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, 1998
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 May 11, 1998:
CLASS NUMBER OF SHARES
Common Stock 11,261,330
<PAGE>
DIONEX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1998 and June 30, 1997.................. 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31, 1998 and 1997........ 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Nine Months Ended March 31, 1998 and 1997......... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 1998 and 1997......... 6-7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS........................................ 8-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............. 10-14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................ 15
SIGNATURES............................................... 15
2
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- -------------
March 31, June 30,
ASSETS 1998 1997
(unaudited)
Current assets:
Cash and equivalents (including invested cash
of $10,079 at March 31, 1998 and $16,586
at June 30, 1997)............................ $ 19,004 $ 24,624
Temporary cash investments..................... 4,850 8,252
Accounts receivable (net of allowance for
doubtful accounts of $548 at March 31,1998
and $533 at June 30, 1997)................... 31,104 29,226
Inventories.................................... 9,771 9,479
Deferred taxes................................. 7,651 7,136
Prepaid expenses and other..................... 1,763 1,076
Total current assets.................... 74,143 79,793
Property, plant and equipment, net............... 29,434 30,225
Other assets .................................... 8,771 8,145
$112,348 $118,163
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks......................... $ 750 $ -
Accounts payable............................... 4,557 4,442
Accrued liabilities............................ 16,714 18,639
Income taxes payable........................... 5,655 4,905
Accrued product warranty....................... 3,810 3,592
Total current liabilities............... 31,486 31,578
Deferred taxes................................... 2,689 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:
11,388,583 shares at March 31, 1998 and
11,847,030 shares at June 30, 1997).......... 39,244 36,323
Retained earnings.............................. 38,501 46,622
Accumulated translation adjustments............ (2,188) (996)
Net unrealized gain on securities.............. 2,616 2,214
Total stockholders' equity.............. 78,173 84,163
$112,348 $118,163
See notes to condensed consolidated financial statements.
3
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands, except per share amounts)
- ------------------
1998 1997
(unaudited)
Net sales...................................... $38,404 $36,646
Cost of sales.................................. 12,134 11,044
Gross profit................................... 26,270 25,602
Operating expenses:
Selling, general and administrative.......... 11,706 11,784
Research and product development............. 3,471 3,397
Total operating expenses.................. 15,177 15,181
Operating income............................... 11,093 10,421
Interest income................................ 325 310
Interest expense............................... (27) (18)
Income before taxes on income.................. 11,391 10,713
Taxes on income................................ 3,873 3,697
Net income..................................... $ 7,518 $ 7,016
Basic earnings per share....................... $ .66 $ .59
Diluted earnings per share..................... $ .62 $ .55
Shares used in computing per share amounts:
Basic..................................... 11,403 11,946
Diluted................................... 12,089 12,644
See notes to condensed consolidated financial statements.
4
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands, except per share amounts)
- ------------------
1998 1997
(unaudited)
Net sales..................................... $111,757 $104,754
Cost of sales................................. 35,254 31,782
Gross profit.................................. 76,503 72,972
Operating expenses:
Selling, general and administrative......... 35,617 35,549
Research and product development............ 9,896 9,271
Total operating expenses................. 45,513 44,820
Operating income.............................. 30,990 28,152
Interest income............................... 1,065 1,022
Interest expense.............................. (81) (66)
Income before taxes on income................. 31,974 29,108
Taxes on income............................... 10,871 10,043
Net income.................................... $ 21,103 $ 19,065
Basic earnings per share...................... $ 1.83 $ 1.58
Diluted earnings per share.................... $ 1.72 $ 1.49
Shares used in computing per share amounts:
Basic....................................... 11,560 12,102
Diluted..................................... 12,245 12,754
See notes to condensed consolidated financial statements.
