SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 0-27316
Molecular Devices Corporation
(Exact name of registrant as specified in its charter)
Delaware 94-2914362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1311 Orleans Drive
Sunnyvale, California 94089
(Address of principal executive offices, including zip code)
(408) 747-1700
(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 X NO
-- --
As of May 8, 1997, 9,088,263 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
MOLECULAR DEVICES CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1997 and December 31, 1996..................... 2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1997 and 1996............... 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997 and 1996............... 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS..... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................... 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ....................................... 10
ITEM 2. CHANGES IN SECURITIES.................................... 10
ITEM 3. DEFAULTS ON SENIOR SECURITIES............................ 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...... 10
ITEM 5. OTHER INFORMATION........................................ 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................... 10
SIGNATURE ............................................................ 11
1
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
March 31, December 31,
1997 1996
---- ----
ASSETS: (unaudited)
Current assets:
Cash and cash equivalents $ 22,524 $ 23,727
Accounts receivable, net 5,833 5,396
Inventories 3,171 2,470
Deferred tax assets 2,959 3,216
Other current assets 308 142
-------- --------
Total current assets 34,795 34,951
Equipment and leasehold improvements, net 1,573 1,632
Other assets 229 250
-------- --------
$ 36,597 $ 36,833
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 2,609 $ 1,933
Accrued liabilities 2,779 3,527
Deferred revenue 751 596
Current obligations under promissory notes -- 1,500
-------- --------
Total current liabilities 6,139 7,556
Stockholders' equity
Preferred stock, no par value; 3,000,000
authorized; no shares outstanding -- --
Common stock, $.001 par value; 30,000,000
shares authorized; 9,050,474 and 8,988,094
shares issued and outstanding at
March 31, 1997 and December 31, 1996,
respectively 9 9
Additional paid-in-capital 37,644 37,462
Accumulated deficit (6,821) (7,848)
Deferred compensation (367) (401)
Accumulated translation adjustment (7) 55
-------- --------
Total stockholders' equity 30,458 29,277
-------- --------
$ 36,597 $ 36,833
======== ========
The accompanying notes are an integral part of these statements.
2
<PAGE>
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
REVENUES:
Product revenues $ 8,304 $ 6,005
Contract revenues 2 97
------- -------
Total revenues 8,306 6,102
------- -------
COST OF REVENUES:
Cost of product revenues 3,191 2,196
Cost of contract revenues -- 46
------- -------
Total cost of revenues 3,191 2,242
------- -------
Gross margin 5,115 3,860
------- -------
OPERATING EXPENSES:
Company-funded research and development 1,078 1,029
Selling, general and administrative 2,661 2,103
------- -------
Total operating expenses 3,739 3,132
------- -------
Income from operations 1,376 728
Other income (expense), net 281 265
------- -------
Income before income taxes 1,657 993
Income tax (provision) benefit (630) 100
------- -------
NET INCOME $ 1,027 $ 1,093
======= =======
NET INCOME PER SHARE $ 0.11 $ 0.12
======= =======
SHARES USED IN COMPUTING NET INCOME PER SHARE 9,656 9,427
======= =======
The accompanying notes are an integral part of these statements.
3
<PAGE>
MOLECULAR DEVICES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended
March 31,
--------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,027 $ 1,093
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 159 155
Amortization of deferred compensation 34 33
Loss on disposal of fixed asset 15 --
(Increase) decrease in assets:
Accounts receivable (437) (23)
Inventories (701) (389)
Deferred tax asset 257 (173)
Other current assets (166) 1
Increase (decrease) in liabilities:
Accounts payable 676 189
Accrued liabilities (749) (567)
Deferred revenue 155 13
-------- --------
Net cash provided by operating activities 270 332
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (115) (67)
Other assets 22 (6)
-------- --------
Net cash used in investing activities (93) (73)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on credit arrangements -- (17)
Repayment on promissory notes (1,500) --
Issuance of common stock, net 182 23
-------- --------
Net cash (used in) provided by financing activities (1,318) 6
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH: (62) (10)
-------- --------
Net increase (decrease) in cash and cash equivalents (1,203) 255
Cash and cash equivalents at beginning of period 23,727 20,379
-------- --------
Cash and cash equivalents at end of period $ 22,524 $ 20,634
======== ========
The accompanying notes are an integral part of these statements.
