-----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, I1vosp9wynjRvDnwAM4w1ulLB5UFLBD2qQ85WVf9wyjfJhErF2Z3b3gW9AArRj9J QUwMAKxKJH7sJr5V4fp+LA== 0000893877-98-000382.txt : 19980513 0000893877-98-000382.hdr.sgml : 19980513 ACCESSION NUMBER: 0000893877-98-000382 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 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: 98616736 BUSINESS ADDRESS: STREET 1: 5445 NE DAWSON CREEK DR CITY: HILLSBORO STATE: OR ZIP: 97124 BUSINESS PHONE: 5036461800 10-Q 1 QUARTERLY REPORT 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 March 31, 1998 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 April 30, 1998 was 7,879,075. RADISYS CORPORATION PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Consolidated Financial Statements Consolidated Balance Sheet - March 31, 1998 and December 31, 1997 3 Consolidated Statement of Operations - Three months ended March 31, 1998 and 1997. 4 Consolidated Statement of Changes In Shareholders' Equity - December 31, 1995 through March 31, 1998 5 Consolidated Statement of Cash Flows - Three months ended March 31, 1998 and 1997 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 6. Exhibits and Reports on Form 8-K 12 Signatures 13
RadiSys Corporation Consolidated Balance Sheet (in thousands, except share amounts) ASSETS March 31, December 31, 1998 1997 ----------- ----------- (unaudited) Current assets Cash and cash equivalents $ 21,196 $ 23,993 Accounts receivable 31,202 27,983 Other receivables 741 503 Inventories 20,935 22,830 Other current assets 1,616 1,910 Deferred income taxes 793 251 ----------- ----------- Total current assets 76,483 77,470 Equipment, net of accumulated depreciation of $8,881 and $8,265 13,206 12,174 Other assets 5,730 5,299 ----------- ----------- Total assets $ 95,419 $ 94,943 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 7,163 $ 10,840 Income taxes payable 3,700 1,558 Accrued wages and bonuses 1,441 2,893 Accrued sales discounts 985 1,211 Deferred revenue 1,181 1,234 Other accrued liabilities 885 712 Current portion of capital lease obligation 266 214 ----------- ----------- Total current liabilities 15,621 18,662 ----------- ----------- Obligations under capital lease 302 399 ----------- ----------- Total liabilities 15,923 19,061 ----------- ----------- Commitments and contingent liabilities Shareholders' equity Common stock, 50,000,000 shares authorized, 7,872,550 and 7,803,595 shares issued and outstanding 51,886 50,788 Cumulative translation adjustment (1,786) (1,177) Retained earnings 29,396 26,271 ----------- ----------- Total shareholders' equity 79,496 75,882 ----------- ----------- Total liabilities and shareholders' equity $ 95,419 $ 94,943 =========== =========== See accompanying notes to consolidated financial statements.
3
RadiSys Corporation Consolidated Statement of Operations (in thousands, except per share amounts) (unaudited) Three Months Ended March 31, March 31, 1998 1997 ------------- ------------- Revenues $ 33,663 $ 27,830 Cost of sales 21,544 16,185 ------------- ------------- Gross Profit 12,119 11,645 Research and development 3,536 2,807 Selling, general and administrative 4,102 3,838 ------------- ------------- Income from operations 4,481 5,000 Interest income, net 326 264 ------------- ------------- Income before income tax provision 4,807 5,264 Income tax provision 1,682 1,842 ------------- ------------- Net income $ 3,125 $ 3,422 ============= ============= Net income per share (basic) $ 0.40 $ 0.46 ============= ============= Net income per share (diluted) $ 0.39 $ 0.43 ============= ============= See accompanying notes to consolidated financial statements.
4
RadiSys Corporation Consolidated Statement of Changes in Shareholders' Equity (in thousands, except share amounts) Common stock Cumulative ----------------------- translation Retained Shares Amount Warrants adjustment earnings Total ----------- ---------- ----------- ----------- ---------- --------- Balances, December 31, 1995 6,014,709 $ 33,627 $ $ (108) $ 1,300 $ 34,819 Shares issued pursuant to benefit plans 73,701 365 365 Tax effect of options exercised 569 569 Translation adjustment (221) (221) Stock issued for acquisition 1,300,000 10,500 10,500 Warrants issued for acquisition 1,200 1,200 Net income for the year 9,546 9,546 ----------- ---------- ----------- ----------- ---------- --------- Balances, December 31, 1996 7,388,410 45,061 1,200 (329) 10,846 56,778 Exercise of warrants 166,667 1,200 (1,200) Shares issued pursuant to benefit plans 165,018 1,605 1,605 Tax effect of options exercised 513 513 Translation adjustment (848) (848) Stock issued for acquisition 83,500 2,409 2,409 Net income for the year 15,425 15,425 ----------- ---------- ----------- ----------- ---------- --------- Balances, December 31, 1997 7,803,595 50,788 - (1,177) 26,271 75,882 Shares issued pursuant to benefit plans 68,955 1,098 1,098 Translation adjustment (609) (609) Net income for the period 3,125 3,125 ----------- ---------- ----------- ----------- ---------- --------- Balances, March 31, 1998 (unaudited) 7,872,550 $ 51,886 $ - $ (1,786) $ 29,396 $ 79,496 =========== ========== =========== =========== ========== ========= See accompanying notes to consolidated financial statements.