5
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands)
- ------------------
1998 1997
(unaudited)
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income............................................$21,103 $19,065
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 1,892 1,886
Deferred taxes...................................... (516) (517)
Changes in assets and liabilities:
Accounts receivable............................... (3,800) (3,278)
Inventories....................................... (736) (1,126)
Prepaid expenses and other assets................. (758) 98
Accounts payable.................................. 222 963
Accrued liabilities............................... (1,680) (1,298)
Income taxes payable.............................. 817 720
Accrued product warranty.......................... 259 478
Net cash provided by operating activities............. 16,803 16,991
Cash flows from investing activities:
Purchase of temporary cash investments..............(11,000) (14,600)
Proceeds from maturities of temporary
cash investments................................. 14,402 24,899
Purchase of property, plant and equipment........... (1,266) (2,150)
Other............................................... (81) (124)
Net cash provided by investing activities............. 2,055 8,025
Cash flows from financing activities:
Net change in notes payable to banks................ 750 1,044
Sale of common stock................................ 4,900 5,212
Repurchase of common stock..........................(31,203) (25,599)
Other............................................... 19 21
Net cash used for financing activities................(25,534) (19,322)
Effect of exchange rate changes on cash............... 1,056 910
Net increase(decrease)in cash and equivalents........ (5,620) 6,604
Cash and equivalents, beginning of period............. 24,624 16,986
Cash and equivalents, end of period...................$19,004 $23,590
(continued)
6
<PAGE>
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(In thousands)
- ------------------
1998 1997
(unaudited)
(continued)
Supplemental disclosures of cash flow information:
Income taxes paid.............................. $ 8,610 $ 8,199
Interest paid.................................. $ 79 $ 64
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):
March 31, June 30,
1998 1997
Finished goods $3,622 $3,720
Work in process 3,561 2,584
Raw materials and subassemblies 2,588 3,175
$9,771 $9,479
3. Income Taxes
The effective income tax rate for the first nine months of
fiscal 1998 was 34.0%, down slightly from the 34.5% reported
in the same period of fiscal 1997.
8
<PAGE>
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
4. Earnings Per Share
In February 1997, the Financial Accounting Standards 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. For the Company, 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. Recently Issued Accounting Standards
During June 1997, the Financial Accounting Standards Board
(Board) issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income (SFAS 130), which
requires that the Company report comprehensive income in the
financial statements, in addition to net income. For the
Company, the primary differences between net income and
comprehensive income will be foreign currency translation
adjustments and changes in net unrealized gains on
securities available for sale. The Board also issued
Statements of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related
Information (SFAS 131), which establishes annual and
interim reporting standards for an enterprise's operating
segments. It also establishes standards for related
disclosures about products, services, geographic areas, and
major customers. Adoption of these statements will not
impact the Company's consolidated financial position,
results of operations or cash flows, and any effect will be
limited to the form and content of its disclosures. Both
statements are effective for fiscal years beginning after
December 15, 1997, with earlier application permitted.
9
<PAGE>
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
6. Common Stock Repurchases
During the first nine months of fiscal 1998, the Company
repurchased 633,225 shares of its common stock on the open
market compared with 679,450 shares repurchased in the
first nine months of the previous fiscal year. During all
of fiscal 1997, the Company repurchased 791,739 shares.
10
<PAGE>
DIONEX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended March 31, 1998
and 1997
Net sales for the three months ended March 31, 1998 were $38.4
million, an increase of 5% from the $36.6 million reported for
the same period last year. The Company experienced sales growth
in its North American and European markets. Sales in our Asian
markets were lower due to the financial turmoil which created
economic uncertainty. Had currency rates been the same as in the
third quarter of last year, sales growth would have been 9%.
Gross margin for the third quarter of fiscal 1998 was 68.4%,
compared with the 69.9% 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 $15.2 million for the third quarter of
fiscal 1998 were unchanged from the prior year. As a percentage
of sales, operating expenses in the current quarter were 40%
compared with 41% for the same period last year.
Selling, general and administrative expenses decreased $78,000,
or 1%, to $11.7 million in the three months ended March 31, 1998.
The decrease was mainly due to the favorable effect of currency
fluctuations on international selling expenses.
Research and development (R&D) costs of $3.5 million increased
$74,000, or 2%, 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 $325,000 for the three months ended March 31,
1998 was essentially unchanged from the $310,000 reported for the
third quarter last year.
