<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
for the quarterly period ended July 1, 2000 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: 1-8145
THORATEC LABORATORIES CORPORATION
--------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
California 94-2340464
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6035 Stoneridge Drive,
Pleasanton, California 94588
------------------------------- -------------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (925) 847-8600
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 August 9, 2000 registrant had 22,380,658 shares of common stock
outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
Period End
-------------------------------
Fiscal Fiscal Year
June 2000 End 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,937,966 $ 1,696,522
Short-term investments available-for-sale 12,254,321 276,464
Receivables 5,500,803 5,453,187
Inventories (Note 3) 7,839,247 6,611,487
Prepaid expenses and other 246,905 425,317
------------ ------------
Total Current Assets 31,779,242 14,462,977
Equipment and improvements, at cost 12,499,384 12,228,805
Accumulated depreciation and amortization (3,295,219) (2,667,991)
------------ ------------
Equipment and leasehold improvements - net 9,204,165 9,560,814
Other Assets 1,053,074 1,036,647
------------ ------------
TOTAL ASSETS $ 42,036,481 $ 25,060,438
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,173,054 $ 1,703,089
Accrued compensation 1,494,126 1,466,147
Deferred distributor revenue (Note 4) 284,765 284,765
Other 588,320 475,870
------------ ------------
Total Current Liabilities 3,540,265 3,929,871
Long-term deferred distributor revenue (Note 4) 711,913 854,294
------------ ------------
Total Liabilities 4,252,178 4,784,165
------------ ------------
Shareholders' Equity:
Common shares, 100,000,000 authorized;
issued and outstanding 22,369,261 in 2000
and 20,466,326 in 1999 89,446,729 72,911,638
Paid-in capital 2,541,223 2,541,223
Accumulated deficit (54,188,713) (55,191,216)
Other comprehensive loss:
Cumulative translation adjustments (14,936) 14,628
------------ ------------
Total Shareholders' Equity 37,784,303 20,276,273
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 42,036,481 $ 25,060,438
============ ============
</TABLE>
See notes to condensed consolidated financial statements
2
<PAGE> 3
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Fiscal June Six Months Ended Fiscal June
------------------------------- -------------------------------
2000 1999 2000 1999
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Product sales $ 7,261,021 $ 4,891,678 $14,866,857 $ 10,267,151
Cost of product sales 2,560,869 1,661,166 5,492,838 4,008,764
----------- ------------ ----------- ------------
Gross profit 4,700,152 3,230,512 9,374,019 6,258,387
----------- ------------ ----------- ------------
Operating expenses:
Research and development 1,873,460 1,277,850 3,478,325 2,431,075
Selling, general and
administrative 2,665,999 2,206,336 5,429,851 4,580,848
----------- ------------ ----------- ------------
Total operating expenses 4,539,459 3,484,186 8,908,176 7,011,923
----------- ------------ ----------- ------------
Other operating income (Note 4) 71,191 71,192 473,985 142,383
----------- ------------ ----------- ------------
Income (loss) from operations 231,884 (182,482) 939,828 (611,153)
Interest and other income - net 133,592 130,701 137,123 229,747
(Note 1)
----------- ------------ ----------- ------------
Income (loss) before taxes 365,476 (51,781) 1,076,951 (381,406)
Income tax expense (Note 7) 11,547 1,119 74,448 7,106
----------- ------------ ----------- ------------
Net income (loss) $ 353,929 $ (52,900) $ 1,002,503 $ (388,512)
=========== ============ =========== ============
Earnings (loss) per share: (Note 6)
Basic $ 0.02 $ (0.00) $ 0.05 $ (0.02)
Diluted $ 0.02 $ (0.00) $ 0.04 $ (0.02)
Shares used to compute earnings
(loss) per share: (Note 6)
Basic 21,978,447 20,437,158 21,257,742 20,431,584
Diluted 23,473,850 20,437,158 22,778,570 20,431,584
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Fiscal June
------------------------------
2000 1999
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,002,503 $ (388,512)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Amortization of deferred distributor revenue (142,381) (142,382)
Loss on disposal of capital assets 66,312 2,034
Depreciation and amortization 654,852 468,290
Changes in assets and liabilities:
Receivables (151,792) 209,465
Prepaid expenses and other 177,323 218,931
Inventories (1,282,080) (1,294,693)
Other assets (16,705) (17,611)
Accounts payable and other liabilities (213,013) (625,557)
Deferred distributor revenue -- 1,423,823
