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This document consists of 15
pages, of which this page
is number 1.
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - -------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11250
DIONEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2647429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1228 Titan Way, Sunnyvale, 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 737-0700
NONE
(Former name, former address and former fiscal year, if changed
since last report.)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of May 9, 1996:
CLASS NUMBER OF SHARES
Common Stock 12,507,027
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DIONEX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1996 and June 30, 1995.................. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1996 and 1995........ 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended March 31, 1996 and 1995......... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1996 and 1995......... 6-7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS........................................ 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 11-14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 15
SIGNATURES................................................... 15
2
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DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- - -------------
March 31, June 30,
ASSETS 1996 1995
(unaudited)
Current assets:
Cash and equivalents (including invested cash of
$20,777 at March 31, 1996 and $31,479 at
June 30, 1995)..............................$ 28,242 $ 36,165
Temporary cash investments.................... 15,349 13,382
Accounts receivable (net of allowance for doubtful
accounts of $439 at March 31, 1996 and $486
at June 30, 1995)........................... 28,038 27,767
Inventories................................... 8,859 9,125
Deferred tax benefits......................... 6,668 5,626
Prepaid expenses and other.................... 922 1,346
Total current assets................... 88,078 93,411
Property, plant and equipment, net.............. 29,757 33,347
Other assets ................................... 6,855 5,022
$124,690 $131,780
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks........................$ 1,682 $ 2,118
Accounts payable.............................. 4,728 3,773
Accrued liabilities........................... 15,451 14,016
Income taxes payable.......................... 3,134 3,448
Accrued product warranty...................... 3,050 2,807
Total current liabilities.............. 28,045 26,162
Long-term debt.................................. - 86
Deferred taxes.................................. 1,780 1,661
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: 12,875,702 shares
at March 31, 1996 and 13,713,962 shares at
June 30, 1995).............................. 32,762 32,398
Retained earnings............................. 60,799 70,426
Accumulated translation adjustments........... 180 1,047
Unrealized gain on securities................. 1,124 -
Total stockholders' equity............. 94,865 103,871
$124,690 $131,780
See notes to condensed consolidated financial statements.
3
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DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per share amounts)
- - ------------------
1996 1995
(unaudited)
Net sales..................................... $34,030 $30,581
Cost of sales................................. 10,627 9,726
Gross profit.................................. 23,403 20,855
Operating expenses:
Selling, general and administrative......... 11,317 10,779
Research and product development............ 2,837 2,717
Total operating expenses................. 14,154 13,496
Operating income.............................. 9,249 7,359
Other income.................................. 1,003 -
Interest income............................... 502 564
Interest expense.............................. (21) (30)
Income before taxes on income................. 10,733 7,893
Taxes on income............................... 3,729 2,743
Net income.................................... $ 7,004 $ 5,150
Net income per common and equivalent share.... $ .51 $ .36
Common and equivalent shares used in
computing per share amounts................. 13,632 14,464
All share and per share amounts have been adjusted to reflect the
2-for-1 split of the Company's common stock effective December 29, 1995.
See notes to condensed consolidated financial statements.
4
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DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per share amounts)
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1996 1995
(unaudited)
Net sales..................................... $98,096 $88,249
Cost of sales................................. 30,810 28,510
Gross profit.................................. 67,286 59,739
Operating expenses:
Selling, general and administrative......... 34,593 32,028
Research and product development............ 8,508 7,708
Write-off of goodwill....................... - 1,168
Total operating expenses................. 43,101 41,904
Operating income.............................. 24,185 17,835
Other income.................................. 1,003 4,130
Interest income............................... 1,615 1,599
Interest expense.............................. (67) (111)
Income before taxes on income................. 26,736 23,453
Taxes on income............................... 9,290 9,063
Net income.................................... $17,446 $14,390
Net income per common and equivalent share.... $ 1.26 $ .97
Common and equivalent shares used in
computing per share amounts................. 13,876 14,868
All share and per share amounts have been adjusted to reflect
the 2-for-1 split of the Company's common stock effective
December 29, 1995.
See notes to condensed consolidated financial statements.
5
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DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
- - ------------------
1996 1995
(unaudited)
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income.........................................$17,446 $14,390
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 2,222 1,842
Deferred taxes................................... (1,673) (135)
Write-off of goodwill............................ - 2,168
Gain on sale of property......................... (1,003) -
Changes in assets and liabilities:
Accounts receivable............................ (2,619) 172
Inventories.................................... (298) 765
Prepaid expenses and other assets.............. 373 126
Accounts payable............................... 1,101 (1,214)
Accrued liabilities............................ 1,457 1,713
Income taxes payable........................... (314) 898
Accrued product warranty....................... 313 142
Net cash provided by operating activities.......... 17,005 20,867
Cash flows from investing activities:
Purchase of temporary cash investments...........(27,549) (13,957)
Proceeds from maturities of temporary
cash investments............................... 25,582 5,111
Purchase of property, plant and equipment........ (1,661) (1,638)
Proceeds from sale of property................... 3,812 -
Other............................................ 47 198
Net cash provided by (used for) investing activities 231 (10,286)
Cash flows from financing activities:
Net change in notes payable to banks............. (5) 1,308
Sale of common stock............................. 2,926 1,840
Repurchase of common stock.......................(29,635) (22,216)
Other............................................ (407) 77
Net cash used for financing activities.............(27,121) (18,991)
Effect of exchange rate changes on cash............ 1,962 (1,387)
Net decrease in cash and equivalents............... (7,923) (9,797)
Cash and equivalents, beginning of period.......... 36,165 47,177
Cash and equivalents, end of period................$28,242 $37,380
6 (continued)
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DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
- - ------------------
1996 1995
(unaudited)
(continued)
Supplemental disclosures of cash flow information:
Income taxes paid................................$10,824 $ 8,751
Interest paid....................................$ 66 $ 104
See notes to condensed consolidated financial statements.
