This document consists of 12
pages, of which this page
is number 1.
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- -------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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 November 12, 1999:
CLASS NUMBER OF SHARES
Common Stock 22,244,504
DIONEX CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Page
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1999 and June 30, 1999............ 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, 1999 and 1998.. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 1999 and 1998.. 5-6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS...................................... 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............... 9-11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................. 12
SIGNATURES................................................. 12
2
DIONEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
- -------------
September 30, June 30,
ASSETS 1999 1999
(unaudited)
Current assets:
Cash and equivalents (including invested cash
of $2,113 at September 30, 1999 and $5,987
at June 30, 1999)............................ $ 11,435 $ 11,336
Accounts receivable (net of allowance for
doubtful accounts of $864 at September 30, 1999
and $812 at June 30, 1999)................... 37,733 39,996
Inventories.................................... 14,713 12,702
Deferred tax benefits.......................... 10,373 10,361
Prepaid expenses and other..................... 1,871 1,800
Total current assets.................... 76,125 76,195
Property, plant and equipment, net............... 39,891 39,306
Intangible assets................................ 10,084 9,924
Marketable equity securities..................... 10,759 14,452
Other assets .................................... 6,433 6,797
$143,292 $146,674
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks......................... $ 4,972 $ 796
Accounts payable............................... 5,230 6,049
Accrued liabilities............................ 16,526 21,361
Income taxes payable........................... 9,450 8,533
Accrued product warranty....................... 4,693 4,701
Total current liabilities............... 40,871 41,440
Deferred taxes and other......................... 7,600 8,506
Long-term debt................................... 476 990
Stockholders' equity:
Preferred stock (par value $.001 per share;
1,000,000 shares authorized; none
outstanding)................................. - -
Common stock (par value $.001 per share;
40,000,000 shares authorized; outstanding:
22,191,154 shares at September 30, 1999 and
22,314,442 shares at June 30, 1999).......... 47,682 46,445
Retained earnings.............................. 44,299 46,677
Accumulated other comprehensive income ........ 2,364 2,616
Total stockholders' equity............. 94,345 95,738
$143,292 $146,674
See notes to condensed consolidated financial statements.
3
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands, except per share amounts)
- ------------------
1999 1998
(unaudited)
Net sales................................... $41,790 $34,845
Cost of sales............................... 13,574 11,031
Gross profit................................ 28,216 23,814
Operating expenses:
Selling, general and administrative....... 13,743 11,516
Research and product development.......... 3,671 3,435
Total operating expenses............... 17,414 14,951
Operating income............................ 10,802 8,863
Interest income............................. 220 258
Interest expense............................ (101) (25)
Income before taxes on income............... 10,921 9,096
Taxes on income............................. 3,549 3,047
Net income.................................. $ 7,372 $ 6,049
Basic earnings per share.................... $ .33 $ .27
Diluted earnings per share ................. $ .31 $ .26
Shares used in computing per share amounts:
Basic ................................. 22,263 22,288
Diluted ............................... 23,691 23,410
See notes to condensed consolidated financial statements.
4
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands)
- ------------------
1999 1998
(unaudited)
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income............................................ $ 7,372 $ 6,049
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 1,103 658
Deferred taxes...................................... 955 428
Changes in assets and liabilities:
Accounts receivable............................... 4,054 2,533
Inventories....................................... (1,544) (1,097)
Prepaid expenses and other assets................. (25) (322)
Accounts payable.................................. (884) (805)
Accrued liabilities............................... (5,148) (2,056)
Income taxes payable.............................. 744 1,319
Accrued product warranty.......................... (66) (50)
Net cash provided by operating activities............. 6,561 6,657
Cash flows from investing activities:
Purchase of temporary cash investments.............. - (3,500)
Proceeds from maturities of temporary
cash investments................................. - 4,350
Purchase of property, plant and equipment........... (713) (4,509)
Other............................................... 259 (32)
Net cash provided used for investing activities. ..... (459) (3,691)
Cash flows from financing activities:
Net change in notes payable to banks................ 3,584 709
Sale of common stock................................ 1,770 597
Repurchase of common stock.......................... (10,283) (3,137)
Lease obligations and other......................... (230) (353)
Net cash used for financing activities................ (5,159) (2,184)
Effect of exchange rate changes on cash............... (844) (227)
Net increase in cash and equivalents.................. 99 555
Cash and equivalents, beginning of period............. 11,336 13,184
Cash and equivalents, end of period................... $11,435 $13,739
(continued)
5
DIONEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In thousands)
- ------------------
1999 1998
(unaudited)
(continued)
Supplemental disclosures of cash flow information:
Income taxes paid................................. $2,073 $1,597
Interest paid..................................... $ 119 $ 28
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 generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes the disclosures
which are made are adequate to make the information presented
not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto
included in the Company's Annual Report to Stockholders for
the fiscal year ended June 30, 1999.
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, 2000.
2. Inventories
Inventories consist of (in thousands):
September 30, June 30,
1999 1999
Finished goods $ 5,742 $ 5,035
Work in process 4,039 2,426
Raw materials and subassemblies 4,932 5,241
$14,713 $12,702
3. Income Taxes
The effective income tax rate for the first three months of
fiscal 2000 was 32.5%, compared to 33.5% reported in the same
period of fiscal 1999.
7
DIONEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ------------------
4. 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 gains on equity securities
available for sale. Comprehensive income was $7,120,000 and
$7,010,000 for the three months ended September 30, 1999 and
1998, respectively.
5. 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. 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.
