030 |   | $ | 2,186 |   | $ | 1,837 |   | $ | 2,081 |   | $ | — |   | $ | 42,594 |   |
| Affiliates                    |       | 2,808                                                                               |       | 470 |   | — |   | 35 |   | — |   | 44 |   | (3,357 | ) | — |   |
| Total                         |       | 33,539                                                                              |       | 3,199 |   | 3,030 |   | 2,221 |   | 1,837 |   | 2,125 |   | (3,357 | ) | 42,594 |   |
| Net instrument revenues:      |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers       |       | 2,250                                                                               |       | 342 |   | 293 |   | 41 |   | 9 |   | 713 |   | — |   | 3,648 |   |
| Affiliates                    |       | 262                                                                                 |       | 672 |   | — |   | — |   | — |   | — |   | (934 | ) | — |   |
| Total                         |       | 2,512                                                                               |       | 1,014 |   | 293 |   | 41 |   | 9 |   | 713 |   | (934 | ) | 3,648 |   |
| Net collagen revenues:        |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers       |       | 848                                                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 848 |   |
| Affiliates                    |       | —                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                         |       | 848                                                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 848 |   |
|                          |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                     |       | 36,899                                                                              |       | 4,213 |   | 3,323 |   | 2,262 |   | 1,846 |   | 2,838 |   | (4,291 | ) | 47,090 |   |
|                          |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations |       | 18,240                                                                              |       | 190 |   | 151 |   | 906 |   | (85 | ) | 26 |   | (349 | ) | 19,079 |   |
|                          |       |                                                                                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                  |       | 798                                                                                 |       | 173 |   | 303 |   | 45 |   | 28 |   | 183 |   | — |   | 1,530 |   |
| Amortization                  |       | 70                                                                                  |       | — |   | — |   | — |   | 16 |   | 2 |   | — |   | 88 |   |
| Restructuring expenses        |       | 122                                                                                 |       | — |   | — |   | — |   | — |   | — |   | — |   | 122 |   |
| Income tax expense            |       | 6,610                                                                               |       | 90 |   | 140 |   | 432 |   | — |   | 24 |   | (129 | ) | 7,167 |   |
| Capital expenditures          |       | 2,538                                                                               |       | 90 |   | — |   | 118 |   | 36 |   | 120 |   | — |   | 2,902 |   |
|                               |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

13

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| ** **                      | ** ** | **For the Nine Months Ended February 28, 2007** | ** ** |
|---------------------------------|------------|------------------------------------------------------------------------------------|------------|
| ** **                      | ** ** | **U.S.**                                                                           | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:           |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | $                                                                                  | 107,820    |   | $ | 8,185 |   | $ | 10,197 |   | $ | 7,778 |   | $ | 5,935 |   | $ | 6,813 |   | $ | — |   | $ | 146,728 |   |
| Affiliates                      |       | 8,318                                                                              |       | 2,329 |   | — |   | 184 |   | — |   | 134 |   | (10,965 | ) | — |   |
| Total                           |       | 116,138                                                                            |       | 10,514 |   | 10,197 |   | 7,962 |   | 5,935 |   | 6,947 |   | (10,965 | ) | 146,728 |   |
| Net instrument revenues:        |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | 7,481                                                                              |       | 2,357 |   | 891 |   | 393 |   | 10 |   | 1,425 |   | — |   | 12,557 |   |
| Affiliates                      |       | 1,767                                                                              |       | 3,431 |   | — |   | — |   | — |   | — |   | (5,198 | ) | — |   |
| Total                           |       | 9,248                                                                              |       | 5,788 |   | 891 |   | 393 |   | 10 |   | 1,425 |   | (5,198 | ) | 12,557 |   |
| Net collagen revenues:          |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers         |       | 3,272                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,272 |   |
| Affiliates                      |       | —                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                           |       | 3,272                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,272 |   |
|                            |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                       |       | 128,658                                                                            |       | 16,302 |   | 11,088 |   | 8,355 |   | 5,945 |   | 8,372 |   | (16,163 | ) | 162,557 |   |
|                            |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from  operations  |       | 58,795                                                                             |       | (153 | ) | 1,755 |   | 3,666 |   | (83 | ) | 669 |   | (484 | ) | 64,165 |   |
|                            |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                    |       | 2,358                                                                              |       | 497 |   | 1,012 |   | 142 |   | 118 |   | 594 |   |   |   | 4,721 |   |
| Amortization                    |       | 211                                                                                |       | — |   | — |   | — |   | 48 |   | 6 |   | — |   | 265 |   |
| Restructuring expenses          |       | 641                                                                                |       | — |   | — |   | — |   | — |   | — |   | — |   | 641 |   |
| Income tax expense              |       | 21,705                                                                             |       | 1 |   | 1,046 |   | 1,456 |   | — |   | 21 |   | (179 | ) | 24,050 |   |
| Capital expenditures            |       | 6,045                                                                              |       | 312 |   | 694 |   | 41 |   | 35 |   | 533 |   | — |   | 7,660 |   |
| Property & equipment -  net |       | 19,737                                                                             |       | 2,306 |   | 2,840 |   | 1,168 |   | 491 |   | 2,061 |   | — |   | 28,603 |   |
| Total assets at period end      |       | 217,055                                                                            |       | 14,054 |   | 21,842 |   | 15,923 |   | 12,857 |   | 10,571 |   | (46,724 | ) | 245,578 |   |
|                                 |            |                                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **                     | ** ** | **For the Nine Months Ended February 28, 2006** | ** ** |
|--------------------------------|------------|------------------------------------------------------------------------------------|------------|
| ** **                     | ** ** | **U.S.**                                                                           | ** ** | **Germany** | ** ** | **Italy** | ** ** | **Canada** | ** ** | **Japan (1)** | ** ** | **Other** | ** ** | **Elims** | ** ** | **Consolidated** | ** ** |
| Net reagent revenues:          |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | $                                                                                  | 86,633     |   | $ | 8,050 |   | $ | 8,921 |   | $ | 6,684 |   | $ | 5,224 |   | $ | 6,287 |   | $ | — |   | $ | 121,799 |   |
| Affiliates                     |       | 7,744                                                                              |       | 1,420 |   | — |   | 161 |   | — |   | 136 |   | (9,461 | ) | — |   |
| Total                          |       | 94,377                                                                             |       | 9,470 |   | 8,921 |   | 6,845 |   | 5,224 |   | 6,423 |   | (9,461 | ) | 121,799 |   |
| Net instrument revenues:       |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 5,204                                                                              |       | 1,182 |   | 893 |   | 217 |   | 12 |   | 1,225 |   | — |   | 8,733 |   |
| Affiliates                     |       | 335                                                                                |       | 1,927 |   | 1 |   | — |   | — |   | — |   | (2,263 | ) | — |   |
| Total                          |       | 5,539                                                                              |       | 3,109 |   | 894 |   | 217 |   | 12 |   | 1,225 |   | (2,263 | ) | 8,733 |   |
| Net collagen revenues:         |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unaffiliated  customers        |       | 3,018                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,018 |   |
| Affiliates                     |       | —                                                                             |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Total                          |       | 3,018                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 3,018 |   |
|                           |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Sales                      |       | 102,934                                                                            |       | 12,579 |   | 9,815 |   | 7,062 |   | 5,236 |   | 7,648 |   | (11,724 | ) | 133,550 |   |
|                           |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from  operations |       | 40,856                                                                             |       | 305 |   | 594 |   | 2,934 |   | (119 | ) | 427 |   | (670 | ) | 44,327 |   |
|                           |       |                                                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation                   |       | 2,331                                                                              |       | 578 |   | 1,159 |   | 165 |   | 56 |   | 479 |   | — |   | 4,768 |   |
| Amortization                   |       | 134                                                                                |       | — |   | — |   | — |   | 44 |   | 4 |   | — |   | 182 |   |
| Restructuring expenses         |       | 2,579                                                                              |       | — |   | — |   | — |   | — |   | — |   | — |   | 2,579 |   |
| Income tax expense             |       | 14,697                                                                             |       | 141 |   | 481 |   | 1,209 |   | — |   | 77 |   | (248 | ) | 16,357 |   |
| Capital expenditures           |       | 6,027                                                                              |       | 525 |   | 327 |   | 267 |   | 38 |   | 120 |   | — |   | 7,304 |   |
| Property & equipment,  net |       | 13,987                                                                             |       | 2,385 |   | 3,018 |   | 1,396 |   | 413 |   | 1,953 |   | — |   | 23,152 |   |
| Total assets at period end     |       | 150,856                                                                            |       | 11,386 |   | 18,865 |   | 13,384 |   | 15,140 |   | 8,885 |   | (46,160 | ) | 172,356 |   |
|                                |            |                                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)    Results of operations forJapan are included from July 5, 2005 onwards, the date on which the Companyacquired Immucor-Kainos, Inc.  No proforma information regarding revenue and income for Immucor-Kainos, Inc. isprovided as the effect of the acquisition on the consolidated financialstatements is not material.

