UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X	THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2011

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to

Commission file number 0-14820

IMMUCOR, INC.

(Exact name of registrant as specified in its charter)

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

3130 GATEWAY DRIVE, P.O. BOX 5625	30091-5625
Norcross, Georgia	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code, is (770) 441-2051

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class COMMON STOCK, $.10 PAR VALUE COMMON STOCK PURCHASE RIGHTS Name of Each Exchange on Which Registered The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

 NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes_X__ No ___ 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. 

Yes ____  No __X__ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes __ X __No _____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes_ X __ No _____

Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ X ]	Accelerated filer [    ]
Non-accelerated filer [     ]	Small reporting company [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes____ No __ X___

As of November 30, 2010, the aggregate market value of the common stock held by non-affiliates of the registrant was $1,276,245,711, based upon the closing price on The Nasdaq Stock Market on that date.  For the purpose of calculating this amount, all officers and directors have been treated as affiliates.

As of July 13, 2011, there were 70,497,802 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III - Portions of the Registrant’s definitive Proxy Statement relating to the registrant’s 2011 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days following the end of the Company’s fiscal year, are incorporated by reference in Part III of this Annual Report on Form 10-K as indicated herein.

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Table Of Contents
	Part I
	Item 1.	Business
	Item 1A.	Risk Factors
	Item 1B.	Unresolved Staff Comments
	Item 2.	Properties
	Item 3.	Legal Proceedings
	Part II
	Item 5.	Market For The Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities
	Item 6.	Selected Financial Data
	Item 7.	Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
	Item 7A.	Quantitative And Qualitative Disclosures About Market Risk
	Item 8.	Financial Statements And Supplementary Data
	Item 9.	Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
	Item 9A.	Controls And Procedures
	Item 9B.	Other Information
	Part III
	Item 10.	Directors, Executive Officers and Corporate Governance
	Item 11.	Executive Compensation
	Item 12.	Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters
	Item 13.	Certain Relationships And Related Transactions, And Director Independence
	Item 14.	Principal Accountant Fees And Services
	Part IV
	Item 15.	Exhibits And Financial Statement Schedules
	Signatures
	Ex-21	Subsidiaries Of The Registrant
	Ex-23	Consents Of Experts And Counsel
	Ex-31.1	Certificate Of Principal Executive Officer Pursuant To Rule 13a-14(a)
	Ex-31.2	Certificate Of Principal Financial Officer Pursuant To Rule 13a-14(a)
	Ex-32	Certifications Required Under Section 906 Of The Sarbanes-Oxley Act Of 2002

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PART I

FORWARD – LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements that are based upon current expectations and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “will be,” “will continue,” “will likely result,” or words or phrases of similar meaning. Forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. We intend that such statements be protected by the safe harbor created thereby. The risks and uncertainties are detailed from time to time in reports filed by us with the SEC, including Forms 8-K, 10-Q, and 10-K.

In addition, such statements are subject to the risks and uncertainties discussed in the “Risk Factors” section and elsewhere in this annual report on Form 10-K. The risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Item 1. — Business.

Founded in 1982, Immucor, Inc., a Georgia corporation (“Immucor” or the “Company”), develops, manufactures and sells a complete line of reagents and automated systems that detect and identify certain properties of the cell and serum components of human blood for the purpose of blood transfusion. Our offerings are targeted at hospitals, donor centers and reference laboratories.

Potential Acquisition of our Company

On July 2, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with IVD Holdings Inc., a Delaware corporation (“Parent”) and affiliate of TPG Partners VI, L.P. (the “TPG Fund”), and IVD Acquisition Corporation, a Georgia corporation and a wholly owned subsidiary of Parent (“Purchaser”).  The TPG Fund is an entity affiliated with TPG Capital, L.P., a Texas limited partnership (“TPG” or “TPG Capital”).

Pursuant to the Merger Agreement, upon the terms and subject to the conditions thereof, on July 15, 2011 Purchaser commenced a tender offer (the “Offer”) to acquire all of the outstanding shares of common stock, $0.10 par value per share, of the Company (the “Shares”) at a purchase price of $27.00 per share, in cash (the “OfferPrice”), without interest thereon and less any applicable withholding taxes.  Immediately following the consummation of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into the Company (the “Merger”) and the Company will become a wholly owned subsidiary of Parent. The Merger Agreement also provides that the Merger may be consummated regardless of whether the Offer is completed, but if the Offer is not completed, the Merger will only be consummated after the shareholders of the Company have approved the Merger Agreement at a meeting of shareholders. In the Merger, each outstanding Share (other than (i) Shares owned by Parent, Purchaser or the Company and (ii) Shares as to which dissenters’ rights have been perfected (and not withdrawn) in accordance with applicable law) will be converted into the right to receive cash in an amount equal to the Offer Price, without interest thereon and less any applicable withholding taxes.

The Offer is initially scheduled to expire at 5:00 p.m., Atlanta, Georgia time, on August 18, 2011. Upon the consummation of the Offer, Purchaser will accept and promptly pay for each Share validly tendered, and not withdrawn, in accordance with the terms of the Offer.

Purchaser’s obligation to accept for payment and pay for all Shares validly tendered pursuant to the Offer is subject to (i) satisfaction of the “minimum tender condition” (as described below), (ii) Parent (either directly or through its subsidiaries) receiving the proceeds of the debt financing set forth in a debt commitment letter, dated July 2, 2011 (the “Debt Commitment Letter”), from Citigroup Global Markets Inc. (“Citi”), JPMorgan Chase Bank, N.A. (“JPMCB”), and J.P. Morgan Securities LLC (“JPMS” and, together with any other lenders party to the Debt Commitment Letter, collectively, the “Lenders”), pursuant to which the Lenders committed to provide an aggregate of $1.1 billion in debt financing to Purchaser (the “Debt Financing”) (or any alternative financing) and/or the Lenders (or the lenders party to a new commitment for any alternative financing) confirming to Parent or Purchaser that the Debt Financing (or any alternative financing) will be available at the consummation of the Offer in an amount sufficient to consummate the Offer and the Merger on the terms and conditions set forth in the Debt Commitment Letter (or a new commitment letter for any alternative financing), and (c) the satisfaction or waiver of other customary closing conditions as set forth in the Merger Agreement, including the expiration or termination of the waiting period (or any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of any applicable consent or approvals pursuant to German antitrust or merger control laws.

The “minimum tender condition” requires that, by the expiration of the Offer (as such expiration may be extended), the number of Shares validly tendered and not withdrawn, which, when added to the Shares already owned by Parent or any of its subsidiaries, represents at least 84% of the total number of Shares outstanding on a fully-diluted basis.

If the minimum tender condition is not met, and in certain other circumstances, the parties have agreed to complete the Merger without the prior completion of the Offer, after the approval of the Merger Agreement by the Company’s shareholders. In that case, the consummation of the Merger would be subject to similar conditions as the Offer, other than (a) the additional condition to the Merger regarding the shareholder approval requirement and the addition of certain customary conditions to the Company’s obligation to effect the Merger and (b) the inapplicability to the Merger of (i) the minimum tender condition and (ii) the condition regarding the receipt of funds from the Lenders and/or the confirmation of the availability of the Debt Financing from the Lenders.

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The Company is permitted to solicit inquiries or engage in discussions with third parties relating to an acquisition proposal (as defined in the Merger Agreement) until 11:59 p.m., Atlanta, Georgia time on August 15, 2011, and after such period the Company may not solicit or initiate discussions with third parties regarding other proposals to acquire the Company (the “no-shop” period) and has agreed to certain restrictions on its ability to respond to such proposals, subject to the fulfillment of certain fiduciary duties of the Company’s board of directors. The Company must give Parent and Purchaser four business days notice (whether prior to or during the “no-shop” period) before the Company is permitted to change its recommendation or terminate the Merger Agreement to accept a superior proposal (as defined in the Merger Agreement).

The Merger Agreement contains certain termination rights for Parent and the Company including, with respect to the Company, in the event that the Company receives a superior proposal. In connection with the termination of the Merger Agreement under specified circumstances, including with respect to the Company’s entry into an agreement with respect to a superior proposal, the Company is required to pay to Parent a termination fee equal to $45 million, unless the termination by the Company and entry into an agreement with respect to a superior proposal occurs prior to the “no-shop” period or involves a party from whom the Company has received an acquisition proposal following the date of the Merger Agreement and prior to the “no shop” period, in which case the Company is required to pay Parent a termination fee equal to $25 million.  Parent will be required to pay the Company a termination fee equal to $90 million under certain specified circumstances as set forth in the Merger Agreement.

Industry

We are part of the blood banking industry, which generally seeks to prevent transfusion reactions through the testing of blood and blood components prior to transfusion. In the United States (U.S.), the Food and Drug Administration (“FDA”) regulates the transfusion of human blood as a drug and as a biological product. The FDA regulates all phases of the blood banking industry, including donor selection and the collection, classification, storage, handling and transfusion of blood and blood components. The FDA requires all facilities that manufacture products used for any of these purposes, and the products themselves, to be registered or licensed by the FDA. (See “Regulation” for further discussion.)

The principal components of blood are red cells (the cellular portion) and plasma (the fluid portion).  Attached to the exterior of red cells are antigens, which determine the blood group (A, B, AB or O) and type (Rh positive or Rh negative) of an individual’s blood. Plasma contains many different kinds of proteins, including antibodies that are produced by the body in response to foreign substances, such as foreign red cell antigens introduced in a transfusion. In its normal state, a patient’s blood does not contain antibodies that will react with its own red cell antigens. However, if foreign antigens are introduced into the patient’s blood in a transfusion, the patient’s body will produce antibodies to combat those foreign antigens.

Because of the potential reaction of antigens and antibodies, it is crucial that healthcare providers correctly identify the antigens and antibodies present in patient blood and donor blood before a transfusion. If a donor’s red cells contain antigens that are recognized by antibodies in the patient’s plasma, the transfused red cells could be destroyed in a potentially life-threatening reaction. Also, if foreign antigens from donor red cells are introduced into a patient’s blood through a transfusion, the patient’s body can produce new antibodies to the foreign antigens.  The production of these new antibodies, known as alloimmunization, can complicate future transfusions.

Because of the critical importance of matching patient and donor blood, highly skilled and educated technologists in hospitals, donor centers and reference laboratories generally perform procedures for testing compatibility. At present, many customers perform these tests manually in the U.S., making blood testing laboratories much more labor intensive than other types of testing laboratories. In our direct markets outside of the U.S., a significant portion of the customers are performing these tests with automation.

We estimate the worldwide blood banking reagent and instrument market at approximately $1.2 billion. The markets in which we have a direct distribution presence, the U.S., Canada, Western Europe and Japan, represent most of the addressable market today. We sell through distributors in other international markets.

Strategy and Long-Term Growth Drivers

Strategy

Our strategy is to drive automation in the blood bank. We began our automation strategy in 1998 with the goal of improving the operations of the blood bank as well as patient safety. Through our innovation, we believe that our instruments are among the most functionally rich instrumentation available on the market.

We believe our customers, whether a hospital, a donor center or a reference laboratory, benefit from automation. Automation can allow customers to reduce headcount as well as overtime in the blood bank, which can be a benefit given the current shortage of qualified blood bank technologists. We also believe that automation can improve patient safety, can increase operational efficiency and, for customers such as integrated delivery networks with multiple blood banks, can permit the standardization of best practices. For Immucor, automation allows us to gain market share and secure a long-term, contractual relationship with our customers.

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We continually innovate to ensure our offerings are competitive. For serology testing, Immucor is the only Company to offer “Scalable Solutions” to meet the needs of blood banks, regardless of size.  We offer two fully automated instruments for serology testing – NEO® and Echo® – to meet the different needs of our customers depending upon the volume in their laboratory and the complexity of the testing required.

In calendar 2010, we launched our fourth generation automated instrument, NEO, worldwide. Targeted at large hospitals, donor centers and reference laboratories, NEO replaces our previous high volume instrument, Galileo®, and due to added functionality, we believe NEO is a more attractive instrument for the hospital market. NEO delivers the market’s highest type-and-screen throughput and broadest test menu as well as new STAT priority functionality for improved workflow.

Launched worldwide in 2007, Echo, our third generation automated instrument, is targeted at the market segment that is the least automated in the U.S. – small- to medium-sized hospitals. Echo features STAT functionality, exceptional mean time between failures and what we believe is the fastest turnaround time in the industry.

In August 2008, we invested in what we believe will be the future of the blood bank – molecular immunohematology – with our acquisition of privately-held BioArray Solutions (“BioArray”). BioArray pioneered the development of DNA typing of blood for transfusion. With the goal of improving transfusion medicine, we believe that molecular immunohematology will revolutionize blood bank operations. In many countries, blood pre-transfusion testing is limited to the prevention of transfusion reactions and not for the prevention of alloimmunization, which occurs when antigens foreign to the patient are inadvertently introduced into the patient’s blood system through transfusions. If alloimmunization occurs, the patient develops new antibodies in response to the foreign antigens, thereby complicating future transfusions. By using multiplex, cost-effective molecular testing, our molecular technology allows testing to prevent alloimmunization for better patient care.

In fiscal 2010, we received CE (“Conformité Européenne”) Mark approval denoting regulatory clearance in the European Union (“EU”) for the Human Platelet Antigen (“HPA”) molecular immunohematology product as well as our current semi-automated molecular immunohematology system, the Array Imaging System and BASIS™ database. While the testing itself is primarily manual today, the current system automates the reading and interpretation of test results. In June 2010, we received CE Mark approval in the EU for our Human Erythrocyte Antigen (“HEA”) molecular immunohematology product. Our molecular offering is currently available for Research Use Only in the U.S.

We are currently working on an automated instrument as well as U.S. regulatory approval for the molecular offering, both of which we believe will allow for the further commercialization of our molecular immunohematology technology. Our current plan is to have a Research Use Only instrument available in calendar 2012.

Long-Term Growth Drivers

Our long-term growth drivers revolve around our automation strategy. We believe innovative instrumentation is the key to improving blood bank operations and patient safety, as well as increasing our market share around the world. In implementing our automation strategy, we are focused on the following:

i) Product Innovations – We believe innovation is an important part of our strategy. We continually seek to improve existing products and develop new products to increase our market share and to improve the operations of our customers. In calendar 2010, we launched our fourth generation automated instrument for serology testing, NEO. We are currently developing new serology reagent tests for use on our automated instruments as well as in a manual testing environment to further improve transfusion medicine. As noted above, in the new field of molecular immunohematology, we are currently developing an automated instrument for the DNA typing of blood for the purpose of transfusion, which we believe will be the future of blood bank operations.

ii) Instrument Placements – We believe that instrument placements are the most effective way to gain market share as there are tangible benefits in terms of gaining operational efficiencies and improving patient safety for customers automating their testing or upgrading their current instrumentation. We continually innovate to ensure our automation offerings are competitive. Our serology instruments are “closed systems,” using our proprietary Capture® reagents as well as certain traditional reagents. Our goal in placing instruments is to secure a long-term, contractual relationship with the customer for reagents. Each instrument placed typically provides us with a recurring revenue stream through the sale of reagents and supplies.

iii) International Growth – Outside of the U.S., we have direct distribution operations in Canada, Western Europe and Japan as well as a network of distributors in other parts of the world. As of May 31, 2011, approximately 30% of our sales were from outside the United States. We believe that our innovative automation offering and our proprietary and traditional reagent lines for serology as well as our new molecular immunohematology offering (discussed below) will enable us to continue to grow our market share outside the U.S.

