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Page 1 of
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1995
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11250
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DIONEX CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 94-2647429
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1228 Titan Way, Sunnyvale, California 94086
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 737-0700
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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
----- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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The aggregate market value of the Registrant's Common Stock held by
nonaffiliates on September 18, 1995 (based upon the closing price of such stock
as of such date) was $327,253,576.
As of September 18, 1995, 6,698,652 shares of the Registrant's Common Stock were
outstanding.
Portions of the Registrant's 1995 Annual Report to Stockholders are incorporated
by reference in Parts I, II and IV of this Report. Portions of the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
October 27, 1995 are incorporated by reference in Part III of this Report.
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PART I
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Item 1. BUSINESS
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Dionex Corporation* designs, manufactures, markets and services analytical
instrumentation and related accessories and chemicals. The Company's products
are used to analyze chemical substances in the environment and in a broad range
of industrial and scientific applications. Since July 1, 1994, there have been
no material changes in the mode of conducting the business of the Company.
Industry Segment Information
----------------------------
The Company operates in a single industry segment consisting of
analytical instruments and related services.
Products
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Dionex develops, manufactures, markets and services a range of
chromatography systems, sample preparation devices and related products that are
used by chemists to isolate and quantify the individual components of complex
chemical mixtures in many major industrial, research and laboratory markets.
Typically, the Company's chromatography systems include several components: a
specially designed liquid pumping and flow system, a sample injection system, a
separator column, a suppressor or other post-column device, a detector and a
data collection and analysis system. These components are designed to be
modular so that systems can be configured to meet the particular analytical
requirements of individual customers. Moreover, individual components may be
sold separately to existing customers who wish to expand their systems.
The Company's chromatography systems are currently focused in
several product areas: ion chromatography, bioseparations, extraction and
supercritical fluid separations. In addition to these product areas, the
Company develops and manufactures columns, detectors, data analysis systems and
other products. Each of these product areas is described below.
ION CHROMATOGRAPHY - Ion Chromatography (IC) is a form of
------------------
chromatography that separates ionic (charged) molecules, usually found in water-
based solutions, and typically identifies them based on their electrical
conductivity. The sale of Dionex IC systems and related columns, suppressors,
detectors, and automation and other products accounts for a majority of the
Company's revenues.
_________________________
* Unless the context otherwise requires, the terms "Dionex" and "the Company"
as used herein include Dionex Corporation, a Delaware corporation, and its
subsidiaries. Dionex was initially incorporated in California in 1980. In
1986, the Company reincorporated in the state of Delaware.
3
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Dionex IC products are used in a wide range of applications, including
environmental monitoring, corrosion monitoring, evaluation of raw materials,
quality control of industrial processes, research and development, and
regulation of the chemical composition of food, beverage and cosmetic products.
Major customers include environmental testing laboratories, chemical and
petrochemical firms, power generating facilities, electronics
manufacturers, government agencies and academic institutions.
In the first quarter of fiscal 1994, the Company introduced the DX 500
Series of chromatography systems for Ion Chromatography and High
Performance Liquid Chromatography (HPLC) in the North American and
European markets. In the third quarter of fiscal 1995, the DX 500 line was
introduced in Japan and it is now marketed worldwide. These modular, high
performance systems meet the needs of various applications, including
classical IC as well as bioscience and environmental HPLC analyses. This
series is gradually replacing the DX-300 Series that was introduced in fiscal
1991.
The Company also sells the DX-100, a cost-effective IC system for
customers who need simple, dedicated instrumentation for routine ion
analysis.
The Company also manufactures the Series 8200 Process Analyzer, a
product designed for continuous on-line monitoring of ions in industrial
applications. The Series 8200, introduced in fiscal 1992, uses industry
standard PC-based automation, similar to that used in laboratory
chromatography. A major application for the Company's process analyzer has been
in the power industry for the continuous monitoring of corrosive
contaminants in boiler water.
BIOSEPARATIONS - Bioseparation products are used to analyze biological molecules
- --------------
such as proteins, carbohydrates and amino acids. The DX 500
Series chromatographs and the capillary electrophoresis(CE) systems are
intended for use by customers in the biological research, biotechnology and
pharmaceutical markets.
The Company manufactures and sells CE systems that utilize an
analytical technique that separates molecules based on their charge to mass
ratios, size or other characteristics. The Company's CE systems are used for
the analysis of biological samples as well as for ion analysis. The Company's
recent developments have focused on chemistry to improve CE separations through
use of buffers and column technology.
4
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AUTOMATED EXTRACTION PRODUCTS - The Company offers two instruments for
- -----------------------------
automated sample extraction. The ASE/TM/ 200 system is based upon a new
extraction technology that extracts solid samples using common solvents at
elevated temperatures and pressures. The SFE-723 is based on Supercritical
Fluid Extraction (SFE), a sample preparation technique that passes a
supercritical fluid through a solid or liquid sample to extract the compounds of
interest for subsequent analysis. A supercritical fluid is a substance (such as
carbon dioxide) that has been put under pressure and heated until it has
certain characteristics of both a liquid and a gas.
In March 1995, the Company introduced a new extraction technology called
Accelerated Solvent Extraction or ASE. The ASE 200 system extracts solid
samples in an automated fashion using the same solvents used in existing
techniques like soxhlet, sonication, and microwave extraction. The ASE 200
system offers several advantages over other solvent based extraction techniques
including: lower solvent consumption, reduced extraction time, higher
throughput and ease of use. ASE 200 systems are used for a number of
environmental, industrial, and food and beverage analysis applications.
The Company also offers the SFE-723 which combines the features of an SFE
with that of an SFE-703M, a cosolvent addition module. This system
provides enhanced extraction for difficult samples. The Company's SFE
systems are used by a number of industrial, government and academic
institutions worldwide for quality control, product evaluation, and research and
development.
SUPERCRITICAL FLUID CHROMATOGRAPHY - In addition to ion chromatography and
- ----------------------------------
bioseparations, the Company is engaged in the market for supercritical fluid
separations. Supercritical fluid chromatography (SFC) is a form of
chromatography that separates compounds dissolved in a supercritical fluid and
identifies them with a variety of detection techniques.
The Company's supercritical fluid separations systems are used by a number
of industrial, government and academic institutions worldwide for quality
control, product evaluation and research and development.
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AUTOMATION PRODUCTS - As part of its efforts to make chemical analyses simpler,
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faster and more reliable, Dionex offers a family of products that automate
sample handling, system operation and data analysis for chromatography systems.
These products include the PeakNet and AI-450 chromatography workstations and
integrators. In addition, automated sample injectors are available.
In September 1993, the PeakNet PC-based Chromatography Workstations were
introduced to complement the DX 500 systems. PeakNet is the Company's latest
release of Windows based applications for chromatography. PeakNet Workstations
are multi-featured, high performance computer systems that automate control,
data acquisition, analysis and reporting for the DX 500 systems.
In March 1994, the universal interface (UI20) module was added to the
PeakNet/DX 500 Series. It allows PeakNet workstations to accept data from other
Dionex instruments such as the DX-100, as well as instruments manufactured by
other vendors. A revision of the PeakNet software was also introduced at that
time to support the new interfacing capabilities.
Also in March 1994, a new Automated Sample Injection module (AS40) was
added to the DX 500 Series.
COLUMNS AND SUPPRESSORS - A chromatography column generally consists of a hollow
- -----------------------
cylinder packed under high pressure with a chemical resin. The column's
function is to separate various chemical components in a sample. The Company
develops and manufactures its own resins using proprietary processes. Dionex
currently manufactures and markets a broad range of column types designed for
particular applications. In addition to the Company's standard liquid
chromatography columns, the Company markets a range of capillary columns for use
in SFC and CE.
Several consumable products were introduced in fiscal 1995, including the
Ionpac CS12A for improved cation analysis and an OnGuard Barium
sample prep cartridge.
These products follow a steady stream of columns and chemistry introduced
previously, including the AS12A IonPac, CS14 and AS11 columns, the ICE-AS6
column and the IonPhor CE buffers in fiscal 1994 and 1993. These products cover
a range of applications.
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In addition to columns, Dionex manufactures suppressors that are used to
enhance detection in ion chromatography. The Company has proprietary positions
in the technology of suppression used in ion chromatography as well as in the
application of suppression techniques. The Company's suppressors lower
background conductivity while allowing separations using higher capacity columns
and more concentrated eluents (liquids used to carry a sample through a liquid
chromatography system). In fiscal 1993, Dionex enhanced its suppression
technology with the introduction of a new AutoSuppression product. The product,
called the Self-Regenerating Suppressor (SRS/TM/), enhances IC performance while
operating with low maintenance requirements.
DETECTORS - Detectors are used to measure the quantity of various sample
- ---------
components after they have been separated in a chromatography column. Dionex
currently offers several detector products based on conductivity,
electrochemistry and optics including the addition of a photodiode array
detector in 1995. This range of detectors is designed to meet customer
requirements for analysis of organics, inorganics, metals, amino acids and other
biological compounds.