4
<PAGE>
MOLECULAR DEVICES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
the disclosures which are made are adequate to make the information presented
not misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's Annual Report to Stockholders for
the fiscal year ended December 31, 1996.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal, recurring adjustments) which
are, in the opinion of management, necessary to state fairly the results for the
periods presented. The results for the three month period ended March 31, 1997
are not necessarily indicative of the results to be expected for the entire
fiscal year ending December 31, 1997.
Certain reclassifications have been made to the financial statements for the
three month period ended March 31, 1996 to conform with the 1997 presentation
for those periods.
Note 2. New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (FAS) 128, "Earnings per Share," and FAS 129,
"Disclosure of Information about Capital Structure," which are required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share (EPS) and to
restate all prior periods as required by FAS 128. Under the new requirements for
calculating EPS, the dilutive effect of stock options will be excluded from a
new EPS measure, Basic EPS. The impact is expected to result in an increase in
Basic EPS for the first quarter ended March 31, 1997 and March 31, 1996;
however, this impact is not expected to be material. The impact of FAS 128 on
the calculation of the second new EPS measure, Diluted Earnings Per Share, for
these quarters is not expected to be material.
FAS 129 consolidates existing guidance relating to disclosure about a company's
capital structure. Since the Company has been in compliance with existing
disclosure requirements of its capital structure, adoption of FAS 129 is not
expected to have a material impact on the financial position, results of
operations or cash flows of the Company.
Note 3. Inventories
Inventories consist of (in thousands):
March 31, 1997 December 31, 1996
-------------- -----------------
Finished goods $ 1,772 $ 1,087
Work in process 361 488
Raw materials and subassemblies 1,038 895
------------- -------------
$ 3,171 $ 2,470
============= =============
5
<PAGE>
Note 4. Promissory Notes
The Company repaid in full two promissory notes valued at $750,000 each on
January 2, 1997.
Note 5. Income Taxes
An income tax provision of $630,000 was recorded for the three-month period
ended March 31, 1997. An income tax benefit of $100,000 was recorded for the
three-month period ended March 31, 1996. The benefit recorded for the
three-month period ended March 31, 1996, resulted primarily from the reduction
of the valuation allowance on the net deferred tax assets due to anticipated
pretax income. As of December 31, 1996, management concluded that no valuation
allowance was required on the net deferred tax asset based on its assessment
that current levels of income would be sufficient to realize the tax benefit.
Note 6. Net Income Per Share
Net income per share is computed using the weighted average number of shares of
common stock and dilutive common equivalent shares from stock options (using the
treasury stock method).
6
<PAGE>
MOLECULAR DEVICES CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as those identified in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 as
filed with the Securities and Exchange Commission on March 27, 1997.
The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and notes thereto included in Part I
- - Item 1 of this Quarterly Report and the audited consolidated financial
statements and notes thereto and Management's Discussion and Analysis of
Financial Condition and Results of Operations for the year ended December 31,
1996 contained in the Company's 1996 Annual Report to Stockholders. The results
for the first quarter of 1997 are not necessarily indicative of the results to
be expected for the entire fiscal year ending December 31, 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Product revenues. Product revenues for the first quarter of 1997 increased 38%
to approximately $8.3 million from approximately $6.0 million in the first
quarter of 1996. The Maxline and Cell Analysis product families showed increased
levels of revenue. Maxline product revenues increased primarily due to greater
sales of SPECTRAmax products and the fMAX in the United States. Cell Analysis
product revenues increased primarily due to greater sales of a new product
(introduced in the second quarter of 1996). Threshold product family revenues
decreased primarily due to the lower shipments to the U.S. Army and decreased
revenue from the sale of Threshold products worldwide.
