0000912057-95-007781.txt : 19950915 0000912057-95-007781.hdr.sgml : 19950915 ACCESSION NUMBER: 0000912057-95-007781 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950731 FILED AS OF DATE: 19950913 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERPHASE CORP CENTRAL INDEX KEY: 0000728249 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 751549797 STATE OF INCORPORATION: TX FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13071 FILM NUMBER: 95573578 BUSINESS ADDRESS: STREET 1: 13800 SENLAC DR CITY: DALLAS STATE: TX ZIP: 75234 BUSINESS PHONE: 2149199000 MAIL ADDRESS: STREET 2: 13800 SENLAC DR CITY: DALLAS STATE: TX ZIP: 75234 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1034 For the Quarter Ended July 31, 1995 Commission File Number 0-13071 INTERPHASE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Texas 75-1549797 (STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.) 13800 Senlac, Dallas, Texas 75234 (Address of principal executive offices) (214)-919-9000 (Registrant's telephone number, including area code) ________________________________________________________________________________ Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No ________________________________________________________________________________ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 1, 1995 ----- -------------------------------- Common Stock, No par value 4,620,860 -------------------------------------------------------------------------------- INTERPHASE CORPORATION INDEX PART I -FINANCIAL INFORMATION ITEM 1. Colidated Interim Financial Statements Consolidated Balance Sheets as of July 31, 1995 and October 31,1994 3 Consolidated Statements of Operations for the three months and nine months ended July 31, 1995 and 1994 4 Consolidated Statements of Cash Flows for the nine months ended July 31, 1995 and 1994 5 Notes to Consolidated Interim Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II- OTHER INFORMATION SIGNATURE 9
INTERPHASE CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except number of shares) ASSETS July 31, October 31, 1995 1994 ------------ ----------- (Unaudited) Cash and cash equivalents $2,013 $3,814 Marketable securities 9,082 7,720 Trade accounts receivable, less allowances for uncollectible accounts of $241 and $240, respectively 7,240 5,658 Inventories, net 7,796 6,577 Refundable income taxes 219 Prepaid expenses and other current assets 976 733 Deferred income taxes, net 625 1,019 -------- -------- Total current assets 27,732 25,740 Machinery and equipment 9,568 10,801 Leasehold improvements 2,787 2,763 Furniture and fixtures 710 648 -------- ------- 13,065 14,212 Less-accumulated depreciation and amortization (8,335) (8,918) -------- -------- Total property and equipment, net 4,730 5,294 Capitalized software, net of accumulated amortization 495 804 Deferred income taxes, net 46 46 Other assets 176 59 -------- -------- Total assets $33,179 $31,943 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable and accrued liabilities $2,617 $3,501 Accrued compensation 1,251 1,463 -------- -------- Total current liabilities 3,868 4,964 Deferred lease obligations 128 130 -------- -------- Total liabilities 3,996 5,094 Common stock, no par value; 100,000,000 shares authorized; 4,560,540 and 4,513,230 shares outstanding 23,735 23,493 Retained earnings 5,499 3,504 Unrealized holding period loss (51) (148) -------- ------- Total shareholders' equity 29,183 26,849 -------- -------- Total liabilities and shareholders' equity $33,179 $31,943 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3
INTERPHASE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended July 31, Nine Months Ended July 31, ------------------------------ ----------------------------- 1995 1994 1995 1994 ------- ------- ------- ------- $12,356 $9,986 Revenues $34,851 $29,016 6,273 5,010 Cost of sales 17,577 14,817 ------- ------- ------- ------- 6,083 4,976 Gross profit 17,274 14,199 1,745 1,595 Research and development 5,320 5,838 2,343 1,903 Sales and marketing 6,233 5,551 948 905 General and administrative 3,019 3,084 - - Provision for strategic realignment - 1,148 ------- ------- ------- ------- 5,036 4,403 Total operating expenses 14,572 15,621 ------- ------- ------- ------- 1,047 573 Operating income (loss) 2,702 (1,422) 156 68 Interest income 412 187 (37) (68) Other, net 4 (69) ------ ------- ------- ------- 1,166 573 Income (loss) before income taxes 3,118 (1,304) 0 421 184 Provision (benefit) for income taxes 1,123 (417) ------- ------- ------- ------- $745 $389 Net income (loss) $1,995 ($887) ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss) per common and $0.14 $0.08 common equivalent share $0.38 ($0.20) ------- ------- ------- ------- ------- ------- ------- ------- Weighted average common and common 5,294 4,658 equivalent shares 5,264 4,480 ------- ------- ------- ------- ------- ------- ------- -------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4
