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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 OR
 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: 0-27316
 Molecular Devices Corporation
  Delaware
    
    94-2914362(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification No.)organization)
 
 
 þ o
  o þ o
 o þ




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##### 



MOLECULAR DEVICES CORPORATION
 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2006
 INDEX
 PAGE NOPART I.
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 2006 AND DECEMBER 31, 2005
    
    
    3CONDENSED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 2006 AND 2005
    
    
    4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2006 AND 2005
    
    
    5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    
    
    6ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    15ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    15PART II.
    
    OTHER INFORMATION
    
    
    16ITEM 1A.
    
    RISK FACTORS
    
    
    16ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    25ITEM 6.
    
    EXHIBITSSIGNATURE
    
    
    26EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands, except share and per share amounts, unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,181
    
    
    $
    28,908Accounts receivable, net
    
    
    32,492
    
    
    
    41,197Inventories, net
    
    
    23,923
    
    
    
    23,197Deferred tax assets
    
    
    5,867
    
    
    
    5,873Prepaid and other current assets
    
    
    2,092
    
    
    
    2,353Total current assets
    
    
    97,555
    
    
    
    101,528Equipment and leasehold improvements, net
    
    
    9,543
    
    
    
    9,902Goodwill
    
    
    102,835
    
    
    
    102,835Developed technology
    
    
    24,439
    
    
    
    25,152Intangible and other assets
    
    
    19,499
    
    
    
    17,999$
    253,871
    
    
    $
    257,416LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    7,939
    
    
    $
    7,676Accrued compensation
    
    
    3,727
    
    
    
    9,759Other accrued liabilities
    
    
    8,073
    
    
    
    13,623Deferred revenue
    
    
    7,923
    
    
    
    7,806Total current liabilities
    
    
    27,662
    
    
    
    38,864Other long-term liabilities
    
    
    928
    
    
    
    993Deferred tax liabilities
    
    
    4,486
    
    
    
    4,486Total liabilities
    
    
    33,076
    
    
    
    44,343Commitments and contingencies (Note 8)Stockholders equityCommon stock, $.001 par value;
60,000,000 shares authorized;
20,661,324 and 20,076,495 shares
issued and 16,943,994 and 16,681,727
outstanding at March 31, 2006 and
December 31, 2005, respectively
    
    
    21
    
    
    
    20Additional paid-in capital
    
    
    286,153
    
    
    
    271,300Retained earnings
    
    
    9,869
    
    
    
    7,023Treasury stock, at cost; 3,717,330
and 3,394,768 shares at March 31,
2006 and December 31, 2005,
respectively
    
    
    (76,639
    )
    
    
    (66,519
    )Accumulated other comprehensive income
    
    
    1,391
    
    
    
    1,249Total stockholders equity
    
    
    220,795
    
    
    
    213,073$
    253,871
    
    
    $
    257,416
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MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (in thousands, except per share amounts, unaudited)
 Three Months Ended March 31,2006
    
    
    2005Revenues
    
    $
    39,996
    
    
    $
    39,064Cost of revenues *
    
    
    15,461
    
    
    
    15,046Gross profit
    
    
    24,535
    
    
    
    24,018Operating expenses:Research and development *
    
    
    5,465
    
    
    
    6,226Selling, general and administrative *
    
    
    16,246
    
    
    
    14,313Total operating expenses
    
    
    21,711
    
    
    
    20,539Income from operations
    
    
    2,824
    
    
    
    3,479Gain on sale of equity securities
    
    
    1,669
    
    
    
    Interest income
    
    
    242
    
    
    
    125Interest expense
    
    
    (19
    )
    
    
    (27
    )Other income (expense), net
    
    
    29
    
    
    
    (577
    )Income before income taxes
    
    
    4,745
    
    
    
    3,000Income tax provision *
    
    
    1,899
    
    
    
    1,156Net income
    
    $
    2,846
    
    
    $
    1,844Basic net income per share
    
    $
    0.17
    
    
    $
    0.11Diluted net income per share
    
    $
    0.16
    
    
    $
    0.11Shares used in computing basic net income per share
    
    
    16,823
    
    
    
    17,041Shares used in computing diluted net income per share
    
    
    17,374
    
    
    
