-----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, SP225LbZog4BGh1Y55PpdIJA+wIAAXILgHOY0HNhm0/KPdVKhc4isa3L/P60IhAl PTE4SyW4fXBI42IY3zsaCg== 0000893877-97-000645.txt : 19971114 0000893877-97-000645.hdr.sgml : 19971114 ACCESSION NUMBER: 0000893877-97-000645 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADISYS CORP CENTRAL INDEX KEY: 0000873044 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 930945232 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26844 FILM NUMBER: 97713683 BUSINESS ADDRESS: STREET 1: 15025 SW KOLL PARKWAY CITY: BEAVERTON STATE: OR ZIP: 97006 BUSINESS PHONE: 5036461800 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (X) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1997 or ( ) 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: 0-26844 RADISYS CORPORATION (Exact name of registrant as specified in its charter) Oregon 93-0945232 (State or other jurisdiction (I.R.S. Employer of organization or incorporation) Identification Number) 5445 NE Dawson Creek Drive Hillsboro, OR 97124 (Address of principal executive offices, including zip code) (503) 615-1100 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Number of shares of common stock outstanding as of October 31, 1997 was 7,872,639. RADISYS CORPORATION PART I. FINANCIAL INFORMATION Page No. Item 1. Consolidated Financial Statements Consolidated Balance Sheet - September 30, 1997 and December 31, 1996 3 Consolidated Statement of Operations - Three months ended September 30, 1997 and 1996, and nine months ended September 30, 1997 and 1996. 4 Consolidated Statement of Changes In Shareholders' Equity - December 31, 1994 through September 30, 1997 5 Consolidated Statement of Cash Flows - Nine months ended September 30, 1997 and 1996 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 12 Item 6. Exhibits 12 Signatures 13
RadiSys Corporation Consolidated Balance Sheet (in thousands, except share amounts) ASSETS September 30, December 31, 1997 1996 ------------- ------------- (unaudited) Current assets Cash and cash equivalents $ 23,417 $ 24,626 Accounts receivable 26,077 20,265 Other receivables 774 3,396 Inventories 20,768 17,834 Other current assets 1,612 742 Deferred income taxes 1,424 1,794 ------------- ------------- Total current assets 74,072 68,657 Equipment, net of accumulated depreciation of $7,276 and $5,208 12,571 11,171 Other Assets 4,786 425 ------------- ------------- $ 91,429 $ 80,253 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 11,583 $ 11,461 Income taxes payable 3,006 2,996 Accrued wages and bonuses 2,386 2,230 Accrued warranty costs 458 1,227 Accrued sales discounts 743 1,360 Other accrued liabilities 1,174 2,139 Note payable 1,200 Current portion of capital lease obligation 214 214 ------------- ------------- Total current liabilities 19,564 22,827 ------------- ------------- Obligations under capital lease 462 648 ------------- ------------- Total liabilities 20,026 23,475 ------------- ------------- Commitments and contingent liabilities Shareholders' equity Common stock, 50,000,000 shares authorized, 7,784,907 and 7,388,410 shares issued and outstanding 49,414 45,061 Warrants 1,200 Cumulative translation adjustment (4) (329) Retained earnings 21,993 10,846 ------------- ------------- Total shareholders' equity 71,403 56,778 ------------- ------------- $ 91,429 $ 80,253 ============= ============= See accompanying notes to consolidated financial statements
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RadiSys Corporation Consolidated Statement of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended Sept 30, Sept 30, Sept 30, Sept 30, 1997 1996 1997 1996 ------------ ------------ ------------ ----------- Revenues $ 31,594 $ 22,459 $ 89,220 $ 53,558 Cost of sales 18,875 12,006 52,935 31,372 ------------ ------------ ------------ ------------ Gross profit 12,719 10,453 36,285 22,186 Research and development 2,953 2,030 8,502 5,666 Selling, general and administrative 3,812 3,513 11,407 8,180 ------------ ------------ ------------ ------------ Income from operations 5,954 4,910 16,376 8,340 Interest income (expense), net 238 288 772 812 ------------ ------------ ------------ ------------ Income before income tax provision 6,192 5,198 17,148 9,152 Income tax provision 2,167 1,819 6,001 3,228 ------------ ------------ ------------ ------------ Net income $ 4,025 $ 3,379 $ 11,147 $ 5,924 ============ ============ ============ ============ Net income per share $ 0.49 $ 0.43 $ 1.37 $ 0.83 ============ ============ ============ ============ Weighted average number of common and common equivalent shares outstanding 8,297 7,819 8,148 7,175 ============ ============ ============ ============ See accompanying notes to consolidated financial statements
