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 September 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 000-31103
LEXAR MEDIA, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 33-0723123 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 47300 Bayside Parkway Fremont, California |
94538 | |
| (Address of principal executive offices) | (Zip Code) | |
(510) 413-1200
(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 ¨
Number of shares of common stock outstanding as of November 1, 2004: 79,197,641
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
TABLE OF CONTENTS
| Page | ||||||
| Item 1. |
3 | |||||
| Condensed Consolidated Balance Sheets as of September 30, 2004 and December 31, 2003 (unaudited) |
3 | |||||
| 4 | ||||||
| 5 | ||||||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
6 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 | ||||
| Item 3. |
46 | |||||
| Item 4. |
47 | |||||
| Item 1. |
48 | |||||
| Item 2. |
51 | |||||
| Item 3. |
51 | |||||
| Item 4. |
51 | |||||
| Item 5. |
51 | |||||
| Item 6. |
51 | |||||
| 52 | ||||||
The Lexar Media name and logo are trademarks that are federally registered in the United States. The titles and logos associated with our products appearing in this report, including ActiveMemory, JumpDrive, JumpGear, JumpShot, and TouchGuard, are either federally registered trademarks or are subject to pending applications for registration. Our trademarks may also be registered in other jurisdictions. Other trademarks or trade names appearing elsewhere in this report are the property of their respective owners.
2
LEXAR MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
| September 30, 2004 |
December 31, 2003 |
|||||||
| A S S E T S |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 65,191 | $ | 115,698 | ||||
| Restricted cash |
5,000 | 5,000 | ||||||
| Short-term investments |
19,236 | — | ||||||
| Accounts receivable, net of allowances for sales returns, discounts and doubtful accounts of $9,098 and $7,394 |
106,509 | 89,579 | ||||||
| Inventories |
130,652 | 99,620 | ||||||
| Prepaid expenses and other current assets |
9,714 | 5,778 | ||||||
| Total current assets |
336,302 | 315,675 | ||||||
| Property and equipment, net |
6,054 | 3,579 | ||||||
| Intangible assets, net |
385 | 499 | ||||||
| Other assets |
1,213 | 602 | ||||||
| Total assets |
$ | 343,954 | $ | 320,355 | ||||
| L I A B I L I T I E S A N D S T O C K H O L D E R S’ E Q U I T Y |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 103,477 | $ | 82,383 | ||||
| Accrued liabilities |
59,240 | 39,936 | ||||||
| Deferred license revenue and product margin |
2,931 | 11,066 | ||||||
| Total current liabilities |
165,648 | 133,385 | ||||||
| Deferred license revenue, net of current portion |
302 | 691 | ||||||
| Total liabilities |
165,950 | 134,076 | ||||||
| Contingencies (Note 10) |
||||||||
| Stockholders’ equity: |
||||||||
| Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued and outstanding |
— | — | ||||||
| Common stock, $0.0001 par value: 200,000,000 shares authorized; 79,170,513 and 78,038,798 shares issued and outstanding |
8 | 8 | ||||||
| Additional paid-in capital |
282,306 | 278,837 | ||||||
| Notes receivable from stockholders |
— | (412 | ) | |||||
| Accumulated deficit |
(104,119 | ) | (91,935 | ) | ||||
| Accumulated other comprehensive loss |
(191 | ) | (219 | ) | ||||
| Total stockholders’ equity |
178,004 | 186,279 | ||||||
| Total liabilities and stockholders’ equity |
$ | 343,954 | $ | 320,355 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
LEXAR MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
| Three Months Ended |
Nine Months Ended |
|||||||||||||||
| September 30, 2004 |
September 30, 2003 |
September 30, 2004 |
September 30, 2003 |
|||||||||||||
| Net revenues: |
||||||||||||||||
| Product revenues |
$ | 164,069 | $ | 94,301 | $ | 487,255 | $ | 221,732 | ||||||||
| License and royalty revenues |
1,152 | 4,369 | 5,891 | 13,065 | ||||||||||||
| Total net revenues |
165,221 | 98,670 | 493,146 | 234,797 | ||||||||||||
| Cost of product revenues |
141,650 | 72,326 | 434,641 | 171,820 | ||||||||||||
| Gross margin |
23,571 | 26,344 | 58,505 | 62,977 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
2,484 | 1,825 | 7,170 | 5,518 | ||||||||||||
| Sales and marketing |
16,180 | 8,004 | 41,348 | 21,212 | ||||||||||||
| General and administrative |
8,292 | 5,593 | 20,245 | 13,511 | ||||||||||||
| Total operating expenses |
26,956 | 15,422 | 68,763 | 40,241 | ||||||||||||
| Income (loss) from operations |
(3,385 | ) | 10,922 | (10,258 | ) | 22,736 | ||||||||||
| Other income (expense): |
||||||||||||||||
| Interest and other expense |
(363 | ) | (38 | ) | (710 | ) | (246 | ) | ||||||||
| Interest and other income |
243 | 91 | 671 | 385 | ||||||||||||
| Foreign exchange gain (loss), net |
344 | (511 | ) | (518 | ) | (606 | ) | |||||||||
| Total other income (expense) |
224 | (458 | ) | (557 | ) | (467 | ) | |||||||||
| Income (loss) before income taxes |
(3,161 | ) | 10,464 | (10,815 | ) | 22,269 | ||||||||||
| Income taxes |
355 | 733 | 1,369 | 1,217 | ||||||||||||
| Net income (loss) |
$ | (3,516 | ) | $ | 9,731 | $ | (12,184 | ) | $ | 21,052 | ||||||
| Net income (loss) per common share: |
||||||||||||||||
| Basic |
$ | (0.04 | ) | $ | 0.14 | $ | (0.15 | ) | $ | 0.31 | ||||||
| Diluted |
$ | (0.04 | ) | $ | 0.12 | $ | (0.15 | ) | $ | 0.27 | ||||||
| Shares used in computing net income (loss) per common share: |
||||||||||||||||
| Basic |
79,092 | 71,017 | 78,745 | 68,204 | ||||||||||||
| Diluted |
79,092 | 83,648 | 78,745 | 78,914 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
LEXAR MEDIA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Nine Months Ended |
||||||||
| September 30, 2004 |
September 30, 2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (12,184 | ) | $ | 21,052 | |||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |
||||||||
| Depreciation and amortization |
1,628 | 1,154 | ||||||
| Amortization of stock-based compensation |
— | 460 | ||||||
| Amortization of short-term investment premium |
49 | |||||||
| Loss on disposition of assets |
51 | — | ||||||
| Tax benefit from stock option and purchase plans |
466 | 894 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
(17,042 | ) | (9,866 | ) | ||||
| Inventories |
(31,143 | ) | (33,604 | ) | ||||
| Prepaid expenses and other assets |
(4,560 | ) | (7,013 | ) | ||||
| Accounts payable and accrued liabilities |
40,578 | 40,818 | ||||||
| Other non-current liabilities |
— | (49 | ) | |||||
| Deferred license revenue and product margin |
(8,584 | ) | (8,603 | ) | ||||
| Net cash (used in) provided by operating activities |
(30,741 | ) | 5,243 | |||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(4,010 | ) | (1,572 | ) | ||||
| Maturities and sales of short-term investments |
6,600 | — | ||||||
| Purchase of short-term investments |
(25,910 | ) | — | |||||
| Net cash used in investing activities |
(23,320 | ) | (1,572 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Issuance of stock under employee stock purchase plan | ||||||||