<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 June 30,1995 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
July 31, 1995 was 7,014,037.
This document consists of 11 pages of which this is page 1.
<PAGE>
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . 3
Item 1. Condensed Consolidated Balance Sheet . . . . . . . . . . . . 3
Condensed Consolidated Statement of Operations . . . . . . 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. . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
LASERSCOPE
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(thousands) 1995 1994
------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . .$ 4,222 $4,604
Short-term investments . . . . . . . . . . . . . . 1,001 1,998
Accounts receivable, net . . . . . . . . . . . . . 5,690 8,066
Inventories. . . . . . . . . . . . . . . . . . . . 9,458 7,512
Other current assets . . . . . . . . . . . . . . . 1,229 1,038
______ ______
Total current assets . . . . . . . . . . . . . 21,600 23,218
______ ______
Property and equipment, net. . . . . . . . . . . . . 2,898 3,320
Other assets . . . . . . . . . . . . . . . . . . . . 2,410 783
______ ______
Total assets . . . . . . . . . . . . . . . . .$26,908 $27,321
______ ______
------ ------
------ ------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . .$ 1,734 $ 1,292
Accrued compensation . . . . . . . . . . . . . . . . 1,267 1,136
Other current liabilities. . . . . . . . . . . . . . 3,594 3,965
______ ______
Total current liabilities . . . . . . . . . . . . 6,595 6,393
______ ______
Obligations under capital leases . . . . . . . . . . 22 27
Commitments and contingencies . . . . . . . . . . .
Shareholders' equity:
Common stock. . . . . . . . . . . . . . . . . . . 37,074 37,074
Accumulated deficit . . . . . . . . . . . . . . .(16,328) (15,744)
Translation adjustments . . . . . . . . . . . . . (206) (180)
Notes receivable from shareholders. . . . . . . . (249) (249)
______ _______
Total shareholders' equity. . . . . . . . . . . . 20,291 20,901
______ ______
Total liabilities and shareholders' equity . . . . .$26,908 $27,321
______ ______
------ ------
------ ------
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
(thousands except per share amounts) 1995 1994 1995 1994
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues . . . . . . . . . . . . $6,879 $8,232 $16,094 $17,356
Cost of products and services sold . 3,078 3,933 7,461 7,979
______ ______ ______ ______
Gross margin . . . . . . . . . . . . 3,801 4,299 8,633 9,377
______ ______ ______ ______
Operating expenses:
Research and development . . . . . 1,118 996 2,039 1,934
Selling, general and administrative 3,643 4,902 7,366 8,905
______ ______ ______ ______
4,761 5,898 9,405 10,839
______ ______ ______ ______
Operating loss . . . . . . . . . . (960) (1,599) (772) (1,462)
Interest and other income, net . . . 89 14 188 82
______ ______ ______ ______
Loss before income taxes . . . . . . (871) (1,585) (584) (1,380)
Provision for income taxes . . . . . (36) (25) 0 0
______ ______ ______ ______
Net loss . . . . . . . . . . . . . . $(835) $(1,560) $(584) $(1,380)
______ ______ ______ ______
______ ______ ______ ______
Net loss per share . . . . . . . . . $(0.12) $(0.23) $ (0.08) $(0.20)
______ ______ ______ ______
______ ______ ______ ______
Shares used in per share
calculations . . . . . . . . . . . 6,984 6,916 6,984 6,897
______ ______ ______ ______
______ ______ ______ ______
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
LASERSCOPE
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
(thousands) 1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(584) $(1,380)
Adjustments to reconcile net income to cash
cash provided (used) by operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . 818 786
Increase (decrease) from changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . 2,376 610
Inventories . . . . . . . . . . . . . . . . . . . . . . (1,946) (601)
Other current assets. . . . . . . . . . . . . . . . . . (191) (613)
Other assets. . . . . . . . . . . . . . . . . . . . . . 47 42
Accounts payable. . . . . . . . . . . . . . . . . . . . 442 456
Accrued compensation. . . . . . . . . . . . . . . . . . 131 87
Other current liabilities . . . . . . . . . . . . . . . (371) (24)
______ ______
Cash provided (used) by operating activities . . . . . . . . . . 722 (637)
______ ______
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . (396) (967)
Purchases of held-to-maturity investments . . . . . . . . . . - (2,009)
Funding of agreement with NWL . . . . . . . . . . . . . . . . (1,674) -
Maturities of held-to-maturity investments . . . . . . . . . 997 2,046
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (26) 5
______ ______
Cash used by investing activities. . . . . . . . . . . . . . . . (1,099) (925)
______ ______
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on obligations under capital leases. . . . . . . . . (5) (76)
Proceeds on sale of common stock, net of
payments on shareholder notes receivable . . . . . . . . . - 446
______ ______
Cash provided (used) by financing activities . . . . . . . . . . (5) 370
______ ______
Decrease in cash and cash equivalents. . . . . . . . . . . . . . (382) (1,192)
Cash and cash equivalents, beginning of period . . . . . . . . . 4,604 6,117
______ ______
Cash and cash equivalents, end of period . . . . . . . . . . . . $4,222 $4,925
______ ______
------ ------
------ ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $22 $4
Income taxes. . . . . . . . . . . . . . . . . . . . . . $26 $52
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
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 six month period ended
June 30, 1995 are not necessarily indicative of the results to be expected
for the full year.