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RadiSys Corporation Consolidated Statement of Changes in Shareholders' Equity (in thousands, except share amounts) Preferred stock -------------------------------------------------------------- Series A Series B Series C Common stock ----------------- ------------------ ------------------- ------------------ Shares Amount Shares Amount Shares Amount Shares Amount Warrants -------- ------ --------- ------ --------- ------- --------- ------- -------- Balances, December 31, 1994 355,556 1,500 1,820,988 4,917 2,159,504 2,973 1,482,200 475 Exercise of common stock options 58,524 106 Issuance of common stock 2,175,000 23,656 Conversion of preferred stock (355,556) (1,500) (1,820,988) (4,917) (2,159,504) (2,973) 2,298,985 9,390 Translation adjustment Net income for the year -------- ------ --------- ------ --------- ------- --------- ------- -------- Balances, December 31, 1995 6,014,709 33,627 Exercise of common stock options 73,701 365 Tax effect of options exercised 569 Translation adjustment Stock issued for acquisition 1,300,000 10,500 Warrants issued for acquisition 1,200 Net income for the period -------- ------ --------- ------ --------- ------- --------- ------- -------- Balances, December 31, 1996 7,388,410 45,061 1,200 Exercise of warrants 166,667 1,200 (1,200) Exercise of common stock options 146,330 744 Translation adjustment Stock issued for acquisition 83,500 2,409 Net income for the period -------- ------ --------- ------ --------- ------- --------- ------- -------- Balances, September 30, 1997 $ $ $ 7,784,907 $49,414 0 ======== ====== ========= ====== ========= ======= ========= ======= ======== See accompanying notes to consolidated financial statements
5A
RadiSys Corporation Consolidated Statement of Changes in Shareholders' Equity (in thousands, except share amounts) Page 2 of 2 Cumulative Retained translation (deficit) adjustment earnings Total ---------- -------- ------ Balances, December 31, 1994 (216) 9,649 Exercise of common stock options 106 Issuance of common stock 23,656 Conversion of preferred stock Translation adjustment (108) (108) Net income for the year 1,516 1,516 ---------- -------- ------ Balances, December 31, 1995 (108) 1,300 34,819 Exercise of common stock options 365 Tax effect of options exercised 569 Translation adjustment (221) (221) Stock issued for acquisition 10,500 Warrants issued for acquisition 1,200 Net income for the period 9,546 9,546 ---------- -------- ------ Balances, December 31, 1996 (329) 10,846 56,778 Exercise of warrants Exercise of common stock options 744 Translation adjustment 325 325 Stock issued for acquisition 2,409 Net income for the period 11,147 11,147 ---------- -------- ------ Balances, September 30, 1997 $ (4) $ 21,993 $71,403 ========== ======== ======= See accompanying notes to consolidated financial statements
5B
RadiSys Corporation Consolidated Statement of Cash Flows (in thousands) (unaudited) Nine Months Ended September 30, September 30, 1997 1996 ------------- ------------- Cash flows from operating activities: Net Income $ 11,147 $ 5,924 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,590 1,339 Deferred income taxes 370 (527) Net changes in current assets and current liabilities: (Increase) decrease in accounts receivable (5,272) (8,175) (Increase) decrease in other receivables 2,622 24 (Increase) decrease in inventories (2,320) (112) (Increase) decrease in other current assets (1,070) (28) Increase (decrease) in accounts payable 10 3,578 Increase (decrease) in income tax payable 10 2,770 Increase (decrease) in accrued wages and bonuses 62 814 Increase (decrease) in accrued warranty costs (780) 795 Increase (decrease) in accrued sales discounts (617) Increase (decrease) in other accrued liabilities (1,301) 3,618 ------------- ------------- Net cash provided by operating activities 5,451 10,020 ------------- ------------- Cash flows from investing activities: Decrease in short term investments 10,922 Business acquisitions (1,060) Capital expenditures (3,502) (5,132) Capitalized software production costs and other assets (449) 118 ------------- ------------- Net