5
RadiSys Corporation Consolidated Statement of Cash Flows (in thousands) (unaudited) Three Months Ended March 31, March 31, 1998 1997 ------------- ------------- Cash flows from operating activities: Net Income $ 3,125 $ 3,422 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 1,152 1,078 Deferred income taxes (542) (285) Net changes in current assets and current liabilities: Increase in accounts receivable (3,219) (3,286) (Increase) decrease in other receivables (238) 1,182 (Increase) decrease in inventories 1,895 (1,560) Decrease in other current assets 294 238 Increase (decrease) in accounts payable (3,677) 1,065 Increase in income taxes payable 2,142 1,332 Decrease in accrued wages and bonuses (1,452) (577) Increase (decrease) in accrued sales discounts (226) 275 Decrease in deferred revenue (53) (148) Increase (decrease) in other accrued liabilities 173 (245) ------------- ------------- Net cash provided by (used for) operating activities (626) 2,491 ------------- ------------- Cash flows from investing activities: Business acquisitions - (1,060) Capital expenditures (1,910) (1,821) Capitalized software production costs and other assets (705) 193 ------------- ------------- Net cash used for investing activities (2,615) (2,688) ------------- ------------- Cash flows from financing activities: Issuance of common stock, net 1,098 662 Payments on notes payable - (1,632) Payments on capital lease obligation (45) (61) ------------- ------------- Net cash provided by (used for) financing activities 1,053 (1,031) ------------- ------------- Effect of exchange rate changes on cash (609) (254) ------------- ------------- Net decrease in cash and cash equivalents (2,797) (1,482) Cash and cash equivalents, beginning of period 23,993 24,626 ------------- ------------- Cash and cash equivalents, end of period $ 21,196 $ 23,144 ============= ============= See accompanying notes to consolidated financial statements.
6 RADISYS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) (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, 1997. The results of operations for interim periods are not necessarily indicative of the results for the entire year. Reclassifications have been made to amounts in prior years to conform to current year presentation. These changes had no impact on previously reported results of operations. 2. Accounts Receivable Trade accounts receivable are net of an allowance for doubtful accounts of $672 and $663 at March 31, 1998 and December 31, 1997, respectively. The Company's customers are concentrated in the technology industry. Revenue from one customer was approximately $8.0 million during the first quarter of 1998. 3. Inventories Inventories consist of the following: Mar 31, Dec 31, 1998 1997 ------------ ------------ Raw Materials $ 11,636 $ 15,388 Work in Process 3,276 1,844 Finished Goods 6,023 5,598 ------------ ------------ $ 20,935 $ 22,830 ============ ============ 7 RADISYS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) (in thousands) (unaudited) 4. Property and Equipment Property and equipment consists of the following: Mar 31, Dec 31, 1998 1997 ------------ ------------ Land $ 1,391 $ 1,387 Manufacturing Equipment 10,604 9,996 Office Equipment 7,724 7,255 Leasehold Improvements 2,368 1,801 ------------ ------------ 22,087 20,439 Less: Accum. Depr. 8,881 8,265 ------------ ------------ $ 13,206 $ 12,174 ============ ============ 5. Earnings Per Share 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. Weighted average shares consist of the following: For the period ended Mar 31, Mar 31, 1998 1997 ------------ ------------ Weighted Average Shares (basic) 7,838 7,470 Effect of Dilutive Stock Options 218 429 ------------ ------------ Weighted Average Shares (diluted) 8,056 7,899 ============ ============ 6. Comprehensive Income In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income." The Company has adopted the standard as of January 1, 1998. Total comprehensive income consists of the following: For the period ended Mar 31, Mar 31, 1998 1997 ------------ ------------ Net Income $ 3,125 $ 3,422 Translation Adjustment (609) (254) ------------ ------------ Total Comprehensive Income $ 2,516 $ 3,168 ============ ============ Translation adjustment represents the Company's only Other Comprehensive Income item. Translation adjustment comprises unrealized gains/losses in accordance with SFAS No. 52, "Foreign Currency Translation". The Company has no intention of liquidating the assets of the foreign subsidiaries in the foreseeable future. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Total revenue was $33.7 million for the three months ended March 31, 1998 compared to $27.8 million for the three months ended March 31, 1997. Net income was $3.1 million for the three months ended March 31, 1998 compared to $3.4 million for the three months ended March 31, 1997. 