-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wjsvv4VrGknmzG9gl3JjWxdrqEtegbbKXS/Tc0JecgG7ohPcnwIHWN7JAWK4ZVYX FDD9HILdZ0MVMJg/hz6awQ== 0000912057-97-026917.txt : 19970812 0000912057-97-026917.hdr.sgml : 19970812 ACCESSION NUMBER: 0000912057-97-026917 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970626 FILED AS OF DATE: 19970811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA I/O CORP CENTRAL INDEX KEY: 0000351998 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 910864123 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10394 FILM NUMBER: 97655285 BUSINESS ADDRESS: STREET 1: 10525 WILLOWS RD NE STREET 2: P O BOX 97046 CITY: REDMOND STATE: WA ZIP: 98073-9746 BUSINESS PHONE: 2068816444 10-Q 1 FORM 10-Q - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended JUNE 26, 1997 Commission File No. 0-10394 DATA I/O CORPORATION (Exact name of registrant as specified in its charter) Washington 91-0864123 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10525 Willows Road N.E., Redmond, Washington, 98073-9746 (address of principal executive offices, Zip Code) Registrant's telephone number, including area code (206) 881-6444 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 6,942,444 shares of no par value Common Stock outstanding as of August 5, 1997 Page 1 of 16 Exhibit Index on Page 15 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- DATA I/O CORPORATION FORM 10-Q FOR THE QUARTER ENDED JUNE 26, 1997 INDEX PART I - FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements (unaudited) 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 Exhibit Index 15 Exhibit 11 16 Page 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DATA I/O CORPORATION CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------- June 26, Dec. 26, 1997 1996 - ------------------------------------------------------------------------------- (in thousands, except share data) (Unaudited) (note 1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,664 $ 4,048 Short-Term Investments 15,553 0 Trade accounts receivable, less allowance for doubtful accounts of $393 and $362 10,200 9,796 Inventories 7,198 8,260 Recoverable income taxes 597 474 Deferred income taxes 750 762 Other current assets 1,089 997 ---------- ---------- TOTAL CURRENT ASSETS 40,051 24,337 Land held for sale 0 2,437 Property, plant and equipment - net 4,073 9,430 Other assets 2,480 3,115 Deferred income taxes 351 0 ---------- ---------- TOTAL ASSETS $46,955 $39,319 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 2,805 $ 1,906 Accrued compensation 3,690 2,587 Deferred revenue 5,244 5,494 Other accrued liabilities 3,105 3,102 Accrued costs of business restructuring 108 312 Income taxes payable 1,565 777 Notes payable 2,132 105 ---------- ---------- TOTAL CURRENT LIABILITIES 18,649 14,283 LONG TERM DEBT 0 1,500 LONG TERM OTHER PAYABLES 533 503 DEFERRED INCOME TAXES 0 474 DEFERRED GAIN ON SALE OF PROPERTY 3,248 0 STOCKHOLDERS' EQUITY: Preferred stock - Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 6,903,965 and 6,777,720 shares, respectively 15,813 15,247 Retained earnings 8,272 6,845 Currency translation adjustments 440 467 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 24,525 22,559 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $46,955 $39,319 ---------- ---------- ---------- ---------- See notes to consolidated financial statements. Page 3 DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Quarter Ended Six Months Ended - ------------------------------------------------------------------------------------------ June 26, June 27, June 26, June 27, 1997 1996 1997 1996 - ------------------------------------------------------------------------------------------ (in thousands, except per share data) Net sales $15,001 $15,308 $30,076 $30,964 Cost of goods sold 7,808 7,725 15,385 15,830 ------- ------- ------- ------- Gross margin 7,193 7,583 14,691 15,134 Operating expenses: Research and development 2,831 2,660 5,711 5,126 Selling, general and administrative 5,342 5,379 9,904 10,392 ------- ------- ------- ------- Total operating expenses 8,173 8,039 15,615 15,518 ------- ------- ------- ------- Operating loss (980) (456) (924) (384) Non-operating income (expense): Interest income 138 38 198 101 Interest expense (58) (80) (109) (134) Foreign currency exchange (29) (5) (14) (3) Gain on sale of property 2,347 2,347 ------- ------- ------- ------- Total non-operating income (expense) 2,398 (47) 2,422 (36) ------- ------- ------- ------- Income (loss) before taxes 1,418 (503) 1,498 (420) Income tax expense 40 203 72 224 ------- ------- ------- ------- Net income (loss) $ 1,378 ($706) $1,426 ($644) ------- ------- ------- ------- ------- ------- ------- ------- Earnings per share: Net income (loss) $0.20 ($0.10) $0.20 ($0.09) ------- ------- ------- ------- ------- ------- ------- ------- Weighted average shares outstanding 7,018 6,827 6,966 6,940 ------- ------- ------- ------- ------- ------- ------- -------