cash provided by (used for) investing activities (5,011) 5,908 ------------- ------------- Cash flows from financing activities: Cash proceeds from issuance of common stock, net 744 274 Payment on notes payable (2,532) Payments on capital lease obligation (186) (149) ------------- ------------- Net cash provided by (used for) financing activities (1,974) 125 ------------- ------------- Effect of exchange rate changes on cash 325 99 ------------- ------------- Net increase (decrease) in cash and cash equivalents (1,209) 16,152 Cash and cash equivalents, beginning of period 24,626 10,236 ------------- ------------- Cash and cash equivalents, end of period $ 23,417 $ 26,388 ============= ============= See accompanying notes to consolidated financial statements
6 RADISYS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share amounts) (unaudited) 1. Basis of Presentation The accompanying consolidated financial statements are unaudited and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission and in the opinion of management include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of results for the interim periods. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1996. The results of operations for interim periods are not necessarily indicative of the results for the entire year. Net income per share is based on the weighted average number of shares of common stock and common stock equivalents (stock options and warrants) outstanding during the periods, computed using the treasury stock method for stock options and warrants. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128 "Earnings Per Share". In accordance with this pronouncement, the Company will adopt the new standard for periods ending after December 15, 1997. Management does not expect the adoption of this pronouncement to have a significant effect on reported earnings per share information. In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income." This statement requires entities to report changes in equity that result from transactions and economic events other than those with shareholders. This statement is effective for fiscal years beginning after December 15, 1997, at which time it will be adopted by the Company. Management expects that the adoption of this pronouncement will have no effect on reported earnings. The Company's comprehensive income component will consist only of the SFAS 52 cumulative translation adjustment, already included in the statement of shareholders' equity. In June 1997, the Financial Accounting Standards Board issue SFAS No. 131, "Disclosures about Segments of an Enterprise and Related information". The objective of the standard is to provide information abut the different types of business activities in which an enterprise engages and the different economic environments in which it operates. This pronouncement will be adopted by the company for fiscal 1998, as required by the statement. This statement will have no impact on reported earnings and management expects that it will not have a significant impact on disclosure requirements as the company operates in one segment. 2. Accounts Receivable Trade accounts receivable are net of an allowance for doubtful accounts of $674 and $706 at September 30, 1997 and December 31, 1996, respectively. The Company's customers are concentrated in the technology industry. 7 3. Inventories Inventories consist of the following: Sept 30, Dec 31, 1997 1996 ------------ ------------ Raw Materials $ 13,297 $ 12,555 Work in Process 2,830 3,538 Finished Goods 4,641 1,741 ------------ ------------ $ 20,768 $ 17,834 ============ ============ 4. Property and Equipment Property and equipment consists of the following: Sept 30, Dec 31, 1997 1996 ------------ ------------ Land $ 2,065 $ 1,230 Manufacturing Equipment 9,466 8,472 Office Equipment 6,513 5,548 Leasehold Improvements 1,803 1,129 19,847 16,379 Less: Accum. Depr. 7,276 5,208 ------------ ------------ $ 12,571 $ 11,171 ============ ============ 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Total revenue was $31.6 million for the three months ended September 30, 1997 compared to $22.5 million for the three months ended September 30, 1996, and $89.2 million for the nine months ended September 30, 1997 compared to $53.6 million for the nine months ended September 30, 1996. Net income was $4.0 million for the three months ended September 30, 1997 compared to $3.4 million for the three