1
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 quarter ended December 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: 0-10961
QUIDEL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2573850
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10165 McKellar Court, San Diego, California 92121
(Address of principal executive offices)
Registrant's telephone number, including area code (619) 552-1100
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 outstanding of the Registrant's Common Stock as of
December 31, 1995 was 21,363,047.
2
QUIDEL CORPORATION
TABLE OF CONTENTS
Page
Numbers
-------
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1995 and March 31, 1995 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations
Three months ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations
Nine months ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
Nine months ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . 6
Notes to Unaudited Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 7 - 9
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . 9
ITEM 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 9
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2
3
QUIDEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31,
ASSETS 1995 1995
------ ------------ ---------
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,775,000 $ 3,878,000
Accounts receivable, including $31,000 due from
related parties ($257,000 as of March 31, 1995) 7,139,000 6,822,000
Inventories, at lower of cost (first-in, first-out) or market:
Raw materials 2,094,000 2,570,000
Work in process 1,093,000 1,158,000
Finished goods 1,022,000 1,137,000
------------- ---------------
4,209,000 4,865,000
Prepaid expenses and other current assets 379,000 633,000
------------- ---------------
Total current assets 14,502,000 16,198,000
Property and equipment, net 13,603,000 12,521,000
Intangible assets, net 5,188,000 5,409,000
Other assets 234,000 396,000
------------- ---------------
$ 33,527,000 $ 34,524,000
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 1,525,000 $ 2,176,000
Accrued payroll and related expenses 878,000 880,000
Note payable to bank under line of credit 564,000 674,000
Accrued acquisition costs 44,000 685,000
Current portion of long-term debt and obligations
under capital leases 589,000 357,000
Other current liabilities 917,000 1,669,000
------------- ---------------
Total current liabilities 4,517,000 6,441,000
Long-term debt and obligations under capital leases 3,683,000 4,145,000
Stockholders' equity:
Common stock 21,000 21,000
Additional paid-in capital 109,797,000 108,854,000
Accumulated deficit (84,491,000) (84,937,000)
------------- ---------------
Total stockholders' equity 25,327,000 23,938,000
------------- ---------------
$ 33,527,000 $ 34,524,000
============= ===============
See accompanying notes.
3
4
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three months ended December 31,
1995 1994
---- ----
Revenues:
Net sales, including $31,000 and $1,046,000
from a related party for the three months
ended December 31, 1995 and 1994, respectively $ 9,044,000 $ 9,201,000
Contracts, license fees and distribution agreements 209,000 36,000
------------- ---------------
Total revenues 9,253,000 9,237,000
Costs and expenses:
Cost of sales 4,248,000 4,220,000
Research and development 1,014,000 901,000
Sales and marketing 2,612,000 2,557,000
General and administrative 866,000 727,000
------------- ---------------
Total costs and expenses 8,740,000 8,405,000
Operating income 513,000 832,000
Other income and expense:
Interest income 39,000 53,000
Interest expense (130,000) (211,000)
------------- ---------------
Net income $ 422,000 $ 674,000
============= ===============
Net income per share $ .02 $ .04
============= ===============
Shares used in computing net income per share 23,056,000 18,994,000
============= ===============
See accompanying notes.
4
5
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine months ended December 31,
1995 1994
---- ----
Revenues:
Net sales, including $356,000 and $1,838,000
from a related party for the nine months
ended December 31, 1995 and 1994, respectively $ 25,654,000 $ 21,255,000
Contracts, license fees and distribution agreements 479,000 467,000
------------- ---------------
Total revenues 26,133,000 21,722,000
Costs and expenses:
Cost of sales 11,883,000 10,902,000
Research and development 2,991,000 2,565,000
Sales and marketing 7,994,000 7,456,000
General and administrative 2,542,000 2,067,000
------------- ---------------
Total costs and expenses 25,410,000 22,990,000
Operating income (loss) 723,000 (1,268,000)
Other income and expense:
Interest income 129,000 145,000
Interest expense (406,000) (592,000)
------------- ---------------
Net income (loss) $ 446,000 $ (1,715,000)
============= ===============
Net income (loss) per share $ .02 $ (.09)
============= ===============
Shares used in computing net income (loss) per share 22,550,000 18,578,000
============= ===============
See accompanying notes.
