UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2000
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 January 31, 2001:
CLASS NUMBER OF SHARES
Common Stock 22,156,187
Page 1 of 21
DIONEX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2000 and June 30, 2000............ 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended December 31, 2000 and 1999.. 4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended December 31, 2000 and 1999.... 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended December 31, 2000 and 1999.... 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS..................................... 7-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............. 13-18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISKS............................... 19
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................. 20
SIGNATURES................................................ 21
2
DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, June 30,
2000 2000
ASSETS (unaudited)
Current assets:
Cash and equivalents (including invested cash
of $7,704 at December 31, 2000 and $5,397
at June 30, 2000)............................ $ 11,513 $ 9,386
Marketable equity securities ........ ........ 24,786 -
Accounts receivable (net of allowance for
doubtful accounts of $792 at December 31,
2000 and $765 at June 30, 2000).... ......... 49,320 42,965
Inventories.................................... 23,475 16,809
Deferred tax assets............................ 8,821 9,757
Prepaid expenses and other..................... 2,430 1,706
Total current assets....... ............ 120,345 80,623
Property, plant and equipment, net............... 41,371 40,842
Intangible assets ............................... 19,057 8,451
Marketable equity securities .................... - 26,450
Other assets .................................... 6,424 6,787
$187,197 $163,153
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks......................... $ 9,312 $ 1,891
Accounts payable............................... 7,243 5,661
Accrued liabilities............................ 19,827 17,783
Income taxes payable........................... 2,106 2,253
Accrued product warranty....................... 3,600 4,645
Total current liabilities............... 42,088 32,233
Deferred taxes and other liabilities............. 12,778 12,478
Long-term debt................................... 2,100 -
Stockholders' equity:
Preferred stock (par value $.001 per share;
1,000,000 shares authorized; none
outstanding)................................. - -
Common stock (par value $.001 per share;
80,000,000 shares authorized; issued and
outstanding: 22,136,312 shares at
December 31, 2000 and 22,122,863 shares
at June 30, 2000)............................ 62,918 60,957
Retained earnings.............................. 60,400 48,285
Accumulated other comprehensive income ........ 6,913 9,200
Total stockholders' equity....................... 130,231 118,442
$187,197 $163,153
See notes to condensed consolidated financial statements.
3
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED DECEMBER 30, 2000 AND 1999
(In thousands, except per share amounts)
2000 1999
(unaudited)
Net sales............................................ $48,540 $48,060
Cost of sales........................................ 16,754 15,020
Revaluation of acquired inventory.................... 121 -
Gross profit......................................... 31,665 33,040
Operating expenses:
Selling, general and administrative................ 15,632 15,037
Research and product development 3,604 3,836
Write-off of in-process research and development... 865 -
Total operating expenses........................ 20,101 18,873
Operating income..................................... 11,564 14,167
Interest income...................................... 221 236
Interest expense..................................... (195) (138)
Other income ..................................... 853 -
Income before taxes on income........................ 12,443 14,265
Taxes on income...................................... 4,044 4,636
Net income........................................... $ 8,399 $ 9,629
Basic earnings per share ............................ $ 0.38 $ 0.43
Diluted earnings per share........................... $ 0.37 $ 0.41
Shares used in computing per share amounts:
Basic.............................................. 22,100 22,232
Diluted............................................ 22,898 23,503
See notes to condensed consolidated financial statements.
4
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED DECEMBER 30, 2000 AND 1999
(In thousands, except per share amounts)
2000 1999
(unaudited)
Net sales........................................... $91,215 $89,850
Cost of sales 31,287 28,594
Revaluation of acquired inventory................... 121 -
Gross profit........................................ 59,807 61,256
Operating expenses:
Selling, general and administrative............... 30,001 28,780
Research and product development.................. 7,183 7,507
Write-off of in-process research and development.. 865 -
Total operating expenses....................... 38,049 36,287
Operating income.................................... 21,758 24,969
Interest income..................................... 423 456
Interest expense (282) (239)
Other income........................................ 853 -
Income before taxes on income....................... 22,752 25,186
Taxes on income..................................... 7,394 8,185
Income before cumulative effect of
change in accounting principle.................... 15,358 17,001
Cumulative effect of change in accounting principle. (359) -
Net income.......................................... $14,999 $17,001
Basic earnings per share:
Income before cumulative effect of change in
accounting principle ........................... $ 0.70 $ 0.76
Cumulative effect of change in accounting principle (0.02) -
Net income...................................... $ 0.68 $ 0.76
Diluted earnings per share:
Income before cumulative effect of change in
accounting principle ........................... $ 0.67 $ 0.72
Cumulative effect of change in accounting principle (0.01) -
Net income...................................... $ 0.66 $ 0.72
Shares used in computing per share amounts:
Basic............................................. 22,082 22,247
Diluted........................................... 22,846 23,597
See notes to condensed consolidated financial statements.
