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 December 31, 1997
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, California 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 February 9, 1998:
CLASS NUMBER OF SHARES
Common Stock 11,406,208
<PAGE>
DIONEX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1997 and June 30, 1997................... 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31, 1997 and 1996......... 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended December 31, 1997 and 1996........... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 1997 and 1996........... 6-7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS............................................ 8-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................. 10-13
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................... 14
SIGNATURES................................................... 15
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- -------------
December 31, June 30,
ASSETS 1997 1997
(unaudited)
Current assets:
Cash and equivalents (including invested cash
of $14,204 at December 31, 1997 and $16,586
at June 30, 1997)............................ $ 21,741 $ 24,624
Temporary cash investments..................... 6,902 8,252
Accounts receivable (net of allowance for
doubtful accounts of $502 at December 31,
1997 and $533 at June 30, 1997).............. 29,613 29,226
Inventories.................................... 9,396 9,479
Deferred tax benefits.......................... 7,607 7,136
Prepaid expenses and other..................... 1,406 1,076
Total current assets.................... 76,665 79,793
Property, plant and equipment, net............... 29,688 30,225
Other assets .................................... 9,462 8,145
$115,815 $118,163
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 3,077 $ 4,442
Accrued liabilities............................ 18,237 18,639
Income taxes payable........................... 6,587 4,905
Accrued product warranty....................... 3,783 3,592
Total current liabilities............... 31,684 31,578
Deferred taxes................................... 2,995 2,422
Stockholders' equity:
Preferred stock (par value $.001 per share;
1,000,000 shares authorized; none
outstanding)................................. - -
Common stock (par value $.001 per share;
40,000,000 shares authorized; outstanding:
11,530,111 shares at December 31, 1997 and
11,847,030 shares at June 30, 1997).......... 36,259 36,323
Retained earnings.............................. 43,674 46,622
Accumulated translation adjustments............ (1,871) (996)
Unrealized gain on securities.................. 3,074 2,214
Total stockholders' equity.............. 81,136 84,163
$115,815 $118,163
See notes to condensed consolidated financial statements.
3
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands, except per share amounts)
- ------------------
1997 1996
(unaudited)
Net sales...................................... $39,420 $36,600
Cost of sales.................................. 12,353 11,084
Gross profit................................... 27,067 25,516
Operating expenses:
Selling, general and administrative.......... 12,346 12,284
Research and product development............. 3,318 3,117
Total operating expenses.................. 15,664 15,401
Operating income............................... 11,403 10,115
Interest income................................ 392 367
Interest expense............................... (13) (27)
Income before taxes on income.................. 11,782 10,455
Taxes on income................................ 4,006 3,607
Net income..................................... $ 7,776 $ 6,848
Basic earnings per share....................... $ .67 $ .57
Diluted earnings per share..................... $ .63 $ .54
Shares used in computing per share amounts:
Basic .................................... 11,591 12,073
Diluted .................................. 12,275 12,698
See notes to condensed consolidated financial statements.
4
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands, except per share amounts)
- ------------------
1997 1996
(unaudited)
Net sales...................................... $73,353 $68,108
Cost of sales.................................. 23,120 20,738
Gross profit................................... 50,233 47,370
Operating expenses:
Selling, general and administrative.......... 23,911 23,765
Research and product development............. 6,425 5,874
Total operating expenses.................. 30,336 29,639
Operating income............................... 19,897 17,731
Interest income................................ 740 712
Interest expense............................... (54) (48)
Income before taxes on income.................. 20,583 18,395
Taxes on income................................ 6,998 6,346
Net income..................................... $13,585 $12,049
Basic earnings per share....................... $ 1.17 $ .99
Diluted earnings per share..................... $ 1.10 $ .94
Shares used in computing per share amounts:
Basic ....................................... 11,639 12,180
Diluted ..................................... 12,323 12,809
See notes to condensed consolidated financial statements.