The Company’s U.S. operations made net export sales tounaffiliated customers of approximately $1.3 million and $0.9 million for thethree months ended February 28, 2007 and 2006, respectively, and approximately$3.9 million and $3.4 million for the nine months ended February 28, 2007 and2006, respectively.  The Company’s Germanoperations made net export sales to unaffiliated customers of approximately$1.2 million and $0.9 million for the three months ended February 28, 2007 and2006, respectively and approximately $3.4 million and $2.7 million for the ninemonths ended February 28, 2007 and 2006, respectively.  The Company’s Canadian operations made netexport sales to unaffiliated customers of approximately****$0.4million and $0.4 million for the three months ended February 28, 2007 and 2006,respectively and approximately $1.2 million and $1.5 million for the ninemonths ended February 28, 2007 and 2006, respectively.

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**6.****              COMPREHENSIVE INCOME**

The components ofcomprehensive income for the three-month and nine-month periods ended February28, 2007 and 2006 are as follows (in thousands):
|                                               | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **February 28,**            | ** ** | **February 28,**           | ** ** | **February 28,** | ** ** | **February 28,** | ** ** |
| ** **                                    | ** ** | **2007**                         | ** ** | **2006**                        | ** ** | **2007** | ** ** | **2006** | ** ** |
| Net income                                    |       | $                                | 15,019     |                            | $          | 11,721 |   | $ | 41,857 |   | $ | 27,781 |   |
| Net foreign  currency translation adjustments |       | (665                             | )          | 973                             |       | (592 | ) | (213 | ) |
| Hedge loss  reclassified into earnings        |       | —                           |       | —                          |       | — |   | 10 |   |
| Comprehensive income                          |       | $                                | 14,354     |                            | $          | 12,694 |   | $ | 41,265 |   | $ | 27,578 |   |

 

No tax effect isrecorded for foreign currency translation since the foreign net assetstranslated are deemed permanently invested.

**7.****              STOCK REPURCHASEPROGRAM**

The Company instituted a stock repurchase program in June 1998 torepurchase up to 6,075,000 shares of its common stock.  Subsequently, the Company’s Board ofDirectors authorized the Company to repurchase up to an additional 675,000shares, 1,125,000 shares, and 1,500,000 shares on June 1, 2004, August 2, 2004,and December 13, 2005, respectively, bringing the total number of sharesauthorized for repurchase to 9,375,000.

During the quarter ended February 28, 2007, theCompany did not repurchase any shares under the 1998 repurchase program.  During the quarter ended February 28, 2006,466,200 shares were repurchased for $7.4 million.  As of February 28, 2007, 8,232,944 shares hadbeen repurchased under the program, leaving 1,142,056 shares available forpurchase.

During the nine-month period ended February 28, 2007,281,969 shares amounting to $4.9 million were repurchased under this program.During the nine-month period ended February 28, 2006, 1,430,100 sharesamounting to $22.3 million were repurchased under this program.  The repurchased shares were returned to thestatus of authorized, but unissued shares.

**8.****              COMMITMENTS ANDCONTINGENCIES**

On January 24, 2007, the Company reported thesettlement of the previously-reported charges against its Italian subsidiaryrelated to an allegedly-improper payment to an Italian physician. On January18, 2007, the Italian judge approved a plea bargain agreement under which thesubsidiary was required to pay a total of approximately $122,000 in fines,penalties, and restitution to a hospital at which the physician worked.  The related charges against Dr. Gioacchino DeChirico, the former president of the subsidiary, have now been sent forward totrial. He indicates he will contest any charges against him. The Companyexpects the trial and related appeals to continue for an extended period oftime.  The Company and Dr. De Chirico arestill seeking to settle the related SEC investigation in the near term.  Except in connection with the settlement withthe Italian prosecutor, no determination can yet be made as to whether, inconnection with these circumstances, the Company will become subject to anyfines, penalties and/or other charges imposed by any governmental authority, orany other damages or costs that may arise in connection with thesecircumstances.

Between August 31 and October 19, 2005, a series often class-action lawsuits were filed in the United States District Court forthe Northern District of Georgia against the Company and certain of its currentand former directors and officers alleging violations of the securities laws.The Court has consolidated these cases for disposition under the caption In reImmucor, Inc. Securities Litigation, File No. 1:05-CV-2276-WSD, designated leadplaintiffs, and permitted the filing of an amended consolidated complaint. Theconsolidated complaint, brought on behalf of a putative class of shareholderswho purchased Immucor stock between August 16, 2004 and August 29, 2005,alleges that the Company’s stock prices during that period were inflated as aresult of material misrepresentations or omissions in the Company’s financialstatements and other public announcements regarding the Company’s business. TheCompany believes the claims are without merit, and in March 2006 the Companymoved to dismiss the consolidated complaint. In October 2006, the Court deniedthe motion to dismiss. The Company has answered the consolidated complaintdenying liability, and the Court has 

15

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ordered the completion of all discovery by July 15,2007.  However, on March 12, 2007, theparties informed the Court that a preliminary settlement had been reached, andthe Court has set the preliminary approval hearing for April 19, 2007.  If the Court approves the proposedsettlement, management believes it will not have a material adverse effect onthe Company’s financial condition or results of operations.  The Court has made no determination whetherany of the plaintiffs’ claims have merit or should be allowed to proceed as aclass action, and if the Court declines to approve the proposed settlement, theCompany intends to continue to vigorously defend the case.

Other than as set forth above or as previouslyreported in the Company’s Annual Report on Form 10-K for the fiscal year endedMay 31, 2006, the Company is not currently subject to any material legalproceedings, nor, to the Company’s knowledge, is any material legal proceedingthreatened against the Company. However, from time to time, the Company maybecome a party to certain legal proceedings in the ordinary course of business.Management does not believe any ongoing legal proceedings, including thosesummarized above, will have a material adverse effect on the Company’sconsolidated financial position.

**9.****              RECENT ACCOUNTINGPRONOUNCEMENTS**

*Income taxes*

In June 2006, the Financial Accounting Standards Boardissued FASB Interpretation No. 48,*Accounting for Uncertainty in Income Taxes, an interpretation of FASB StatementNo. 109*  (“FIN 48”). FIN48 clarifies the accounting for uncertainty in income taxes recognized in anenterprise’s financial statements in accordance with FASB StatementNo. 109,*  Accounting for Income Taxes*.  FIN 48 describes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return and alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure and transition. FIN 48 will be effective for theCompany in the first quarter of fiscal 2008. The Company has not yet determined the impact of this newaccounting interpretation on its financial statements.

