UNITED STATES
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 THE QUARTERLY PERIOD ENDED MARCH 31, 2004 |
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transaction period from to
Commission File Number 0-28414
UROLOGIX, INC.
(Exact name of registrant as specified in its charter)
| Minnesota | 41-1697237 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
14405 21st Avenue North, Minneapolis, MN 55447
(Address of principal executive offices)
Registrant’s telephone number, including area code: (763) 475-1400
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2) of the Exchange Act.
Yes ¨ No x
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 ¨
As of April 30, 2004, the Company had outstanding 14,056,815 shares of common stock, $.01 par value.
PART I – FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
Urologix, Inc.
Condensed Balance Sheets
(In thousands, except per share data)
| March 31, 2004 |
June 30, 2003 |
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| (unaudited) | (*) | |||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 2,748 | $ | 727 | ||||
| Available-for-sale investments |
2,807 | 3,892 | ||||||
| Accounts receivable, net of allowances of $349 and $365 |
2,166 | 2,129 | ||||||
| Inventories |
2,400 | 2,893 | ||||||
| Prepaids and other current assets |
351 | 697 | ||||||
| Total current assets |
10,472 | 10,338 | ||||||
| Property and equipment: |
||||||||
| Machinery, equipment and furniture |
9,224 | 9,843 | ||||||
| Less accumulated depreciation |
(6,516 | ) | (6,029 | ) | ||||
| Property and equipment, net |
2,708 | 3,814 | ||||||
| Other assets |
2,150 | 2,404 | ||||||
| Goodwill, net |
10,193 | 10,193 | ||||||
| Other intangible assets, net |
8,615 | 9,113 | ||||||
| Total assets |
$ | 34,138 | $ | 35,862 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
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| Current liabilities: |
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| Accounts payable |
$ | 759 | $ | 1,271 | ||||
| Accrued compensation |
903 | 476 | ||||||
| Other accrued expenses |
1,783 | 2,450 | ||||||
| Current portion of lease obligation |
— | 351 | ||||||
| Current portion of long-term debt |
165 | 575 | ||||||
| Deferred income |
1,412 | 1,634 | ||||||
| Total current liabilities |
5,022 | 6,757 | ||||||
| COMMITMENTS AND CONTINGENCIES (Notes 10 and 11) |
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| Shareholders’ equity: |
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| Common stock, $.01 par value, 25,000 shares authorized; 14,030 and 13,962 shares issued and outstanding |
140 | 140 | ||||||
| Additional paid-in capital |
108,868 | 108,606 | ||||||
| Accumulated deficit |
(79,923 | ) | (79,728 | ) | ||||
| Accumulated other comprehensive income |
31 | 87 | ||||||
| Total shareholders’ equity |
29,116 | 29,105 | ||||||
| Total liabilities and shareholders’ equity |
$ | 34,138 | $ | 35,862 | ||||
| (*) | The Balance Sheet at June 30, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. |
The accompanying notes to financial statements are an integral part of these statements.
1
Urologix, Inc.
Condensed Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, |
Nine Months Ended March 31, |
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| 2004 |
2003 |
2004 |
2003 |
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| Sales |
$ | 6,668 | $ | 4,558 | $ | 17,348 | $ | 13,606 | |||||||
| Cost of goods sold |
2,366 | 1,802 | 6,412 | 5,162 | |||||||||||
| Gross profit |
4,302 | 2,756 | 10,936 | 8,444 | |||||||||||
| Costs and expenses: |
|||||||||||||||
| Selling, general and administrative |
3,096 | 3,739 | 9,068 | 11,509 | |||||||||||
| Research and development |
559 | 927 | 1,774 | 2,864 | |||||||||||
| Amortization of intangible assets |
166 | 166 | 498 | 498 | |||||||||||
| Restructuring |
— | — | (175 | ) | — | ||||||||||
| Total costs and expenses |
3,821 | 4,832 | 11,165 | 14,871 | |||||||||||
| Operating earnings (loss) |
481 | (2,076 | ) | (229 | ) | (6,427 | ) | ||||||||
| Interest income, net |
21 | 8 | 34 | 119 | |||||||||||
| Net earnings (loss) |
$ | 502 | $ | (2,068 | ) | $ | (195 | ) | $ | (6,308 | ) | ||||
| Net earnings (loss) per common share - basic |
$ | 0.04 | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.45 | ) | ||||
| Net earnings (loss) per common share - diluted |
$ | 0.03 | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.45 | ) | ||||
| Weighted average number of shares used in basic per share calculations |
14,015 | 13,916 | 13,989 | 13,914 | |||||||||||
| Weighted average number of shares used in diluted per share calculations |
14,769 | 13,916 | 13,989 | 13,914 | |||||||||||
The accompanying notes to financial statements are an integral part of these statements.
