-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hg7Z1fB/KG+QjEm3yawLa3NxGGgGi2l4x8oMrh1Mcji8svs02juO8Fr9TyCBV8Gp g80DsOPGDNuyUeTvfDJnrA== 0000891618-97-002316.txt : 19970520 0000891618-97-002316.hdr.sgml : 19970520 ACCESSION NUMBER: 0000891618-97-002316 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LASERSCOPE CENTRAL INDEX KEY: 0000851737 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 770049527 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18053 FILM NUMBER: 97606330 BUSINESS ADDRESS: STREET 1: 3052 ORCHARD DR CITY: SAN JOSE STATE: CA ZIP: 95134 BUSINESS PHONE: 4089430636 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31,1997 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to ______ Commission file number 0-18053 LASERSCOPE (Exact name of Registrant as specified in its charter) CALIFORNIA 77-0049527 (State of Incorporation) (I.R.S. Employer Identification No.) 3052 ORCHARD DRIVE, SAN JOSE, CALIFORNIA 95134-2011 (Address of principal executive offices) Registrant's telephone number: (408) 943-0636 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of shares of Registrant's common stock issued and outstanding as of April 30, 1997 was 12,158,888. 2 TABLE OF CONTENTS
PAGE ---- PART I. FINANCIAL INFORMATION 3 Item 1. Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 4 Condensed Consolidated Statements 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 8 Liquidity and Capital Resources 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 PART II. OTHER INFORMATION 11 Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 3. Defaults upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Items 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11
2 3 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: LASERSCOPE CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31, (thousands) 1997 1996 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 2,074 $ 3,917 Accounts receivable, net 15,244 13,286 Inventories 18,010 17,407 Other current assets 967 926 -------- -------- Total current assets 36,295 35,536 Property and equipment, net 4,453 3,109 Investment in NWL 1,681 1,681 Developed technology and other intangibles, net 3,338 3,473 Other assets 496 670 -------- -------- Total assets $ 46,263 $ 44,469 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 8,476 $ 9,246 Accrued compensation 2,306 2,947 Bank loans 1,000 - Other current liabilities 5,144 4,899 -------- -------- Total current liabilities 16,926 17,092 Obligations under capital leases 189 202 Commitments and contingencies Shareholders' equity: Common stock 50,118 48,798 Accumulated deficit (20,107) (20,988) Translation adjustments (488) (260) Notes receivable from shareholders (375) (375) -------- -------- Total shareholders' equity 29,148 27,175 -------- -------- Total liabilities and shareholders' equity $ 46,263 $ 44,469 ======== ========
See notes to condensed consolidated financial statements 3 4 LASERSCOPE CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31, (thousands except per share amounts) 1997 1996 -------- -------- Net revenues $ 15,763 $ 7,722 Cost of sales 8,687 3,852 -------- -------- Gross margin 7,076 3,870 Operating expenses: Research and development 670 629 Selling, general and administrative 5,401 3,092 -------- -------- 6,071 3,721 Operating income 1,005 149 Interest income and (expense), net (26) 7 -------- -------- Income before income taxes 979 156 Provision for income taxes 98 19 -------- -------- Net income $ 881 $ 137 ======== ======== Net income per share $ 0.07 $ 0.02 ======== ======== Shares used in per share calculations 13,041 7,295 ======== ========
See notes to condensed consolidated financial statements 4 5 LASERSCOPE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, (thousands) 1997 1996 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 881 $ 137 Adjustments to reconcile net income to cash cash provided (used) by operating activities: Depreciation and amortization 500 277 Increase (decrease) from changes in: Accounts receivable (1,958) (131) Inventories (603) 795 Other current assets (41) 49 Other assets 100 10 Accounts payable (770) (200) Accrued compensation (641) 101 Other current liabilities 246 (531) ------- ------- Cash provided (used) by operating activities (2,286) 507 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,635) (92) Maturities of held-to-maturity investments - - Other (228) (99) ------- ------- Cash used by investing activities (1,863) (191) ------- ------- CASH USED BY FINANCING ACTIVITIES: Payments on obligations under capital leases (14) (3) Proceeds from the sale of common stock under stock plans 1,320 - Proceeds from short-term bank loans 2,300 - Repayment of short-term bank loans (1,300) - ------- ------- Cash provided (used) by financing activities 2,306 (3) Increase (decrease) in cash and cash equivalents (1,843) 313 Cash and cash equivalents, beginning of period 3,917 2,278 ------- ------- Cash and cash equivalents, end of period $ 2,074 $ 2,591 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 43 $ 3 Income taxes $ 42 $ 25