*Quantifying financial statement misstatements*

In September 2006, the Securities and ExchangeCommission (“SEC”) issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due todiversity in practice among registrants, SAB 108 expresses SEC staff viewsregarding the process by which misstatements in financial statements areevaluated for purposes of determining whether financial statement restatementis necessary. SAB 108 requires registrants to quantify misstatements using boththe balance sheet and income statement approaches and to evaluate whethereither approach results in quantifying an error that is material in light ofrelative quantitative and qualitative factors. SAB 108 is effective for fiscalyears ending after November 15, 2006, and early application is encouraged. TheBulletin is effective for the Company as of May 31, 2007. The Company does notbelieve SAB 108 will have a material impact on the Company’s results fromoperations or financial position.

*Fair value measurements*

In September 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, “*Fair Value Measurements*”(“SFAS No. 157”). SFAS No. 157 provides guidance for using fair value tomeasure assets and liabilities. This standard also responds to investors’ requestsfor expanded information about the extent to which companies measure assets andliabilities at fair value, the information used to measure fair value and theeffect of fair value measurements on earnings. SFAS No. 157 applies wheneverother standards require (or permit) assets or liabilities to be measured atfair value. The standard does not expand the use of fair value in any newcircumstances. SFAS No. 157 is effective for financial statements issued forfiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years; therefore, the Company expects to adopt SFAS No. 157 at thebeginning of fiscal 2009. The Company does not believe SFAS No. 157 will have amaterial impact on the Company’s results from operations or financial position.

*Fair value option for certainfinancial instruments*

On February 15, 2007, the FASB issuedSFAS No. 159, “*The Fair Value Option forFinancial Assets and Financial Liabilities,”* (“SFAS No.159”) whichgives entities the option to measure eligible financial assets, financialliabilities and firm commitments at fair value (i.e., the fair value option),on an instrument-by-instrument basis, that are otherwise not permitted to beaccounted for at fair value under other accounting standards. The election touse the fair value option is available when an entity first recognizes afinancial asset or financial liability or upon entering into a firm commitment.Subsequent changes in fair value must be recorded in earnings. SFAS No.159 is effective for financial statements issued for fiscal years beginningafter November 15, 2007 and is therefore effective for the Companybeginning in fiscal year 2009. The Company is currently assessing the effect ofimplementing this guidance, which is dependent upon the nature and extent ofeligible items elected to be measured at fair value upon initial application ofthe standard. However, the Company does not expect the adoption of SFASNo. 159 to have a material impact on the Company’s results of operationsand financial position.

 

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**ITEM 2.  Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

*Certain statements that the Company may make fromtime to time, including all statements contained in this report that are notstatements of historical fact, constitute “forward-looking statements” underthe federal securities laws. Forward-looking statements may be identified bywords such as “plans,” “expects,” “believes,” “anticipates,” “estimates,” “projects,”“will,” “should” 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, FDA and other regulatoryapplications and approvals, market position and expenditures.  Factors that could cause actual results todiffer materially from those expressed in any forward-looking statement madeby, or on behalf of, the Company include the following, some of which aredescribed in greater detail below:  thedecision of customers to defer capital spending; the inability of customers toefficiently integrate our instruments into their blood banking operations;increased competition in the sale of instruments and reagents; productdevelopment or regulatory obstacles; the ability to hire and retain keymanagers; changes in interest rates and foreign currency exchange rates; theability of the Company’s Japanese subsidiary to attain expected revenue, grossmargin and net income levels; delays in regulatory approvals or otherunforeseen delays related to the Company’s plans to move Houston manufacturingoperations to another Company facility; higher than expected costs related tothe planned closure of the Houston facility; higher than expected manufacturingconsolidation costs; problems in efficiently producing products after theconsolidation; the outcome of any legal claims known or unknown; and generaleconomic conditions. In addition, the strengthening of the dollar versus theEuro, Canadian Dollar and Japanese Yen would adversely impact reported results.  Investors are cautioned not to place unduereliance on any forward-looking statements. The Company cautions that historical results should not be relied uponas indications of future performance. The Company assumes no obligation to update any forward-lookingstatements.*  *Additional informationconcerning these and other factors which could cause differences betweenforward-looking statements and future actual results is discussed under theheading “Risk Factors” in our Annual Report on Form 10-K for the year endedMay 31, 2006, as filed with the SEC on August 1, 2006.*

**Overview**

Founded in 1982,Immucor develops, manufactures and sells a complete line of reagents andautomated systems used primarily by hospitals, clinical laboratories and bloodbanks in a number of tests performed to detect and identify certain propertiesof the cell and serum components of human blood prior to bloodtransfusion.  Our strategy is tostrengthen our leadership position in the automation of blood bank testing bycontinuing to expand our base of installed instruments. To facilitateinstrument placements, we offer customers a selection of automated analyzers,which address the various needs of low, medium, and high-volume testingfacilities.  We have adopted a “razor/razorblade”business model.  Our instruments aredesigned to operate with our proprietary reagents.  Therefore, once a customer procures aninstrument from us, the customer is likely to continue to purchase proprietaryreagents from us for use with the instrument on an on-going basis.  In order to satisfy the broad spectrum ofcustomers’ operational and financial criteria, we intend to continue to offerseveral instrument procurement options, including third-party financing leases,direct sales and reagent rentals and to expand the range and price points ofour instrument offerings.

As furtherdiscussed below under “Results of Operations,” the improvement in revenues andgross margins during the quarter ended February 28, 2007, as compared to theprior year period, was due primarily to the following:

·                  Reagentprice increases; and

·                  IncreasedCapture® reagent revenues with placement of additional instruments whichrequire the use of Capture® reagents.

*Business outlook*

In the next two years, besides continuing to focus onimproving gross margins on our products through achieving continued benefitsfrom successful strategies already implemented, our focus will be on customersatisfaction, improving our products by using new technologies and increasingmarket share. We believe these factors will be major business drivers forachieving our planned growth. To that end, we have made changes to ourorganizational structure, streamlined certain operations to maximizeefficiencies and commenced research and development work on a second generationGalileo automated analyzer.  As wemonitor our progress and strengthen our focus to achieve these goals, ourorganization will evolve and we may make more changes to our organization andto the way we do business.

17

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As previously reported,we expect to further improve our competitive position through the launch ofGalileo ECHOTM, our third generation automated assay instrument, which iscurrently expected to be released in the U.S. and European markets in the firstquarter of fiscal 2008. We submitted the 510(k) premarket notification for theGalileo EchoTM to the FDA on March 16, 2007, and we believe clearance will begranted within 90 days of our submission. However, clearance could take much longer, and a delay in the FDA reviewand clearance would delay the launch. The Galileo ECHOTM has substantially allof the features of our larger Galileo product, apart from lower throughput, andis significantly smaller and faster than the ABS2000, the instrument it isintended to replace. We believe the Galileo ECHOTM will appeal to the small- tomedium-sized hospital market, the largest segment of our customers (whichnumber approximately 5,000 to 6,000 worldwide), to which our ABS2000 instrumentis currently marketed.  Based on thepositive customer reaction to our planned launch of the Galileo ECHOTM, webelieve we can achieve market share gain and revenue growth through continuedGalileo placements and the launch of the Galileo ECHOTM.  As of February 28, 2007, we had receivedpurchase orders for a total of 460 Galileo instruments worldwide (an increaseof 33 instruments in the current quarter), including 280 in Europe, 178 inNorth America and 2 in Japan; and 394 of these instruments were generatingreagent revenues, an increase of 39 in the current quarter.

Additionally, as aresult of the planned closure of the Houston, Texas, manufacturing facilityscheduled for December 2007 and the subsequent consolidation of production inNorcross, Georgia, and Halifax, Nova Scotia, the Company anticipates a significantreduction in costs, with the benefits expected to be partially realized in the2008 fiscal year and fully realized in fiscal 2009 and subsequent years.