------------ -----------
Net cash provided by (used in) operating
activities 95,019 (146,212)
------------ -----------
Cash flows from investing activities:
Purchases of short-term investments
available-for-sale (12,538,209) (5,101,483)
Maturities of short-term investments
available-for-sale 276,137 4,224,000
Sales of short-term investments available-for-sale 284,215 813,572
Capital expenditures (435,482) (434,784)
------------ -----------
Net cash used in investing activities (12,413,339) (498,695)
------------ -----------
Cash flows from financing activities:
Net proceeds from public offering of common stock 15,720,709 --
Common stock issued upon exercise of options 869,253 45,476
------------ -----------
Net cash provided by financing activities 16,589,962 45,476
------------ -----------
Effect of exchange rate changes on cash (30,198) (34,824)
------------ -----------
Net increase (decrease) in cash and cash equivalents 4,241,444 (634,255)
Cash and cash equivalents at beginning of period 1,696,522 2,712,686
------------ -----------
Cash and cash equivalents at end of period $ 5,937,966 $ 2,078,431
============ ===========
Noncash Investing Transaction:
Capital assets in accounts payable $ 15,561 $ 42,139
Noncash Financing Transaction:
Deferred financing charges in accounts payable $ 54,871 $ --
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Fiscal June Fiscal June
------------------------ ---------------------------
2000 1999 2000 1999
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Net income (loss) $ 353,929 $(52,900) $ 1,002,503 $(388,512)
Other net comprehensive income:
Unrealized loss on securities -- (1,618) -- (2,538)
Foreign currency translation
adjustments (16,681) (36,400) (29,564) (229,379)
--------- -------- ----------- ---------
Comprehensive income (loss) $ 337,248 (90,918) 972,939 $(620,429)
========= ======== =========== =========
</TABLE>
See notes to condensed consolidated financial statements.
5
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THORATEC LABORATORIES CORPORATION AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared
by us without audit and, in our opinion, reflect all adjustments necessary
(consisting only of normal recurring adjustments) to present fairly the
financial position, results of operations and cash flows at July 1, 2000
(second quarter 2000) and for the three and six-month periods ended July
1, 2000 (second quarter and first half 2000) and the three and six-month
periods ended July 3, 1999 (second quarter and first half 1999). The
results of operations for any interim period are not necessarily
indicative of results for a full year.
The consolidated balance sheet presented as of the end of 1999 (January 1,
2000), has been derived from the consolidated financial statements that
have been audited by our independent public accountants. The consolidated
financial statements and notes are presented as permitted by the
Securities and Exchange Commission and do not contain certain information
included in our annual consolidated financial statements and notes. We
suggest that the accompanying condensed consolidated financial statements
be read in conjunction with the audited consolidated financial statements
and the notes thereto contained in our Annual Report on Form 10-K for the
1999 year, filed with the Securities and Exchange Commission.
The preparation of our consolidated financial statements in conformity
with generally accepted accounting principles necessarily requires us to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
consolidated balance sheet dates and the reported amounts of revenues and
expenses for the periods presented.
All assets and liabilities of our non-United States operations are
translated into United States dollars at the fiscal period-end exchange
rates, and, except as follows, the resulting translation adjustments are
included in comprehensive income. Exchange rate fluctuations resulting
from the period-end translation of the current portion of the intercompany
obligation of our wholly-owned subsidiary into United States dollars are
recorded in the income statement as foreign currency exchange gains or
losses and are included in interest and other income. Net foreign currency
exchange loss was approximately $130,000 in the second quarter 2000,
approximately $201,000 in the first half 2000, and zero for both the
second quarter 1999 and the first half 1999.
The calculation of diluted EPS takes into account the effect of dilutive
instruments, such as stock options and warrants, and uses the average
share price for the period in determining the number of incremental shares
that are to be added to the weighted average number of shares outstanding.