months ended September 30, 1996, and $11.1 million for the nine months ended September 30, 1997 compared to $5.9 million for the nine months ended September 30, 1996. Information contained in this Quarterly Report on Form 10-Q and statements that may be made in the future by the Company's management regarding future industry trends, the Company's future development and introduction of products, and the Company's future liquidity, development, and business activities constitute forward looking statements that involve a number of risks and uncertainties. The following are among the factors that could cause actual results to differ materially from the forward looking statements: business conditions and growth in the electronics industry and general economies, both domestic and international; uncertainty of market development; dependence on a limited number of OEM customers; dependence on limited or sole source suppliers; dependence on the relationship with Intel Corporation ("Intel"); dependence on Intel's support of the embedded computer market; lower than expected customer orders; competitive factors, including increased competition, new product offerings by competitors and price pressures; the availability of parts and components at reasonable prices; changes in product mix; dependence on proprietary technology; technological difficulties and resource constraints encountered in developing new products; and product shipment interruptions due to manufacturing difficulties. On April 29, 1996, the Company purchased substantially all of the assets of Intel Corporation ("Intel") that were dedicated to the design, manufacture and sale of all standard and custom Multibus I and Multibus II products ("Multibus") (collectively the "Acquisition"). In addition, pursuant to the terms of the Acquisition, Intel licensed certain Intel software to the Company. On February 18, 1997, the Company purchased substantially all of the assets of Sonitech International, Inc., a provider of digital signal processing hardware and software solutions for embedded applications. Both acquisitions were accounted for using the purchase method. The results of operations for these acquisitions have been included in the financial statements since the dates of the acquisition. REVENUES
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- (in thousands except % amounts) (in thousands except % amounts) Sept 30, % Sept 30, Sept 30, % Sept 30, 1997 Change 1996 1997 Change 1996 ---- ------ ---- ---- ------ ---- Revenues $31,594 41 $22,459 $89,220 67 $53,558
The increases in revenues for the three months ended September 30, 1997 compared to the three months ended September 30, 1996 resulted primarily from new design wins ramping into production and volume increases in OEM sales. The increase in revenues for the nine months 9 ended September 30, 1997 compared to the nine months ended September 30, 1996 resulted primarily from the inclusion of the Multibus acquisition for all of 1997 compared with only five of the nine months of 1996, new design wins ramping into production and volume increases in OEM sales. COST OF GOODS SOLD
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- (in thousands except % amounts) (in thousands except % amounts) Sept 30, % Sept 30, Sept 30, % Sept 30, 1997 Change 1996 1997 Change 1996 ---- ------ ---- ---- ------ ---- Cost of Goods Sold $18,875 57 $12,006 $52,935 69 $31,372 As a % of total revenue 60% 54% 59% 59%
The increase in cost of goods sold as a percentage of revenues for the three months ended September 30, 1997 compared to the three months ended September 30, 1996 is primarily the result of nonrecurring royalty revenues paid in the third quarter of 1996 by Intel to RadiSys for backlog retained by Intel in connection with its sale of Multibus to RadiSys and lower margin new design wins ramping into production. As a percentage of revenues, total cost of goods sold remained stable for the nine months ended September 30, 1997 compared to the nine months ended September 30, 1996 primarily as a result of component pricing and the mix of products sold through distributors versus direct sales, offset by lower margin new design wins ramping into production and product mix. RESEARCH AND DEVELOPMENT
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- (in thousands except % amounts) (in thousands except % amounts) Sept 30, Sept 30, Sept 30, Sept 30, 1997 1996 1997 1996 ---- ---- ---- ---- Research and Development $2,953 $2,030 $8,502 $5,666 As a % of total revenue 9% 9% 10% 11%
