Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
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þ |
|
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
for the quarterly period ended June 30, 2008
or
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o |
|
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: 000-30109
LUMINEX CORPORATION
(Exact name of registrant as specified in its charter)
|
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|
DELAWARE
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74-2747608 |
(State or other jurisdiction of
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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|
12212 TECHNOLOGY BLVD., AUSTIN, TEXAS
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|
78727 |
(Address of principal executive offices)
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(Zip Code) |
(512) 219-8020
(Registrants 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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
There were 41,095,592 shares of the registrants Common Stock, par value $0.001 per share,
outstanding on August 4, 2008.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LUMINEX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
|
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|
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June 30, |
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December 31, |
|
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|
2008 |
|
|
2007 |
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|
(unaudited) |
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|
|
ASSETS
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Current assets: |
|
|
|
|
|
|
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|
Cash and cash equivalents |
|
$ |
102,679 |
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$ |
27,233 |
|
Short-term investments |
|
|
9,876 |
|
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|
6,944 |
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Accounts receivable, net |
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|
10,042 |
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|
11,827 |
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Inventory, net |
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8,513 |
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6,508 |
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Other |
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1,833 |
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|
856 |
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Total current assets |
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132,943 |
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53,368 |
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Property and equipment, net |
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12,366 |
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12,673 |
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Intangible assets, net |
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16,861 |
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16,919 |
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Goodwill |
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39,617 |
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39,617 |
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Other |
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|
857 |
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|
982 |
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Total assets |
|
$ |
202,644 |
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$ |
123,559 |
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities: |
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Accounts payable |
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$ |
3,816 |
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$ |
3,346 |
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Accrued liabilities |
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6,100 |
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6,811 |
|
Deferred revenue and other |
|
|
3,019 |
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|
2,410 |
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Total current liabilities |
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12,935 |
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|
12,567 |
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Long-term debt |
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3,551 |
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2,976 |
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Deferred revenue and other |
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4,583 |
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4,536 |
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Total liabilities |
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21,069 |
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20,079 |
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Stockholders equity: |
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Common stock |
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40 |
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35 |
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Additional paid-in capital |
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271,376 |
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191,218 |
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Accumulated other comprehensive gain |
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49 |
|
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|
(8 |
) |
Accumulated deficit |
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(89,890 |
) |
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(87,765 |
) |
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Total stockholders equity |
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181,575 |
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|
103,480 |
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|
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Total liabilities and stockholders equity |
|
$ |
202,644 |
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|
$ |
123,559 |
|
|
|
|
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|
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|
See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.
1
LUMINEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
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Three Months Ended |
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Six Months Ended |
|
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June 30, |
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June 30, |
|
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2008 |
|
|
2007 |
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2008 |
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2007 |
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|
(unaudited) |
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(unaudited) |
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Revenue |
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$ |
24,341 |
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$ |
17,548 |
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$ |
47,353 |
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$ |
34,155 |
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Cost of revenue |
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7,778 |
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7,211 |
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15,533 |
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13,388 |
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Gross profit |
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16,563 |
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10,337 |
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31,820 |
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20,767 |
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Operating expenses: |
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Research and development |
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5,025 |
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3,865 |
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9,456 |
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6,571 |
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Selling, general and administrative |
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|
12,052 |
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10,716 |
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24,146 |
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18,812 |
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In-process research and development expense |
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8,000 |
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8,000 |
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Total operating expenses |
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|
17,077 |
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|
|
22,581 |
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|
33,602 |
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|
33,383 |
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Loss from operations |
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(514 |
) |
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|
(12,244 |
) |
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|
(1,782 |
) |
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(12,616 |
) |
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|
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Interest expense from long-term debt |
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|
(134 |
) |
|
|
(334 |
) |
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|
(269 |
) |
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(419 |
) |
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Other income, net |
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(181 |
) |
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|
421 |
|
|
|
139 |
|
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|
1,028 |
|
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Income taxes |
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|
(130 |
) |
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|
101 |
|
|
|
(213 |
) |
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|
87 |
|
|
|
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|
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Net loss |
|
$ |
(959 |
) |
|
$ |
(12,056 |
) |
|
$ |
(2,125 |
) |
|
$ |
(11,920 |
) |
|
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|
|
|
|
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|
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Net loss per share, basic |
|
$ |
(0.03 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.36 |
) |
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|
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Shares used in computing net loss
per share, basic |
|
|
35,698 |
|
|
|
35,006 |
|
|
|
35,559 |
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|
33,504 |
|
|
|
|
|
|
|
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|
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|
|
|
|
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|
Net loss per share, diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.36 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss
per share, diluted |
|
|
35,698 |
|
|
|
35,006 |
|
|
|
35,559 |
|
|
|
33,504 |
|
See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.
2
LUMINEX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
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Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
(unaudited) |
|
|
(unaudited) |
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net loss |
|
$ |
(959 |
) |
|
$ |
(12,056 |
) |
|
$ |
(2,125 |
) |
|
$ |
(11,920 |
) |
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,648 |
|
|
|
1,837 |
|
|
|
3,305 |
|
|
|
2,377 |
|
In-process research and development expense |
|
|
|
|
|
|
8,000 |
|
|
|
|
|
|
|
8,000 |
|
Stock-based compensation and other |
|
|
1,692 |
|
|
|
1,593 |
|
|
|
3,421 |
|
|
|
3,100 |
|
Loss on disposal of assets |
|
|
7 |
|
|
|
34 |
|
|
|
7 |
|
|
|
88 |
|
Other |
|
|
124 |
|
|
|
4 |
|
|
|
592 |
|
|
|
4 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
1,734 |
|
|
|
(580 |
) |
|
|
1,785 |
|
|
|
(1,657 |
) |
Inventory, net |
|
|
(1,076 |
) |
|
|
(689 |
) |
|
|
(2,005 |
) |
|
|
(721 |
) |
Prepaids and other |
|
|
(638 |
) |
|
|
(460 |
) |
|
|
(931 |
) |
|
|
(120 |
) |
Accounts payable |
|
|
348 |
|
|
|
(2,263 |
) |
|
|
638 |
|
|
|
(3,817 |
) |
Accrued liabilities |
|
|
1,325 |
|
|
|
772 |
|
|
|
(1,056 |
) |
|
|
(2,353 |
) |
Deferred revenue |
|
|
(32 |
) |
|
|
(217 |
) |
|
|
592 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net cash provided by (used in) operating activities |
|
|
4,173 |
|
|
|
(4,025 |
) |
|
|
4,223 |
|
|
|
(6,876 |
) |
|
|
|
|
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|
|
|
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|
|
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|
|
|
|
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Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (sales) purchases of held-to-maturity investments |
|
|
(1,951 |
) |
|
|
2,185 |
|
|
|
(2,933 |
) |
|
|
9,710 |
|
Purchase of property and equipment |
|
|
(1,107 |
) |
|
|
(1,724 |
) |
|
|
(1,894 |
) |
|
|
(3,329 |
) |
Acquisition of business, net of cash acquired |
|
|
|
|
|
|
(744 |
) |
|
|
|
|
|
|
(2,735 |
) |
Acquisition activity |
|
|
(412 |
) |
|
|
|
|
|
|
(412 |
) |
|
|
|
|
Acquired technology rights |
|
|
(982 |
) |
|
|
(265 |
) |
|
|
(982 |
) |
|
|
(265 |
) |
Proceeds from sale of assets |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(4,452 |
) |
|
|
(518 |
) |
|
|
(6,221 |
) |
|
|
3,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on debt |
|
|
(134 |
) |
|
|
(117 |
) |
|
|
(134 |
) |
|
|
(12,345 |
) |
Proceeds from secondary offering, net of offering costs |
|
|
74,779 |
|
|
|
|
|
|
|
74,779 |
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
1,962 |
|
|
|
159 |
|
|
|
2,770 |
|
|
|
174 |
|
Other |
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
76,607 |
|
|
|
49 |
|
|
|
77,415 |
|
|
|
(12,164 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate on cash |
|
|
(9 |
) |
|
|
135 |
|
|
|
29 |
|
|
|
51 |
|
Change in cash and cash equivalents |
|
|
76,319 |
|
|
|
(4,359 |
) |
|
|
75,446 |
|
|
|
(15,578 |
) |
Cash and cash equivalents, beginning of period |
|
|
26,360 |
|
|
|
16,195 |
|
|
|
27,233 |
|
|
|
27,414 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
102,679 |
|
|
$ |
11,836 |
|
|
$ |
102,679 |
|
|
$ |
11,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cashflow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and penalties paid |
|
$ |
23 |
|
|
$ |
254 |
|
|
$ |
25 |
|
|
$ |
1,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash effect of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price |
|
$ |
|
|
|
$ |
(744 |
) |
|
$ |
|
|
|
$ |
(47,745 |
) |
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,755 |
|
Conversion of Tm options and warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,315 |
|
Cash acquired |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition, net of cash acquired |
|
$ |
|
|
|
$ |
(744 |
) |
|
$ |
|
|
|
$ |
(2,735 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes which are an integral part of these
Condensed Consolidated Financial Statements.
3
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been prepared by
Luminex Corporation (the Company or Luminex) in accordance with United States generally
accepted accounting principles for interim financial information and the rules and regulations of
the Securities and Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by United States generally accepted accounting principles for complete financial
statements. The condensed consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal
recurring entries) considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 2008 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2008. These financial statements
should be read in conjunction with the financial statements and notes thereto included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2007.
Certain items in prior financial statements have been reclassified to conform to the current
presentation.
The Companys comprehensive income or loss is comprised of net income or loss and foreign
currency translation. Comprehensive loss for the three months ended June 30, 2008 was
approximately $1.0 million and comprehensive loss for the three months ended June 30, 2007 was
approximately $12.1 million.
The Company has two segments for financial reporting purposes: the Technology Segment and the
Assay Segment. See Note 6 Segment Information.
The acquisition of Tm Bioscience Corporation, now known as Luminex Molecular Diagnostics or
LMD, was completed on March 1, 2007; therefore, the results of operations in our consolidated
financial statements only include results from LMD since this date.
On June 30, 2008, we closed on a public offering of 4,025,000 shares
of common stock which raised $74.8 million, net of approximately $5.4 million of offering costs.
Pro Forma Information
The financial information in the table below summarizes the combined results of operations of
Luminex and LMD, on a pro forma basis, as though the companies had been combined at the beginning
of 2007.
The pro forma financial information is presented for informational purposes only and is not
indicative of the results of operation that would have been achieved if the acquisition of LMD had
taken place at the beginning of fiscal 2007.
The following table summarizes the pro forma financial information (in thousands, except per
share amounts):
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, 2007 |
|
Revenues |
|
$ |
34,474 |
|
Net loss |
|
$ |
(18,297 |
) |
Net loss per share, basic and diluted |
|
$ |
(0.52 |
) |
4
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 2 INVESTMENTS
Held-to-maturity securities as of June 30, 2008 consisted of $9.9 million of federal agency
debt securities. Amortized cost approximates fair value of these investments.