    17,361* Includes the following amounts related to stock-based
compensation expense recorded under FAS 123R:Cost of revenues
    
    $
    105
    
    
    $
    Research and development
    
    
    284
    
    
    
    Selling, general and administrative
    
    
    894
    
    
    
    Income tax benefit
    
    
    (391
    )
    
    
    Effect on net income
    
    $
    892
    
    
    $
    
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MOLECULAR DEVICES CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands, unaudited)
 Three Months Ended March 31,2006
    
    
    2005Cash flows from operating activities:Net income:
    
    $
    2,846
    
    
    $
    1,844Adjustments to reconcile net income to net cash provided by (used in) operating actives:Depreciation and amortization
    
    
    1,530
    
    
    
    1,748Amortization of intangible assets
    
    
    821
    
    
    
    559Amortization of deferred stock compensation
    
    
    
    
    
    
    56Equity investment exchanged for services
    
    
    
    
    
    
    131Gain on sale of equity securities
    
    
    (1,699
    )
    
    
    Loss on disposal of fixed assets
    
    
    42
    
    
    
    Employee stock-based compensation
    
    
    1,283
    
    
    
    Income tax benefit realized as a result of employee exercises of stock options
    
    
    (2,403
    )
    
    
    (Increase) decrease in assets:Accounts receivable
    
    
    8,861
    
    
    
    891Inventories
    
    
    (1,158
    )
    
    
    (1,099
    )Deferred tax assets
    
    
    (43
    )
    
    
    (113
    )Other current assets
    
    
    268
    
    
    
    372Increase (decrease) in liabilities:Accounts payable
    
    
    258
    
    
    
    (330
    )Accrued liabilities
    
    
    (7,600
    )
    
    
    (6,497
    )Deferred revenue
    
    
    89
    
    
    
    (27
    )Net cash provided by (used in) operating activities
    
    
    3,095
    
    
    
    (2,465
    )Cash flows from investing activities:Proceeds from sale of equity securities
    
    
    1,699
    
    
    
    Capital expenditures
    
    
    (737
    )
    
    
    (676
    )Purchase of intangible and other assets
    
    
    (3,187
    )
    
    
    (11,685
    )Net cash used in investing activities
    
    
    (2,225
    )
    
    
    (12,361
    )Cash flows from financing activities:Issuance of common stock
    
    
    11,168
    
    
    
    2,211Purchase of treasury stock
    
    
    (10,120
    )
    
    
    (8,397
    )Income tax benefit realized as a result of employee exercises of stock options
    
    
    2,403
    
    
    
    Net cash provided by (used in) financing activities
    
    
    3,451
    
    
    
    (6,186
    )Effect of exchange rate changes on cash
    
    
    (48
    )
    
    
    (837
    )Net increase (decrease) in cash and cash equivalents
    
    
    4,273
    
    
    
    (21,849
    )Cash and cash equivalents at beginning of period
    
    
    28,908
    
    
    
    30,175Cash and cash equivalents at end of period
    
    $
    33,181
    
    
    $
    8,326
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MOLECULAR DEVICES CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 Note 1. Description of Business and Basis of Presentation
      Note 2. Stock Based Compensation
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Cost of revenues
    
    $
    105Research and development
    
    
    284Selling, general and administrative
    
    
    894Income tax benefit
    
    
    (391
    )Effect on net income
    
    $
    892Basic net income per share
    
    $
    0.05Diluted net income per share
    
    $
    0.05
   Three Months EndedMarch 31, 2005Net income  as reported
    
    $
    1,844Plus: Stock based employee compensation expense included in reported net income, net of tax
    
    
    56Less: Stock based compensation expense determined using the fair value method, net of tax
    
    
    (1,792
    )Net income  pro forma
    
    $
    108Net income per share:Basic  as reported
    
    
    0.11Basic  pro forma
    
    
    0.01Diluted  as reported
    
    
    0.11Diluted  pro forma
    
    
    0.01
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Three Months Ended March 31,2006
    
    
    2005Expected dividend yield
    
    
    0
    %
    
    
    0
    %Expected stock price volatility
    
    
    49
    %
    
    
    77
    %Risk-free interest rate
    
    
    4.3
    %
    
    
    4.0
    %Expected term of options
    
    5.2 years
    
    6.0 years
  Shares Available for
    
    
    