SERVICE AND OTHER - The Company also generates revenue from its Customer
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Service organization through service contracts, spare part sales, customer
training and sales of other product and services. (See Technical Support,
Installation and Service below.)
Marketing and Customers
-----------------------
The Company's market strategy is twofold. First, in those applications
where Dionex technology is well established, the Company works to further
increase demand for its chromatography systems through direct mailings,
advertising in trade publications, seminars and workshops, conferences and
expositions, and direct sales calls. Growth in these markets results from
identifying new customers in existing sales regions, extending geographic
penetration and increasing demand for the Company's products and technical
support capabilities among existing customers.
The second component of the Company's marketing strategy is to work
closely with existing and potential customers to develop new applications.
Technical support staff assist such customers in problem definition,
development of applications chemistry needed to solve problems and providing
user training and ongoing user support. By combining this support function with
direct sales efforts, the Company works to increase the range of applications
and the potential market for its products.
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The Company currently markets its products and services through its own
sales force in the United Kingdom, Germany, Italy, France, the Netherlands,
Belgium, Switzerland, Japan, Canada and the United States. In each of these
countries, the Company maintains one or more local sales offices in order to
service customers in regional markets. In other international locations where it
does not have a sales force, the Company has developed a network of distributors
and sales agents.
The Company's products are used extensively in environmental analysis and
by the pharmaceutical, life science, biotechnology, chemical, petrochemical,
power generation, food and beverage, and electronics industries. Its customers
include a number of the largest industrial companies worldwide, as well as
government agencies, research institutions and universities. Geographically,
sales outside of North America accounted for 59% of consolidated sales in fiscal
1995 and 57% of consolidated sales in fiscal 1994 and 1993. No single customer
accounted for 10 percent or more of the Company's sales in fiscal 1995, 1994 or
1993.
Demand for the Company's products is dependent upon the size of the markets
for its chromatography systems, the level of capital expenditures of the
Company's customers, the rate of economic growth in the Company's major markets
and competitive considerations. The Company believes that demand for its
products does not exhibit any significant seasonal pattern.
Dionex manufactures its products based upon its forecast of customer demand
and maintains inventories of completed modules in advance of receipt of firm
orders from its customers. Orders are generally placed by the customer on an as-
needed basis, and products are usually shipped within four to six weeks after
receipt of an order. Dionex does not maintain a substantial backlog, and backlog
as of any particular date may not be indicative of the Company's actual sales in
any succeeding period. The level of backlog at June 30, 1995 was $17.5 million
and at June 30, 1994 was $12.2 million.
Competition
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Companies competing with Dionex in the analytical instruments market
include Hewlett Packard, Perkin Elmer, Varian, Shimadzu and Waters. The
analytical instruments market is comprised of many different analytical
techniques. One of these analytical techniques is Ion Chromatography (IC). The
Company believes it has a major position in IC. Competitors of the Company in IC
include HPLC vendors such as Hewlett-Packard, Waters, Alltech and other smaller
companies. The Company believes no single competitor has a dominant position in
the analytical instruments market.
8
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Competition in the Company's business segment is based upon the performance
capabilities of the analytical instrument, technical support and after-market
service, the manufacturer's reputation as a technological leader, and price.
Management believes that system performance capabilities are the most important
of these criteria. Customers measure system performance in terms of sensitivity
(the ability to discern minute quantities of a particular sample component),
selectivity (the ability to distinguish between similar components), speed of
analysis and the breadth of samples which the system can effectively analyze.
Management believes that Dionex enjoys a favorable reputation in terms of
performance capabilities, technical support and service.
Dionex ion chromatography systems generally compete with a number of
analytical techniques used in identifying and quantifying ionic and polar
compounds. The two primary sources of competition for ion chromatography are
conventional manual and automated wet chemistry procedures and certain modified
liquid chromatography systems. Some suppliers of liquid chromatography systems
have developed a single column ion chromatography (SCIC) method that does not
use a suppressor device. SCIC methods compete favorably with Dionex ion
chromatography for the analysis of a limited number of ions and in situations
when chemical composition of the sample is not complex or when high sensitivity
is not required. The recent introduction of AutoSuppression technology
considerably improves the ease of use of chemical suppression. In addition to
SCIC products, the Company's competitors also offer other products to compete in
ion analysis, including capillary electrophoresis and chromatography products
using technology similar to that of the Company.
The Company's DX-300 and DX 500 Series compete directly with HPLC systems
in certain traditional HPLC applications. Dionex is a relatively new entrant in
the highly competitive HPLC and biological separations markets. Nonetheless,
management believes that the DX-300 Series, and to a greater extent, the DX 500
Series, have certain benefits over competing systems, including a totally non-
metallic flow system and the capability of performing gradient ion
chromatography, as well as HPLC, on a single analytical system.
The Company's ASE 200 competes directly with standard soxhlet,
sonication and microwave extraction techniques provided by other companies.
Management believes that the ASE 200, a new extraction technology, has
certain benefits compared to competing techniques including faster extraction
time, reduced solvent usage and built-in automation.
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The Company's supercritical fluid separations technologies compete with
alternate technologies from several other companies. Management initially
believed that supercritical fluid separations techniques had potentially
wide-ranging applications. However, the underlying market for these
technologies has not emerged from the early stages of commercialization.
In addition, supercritical fluid separations now face competition from new
technologies, such as ASE 200, and other forms of chromatography and sample
preparation.
The Company's capillary electrophoresis system competes with those offered
by a number of analytical instrument manufacturers. The Company believes that
the continued participation of these analytical instrument companies in the
capillary electrophoresis market is dependent on how rapidly the demand for
capillary electrophoresis applications expands.
The Company believes that competition in the ion analysis market will
continue to increase in the future. Moreover, the Company's entrance into the
HPLC, biological separations, SFC, extraction and capillary electrophoresis
markets has resulted in increased competition. Many of the companies whose
products compete with those of the Company have substantially greater financial
resources and larger technical staffs and sales forces at their disposal.
Patents and Licenses
--------------------
The Company has exclusive rights under patents and patent applications
licensed from the Dow Chemical Company ("Dow") (except for rights retained by
Dow and its subsidiaries) covering certain of the Company's current products.
The primary benefits of this exclusivity are presently limited to the United
States and certain other foreign countries where patents have been issued. The
licenses reserve to Dow and its subsidiaries the right to practice the patents,
and Dow has made products covered by the patent rights for its own use. The
Company believes that Dow has not made products covered by the patent rights for
sale to third parties.
As a matter of Company policy, the Company vigorously pursues and protects
its proprietary position and seeks patent coverage on all developments that it
regards as material and patentable. The Company's patents, including those
licensed from others, expire on various dates through 2007. The Company believes
that, while its patents have value, no single patent or application is in itself
essential and that the invalidity or expiration of any single patent would not
have a material adverse effect on its business.
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International Operations
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Financial information about foreign and domestic operations and export
sales required by Item 1 of Form 10-K is incorporated by reference to Note 13 of
the Notes to Consolidated Financial Statements at page 26 of the Registrant's
1995 Annual Report to Stockholders. A copy of the applicable page is attached
hereto as Exhibit 13.1.
The Company has subsidiaries in the United Kingdom, Germany, Italy, France,
the Netherlands, Belgium, Switzerland, Japan and Canada. The Company's foreign
sales are affected by fluctuations in currency exchange rates and by regulations
adopted by foreign governments. Export sales are subject to certain controls and
restrictions, but the Company has not experienced any material difficulties
related to these limitations.
Manufacturing and Suppliers
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The Company produces chemicals and resins and assembles systems and
components in its California manufacturing facilities. Dionex has developed
proprietary processes for the manufacture of polystyrene-based resins and for
packing columns with these resins. The Company believes that its resins, columns
and suppressor manufacturing know-how are critical to the performance and
reliability of its chromatography systems.
The Company has emphasized a modular design for the principal subsystems of
its pumping flow systems, sample injection systems, chromatography modules,
detectors, and control and data analysis systems. The Company believes that this
modular approach has enabled it to meet the wide range of system configurations
required by its customers while effectively managing inventory levels.
Many components used in the Company's products, including proprietary
analog and digital circuitry, are manufactured by Dionex. Other components,
including packaging materials, integrated circuits, microprocessors,
microcomputers and certain detector and data analysis modules, are acquired from
other manufacturers. Most of the raw materials, components and supplies
purchased by the Company are available from a number of different suppliers;
however, a number of items are purchased from limited or single sources of
supply, and disruption of these sources could have a temporary adverse effect on
shipments and the financial results of the Company.