Gross margin on product revenues. The gross margin on product revenues decreased
to 61.6% in the first quarter of 1997 from 63.4% in the first quarter of 1996
due primarily to increased sales of new lower margin Maxline and Cell Analysis
products. In addition, the margin was negatively impacted by decreased Threshold
product shipments.
Company-Funded Research and Development. Company-funded research and development
expenses for the first quarter of 1997 increased 5% to approximately $1.1
million (13% of total product revenues) from approximately $1.0 million (17.1%
of total product revenues) for the first quarter of 1996.
Selling, General and Administrative. Selling, general and administrative
expenses for the first quarter of 1997 increased 27% to approximately $2.7
million (32.0% of total product revenues) from approximately $2.1 million (35%
of total product revenues) for the first quarter of 1996. The increased spending
is primarily the result of additional spending on marketing, sales and service
related activities as the Company continued to expand market coverage.
Other Income (Expense), Net. Net other income for the first quarter of 1997
increased by 6% to approximately $281,000 from approximately $265,000 for the
first quarter of 1996. The increased net other income relates primarily to
increased interest income earned as a result of increased cash balances in the
first quarter of 1997 as compared to the first quarter of 1996.
Provision for Taxes. An income tax provision of $630,000 recorded in the first
quarter of 1997 decreased net income, whereas an income tax benefit of $100,000
recorded in the first quarter of 1996 increased net income. The benefit recorded
for the first quarter of 1996 related primarily to a reduced valuation allowance
on the Company's net deferred tax assets. As of December 31, 1996, management
concluded that no valuation allowance was required on the net deferred tax asset
based on its assessment that current levels of income would be sufficient to
realize the tax benefit.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $22.5 million at March 31, 1997.
The Company generated $270,000 from operations which was offset by $93,000 and
$1.3 million used in investing and financing activities, respectively. The cash
used in investing activities related primarily to capital expenditures, whereas
the cash used
7
<PAGE>
in financing activities related to the $1.5 million repayment of the promissory
notes as offset by $182,000 of cash provided by stock option exercises.
The Company believes that its existing capital resources and cash expected to be
generated from future operations will be sufficient to fund its operations and
anticipated capital expenditures through at least 1998. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the resources the Company devotes to developing, manufacturing and
marketing its products, the extent to which the Company's products generate
market acceptance and demand, potential acquisition opportunities that may arise
and other factors. As such, there can be no assurances that the Company will not
require additional financing within this time frame and, therefore, the Company
may in the future seek to raise additional funds through bank facilities, debt
or equity offerings or other sources of capital. Additional funding may not be
available when needed or on terms acceptable to the Company, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Factors That May Affect Future Results
The Company's business, financial condition and results of operations are
subject to various risk factors, including those described below and elsewhere
in this report.
o Uncertainty of Future Operating Results. Future operating results
will depend on many factors, including demand for the Company's
products, the levels and timing of government and private sector
funding of life sciences research activities, the timing of the
introduction of new products by the Company or by competing
companies, the integration of acquired products and technology
into manufacturing and distribution processes, the Company's
ability to control costs and its ability to attract and retain
highly qualified personnel. Furthermore, the Company's gross
margins can be significantly affected by many factors, including
shifts in product mix, the mix of direct sales as compared with
sales through distributors, competitive price pressures or
quarterly fluctuations in sales levels relative to fixed costs.
