-----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, V3f7UtKGHtP6fxvyv+walugqlHKTrUpBaN2PMyCUCs7zKyhJtTi9UDeCBlObBIjI l6DgJMMYZwnTuCneF5YAyg== 0000905718-96-000291.txt : 19961118 0000905718-96-000291.hdr.sgml : 19961118 ACCESSION NUMBER: 0000905718-96-000291 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96666095 BUSINESS ADDRESS: STREET 1: 1515 US RTE 10 CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 2019933000 10-Q 1 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1996 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 September 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 22-2476114 (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 September 30, 1996, there were 15,741,367 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 September 30, 1996 1 and December 31, 1995 Consolidated Statements of Income for the Three and Nine 2 Months Ended September 30, 1996 and 1995 Consolidated Statements of Cash Flows for the Nine Months 3 Ended September 30, 1996 and 1995 Notes to Consolidated Financial Statements 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 6. Exhibits and Reports on Form 8-K 9 Signatures 10 -i- DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts) September 30, December 31, 1996 1995 ------------ ------------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,008 $ 5,987 Short term investments 26,177 24,689 Convertible note, options and shares recorded at fair market value 6,551 12,777 Accounts receivable (net of allowance for doubtful accounts of $1,113 in 1996 and $894 in 1995) 34,638 25,727 Inventory 29,850 23,969 Deferred income taxes 3,817 3,067 Other current assets 4,658 3,107 ------- ------- Total current assets 112,669 99,323 PROPERTY AND EQUIPMENT - Net 18,559 15,126 GOODWILL 3,625 79 DEPOSITS AND OTHER ASSETS 2,712 2,834 ----- ----- TOTAL ASSETS $137,595 $117,362 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable 7,015 9,232 Accrued expenses 9,876 7,199 Deferred income taxes 3,019 5,320 Current maturities of long-term liabilities 523 595 -------- ------ Total current liabilities 20,433 22,346 LONG-TERM LIABILITIES: 2,815 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; 15,741,367 and 15,491,965 shares outstanding, respectively 203 199 Additional paid-in capital 44,814 38,697 Retained earnings 66,694 46,723 Unrealized gains/losses on available for sale securities 2,759 6,765 Cumulative translation adjustment (123) 373 -------- ------- Total shareholders' equity 114,347 92,757 -------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 137,595 117,362 ======== ======= See Notes to Consolidated Financial Statements
DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except share amounts)
Three months ended Nine months ended September 30, September 30, -------------------- ------------------ 1996 1995 1996 1995 REVENUES $55,432 $44,029 $154,218 $120,466 ------- ------- -------- -------- COSTS AND EXPENSES: Costs of goods sold 22,733 17,914 62,392 48,460 Research and development expenses 10,743 7,269 28,986 20,959 Selling, general and administrative expenses 15,280 11,780 42,672 33,724 Merger costs --- --- --- 1,294 Interest expense 58 5 127 21 Interest income (764) (883) (1,943) (1,697) Net realized (gains) on available for sale securities --- (14) (9,219) (102) ------ ------ ------ ------ Total costs and expenses 48,050 36,071 123,015 102,659 ------ ------ ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 7,382 7,958 31,203 17,807 PROVISION FOR INCOME TAXES 2,589 3,029 11,232 6,814 ----- ----- ------ ----- NET INCOME $ 4,793 $ 4,929 $ 19,971 $ 10,993 ====== ===== ====== ====== Income per share $ 0.29 $ 0.31 $ 1.22 $ 0.69 ====== ==== ====== ==== Weighted average shares outstanding 16,400 15,965 16,387 15,983 ====== ====== ====== ======
DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Ended September 30, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 19,971 10,993 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 4,225 2,614 Provision of inventory obsolescence 727 243 Provision for bad debts 583 630 Tax benefit from exercise of stock options 1,633 1,273 Miniority interest 35 --- Compensation expenses on issuance of options at below fair market value --- 609 Deferred income taxes (650) (306) Deferred rent 294 409 Non-cash interest income (870) (532) Net realized (gains) on available for sale securities (9,219) (102) Changes in operating assets and liabilities, net of effects of acquisition of business: (Increase) in accounts receivable (9,025) (6,140) (Increase) in inventory (6,273) (6,315) (Increase) in other assets (1,482) (1,382) (Decrease) in accounts payable (2,421) (146) Increase in accrued expenses 2,409 2,769 Other (324) (227) ---- ---- Net cash (used in) provided by operating activities (387) 4,390 ---- ----- CASH FLOW FROM INVESTING ACTIVITIES: Capital expenditures (7,415) (4,937) Purchase of available for sale securities (43,441) (12,150) Proceeds from available for sale securities 51,862 9,825 Acquisition of business, net of cash acquired (820) 378 ---- --- Net cash provided by (used in) investing activities 186 (6,884) --- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under capital lease obligations (72) (371) Payments of current maturities of long term liabilities (500) --- Proceeds from short-term borrowings 12,625 1,757 Payments on short-terms borrowings (12,625) (1,757) Exercise of stock options 805 575 Issuance of common stock 989 --- Proceeds of note receivable --- 285 ------ ------ Net cash provided by financing activities 1,222 489 ------ ------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,021 (2,005) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,987 8,281 ------ ------ CASH AND CASH EQUIVALENTS, END OF PERIOD $7,008 $6,276 ====== ======
DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLDIATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended September 30, 1996 1995 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 127 $ 21 ======== ====== Income Taxes $ 10,315 $4,483 ======== ====== SUPPLEMENTAL INFORMATION FOR NON CASH INVESTING AND FINANCING ACTIVITIES: Unrealized gain (losses) on available for sale securities $ (4,006) $ 2,455 -------- ------- 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) ======= ======= DIALOGIC CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 nine months ended September 30, 1996 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year. Certain reclassifications were made to the 1995 financial statements to conform to the 1996 presentation. 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): September 30,1996 December 31,1995 Raw materials $ 12,430 $ 11,900 Work-in process 4,389 2,784 Finished goods 13,031 9,285 ------ ----- $ 29,850 $ 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. See Item 1 of Part II of this Quarterly Report. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements, the related Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Results of Operations and Financial Condition incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the Consolidated Financial Statements and the related Notes to Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q. Except for historical information contained herein, the matters discussed below are forward looking statements made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995 ("Forward Looking Statements"). Such statements involve risks and uncertainties which could cause the Company's actual results to differ materially from such Forward Looking Statements, including but not limited to economic, competitive, governmental and technological factors affecting the Company's operations, markets, products and prices, and other factors referenced in the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 10, 1996. 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Revenues 100.0% 100.0% 100.0% 100.0% Cost and expenses: Cost of goods sold 41.0 40.7 40.5 40.2 Research and development expenses 19.3 16.5 18.8 17.4 Selling, general and administrative expenses 27.6 26.7 27.6 28.0 Merger costs --- --- --- 1.1 Interest expense (income) - net (1.3) (2.0) (1.2) (1.3) Realized (gains) losses on available --- --- (6.0) (0.1) for sale securities ____ ___ ____ _____ Income before provision for income taxes 13.4 18.1 20.3 14.7 Provision for income taxes 4.7 6.9 7.3 5.6 ---- ---- ---- ---- Net income 8.7% 11.2% 13.0% 9.1% ==== ==== ==== ====
The following table sets forth, for the periods indicated, the percentage increase (decrease) of certain items included in the Company's consolidated statements of income.
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 Compared With Compared With Three Months Ended Nine Months Ended September 30, 1995 September 30, 1995 Revenues 25.9% 28.0% Costs and expenses: Cost of goods sold 26.9 28.7 Research and development expenses 47.8 38.3 Selling, general and administrative expenses 29.7 26.5 Merger costs NSM(1) NSM(1) Interest expense (income) - net NSM(1) NSM(1) Realized (gains)losses on available for sale securities NSM(1) NSM(1) Income before provision for income taxes (7.2) 75.2 Provision for income taxes (14.5) 64.8 Net income (2.8) 81.7
- ---------------- (1) Not statistically meaningful. The Company's revenues increased by 26% during the third quarter of 1996 and by 28% during the first nine 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 17% and 28% for the three and nine 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 third quarter of 1996, the international market in Asia rebounded; however, other international markets, principally in central Europe, remained soft. 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 Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (Dollars in millions) Domestic: Amount $38.7 $33.2 $109.5 $85.3 Percentage of total revenues 69.9% 75.5% 71.0% 70.8% International: Amount $16.7 $10.8 $44.7 $35.2 Percentage of total revenues 30.1% 24.5% 29.0% 29.2%
Cost of goods sold as a percentage of sales increased slightly, comparing both the three and nine months ended September 30, 1996 and 1995. Included in cost of goods sold for the third quarter of 1996 is a one time charge of $1.0 million, related to a patent licensing agreement entered into with Syntellect. In 1996, research and development expenses grew by 48% during the third quarter and 38% during the nine month period. These increases primarily reflect additional headcount and related expenses associated with new hardware and software initiatives. The Company believes that investment in research and development is critical to future growth and anticipates investing at current or greater levels during the fourth quarter of 1996 in an effort to enable the Company to maintain its technological leadership in the market. This statement regarding fourth quarter expenses constitutes a Forward Looking Statement. Actual research and development expenditures may be materially less than anticipated, depending primarily upon the availability of skilled employees and the priorities established by management during the fourth quarter. Selling, general and administrative expenses grew by 27% from the first nine months of 1995 to the first nine months of 1996 and by 30% for the third quarter periods. As a percentage of sales, such expenses have remained at relatively consistent levels for the periods presented, reflecting the leveraging of the Company's marketing and sales efforts. Nine 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 third quarter was $ 4.8 million or $.29 per share, and $20.0 million or $1.22 per share for the nine month period ended September 30, 