Diluted EPS for the first quarter and the first half 1999 excludes the
effect of any such instruments as their inclusion would be anti-dilutive.
We have made certain reclassifications to the 1999 amounts to conform to
the 2000 presentation.
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2. RECENTLY ISSUED ACCOUNTING STANDARDS
During June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which defines derivatives,
requires that all derivatives be carried at fair value, and provides for
hedge accounting when certain conditions are met. Such Statement is
effective for all fiscal quarters of fiscal years beginning after June 15,
2000. We have not yet evaluated the impact of the new standard.
In December 1999 the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial
Statements" which summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in
financial statements. Based on these guidelines, revenue should not be
recognized until it is realized or realizable and earned. We will adopt
this statement in the fourth fiscal quarter of our fiscal year ending
December 30, 2000. We do not expect any material impact as a result of
adopting the guidelines of this standard.
In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation (FIN 44), that clarifies guidance for certain issues related
to the application of APB Opinion No. 25, Accounting for Stock Issued to
employees (APB 25). Such statement is effective for all new awards and
modifications after June 30, 2000. Management has not yet evaluated the
impact of FIN 44.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
Period Ended
------------------------------
Second Quarter Year end
2000 1999
-------------- ----------
<S> <C> <C>
Finished goods $4,122,871 $3,163,055
Work in process 2,078,829 2,033,194
Raw materials 1,637,547 1,415,238
---------- ----------
Total $7,839,247 $6,611,487
========== ==========
</TABLE>
4. LICENSE AGREEMENT AND DISTRIBUTION AGREEMENT
In the first quarter of 2000, we amended the license granted to Gambro,
Inc., formerly known as COBE Laboratories, Inc., to be a fully paid-up,
world-wide, irrevocable field-of-use license and sublicense (with the
right to sublicense others) for our biomaterials to be used in some of
Gambro's products. The original license was granted in 1992 and was for
use in renal dialysis devices, blood component devices and blood tubing
sets and accessories used in direct connection with any of these. We
received a one-time payment of approximately $330,000 in the first quarter
7
<PAGE> 8
of 2000 in conjunction with this amendment, which is included in other
operating income in the first quarter of 2000. Thoratec has no continuing
obligation to Gambro under this license agreement.
During the first quarter of 1999, we entered into a five-year distribution
agreement with Guidant Corporation. Under the terms of the agreement,
Guidant receives exclusive worldwide marketing and distribution rights to
our Vectra(TM) vascular access graft product line, except in Japan. In
exchange for these rights, Guidant made a $1.5 million non-refundable
payment in the first quarter of 1999, and will pay up to an additional $2
million when the Vectra product line receives FDA approval for use in the
United States. In the first quarter of 1999, we began recognizing the $1.5
million contract payment ratably over the five-year life of the contract.
Other operating income in 2000 and 1999 include approximately $71,000 of
such payment amortization in each of the first two quarters.
5. PUBLIC OFFERING
In April 2000, we sold, through an underwritten public offering, 2,000,000
shares of common stock at $10.00 per share. Included in the 2,000,000
shares were 500,000 shares offered by Gambro Inc., a major shareholder of
our company, for which we received no proceeds. In addition, the
underwriters exercised a 30-day option to purchase from us and Gambro
300,000 shares of common stock to cover any over-allotments, of which the
proceeds from 225,000 shares were received by us. After deducting
underwriting discounts of approximately $983,000, we received a total of
$16,267,000, from which approximately $600,000 in offering-related costs
have been paid. Underwriting discounts and the other estimated
offering-related costs were recorded as an offset to common stock at the
closing of the offering. We intend to use the net proceeds for clinical
trials of products under development, expansion of our sales and marketing
capabilities, research and development, potential acquisitions of
complementary technology, working capital and other general corporate
purposes.
8
<PAGE> 9
6. EARNINGS PER SHARE
Basic earnings per share ("EPS") excludes potentially dilutive securities
and is computed by dividing our net income (loss) by the weighted average
of our common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. We
convert common stock options and warrants into diluted potential shares
using the treasury stock method.