The amortized costs of held-to-maturity debt securities at June 30, 2008, by contractual
maturity, are shown below (in thousands). Expected maturities may differ from contractual
maturities because the issuers of the securities may have the right to prepay obligations without
prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued |
|
|
Amortized |
|
|
|
Cost |
|
|
Interest |
|
|
Cost |
|
Due in one year or less |
|
$ |
9,876 |
|
|
$ |
73 |
|
|
$ |
9,949 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 3 INVENTORY, NET
Inventory consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
Parts and supplies |
|
$ |
4,530 |
|
|
$ |
3,613 |
|
Work-in-progress |
|
|
2,499 |
|
|
|
1,632 |
|
Finished goods |
|
|
2,206 |
|
|
|
1,956 |
|
|
|
|
|
|
|
|
|
|
|
9,235 |
|
|
|
7,201 |
|
|
Less: Allowance for excess and obsolete inventory |
|
|
(722 |
) |
|
|
(693 |
) |
|
|
|
|
|
|
|
|
|
$ |
8,513 |
|
|
$ |
6,508 |
|
|
|
|
|
|
|
|
NOTE 4 EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per
Share, basic and diluted net income per share is computed by dividing the net income for the
period by the weighted average number of common shares outstanding during the period.
5
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
A reconciliation of the denominators used in computing per share net income, or EPS, is as
follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(959 |
) |
|
$ |
(12,056 |
) |
|
$ |
(2,125 |
) |
|
$ |
(11,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic net loss per share
weighted average common stock outstanding |
|
|
35,698 |
|
|
|
35,006 |
|
|
|
35,559 |
|
|
|
33,504 |
|
Dilutive common stock equivalents common stock
options and awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted net loss per share
weighted average common stock outstanding and
dilutive common stock equivalents |
|
|
35,698 |
|
|
|
35,006 |
|
|
|
35,559 |
|
|
|
33,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per share |
|
$ |
(0.03 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.36 |
) |
Diluted net loss per share |
|
$ |
(0.03 |
) |
|
$ |
(0.34 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.36 |
) |
Restricted stock awards, or RSAs, and stock options to acquire 2.8 million and 1.7 million
shares, respectively, for the three months ended June 30, 2008 and 2007 and 2.6 million and 1.3
million, respectively, for the six months ended June 30, 2008 and 2007 were excluded from the
computations of diluted EPS because the effect of including the RSAs and stock options would have
been anti-dilutive.
NOTE 5 STOCK-BASED COMPENSATION
The Companys stock option activity for the six months ended June 30, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
Exercise |
|
Stock Options |
|
(in thousands) |
|
|
Price |
|
Outstanding at December 31, 2007 |
|
|
3,444 |
|
|
$ |
11.96 |
|
Granted |
|
|
77 |
|
|
|
20.70 |
|
Exercised |
|
|
(249 |
) |
|
|
11.11 |
|
Cancelled or expired |
|
|
(3 |
) |
|
|
21.71 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2008 |
|
|
3,269 |
|
|
$ |
12.22 |
|
The Company had $1.7 million of total unrecognized compensation costs related to stock options
at June 30, 2008 that are expected to be recognized over a weighted-average period of 2.1 years.
6
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Companys restricted shares activity for the six months ended June 30, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Shares |
|
|
Grant-Date |
|
Restricted Stock Awards |
|
(in thousands) |
|
|
Fair Value |
|
Non-vested at December 31, 2007 |
|
|
1,333 |
|
|
$ |
13.37 |
|
Granted |
|
|
292 |
|
|
|
20.91 |
|
Vested |
|
|
(235 |
) |
|
|
12.71 |
|
Cancelled or expired |
|
|
(35 |
) |
|
|
13.98 |
|
|
|
|
|
|
|
|
Non-vested at June 30, 2008 |
|
|
1,355 |
|
|
$ |
15.09 |
|
As of June 30, 2008, there was $19.3 million of unrecognized compensation cost related to
RSAs. That cost is expected to be recognized over a weighted average-period of 3.3 years.
The following are the stock-based compensation costs recognized in the Companys condensed
consolidated statements of income (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Cost of revenue |
|
$ |
122 |
|
|
$ |
71 |
|
|
$ |
234 |
|
|
$ |
142 |
|
Research and development |
|
|
255 |
|
|
|
165 |
|
|
|
499 |
|
|
|
343 |
|
Selling, general and administrative |
|
|
1,315 |
|
|
|
1,357 |
|
|
|
2,688 |
|
|
|
2,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation costs |
|
$ |
1,692 |
|
|
$ |
1,593 |
|
|
$ |
3,421 |
|
|
$ |
3,095 |
|
NOTE 6 SEGMENT INFORMATION
Management has determined that we have two segments for financial reporting purposes: the
Technology Segment and the Assay Segment. The accounting principles of the segments are the same
as those described in the Summary of Significant Accounting Policies in our Annual Report on Form
10-K for the year ended December 31, 2007. Following is selected information as of or for the six
months ended June 30, 2008 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
Assay |
|
|
Intersegment |
|
|
|
|
|
|
Group |
|
|
Group |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external
customers |
|
$ |
38,914 |
|
|
$ |
8,439 |
|
|
$ |
|
|
|
$ |
47,353 |
|
Intersegment revenue |
|
|
(2,405 |
) |
|
|
(86 |
) |
|
|
2,491 |
|
|
|
|
|
Depreciation and amortization |
|
|
1,577 |
|
|
|
1,819 |
|
|
|
(91 |
) |
|
|
3,305 |
|
Segment profit (loss) |
|
|
5,457 |
|
|
|
(7,401 |
) |
|
|
(181 |
) |
|
|
(2,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
223,067 |
|
|
|
65,741 |
|
|
|
(86,164 |
) |
|
|
202,644 |
|
7
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Following is selected information as of or for the six months ended June 30, 2007 (in
thousands), with recognition that the LMD impact is only for the period of March 1, 2007 through
June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
Assay |
|
|
Intersegment |
|
|
|
|
|
|
Group |
|
|
Group |
|
|
Eliminations |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers |
|
$ |
28,980 |
|
|
$ |
5,175 |
|
|
$ |
|
|
|
$ |
34,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenue |
|
|
(1,580 |
) |
|
|
(25 |
) |
|
|
1,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
938 |
|
|
|
658 |
|
|
|
(86 |
) |
|
|
1,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
|
|
1,674 |
|
|
|
(13,208 |
) |
|
|
(386 |
) |
|
|
(11,920 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
223,067 |
|
|
|
65,741 |
|
|
|
(6,284 |
) |
|
|
282,524 |
|
NOTE 7 INCOME TAXES
The Company adopted the Financial Accounting Standards Board (FASB) Interpretation 48,
Accounting for Uncertainty in Income Taxes (FIN 48) at the beginning of fiscal year 2007. As
of the date of adoption and at June 30, 2008, all of the unrecognized tax benefits are associated
with tax carryforwards that, if recognized, would have no effect on the effective tax rate because
the recognition of the associated deferred tax asset would be offset by a change to the valuation
allowance.
The Company recognizes interest and penalties related to uncertain tax positions in the
provision for income taxes. The Company has not recognized any interest or penalties related to
uncertain tax positions to date.
NOTE 8 COMMITMENTS AND CONTINGENCIES
On January 16, 2008, Luminex Corporation and Luminex Molecular Diagnostics, Inc. were served
with a complaint, filed by The Research Foundation of the State University of New York (SUNY) in
Federal District Court for the Northern District of New York, alleging, among other claims, that
LMD breached its license agreement with SUNY by failing to pay royalties allegedly owed under the
agreement. The complaint seeks an undetermined amount of damages as well as injunctive relief. On
February 9, 2008, Luminex and LMD filed an answer to this complaint denying all claims brought by
SUNY. The parties participated in a scheduling conference on April 2, 2008, to establish deadlines
for completion of discovery. A trial date has not been set. The parties are engaging in the
discovery process.
8
LUMINEX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 9 RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements (FAS 157). FAS 157
provides enhanced guidance for using fair value to measure assets and liabilities. It does not
require any new fair value measurements, but does require expanded disclosures to provide
information about the extent to which fair value is used to measure assets and liabilities, the
methods and assumptions used to measure fair value, and the effect of fair value measures on
earnings. FAS 157 is effective for financial assets and financial liabilities for fiscal years
beginning after November 15, 2007. In February 2008, the FASB issued FASB Staff Position FAS
157-2, Effective Date of FASB Statement No. 157 (the FSP). The FSP delayed, for one year, the
effective date of FAS 157 for all nonfinancial assets and liabilities, except those that are
recognized or disclosed in the financial statements on at least an annual basis. The
implementation of SFAS No. 157 for financial assets and financial liabilities, effective January 1,
2008, did not have a material impact on our consolidated financial position and results of
operations. We will disclose the fair value of our debt in our Annual Report on Form 10-K for the
year ended December 31, 2008. The Company is currently assessing the impact of SFAS No. 157 for
nonfinancial assets and nonfinancial liabilities on its consolidated financial position and results
of operations.
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB Statement No. 115 (FAS 159). FAS No. 159
permits entities to choose to measure many financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has been elected are
reported in earnings. FAS No. 159 is effective for fiscal years beginning after November 15, 2007.
The implementation of this standard did not have a material impact on our consolidated financial
position and results of operations.
In December 2007, the FASB issued FAS No. 141 (Revised 2007), Business Combinations (FAS
141R) which replaces FAS No. 141, Business Combinations and FAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements (FAS 160). FAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. FAS 141R also establishes disclosure requirements that will enable
users to evaluate the nature and financial effects of the business combination. FAS 160 clarifies
the classification of noncontrolling interests in the financial statements and the accounting for
and reporting of transactions between the reporting entity and holders of such noncontrolling
interests. FAS 141R and FAS 160 are effective for our fiscal year 2009 and must be applied
prospectively to all new acquisitions closing on or after January 1, 2009. We are currently
evaluating the potential impact, if any, of FAS 141R and FAS 160 on our consolidated financial
position and results of operations.
9
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the condensed consolidated
financial statements and the accompanying notes included in Part I, Item 1 of this Report, the
Risk Factors included in Part II, Item 1A of this Report and Part I, Item 1A of our Annual Report
on Form 10-K for the year ended December 31, 2007.