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Technical Support, Installation and Service
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Users of the Company's chromatography systems require substantial technical
support before and after the system sale to ensure that analysis problems are
resolved. As part of its support services, the Company's technical support staff
provides, typically at no additional cost, individual assistance in solving
chemical analysis problems. The Company offers training courses and periodically
sends its customers information on applications development. Chromatography
systems sold by the Company generally include a one-year warranty, installation
and certain user training, all at no additional cost. Service contracts may be
purchased by customers to cover equipment no longer under warranty. Service work
not performed under warranty or service contracts is performed on a time and
materials basis. The Company installs and services its products through its own
field service personnel in the United Kingdom, Germany, Italy, France, the
Netherlands, Belgium, Switzerland, Japan, Canada and the United States.
Installation and service in other foreign countries are typically provided by
the Company's distributors or agents.
Research and Development
------------------------
The Company's research and development efforts are focused on increasing
the performance of its chromatography and other products and expanding the
number of chemical compounds that can be analyzed efficiently with its products.
Research and product development expenditures were $10,500,000, $9,902,000 and
$9,295,000 in fiscal 1995, 1994, and 1993, respectively. The Company pursues
active development programs in the areas of system hardware, applications,
computer software, and resin and column technologies.
Environmental Laws and Regulations
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Compliance by the Company with federal, state and local environmental laws
during fiscal 1995 had no material effect upon capital expenditures,
earnings or its competitive position.
Employees
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Dionex had 647 employees at June 30, 1995, compared with 637 employees at
June 30, 1994. The Company believes that its future success will depend in large
part upon its continued ability to attract and retain highly skilled employees.
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Item 2. PROPERTIES
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As of September 18, 1995 the Company owns nine buildings in Sunnyvale,
California, providing 252,000 square feet of space utilized for
Administration, Marketing, Sales, Service, Research and Product
Development, and Manufacturing. The Company also owns 9.4 acres of
undeveloped land in San Jose, California, and a building utilized for
Sales, Service and Administration in Idstein, Germany.
The Company leases sales and service offices in: Smyrna, Georgia;
Houston, Texas; Westmont, Illinois; Marlton, New Jersey; Sunnyvale,
California; and in the United Kingdom, Germany, France, Italy, the
Netherlands, Belgium, Switzerland, Japan and Canada. In addition,
the Company leases marketing and research and development offices
in Salt Lake City.
As of the date of this report, the Company's facilities are well
maintained, adequate to conduct the Company's current business, and are
substantially utilized by the Company.
Several of the Company's properties are located in an area under
investigation by the California Regional Water Quality Control Board
(the "Water Board".) The Water Board's investigation addresses the
presence of certain volatile organic compounds in portions of the local
groundwater system and focuses principally on the activities of several
other companies located near the Company. The Water Board review has
encompassed the property acquired by the Company in July 1986. The
Company believes that any remedial work affecting the subject property
will be performed by or at the expense of other parties responsible for
any release of chemicals onto the property, or at the expense of the
previous owner of the property. As a result, management believes that
any action required by the Water Board's investigation will not have a
material adverse effect on the Company's financial position or results
of operations.
Item 3. LEGAL PROCEEDINGS
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None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matters were submitted to a vote of security holders during the
quarter ended June 30, 1995.
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Executive Officers of the Registrant
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The following table lists the names and positions of all current executive
officers of the Company, and their ages, as of September 18, 1995. There are no
family relationships between any director or executive officer and any other
director or executive officer of the Registrant. Executive officers serve at the
discretion of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions
---- --- ---------
<S> <C> <C>
A. Blaine Bowman 49 President, Chief Executive
Officer and Director
Barton Evans, Jr. 47 Senior Vice President
Nebojsa Avdalovic 60 Vice President
Michael W. Pope 29 Vice President
Susan E. Strong 43 Vice President
</TABLE>
Mr. Bowman has served as the Registrant's President and Chief Executive
Officer and as a director since the Registrant began operations in 1980.
Mr. Evans has served as Senior Vice President, Operations for the
Registrant since September 1993. Prior to that, he served as Vice President,
Operations and in various other capacities for the Registrant since it began
operations in 1980.
Dr. Avdalovic has served as Vice President, Research and Development for
the Registrant since August 1990. Prior to joining the Registrant, Dr.
Avdalovic served as Research Manager and Manager of Technology Assessment for
Beckman Instruments Spinco Division in Palo Alto, California.
Mr. Pope has served as Vice President of Finance and Administration for the
Registrant since April 1995. Prior to that, he served as Director of Finance and
Senior Financial Analyst with the Company. Mr. Pope has been with the Company
since June 1992. Before joining the Company, Mr. Pope was employed at the
Federal Reserve Bank of New York.
Ms. Strong has served as Vice President, Marketing for the Registrant since
July 1995. Prior to that, she served as Director of Marketing and in
various other capacities since joining the Company in August 1990.
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PART II
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Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
------------------------------------------------
STOCKHOLDER MATTERS
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The information required by Item 5 of Form 10-K is incorporated by
reference to the information contained in the section captioned
"Supplemental Information" at page 28 of the Registrant's 1995 Annual
Report to Stockholders. A copy of the applicable page is attached hereto
as Exhibit 13.1.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
------------------------------------
The information required by Item 6 of Form 10-K is incorporated by
reference to the information contained in the section captioned
"Selected Financial Information" at page 15 of the Registrant's 1995
Annual Report to Stockholders. A copy of the applicable page is attached
hereto as Exhibit 13.1.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Result of Operations
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The following table summarizes the consolidated income statement items as a
percentage of sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
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Years Ended June 30 1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 32.0 32.1 31.3
----- ----- -----
Gross profit 68.0 67.9 68.7
Selling, general and administrative 36.2 36.1 37.8
Research and product development 8.7 9.0 8.8
Write-off of goodwill 1.8 - -
----- ----- -----
Operating income 21.3 22.8 22.1
Other income 3.4 - -
Interest income, net 1.7 1.1 1.4
----- ----- -----
Income before taxes 26.4 23.9 23.5
Taxes on income 9.9 8.3 8.1
----- ----- -----
Net income 16.5% 15.6% 15.4%
----- ----- -----
</TABLE>
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Net Sales and Gross Profit. In fiscal 1995 the Company reported its 15th
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consecutive year of record sales. The Company's total sales increased 10% to
$120.0 million in fiscal 1995, compared to $109.5 million in fiscal 1994 and
$105.6 million in fiscal 1993.
Sales in our European markets grew 18% in fiscal 1995, while sales in our
markets in North America and the Far East increased moderately. In fiscal 1994,
sales in the Far East experienced solid growth, while sales in North America
improved during the course of the year.
Sales outside of North America accounted for 59% of consolidated sales in fiscal
1995 compared to 57% in fiscal 1994 and 1993. The Company sells directly through
its sales forces in the United Kingdom, Germany, Italy, France, the Netherlands,
Belgium, Switzerland, Japan, Canada and the United States. Direct sales
accounted for 91% of consolidated sales in fiscal 1995, compared to 90% in
fiscal 1994 and 1993. International distributors and representatives in Europe,
the Far East and other international markets accounted for the balance of
consolidated sales. The Company is subject to the effects of currency
fluctuations, which can have an impact on reported sales and margins. Currency
effects increased reported sales by 5% in fiscal 1995, reduced reported sales by
1% in fiscal 1994, and increased reported sales by 2% in fiscal 1993. There were
no significant price changes during the three-year period.
Gross profit as a percentage of consolidated sales was 68.0% for fiscal 1995
compared to 67.9% in fiscal 1994 and 68.7% in fiscal 1993. Gross profit in
fiscal 1995 was essentially unchanged from fiscal 1994. However, gross profit
was positively affected by a weak U.S. dollar offset by an increase in
manufacturing costs. Gross profit in fiscal 1994 declined slightly due to a
stronger U.S. dollar and changes in the mix of products sold.
Operating Expenses. Selling, general and administrative ("SG&A") expenses as a
- ------------------
percentage of consolidated sales was essentially unchanged at 36.2% in fiscal
1995. SG&A expenses increased to $43.4 million in fiscal 1995 due primarily to
the effects of currency fluctuations and the addition of a subsidiary in
Switzerland in the fourth quarter of fiscal 1994. SG&A expenses declined in
fiscal 1994 from fiscal 1993 due to the consolidation of the Company's Salt Lake
City manufacturing operations to Sunnyvale in fiscal 1993. The Company
anticipates that SG&A expenses will remain in the 36% to 39% range in the near
term.
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Research and product development expenses in fiscal 1995 decreased to 8.7% of
consolidated sales compared to 9.0% and 8.8% of sales in fiscal 1994 and 1993,
respectively. The higher spending as a percentage of revenues in fiscal 1994 was
due to costs incurred in the first quarter related to the DX 500 introduction.
Research and product development spending depends on both the breadth of the
Company's research and product development efforts and the stage of specific
product development projects. The Company expects that the level of research and
product development expenses as a percentage of sales will remain in the 8% to
10% range in the near term.
Write-off of Goodwill. In the first quarter of fiscal 1995, the Company wrote
- ---------------------
off the remaining goodwill that resulted from the 1988 acquisition of Lee
Scientific, Inc. as the Company determined that the goodwill was not
recoverable.