See notes to consolidated financial statements. Page 4 DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - -------------------------------------------------------------------------------- For the six months ended: June 26, June 27, 1997 1996 - -------------------------------------------------------------------------------- (in thousands) OPERATING ACTIVITIES: Net income (loss) 1,426 ($644) Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization 1,777 2,046 Deferred income taxes and tax refunds (120) (408) Deferred revenue (250) 290 Gain on sale of property (2,347) Changes in current items other than cash and cash equivalents: Trade accounts receivable (395) 1,315 Inventories 1,061 (1,258) Other current assets (91) 244 Accounts payable and accrued liabilities 2008 (126) Business restructure accrual (204) (514) -------- -------- Cash provided by operating activities 2,865 945 INVESTING ACTIVITIES: Additions to property, plant and equipment (1,176) (1,296) Net proceeds on sale of property 13,380 Purchase of short-term investments (15,553) -------- -------- Cash used for investing activities (3,349) (1,296) FINANCING ACTIVITIES: Additions to/(repayment of) notes payable 531 172 Sale of common stock 179 154 Repurchase of common stock (3) (2,930) Proceeds from exercise of stock options 390 397 -------- -------- Cash provided by/(used for) financing activities 1,097 (2,207) -------- -------- Increase (decrease) in cash and cash equivalents 613 (2,558) Effects of exchange rate changes on cash 3 (12) Cash and cash equivalents - Beginning of period 4,048 4,496 -------- -------- Cash and cash equivalents - End of period $4,664 $1,926 -------- -------- -------- -------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 92 $ 34 Income taxes $143 $477 See notes to consolidated financial statements. Page 5 DATA I/O CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - FINANCIAL STATEMENT PREPARATION The financial statements as of June 26, 1997 and June 27, 1996, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). These statements are unaudited but, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the results for the periods presented. The balance sheet at December 26, 1996 has been derived from the audited financial statements at that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Operating results for the quarter and six months ended June 26, 1997 are not necessarily indicative of the results that may be expected for the year ending December 25, 1997. These financial statements should be read in conjunction with the annual audited financial statements and the accompanying notes as well as management's discussion and analysis included in the Company's Form 10-K for the year ended December 26, 1996. NOTE 2 - CLASSIFICATIONS Certain prior period's balances have been reclassified to conform to the presentation used in the current period. NOTE 3 - INVENTORIES Inventories consisted of the following components (in thousands): June 26 June 27, 1997 1996 ------- -------- Raw material $3,709 $5,134 Work-in-process 2,348 2,694 Finished goods 1,141 1,969 ------- -------- $7,198 $9,797 ------- -------- ------- -------- NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following components (in thousands): June 26 June 27, 1997 1996 ------- -------- Land $ 0 $ 910 Building and improvements 141 7,554 Equipment 21,949 22,386 ------- -------- 22,090 30,850 Less accumulated depreciation 18,017 20,685 ------- -------- $ 4,073 $10,165 ------- -------- ------- -------- Page 6 NOTE 5 - ACCOUNTING FOR INCOME TAXES Statement of Financial Accounting Standards ("SFAS") 109 requires the establishment of deferred tax assets and liabilities for expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using currently enacted tax rates which are expected to be in effect during the years in which the differences are anticipated to reverse. The Company was able to reverse deferred tax asset valuation allowances due to the Company's profit generated in the current period which allows the recognition of the benefit of future reversing temporary differences. The valuation allowance for deferred tax assets decreased by approximately $875,000 during the second quarter and approximately $1.1 million for the first six months of 1997 to $2.5 million as of June 26, 1997. Page 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General SHARE REPURCHASE PROGRAM The Company announced on October 27, 1995 a share repurchase program which authorized the Company to repurchase up to 7.5% (approximately 570,000 shares) of its outstanding shares of common stock. On February 21, 1996 and May 13, 1997 the Company announced an extension of the