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iv) Molecular Immunohematology – We believe that our acquisition of BioArray provides new, strategic growth markets for us, both in our current market of transfusion medicine through an offering complementary to our current serology product offerings as well as in potential new markets. We are currently working on new assays as well as an automated molecular immunohematology instrument.  Additionally, we are working on achieving U.S. regulatory approval for the molecular offering.  We believe these steps will help us further commercialize this innovative technology. Our current plan is to have a Research Use Only instrument available in calendar 2012. We believe that bringing the DNA typing of blood for transfusion to the blood bank will revolutionize transfusion medicine. We believe that we are in the forefront of this field.

Traditional Serology Reagents

A reagent is a substance that is added during a test in order to bring about a reaction. The resulting reaction is used to confirm the presence of another substance. Our reagents are used to identify different properties of blood for the purpose of transfusion.

Most of our current reagent products are used in tests to i) identify the blood group (A, B, AB, O) and type (Rh positive or negative) ii) to detect and identify red cell antibodies or red cell antigens, iii) to detect and identify platelet antibodies and iv) to determine blood compatibility (crossmatch). The FDA requires the accurate testing of blood and blood components for the purpose of transfusion, using only reagents that have been licensed or cleared by the FDA.

Under traditional agglutination blood testing techniques (manual method), the technologist manually mixes serum with red blood cells in a test tube, performs several additional procedures, and then examines the mixture to determine whether there has been an agglutination reaction. A positive reaction occurs if the cells are drawn together in clumps by the presence of corresponding antibodies and antigens. Due to the critical importance of matching patient and donor blood, testing procedures using agglutination techniques are usually performed manually by highly educated and skilled technologists.

We estimate that approximately 60% of customers in the U.S. perform testing on a manual basis without the use of an automated instrument. These customers are primarily in the small- to medium-hospital segment of the market. In the high volume segment of the U.S. market (large hospitals, donor centers and reference laboratories) and in our international direct markets, a significant portion of the customers are automated.

Traditional reagents are used in a manual setting but certain products are also used on our automated instruments. Traditional reagents accounted for approximately 60% of our revenue in fiscal 2011. We believe there is a slight amount of seasonality in our reagent business as fewer donations and elective surgical procedures are performed in our first fiscal quarter (June-August).

Proprietary Technology Platforms

Solid Phase Technology

Our serology instruments use both our proprietary solid phase technology, marketed under the name Capture, as well as certain traditional reagents to perform tests. In our proprietary solid phase blood test system, red cell or platelet antigens are bound to a microtitration plate as a solid support (the solid phase), and the bound reactant captures other reactants in a fluid state and binds those fluid reactants to the solid phase. In this testing system, patient or donor serum or plasma is placed in the well of a plastic microtitration plate on which antigen reactants have been bound. Special proprietary indicator cells manufactured by Immucor are then added. In a positive reaction, antibodies in the test sample are captured by the indicator cells and adhere to the bottom of the test well as a thin layer. In a negative reaction, there is no antibody attached to the indicator cells and they settle to the bottom of the test well as a small cell button. These reactions occur rapidly and result in clearly defined, machine-readable test results that are often easier to interpret than the subjective results sometimes obtained from existing agglutination technology (manual method). Also, in batch test mode the solid phase test results can generally be obtained in substantially less time than by traditional agglutination techniques. We have FDA approval or clearance for the Capture-P products for platelet testing, the Capture-R products for red cell testing, and one infectious disease test, Capture-CMV for acute cytomegalovirus antibody testing.

Molecular Immunohematology Technology

Our molecular immunohematology technology, which was obtained in August 2008 through our acquisition of BioArray, is marketed as the BeadChip™ system. BioArray developed a novel and flexible technology platform that allows for a variety of multiplex DNA-based testing, combining DNA amplification (PCR) with BeadChip detection and data analysis software. The platform combines semiconductor processing, microparticle chemistry and molecular biology to bring a high degree of flexibility and performance to DNA and protein analyses. Current BeadChip kits include Multiplex Human Erythrocyte Antigen (HEA) and Human Platelet Antigen (HPA). In late fiscal 2010, we received CE Mark approval for our HPA product as well as our system for reading and interpreting results (see below). In June 2010, we received CE Mark approval for our HEA product. The BeadChip system is currently available for Research Use Only in the U.S.

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Instruments and Instrument Systems

We offer customers a selection of automated analyzers. We designed our systems to be scalable, which enables laboratories to better match the instrument to their various needs based on the size of their testing facility, whether it is low, medium or high volume.  While we design and own the rights to our instruments, we contract with third-party manufacturers for their production.

Serology

NEO – Targeted at donor centers, large-volume hospitals and reference laboratories, NEO provides a fully-automated solution to perform all routine blood bank tests, including blood grouping, antibody screening, crossmatch, direct antiglobulin test (DAT) and antibody identification. Launched worldwide in calendar 2010, NEO is our fourth generation automated instrument. It replaces our previous high volume instrument, Galileo, which was launched in Europe in 2002 and in the U.S. in 2004. We believe Galileo is in its natural replacement cycle (approximately five to seven years). In addition to opportunities in the Galileo installed base, we believe there is also opportunity to expand our automated footprint in the hospital market because of NEO’s added functionality, including STAT functionality, a faster turnaround time and improved reliability. A high throughput instrument, NEO can process up to 224 different samples at once, and can perform approximately 60 type-and-screen tests an hour.  NEO uses our proprietary Capture reagent products as well as certain traditional reagents. We believe that NEO has the highest type and screen throughput available in the global market.

ECHO – Launched worldwide in 2007, Echo is targeted at small- to medium-sized hospitals as well as at integrated delivery networks (both hospital and lab systems) in combination with NEO. Like NEO, Echo has a broad test menu and uses both our proprietary Capture reagents as well as certain traditional reagents to perform its testing. With the capacity to load 20 samples at a time, Echo can perform approximately 14 type-and-screen tests an hour. Echo features STAT functionality, exceptional mean time between failures and what we believe is the fastest turnaround time in the industry.

CAPTURE WORKSTATION (Semi-automated Processor) – The Capture Workstation has semi-automated components for performing our proprietary Capture assays manually. It is marketed as a back-up system for our fully automated NEO and Echo instruments, or as a standalone test system for small laboratories looking to standardize testing.

Molecular

ARRAY IMAGING SYSTEM AND BASIS™ (Semi-automated)– Today, molecular testing using our BeadChip technology is a semi-automated process. The testing itself is primarily manual while the reading and interpretation of test results is automated with our Array Imaging System and BASIS database. We are in the process of developing an instrument to automate the manual testing process. We are targeting to have a Research Use Only instrument available in calendar 2012.

Research and Development

We continually seek to improve our existing products and to develop new ones in order to increase our market share.  Prior to sale, any new product requires regulatory approvals, including licensing or pre-market clearance from the FDA in the U.S. and CE marking in Western Europe.  For the fiscal years ended May 31, 2011, 2010 and 2009, we spent approximately $15.9 million, $15.4 million and $10.7 million, respectively, for research and development. Research and development expenses have increased over the past three years due to the acquisition of BioArray in August 2008 and the subsequent development work on our molecular immunohematology offering.

Marketing and Distribution

Our potential customers are donor centers, hospitals and reference laboratories. No single customer represents 10% or more of our annual consolidated revenue.

We have a direct sales presence in the U.S., Canada, Western Europe and Japan. We sell through distributors in other regions of the world. We offer several instrument procurement options, including direct sales and rentals.

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Backlog

As of May 31, 2011, we had an instrument backlog of approximately 113 Echos and 60 Galileo/NEOs. This backlog represents instrument orders that have been received but the instruments have either not been installed or the customer validation process has not been completed. As such, the instruments are not generating recurring reagent revenue at their expected annualized run rates. While the instrument backlog is not material as of May 31, 2011, reagent revenue that will be generated from these instruments will contribute to revenue growth in the future.  At May 31, 2011, in accordance with U.S. generally accepted accounting principles, we had not recognized approximately $13.6 million in deferred revenue from instrument sales contracts that had reagent price protection and from extended warranty sales.

Suppliers

We obtain raw materials from numerous outside suppliers and believe our business relationships with them are good. Some of our products are derived from blood having particular or rare combinations of antibodies or antigens, which are found in a limited number of individuals. To date, we have been able to obtain sufficient quantities of such blood for use in manufacturing our products, but there can be no assurance that a sufficient supply of such blood will always be available to us.

We source our serology instruments from single-source suppliers. While these relationships are significant, our business is not substantially dependent upon them because we believe that other manufacturers could supply the instruments to us after a reasonable transition period. We believe that our business relationship with our instrument suppliers is excellent. We have elected not to dual source our instruments because we consider our primary exposure to be the sudden bankruptcy of the suppliers. In the event a current instrument supplier experiences financial problems that prevent it from continuing to produce our instrument, we believe it would take in the range of 18 months to 24 months to transfer the technology and begin production with a new instrument supplier. While a change in an instrument supplier would disrupt our growth opportunities during the transition period, we do not believe it would have a material financial impact on our existing business as nearly 85% of our revenue is generated from our reagents.

Regulation

The manufacture and sale of blood banking products is a highly regulated business and is subject to continuing compliance with multiple U.S., Canadian, Western European, Japanese and other country-specific statutes, regulations and standards that generally include licensing, product testing, facilities compliance, product labeling, post-market vigilance and consumer disclosure.  

In the U.S., an FDA biologics license is issued for an indefinite period of time, subject to the FDA’s right to revoke the license.  As part of its overview responsibility, the FDA makes facility inspections on an unannounced basis.  In addition, each product manufactured by us is subject to formal product submissions and review processes by the FDA and other regulatory bodies, such as Health Canada, a European Union recognized Notified Body and the Japanese Ministry of Health prior to authorization to market. Significant changes to our products or facilities can require additional submission and review prior to implementation. For example, we hold several FDA biologic licenses to manufacture blood grouping reagents, anti-human globulin reagents and reagent red blood cells. We must submit biologic license applications or 510(k) pre-market notifications to the FDA to obtain product licenses or market clearance for new products or instruments. To accomplish this, we must submit detailed product information to the FDA, perform a clinical trial of the product, and demonstrate to the satisfaction of the FDA that the product meets certain efficacy and safety standards. There can be no assurance that any future product licenses, product clearances or instrument clearances will be obtained by us.

Our manufacturing and distribution facilities in the U.S., Germany and Canada are certified to ISO 13485:2003. This is an internationally recognized standard and certification is required in order to continue product distribution in key markets such as the European Union and Canada. In addition, to allow continued marketing of our products in the European Union, we are required to maintain certification under the EC Full Quality Assurance System Assessment in accordance with the requirements of Annex IV of the IVD Medical Devices Directive 98/79/EC. This certification authorizes the use of the CE Mark on our products that allows products free access to all countries within the European Union. We have successfully completed certifications for CE marking of all products manufactured for the European market.

In addition to the U.S., Western Europe, Canada and Japan, there are multiple countries worldwide that also impose regulatory barriers to market entry. We continue to maintain product registrations and approvals necessary to maintain access to foreign markets.

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In June 2009, we announced that the FDA, in an administrative action based on a January 2009 inspection, issued a notice of intent to revoke (“NOIR”) our biologics license with respect to our Reagent Red Blood Cells and Anti-E (Monoclonal) Blood Grouping Reagent products. Under this administrative action, we have the opportunity to demonstrate or achieve compliance before the FDA initiates revocation proceedings or takes other action. The FDA did not order the recall of any of our products or restrict us from selling these products. This administrative action was a follow on to a warning letter that we received in May 2008. We had been working on an FDA-approved remediation plan, submitted after the warning letter, but had failed to make adequate progress at the time of the FDA’s follow-up inspection in January 2009. In early calendar 2009 (during our fiscal third quarter of 2009), we formalized efforts to improve our quality systems through the Quality Process Improvement Project. In August 2009 in response to the June 2009 administrative action, we submitted a detailed remediation plan that outlined our actions and timelines to correct the FDA’s noted deficiencies from the January 2009 inspection. The Quality Process Improvement Project served as the basis for the detailed remediation plan. During our third fiscal quarter of 2010, we completed the remediation portion of the Project. During June 2010, the FDA conducted an inspection of our facilities.  During September 2010, we were notified by the FDA that while the June 2010 inspection “disclosed that substantive corrections have been made, some deviations continue.” Therefore, the FDA stated that the conditions outlined in the June 2009 NOIR administrative action remain in effect. The FDA stated it will evaluate our overall compliance status at its next inspection. Because of the progress demonstrated at the June 2010 inspection, the FDA is allowing normal approval of regulatory applications.

Environmental

Some of our processes generate hazardous waste and we have a U.S. Environmental Protection Agency identification number. We believe we are in compliance with applicable portions of the federal and state hazardous waste regulations.

Patents and Trademarks

Since 1986, the U.S. Patent Office has issued six patents to us pertaining to our solid phase technology for serology testing, five of which have expired. The remaining patent expires in 2012. We believe that our trade secrets and know-how will help prevent any current or future competitors from successfully copying our solid phase products.

When we acquired BioArray in August 2008, we acquired a substantial portfolio of issued patents or pending patent applications.  Through the development of technologies supported by the patents, BioArray developed a novel and flexible technology platform that allows for a variety of DNA-based testing applications. The platform combines semiconductor processing, microparticle chemistry and molecular biology to bring a high degree of flexibility and performance to DNA and protein analysis. Using this technology platform, BioArray developed complete assay solutions called the BeadChip system. These patents expire between 2018 and 2025.

 We use trademarks on several of the products we sell. These trademarks are protected by registration in the U. S. and other countries where such products are marketed using the trademarks. We consider these trademarks in the aggregate to be of material importance in the operation of our business.

Competition

Competition in the blood banking industry is based on quality of instrumentation and reagents, pricing, talent of the sales forces, ability to furnish a range of quality existing and new products, reliable technology, skilled and trained technicians, customer service and continuity of product supply. We believe we are well positioned to compete favorably in this industry principally because of the completeness, reliability and quality of our product line, our competitive pricing structure and our introduction of new innovative products, such as our Capture technology and full line of automated instruments for serology testing and our innovative molecular immunohematology offering. We also believe that continuing research efforts in the area of blood bank automation, the experience and expertise of our sales personnel and the expertise of our technical and customer support staff will enable us to remain competitive in the market.

Our principal competitors worldwide are Ortho-Clinical Diagnostics (“Ortho”), a Johnson & Johnson company, and Bio-Rad Laboratories, Inc. (“Bio-Rad”). Both Ortho and Bio-Rad sell instrumentation as well as reagents.

Financial Information about Geographic Areas

We conduct our business globally with manufacturing facilities in the U.S. and Canada. We have sales operations in the U.S., Canada, several Western European countries and Japan. Roughly 30% of our revenues are generated by our international affiliates. In addition to the potentially adverse impact of foreign regulations (see “Regulations”), we may also be affected by more difficult market conditions outside the U.S., which could impact our revenues and profit margins. Also, there may be adverse consequences from fluctuations in foreign currency exchange rates, which may affect the competitiveness of our products and our profit margins because our affiliates sell our products predominantly in local currencies, but our cost structure is weighted towards the U.S. dollar.

For financial information about geographic areas, see Note 15 “Domestic and Foreign Operations” of the notes to the consolidated financial statements.

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Employees

At May 31, 2011, we had a total of 757 full-time employees worldwide. We have a low staff turnover rate and consider our employee relations to be good. In addition to our full-time work force, we employ temporary and contract employees. None of our employees are represented by a labor union.

Available Information

We file reports, proxy statements and other information under the Securities Exchange Act of 1934 with the Securities and Exchange Commission (the “SEC”).  Electronic versions of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports filed or furnished with the SEC may be accessed free of charge through our website at www.immucor.com. The information may also be accessed at the SEC’s web site at www.sec.gov.