SAFE HARBOR CAUTIONARY STATEMENT
This Quarterly Report on Form 10-Q contains statements that are forward-looking statements
under the Private Securities Litigation Reform Act of 1995. Forward-looking statements give our
current expectations of forecasts of future events. All statements other than statements of current
or historical fact contained in this report, including statements regarding our future financial
position, business strategy, budgets, projected costs, and plans and objectives of management for
future operations, are forward-looking statements. The words anticipate, believe, continue,
should, estimate, expect, intend, may, plan, projects, will, and similar
expressions, as they relate to us, are intended to identify forward-looking statements. These
statements are based on our current plans and actual future activities, and our results of
operations may be materially different from those set forth in the forward-looking statements as a
result of known or unknown risks and uncertainties, including, among other things:
|
|
|
risks and uncertainties relating to market demand and acceptance of our products and
technology; |
|
|
|
|
dependence on strategic partners for development, commercialization and distribution of
products; |
|
|
|
|
concentration of our revenue in a limited number of strategic partners; |
|
|
|
|
fluctuations in quarterly results due to a lengthy and unpredictable sales cycle and
bulk purchases of consumables; |
|
|
|
|
our ability to scale manufacturing operations and manage operating expenses, gross
margins and inventory levels; |
|
|
|
|
potential shortages of components; |
|
|
|
|
competition; |
|
|
|
|
our ability to successfully launch new products; |
|
|
|
|
the timing of regulatory approvals; |
|
|
|
|
the implementation, including any modification, of our strategic operating plans; |
|
|
|
|
the uncertainty regarding the outcome or expense of any litigation brought against us; |
|
|
|
|
risks relating to our foreign operations; and |
|
|
|
|
risks and uncertainties associated with implementing our acquisition strategy and the
ability to integrate acquired companies, including LMD, or selected assets into our
consolidated business operations, including the ability to recognize the benefits of our
acquisitions. |
Any or all of our forward-looking statements in this report may turn out to be inaccurate. We
have based these forward-looking statements largely on our current expectations and projections
about future events and financial trends that we believe may affect our financial condition,
results of operations, business strategy and financial needs. They can be affected by inaccurate
assumptions we might make or by known or unknown risks, uncertainties and assumptions, including
the risks, uncertainties and assumptions outlined above and described in the section titled Risk
Factors below. In light of these risks, uncertainties and assumptions, the forward-looking events
and circumstances discussed in this report may not occur and actual results could differ materially
from those anticipated or implied in the forward-looking statements. When you consider these
forward-looking statements, you should keep in mind these risk factors and other cautionary
statements in this report and our other annual and periodic reports.
Our forward-looking statements speak only as of the date made. We undertake no obligation to
publicly update or revise forward-looking statements, whether as a result of new information,
future events or otherwise. All subsequent written and oral forward-looking statements attributable
to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained in this report. Unless the context requires
otherwise, references in this Quarterly Report on Form 10-Q to Luminex, the Company, we, us
and our refer to Luminex Corporation and its subsidiaries.
10
OVERVIEW
We develop, manufacture and sell proprietary biological testing technologies and products with
applications throughout the life sciences and diagnostics industries. These industries depend on a
broad range of tests, called bioassays, to perform diagnostic tests, discover and develop new drugs
and identify genes. Our xMAP® technology, an open architecture, proprietary multiplexing
technology, allows simultaneous analysis of up to 100 bioassays from a small sample volume,
typically a single drop of fluid, by reading biological tests on the surface of microscopic
polystyrene beads called microspheres. xMAP technology combines this miniaturized liquid array
bioassay capability with small lasers, digital signal processors and proprietary software to create
a system offering advantages in speed, precision, flexibility and cost. Our xMAP technology is
currently being used within various segments of the life sciences industry which includes the
fields of drug discovery and development, clinical diagnostics, genetic analysis, bio-defense,
protein analysis and biomedical research.
Our end-user customers and partners, which include laboratory professionals performing
research, clinical laboratories performing tests on patients as ordered by a physician and other
laboratories, have a fundamental need to perform high quality testing as efficiently as possible.
We have adopted a business model built around strategic partnerships. We have licensed our xMAP
technology to companies, who then develop products that incorporate the xMAP technology that they
sell to the end-user customers. We develop and manufacture the proprietary xMAP laboratory
instrumentation and the proprietary xMAP microspheres and sell these products to our partners. Our
partners then sell xMAP instrumentation and xMAP-based reagent consumable products, which run on
the instrumentation, to the end-user customers. We earn a contractually-determined royalty on the
sales of these xMAP-based reagent consumable products. We were founded on this model, and the
majority of our success to date has been due to this model. As of June 30, 2008, we had 63
strategic partners and product distributors, 34 of which have released commercialized products
using our technology. We and our partners had sold and placed 5,402 xMAP-based instruments in
laboratories worldwide.
Beginning in 2006, we began developing proprietary assays through Luminex Bioscience Group, or
LBG. This activity was supplemented by our March 1, 2007 acquisition of Tm Bioscience Corporation,
which we refer to as Luminex Molecular Diagnostics, or LMD. Our newly formed Assay Segment, which
includes LMD and LBG, is focusing on the molecular diagnostics market through LMD and in certain
specialty markets through LBG.
We have several forms of revenue that result from this business model:
|
|
|
System revenue is generated from the sale of our xMAP systems and peripherals.
Currently, system revenue is derived from the sale of the Luminex 100e and 200 analyzers
often coupled with an optional XY Platform and/or Sheath Delivery System products. This
metric includes all configurations of our xMAP systems including refurbished systems,
demonstration systems and modular components. |
|
|
|
|
Consumable revenue is generated from the sale of our dyed polystyrene microspheres and
sheath fluid. Our larger commercial and development partners often purchase these
consumables in bulk to minimize the number of incoming qualification events and to allow
for longer development and production runs. |
|
|
|
|
Royalty revenue is generated when a partner sells a kit incorporating our proprietary
microspheres to an end user or when a partner utilizes a kit to provide a testing result to
a user. End users can include facilities such as testing labs, development facilities and
research facilities that purchase prepared kits and have specific testing needs or testing
service companies that provide assay results to pharmaceutical research companies or
physicians. |
|
|
|
|
Assay revenue is generated from the sale of our kits which are a combination of chemical
and biological reagents and our proprietary bead technology used to perform diagnostic and
research assays on test samples. Assay revenue currently includes both LBG and LMD sales.
LMD sales have been included since March 1, 2007 as a result of our acquisition that was
effective on that date. Previously, assay revenue generated from LBG was recorded in other
revenue as it did not constitute a material amount of total revenue. |
11
|
|
|
Service revenue is generated when a partner or other owner of a system purchases a
service contract from us after the warranty has expired. Service contract revenue is
amortized over the life of the contract and the costs associated with those contracts are
recognized as incurred. |
|
|
|
|
Other revenue consists of items such as training, shipping, parts sales, license
revenue, grant revenue, contract research and development fees, milestone revenue and other
items that individually amount to less than 5% of total revenue. |
Acquisition of LMD
On March 1, 2007, we completed our acquisition of LMD for $49.4 million. Upon closing the
acquisition, we exchanged 0.06 shares of our common stock for each outstanding share of common
stock of Tm Bioscience, which resulted in the issuance of approximately 3.2 million shares of our
common stock valued at $41.8 million. We retired debt of $13.2 million and incurred approximately
$5.6 million of expense associated with advisors, consultants, and other transaction related costs.
Second Quarter 2008 Highlights
|
|
|
Consolidated total revenue of $24.3 million representing a 38.7% increase over revenue
for the second quarter of 2007, the first full quarter of consolidated activity after the
acquisition of LMD |
|
|
|
|
System shipments of 203 resulting in cumulative life to date shipments of 5,402, up
19.4% from a year ago representing the seventh consecutive quarter of system shipments of
200 or more |
|
|
|
|
Increase in consumables and royalty revenue by 157% and 55%, respectively, from the
second quarter of 2007 |
|
|
|
|
Consolidated gross profit margin of 68% for the second quarter |
|
|
|
|
Raised $74.8 million net proceeds in a public offering of 4,025,000 shares of common
stock |
|
|
|
|
Our partners reported over $55 million of royalty bearing end user sales in xMAP
technology for the quarter ended June 30, 2008 |
Segment Information
We have two reportable segments: The Technology Segment and the Assay Segment. The Technology
Segment, which is the business on which our company was founded, consists of system sales to
partners, raw bead sales, royalties, service and support of the technology, and other miscellaneous
items. The Assay Segment consists of LBG and LMD. This segment is primarily involved in the
development and sale of assays developed on xMAP technology for use on the installed base of
systems.
Future Operations
We expect revenue growth for the remainder of 2008 will be driven by continued adoption of our
core technology coupled with assay introduction and commercialization by the Assay Segment. The
anticipated continued shift in revenue concentration towards higher margin items, assays,
consumables and royalties, should also continue to provide favorable gross margins. Additionally,
we believe that a sustained investment in R&D is necessary to meet the needs of our marketplace;
however, we estimate that R&D expenditures for 2008 will decline as a percentage of revenue from
21% for the year ended December 31, 2007 towards our long term target of 15% of revenue. Finally,
we believe our partner model allows us to leverage our operating expenses, which, assuming revenue
increases and R&D expense as described above, should allow us to generate increased operating
income for 2008 as a percentage of total revenue of our core business.
12
We expect our primary challenges will be increasing traction of partner products incorporating
Luminex technology, capitalizing on the realized synergies of the LMD acquisition,
commercialization and market adoption of output from the Assay Segment, and expanding our footprint
and reputation within our identified target market segments.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The discussion and analysis of our financial condition and results of operations are based
upon our condensed consolidated financial statements, which have been prepared in accordance with
United States generally accepted accounting principles for interim financial statements. The
preparation of these financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Estimates and assumptions are reviewed periodically.
Actual results may differ from these estimates under different assumptions or conditions.
Management believes there have been no significant changes during the quarter ended June 30,
2008 to the items that we disclosed as our critical accounting policies and estimates in
Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual
Report on Form 10-K for the year ended December 31, 2007 other than the addition of the following
policy:
Acquisition Expenses. We currently capitalize all direct costs associated with proposed
acquisitions. If the proposed acquisition is consummated, such costs will be included as a
component of the overall cost of the acquisition. Such costs are expensed at such time as we deem
the consummation of a proposed acquisition to be unsuccessful. Effective January 1, 2009,
acquisition-related costs, including restructuring costs, will be recognized separately from the
acquisition and will generally be expensed as incurred in accordance with Statement of Financial
Accounting Standards No. 141(R), Business Combinations.
13
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30, 2007
Selected consolidated financial data for the three months ended June 30, 2008 and 2007
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
24,341 |
|
|
$ |
17,548 |
|
Gross profit |
|
$ |
16,563 |
|
|
$ |
10,337 |
|
Gross profit margin percentage |
|
|
68 |
% |
|
|
59 |
% |
Operating expenses |
|
$ |
17,077 |
|
|
$ |
22,581 |
|
Net operating loss |
|
$ |
(514 |
) |
|
$ |
(12,244 |
) |
Total revenue increased by 39% to $24.3 million for the three months ended June 30, 2008 from
$17.5 million for the comparable period in 2007. The increase in revenue was primarily attributable
to growth in the Technology Segment, including a 157% increase in consumable revenues to $8.5
million in the second quarter of 2008 from $3.3 million in the second quarter of 2007 and a 55%
increase in royalty revenues to $3.5 million in the second quarter of 2008 from $2.2 million in the
second quarter of 2007.
We continued to experience revenue concentration in a limited number of strategic partners.
Two customers accounted for 42% of consolidated total revenue in the second quarter of 2008 (28%
and 14%, respectively). For comparative purposes, these same two customers accounted for 29% of
total revenue (10% and 19%, respectively) in the second quarter of 2007. The increase in revenue
attributable to our largest customer is due to consumable purchases directly associated with the
development of new products. No other customer accounted for more than 10% of total revenue in
this quarter.