Other Income. Other income includes a payment of $4.1 million (net of
- ------------
expenses) received by the Company in the first quarter of fiscal 1995, when a
proposed acquisition by Dionex of a business was terminated by the seller in
favor of another buyer.
Interest Income and Expense. Interest income in fiscal 1995 was $2.2 million
- ---------------------------
compared to $1.5 million in fiscal 1994 and $2.0 million in fiscal 1993. The
increase in fiscal 1995 was due to higher interest rates and higher average cash
balances. The decrease in fiscal 1994 was the result of lower interest rates and
investment in tax-exempt securities. Interest expense in fiscal 1995 was
$153,000 compared to $249,000 in fiscal 1994 and $456,000 in fiscal 1993. Lower
interest rates on foreign borrowings caused the decline in fiscal 1995, while
lower interest rates and reduced borrowings caused the decline in fiscal 1994.
Income Taxes. The Company's effective tax rate in fiscal 1995 increased to
- ------------
37.6% from 34.8% in fiscal 1994 and 34.5% in fiscal 1993. The increase in fiscal
1995 was due to the write-off of goodwill discussed above which was not
deductible for income tax purposes. The increase in fiscal 1994 was due to the
increase in federal income tax rates in calendar year 1994, partially offset by
the investment in tax-exempt securities.
Earnings Per Share. Earnings per share for fiscal 1995 increased to $2.69 per
- ------------------
share compared with $2.21 per share in fiscal 1994 and $2.02 in fiscal 1993.
Common and equivalent shares outstanding for fiscal 1995 were 7.4 million
compared to 7.7 million in fiscal 1994 and 8.1 million in fiscal 1993. The
common and equivalent shares outstanding decreased in each of the years due to
the Company's continuing stock repurchase programs.
17
<PAGE>
Liquidity and Capital Resources
- -------------------------------
In fiscal 1995, the Company's liquidity and financial condition remained strong.
The Company's working capital was $67.2 million at June 30, 1995. Working
capital declined by $4.2 million in fiscal 1995 due to the Company's stock
repurchase programs. In fiscal 1995, the Company repurchased 816,578 shares for
$30.9 million, compared to 125,000 shares repurchased for $4.0 million fiscal
1994 and 588,200 shares repurchased for $19.0 million in fiscal 1993.
Cash generated by operating activities grew to $28.3 million from $19.7 million
in fiscal 1994 and $13.5 million in fiscal 1993. The increase in fiscal 1995
was due to higher net income, an increase in accrued liabilities and lower
inventory levels.
Net capital expenditures in fiscal 1995 declined to $2.0 million compared to
$7.8 million and $1.8 million in fiscal 1994 and 1993, respectively. The
increase in fiscal 1994 related primarily to the purchase of two buildings and
the addition of capital equipment related to the DX 500 product line.
At June 30, 1995, the Company's international subsidiaries had utilized $2.1
million of the Company's $16.2 million of bank lines of credit, which are used
to meet working capital requirements and reduce exposure to foreign currency
fluctuations. The Company believes that its cash flow from operations, its
current cash and cash investments and the remainder of the bank lines of credit
are sufficient to meet its cash requirements for the foreseeable future.
The impact of inflation on Dionex's financial position and results of operations
has not been significant during the three-year period ended June 30, 1995.
The Company's future success is dependent on its ability to continue to develop
and engineer high-quality products demanded by its customers. However, there are
many risks associated with new product development, including market
receptiveness, possible competition from other products, existing product
obsolescence and the Company' ability to manufacture products on an efficient
and timely basis and at reasonable cost and in sufficient volume.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Index to Financial Statements and Financial Statement
Schedules appearing on page 24 of this Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
Not Applicable.
18
<PAGE>
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
Identification of Directors
---------------------------
The information required by Item 10 of Form 10-K with respect to
identification of directors is incorporated by reference to the
information contained in the section captioned "Nominees" at page 2 of
the Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held October 27, 1995, which has been previously
filed.
Identification of Officers
--------------------------
See Page 14 of this Report
Item 11. EXECUTIVE COMPENSATION
----------------------
The information required by Item 11 of Form 10-K is incorporated by
reference to the information contained in the section captioned
"Executive Compensation," at pages 10 through 13 of the Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to
be held October 27, 1995, which has been previously filed.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
The information required by Item 12 of Form 10-K is incorporated by
reference to the information contained in the sections captioned
"Security Ownership of Certain Beneficial Owners and Management" at
pages 9 and 10 of the Registrant's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held October 27, 1995, which has
been previously filed.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None.
19
<PAGE>
PART IV
-------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K
--------
(a) (1) Financial Statements - See Index to Financial Statements and
Financial Statement Schedules at page 24 of this Report.
(2) Financial Statement Schedules - See Index to Financial
Statements and Financial Statement Schedules at page 24 of
this Report.
(3) Exhibits - See Exhibit Index at page 21 and 22 of this
Report.
(b) Reports on Form 8-K - The Company did not file any reports on Form
8-K during the quarter ended June 30, 1995.
20
<PAGE>
DIONEX CORPORATION
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------ ----------- ---------
<C> <S> <C>
3.1 Restated Certificate of Incorporation, filed December 12, 1988............ (5)
3.2 Bylaws, as amended on October 21, 1988.................................... (5)
4.1 Shareholder Rights Agreement dated June 27, 1989, between the
Registrant and The First National Bank of Boston......................... (4)
10.1 Agreement, effective as of January 1, 1975, between The Dow
Chemical Company and International Plasma Corporation.................... (1)
10.2 Memorandum agreement, dated March 14, 1975, between
The Dow Chemical Company and International Plasma
Corporation.............................................................. (1)
10.3 Agreement, dated March 6, 1975, between International Plasma
Corporation and the former Dionex Corporation............................ (1)
10.4 Consent to Assignment executed as of March 26, 1980, between
the Dow Chemical Company and the former Dionex Corporation............... (1)
10.5 Amendatory Agreement, effective as of November 1, 1981, between
The Dow Chemical Company and the Registrant (with certain
confidential information deleted)........................................ (1)
10.6 Amendatory Agreement, effective as of July 1, 1982, between
The Dow Chemical Company and the Registrant (with certain
confidential information deleted)........................................ (1)
10.7 Registrant's Supplemental Stock Option Plan (Exhibit 28.4)............... (2)
10.8 Registrant's Medical Care Reimbursement Plan (Exhibit 10.17)............. (1)
10.9 Registrant's Employee Stock Participation Plan (Exhibit 28.3)............. (7)
10.10 Credit Agreement dated April 30, 1993 between Bank of America
and the Registrant....................................................... (6)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Reference
- ------ ----------- ---------
<C> <S> <C>
10.11 1988 Directors' Stock Option Plan (and related stock option
grant form) (Exhibit 10.20)........................................... (3)
10.12 Dionex Corporation Stock Option Plan, as amended and restated
(formerly, the 1990 Stock Option Plan)................................
13.1 Portions of the Registrant's 1995 Annual Report to Stockholders
which are incorporated by reference in this Annual Report on
Form 10-K.............................................................
21.1 Subsidiaries of Registrant.............................................
22.1 Registrant's definitive Proxy Statement for the Annual Meeting of
Stockholders to be held October 27, 1995.............................
23.1 Independent Auditors' Consent..........................................
27.1 Financial Data Schedule................................................
</TABLE>
(1) Incorporated by reference to the indicated exhibit in Amendment No. 1 of
the Registrant's Registration Statement on Form S-1 filed December 7, 1982.
(2) Incorporated by reference to the indicated exhibit in the Registrant's
Registration Statement on Form S-8 filed March 3, 1987.
(3) Incorporated by reference to the indicated exhibit in the Registrant's
Annual Report on Form 10-K filed September 27, 1988.
(4) Incorporated by reference to the corresponding exhibit in the Registrant's
Current Report on Form 8-K filed June 29, 1989.
(5) Incorporated by reference to the indicated exhibit in the Registrant's
Annual Report on Form 10-K filed September 20, 1989.
(6) Incorporated by reference to the indicated exhibit in the Registrant's
Annual Report on Form 10-K filed September 24, 1993.