7
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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- - ------------------
1. Basis of Presentation
The condensed consolidated financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote
disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes the
disclosures which are made are adequate to make the
information presented not misleading. It is suggested that
these condensed consolidated financial statements be read
in conjunction with the consolidated financial statements
and the notes thereto included in the Company's Annual
Report to Stockholders for the fiscal year ended
June 30, 1995.
The unaudited condensed consolidated financial statements
included herein reflect all adjustments (which include only
normal, recurring adjustments) which are, in the opinion of
management, necessary to state fairly the results for the
periods presented. The results for such periods are not
necessarily indicative of the results to be expected for
the entire fiscal year ending June 30, 1996.
8
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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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2. Investments
The Company has classified its existing short-term investments as
"held to maturity" securities; and the carrying value has been
reported at amortized cost.
The Company's investment in equity securities has been
reported at fair market value. The unrealized gain is reported
as a separate component of stockholders' equity, net of deferred
taxes. The Company's investment in equity securities is
included with other noncurrent assets, consistent with the
Company's investment strategy.
3. Inventories
Inventories consist of (in thousands):
March 31, June 30,
1996 1995
Finished goods $4,200 $3,732
Work in process 2,032 2,153
Raw materials and subassemblies 2,627 3,240
$8,859 $9,125
9
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DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- - ------------------
4. Income Taxes
The effective income tax rate for the first nine months of
fiscal 1996 was 34.8% compared to 38.6% in the same period
of fiscal 1995. The rate in fiscal 1995 was higher due to
the write-off of goodwill which was not deductible for
income tax purposes.
5. 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 outstanding
during each period. The difference between primary and
fully diluted net income per share is not significant in any
period.
6. Stock Split
In November 1995, the Company's Board of Directors approved
a 2-for-1 split of the Company's common stock, effective on
December 29, 1995 for shareholders of record on December 4,
1995. All share and per share amounts have been restated to
reflect the stock split.
7. Common Stock Repurchases
During the first nine months of fiscal 1996, the Company
repurchased 1,050,900 shares of its common stock on the open
market compared with 1,218,756 shares repurchased in the
first nine months of the previous fiscal year.
10
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DIONEX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended March 31, 1996 and 1995
Net sales for the third quarter of fiscal 1996 were $34.0 million,
an increase of 11% from the $30.6 million reported in the third
quarter of fiscal 1995. This increase reflects continued growth in
the Company's international markets. Demand for the Company's
products in North America increased slightly in the third quarter
from the two previous quarters. Had currency rates been the same as
in last year's third quarter, sales growth would have been 12%.
Gross margin for the third quarter of fiscal 1996 was 68.8%,
up 0.6% from the 68.2% reported for the same period last year. The
increase in gross margin was due primarily to a higher
percentage of shipments from the Company's direct sales
subsidiaries. There were no significant selling price changes
between these periods.
Operating expenses of $14.2 million for the third quarter of
fiscal 1996 were up 5% compared with the $13.5 million reported in
the same period a year ago. As a percent of sales, operating
expenses were 42%, a decrease of 2% from the 44% reported in the
third quarter of fiscal 1995. Selling, general and administrative
(SG&A) expenses increased 5% to $11.3 million in the third quarter of
fiscal 1996. This increase was due primarily to increased personnel
costs and higher international selling expenses.
Research and development (R&D) costs of $2.8 million were up 4%
compared with $2.7 million in the same period last year. The
increase in R&D is due to greater personnel costs associated with
several product development programs. The level of R&D spending
varies depending on both the breadth of the Company's R&D efforts and
the state of specific product developments.
11
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In the third quarter of fiscal 1996, interest income declined to
$502,000 from the $564,000 reported in the same period last year.
Lower yields and lower average cash balances contributed to the
decrease in interest income.
Other income in the third quarter of fiscal 1996 was derived from the
sale of undeveloped property. The Company received proceeds of $3.8
million, net of selling expenses, and the assumption of an industrial
revenue bond associated with the property by the buyer. The Company
recorded a gain of $1.0 million on the sale of the property. The
effect of the sale increased earnings per share by $.05.
The effective tax rate for the third quarter of fiscal 1996 was
34.8%, substantially unchanged from the rate in the same period last
year.
Net income per share increased 42% to $.51 in the third quarter of
fiscal 1996 due to higher net income and the favorable impact of the
Company's stock repurchase programs.