2. Inventory was comprised of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------------------
<S> <C> <C>
Sub-assemblies and purchased parts $ 6,352 $ 4,996
Finished goods 3,106 2,516
------ ------
$ 9,458 $ 7,512
------ -----
------ -----
</TABLE>
3. Net income (loss) per share is based upon the weighted average number of
shares of common stock outstanding.
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 June 30, 1995 and December 31, 1994 the Company's cash equivalents were
in the form of institutional money market accounts and totaled $2.67
million and $3.02 million, respectively. At June 30, 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 $1.00 million and $2.00 million, respectively.
6
<PAGE>
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 and six months ended June 1995 were $6.88 million
and $16.09 million, respectively. Compared to the corresponding quarter and six
months of 1994, these revenues decreased approximately 16% and 7%, respectively.
These decreases were due to lower shipments of the Company's KTP/YAG Surgical
Laser Systems, disposable supplies and instrumentation.
Revenues from the sales of disposable supplies, instrumentation and service
comprised approximately 76% of net revenues during the quarter ended June 30,
1995 compared to approximately 71% of net revenues for the same quarter in 1994
due principally to lower shipments of the Company's KTP/YAG Surgical Laser
Systems. During the six month period ended June 30, 1995 and the corresponding
period in 1994, sales of disposable supplies, instrumentation and service
comprised approximately 70% of net revenues.
The Company believes that continuing pressure to reduce health care costs in the
United States has been and continues to be a factor which negatively impacts
capital equipment procurement by its customers. The Company also believes that
its net revenues during the quarter and six months ended June 30, 1995 were
negatively impacted by lower shipments of its side-firing devices due, in part,
to the introduction of a competitive surgical device for prostate surgery.
The Company 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 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 products 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 June 30, 1995
was 55.3% compared to 52.2% for the corresponding quarter in 1994. For the six
months ended June 30, 1995 gross margin as a percentage of net revenues was
relatively unchanged at 53.6% compared to 54.0% in the corresponding period in
1994. The increase during the second quarter of 1995 relative to the second
quarter of 1994 was due in part to higher production volumes of its products.
Additionally, the Company recorded a $0.17 million charge in the quarter ended
June 30, 1994 relating to the disposition of electrosurgery equipment which
negatively impacted gross margin as a percentage of net sales by 2 percentage
points during this period. The Company expects that gross margin as a
7
<PAGE>
percentage of net revenues for the remainder of 1995 may vary from quarter to
quarter as it continues to balance production volumes and inventory levels with
product demand.
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, increased by approximately 12%
in the second quarter of 1995 compared to the same quarter of 1994, and
increased by 5% in the first six months of 1995 compared to the first six months
of 1994. These increases are primarily attributable to spending for the
development of the Company's new Aura-TM- desktop laser system which is being
designed to facilitate surgical and dermatological procedures in an office or
outpatient center and is scheduled to be available for sale early during the
fourth quarter of 1995. As a percentage of net revenues, research and
development expenses were 16% and 13% in the quarter and six months ended June
30, 1995, respectively, compared with 12% and 11% in the corresponding periods
of 1994. These percentage increases relative to the prior year reflect both
increased spending and decreased net revenues. The Company expects to continue
to make significant investments in research and development during the balance
of 1995 and beyond.
