-----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, PvNFfPd3gT7UckdTqxoZpMrIW85u1th668RpXBLicTpenLI6E3cgE1rf7WxLMG4D U4zcNoYz06idjzjnSRKmqg== 0000905718-96-000202.txt : 19960816 0000905718-96-000202.hdr.sgml : 19960816 ACCESSION NUMBER: 0000905718-96-000202 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960815 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIALOGIC CORP CENTRAL INDEX KEY: 0000899042 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 222476114 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23816 FILM NUMBER: 96616092 BUSINESS ADDRESS: STREET 1: 1515 US RTE 10 CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 2019933000 10-Q 1 10-Q FOR 6/30/96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1996 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: 33-59598 DIALOGIC CORPORATION (Exact name of registrant as specified in its charter) New Jersey 22-2476 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1515 Route 10 Parsippany, New Jersey 07054 (Address of principal executive office, including zip code) 201-993-3000 (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. At June 30, 1996, there were 15,676,884 shares of Common Stock, no par value, outstanding. DIALOGIC CORPORATION INDEX Page Number Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of June 30, 1996 1 and December 31, 1995 (Unaudited) Consolidated Statements of Income for the Three and Six 2 Months Ended June 30, 1996 and 1995 (Unaudited) Consolidated Statements of Cash Flows for the Six Months 3 Ended June 30, 1996 and 1995 (Unaudited) Notes to Consolidated Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial 6 Condition and Results of Operations Part II. Other Information Item 1. Legal Proceedings 9 Item 4. Submission of Matters to a Vote of Security Holders 9 Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 -i- Item 1. Financial Statements
DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share amounts) June 30, December 31, ASSETS 1996 1995 CURRENT ASSETS: Cash and cash equivalents $ 6,817 $ 5,987 Short term investments 24,646 24,689 Convertible note, options and shares recorded at fair market value 9,277 12,777 Accounts receivable (net of allowance for doubtful accounts of $1,105 in 1996 and $894 in 1995) 27,959 25,727 Inventory 30,903 23,969 Deferred income taxes 3,340 3,067 Other current assets 5,642 3,107 ------- ------- Total current assets 108,584 99,323 PROPERTY AND EQUIPMENT - Net 17,488 15,126 GOODWILL 3,718 79 DEPOSITS AND OTHER ASSETS 2,736 2,834 ------- ------- TOTAL ASSETS $132,526 $117,362 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 8,492 $ 9,232 Accrued expenses 5,801 7,199 Deferred income taxes 4,096 5,320 Current maturities of long-term liabilities 535 595 ------- ------- Total current liabilities 18,924 22,346 LONG-TERM LIABILITIES 2,964 2,259 SHAREHOLDERS' EQUITY: Preferred stock, no par value--10,000,000 shares authorized; none issued: Common stock, no par value--60,000,000 shares authorized; 15,676,884 and 15,491,965 shares outstanding, respectively 202 199 Additional paid-in capital 43,778 38,697 Retained earnings 61,900 46,723 Unrealized gains/losses on available for sale securities 4,799 6,765 Cumulative translation adjustment (41) 373 ---------- -------- Total shareholders' equity 110,638 92,757 ------- ------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $132,526 $117,362 ======== ========
See Notes to Consolidated Financial Statements -1-
DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three months ended Six months ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES $50,054 $40,625 $98,786 $76,437 ------- ------- ------- ------- COSTS AND EXPENSES: Cost of goods sold 19,908 16,210 39,659 30,546 Research and development expenses 9,366 7,053 18,243 13,690 Selling, general and administrative expenses 13,909 11,260 27,392 21,945 Merger costs --- --- --- 1,294 Interest expense 66 8 69 15 Interest income (422) (387) (1,179) (813) Net realized (gains) on available for sale securities 25 (79) (9,219) (88) -------- -------- ------ -------- Total costs and expenses 42,852 34,065 74,965 66,589 -------- -------- ------ -------- INCOME BEFORE PROVISION FOR INCOME TAXES 7,202 6,560 23,821 9,848 PROVISION FOR INCOME TAXES 2,636 2,546 8,643 3,784 ------ ------- ------ ------ NET INCOME $ 4,566 $ 4,014 $ 15,178 $ 6,064 ======= ======= ======= ====== Income Per Share $ 0.28 $ 0.25 $ 0.93 $ 0.38 ======== ======== ======== ======= Weighted average shares outstanding 16,489 16,003 16,369 15,992 ====== ====== ====== ======