5
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 30, 2000 AND 1999
(In thousands)
2000 1999
(unaudited)
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income............................................ $14,999 $17,001
Adjustments to reconcile net income to net cash
provided by operating activities:
Write-off of in-process research and development.... 865 -
Gain on sale of marketable securities............... (790) -
Depreciation and amortization....................... 2,573 2,250
Deferred taxes...................................... 790 (894)
Tax benefit related to stock option plans........... 513 6,137
Changes in assets and liabilities:
Accounts receivable............................... (5,782) 1,026
Inventories....................................... (6,470) (1,408)
Prepaid expenses and other assets................. (511) (796)
Accounts payable.................................. 1,146 (383)
Accrued liabilities............................... 1,809 (1,959)
Income taxes payable.............................. (654) (4,118)
Accrued product warranty.......................... (1,000) 94
Net cash provided by operating activities............. 7,488 16,950
Cash flows from investing activities:
Proceeds from sale of marketable securities......... 947 -
Purchase of property, plant and equipment........... (3,060) (2,650)
Acquisition of LC Packings, net of cash acquired.... (11,404) -
Other............................................... (22) 188
Net cash used for investing activities................ (13,539) (2,462)
Cash flows from financing activities:
Net change in borrowings under lines of credit...... 6,539 250
Proceeds from long-term debt........................ 2,486 -
Principal payments on long-term debt................ (276) -
Sale of common stock................................ 1,761 3,689
Repurchase of common stock.......................... (3,197) (19,066)
Other............................................... 287 (94)
Net cash provided by (used for) financial activities.. 7,600 (15,221)
Effect of exchange rate changes on cash............... 578 (1,048)
Net increase (decrease) in cash and equivalents. ..... 2,127 (1,781)
Cash and equivalents, beginning of period............. 9,386 11,336
Cash and equivalents, end of period................... $11,513 $ 9,555
Supplemental disclosures of cash flow information:
Income taxes paid................................... $ 6,663 $6,311
Interest paid....................................... $ 285 $ 266
See notes to condensed consolidated financial statements.
6
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 accounting
principles generally accepted in the United States of America 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, 2000.
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,
2001.
2. Acquisition
On October 17, 2000, the Company purchased all of the issued and
outstanding shares of LC Packings Nederland B.V. and LC Packings
(U.S.A.), Inc. (collectively referred to as "LC Packings") for a
purchase price of $12 million. In addition, the shareholders of LC
Packings have the right to receive additional contingent purchase
consideration, to be paid in varying amounts at the end of calendar
years 2000 through 2004, in the event LC Packings achieves certain
revenue goals. If the entire additional contingent purchase
consideration is achieved, the shareholders of LC Packings will be
paid an additional amount not to exceed $13 million. At December 31,
2000, $2.0 million of the additional contingent purchase
consideration had been earned and was recorded as goodwill.
The acquisition of LC Packings was accounted for using the
purchase method of accounting and its results of operations have been
included in the Company's results of operations since the date of
acquisition.
The total purchase price and preliminary allocation among the tangible
and intangible assets and liabilities acquired (including acquired
in-process research and development) is summarized as follows (in
thousands):
7
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
Total purchase price:
Total cash consideration $12,000
Transaction costs 250
Total purchase price $12,250
Purchase price allocation:
Net tangible assets $ 1,875
Intangible assets:
Developed and core technology 5,000
Assembled workforce 241
Goodwill 4,269
In-process research and development 865
$12,250
In connection with the acquisition the Company recorded a
nonrecurring charge of $865,000 for the write-off of in-process
research and development acquired. In addition, cost of sales
included $121,000 in the quarter ended December 31, 2000 related to
the sale of inventory acquired which has been written-up to fair
market value as part of the purchase price allocation. Goodwill and
other intangibles will be amortized using the straight line method
over their useful lives ranging from 7 to 20 years.