Selling, general and administrative expenses for the quarter and six months
ended June 30, 1995 decreased by approximately 26% and 17%, respectively,
compared to the same periods in 1994. The decrease in spending was due in part
to lower direct selling expenses resulting from lower system sales as well as
expense reduction measures put in place by the Company since June 30, 1994.
Additionally, the Company recorded charges totaling approximately $0.30 million
relating to the reduction of its capital equipment sales force and supporting
personnel in the quarter ended June 30, 1994. 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 six months ended June 30, 1995 and June 30, 1994 the Company recorded
no income tax provision due to the net losses generated by its operations.
The Company anticipates that many of the market conditions which affected its
performance during the first half 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
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Total assets and liabilities as of June 30, 1995 were $26.91 million and $6.62
million respectively, compared to assets and liabilities of $27.32 million and
$6.42 million at December 31, 1994. Working capital decreased $1.82 million
from $16.82 million at December 31, 1994 to $15.00 million at June 30, 1995
while cash, cash equivalents and short-term investments decreased $1.38 million
during the period. The net decrease in cash, cash equivalents and short term
investments was principally due to $1.67 million disbursed in connection with
the Company's relationship with NWL together with a $1.95 million increase in
inventories primarily due to procurement in preparation for the Company's
introduction of its Aura system and, to a significantly lesser extent, finished
goods inventory growth due to lower shipments. These uses of cash were
partially offset by a $2.38 reduction in accounts receivable. The Company
anticipates that future changes in cash and working capital will be dependent on
the levels of its business.
At June 30, 1995 the Company had no material commitments for capital
expenditures.
At June 30, 1995, cash, cash equivalents and short term investments amounted to
approximately $5.22 million. The Company is in the process of negotiating a
renewal of the $5.00 million revolving bank line of credit which expired July
1995 and under which no borrowings were outstanding at June 30, 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
<PAGE>
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
(a) The annual meeting of shareholders was held on June 22, 1995.
(b) The first matter voted upon at the meeting was the election of
directors and the results of that vote were as follows:
<TABLE>
<CAPTION>
PRESENT BUT
FOR WITHHELD ABSTAINED NOT VOTING
--- -------- --------- ----------
<S> <C> <C> <C> <C>
Herbert M. Dwight 6,302,700 117,035 0 0
Benjamin L. Holmes 6,302,700 117,035 0 0
E. Walter Lange 6,302,600 117,135 0 0
Robert V. McCormick 6,301,200 118,535 0 0
Rodney Perkins, M.D. 6,299,100 120,635 0 0
Robert J. Pressley, Ph.D. 6,302,700 117,035 0 0
</TABLE>
(c) The second matter voted upon at the meeting and the results of that
vote were as follows:
<TABLE>
<CAPTION>
PRESENT BUT
FOR WITHHELD ABSTAINED NOT VOTING
--- -------- --------- ----------
<S> <C> <C> <C> <C>
To authorize an 5,331,704 584,740 85,778 417,513
amendment to the
Company's 1994 Stock
Option Plan to increase the
number of shares for issuance
thereunder by 250,000 shares to
an aggregate of 575,000 shares.
</TABLE>
10
<PAGE>
(d) The other matter voted upon at the meeting and the results of that
vote were as follows:
<TABLE>
<CAPTION>
PRESENT BUT
FOR WITHHELD ABSTAINED NOT VOTING
--- -------- --------- ----------
<S> <C> <C> <C> <C>
To ratify the appointment 6,334,219 44,460 41,056 0
of Ernst & Young LLP as
the independent auditors for
the Company for the Company
for the fiscal year ending
December 31, 1995.
</TABLE>
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: August 10, 1995
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,222
<SECURITIES> 1,001
<RECEIVABLES> 6,230
<ALLOWANCES> 540
<INVENTORY> 9,458
<CURRENT-ASSETS> 21,600
<PP&E> 12,897
<DEPRECIATION> 9,999
<TOTAL-ASSETS> 26,908
<CURRENT-LIABILITIES> 6,595
<BONDS> 0
<COMMON> 37,074
0
0
<OTHER-SE> (16,783)
<TOTAL-LIABILITY-AND-EQUITY> 20,291
<SALES> 16,094
<TOTAL-REVENUES> 16,094
<CGS> 7,461
<TOTAL-COSTS> 7,461
<OTHER-EXPENSES> 9,405
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (188)
<INCOME-PRETAX> (584)
<INCOME-TAX> 0
<INCOME-CONTINUING> (584)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