Item 1A. — Risk Factors.

We are subject to various risks and uncertainties relating to or arising out of the nature of our business and general business, economic, financing, legal and other factors or conditions that may affect us. We provide the following cautionary discussion of risks and uncertainties relevant to our business, which we believe are factors that, individually or in the aggregate, could have a material and adverse impact on our business, results of operations and financial condition, or could cause our actual results to differ materially from expected or historical results. You should understand that it is not possible to predict or identify all such factors. Consequently, our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial to our operations.

Risks Relating to Our Company

The completion of the Offer for all of our Shares and the consummation of the proposed Merger are subject to risks and uncertainties, including the satisfaction of specified conditions.

As previously disclosed, Parent, Purchaser and the Company entered into the Merger Agreement pursuant to which Purchaser commenced the Offer on July 15, 2011.  The consummation of the transaction is subject to several conditions, including regulatory approvals.

We cannot predict whether the closing conditions to the Offer and those set forth in the Merger Agreement will be satisfied, and the transactions contemplated by the Merger Agreement may be delayed or even abandoned before completion if certain events occur. If the conditions to the Offer or the Merger are not satisfied or waived, or if the transactions are not completed for any other reason, (i) the market price of our common stock could significantly decline, (ii) we will remain liable for expenses that we have incurred related to the transaction, including financial advisor and legal fees, and may be required to pay either a $25 million or $45 million termination fee if we terminate the Merger Agreement and accept a superior offer, and (iii) we may experience substantial disruption in our sales, research and development, and operating activities, and the loss of key personnel, customers, suppliers and other third-party relationships, any of which could materially and adversely affect us and our business, operating results and financial condition.

Lower blood demand could negatively impact our financial results.

Our products are used to test blood prior to transfusion. Lower demand for blood in the markets in which we operate could result in lower testing volumes. Lower blood demand could result from a variety of factors, such as fewer elective surgeries and more efficient blood utilization by hospitals. Blood is a large expense for hospital laboratories and pressure on hospital budgets due to macroeconomic factors and healthcare reform could force changes in the ways in which blood is used. Lower blood demand could negatively impact our revenue and profitability.

FDA administrative action could have a material and adverse effect on our business.

In June 2009, we announced that the Food and Drug Administration (“FDA”), in an administrative action based on a January 2009 inspection, issued a notice of intent to revoke our biologics license (“NOIR”) with respect to our Reagent Red Blood Cells and Anti-E (Monoclonal) Blood Grouping Reagent products. During June 2010, the FDA conducted an inspection of our facilities. During September 2010, we were notified by the FDA that while the June 2010 inspection “disclosed that substantive corrections have been made, some deviations continue.” Therefore, the FDA stated that the conditions outlined in the June 2009 NOIR administrative action remain in effect. The FDA stated it will evaluate our overall compliance status at its next inspection. Because of the progress demonstrated at the June 2010 inspection, the FDA is allowing normal approval of regulatory applications.

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As part of its overview responsibility, the FDA makes plant and facility inspections on an unannounced basis. The FDA could seek to escalate the NOIR, for example, by issuing a consent decree or revoking our biologics license for the products impacted if we fail to implement a corrective action plan that adequately addresses the deficiencies noted by the NOIR. The FDA could also take further regulatory actions, including recalls or seizures of our products, a total or partial shutdown of production, delays in future marketing clearances or approvals, and withdrawals or suspensions of our current products from the market.

On-going governmental investigations and litigation could have a material and adverse effect on our business.

As noted in Item 3 below, we are the subject of a number of investigations and private actions.

● The Federal Trade Commission (“FTC”) is investigating whether Immucor violated federal antitrust laws or engaged in unfair methods of competition, through three acquisitions made in the period from 1996 through 1999 or by restricting price competition. The FTC could decide to commence administrative and possibly federal court proceedings for purposes of determining whether there has been a violation and might seek to impose a variety of remedies for any violation including injunctive relief, divestiture of assets and/or disgorgement of profits.

● We are the subject of a number of private civil actions by customers seeking class certification and alleging price fixing. Were plaintiffs to prevail in one or more of the pending civil actions, we could have to pay significant amounts, including treble damages and attorneys’ fees.

● We were the subject of a private civil action brought by a shareholder seeking class certification and alleging that the Company failed to disclose material information with respect to alleged violations of the antitrust laws and that the Company made inadequate disclosures about the results of FDA inspections and the Company’s quality control efforts. On June 30, 2011, the District Court granted our motion to dismiss the complaint and closed the case.  Plaintiff could challenge that result, but has not done so as of July 20, 2011. Were this action to be reinstated and the plaintiff to prevail on behalf of a class, we could have to pay significant amounts, including damages and attorneys’ fees.

The imposition of any of the above remedies could have a materially adverse impact on our business, financial condition and results of operations. In addition, regardless of the ultimate outcome in the above matters, we expect to incur significant expenses, including attorneys’ fees, in responding to and defending against issues raised in the above matters.

A catastrophic event at our Norcross, Georgia facility would prevent us from producing many of our reagent products.

Substantially all our reagent products are produced in our Norcross facility. While we have reliable supplies of most raw materials, our reagent production is highly dependent on the uninterrupted and efficient operation of the Norcross facility, and we currently have no plans to develop a third-party reagent manufacturing capability. Therefore, if a catastrophic event occurred at the Norcross facility, such as a fire or tornado, many of those products could not be produced until the manufacturing portion of the facility was restored and cleared by the FDA. We maintain a disaster plan to minimize the effects of such a catastrophe, and we have obtained insurance to protect against certain business interruption losses. However, there can be no assurance that such coverage will be adequate or that such coverage will continue to remain available on acceptable terms, if at all.

Unforeseen product performance problems could prevent us from selling or result in a recall of the affected products.

In the event that we experience a product performance problem with either our instruments or our reagents, we may be required to voluntarily recall or suspend selling the products until the problem is resolved. Depending on the product as well as the availability of acceptable substitutes, such a product recall or suspension could significantly impact our operating results.

Poor product performance could increase operating costs and result in the loss of current or future customers.

Instrument performance and reliability is a key factor in satisfying current customers and attracting new customers. Poor performance or unreliability of instruments would not only increase maintenance costs but also could result in losing important customers. Therefore, if we are unable to provide effective instrument support and service and minimize instrument down time, our revenues and financial results would be adversely affected.

Because we sell our products internationally, we could be adversely affected by fluctuations in foreign currency exchange rates.

In the fiscal year ended May 31, 2011, revenue outside the U.S. was approximately 30% of total revenue. As a result, fluctuations in foreign currency exchange rates, particularly the Euro, the Canadian Dollar, the British Pound and the Japanese Yen against the U.S. Dollar, could make our products less competitive and affect our sales and earnings levels. An increase in our revenue outside the U.S. would increase this exposure. We have not historically hedged against currency exchange rate fluctuations.

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Gross margin volatility may negatively impact our profitability.

Our gross margin may be volatile from period to period due to various factors, including instrument sales, reagent product mix and manufacturing costs. As we continue to drive automation in the blood bank marketplace and experience increased instrument sales as a result, the probable sales mix (in terms of instrument/reagent sales) could make it difficult for us to sustain the overall gross margins we have generated in the past. The higher margins on the Capture reagents used on our instruments may not be enough to offset the lower margins on the instruments themselves. Moreover, if the sales mix of instruments includes more capital purchases and fewer rentals, applicable accounting rules could put further pressure on our overall gross margin. ASC 605-25 “Revenue Recognition: Multiple-Element Arrangements,” requires that, for sales made on a purchase basis, the cost of the instrument be expensed upfront and the corresponding revenue be spread over the entire sales contract period for sales contracts with reagent price guarantees. For our reagent products, margins vary depending upon the product with rarer products generating higher margins. Depending upon the sales mix of these products, margins could vary significantly from period to period. Our reagent products are manufactured in-house. Margins for these products could be impacted based upon costs of raw materials and labor as well as overhead and the efficiency of our manufacturing operations from period to period. Margins may also be negatively impacted by increased competition. New market entrants or existing market participants seeking to gain market share may foster a competitive environment of pricing pressures and/or increased marketing and other expenditures that could negatively impact profitability.

If customers delay integrating our instruments into their operations, the growth of our business could be negatively impacted.

From time to time in the past, some of our customers have experienced significant delays between the purchase of an instrument and the time at which it has been successfully integrated into the customer’s existing operations and is generating reagent revenue at its expected annualized run rate. These delays may be due to a number of factors, including staffing and training issues and difficulties interfacing our instruments with the customer’s computer systems. Because our business operates on a “razor/razorblade” model, such integration delays result in delayed purchases of the reagents used with the instrument. A number of steps have mitigated these integration delays: improved performance of our field service staff, better instrument instructions, increased use of internet-based remote diagnostic tools, and more efficient scheduling of instrument installations. In addition, we have taken steps in the design of our next generation instruments intended to make it easier for our customers to integrate the instruments into existing operations. However, delays of customers successfully integrating instruments into their operations could adversely impact our future revenues and earnings growth.

We may not be successful in capitalizing on acquisitions of former distributors or newly established distribution networks outside the U.S.

An integral part of our strategy is to place our instruments in additional markets outside North America. To further this strategy, in the past few years we have acquired our former distribution businesses in Japan and the U.K. and established our own direct distribution organization in France. Our ability to grow successfully in overseas markets depends in part on our ability to achieve product acceptance and customer loyalty in these markets. Additionally, our operations in foreign countries present certain challenges and are subject to certain risks not necessarily present in our domestic operations, such as fluctuations in currency exchange rates, shipping delays, changes in applicable laws and regulations and various restrictions on trade. These factors could impact our ability to compete successfully in these markets, which could in turn negatively affect our international expansion goals, and could have a material adverse effect on our operating results.

Our financial performance is highly dependent on the timely and successful introduction of new products and services.

Our financial performance depends in part upon our ability to successfully develop and market next generation automated instruments, new instruments such as our next generation molecular immunohematology instrument and other products in a rapidly changing technological and economic environment. Our market share and operating results would be adversely affected if we fail to successfully identify new product opportunities and timely develop and introduce new instruments that achieve market acceptance, or if new products or technology are introduced in the market by competitors that could render Immucor’s instruments or reagents uncompetitive or obsolete. In addition, delays in the introduction of new products due to regulatory, developmental, or other obstacles could negatively impact our revenue and market share, as well as our earnings, including the potential impairment of goodwill related to our molecular immunohematology offering.

Global economic conditions may have a material adverse impact on our results.

Immucor is a global company with direct operations in the U.S., Canada, Western Europe and Japan and customers around the world. General economic conditions impact our customers, particularly hospitals. For our instruments that are primarily sold on a capital purchase basis, reduced capital budgets that result from negative economic conditions, such as a global recession, could result in lower instrument sales, which would negatively impact our future revenue, profitability and cash flow. A shift from capital purchases to rentals, which require no upfront cash outlay, could negatively impact our cash flow in the near term. Additionally, global economic conditions may adversely affect the ability of our customers to access funds to enable them to fund their operating and capital budgets. Budget constraints could slow our progress in driving automation in both our customer base and the blood banking industry as a whole, which could negatively impact our future revenues, profitability and cash flow.

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We are highly dependent on our senior management team and other key employees, and the loss of one or more of these employees could adversely affect our operations.

Our success is dependent upon the efforts of our senior management and staff, including sales, technical and management personnel, many of whom have very specialized industry and technical expertise that is not easily replaced. If key individuals leave us, we could be adversely affected if suitable replacement personnel are not quickly recruited. Our future success depends on our ability to continue to attract, retain and motivate qualified personnel. There is intense competition for medical technologists and in some markets there is a shortage of qualified personnel in our industry. If we are unable to continue to attract or retain highly qualified personnel, the development, growth and future success of our business could be adversely affected.

Supply chain interruptions could negatively impact our operations and financial performance.

Supply chain interruptions could negatively impact our operations and financial performance. The supply of any of our manufacturing materials may be interrupted because of poor vendor performance or other events outside our control, which may require us, among other things, to identify alternate vendors and result in lost sales and increased expenses. While such interruption could impact any of our third-party sourced materials, two particular areas of note are our instrument suppliers and our supply sources for rare antibodies or antigen combinations, which are described below.

We purchase our instruments from single-source suppliers. If the supply of any of our instruments were interrupted, due to the supplier’s financial problems or otherwise, we believe an alternative supplier could be found but it would take in the range of 18 months to 24 months to transfer the technology and begin production with a new instrument supplier. The disruption of one of these supply relationships could cause us to incur costs associated with the development of an alternative source. Also, we may be required to obtain FDA clearance of the instrument if it is not built to the same specifications as with the previous supplier. The process of changing an instrument supplier could have an adverse impact on future growth opportunities during the transition period if supplies of finished goods on hand were insufficient to satisfy demand.

Some of our reagent products are derived from blood having particular or rare combinations of antibodies or antigens, which are found in a limited number of individuals. If we had difficulty in obtaining sufficient quantities of such blood and the supply was interrupted, we would need to establish a viable alternative, which may take both time and expense to either identify and/or develop and could have an adverse impact on our operations and financial position.

Distribution chain interruptions could negatively impact our operations and financial performance.

Distribution chain interruptions could negatively impact our operations and financial performance. Our international affiliates are supplied with a significant amount of product from our U.S. manufacturing facilities. If circumstances arose that disrupted our distribution of U.S.-sourced product internationally, we would need to establish an alternate distribution channel, which may take both time and expense to establish and could have an adverse impact on our operations and financial position.

We may be unable to adequately protect our proprietary technology.

We have a substantial patent portfolio of issued patents or pending patent applications supporting our molecular immunohematology offering. Also, we have one of the original six patents on our proprietary Capture technology still in force. Our competitiveness depends in part on our ability to maintain the proprietary nature of our owned and licensed intellectual property. Because the law is constantly changing, and unforeseen facts may arise, there is always a risk that patents may be found to be invalid or unenforceable. Therefore, there is no absolute certainty as to the exact scope of protection associated with any intellectual property. We believe our patents, together with our trade secrets and know-how, will prevent any current or future competitors from successfully copying and distributing our BeadChip and Capture products. However, there can be no assurance that competitors will not develop around the patented aspects of any of our current or proposed products or independently develop technology or know-how that is the same as or competitive with our technology and know-how. Any damage to our intellectual property portfolio could result in an adverse effect on our current or proposed products, our revenues and our operations.

Protecting our intellectual property rights is costly and time consuming. We may need to initiate lawsuits to protect or enforce our patents, or litigate against third party claims, which would be expensive and, if we lose, may cause us to lose some of our intellectual property rights and reduce our ability to compete in the marketplace. Furthermore, these lawsuits may divert the attention of our management and technical personnel.

In the future, we may be subject to intellectual property rights infringement claims, which are costly to defend, could require us to pay substantial damages and could limit our ability to use certain technologies in the future.

Our commercial success depends, in part, not only on protecting our own intellectual property but on not infringing the patents or proprietary rights of third parties. From time to time we may receive notices from, or have lawsuits filed against us by, third parties claiming that we infringe on their intellectual property rights. Responding to such claims, regardless of their merit, can be time consuming, result in costly litigation, divert management’s attention and resources and cause us to incur significant expenses. Our practices, products and technologies, particularly with respect to the field of molecular immunohematology, may not be able to withstand third-party claims, regardless of the merits of such claims.

