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 quarter ended March 31, 2004
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 1-15477
MAXWELL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 95-2390133 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| 9244 Balboa Avenue San Diego, California | 92123 | |
| (Address of principal executive offices) | (Zip Code) |
(858) 503-3300
(Registrant’s telephone number, including area code)
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 by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). YES x NO ¨
The number of shares of the registrant’s Common Stock outstanding as of May 3rd, 2004 was 14,440,269 shares.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the quarter ended March 31, 2004
| Page | ||||
| PART I – Financial Information Index | ||||
| Item 1. |
||||
| Consolidated Balance Sheets as of March 31, 2004 and December 31, 2003 |
1 | |||
| Consolidated Statements of Operations Three Months Ended March 31, 2004 and 2003 |
2 | |||
| Consolidated Statements of Cash Flows – Three Months Ended March 31, 2004 and 2003 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 | ||
| Item 3. |
21 | |||
| Item 4. |
22 | |||
| PART II – Other Information | ||||
| Item 1. |
23 | |||
| Item 2. |
23 | |||
| Item 3. |
23 | |||
| Item 4. |
23 | |||
| Item 5. |
23 | |||
| Item 6. |
23 | |||
| Signatures | 23 | |||
ii
PART I - Financial Information
Item 1. Consolidated Financial Statements
The consolidated condensed 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 have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest annual report on Form 10-K.
In the opinion of the Company, these unaudited statements contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of Maxwell Technologies, Inc. and subsidiaries as of March 31, 2004, and the results of their operations and cash flows for the three months then ended.
The results reported in these condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year.
MAXWELL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share information)
| March 31, 2004 |
December 31, 2003 |
|||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 8,483 | $ | 9,784 | ||||
| Short-term investments |
2,431 | 2,455 | ||||||
| Trade and other accounts receivable, net |
6,863 | 5,936 | ||||||
| Inventories |
7,289 | 7,309 | ||||||
| Prepaid expenses and other current assets |
1,095 | 1,143 | ||||||
| Total current assets |
26,161 | 26,627 | ||||||
| Property, plant and equipment, net |
10,366 | 10,769 | ||||||
| Other intangible assets, net |
1,917 | 2,002 | ||||||
| Goodwill |
18,968 | 19,478 | ||||||
| Prepaid pension asset |
3,962 | 3,962 | ||||||
| Other non-current assets |
— | 175 | ||||||
| $ | 61,374 | $ | 63,013 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable and accrued liabilities |
$ | 6,686 | $ | 7,650 | ||||
| Accrued warranty |
1,359 | 1,262 | ||||||
| Customer deposits |
433 | 599 | ||||||
| Accrued employee compensation |
1,748 | 1,653 | ||||||
| Short-term borrowings and current portion of long-term debt |
1,716 | 1,851 | ||||||
| Deferred tax liability |
336 | 339 | ||||||
| Net liabilities of discontinued operations |
1,375 | 1,494 | ||||||
| Total current liabilities |
13,633 | 14,848 | ||||||
| Deferred tax liability |
473 | 473 | ||||||
| Long-term debt, excluding current portion |
179 | — | ||||||
| Commitments and contingencies (note 3) |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock, $0.10 par value per share, 40,000 shares authorized; 14,440 and 14,339 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively. |
1,444 | 1,434 | ||||||
| Additional paid-in capital |
113,998 | 113,221 | ||||||
| Accumulated deficit |
(70,895 | ) | (70,310 | ) | ||||
| Accumulated other comprehensive income |
2,522 | 3,347 | ||||||
| Total stockholders’ equity |
47,069 | 47,692 | ||||||
| $ | 61,374 | $ | 63,013 | |||||
See accompanying notes to consolidated financial statements.
1
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Net revenues: |
||||||||
| Products |
$ | 9,465 | $ | 10,241 | ||||
| License fees |
1,000 | — | ||||||
| Total net revenues |
10,465 | 10,241 | ||||||
| Cost of sales |
7,067 | 8,930 | ||||||
| Gross profit |
3,398 | 1,311 | ||||||
| Operating expenses (income): |
||||||||
| Selling, general and administrative |
2,792 | 4,073 | ||||||
| Research and development |
1,218 | 1,307 | ||||||
| Amortization of other intangibles |
19 | 19 | ||||||
| Gain on sale of property and equipment |
(7 | ) | — | |||||
| Gain on sale of business |
— | (228 | ) | |||||
| Total operating expenses |
4,022 | 5,171 | ||||||
| Loss from operations |
(624 | ) | (3,860 | ) | ||||
| Interest income, net |
50 | 27 | ||||||
| Other income, net |
19 | 33 | ||||||
| Loss from continuing operations before income taxes |
(555 | ) | (3,800 | ) | ||||
| Income tax (benefit) provision |
— | (14 | ) | |||||
| Loss from continuing operations |
(555 | ) | (3,786 | ) | ||||
| Discontinued operations (Note 6): |
||||||||
| Loss from operations, net of tax |
(30 | ) | (575 | ) | ||||
| Net loss |
$ | (585 | ) | $ | (4,361 | ) | ||
| Net loss per common share-basic and diluted: |
||||||||
| Loss from continuing operations |
$ | (0.04 | ) | $ | (0.28 | ) | ||
| Loss from discontinued operations, net of tax |
— | (0.04 | ) | |||||
| Net loss per share |
$ | (0.04 | ) | $ | (0.32 | ) | ||
| Shares used in computing net loss per common share - basic and diluted |
14,386 | 13,741 | ||||||
See accompanying notes to consolidated financial statements.