6. Common Stock Repurchases
During the first three months of fiscal 2000, the Company
repurchased 253,100 shares of its common stock on the open
market compared with 140,000 shares repurchased in the
first three months of the previous fiscal year. During all
of fiscal 1999, the Company repurchased 501,500 shares.
8
DIONEX CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three Months Ended September 30, 1999
and 1998
Net sales for the first quarter of fiscal 2000 were $41.8 million,
an increase of 20% from the $34.8 million reported for the same
period last year. Sales increased over the prior year period in
all three of the Company's major geographic regions. Had currency
rates been the same as in last year's first quarter, sales growth
would have been 18%.
Gross margin for the first quarter of fiscal 2000 was 67.5%, down
slightly from the 68.3% reported for the same period last year.
Gross margin was lower due to the inclusion of the Summit HPLC
products introduced with the acquisition of Softron GmbH. These
products generally have a lower margin than the historical Dionex
product margin. There were no significant selling price changes
between these periods.
Operating expenses of $17.4 million for the first quarter of fiscal
2000 were up $2.4 million, or 16%, from the $15.0 million reported
in the same quarter last year. As a percentage of sales, operating
expenses were 42%, slightly lower than the 43% reported for the
first quarter last year. Selling, general and administrative
(SG&A) expenses increased $2.2 million, or 19%, to $13.7 million in
the first quarter of fiscal 2000. The increase was due to the
inclusion of Softron GmbH since the acquisition date in October
1998 and the unfavorable effect of currency fluctuations on
international selling expenses.
Research and development (R&D) costs of $3.7 million were up 7%
from the $3.4 million reported in the same period last year. The
increase in costs was due to the inclusion of Softron GmbH since
the acquisition date in October 1998. The level of R&D spending
varies depending on both the breadth of the Company's R&D efforts
and the stage of specific product development.
Interest income of $220,000 for the first quarter of fiscal 2000
was $38,000 lower than the $258,000 reported in the first quarter
last year. The decrease in interest income was due to lower
average cash balances.
The effective tax rate for the first quarter of fiscal 2000 was
32.5%, compared with 33.5% in the first 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.
9
Net income in the first quarter of fiscal 2000 was $7.4 million, an
increase of 22% from the $6.0 million reported for the same period
last year. Diluted earnings per share rose $.05, or 19%, to $.31
compared with $.26 for the same period last year. Net income per
share was favorably affected by the Company's stock repurchase
program.
Liquidity and Capital Resources
The Company's liquidity and capital resources remained strong
during the first three months of fiscal 2000. At September 30,
1999, the Company had cash and cash investments of $11.4 million.
During the first quarter of fiscal 2000, the Company repurchased
253,100 shares of its common stock compared with 140,000 shares
repurchased in the first three months of last year. During all of
fiscal 1999, the Company repurchased 501,500 shares.
At September 30, 1999, the Company had utilized $5.0 million of the
Company's $38.2 million in committed bank lines of credit. The
Company is in the early stages of planning for construction of a
building in Osaka, Japan for occupancy by its Japanese operations.
The Company believes that its cash flow from operations, current
cash and cash investments and the remainder of its $38.2 million
bank lines of credit will be adequate to meet its cash requirements
for fiscal 2000 and the foreseeable future.
The impact of inflation on Dionex Corporation's financial position
and results of operations was not significant during the three
months ended September 30, 1999.
Year 2000 Compliance
Many older computer software programs refer to years in terms of
their final two digits only. Such programs may interpret the year
2000 to mean the year 1900 instead. If not corrected, those
programs could cause date-related transaction failures. Beginning
in fiscal 1997, the Company started a process to review its
internal systems for year 2000 compliance. Testing of the internal
systems was substantially completed during fiscal 1998 and the
Company believes its current internal systems are compliant. Dionex
believes the products it is currently shipping are year 2000
compliant as well. To date, the Company has spent approximately
$150,000 related to year 2000 compliance, primarily in capital
expenditures to replace certain predecessor capital items. The
Company does not expect that any remaining remediation costs that
may exist will be material.
10
The Company has made public statements to customers regarding its
state of year 2000 preparedness for its products; however, the
possibility of product liability claims still exists. To date, the
Company has received communications from many of its major
customers regarding their awareness of the year 2000 issue.
Additionally, the Company has contacted numerous vendors to assess
their progress in addressing the year 2000 issue. Based upon our
assessments, testing and the plans in progress, the Company does
not believe that the year 2000 issue will have a material adverse
effect on the Company's financial position, results of operation or
cash flows. However, the Company does not have control over whether
its vendors or customers will make the appropriate modifications on
a timely basis. If such modifications are not made in a timely
manner, the Company's financial position and results of operations
could be materially adversely affected.
The Company is in the process of identifying contingency
alternatives for certain elements of year 2000 risk and the plan is
intended to be completed before December 1999. The plan will
address vendor problems as well as temporary remedies in the event
of failure of company or third party systems. The Company will
continue to monitor its business to determine if additional
contingency plans need to be developed. There can be no assurance
that any contingency plans will prevent a year 2000 problem from
occurring. However, should the need arise, the Company believes it
has adequate resources and would use them to resolve significant
year 2000 issues in a timely manner.
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
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, year 2000 compliance issues, 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, 1999. 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
11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule for the period ended
September 30, 1999.
(b) The Company did not file any reports on Form 8-K
during the quarter ended September 30, 1999.
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: November 5, 1999 By: /s/ A. Blaine Bowman
A. Blaine Bowman
President, Chief Executive
Officer
By: /s/ Craig A. McCollam
Craig A. McCollam
Vice President, Finance and
Administration
(Principal Financial and
Accounting Officer)
12