    
    
    
    Weighted AverageFuture Grant
    
    
    Options Outstanding
    
    
    Exercise PriceBalance at December 31, 2005
    
    
    1,076,718
    
    
    
    3,084,330
    
    
    $
    25.15Granted
    
    
    (312,250
    )
    
    
    312,250
    
    
    
    29.45Exercised
    
    
    
    
    
    
    (592,014
    )
    
    
    18.76Cancelled
    
    
    13,456
    
    
    
    (13,456
    )
    
    
    21.63Balance at March 31, 2006
    
    
    777,924
    
    
    
    2,791,110
    
    
    $
    26.95
  Options Outstanding
    
    
    Options ExercisableWeighted AverageRange of Exercise
    
    
    
    
    
    Remaining Contractual
    
    
    Weighted Average
    
    
    Number
    
    
    Weighted AveragePrices
    
    Number Outstanding
    
    
    Life (Yr.)
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise Price$0.00 to $12.58
    
    
    131,686
    
    
    
    4.3
    
    
    
    $ 7.47
    
    
    
    121,397
    
    
    
    $ 7.43$12.59 to $25.16
    
    
    1,684,981
    
    
    
    6.7
    
    
    
    19.52
    
    
    
    1,029,818
    
    
    
    19.48$25.17 to $37.74
    
    
    480,617
    
    
    
    7.4
    
    
    
    29.06
    
    
    
    168,367
    
    
    
    28.33$37.75 to $50.33
    
    
    306,331
    
    
    
    3.8
    
    
    
    46.49
    
    
    
    306,331
    
    
    
    46.80$50.34 to $62.91
    
    
    70,896
    
    
    
    3.6
    
    
    
    53.07
    
    
    
    70,896
    
    
    
    53.07$62.92 to $75.49
    
    
    42,250
    
    
    
    4.7
    
    
    
    75.27
    
    
    
    42,250
    
    
    
    75.27$75.50 to $88.08
    
    
    74,349
    
    
    
    4.6
    
    
    
    77.74
    
    
    
    74,349
    
    
    
    77.742,791,110
    
    
    
    
    
    
    
    $ 26.95
    
    
    
    1,813,408
    
    
    
    $ 29.11
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Note 3. Balance Sheet Components (in thousands)
 March 31,
    
    
    December 31,2006
    
    
    2005(in thousands)Inventories, net:Raw materials
    
    $
    11,586
    
    
    $
    11,350Work-in-process
    
    
    1,731
    
    
    
    2,127Finished goods and demonstration equipment
    
    
    10,606
    
    
    
    9,720$
    23,923
    
    
    $
    23,197Other accrued liabilities:Accrued income taxes
    
    $
    326
    
    
    $
    3,051Warranty accrual
    
    
    2,530
    
    
    
    2,663Other
    
    
    5,217
    
    
    
    7,909$
    8,073
    
    
    $
    13,623
 Note 4. Developed Technology and Intangible and Other Assets
   March 31, 2006
    
    
    December 31, 2005Gross Carrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingValue
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    ValueDeveloped technology
    
    $
    28,743
    
    
    $
    4,304
    
    
    $
    24,439
    
    
    $
    28,743
    
    
    $
    3,591
    
    
    $
    25,152License fees
    
    
    4,188
    
    
    
    841
    
    
    
    3,347
    
    
    
    2,688
    
    
    
    772
    
    
    
    1,916Patents
    
    
    1,372
    
    
    
    644
    
    
    
    728
    
    
    
    1,372
    
    
    
    610
    
    
    
    762Tradename
    
    
    200
    
    
    
    20
    
    
    
    180
    
    
    
    200
    
    
    
    15
    
    
    
    185Total
    
    $
    34,503
    
    
    $
    5,809
    
    
    $
    28,694
    
    
    $
    33,003
    
    
    $
    4,988
    
    
    $
    28,015
  For the Year Ended December 31,
    
    Amortization Expense2006 (remaining 9 months)
    
