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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For quarter ended June 30, 1995
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: 0-10961
QUIDEL CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 94-2573850
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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10165 McKellar Court, San Diego, California 92121
(Address of principal executive offices)
Registrant's telephone number, including area code (619) 552-1100
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 ________
The number of shares outstanding of the Registrant's Common Stock as
of June 30, 1995 was 21,149,577.
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QUIDEL CORPORATION
TABLE OF CONTENTS
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Page
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1995 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . 5
Notes to Unaudited Condensed Consolidated Financial Statements . . . . . . . . . . . 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . 7 - 8
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . 9
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . 9
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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June 30, March 31,
1995 1995
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ASSETS
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Current assets:
Cash and cash equivalents $ 2,814,000 $ 3,878,000
Accounts receivable, including $162,000 due from
related parties ($257,000 as of March 31, 1995) 5,988,000 6,822,000
Inventories, at lower of cost (first-in, first-out) or market:
Raw materials 2,409,000 2,570,000
Work in process 1,121,000 1,158,000
Finished goods 1,201,000 1,137,000
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4,731,000 4,865,000
Prepaid expenses and other current assets 447,000 633,000
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Total current assets 13,980,000 16,198,000
Property and equipment, net 13,219,000 12,521,000
Intangible assets, net 5,302,000 5,409,000
Other assets 344,000 396,000
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$ 32,845,000 $ 34,524,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 1,282,000 $ 2,176,000
Accrued payroll and related expenses 849,000 880,000
Note payable to bank under line of credit 699,000 674,000
Accrued acquisition costs 314,000 685,000
Current portion of long-term debt and obligations
under capital leases 615,000 357,000
Other current liabilities 1,183,000 1,669,000
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Total current liabilities 4,942,000 6,441,000
Long-term debt and obligations under capital leases 3,800,000 4,145,000
Stockholders' equity:
Common stock 21,000 21,000
Additional paid-in capital 109,002,000 108,854,000
Accumulated deficit (84,920,000) (84,937,000)
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Total stockholders' equity 24,103,000 23,938,000
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$ 32,845,000 $ 34,524,000
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See accompanying notes.
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended June 30,
1995 1994
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Revenues:
Net sales, including $172,000 and $228,000
from a related party for the three months
ended June 30, 1995 and 1994, respectively $8,481,000 $ 5,278,000
Contracts, license fees and distribution agreements 66,000 51,000
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Total revenues 8,547,000 5,329,000
Costs and expenses:
Cost of sales 3,875,000 2,951,000
Research and development 971,000 800,000
Sales and marketing 2,757,000 2,366,000
General and administrative 832,000 740,000
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Total costs and expenses 8,435,000 6,857,000
Operating income (loss) 112,000 (1,528,000)
Other income and expense:
Interest income 49,000 26,000
Interest expense (144,000) (163,000)
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Net income (loss) $ 17,000 $(1,665,000)
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Net income (loss) per share $ -- $ (.09)
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Shares used in computing net income (loss) per share 21,908,000 18,490,000
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See accompanying notes.
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three months ended June 30,
1995 1994
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Cash flows from operating activities:
Net income (loss) $ 17,000 $(1,665,000)
Adjustments to reconcile net income (loss) to net cash
flows provided by (used for) operating activities:
Depreciation and amortization 472,000 454,000
Changes in assets and liabilities:
Accounts receivable 834,000 2,230,000
Inventories 134,000 86,000
Prepaid expenses and other current assets 186,000 214,000
Accounts payable (894,000) (757,000)
Accrued payroll and related expenses (31,000) (172,000)
Accrued acquisition expenses (371,000) --
Other current liabilities (486,000) 46,000
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Net cash flows from operating activities (139,000) 436,000
Cash flows used for investing activities:
Additions to equipment and improvements (1,008,000) (305,000)
Increase in other assets (3,000) (157,000)
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Net cash flows from investing activities (1,011,000) (462,000)
Cash flows provided by (used for) financing activities:
Net proceeds from issuance of common stock 148,000 109,000
Payments on notes payable, long term debt and
obligations under capital leases (62,000) (214,000)
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Net cash flows from financing activities 86,000 (105,000)
Net decrease in cash and cash equivalents (1,064,000) (131,000)
Cash and cash equivalents at beginning of period 3,878,000 3,173,000
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Cash and cash equivalents at end of period $ 2,814,000 $ 3,042,000
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 135,000 $ 147,000
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See accompanying notes.
