<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 For the quarterly period ended March 31,1995 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 0-18053
LASERSCOPE
(Exact name of Registrant as specified in its charter)
CALIFORNIA 77-0049527
(State of Incorporation) (I.R.S. Employer Identification No.)
3052 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011
(Address of principal executive offices)
Registrant's telephone number: (408) 943-0636
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
--- ---
The number of shares of Registrant's common stock issued and outstanding as of
April 30, 1995 was 6,983,092.
This document consists of 10 pages of which this is page 1.
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TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION 3
Item 1. Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statement of Income 4
Condensed Consolidated Statement of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Results of Operations 7
Liquidity and Capital Resources 9
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Items 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 10
2
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
LASERSCOPE
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
(thousands) 1995 1994
- -------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,019 $ 4,604
Short-term investments 1,014 1,998
Accounts receivable, net 7,675 8,066
Inventories 7,221 7,512
Other current assets 1,033 1,038
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Total current assets 23,962 23,218
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Property and equipment, net 3,159 3,320
Other assets 761 783
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Total assets $27,882 $27,321
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,430 $ 1,292
Accrued compensation 448 1,136
Other current liabilities 3,822 3,965
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Total current liabilities 6,700 6,393
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Obligations under capital leases 25 27
Commitments and contingencies
Shareholders' equity:
Common stock 37,074 37,074
Accumulated deficit (15,493) (15,744)
Translation adjustments (175) (180)
Notes receivable from shareholders (249) (249)
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Total shareholders' equity 21,157 20,901
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Total liabilities and shareholders' equity $27,882 $27,321
______ ______
______ ______
</TABLE>
See notes to condensed consolidated financial statements
3
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LASERSCOPE
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(thousands except per share amounts) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Net revenues $9,215 $9,124
Cost of products and services sold 4,383 4,046
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Gross margin 4,832 5,078
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Operating expenses:
Research and development 921 938
Selling, general and administrative 3,723 4,003
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4,644 4,941
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Operating income 188 137
Interest and other income, net 99 68
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Income before income taxes 287 205
Provision for income taxes 36 25
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Net income $251 $180
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Net income per share $0.04 $0.03
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Shares used in per share calculations 6,989 6,963
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</TABLE>
See notes to condensed consolidated financial statements
4
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LASERSCOPE
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(thousands) 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 251 $ 180
Adjustments to reconcile net income to cash
cash provided by operating activities:
Depreciation and amortization 403 405
Increase (decrease) from changes in:
Accounts receivable 391 100
Inventories 291 (317)
Other current assets 5 (89)
Other assets 22 27
Accounts payable 138 94
Accrued compensation 312 61
Other current liabilities (149) -
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Cash provided by operating activities 1,664 461
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (242) (171)
Purchases of held-to-maturity investments - (2,009)
Maturities of held-to-maturity investments 984 2,018
Other 9 (11)
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Cash provided (used) by investing activities 751 (173)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on obligations under capital leases - (55)
Proceeds on sale of common stock, net of
payments on shareholder notes receivable - 320
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Cash provided by financing activities - 265
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Increase in cash and cash equivalents 2,415 553
Cash and cash equivalents, beginning of period 4,604 6,117
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Cash and cash equivalents, end of period $7,019 $6,670
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 20 $ 4
Income taxes $ 22 $ 29
</TABLE>
See notes to condensed consolidated financial statements
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
1. The accompanying condensed consolidated financial statements include
Laserscope (the "Company") and its wholly and majority owned
subsidiaries. All intercompany transactions and balances have been
eliminated. While the financial information in this report is
unaudited, in the opinion of management, all adjustments (which
included only normal recurring adjustments) necessary to present
fairly the financial position and results of operations as of and for
the periods indicated have been recorded. It is suggested that these
consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto for the year ended
December 31, 1994 included in the Company's annual report. The results of
operations for the three month period ended March 31, 1995 are not
necessarily indicative of the results to be expected for the full year.