Gross profit margin percentage increased to 68% for the three months ended June 30, 2008 from
59% for the comparable period in 2007 due to the continuing shift in revenue concentration towards
higher margin items such as assays, consumables and royalties. The decrease in operating expenses
from $22.6 million for the second quarter of 2007 to $17.1 million for the second quarter of 2008
was primarily as a result of the $8.0 million write-off of in-process research and development
related to the acquisition of LMD in 2007 offset by additional personnel costs associated with the
increase in research and development and selling, general, and administrative employees to 242 at
June 30, 2008 from 202 at June 30, 2007. Net operating loss decreased as a result of the
non-recurring $8.0 million write-off of in-process research and development related to the
acquisition of LMD in 2007, the increase in revenues in 2008, and the gross margin increase. Other
income, net decreased to $(181,000) for the three months ended June 30, 2008 from $421,000 for the
comparable period in 2007 mainly as a result of $412,000 in costs related to a potential
acquisition that did not occur. In addition, the average rate earned on current invested balances
decreased to 2.1% for the three months ended June 30, 2008 from 5.6% for the three months ended
June 30, 2007. This decrease in the average rate earned is the result of an overall decrease in
market rates compared to the prior year period and as a result of holding shorter term investments.
See additional discussions by segment below.
14
Technology Segment
Selected financial data for our Technology Segment for the three months ended June 30, 2008
and 2007 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
20,258 |
|
|
$ |
13,565 |
|
Gross profit |
|
$ |
13,826 |
|
|
$ |
7,739 |
|
Gross profit margin |
|
|
68 |
% |
|
|
57 |
% |
Operating expenses |
|
$ |
11,365 |
|
|
$ |
9,347 |
|
Net operating income (loss) |
|
$ |
2,461 |
|
|
$ |
(1,608 |
) |
Revenue. Total revenue for our Technology Segment increased by 49% to $20.3 million for the
three months ended June 30, 2008 from $13.6 million for the comparable period in 2007. The increase
in revenue was primarily attributable to an increase in consumable and royalty revenue as a result
of the continued acceptance and utilization of our technology in the marketplace. Two customers
accounted for 50% of total Technology Segment revenue in the second quarter of 2008 (33% and 17%,
respectively). For comparative purposes, these same two customers accounted for 36% of total
Technology Segment revenue (13% and 23%, respectively) in the second quarter of 2007.
A breakdown of revenue in the Technology Segment for the three months ended June 30, 2008 and
2007 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
System sales |
|
$ |
5,860 |
|
|
$ |
5,397 |
|
Consumable sales |
|
|
8,492 |
|
|
|
3,305 |
|
Royalty revenue |
|
|
3,472 |
|
|
|
2,210 |
|
Service contracts |
|
|
1,266 |
|
|
|
1,087 |
|
Other revenue |
|
|
1,168 |
|
|
|
1,566 |
|
|
|
|
|
|
|
|
|
|
$ |
20,258 |
|
|
$ |
13,565 |
|
|
|
|
|
|
|
|
System and peripheral component sales increased by 9% to $5.9 million for the three months
ended June 30, 2008 from $5.4 million for the comparable period of 2007. The Technology Segment
sold 192 of the 203 total system sales in the three months ended June 30, 2008. For the three
months ended June 30, 2008, five of our
partners accounted for 156, or 81%, of total technology segment system sales for the period.
Five of our partners in 2007 purchased 170, or 81%, of total technology segment system sales in the
three months ended June 30, 2007.
Consumable sales increased by 157% to $8.5 million for the three months ended June 30, 2008
from $3.3 million for the three months ended June 30, 2007. This is primarily the result of an
increase in bulk purchases due to increased commercial activity by our partners. A bulk purchase
is defined as the purchase of $100,000 or more of consumables in a quarter. During the three
months ended June 30, 2008, we had 12 bulk purchases of consumables totaling approximately $7.3
million, or 85% of total consumable sales for the three months ended June 30, 2008 as compared with
9 bulk purchases totaling approximately $2.1 million, or 63% of total consumable sales for the
three months ended June 30, 2007. Partners who reported royalty bearing sales accounted for $8.0
million, or 94%, of total consumable sales for the three months ended June 30, 2008. As the number
of applications available on our platform expands, we anticipate that the overall level of
consumable sales, and related bulk purchases, will continue to fluctuate.
15
Technology segment royalty revenue, which results when our partners sell products or services
incorporating our technology, increased by 57% to $3.5 million for the three months ended June 30,
2008 compared with $2.2 million for the three months ended June 30, 2007. We believe this is
primarily the result of the increased use and acceptance of our technology and an increase in
commercialism of products by our partners. We expect modest fluctuations in the number of
commercial partners submitting royalties quarter to quarter based upon the varying contractual
terms, consolidations among partners, differing reporting and payment requirements, and the
addition of new partners. For the three months ended June 30, 2008 and June 30, 2007, we had 31
commercial partners submitting royalties. One of our partners reported royalties totaling
approximately $1.1 million or 32% of total royalties for the current quarter. Two other customers
reported royalties totaling approximately $762,000 or 21% (11% and 10%, respectively) of total
royalties for the current quarter. No other customer accounted for more than 10% of total royalty
revenue for the current quarter. Total royalty bearing sales reported to us by our partners were
over $55 million for the quarter ended June 30, 2008, compared with over $36 million for the
quarter ended June 30, 2007 and over $167 million for the year ended December 31, 2007.
Service contracts revenue increased by 15% to $1.3 million for the second quarter of 2008 from
$1.1 million for the second quarter of 2007. This increase is attributable to additional resources
allocated to the sale of extended service agreements resulting in increased penetration, an
expanding installed base, and the number of systems coming off warranty. At June 30, 2008, we had
$2.3 million in deferred revenue related to those contracts. At June 30, 2007, we had $2.1 million
in deferred revenue related to those contracts.
Other revenues decreased by 25% to $1.2 million for the three months ended June 30, 2008 from
$1.6 million for the three months ended June 30, 2007. This decrease is primarily the result of a
decrease in part sales and a decrease in grant revenue.
Gross profit. The gross profit margin percentage (gross profit as a percentage of total
revenue) for the Technology Segment increased to 68% for the three months ended June 30, 2008 from
57% for the three months ended June 30, 2007. Gross profit for the Technology Segment increased to
$13.8 million for the three months ended June 30, 2008, as compared to $7.7 million for the three
months ended June 30, 2007. The increase in gross profit margin percentage was primarily
attributable to changes in revenue mix between our higher and lower gross margin items. The
increase in gross profit was primarily attributable to the overall increase in revenue coupled with
the increase in gross margin. Consumables and royalties, two of our higher margin items, comprised
$12.0 million, or 59%, of Technology Segment revenue for the current quarter and $5.5 million, or
41%, of Technology Segment revenue for the quarter ended June 30, 2007. We anticipate continued
fluctuation in gross margin rate and related gross profit for the Technology Segment primarily as a
result of variability in partner bulk purchases and absolute number of quarterly system sales.
Research and development expense. Research and development expenses for the Technology Segment
increased to $2.8 million for the three months ended June 30, 2008 from $2.2 million for the
comparable period in 2007. The increase was primarily related to an increase in materials and
supplies and additional personnel costs associated with the addition of employees and contract
employees in the Technology Segment to 68 at June 30, 2008 from 59 at June 30, 2007. The increase
in materials and supplies and the number of employees has allowed us to enhance our
focus on development of our system, consumable and software products and the expansion of
applications for use on our platforms.
Selling, general and administrative expense. Selling, general and administrative expense for
the Technology Segment increased to $8.6 million for the three months ended June 30, 2008 from $7.2
million for the comparable period in 2007. The increase was primarily related to additional
personnel costs and the related stock compensation and travel costs associated with the increase in
employees and contract employees of the Technology Segment to 91 at June 30, 2008 from 75 at June
30, 2007 and higher legal and professional fees.
Other income, net. Other income decreased to $(183,000) for the three months ended June 30,
2008 from $521,000 for the comparable period in 2007 primarily due to $412,000 in costs related to
a potential acquisition that did not occur. The average rate earned on current invested balances
decreased to 2.1% at June 30, 2008 from 5.6% at June 30, 2007. This decrease in the average rate
earned is the result of an overall decrease in market rates compared to the prior year period.
16
Assay Segment
Selected financial data for our Assay Segment for the three months ended June 30, 2008 and
2007 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
4,083 |
|
|
$ |
3,983 |
|
Gross profit |
|
$ |
2,737 |
|
|
$ |
2,598 |
|
Gross profit margin |
|
|
67 |
% |
|
|
65 |
% |
Operating expenses |
|
$ |
5,712 |
|
|
$ |
13,234 |
|
Net operating loss |
|
$ |
(2,975 |
) |
|
$ |
(10,636 |
) |
A breakdown of revenue in the Assay Segment for the three months ended June 30, 2008 and 2007
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
System sales |
|
$ |
458 |
|
|
$ |
186 |
|
Consumable sales |
|
|
11 |
|
|
|
|
|
Service contracts |
|
|
11 |
|
|
|
|
|
Assay revenue |
|
|
3,526 |
|
|
|
3,737 |
|
Other revenue |
|
|
77 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
$ |
4,083 |
|
|
$ |
3,983 |
|
|
|
|
|
|
|
|
Revenue. Total revenue for our Assay Segment increased by 3% to $4.1 million for the three
months ended June 30, 2008 from $4.0 million for the comparable period in 2007. The increase in
revenue was primarily attributable to an increase in assay system sales. The majority of our Assay
Segment revenues are kits, most of which are from our Cystic Fibrosis product line. The top five
customers, by revenue, accounted for 73% of total Assay Segment revenue for the three months ended
June 30, 2008. In particular, four customers accounted for 66% of total assay segment revenue
(23%, 21%, 13%, and 10% respectively) for the three months ended June 30, 2008. Two customers
accounted for 47% of revenue for the second quarter of 2007 (37% and 10%, respectively). No other
customer accounted for more than 10% of total Assay Segment revenue. During the three months ended
June 30, 2008, our Assay Segment sold 11 systems. Other revenue includes shipping revenue and
training revenue.
Gross profit. The gross margin rate (gross profit as a percentage of total revenue) for the
Assay Segment increased to 67% for the three months ended June 30, 2008 from 65% for the three
months ended June 30, 2007. Gross profit for the Assay Segment increased to $2.7 million for the
three months ended June 30, 2008, as compared
to $2.6 million for the three months ended June 30, 2007. The modest increase in gross margin
rate was primarily attributable to increased utilization and capacity at LMD, increased sales of
higher gross margin assays, and changes in revenue mix between our higher and lower gross margin
assays. The increase in gross profit was primarily attributable to the overall increase in
revenue.
Research and development expense. Research and development expenses for our Assay Segment were
$2.3 million and $1.7 million for the three months ended June 30, 2008 and 2007, respectively. The
increase in research and development expenses was primarily due to increased activity by LBG
related to product development.
Selling, general and administrative expense. Selling, general and administrative expenses for
the Assay Segment were $3.4 million and $3.3 million for the three months ended June 30, 2008 and
2007, respectively. The overall increase in selling, general, and administrative expenses is
primarily due to additional personnel costs and the related stock compensation and travel costs
associated with the increase in employees and contract employees at LMD to 34 at June 30, 2008 from
30 at June 30, 2007.
