Add
INPH to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| INPH > SEC Filings for INPH > Form 10-Q on 10-Aug-2009 | All Recent SEC Filings |
10-Aug-2009
Quarterly Report
Research and Development
Our investment in the development of new products through research and
development was $1.9 million and $2.5 million for the three months ended
June 30, 2009 and 2008, respectively. The decrease in research and development
expense is primarily due to several factors. First, we had a reduction in
project related expense of approximately $225,000 compared to the second quarter
of 2008. Second, much of our research and development resources are located in
France and as such those costs are subject to exchange rate fluctuations with
the Euro and the Dollar. The Dollar was significantly stronger against the Euro
in the second quarter of 2009 compared to the second quarter of 2008. This
exchange rate fluctuation resulted in a decrease to research and development
expense of approximately $160,000, compared to the same period last year. Third,
included in research and development expenses in the second quarter of 2008 was
a charge of approximately $115,000 related to software that was originally
purchased for the development of a product that was subsequently discontinued.
There was no such charge during the second quarter of 2009. Finally, the reduced
headcount and facility expense resulting from the restructuring plan we
undertook in the first quarter of 2008 decreased research and development
expense by approximately $40,000 for the three months ended June 30, 2009,
compared to the same period in the prior year. See Note 7 in the Notes to
Condensed Consolidated Financial Statements for more information on the
restructuring plan. As a percentage of total revenue, research and development
expense was approximately 24% in the second quarter of 2009 as compared to
approximately 38% for the same period for the prior year. The decrease in
research and development expense as a percentage of total revenue is due to
research and development expense decreasing while revenue increased for the
period.
Our investment in research and development was $4.0 million and $5.4 million for
the six months ended June 30, 2009 and 2008, respectively. The decrease in
research and development expense is primarily due to several factors. First, we
had a reduction in project related expense of $465,000 during the six months
ended June 30, 2009, compared to the same period in the prior year. Second, the
reduced headcount and facility expense resulting from the restructuring plan we
undertook in the first quarter of 2008 decreased research and development
expense by approximately $345,000 for the six months ended June 30, 2009,
compared to the same period in the prior year. Third, a significantly stronger
Dollar against the Euro in 2009 resulted in a decrease to research and
development expense of approximately $340,000 for the six months ended June 30,
2009, compared to the same period last year. Finally, there were charges of
approximately $185,000 during the six months ended June 30, 2008 related to
software purchased for the development of products that were subsequently
discontinued. There were no such charges during the six months ended June 30,
2009. As a percentage of total revenue, research and development expense was
approximately 24% for the six months ended June 30, 2009 and 38% for the six
months ended June 30, 2008. The decrease in research and development expense as
a percentage of total revenue is due to research and development expense
decreasing while revenue increased for the period.
Sales and Marketing
Sales and marketing expenses were $1.6 million and $1.2 million for the three
months ended June 30, 2009 and 2008, respectively. The increase in sales and
marketing expense is primarily due to increased headcount in business
development, product management and marketing. The increased headcount resulted
in an increase in sales and marketing expense of approximately $230,000 for the
three months ended June 30, 2009 compared to the second quarter of 2008. Sales
and marketing expense also increased as a result of increased commission and
variable compensation expense of approximately $155,000 in the three months
ended June 30, 2009 compared to the same period in the prior year. As a
percentage of total revenue, sales and marketing expense was approximately 20%
for the second quarter of 2009 and 19% for the second quarter of 2008. The
increase in sales and marketing expenses as a percentage of total revenue is due
to sales and marketing expense increasing at a higher rate than revenue. We will
continue to monitor the level of sales and marketing costs concurrently with
actual revenue and profit results.
Sales and marketing expenses were $3.1 million and $2.7 million for the six
months ended June 30, 2009 and 2008, respectively. The increase in sales and
marketing expense is primarily due to increased headcount in business
development, product management and marketing. The increased headcount resulted
in an increase in sales and marketing expense of approximately $360,000 for the
six months ended June 30, 2009 compated to the same period in 2008.
Additionally, sales and marketing expense increased as a result of increased
commission and variable compensation expense of approximately $315,000 as a
result of higher revenues for the first six months of 2009, compared to the same
period in 2008. These two increases were partially offset by a significantly
stronger Dollar against the Euro in 2009 resulting in a decrease to sales and
marketing expense of approximately $140,000 for the six months ended June 30,
2009, compared to the same period last year. Additionally, sales and marketing
expenses decreased as a result of the restructuring plan we undertook in the
first quarter of 2008 resulting in a reduction of headcount expenses of
approximately $138,000 in the first six months of 2009 compared to the same
period in 2008. See Note 7 in the Notes to Condensed Consolidated Financial
Statements for more information. As a percentage of total revenue, sales and
marketing expense was approximately 19% for both the six months ended June 30,
2009 and 2008.