The EPS calculation for the periods presented excludes certain stock
options and stock warrants because their effect would have been
antidilutive due to the options' exercise prices exceeding the average
market price for the common stock.
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 2000 June 1999 June 2000 June 1999
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net income (loss) $ 353,929 $ (52,900) $ 1,002,503 $ (388,512)
Shares:
Weighted average common
shares outstanding 21,978,447 20,437,158 21,257,742 20,431,584
Effect of stock options 1,495,403 -- 1,520,828 --
----------- ------------ ----------- ------------
Total basic and diluted
shares 23,473,850 20,437,158 22,778,570 20,431,584
=========== ============ =========== ============
Basic net income (loss)
per common share $ 0.02 $ (0.00) $ 0.05 $ (0.02)
Diluted net income (loss)
per common share $ 0.02 $ (0.00) $ 0.04 $ (0.02)
</TABLE>
7. INCOME TAXES
The provision for income taxes was approximately $12,000 and $74,000 for
the three and six-month periods ended fiscal June 2000. The effective tax
rate was 3% and 7% for the respective periods and is lower than the
statutory U.S. tax rate of 35% for 2000 due primarily to the realization
of net operating loss carryforwards and the effect of state and local
taxes. The provision for income taxes was approximately $1,000 and $7,000
for the three and six-month periods ended fiscal June 1999 and represents
state and local taxes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
At the end of the first half of 2000 we had working capital of $28.2 million
compared with $10.5 million at the end of 1999. Cash, cash equivalents, and
short-term investments available for sale increased $16.2 million to $18.2
million principally due to net proceeds received from the recent public offering
of $15.6 million, a $350,000 license payment from Gambro, Inc., discussed below,
and $869,000 from stock option exercises, less capital expenditures of $435,000.
Accounts receivable remained fairly flat based on similar product sales in the
second quarter of 2000 compared to the fourth quarter of 1999. Inventories
increased $1.2 million to $7.8 million in preparation for planned increases in
product sales and a higher number of units available for our rent-to-own
program. Current liabilities decreased $390,000 to $3.5 million, principally
from the timing of payments made for inventory purchases. These decreases were
partially offset by an increase in accrued warranty costs for the rework of our
TLC-II(TM) Portable VAD Drivers (our TLC-II) currently at customers'sites and
in our inventory.
In the first quarter of 2000, we amended the license granted to Gambro, Inc.,
formerly known as COBE Laboratories, Inc., to be a fully paid-up, world-wide,
irrevocable field-of-use license and sublicense (with the right to sublicense
others) for our biomaterials to be used in some of Gambro's products. The
original license was granted in 1992 and was for use in renal dialysis devices,
blood component devices and blood tubing sets and accessories used in direct
connection with any of these. We received a one-time payment of approximately
$330,000 in the first quarter of 2000 in conjunction with this amendment, which
is included in other operating income in the first quarter of 2000. Thoratec has
no continuing obligation to Gambro under this license agreement.
In April 2000, we sold, through an underwritten public offering, 2,000,000
shares of common stock at $10.00 per share. Included in the 2,000,000 shares
were 500,000 shares offered by Gambro Inc., a major shareholder of our company,
for which we received no proceeds. In addition, the underwriters exercised a
30-day option to purchase from us and Gambro 300,000 shares of common stock to
cover over-allotments, of which the proceeds from 225,000 shares were received
by us. After deducting underwriting discounts of approximately $983,000, we
received a total of $16,267,000, from which approximately $600,000 in
offering-related costs have been paid. Underwriting discounts and the other
estimated offering-related costs were recorded as an offset to common stock at
the closing of the offering. We intend to use the net proceeds for clinical
trials of products under development, expansion of our sales and marketing
capabilities, research and development, potential acquisitions of complementary
technology, working capital and other general corporate purposes.
We believe that expected cash flow from operations, in conjunction with the
proceeds of the public offering discussed above, will be sufficient to fund our
operations for at least the next twelve months. We expect that our operating
expenses will increase in future periods as we spend more on product
manufacturing, marketing and research and development of new product lines.
Although we were profitable in the first half of 2000, we may not be able to
sustain or increase profitability on a quarterly or annual basis.