The preliminary valuation of intangibles was based upon
management's estimates of after tax net cash flow. The valuation
gave consideration to the following: (i) comprehensive due diligence
concerning all potential intangibles; (ii) the value of developed and
core technology, ensuring that the relative allocation to core
technology and in-process research and development were consistent
with the contribution of each to the final product; (iii) the
allocation to in-process research and development was based upon a
calculation that only considered the efforts completed as of the date
the transaction, and only the cash flows associated with one
generation of products currently in-process; and (iv) it was
performed by an independent valuation group and was deemed reasonable
in light of all the quantitative and qualitative information
available. The Company has not yet completed the evaluation of the
intangible assets acquired. The valuation of these intangible assets
will be completed in the third quarter of fiscal 2001. The
allocation of the purchase price is subject to a final valuation to
be completed by an independent valuation specialist.
The write-off of in-process research and development related to
six projects that were in development, had not reached technological
feasibility, had no alternative future use and for which successful
development was uncertain.
8
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
Two of the in-process projects were to design and build new
liquid chromatography modules. Three of the in-process projects were
related to the development of consumable products. The sixth project
was for development of software. At the time of acquisition, the
estimated costs to complete were approximately $1.3 million. The
projects are scheduled to be completed in mid to late 2001. Costs
incurred during the current quarter were approximately $125,000.
There can be no assurances that the Company will be able to
complete the development of the products on a timely basis. Failure
to complete these projects could have an adverse impact on the
Company's financial condition or results of operations.
The following unaudited pro forma results of operations for the
six months ended December 31, 2000 and 1999 give effect to the
acquisition as if it had occurred at the beginning of fiscal 1999.
The pro forma results of operations exclude the nonrecurring charges
that were recorded in conjunction with the acquisition and the
contingent purchase consideration.
Pro Forma Results of Operations
(in thousands, except per share amounts)
Six Months Ended
December 31,
2000 1999
Net sales $93,183 $91,903
Income from continuing operations $23,420 $25,219
Net income $16,314 $17,158
Basic earnings per share $.74 $.77
Diluted earnings per share $.71 $.73
LC Packings, which markets its products primarily in the United
States and Europe, specializes in micro, capillary and nano liquid
chromatography used by proteomics and genomics researchers in
pharmaceutical, biotechnology and scientific laboratories to analyze
and separate proteins, glycoproteins and other complex compounds.
3. Inventories
Inventories consist of (in thousands):
December 31, June 30,
2000 2000
Finished goods $ 7,585 $ 6,217
Work in process 4,788 3,115
Raw materials 11,102 7,477
$23,475 $16,809
9
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
4. Credit Agreement
Effective November 13, 2000, the Company entered into a new
credit agreement that expires December 31, 2002. This replaced a
previous agreement and allows borrowings up to $25 million. At
December 31, 2000 there was $8.0 million outstanding on the line.
The interest rate on borrowings is one-half percent below the Bank's
prime rate, or LIBOR plus .60 percent. The agreement has financial
covenants, including a current ratio of at least 1.75 to 1.0,
tangible net worth of at least $90 million, total liabilities divided
by tangible net worth not greater than 1.0, and net income after
taxes not less than $1.00 on an annual basis. At December 31, 2000,
the Company was in compliance with all covenants.
5. Income Taxes
The effective income tax rate for the first six months of
fiscal 2001 was 32.5%, unchanged from the same period in fiscal
2000.
5. Cumulative Effect of Change in Accounting Principle
During the six months ended December 31, 2000, the Company
adopted Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements", ("SAB 101"). SAB 101 outlines the basic
criteria that must be met to recognize revenue and provides guidance
for disclosures related to revenue recognition policies.
The Company's previous policy was to recognize product
installation revenue upon shipment and to accrue product installation
costs at the time revenue was recognized. Under the current method,
the Company defers installation revenue until installation has been
completed and recognize installation costs as incurred.
The cumulative effect of the change, totaling $359,000, is shown
as a one-time charge to income in the first quarter's income
statement. If SAB 101 had been adopted at the beginning of fiscal
2000, the effect on the results of operations for the second quarter
last year would not have been material.
10
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
7. Comprehensive Income
Components of comprehensive income include net income, foreign
currency translation adjustments and unrealized gain on equity
securities available for sale. As such, Accumulated Other
Comprehensive Income in the Condensed Consolidated Balance Sheets
represents cumulative foreign currency translation adjustments and
unrealized gain on equity securities available for sale.
