Here the management discussion of MDCC's 10Q, filed last week, and a
summary off E*Trade:
Business Overview
Molecular Devices makes high-performance
bioanalytical measurement systems. Its
products are used around the world by
scientists engaged in pharmaceutical
research and development and in clinical
applications such as manufacturing and
quality control. The company's product line
-- which incorporates Molecular Devices's
expertise in chemistry, biology, software
design, and systems engineering -- includes
the Cytosensor Microphysiometer
cell-monitoring device; MAXline Microplate
Readers, a range of spectrophotometers;
and Threshold System, a device for
measuring contaminants in
biopharmaceuticals.
(((((There's more...like financials...if you want it. Good luck with the
beavers!))))
MOLECULAR DEVICES CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF OPERATIONS
Except for the historical information contained herein, the following
discussion
contains forward-looking statements that involve risks and
uncertainties. The
Company's actual results could differ materially from those
discussed here.
Factors that could cause or contribute to such differences include, but
are not
limited to, those discussed in this section, as well as those
identified in the
Company's Annual Report on Form 10-K for the year ended December 31,
1996 as
filed with the Securities and Exchange Commission on March 27, 1997.
The following discussion should be read in conjunction with the
unaudited
condensed consolidated financial statements and notes thereto included
in Part I
- - Item 1 of this Quarterly Report and the audited consolidated
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 1996 Annual Report to Stockholders. The
results
for the three and six month periods ended June 30, 1997 are not
necessarily
indicative of the results to be expected for the entire fiscal
year ending
December 31, 1997.
Results of Operations - Three and Six Months Ended June 30, 1997 and
1996.
PRODUCT REVENUES. Product revenues for the second quarter of 1997
increased 30%
to approximately $9.8 million from approximately $7.5 million in
the second
quarter of 1996. The Maxline and Cell Analysis product families showed
increased
levels of revenue. Maxline product revenues increased primarily due to:
(1) the
introduction of the SPECTRAmax PLUS in the second quarter of 1997; (2)
greater
sales of the f MAX worldwide; and (3) increased penetration of Maxline
products
into the international distribution channels. Cell Analysis product
revenues
increased primarily due to greater sales of the FLIPR product
worldwide.
Threshold product family revenues decreased primarily due to lower
shipments to
the US Army.
Product revenues for the first six months of 1997 increased 34% to
approximately
$18.1 from approximately $13.5 million. The Maxline and Cell Analysis
product
families showed increased levels of revenue. Maxline product revenues
increased
primarily due to greater sales of SPECTRAmax products (including the
SPECTRAmax
PLUS introduced in the second quarter of 1997) and the f MAX
worldwide. Cell
Analysis product revenues increased primarily due to greater sales of
the FLIPR
product worldwide. Threshold product family revenues decreased
primarily due to
lower shipments to the US Army and decreased shipments of Threshold
products
worldwide.
GROSS MARGIN ON PRODUCT REVENUES. The gross margin on product revenues
declined
to 60.5% in the second quarter of 1997 from 62.8% in the second quarter
of 1996.
The gross margin on product revenues declined to 61% in the first six
months of
1997 from 63.1% in the same period of 1996. The margin deterioration
for both
periods relates primarily to increased sales of new lower margin
products and
increased penetration of the Maxline product family into the
international
distribution channels. In addition, the margin was negatively
impacted by
decreased shipments of Threshold products.
COMPANY-FUNDED RESEARCH AND DEVELOPMENT. Company-funded research and
development
expenses for the second quarter of 1997 decreased by 10% to
approximately $1.1
million (11.3% of total product revenues) from approximately $1.2
million (16.4%
of total product revenues) for the second quarter of 1996.
Company-funded
research and development expenses for the first six months of 1997
decreased by
3% to approximately $2.19 million (12.1% of total product
revenues) from
approximately $2.27 million (16.7% of total product revenues) for
the same
period of 1996. The decreased spending for both periods relates
primarily to
development costs incurred during the second quarter and first six
months of
1996 related to the development of a robotics product for the Maxline
product
family.
CHARGE FOR ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. The Company
recorded a
one-time charge of approximately $4.6 million during the second quarter
of 1996
due to the write-off of acquired in-process research and development
related to
the Company's acquisition of NovelTech Systems, Inc. on June 7, 1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative
expenses for the second quarter of 1997 increased by 24% to
approximately $3
million (30.7% of total product revenues) from approximately $2.4
million (32.3%
of total product revenues) for the second quarter of 1996. Selling,
general and
administrative expenses for the first six months of 1997 increased
by 25% to
approximately $5.7 million (31.3% of total product revenues) from
approximately
$4.5 million (33.5% of total product revenues) for the
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same period of 1996. The increased spending for both periods is
primarily the
result of additional spending on marketing, sales and service related
activities
(including increased headcount) as the Company continued to expand
worldwide
market coverage.
PROVISION FOR TAXES. Income tax provisions of $806,000 and $1.4 million
recorded
in the second quarter and first six months of 1997, respectively,
decreased net
income, whereas income tax benefits of $116,000 and $216,000
recorded in the
second quarter and first six months of 1996, respectively, increased net
income.
The benefits recorded during 1996 related primarily to a reduced
valuation
allowance on the Company's net deferred tax assets. As of December
31, 1996,
management concluded that no valuation allowance was required on
the net
deferred tax asset based on its assessment that current levels of
income would
be sufficient to realize the tax benefit.
Liquidity and Capital Resources.