We do not expect that inflation will have a material impact on our operations.
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Results of Operations
Second quarter 2000 and 1999
Product sales in the second quarter of 2000 were $7.3 million compared to $4.9
million in the second quarter of 1999, an increase of approximately $2.4 million
or 48%. The increase is attributable to sales of our VAD System disposable blood
pumps and cannulae, which increased to approximately $6.2 million in the second
quarter of 2000 from $4.0 million in the second quarter of 1999, an increase of
approximately $2.2 million or 54%. The growth of sales in VAD disposables was
primarily attributable to a 58% increase in the quantity of VAD pumps sold,
offset by a slight decrease in the average selling price of our VAD pumps. The
total number of centers using our VAD System increased to 148 at the end of the
second quarter of 2000 from 111 at the end of the second quarter of 1999.
Gross profit was $4.7 million, representing approximately 65% of product sales
for the second quarter of 2000 compared to a gross profit of $3.2 million
representing approximately 66% of product sales for the second quarter of 1999.
The decrease in gross profit percentage was due to slightly lower average
selling prices for the VAD pumps partially offset by a higher proportion of VAD
System disposables being sold in the United States in the second quarter of 2000
compared to the second quarter of 1999. VAD disposable products sold in the
United States generally have a higher gross margin than those sold in the rest
of the world.
Research and development expenses remained constant at 26% of product sales in
the second quarters of both 2000 and 1999. These expenses increased to $1.9
million in the second quarter of 2000 from $1.3 million in the second quarter of
1999, an increase of $596,000, or 47%. Of the total increase in research and
development expenses, $120,000 was due to increased research spending for graft
products, $195,000 was due to the TLC-II, and $244,000 was due to indirect
engineering and manufacturing expenses, representing higher overall facilities
expenses and higher levels of support from quality assurance and manufacturing
personnel.
Selling, general and administrative expenses increased to $2.7 million in the
second quarter of 2000, from $2.2 million in the second quarter of 1999, an
increase of $460,000 or 21%. As a percentage of sales, selling, general and
administrative expenses decreased to 37% of sales in 2000 from 45% of sales in
1999. Of the total increase in selling, general and administrative expenses,
$350,000 is associated with the continued development of the domestic and
European sales organizations and other promotional activities, and $109,000 is
associated with various administrative expenses, principally related to
increased personnel expenses and expenses related to our quarterly reports,
proxy statements, and facilities overhead.
Interest and other income in the second quarter of 2000 remained flat compared
to the second quarter of 1999, with $170,000 higher interest income resulting
from higher cash balances offset by $40,000 lower grant revenue and $130,000 of
foreign currency exchange losses.
First Half 2000 and 1999
Product sales in the first half of 2000 were $14.9 million compared to $10.3
million in the first half of 1999, an increase of approximately $4.6 million or
45%. The increase is attributable to sales of our VAD System disposable blood
pumps and cannulae, which increased to approximately $12.9 million in the first
half of 2000 from $8.2 million in the first half of 1999, an increase of
approximately $4.7 million or 57%. The growth of sales in VAD disposables was
primarily attributable to a 50% increase in the quantity of
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<PAGE> 12
VAD pumps sold. A small increase in the average selling price of our domestic
VAD pumps also contributed to the increase in revenue as compared to the first
half of last year.
Gross profit was $9.4 million, representing approximately 63% of product sales
for the first half of 2000 compared to a gross profit of $6.3 million
representing approximately 61% of product sales for the first half of 1999. The
increase in gross profit percentage was due to a higher proportion of VAD System
disposables being sold in the United States in the first half of 2000 compared
to the first half of 1999. VAD disposable products sold in the United States
generally have a higher gross margin than those sold in the rest of the world
because the average selling price of VAD pumps sold in the United States is
higher. Partially offsetting the favorable geographic sales mix and higher
domestic average selling prices for the VAD System disposables was approximately
$423,000 in higher manufacturing, service and retrofitting costs associated with
a change in a component used in our TLC-II portable driver.