See Notes to Consolidated Financial Statements -2- DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 ---- ---- Net income $15,178 $6,064 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 2,549 1,742 Provision for inventory obsolescence 306 208 Provision for bad debts 455 385 Tax benefit from exercise of stock options 1,350 1,056 Minority interest 24 --- Compensation expense on issuance of options at below fair market value --- 609 Deferred income taxes (263) 273 Deferred rent 309 279 Non-cash interest income (318) --- Realized (gains)/losses on available for sales securities (9,220) --- Changes in operating assets and liabilities, net of effects of acquisition of business: (Increase) in accounts receivable (2,218) (3,772) (Increase) in inventory (6,905) (5,495) (Increase) in other assets (2,466) (1,155) (Decrease) increase in accounts payable (944) 84 (Decrease) in accrued expenses (1,666) (181) Other (187) 794 --------- -------- Net cash (used in) provided by operating activities (4,016) 891 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,856) (3,786) Purchases of available for sale securities (40,945) (10,071) Proceeds from available for sale securities 50,862 8,790 Acquisition of business, net of cash acquired (820) 378 ------- -------- Net cash provided by (used in) investing activities 4,241 (4,689) ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under capital lease obligations (60) (84) Payments of current maturities of long term liabilities (375) (125) Proceeds from short-term borrowings 11,150 1,757 Payments on short-term borrowings (11,150) (1,757) Exercise of stock options 451 413 Issuance of common stock 589 --- Proceeds of note receivable for stock --- 285 --------- ----- Net cash provided by financing activities 605 489 --------- ----- NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS 830 (3,309) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,987 8,281 ------- ------ CASH AND CASH EQUIVALENTS, END OF PERIOD $6,817 $4,972 ====== ======
(continued) -3- DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Ended June 30, 1996 1995 ---- ---- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 66 $ 15 ======= ======= Income taxes $ 9,631 $ 1,968 ======= ======= SUPPLEMENTAL INFORMATION OF NON CASH INVESTING AND FINANCING ACTIVITIES: Unrealized gain(losses) on available for sale securities $(1,966) $ 30 ======= ======= Acquisition of business: Fair value of assets acquired $ 5,022 $ -- Liabilities assumed 1,234 -- --- -- Net assets acquired 3,788 -- Value of stock issued to effect combination 2,694 -- --- -- Cash paid 1,094 -- Cash acquired (274) (378) ------ ----- $ 820 $ (378) ====== =======
See Notes to Consolidated Financial Statements -4- DIALOGIC CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The 1996 and 1995 financial statements have been prepared by Dialogic Corporation (the "Company" or "Dialogic") and are unaudited. In the opinion of the Company's management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for the interim periods have been made. Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted from the consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. The consolidated financial statements presented herein should be read in conjunction with the year-end consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. The results of operations for the three and six months ended June 30, 1996 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year 2. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock- Based Compensation," which is effective for the Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures in annual financial statements of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share in its annual financial statements. 3. Inventory consisted of the following (in thousands): June 30,1996 December 31,1995 Raw materials $15,565 $11,900 Work-in process 2,546 2,784 Finished goods 12,792 9,285 ------- ------- $30,903 $ 23,969 ======= ======= 4. On June 27, 1996, the Company acquired all of the outstanding common stock of Dianatel Corporation in exchange for 55,424 shares of Dialogic common stock, and $1.1 million in cash. Additionally, options to purchase shares of Dianatel stock were exchanged for options to purchase 29,874 shares of Dialogic common stock. The merger has been accounted for as a purchase. The merger resulted in goodwill of approximately $3.6 million and is being amortized over five years. Pro forma results of operations have not been presented since the effect of the acquisition on Dialogic's consolidated financial position and results of operations is not significant. -5- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION A. Results of Operations The following table sets forth, for the periods indicated, the percentage relationship to net sales of certain items included in the Company's consolidated statements of income.
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Revenues 100.0% 100.0% 100.0% 100.0% Cost and expenses: Cost of goods sold 39.8 39.9 40.1 40.0 Research and development expenses 18.7 17.4 18.5 17.9 Selling, general and administrative expenses 27.8 27.7 27.7 28.7 Merger costs --- --- --- 1.7 Interest expense (income) - net (0.7) (0.9) (1.1) (1.1) Realized (gains)losses on available --- (0.2) (9.3) (0.1) for sales securities Income before provision for income taxes 14.4 16.1 24.1 12.9 Provision for income taxes 5.3 6.2 8.7 5.0 Net income 9.1% 9.9% 15.4% 7.9% ===== ===== ==== ====
The following table sets forth, for the periods indicated, the percentage increase of certain items included in the Company's consolidated statements of income.
