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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 September 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)
DELAWARE 94-2573850
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 September 30, 1995 was 21,172,000.
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QUIDEL CORPORATION
TABLE OF CONTENTS
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Page
Numbers
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PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
September 30, 1995 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations
Six months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Six months ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 7 - 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, March 31,
1995 1995
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ASSETS (Unaudited)
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Current assets:
Cash and cash equivalents $ 2,239,000 $ 3,878,000
Accounts receivable, including $17,000 due from
related parties ($257,000 as of March 31, 1995) 5,613,000 6,822,000
Inventories, at lower of cost (first-in, first-out) or market:
Raw materials 2,460,000 2,570,000
Work in process 1,313,000 1,158,000
Finished goods 901,000 1,137,000
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4,674,000 4,865,000
Prepaid expenses and other current assets 681,000 633,000
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Total current assets 13,207,000 16,198,000
Property and equipment, net 13,388,000 12,521,000
Intangible assets, net 5,261,000 5,409,000
Other assets 279,000 396,000
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$32,135,000 $34,524,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,502,000 $ 2,176,000
Accrued payroll and related expenses 677,000 880,000
Note payable to bank under line of credit 568,000 674,000
Accrued acquisition costs 56,000 685,000
Current portion of long-term debt and obligations
under capital leases 602,000 357,000
Other current liabilities 872,000 1,669,000
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Total current liabilities 4,277,000 6,441,000
Long-term debt and obligations under capital leases 3,711,000 4,145,000
Stockholders' equity:
Common stock 21,000 21,000
Additional paid-in capital 109,039,000 108,854,000
Accumulated deficit (84,913,000) (84,937,000)
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Total stockholders' equity 24,147,000 23,938,000
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$32,135,000 $34,524,000
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</TABLE>
See accompanying notes.
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three months ended September 30,
1995 1994
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Revenues:
Net sales, including $153,000 and $564,000
from a related party for the three months
ended September 30, 1995 and 1994, respectively $ 8,129,000 $ 6,776,000
Contracts, license fees and distribution agreements 204,000 380,000
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Total revenues 8,333,000 7,156,000
Costs and expenses:
Cost of sales 3,760,000 3,731,000
Research and development 1,006,000 864,000
Sales and marketing 2,625,000 2,533,000
General and administrative 844,000 600,000
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Total costs and expenses 8,235,000 7,728,000
Operating income (loss) 98,000 (572,000)
Other income and expense:
Interest income 41,000 66,000
Interest expense (132,000) (218,000)
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Net income (loss) $ 7,000 $ (724,000)
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Net income (loss) per share $ -- $ (.04)
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Shares used in computing net income (loss) per share 22,687,000 18,608,000
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</TABLE>
See accompanying notes.
4
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Six months ended September 30,
1995 1994
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Revenues:
Net sales, including $325,000 and $792,000
from a related party for the six months
ended September 30, 1995 and 1994, respectively $16,610,000 $12,054,000
Contracts, license fees and distribution agreements 270,000 431,000
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Total revenues 16,880,000 12,485,000
Costs and expenses:
Cost of sales 7,635,000 6,682,000
Research and development 1,977,000 1,664,000
Sales and marketing 5,382,000 4,899,000
General and administrative 1,676,000 1,340,000
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Total costs and expenses 16,670,000 14,585,000
Operating income (loss) 210,000 (2,100,000)
Other income and expense:
Interest income 90,000 92,000
Interest expense (276,000) (381,000)
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Net income (loss) $ 24,000 $(2,389,000)
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Net income (loss) per share $ -- $ (.13)
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Shares used in computing net income (loss) per share 22,297,000 18,549,000
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</TABLE>
See accompanying notes.