(7) Incorporated by reference to the indicated exhibit in the Registrant's
Statement of Form S-8 filed May 6, 1994.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DIONEX CORPORATION
------------------
(Registrant)
Date September 22, 1995 By /s/ A. Blaine Bowman
----------------------- ----------------------------------
A. Blaine Bowman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ A. Blaine Bowman President, Chief Executive September 22, 1995
- ------------------------ Officer, and Director
A. Blaine Bowman (Principal Executive Officer)
/s/ Michael W. Pope Vice President of Finance September 22, 1995
- ------------------------ and Administration
Michael W. Pope (Principal Financial and
Accounting Officer)
/s/ David L. Anderson Director September 22, 1995
- ------------------------
David L. Anderson
/s/ James F. Battey Director September 22, 1995
- -------------------------
James F. Battey
/s/ B. J. Moore Director September 22, 1995
- ----------------------------
B.J. Moore
</TABLE>
23
<PAGE>
DIONEX CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------------------
FINANCIAL STATEMENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets at June 30, 1995 and 1994 *
Consolidated Statements of Income for the years
ended June 30, 1995, 1994 and 1993 *
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1995, 1994 and 1993 *
Consolidated Statements of Cash Flows for the years
ended June 30, 1995, 1994 and 1993 *
Notes to Consolidated Financial Statements *
Independent Auditors' Report *
* Incorporated by reference to information contained
on pages 16 through 27 of the Registrant's 1995
Annual Report to Stockholders. A copy of the
applicable pages is attached hereto as Exhibit 13.1
FINANCIAL STATEMENT SCHEDULES
- -----------------------------
Independent Auditors' Report 25
Schedule II - Valuation and Qualifying Accounts and Reserves 26
</TABLE>
All other schedules are omitted because they are not required, are not
applicable or the information is included in the consolidated financial
statements or notes thereto.
24
<PAGE>
INDEPENDENT AUDITORS' REPORT
Dionex Corporation
We have audited the consolidated financial statements of Dionex Corporation and
its subsidiaries as of June 30, 1995 and 1994, and for each of the three years
in the period ended June 30, 1995, and have issued our report thereon dated July
24, 1995; such financial statements and report are included in your 1995 Annual
Report to Stockholders and are incorporated herein by reference. Our audits also
included the consolidated financial statement schedule of Dionex Corporation and
its subsidiaries, listed in the accompanying Index to Financial Statements and
Financial Statement Schedules. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
San Jose, California
July 24, 1995
25
<PAGE>
SCHEDULE II
DIONEX CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JUNE 30, 1995, 1994, AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance Charged to Charged to Balance
Beginning Costs and Other End of
of Year Expenses Accounts (1) Deductions Year
--------- ---------- ------------ ------------ -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1993:
Allowance for doubtful
accounts $ 463 $ 48 $(43) $ 7 (2) $ 475
------ ------ ---- ------- ------
Accrued product warranty
and installation $2,283 $2,022 $(66) $(1,785)(3) $2,454
------ ------ ---- ------- ------
YEAR ENDED JUNE 30, 1994:
Allowance for doubtful
accounts $ 475 $ (73) $ 16 $ (4)(2) $ 414
------ ------ ---- ------- ------
Accrued product warranty
and installation $2,454 $2,221 $ 31 $(2,267)(3) $2,439
------ ------ ---- ------- ------
YEAR ENDED JUNE 30, 1995:
Allowance for doubtful
accounts $ 414 $ 123 $ 34 $ (85)(2) $ 486
------ ------ ---- ------- ------
Accrued product warranty
and installation $2,439 $2,601 $ 89 $(2,322)(3) $2,807
------ ------ ---- ------- ------
</TABLE>
(1) Effects of exchange rate changes
(2) Accounts written off, net of recoveries
(3) Product warranty and installation costs
26
<PAGE>
DIONEX CORPORATION
STOCK OPTION PLAN
ADOPTED AUGUST 2, 1990
(AS AMENDED AND RESTATED JULY 27, 1995)
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company, and its Affiliates, may be given an
opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees, Consultants, and
to provide incentives for such persons to exert maximum efforts for the success
of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
1
<PAGE>
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Dionex Corporation, a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the employment
or relationship as a Consultant is not interrupted or terminated. The Board, in
its sole discretion, may determine whether Continuous Status as an Employee or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between locations of the Company or
between the Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for
2
<PAGE>
whom total compensation is required to be reported to shareholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "DISINTERESTED PERSON" means a Director who either (i) was not during
the one year prior to service as an administrator of the Plan granted or awarded
equity securities pursuant to the Plan or any other plan of the Company or any
Affiliate entitling the participants therein to acquire equity securities of the
Company or any Affiliate except as permitted by Rule 16b-3(c)(2)(i); or (ii) is
otherwise considered to be a "disinterested person" in accordance with Rule
16b-3(c)(2)(i), or any other applicable rules, regulations or interpretations of
the Securities and Exchange Commission.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange or
a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading
3
<PAGE>
in common stock) on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(2) If the common stock is quoted on the NASDAQ System (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock, the
Fair Market Value shall be determined in good faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
4
<PAGE>
(s) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "PLAN" means this Dionex Corporation Stock Option Plan.
(v) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Options; when and how each Option shall be granted;
whether an Option will be an Incentive
5
<PAGE>
Stock Option or a Nonstatutory Stock Option; the provisions of each Option
granted (which need not be identical), including the time or times such Option
may be exercised in whole or in part; and the number of shares for which an
Option shall be granted to each such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
Notwithstanding anything in this Section 3 to the contrary, the Board or the
Committee may delegate to a committee of one or more
6
<PAGE>
members of the Board the authority to grant Options to eligible persons who (1)
are not then subject to Section 16 of the Exchange Act and/or (2) are either (i)
not then Covered Employees and are not expected to be Covered Employees at the
time of recognition of income resulting from such Option, or (ii) not persons
with respect to whom the Company wishes to comply with Section 162(m) of the
Code.
(d) Any requirement that an administrator of the Plan be a Disinterested
Person shall not apply if the Board or the Committee expressly declares that
such requirement shall not apply. Any Disinterested Person shall otherwise
comply with the requirements of Rule 16b-3.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate One Million Three Hundred Thousand (1,300,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees or Consultants.
7
<PAGE>
(b) A Director shall in no event be eligible for the benefits of the Plan
unless at the time discretion is exercised in the selection of the Director as a
person to whom Options may be granted, or in the determination of the number of
shares which may be covered by Options granted to the Director: (i) the Board
has delegated its discretionary authority over the Plan to a Committee which
consists solely of Disinterested Persons; or (ii) the Plan otherwise complies
with the requirements of Rule 16b-3. The Board shall otherwise comply with the
requirements of Rule 16b-3. This subsection 5(b) shall not apply if the Board
or Committee expressly declares that it shall not apply.
(c) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least one hundred
ten percent (110%) of the Fair Market Value of such stock at the date of grant
and the Incentive Stock Option is not exercisable after the expiration of five
(5) years from the date of grant.
(d) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred thousand (200,000) shares of the Company's common stock in
any twelve (12) month period.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option
8
<PAGE>
shall include (through incorporation of provisions hereof by reference in the
Option or otherwise) the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and
9
<PAGE>
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's
10
<PAGE>
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Option for such person's own account and not
with any present intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
Option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A CONSULTANT. In the
event an Optionee's Continuous Status as an Employee or Consultant terminates
(other than upon the Optionee's death or disability), the Optionee may exercise
his or her Option (to the extent that the Optionee was entitled to exercise it
at the date of termination) but only within such period of time ending on the
earlier of (i) the date thirty (30) days after the termination of the Optionee's
Continuous Status as an Employee or Consultant, or such longer or shorter period
specified
11
<PAGE>
in the Option Agreement, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionee does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination), but only
within such period of time ending on the earlier of (i) the date one (1) year
following such termination (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the Optionee
is not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during, or
within a period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option at the date of
death) by the Optionee's estate, by a person who acquired the right to exercise
the Option by bequest or inheritance or by a person designated to exercise the
option
12
<PAGE>
upon the Optionee's death pursuant to subsection 6(d), but only within the
period ending on the earlier of (i) the date eighteen (18) months following the
date of death (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee or Consultant to
exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may
be subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13
<PAGE>
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of,
14
<PAGE>
or to have any of the rights of a holder with respect to, any shares subject to
such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms.
(c) Throughout the term of any Option, the Company shall make available to
the holder of such Option, not later than one hundred twenty (120) days after
the close of each of the Company's fiscal years during the Option term, upon
request, such financial and other information regarding the Company as comprises
the annual report to the stockholders of the Company provided for in the bylaws
of the Company.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Consultant or Optionee any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment or relationship as a Consultant of any
Employee, Consultant or Optionee with or without cause.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options granted
after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash,
15
<PAGE>
stock split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or otherwise), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan
pursuant to subsection 4(a) and the maximum number of shares subject to award to
any person during any twelve (12) month period pursuant to subsection 5(d), and
the outstanding Options will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding
Options.
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Options outstanding under the Plan or
shall substitute similar Options for those outstanding under the Plan, or (ii)
such Options shall continue in full force and effect. In the event any
surviving corporation refuses to assume or continue such Options, or to
substitute similar options for those outstanding under the Plan, then, with
respect to Options held by persons then performing services as Employees or
Consultants, the time during which such Options may be exercised shall be
accelerated and the Options terminated if not exercised prior to such event.
16
<PAGE>
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the Plan;
(2) Modify the requirements as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under
17
<PAGE>
the provisions of the Code and the regulations promulgated thereunder relating
to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock
Options granted under it into compliance therewith.