INTERPHASE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended July 31 ------------------------- 1995 1994 ----------- ---------- Cash flows from operating activities: Net income (loss) $ 1,995 $ (887) Adjustment to reconcile net income (loss) to net cash provided (used) by operating activities: Provision for strategic realignment - 1,148 Depreciation and amortization 2,066 2,507 Change in assets and liabilities, excluding effect from provision for strategic realignment: Trade accounts receivable (1,582) 1,298 Inventories (1,218) 93 Refundable income taxes 219 787 Prepaid expenses and other current assets (244) 127 Accounts payable and accrued liabilities (582) (1,769) Accrued compensation (212) (521) Deferred income taxes payable 394 (29) Deferred lease obligations (2) 19 -------- ------- Net adjustments (1,161) 3,660 -------- ------- Net cash provided (used) by operating activities 834 2,773 Cash flows from investing activities: Additions to property, equipment and leasehold improvements (1,356) (924) Additions to capitalized software (139) (250) Decrease (Increase) in other assets (117) 21 Decrease (Increase) in marketable securities (1,362) (339) Change in unrealized holding period loss on marketable securities 97 - -------- ------- Net cash provided (used) by investing activities (2,877) (1,492) Cash flows from financing activities: Principal payments on capital lease obligations - (90) Increase in common stock 242 39 ------- ------- Net cash provided (used) by financing activities 242 (51) ------- ------- Net increase (decrease) in cash and cash equivalents (1,801) 1,230 Cash and cash equivalents at beginning of year 3,814 2,703 ------- ------- Cash and cash equivalents at end of period $ 2,013 $ 3,933 ------- ------- ------- ------- Supplemental Disclosure of Cash Flow Information Interest paid - 5 Taxes refunded 237 - Taxes paid 1,013 -
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5 INTERPHASE CORPORATION NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying consolidated interim financial statements include the accounts of Interphase Corporation and its wholly owned subsidiary. Significant intercompany accounts and transactions have been eliminated. While the accompanying interim financial statements are unaudited, they have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, all material adjustments and disclosures necessary to fairly present the results of such periods have been made. 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 the rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended October 31, 1994. 2. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Net income per common and common equivalent share is computed using the weighted average number of outstanding shares and common equivalent shares. The dilutive impact of outstanding stock options have been considered under the treasury stock method using the greater of the average bid price or closing bid price for the period. In 1994, the impact of outstanding stock options and warrants was antidilutive and therefore, has been excluded from the computation of net loss per share in 1994. Weighted average common and common equivalent shares:
Three Months Ended Nine Months Ended July 31, July 31, ----------------------------------------- (IN THOUSANDS) 1995 1994 1995 1994 ---- ----- ----- ---- Outstanding 4,550 4,658 4,536 4.480 Stock options 744 ---- 728 ---- ----- ----- ----- ----- Total 5,294 4,658 5,264 4,480 ----- ----- ----- -----