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As a result of such potential intellectual property infringement claims, we could be required or otherwise decide it is appropriate to discontinue manufacturing, using, or selling particular products subject to infringement claims or develop other technology not subject to infringement claims, which could be time consuming and costly or may not be possible. In addition, to the extent potential claims against us are successful, we may have to pay substantial monetary damages or discontinue certain of our practices, products or technologies that are found to be in violation of another party’s rights. We also may have to seek third-party licenses to continue certain of our existing or planned product lines, thereby incurring substantial costs related to royalty payments for such licenses, which could negatively affect our gross margins. Also, license agreements can be terminated under appropriate circumstances.  No assurance can be given that efforts to remediate any infringement will be successful or that licenses can be obtained on acceptable terms or that litigation will not occur.

In the event there is a temporary or permanent injunction entered prohibiting us from marketing or selling certain of our products, or a successful claim of infringement against us requiring us to pay royalties to a third party, and we fail to license such technology on acceptable terms and conditions or to develop or license a substitute technology, our business, results of operations or financial condition could be materially adversely affected. Further, any adverse ruling or perception of an adverse ruling in defending ourselves against these claims could have a material adverse impact on our stock price, which may be disproportionate to the actual significance of the ruling itself.

Risks Relating to our Industry

Government regulation may delay or prevent new product introduction and affect our ability to continue manufacturing and marketing existing products.

Our instruments, reagents and other products are subject to regulation by governmental and private agencies in the U.S. and abroad, which regulate the testing, manufacturing, packaging, labeling, distribution and marketing of medical supplies and devices. Certain international regulatory bodies also impose import and tax restrictions, tariff regulations, and duties on imported products. Delays in agency review can significantly delay new product introduction and may result in a product becoming “outdated” or losing its market opportunity before it can be introduced. Also, the FDA and international agencies have the authority to require a recall or modification of products in the event of a defect.

FDA clearance or approval generally is required before we can market new instruments or reagents in the U.S. or make significant changes to existing products. The process of obtaining marketing clearances and approvals from regulatory agencies for new products can be time consuming and expensive. There is no assurance that clearances or approvals will be granted or that agency review will not involve delays that would adversely affect our ability to commercialize our products.

If any of our products failed to perform in the manner represented during this clearance or approval process, particularly concerning safety issues, one or more of these agencies could require us to cease manufacturing and selling that product, or even recall previously-placed products, and to resubmit the product for clearance or approval before we could sell it again. Depending on the product, and the availability of acceptable substitutes, such an agency action could result in significantly reduced revenues and earnings for an indefinite period.  See the risk factor above describing in detail the risks related to the FDA’s June 2009 administrative action.

Federal, state and foreign regulations regarding the manufacture and sale of our products are subject to change. We cannot predict what impact, if any, such changes might have on our business. In addition, there can be no assurance that regulation of our products will not become more restrictive in the future and that any such development would not have a material adverse effect on our business.

The industry and market segment in which we operate are highly competitive, and we may not be able to compete effectively with larger companies with greater financial resources than we have.

Our industry and the markets we operate in are highly competitive. Some of our competitors have greater financial resources than we do, making them better equipped to fund research and development, manufacturing and marketing efforts, or license technologies and intellectual property from third parties. Moreover, competitive and regulatory conditions in many markets in which we operate restrict our ability to fully recoup our costs in those markets. Our competitors can be expected to continue to improve the design and performance of their products and to introduce new products with competitive price and performance characteristics. Although we believe that we have certain technological and other advantages over our competitors, maintaining these advantages will require us to continue to invest in research and development, sales and marketing and customer service and support. We cannot assure you that we will have sufficient resources to continue to make such investments at levels that our larger competitors could make or that we will be successful in maintaining such advantages.  

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Increased competition in the United States could negatively impact our revenues and profitability.

We could face increased competition in the U.S. market, which historically has had a limited number of market participants. For fiscal 2011, approximately 70% of our revenues were generated in the U.S., and our U.S. operations have higher gross margins than our operations outside the U.S. Additional competition in the U.S. could negatively impact our revenues and/or our profitability.

Changes in government policy may have a material adverse effect on our business.

Changes in government policy could have a significant impact on our business by increasing the cost of doing business, affecting our ability to sell our products and negatively impacting our profitability. Such changes could include modifications to existing legislation, such as U.S. tax policy, or entirely new legislation, such as the recently adopted healthcare reform bill.

The Patient Protection and Affordable Care Act that became law in March 2010 imposes a new 2.3% excise tax on medical device makers beginning in 2013, which could have a material negative impact on our results of operations and our cash flows. Other elements of this legislation could meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our business.

We may be exposed to product liability claims resulting from the use of products we sell and distribute.

Although product liability claims in our industry are infrequent, the expansion of our business in an increasingly litigious business environment may expose us to product liability claims related to the products we sell. We maintain insurance that includes product liability coverage and we believe our insurance coverage is adequate for our business. However, there can be no assurance that insurance coverage for these risks will continue to be available or, if available, that it will be sufficient to cover potential claims or that the present level of coverage will continue to be available at a reasonable cost. A partially or completely uninsured successful claim against us could have a material adverse effect on us.

Item 1B. — Unresolved Staff Comments.

Not applicable.

Item 2. — Properties.

In the U.S., we lease our corporate office and main manufacturing facilities along with laboratories and warehouses, which are located in Norcross, Georgia. We also lease the manufacturing facility for our molecular immunohematology products, which is located in Warren, New Jersey. Outside the U.S., we lease our distribution facility in Germany as well as our sales offices in Western Europe and in Japan, with the exception of our Belgium sales office, which we own. We also own our Canadian manufacturing facility.

Our owned properties are not encumbered as security for any loan. We believe that our current facilities are adequate for our current and anticipated needs and do not foresee any difficulty in renewing leases that expire in the near term.

Item 3. — Legal Proceedings.

In October 2007, we reported that the Federal Trade Commission (“FTC”) was investigating whether Immucor violated federal antitrust laws or engaged in unfair methods of competition through three acquisitions made in the period from 1996 through 1999, and whether Immucor or others engaged in unfair methods of competition by restricting price competition.  The FTC letter requested that we provide certain documents and information to the FTC concerning those acquisitions and concerning our product pricing activities since then.  In July 2008, the FTC formalized its document and information requests into a Civil Investigative Demand (“CID”) and also required us to provide certain additional information within the same general scope of its previous requests. The FTC has also required that we provide to them the documents we provided to the Department of Justice (see below). We have been cooperating with the FTC and we intend to continue cooperating, and we are assured that the issuance of a formal CID does not indicate any dissatisfaction with our cooperation. As was previously the case, at this time we cannot reasonably assess the timing or outcome of the investigation or its effect, if any, on our business.

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In April 2009, we received a subpoena from the United States Department of Justice, Antitrust Division (“DOJ”), requiring us to produce documents for the period beginning September 1, 2000 through April 23, 2009, pertaining to an investigation of possible violations of the federal criminal antitrust laws in the blood reagents industry. On November 8, 2010, we announced that the DOJ had informed us that it had closed its investigation.  The investigation was closed with no further action taken on the part of the DOJ.

Beginning in May 2009, a series of class action lawsuits has been filed against the Company, Ortho-Clinical Diagnostics, Inc. and Johnson & Johnson Health Care Systems, Inc. alleging that the defendants conspired to fix prices at which blood reagents are sold, asserting claims under Section 1 of the Sherman Act, and seeking declaratory and injunctive relief, treble damages, costs, and attorneys’ fees. These cases are identified in Exhibit 99.1 to the fiscal 2011 Form 10-K. All of these complaints make substantially the same allegations. The cases have been consolidated in the United States District Court for the Eastern District of Pennsylvania.  In August 2010 the United States District Court for the Eastern District of Pennsylvania denied, in part, Motions to Dismiss for failure to state a cause of action and a Motion to Stay Discovery filed by the Company and co-defendant Ortho-Clinical Diagnostics, Inc. The defendants filed a Motion for Reconsideration or for Certification for Interlocutory Appeal with respect to the Court’s order on defendants’ motion to dismiss, and that motion was denied in December 2010.  Discovery has now commenced in this litigation.  No determination has been made whether any of the plaintiffs’ claims have merit or should be allowed to proceed as a class action. We intend to vigorously defend against these cases. At this time we cannot reasonably assess the timing or outcome of this litigation or its effect, if any, on our business.

Private securities litigation in the United States District Court of North Georgia against the Company and certain of its current and former directors and officers asserts federal securities fraud claims on behalf of a putative class of purchasers of the Company's Common Stock between October 19, 2005 and June 25, 2009. This case is identified in Exhibit 99.1 to the fiscal 2011 Form 10-K. The case alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, by failing to disclose that Immucor had violated the antitrust laws, and challenges the sufficiency of the Company’s disclosures about the results of FDA inspections and the Company’s quality control efforts. On June 30, 2011, the District Court granted the defendants' motion to dismiss the complaint and closed the case.  Plaintiff could challenge that result, but has not done so as of July 20, 2011.  The Company will defend the case vigorously if it is reinstated. At this time, the Company cannot reasonably assess the timing or outcome of this litigation or its effect, if any, on its business.

On July 12, 2011, a purported shareholder of the Company filed a putative class action lawsuit in the Superior Court of Fulton County, Georgia, captioned as Hillary Kramer v. Immucor, Inc., et al., Civil Action No. 2011CV203124.  The action was brought on behalf of public shareholders of the Company and names as defendants Immucor, the individual directors of the Company, and TPG Capital and certain of its affiliates.  The action asserts claims for breaches of fiduciary duties against the Company’s board of directors in connection with the proposed previously-announced transaction with TPG, and for aiding and abetting the purported breaches of fiduciary duties by the TPG defendants.  The plaintiff seeks, among other things, preliminary and permanent relief, including injunctive relief enjoining the consummation of the proposed transaction, rescission of the proposed transaction to the extent it is consummated prior to the entry of a final judgment, and costs, expenses and disbursements of the action.  At this time, the Company cannot reasonably assess the timing or outcome of this litigation or its effect, if any, on its business.

On July 15, 2011, a second putative class action challenging the proposed transaction was filed by a purported shareholder of Immucor.  This action was filed in the Superior Court of Gwinnett County for the State of Georgia, and is captioned as Babette C. Schorsch v. Immucor, Inc., et al., Civil Action No. 11A0776-1.  The action is brought on behalf of public shareholders of Immucor and names as defendants Immucor, the individual directors of Immucor, two Immucor executive officers, and TPG Capital and its affiliates.  The action asserts claims for breaches of fiduciary duties against the Immucor board of directors in connection with the proposed transaction, and for aiding and abetting the purported breaches of fiduciary duties by the TPG defendants.  The plaintiff seeks, among other things, injunctive relief enjoining the consummation of the proposed transaction, rescission of the proposed transaction to the extent it is consummated prior to the entry of a final judgment, and costs, expenses and disbursements of the action.  At this time, Immucor cannot reasonably assess the timing or outcome of this litigation or its effect, if any, on its business.

On July 18, 2011, a third putative class action challenging the proposed transaction was filed by a purported shareholder of Immucor.  This is the second case filed in the Superior Court of Fulton County for the State of Georgia, and is captioned as Allan Pillay v. Immucor, Inc., et al., Civil Action No. 2011CV203339.  The action is brought on behalf of public shareholders of Immucor and names as defendants Immucor, the individual directors of Immucor, and TPG Capital and its affiliates.  The action asserts claims for breaches of fiduciary duties against the Immucor board of directors in connection with the proposed transaction, including that the Immucor’s Schedule 14D-9 is misleading or incomplete, and a claim for aiding and abetting the purported breaches of fiduciary duties by the TPG defendants.  The plaintiff seeks, among other things, a declaration that the action is maintainable as a class action, preliminary and permanent relief, including injunctive relief enjoining the consummation of the proposed transaction and rescission of the proposed transaction to the extent it is consummated prior to the entry of a final judgment, and costs, expenses and disbursements of the action.  At this time Immucor cannot reasonably assess the timing or outcome of this litigation or its effect, if any, on its business.

In fiscal 2011, the Company incurred approximately $1.6 million in legal expenses related to the Department of Justice investigation and the related lawsuits.

Other than as set forth above, we are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.  However, from time to time, we may become a party to certain legal proceedings in the ordinary course of business.

PART II

Item 5. — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on The Nasdaq Stock Market under the symbol BLUD.  The following table sets forth the quarterly high and low prices of the common stock for the fiscal periods indicated as reported on The Nasdaq Stock Market.

	High		Low
Fiscal Year Ended May 31, 2011
First Quarter	$	20.71	$	17.29
Second Quarter		20.55		15.01
Third Quarter		21.50		18.23
Fourth Quarter		21.95		18.21
Fiscal Year Ended May 31, 2010
First Quarter	$	18.80	$	11.24
Second Quarter		19.44		16.84
Third Quarter		21.45		18.17
Fourth Quarter		22.79		18.81

As of June 30, 2011, there were 405holders of record of our common stock, which excludes shareholders whose shares were held by brokerage firms, depositories and other institutional firms in “street name” for their customers.

Dividend Policy

We have never declared cash dividends with respect to our common stock. We presently intend to continue to reinvest our earnings in the business.

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Equity Compensation Plan Information

In 2005, our Board of Directors adopted, and the shareholders approved, the Immucor, Inc. 2005 Long-Term Incentive Plan (the “2005 Plan”). The 2005 Plan replaced our preexisting stock option plans, which were frozen and remain in effect only to the extent of awards outstanding under these plans. Under the 2005 Plan, the Company is able to award stock options, stock appreciation rights, restricted stock, deferred stock, and other performance-based awards as incentive and compensation to employees and directors. Awards for up to 3,600,000 shares of the Company’s common stock may be granted under the 2005 Plan. There is a restriction on the number of shares that may be used for awards other than stock options (1,800,000), and a separate restriction on the number of shares that may be used for grants of incentive stock options (also 1,800,000), but there is no restriction on the number of shares that may be used for grants of non-incentive stock options. Options are granted at the closing market price on the date of the grant. Option awards generally vest equally over a four-year period and have a six-year contractual term. Restricted stock awards generally vest equally over a five-year period. The 2005 Plan provides for accelerated vesting of option and restricted stock awards if there is a change in control, as defined in the plan.

The following table provides information as of May 31, 2011 with respect to the shares of our common stock that may be issued under our existing equity compensation plans:

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance ***
Equity compensation plans approved by security holders *	2,800,393	$17.17	1,095,803
Equity compensation plans not approved by security holders **	13,941	$0.89	-
Total	2,814,334	$17.09	1,095,803

*	Includes our 1998 Stock Option Plan, 2003 Stock Option Plan and 2005 Plan.
**	Includes our 1990 Stock Option Plan and 1995 Stock Option Plan.
***	Number of securities available for future issuance represents securities available under the 2005 Plan. At May 31, 2011, options had been granted under the 2005 Plan to purchase 2,393,382 shares of common stock and 695,592 shares of restricted stock had been granted; all of the 1,095,803 remaining shares are available for issue under the 2005 Plan. No securities are available for future issuance under any of the other plans, which were frozen when the 2005 Plan was adopted. For a description of the material features of the 2005 Plan, see Note 12 to the consolidated financial statements.

Stock Repurchase Program

The Company instituted a stock repurchase program in June 1998. In August 2009, the Board of Directors authorized the Company to repurchase an additional 2,000,000 shares of the Company’s common stock under this repurchase program, bringing the total authorized shares to 11,375,000.  No repurchases were made during the fiscal year ended May 31, 2011.  During the fiscal year ended May 31, 2010 and 2009, we repurchased approximately 650,000 and approximately 295,000 shares of our common stock in the open market for $11.6 million and $6.7 million, respectively. As of May 31, 2011, 9,178,356 shares had been repurchased under the program, leaving 2,196,644 shares available for repurchase.  The Company’s stock repurchase program does not have an expiration date.
 

