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 June 30, 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: 0-27234
PHOTON DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
| California | 94-3007502 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
5970 Optical Court
San Jose, California 95138-1400
(Address of principal executive offices including zip code)
(408) 226-9900
(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 in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of July 30, 2004, there were 16,807,936 shares outstanding of the Registrant’s Common Stock, no par value.
| Page | ||||
| PART I |
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| Item 1. |
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| Condensed Consolidated Balance Sheets as of June 30, 2004 and September 30, 2003 |
1 | |||
| 2 | ||||
| Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2004 and 2003 |
3 | |||
| 4 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 | ||
| Item 3. |
38 | |||
| Item 4. |
39 | |||
| PART II |
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| Item 1. |
39 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
40 | ||
| Item 3. |
40 | |||
| Item 4. |
40 | |||
| Item 5. |
40 | |||
| Item 6. |
40 | |||
| 41 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30, 2004 |
September 30, 2003 |
|||||||
| (in thousands) | ||||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 22,138 | $ | 18,305 | ||||
| Short-term investments |
64,757 | 98,164 | ||||||
| Accounts receivable, net |
42,366 | 10,402 | ||||||
| Inventories |
28,759 | 9,887 | ||||||
| Other current assets |
5,294 | 6,449 | ||||||
| Total current assets |
163,314 | 143,207 | ||||||
| Land, property and equipment, net |
20,153 | 12,298 | ||||||
| Other assets |
4,244 | 3,002 | ||||||
| Intangible assets, net |
4,028 | 2,894 | ||||||
| Goodwill |
153 | 518 | ||||||
| Total assets |
$ | 191,892 | $ | 161,919 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 19,379 | $ | 4,239 | ||||
| Other current liabilities |
12,633 | 10,605 | ||||||
| Deferred gross margin |
3,113 | 2,739 | ||||||
| Total current liabilities |
35,125 | 17,583 | ||||||
| Other liabilities |
1,512 | 193 | ||||||
| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Common stock, no par value |
283,779 | 279,417 | ||||||
| Accumulated deficit |
(128,617 | ) | (135,872 | ) | ||||
| Accumulated other comprehensive income |
93 | 598 | ||||||
| Total shareholders’ equity |
155,255 | 144,143 | ||||||
| Total liabilities and shareholders’ equity |
$ | 191,892 | $ | 161,919 | ||||
See accompanying notes to condensed consolidated financial statements.
1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Revenue |
$ | 38,452 | $ | 17,996 | $ | 89,429 | $ | 46,216 | ||||||||
| Cost of revenue |
20,711 | 11,789 | 48,306 | 31,267 | ||||||||||||
| Gross margin |
17,741 | 6,207 | 41,123 | 14,949 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
8,031 | 6,313 | 19,985 | 16,219 | ||||||||||||
| Selling, general and administrative |
4,594 | 3,176 | 13,158 | 10,020 | ||||||||||||
| Impairment of goodwill |
— | — | 665 | — | ||||||||||||
| Impairment of purchased intangibles |
— | — | 2,089 | — | ||||||||||||
| Impairment of fixed assets |
— | — | 234 | — | ||||||||||||
| Acquired in-process research and development |
210 | 625 | 210 | 2,474 | ||||||||||||
| Amortization of intangible assets |
155 | 408 | 416 | 1,035 | ||||||||||||
| Total operating expenses |
12,990 | 10,522 | 36,757 | 29,748 | ||||||||||||
| Income (loss) from operations |
4,751 | (4,315 | ) | 4,366 | (14,799 | ) | ||||||||||
| Interest income and other, net |
808 | 955 | 4,943 | 2,496 | ||||||||||||
| Income (loss) from continuing operations before income taxes |
5,559 | (3,360 | ) | 9,309 | (12,303 | ) | ||||||||||
| Provision for income taxes |
134 | 3 | 560 | 51 | ||||||||||||
| Income (loss) from continuing operations |
5,425 | (3,363 | ) | 8,749 | (12,354 | ) | ||||||||||
| Loss from discontinued operations |
(265 | ) | (5,607 | ) | (1,494 | ) | (44,647 | ) | ||||||||
| Net income (loss) |
$ | 5,160 | $ | (8,970 | ) | $ | 7,255 | $ | (57,001 | ) | ||||||
| Net income (loss) per share from continuing operations |
| |||||||||||||||
| Basic |
$ | 0.33 | $ | (0.21 | ) | $ | 0.53 | $ | (0.77 | ) | ||||||
| Diluted |
$ | 0.32 | $ | (0.21 | ) | $ | 0.51 | $ | (0.77 | ) | ||||||
| Net loss per share from discontinued operations |
||||||||||||||||
| Basic |
$ | (0.02 | ) | $ | (0.35 | ) | $ | (0.09 | ) | $ | (2.78 | ) | ||||
| Diluted |
$ | (0.02 | ) | $ | (0.35 | ) | $ | (0.09 | ) | $ | (2.78 | ) | ||||
| Net income (loss) per share |
||||||||||||||||
| Basic |
$ | 0.31 | $ | (0.56 | ) | $ | 0.44 | $ | (3.55 | ) | ||||||
| Diluted |
$ | 0.30 | $ | (0.56 | ) | $ | 0.42 | $ | (3.55 | ) | ||||||
| Weighted average number of shares: |
| |||||||||||||||
| Basic |
16,663 | 16,003 | 16,565 | 16,036 | ||||||||||||
| Diluted |
17,071 | 16,003 | 17,141 | 16,036 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| (in thousands) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) from continuing operations |
$ | 8,749 | $ | (12,354 | ) | |||
| Adjustments to reconcile net income (loss) from continuing operations to net cash used in operating activities from continuing operations: |
||||||||
| Depreciation |
2,721 | 1,648 | ||||||
| Amortization of intangible assets |
416 | 1,592 | ||||||
| Impairment of goodwill |
665 | — | ||||||
| Impairment of purchased intangibles, and fixed assets |
2,323 | — | ||||||
| Acquired in-process research and development |
210 | 2,474 | ||||||
| Stock ownership expense |
164 | 142 | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
(32,099 | ) | (2,487 | ) | ||||
| Inventories |
(16,776 | ) | 1,900 | |||||
| Other current assets |
758 | (189 | ) | |||||
| Other assets |
(1,242 | ) | (463 | ) | ||||
| Accounts payable |
15,342 | (447 | ) | |||||
| Other current liabilities |
1,592 | (2,112 | ) | |||||
| Deferred gross margin |
374 | 5,943 | ||||||
| Other liabilities |
(65 | ) | — | |||||
| Net cash used in operating activities from continuing operations |
(16,868 | ) | (4,353 | ) | ||||
| Net cash used in operating activities from discontinued operations |
(1,453 | ) | (10,947 | ) | ||||
| Net cash used in operating activities |
(18,321 | ) | (15,300 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(12,508 | ) | (1,588 | ) | ||||
| Acquisition of assets of Quantum Composers, Inc. |
(1,000 | ) | ||||||