See notes to condensed consolidated financial statements 5 6 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, 1996 included in the Company's annual report on Form 10-K/A for the year ended December 31, 1996. The results of operations for the three month period ended March 31, 1997 are not necessarily indicative of the results expected for the full year. 2. Inventory was comprised of the following (in thousands):
MARCH 31, DECEMBER 31, 1997 1996 ------- ------- Sub-assemblies and purchased parts $12,517 $12,015 Finished goods 5,493 5,392 ------- ------- $18,010 $17,407 ======= =======
3. Net income per share is based upon the weighted average number of shares of common stock outstanding and dilutive common equivalent shares from stock options (using the treasury stock method). 4. The Company invests its excess cash in investment grade 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. At March 31, 1997 and December 31, 1996 the Company's cash equivalents were in the form of institutional money market accounts and totaled $0.1 million and $1.8 million, respectively. At March 31, 1997 and December 31, 1996 the Company had no investment in debt securities. 5. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings Per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The change to Statement 128 is expected to increase primary earnings per share for the Quarter ended March 31 1997 by $0.01 and to have no impact on the primary earnings per share for the Quarter ended March 31, 1996. The impact of Statement 128 on the calculation of fully diluted earnings per share for these quarters is not expected to be material. 6. On August 30, 1996 the Company completed the acquisition of Heraeus Surgical, Inc. ("HSI"). The acquisition was accounted for as a purchase. Accordingly, the operating results of HSI are included in the Company's consolidated results of operations 6 7 for the period ended March 31, 1997, however, are not included in the Company's consolidated results of operations for the corresponding period in 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Except for the historical information contained in this Quarterly Report on Form 10-Q, the matters discussed herein are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements are subject to certain risks and uncertainties that could cause the actual results to differ materially from those projected. Factors that could cause actual results to differ materially include, but are not limited to, the risks associated with the acquisition of Heraeus Surgical, Inc. ("HSI"), including the integration of the assets acquired and the assumption of the liabilities assumed by Laserscope, the timing of orders and shipments, the Company's ability to balance its inventory and production schedules, the timely development, clearance by the F.D.A. and other regulatory agencies and market acceptance of new products and surgical/therapeutic procedures, the impact of competitive products and pricing, the Company's ability to expand further into international markets, and public policy relating to health care reform in the United States and other countries. The Company desires to continue expansion of its operations outside of the United States and to enter additional international markets, requiring significant management attention and financial resources and further subjecting the Company to the risks of operating internationally. These risks include unexpected changes in regulatory requirements, delays resulting from difficulty in obtaining export licenses for certain technology, customs, tariffs and other barriers and restrictions, and the burdens of complying with a variety of foreign laws. The Company is also subject to general geopolitical risks in connection with its international operations, such as political and economic instability and changes in diplomatic and trade relationships. The Company cannot predict whether quotas, duties, taxes or other charges or restrictions will be imposed by the United States, Japan, countries in the European Union or other countries upon the import or export of the Company's products in the future, or what effect any such actions would have on its business, financial condition or results of operations. In addition, fluctuations in currency exchange rates may negatively impact the Company's ability to compete in terms of price against products denominated in local currencies. In addition, there can be no assurance that regulatory, geopolitical and other factors will not adversely impact the Company's operations in the future or require the Company to modify its current business practices. Other risks are detailed from time to time in the Company's press releases and other public disclosure filings with the U.S. Securities and Exchange Commission (SEC), copies of which are available upon request from the Company. The forward-looking statements included herein speak only as of the date hereof. The Company assumes no obligation to update any forward-looking statements included herein. 