o Fluctuations in Quarterly Operating Results; Lack of Backlog. The
Company manufactures its products to forecast rather than to
outstanding orders, and products are typically shipped within 30
to 90 days of purchase order receipt. As a result, the Company
does not believe the amount of backlog at any particular date is
indicative of its future level of sales. The Company's
manufacturing procedures may in certain instances create a risk of
excess or inadequate inventory levels if orders do not match
forecasts. The Company's expense levels are based, in part, on
expected future sales. If sales levels in a particular quarter do
not meet expectations, the Company may not be able to adjust
operating expenses sufficiently quickly to compensate for the
shortfall, and the Company's results of operations may be
materially adversely affected. Many of the Company's products are
subject to long customer procurement processes. Accordingly, the
timing of capital equipment purchases by customers is expected to
be uneven and difficult to predict. In addition, a significant
portion of the Company's revenues is typically derived from sales
of a small number of relatively high-priced systems, and sales of
such products may increase as a percentage of revenue in the
future. Delays in receipt of anticipated orders or such products
could lead to substantial variability from quarter to quarter. In
addition, the Company has historically received purchase orders
and made a significant portion of each quarter's product shipments
near the end of the quarter. If that pattern continues, even short
delays in the receipt of orders or shipment of products at the end
of a quarter could have a material adverse effect on results of
operations for that quarter. The Company typically experiences a
decrease in the level of sales in the first calendar quarter as
compared to the fourth quarter of the preceding year because of
budgetary and capital equipment purchasing patterns in the life
sciences industry. In 1995, the Company also experienced a
decrease in product revenues in the third quarter compared to the
second quarter, related to seasonality primarily associated with
lower European and academic sales during the summer months. The
Company's product revenues increased in the third quarter of 1996
compared to the second quarter of 1996 primarily due to the
introduction of a new Cell Analysis product. The Company, however,
expects the third quarter seasonality trend to continue in future
years as the Company increases its efforts to penetrate
international markets. Operating results in any period should not
be considered indicative of the results to be expected for any
future period.
o Dependency on New Products; Rapid Technological Change. The life
sciences instrumentation market is characterized by rapid
technological change and frequent new product introductions. The
Company's future success will depend on its ability to enhance its
current products and to develop and introduce, on a timely basis,
new products that address the evolving needs of its customers.
8
<PAGE>
o Other Factors. The Company's business is affected by other
factors, including: (i) the possibility that the introduction or
announcement of new products would render existing products
obsolete or result in a delay or decrease in purchase orders for
existing products; (ii) the extent to which and the timing in
which the Company's products achieve market acceptance; (iii) the
capital spending policies of the Company's customers (which depend
on various factors, including the resources available to such
customers, the spending priorities among various types of research
equipment and the policies regarding capital expenditures during
recessionary periods), including those policies of universities,
government research laboratories and other institutions whose
funding is dependent on grants from government agencies; (iv)
competition; (v) the Company's ability to obtain and maintain
patent and other intellectual property protection for its products
and technology; (vi) the Company's ability to obtain in a timely
manner certain components used in its products which are currently
obtained from single sources; (vii) compliance with governmental
regulations, including those promulgated by the United Sates Food
and Drug Administration and similar state and foreign agencies;
and (viii) the extent of the Company's sales outside the United
States, which involve certain specific risks, including risks
related to currency fluctuations, imposition of government
controls, export license requirements, restrictions on export of
critical technology, political and economic instability or
conflicts, trade restrictions, changes in tariffs and taxes,
difficulties in staffing and managing international operations and
international distributor relationships and general economic
conditions.
9
<PAGE>
MOLECULAR DEVICES CORPORATION
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOLECULAR DEVICES CORPORATION
By: Andrew Galligan
------------------------------------------------------
Vice President, Finance and Chief Financial Officer
(Duly Authorized and Principal Financial and Accounting
Officer)
Date: May 13, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet as of March 31, 1997 and the
Consolidated Statements of Operations for the three months ended March 31,
1997 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,524
<SECURITIES> 0
<RECEIVABLES> 6,022
<ALLOWANCES> 189
<INVENTORY> 3,170
<CURRENT-ASSETS> 34,795
<PP&E> 5,573
<DEPRECIATION> 4,000
<TOTAL-ASSETS> 36,597
<CURRENT-LIABILITIES> 6,139
<BONDS> 0
<COMMON> 9
0
0
<OTHER-SE> 30,449
<TOTAL-LIABILITY-AND-EQUITY> 36,597
<SALES> 8,304
<TOTAL-REVENUES> 8,306
<CGS> 3,191
<TOTAL-COSTS> 3,191
<OTHER-EXPENSES> 0
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<INCOME-TAX> 630
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<NET-INCOME> 1,027
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