The dollar increases in research and development expenses were primarily the result of increased investment in new product development and costs of enhancements to existing products. The Company continues to invest in new design wins for OEM customers and the dollar increases reflect steady increases in the number of employees working in research and development. SELLING, GENERAL AND ADMINISTRATIVE
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- (in thousands except % amounts) (in thousands except % amounts) Sept 30, Sept 30, Sept 30, Sept 30, 1997 1996 1997 1996 ---- ---- ---- ---- Selling, General & Admin. $3,812 $3,513 $11,407 $8,180 As a % of total revenue 12% 16% 13% 15%
10 Selling, general and administrative expenses have increased in dollar amount in the three and nine months ended September 30, 1997 compared to the three and nine months ended September 30, 1996, primarily as a result of increased personnel, facilities and travel costs to support higher levels of sales. The decreases as a percentage of revenues in these periods compared to the same periods in 1996 were primarily the result of operating efficiencies achieved by spreading fixed costs over a larger revenue base. INTEREST INCOME, NET AND INCOME TAX PROVISION
Three Months Ended Nine Months Ended ------------------------------- ------------------------------- (in thousands except % amounts) (in thousands except % amounts) Sept 30, % Sept 30, Sept 30, % Sept 30, 1997 Change 1996 1997 Change 1996 ---- ------ ---- ---- ------ ---- Interest Income, net $ 238 (17) $ 288 $ 772 (5) $ 812 Income Tax Provision 2,167 19 1,819 6,001 86 3,228
Interest income, net includes interest income, interest expense, bank charges and foreign currency transaction gains or losses. The increase in the income tax provision is solely attributable to increased net income before taxes in 1997. LIQUIDITY AND CAPITAL RESOURCES At September 30, 1997, the Company had $23.4 million in cash and cash equivalents, which represents the Company's principal source of liquidity. At September 30, 1997, the Company had working capital of approximately $54.5 million. Effective October, 1997, the Company renewed a $10.0 million line of credit with a bank. The Company has not drawn any funds under this line of credit. Net cash provided by operating activities for the nine months ended September 30, 1997 was $5.5 million as compared with $10.0 million for the nine months ended September 30, 1996. Capital expenditures were $3.5 million in the nine months ended September 30, 1997 and $5.1 million for the nine months ended September 30, 1996. The decrease is primarily attributable to two parcels of land for future expansion being purchased in the nine months ended September 30, 1996, partially offset by capital expenditures for the nine months ended September 30, 1997 composed of the purchase of an additional parcel of land for future expansion, the relocation of the Company's Boston office into a larger facility, and construction in progress for a new engineering design center which the Company plans to occupy in January 1998. The Company signed a long term lease on the new design center in the second quarter of 1997. The Company believes that existing cash and cash equivalents and cash from operations will be sufficient to fund its operations for at least the next 12 months. 11 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS In August 1997, the Company settled a lawsuit that had been filed in July 1996 by a former officer of the Company alleging wrongful termination. (Taylor vs. RadiSys Corporation, et al., in the Circuit Court of the State of Oregon in Washington County.) The settlement was not material to the Company's financial position or results of operations. Item 6. EXHIBITS 27 Financial Data Schedule 12 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RADISYS CORPORATION BRIAN V. TURNER -------------------------------------------- Date: November 12, 1997 Brian V. Turner Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer) 13 EXHIBIT INDEX Exhibit No. Description ------- --------------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 23,417 0 26,077 674 20,768 74,072 12,571 7,276 91,429 19,564 0 0 0 49,414 21,989 91,429 89,220 89,220 52,935 19,909 0 0 772 17,148 6,001 11,147 0 0 0 11,147 1.37 1.37
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