(d) Rights and obligations under any Option granted before amendment of the
Plan shall not be impaired by any amendment of the Plan unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on August 26, 2005, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which
18
<PAGE>
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board, and, if required, an appropriate permit has been issued by
the Commissioner of Corporations of the State of California.
19
<PAGE>
Dionex Corporation
Selected Financial Information
<TABLE>
<CAPTION>
Years ended June 30 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $120,024 $109,526 $105,556 $96,380 $89,326
Cost of sales 38,428 35,152 33,027 30,504 28,344
Gross profit 81,596 74,374 72,529 65,876 60,982
Operating expenses:
Selling, general and administrative 43,401 39,570 39,896 37,144 34,556
Research and product development 10,500 9,902 9,295 8,251 7,524
Write-off of goodwill 2,168 - - -
Total operating expenses 56,069 49,472 49,191 45,395 42,080
Operating income 25,527 24,902 23,338 20,481 18,902
Other income 4,130 - - - -
Interest income 2,202 1,465 1,996 2,703 3,517
Interest expense (153) (249) (456) (679) (633)
Income before taxes on income 31,706 26,118 24,878 22,505 21,786
Taxes on income 11,932 9,076 8,583 7,764 7,625
Net income $ 19,774 $ 17,042 $ 16,295 $14,741 $14,161
Net income per share $ 2.69 $ 2.21 $ 2.02 $ 1.78 $ 1.69
Common and equivalent shares 7,364 7,720 8,065 8,290 8,382
</TABLE>
The Company has paid no cash dividends.
<TABLE>
<CAPTION>
At June 30 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Working capital $ 67,249 $ 71,414 $ 60,870 $60,913 $57,448
Total assets 131,780 133,278 118,082 120,008 109,361
Long-term debt 86 104 121 137 151
Stockholders' equity 103,871 111,139 94,874 94,947 85,282
</TABLE>
1
<PAGE>
Dionex Corporation
Consolidated Balance Sheets
At June 30
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents (including
invested cash of $31,479 in 1995
and $39,861 in 1994) $ 36,165 $ 47,177
Temporary cash investments 13,382 4,102
Accounts receivable (net of
allowance for doubtful accounts
of $486 in 1995 and $414 in 1994) 27,767 25,571
Inventories 9,125 9,759
Deferred taxes 5,626 4,760
Prepaid expenses and other 1,346 1,133
Total current assets 33,411 92,502
Property, plant and equipment, net 33,347 33,328
Other assets 5,022 7,448
$131,780 $133,278
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 2,118 $ 816
Accounts payable 3,773 4,122
Accrued liabilities 14,016 11,655
Income taxes payable 3,448 2,056
Accrued product warranty 2,807 2,439
Total current liabilities 26,162 21,088
Long-term debt 86 104
Deferred taxes 1,661 947
Commitments (Note 11)
Stockholders' equity:
Preferred stock (par value
$.001 per share; 1,000,000 shares
authorized; none outstanding) - -
Common stock (par value
$.001 per share; 20,000,000 shares
authorized; outstanding: 6,856,981
in 1995 and 7,568,768 shares in 1994) 32,398 33,180
Retained earnings 70,426 77,868
Accumulated translation adjustments 1,047 91
Total stockholders' equity 103,871 111,139
$131,780 $133,278
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
Dionex Corporation
Consolidated Statements of Income
Years ended June 30
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net sales $120,024 $109,526 $105,556
Cost of sales 38,428 35,152 33,027
Gross profit 81,596 74,374 72,529
Operating expenses:
Selling, general and administrative 43,401 39,570 39,896
Research and product development 10,500 9,902 9,295
Write-off of goodwill 2,168 - -
Total operating expenses 56,069 49,472 49,191
Operating income 25,527 24,902 23,338
Other income 4,130 - -
Interest income 2,202 1,465 1,996
Interest expense (153) (249) (456)
Income before taxes on income 31,706 26,118 24,878
Taxes on income 11,932 9,076 8,583
Net income $ 19,774 $ 17,042 $ 16,295
Net income per common and equivalent share $ 2.69 $ 2.21 $ 2.02
Common and equivalent shares used in
computing per share amounts 7,364 7,720 8,065
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
Dionex Corporation
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Accumulated
Retained Translation
Shares Amount Earnings Adjustments Total
<S> <C> <C> <C> <C> <C>
Balance at
June 30, 1992 8,025,849 $29,558 $ 64,837 $ 552 $ 94,947
Common stock
issued 159,146 3,716 3,716
Repurchase of
common stock (588,200) (2,260) (16,787) (19,047)
Translation
adjustments (1,037) (1,037)
Net income 16,295 16,295
Balance at
June 30, 1993 7,596,795 31,014 64,345 (485) 94,874
Common stock
issued 96,973 2,685 2,685
Repurchase of
common stock (125,000) (519) (3,519) (4,038)
Translation
adjustments 576 576
Net income 17,042 17,042
Balance at
June 30, 1994 7,568,768 33,180 77,868 91 111,139
Common stock
issued 104,791 2,880 2,880
Repurchase of
common stock (816,578) (3,662) (27,216) (30,878)
Translation
adjustments 956 956
Net income 19,774 19,774
Balance at
June 30, 1995 6,856,981 $32,398 $ 70,426 $ 1,047 $103,871
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Dionex Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended June 30
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income $ 19,774 $ 17,042 $ 16,295
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,615 2,495 2,236
Deferred taxes (726) (436) (523)
Write-off of goodwill 2,168 - -
Changes in assets and liabilities:
Accounts receivable (49) (877) (2,614)
Inventories 1,197 953 (2,487)
Prepaid expenses and other assets (146) 579 (321)
Accounts payable (504) 547 553
Accrued liabilities 2,359 458 (455)
Income taxes payable 1,325 (1,056) 581
Accrued product warranty 279 (51) 237
Net cash provided by operating activities 28,292 19,654 13,502
Cash flows from investing activities:
Purchase of temporary cash
investments (18,407) (17,983) (57,063)
Proceeds from maturities of
temporary cash investments 9,127 35,767 74,822
Purchase of property, plant and
equipment (1,980) (7,835) (1,819)
Other 214 61 (79)
Net cash provided by (used for)
investing activities (11,046) 10,010 15,861
Cash flows from financing activities:
Net change in notes payable to banks 1,042 (1,136) (2,558)
Sale of common stock 2,880 2,685 3,716
Repurchase of common stock (30,878) (4,038) (19,047)
Other 68 (82) (169)
Net cash used for financing
activities (26,888) (2,571) (18,058)
Effect of exchange rate changes on cash (1,370) (512) (608)
Net increase (decrease) in cash
and equivalents (11,012) 26,581 10,697
Cash and equivalents, beginning of year 47,177 20,596 9,899
Cash and equivalents, end of year $ 36,165 $ 47,177 $ 20,596
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
Notes to Consolidated Financial Statements
Note 1:
Significant Accounting Policies
Principles of consolidation. The consolidated financial statements include
Dionex Corporation and its subsidiaries (the "Company"). All significant
intercompany transactions and accounts are eliminated in consolidation.
Cash equivalents. Cash equivalents are highly liquid debt instruments acquired
with a maturity at date of purchase of three months or less.
Temporary cash investments. Temporary cash investments consist of short-term
investments stated at amortized cost which approximates market. The Company
adopted Statement of Financial Accounting Standards No. 115 (SFAS No. 115),
"Accounting for Certain Investments in Debt and Equity Securities," effective
July 1, 1994. The Company has classified its existing short-term investments as
"held-to-maturity" securities, and the carrying value of these securities is
amortized cost. Adoption of SFAS No. 115 had no impact on the Company's
consolidated financial statements.
Concentration of credit risk. Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of investments
and trade receivables. The Company invests in high-grade instruments which it
places for safekeeping with high quality financial institutions. The Company
sells its products primarily to large organizations in diversified industries
worldwide. Credit risk is further mitigated by the Company's credit evaluation
process and the reasonably short collection terms. The Company does not require
collateral or other security to support accounts receivable. While the Company
does maintain allowances for potential credit losses, actual bad debt losses
have not been significant.
Inventories. Inventories are stated at the lower of standard cost (which
approximates cost on a first-in, first-out basis) or market.
Property, plant and equipment. Property, plant and equipment are stated at
cost. Depreciation is computed using the straight-line method based on estimated
useful lives of 3 to 30 years. Leasehold improvements are amortized over the
lesser of the useful life or the remaining term of the lease.
Intangibles. The excess of cost over net assets of businesses acquired is
amortized on a straight-line basis over periods not exceeding seven years.
6
<PAGE>
Revenue recognition. Revenue related to systems is recognized upon shipment.
Service contract revenue is deferred and recognized on a pro rata basis over the
contractual period. Installation and product warranty costs are accrued at the
time revenue is recognized.
Taxes on income. The Company currently accounts for income taxes in accordance
with Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes," which requires the asset and liability approach
to account for deferred income taxes. Prior to fiscal 1994, the Company
accounted for income taxes using the provisions of APB No. 11, "Accounting for
Income Taxes."