17
SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO SIX MONTHS ENDED JUNE 30, 2007
Selected consolidated financial data for the six months ended June 30, 2008 and 2007 (dollars
in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2007 |
|
|
2007 |
|
Revenue |
|
$ |
47,353 |
|
|
$ |
34,155 |
|
Gross profit |
|
$ |
31,820 |
|
|
$ |
20,767 |
|
Gross profit margin percentage |
|
|
67 |
% |
|
|
61 |
% |
Operating expenses |
|
$ |
33,602 |
|
|
$ |
33,383 |
|
Net operating loss |
|
$ |
(1,782 |
) |
|
$ |
(12,616 |
) |
Total revenue increased by 39% to $47.4 million for the six months ended June 30, 2008 from
$34.2 million for the comparable period in 2007. The increase in revenue was attributable to an
increase of $9.2 million in consumable and royalty revenues in the Technology Segment and continued
growth in the Assay Segment, including the effects of the acquisition of LMD, which contributed
$3.0 million of the overall increase. In addition, system sales for the first half of 2008
increased to 423 systems from 404 systems for the corresponding prior year period bringing total
system sales since inception to 5,402 as of June 30, 2008.
We continue to experience revenue concentration in a limited number of strategic partners.
Two customers accounted for 37% of consolidated total revenue in the first half of 2008 (22% and
15%, respectively). For comparative purposes, these same two customers accounted for 31% of total
revenue (11% and 20%, respectively) in the first half of 2007. No other customer accounted for
more than 10% of total revenue in the six months ended June 30, 2008.
Gross profit margin percentage increased to 67% for the six months ended June 30, 2008 from
61% for the comparable period in 2007 due to the continuing shift in revenue concentration towards
higher margin items such as: assays, consumables and royalties. The increase in operating expenses
from $33.4 million for the six months ended June 30, 2007 to $33.6 million for the six months ended
June 30, 2008 reflects growth in the Assay Segment including the incorporation of the results of
LMD for the full six months in 2008 compared to the inclusion of only one month of operating
results of LMD in the six months ended June 30, 2007 as the acquisition was consummated on March 1,
2007, additional personnel costs associated with the increase in research and development and
selling,
general, and administrative employees to 242 at June 30, 2008 from 202 at June 30, 2007,
offset by the non-recurring $8.0 million write-off of in-process research and development related
to the acquisition of LMD in 2007. Net operating income increased as a result of the non-recurring
$8.0 million write-off of in-process research and development related to the acquisition of LMD in
2007, the increase in revenues in 2008, and the gross margin increase. Other income, net decreased
to $139,000 for the three months ended June 30, 2008 from $1.0 million for the comparable period in
2007 partially due to $412,000 in costs related to a potential acquisition that did not occur. In
addition, the average rate earned on current invested balances decreased to 3.2% for the six months
ended June 30, 2008 from 5.3% for the six months ended June 30, 2007. This decrease in the average
rate earned is the result of an overall decrease in market rates compared to the prior year period
and as a result of holding shorter term investments. See additional discussions by segment below.
18
Technology Segment
Selected financial data for our Technology Segment for the six months ended June 30, 2008 and
2007 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
38,914 |
|
|
$ |
28,980 |
|
Gross profit |
|
$ |
25,815 |
|
|
$ |
17,442 |
|
Gross profit margin percentage |
|
|
66 |
% |
|
|
60 |
% |
Operating expenses |
|
$ |
22,455 |
|
|
$ |
18,217 |
|
Net operating income (loss) |
|
$ |
3,360 |
|
|
$ |
(775 |
) |
Revenue. Total revenue for our Technology Segment increased by 34% to $38.9 million for the
six months ended June 30, 2008 from $29.0 million for the comparable period in 2007. The increase
in revenue was primarily attributable to an increase in consumable and royalty revenue as a result
of the continued acceptance and utilization of our technology in the marketplace. Two customers
accounted for 45% of total Technology Segment revenue in the first half of 2008 (27% and 18%,
respectively). For comparative purposes, these same two customers accounted for 37% of total
Technology Segment revenue (13% and 24%, respectively) in the first half of 2007. The increase in
revenue attributable to our largest customer is due to consumable purchases directly associated
with the development of new products.
A breakdown of revenue in the Technology Segment for the six months ended June 30, 2008 and
2007 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
System sales |
|
$ |
12,023 |
|
|
$ |
11,089 |
|
Consumable sales |
|
|
15,037 |
|
|
|
8,116 |
|
Royalty revenue |
|
|
6,990 |
|
|
|
4,742 |
|
Service contracts |
|
|
2,485 |
|
|
|
2,090 |
|
Other revenue |
|
|
2,379 |
|
|
|
2,943 |
|
|
|
|
|
|
|
|
|
|
$ |
38,914 |
|
|
$ |
28,980 |
|
|
|
|
|
|
|
|
System and peripheral component sales increased by 8% to $12.0 million for the six months
ended June 30, 2008 from $11.1 million for the comparable period of 2007. The Technology Segment
sold 402 of the 423 total system sales in the six months ended June 30, 2008. For the six months
ended June 30, 2008, five of our partners accounted
for 300, or 75%, of total technology segment system sales for the period. Five of our
partners purchased 323, or 80%, of total technology segment system sales in the six months ended
June 30, 2007.
Consumable sales increased by 85% to $15.0 million for the six months ended June 30, 2008 from
$8.1 million for the six months ended June 30, 2007. This is primarily the result of an increase
in bulk purchases due to increased commercial activity by our partners. A bulk purchase is defined
as the purchase of $100,000 or more of consumables in a quarter. During the six months ended June
30, 2008, we had 23 bulk purchases of consumables totaling approximately $12.4 million, or 82% of
total consumable sales for the six months ended June 30, 2008 as compared with 20 bulk purchases
totaling approximately $5.5 million, or 68% of total consumable sales for the six months ended June
30, 2007. Partners who reported royalty bearing sales accounted for $14.1 million, or 94%, of
total consumable sales for the six months ended June 30, 2008. As the number of applications
available on our platform expands, we anticipate that the overall level of consumable sales, and
related bulk purchases, will continue to fluctuate.
19
Royalty revenue increased by 47% to $7.0 million for the six months ended June 30, 2008
compared with $4.7 million for the six months ended June 30, 2007. We believe this is primarily
the result of the increased use and acceptance of our technology. We expect modest fluctuations in
the number of commercial partners submitting royalties quarter to quarter based upon the varying
contractual terms, consolidations among partners, differing reporting and payment requirements, and
the addition of new partners. For the six months ended June 30, 2008, we had 34 commercial
partners submitting royalties as compared to 31 for the six months ended June 30, 2007. One of our
partners reported royalties totaling approximately $2.1 million or 27% of total royalties for the
six months ended June 30, 2008. Two other customers reported royalties totaling approximately $1.6
million or 21% (11% and 10%, respectively) of total royalties for the current quarter. No other
customer accounted for more than 10% of total royalty revenue for the six months ended June 30,
2008. Total royalty bearing sales reported to us by our partners were over $109 million for the six
months ended June 30, 2008, compared with over $78 million for the six months ended June 30, 2007
and over $167 million for the year ended December 31, 2007.
Service contracts revenue increased by 19% to $2.5 million for the first half of 2008 from
$2.1 million for the first half of 2007. This increase is attributable to additional resources
allocated to the sale of extended service agreements resulting in increased penetration. At June
30, 2008, we had 943 Luminex systems covered under extended service agreements and $2.3 million in
deferred revenue related to those contracts. At June 30, 2007, we had 804 Luminex systems covered
under extended service agreements and $2.1 million in deferred revenue related to those contracts.
Other revenues decreased by 19% to $2.4 million for the six months ended June 30, 2008 from
$2.9 million for the six months ended June 30, 2007. This decrease is primarily the result of a
decrease in part sales and a decrease in grant revenue.
Gross profit. The gross profit margin percentage (gross profit as a percentage of total
revenue) for the Technology Segment increased to 66% for the six months ended June 30, 2008 from
60% for the six months ended June 30, 2007. Gross profit for the Technology Segment increased to
$25.8 million for the six months ended June 30, 2008, as compared to $17.4 million for the six
months ended June 30, 2007. The increase in gross profit margin percentage was primarily
attributable to changes in revenue mix between our higher and lower gross margin items. The
increase in gross profit was primarily attributable to the overall increase in revenue coupled with
the increase in gross margin. Consumables and royalties, two of our higher margin items, comprised
$22.0 million, or 57%, of Technology Segment revenue for the six months ended June 30, 2008 and
$12.9 million, or 44%, of Technology Segment revenue for the six months ended June 30, 2007. We
anticipate continued fluctuation in gross margin rate and related gross profit for the Technology
Segment primarily as a result of variability in partner bulk purchases and absolute number of
quarterly system sales.
Research and development expense. Research and development expenses for the Technology Segment
increased to $5.4 million for the six months ended June 30, 2008 from $4.2 million for the
comparable period in 2007. The increase was primarily related to an increase in materials and
supplies and additional personnel costs associated with the addition of employees and contract
employees in the Technology Segment to 68 at June 30, 2008 from 59 at June 30, 2007. The increase
in materials and supplies and the number of employees has allowed us to enhance our
focus on development of our system, consumable and software products and the expansion of
applications for use on our platforms.
Selling, general and administrative expense. Selling, general and administrative expense for
the Technology Segment increased to $17.0 million for the six months ended June 30, 2008 from $14.0
million for the comparable period in 2007. The increase was primarily related to additional
personnel costs and the related stock compensation and travel costs associated with the increase in
employees and contract employees of the Technology Segment to 91 at June 30, 2008 from 75 at June
30, 2007 and higher legal and professional fees.
20
Assay Segment
Selected financial data for our Assay Segment for the six months ended June 30, 2008 and 2007
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Revenue |
|
$ |
8,439 |
|
|
$ |
5,175 |
|
Gross profit |
|
$ |
6,005 |
|
|
$ |
3,325 |
|
Gross profit margin percentage |
|
|
71 |
% |
|
|
64 |
% |
Operating expenses |
|
$ |
11,147 |
|
|
$ |
15,166 |
|
Net operating loss |
|
$ |
(5,142 |
) |
|
$ |
(11,841 |
) |
A breakdown of revenue in the Assay Segment for the six months ended June 30, 2008 and 2007 is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
System sales |
|
$ |
922 |
|
|
$ |
226 |
|
Consumable sales |
|
|
20 |
|
|
|
|
|
Service contracts |
|
|
12 |
|
|
|
|
|
Assay revenue |
|
|
7,371 |
|
|
|
4,880 |
|
Other revenue |
|
|
114 |
|
|
|
69 |
|
|
|
|
|
|
|
|
|
|
$ |
8,439 |
|
|
$ |
5,175 |
|
|
|
|
|
|
|
|
Revenue. Revenues for our Assay Segment for the six months ended June 30, 2008 include six
months of revenues from LMD and LBG; while revenues for the six months ended June 30, 2007 include
six months of LBG, but only four months of revenues from LMD, as the LMD acquisition was
consummated on March 1, 2007. The majority of our Assay Segment revenues are kits, most of which
are from our Cystic Fibrosis product line. The top five customers, by revenue, accounted for 69%
of total Assay Segment revenue for the six months ended June 30, 2008. In particular, four
customers accounted for 63% of total assay segment revenue (21%, 20%, 12% and 10% respectively) for
the six months ended June 30, 2008. Two customers accounted for 52% of total revenue in the six
months ended June 30, 2007 (38% and 14%, respectively). No other customer accounted for more than
10% of total Assay Segment revenue. During the six months ended June 30, 2008, our Assay Segment
sold 21 systems. Other revenue includes shipping revenue and training revenue.