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1. Basis of Presentation
QUIDEL Corporation (the "Company") discovers, develops, manufactures and
markets diagnostic products for human health care. The unaudited financial
information included herein is condensed and has been prepared in accordance
with generally accepted accounting principles applicable to interim periods;
consequently it does not include all generally accepted accounting disclosures
required for complete annual financial statements. The condensed financial
information contains, in the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary to state fairly the financial
position, results of operations and cash flows. The results of operations for
the three months ended June 30, 1995 and 1994 are not necessarily indicative of
the results to be expected for the full year.
Management suggests that these condensed financial statements be read in
conjunction with the financial statements and notes thereto for the year ended
March 31, 1995, included in the Company's Annual Report on Form 10-K filed with
the Securities and Exchange Commission.
NET INCOME (LOSS) PER SHARE - Net income (loss) per share has been computed
using the weighted average number of common shares and for income periods
dilutive common stock equivalents outstanding during each period presented.
Common shares issuable upon exercise of certain warrants and stock options or
upon conversion of notes payable were not included in the calculations for loss
periods since the effect of their inclusion would be antidilutive.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended June 30, 1995 totaled $8,481,000,
an increase of $3,203,000 or 61% from the same period of the prior year.
Approximately fifty percent (50%) of this increase between periods is related
to the sales of pregnancy and mononucleosis products of our newly acquired (in
January 1995) subsidiary Pacific Biotech ("PBI"), which were not present in the
prior year's first quarter. The balance of our sales growth is related to an
increase in U.S. over-the-counter pregnancy and ovulation test sales of
$416,000 and an increase in international sales of $1,203,000, $631,000 of
which is related to sales of our subsidiaries in Germany and Spain not present
in the prior year's first quarter.
The majority of the Company's domestic doctor's office market sales
are made through medical product distributors. This distribution channel is in
the process of change. During the past year there has been a consolidation of
distributors. Other changes include the recent decision by one of our
distributors, Physician Sales and Services Inc. ("PSS") to enter into an
exclusive distribution agreement with a division of a major pharmaceutical
company with the result that they will no longer sell our products. The
Company's fiscal 1995 sales to PSS were approximately $1.7 million, and while
the Company is attempting to recapture these sales through other remaining
distributors, there can be no assurance that this will be achieved.
Gross profit as a percent of sales improved from forty-four percent
(44%) in the first quarter of the prior fiscal year to fifty-four percent (54%)
in the current quarter as a result of increased sales volume coupled with a
relatively constant level of manufacturing overhead costs between periods.
Research and development expenses increased $171,000 (21%) between
periods due to increased activity in new product development projects and work
directed towards the future reintroduction of the PBI Strep A product, which
was recalled by PBI in October 1994 as a result of certain field performance
issues. Sales and marketing expenses increased $391,000 (17%) between periods;
approximately $300,000 of this increase is related to the costs associated with
our new European subsidiaries in Germany and Spain which were not present in
the prior year's first quarter. General and administrative expenses increased
$92,000 (12%) over the prior year quarter due to salaries and other expenses
associated with increased volume.
As a result of the improved sales volume in the current period, the
Company achieved a net income of $17,000 for the three months ended June 30,
1995 compared to a net loss of $1,665,000 in the prior year quarter.
The Company's operating results may continue to fluctuate on a quarter
to quarter basis as a result of a number of factors, including the phase-out of
older
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products near the end of their product life cycles, the timing and success of
new product introductions, relationships with strategic marketing partners and
seasonality. Due to seasonal demand trends for certain of its products, the
Company may generally achieve lower results in the first and second quarters
and higher results in the third and fourth quarters of the fiscal year. Actual
results for the remainder of the fiscal year will be influenced by competitive
and economic factors affecting the Company's markets, actions of our major
distributors, and the degree of acceptance that our new products achieve during
the year.