    $
    2,5962007
    
    
    3,4632008
    
    
    3,4632009
    
    
    3,4632010
    
    
    3,463Thereafter
    
    
    12,246$
    28,694
 Note 5. Net Income Per Share
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Three Months EndedMarch 31,2006
    
    
    2005Weighted average common shares outstanding
for the period
    
    
    16,823
    
    
    
    17,041Common equivalent shares assuming the
exercise of stock options under the
treasury stock method
    
    
    551
    
    
    
    320Shared used in computing diluted net income
per share
    
    
    17,374
    
    
    
    17,361Net income
    
    $
    2,846
    
    
    $
    1,844Basic net income per share
    
    $
    0.17
    
    
    $
    0.11Diluted net income per share
    
    $
    0.16
    
    
    $
    0.11
  Note 6. Comprehensive Income
  Note 7. Restructuring
  Balance at
    
    
    
    
    
    
    Balance atDecember 31,
    
    
    
    
    
    
    March 31,2005
    
    
    Payments
    
    
    2006Molecular Devices employee severance
    
    $
    403
    
    
    $
    (374
    )
    
    $
    29
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Note 8. Commitments and Contingencies
 Guarantees
 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others,
   Warranty
  Balance December 31, 2005
    
    $
    2,663New warranties issued during the period
    
    
    1,524Cost of warranties incurred during the period
    
    
    (1,657
    )Balance March 31, 2006
    
    $
    2,530
 Note 9. Revolving Credit Facility
  Note 10. Gain on Sale of Equity Securities
  Note 11. Subsequent Event
   11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
 Except for the historical information contained herein, the following discussion contains
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any
statements that are not statements of historical fact may be deemed to be forward-looking
statements. Words such as believes, anticipates, plans, predicts, expects, estimates,
intends, will, continue, may, potential, should and similar expressions are intended to
identify forward-looking statements. There are a number of important factors that could cause our
results to differ materially from those indicated by these forward-looking statements, including,
among others, those discussed in this section as well as under Item 1A of Part II  Risk Factors
and Item 3  Quantitative and Qualitative Disclosures About Market Risk and the risks detailed
from time to time in our future SEC reports.
      Critical Accounting Policies
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Stock Based Compensation
    Results of Operations  Three Months Ended March 31, 2006 and 2005
 Revenues
  Gross Profit
  Research and Development Expense
  Selling, General and Administrative Expense
  Gain on Sale of Equity Securities
  Interest Income
  Interest Expense
  13




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Other Income (Expense), Net
  Income Tax Provision
  Liquidity and Capital Resources
      
    
    the progress of our research and development;
    
    the number and scope of our research and development programs;
    
    market acceptance and demand for our products;
    
    the costs that may be involved in enforcing our patent claims and other intellectual property rights;
    
    potential acquisition and technology licensing opportunities;
    
    the costs associated with repurchasing shares of our common stock;
    
    manufacturing capacity requirements; and
    
    the costs of expanding our sales, marketing and distribution capabilities both in the United States and abroad.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Currency Exchange
  Interest and Investment Income
  Debt and Interest Expense
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
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Changes in Internal Control Over Financial Reporting
  
 Part II. Other Information
 
 Item 1A. Risk Factors
  Variations in the amount of time it takes for us to sell our products and collect accounts
receivable and the timing of customer orders may cause fluctuations in our operating results,
which could cause our stock price to decline.
     We depend on orders that are received and shipped in the same quarter and therefore have limited
visibility of future product shipments.
  Many of our current and potential competitors have significantly greater resources than we do, and
increased competition could impair sales of our products.
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If we are not successful in developing new and enhanced products, we may lose market share to our
competitors.
  We must expend a significant amount of time and resources to develop new products, and if these
products do not achieve commercial acceptance, our operating results may suffer.
  We obtain some of the consumables, components and subassemblies used with or included in our
systems from a single source or limited group of suppliers, and the partial or complete loss of
one of these suppliers could cause customer supply or production delays and a substantial loss of
revenues.
   §
    
    our suppliers may cease or interrupt production of required consumables, components or
subassemblies or otherwise fail to supply us with an adequate supply of required
consumables, components or subassemblies for a number of reasons,
including contractual disputes with our suppliers or adverse financial developments at or
affecting the supplier;
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§
    