share repurchase program which authorized the Company to repurchase up to an additional 8% (approximately 570,000 shares) and approximately 14.5% (up to 1,000,000 shares) respectively of its outstanding common stock. These purchases may be executed through open market purchases at prevailing market prices, through block purchases or in privately negotiated transactions. Purchases may commence or be discontinued at any time. As of June 26, 1997, the Company had repurchased 1,016,200 shares at a total cost of approximately $7.1 million. SALE OF HEADQUARTERS PROPERTY On May 13, 1997 the Company announced the completion of the sale of land and building comprising its Redmond, Wash., corporate headquarters and excess land that had been held for resale for approximately $13.8 million. The sale includes a 10 year lease-back of the building to the Company, with an option to renew the lease for an additional 10 years. The Company realized approximately $12 million in cash after payment of transaction fees and taxes. The sale resulted an overall pre-tax gain of approximately $5.6 million, and of this approximately $2.3 million related to the excess land was recognized in the second quarter of 1997. The remainder will be amortized over the life of the lease. FORWARD-LOOKING STATEMENTS Although most of the information contained in this report is historical, certain statements contain forward-looking information. To the extent these statements express or imply, without limitation, product development and introduction plans, the Company's expectations for growth, estimates of future revenue, expenses, profit, cash flow, balance sheet items, sell-through or backlog, forecasts of demand or market trends for the Company's various product categories and for the industries in which the Company operates or any other guidance on future periods, these statements are forward-looking and involve matters which are subject to a number of known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Readers of this report should consider, along with other relevant information, the risk factors identified by the Company under the caption "Risk Factors" in Item 1 and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 26, 1996, and other risks identified from time to time in the Company's filings with the Securities and Exchange Commission, press releases and other communications. Page 8 RESULTS OF OPERATIONS
NET SALES - ---------------------------------------------------------------------------------------------------- Second Quarter First Six Months ----------------------------- ----------------------------- Net sales by division (in thousands) 1997 1996 % Change 1997 1996 % Change - ------------------------------------ -------- -------- -------- -------- -------- -------- Programming Systems Division: Non-automated programming systems $ 7,125 $8,579 (16.9%) $15,076 $16,792 (10.2%) Automated programming systems 4,273 4,152 2.9% 8,189 8,757 (6.5%) -------- -------- -------- -------- -------- -------- Total Programming Systems Division 11,398 12,731 (10.5%) 23,265 25,549 (8.9%) Synario Design Automation Division 1,529 1,522 0.5% 3,452 3,330 3.7% Semiconductor Equip. Div. (Reel-Tech) 2,074 1,055 96.6% 3,359 2,085 61.1% -------- -------- -------- -------- -------- -------- Net sales $15,001 $15,308 (2.0%) $30,076 $30,964 (2.9%) -------- -------- -------- -------- -------- -------- Second Quarter First Six Months ----------------------------- ----------------------------- Net sales by location (in thousands) 1997 1996 % Change 1997 1996 % Change - ------------------------------------ -------- -------- -------- -------- -------- -------- United States $7,624 $6,723 13.4% $15,099 $14,798 2.0% % of total 50.8% 43.9% 50.2% 47.8% International $7,377 $8,585 (14.1%) $14,977 $16,166 (7.4%) % of total 49.2% 56.1% 49.8% 52.2% - ----------------------------------------------------------------------------------------------------
The Company experienced a decline in revenues in the second quarter of 1997 of approximately 2% to $15.0 million compared with $15.3 million in the second quarter of 1996. Orders increased approximately 2% to $14.5 million compared with $14.2 million in the same period of 1996. The Company believes that the decline in revenues for the Programming Systems Division is due primarily to delays in new product introductions by the Company. The Company believes that increased competition in the areas where new Data I/O product introductions are not scheduled to occur until the later half of 1997, or where products are nearing the end of their product life cycles, is also adversely affecting sales. The Company's continued expectation is that these new products will not be available in production quantities until late in the second half of 1997 and early 1998. In addition, the Company