Comprehensive income was $1,634,000 and $14,474,000 for the three
months ended December 31, 2000 and 1999, respectively, and
$12,712,000 and $21,594,000 for the six months ended December 31,
2000 and 1999, respectively.
8. Net Income Per Share
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 using the treasury stock method.
The difference between the number of shares outstanding for basic and
diluted earnings per share is due to stock options outstanding during
the periods presented.
9. Common Stock Repurchases
During the first six months of fiscal 2001, the Company
repurchased 117,100 shares of its common stock on the open market,
compared with 453,800 shares repurchased in the first six months of
the previous fiscal year. During all of fiscal 2000, the Company
repurchased 935,850 shares.
10. Derivative Instruments
In the first quarter of fiscal 2001, the Company adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The statement establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value.
11
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
The Company enters into foreign exchange forward contracts with
high quality financial institutions to manage its exposure to the
impact of fluctuations in foreign currency exchange rates on its
intercompany receivables balances. These contracts generally have
maturities of approximately 30 days and require the Company to
exchange foreign currencies for U.S. dollars at maturity. The
Company has not designated these contracts as hedging instruments.
The contracts are recorded at fair value on the Balance Sheet.
Changes in the fair values of these derivative instruments are
recognized in earnings in the period they occur. Adoption of SFAS
No. 133 did not have a significant impact on results for the first
six months of the fiscal year.
12
DIONEX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Acquisition Event
On October 17, 2000, the Company purchased all of the issued and
outstanding shares of LC Packings Nederland B.V. and LC Packings
(U.S.A.), Inc. (collectively referred to as "LC Packings") for a
purchase price of $12 million. The acquisition of LC Packings will
be treated by the Company as a purchase for accounting purposes. In
addition the shareholders of LC Packings have the right to receive an
earn-out, to be paid in varying amounts at the end of calendar years
2000 through 2004, in the event LC Packings achieves certain business
goals. If the entire earn-out is achieved, the shareholders of LC
Packings will be paid an additional amount not to exceed $13 million.
At December 31, 2000, $2.0 million of the additional contingent
purchase consideration had been earned and was recorded as goodwill.
The acquisition of LC Packings was accounted for by the purchase
method and its results of operations have been included in the
Company's results of operations since the date of acquisition.
In connection with the acquisition the Company recorded a
nonrecurring charge of $865,000 for the write-off of in-process
research and development acquired. In addition, cost of sales
included $121,000 in the quarter ended December 31, 2000 related to
the sale of inventory acquired which had been written up as part of
the purchase accounting.
Results of Operations - Three months Ended December 31, 2000
and 1999
Net sales for the second quarter of fiscal 2001 were $48.5 million,
an increase of 1% from the $48.1 million reported for the same period
last year. Sales declined slightly over the prior year period in our
North American market. Sales increased in Europe in local currency and in
reported dollars. Sales in Japan declined moderately in the second quarter
compared with the same period last year. Sales in the Company's other
international locations increased significantly for the quarter. Had
currency rates been the same as in last year's second quarter, sales growth
would have been 8%. LC Packings also had a favorable impact on the current
year's quarterly sales.
Gross margin for the second quarter of fiscal 2001 was 65.2%, down
from the 68.7% reported for the same period last year. Gross margin
was lower primarily due to the unfavorable effect of currency
fluctuations and higher costs for certain electronic components.
13
Operating expenses of $20.1 million for the second quarter of fiscal
2001 were up $1.2 million, or 6.5%, from the $18.9 million reported
in the same quarter last year. As a percentage of sales, operating
expenses were 41%, slightly higher than the 39% reported for the
second quarter last year. Selling, general and administrative (SG&A)
expenses increased $595,000, or 4%, to $15.6 million in the second
quarter of fiscal 2001. The increase was due to the addition of LC
Packings and higher selling costs, primarily personnel and related
costs, partially offset by the favorable effect of currency
fluctuations on international selling expenses.
Research and development (R&D) costs of $3.6 million were slightly
lower than the $3.8 million reported in 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.
Write-off of in-process research and development represents a
nonrecurring charge of $865,000 associated with acquisition of LC
Packings completed in October 2000 for technology which had not
reached technological feasibility and had no alternative future use.