Three Months Ended Six Months Ended June 30, 1996 June 30, 1996 Compared With Compared With Three Months Ended Six Months Ended June 30, 1995 June 30, 1995 ------------- ---------------- Revenues 23.2% 29.2% Costs and expenses: Cost of goods sold 22.8 29.8 Research and development expenses 32.8 33.3 Selling, general and administrative expenses 23.5 24.8 Merger costs NSM(1) NSM(1) Interest expense (income) - net NSM(1) NSM(1) Realized (gains)losses on available for sales securities NSM(1) NSM(1) Income before provision for income taxes 9.8 141.9 Provision for income taxes 3.5 128.4 Net income 13.8 150.3 - ---------------- (1) Not statistically meaningful. -6-
The Company's revenues increased by 23% during the second quarter of 1996 and by 29% during the first six months of 1996, as compared with the same periods in 1995. These revenue gains were primarily attributable to growth in domestic sales. Domestic sales increased by 29% and 35% for the three and six month periods, reflecting sales of several new products, design "wins" during 1995 that resulted in shipments to new customers during 1996 and increased unit sales of existing products to new and existing customers. During the second quarter of 1996, the international markets did not perform as expected, reflecting only 11% growth over the second quarter of 1995. The shortfall in international sales reflected weaknesses in international markets, principally in central Europe, where economic issues (recessionary pressures) and regulatory issues (generally, a slowdown in the deregulation of the telecom industry) appear to be impeding the deployment of computer telephony projects. In addition, sales from Dialogic's Spectron Microsystems division were less than anticipated. The following table allocates the Company's revenues between domestic and international markets for the periods presented:
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- (Dollars in millions) Domestic: Amount $ 36.0 $27.9 $70.2 $52.0 Percentage of total revenues 71.8% 68.7% 71.0% 68.1% International: Amount $ 14.1 $12.7 $28.6 $24.4 Percentage of total revenues 28.2% 31.3% 29.0% 31.9%
The Company maintained consistent margins, comparing both the three and six months ended June 30, 1996 and 1995. Minor changes in the margins principally reflect the product mix for the particular periods involved. During the third quarter of 1996, the Company has entered into certain arrangements and may enter into other arrangements relating to patent license matters. These arrangements provide for certain non-recurring payments to be made by Dialogic. Depending primarily upon whether an agreement currently being negotiated is ultimately signed in the third quarter, such payments are expected to range between $1.1 million and $2.0 million during the third quarter. Such payments will be reflected in cost of goods sold during the third quarter. Research and development expenses grew by 33% for both the three and six month periods. These increases primarily reflect continued expansion of the Company's engineering staff, allowing the Company to release fourteen new products into the newer emerging markets and applications. The Company believes that investment in research and development is critical to future growth and anticipates investing at current or greater levels throughout 1996 in an effort to enable the Company to maintain its technological leadership in the market. Selling, general and administrative expenses grew by 25% from the first six months of 1995 to the first six months of 1996 and by 24% for the second quarter periods. As a percentage of sales, such expenses have remained at consistent levels for the periods presented, reflecting the Company's marketing and sales efforts. -7- Six month results were affected by certain steps taken by Dialogic during the first quarter of 1996 with respect to its investments in Voice Control Systems, Inc. ("VCS"). An election to convert accrued interest on a convertible promissory note into capital stock of VCS and the sale by Dialogic of VCS' stock in VCS' public offering resulted in increased interest income and a $9.2 million realized gain on available for sale securities during the first quarter of 1996. Net income for the quarter was $ 4.6 million or $.28 per share, and $15.2 million or $0.93 per share for the six month period ended June 30, 1996. On an operating basis (i.e., in 1996, excluding the effect of realized gains on available for sale securities and in 1995, excluding $1.3 million of merger-related expense attributable to the February 1995 acquisition of Spectron Microsystems), net income was $9.4 million during the first six months of 1996, up 36% from $6.9 million during the first six months of 1995. Earnings per share on an operating basis were $.58, up 35% from $.43 on an operating basis for the first six months of 1995. Weighted average shares increased from 16.0 million at June 30, 1995 to 16.5 million at June 30, 1996. B. Financial Condition As of June 30, 1996, Dialogic had working capital of $89.7 million and a current ratio (i.e., the ratio of current assets to current liabilities) of 5.7 to 1, as compared with working capital of $77.0 million and a current ratio of 4.4 to 1 at December 31, 1995. For the six months ended June 30, 1996, Dialogic's cash and cash equivalents