believes the declines in non-automated programming systems also reflect the continuing market shift away from the Company's traditional line of higher-price IC programmers for the engineering market, toward lower-price programmers. As a result, the Company believes that until its new products are released and shipping in production quantities, overall demand for its programming systems will continue to be weak. The Company released four new low-cost programming products late in the second quarter, consisting of the ChipWriter-TM-, the ChipWriter-TM- Portable, the ChipWriter-TM-Gang and the LabSite-TM- Programming System. The company believes the market shift toward lower-priced IC programmers has been caused in part by advances in semiconductor processing technology that have lowered the barriers to entry in the programmer business over the last several years. This has caused new market entrants to appear regularly, each trying to carve out a niche. New entrants cause downward price pressure, and each cycle of new competitors lowers the acceptable price of a conventional IC programmer in the customer's view. In addition, the company believes that technological improvements in personal computers and design software tools have caused a shift in the demand for IC design tools by engineering design teams away from hardware tools in favor of increased software design tools. These industry changes had, and are continuing to have, an adverse effect on the Company's IC programmer sales and gross margins, especially because the Company's products historically have been oriented toward hardware tools and, within hardware tools, toward higher-priced IC programmers. However, the Company believes that recent changes in programmable IC technology, such as increasingly complex logic ICs, lower voltage requirements and higher pin counts, and the increasing need for higher quality and high-volume programming by users of programmable ICs means that there is a significant market need for more sophisticated programmers with new programming Page 9 technology and automated programming systems. The company currently has development projects underway for new programmer and automation technology to address the needs created by these technology changes. The first of these products, the ProMaster 970, a fine pitch automated programming system, was introduced at the Nepcon trade show in February. The Company's Semiconductor Equipment Division products, acquired as part of the Reel-Tech acquisition, continued to experience strong demand, and partially offset the decline in revenue for programming systems products. Semiconductor Equipment Division revenues showed a strong 97% growth compared to the second quarter of 1996. The Company believes the market for semiconductor equipment, after experiencing several quarters of a slow down in capital spending in 1996, has turned around. The Company believes this favorable market condition is continuing; however due to the cyclical nature of demand for ICs, the activities of competitors and other factors, there can be no assurance that strong demand for this equipment will continue. The Company introduced its new high throughput TR4000 Tape and Reel System at the Semicon West trade show in July in San Jose which is scheduled for shipment in the fourth quarter. Synario division sales were flat compared with the same quarter in the prior year as it made major changes in its U.S. sales channels and competition increased from low-priced semiconductor company software. GROSS MARGIN Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Gross margin $7,193 $7,583 $14,691 $15,134 Percentage of net sales 48.0% 49.5% 48.8% 48.9% - -------------------------------------------------------------------------------- Gross margin declined slightly in amount and as a percentage of net sales for the second quarter and first six months of 1997 as compared to the prior year due primarily to lower sales volumes and lower product margins. Contributing to the decline of gross margin was strengthening of the U.S. Dollar in relation to the Japanese Yen and the German Mark, in which approximately 18% of the company's sales were denominated. RESEARCH AND DEVELOPMENT Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Research and development $2,831 $2,660 $5,711 $5,126 Percentage of net sales 18.9% 17.4% 19.0% 16.6% - -------------------------------------------------------------------------------- The increase in research and development spending compared to the second quarter and the first six months of 1996 is primarily due to increased personnel and product development costs related to the Company's continued significant investment in new technology. The Company expects to continue its significant investment in research and development activities during the second