    we have reduced control over the pricing of third party-supplied consumables, components
and subassemblies, and our suppliers may be unable or unwilling to supply us with required
consumables, components and subassemblies on commercially acceptable terms, or at all;§
    
    we have reduced control over the timely delivery of third party-supplied consumables,
components and subassemblies; and§
    
    our suppliers may be unable to develop technologically advanced products to support our
growth and development of new systems.
  We may encounter manufacturing and assembly problems or delays, which could result in lost
revenues.
    If we deliver products with defects, our credibility will be harmed and the sales and market
acceptance of our products will decrease.
  We have significantly expanded our international operations, which exposes us to risks inherent in
international business activities.
  18




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§
    
    political, social and economic instability;§
    
    trade restrictions and changes in tariffs;§
    
    the impact of business cycles and downturns in economies outside of the United States;§
    
    unexpected changes in regulatory requirements that may limit our ability to export our
products or sell into particular jurisdictions;§
    
    import and export license requirements and restrictions;§
    
    difficulties and costs of staffing, managing and monitoring geographically disparate operations;§
    
    difficulties in maintaining effective communications with employees and customers due to
distance, language and cultural barriers;§
    
    disruptions in international transport or delivery;§
    
    difficulties in protecting our intellectual property rights, particularly in countries
where the laws and practices do not protect proprietary rights to as great an extent as do
the laws and practices of the United States;§
    
    difficulties in enforcing agreements through non-U.S. legal systems;§
    
    longer payment cycles and difficulties in collecting receivables; and§
    
    potentially adverse tax consequences.
   Most of our current and potential customers are from the pharmaceutical and biotechnology
industries and are subject to risks faced by those industries.
   Our products could infringe on the intellectual property rights of others, which may cause us to
engage in costly litigation and, if we are not successful, could also cause us to pay substantial
damages and prohibit us from selling our products.
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We may need to initiate lawsuits to protect or enforce our patents, which would be expensive and,
if we lose, may cause us to lose some of our intellectual property rights, which would reduce our
ability to compete in the market.
  §
    
    assert claims of infringement;§
    
    enforce our patents;§
    
    protect our trade secrets or know-how; or§
    
    determine the enforceability, scope and validity of the proprietary rights of others.
  The rights we rely upon to protect our intellectual property underlying our products may not be
adequate, which could enable third parties to use our technology and would reduce our ability to
compete in the market.
   §
    
    the pending patent applications we have filed or to which we have exclusive rights may
not result in issued patents or may take longer than we expect to result in issued patents;§
    
    the claims of any patents which are issued may not provide meaningful protection;§
    
    we may not be able to develop additional proprietary technologies that are patentable;§
    
    the patents licensed or issued to us or our customers may not provide a competitive advantage;§
    
    other companies may challenge patents licensed or issued to us or our customers;§
    
    patents issued to other companies may harm our ability to do business;§
    
    other companies may independently develop similar or alternative technologies or duplicate our technologies; and§
    
    other companies may design around the technologies we have licensed or developed.
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We may have difficulty managing our growth.
  We rely upon distributors for product sales and support outside of North America.
  If we choose to acquire new and complementary businesses, products or technologies instead of
developing them ourselves, we may be unable to complete these acquisitions or may not be able to
successfully integrate an acquired business or technology in a cost-effective and non-disruptive
manner.
 ®
 §
    
    the potential disruption of our ongoing business and distraction of our management;§
    
    the potential strain on our financial and managerial controls and reporting systems and procedures;§
    
    unanticipated expenses and potential delays related to integration of the operations,
technology and other resources of acquired businesses;§
    
    the impairment of relationships with employees, suppliers and customers as a result of
any integration of new management personnel;§
    
    greater than anticipated costs and expenses related to restructuring, including employee
severance or relocation costs and costs related to vacating leased facilities; and§
    
    potential unknown liabilities associated with any acquisition, including higher than
expected integration costs, which may cause our quarterly and annual operating results to
fluctuate.
  21