**Resultsof Operations**

We generatedrevenues of $57.1 million and $162.6 million for the three-month and nine-monthperiods ended February 28, 2007, compared to $47.1 million and $133.6 millionfor the three-month and nine-month periods ended February 28, 2006.  These revenue results represented increasesof $10.0 million, or 21%, and $29.0 million, or 22%, respectively, over thecorresponding fiscal periods in the prior year.

Our gross marginincreased to 71% for the quarter ended February 28, 2007, from 68% achieved inthe prior year quarter. For the nine-month period ended February 28, 2007, the grossprofit margin increased to 69%, from 65% achieved in the prior year period.

Net income for thethree-month and nine-month periods ended February 28, 2007, totaled $15.0million and $41.9 million, respectively compared to $11.7 million and $27.8million, respectively for the three-month and nine-month periods ended February28, 2006; the results represented respective increases of $3.3 million, or 28%,and $14.1 million, or 51%, in net income over the corresponding fiscal periodsin the prior year.

Diluted earningsper share were $0.21 for the three-month period ended February 28, 2007compared with diluted earnings per share of $0.17 for the three-month periodended February 28, 2006, an increase of 24%. Diluted earnings per share were $0.59 for the nine-month period endedFebruary 28, 2007 compared with diluted earnings per share of $0.39 for thenine-month period ended February 28, 2006, an increase of 51%.

For thethree-month and nine-month periods ended February 28, 2007, the effect on netsales of the change in the exchange rates was an approximate increase of $0.8million and $2.0 million, respectively.

The adoption ofSFAS 123R on June 1, 2006, resulted in a reduction of net income (after theeffect of taxes) of approximately $0.6 million and $1.7 million for thethree-month and nine-month periods ended February 28, 2007.

United Statesoperations continue to generate the majority of our revenue and operatingincome. U.S. operations generated 73% and 92%, respectively, of our revenue andoperating income in the nine months ended February 28, 2007, compared to 71%and 92%, respectively, in the corresponding periods of fiscal year 2006.

18

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| ** **                       | ** ** | **Three Months Ended  February 28,** | ** ** | ** ** | ** ** | ** **        | ** ** | **Nine Months Ended  February 28,** | ** ** | ** ** | ** ** |
|----------------------------------|------------|-----------------------------------------------------|------------|------------|------------|-------------------|------------|----------------------------------------------------|------------|------------|------------|
| ** **                       | ** ** | **2007**                                            | ** ** | **2006**   | ** ** | **% change** | ** ** | ** **                                         | ** ** | **2007**   | ** ** | **2006** | ** ** | **% change** | ** ** |
| ** **                       | ** ** | **($ in thousands)**                      | ** ** | ** ** | ** ** | ** **        | ** ** | **($ in thousands)**                     | ** ** | ** ** | ** ** |
| Net Sales                        |       | $                                                   | 57,091     |       | $          | 47,090            |       | 21                                                 | %          |       |       | $ | 162,557 |   | $ | 133,550 |   | 22 | % |
| Gross profit                     |       | 40,353                                              |       | 32,134     |       | 26                | %          |                                               |       | 112,732    |       | 87,371 |   | 29 | % |
| Gross profit  percentage         |       | 71                                                  | %          | 68         | %          | 4                 | %          |                                               |       | 69         | %          | 65 | % | 6 | % |
| Research and development         |       | 1,624                                               |       | 938        |       | 73                | %          |                                               |       | 4,658      |       | 3,401 |   | 37 | % |
| Selling and marketing            |       | 6,850                                               |       | 5,141      |       | 33                | %          |                                               |       | 19,164     |       | 15,550 |   | 23 | % |
| Distribution                     |       | 2,393                                               |       | 1,971      |       | 21                | %          |                                               |       | 7,061      |       | 5,753 |   | 23 | % |
| General and administrative       |       | 6,271                                               |       | 4,797      |       | 31                | %          |                                               |       | 16,784     |       | 15,507 |   | 8 | % |
| Restructuring expense            |       | 72                                                  |       | 122        |       | -41               | %          |                                               |       | 641        |       | 2,579 |   | -75 | % |
| Amortization expense and other   |       | 86                                                  |       | 86         |       | 0                 | %          |                                               |       | 259        |       | 254 |   | 2 | % |
| Total operating expenses         |       | 17,296                                              |       | 13,055     |       | 32                | %          |                                               |       | 48,567     |       | 43,044 |   | 13 | % |
| Non-operating  income (expenses) |       | 711                                                 |       | (191       | )          | n/m               |       |                                               |       | 1,742      |       | (189 | ) | n/m |   |
| Income before  income tax        |       | 23,768                                              |       | 18,888     |       | 26                | %          |                                               |       | 65,907     |       | 44,138 |   | 49 | % |
| Provision for  income tax        |       | 8,749                                               |       | 7,167      |       | 22                | %          |                                               |       | 24,050     |       | 16,357 |   | 47 | % |
| Net income                       |       | $                                                   | 15,019     |       | $          | 11,721            |       | 28                                                 | %          |       |       | $ | 41,857 |   | $ | 27,781 |   | 51 | % |

 

*Revenues*

Revenue for this fiscal quarter totaled $57.1 million,up 21% from $47.1 million in the corresponding period in the prior fiscal year.The $10.0 million increase was primarily the result of price increases in theU.S. (approximately $8.2 million), volume increases in the U.S. includinginstrument, warranty and service income (approximately $0.6 million), anincrease in sales outside the U.S. (approximately $0.4 million) and a gain fromfluctuations in exchange rates (approximately $0.8 million).  For the nine-months ended February 28, 2007,revenue increased by approximately $29.0 million to $162.6 million, an increaseof 22%.  The $29.0 million increase wasprimarily the result of price increases in the U.S. (approximately $18.0million), volume increases in the U.S. including instrument, warranty andservice income  (approximately $5.7million), an increase in sales outside the U.S. (approximately $3.3 million)and a gain from fluctuations in exchange rates (approximately $2.0 million).

Traditional reagent revenues (i.e. revenues fromproducts not using the Company’s patented Capture® technology) grew by $7.4million to $41.4 million compared to $34.0 million in the prior year quarter, a22% increase in the third quarter of fiscal 2007.  For the nine-month period ended February 28,2007, traditional reagent revenues increased by $19.1 million to $115.9million, an increase of 20%. The growth in traditional reagent revenue occurredmainly as a result of price increases in the U.S. Traditional reagent saleshave historically been our primary source of revenue and still constitute avery significant portion of our business. We expect the significance of thisline of products to eventually decline as we place more instruments in themarket and increase sales of our Capture® products.

Capture® product sales increased to $10.2 million in the three-monthperiod ended February 28, 2007 compared to $8.6 million in the correspondingperiod of fiscal 2006.  For thenine-month period ended February 28, 2007, Capture® product sales increasedfrom $24.9 million to $30.8 million, an increase of 24%. The revenue growth wasprimarily attributable to volume increase. Sales of Capture® products arelargely dependent on the number of instruments requiring the use of Capture®reagents placed with customers and in operation, and to some extent on thenumber of eight-week shipping cycles of our high volume products that fall in aparticular period. As we succeed in placing more instruments in the market, weexpect revenue from Capture® products to continue to increase.

Sales of instruments were $4.4 million in the thirdquarter of fiscal 2007 compared to $3.6 million in the prior year quarter. Mostof our current instrument sales are accompanied by reagent contracts with priceguarantee clauses. Therefore, we defer and recognize the revenue from theseinstrument sales over the related guarantee periods, normally five years.However, we record the cost of these instruments at the time the instrumentsare sold. In the third quarter of fiscal 2007, approximately $1.9 million ofinstrument sales were deferred in this manner while the entire cost of theseinstruments of $1.2 million was expensed, and $1.2 million of previouslydeferred revenue was recognized. For the nine-month period ended February 28,2007, approximately $4.9 million of instrument sales were deferred in thismanner while the entire cost of these instruments of $3.1 million was expensed,and $3.0 million of previously deferred revenue was recognized. As of February28, 2007, deferred revenues totaled $18.5 million (including approximately $3.0million of the associated warranty revenue), an increase of $1.1 million in thequarter compared to an increase of $0.3 million in the quarter ended November30, 2006.