increased by $0.8 million. Cash flows used in operating activities amounted to $4.0 million, consisting primarily of net income (including realized gains) offset by increases in inventory ($6.9 million) and accounts receivable ($2.2 million). Cash flow provided by investing activities was $4.2 million, resulting from the proceeds from sales of securities offset by purchases of securities and by capital expenditures ($4.9 million). Cash provided by financing activities was $0.6 million, consisting primarily of proceeds from the exercise of stock options and the issuance of common stock offset by debt repayments. The increase in inventory reflects product levels for existing products as well as many newly released or "to be" released products - which the Company feels are necessary in order to satisfy customer requirements. The average period during which accounts receivable are outstanding has increased slightly during the second quarter to 47 days compared to 43 days as of June 30, 1995; inventory turns also decreased slightly with the transition to several new products. Capital expenditures reflect the expansion of the Company associated with the Company's growth. Dialogic believes that its current liquidity, coupled with cash generated from operations and credit available under its credit lines, will be sufficient to meet its liquidity and capital requirements for at least the next twelve months. -8- PART II. Other Information Item 1. Legal Proceedings A complaint has been filed in New Jersey Superior Court against the Company and certaon of its directors alleging that the defendants breached principles of common law fraud in connection with certain public statements made prior to the Company's July 8, 1996 press release announcing preliminary results for the quarter ended June 30, 1996. The complaint seeks monetary damages on behalf of a class of purchasers of the Company's Common Stock. The defendants have not been served in this matter. The Company believes that it has meritorious defenses to the substantive assertions made in the complaint. If the Company is served with the complaint, the Company intends to vigorously defend this matter. Reference is also made to Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995. Item 4. Submission of Matters to a Vote of Security Holders The Company's 1996 annual meeting of shareholders was held on April 25, 1996. At that meeting, the shareholders re-elected Francis G. Rodgers and Nicholas Zwick to the Board and approved certain amendments to the Company's 1988 Incentive Compensation Plan, including a 400,000 share increase in the number of shares covered by that plan. The following table sets forth the voting at such annual meeting: I. Election of Directors: Name For Authority Withheld Francis G. Rodgers 12,058,407 20,050 Nicholas Zwick 12,058,407 20,050 II. Approval of Proposed Amendments to the 1988 Incentive Compensation Plan For . . . . . . ..10,709,452 Abstentions . .. . . . .40,163 Against . . . . . .1,242,751 Broker Non-votes . . . .86,091 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11.1 - Calculation of income per share 11.2 - Calculation of income per share 27.1 - Financial Data Schedule (b) Current Reports on Form 8-K filed during the quarter ended June 30, 1996: None SIGNATURES 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. DIALOGIC CORPORATION By: /s/Edward B. Jordan Edward B. Jordan Vice President, Chief Financial Officer and Chief Accounting Officer Dated: August 14, 1996 -9- EXHIBIT INDEX Exhibit No. Exhibit Page 11.1 Calculation of Income Per Share E-1 11.2 Calculation of Income Per Share E-2 27.1 Financial Data Schedule E-3 EX-11 2 CALCULATION OF INCOME PER SHARE Exhibit 11.1 DIALOGIC CORPORATION AND SUBSIDIARIES CALCULATION OF INCOME PER SHARE (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, 1996 June 30, 1996 Income applicable to shares used in calculation of income per share $ 4,566 $ 15,178 ====== ======= Shares used in calculation of income per share: Weighted average shares outstanding 15,601 15,557 Dilutive effect of stock options after application of treasury stock method 888 812 Number of shares used in calculation of income per share 16,489 16,369 ====== ====== Income per share $ 0.28 $ 0.93 -------- -------- E-1 Exhibit 11.2 DIALOGIC CORPORATION AND SUBSIDIARIES CALCULATION OF INCOME PER SHARE (In thousands, except per share amounts) Three Months Ended Six Months Ended June 30, 1995 June 30,1995 Income applicable to shares used in calculation of income per share $ 4,014 $ 6,064 ===== ======== Shares used in calculation of income per share: Weighted average shares outstanding 15,337 15,275 Dilutive effect of stock options after application of treasury stock method 666 717 Number of shares used in calculation _____ _____ of income per share 16,003 15,992 ====== ====== Income per share $ 0.25 $ 0.38 ------- ------- E-2 EX-27 3 FINANCIAL DATA SCHEDULE
5 This financial data schedule contains summary financial information extracted from Dialogic Corporation's financial statements and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS Dec-31-1996 Jun-30-1996 6,817 33,923 27,959 1,105 30,903 108,584 17,488 2,549 132,526 18,924 0 0 0 202 110,436 132,526 98,786 98,786 39,659 39,659 45,635 0 66 23,821 8,643 0 0 0 0 15,178 0.93 0
-----END PRIVACY-ENHANCED MESSAGE-----