6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenues for the three months ended July 31, 1995 increased $2,370,000 or approximately 24% to $12,356,000 as compared to $9,986,000 for the same period in 1994. Networking products represented a growth of 24% over the same period in 1994. Which consisted of a 33% growth in FDDI product revenues, partially offset by a 18% decline in older ethernet product revenues. Asynchronous Transfer Mode ("ATM") products continued to grow as compared to the respective quarter in 1994, and comprised approximately 4% of total revenues for the third quarter of 1995. FDDI revenues approximated 46% of total revenues in the third quarter of 1995. Networking products in total comprised 62% of total revenue for the third quarter of 1995. Mass storage product revenues increased approximately 21% in the third quarter of 1995 compared to 1994. The growth in the mass storage product revenues is attributable to the increase in SCSI adapter cards revenues, which increased approximately 32%, and more than offset the decline in older storage product revenues during the same period. Mass storage product revenues comprised approximately 34% of total revenues in the third quarter of 1995, compared to 35% of total revenues in the third quarter of 1994. Geographically, domestic revenues comprised 89% of consolidated revenues. European revenues comprised 7% of consolidated revenues in the third quarter of 1995 compared to 10% in the third quarter of 1994. Revenues for the nine months ended July 31, 1995 increased $5,835,000 or 20% to $34,851,000 as compared to $29,016,000 for the same period in fiscal 1994. Revenues from networking products comprised 59% of consolidated revenue for the nine months ended July 31, 1995, as compared to 60% of consolidated revenues for the same period in fiscal 1994. Revenue from mass storage products were unchanged, comprising 36% for the nine months ending July 31, 1995 and comprising 36% for the same period in fiscal 1994. The gross margin percentage for the three months ended July 31, 1995 was approximately 49% as compared to approximately 50% during the same period in 1994. The gross margin percentage for the nine months ended July 31, 1995 was approximately 50% as compared to approximately 49% during the same period in 1994. Operating expenses for the three months ended July 31, 1995 were $5,036,000, representing approximately 41% of consolidated revenue, as compared to 44% for the same period in 1994. Operating expenses increased 14% over the same period in 1994, due primarily to expenses associated with reorganizing the European operations, volume related selling expenses and incremental development engineering expenses. Operating expenses for the nine months ended July 31, 1995 were $14,572,000, representing approximately 42% of consolidated revenue excluding the provision for strategic realignment recorded in the first quarter 1994, and increased $99,000 from the same period in 1994. As a percentage of revenues operating expenses for the nine months ended July 31, 1995 decreased from 54% in 1994 to 42% in 1995. The decreased spending relative to sales is primarily the result of cost reduction actions initiated in early 1994 and management's continued focus on controlling operating expenses. The company reported a net income of $745,000 for the three months ended July 31, 1995 as compared to $389,000 for the same period in fiscal 1994. The company reported a net income of $1,995,000 for the nine months ended July 31, 1995 as compared to a net loss of ($887,000) for this same period in fiscal 1994. The increase in profitability in 1995 compared to 1994 is primarily due to higher sales volumes and lower operating expenses relative to revenue levels. In addition, the nine month ended July 31, 1994 included a before tax provision for strategic realignment of $1,148,000. 7 LIQUIDITY AND CAPITAL RESOURCES The Company's cash , cash equivalents and marketable securities aggregated $11,095,000 at July 31, 1995, $11,534,000 at October 31, 1994 and $9,860,000 at July 31, 1994. The improvement in cash position from July 31, 1994 to July 31, 1995 is primarily the result of increased profitability since the third quarter of 1994. The company expects that its cash, cash equivalents and marketable securities will be adequate to meet foreseeable needs for the next 12 months. 8 SIGNATURE 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. INTERPHASE CORPORATION (Registrant) Date: September 12, 1995 /s/ Robert L. Drury --------------------------- Robert L. Drury Chief Financial Officer and Vice President Finance (Principal Financial and Accounting Officer) 9
EX-27 2 EXHIBIT 27
5 1,000 9-MOS OCT-31-1995 MAY-01-1995 JUL-31-1995 2,013 9,082 7,481 (241) 7,796 27,732 13,065 (8,335) 33,179 3,868 0 23,735 0 0 5,448 33,179 34,851 34,851 17,577 17,577 14,572 0 0 3,118 1,123 1,995 0 0 0 1,995 0 .38