The valuation of intangibles acquired from LC Packings was based upon
management's estimates of after tax net cash flow. The valuation gave
consideration to the following: (i) comprehensive due diligence
concerning all potential intangibles; (ii) the value of developed and
core technology, ensuring that the relative allocation to core
technology and in-process research and development were consistent
with the contribution of each to the final product; (iii) the
allocation to in-process research and development was based upon a
calculation that only considered the efforts completed as of the date
of the transaction, and only the cash flows associated with one
generation of products currently in-process; and (iv) it was
performed by an independent valuation group and was deemed reasonable
in light of all the quantitative and qualitative information
available. The Company has not yet completed the evaluation of the
intangible assets acquired. The valuation of these intangible assets
will be completed in the third quarter of fiscal 2001. The
allocation of the purchase price is subject to a final valuation to
be completed by an independent valuation specialist.
The write-off of in-process research and development related to six
projects that were in development, had not reached technological
feasibility, had no alternative future use and for which successful
development was uncertain.
Two of the in-process projects were to design and build new liquid
chromatography modules. Three of the in-process projects were related
to the development of consumable products. The sixth project was for
development of software. At the time of acquisition, the estimated
costs to complete were approximately $1.3 million. The projects are
scheduled to be completed in mid to late 2001. Costs incurred during
the current quarter were approximately $125,000.
14
There can be no assurance that the Company will be able to complete
the development of the products on a timely basis. Failure to
complete these projects could have an adverse impact on the Company's
financial condition or results of operations.
Interest income was $221,000 for the second quarter of fiscal 2001,
slightly lower than the $236,000 reported in the second quarter last
year. The decrease in interest income was due to lower average cash
balances resulting from the acquisition of LC Packings.
Interest expense was $195,000 for the second quarter of fiscal 2001,
an increase of $57,000 compared with $138,000 reported in the second
quarter last year. The increase was due to borrowings used in the
acquisition of LC Packings.
Other income was $853,000 in the second quarter of fiscal 2001.
Other income resulted primarily from the sale of marketable equity securities
during the quarter.
The effective tax rate for the second quarter of fiscal 2001 was
32.5%, unchanged from the second quarter a year ago. Variations in
the tax rate reflect changes in the mix of taxable income among the
various tax jurisdictions in which the Company does business.
Net income in the second quarter of fiscal 2001 was $8.4 million,
compared with $9.6 million reported for the same period last year.
After the effect of the charges, diluted earnings per share were $.37
compared with $.41 in the same period last year.
Results of Operations - Six Months Ended December 31, 2000
and 1999
Net sales for the first six months of fiscal 2001 were $91.2 million,
an increase of 2% from the $89.9 million reported for the same period
last year. Sales declined slightly over the prior year period in our
North American market. Sales increased in Europe in local currency but
declined slightly in reported dollars. Sales in Japan declined moderately
in the first six months compared with the same period last year. Sales in
the Company's other international locations increased significantly in the
first six months of fiscal 2001. Had currency rates been the same as in
last year's first six months, sales growth would have been 8%. LC Packings
also had a favorable impact on the current year's sales.
Gross margin for the first six months of fiscal 2001 was 65.6%, down
from the 68.2% reported for the same period last year. Gross margin
was lower due to the unfavorable effect of currency fluctuations,
higher costs for certain electronic components and higher costs to
remedy part shortages.
15
Operating expenses of $38.0 million for the first six months of
fiscal 2001 were up $1.8 million, or 5%, from the $36.3 million
reported in the same period last year. As a percentage of sales,
operating expenses were 42%, up from the 40% reported for the first
six months last year. Selling, general and administrative (SG&A)
expenses increased $1.2 million, or 4%, to $30.0 million in the first
six months of fiscal 2001. The increase was due to the addition of
LC Packings and higher selling costs, primarily personnel and related
costs, partially offset by the favorable effect of currency
fluctuations on international selling expenses.
Research and development (R&D) costs of $7.2 million were lower than
the $7.5 million reported in 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.
Write-off of in-process research and development represents a
nonrecurring charge of $865,000 associated with the acquisition of LC
Packings, completed in October 2000, for technology which had not
reached technological feasibility and had no alternative future use.
Interest income was $423,000 for the first six months of fiscal 2001,
slightly lower than the $456,000 reported in the first six months of
last year. The decrease in interest income was due to lower average
cash balances primarily resulting from the acquisition of LC
Packings.
Interest expense was $282,000 for the first six months of fiscal
2001, an increase of $43,000 compared with $239,000 reported in the
first six months of last year. The increase was primarily due to
borrowings used in the acquisition of LC Packings.