2. Inventory was comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
-----------------------------
<S> <C> <C>
Sub-assemblies and purchased parts $5,006 $4,996
Finished goods 2,215 2,516
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$7,221 $7,512
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----- -----
</TABLE>
3. Net income per share is based upon the weighted average number of shares of
common stock outstanding and dilutive common equivalent shares from stock
options (using the treasury stock method).
4. The Company invests its excess cash in high-quality debt instruments.
The Company considers cash equivalents to be financial instruments that are
readily convertible to cash, subject to no more than insignificant interest
rate risk and that have original maturities of three months or less. Short-
term investments consist of financial instruments with less than one year to
maturity.
At March 31, 1995 and December 31, 1994 the Company's cash equivalents were
in the form of institutional money market accounts and totaled $5.68 million
and $3.02 million, respectively. At March 31, 1995 and December 31, 1994
the Company's investment in short-term securities stated at amortized cost,
which approximates their fair value, consisted of corporate debt securities
of $1.01 million and $2.00 million respectively.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
RESULTS OF OPERATIONS:
The following discussion should be read in conjunction with the unaudited
consolidated financial statements and notes thereto included in Part I -- Item 1
of this Quarterly Report and the audited financial statements and notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations for the year ended December 31, 1994 contained in the Company's
annual report.
Net revenues for the quarter ended March 31, 1995 were $9.22 million, an
increase of 1% from net revenues of $9.12 million in the corresponding quarter
of 1994. Net revenues increased during the first quarter of 1995 relative to
the first quarter of 1994 due to higher shipments of the Company's KTP/YAG
Surgical Laser Systems, disposable supplies and instrumentation. The higher
level of shipments was partially offset by lower average selling prices of
its KTP/YAG Surgical Laser Systems due to a greater proportion of its shipments
being made to independent international distributors during the first quarter
of 1995 than in the corresponding quarter of 1994.
Revenues from the sales of disposable supplies, instrumentation and service
comprised approximately 65% of total net revenues during the quarter ended March
31, 1995, compared to approximately 67% of total net revenues in the
corresponding period in 1994. Although the Company's net revenues increased
during the quarter ended March 31, 1995 relative to the same period in 1994, the
Company believes that continuing pressure to reduce health care costs in the
United States and uncertainty concerning health care reform have been and
continue to be factors which negatively impact capital equipment procurement
by its customers.
The Company also believes that acceptance of lasers in urology, ear, nose and
throat surgery, aesthetic surgery and dermatology will continue to be important
to its business. In particular, the Company anticipates that the increasing
use of the laser in urologic procedures will be a significant factor that will
affect the Company's business during 1995 and beyond. The Company continues to
invest in developing new instrumentation for emerging surgical applications and
to educate surgeons in the United States and internationally to encourage the
adoption of such new applications. Finally, penetration of the international
market has been limited and the Company continues to view this as a significant
opportunity.
Gross margin as a percentage of net revenues for the quarter ended March 31,
1995 was 52.4%, compared to 55.7% for the corresponding quarter in 1994. The
decrease is due in part to a higher proportion of revenues from sales to
independent international distributors during the first quarter of 1995 than in
the corresponding quarter of 1994. These revenues generally generate lower
gross margins than those generated by revenues from sales through the Company's
direct sales force. In addition, the Company continues to balance its
inventories with product demand and it reduced production volumes in the first
quarter of 1995 relative the first quarter of 1994 which further negatively
impacted gross margins during the first quarter of 1995. Finally, pressures to
reduce healthcare costs in the United States have negatively impacted the
Company's service pricing structure resulting in lower gross margins from the
sales of service in the first quarter of 1995 relative to the first quarter of
1994. The Company expects that gross margin as a percentage of revenues for
the remainder of 1995
7
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may vary from quarter to quarter as it continues to balance production volumes
and inventory levels with product demand and as its proportion of revenues
from sales to independent international distributors varies relative to sales
through its direct sales force.
