<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20584
ABIOMED, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2743260
(State of incorporation) (I.R.S. Employer No.)
33 CHERRY HILL DRIVE
DANVERS, MASSACHUSETTS 01923
(Address of principal executive offices, including zip code)
(508) 777-5410
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or 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 [ ]
As of June 30, 1997, there were 7,017,872 shares outstanding of the
registrant's Common Stock, $.01 par value, and no shares outstanding of the
registrant's Class A Common Stock, $.01 par value.
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ABIOMED, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page No.
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Part I - Financial Information:
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 1997 and March 31, 1997
3-4
Consolidated Statements of Operations
Three Months Ended June 30, 1997 and
June 30, 1996
5
Consolidated Statements of Cash Flows
Three Months Ended June 30, 1997 and
June 30, 1996
6
Notes to Consolidated Financial Statements
7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
9-12
Part II - Other Information
13
Signatures
13
</TABLE>
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, 1997
March 31, 1997
(unaudited)
(audited)
<S>
<C>
<C>
Current Assets:
Cash and cash equivalents (Note 6)
$1,605,276
$1,616,696
Short-term marketable securities (Note 6)
7,160,563
7,744,664
Accounts receivable, net
5,860,089
4,816,500
Inventories (Note 3)
2,013,944
1,820,783
Prepaid expenses and other current assets
203,162
173,172
Total current assets
16,843,034
16,171,815
Property and equipment, at cost:
Machinery and equipment
3,620,677
3,147,837
Furniture and fixtures
349,791
241,867
Leasehold improvements
1,186,047
1,118,677
5,156,515
4,508,381
Less: Accumulated depreciation
and amortization
2,734,487
2,618,603
2,422,028
1,889,778
Other assets, net (Note 7)
449,462
485,000
$19,714,524
$18,546,593
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
June 30, 1997
March 31, 1997
(unaudited)
(audited)
<S>
<C>
<C>
Current Liabilities:
Accounts payable
$1,216,225
$1,289,024
Accrued expenses
2,336,031
2,032,506
Total current liabilities
3,552,256
3,321,530
Stockholders' Investment (Note 4):
Class B Preferred Stock, $.01 par value-
Authorized 1,000,000 shares
Issued and outstanding-none
- -
- -
Common Stock, $.01 par value-
Authorized 25,000,000 shares at June 30, 1997
Issued and Outstanding-7,017,872 shares at
June 30, 1997 and 7,008,282 shares at
March 31, 1997
70,179
70,082
Class A Common Stock $.01 par value
Authorized - 2,346,000 shares -
None Issued and Outstanding at
June 30, 1997 and March 31, 1997
- -
-
Additional paid-in capital
37,236,040
37,169,893
Accumulated deficit
(21,143,951)
(22,014,912)
Total stockholders' investment
16,162,268
15,225,063
$19,714,524
$18,546,593
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1997
June 30, 1996
<S>
<C>
<C>
Revenues:
Products
$4,206,743
$2,868,349
Contracts
1,829,045
816,923
6,035,788
3,685,272
Costs and expenses:
Cost of products
1,529,278
1,048,699
Research and development
1,643,499
863,975
Selling, general and administrative
2,116,545
1,519,593
5,289,322
3,432,267
Net income from operations
746,466
253,005
Interest and other income
124,495
130,224
Net income
870,961
383,229
Net income per common share (Note 5):
$0.12
$0.05
Weighted average number of common
and dilutive common equivalent shares
outstanding
7,601,273
7,206,261
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1997
June 30, 1996
<S>
<C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$870,961
$383,229
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization
151,422
96,084
Changes in assets and liabilities-
Accounts receivable
(1,043,589)
194,412
Inventories
(193,161)
(28,667)
Prepaid expenses and other current assets
(29,990)
(87,077)
Accounts payable
(72,799)
(169,637)
Accrued expenses
303,525
(230,653)
Net cash provided by (used in) operating activities
(13,631)
157,691
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities (purchases) of investments, net
584,101
(1,767,851)
Purchases of property and equipment and improvements
(648,134)
(143,735)
Net cash used in investing activities
(64,033)
(1,911,586)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options and stock issued
under employee stock purchase plan
66,244
197,415
Net cash provided by financing activities
66,244
197,415
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS,
EXCLUDING INVESTMENTS
(11,420)
(1,556,480)
CASH AND CASH EQUIVALENTS, EXCLUDING INVEST-
MENTS, AT BEGINNING OF PERIOD
1,616,696
2,938,332
CASH AND CASH EQUIVALENTS , EXCLUDING INVEST-
MENTS, AT END OF PERIOD
$1,605,276
$1,381,852
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Preparation
The unaudited consolidated financial statements of ABIOMED, Inc.