Research and development expenses increased to $3.5 million in the first half of
2000, representing 23% of product sales, from $2.4 million in the first half of
1999, representing 24% of product sales, an increase of $1.1 million or 43%. Of
the total increase in research and development expenses, $175,000 was due to
increased research spending for the implantable version of our ventricular
assist device, $193,000 was due to graft products, $271,000 was due to the
TLC-II, and $376,000 was due to indirect engineering and manufacturing expenses,
representing higher overall facilities expenses and higher levels of support
from quality assurance and manufacturing personnel.
Selling, general and administrative expenses increased to $5.4 million in the
first half of 2000, representing 37% of sales, from $4.6 million in first half
of 1999, representing 45% of sales, an increase of $849,000 or 19%. Of the total
increase in selling, general, and administrative expenses, $577,000 is
associated with the continued development of the domestic and European sales
organizations and other promotional activities, and $271,000 is associated with
various administrative expenses, principally related to increased personnel
expenses and higher expenses related to our annual report to shareholders and
other year-end statutory reports.
Interest and other income in the first half of 2000 decreased $93,000 from the
first half of 1999, due to $201,000 of foreign exchange losses and $35,000 of
lower grant revenue partially offset by $140,000 higher interest income
resulting from higher cash balances in the second quarter of 2000.
Forward-Looking Statements
The statements in this report that relate to future plans, events or performance
are forward-looking statements which involve risks and uncertainties. These
risks include those related to results of clinical trials, government regulatory
approval processes, delays in product development and new product introductions,
announcements by our competitors, single source suppliers, rapidly changing
technology, an intensely competitive market, market acceptance of new products,
reimbursement policies and general economic conditions. These factors, and
others, are discussed more fully in our annual report on Form 10-K for 1999 and
our other filings with the Securities and Exchange Commission. Actual results,
events or performance may differ materially. These forward-looking statements
speak only as of the date hereof.
We undertake no obligation to publicly release the result of any revisions to
these forward-looking statements that may be needed to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
We do not currently use derivative financial instruments in our operations or
investment portfolio. We do not have material exposure to market risk associated
with changes in interest rates as we have no long-term debt obligations or
long-term investments outstanding. Our investment portfolio at the end of 1999
consisted of short-term corporate debt instruments and Federal government agency
debt instruments that were classified as available-for-sale. The weighted
average maturity of our investment portfolio was less than 90 days in 1999. Our
investment portfolio at the end of the first half of 2000 had a weighted average
maturity of 32 days and consisted primarily of state and municipal government
bonds. We do not expect to be subject to material interest rate risk with
respect to our short-term investments. We do not believe we have any other
material exposure to market risk associated with interest rates.
Although we conduct business in foreign countries, our international operations
consist primarily of sales and service personnel for our VAD System. These
employees report into our U.S. sales and marketing group and are internally
reported as part of that group. Net foreign currency exchange loss was
approximately $130,000 in the second quarter 2000, approximately $201,000 in the
first half 2000, and zero for both the second quarter 1999 and the first half
1999.
We do not expect to be subject to material foreign currency risk with respect to
future costs or cash flows from our foreign operations. To date, we have not
entered into any significant foreign currency forward exchange contracts or
other derivative financial instruments to hedge the effects of adverse
fluctuations in foreign currency exchange.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of Shareholders was held on May 12, 2000. The following item
was voted upon and approved at the meeting:
To elect directors to serve for the ensuing year until their successors are
elected
<TABLE>
<CAPTION>
Number of Votes
For Withheld
---------- --------
<S> <C> <C>
Howard Chase 18,545,641 8,981
D. Keith Grossman 18,545,641 8,981
J. Donald Hill 18,545,641 8,981
William M. Hitchcock 18,545,641 8,981
George W. Hollbrook, Jr. 18,545,641 8,981
Daniel M. Mulvena 18,545,641 8,981
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THORATEC LABORATORIES CORPORATION
Date: August 11, 2000 /s/ D. Keith Grossman
-------------------- -------------------------------------
D. Keith Grossman,
Chief Executive Officer
Date: August 11, 2000 /s/ Cheryl D. Hess
-------------------- -------------------------------------
Cheryl D. Hess,
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Document
-------------- --------
<S> <C>
27 Financial Data Schedule
</TABLE>
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