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Performance Graph

The following performance graph compares the cumulative total shareholder return on an investment of $100 in our common stock for the last five fiscal years with the total return of the S & P 500 and a Peer Group Index for our last five fiscal years. Our primary competitor in the U.S. market is Johnson & Johnson through its Ortho-Clinical Diagnostics business unit. Due to the size and diversity of Johnson and Johnson, we do not believe it to be a true peer. For this reason, our Peer Group is comprised of the following publicly traded companies: (1) Meridian Bioscience, Inc.; (2) Gen-Probe, Inc.; (3) Haemonetics Corp. and (4) Qiagen NV, which we consider peers because they are medical technology companies without large pharmaceutical operations.

	5/06	5/07	5/08	5/09	5/10	5/11
Immucor, Inc.	100.00	173.71	147.58	82.78	108.03	115.13
S&P 500	100.00	122.79	114.57	77.26	93.47	117.73
Peer Group	100.00	109.77	124.88	102.81	112.41	139.92

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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Item 6 – Selected Financial Data.

(All amounts are in thousands, except per share amounts)

	For the Year Ended May 31,
	2011			2010			2009			2008			2007
		(1)			(1)			(1)			(1)			(1)
Statement of Income Data:
Net sales	$	333,091		$	329,073		$	300,547		$	261,199		$	223,678
Cost of sales     (exclusive of amortization included in operating expenses below)		96,175			95,349			84,536			75,710			65,923
Gross profit		236,916			233,724			216,011			185,489			157,755
Operating expenses:
Research and development		15,900			15,437			10,698			6,454			6,354
Selling, general, and administrative		90,686			88,667			84,616			70,289			58,392
Restructuring expenses		-			-			-			646			1,051
Amortization expense		4,333			4,278			3,739			357			346
Total operating expenses		110,919			108,382			99,053			77,746			66,143
Income from operations		125,997			125,342			116,958			107,743			91,612
Non-operating income (expense):
Interest income		706			454			1,957			4,263			2,841
Interest expense		(70	)		(33	)		(250	)		(371	)		(432	)
Other (expense) income – net		3,997			(551	)		(1,684	)		33			133
Total non-operating income (expense)		4,633			(130	)		23			3,925			2,542
Income before income taxes		130,630			125,212			116,981			111,668			94,154
Income taxes		41,303			42,629			40,798			40,214			34,086
Net income	$	89,327		$	82,583		$	76,183		$	71,454		$	60,068
Income per share:
Per common share – Basic	$	1.27		$	1.18		$	1.08		$	1.02		$	0.88
Per common share – Diluted	$	1.26		$	1.17		$	1.07		$	1.00		$	0.85
Weighted average shares outstanding:
Common shares		70,073			70,062			70,382			69,867			68,441
Common shares – assuming dilution		70,618			70,646			71,168			71,109			70,669

	May 31,
		2011		2010		2009		2008		2007
Balance Sheet Data:
Working capital	$	378,979	$	270,939	$	192,562	$	230,556	$	162,865
Total assets		633,127		519,834		451,340		364,950		275,478
Long-term obligations, less current portion		-		-		-		-		3,488
Retained earnings		499,152		409,825		327,242		251,059		179,768
Shareholders’ equity		568,872		456,123		384,578		307,696		219,448

(1)No cash dividend was declared during any of the five years.

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Item 7. — Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Refer to “Forward Looking Statements” following the Index and Item 1A “Risk Factors” of this Form 10-K.

Overview

Our Business

We develop, manufacture and sell a complete line of reagents and automated systems used primarily by donor centers, hospitals and reference laboratories for testing to detect and identify certain properties of human blood for the purpose of blood transfusion. We have manufacturing facilities in the United States (“U.S.”) and Canada and sell our products through our direct sales network in the U.S., Canada, Western Europe and Japan as well as through third-party distributors in other markets.

We operate in a highly regulated industry and are subject to continuing compliance with multiple country-specific statutes, regulations and standards. For example, in the U.S. the Food and Drug Administration (“FDA”) regulates all aspects of the blood banking industry, including the marketing of reagents and instruments used to detect and identify blood properties. Additionally, we are subject to government legislation that governs the delivery of healthcare.  For example, in the U.S. the Patient Protection and Affordable Care Act was signed into law in March 2010 and contains elements that could meaningfully change the way healthcare is developed and delivered in the U.S.  Included in the legislation is a 2.3% excise tax on medical device makers beginning in 2013.

In the markets of Western Europe, Canada and Japan, the testing of donor and patient blood for the purpose of transfusion is primarily automated. However, in the U.S., we estimate approximately 60% of laboratories perform this testing manually today. These laboratories are primarily in the small- to medium-sized hospital segment.

Our strategy is to drive automation in the blood bank with the goal of improving operations as well as patient safety. We continually innovate to ensure our automation offerings are competitive. We offer two fully automated instruments for serology testing – NEO® and Echo® – to meet the different needs of our customers depending upon the volume in their laboratory and the complexity of the testing required.

In calendar 2010, we launched our fourth generation automated instrument, NEO, worldwide. Targeted at large hospitals, donor centers and reference laboratories, NEO replaces our previous high volume serology instrument, Galileo®, and due to added functionality, we believe NEO is a more attractive instrument for the hospital market. We believe that NEO delivers the market’s highest type-and-screen throughput and broadest test menu as well as new STAT priority functionality for improved workflow.

Launched worldwide in 2007, Echo®, our third generation automated instrument, is a compact bench top, fully-automated walk-away serology instrument that meets the needs of the small- to medium-sized hospital market as well as integrated delivery networks that want to standardize the operations of their laboratories. Echo offers an extensive test menu and significant labor reduction while increasing productivity and patient safety. Echo features STAT functionality, exceptional mean time between failures and what we believe is the fastest turnaround time in the industry.

Both our high and lower volume serology instruments use Capture® technology, our proprietary reagents, as well as certain traditional reagents to perform the automated testing.

In fiscal 2009, we entered the field of molecular immunohematology, which is the DNA analysis of blood for the purpose of transfusion, with our purchase of BioArray Solutions.

BioArray Acquisition

On August 4, 2008, we invested in what we believe will be the future of the blood bank – molecular immunohematology – with our acquisition of privately-held BioArray Solutions Ltd. (“BioArray”) for an aggregate purchase price of $115.2 million in cash, including approximately $2.4 million of acquisition-related transaction costs. We have included the financial results of BioArray in our consolidated financial statements beginning August 4, 2008.

BioArray pioneered the development of molecular diagnostic systems that enable the DNA typing (genotyping) of blood for transfusion donors and recipients. With the goal of improving transfusion medicine, we believe that molecular immunohematology will revolutionize blood bank operations. In many countries, blood pre-transfusion testing is limited to the prevention of transfusion reactions and not for the prevention of alloimmunization, which occurs when antigens foreign to the patient are inadvertently introduced into the patient’s blood system through transfusions. If alloimmunization occurs, the patient develops new antibodies in response to the foreign antigens, thereby complicating future transfusions. By using multiplex, cost-effective molecular testing, we believe that our molecular technology allows testing to prevent alloimmunization for better patient care.

In the BioArray transaction we acquired the broad intellectual property portfolio of issued patents and pending patent applications that BioArray generated through its substantial investments in research and development. Through the development of technologies supported by the patents, BioArray developed a novel and flexible technology platform that allows for a variety of DNA-based testing. The platform combines semiconductor processing, microparticle chemistry and molecular biology to bring a high degree of flexibility and performance to DNA and protein analysis. Using this technology platform, BioArray offers complete assay solutions called the BeadChip™ system.

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The BeadChip system includes BeadChips featuring proprietary array designs as well as a semi-automated system called the Array Imaging System and BASIS™ database.  While the testing itself is primarily manual today, the current system automates the reading and interpretation of test results. The ensuing integrated assay delivery system enables users to simultaneously perform dozens of customized tests on each patient sample in a semi-automated fashion. We believe this versatility makes the BeadChip format ideally suited to a wide scope of applications. The BeadChip system is currently installed in a number of leading donor and transfusion centers worldwide.

We believe that molecular immunohematology, or the DNA analysis of blood for the purpose of transfusions, will revolutionize transfusion medicine. We believe that our acquisition of BioArray provides new, strategic growth markets for the Company in both our current market of transfusion through an offering complementary to our current serology product offerings as well as potential new markets. Our leadership in blood banking industry automation and BioArray’s leadership in molecular diagnostic systems for specialty transfusion applications should allow us to develop and deliver more precise molecular immunohematology solutions to enhance patient outcomes.

We also believe our proven strength in developing automated instruments combined with our FDA licensing and CE (Conformité Européenne) Mark process experience, our established distribution network, our sales and marketing capabilities as well as our financial resources will generate enhanced long-term growth opportunities for the commercialization of BioArray’s BeadChip system.

In late fiscal 2010, we received CE Mark approval denoting regulatory clearance in the European Union (“EU”) for the Human Platelet Antigen (HPA) molecular immunohematology product as well as our current instrument. In June 2010, we received CE Mark approval in the EU for our Human Erythrocyte Antigen (HEA) molecular immunohematology product. Our molecular offering is currently available for Research Use Only in the U.S.

We are currently working on an automated molecular immunohematology instrument as well as U.S. regulatory approval for the molecular offering, both of which we believe will facilitate the further commercialization of this innovative technology. Our current plan is to have a Research Use Only instrument available in calendar 2012.

Business Highlights

A significant business highlight is the development of the automated instrument and the work to obtain U.S. regulatory approval to allow the full scale commercialization of our molecular immunohematology offering, which is discussed above under “BioArray Acquisition.” The following discusses other highlights in our business.

Entered into definitive agreement to be acquired by TPG Capital – On July 2, 2011, the Company entered into a definitive agreement to be acquired by investment funds managed by TPG Capital. Under the terms of the agreement, the Company’s shareholders will receive $27.00 in cash for each share of common stock they own. The transaction is expected to close in the second half of calendar 2011. The agreement was unanimously approved by the Company’s Board of Directors.

Atypical items positively impacted fiscal 2011 net income – We had three atypical items in the fourth quarter of fiscal 2011 that, together, positively impacted fully diluted earnings per share by approximately $0.07 per fully diluted share, net of tax as appropriate.

· In May 2011, $7.2 million of funds escrowed in connection with the BioArray acquisition were released and returned to the Company.  In accordance with ASC 805 “Business Combinations,” $2.9 million of the $7.2 million returned to the Company was recorded to Goodwill and the remaining $4.3 million, or approximately $0.06 per fully diluted share, was recorded to Other Income. Since the return of the escrowed funds was considered a return of purchase price, no tax was provided on these amounts.

· In April 2011, a change in the state of New Jersey tax apportionment factors resulted in a positive adjustment of approximately $2.3 million, or $0.03 per fully diluted share, to our deferred tax liability that was established on the acquisition of BioArray.

· In April 2011, we announced that our Chief Operating Officer resigned. The Company incurred approximately $2.3 million, or $0.02 per fully diluted share, net of tax, of expenses in association with his resignation.

Lower Industry Demand in the U.S. Market – Beginning early in our fiscal year 2010, we believe the U.S. market began experiencing lower demand for blood because of the macroeconomic environment. Lower blood demand negatively impacts our reagent revenue as fewer blood transfusions result in lower testing volume. In our fiscal years 2010 and 2011, we believe industry demand in the U.S. market declined by approximately 3.5% in both years.

U.S. Department of Justice Closes its Investigation – In November 2010, the United States Department of Justice, Antitrust Division (“DOJ”) informed us that its investigation of the Company had been closed. We learned in April 2009 that we were being investigated for possible violations of the federal criminal antitrust laws in the blood reagents industry. We cooperated fully with the investigation, which was closed with no further action taken on the part of the DOJ.

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Worldwide launch of NEO – In calendar 2010, we launched our fourth generation automated instrument for serology testing, NEO, which replaces our current high volume instrument, Galileo. We believe Galileo, which was launched in Western Europe in 2002 and in the U.S. in 2004, has reached its natural replacement cycle of five to seven years. Like Galileo, NEO is targeted at high volume customers: large hospitals, donor centers and reference laboratories. We believe NEO will have broader market appeal in the hospital segment than Galileo due to added functionality and faster turnaround times.

Continued market penetration of the Echo instrument – We launched our third generation automated instrument for serology testing, Echo, in the first quarter of fiscal 2008. Echo features STAT functionality, exceptional mean time between failures and what we believe is the fastest turnaround time in the industry. Echo is targeted at small- to medium-sized hospitals, the largest segment of our market, as well as at integrated delivery networks, in combination with NEO, to facilitate standardization across facilities.

FDA Administrative Action – In June 2009, we announced that the FDA, in an administrative action based on a January 2009 inspection, issued a notice of intent to revoke our biologics license with respect to our Reagent Red Blood Cells and Anti-E (Monoclonal) Blood Grouping Reagent products. Under this administrative action, we have the opportunity to demonstrate or achieve compliance before the FDA initiates revocation proceedings or takes other action. The FDA did not order the recall of any of our products or restrict us from selling these products. This administrative action was a follow on to a warning letter that we had received in May 2008. We had been working on an FDA-approved remediation plan, submitted after the warning letter, but had failed to make adequate progress at the time of the FDA’s follow up inspection in January 2009. In early calendar 2009 (during our third quarter of fiscal 2009), we formalized efforts to improve our quality systems through the Quality Process Improvement Project, which is discussed in further detail below. In August 2009 in response to the June 2009 administrative action, we submitted a detailed remediation plan that outlined our actions and timelines to correct the FDA’s noted deficiencies from the January 2009 inspection. The Quality Process Improvement Project served as the basis for the detailed remediation plan. During our third fiscal quarter of 2010, we completed the remediation portion of the Project. During June 2010, after our fiscal 2010 year-end, the FDA conducted an inspection of our facilities. During September 2010, we were notified by the FDA that while the June 2010 inspection “disclosed that substantive corrections have been made, some deviations continue.” Therefore, the FDA stated that the conditions outlined in the June 2009 NOIR administrative action remain in effect. The FDA stated it will evaluate our overall compliance status at its next inspection. Because of the progress demonstrated at the June 2010 inspection, the FDA is allowing normal approval of regulatory applications.

Quality Process Improvement Project – During our third quarter of fiscal 2009, we formalized our efforts to improve the processes and procedures of our quality department through establishing the Quality Process Improvement Project. The Project expanded the role of consultants hired in April 2008. The Project’s objective is to both remediate the deficiencies noted by FDA and to deliver on our commitment of maintaining a world-class quality system. During fiscal 2010 and fiscal 2009, we spent approximately $5.9 million and $2.4 million, respectively, on the Project. These costs were reflected in cost of sales and primarily represent the cost of external consultants who were assisting us with the Project. During our third fiscal quarter of 2010, we completed the remediation portion of the Project, which was designed to remediate the deficiencies from the January 2009 inspection as well as other high-risk compliance areas. The second phase of the Project continues with a focus on ongoing quality systems improvements as well as the deficiencies noted in the FDA’s June 2010 inspection. We are using primarily internal resources on the Project going forward.

Instruments

We continue to focus on increasing market share and, therefore, revenue through our automation strategy, which has instrument placements at its core. We believe our innovative automation offering is a key competitive advantage we have in the industry.

For markets in which we sell directly to the end user (e.g., a hospital), the process is as follows: we receive the order, we schedule installation of the instrument and customer staff training, the customer performs validation testing of the instrument, which begins generating recurring reagent revenue and the revenue ramps up to its expected annualized run rate once the validation process has been completed.