1996. In 1996, excluding the effect of realized gains on available for sale securities and the Syntellect license fees, and in 1995, excluding $1.3 million of merger-related expense attributable to the February 1995 acquisition of Spectron Microsystems, net income was $14.8 million during the first nine months of 1996, up 26% from $11.8 million during the first nine months of 1995. Earnings per share excluding the above mentioned items were $.91 for the first nine months of 1996, up 23% from $.74 for the first nine months of 1995. Management believes that this additional measurement of earnings excluding certain one time charges is useful and meaningful to an understanding of the operating performance of the Company. However, this measurement of earnings should not be considered by the reader as an alternative to net income as an indicator of the Company's operating performance or to cash flows as an indicator of liquidity. Weighted average shares increased from 16.0 million at September 30, 1995 to 16.4 million at September 30, 1996. B. Financial Condition As of September 30, 1996, Dialogic had working capital of $92.3 million and a current ratio (i.e., the ratio of current assets to current liabilities) of 5.5 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 nine months ended September 30, 1996, Dialogic's cash and cash equivalents increased by $1.0 million. Cash flows used in operating activities amounted to $.4 million, as net income, after adjustment for realized gains, was offset by increases in accounts receivable ($9.0 million) and inventory ($6.3 million). Cash flow provided by investing activities was $.2 million, resulting from the proceeds from sales of securities offset by purchases of securities and by capital expenditures ($7.4 million). Cash provided by financing activities was $1.2 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 third quarter to 48 days as of September 30, 1996 compared to 44 days as of December 31, 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. This statement constitutes a Forward Looking Statement. The actual sufficiency of such capital resources could differ materially from the Company's expectations, depending primarily upon the extent to which unanticipated capital requirements may arise and the extent to which unanticipated events may materially adversely affect the Company's profitability. PART II. Other Information Item 1. Legal Proceedings A complaint has been filed in New Jersey Superior Court against the Company and certain 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 purported class of purchasers of the Company's Common Stock. Management is unable to predict a potential range of monetary exposure, if any, to the Company, but believes that the substantive claims asserted are without merit and that a material adverse effect on the Company's consolidated financial condition, results of operations or liquidity is less than probable. However, based on the extent of the decline in the market price of the Company's Common Stock after such press release was published, an unfavorable result could have a material adverse effect on the Company. Management intends to vigorously defend this matter. The Company's statements regarding the effect of this litigation are Forward Looking Statements. Actual results could differ materially from these statements, depending upon uncertainties that exist in any litigation relating to interpretations of legal issues and the development and presentation of potential factual issues. Reference is also made to Item 3 of Dialogic's Annual Report on Form 10-K for the year ended December 31, 1995. 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 Current Reports on Form 8-K filed during the quarter ended September 30, 1996: (i) A Current Report on Form 8-K was filed on July 10,1996 disclosing (under Item 5) the Company's preliminary earnings estimate for the Company's second quarter. (ii) A Current Report on Form 8-K was filed on September 9, 1996 disclosing (under Item 5) certain information regarding the above-mentioned legal proceedings. 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: November 14, 1996 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 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11.1 DIALOGIC CORPORATION AND SUBSIDIARIES CALCULATION OF INCOME PER SHARE (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 Income applicable to shares used in calculation of income per share $ 4,793 $19,971 ======= ======= Shares used in calculation of income per share: Weighted average shares outstanding 15,714 15,616 Dilutive effect of stock options after application of treasury stock method 686 771 Number of shares used in calculation of income per share 16,400 16,387 ====== ====== Income per share $ 0.29 $ 1.22 ------- ---------
EX-11 3 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS Exhibit 11.2 DIALOGIC CORPORATION AND SUBSIDIARIES CALCULATION OF INCOME PER SHARE (In thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, 1996 September 30, 1996 Income applicable to shares used in calculation of income per share $ 4,929 $10,993 ======= ======= Shares used in calculation of income per share: Weighted average shares outstanding 15,365 15,305 Dilutive effect of stock options after application of treasury stock method 600 678 --- --- Number of shares used in calculation of income per share 15,965 15,983 ====== ====== Income per share $ 0.31 $ 0.69 ------- ---------
EX-27 4 FDS
5 This financial date 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 9-MOS Dec-31-1996 Sep-30-1996 7,008 32,728 34,638 1,113 29,850 112,699 18,559 4,037 137,595 20,433 0 0 0 203 0 137,595 154,218 154,218 62,392 62,392 71,658 0 127 31,203 11,232 0 0 0 0 19,971 1.22 0
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