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The instrument business continues to be uneven.  Instrument sales are typically uneven due todifferences in the time it takes customers to place the instruments intoservice. In the third quarter of this fiscal year, we received orders for 33instruments compared to 41 orders received in the second quarter. In additionto the new revenue we expect to generate from the continued placement of moreGalileo instruments in the market, we also expect to begin generating revenuesin fiscal 2008 from the sale of our new Galileo ECHOTM instruments.

*Gross Margins*

Overall gross margin improved during the quarter endedFebruary 28, 2007 to a record 71%, up from 68% in the prior year quarter. Forthe nine-month period ended February 28, 2007, overall gross margin increasedto 69%, up from 65% in the prior year period. Gross margin on traditionalreagents for the quarter ended February 28, 2007 increased to 76%, from 72% inthe prior year quarter primarily as a result of the price increases discussedabove. For the nine-month period ended February 28, 2007, gross margin ontraditional reagents increased to 75%, up from 70% in the prior year period.The gross margin on Capture® products was 86% for the quarter ended February28, 2007, compared to 83% in the prior year quarter. For the nine-month periodended February 28, 2007, gross margin on Capture® products increased to 83%, upfrom 81% in the prior year period. The gross margin on instruments, includingthe impact of the cost of providing service, was 0.5% for the quarter endedFebruary 28, 2007, compared to 11% for the same quarter last year.  For the nine-month period ended February 28,2007, gross margin on instruments was a negative 4% compared to a negative 14%in the prior year period. Instrument gross margin is negatively impacted by thedeferral of revenue from instrument sales while the entire cost of sales onthose instrument sales is expensed in the quarter in which the instruments aresold.

*Operating Expenses*

Research anddevelopment expenses increased by $0.7 million to $1.6 million for the quarterended February 28, 2007. An increase in bonus accrual for research anddevelopment staff of $0.4 million, stock-based compensation expenses of $0.1million related to the adoption of SFAS 123R and expenses relating todevelopment of a second generation Galileo ($0.2 million) accounted for most ofthe increase. For the nine-month period ended February 28, 2007, research anddevelopment expenses increased to $4.7 million, an increase of $1.3 millionover the prior year period, impacted by an increase in laboratory supplies usedprimarily in the testing of ECHOTM instruments ($0.3 million), an increase inbonus accrual and salaries ($0.3 million), and an increase in stock-basedcompensation expense related to the adoption of SFAS 123R ($0.2 million).  We anticipate the level of research anddevelopment activities to remain at the similar level during the fourth quarterand during fiscal 2008.

Selling andmarketing expenses increased by approximately $1.7 million to $6.9 million forthe three-month period ended February 28, 2007, compared to the prior year quarter;impacted by new hires ($0.3 million), increase in sales commissions ($0.3million), increase in travel ($0.1 million), increase in management bonusexpense ($0.3 million) and stock-based compensation expenses of $0.2 millionrelated to the adoption of SFAS 123R. For the nine-month period ended February28, 2007, selling and marketing expenses increased by $3.6 million to $19.2million compared to the prior year period; impacted primarily by new hires($0.7 million), increase in sales commission ($0.3 million), increase in travel($0.4 million), increase in convention expenses ($0.2 million), increase inbonus accrual ($0.5 million) and stock-based compensation expenses of $0.5million related to the adoption of SFAS 123R.

Distribution expenses increased by approximately $0.4million, as compared to the prior year period, to $2.4 million for thethree-month period ended February 28, 2007. This increase was mainly due to anincrease in U.S. and German shipment costs of approximately $0.4 million.  For the nine-month period ended February 28,2007, distribution expenses increased by $1.3 million, as compared to the prioryear period, to $7.1 million. Our Japanese subsidiary accounted for $0.3million of the increase and increased shipments of instruments and freightcosts in the U.S. and Germany accounted for $0.6 million of the increase.

General andadministrative expenses increased in the three months ended February 28, 2007by $1.5 million to $6.3 million for the third quarter of 2007 as compared tothe prior year quarter, mainly due to a $0.5 million increase in managementbonus expense (based on better than anticipated Company performance), a $0.7million increase in legal expenses and a $0.4 million increase in stockcompensation expense that resulted from the adoption of SFAS 123R. For thenine-month period ended February 28, 2007, general and administration expensesincreased by $1.3

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million to $16.8million compared to the prior year period, primarily due to stock-basedcompensation expenses of $1.3 million related to the adoption of SFAS 123R.

During the quarterended February 28, 2007, we recorded a charge of approximately $0.1 million inconnection with the planned closure of our Houston facility. The total cost ofclosing this plant is estimated at $4.6 million, including approximately $2.3million for impairment of long-lived assets which we recorded in the secondquarter of the fiscal year 2006. As of February 28, 2007, we have recorded atotal cost of $3.3 million and expect to incur approximately $1.3 million ofadditional costs until we close the facility in December 2007. Total futurecash outlays for the restructuring plan are expected to be approximately $1.6million.

*Non-operating income (expenses):*

Non-operating income increased by approximately $0.9million, from $0.2 million of net expenses in the prior year period to $0.7million of net income for the three-month period ended February 28, 2007; $0.5million of the increase was due to an increase in interest income.  For the nine-month period ended February 28,2007, non-operating income increased by approximately $1.9 million, from $0.2million of net expenses in the prior year period to $1.7 million of net incomefor the nine-month period ended February 28, 2007; $1.2 million of the increasewas due to an increase in interest income. Our cash balance has been improvingand this is reflected in the increase in our interest income.

*Net Income and Earnings per Share*

Higher sales and improved margins resulted in netincome for the fiscal 2007 third quarter of $15.0 million, up 28% from $11.7million for the same quarter last year. For the nine-month period endedFebruary 28, 2007, net income of $41.9 million was 51% higher compared to $27.8million for the prior year period.  Forthe fiscal 2007 third quarter, diluted earnings per share was $0.21, up from$0.17 for the prior year period.  For thenine-month period ended February 28, 2007, diluted earnings per share was$0.59, up from $0.39 for the prior year period.

**Liquidity and Capital Resources**
| ** **                                                    | ** ** | **For the Nine Months Ended** | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                                    | ** ** | **February 28,**                             | ** ** |
| ** **                                                    | ** ** | **2007**                                          | ** ** | **2006** | ** ** |
| ** **                                                    | ** ** | **(in thousands)**                           | ** ** |
| Net cash  provided by operating activities                    |       | $                                                 | 39,020     |   | $ | 42,562 |   |
| Net cash used in  investing activities                        |       | (6,019                                            | )          | (11,477 | ) |
| Net cash  provided by (used in) financing activities          |       | 6,843                                             |       | (29,431 | ) |
| Effect of  exchange rate changes on cash and cash equivalents |       | (224                                              | )          | (155 | ) |
| Increase in cash  and cash equivalents                        |       | $                                                 | 39,620     |   | $ | 1,499 |   |

 

We have adequateworking capital and sources of capital to carry on our current business and tomeet our long- and short-term capital requirements.  At February 28, 2007, we had working capitalof $141.7 million, compared to $92.9 million of working capital at May 31,2006.  Our cash, cash equivalents andmarketable securities totaled $93.7 million at February 28, 2007 as compared to$75.2 million at November 30, 2006 and $55.7 million at May 31, 2006.

In the nine monthsended February 28, 2007, we spent $4.9 million to repurchase our stock, $17.4million less than the $22.3 million we spent in the corresponding period of theprevious fiscal year. We also utilized $0.9 million to repay long-termobligations in the current period, $7.3 million less than our cash outlay of$8.2 million in the corresponding previous fiscal period. These two factors,along with a $5.4 million increase in tax benefit received from the exercise ofstock options in the current period, significantly contributed to the increasein the cash balance of $39.6 million in the 2007 fiscal period compared to a$1.5 million increase in the 2006 fiscal period.