Other income was $853,000 in the first six months of fiscal 2001.
Other income resulted primarily from the sale of marketable equity
securities during the second quarter.
The effective tax rate for the first six months of fiscal 2001 was
32.5%, unchanged from the first six months a year ago. Variations in
the tax rate reflect changes in the mix of taxable income among the
various tax jurisdictions in which the Company does business.
Cumulative effect of change in accounting principle reflects the
adoption of Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements", ("SAB 101") in the first six months of
fiscal 2001. SAB 101 outlines the basic criteria that must be met to
recognize revenue and provides guidance for disclosures related to
revenue recognition policies. The cumulative effect of the change,
totaling $359,000, is shown as a one-time charge to income in the
first quarter's income statement. If SAB 101 had been adopted at the
beginning of fiscal 2000, the effect on the results of operations for
the first six months last year would not have been material.
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Net income in the first six months of fiscal 2001 was $15.0 million,
compared with $17.0 million reported for the same period last year.
Diluted earnings per share before the cumulative effect of change in
accounting principle were $.67 compared with $.72 for the same period
last year. After the effect of the change, diluted earnings per
share were $.66 compared with $.72 in the same period last year. Net
income per share was favorably impacted by the Company's stock
repurchase program.
Liquidity and Capital Resources
At December 31, 2000, the Company had cash and cash investments of
$11.5 million. The Company's working capital was $78.3 million, an
increase of $29.9 from the $48.4 million reported at June 30, 2000.
This increase was mainly due to the reclassification of the Company's
marketable equity securities to current assets. The reclassification of
marketable equity securities was due to the expectation that the
Company may sell all or part of the securities in the next twelve
months. Cash generated by operating activities for the six months
ended December 31, 2000 was $7.5 million compared with $17.0 million
for the same period last year. The decrease in spending cash flow
was due to an increase in receivables and inventory. During the
first half of fiscal 2001, the Company repurchased 117,100 shares for
$3.2 million.
Capital expenditures during the first half of fiscal 2001 were $3.1
million. This includes $1.6 million related to completion of a
building in Osaka, Japan for occupancy by the Company's Japanese
operations.
At December 31, 2000, the Company has utilized $8.0 million of the
Company's $36.5 million in committed bank lines of credit, mainly to
fund the acquisition of LC Packings. The Company believes that its
cash flow from operations, current cash and cash investments and the
remainder of its $36.5 million bank lines of credit will be adequate
to meet its cash requirements for fiscal 2001 and the foreseeable
future.
The impact of inflation on Dionex Corporation's financial position
and results of operations was not significant during the six months
ended December 31, 2000.
Forward-looking statements
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 risk and uncertainties include: general economic
conditions, foreign currency fluctuations, competition from other products,
existing product obsolescence, fluctuation in worldwide demand for
17
analytical instrumentation, new product development, including market
receptiveness, 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 for the year
ended June 30, 2000. 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.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS
The Company is exposed to financial market risks, including changes
in foreign currency rates, interest rates and marketable equity
securities.
For a detailed analysis of these market risks see the discussion in
the Company's Annual Report to Stockholders for the year ended June
30, 2000 and the Company's Form 10-K for the year ended June 30, 2000
filed with the Securities and Exchange Commission.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On October 27, 2000, the Company held its annual meeting for the
following purposes: (1) to elect directors, and (2) to ratify the
selection of Deloitte & Touche LLP as the Company's independent
auditors for its fiscal year ending June 30, 2001. A description of
these matters is contained in the Company's Proxy Statement, dated
September 11, 2000, relating to the 2000 Annual Meeting of
Stockholders.
There were 22,306,404 shares of the Company's common stock entitled
to vote at the Annual Meeting of Stockholders based on the September
11, 2000 record date. The Company solicited proxies pursuant to
Regulation 14 of the Securities and 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 19,378,967 votes, which represented at least 86% of the
outstanding common shares entitled to vote.
The stockholders voted to ratify the selection of Deloitte & Touche
LLP as the Company's independent auditors for its fiscal year ending
June 30, 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.15 Credit Agreement dated November 13, 2000
between Wells Fargo Bank and the Registrant.
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K on November 13,
2000 related to the acquisition of LC Packings during the
quarter ended December 31, 2000.
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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 12, 2001 By:
A. Blaine Bowman
President, Chief Executive
Officer
By:
Craig A. McCollam
Vice President, Finance and
Administration
(Principal Financial and
Accounting Officer)
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