5
6
QUIDEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine months ended December 31,
1995 1994
---- ----
Cash flows from operating activities:
Net income (loss) $ 446,000 $ (1,715,000)
Adjustments to reconcile net income (loss) to net cash
flows provided by (used for) operating activities:
Depreciation and amortization 1,505,000 1,394,000
Provision for losses on accounts receivable -- 160,000
Changes in assets and liabilities:
Accounts receivable (317,000) 1,044,000
Inventories 656,000 280,000
Prepaid expenses and other current assets 254,000 185,000
Accounts payable (651,000) (346,000)
Accrued payroll and related expenses (2,000) (170,000)
Accrued acquisition expenses (591,000) --
Other current liabilities (752,000) 113,000
------------- ---------------
Net cash flows from operating activities 548,000 945,000
Cash flows used for investing activities:
Additions to equipment and improvements (2,119,000) (1,122,000)
Increase in other assets (135,000) (827,000)
------------- ---------------
Net cash flows used for investing activities (2,254,000) (1,949,000)
Cash flows provided by (used for) financing activities:
Net proceeds from issuance of common stock 943,000 227,000
Payments on line of credit (110,000) (1,343,000)
Payments on notes payable, long-term debt and
obligations under capital leases (230,000) (3,585,000)
Proceeds from issuance of debt -- 3,875,000
------------- ---------------
Net cash flows provided by (used for)
financing activities 603,000 (826,000)
Net decrease in cash and cash equivalents (1,103,000) (1,830,000)
Cash and cash equivalents at beginning of period 3,878,000 3,173,000
------------- ---------------
Cash and cash equivalents at end of period $ 2,775,000 $ 1,343,000
============= ===============
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 368,000 $ 598,000
============= ===============
See accompanying notes.
6
7
QUIDEL CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
QUIDEL Corporation (the "Company") discovers, develops, manufactures and
markets diagnostic products for human health care. The unaudited financial
information included herein is condensed and has been prepared in accordance
with generally accepted accounting principles applicable to interim periods;
consequently it does not include all generally accepted accounting
disclosures required for complete annual financial statements. The condensed
financial information contains, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary to state
fairly the Company's financial position, results of operations and cash
flows. The Company's results of operations for the three and nine months
ended December 31, 1995 are not necessarily indicative of the results to be
expected for the full year.
Management suggests that these condensed financial statements be read in
conjunction with the financial statements and notes thereto for the year
ended March 31, 1995, included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission.
NET INCOME (LOSS) PER SHARE - Net income (loss) per share has been computed
using the weighted average number of common shares and for income periods
dilutive common stock equivalents outstanding during each period presented.
Common shares issuable upon exercise of certain warrants and stock options
or upon conversion of notes payable were not included in the calculations
for loss periods since the effect of their inclusion would be antidilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the third quarter ended December 31, 1995 totaled
$9,044,000, down $157,000 or 2% from the same period of the prior year. The
mix of the Company's sales continues to shift away from U.S. OEM sales which
declined $1,015,000 to $31,000 in the current quarter vs. the same period in
the prior year. The year-to-year comparison of third quarter net sales was
also impacted by a $778,000 reduction in U.S. sales of the Company's Strep A
tests, due in part to the increased level of prior year sales resulting from
the initial introduction of the new in-line one step strep test. These
reductions were offset in part by $1,534,000 in sales of pregnancy and
mononucleosis products of our subsidiary Pacific Biotech, Inc., a
7
8
California corporation ("PBI") acquired in January 1995 which were not
present in the third quarter of the prior year.