Results of Operations - Nine Months Ended March 31, 1996 and 1995
Net sales in the first nine months of fiscal 1996 increased 11% to
$98.1 million compared with $88.2 million in the same period a year
ago. The first nine months reflects solid growth in the Company's
international markets and sluggish but improving demand in the
Company's North American markets. Currency fluctuations favorably
impacted sales growth by 2% in the first nine months of fiscal 1996.
Gross margin for the first nine months of fiscal 1996 was 68.6%, an
increase from gross margin of 67.7% reported in the same period
last year. The increase in gross margin was due primarily to a
higher percentage of shipments from the Company's direct sales
subsidiaries. There were no significant selling price changes
between these periods.
12
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Operating expenses increased 3% to $43.1 million from the $41.9
million reported in the first nine months of fiscal 1995. The
operating expenses for the first nine months of fiscal 1995 included
a $2.2 million non-recurring charge for the write-off of the
remaining goodwill that resulted from the 1988 acquisition of Lee
Scientific, Inc. The Company determined that the goodwill was not
recoverable through future operations of the business acquired.
Excluding the non-recurring charge, operating expenses increased 9%
from the same period in the prior year. Operating expenses were 44%
of sales in the first nine months of fiscal 1996 compared with 48% of
sales in the first nine months of last year. Excluding the goodwill
write-off, operating expenses were 45% of sales in the first nine
months of fiscal 1995.
SG&A expenses increased 8%, to $34.6 million from $32.0 million
reported in the first nine months of fiscal 1995. The increase in
SG&A expenses is primarily due to higher international selling
expenses and increased personnel and related costs. The impact of
currency fluctuations also caused international selling expenses to
be higher.
R&D expenses for the first nine months of fiscal 1996 were $8.5
million, an increase of 10% compared with $7.7 million reported for
the same period of fiscal 1995. R&D expenses increased mainly due to
higher project material and personnel costs associated with several
product development projects. The level of R&D spending varies
depending on both the breadth and the stage of the Company's R&D
efforts.
Interest income of $1.6 million for the first nine months of fiscal
1996 was virtually unchanged from the first nine months of fiscal
1995. Interest expense declined to $67,000 due to lower interest
rates on bank borrowings by the Company's foreign subsidiaries.
The effective tax rate was 34.8% for the first nine months of fiscal
1996 compared with 38.6% for the same period last year. The decrease
in the effective tax rate is due to the write-off of goodwill in
fiscal 1995 which was not deductible for tax purposes. The effective
tax rate for the remainder of fiscal 1996 is expected to be
consistent with the rate for the first nine months.
13
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Net income per share grew by 30% to $1.26 in the first nine months of
fiscal 1996 compared with $.97 for the same period last year. The
increase in net income per share was due to a 21% increase in net
income and the favorable impact of the Company's stock repurchase
programs.
Liquidity and Capital Resources
The Company's liquidity and capital resources remained strong during
the first nine months of fiscal 1996. The Company had cash and cash
investments of $43.6 million at March 31, 1996, including $17.0
million generated from operating activities in the first nine months
of fiscal 1996.
During the first nine months of fiscal 1996, the Company repurchased
1,050,900 shares of its common stock for $29.6 million, compared with
1,218,756 shares repurchased in the first nine months of fiscal 1995.
At March 31, 1996, the Company's Japanese subsidiary had utilized
approximately $1.7 million of the Company's $15.2 million committed
bank lines of credit to meet its local working capital requirements.
The Company believes that its cash flow from operations, its current
cash and cash investments and the remainder of its bank lines of
credit are adequate to meet its cash requirements for fiscal 1996 and
the foreseeable future.
The impact of inflation on the Company's financial position and
results of operations was not significant during any of the periods
presented.
Except for historical information continued herein, the above
discussion contains forward looking statements that involve risks and
uncertainties that could cause actual results to differ materially
from those discussed here. Such risks and uncertainties include: new
product development, including market receptiveness, competition from
other products, existing product obsolescence, worldwide demand for
analytical instrumentation, general economic conditions, foreign
currency fluctuations, the ability to manufacture products on an
efficient and timely basis and at reasonable cost and in sufficient
volume and other risks as detailed from time to time in the Company's
filings with the Securities and Exchange Commission.
14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits required to be filed pursuant to
this Report on Form 10-Q.
(b) The Company did not file any Reports on Form 8-K during
the quarter ended March 31, 1996.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DIONEX CORPORATION<UL0>
(Registrant)
Date: May 9, 1996 By:/s/ A. Blaine Bowman
A. Blaine Bowman
President, Chief Executive
Officer
By:/s/ Michael W. Pope
Michael W. Pope
Vice President, Finance
and Administration
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the condensed consolidated financial statements included in the Form 10-Q
of Dionex Corporation for the quarter ended March 31, 1996 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-END> MAR-31-1996
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<RECEIVABLES> 28038
<ALLOWANCES> 439
<INVENTORY> 8859
<CURRENT-ASSETS> 88078
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0
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<TOTAL-LIABILITY-AND-EQUITY> 124690
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