*Operatingactivities* - Net cash generated by operating activities was$39.0 million for the nine months ended February 28, 2007, compared to $42.6million generated in the prior year period. The increase in net income of $14.1 million (from $27.8 million for thenine months ended February 28, 2006 to $41.9 million for the current

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period) was offsetby, among other things, an adjustment of approximately $10.0 million for thetax benefit arising on exercise of stock options which is required to bedisclosed as cash generated by financing activity upon adoption of SFAS 123Reffective June 1, 2006. An increase in inventory levels by approximately $4.8million in fiscal 2007 also adversely impacted the cash generated by operatingactivities. Approximately $3.5 million of this increase was due to inventorybuild up of instruments and related parts in anticipation of an increase ininstruments shipments in the near term.

*Investingactivities -* For the nine months ended February 28, 2007, $6.0million of net cash was used in investing activities, primarily for thepurchase of property and equipment ($7.7 million), which was offset by proceedsfrom the maturity of short term investments ($1.6 million).  Planned capital expenditures for fiscal 2007total approximately $13.5 million, which we intend to finance from our internalresources.

In the first ninemonths of fiscal 2006, we spent $7.3 million on the purchase of property andequipment.  In the same period, we alsoacquired Immucor-Kainos, Inc. and paid ¥459 million (approximately $4.2million) in cash on signing of the purchase agreements. We incurred other costsamounting to $0.5 million relating to this acquisition. Under the terms of thepurchase agreements, we are also required to pay an additional ¥300 million(approximately $2.5 million) over three years with payments of ¥125 million ineach of the first two years and the remaining ¥50 million in the third year. Asof February 28, 2007, we have paid ¥226 million of this liability.  In addition, a final payment of ¥441 millionwill be made after a three-year transition period ending on June 30, 2008, orearlier upon mutual agreement.

*Financingactivities -* Net cash generated from financing activitiestotaled approximately $6.8 million for the nine months ended February 28, 2007.During this period, we utilized $4.9 million to repurchase shares of our commonstock and $0.9 million to repay a portion of the Immucor-Kainos acquisitionliability; we received $2.6 million from the proceeds of stock option exercisesand $10.0 million from the excess tax benefit from stock option exercises. Netcash used by financing activities totaled approximately $29.4 million for thenine months ended February 28, 2006. During this period, we repaid long-term debtand capital leases amounting to $8.2 million and utilized $22.3 million torepurchase shares of our common stock; we received $1.0 million from theproceeds of stock option exercises.

*Stock Repurchase Program*

During the nine-monthperiod ended February 28, 2007, we repurchased 281,969 shares at an average pershare price of $17.23, totaling $4.9 million, bringing the aggregate number ofshares repurchased to date to 8,232,944 under the program. During thenine-month period ended February 28, 2006, 1,430,100 shares amounting to $22.3million were repurchased under this program. An aggregate of 1,142,056 shares were available for repurchase under theprogram as of February 28, 2007.

*ContingentLiabilities*

We record contingent liabilities resulting from asserted andunasserted claims against us when it is probable that a liability has beenincurred and the amount of the loss is reasonably estimable. We disclosecontingent liabilities when there is a reasonable possibility that the ultimateloss will exceed the recorded liability. Estimating probable losses requiresanalysis of multiple factors, in some cases including judgments about thepotential actions of third-party claimants and courts. Therefore, actual lossesin any future period are inherently uncertain. We currently are involved incertain legal proceedings. We do not believe these proceedings will have amaterial adverse effect on our consolidated financial position. It is possible,however, that future results of operations for any particular quarterly orannual period could be materially affected by changes in our assumptions or theeffectiveness of our strategies related to these proceedings. Contingentliabilities are described in Note 8 to the condensed consolidated financialstatements.

*FutureCash Requirements and Restrictions*

We expect thatcash and cash equivalents and cash flows from operations will be sufficient tosupport operations and planned capital expenditures for at least the next 12months.  There are no restrictions on oursubsidiaries in the matter of sending dividends, or making loans or advances toImmucor.

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**Critical Accounting Policies**

*General*

We have identifiedthe policies below as critical to our business operations and the understandingof our results of operations. The impact and any associated risks related tothese policies on our business operations is discussed throughout Management’sDiscussion and Analysis of Financial Condition and Results of Operations wheresuch policies affect our reported and expected financial results.  For a detailed discussion on the applicationof these and other accounting policies, see the notes to the condensedconsolidated financial statements of this quarterly report on Form 10-Q and thenotes to the consolidated financial statements and the MD&A contained inour Annual Report on Form 10-K for the fiscal year ended May 31, 2006.  Note that our preparation of this Form 10-Qrequires us to make estimates and assumptions that affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilitiesat the date of our financial statements, and the reported amounts of revenueand expenses during the reporting period. Actual results could differ fromthose estimates, and certain assumptions could prove to be incorrect.  Senior management has discussed thedevelopment and selection of critical accounting estimates and the relateddisclosures in this Management’s Discussion and Analysis of Financial Conditionand Results of Operations with the Audit Committee of the Board of Directors.

*Revenue Recognition*

We recognizerevenue when the following four basic criteria have been met:  (1) persuasive evidence of an arrangementexists; (2) delivery has occurred or services rendered; (3) the fee is fixedand determinable; and (4) collectibility is reasonably assured.  Should changes in conditions cause managementto determine these criteria are not met for certain future transactions,revenue recognized for any reporting period could be adversely affected.

·                  Reagentsales

Revenue from the sale of our reagents to end users isrecognized upon shipment when both title and risk of loss transfer to thecustomer, unless there are specific contractual terms to the contrary.  Revenue from the sale of our reagents todistributors is recognized FOB customs clearance when both title and risk ofloss transfer to the customer.

·                  Instrumentsales

Revenue from the sale of our instruments is generallyrecognized upon shipment and completion of contractual obligations.  Revenue from rentals of our instruments isrecognized over the term of the rental agreement.  Instrument service contract revenue isrecognized over the term of the contract.

Beginning in the second quarter of fiscal year 2004,we began recognizing revenue on the sale of instruments in accordance withEmerging Issues Task Force (“EITF”) Issue No. 00-21, *Accounting for Revenue Arrangements with Multiple Deliverables*.  Our instrument sales contracts involvemultiple deliverables, including the sale or rental of an instrument (includingdelivery, installation and training), the servicing of the instrument duringthe first year, providing software interface, and, in some cases, priceguarantees for consumables purchased during the contract period.  We have determined the fair value of certainof these elements, such as training and first year service.  The portion of the instrument sales priceapplicable to the instrument itself is recognized upon shipment and completionof contractual obligations relating to training and/or installation based onthe related contractual specifications. If the agreement does not include anyprice guarantees, the sales price in excess of the fair values of training andservice is allocated to the instrument itself. The fair value of a training session is recognized as revenue whenservices are provided.  If multiplesessions are contractually provided for, and not all training has beencompleted at the time the instrument is recognized, additional training revenueis recognized upon delivery.  The fairvalue of first year service is deferred and recognized over the first year ofthe contract. If the agreement contains price guarantees, the entire salesprice is deferred and recognized over the related guarantee period due to thefair value of the price guarantee not being determinable prior to thecompletion of the contract.  Theallocation of the total consideration received, which is based on the estimatedfair value of the units of accounting, requires judgment by management.

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·                  Salessubject to a plan of factoring

Sales subject to a plan offactoring are recorded at net realizable value (defined as gross sales less theannual estimated cost of factoring the sale). Should the factored sale remain uncollected by the factor at the end ofone year, an estimate of the additional factoring discount is made and recordedmonthly as an additional reduction of sales revenue.