Gross profit. The gross margin rate (gross profit as a percentage of total revenue) for the
Assay Segment increased to 71% for the six months ended June 30, 2008 from 64% for the six months
ended June 30, 2007. Gross profit for the Assay Segment increased to $6.0 million for the six
months ended June 30, 2008, as compared to $3.3 million for the six months ended June 30, 2007.
The increase in gross margin rate was primarily attributable to increased utilization and capacity
at LMD, increased sales of higher gross margin assays, and changes in revenue mix between our
higher and lower gross margin items. The increase in gross profit was primarily attributable to
the overall increase in revenue coupled with the increase in gross margin.
Research and development expense. Research and development expenses for our Assay Segment were
$4.0 million and $2.4 for the six months ended June 30, 2008 and 2007, respectively. The increase
in research and development expenses was primarily due to incorporation of the results of LMD for
the full six months in 2008 compared to the inclusion of only four months of operating results of
LMD in the six months ended June 30, 2007 as the acquisition was consummated on March 1, 2007, and
to a lesser extent, to increased activity by LBG related to product development.
21
Selling, general and administrative expense. Selling, general and administrative expenses for
the Assay Segment were $6.1 million and $4.8 million for the six months ended June 30, 2008 and
2007, respectively. The overall increase in selling, general, and administrative expenses is
primarily due to the addition of costs associated with LMD. As previously discussed, the expenses
for the six months ended June 30, 2007 include expenses related to LBG for the entire six months
and expenses related to LMD for four months only. In addition, the increase is due to the impact
of foreign exchange on foreign denominated balances of $653,000 for the six months ended June 30,
2008 compared to $4,000 for the six months ended June 30, 2007.
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
|
|
(in thousands) |
|
|
(in thousands) |
|
Cash and cash equivalents |
|
$ |
102,679 |
|
|
$ |
27,233 |
|
Short-term investments |
|
|
9,876 |
|
|
|
6,944 |
|
|
|
|
|
|
|
|
|
|
$ |
112,555 |
|
|
$ |
34,177 |
|
|
|
|
|
|
|
|
At June 30, 2008, we held cash, cash equivalents and short-term investments of $112.6 million
and had working capital of $120.0 million. At December 31, 2007, we held cash, cash equivalents,
and short-term investments of $34.2 million and had working capital of $40.8 million. The increase
is due to our secondary public offering of 4,025,000 shares which raised net proceeds of $74.8
million and closed on June 30, 2008 and our management of receivables and inventory.
We have funded our operations to date primarily through the issuance of equity securities (in
conjunction with an initial public offering in 2000 and subsequent option exercises) and cash
generated from operations. Our cash reserves are held directly or indirectly in a variety of
short-term, interest-bearing instruments, including obligations of the United States government or
agencies thereof and U.S. corporate debt securities. We do not have any investments in
asset-backed commercial paper, auction rate securities, mortgage backed or sub-prime style
investments
Cash provided by operations was $4.2 million for the six months ended June 30, 2008, compared
with cash used in operations of $(6.9) million for the six months ended June 30, 2007. Significant
items affecting operating cash flows for the six months ended June 30, 2008 were our net loss of
$2.2 million, depreciation and amortization of $3.3 million and stock compensation of $3.4 million,
offset by a decrease in accounts receivable and an increase in inventory of $2.0 million as a
result of an increase in raw material and work in process in anticipation of third quarter sales.
Other income decreased due to expenditures of approximately $412,000 in the six months ended June
30, 2008 related to a potential acquisition that did not occur, and were consequently reflected as
an investing activity rather than an operating activity.
Our operating expenses during the six months ended June 30, 2008 were $33.6 million, of which
$9.5 million was research and development expense and $24.1 million was selling, general and
administrative expense. We expect research and development expense as a percentage of revenue to be
between 15% and 20% of total revenue for the remainder of 2008. While research and development
expense as a percentage of revenue is expected to decrease, we expect the absolute dollars of
research and development expense to scale with our revenue growth as a result of our continuing
investment in the research and development pipeline to support our strategy and expanded focus on
product and platform development. We do not currently expect selling, general, and administrative
expenses in 2008, excluding the impact of foreign exchange on foreign denominated balances, to
increase at the same rate as in prior years.
Cash used in investing was $4.5 million for the three months ended June 30, 2008 as compared
with cash used by investing of $518,000 for the three months ended June 30, 2007. Cash used in
investing was affected by $5.0 million in purchases of held-to-maturity investments in the three
months ended June 30, 2008 compared to no purchases of held-to-maturity investments in the three
months ended June 30, 2007.
22
Cash provided by financing activities was $76.6 million for the quarter ended June 30, 2008 as
compared with cash used in financing activities of $12.8 million for the quarter ended June 30,
2007. Cash provided by financing activities for the quarter ended June 30, 2008 increased due to
our secondary public offering of 4,025,000 shares which raised net proceeds of $74.8 million and
exercises of stock options compared to $12.3 million used to retire debt in 2007 as part of the LMD
acquisition.
Our future capital requirements depend on a number of factors, including our success in
developing and expanding markets for our products, payments under possible future strategic
arrangements, continued progress of our research and development of potential products, the timing
and outcome of regulatory approvals, the need to acquire licenses to new technology, costs
associated with strategic acquisitions including integration costs and assumed liabilities,
litigation expense, the status of competitive products and potential costs associated with both
protecting and defending our intellectual property. Additionally, actions taken as a result of the
ongoing internal evaluation of our business could result in expenditures not currently contemplated
in our estimates for 2008. We believe, however, that our existing cash and cash equivalents
together with availability under our revolving credit facility as described below are more than
adequate to fund our operating expenses, capital equipment requirements and other expected
liquidity requirements for the coming twelve months. Based upon our current operating plan and
structure, management anticipates total cash, cash equivalents, short-term and long-term
investments, in the aggregate, at December 31, 2008 to remain substantially at the same level as at
June 30, 2008. Factors that could affect this estimate, in addition to those listed above,
include: (i) continued collections of accounts receivable consistent with our historical
experience, (ii) our ability to manage our inventory levels consistent with past practices, (iii)
signing of partnership agreements which include significant up front license fees, (iv)
unanticipated costs associated with, and the negative operating cash flows resulting from, the LMD
acquisition, and (v) future acquisitions.
On March 1, 2007, we entered into a senior revolving credit facility with JPMorgan Chase Bank,
N.A., which provides borrowings of up to a maximum aggregate principal amount outstanding of $15.0
million based on availability under a borrowing base consisting of eligible accounts and inventory.
The obligations under the senior revolving credit facility are guaranteed by our wholly-owned
domestic subsidiaries and secured by all of our accounts, equipment inventory and general
intangibles (excluding intellectual property) and those of the guarantors including the pledge of
an intercompany note from LMD and payable to us. Loans under the senior credit facility accrue
interest on the basis of either a base rate or a LIBOR rate. The base rate is calculated daily and
is the greater of (i) prime minus 1.00% and (ii) federal funds rate plus .50%. Borrowings at the
LIBOR rate are based on one, two or six month periods and interest is calculated by taking the sum
of (i) the product of LIBOR for such period and statutory reserves plus (ii) 1.75%. We pay a fee
of 0.125% per annum on the unfunded portion of the lenders aggregate commitment under the
facility. Approximately $9.2 million was available for borrowing at June 30, 2008. This credit
facility currently has a maturity of February 26, 2009.
The senior credit facility contains conditions to making loans, representations, warranties
and covenants, including financial covenants customary for a transaction of this type. Financial
covenants include (i) a tangible net worth covenant of $35.0 million and (ii) a liquidity
requirement of availability not less than the funded debt of us and our subsidiaries calculated
using the unencumbered cash, cash equivalents and marketable securities of us and our guarantors
(including LMD). The senior credit facility also contains customary events of default as well as
restrictions on undertaking certain specified corporate actions, including, among others, asset
dispositions, acquisitions and other investments, dividends, fundamental corporate changes such as
mergers and consolidations, incurrence of additional indebtedness, creation of liens and negative
pledges, transactions with affiliates and agreements as to certain subsidiary restrictions and the
creation of additional subsidiaries. If an event of default occurs that is not otherwise waived or
cured, the lender may terminate its obligations to make loans under the senior credit facility and
may declare the loans then outstanding under the senior credit facility to be due and payable. We
believe we are currently in compliance with our financial and other covenants under the senior
credit facility. As of June 30, 2008, no amounts were outstanding under the senior revolving
credit facility.
23
To the extent capital resources are insufficient to meet future capital requirements we will
have to raise additional funds to continue the development and deployment of our technologies.
There can be no assurance that debt or equity funds will be available on favorable terms, if at
all. To the extent that additional capital is raised through the sale of equity or convertible debt
securities, the issuance of those securities could result in dilution to our stockholders.
Moreover, incurring debt financing (under our credit facility or otherwise) could result in a
substantial portion of our operating cash flow being dedicated to the payment of principal and
interest on such indebtedness, could render us more vulnerable to competitive pressures and
economic downturns and could impose restrictions on our operations. If adequate funds are not
available, we may be required to curtail operations significantly or to obtain funds through
entering into agreements on unattractive terms.
Contractual Obligations
We currently have approximately $7.6 million in non-cancelable obligations for the next 12
months. These obligations are included in our estimated cash usage described below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment Due By Period |
|
|
|
|
|
|
|
Less Than |
|
|
|
|
|
|
|
|
|
|
More Than |
|
Contractual Obligations |
|
Total |
|
|
1 Year |
|
|
1-3 Years |
|
|
3-5 Years |
|
|
5 Years |
|
Non-cancelable rental
obligations |
|
$ |
10,160 |
|
|
$ |
2,027 |
|
|
$ |
2,845 |
|
|
$ |
2,700 |
|
|
$ |
2,588 |
|
Non-cancelable purchase
obligations (1) |
|
|
9,430 |
|
|
|
5,057 |
|
|
|
876 |
|
|
|
1,006 |
|
|
|
2,491 |
|
Long-term debt
obligations (2) |
|
|
5,484 |
|
|
|
522 |
|
|
|
2,763 |
|
|
|
2,199 |
|
|
|
|
|
Capital lease obligations |
|
|
75 |
|
|
|
35 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,149 |
|
|
$ |
7,641 |
|
|
$ |
6,524 |
|
|
$ |
5,905 |
|
|
$ |
5,079 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Purchase obligations include contractual arrangements in the form of purchase orders
primarily resulting from normal inventory purchases or minimum payments due resulting when
minimum purchase commitments are not met and annual minimum purchase requirements in supply
agreements. Purchase obligations relating to purchase orders do not extend beyond a year;
however, we would expect future years to have these purchase commitments that will arise in
the ordinary course of business and will generally increase or decrease according to
fluctuations in overall sales volume. Annual minimum purchase requirements in supply
agreements extend up to ten years. |
|
(2) |
|
In 2003, Tm Bioscience entered into an agreement with the Ministry of
Industry of the Government of Canada under which the Government agreed to invest up to
Canadian (Cdn) 7.3 million relating to the development of several genetic tests. Funds
were advanced from Technology Partnerships Canada (TPC), a special operating program.