5
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands)
- ------------------
1997 1996
(unaudited)
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income............................................ $13,585 $12,049
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 1,243 1,247
Deferred taxes...................................... (471) (650)
Changes in assets and liabilities:
Accounts receivable............................... (1,836) (899)
Inventories....................................... (256) (136)
Prepaid expenses and other assets................. (367) 215
Accounts payable.................................. (1,295) (543)
Accrued liabilities............................... (243) (1,962)
Income taxes payable.............................. 1,771 1,750
Accrued product warranty.......................... 219 238
Net cash provided by operating activities............. 12,350 11,309
Cash flows from investing activities:
Purchase of temporary cash investments.............. (7,650) (11,100)
Proceeds from maturities of temporary
cash investments................................. 9,000 18,399
Purchase of property, plant and equipment........... (794) (899)
Other............................................... 13 (75)
Net cash provided by investing activities............. 569 6,325
Cash flows from financing activities:
Net change in notes payable to banks................ - (270)
Sale of common stock................................ 1,094 1,522
Repurchase of common stock.......................... (17,691) (19,936)
Other............................................... 9 -
Net cash used for financing activities................ (16,588) (18,684)
Effect of exchange rate changes on cash............... 786 423
Net decrease in cash and equivalents.................. (2,883) (627)
Cash and equivalents, beginning of period............. 24,624 16,986
Cash and equivalents, end of period................... $21,741 $16,359
(continued)
6
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996
(In thousands)
- ------------------
1997 1996
(unaudited)
(continued)
Supplemental disclosures of cash flow information:
Income taxes paid................................. $5,787 $5,208
Interest paid..................................... $ 55 $ 50
See notes to condensed consolidated financial statements.
7
<PAGE>
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, 1997.
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, 1998.
2. Inventories
Inventories consist of (in thousands):
December 31, June 30,
1997 1997
Finished goods $3,798 $3,720
Work in process 2,935 2,584
Raw materials and subassemblies 2,663 3,175
$9,396 $9,479
8
<PAGE>
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
3. Income Taxes
The effective income tax rate for the first half of fiscal
1998 was 34.0%, down slightly from the 34.5% reported in the
first half of fiscal 1997.
4. Net Income Per Share
In February 1997, the Financial Accounting Board issued SFAS
No. 128, Earnings Per Share. The Company adopted SFAS No.
128 in the second quarter of fiscal 1998 and restated earnings
per share data for prior periods to conform with the current
presentation. SFAS No. 128 requires a dual presentation of
basic and diluted earnings per share(EPS).
Basic earnings per share excludes dilution and is computed
by dividing net income by the weighted average of common
shares outstanding for the period. Diluted earnings per
share reflects the potential dilution from securities and
other contracts which are exercisable or convertible into
common stock. Diluted earnings per share is computed by
dividing net income by the weighted average number of common
shares that would have been outstanding during the period
assuming the issuance of common shares for all dilutive
potential common shares outstanding. The difference between
the number of shares outstanding for basic and diluted
earnings per share is due to stock options outstanding during
the period.
5. Common Stock Repurchases
During the first half of fiscal 1998, the Company
repurchased 373,950 shares of its common stock on the open
market compared with 556,800 shares repurchased in the first
half of the previous fiscal year. During all of fiscal
1997, the Company repurchased 791,739 shares.
9
<PAGE>
DIONEX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended December 31, 1997 and
1996
Net sales for the three months ended December 31, 1997 were $39.4
million, an increase of 8% from the $36.6 million reported for
the same period last year. The Company experienced solid sales
growth throughout all three of the Company's major geographic
regions: North America, Europe and Asia. Had currency rates been
the same as in the second quarter of last year, sales growth
would have been 13%.
Gross margin for the second quarter of fiscal 1998 was 68.7%,
down 1.0% from the 69.7% reported in the same period last year.
The reduction in gross margin was due primarily to an unfavorable
effect of currency fluctuations and higher product costs. There
were no significant selling price changes between these periods.
Operating expenses of $15.7 million for the second quarter of
fiscal 1998 were up $263,000, or 2%, from the $15.4 million
reported for the second quarter last year. As a percentage of
sales, operating expenses in the second quarter were 40% compared
with 42% for the same period last year. Selling, general and
administrative expenses increased $62,000, or 1%, to $12.3
million in the three months ended December 31, 1997. The
increase was due to higher selling costs and the costs related to
the establishment of our Austrian subsidiary, effective January
1, 1997, partially offset by the favorable effect of currency
fluctuations on international selling expenses.