Net income per share. Net income per common and equivalent share is computed by
dividing net income by the weighted average number of common shares and dilutive
common share equivalents (stock options) outstanding during each year. The
difference between primary and fully diluted net income per share is not
significant in any year.
Common stock repurchases. The Company repurchases shares in the open market
under its ongoing stock repurchase programs. For each share repurchased, the
Company reduces the common stock account by the average value per share
reflected in the account prior to the repurchase with the excess allocated to
retained earnings. The Company currently retires all shares repurchased.
Translation of foreign currency. The Company's foreign operations are measured
using local currencies as the functional currency. Assets and liabilities are
translated into U.S. dollars at year-end rates of exchange and results of
operations are translated at average rates for the year.
Dionex enters into foreign exchange forward contracts to manage its exposure to
fluctuations in foreign currency exchange rates. Gains and losses on these
contracts are recorded in net income currently. These contracts generally have
maturities of approximately 30 days and require the Company to exchange foreign
currencies for U.S. dollars at maturity. The Company does not engage in foreign
currency speculation. The Company's foreign exchange forward hedging activities
do not subject the Company to risk due to exchange rate movements because gains
and losses on these contracts generally offset losses and gains on the
underlying items being hedged.
At June 30, 1995 the Company had forward exchange contracts to sell foreign
currencies totalling $9.8 million dollars, including approximately $5.7 million
of Japanese yen, $1.0 million of French francs, $940,000 of Deutschemarks,
$600,000 of Italian lire and the remainder in Dutch gilders, British pounds,
Swiss francs, Belgium francs and Canadian dollars.
7
<PAGE>
Note 2:
Temporary Cash Investments
The following held-to-maturity investments were included in the Company's
current assets under the caption "Temporary Cash Investments" at June 30, 1995:
<TABLE>
<CAPTION>
Gross Fair
Amortized Unrealized Market
Cost Losses Value
<S> <C> <C> <C>
(In thousands)
U.S. treasury note $ 1,991 $ 2 $ 1,989
Obligations of states
and political subdivisions 5,191 38 5,153
U.S. corporate debt securities 3,200 - 3,200
Municipal auction rate preferred stock 3,000 - 3,000
$13,382 $40 $13,342
</TABLE>
All maturities during fiscal 1995 were held-to-maturity investments. There were
no realized gains or losses for the year ended June 30, 1995. All temporary cash
investments at June 30, 1995 mature within one year.
Note 3:
Inventories
Inventories at June 30 consist of:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
(In thousands)
Finished goods $ 3,732 $ 4,078
Work in process 2,153 1,868
Raw materials and subassemblies 3,240 3,813
$ 9,125 $ 9,759
</TABLE>
Note 4:
Property, Plant and Equipment
Property, plant and equipment at June 30 consist of:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Land $ 16,375 $ 16,302
Buildings and improvements 16,668 15,777
Machinery, equipment and tooling 9,357 8,644
Furniture and fixtures 3,890 3,371
46,290 44,094
Accumulated depreciation
and amortization (12,943) (10,766)
Property, plant and equipment, net $ 33,347 $ 33,328
</TABLE>
8
<PAGE>
Note 5:
Write-off of Goodwill
Operating expenses in fiscal 1995 reflect a first quarter $2.2 million non-
recurring charge to write off the remaining goodwill associated with the 1988
acquisition of Lee Scientific, Inc. The Company determined that this goodwill
was not recoverable through future operations of the business acquired.
Note 6:
Financing Arrangements
The Company has unsecured lines of credit with various domestic and foreign
banks totalling approximately $16.2 million which are used primarily to minimize
the Company's exposure to foreign currency fluctuations. These lines of credit
expire between December 1995 and December 1996. At June 30, 1995 the Company's
foreign subsidiaries had utilized $2.1 million of these lines of credit.
Borrowings in each country bear interest at the local reference rates which
ranged from 2% to 11% at June 30, 1995.
The weighted average interest rate on borrowings at June 30, 1995 and 1994 was
2.1% and 3.3%, respectively.
Such line of credit agreements restrict the payment of cash dividends and impose
certain financial restrictions relating to working capital, tangible net worth
and the repurchase of the Company's common stock. At June 30, 1995, the Company
was in compliance with such covenants.
One of the Company's foreign subsidiaries discounts trade notes receivable with
a bank. Total notes receivable discounted were approximately $4,900,000 in
fiscal 1995 and $2,400,000 in fiscal 1994. The uncollected balances of notes
receivable due the discounting bank at June 30, 1995 and 1994 were approximately
$1,500,000 and $1,200,000, respectively. The Company is contingently liable for
these unpaid balances.
Long-term debt consists of property improvement bonds payable semi-annually
through June 2000 which bear interest at 7 3/8%.
Total interest paid was $155,000 in 1995, $243,000 in 1994 and $495,000 in 1993.
9
<PAGE>
Note 7:
Accrued Liabilities
Accrued liabilities at June 30 consist of:
<TABLE>
<CAPTION>
1995 1994
(In thousands)
<S> <C> <C>
Accrued payroll and related expenses $ 6,353 $ 5,574
Deferred revenues 3,057 2,554
Other accrued liabilities 4,606 3,527
$14,016 $11,655
</TABLE>
Note 8:
Stock Option and Purchase Plans
Stock Option Plans. The Company has stock option plans under which incentive
and nonqualified options may be granted. Options are granted at the stock's fair
market value at the grant date. Options generally become exercisable in 25%
increments each year beginning one year from the date of grant and expire five
or ten years from the grant date.
Activity under the plans for the three-year period ended June 30, 1995 is
summarized below.
<TABLE>
<CAPTION>
shares price per share
<S> <C> <C>
Balance at June 30, 1992 775,775 $16.00 - $26.00
Granted 4,500 26.25 - 32.75
Exercised (143,812) 17.50 - 26.00
Canceled (58,175) 17.50 - 26.00
Balance at June 30, 1993 578,288 16.00 - 32.75
Granted 260,950 31.75 - 34.00
Exercised (73,688) 16.00 - 32.75
Canceled (22,000) 17.50 - 32.75
Balance at June 30, 1994 743,550 16.00 - 34.00
Granted 200,100 33.38 - 41.75
Exercised (79,357) 16.00 - 32.75
Canceled (18,576) 17.50 - 32.75
Balance at June 30, 1995 845,717 $16.00 - $41.75
</TABLE>
At June 30, 1995, the average exercise price of outstanding options was $29.15
per share, options for 412,397 shares were exercisable and 187,376 shares were
available for future grants. In July 1995, the Board of Directors of the Company
approved certain amendments to one of the Company's stock option plans. The
amendments include, but are not limited to, an additional 350,000 shares
authorized for issuance and an extension of the termination date to July 2005.
The amendments are subject to shareholder approval.
10
<PAGE>
Stock Purchase Plan. The Company has an employee stock purchase plan covering
most U.S. employees. Under the plan, employees may contribute up to 10% of their
compensation to purchase shares of the Company's common stock at 85% of the
stock's fair market value at the beginning or end of each six-month offering
period. In fiscal 1995, 25,434 shares were purchased at an average price of
$28.43 per share. Comparable figures for 1994 and 1993 were 23,285 shares at
$27.63 per share and 15,334 shares at $23.38 per share, respectively. At June
30, 1995, 374,566 shares were reserved for purchase by employees under the plan.
Note 9:
Employee Benefit Plans
The Company has an employee profit sharing plan covering most North American
employees. Cash distributions are determined by the Board of Directors and were
$1,971,000 for 1995, $1,924,000 for 1994 and $1,872,000 for 1993.
The Company has a 401(k) tax deferred savings plan covering most U.S. employees.
Participants may contribute up to 10% of their compensation and the Company
makes matching contributions ($834,000 in 1995, $833,000 in 1994 and $794,000 in
1993) limited to 5% of each participant's compensation. Matching contributions
vest in 25% increments each year beginning two years after the participant's
date of employment.
Note 10:
Taxes on Income
The provision for taxes on income consists of:
<TABLE>
<CAPTION>
Years ended June 30 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ 9,043 $6,310 $6,609
State 1,984 1,470 1,535
Foreign 1,631 1,732 962
Total current 12,658 9,512 9,106
Deferred:
Federal (721) 90 (374)
State (113) 22 (129)
Foreign 108 (548) (20)
Total deferred (726) (436) (523)
$11,932 $9,076 $8,583
</TABLE>
11
<PAGE>
Domestic and foreign income before taxes on income is as follows:
<TABLE>
<CAPTION>
Years ended June 30 1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Domestic $28,102 $22,801 $22,732
Foreign 3,604 3,317 2,146
$31,706 $26,118 $24,878
</TABLE>
For 1993, the tax provision, computed in accordance with APB No. 11, represents
the effects of timing differences between financial and income tax reporting.