General and Administrative
General and administrative expenses were $1.1 million for the three months ended
June 30, 2009 and 2008. As a percentage of total revenue, general and
administrative expenses were approximately 14% in the second quarter of 2009 and
16% for the same period in the prior year. The decrease as a percentage of
revenue is due to revenues increasing while general and administrative expense
remained relatively consistent. We will continue to monitor the level of general
and administrative costs concurrently with actual revenue and profit results.
General and administrative expenses were $2.3 million and $2.0 million for the
six months ended June 30, 2009 and 2008, respectively. The increase in general
and administrative expense is primarily driven by an increased utilization of
outside providers for accounting, consulting and legal services, which accounted
for approximately $175,000 of the increase. The remainder of the increase
relates primarily to the funding of potential variable compensation awards that
are being accrued, as it is more likely than not that we will achieve certain
targets outlined in the variable compensation plan for 2009. As a percentage of
total revenue, general and administrative expense was approximately 14% for both
the six months ended June 30, 2009 and 2008.
Restructuring Charge
On March 27, 2008, we adopted a plan to restructure our United States based
business operations to balance our current spending with recent revenue trends.
The primary goal of the restructuring program was to improve our ability to
invest in future business opportunities that are designed to provide us with
increased growth potential and greater revenue diversification in the coming
years and better align our skills with our future direction. Under the
restructuring plan, we reduced our workforce by 14 employees. As a result of the
restructuring program, the Company recorded a restructuring charge of $38,000,
classified as operating expense, during the second quarter of 2008 associated
with lease obligations related to a facility closure. During the six months
ended June 30, 2008, the Company recorded restructuring charges of $403,000,
classified as operating expense, related to severance and fringe benefits and
lease obligations. See Note 7 in the Notes to Condensed Consolidated Financial
Statements for more information. There were no such restructuring activities
during 2009.
Interest Income, Net
Interest income, net of interest expense, decreased to $78,000 for the three
months ended June 30, 2009 from $123,000 in the comparable period in the prior
year. Interest income, net of interest expense, was $178,000 for the six months
ended June 30, 2009 and $286,000 for the six months ended June 30, 2008. The
decrease in interest income, net for each period primarily relates to lower
rates of return on our investments during the three and six months ended
June 30, 2009 compared to the same periods in 2008, resulting in decreased
interest income during the periods.
Other (Loss) Income, Net
Other loss, net, was $3,000 and $6,000 for the three and six months ended
June 30, 2009, respectively. Other income, net was $22,000 and $325,000 for the
three and six months ended June 30, 2008, respectively. The other loss, net
during the periods presented for 2009 primarily relates to changes in foreign
currency related to supplier invoices. During 2008, the other income, net was
the result of the change in market value of our foreign exchange derivative
financial instruments which resulted in income of approximately $30,000 and
$346,000 for the three months and six months ended June 30, 2009, respectively.
During, the three and six months ended June 30, 2009, we have had no such
foreign exchange derivative financial instruments. See Note 5 in the Notes to
Condensed Consolidated Financial Statements for more information.
Income Taxes
Our tax benefit rate for the six months ended June 30, 2009 was 155%, compared
to a tax benefit rate of 32% for the six months ended June 30, 2008.
The effective tax rate differed from the U.S. statutory rate as we continued to
provide a full valuation allowance for our net deferred tax assets at June 30,
2009 and June 30, 2008. During each of the six months ended June 30, 2009 and
June 30, 2008, we recorded a tax benefit related to our operations in France.
This benefit was primarily the result of a 30% research and development tax
credit.
Net Income (Loss)
We reported a net income of $74,000 for the three months ended June 30, 2009 and
net loss of $1.2 million for the three months ended June 30, 2008. Basic and
diluted earnings per share for the three months ended June 30, 2009 was $0.01.
Basic loss per share for the three months ended June 30, 2008 was ($0.18). The
Company reported a net income of $781,000 and a net loss of $1.7 million for the
six months ended June 30, 2009 and June 30, 2008, respectively. Basic and
diluted earnings per share for the six months ended June 30, 2009 was $0.11.
Basic loss per share for the six months ended June 30, 2008 was ($0.26).