Liquidity and Capital Resources
At June 30, 1995, the Company had cash and cash equivalents of
$2,814,000, compared to $3,878,000 at March 31, 1995. Cash used in operations
totaled $139,000 for the three month period, reflecting proceeds from the
collection of accounts receivable and reduction in inventory offset by payments
of accounts payable and PBI acquisition-related expenses. The principal use of
cash in the quarter was related to the $1,008,000 invested in capital programs
for new production equipment and facility improvements required because of
increased volume.
During fiscal 1996, Quidel's principal capital requirements will be
related to the capital expenditures associated with automated production
systems which are intended to increase capacity and reduce product cost, and
for other working capital needs. The Company's working capital requirements
fluctuate as a result of numerous factors, such as the extent to which the
Company uses or generates cash in operations, progress in research and
development projects, competition and technological developments and the time
and expenditures required to obtain governmental approval of its products. The
Company has established an accounts receivable based bank line of credit which
provides for borrowing up to $3 million. At June 30, 1995 there were no
outstanding borrowings under the line of credit. Based on its current cash
position and its current assessment of future operating results, management
believes that its existing sources of liquidity should be adequate to meet its
operating needs.
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PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
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(a) The Company's Annual Meeting of Stockholders was held on July
27, 1995 at the principal offices of the Company in San Diego, California.
(b) The directors elected at the meeting were:
John D. Diekman
Steven T. Frankel
Thomas A. Glaze
Roger F. Greaves
Rockell N. Hankin
Richard C.E. Morgan
Mary Lake Polan
Faye Wattleton
(c) Matters voted upon at the meeting and the results of those
votes were as follows:
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For Against Abstain
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1. Elected as director:
John D. Diekman 16,158,623 95,182 -
Steven T. Frankel 16,158,617 95,188 -
Thomas A. Glaze 16,149,523 104,282 -
Roger F. Greaves 16,156,773 97,032 -
Rockell N. Hankin 16,156,823 96,982 -
Richard C.E. Morgan 16,159,373 94,432 -
Mary Lake Polan 16,151,273 102,532 -
Faye Wattleton 16,149,873 103,932 -
2. Increase by 100,000 shares the
total number of shares
reserved for issuance under
the Company's 1983 Employee
Stock Purchase Plan. 15,853,455 317,880 82,470
3. Ratification of the selection of
Ernst & Young LLP as independent
auditors for the Company for the
fiscal year ending March 31, 1996. 15,092,605 126,308 1,034,892
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The foregoing matters are described in detail in the Company's proxy statement
dated June 30, 1995 for the 1995 Annual Meeting of Stockholders.
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ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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Exhibit
Number Exhibit
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27 Financial Data Schedule
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(b) Reports on Form 8-K filed in the first quarter of fiscal 1996
1. Form 8-K dated June 12, 1995 reporting the announcement of
(i) June 9, 1995 as the record date for the determination
of stockholders entitled to notice and to vote at the
Company's 1995 Annual Meeting of Stockholders, and (ii)
July 27, 1995 as the date of the Annual Meeting.
2. Form 8-K dated June 16, 1995 containing the Amended and
Restated Bylaws of the Company.
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SIGNATURES
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.
QUIDEL CORPORATION
_________________________________
(Registrant)
Date: August 11, 1995 /s/ STEVEN C. BURKE
_________________________________
Steven C. Burke
Chief Accounting Officer
Signed both as a duly authorized
officer to sign on behalf of the
Registrant and as Chief Accounting
Officer
11
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,814
<SECURITIES> 0
<RECEIVABLES> 5,988
<ALLOWANCES> 654
<INVENTORY> 4,731
<CURRENT-ASSETS> 13,980
<PP&E> 20,849
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<TOTAL-ASSETS> 32,845
<CURRENT-LIABILITIES> 4,942
<BONDS> 3,800
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<OTHER-SE> 24,082
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