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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Commission file Number: 0-26126

SEROLOGICALS CORPORATION
(Exact Name of Registrant as Specified in its Charter)

(678) 728-2000
(Registrant's Telephone Number Including Area Code)

        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 ý    No o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

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

INDEX

SEROLOGICALS CORPORATION AND SUBSIDIARIES

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PART I.

Item 1. Financial Statements

SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and in thousands, except share and per share amounts)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 3, 2005
(UNAUDITED)

1.     ORGANIZATION AND BASIS OF PRESENTATION

Organization

        Serologicals Corporation, a Delaware corporation, (together with its subsidiaries, "we", "our", the "Company" or "Serologicals"), with facilities in North America, Europe and Australia, is a global provider of consumable biological products, enabling technologies and services to a diverse customer base that includes major life science companies and leading research institutions. Our customers use our products, technologies and services in a wide variety of their activities, including basic research, drug discovery, diagnosis and biomanufacturing. Our products, technologies and services are essential tools for research in key disciplines, including neurology, oncology, hematology, immunology, cardiology, proteomics, infectious diseases, cell signaling, stem cell research and molecular biology. In addition, we provide a comprehensive range of monoclonal antibodies for the blood typing industry.

Basis of Presentation

        The accompanying unaudited condensed consolidated financial statements include the accounts of Serologicals and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, considered necessary to present fairly Serologicals' financial position, results of operations and cash flows at the dates and for the periods presented. Interim results of operations are not necessarily indicative of results to be expected for the full year. The interim financial statements should be read in conjunction with the audited consolidated financial statements as of January 2, 2005 and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 2, 2005.

Inventories

        Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. Market for inventories is replacement cost for raw materials or net realizable value for all other categories.

        Inventories at April 3, 2005 and January 2, 2005 consisted of the following (in thousands):

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Derivative Financial Instruments

        In October 2003, the Company entered into interest rate swap agreements relating to $70 million principal amount of its 4.75% Convertible Senior Subordinated Debentures due August 15, 2033 (the "Debentures"). The objective of the swaps is to convert the 4.75% fixed interest rate on this portion of the Debentures to a variable interest rate based on the 6-month LIBOR at the end of each interest period plus a spread of 66 basis points. The gain or loss from changes in the fair value of the swaps is expected to offset the gain or loss from the changes in the fair value of the cash flows from the interest payments on 54% of the Debentures throughout the expected life of the Debentures. At April 3, 2005 and January 2, 2005, the fair market value of the interest rate swaps was a liability of $1.3 million and an asset of $0.4 million, respectively. The fair value of the interest rate swaps was included in "Other long term liabilities" and "Other assets" at April 3, 2005 and January 2, 2005, respectively, in the accompanying Consolidated Balance Sheets. The Company analyzed ineffectiveness on the swaps as of April 3, 2005 and determined that ineffectiveness was immaterial. The interest rate swaps were designated and qualified as a fair value hedge in accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging Activities" and related interpretations and amendments. Accordingly, the portion of the Debentures hedged reflect the fair value of the changes related to the swap. The Company has presented the carrying value of the Debentures as follows (in thousands):

Earnings per Share

        Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding during the period. The calculation of diluted earnings per share is similar to basic earnings per share, except that net income is adjusted by the after-tax interest expense on the Debentures when they are dilutive and the weighted average number of shares includes the dilutive effect of stock options, stock awards, and the Debentures. The Debentures were anti-dilutive for the three months ended April 3, 2005 and, accordingly, were excluded from the calculation of diluted earnings per share. They were, however, dilutive and included in diluted earnings per share for the three months ended March 28, 2004.

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        The following table sets forth the calculation of basic and diluted earnings per share (in thousands, except per share amounts):

        The following shares issuable under stock option agreements and the Debentures were excluded from the calculation of diluted earnings per share for the periods indicated because either the option price exceded the average market price for the Company's stock or the conversion of the Debentures would have been antidilutive:

Stock-Based Compensation Plan

        The Company accounts for stock-based employee compensation plans under the recognition and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. No stock-based employee compensation cost, other than amortization of restricted stock, was reflected in net income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had

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applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands, except per share amounts):

        Under SFAS No. 123, the fair value of stock-based awards is calculated through the use of option-pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from the Company's stock option grants. These models also require subjective assumptions, including future stock price volatility and expected lives of each option grant. There were no changes in these assumptions from those disclosed in our Annual Report on Form 10-K for the fiscal year ended January 2, 2005.

Comprehensive Income

        The following table sets forth the calculation of comprehensive income for the periods indicated below (in thousands):

        As previously disclosed in the Company's Annual Report on Form 10-K for the year ended January 2, 2005, the Company determined that foreign currency translation adjustments were incorrectly presented net of tax for periods prior to the year ended January 2, 2005. As a result, the Company restated the previously reported foreign currency translation adjustments from $0.25 million to $0.38 million for the three months ended March 28, 2004.

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2.     ACQUISITIONS

Specialty Media

        On February 22, 2005 the Company completed the acquisition of Specialty Media, a division of Cell & Molecular Technologies, Inc., wholly owned by Sentigen Holding Corporation (NASDAQ: SGHL). Specialty Media, based in Phillipsburg, New Jersey, develops and supplies a variety of specialty stem cell culture media formulations and supplements, cells and research reagent tools to the life sciences industry. Serologicals acquired all of the assets of Specialty Media for $6.5 million in cash and assumption of certain liabilities. The Specialty Media acquisition provides a number of important strategic additions for our Research segment, most significantly, its products extend Chemicon's stem cell product portfolio.

        The results of Specialty Media were not material to the results of operations for the three months ended April 3, 2005, accordingly, no pro forma disclosure is presented.

        The components of the purchase price were (in thousands):

        The Company has not completed its valuation of the fair market value of the underlying assets acquired; however at April 3, 2005 the preliminary summary allocation of assets acquired was as follows (in thousands):

Upstate Group, Inc

        During the first quarter of 2005, the Company completed its evaluation of the purchase price allocation of Upstate Group, Inc., which it acquired in October 2004, based on the estimated fair values of the assets and liabilities assumed as of the date of purchase. The components of the purchase price are as follows (in thousands):

        During the first quarter of 2005, the Company completed its analysis of the fair market value at the date of acquisition of the finished goods inventory and certain intangible assets resulting in a net increase in these assets and a corresponding net decrease in goodwill of $6.7 million. We also completed our analysis of deferred income taxes arising from the Upstate acquisition, resulting in

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additional long-term deferred income tax liabilities and a corresponding increase in goodwill of $3.3 million. The final allocation of purchase price to the underlying assets is as follows (in thousands):