*Trade Accounts Receivable andAllowance for Doubtful Accounts*

Trade receivables atFebruary 28, 2007, totaling $45.7 million, and at May 31, 2006, totaling $37.2million, are net of allowances for doubtful accounts of $1.9 million and $2.0million, respectively.  The allowance fordoubtful accounts represents a reserve for estimated losses resulting from theinability of our customers to pay their debts. The collectibility of tradereceivable balances is regularly evaluated based on a combination of factorssuch as customer credit-worthiness, past transaction history with the customer,current economic industry trends and changes in customer payment patterns. Ifit is determined that a customer will be unable to fully meet its financialobligation, such as in the case of a bankruptcy filing or other material eventsimpacting its business, a specific allowance for doubtful accounts is recordedto reduce the related receivable to the amount expected to be recovered.

*Inventory*

Inventories arestated at the lower of cost (first-in, first-out basis) or market (netrealizable value). Cost includes material, labor and manufacturingoverhead.  We use a standard cost systemas a tool to monitor production efficiency. The standard cost system applies estimated labor and manufacturingoverhead factors to inventory based on budgeted production and efficiencylevels, staffing levels and costs of operation, based on the experience andjudgment of management.  Actual costs andproduction levels may vary from the standard established and such variances arecharged to the consolidated statement of income as a component of cost ofsales.  Since U.S. generally acceptedaccounting principles require that the standard cost approximate actual cost,periodic adjustments are made to the standard rates to approximate actualcosts.  The provision for obsolete and/orexcess inventory is reviewed on a quarterly basis or, if warranted bycircumstances, more frequently.  Inevaluating this reserve, management considers technology changes, competition,customer demand, product shelf life and manufacturing quality.  No material changes have been made to theinventory policy during the third quarter of fiscal 2007.

*Goodwill*

On adoption ofSFAS No. 142, *Goodwill and Other Intangible Assets,*goodwill and indefinite lived intangible assets are no longer amortized but aretested for impairment annually or more frequently if impairment indicatorsarise.  Intangible assets that havefinite lives are continuing to be amortized over their useful lives.

We evaluate thecarrying value of goodwill during the fourth quarter of each year and betweenannual evaluations if events occur or circumstances change that would morelikely than not reduce the fair value of the reporting unit below its carryingamount. Such circumstances could include, but are not limited to: (1) asignificant adverse change in legal factors or in business climate, (2) unanticipatedcompetition, or (3) an adverse action or assessment by a regulator. Whenevaluating whether goodwill is impaired, we compare the fair value of thereporting unit to which the goodwill is assigned to the reporting unit’scarrying amount, including goodwill. The fair value of the reporting unit isestimated using primarily the income, or discounted cash flows, approach. Ifthe carrying amount of a reporting unit exceeds its fair value, then the amountof the impairment loss must be measured. The impairment loss would becalculated by comparing the implied fair value of reporting unit goodwill toits carrying amount. In calculating the implied fair value of reporting unitgoodwill, the fair value of the reporting unit is allocated to all of the otherassets and liabilities of that unit based on their relative fair values. Theexcess of the fair value of a reporting unit over the amount assigned to itsother assets and liabilities is the implied fair value of goodwill. Animpairment loss would be recognized when the carrying amount of goodwillexceeds its implied fair value. Our evaluation of goodwill completed during theyear ended May 31, 2006 resulted in no impairment losses.

*Income Taxes*

Our income taxpolicy records the estimated future tax effects of temporary differencesbetween the tax bases of assets and liabilities and amounts reported in theaccompanying consolidated balance sheets, as well as operating loss and taxcredit carry-forwards. The value of our deferred tax assets assumes that we willbe able to generate sufficient future taxable income in certain taxjurisdictions, based on estimates and assumptions. If these estimates andrelated assumptions change in the future, we may be required to recordadditional valuation allowances against

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our deferred taxassets resulting in additional income tax expense in our consolidatedstatements of income. In assessing the realizability of deferred tax assets, weconsider whether it is more likely than not that some portion or all of thedeferred tax assets will not be realized and consider the scheduled reversal ofdeferred tax liabilities, projected future taxable income, carry-backopportunities, and tax-planning strategies in making this assessment.  We also evaluate the realizability of thedeferred tax assets and assess the need for additional valuation allowancesquarterly.  No material changes have beenmade to the income tax policy during the third quarter of fiscal 2007.

*Stock-Based Employee Compensation*

In December 2004,the Financial Accounting Standards Board revised Statement of FinancialAccounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS123R”), requiring companies to record share-based payment transactions ascompensation expense at the grant date fair value. We adopted SFAS 123Reffective June 1, 2006, using the modified prospective transition method, whichrequires that compensation costs be recorded as earned for all unvested stockoptions outstanding at the beginning of the first fiscal year of adoption basedon the grant date fair value estimated in accordance with the originalprovisions of SFAS 123. For all share-based payments granted or modifiedsubsequent to the adoption of SFAS 123R, compensation costs are required to berecorded based on fair value estimated in accordance with the provisions ofSFAS 123R. In accordance with the modified prospective transition method, wehave not restated the financial statements for prior periods and thosestatements do not include the impact of SFAS 123R.

Total share-basedcompensation expense included in the Condensed Consolidated Statement of Incomefor the three months ended February 28, 2007 was $0.8 million. As a result ofadopting SFAS 123R on June 1, 2006, our pre-tax income for the three monthsended February 28, 2007 was $0.8 million lower, and our income after tax was$0.6 million lower than if we had continued to account for share-basedcompensation under APB No. 25. Basic and diluted earnings per share forthe quarter ended February 28, 2007 were lower by $0.01 due to the adoption ofSFAS 123R.  Total share-basedcompensation expense included in the Condensed Consolidated Statement of Incomefor the nine months ended February 28, 2007 was $2.5 million. As a result ofadopting SFAS 123R on June 1, 2006, our pre-tax income for the nine monthsended February 28, 2007 was $2.5 million lower, and our income after tax was$1.7 million lower than if we had continued to account for share-basedcompensation under APB No. 25. Basic and diluted earnings per share forthe year ended February 28, 2007 were lower by $0.3 and $0.02, respectively,due to the adoption of SFAS 123R.

We estimate thefair value of stock options using a Black-Scholes valuation model, consistentwith the provisions of SFAS 123R, Securities and Exchange Commission StaffAccounting Bulletin 107 (“SAB 107”) and our prior pro-forma disclosures of netearnings, including the fair value of stock-based compensation. Key inputassumptions used to estimate the fair value of stock options include theexpected term until the exercise of the option, the expected volatility of ourstock, risk-free rates of return, option forfeiture rates, and dividend yields,if any. The expected term of the options is based on the simplified transitionmethod permitted by SAB 107. The expected volatility is derived from thehistorical volatility of our stock price on the NASDAQ market. The risk-freeinterest rate is the yield from a Treasury bond or note corresponding to theexpected term of the option. Estimated option forfeiture rates are based on ourhistorical forfeiture rates. Before the adoption of SFAS 123R, we used actualforfeiture rates to calculate compensation expense as allowed by SFAS 123 forthe disclosure footnote required under SFAS 148. We estimate that the impact ofthis change, from the actual forfeiture rates to the estimated forfeiture ratesas required under SFAS 123R, is not likely to have a material impact on ourfinancial statements as it is expected that we will continue to experience lowstaff turnover.  We have not paiddividends on our common stock and do not expect to pay dividends on our commonstock in the near future, and hence dividends are not considered in determiningthe fair value of stock options.

As of February 28,2007, there was $5.4 million of total unrecognized compensation cost related tonon-vested share based compensation arrangements. This cost is expected to berecognized through June 6, 2011 based on existing vesting terms with theweighted average remaining expense recognition period being approximately 2.92years from February 28, 2007.