Research and development expenses, which are the result of activities related to
the development of new laser, instrumentation and disposable products and the
enhancement of the Company's existing products were at approximately the same
levels in absolute amounts and as a percentage of net revenues in the first
quarter of 1995 when compared to the corresponding quarter of 1994. The Company
expects to continue to make significant investments in research and development
during 1995 and beyond.
Selling, general and administrative expenses decreased to $3.72 million in the
quarter ended March 31, 1995 compared to $4.00 million during the corresponding
quarter of 1994. The reduction is due in part to lower direct selling expenses
resulting from a higher proportion of its revenues being generated from sales
to independent international distributors. As a percentage of revenues, selling,
general and administrative expenses are expected to remain at relatively high
levels during 1995 since the Company expects to continue to invest significant
amounts in international expansion, marketing programs and educational support.
During the quarter ended March 31, 1995 the Company recorded $36,000 in income
tax provisions representing an effective tax rate of 13%. The amount is below
the combined federal and state rates primarily as a result of the utilization of
available net operating loss carryforwards.
The Company anticipates that many of the market conditions which affected its
performance during the first quarter of 1995 may continue to have an impact on
sales trends for the next several quarters. In particular, the timing of
orders and shipments affects quarterly results and there can be no certainty
that revenue growth or profitability can be accomplished on a quarter by quarter
basis, or otherwise.
8
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LIQUIDITY AND CAPITAL RESOURCES:
Total assets and liabilities as of March 31, 1995 were $27.88 million and $6.73
million respectively, compared to assets and liabilities of $27.32 million and
$6.42 million at December 31, 1994. Working capital increased $0.44 million
from $16.82 million at December 31, 1994 to $17.26 million at March 31, 1995
while cash, cash equivalents and short-term investments increased $1.43 million
during the period. The net increase in cash, cash equivalents and short term
investments was primarily due to cash provided by operating activities of $1.66
million. The Company anticipates that future changes in cash and working capital
will be dependent on the levels of its business.
At March 31, 1995 the Company had outstanding commitments of approximately
$1.50 million related to its investment in NWL Laser Technologie.
At March 31, 1995, cash, cash equivalents and short term investments amounted
to approximately $8.03 million. The Company currently has in place a $5.00
million revolving bank line of credit which expires July 1995 and under which no
borrowings were outstanding at March 31, 1995. The Company anticipates that
current cash resources, internally generated funds, capital leases and bank
borrowings will be sufficient to meet anticipated operating needs at least for
the next twelve months.
The Company's need for capital is principally affected by the current and
anticipated demand for its products as well as procurement and production lead
times in its manufacturing operations. Changes in these factors can have a
significant impact on capital requirements. From time to time, the Company may
also consider the acquisition of, or evaluate investments in, certain products
and businesses complementary to the Company's business. Any such acquisition
or investment may require additional capital resources.
9
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings arising in the ordinary
course of business. While it is not feasible to predict or determine the
outcome of the actions brought against it, the Company believes that the
ultimate resolution of these claims will not ultimately have a material adverse
effect on its financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER ITEMS
Not applicable.
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.
LASERSCOPE
Registrant
/s/ Thomas B. Boyd
-----------------------------
Thomas B. Boyd
Senior Vice President of
Operations and Finance
(Principal Financial Officer)
Date: May 12, 1995
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,019
<SECURITIES> 1,014
<RECEIVABLES> 8,215
<ALLOWANCES> 540
<INVENTORY> 7,221
<CURRENT-ASSETS> 23,962
<PP&E> 12,743
<DEPRECIATION> 9,584
<TOTAL-ASSETS> 27,882
<CURRENT-LIABILITIES> 6,700
<BONDS> 0
<COMMON> 37,074
0
0
<OTHER-SE> (15,493)
<TOTAL-LIABILITY-AND-EQUITY> 21,157
<SALES> 9,215
<TOTAL-REVENUES> 9,215
<CGS> 4,383
<TOTAL-COSTS> 4,383
<OTHER-EXPENSES> 4,644
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (99)
<INCOME-PRETAX> 287
<INCOME-TAX> 36
<INCOME-CONTINUING> 251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