Revenue and expenses related to the sale of instruments are accounted for under FASB Accounting Standards CodificationTM (“ASC”) 605-25 “Revenue Recognition: Multiple-Element Arrangements” (“ASC 605-25”). ASC 605-25 mandates the deferral of certain revenue for sales agreements that have multiple deliverables while also mandating the upfront expensing of the related costs. The reagent contracts that are signed when customers automate typically have reagent price guarantee clauses. When instruments are sold (versus rented) the instrument costs are expensed when the sale is made and the related instrument revenue is deferred and recorded as income over the term of the underlying reagent contract. If an instrument is rented, then the revenue and expenses are recognized ratably over the contract period. While the overall transaction economics may be similar, this accounting treatment may result in margin improvement or degradation depending on the sales mix of instruments purchased or rented by customers in the period. For Echo and NEO, in fiscal 2011, we experienced a rental rate of more than 75% for new instrument orders in the U.S. Historically, our high volume instrument, Galileo, was purchased 90% of the time in the U.S. market. As of May 31, 2011 and 2010, we had deferred revenue of approximately $13.6 million and $16.7 million, respectively, and a major portion of these balances related to the deferral of revenue from sales of instruments.

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Results of Operations

Comparison of Years Ended May 31, 2011 and May 31, 2010

	For the Year Ended May 31,						Change
	2011			2010			Amount			%
	($ in thousands)
Net sales	$	333,091		$	329,073		$	4,018			1	%
Gross profit (1)		236,916			233,724			3,192			1	%
Gross profit percentage		71.1	%		71.0	%					0	%
Operating expenses		110,919			108,382			2,537			2	%
Income from operations		125,997			125,342			655			1	%
Non-operating income (expense)		4,633			(130	)		4,763		NM
Income before income tax		130,630			125,212			5,418			4	%
Provision for income tax		41,303			42,629			(1,326	)		-3	%
Net income	$	89,327		$	82,583		$	6,744			8	%
Earnings per share:
Per common share - basic	$	1.27		$	1.18		$	0.09			8	%
Per common share - diluted	$	1.26		$	1.17		$	0.09			8	%
(1) The determination of gross margin is exclusive of amortization expense which is presented separately as an operating expense in the income statement.

Revenue increased by approximately $4.0 million, or approximately 1%, during the year ended May 31, 2011 compared with the prior year. This increase was primarily attributable to approximately $3.3 million from price contributions, which included incremental revenue from both contractual and discretionary sources, and approximately $1.2 million from volume contributions, which included incremental revenue primarily from instrument placements. Volume contribution in fiscal 2011 was negatively impacted by lower sales volume of reagents due to weaker industry demand in the U.S. market as well as by a decreased number of ship cycles when compared with the prior year. While ship cycles are typically consistent year-to-year, the timing of ship cycles is determined by the calendar, which can result in a different number of ship cycles between years.  Revenue was negatively impacted by approximately $0.5 million in fiscal 2011 from foreign currency fluctuations. Approximately 70% of our fiscal 2011 consolidated revenue is from the U.S. and approximately 30% is from international sales largely denominated in local currency. Our significant currencies besides the U.S. dollar are the Euro, the Canadian Dollar, the British Pound and the Japanese Yen. As a result, our consolidated revenue expressed in dollars benefits when the U.S. dollar weakens and decreases when the U.S. dollar strengthens in relation to other currencies.  

For fiscal 2011, our consolidated gross margin was generally in line compared with the prior year. Gross margins in the prior year included costs related to the Quality Process Improvement Project of approximately $5.9 million, primarily for external consultants. There were no material external costs related to the Project in the current year, which benefited margins. Gross margins in the current year were negatively impacted by the mix of instrument-related revenue, more instruments being expensed in the current year compared with the prior year as well as by manufacturing variances related primarily to fewer ship cycles. Operating expenses increased by 2% when compared by the prior year, primarily due to increased distribution expenses and increased general and administrative expenses. Non-operating income increased by $4.8 million when compared with the prior year, primarily due to a return of funds escrowed in connection with the BioArray acquisition. Net income increased by approximately 8% in fiscal 2011 when compared with the prior year.

In fiscal 2011, we received 114 orders for our high volume instruments, Galileo and NEO, including 64 in the rest of the world, including distributors, and 50 in the U.S. and Canada. In fiscal 2011, we received 151 orders for our Echo instrument, 51 in the rest of the world, including distributors, and 100 in the U.S. and Canada. As of May 31, 2011, we had an instrument backlog of 60 Galileo/NEOs and 113 Echos.

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Net sales

	For the Year Ended May 31,				Change
	2011		2010		Amount			%
	($ in thousands)
Traditional reagents	$	199,826	$	207,710	$	(7,884	)		-4	%
Capture products		82,366		77,003		5,363			7	%
Instruments		45,112		39,680		5,432			14	%
Molecular immunohematology		5,787		4,680		1,107			24	%
	$	333,091	$	329,073	$	4,018			1	%

Traditional reagent revenue decreased by approximately $7.9 million, or approximately 4%, in fiscal 2011 compared with fiscal 2010 primarily due to lower sales volume because of weaker industry demand in the U.S. market and fewer ship cycles in the current year compared with the prior year. Traditional reagent revenue is negatively impacted as we place more instruments in the market. Instruments use approximately 70% Capture reagents and 30% traditional reagents so placing an instrument results in an increase in Capture reagent revenue and a decrease in traditional reagent revenue when the instrument is placed with a current customer. With our automation strategy, we expect this trend to continue. Additionally, we revised our go-to-market strategy at the beginning of the third quarter of fiscal 2011 to better address the economic downturn as well as the competitive pressures that we have historically experienced in our traditional reagent business.

Capture revenue increased by approximately $5.4 million, or approximately 7%, in fiscal 2011 when compared with the prior yearprimarily from incremental revenue from instrument placements. Capture’s year-over-year revenue growth rate was negatively impacted by weaker industry demand in the U.S. market. Sales of Capture reagents are largely dependent on the number of installed instruments requiring the use of our proprietary Capture technology. As we continue to place more instruments in the market, we expect revenue from Capture reagents to continue to increase as a percent of our total revenue.

Revenue from instruments increased by approximately $5.4 million, or approximately 14% in fiscal 2011 compared with the prior year due to increased instrument placements. Instrument revenue is typically recognized over the life of either the instrument rental period or the underlying reagent contract period dependent upon how the instrument was acquired. Historically, when instruments are sold (versus rented) revenue is deferred and recognized over the life of the underlying reagent contract period when the contract includes a price guarantee (which our contracts typically do). Since the launch of the Echo in the first quarter of fiscal 2008, the proportion of instruments rented (versus sold) has increased. In fiscal 2011, approximately $15.2 million of deferred revenue was recognized from previous instrument sales compared with $16.8 million recognized in fiscal 2010. In fiscal 2011, we deferred approximately $11.6 million of instrument and associated service revenues related to instrument sales compared with $11.6 million in the prior year. As of May 31, 2011 and 2010, deferred instrument and service revenues on the balance sheet totaled approximately $13.6 million and $16.7 million, respectively. The decrease in the deferred revenue balance is due to the increase in rentals as an acquisition option.

Molecular immunohematology revenue increased by approximately $1.1 million in fiscal 2011 compared with fiscal 2010 due to new customers.

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Gross margin

	For the Year Ended May 31,
	2011					2010					Change
	Amount		Margin %			Amount		Margin %			Amount
	(in '000)					(in '000)					(in '000)
Traditional reagents (1)	$	160,630		80.4	%	$	161,557		77.8	%	$	(927	)
Capture products  (1)		65,305		79.3	%		62,732		81.5	%		2,573
Instruments (1)		8,541		18.9	%		8,813		22.2	%		(272	)
Molecular immunohematology (1)		2,440		42.2	%		622		13.3	%		1,818
	$	236,916		71.1	%	$	233,724		71.0	%	$	3,192
(1) The determination of gross margin is exclusive of amortization expense which is presented separately as an operating expense in the income statement.

Gross margins on traditional reagents increased to 80.4% in fiscal 2011 from 77.8% in the prior year. Gross margins in the prior year included expenses related to the remediation portion of our Quality Process Improvement Project, which was completed in the third quarter of fiscal 2010, of approximately $5.9 million. These Project costs were primarily for external consultants. There were no material external costs related to the Project in the current year periods, which benefited gross margins.

For fiscal 2011, Capture product gross margins decreased to 79.3% from 81.5% in the prior year primarily due to the allocation of revenue from Capture reagents to instruments related to reagent rentals. In a reagent rental, the reagent revenue stream is used to fund all components of the customer’s acquisition, including the reagents themselves as well as the instrument and instrument-related items, such as training. Reagent gross margin is negatively impacted as a portion of reagent revenue is allocated to instruments over the life of the contract but none of the costs associated with the reagents are allocated.

Gross margins on instruments decreased to 18.9% in fiscal 2011 from 22.2% in the prior year, primarily due to the mix of instrument revenue and more instruments being expensed in the current year as compared with the prior year. Where sales contracts have reagent price guarantee clauses (which our automation contracts typically do), instrument costs are expensed when the sale is made, but the related instrument revenue is deferred and recorded as income over the term of the contract. When an instrument is rented, revenue and expenses for the transaction are recognized evenly over the life of the contract.  In fiscal 2011 and fiscal 2010, we recognized $15.2 million and $16.8 million, respectively, of deferred revenue related to instrument sales and service.

We expect molecular immunohematology gross margin to be volatile until production volumes are higher.

Operating expenses

	For the Year Ended May 31,				Change
	2011		2010		Amount			%
	($ in thousands)
Research and development	$	15,900	$	15,437	$	463			3	%
Selling and marketing		36,431		36,995		(564	)		-2	%
Distribution		16,508		14,831		1,677			11	%
General and administrative		37,747		36,841		906			2	%
Amortization expense and other		4,333		4,278		55			1	%
Total operating expenses	$	110,919	$	108,382	$	2,537			2	%

Research and development expenses increased by approximately $0.5 million in fiscal 2011 compared with the prior year, primarily due to project-related expenses.

Selling and marketing expenses decreased by approximately $0.6 million in fiscal 2011 compared with fiscal 2010, primarily due to lower compensation expense.

Distribution expenses rose by approximately $1.7 million in fiscal 2011 over the prior year, primarily due to increased shipping supplies and freight costs.

General and administrative expenses increased by approximately $0.9 million in fiscal 2011 over the prior year, primarily due to expenses of approximately $2.3 million related to the resignation of the Company’s Chief Operating Officer offset by lower legal expenses.  Legal expenses related to the Department of Justice investigation and the related lawsuits totaled approximately $1.6 million in fiscal 2011 down from $2.9 million in fiscal 2010.

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Amortization expense was generally in line with the prior year period.

Non-operating income (expense)

	For the Year Ended May 31,					Change
	2011		2010			Amount
	($ in thousands)
Non-operating income (expense)	$	4,633	$	(130	)	$	4,763

The year-over-year change in non-operating income (expense) was primarily attributable to the recognition of $4.3 million of other income related to the return of funds escrowed in association with the BioArray acquisition.

Income taxes

The provision for income taxes decreased $1.3 million in fiscal 2011 compared with fiscal 2010 primarily due to a New Jersey state tax law change relating to apportionment. The effective income tax rate was 31.6% in the current year compared with 34.0% in the prior year. The tax rate in the current year period was favorably impacted primarily by the New Jersey law change and a settlement of the escrow account related to the acquisition of BioArray.  Since the return of the escrowed funds was considered a return of purchase price, no tax was provided on these amounts.

As a result of using compensation cost deductions arising from the exercise of nonqualified employee stock options and vesting of restricted shares for federal and state income tax purposes, we had an income tax benefit of approximately $1.8 million in fiscal 2011 and we had an income tax shortfall of approximately $0.2 million in fiscal 2010. As required by U.S. generally accepted accounting principles, the income tax benefits and income tax shortfall are recognized in our financial statements as a reduction of or an addition to additional paid-in capital rather than as an increase or reduction of the respective income tax provisions in the consolidated financial statements.

Comparison of Years Ended May 31, 2010 and May 31, 2009

	For the Year Ended May 31,						Change
	2010			2009			Amount			%
	($ in thousands)
Net Sales	$	329,073		$	300,547		$	28,526			9	%
Gross profit (1)		233,724			216,011			17,713			8	%
Gross profit percentage		71.0	%		71.9	%					-1	%
Operating expenses		108,382			99,053			9,329			9	%
Income from Operations		125,342			116,958			8,384			7	%
Non-operating income (expense)		(130	)		23			(153	)		-665	%
Provision for income tax		42,629			40,798			1,831			4	%
Net income	$	82,583		$	76,183		$	6,400			8	%
Earnings per share:
Per common share - basic	$	1.18		$	1.08		$	0.10			9	%
Per common share - diluted	$	1.17		$	1.07		$	0.10			9	%
(1) The determination of gross margin is exclusive of amortization expense which is presented separately as an operating expense in the statements of income.

Revenue increased by approximately $28.5 million, or approximately 9%, during the year ended May 31, 2010 compared with the prior year. This increase was primarily attributable to approximately $18.1 million from price contributions, which included incremental revenue from both contractual and discretionary sources, and approximately $7.6 million from volume contributions, which included incremental revenue primarily from instrument placements. Revenue also benefited by approximately $2.8 million in fiscal 2010 from foreign currency fluctuations. Approximately 70% of our fiscal 2010 consolidated revenue is from the U.S. and approximately 30% is from international sales largely denominated in local currency. Our significant currencies besides the U.S. dollar are the Euro, the Canadian Dollar, the British Pound and the Japanese Yen. As a result, our consolidated revenue expressed in dollars benefits when the U.S. dollar weakens and decreases when the U.S. dollar strengthens in relation to other currencies.  

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For fiscal 2010, our consolidated gross margin decreased to 71.0% from 71.9% achieved in fiscal 2009, primarily due to expenses related to our Quality Process Improvement Project, which were reflected in cost of sales. During fiscal 2010, we spent approximately $5.9 million on our Quality Process Improvement Project compared with approximately $2.4 million spent in fiscal 2009. Operating expenses increased approximately 9%, primarily due to our acquisition of BioArray (which closed on August 4, 2008), increased legal expenses and increased research and development expenses related to various projects, including our next generation instrument for molecular immunohematology. Net income increased approximately 8% in fiscal 2010 over the prior year.

In fiscal 2010, we received 85 orders for our high volume instruments, Galileo and NEO, including 83 in the rest of the world, including distributors, and 2 in the U.S. and Canada. In fiscal 2010, we received 248 orders for our Echo instrument, including 74 in the rest of the world, including distributors, and 174 in the U.S. and Canada. As of May 31, 2010, we had an instrument backlog of 43 Galileo/NEOs and 179 Echos.

Net sales

	For the Year Ended May 31,				Change
	2010		2009		Amount		%
	($ in thousands)
Traditional reagents	$	207,710	$	199,277	$	8,433		4	%
Capture reagents		77,003		64,145		12,858		20	%
Instruments		39,680		34,672		5,008		14	%
Molecular immunohematology		4,680		2,453		2,227		91	%
	$	329,073	$	300,547	$	28,526		9	%

Traditional reagent revenue increased by approximately $8.4 million, or approximately 4%, in fiscal 2010 compared with fiscal 2009 primarily due to price contributions, which included incremental revenue from both contractual and discretionary sources. Traditional reagent revenue was negatively impacted by the economic downturn as well as the competitive pressures that we have historically experienced in our traditional reagent business.  Traditional reagent sales, which accounted for approximately 63% of total revenue in fiscal 2010, have historically been a significant portion of our revenue. Our revenue mix is changing over time as we place more instruments in the market, which results in increased sales of our Capture reagents.

Capture revenue increased by approximately $12.9 million, or approximately 20%, in fiscal 2010 over the prior year primarily due to increased volume. Sales of Capture reagents are largely dependent on the number of installed instruments requiring the use of our proprietary Capture technology. As we continue to place more instruments in the market, we expect revenue from Capture reagents to continue to increase.