2
Urologix, Inc.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
| Nine Months Ended March 31, |
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| 2004 |
2003 |
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| Operating Activities: |
||||||||
| Net loss |
($195 | ) | ($6,308 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: |
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| Depreciation and amortization |
1,457 | 1,547 | ||||||
| Provision for bad debts |
17 | 10 | ||||||
| Change in operating items: |
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| Accounts receivable |
(54 | ) | 2,433 | |||||
| Inventories |
698 | (3,639 | ) | |||||
| Prepaids and other assets |
600 | 573 | ||||||
| Accounts payable |
(512 | ) | (313 | ) | ||||
| Accrued expenses and deferred income |
(462 | ) | (248 | ) | ||||
| Net cash provided by (used for) operating activities |
1,549 | (5,945 | ) | |||||
| Investing Activities: |
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| Purchase of property and equipment |
(58 | ) | (321 | ) | ||||
| Proceeds from sale of available-for-sale investments, net |
1,029 | 5,585 | ||||||
| Net cash provided by investing activities |
971 | 5,264 | ||||||
| Financing Activities: |
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| Payments made on capital lease obligations |
(351 | ) | (375 | ) | ||||
| Payments made on term debt |
(410 | ) | — | |||||
| Proceeds from exercise of stock options |
262 | 55 | ||||||
| Net cash used for financing activities |
(499 | ) | (320 | ) | ||||
| Net increase / (decrease) in cash and cash equivalents |
2,021 | (1,001 | ) | |||||
| Cash and cash equivalents: |
||||||||
| Beginning of period |
727 | 1,604 | ||||||
| End of period |
$ | 2,748 | $ | 603 | ||||
| Supplemental cash-flow information |
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| Cash paid during the period for interest |
$ | 157 | $ | 108 | ||||
| Net value of inventory transferred to / (from) property and equipment |
$ | (205 | ) | $ | 1,393 | |||
The accompanying notes to financial statements are an integral part of these statements.
3
Urologix, Inc.
Notes to Condensed Financial Statements
March 31, 2004
(Unaudited)
| 1. | Basis of presentation |
The accompanying unaudited condensed financial statements of Urologix, Inc. (the “Company” or “Urologix”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. The balance sheet as of March 31, 2004, the statements of operations for the three and nine months ended March 31, 2004 and 2003 and the statements of cash flows for the nine months ended March 31, 2004 and 2003 are unaudited but include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial position at such date and the operating results and cash flows for those periods. Certain information normally included in financial statements and related footnotes prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Urologix Annual Report on Form 10-K for the year ended June 30, 2003.
Results for any interim period shown in this report are not necessarily indicative of results to be expected for any other interim period or for the entire year. Certain prior year amounts have been reclassified to conform to current year presentation.
| 2. | New Accounting Pronouncement |
In December 2002, the Emerging Issues Task Force (“EITF”) issued EITF 00-21, Revenue Arrangements with Multiple Deliverables. EITF 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. In some arrangements, the different revenue-generating activities (deliverables) are sufficiently separable, and there exists sufficient evidence of their fair values to separately account for some or all of the deliverables (that is, there are separate units of accounting). In other arrangements, some or all of the deliverables are not independently functional, or there is not sufficient evidence of their fair values to account for them separately. EITF 00-21 addresses when and, if so, how an arrangement involving multiple deliverables should be divided into separate units of accounting. EITF 00-21 does not change otherwise applicable revenue recognition criteria. We adopted EITF 00-21 effective July 1, 2003, and it did not have an impact on our revenue recognition policy.
| 3. | Use of Estimates |
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
4
Urologix, Inc.
Notes to Condensed Financial Statements
March 31, 2004
(Unaudited)
| 4. | Stock-Based Compensation |
We account for stock-based employee compensation arrangements in accordance with the provisions and related interpretations of Accounting Principles Board Opinion 25, “Accounting for Stock Issued to Employees” and have elected to follow the “disclosure only” alternative prescribed by SFAS 123, “Accounting for Stock-Based Compensation”.
Had compensation cost for stock-based compensation been determined consistent with SFAS 123, the net earnings (loss) and net earnings (loss) per share would have been adjusted to the following pro-forma amounts (in thousands, except for per share data):
| Three months ended March 31, |
Nine months ended March 31, |
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| 2004 |
2003 |
2004 |
2003 |
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| Net earnings (loss), as reported |
$ | 502 | $ | (2,068 | ) | $ | (195 | ) | $ | (6,308 | ) | |||||
| Total stock-based employee compensation expense determined under fair value based method |
(652 | ) | (730 | ) | (1,945 | ) | (2,073 | ) | ||||||||
| Pro forma net loss |
$ | (150 | ) | $ | (2,798 | ) | $ | (2,140 | ) | $ | (8,381 | ) | ||||
| Net earnings (loss) per share |
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| Basic - as reported |
$ | 0.04 | $ | (0.15 | ) | $ | (0.01 | ) | $ | (0.45 | ) | |||||
| Basic - pro forma |
$ | (0.01 | ) | $ | (0.20 | ) | $ | (0.15 | ) | $ | (0.60 | ) | ||||
| Diluted - as reported |
$ | 0.03 | $ | (0.15 | ) | $ | ||||||||||