The components of the deferred tax provision are as follows:
<TABLE>
<CAPTION>
Year ended June 30 1993
(In thousands)
<S> <C>
Accounting accruals deductible in
different periods for tax purposes $ (677)
State income tax (60)
Accelerated depreciation 238
Other (24)
$ (523)
</TABLE>
Deferred income taxes for 1995 and 1994 reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The components
of the current and noncurrent deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
Years ended June 30 1995 1994
(In thousands)
<S> <C> <C>
Current deferred tax assets:
Accounting accruals deductible in
different periods for tax purposes $4,653 $3,870
State income tax 537 541
Other 436 349
Total deferred tax assets 5,626 4,760
Noncurrent deferred tax liabilities:
Accelerated depreciation 968 831
Foreign currency accumulated
translation adjustments 574 -
Other 119 116
Total deferred tax liabilities 1,661 947
Net deferred tax assets $3,965 $3,813
</TABLE>
12
<PAGE>
Total income tax expense differs from the amount computed by applying the
statutory Federal income tax rate to income before taxes as follows:
<TABLE>
<CAPTION>
Years ended June 30 1995 1994 1993
<S> <C> <C> <C>
Statutory Federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of Federal
income tax effect 3.8 3.5 3.7
FSC income not taxed (3.6) (3.2) (3.6)
Foreign taxes at differing rates .8 .9 .7
Goodwill 2.4 .3 .3
Other (.8) (1.7) (.6)
37.6% 34.8% 34.5%
</TABLE>
Income taxes paid were $10,847,000 in 1995, $9,950,000 in 1994 and $7,842,000 in
1993.
The Company has not provided for Federal income taxes on approximately $7.0
million of undistributed earnings of foreign subsidiaries, which have been
permanently reinvested in subsidiary operations. If these earnings were
distributed to the parent company, foreign tax credits available under current
law would substantially eliminate the resulting Federal income tax liability.
Note 11:
Commitments
Certain facilities and equipment are leased under noncancelable operating
leases. The Company generally pays taxes, insurance and maintenance costs on
leased facilities and equipment. Minimum annual rental commitments under these
noncancelable operating leases are $1,611,000 for 1996, $1,043,000 for 1997,
$813,000 for 1998, $544,000 for 1999, $374,000 for 2000 and $1,613,000
thereafter.
Total rental expense for all operating leases was $2,657,000 in 1995, $2,417,000
in 1994 and $2,700,000 in 1993.
13
<PAGE>
Note 12:
Transactions with Related Parties
In December 1989, the Company invested $3.0 million in the stock of Molecular
Devices Corporation (MDC), a privately held supplier of bioanalytical
instrumentation and biosensor measurement systems. The Company's President and a
director serve on the Board of Directors of MDC. The Company's ownership
interest in MDC is approximately 5% and is held as a long-term investment
accounted for at cost.
Note 13:
Business Segment Information
The Company develops, manufactures, markets and services analytical
instrumentation and related accessories in its one industry segment.
Dionex's products are manufactured in the United States and are sold worldwide.
The Company markets internationally through both exports and foreign-based sales
operations.
The following table presents a summary of operations by geographic region.
Research and development and general corporate expenses are reflected in
operating income from North American operations.
<TABLE>
<CAPTION>
1995 1994 1993
(In thousands)
<S> <C> <C> <C>
Net sales to unaffiliated customers:
North America $ 60,834 $ 58,273 $ 56,136
Europe 38,382 32,520 36,973
Far East 20,808 18,733 12,447
Consolidated net sales to
unaffiliated customers $120,024 $109,526 $105,556
Operating income:
North America $ 22,113 $ 21,615 $ 20,624
Europe 2,457 1,651 2,083
Far East 1,169 1,868 456
Eliminations (212) (232) 175
Consolidated operating income $ 25,527 $ 24,902 $ 23,338
Identifiable assets:
North America $ 62,025 $ 64,348 $ 56,978
Europe 19,344 19,544 17,678
Far East 13,733 12,109 10,642
General corporate assets
(cash investments) 44,861 43,963 38,355
Eliminations (8,183) (6,686) (5,571)
Consolidated assets $131,780 $133,278 $118,082
</TABLE>
14
<PAGE>
Interarea transfers, which have been eliminated in consolidation and are
not included in the above table, represent transfers from domestic operations to
international subsidiaries and are based on prices that approximate selling
prices to foreign distributors. Interarea transfers from the United States to
international subsidiaries were $33,125,000, $28,558,000 and $28,466,000 in
1995, 1994 and 1993, respectively. North American sales to unaffiliated
customers include export sales of $11,256,000, $10,861,000 and $10,410,000,
respectively, for 1995, 1994 and 1993.
Note 14:
Other Income
During the first quarter of fiscal 1995 the Company received a payment of $4.1
million (net of related expenses incurred by the Company) when a proposed
acquisition by Dionex of a business was terminated by the seller in favor of
another buyer.
Note 15:
Quarterly Results of Operations (unaudited)
The following is a summary of the unaudited quarterly results of operations
for the years ended June 30, 1995 and 1994.
<TABLE>
<CAPTION>
Quarter
First Second Third Fourth
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Fiscal 1995
Net sales $27,044 $30,624 $30,581 $31,775
Gross profit 18,277 20,607 20,855 21,857
Net income 4,202 5,038 5,150 5,384
Net income per share $ .55 $ .68 $ .71 $ .75
Fiscal 1994
Net sales $25,462 $28,131 $27,717 $28,216
Gross profit 17,316 19,154 18,818 19,086
Net income 3,379 4,488 4,542 4,633
Net income per share $ .44 $ .58 $ .59 $ .60
</TABLE>
15
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders, Dionex Corporation:
We have audited the accompanying consolidated balance sheets of Dionex
Corporation and its subsidiaries as of June 30, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended June 30, 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Dionex Corporation and its
subsidiaries at June 30, 1995 and 1994, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1995
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
San Jose, California
July 24, 1995
16
<PAGE>
Dionex Corporation
Supplemental Stockholder Information
Market Price of Common Stock
The Company's common stock is traded in the over-the-counter market through the
Nasdaq national market system under the symbol DNEX. The following table sets
forth, for the periods indicated, the high and low sales prices as reported by
Nasdaq.
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
Quarter High Low High Low
<S> <C> <C> <C> <C>
First 36 1/4 $32 7/8 $36 1/4 $30 1/2
Second 39 35 3/4 33 3/4 30
Third 42 1/2 37 37 1/2 31 1/4
Fourth 46 40 35 3/4 32 1/4
</TABLE>
As of June 30, 1995 there were 1,778 holders of record of the Company's common
stock as shown on the records of its transfer agent.
Dividends
The Company has paid no cash dividends on its common stock and anticipates that
for the foreseeable future it will continue to retain its earnings for use in
its business.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF DIONEX CORPORATION
----------------------------------
The following table sets forth the names of the subsidiaries of the
Registrant, the state or other jurisdiction of incorporation or organization
of each, and the names under which subsidiaries do business as of June 30, 1995.
<TABLE>
<CAPTION>
State or other
jurisdiction of Name under which
incorporation or subsidiary does
Name of Subsidiary organization business
- ------------------ ----------------- ------------------------
<S> <C> <C>
Dionex (U.K.) Limited England Dionex (U.K.) Limited
Dionex GmbH Federal Republic Dionex GmbH
of Germany
Dionex S.r.l. Italy Dionex S.r.l.
Dionex S.A. France Dionex S.A.
Dionex Export Corporation U.S. Virgin Islands Dionex Export Corporation
Dionex Canada Ltd./Ltee. Canada Dionex Canada Ltd./Ltee.
Dionex B.V. The Netherlands Dionex B.V.
Nippon Dionex K.K. Japan Nippon Dionex K.K.
Dionex N.V. Belgium Dionex N.V.
Dionex (Switzerland) AG Switzerland Dionex (Switzerland) AG
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
2-88238, 2-96635, 33-12399, 33-40796 and 33-78584 of Dionex Corporation on S-8
of our reports dated July 24, 1995, appearing in and incorporated by reference
in this Annual Report on Form 10-K of Dionex Corporation for the year ended
June 30, 1995.
DELOITTE & TOUCHE LLP
San Jose, California
September 21, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 36,165
<SECURITIES> 13,382
<RECEIVABLES> 28,253
<ALLOWANCES> 486
<INVENTORY> 9,125
<CURRENT-ASSETS> 93,411
<PP&E> 46,290
<DEPRECIATION> 12,943
<TOTAL-ASSETS> 131,780
<CURRENT-LIABILITIES> 26,162
<BONDS> 0
<COMMON> 32,398
0
0
<OTHER-SE> 70,426
<TOTAL-LIABILITY-AND-EQUITY> 131,780
<SALES> 120,024
<TOTAL-REVENUES> 120,024
<CGS> 38,428
<TOTAL-COSTS> 38,428
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 153
<INCOME-PRETAX> 31,706
<INCOME-TAX> 11,932
<INCOME-CONTINUING> 19,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,774
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.69
</TABLE>