Luminex assumed this agreement upon acquisition of Tm Bioscience, now LMD. LMD has
received $4.3 million from TPC which is expected to be repaid along with approximately $1.2
million of imputed interest for a total of approximately $5.5 million. LMD has agreed to
repay the TPC funding through a royalty on assay revenue related to the funded product
development. Royalty payments commenced in 2007 at a rate of 1% of assay revenue and at a
rate of 2.5% for 2008 and thereafter. Aggregate royalty repayment will continue until
total advances plus imputed interest has been repaid or until April 30, 2015, whichever is
earlier. The repayment obligation expires on April 30, 2015 and any unpaid balance will be
cancelled and forgiven on that date. Should the term of repayment be shorter than we
expect due to higher than expected assay revenue, the effective interest rate would
decrease as repayment is accelerated. Repayments denominated in U.S. Dollars are currently
projected to be as shown in the table above, but actual future sales generating a repayment
obligation will vary from this projection and are subject to the risks and uncertainties
described elsewhere in this report, including under Risk Factors and Safe Harbor
Cautionary Statement. Furthermore, payment reflected in U.S. Dollars is subject to
adjustment based upon applicable exchange rates as of the reporting date. |
24
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk. Our interest income is sensitive to changes in the general level of
domestic interest rates, particularly since our investments are in short-term and long-term
instruments held to maturity. A 50 basis point fluctuation from average investment returns at June
30, 2008 would yield an approximate 4.3% variance in overall investment return. Due to our
intention to hold our investments to maturity, we have concluded that there is no material market
risk exposure.
Our revolving credit facility also will be affected by fluctuations in interest rates as it is
based on LIBOR, prime minus 1% or the Federal Funds Effective Rate in effect plus 0.50%. As of
June 30, 2008, we had not drawn on this facility.
Foreign Currency Risk. As of June 30, 2008, as a result of our foreign operations, we have
costs, assets and liabilities that are denominated in foreign currencies, primarily Canadian
dollars and to a lesser extent the Euro. For example, some fixed asset purchases, certain expenses,
and the TPC debt of our Canadian subsidiary, LMD, are denominated in Canadian dollars, while sales
of products are primarily denominated in U.S. dollars. All transactions in our Netherlands
subsidiary are denominated in Euros. As a consequence, movements in exchange rates could cause our
foreign currency denominated expenses to fluctuate as a percentage of net revenue, affecting our
profitability and cash flows. A significant majority of our revenues are denominated in U.S.
dollars. The impact of foreign exchange on foreign denominated balances will vary in relation to
changes between the U.S. and Canadian dollar exchange rates. A 10% change in the Canadian dollar in
relation to the U.S. dollar could result in a foreign exchange impact of approximately $416,000
dollars.
In addition, the indirect effect of fluctuations in interest rates and foreign currency
exchange rates could have a material adverse effect on our business financial condition and results
of operations. For example currency exchange rate fluctuations could affect international demand
for our products. In addition, interest rates fluctuations could affect our customers buying
patterns. Furthermore, interest rate and currency exchange rate fluctuations may broadly influence
the United States and foreign economies resulting in a material adverse effect on our business,
financial condition and results of operations. As a result, we cannot give any assurance as to the
effect that future changes in foreign currency rates will have on our consolidated financial
position, results of operations or cash flows. Our aggregate foreign currency transaction loss of
$653,000 was included in determining our consolidated results of operations for the six months
ended June 30, 2008.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our senior management, including our
President and Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) promulgated under the Securities Exchange Act of 1934 (the Exchange Act), as of the end
of the period covered by this quarterly report. Based on that evaluation, our senior management,
including our President and Chief Executive Officer and Chief Financial Officer, concluded that as
of June 30, 2008 our disclosure controls and procedures were effective to provide reasonable
assurance that the information required to be disclosed by us in the reports filed or submitted by
us under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the SECs rules and forms.
Due to the acquisition of LMD we were required to implement processes and controls over
transactions related to those operations. As of June 30, 2008, we have not completed the tests of
the operating effectiveness of the internal controls related to the integration of LMD. In
compliance with PCAOB regulations, evaluation of LMD controls under Sarbanes-Oxley is not required
until December 31, 2008.
25
Changes in Internal Control over Financial Reporting
There were no changes in our internal control during the quarter ended June 30, 2008 that
materially affected, or are reasonably likely to materially affect, our existing internal control
over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 16, 2008, Luminex Corporation and Luminex Molecular Diagnostics, Inc. were served
with a complaint, filed by The Research Foundation of the State University of New York (SUNY) in
Federal District Court for the Northern District of New York, alleging, among other claims, that
LMD breached its license agreement with SUNY by failing to pay royalties allegedly owed under the
agreement. The complaint seeks an undetermined amount of damages as well as injunctive relief. On
February 9, 2008, Luminex and LMD filed an answer to this complaint denying all claims brought by
SUNY. The parties participated in a scheduling conference on April 2, 2008, to establish deadlines
for completion of discovery. A trial date has not been set. The parties are engaging in the
discovery process. There can be no assurance that we will successfully defend this suit or that a
judgment against us would not materially adversely affect our operating results.
When and if it appears probable in managements judgment that we will incur monetary damages
or other costs in connection with any claims or proceedings, and such costs can be reasonably
estimated, liabilities will be recorded in the financial statements and charges will be recorded
against earnings. Though there can be no assurances, our management believes that the resolution of
existing routine matters and other incidental claims, taking into account accruals and insurance,
will not have a material adverse effect on our financial condition or results of operations.
ITEM 1A. RISK FACTORS
Reference is made to the factors set forth under the caption Safe Harbor Cautionary
Statement in Part I, Item 2 of this report and other risk factors described in Part I, Item 1A of
our Annual Report on Form 10-K for the year ended December 31, 2007, which are incorporated herein
by reference, subject to the following modified risk factors.
We have a limited history of profitability and had an accumulated deficit of approximately $89.9
million as of June 30, 2008.
We have incurred significant net losses since our inception, including a loss of $2.7 million
for the year ended December 31, 2007 and a loss of $2.1 million for the six months ended June 30,
2008. At June 30, 2008, we had an accumulated deficit of approximately $89.9 million. Prior to our
acquisition of LMD in March 2007, LMD had an accumulated deficit of approximately $74.6 million. In
order to become profitable, we need to generate and sustain substantially higher revenue while
achieving reasonable cost and expense levels. If we fail to achieve operating results in line with
the expectations of securities analysts or investors, the market price of our common stock will
likely decline. Furthermore, as we continue to utilize cash to support operations, acquisitions and
research and development efforts, we may further decrease the cash available to us. As of June 30,
2008, cash, cash equivalents and short-term and long-term investments totaled $112.5 million,
compared to $34.2 million at December 31, 2007 and $45.7 million at December 31, 2006, which
increase since December 31, 2006 is primarily attributable to the cash proceeds from our secondary
public offering in June of 2008 of $74.8 million.
We expect our operating results to continue to fluctuate from quarter to quarter.
The sale of our instrumentation and assay products typically involves a significant technical
evaluation and commitment of capital by us, our partners and the end-user. Accordingly, the sales
cycle associated with our products typically is lengthy and subject to a number of significant
risks, all of which are beyond our control, including partners budgetary constraints, inventory
management practices, regulatory approval and internal acceptance reviews. As a result of this
lengthy and unpredictable sales cycle, our operating results have historically fluctuated
significantly from quarter to quarter. We expect this trend to continue for the foreseeable future.
26
The vast majority of our system sales are made to our strategic partners. Our partners
typically purchase instruments in three phases during their commercialization cycle: first,
instruments necessary to support internal assay development; second, instruments for sales force
demonstrations; and finally, instruments for resale to their customers. As a result, most of our
system placements are highly dependent on the continued commercial success of our strategic
partners and can fluctuate from quarter to quarter as our strategic partners move from phase to
phase. We expect this trend to continue for the foreseeable future.
Our assay products are sometimes sold to large customers. The ordering and consumption
patterns of these customers can fluctuate, affecting the timing or shipments and revenue
recognition. In addition, certain products assist in the diagnosis of illnesses that are seasonal,
and customer orders can fluctuate for this reason.
Because of the effect of bulk purchases and the introduction of seasonal components to our
assay menus, we experience fluctuations in the percentage of our quarterly revenues derived from
our highest margin items, consumables, royalties and assays. Our gross margin percentage is highly
dependent upon the mix of revenue components each quarter. These fluctuations contribute to the
variability and lack of predictability of both gross margin percentage and total gross profit from
quarter to quarter. We expect this trend to continue for the foreseeable future.
Due to the early stage of the market for molecular tests, projected growth scenarios for LMD
are highly volatile and are based on a number of underlying assumptions that may or may not prove
to be valid, including the performance of strategic partners that distribute LMD products.
If the FDA or other governmental laws and regulations change in ways that we do not anticipate and
we fail to comply with those regulations that affect our business, we could be subject to
enforcement actions, injunctions and civil and criminal penalties or otherwise be subject to
increased costs that could delay or prevent marketing of our products.
The production, testing, labeling, marketing and distribution of our products for some
purposes and products based on our technology are subject to governmental regulation by the United
States Food and Drug Administration (FDA) and by similar agencies in other countries. Some of our
products and products based on our technology for in vitro diagnostic purposes are subject to
clearance by the FDA prior to marketing for commercial use. To date, eight strategic partners have
obtained such clearances. Others are anticipated. The process of obtaining necessary FDA clearances
can be time-consuming, expensive and uncertain. Further, clearance may place substantial
restrictions on the indications for which the product may be marketed or to whom it may be
marketed. In addition, because some of our products employ laser technology, we are also required
to comply with FDA requirements relating to radiation performance safety standards (21 CFR 1040.1
and 1040.11).
Periodically the FDA issues guidance documents that represent the FDAs current thinking on a
topic. These issues are initially issued in draft form prior to final rule generally with
enforcement discretion for some grace period of time. Changes made through this process may impact
the release status of products offered and our ability to market those products affected by the
change.
For example, the FDA released on September 14, 2007 the final document Guidance for Industry
and FDA Staff Commercially Distributed Analyte Specific Reagents (ASRs): Frequently Asked
Questions. This guidance may limit or delay distribution of assays on our platform, including
assays developed and distributed by LMD, to the extent additional regulatory clearance is required
prior to distribution. The final document was released with an enforcement discretion period of one
year from date of issue.
Cleared medical device products are subject to continuing FDA requirements relating to, among
others, manufacturing quality control and quality assurance, maintenance of records and
documentation, registration and listing, import/export, adverse event and other reporting,
distribution, labeling and promotion and advertising of medical devices. Our inability or the
inability of our strategic partners, to obtain required regulatory approval or clearance on a
timely or acceptable basis could harm our business. In addition, failure to comply with applicable
regulatory requirements could subject us or our strategic partners to regulatory enforcement
action, including warning letters, product seizures, recalls, withdrawal of clearances,
restrictions on or injunctions against marketing our products or products based on our technology,
and civil and criminal penalties.