2
MAXWELL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Loss from continuing operations |
$ | (555 | ) | $ | (3,786 | ) | ||
| Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
872 | 877 | ||||||
| Gain on sales of property and equipment |
(7 | ) | — | |||||
| Gain on sales of business |
— | (228 | ) | |||||
| Provision for losses on accounts receivable |
36 | 292 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Trade and other accounts receivable |
(966 | ) | 1,864 | |||||
| Inventories |
(64 | ) | 300 | |||||
| Prepaid expenses and other current assets |
223 | (83 | ) | |||||
| Deferred income taxes |
(3 | ) | 6 | |||||
| Accounts payable and accrued liabilities |
(887 | ) | (3,475 | ) | ||||
| Customer deposits |
(166 | ) | 3,137 | |||||
| Accrued employee compensation |
95 | 317 | ||||||
| Net cash used in operating activities |
(1,402 | ) | (779 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Proceeds from sale of business |
— | 278 | ||||||
| Acquisition of property, plant and equipment |
(544 | ) | (397 | ) | ||||
| Proceeds from sale of property and equipment |
17 | — | ||||||
| Proceeds from sale of short-term investments |
176 | 2,836 | ||||||
| Purchases of short-term investments |
(151 | ) | (924 | ) | ||||
| Net cash provided by (used in) investing activities |
(502 | ) | 1,793 | |||||
| Cash flows from financing activities: |
||||||||
| Principal payments on long-term debt and short-term borrowings |
(872 | ) | (75 | ) | ||||
| Proceeds from long-term and short-term borrowings |
972 | 314 | ||||||
| Proceeds from exercise of stock options |
787 | 121 | ||||||
| Net cash provided by financing activities |
887 | 360 | ||||||
| Increase (decrease) in cash and cash equivalents from continuing operations |
(1,017 | ) | 1,374 | |||||
| Net cash used in discontinued operations |
(149 | ) | (328 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents |
(135 | ) | 28 | |||||
| Increase (decrease) in cash and cash equivalents |
(1,301 | ) | 1,074 | |||||
| Cash and cash equivalents, beginning of period |
9,784 | 3,545 | ||||||
| Cash and cash equivalents, end of period |
$ | 8,483 | $ | 4,619 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid for interest |
$ | 8 | $ | 4 | ||||
| Cash paid for income taxes |
$ | — | $ | — | ||||
See accompanying notes to consolidated financial statements.
3
NOTE 1 – DESCRIPTION OF BUSINESS
Maxwell is a leading developer and manufacturer of innovative, cost-effective energy storage and power delivery solutions. Our BOOSTCAP® ultracapacitor cells and multi-cell modules and POWERCACHE® backup power systems provide safe and reliable power solutions for applications in consumer and industrial electronics, transportation and telecommunications. Our CONDIS® high-voltage grading and coupling capacitors help to ensure the safety and reliability of electric utility infrastructure and other applications involving transport, distribution and measurement of high-voltage electrical energy. Our radiation-mitigated microelectronic products include power modules, memory modules and single board computers that incorporate powerful commercial silicon for superior performance and high reliability in aerospace applications. For more information, please visit our website: www.maxwell.com.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Maxwell Technologies, Inc. and its subsidiaries. All significant intercompany transactions and account balances are eliminated in consolidation.
The Company’s defense contracting business, which was sold in March 2001, and its PurePulse business which was shut down in September 2002, each of which was previously reported as a separate segment, have been classified as discontinued operations in the accompanying consolidated financial statements (Note 6). The results of operations of other businesses, which do not meet the criteria to be classified as a component of an entity, and were sold or otherwise disposed of, are included in continuing operations. The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. These estimates include assessing the collectability of accounts receivable, the usage and recoverability of inventories and long-lived assets, and the incurrence of losses on warranty costs, vacant leased facilities and other facilities offered for sale. License fee revenue is recognized when the performance requirements have been met, the fee is fixed or determinable, and collection of fees is probable. We have net deferred tax assets before our valuation allowance, which are still available for us to use in the future to offset taxable income. The markets for the Company’s products are extremely competitive and are characterized by rapid technological change, new product development, product obsolescence and evolving industry standards. In addition, price competition is intense and significant price erosion generally occurs over the life of a product. With respect to vacant leased facilities, commercial real estate markets have been depressed due to continued poor economic conditions and spending reductions by businesses and government agencies. As a result of such factors, actual results could differ from the estimates used by management. Certain prior year amounts have been reclassified to conform to the current year presentation. The Company’s fiscal quarters end on the last day of the calendar month on March 31, June 30, September 30, and December 31.
Computation of Net Loss per Common Share
Loss per share is calculated using the weighted average number of common shares outstanding. Diluted loss per share is calculated on the basis of t