Research and development (R&D) costs of $3.3 million increased
$201,000, or 6%, compared with the same period last year. The
level of R&D spending varies depending on both the breadth of the
Company's R&D efforts and the stage of specific product
development.
Interest income of $392,000 for the three months ended December
31, 1997 was essentially unchanged from the $367,000 reported for
the second quarter last year.
The effective tax rate for the second quarter of fiscal 1998 was
34.0% compared with 34.5% for the same period last year.
Variations in the tax rate reflect changes in the mix of taxable
income among the various tax jurisdictions in which the Company
does business. The effective tax rate for the remainder of
fiscal 1998 is expected to be consistent with the second quarter
of fiscal 1998.
10
<PAGE>
Net income in the second quarter of fiscal 1998 was $7.8 million,
an increase of 14% from the $6.8 million reported in the second
quarter last year. Basic earnings per share of $.67 increased
$.10, or 18% compared with $.57 per share last year. Diluted
earnings per share increased by $.09 per share, or 17%, to $.63
compared with $.54 reported for the second quarter last year.
Basic and diluted earnings per share were favorably affected by
the Company's stock repurchase program.
Results of Operations - Six months ended December 31, 1997 and
1996
Net sales for the six months ended December 31, 1997 were $73.4
million, an increase of 8% over the $68.1 million reported for
the same period last year. The increase in sales was
attributable to solid growth in North America and Asia. Sales
growth in Europe improved during the six-month period. Currency
fluctuations had an unfavorable effect on sales growth in the
six-month period. Had currency rates remained the same as the
first half of last year, sales growth would have been 13%.
Gross margin in the first half of fiscal 1998 was 68.5% compared
with 69.6% in the first half last year. The reduction in gross
margin was primarily attributable to the unfavorable effect of
currency fluctuations and higher product costs. There were no
significant selling price changes between these periods.
Operating expenses for the first six months of fiscal 1998 were
$30.3 million, an increase of $697,000, or 2%, compared with the
$29.6 million reported for the first six months last year.
Operating expenses as a percentage of sales decreased to 41% in
the first six months of fiscal 1998 compared with 44% in the same
period last year. Selling, general and administrative expenses
for the first six months of fiscal 1998 were $23.9 million, an
increase of 1% compared with the $23.8 million reported for the
same period last year. The increase was primarily due to higher
personnel and related costs, higher domestic selling expenses and
the establishment of our subsidiary in Austria, effective January
1, 1997, partially offset by the favorable effect of currency
fluctuations.
R&D expenses for the six months ended December 31, 1997 were $6.4
million, an increase of $551,000, or 9%, from the $5.9 million
reported in the same six-month period last year. The level of
R&D spending varies depending on both the breadth of the
Company's R&D efforts and the stage of specific product
development.
Interest income for the six months ended December 31, 1997 was
$740,000, which was essentially unchanged from the $712,000
reported for the same period last year.
11
<PAGE>
The effective tax rate for the first six months of fiscal 1998
was 34.0% compared with 34.5% for the same period last year.
Variations in the tax rate reflect changes in the mix of taxable
income among the various tax jurisdictions in which the Company
does business. The effective tax rate for the remainder of
fiscal 1998 is expected to be consistent with the first half of
fiscal 1998.
Net income in the first half of fiscal 1998 was $13.6 million, an
increase of 13% from the $12.0 million reported in the same
period last year. Basic earnings per share of $1.17 increased
$.18, or 18%, compared with $.99 per share reported for the first
half of last year. Diluted earnings per share increased by $.16
per share, or 17%, to $1.10 compared with $.94 reported for the
same period last year. Basic and diluted earnings per share were
favorably affected by the Company's stock repurchase program.
Liquidity and Capital Resources
The Company's liquidity and capital resources remained strong
during the first half of fiscal 1998. At December 31, 1997, the
Company had cash and cash investments of $28.6 million.
During the second quarter of fiscal 1998, the Company repurchased
103,400 shares of its common stock , bringing the total shares
repurchased for the first six months of fiscal 1998 to 373,950.