Net sales for the nine months ended December 31, 1995 totaled $25,654,000,
up $4,399,000 or 21% from the prior year level. The significant changes
between the current and prior year nine month periods included the addition
of sales of PBI products not present in the prior year amounting to
$5,016,000, increased international sales of $1,084,000 due in part to sales
by the Company's European subsidiaries, some of which were not present in
the first quarter of the prior year, partially offset by a reduction of
$1,482,000 in U.S. OEM sales and $712,000 in sales of Strep A tests as
discussed above.
Gross profit for the third quarter represented 53% of sales compared to
54% in the prior year quarter. Year-to-date gross profit as a percentage of
sales stands at 54%, up from the prior year's 49% of sales, due to increased
sales volume in relation to a relatively constant level of manufacturing
overhead costs.
Overall operating expense increased $307,000 (7%) and $1,439,000 (12%) in
the current quarter and nine month periods respectively, versus the prior
year periods. Research and development expense has increased in line with
the increased activity in new product development projects. Increases in
sales and marketing expense reflects the addition of our new European
subsidiaries in Germany and Spain which were not present in the first
quarter of the prior year. General and administrative expense in the current
quarter and year-to-date period has increased over the prior year, due
principally to increased personnel cost, bad debt expense and legal fees.
Net income of $422,000 for the quarter ended December 31, 1995, although
$252,000 below that of the prior year period, marks the third consecutive
profitable quarter this year. The year-to-date improvement in sales and
gross profit has resulted in current year-to-date net income of $446,000 as
contrasted to a net loss of $1,715,000 in the prior year nine month period.
The Company's operating results may continue to fluctuate on a quarter to
quarter basis as a result of a number of factors, including the phase-out of
older products near the end of their product life cycles, the timing and
success of new product introductions, relationships with strategic marketing
partners and seasonality, e.g. the higher incidence of strep throat in the
fall and winter months. Actual results for the remainder of the fiscal year
will be influenced by competitive and economic factors affecting the
Company's markets, actions of our major distributors, and the degree of
acceptance that our new products achieve during the year.
8
9
Liquidity and Capital Resources
At December 31, 1995, the Company had cash and cash equivalents of
$2,775,000, compared to $3,878,000 at March 31, 1995. Cash provided by
operations totaled $548,000 for the nine month period ended December 31,
1995, reflecting in part profitable operations and proceeds from a reduction
in inventory offset by increased accounts receivable, payments of accounts
payable and PBI acquisition-related expenses. The principal use of cash in
the nine months ended December 31, 1995 was related to the $2,119,000
invested in capital programs for new production equipment and facility
improvements required because of increased volume.
During the balance of fiscal 1996, the Company's principal capital
requirements will be related to the capital expenditures associated with
automated production systems which are intended to increase quality and
capacity and to reduce product cost, and for other working capital needs.
The Company's working capital requirements fluctuate as a result of numerous
factors, such as the extent to which the Company uses or generates cash in
operations, progress in research and development projects and the time and
expenditures required to obtain governmental approval of its products. The
Company has established an accounts receivable based bank line of credit
which provides for borrowing up to $3 million. At December 31, 1995 there
were no outstanding borrowings under the line of credit. Based on its
current cash position and its current assessment of future operating
results, management believes that its existing sources of liquidity should
be adequate to meet its operating needs.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS None
ITEM 2. CHANGES IN SECURITIES None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS None
ITEM 5. OTHER INFORMATION None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Exhibit
------- -------
27 Financial Data Schedule
(b) Reports on Form 8-K None
9
10
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.
QUIDEL CORPORATION
-------------------------
(Registrant)
Date: February 14 , 1996 /S/ STEVEN C. BURKE
-------------------------
Steven C. Burke
Chief Accounting Officer
Signed both as a duly authorized
officer to sign on behalf of the
Registrant and as Chief Accounting
Officer
10