The effective tax rate for the third 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 first nine
months of fiscal 1998.
11
<PAGE>
Net income in the third quarter of fiscal 1998 was $7.5 million,
an increase of 7% from the $7.0 million reported in the third
quarter last year. Basic earnings per share of $.66 increased
$.07, or 12%, compared with $.59 per share last year. Diluted
earnings per share increased by $.07 per share, or 13%, to $.62
compared with $.55 reported for the third quarter last year.
Basic and diluted earnings per share were favorably affected by
the Company's stock repurchase program.
Results of operations - Nine Months Ended March 31, 1998
and 1997
Net sales for the nine months were $111.8 million, an increase of
7% over the $104.8 million reported for the same period last
year. The increase in sales was attributable to growth in North
America and a continued strengthening in Europe. Business in our
Asian markets was weak due to the financial uncertainties in that
area. Currency fluctuations had an unfavorable effect on sales
growth in the nine-month period. Had currency rates remained the
same as the first nine months of last year, sales growth would
have been 12%.
Gross margin in the first nine months of fiscal 1998 was 68.5%,
down 1.2% from the 69.7% reported in the first nine months of
fiscal 1997. The decline in gross margin is attributable to an
unfavorable effect of currency fluctuations and higher product
costs. There were no significant selling price changes between
these periods.
Operating expenses of $45.5 million for the first nine months of
fiscal 1998 increased less than 2% from the $44.8 million
reported for the first nine months last year. Operating expenses
as a percentage of sales decreased to 41% from the 43% of sales
reported last year.
SG&A expenses for the first nine months of fiscal 1998 increased
less than 1%, from $35.5 million to $35.6 million. Increases in
personnel and related costs, were partially offset by the effect
of currency fluctuations on international selling expenses. SG&A
expenses were 32% of sales for the first nine months of fiscal
1998 compared with 34% for the same period last year.
R&D expenses for the first nine months were $9.9 million, an
increase of $625,000, or 7%, from the $9.3 million reported for
the same period last year. The increased costs were primarily
attributable to personnel and related costs and project
materials. 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 first nine months of fiscal 1998 was up
slightly to $1.1 million from $1.0 million reported for the same
period last year.
12
<PAGE>
The effective income tax rate was 34.0% in the first three
quarters of fiscal 1998, compared to 34.5% in the prior year's
first three quarters. Variations in the tax rate reflect
variations 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 rate for the first nine months.
Net income of $21.1 million increased $2.0 million or 11%, from
the first three quarters of fiscal 1997. Basic earnings per
share grew $.25, or 16%, to $1.83 compared with $1.58 for the
same period last year. Diluted earnings per share increased by
$.23, or 15%, to $1.72 compared with $1.49 reported for the first
nine months of the prior year. Basic and diluted earnings per
share were favorably impacted by the Company's stock repurchase
program.
Liquidity and Capital Resources
The Company's liquidity and capital resources remained strong
during the first nine months of fiscal 1998. At March 31, 1998,
the Company had cash and cash investments of $23.9 million.
During the third quarter of fiscal 1998, the Company repurchased
259,275 shares of its common stock, bringing the total shares
repurchased for the first nine months of fiscal 1998 to 633,225.
During fiscal 1997, the Company repurchased a total of 791,739
shares of its common stock.
At March 31, 1998, the Company's Japanese subsidiary had utilized
$750,000 of the $14.2 million available to the Company under its
committed bank lines of credit. The Company believes that its
cash flow from operations, its existing cash and cash investments
and unutilized portion of 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
nine months ended March 31, 1998.
13
<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: general economic
conditions, foreign currency fluctuations, competition from other
products, 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.
14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with the Company's
Form 10-Q:
Exhibit Description
2.7 Financial Data Schedule for the
period ended March 31, 1998
(b) The Company did not file any reports on Form 8-K during
the quarter ended March 31, 1998.
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: May 11, 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
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, 1998 and is qualified in its
entirety by referenced to such financial statements.
</LEGEND>
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