half of 1997 in preparation for the anticipated new product releases The Company believes it is essential to invest in research and development to support its existing products and to create new products as markets develop and technologies change. The Company is focusing its research and development efforts in its strategic growth markets, namely automated handling systems for the manufacturing environment, Windows-based EDA software design tools, lower-priced IC programmers and semiconductor equipment. Page 10 SELLING, GENERAL AND ADMINISTRATIVE Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Selling, general and administrative $5,342 $5,379 $9,904 $10,392 Percentage of net sales 35.6% 35.1% 32.9% 33.6% - -------------------------------------------------------------------------------- Second quarter selling, general and administrative expenditures were relatively flat as compared to the same quarter in 1996. Information system year 2000 project charges of approximately $300,000 were included during the second quarter which was offset by lower sales commissions as a result of lower sales volume and continued cost control efforts during the second quarter and first six months of 1997. In addition, the increased value of the U.S. Dollar versus the Japanese Yen and German Mark also contributed to a decrease in translated expenditures during the second quarter and first six months of 1997. INTEREST Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Interest income $138 $38 $198 $101 Interest expense $58 $80 $109 $134 - -------------------------------------------------------------------------------- The increase in interest income is due primarily to increased funds available for investment, primarily as a result of the sale of the Company's headquarters property. INCOME TAXES Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Income taxes $40 $203 $72 $224 Effective tax rate 2.8% N/A 4.8% N/A - -------------------------------------------------------------------------------- The Company's effective tax rate for the second quarter and the first six months of 1997 differed from the statutory 34% tax rate primarily due to reversing deferred tax valuation reserves. The valuation reserves decreased primarily due to the Company's having recorded profits. The Company has valuation reserves of $2.5 million that may increase should the Company experience losses or reverse as the Company records income. NET INCOME AND EARNINGS PER SHARE Second Quarter First Six Months --------------------- ----------------------- (in thousands) 1997 1996 1997 1996 - -------------------------------------------------------------------------------- Net income (loss) $1,378 ($706) $1,426 ($644) Earnings per share $0.20 ($0.10) $0.20 ($0.09) - -------------------------------------------------------------------------------- Net Income for the second quarter includes a gain on the sale and leaseback of the corporate headquarters property of $2,347,000. Without the headquarters sale, the Company would have recorded a net loss of $969,000 or ($.14) per share. Page 11 INFLATION AND CHANGES IN FOREIGN CURRENCY EXCHANGE RATES Historically, the Company has been able to offset the impact of inflation through efficiency increases and price adjustments. Increasing price competition, especially in IC programmers, is currently diminishing and may continue to diminish the Company's ability to offset the impacts of inflation in the future. Sales and expenses incurred by foreign subsidiaries are denominated in the subsidiary's local currency and translated into U.S. Dollar amounts at average rates of exchange during the year. To date the foreign currency rate changes have not significantly impacted the company's profitability. This is because approximately 20% of the Company's sales are made by foreign subsidiaries and independent currency fluctuations tend to minimize the translation effect of any individual currency exchange fluctuations, and the effect of individual rate changes on sales and expenses tend to offset each other. Additionally, the company hedges its foreign currency exposure on the sales of inventory and certain loans to its foreign subsidiaries through the use of foreign exchange contracts. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES (in thousands) June 26, Dec. 26, 1997 Change 1996 - -------------------------------------------------------------------------------- Working capital $21,402 $11,348 $10,054 Total debt $2,132 $527 $1,605 - -------------------------------------------------------------------------------- Working capital increased during the second quarter of 1997 primarily due to the funds received from the sale of the corporate headquarters property. The Company's trade accounts receivable decreased by approximately $1.2 million during the second quarter. This decrease is due primarily to increased collection efforts and the timing of sales within the quarter. The company decreased its inventory level by approximately $402,000 during the second quarter. This decrease was primarily due to a continuing effort to align the level of inventory to the sales volume the Company is experiencing. As of June 26, 1997, the Company had total debt of $2.1 million or approximately 9% of its $25 million in equity. Of this debt, $1.5 million is a note payable due in 1998 for the balance of the purchase price of the CAD/CAM Group. The remaining $600,000 is current debt, consisting entirely of borrowings on the Company's $1.4 million foreign line of credit. No borrowings were outstanding under the Company's $8.0 million U.S. line of credit. The U.S. line of credit expires on May 31, 1998. The foreign line of credit expires in November 1997. Historically, these credit lines have been structured as short-term and have been renewed by their expiration dates. The Company currently expects to be able to renew these lines of credit before expiration under substantially the same terms as those presently in place. The Company estimates that capital expenditures for property, plant and equipment during the remainder of 1997 will be approximately $1.5 million. Such expenditures are currently expected to be funded from internally generated funds and, if necessary, borrowings under the Company's existing credit lines. Although the Company fully expects that such expenditures will be made, it has purchase commitments for only a small portion of this amount. At June 26, 1997, the Company's material short-term unused sources of liquidity consisted of approximately $20.2 million in cash, cash equivalents, and short-term investments, available borrowings of $8.0 million under its U.S. line of credit and available borrowings of approximately $800,000 under its foreign line of credit. The Company believes these sources of working capital will be sufficient to fund working capital needs, service existing debt, finance planned capital expenditures, fund the company's share repurchase program, and fund the Reel-Tech contingent payment obligations. Page 12 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Annual Meeting of Shareholders held on May 13, 1997, there were present in person or by proxy the holders of 5,823,511 shares of the 6,835,965 shares of Common Stock of the Corporation. Following are the matters ratified and the voting results: (a) Election of a Board of Directors consisting of the following six (6) directors: Name Votes For Votes Withheld ---- --------- -------------- William C. Erxleben 5,273,816 548,660 Keith L. Barnes 5,272,932 549,544 Frances M. Conley 5,279,482 542,994 Edward D. Lazowska 5,277,032 545,444 Donald R. Stenquist 5,276,381 546,095 Milton F. Zeutschel 5,276,847 545,629 (b) Approval of an amendment to the Company's 1996 Employee Stock Option Plan whereby the number of shares of the Company's Common Stock reserved for issuance under the Plan was increased by 300,000 shares. Votes cast were 4,933,063 For, 762,987 Against, 79,057 Abstain and 48,404 Broker Non-votes. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K Page ---- (a) Exhibits 11. Statement Regarding Computation of Earnings Per Share 16 (b) Reports on Form 8-K None Page 13 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. DATA I/O CORPORATION (REGISTRANT) DATED: August 8, 1997 By: //S// Alan J. Beauchamp ----------------------- Alan J. Beauchamp Vice President Finance and Administration Chief Financial Officer Secretary and Treasurer Page 14 EXHIBIT INDEX Exhibit Number Title Page Number - -------------- ------------------------------------------------ ----------- 11 Statement Regarding Computation of Earnings 16 per Share Page 15 EX-11 2 EXHIBIT 11 EXHIBIT 11 DATA I/O CORPORATION COMPUTATION OF EARNINGS PER SHARE Earnings per share reported in Form 10-Q for the quarters ended June 26, 1997, and June 27, 1996 are based on the following (in thousands):
Quarter Ended Six Months Ended ------------- ---------------- June 26, June 27, June 26, June 27, Primary and Fully Diluted: 1997 1996 1997 1996 - -------------------------- -------- -------- -------- ------ Weighted Average Shares Outstanding 6,877 6,827 6,847 6,940 Dilutive Effect of Stock Options 141 119 -------- -------- -------- ------ Weighted Average Common and Equivalent Shares Outstanding 7,018 6,827 6,966 6,940 -------- -------- -------- ------ -------- -------- -------- ------
Page 16 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-25-1997 DEC-27-1996 JUN-26-1997 4,664 15,553 10,593 393 7,198 40,051 22,090 18,017 46,955 18,649 0 0 0 15,813 8,712 46,955 30,076 30,076 15,385 15,552 (2,531) 63 109 1,498 72 1,426 0 0 0 1,426 0.20 0.20
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