7 8 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, 1996 contained in the Company's Annual Report on Form 10-K/A. Net revenues for the quarter ended March 31, 1997 were $15.8 million, an increase of 104% from net revenues of $7.7 million in the corresponding quarter of 1996. Net revenues increased during the first quarter of 1997 relative to the first quarter of 1996 as a combined result of higher unit shipments of the Company's laser systems at lower average selling prices, higher shipments of instrumentation and, shipments of products and sales of services acquired in the acquisition of HSI completed in August 1996. Revenues from the sales of laser systems comprised approximately 44% of total net revenues during the quarter ended March 31, 1997 compared to approximately 39% of total net revenues during the corresponding period in 1996. In absolute dollars these revenues increased 152% which reflects a combination of higher unit shipments and lower average unit prices. The higher unit shipments reflect both increased shipments of the Company's KTP Surgical Laser Systems and shipments of laser products acquired in the acquisition of HSI. The lower average unit prices are the combined result of greater shipments of lower priced Aura office laser units as well as increased shipments to independent international distributors. The Company believes that the continuing trend toward reduced health care costs in the United States is still a factor which continues to impact negatively laser procurement by its hospital customers in the United States. As a result, the Company expects that its revenue mix trends in the U. S. market will continue to shift toward lower priced office lasers. Revenues from the sales to the Company's Ascent Medical System ("AMS") products comprised approximately 18% of total net revenues during the quarter ended March 31, 1997. This product line was acquired in the acquisition of HSI. Revenues from the sales of disposable supplies, instrumentation and services comprised approximately 38% of total net revenues during the quarter ended March 31, 1997, compared to approximately 61% of total net revenues in the corresponding period in 1996, however, in absolute dollars these revenues increased approximately 27%. The decrease as a percentage of net revenues is due primarily to the relative growth of revenues from shipments of laser systems as well as revenues resulting from the addition of the AMS product line. The increase in absolute dollars is due principally to increased shipments of scanning devices sold as accessories to the Aura office laser system and, to a lesser extent, increased sales of service supporting products acquired in the HSI acquisition. The Company expects that revenues from sales of disposable supplies, instrumentation and service will depend principally upon the Company's ability to increase its installed base of systems and to promote and develop surgical procedures which use its laser systems, instrumentation and disposable supplies. The Company believes that acceptance of lasers in aesthetic surgery, dermatology, urology, ear, nose and throat surgery, will continue to be important to its business. In addition, the adoption of photodynamic therapy by medical practitioners will be important. The Company continues to invest in developing new instrumentation for emerging surgical applications and to educate surgeons in the United States and internationally to encourage the adoption of such new applications. Through the acquisition of HSI, the Company has expanded its 8 9 product offering to include non-laser operating room equipment. The acceptance of this equipment by hospitals will be critical to the success of this product line. Finally, penetration of the international market, although increasing, has been limited and the Company continues to view expansion of international sales as important to the Company's success. Gross margin as a percentage of net revenues for the quarter ended March 31, 1997 was 45%, compared to 50% for the corresponding quarter in 1996. The decrease is due in part to revenues generated from sales of AMS products. These products generally generate lower gross margins than the Company's other product lines. In addition, a higher proportion of revenues from sales to independent international distributors were generated during the first quarter of 1997 than in the corresponding quarter of 1996. These revenues generally generate lower gross margins than those generated by revenues from sales through the Company's direct sales force. The Company expects that gross margin as a percentage of revenues for the remainder of 1997 may vary from quarter to quarter as it continues to balance production volumes and inventory levels with product demand and as product and distribution mix varies. Research and development expenses, which are the result of activities related to the development of new laser, instrumentation and disposable products and the enhancement of the Company's existing products were 7% higher in the first quarter of 1997 when compared to the corresponding quarter of 1996. As a percentage of net revenues these expenses were 4% and 8% in the quarters ended March 31, 1997 and March 31, 1996, respectively. The decrease in spending as a percentage of net revenues was due principally to the increase in revenues resulting from the acquisition of HSI without comparable increases to spending. The Company expects to increase amounts spent in research and development