During fiscal 1997, the Company repurchased a total of 791,739
shares of its common stock.
At December 31, 1997, the Company had not utilized any of the
$14.3 million available under its committed bank lines of credit.
The Company believes that its cash flow from operations, its
existing cash and cash investments and its bank lines of credit
will be adequate to meet its cash requirements for the remainder
of the fiscal year.
The impact of inflation on Dionex Corporation's financial
position and results of operations was not significant during the
six months ended December 31, 1997.
12
<PAGE>
Except for historical information contained herein, the above
discussion contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, Section
21E of the Securities and Exchange Act of 1934, as amended, and
the Private Securities Litigation Reform Act of 1995, and are
made under the safe harbor provisions thereof. Such statements
are subject to certain risks and uncertainties that could cause
actual results to differ materially from those discussed here.
Such risks and uncertainties include: competition from other
products, foreign currency fluctuations, general economic
conditions, new product development, including market
receptiveness, existing product obsolescence, fluctuation in
worldwide demand for analytical instrumentation, the ability to
manufacture products on an efficient and timely basis and at a
reasonable cost and in sufficient volume, the ability to attract
and retain talented employees and other risks as described in
more detail in the Company's Form 10-K. Readers are cautioned
not to place undue reliance on these forward-looking statements
which reflect management's analysis only as of the date hereof.
The Company undertakes no obligation to publicly release the
results of any revision to these forward-looking statements which
may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On October 23, 1997, the Company held its annual meeting
for the following purposes: (1) to elect directors, (2)
to approve an amendment to the Dionex Corporation Stock
Option Plan to increase the aggregate number of shares
of Common Stock authorized for issuance under such plan
by 400,000 shares, (3) to approve an amendment to the
1988 Directors Stock Option Plan to extend the term of
the plan to July 27, 2007 and to make certain
administrative changes, and (4) to ratify the selection
of Deloitte & Touche LLP as the Company's independent
auditors for its fiscal year ending June 30, 1998. A
description of these matters is contained in the
Company's Proxy Statement, dated September 12, 1997,
relating to the 1997 Annual Meeting of Stockholders.
There were 11,688,311 shares of the Company's common
stock entitled to vote at the Annual Meeting of
Stockholders based on the September 8, 1997 record
date. The Company solicited proxies pursuant to
Regulation 14 of the Securities Exchange Act of 1934 and
there was no solicitation in opposition to management's
nominees for directors as listed in the proxy statement.
Each director received a minimum of 10,346,253 votes
which represented at least 89% of the outstanding common
shares entitled to vote.
The shareholders approved the amendment to the Company's
Stock Option Plan, increasing the aggregate number of
shares under the plan with 8,149,620 votes for,
1,988,048 votes against and 232,381 votes abstaining.
The shareholders also approved the amendment to the
Directors Stock Option Plan, with 9,865,808 votes for,
258,708 votes against and 245,533 votes abstaining.
The shareholders voted to ratify the selection of
Deloitte & Touche LLP as the Company's independent
auditors for its fiscal year ending June 30, 1998.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with the Company's
Form 10-Q.
Exhibit Description
27 Financial Data Schedule for the
period ended December 31, 1997
(b) The Company did not file any reports on Form 8-K
during the quarter ended December 31, 1997.
14
<PAGE>
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
(Registrant)
Date: February 9, 1998 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 December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1998
<CASH> 21741
<SECURITIES> 6902
<RECEIVABLES> 30115
<ALLOWANCES> 502
<INVENTORY> 9396
<CURRENT-ASSETS> 76665
<PP&E> 45881
<DEPRECIATION> 16193
<TOTAL-ASSETS> 115815
<CURRENT-LIABILITIES> 31684
<BONDS> 0
0
0
<COMMON> 36259
<OTHER-SE> 44877
<TOTAL-LIABILITY-AND-EQUITY> 115815
<SALES> 73353
<TOTAL-REVENUES> 73353
<CGS> 23120
<TOTAL-COSTS> 23120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 20583
<INCOME-TAX> 6998
<INCOME-CONTINUING> 13585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13585
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.10
</TABLE>