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We depend on our key personnel, the loss of whom would impair our ability to compete.
  Changes to financial accounting standards may affect our results of operations and cause us to
change our business practices.
  Changes in our effective income tax rate could reduce our earnings.
 Share-Based
Payment
 Our operating results fluctuate and any failure to meet financial expectations may disappoint
securities analysts or investors and result in a decline in our stock price.
  §
    
    customer confidence in the economy, evidenced, in part, by stock market levels;§
    
    changes in the domestic and international economic, business and political conditions;§
    
    economic conditions within the pharmaceutical and biotechnology industries;§
    
    levels of product and price competition;§
    
    the length of our sales cycle and customer buying patterns;
 22




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##### Table of Contents



§
    
    the size and timing of individual transactions;§
    
    the timing of new product introductions and product enhancements;§
    
    the mix of products sold;§
    
    levels of international transactions;§
    
    activities of and acquisitions by competitors;§
    
    the timing of new hires and the allocation of our resources;§
    
    changes in foreign currency exchange rates;§
    
    our ability to develop and market new products and control costs; and§
    
    changes in U.S. generally accepted accounting principles.
    Failure to maintain effective internal controls in accordance with Section 404 of the
Sarbanes-Oxley Act of 2002 could have a material adverse effect on our stock price.
  Our stock price is volatile, which could cause stockholders to lose a substantial part of their
investment in our stock.
   23




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##### Table of Contents



§
    
    domestic and international economic, business and political conditions;§
    
    economic conditions within the pharmaceutical and biotechnology industries;§
    
    our failure to meet our performance estimates or the performance estimates of securities analysts;§
    
    changes in financial estimates of our revenues and operating results by us or securities analysts;§
    
    changes in buy/sell recommendations by securities analysts; and§
    
    the timing of announcements by us or our competitors of significant products, contracts
or acquisitions or publicity regarding actual or potential results or performance thereof.
 Provisions of our charter documents and Delaware law may inhibit a takeover, which could limit the
price investors might be willing to pay in the future for our common stock.
  Our actual results could differ materially from those anticipated in our forward-looking
statements.
  24




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total number
    
    
    Maximumof shares
    
    
    number ofpurchased as
    
    
    shares thatpart of
    
    
    may yet beTotal number
    
    
    
    
    
    
    publicly
    
    
    purchasedof shares
    
    
    Average price
    
    
    announced
    
    
    under thePeriod
    
    purchased
    
    
    paid per share
    
    
    programs
    
    
    programsJanuary 1, 2006 through January 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    February 1, 2006 through February 28, 2006
    
    
    322,562
    
    
    $
    31.37
    
    
    
    322,562
    
    
    
    787,116March 1, 2006 through March 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    322,562
    
    
    $
    31.37
    
    
    
    322,562
    
    
    
    787,116
  
 Item 6. Exhibits
 ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.57(3)
    
    Executive Officer Compensation Arrangements, effective as of March 1, 200631.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section
1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C 1350).
 
 (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the information in our Current Report on Form 8-K filed on
February 15, 2006.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Registrant
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. 25




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##### Table of Contents



SIGNATURE
   Date: May 10, 2006
    
    By:
    
    /s/ TIMOTHY A. HARKNESSTimothy A. HarknessChief Financial Officer and Senior VicePresident Finance and Operations(Duly Authorized and Principal Financialand Accounting Officer)
 26




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description of Exhibit3.1(1)
    
    Amended and Restated Certificate of Incorporation of the Registrant.3.2(1)
    
    Bylaws of the Registrant.3.3(2)
    
    Certificate of Amendment to Certificate of Incorporation.4.1(1)
    
    Specimen Certificate of Common Stock of the Registrant.10.57(3)
    
    Executive Officer Compensation Arrangements, effective as of March 1, 200631.1
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).31.2
    
    Certification required by Rule 13a-14(a) or Rule 15d-14(a).32.1*
    
    Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section
1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C 1350).
 
 (1)
    
    Incorporated by reference to the similarly described exhibit in our Registration Statement on
Form S-1 (File No. 33-98926), as amended.(2)
    
    Incorporated by reference to the similarly described exhibit in our Annual Report on Form 10-K
for the year ended December 31, 2001 and filed on April 1, 2002.(3)
    
    Incorporated by reference to the information in our Current Report on Form 8-K filed on
February 15, 2006.*
    
    The certification attached as Exhibit 32.1 accompanies the Quarterly Report on Form 10-Q pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Registrant
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.