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 expected revenues and anticipated gross margins, 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, including conditions precipitated by the Asian economies; 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 or variations in customer order patterns due to changes in demand for customers' products and customer and channel inventory levels; 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. The forward looking statements contained in this MD&A regarding industry trends, product development and introductions, and liquidity and future business activities should be considered in light of these factors. REVENUES Three Months Ended ----------------------------------------- (in thousands, except percentage amounts) March 31, Percentage March 31, 1998 Change 1997 -------- ---------- -------- Revenues $ 33,663 21% $ 27,830 The increase in revenues for the three months ended March 31, 1998 compared to the three months ended March 31, 1997 resulted primarily from design wins ramping into production and volume increases in OEM sales. Revenues decreased from $36.2 million for the three months ended December 31, 1997 due to traditional first quarter seasonality and order push-outs and reductions from several customers in the semiconductor equipment and other electronics assembly equipment industries because of current worldwide weaknesses in these markets. 9 COST OF GOODS SOLD Three Months Ended ----------------------------------------- (in thousands, except percentage amounts) March 31, Percentage March 31, 1998 Change 1997 -------- ---------- -------- Cost of Goods Sold $ 21,544 33% $ 16,185 As a Percentage of Revenues 64% 58% As a percentage of revenues total cost of goods sold increased for the three months ended March 31, 1998 compared to the three months ended March 31, 1997 primarily as a result of the product mix consisting of a larger portion of lower margin product relative to higher margin product shipped during the first quarter of 1998 compared to the first quarter of 1997. RESEARCH AND DEVELOPMENT Three Months Ended ----------------------------------------- (in thousands, except percentage amounts) March 31, Percentage March 31, 1998 Change 1997 -------- ---------- -------- Research and Development $ 3,536 26% $ 2,807 As a Percentage of Revenues 11% 10% 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. The increase in research and development as a percentage of revenues is primarily the result of lower revenue levels in the first quarter of 1998 compared to the fourth quarter of 1997 and increased design activity. SELLING, GENERAL AND ADMINISTRATIVE Three Months Ended ----------------------------------------- (in thousands, except percentage amounts) March 31, Percentage March 31, 1998 Change 1997 -------- ---------- -------- Selling, General & Admin. $ 4,102 7% $ 3,838 As a Percentage of Revenues 12% 14% Selling, general and administrative expenses have increased in dollar amount in the three months ended March 31, 1998 compared to the three months ended March 31, 1997, primarily as a result of increased personnel, facilities and travel costs to support higher levels of sales. The decreases as a percentage of revenues were primarily the result of operating efficiencies achieved by spreading fixed costs over a larger revenue base. 10 INTEREST INCOME, NET AND INCOME TAX PROVISION Three Months Ended ----------------------------------------- (in thousands, except percentage amounts) March 31, Percentage March 31, 1998 Change 1997 -------- ---------- -------- Interest Income, net $ 326 23% $ 264 Income Tax Provision $ 1,682 (9%) $ 1,842 Interest income, net includes interest income, interest expense, bank charges and foreign currency transaction gains or losses. The decrease in the income tax provision is solely attributable to decreased net income before taxes in 1998 as the Company's effective tax rate remained at approximately 35%. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1998, the Company had $21.2 million in cash and cash equivalents, which represents the Company's principal source of liquidity, and working capital of approximately $60.9 million. The Company maintains a $10.0 million line of credit with a bank which expires October 1998. The Company has not drawn any funds under this line of credit. Net cash used for operating activities for the three months ended March 31, 1998 was $626 as compared with net cash provided by operating activities of $2.5 million for the three months ended March 31, 1997 primarily as a result of normal fluctuations in current assets and current liabilities. Capital expenditures were $1.9 million in the three months ended March 31, 1998 and $1.8 million for the three months ended March 31, 1997. Capital expenditures for the three months ended March 31, 1998 were primarily for the purchase of leasehold improvements and office furniture related to the Company's corporate headquarters and manufacturing equipment. 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 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule 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: May 6, 1998 Brian V. Turner Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer) EXHIBIT INDEX Sequential Exhibit No. Description Page No. - ----------- ----------- ---------- 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 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 21,196 0 31,202 672 20,935 76,483 13,206 8,881 95,419 15,621 0 0 0 51,886 27,610 95,419 33,663 33,663 21,544 7,638 0 0 326 4,807 1,682 3,125 0 0 0 3,125 0.40 0.39
-----END PRIVACY-ENHANCED MESSAGE-----