Revenue from instruments increased by approximately $5.0 million, or approximately 14% in fiscal 2010 compared with the prior year due to increased instrument placements. Instrument revenue is typically recognized over the life of either the instrument rental period or the underlying reagent contract period. Historically, when instruments are sold (versus rented) revenue is deferred and recognized over the life of the underlying reagent contract period when the contract includes a price guarantee (which our contracts typically do). In fiscal 2010, approximately $16.8 million of deferred revenue was recognized from previous instrument sales compared with $16.9 million recognized in fiscal 2009. In fiscal 2010, we deferred approximately $11.6 million of instrument and associated service revenues related to instrument sales compared with $14.7 million in the prior year. As of May 31, 2010 and 2009, deferred instrument and service revenues on the balance sheet totaled approximately $16.7 million and $22.1 million, respectively. Over the past three years, the proportion of instruments rented (versus sold) has increased. Therefore, our deferred revenue balance has declined.

Molecular immunohematology revenue increased by approximately $2.2 million in fiscal 2010 compared with fiscal 2009, primarily due to the introduction of our molecular offering outside the U.S. Our molecular immunohematology products are a result of our August 4, 2008 BioArray acquisition.

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Gross margin

	For the Year Ended May 31,
	2010					2009					Change
	Amount		Margin %			Amount		Margin %			Amount
	(in '000)					(in '000)					(in '000)
Traditional reagents (1)	$	161,557		77.8	%	$	155,744		78.2	%	$	5,813
Capture reagents  (1)		62,732		81.5	%		54,411		84.8	%		8,321
Instruments (1)		8,813		22.2	%		5,259		15.2	%		3,554
Molecular immunohematology (1)		622		13.3	%		597		24.3	%		25
	$	233,724		71.0	%	$	216,011		71.9	%	$	17,713
(1) The determination of gross margin is exclusive of amortization expense which is presented separately as an operating expense in the statements of income.

Gross margins on traditional reagents decreased to 77.8% in fiscal 2010 from 78.2% in the prior year, primarily due to expenses related to our Quality Process Improvement Project. During the current fiscal year, we spent approximately $5.9 million on our Quality Process Improvement Project compared with approximately $2.4 million spent in fiscal 2009. These costs were primarily reflected in traditional reagent cost of sales.

For fiscal 2010, Capture product gross margins decreased to 81.5% from 84.8% in the prior year primarily due to the allocation of revenue from Capture reagents to instruments related to reagent rentals as well as due to manufacturing variances. In a reagent rental, the reagent revenue stream is used to fund all components of the customer’s acquisition, including the reagents themselves as well as the instrument and instrument-related items, such as training. Reagent gross margin is negatively impacted as a portion of reagent revenue is allocated to instruments over the life of the contract but none of the costs associated with the reagents are allocated.

Gross margins on instruments increased to 22.2% in fiscal 2010 from 15.2% in the prior year, primarily due to sales mix. In the current year, more instruments were rented (versus sold) compared to the prior year. An instrument rental results in revenue and expenses related to the instrument being recognized evenly over the contract period. When we sell an instrument and the sales contract has reagent price guarantees, which our contracts typically do, the instrument costs are expensed upfront and the related instrument revenue is deferred and recognized over the contract period. Current year and prior year margins benefited from the recognition of revenue deferred from prior periods. In fiscal 2010 and fiscal 2009, we recognized $16.8 million and $16.9 million, respectively, of deferred revenue related to instrument sales and service.

Operating expenses

	For the Year Ended May 31,				Change
	2010		2009 (1)		Amount			%
	($ in thousands)
Research and development	$	15,437	$	10,698	$	4,739			44	%
Selling and marketing		36,995		38,315		(1,320	)		-3	%
Distribution		14,831		13,708		1,123			8	%
General and administrative		36,841		32,593		4,248			13	%
Amortization expense and other		4,278		3,739		539			14	%
Total operating expenses	$	108,382	$	99,053	$	9,329			9	%
(1) Certain operating expenses have been reclassified to conform with current year presentation.

Research and development expenses increased by approximately $4.7 million in fiscal 2010 over the prior year, primarily due to recognizing a full year of BioArray expenses, which was acquired on August 4, 2008, and the development activities for the next generation molecular immunohematology instrument.

Selling and marketing expenses decreased by approximately $1.3 million in fiscal 2010 compared with fiscal 2009, primarily due to lower compensation expense.

Distribution expenses rose by approximately $1.1 million in fiscal 2010 over the prior year, primarily due to increased shipping and packaging costs.

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General and administrative expenses increased by approximately $4.2 million in fiscal 2010 over the prior year, primarily due to legal expenses related to the Department of Justice investigation and the related lawsuits.

Amortization expense increased by approximately $0.5 million in fiscal 2010 compared with fiscal 2009 primarily due to recognizing a full year of amortization of finite-lived intangibles that were recorded upon the acquisition of BioArray.

Non-operating income (expense)

	For the Year Ended May 31,					Change
	2010			2009		Amount
	($ in thousands)
Non-operating income (expense)	$	(130	)	$	23	$	(153	)

The year-over-year change in non-operating income (expense) was primarily attributable to lower interest income due to a decrease in interest rates.

Income taxes

The provision for income taxes increased $1.8 million in fiscal 2010 compared with fiscal 2009 primarily due to increased pre-tax income. The effective income tax rate was 34.0% in the current year compared with 34.9% in the prior year. The tax rate in the current year period was favorably impacted primarily by a settlement with a state taxing authority.

As a result of using compensation cost deductions arising from the exercise of nonqualified employee stock options and vesting of restricted shares for federal and state income tax purposes, we had an income tax shortfall of approximately $0.2 million in fiscal 2010 and we realized income tax benefits of $3.3 million in fiscal 2009. As required by U.S. generally accepted accounting principles, the income tax shortfall and income tax benefits are recognized in our financial statements as a reduction of or an addition to additional paid-in capital rather than as an increase or reduction of the respective income tax provisions in the consolidated financial statements.

Liquidity and Capital Resources

Cash flow

Our principal source of liquidity is our operating cash flow. This cash-generating capability is one of our fundamental strengths and provides us with substantial financial flexibility in meeting our operating, investing and financing needs. We have adequate working capital and sources of capital to operate our current business and to meet our existing capital requirements. At May 31, 2011, we had working capital of $379.0 million, compared to $270.9 million of working capital at May 31, 2010. The following table shows the cash flows provided by or used in operating, investing and financing activities for fiscal years 2011, 2010 and 2009, as well as the effect of exchange rates on cash and cash equivalents for those same years:

	For the Year Ended May 31,
	2011			2010			2009
	(in thousands)
Net cash provided by operating activities	$	102,111		$	84,751		$	79,822
Net cash used in investing activities		(9,061	)		(6,304	)		(116,556	)
Cash provided by (used in) financing activities		2,578			(11,757	)		(1,396	)
Effect of exchange rate changes on cash and cash equivalents		4,326			(502	)		(465	)
Increase (decrease) in cash and cash equivalents	$	99,954		$	66,188		$	(38,595	)

Our cash and cash equivalents were $302.6 million as of May 31, 2011, as compared to $202.6 million as of May 31, 2010. The increase in our cash position resulted from operating cash flow in the current year.

Operating activities – Cash flow from operations generally increases with net income.

In fiscal 2011, net cash generated by operating activities was $102.1 million compared with $84.8 million in fiscal 2010. The year-over-year increase in cash flow from operating activities was primarily attributable to the $6.7 million year-over-year increase in net income and changes in working capital.

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In fiscal 2010, net cash generated by operating activities was $84.8 million compared with $79.8 million in fiscal 2009. The year-over-year increase in cash flow from operating activities was primarily attributable to the $6.4 million year-over-year increase in net income.

Investing activities – Generally, the primary use of cash for investing activities is related to the purchase of property and equipment.  However, in fiscal 2009, we used a significant amount of cash for acquisitions.

In fiscal 2011, $9.1 million of net cash was used in investing activities compared with $6.3 million of cash used in the fiscal 2010. In the current year, $9.1 million was used to purchase property and equipment. In the prior year, $6.3 million was used to purchase of property and equipment.

In fiscal 2010, $6.3 million of net cash was used in investing activities compared with $116.6 million of cash used in fiscal 2009. Cash used in investing activities in fiscal 2010 related to the purchase of property and equipment. In fiscal 2009, we paid $108.0 million for the acquisition of BioArray and our U.K. distributor as well as $8.6 million for the purchase of property and equipment.

Financing activities – For financing activities, the typical use of cash is for the repurchase of our common stock and the typical cash proceeds relates to the exercise of stock options.

Net cash provided by financing activities was $2.6 million during fiscal 2011, compared with $11.8 million used in financing activities in the prior year. Reflected in ‘repurchase of common stock’ in the cash flow statement is approximately $0.5 million in withholding taxes we paid in fiscal 2011 compared with $0.3 million in fiscal 2010. This payment was in compliance with statutory tax withholding requirements for the exercise of options and vesting of restricted shares in exchange for surrender of the Company’s shares of equal value. During fiscal 2011, we received $1.3 million cash from the exercise of employee stock options compared with $0.3 million in the same period of the prior year. For fiscal 2011 we had a tax benefit of $1.8 million and in fiscal 2010 we had a tax shortfall of $0.2 million from the exercise of nonqualified employee stock options.  During fiscal 2010, we used $11.6 million to repurchase shares of our common stock in the open market.

Net cash used in financing activities was $11.8 million during fiscal 2010, compared with $1.4 million in the prior year. During fiscal 2010, we used $11.6 million to repurchase shares of our common stock in the open market. Also reflected in ‘repurchase of common stock’ in the cash flow statement is approximately $0.3 million in withholding taxes we paid. This payment was in compliance with statutory tax withholding requirements for the exercise of options and vesting of restricted shares in exchange for surrender of the Company’s shares of equal value. During fiscal 2010, we received $0.3 million cash from the exercise of employee stock options compared with $3.2 million in the same period of the prior year. For fiscal 2010 we had a tax shortfall of $0.2 million and in fiscal 2009 we had a tax benefit of $3.3 million from the exercise of nonqualified employee stock options.

Stock Repurchase Program

The Company instituted a stock repurchase program in June 1998. In August 2009, the Board of Directors authorized the Company to repurchase an additional 2,000,000 shares of the Company’s common stock under this repurchase program, bringing the total authorized shares to 11,375,000.

We made no share repurchases during fiscal 2011. During fiscal 2010, approximately 650,000 shares were repurchased in the open market under the 1998 repurchase plan for approximately $11.6 million. During fiscal 2009, we repurchased 295,409 shares in the open market for approximately $6.7 million. Shares that are repurchased by the Company are returned to the status of authorized but unissued.

As of May 31, 2011, 9,178,356 shares had been repurchased under the program, leaving 2,196,644 shares available for repurchase.  The Company’s stock repurchase program does not have an expiration date.

Contingencies

We record contingent liabilities resulting from asserted and unasserted claims against us when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. We disclose contingent liabilities when there is a reasonable possibility that the ultimate loss will exceed the recorded liability. Estimating probable losses requires analysis of multiple factors, in some cases including judgments about the potential actions of third-party claimants and courts. Therefore, actual losses in any future period are inherently uncertain. We are currently involved in certain legal proceedings. (See Item 3 – Legal Proceedings for further discussion.) We believe we have meritorious defenses to the claims and other issues asserted in such matters; however, there can be no assurance that such matters or any future legal matters will not have an adverse effect on the Company, our financial position or future results of operations.  Contingent liabilities are described in Note 17 to the consolidated financial statements.

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Future Cash Requirements and Restrictions

We expect that cash and cash equivalents and cash flows from operations will be sufficient to support our operations and planned capital expenditures for at least the next 12 months. We expect to continue to generate net positive cash flow. We are currently using a portion of the acquired net operating loss tax carry-forwards from the BioArray acquisition, subject to certain conditions and limitations, which is positively impacting cash flows. We have normal maintenance capital expenditure requirements that we plan to fund through operating cash flow. Additionally, we internally finance the rental agreements for our instruments and also plan to fund this activity through operating cash flows. There are no legal restrictions on our subsidiaries with respect to sending dividends, or making loans or advances to Immucor.

Contractual Obligations and Commercial Commitments

Contractual obligations and commercial commitments, primarily for the next five years, are detailed in the table below:

Contractual Obligations	Payments Due by Period
	(in thousands)
	Total		Less than 1 year		1-3 years		4 - 5 years		After 5 years
Operating leases	$	12,214	$	2,905	$	4,886	$	4,105	$	318
Purchase obligations		15,118		15,066		52		-		-
Total contractual cash obligations	$	27,332	$	17,971	$	4,938	$	4,105	$	318

In addition to the obligations in the table above, approximately $9.8 million of unrecognized tax benefits have been recorded as liabilities in accordance with ASC 740, “Income Taxes” (“ASC 740”), and we are uncertain as to if or when such amounts may be settled.  Related to the unrecognized tax benefits not included in the table above, we have also recorded a liability for interest of $0.9 million. 

Off-Balance Sheet Arrangements

We have no off-balance sheet financial arrangements as of May 31, 2011.

Critical Accounting Policies and Estimates

General

We have identified the policies below as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to these policies on our business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.  For a detailed discussion on the application of these and other accounting policies, see Note 1 to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.  Note that our preparation of this Annual Report on Form 10-K requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates, and certain assumptions could prove to be incorrect.  Senior management has discussed the development and selection of critical accounting estimates and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations disclosure with the Audit Committee of our Board of Directors. We believe that our most critical accounting policies and estimates relate to the following:

i. Revenue recognition

ii. Trade accounts receivable and allowance for doubtful accounts

iii. Inventories

iv. Goodwill

v. Income taxes

vi. Share-based employee compensation

i) Revenue Recognition

In accordance with ASC 605, “Revenue Recognition” (“ASC 605”), we recognize revenue when the following four basic criteria have been met:  (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services are rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured.  Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected.

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· Reagent sales

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

· Instrument sales

Contracts for the sale or rental of our instruments typically have multiple deliverables.  In such cases, we recognize revenue on the sale of instruments in accordance with ASC 605-25. Our instrument sales contracts with multiple deliverables include the sale or rental of an instrument (including delivery, installation and training), the servicing of the instrument during the first year, and, in many cases, price guarantees for reagents and consumables purchased during the contract period.  We have determined the fair value of certain of these elements, such as training and first year service. We do not believe it is possible to determine the fair value of price guarantees at the time of the sale.

If the contract contains price guarantees, which our contracts typically do, the entire arrangement consideration is deferred and recognized over the related guarantee period.  For contracts without price guarantees, the sales price in excess of the fair values of training and service is allocated to the instrument itself and recognized upon shipment and completion of contractual obligations relating to training and/or installation. The fair value of a training session is recognized as revenue when services are provided.  The fair value of first year service is recognized over the first year of the contract. The allocation of the total consideration, which is based on the estimated fair value of the units of accounting, requires judgment by management.

In revenue deferral situations, the costs related to the instruments are recognized when the instrument is installed and accepted by the customer.