**ITEM3.  Quantitative and QualitativeDisclosures about Market Risk.**

Therehave been no material changes regarding the Company’s market risk positionsince the filing of its Annual Report on Form 10-K for the fiscal year endedMay 31, 2006.  For further detailsregarding the quantitative and qualitative disclosures about market risk, seeItem 7A, Quantitative and Qualitative Disclosures About Market Risk,

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containedin the Company’s Annual Report on Form 10-K for the fiscal year ended May 31,2006.

**ITEM 4.  Controls and Procedures.**

As required by Rule 13a-15 under the SecuritiesExchange Act of 1934, an evaluation was carried out under the supervision andwith the participation of our management, including the Chief Executive Officerand Chief Financial Officer, of the effectiveness of the design and operationof our disclosure controls and procedures as of February 28, 2007. Based uponour evaluation, our Chief Executive Officer and Chief Financial Officer haveconcluded that, as of February 28, 2007, our disclosure controls and procedureswere effective to provide reasonable assurance that information required to bedisclosed in the reports that we file or submit under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported within the timeperiods specified in the applicable rules and forms, and that it isaccumulated and communicated to our management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure.

There were no changes in our internal control overfinancial reporting during the quarter ended February 28, 2007 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

**PART II**

**OTHERINFORMATION**

**ITEM 1. Legal Proceedings.**

On January 24, 2007, we reported the settlement of thepreviously-reported charges against our Italian subsidiary related to anallegedly-improper payment to an Italian physician. On January 18, 2007, theItalian judge approved a plea bargain agreement under which the subsidiary wasrequired to pay a total of approximately $122,000 in fines, penalties, andrestitution to a hospital at which the physician worked.  The related charges against Dr. Gioacchino DeChirico, the former president of the subsidiary, have now been sent forward totrial. He indicates he will contest any charges against him. We expect thetrial and related appeals to continue for an extended period of time.  The Company and Dr. De Chirico are stillseeking to settle the related SEC investigation in the near term.  Except in connection with the settlement withthe Italian prosecutor, no determination can yet be made as to whether, inconnection with these circumstances, we will become subject to any fines,penalties and/or other charges imposed by any governmental authority, or anyother damages or costs that may arise in connection with these circumstances.

Between August 31 and October 19, 2005, a series often class-action lawsuits were filed in the United States District Court forthe Northern District of Georgia against us and certain of our current andformer directors and officers alleging violations of the securities laws. TheCourt has consolidated these cases for disposition under the caption In reImmucor, Inc. Securities Litigation, File No. 1:05-CV-2276-WSD, designated leadplaintiffs, and permitted the filing of an amended consolidated complaint. Theconsolidated complaint, brought on behalf of a putative class of shareholderswho purchased Immucor stock between August 16, 2004 and August 29, 2005,alleges that our stock prices during that period were inflated as a result ofmaterial misrepresentations or omissions in our financial statements and otherpublic announcements regarding our business. We believe the claims are withoutmerit, and in March 2006 we moved to dismiss the consolidated complaint. InOctober 2006, the Court denied the motion to dismiss. We have answered theconsolidated complaint denying liability, and the Court has ordered thecompletion of all discovery by July 15, 2007. However, on March 12, 2007, the parties informed the Court that apreliminary settlement had been reached, and the Court has set the preliminaryapproval hearing for April 19, 2007.  Ifthe Court approves the proposed settlement, management believes it will nothave a material adverse effect on our financial condition or results ofoperations.  The Court has made no determinationwhether any of the plaintiffs’ claims have merit or should be allowed toproceed as a class action, and if the Court declines to approve the proposedsettlement, we intend to continue to vigorously defend the case.

Other than as set forth above or as previouslyreported in our Annual Report on Form 10-K for the fiscal year ended May 31,2006, as filed with the SEC on August 1, 2006, we are not currently subject toany material legal proceedings, nor, to our knowledge, is any material legal proceedingthreatened against us. However, from time to time, we may become a party tocertain legal proceedings in the ordinary course of business. We do not believeany ongoing legal proceedings, including those summarized above, will have amaterial adverse effect on our consolidated financial position.

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**ITEM 1A. Risk Factors.**

There have been no material changes to the riskfactors set forth in our Annual Report on Form 10-K for the year ended May 31,2006, as filed with the SEC on August 1, 2006. In addition to the otherinformation set forth in this report, you should carefully consider the factorsdiscussed in Part I, Item 1A, “Risk Factors” in our Annual Report onForm 10-K which could materially affect our business, financial condition orfuture results. The risks described in our Annual Report on Form 10-K are notthe only risks facing our company. Additional risks and uncertainties notcurrently known to us or that we currently deem immaterial also may have amaterial adverse effect on our business, financial condition and/or operatingresults.

**ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds.**

The Company did not sell unregistered securities during the periodcovered by this report. The Company did not repurchase any shares of its CommonStock during the quarter ended February 28, 2007.  As of February 28, 2007, an aggregate of1,142,056 shares of Common Stock remain authorized for repurchase under theCompany’s stock repurchase programs.

**ITEM 6. Exhibits.**

The Company hasfiled the following exhibits with this report:

3.1                                 Amendedand Restated Articles of Incorporation (incorporated by reference to Exhibit3.1 to Immucor, Inc.’s Quarterly Report on Form 10-Q filed on January 5, 2007).

3.2                                 Amendedand Restated Bylaws (incorporated by reference to Exhibit 3.1 to Immucor, Inc.’sCurrent Report on Form 8-K filed on September 13, 2006).

10.1                           EmploymentAgreement dated April 1, 2007, between the Company and Philip H. Moïse.

31.1                           Certificationof Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

31.2                           Certificationof Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*

32.1                           Certificationof Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of2002.*

32.2                           Certificationof Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of2002.*

*                 Thecertifications contained in these exhibits are not “filed” for purposes ofSection 18 of the Exchange Act [15 U.S.C. 78r], or otherwise subject to theliability of that section.  Suchcertifications will not be deemed to be incorporated by reference into anyfiling under the Securities Act or the Exchange Act, except to the extent thatthe Company specifically incorporates them by reference.

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SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

IMMUCOR, INC.

(Registrant)
| Date:  | April 5, 2007 |   | By:    | /s/ Dr. Gioacchino DeChirico                                  |
|--------|---------------|--------|--------|---------------------------------------------------------------|
|   |          |   |   | Dr. Gioacchino DeChirico, Chief Executive Officer             |
|   |          |   |   | (on behalf of Registrant and as Principal Executive  Officer) |
|   |          |   |   |                                                          |
| Date:  | April 5, 2007 |   | By:    | /s/ Patrick D. Waddy                                          |
|   |          |   |   | Patrick D. Waddy, Chief Financial Officer                     |
|   |          |   |   | (Principal Financial and Accounting Officer)                  |

 

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**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 5, 2007). |
|   |       |                                                                                                                                                                        |
| 3.2    |       | Amended and Restated Bylaws (incorporated by  reference to Exhibit 3.1 to Immucor, Inc.’s Current Report on Form 8-K filed  on September 13, 2006).                    |
|   |       |                                                                                                                                                                        |
| 10.1   |       | Employment Agreement dated April 1, 2007, between  the Company and Philip H. Moïse.                                                                                    |
|   |       |                                                                                                                                                                        |
| 31.1   |       | Certification of Principal Executive Officer  Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*                                                                               |
|   |       |                                                                                                                                                                        |
| 31.2   |       | Certification of Principal Financial Officer  Pursuant to Rule 13a-14(a) and Rule 15d-14(a).*                                                                               |
|   |       |                                                                                                                                                                        |
| 32.1   |       | Certification of Chief Executive Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                       |
|   |       |                                                                                                                                                                        |
| 32.2   |       | Certification of Chief Financial Officer Pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                       |

 

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*                 Thecertifications contained in these exhibits are not “filed” for purposes ofSection 18 of the Exchange Act [15 U.S.C. 78r], or otherwise subject to theliability of that section.  Suchcertifications will not be deemed to be incorporated by reference into anyfiling under the Securities Act or the Exchange Act, except to the extent thatthe Company specifically incorporates them by reference.

 

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