27
Medical device laws and regulations are in effect within the United States and also in many
countries outside the United States. These range from comprehensive device clearance requirements
for some or all of our medical device products to requests for product data or certifications to
the hazardous material content of our products. As part of the European Council Directive 2002/96
of February 13, 2003 (WEEE), we are expected to comply with certain requirements regarding the
collection, recycling and labeling of our products containing electronic devices beginning on
August 13, 2005 in each of the European Union, or EU, member states where our regulated products
are distributed. While we are taking steps to comply with the requirements of WEEE, we cannot be
certain that we will comply with the national stage implementation of WEEE in all member states.
Our products are currently exempt from the European Council Directive 2002/95 of January 27, 2003,
Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment
(RoHS), which requires the removal of certain specified hazardous substances from certain products
beginning July 1, 2006 in each of the member states. However, the EU has indicated that it may, and
it is generally expected it will, include medical devices, including some of our products, under
the jurisdiction of RoHS. If this exemption is revoked, it could result in increased costs to us
and we cannot assure you we will ultimately be able to comply with RoHS or related requirements in
other jurisdictions. In addition, the State of California adopted the Electronic Waste Recycling
Act, effective January 1, 2007, which requires the California Department of Toxic Substances
Control to adopt regulations to prohibit the sale of electronic devices in California if they are
also prohibited from sale in the EU under the RoHS directive because they contain certain heavy
metals. The number and scope of these requirements are increasing and we will likely become subject
to further similar laws in other jurisdictions. Failure to comply with applicable federal, state
and foreign medical device laws and regulations may harm our business, financial condition and
results of operations. We are also subject to a variety of other laws and regulations relating to,
among other things, environmental protection and workplace health and safety.
Our strategic partners and customers expect our organization to operate on an established
quality management system compliant with FDA Quality System Regulations and industry standards, the
In Vitro Diagnostic Directive 98/79/EC of 27 October 1998 (Directive) as implemented nationally
in the EU member states and industry standards, such as ISO 9000. We became ISO 9001:2000 certified
in March 2002 and self-declared our Luminex 100 and Luminex 200 devices are in conformity with
Article 1, Article 9, Annex I (Essential Requirements), and Annex III, and the additional
provisions of the Directive as of December 7, 2003. Subsequent audits are carried out annually to
ensure we maintain our system in substantial compliance with ISO and other applicable regulations
and industry standards. We became ISO 13485:2003 and Canadian Medical Device Conformity Assessment
System (CMDCAS) certified in July 2005. In August 2006 a Level II QSIT contract inspection was
conducted in accordance with CPGM 7382.845, Inspection of Medical Device Manufacturers, PAC 82845B,
Medical Device Level II Inspections pursuant to the FDA Dallas District Office FY 06 Workplan and
the DSHS Drugs & Medical Device Group FY 06 Workplan. The inspection is closed under 21 C.F.R.
20.64 (d) (3) and the Establishment Inspection Report No. 3002524000 provided in accordance with
the FOIA and 21 C.F.R. Part 20. No DSHS form E-14 or FDA form 483 was issued. Failure to maintain
compliance with FDA, CMDCAS and EU regulations and other medical device laws, or to obtain
applicable registrations where required, could reduce our competitive advantage in the markets in
which we compete and also decrease satisfaction and confidence levels with our partners.
Our success depends partly on our ability to operate without infringing on or misappropriating the
proprietary rights of others.
We have been (and from time to time we may be) notified that third parties consider their
patents or other intellectual property relevant to our products. We may be sued for infringing the
intellectual property rights of others, including claims with respect to intellectual property of
entities we may acquire. We are currently party to a suit brought by The Research Foundation of the
State University of New York against Luminex and LMD, alleging, among other claims, that LMD
breached its license agreement with SUNY by failing to pay royalties allegedly owed under the
agreement, as described in this Quarterly Report on Form 10-Q for the period ended June 30, 2008.
In addition, we may find it necessary, if threatened, to initiate a lawsuit seeking a declaration
from a court that we do not infringe on the proprietary rights of others or that their rights are
invalid or unenforceable. Intellectual property litigation is costly, and, even if we prevail, the
cost of such litigation could affect our profitability. Furthermore, litigation is time consuming
and could divert managements attention and resources away from our business. If we do not prevail
in any litigation, we may have to pay damages and could be required to stop the infringing activity
or obtain a license. Any required license may not be available to us on acceptable terms, if at
all. Moreover, some licenses may be nonexclusive, and therefore, our competitors may have access to
the same technology licensed to us. If we fail to obtain a required license or are unable to design
around a patent, we may be unable to sell some of our products, which could have a material adverse
affect on our business, financial condition and results of operations.
28
We require collaboration with other organizations in obtaining relevant biomarkers, access to
oligonucleotides and enzymes that are patented or controlled by others. If we cannot continue to
obtain access to these areas or identify freedom to operate opportunities this could affect our
future sales and profits.
We may be unsuccessful in implementing our acquisition strategy. We may face difficulties
integrating acquired entities with our existing businesses.
Acquisitions of assets or entities designed to accelerate the implementation of our strategic
plan are an element of our long-term strategy. We may be unable to identify and complete
appropriate future acquisitions in a timely manner and no assurance can be provided that the market
price of potential business acquisitions will be acceptable. In addition, many of our competitors
have greater financial resources than we have and may be willing to pay more for these businesses
or selected assets. In the future, should we identify suitable acquisition targets, we may be
unable to complete acquisitions or obtain the financing, if necessary, for these acquisitions on
terms favorable to us. Generally, potential acquisitions pose a number of risks, including, among
others, that:
|
|
|
we may not be able to accurately estimate the financial effect of
acquisitions on our business; |
|
|
|
future acquisitions may require us to assume liabilities, incur large
and immediate write-offs, issue capital stock potentially dilutive to our
stockholders or spend significant cash or may result in a decrease in our future
operating income or operating margins; |
|
|
|
we may be unable to realize the anticipated benefits and synergies from
acquisitions as a result of inherent risks and uncertainties, including
difficulties integrating acquired businesses or retaining their key personnel,
partners, customers or other key relationships, entering market segments in which
we have no or limited experience, and risks that acquired entities may not operate
profitably or that acquisitions may not result in improved operating performance; |
|
|
|
acquisitions and subsequent integration of these companies may disrupt
our business and distract our management from other responsibilities; and |
|
|
|
the costs of unsuccessful acquisition efforts may adversely affect our
financial performance. |
Other risks of integration include:
|
|
|
disparate information technology, internal control, financial reporting
and record-keeping systems; |
|
|
|
differences in accounting policies, including those requiring judgment
or complex estimation processes; |
|
|
|
new partners or customers who may operate on terms and programs different than ours; |
|
|
|
|
additional employees not familiar with our operations; |
|
|
|
facilities or operations in remote locations or potentially foreign
jurisdictions and the inherent risks of operating in unfamiliar legal and
regulatory environments; and |
|
|
|
new products, including the risk that any underlying intellectual
property associated with such products may not have been adequately protected or
that such products may infringe on the proprietary rights of others. |
29
Our operating results may be affected by current economic and political conditions.
The ongoing uncertainty in the domestic and global finance markets and events in the Middle
East and concern for future terrorist attacks leave many economic and political uncertainties.
Furthermore, foreign stock markets have been volatile and equally sensitive to global geopolitical
concerns and terrorist threats. These uncertainties could adversely affect our business and
revenues in the short or long term in ways that cannot presently be predicted.
ITEM 2. UNREGISTRED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The stock repurchase activity for the second quarter of 2008 was as follows:
ISSUER PURCHASES OF EQUITY SECURITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of Shares |
|
|
Approximate Dollar Value of |
|
|
|
Total Number of |
|
|
Average Price |
|
|
Purchased as Part of |
|
|
Shares that May Yet Be |
|
|
|
Shares |
|
|
Paid per Share |
|
|
Publicly Announced |
|
|
Purchased Under the Plans or |
|
Period |
|
Purchased |
|
|
(1)($) |
|
|
Plans or Programs |
|
|
Programs |
|
04/01/08 04/30/08 |
|
|
6,289 |
|
|
|
19.76 |
|
|
|
|
|
|
|
|
|
05/01/08 05/31/08 |
|
|
3,098 |
|
|
|
20.42 |
|
|
|
|
|
|
|
|
|
06/01/08 06/30/08 |
|
|
497 |
|
|
|
21.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First Quarter |
|
|
9,884 |
|
|
|
20.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Shares purchased are attributable to the withholding of shares by Luminex to satisfy the payment of tax
obligations related to the vesting of restricted shares. |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At our 2008 Annual Meeting of Stockholders, which was held on May 22, 2008, our stockholders
elected Fred C. Goad, Jr., Jim D. Kever, and Jay B. Johnston to serve as Class II directors for a
term of three years by the following votes:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
Voted For |
|
|
Withheld |
|
Fred C. Goad, Jr. |
|
|
30,861,141 |
|
|
|
1,667,016 |
|
Jim D. Kever |
|
|
30,812,027 |
|
|
|
1,716,130 |
|
Jay B. Johnston |
|
|
30,869,160 |
|
|
|
1,658,997 |
|
The other directors whose terms of office as a director continued after the meeting were as
follows: Patrick J. Balthrop, Robert J. Cresci, Thomas W. Erickson, G. Walter Loewenbaum II, Kevin
M. McNamara, J. Stark Thompson, and Gerard Vaillant.
30
The following item was also presented to the stockholders with the following results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
|
|
|
|
|
|
|
|
|
Voted |
|
|
|
|
|
|
Broker |
|
|
|
Voted For |
|
|
Against |
|
|
Abstained |
|
|
Non-Votes |
|
To ratify the
appointment by the
Companys Audit
committee of Ernst &
Young LLP as the
Companys
independent
registered public
accounting firm for
fiscal 2008 |
|
|
32,493,737 |
|
|
|
6,973 |
|
|
|
27,447 |
|
|
|
0 |
|
ITEM 6. EXHIBITS
The following exhibits are filed herewith:
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
|
|
|
|
|
|
1.1 |
|
|
Underwriting Agreement dated June 24, 2008 by and among Luminex Corporation, J.P. Morgan
Securities Inc. and UBS Securities LLC, as representatives for the several underwriters named
therein. (Incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K dated
June 25, 2008) |
|
|
|
|
|
|
10.1 |
|
|
First Amendment to Credit Agreement, dated May 28, 2008, by and between Luminex Corporation
and JPMorgan Chase Bank, N.A. (Incorporated by reference to Exhibit 10.1 to our Current Report
on Form 8-K dated May 29, 2008) |
|
|
|
|
|
|
31.1 |
|
|
Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
|
|
Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
|
|
Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
LUMINEX CORPORATION
|
|
|
|
|
Date: August 8, 2008 |
|
|
|
|
|
|
By: |
/s/ Harriss T. Currie
|
|
|
|
Harriss T. Currie |
|
|
|
Vice President - Finance,
Chief Financial Officer and Treasurer (Principal Financial
Officer) |
|
|
|
|
|
By: |
/s/ Patrick J. Balthrop, Sr.
|
|
|
|
Patrick J. Balthrop, Sr. |
|
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
32
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description of Documents |
|
|
|
|
|
|
31.1 |
|
|
Certification by CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
31.2 |
|
|
Certification by CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.1 |
|
|
Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
|
32.2 |
|
|
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. |