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Cash Flows
Cash and cash equivalents increased $3.8 million from December 31, 2008 to
June 30, 2009 and decreased $1.1 million from December 31, 2007 to June 30,
2008. Cash flows are impacted by operating, investing and financing activities.
Operating Activities
Trends in cash flows from operating activities for the six months ended June 30,
2009 and 2008 are generally similar to the trends in our earnings except for
provision for uncollectible accounts and returns, provision for excess and
obsolete inventories, depreciation and amortization, amortization of restricted
stock and write-off of impaired capitalized software. Cash provided by operating
activities totaled $1.7 million for the six months ended June 30, 2009, compared
to a net income of $781,000. Provision for uncollectible accounts and returns
increased $53,000 for the six months ended June 30, 2009 compared to the same
period in 2008. Provision for excess and obsolete inventories increased by
$100,000 for the six months ended June 30, 2009, compared to the same period in
2008. Depreciation and amortization decreased slightly for the six months ended
June 30, 2009 compared to the same period in 2008. Amortization of restricted
stock increased $68,000 for the six months ended June 30, 2009, compared to the
six months ended June 30, 2008. See Note 2 in Notes to Condensed Consolidated
Financial Statements for more information on restricted stock. Write-offs of
impaired capitalized software decreased by $185,000 for the six months ended
June 30, 2009 compared to the same period in 2008.
Changes in assets and liabilities result primarily from the timing of
production, sales, purchases and payments. Such changes in assets and
liabilities generally tend to even out over time and result in trends in cash
flows from operating activities generally reflecting earnings trends.
Investing Activities
Cash provided by investing activities totaled $2.0 million for the six months
ended June 30, 2009, primarily driven by the sale of marketable securities. Cash
used in investing activities totaled $260,000 for the six months ended June 30,
2008. Cash provided by or used in investing activities in each of the periods
presented related principally to proceeds from the sale of marketable
securities, disbursements for additions to property and equipment, capitalized
software and our investments in marketable securities. Additions to property and
equipment and capitalized software were $202,000 for the six months ended
June 30, 2009 compared to $253,000 for the six months ended June 30, 2008. The
additions for the six months ended June 30, 2009 primarily related to
enhancements to our enterprise performance management system and software
purchases for our engineering function. The additions for the six months ended
June 30, 2008 primarily related to software and equipment purchases for our
engineering and manufacturing functions. Purchases of marketable securities were
$2.9 million and $4.8 million for the six months ended June 30, 2009 and 2008,
respectively. Proceeds from the sale of marketable securities increased to
$5.2 million for the six months ended June 30, 2009 compared to $4.8 million for
the same period in 2008.
Financing Activities
There was no net cash provided by or used in financing activities for the six
months ended June 30, 2009. Net cash provided by financing activities totaled
$2,000 for the six months ended June 30, 2008 related to proceeds from employees
exercising stock options.
Commitments
Commitments
At June 30, 2009, we had no material commitments to purchase capital assets.
However, planned capital expenditures for the remainder of 2009 are estimated at
approximately $235,000, a significant portion of which relates to engineering
equipment and tools. The remaining planned purchases relate to enhancement to
our manufacturing and general office equipment. Our significant long-term
obligations as of June 30, 2009, are our operating leases on facilities and
future debt payments related to our credit facility. To date, we have not paid
any dividends and do not anticipate paying any dividends in 2009.
Off-Balance Sheet Arrangements
At June 30, 2009 and December 31, 2008, we did not have any off-balance sheet
arrangements including foreign exchange contracts.
Other
Management believes that cash generated from operations and borrowing
availability under the revolving credit facility, together with cash on hand,
will be sufficient to meet our liquidity needs for working capital, capital
expenditures and debt service. To the extent that our actual operating results
or other developments differ from our expectations, our liquidity could be
adversely affected.
We periodically evaluate our liquidity requirements, alternative uses of
capital, capital needs and available resources in view of, among other things,
our capital expenditure requirements and estimated future operating cash flows.
As a result of this process, we have in the past, and may in the future, seek to
raise additional capital, refinance or restructure indebtedness, issue
additional securities, repurchase shares of our common stock or take a
combination of such steps to manage our liquidity and capital resources. In the
normal course of business, we may review opportunities for acquisitions, joint
ventures or other business combinations. In the event of any such transaction,
we may consider using available cash, issuing additional equity securities or
increasing our indebtedness or our subsidiaries' indebtedness.
Management's Discussion and Analysis of Financial Condition and Results of
Operations in this Form 10-Q should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations and
other material included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2008.
|
|