during 1997, however, as a percentage of net revenues, the Company expects these amounts to vary from quarter to quarter as net revenues change. Selling, general and administrative expenses in absolute terms increased approximately 75% in the quarter ended March 31, 1997 compared to the corresponding quarter of 1996. As a percentage of revenue these expenses decreased from 40% in the first quarter of 1996 to 34% in the first quarter of 1997. The increase in absolute spending is primarily due to higher expenses resulting from personnel which joined the Company from HSI after the acquisition. The Company expects these amounts to remain at similar levels during the remainder of 1997 as the Company continues to invest in international expansion, marketing programs and educational support. During the quarters ended March 31, 1997 and 1996 the Company recorded income tax provisions representing effective tax rates of 10% and 12%, respectively. Both years' tax rates are below the combined federal and state statutory rates due to the utilization of available net operating loss carryforwards. The 1997 tax rate is lower than the 1996 rate principally due to the impact of non-deductible acquisition related charges in 1996. LIQUIDITY AND CAPITAL RESOURCES: Total assets and liabilities as of March 31, 1997 were $46.3 million and $17.1 million respectively, compared to assets and liabilities of $44.5 million and $17.3 million at December 31, 1996. Working capital increased $1.0 million from $18.4 million at December 31, 1996 to $19.4 million at March 31, 1997, while cash and cash equivalents decreased $1.8 million during the period. The net decrease in cash and cash equivalents was due principally to the combination of cash used by operating activities of $2.3 million and capital expenditures of 9 10 $1.6 million offset by proceeds from the sale of common stock pursuant to option exercises of $1.3 million and net short-term bank borrowings of $1.0 million. Significant components of cash used by operating activities included an increase in accounts receivable of $2.0 million, an increase in inventory of $0.6 million and decreases to accounts payable and accrued compensation of $0.8 million and $0.6 million, respectively. The Company believes that the increase to accounts receivable was due to longer collection cycles for sales by its international subsidiaries, particularly in France and similarly long collection cycles for sales to its AMS customers. The Company anticipates that future changes in cash and working capital will be dependent on a number of factors. As a result of the acquisition of HSI, the Company's Balance Sheet liquidity ratios changed and the Company's ability to generate cash will be partially dependent on management's ability to manage effectively non-cash assets such as inventory and accounts receivable. In addition, the level of profitability of the Company will have a significant impact on cash resources. The Company anticipates that it will exercise its option to purchase additional shares of NWL LaserTechnologies ("NWL") before July 1, 1997. Such exercise will require an expenditure of approximately $1.0 million and will result in the Company owning 52% of the outstanding shares of NWL. The Company has in place a $5.0 million revolving bank line of credit which expires in November 1997, under which $1.0 million in borrowings were outstanding at March 31, 1997. 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. The Company anticipates that current cash resources, internally generated funds, capital and operating lease lines and available bank borrowings will be sufficient to meet liquidity and capital needs at least through the next twelve months. The Company financed the HSI acquisition using its existing cash resources and anticipates that, while its remaining cash resources will be sufficient to fund its short term operating needs, additional financing either through its bank line of credit or otherwise will be required for the Company's currently envisioned long term needs. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable 10 11 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is a party to a number of legal proceedings arising in the ordinary course of business. While it is not feasible to predict or determine the outcome of the actions brought against it, the Company believes that the ultimate resolution of these claims will not ultimately have a material adverse effect on its financial position or results of operations. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER ITEMS Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. None (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LASERSCOPE Registrant /s/ DENNIS LALUMANDIERE ----------------------------------------------- Dennis LaLumandiere Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Date: May 15, 1997 11 12 EXHIBIT INDEX
Exhibit No. Description - -------- ----------- 27 Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 2,074 0 15,244 700 18,010 36,295 16,279 11,826 46,263 16,926 0 0 0 50,118 (20,970) 46,263 15,763 15,763 8,687 8,687 6,071 0 26 979 98 881 0 0 0 881 .07 .07
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