(the Company), presented herein have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the information and note
disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's latest audited
financial statements, which are contained in the Company's Form 10-K for
the year ended March 31, 1997, which was filed with the Securities and
Exchange Commission. In the opinion of management, the accompanying
consolidated financial statements include all adjustments (consisting only of
normal, recurring adjustments) necessary to summarize fairly the Company's
financial position and results of operations. The results of operations for
the three months ended June 30, 1997 may not be indicative of the results
that may be expected for the full fiscal year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, and the accounts of its majority-
owned subsidiary Abiomed Limited Partnership. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
3. Inventories
Inventories include raw materials, work-in-process, and finished goods
and are priced at the lower of cost (first-in, first-out) or market and consist
of the following:
<TABLE>
<CAPTION>
June 30, 1997
March 31, 1997
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Raw Materials
$1,050,941
$896,434
Work-in-Process
266,881
373,383
Finished Goods
696,122
550,966
TOTAL
$2,013,944
$1,820,783
</TABLE>
Finished goods and work-in-process inventories consist of direct
material, labor and overhead.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 1: FINANCIAL STATEMENTS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited, continued)
4. Stockholders' Investment
During the first quarter of fiscal 1998, options to purchase 141,500
shares of Common Stock were granted at exercise prices ranging from
$10.00 to $12.75 per share. Options to purchase 600 shares were canceled
during the quarter. Options to purchase 9,590 shares were exercised in the
first quarter at exercise prices ranging from $5.75 to $8.00 per share.
5. Net Income Per Common Share
Net income per common and common equivalent share is computed by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the period using the treasury stock
method.
6. Cash and Cash Equivalents
The Company classifies any marketable security with a maturity date of
90 days or less at the time of acquisition to be a cash equivalent. Securities,
including marketable securities, with original maturities of greater than 90
days are classified as investments.
7. Other Assets
Other assets represent the Company's majority interest of the Abiomed
Limited Partnership. Abiomed Limited Partnership (the Partnership) was
formed in March 1985 and provided initial funding for the design and
development of certain of the Company's products.
Through August 3, 2000, the Company owes a royalty to the
Partnership of 5.5% of certain revenues from these products. Because the
Company owns 61.7% of the Partnership, the net royalty expense to the
Company is approximately 2.1% of these product revenues. This royalty
formula is subject to certain maximum amounts and to certain additional
adjustments in the event that the Company sells the technology. The
Partnership is inactive except with respect to receiving and distributing
proceeds from these royalty rights.
8. Recent Accounting Development
On March 3, 1997, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 128, "Earnings Per Share." This statement establishes
standards for the computation and presentation of earnings per share and
applies to entities with publicly held common stock or potential common
stock. This statement, which supersedes APB Opinion No. 15, is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. This statement when adopted, will require the
restatement of prior years' earnings per share. Management expects that the
adoption of this new statement will not have a material impact on the
Company's previously disclosed earnings per share.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET INCOME
Net income and income per share for the three months ended June 30,
1997 were approximately $871,000 and $0.12 per share, respectively. These
earnings compare to net income and income per share of approximately
$383,000 and $0.05 per share, respectively, in the same period of the
previous year.
REVENUES
In the three months ended June 30, 1997, total revenues were
approximately $6,036,000, 64% higher than total revenues of approximately
$3,685,000 in the same period of the previous year.
Product revenues were approximately $4,207,000, 47% higher than
product revenues of approximately $2,868,000 in the same period of the
previous year. These results primarily reflect increased domestic unit sales
of BVS blood pumps and consoles. More than 90% of total product revenues
in the quarter were derived from domestic sources.
Revenues from research and development contracts and grants for this
quarter were approximately $1,829,000, 124% higher than total revenues of
approximately $817,000 reported in the same quarter of the previous year.
This increase primarily reflects increased activity under the Company's
Phase II contract with the National Heart, Lung and Blood Institute (NHLBI)
to develop a Total Artificial Heart (TAH). This contract, in the amount of
$8.5 million, was awarded to the Company in September 1996 and has a term
of four years. As of June 30, 1997, the Company's backlog of research and
development contracts and grants totaled approximately $8,905,000,
including approximately $5,043,000 under the TAH contract. All such
government contracts contain provisions making them subject to government
appropriation and are terminable at the convenience of the government.
The Company accounts for revenue under its government contracts and
grants as work is performed, provided that the government has appropriated
sufficient funds for the work. To date, the government has appropriated
approximately $4.9 million of the $8.5 million TAH contract amount. The
original government appropriation schedule calls for no further
appropriations for the TAH contract until October 1998. This schedule is
subject to change at the discretion of the government.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
REVENUES (continued)
During the first quarter of fiscal 1998, the Company recognized
$1,680,000 of revenue under its TAH contract, reflecting the highest
quarterly spending by the Company on the TAH, inception-to-date. As a
result of this increased activity, the Company has recognized $3.4 million of
the $4.9 million appropriated as revenue through June 30, 1997. The
Company anticipates that its rate of spending on TAH development will
further increase and that this spending will exceed the remaining currently
appropriated balance before the end of the Company's second quarter of
fiscal 1998 (the quarter ending September 30, 1997). The Company believes
that certain of these excess costs may be reimbursable under the TAH
contract, if and when additional appropriation under the TAH contract is
made. Due to its accelerated TAH development activity and the timing of
government appropriations, the Company believes that it will experience
significant quarterly fluctuations in contract revenues. The Company also
believes that the Company's total expenses to complete the development of
the TAH will significantly exceed the remaining TAH contract amount.