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QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Six months ended September 30,
1995 1994
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Cash flows from operating activities:
Net income (loss) $ 24,000 $(2,389,000)
Adjustments to reconcile net income (loss) to net cash
flows provided by (used for) operating activities:
Depreciation and amortization 976,000 909,000
Provision for losses on accounts receivable -- 160,000
Changes in assets and liabilities:
Accounts receivable 1,209,000 1,721,000
Inventories 191,000 454,000
Prepaid expenses and other current assets (48,000) 261,000
Accounts payable (674,000) (657,000)
Accrued payroll and related expenses (203,000) (285,000)
Accrued acquisition expenses (629,000) --
Other current liabilities (797,000) 103,000
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Net cash flows from operating activities 49,000 277,000
Cash flows used for investing activities:
Additions to equipment and improvements (1,502,000) (699,000)
Increase in other assets (76,000) (267,000)
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Net cash flows from investing activities (1,578,000) (966,000)
Cash flows provided by (used for) financing activities:
Net proceeds from issuance of common stock 185,000 121,000
Proceeds from line of credit -- 227,000
Payments on notes payable, long term debt and
obligations under capital leases (295,000) (441,000)
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Net cash flows from financing activities (110,000) (93,000)
Net decrease in cash and cash equivalents (1,639,000) (782,000)
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 $ 2,239,000 $ 2,391,000
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Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 260,000 $ 358,000
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</TABLE>
See accompanying notes.
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QUIDEL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 and six months ended September 30, 1995 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended September 30, 1995 totaled $8,129,000,
an increase of $1,353,000 or 20% from the same period of the prior year. This
increase is primarily 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 second quarter. Net sales
for the six months ended September 30, 1995 increased $4,556,000 (38%) over the
prior year period and totaled $16,610,000. Of this increase, $3,483,000 is
related to the addition of the PBI products and $809,000 to increased sales of
our European subsidiaries, some of which were not present in the first half of
the prior year.
7
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Gross profit increased significantly over the prior year periods, amounting
to $4,369,000, an increase of $1,324,000 (43%) in the second quarter and
totaling $8,975,000 for the six months ended September 30, 1995, which reflects
an increase of $3,603,000 or 67% over the first half of the prior year. Gross
profit as a percent of sales improved from forty-five percent (45%) in the
second quarter and six months of the prior fiscal year to fifty-four percent
(54%) in the current year's periods as a result of increased sales volume
coupled with a relatively constant level of manufacturing overhead costs.
Overall operating expense increased $478,000 (12%) and $1,132,000 (14%) in
the current quarter and six month periods respectively, versus the prior year
periods. Research and development expense has increased in line with the
increased activity in new product development projects. Sales and marketing
expense reflects the addition of our new European subsidiaries in Germany and
Spain which were not present in the first quarter of the prior year. The prior
year second quarter level of general and administrative expense was reduced by
approximately $125,000 associated with the recovery of a previously written off
bad debt.
Improved sales volume has resulted in increased gross profit sufficient to
offset the current level of operating expenses. This has enabled the Company
to breakeven in both the first and second quarter of fiscal 1996 as contrasted
to the prior year results of a net loss of $724,000 and $2,389,000 in the
second quarter and six month periods, respectively.
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 products near the end of their product life cycles, the timing and
success of new product introductions, relationships with strategic marketing
partners and seasonality. 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 September 30, 1995, the Company had cash and cash equivalents of
$2,239,000, compared to $3,878,000 at March 31, 1995. Cash provided by
operations totaled $49,000 for the six 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 six months ended September 30, 1995 was related to
the $1,502,000 invested in capital programs for new production equipment and
facility improvements required because of increased volume.
During the balance of fiscal 1996, Quidel's principal capital requirements
will be related to the capital expenditures associated with
8
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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 September 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.
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 None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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Exhibit
Number Exhibit
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27 Financial Data Schedule
(b) Reports on Form 8-K. None
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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: November 9, 1995 /S/ STEVE 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
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,239
<SECURITIES> 0
<RECEIVABLES> 5,613
<ALLOWANCES> 484
<INVENTORY> 4,674
<CURRENT-ASSETS> 13,207
<PP&E> 21,343
<DEPRECIATION> 7,955
<TOTAL-ASSETS> 32,135
<CURRENT-LIABILITIES> 4,277
<BONDS> 3,711
<COMMON> 21
0
0
<OTHER-SE> 24,126
<TOTAL-LIABILITY-AND-EQUITY> 32,135
<SALES> 16,610
<TOTAL-REVENUES> 16,880
<CGS> 7,635
<TOTAL-COSTS> 16,670
<OTHER-EXPENSES> (90)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276
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</TABLE>