Revenue from the sale of our instruments without multiple deliverables is generally recognized upon shipment and completion of contractual obligations.  Revenue from rentals of our instruments is recognized over the term of the rental agreement.  Instrument service contract revenue is recognized over the term of the service contract.

ii) Trade Accounts Receivable and Allowance for Doubtful Accounts

Trade receivables at May 31, 2011 and May 31, 2010, totaling $63.3 million and $59.6 million, respectively, are net of allowances for doubtful accounts of $2.2 million and $2.1 million, respectively. The allowance for doubtful accounts represents a reserve for estimated losses resulting from the inability of our customers to pay their debts. The collectibility of trade receivable balances is regularly evaluated based on a combination of factors such as customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment patterns. If it is determined that a customer will be unable to fully meet its financial obligation, such as in the case of a bankruptcy filing or other material events impacting its business, a specific allowance for doubtful accounts is recorded to reduce the related receivable to the amount expected to be recovered.

iii) Inventories

Inventories are stated at the lower of cost (first-in, first-out basis) or market (net realizable value). Cost includes material, labor and manufacturing overhead. The Company also allocates certain production-related general and administrative costs to inventory and incurred approximately $2.8 million, $3.3 million and $3.0 million of such costs in fiscal 2011, 2010 and 2009, respectively. The Company had approximately $0.9 million and $1.2 million of general and administrative costs remaining in inventory as of May 31, 2011 and May 31, 2010, respectively.

We use a standard cost system as a tool to monitor production efficiency.  The standard cost system applies estimated labor and manufacturing overhead factors to inventory based on budgeted production and efficiency levels, staffing levels and costs of operation, based on the experience and judgment of management.  Actual costs and production levels may vary from the standard established and such variances are charged to the consolidated statement of income as a component of cost of sales.  Since U.S. generally accepted accounting principles require that the standard cost approximate actual cost, periodic adjustments are made to the standard rates to approximate actual costs.  No material changes have been made to the inventory policy during fiscal 2011, 2010 or 2009.

33

iv) Goodwill

Consistent with ASC 350, “Intangibles – Goodwill and Other” (“ASC 350”), goodwill and intangible assets with indefinite lives are no longer amortized but are tested for impairment annually or more frequently if impairment indicators arise.  Intangible assets that have finite lives continue to be amortized over their useful lives.

We evaluate the carrying value of goodwill at the end of the third quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, we compare the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using primarily the income, or discounted cash flows, approach. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. Our evaluation of goodwill completed during the year resulted in no impairment charges.

v) Income Taxes

Our income tax policy records the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and amounts reported in the accompanying consolidated balance sheets, as well as operating loss and tax credit carry-forwards. The value of our deferred tax assets assumes that we will be able to generate sufficient future taxable income in certain tax jurisdictions, based on estimates and assumptions. If these estimates and related assumptions change in the future, we may be required to record additional valuation allowances against our deferred tax assets resulting in additional income tax expense in our consolidated statements of income. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized, and we consider the scheduled reversal of deferred tax liabilities, projected future taxable income, carry-back opportunities, and tax-planning strategies in making this assessment.  We assess the need for additional valuation allowances quarterly.  See Note 13 to the consolidated financial statements.

The calculation of income tax liabilities involves significant judgment by management in estimating the impact of uncertainties in the application of complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our results of operations.

vi) Share-based Employee Compensation

Consistent with the provisions of ASC 718, “Compensation – Stock Compensation,” compensation cost for grants of all share-based payments is based on the estimated grant date fair value.  We attribute the value of share-based compensation to expense using the straight-line method.

We estimate the fair value of our share-based payment awards using the Black-Scholes option-pricing model (the “Black-Scholes model”). The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable.  The Black-Scholes model requires the input of certain assumptions. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

We have calculated our additional paid in capital pool (“APIC pool”) based on the actual income tax benefits received from exercises of stock options granted after the effective date of ASC 718 using the long method. The APIC pool is available to absorb any tax deficiencies subsequent to the adoption of ASC 718.

Recently Issued Accounting Standards

Adopted by the Company in fiscal 2011

In June 2009, the Financial Accounting Standards Board (“FASB”) issued an update to ASC 810, “Consolidation” (“ASC 810”). This update changes how a reporting entity determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a reporting entity is required to consolidate another entity is based on, among other things, the other entity’s purpose and design and the reporting entity’s ability to direct the activities of the other entity that most significantly impact the other entity’s economic performance. This update requires a reporting entity to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A reporting entity is now required to disclose how its involvement with a variable interest entity affects the reporting entity’s financial statements. The update is effective at the start of a reporting entity’s first fiscal year beginning after November 15, 2009.  The adoption of this update to ASC 810 during the first quarter of fiscal 2011 did not have an impact on the Company’s consolidated financial statements.

34

In December 2009, the FASB issued ASU 2009-16, “Accounting for Transfers of Financial Assets” (“ASU 2009-16”), which is an amendment of ASC 860, “Transfers and Servicing.”  This update requires more information about the transfer of financial assets.  More specifically, ASU 2009-16 eliminates the concept of a “qualified special purpose entity”, changes the requirements for derecognizing financial assets, and enhances the information reported to users of financial statements.  This update is effective for fiscal years beginning on or after November 15, 2009. The adoption of ASU 2009-16 during the first quarter of fiscal 2011 did not have an impact on the Company’s consolidated financial statements.

In April 2010, the FASB issued ASU 2010-13, “Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades” (“ASU 2010-13”), which is an amendment of ASC 718, “Compensation—Stock Compensation.  This update clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. This update is effective for fiscal years and interim periods beginning on or after December 15, 2010, however, early application was permitted.  The adoption of ASU 2010-13 during the first quarter of fiscal 2011 did not have an impact on the Company’s consolidated financial statements.

Not yet adopted by the Company

In October 2009, the FASB issued ASU 2009-13, “Multiple Deliverables Revenue Arrangements” (“ASU 2009-13”), which is an amendment of ASC 605-25, “Revenue Recognition: Multiple Element Arrangements.”  This update addresses the accounting for multiple-deliverable arrangements to allow the vendor to account for deliverables separately instead of as one combined unit by amending the criteria for separating consideration in multiple-deliverable arrangements.  This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on (a) vendor-specific objective evidence, (b) third-party evidence or (c) best estimate of selling price.  The residual method of allocation has been eliminated and arrangement consideration is now required to be allocated to all deliverables at the inception of the arrangement using the selling price method.  Additionally, expanded disclosures will be required relating to multiple deliverable revenue arrangements.  This update will be effective for fiscal years beginning on or after June 15, 2010, which corresponds to the Company’s first quarter of fiscal 2012.  Early adoption is permitted, however, the Company did not adopt early.  The Company does not expect the adoption of this update to ASC 605-25 to have a material impact on its financial statements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), which was issued to enhance comparability between entities that report under U.S. GAAP and IFRS, and to provide a more consistent method of presenting non-owner transactions that affect an entity’s equity. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, which corresponds to the Company’s first quarter of fiscal 2013. Early adoption of the new guidance is permitted and full retrospective application is required. The Company is currently evaluating the effect that the provisions of this pronouncement will have on its financial statements.

Item 7A. — Quantitative and Qualitative Disclosures about Market Risk.

We are exposed to market risks for foreign currency exchange rates principally with the U.S. Dollar versus the Euro, Canadian Dollar, British Pound and Japanese Yen. Our financial instruments that can be affected by foreign currency fluctuations and exchange risks consist primarily of cash and cash equivalents and trade receivables denominated in currencies other than the U.S. dollar.We attempt to manage our exposure primarily by balancing assets and liabilities and maintaining cash positions in foreign currencies only at levels necessary for operating purposes. It has not been our practice to actively hedge our foreign subsidiaries’ assets or liabilities denominated in foreign currencies. To manage these risks, we regularly evaluate our exposure and, if warranted, may enter into various derivative transactions when appropriate. We do not hold or issue derivative instruments for trading or other speculative purposes. As part of accumulated other comprehensive income in shareholders’ equity, we recorded foreign currency translation gains of $13.9 million in fiscal 2011 and foreign currency translation losses of $5.2 million and $4.0 million in fiscal 2010 and 2009, respectively.  Additionally, we are exposed to interest rate risks related to cash and cash equivalents. It has been our practice to hold cash and cash equivalents in deposits that can be redeemed on demand and in investments with an original maturity of three months or less. The interest income earned from these deposits and investments is impacted by interest rate fluctuations.

35

Item 8. — Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS	Page
Reports of Grant Thornton, LLP, Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets, May 31, 2011 and 2010	39
Consolidated Statements of Income for the Years Ended May 31, 2011, 2010 and 2009	40
Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Years Ended May 31, 2011, 2010 and 2009	41
Consolidated Statements of Cash Flows for the Years Ended May 31, 2011, 2010 and 2009	42
Notes to Consolidated Financial Statements	43
Consolidated Financial Statement Schedule	66

36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS

Board of Directors and Shareholders

Immucor, Inc.

We have audited the accompanying consolidated balance sheets of Immucor, Inc. (a Georgia corporation) and subsidiaries (the “Company”) as of May 31, 2011 and 2010, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended May 31, 2011. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 8. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 31, 2011 and 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended May 31, 2011 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated July 20, 2011 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

July 20, 2011

37

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders

Immucor, Inc.

We have audited Immucor, Inc. (a Georgia corporation) and subsidiaries’ (the “Company”) internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control –Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Controls Over Financial Reporting appearing under Item 9A of this Annual Report on Form 10-K. Our responsibility is to express an opinion on Immucor, Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 31, 2011, based on criteria established in Internal Control – Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of May 31, 2011 and 2010, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended May 31, 2011 and our report dated July 20, 2011 expressed an unqualified opinion on those financial statements.

/s/ GRANT THORNTON LLP

Atlanta, Georgia

July 20, 2011

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ITEM 1. Financial Statements

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

	May 31, 2011		May 31, 2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	302,603	$	202,649
Trade accounts receivable, net of allowance for doubtful accounts of $2,157 and $2,122 at May 31, 2011 and May 31, 2010, respectively		63,324		59,578
Inventories		32,914		35,730
Deferred income tax assets, current portion		15,884		14,807
Prepaid expenses and other current assets		11,164		4,832
Total current assets		425,889		317,596
PROPERTY AND EQUIPMENT, Net		58,216		49,169
GOODWILL		93,767		94,336
INTANGIBLE ASSETS, Net		54,133		57,628
DEFERRED INCOME TAX ASSETS		376		540
OTHER ASSETS		746		565
Total assets	$	633,127	$	519,834
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	10,790	$	7,973
Accrued expenses and other current liabilities		20,331		17,378
Income taxes payable		8,294		12,312
Deferred revenue, current portion		7,495		8,994
Total current liabilities		46,910		46,657
DEFERRED REVENUE		6,080		7,687
DEFERRED INCOME TAX LIABILITIES		9,264		7,368
OTHER LONG-TERM LIABILITIES		2,001		1,999
Total liabilities		64,255		63,711
COMMITMENTS AND CONTINGENCIES (Note 17)		-		-
SHAREHOLDERS' EQUITY:
Common stock, $0.10 par value; authorized 120,000,000 shares, issued and outstanding 70,367,219 and 69,912,449 shares at May 31, 2011 and May 31, 2010, respectively		7,037		6,991
Additional paid-in capital		45,729		36,256
Retained earnings		499,152		409,825
Accumulated other comprehensive income		16,954		3,051
Total shareholders' equity		568,872		456,123
Total liabilities and shareholders' equity	$	633,127	$	519,834

The accompanying notes are an integral part of these Consolidated Financial Statements.

39

IMMUCOR, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

	For the year ended May 31,
	2011			2010			2009 (1)
NET SALES	$	333,091		$	329,073		$	300,547
COST OF SALES (exclusive of amortization shown separately below)		96,175			95,349			84,536
GROSS MARGIN		236,916			233,724			216,011
OPERATING EXPENSES
Research and development		15,900			15,437			10,698
Selling and marketing		36,431			36,995			38,315
Distribution		16,508			14,831			13,708
General and administrative		37,747			36,841			32,593
Amortization expense		4,333			4,278			3,739
Total operating expenses		110,919			108,382			99,053
INCOME FROM OPERATIONS		125,997			125,342			116,958
NON-OPERATING INCOME (EXPENSE)
Interest income		706			454			1,957
Interest expense		(70	)		(33	)		(250	)
Other, net		3,997			(551	)		(1,684	)
Total non-operating income (expense)		4,633			(130	)		23
INCOME BEFORE INCOME TAXES		130,630			125,212			116,981
PROVISION FOR INCOME TAXES		41,303			42,629			40,798
NET INCOME	$	89,327		$	82,583		$	76,183
Earnings per share:
Per common share - basic	$	1.27		$	1.18		$	1.08
Per common share - diluted	$	1.26		$	1.17		$	1.07

The accompanying notes are an integral part of these Consolidated Financial Statements.

(1) Certain numbers have been reclassed to conform to current year presentation.

40

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Amounts in thousands)

												Accumulated
							Additional					Other			Total
	Common Stock						Paid-In			Retained		Comprehensive			Shareholders’
	Shares			Amount			Capital			Earnings		Income *			Equity
BALANCE, MAY 31, 2008		70,136		$	7,014		$	37,325		$	251,059	$	12,298		$	307,696
Shares issued under employee stock plan		669			67			3,632			-		-			3,699
Share-based compensation expense		-			-			5,904			-		-			5,904
Stock repurchases and retirements		(349	)		(35	)		(8,102	)		-		-			(8,137	)
Tax benefits related to stock-based compensation		-			-			3,253			-		-			3,253
Comprehensive income (net of taxes):
Foreign currency translation adjustments		-			-			-			-		(4,020	)		(4,020	)
Net income		-			-			-			76,183		-			76,183
Total comprehensive income																72,163
BALANCE, MAY 31, 2009		70,456		$	7,046		$	42,012		$	327,242	$	8,278		$	384,578
Shares issued under employee stock plan		125			12			324			-		-			336
Share-based compensation expense		-			-			5,946			-		-			5,946
Stock repurchases and retirements		(669	)		(67	)		(11,843	)		-		-			(11,910	)
Tax shortfall related to stock-based compensation		-			-			(183	)		-		-			(183	)
Comprehensive income (net of taxes):
Foreign currency translation adjustments		-			-			-			-		(5,227	)		(5,227	)
Net income		-			-			-			82,583		-			82,583
Total comprehensive income																77,356
BALANCE, MAY 31, 2010		69,912		$	6,991		$	36,256		$	409,825	$	3,051		$	456,123
Shares issued under employee stock plan		482			48			1,264			-		-			1,312
Share-based compensation expense		-			-			6,941			-		-			6,941
Stock repurchases and retirements		(27	)		(2	)		(524	)		-		-			(526	)
Tax benefits related to stock-based compensation		-			-			1,792			-		-			1,792
Comprehensive income (net of taxes):		-			-			-			-		-
Foreign currency translation adjustments		-			-			-			-		13,903			13,903
Net income		-			-			-			89,327		-			89,327
Total comprehensive income																103,230
BALANCE, MAY 31, 2011		70,367		$	7,037		$	45,729		$	499,152	$	16,954		$	568,872

*Accumulated Other Comprehensive Income balance primarily consists of foreign currency translation adjustments and has no tax effect.

The accompanying notes are an integral part of these Consolidated Financial Statements.

41

IMMUCOR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	For the year ended May 31,
	2011			2010			2009
OPERATING ACTIVITIES:
Net income	$	89,327		$	82,583		$	76,183
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,213			16,569			13,306
Loss on retirement of fixed assets		1,072			538			352
Provision for doubtful accounts		371			361			848
Share-based compensation expense		6,941			5,946			5,904
Deferred income taxes		941			4,994			5
Excess tax (benefits) shortfall from share-based compensation		(1,792	)		183			(3,253	)
Accrued refund of BioArray escrowed funds (1)		(4,256	)		-			-
Changes in operating assets and liabilities:
Accounts receivable, trade		757			(6,386	)		(6,310	)
Income taxes		(2,790	)		1,037			7,796
Inventories		(8,248	)		(12,551	)		(4,647	)
Other assets		875			(102	)		(7,450	)
Accounts payable