COSTS AND EXPENSES
Total costs and expenses for the three months ended June 30, 1997
were approximately $5,289,000, 54% higher than total costs and expenses of
approximately $3,432,000 in the same fiscal quarter of the previous year.
Cost of products sold as a percentage of product sales (36%) decreased
from the same quarter of the previous year (37%). This decrease primarily
reflects increased operational efficiencies.
Selling, general and administrative expenses for the three months
ended June 30, 1997 increased to approximately $2,117,000, 39% higher than
selling, general and administrative expenses in the same fiscal quarter of the
previous year. This increase primarily reflects increased sales and marketing
expenses, particularly increased personnel and sales commissions, related to
the increase in product revenues.
<PAGE>
ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
INTEREST AND OTHER
Interest and other income was approximately $124,000 in the first
quarter of fiscal 1998 and approximately even with interest and other income
in the corresponding quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company's balance sheet included $8,766,000
in cash and short-term investments, a decrease of approximately $596,000
from March 31, 1997. This decrease primarily reflects purchases of
equipment and facilities leasehold improvements of approximately $648,000
and cash used in operating activities of approximately $14,000 offset by the
proceeds from the exercise of stock options of approximately $66,000. The
Company also has a $3,000,000 line of credit from a bank which expires in
September 1997, and which was entirely available at June 30, 1997.
Net sources of cash provided by operating activities reflects net
income of approximately $871,000, including depreciation and amortization
expenses of $151,000, and an increase in accrued expenses of approximately
$304,000. These sources of cash were offset by an increase in accounts
receivable of approximately $1,044,000, a decrease in accounts payable of
approximately $73,000 and increases in prepaid expenses and inventory of
$30,000 and $193,000 respectively. Net cash used for the three months
ended June 1997 was $14,000.
Net cash used in investing activities included approximately $584,000
of net maturities of short-term investments and approximately $648,000 of
purchases and improvements of property and equipment.
Although the Company does not currently have significant capital
commitments other than described above, the Company believes that it will
continue to make significant investments to support the development and
commercialization of its products.
Subsequent to the close of the Company's first quarter of fiscal 1998,
the Company received approximately $16 million in cash as proceeds from
the sale of 1,242,710 shares of its Common Stock in a private offering. Of
the shares sold, 88,864 were sold to certain members of the Company's Board
of Directors.
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ABIOMED, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION (continued)
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(continued)
RISK FACTORS
Certain statements in this Quarterly Report constitute "forward-looking
statements," such as statements of the Company's plans, objectives,
expectations and intentions, including without limitation, statements
regarding the Company's anticipated funding and expenditures under its
government contracts. All forward-looking statements involve risks and
uncertainties, and actual results could differ materially from those set forth
in the forward-looking statements. Factors that could cause or contribute to
such differences include changes in government funding policies and
technical risks associated with development activities, risks associated with
attracting and retaining key technical personnel and other risk factors set
forth in the Company's Annual Report on Form 10K for its fiscal year ended
March 31, 1997. The forward-looking statements contained herein speak only
as of the date of this Report. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
such statement to reflect any change in the Company's expectations or any
change in events, conditions or circumstances on which any such statement is
based.
***
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ABIOMED, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
None
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.
ABIOMED, Inc.
Date: August 5, 1997 /s/ David M. Lederman
David M. Lederman
CEO and President
Date: August 5, 1997 /s/ John F. Thero
John F. Thero
Vice President Finance
and Treasurer
Chief Financial Officer
Principal Accounting Officer
13
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<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Company's
Consolidated Income Statement, Consolidated Balance Sheet and Consolidated
Statement of Cash Flows and is qualified in its entirety by reference to Form
10-Q for the period ending June 30, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1997
<CASH> 1605276
<SECURITIES> 7160563
<RECEIVABLES> 5860089
<ALLOWANCES> 223046
<INVENTORY> 2013944
<CURRENT-ASSETS> 16843034
<PP&E> 5156515
<DEPRECIATION> 2734487
<TOTAL-ASSETS> 19714524
<CURRENT-LIABILITIES> 3552256
<BONDS> 0
0
0
<COMMON> 70179
<OTHER-SE> 16162268
<TOTAL-LIABILITY-AND-EQUITY> 19714524
<SALES> 6035788
<TOTAL-REVENUES> 6035788
<CGS> 3172777
<TOTAL-COSTS> 5289322
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (124495)
<INCOME-PRETAX> 870961
<INCOME-TAX> 870961
<INCOME-CONTINUING> 870691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 870691
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