The Company had cash and cash equivalents of $22.1 million at June 30,
1997. The
Company used $133,000, $244,000 and $1.2 million of cash for
operating,
investing and financing activities, respectively, during the first six
months of
1997. The cash used in operating activities is primarily due to the
Company's
increased accounts receivable and inventory balances required to
support sales
growth and new products. The cash used in investing activities relates
primarily
to capital expenditures. The cash used in financing activities
related to the
$1.5 million repayment of the promissory notes as offset by $331,000
of cash
provided by stock option exercises.
The Company believes that its existing capital resources and cash
expected to be
generated from future operations will be sufficient to fund its
operations and
anticipated capital expenditures through at least 1998. However, the
Company's
future liquidity and capital requirements will depend upon numerous
factors,
including the resources the Company devotes to developing,
manufacturing and
marketing its products, the extent to which the Company's products
generate
market acceptance and demand, potential acquisition opportunities that
may arise
and other factors. As such, there can be no assurances that the Company
will not
require additional financing within this time frame and, therefore, the
Company
may in the future seek to raise additional funds through bank
facilities, debt
or equity offerings or other sources of capital. Additional funding
may not be
available when needed or on terms acceptable to the Company, which
could have a
material adverse effect on the Company's business, financial
condition and
results of operations.
Factors That May Affect Future Results
The Company's business, financial condition and results of
operations are
subject to various risk factors, including those described below and
elsewhere
in this report.
o UNCERTAINTY OF FUTURE OPERATING RESULTS. Future operating
results will
depend on many factors, including demand for the Company's
products,
the levels and timing of government and private sector funding
of life
sciences research activities, the timing of the
introduction of new
products by the Company or by competing companies, the
integration of
acquired products and technology into manufacturing and
distribution
processes, the Company's ability to control costs and its
ability to
attract and retain highly qualified personnel.
Furthermore, the
Company's gross margins can be significantly affected by many
factors,
including shifts in product mix, the mix of direct sales as
compared
with sales through distributors, competitive price
pressures or
quarterly fluctuations in sales levels relative to fixed costs.
o FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; LACK OF
BACKLOG. The
Company manufactures its products to forecast rather
than to
outstanding orders, and products are typically shipped within
30 to 90
days of purchase order receipt. As a result, the Company
does not
believe the amount of backlog at any particular date is
indicative of
its future level of sales. The Company's manufacturing
procedures may
in certain instances create a risk of excess or inadequate
inventory
levels if orders do not match forecasts. The Company's
expense levels
are based, in part, on expected future sales. If sales
levels in a
particular quarter do not meet expectations, the Company
may not be
able to adjust operating expenses sufficiently quickly to
compensate
for the shortfall, and the Company's results of
operations may be
materially adversely affected. Many of the Company's
products are
subject to long customer procurement processes. Accordingly,
the timing
of capital equipment purchases by customers is expected to
be uneven
and difficult to predict. In addition, a significant
portion of the
Company's revenues is typically derived from sales of a small
number of
relatively high-priced systems, and sales of such products may
increase
as a percentage of revenue in the future. Delays in
receipt of
anticipated orders or such products could lead to
substantial
variability from quarter to quarter. In addition, the
Company has
historically received purchase orders and made a significant
portion of
each quarter's product shipments near the end of the quarter.
If that
pattern
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<PAGE>
continues, even short delays in the receipt of orders or
shipment of
products at the end of a quarter could have a material
adverse effect
on results of operations for that quarter. The Company
typically
experiences a decrease in the level of sales in the first
calendar
quarter as compared to the fourth quarter of the preceding year
because
of budgetary and capital equipment purchasing patterns in
the life
sciences industry. In 1995, the Company also experienced a
decrease in
product revenues in the third quarter compared to the second
quarter,
related to seasonality primarily associated with lower
European and
academic sales during the summer months. The Company's product
revenues
increased in the third quarter of 1996 compared to the second
quarter
of 1996 primarily due to the introduction of a new Cell
Analysis
product. The Company, however, expects the third quarter
seasonality
trend to continue in future years as the Company increases its
efforts
to penetrate international markets. Operating results in
any period
should not be considered indicative of the results to be
expected for
any future period.
o DEPENDENCY ON NEW PRODUCTS; RAPID TECHNOLOGICAL CHANGE.
The life
sciences instrumentation market is characterized by rapid
technological
change and frequent new product introductions. The
Company's future
success will depend on its ability to enhance its current
products and
to develop and introduce, on a timely basis, new products that
address
the evolving needs of its customers.
o OTHER FACTORS. The Company's business is affected by other
factors,
including: (i) the possibility that the introduction or
announcement of
new products would render existing products obsolete or
result in a
delay or decrease in purchase orders for existing products;
(ii) the
extent to which and the timing in which the Company's products
achieve
market acceptance; (iii) the capital spending policies of the
Company's
customers (which depend on various factors, including the
resources
available to such customers, the spending priorities among
various
types of research equipment and the policies regarding
capital
expenditures during recessionary periods), including those
policies of
universities, government research laboratories and other
institutions
whose funding is dependent on grants from government
agencies; (iv)
competition; (v) the Company's ability to obtain and
maintain patent
and other intellectual property protection for its
products and
technology; (vi) the Company's ability to obtain in a
timely manner
certain components used in its products which are currently
obtained
from single sources; (vii) compliance with governmental
regulations,
including those promulgated by the United Sates Food
and Drug
Administration and similar state and foreign agencies; and
(viii) the
extent of the Company's sales outside the United States, which
involve
certain specific risks, including risks related to
currency
fluctuations, imposition of government controls, export
license
requirements, restrictions on export of critical technology,
political
and economic instability or conflicts, trade restrictions,
changes in
tariffs and taxes, difficulties in staffing and managing
international
operations and international distributor relationships and
general
economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
None.
Hope this helps you........C.R. Peluso M.D. |
