-----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, VaJsHxAtoRDA5qz4oUBPJAo/CRuD+S9utfds8NdRjBaa8yVEu2bJ/1XkqVTQtBI2 Oo5AhlXz3tdT9O1u5ebywA== 0000905718-97-000245.txt : 19970520 0000905718-97-000245.hdr.sgml : 19970520 ACCESSION NUMBER: 0000905718-97-000245 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97607252 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 MARCH 31, 1997 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 March 31, 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: 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 March 31, 1997, there were 15,829,428 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 March 31, 1997 3 and December 31, 1996 Consolidated Statements of Income for the Three 4 Months Ended March 31, 1997 and 1996 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 8 Condition and Results of Operations Part II. Other Information Item 1. Legal Proceedings 13 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 PART I. Financial Information Item 1. Financial Statements DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts)
March 31, December 31, 1997 1996 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,749 $ 11,848 Short term investments 35,059 37,473 Accounts receivable (net of allowance for doubtful accounts of $982 in 1997 and $829 in 1996) 39,579 34,706 Inventory - Net 28,643 27,762 Deferred income tax benefits 3,986 3,871 Other current assets 5,373 5,086 ------- ------- Total current assets 123,389 120,746 PROPERTY AND EQUIPMENT - Net 22,588 20,408 GOODWILL - Net 4,178 4,434 DEPOSITS AND OTHER ASSETS 2,497 2,661 ------- ------- TOTAL ASSETS $152,652 $148,249 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 8,692 $ 7,043 Accrued expenses 10,188 8,256 Deferred income taxes payable 3,643 4,623 Current maturities of long-term liabilities 550 559 ------- ------- Total current liabilities 23,073 20,481 LONG-TERM LIABILITIES 2,771 2,926 SHAREHOLDERS' EQUITY: Preferred stock, no par value--10,000,000 shares authorized; none issued Common stock, no par value--60,000,000 shares authorized; 15,829,428 and 15,774,222 shares outstanding, respectively 204 203 Additional paid-in capital 47,672 46,740 Retained earnings 75,498 72,271 Net unrealized gains on available for sale securities 3,760 5,614 Cumulative translation adjustments (326) 14 -------- -------- Total shareholders' equity 126,808 124,842 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $152,652 $148,249 ======== ========
See Notes to Unaudited Consolidated Financial Statements DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands, except per share amounts) Three Months Ended March 31, 1997 1996 ---- ---- REVENUES $57,089 $48,732 COSTS AND EXPENSES: Cost of goods sold 21,769 19,751 Research and development expenses 12,254 8,877 Selling, general and administrative expenses 18,374 13,483 Interest expense 32 3 Interest income (386) (757) Net realized loss (gains) on available for sale securities 4 (9,245) ------- ------- Total costs and expenses 52,047 32,112 ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 5,042 16,620 PROVISION FOR INCOME TAXES 1,815 6,008 ------- ------- NET INCOME $ 3,227 $ 10,612 ======= ======== Income per share $ 0.20 $ 0.65 ======= ======== Weighted average shares outstanding 16,511 16,256 ====== ====== See Notes to Unaudited Consolidated Financial Statements DIALOGIC CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three Months Ended March 31, 1997 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $3,227 $10,612 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 2,112 1,225 Provision for inventory obsolescence 448 215 Provision for bad debts 153 218 Deferred income taxes (113) (157) Other 246 (9,051) Changes in operating assets and liabilities (3,061) (1,620) ------- -------- Net cash provided by operating activities 3,012 1,442 ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (4,036) (2,616) Purchases of available for sale securities (721) (27,848) Proceeds from available for sale securities sold 295 17,492 Proceeds from sales of other investments --- 10,100 ------ ------ Net cash by used in investing activities (4,462) (2,872) ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under capital lease obligations (9) (30) Payments of current maturities of long term liabilities (250) (250) Repayment of notes payable (21) --- Proceeds from short-term borrowings --- 500 Payments on short-term borrowings --- (500) Exercise of stock options 186 164 Issuance of common stock 445 292 ------ ------- Net cash provided by financing activities 351 176 ------ -------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS (1,099) (1,254) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,848 5,987 ------ ------- CASH AND CASH EQUIVALENTS, END OF PERIOD $10,749 $4,733 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 28 $ 19 Income taxes $ 1,124 $ 3,769 SUPPLEMENTAL INFORMATION OF NON CASH INVESTING AND FINANCING ACTIVITIES: Change in net unrealized gains on available for sale securities $ (1,854) $ 903 See Notes to Unaudited Consolidated Financial Statements DIALOGIC CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. Unaudited Condensed Consolidated Financial Statements In the opinion of management, the unaudited condensed consolidated statements of income and unaudited consolidated condensed statements of cash flows for the interim periods ended March 31, 1997 and 1996 include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly these financial statements. In accordance with the rules of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The year-end balance sheet data was derived from audited financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these condensed statements be read in conjunction with the Company's most recent Annual Report or Form 10-K for the fiscal year ended December 31, 1996. 2. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per share," which is effective for the Company beginning December 15, 1997. This statement establishes standards for computing and presenting earnings per share (EPS), and replaces the presentation of primary EPS (previously defined in Accounting Principles Board (APB), No. 15), with a presentation of basic EPS. The Company does not expect the adoption of this statement will have a material effect on its consolidated financial statements. 3. Inventory consisted of the following (in thousands): March 31,1997 December 31,1996 Raw materials $ 10,495 $ 10,399 Work-in process 5,525 4,607 Finished goods 12,623 12,756 ------ ------ $ 28,643 $ 27,762 ====== ====== 4. Available for Sale Securities The following is a summary of the available for sale securities as of March 31, 1997 and December 31, 1996 ($000's):
March 31, 1997 Cost Gross Gross Estimated Unrealized Unrealized Fair Value Gains Losses Municipal Bonds $26,816 20 $ 26,836 Equity Investments 1,954 6,302 (32) 8,224 - ------------------------------------------------------------------------------------ Total marketable securities $28,770 6,322 (32) $ 35,060 - ------------------------------------------------------------------------------------ December 31, 1996 Cost Gross Gross Estimated Unrealized Unrealized Fair Value Gains Losses Municipal Bonds $26,395 48 $26,443 Convertible note; options 1,954 9,083 (7) 11,030 - ----------------------------------------------------------------------------------- Total marketable securities$28,349 9,131 (7) $37,473 - --------------------------------------------------------------------------------------------------
Included in the convertible note and shares are equity securities of $792, net of unrealized gains of $274. On January 1, 1997 the Company converted its note with Voice Control Systems Inc. into 1,264,474 shares of capital stock of VCS, after which the Company's total holdings in VCS amounted to 1,399,715 shares of capital stock. The shares were classified as available for sale under (SFAS) No. 115. The fair values of the Company's investments in VCS have been determined by reference to the market price for VCS stock as quoted on publicly traded exchanges on the representative valuation dates. The price per share of VCS stock has declined approximately $2.00 to $5.875 at March 31, 1997 as compared to $7.88 at December 31, 1996. The decline has been reported net of tax in the equity section of the Company's balance sheet per (SFAS) No. 115. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION A. General 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, 1996 and the Unaudited Consolidated Financial Statements and related Notes to Consolidated Financial Statements included in Item 1 of Part 1 of this Quarterly Report on Form 10-Q. This Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 ("Forward-Looking Statements"), which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, (i) the possibility that the Company's products may become obsolete in light of rapidly changing technological developments or that the Company may fail to respond adequately to such developments, (ii) the advances that other companies may make in the highly competitive CT industry, (iii) the likelihood that Dialogic revenues may vary significantly from accounting period to accounting period due to a variety of factors, including the timing of significant customer orders and other factors that impact customer demand, changes in Dialogic's products, geographic mix and customer mix, the introduction of new products by Dialogic or its competitors, pricing pressures or other competitive marketing initiatives, regulatory developments, economic conditions or unanticipated development and/or manufacturing difficulties or expenses, (iv) disputes that may arise in the future regarding the intellectual property rights of the Company, its competitors or other third-parties, (v) the outcome of litigation, which typically is difficult to predict in light of the uncertainties involved in legal proceedings, (vi) uncertainties resulting from the Company's dependence on only one or a limited number of sources for certain critical components and the Company's reliance upon a small number of third-party suppliers which perform manufacturing functions on behalf of the Company, (vii) the extent to which Dialogic is able to obtain regulatory approvals throughout the world, (viii) the Company's dependence on its personnel and its ability to attract and retain qualified personnel to support future technology developments and business growth, (ix) risks that may arise as a result of efforts to integrate any companies that Dialogic may acquire in the future and (x) the possibility that Dialogic may hold excess and obsolete inventory at any time as a result of the rapidly changing technology or needs of its customers. Such factors, as well as announcements of technological innovations or new products by Dialogic, its competitors or third-parties, consolidations or other substantial changes with or affecting the computer telephony industry, quarterly variations in the Company's results of operations, shortfalls in Dialogic's revenues, gross margins or earnings as compared with analysts' expectations, regulatory developments, capital market conditions and general and economic conditions, may also cause substantial volatility in the market price of the Company's common stock. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of costs and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Significant estimates in the Company's financial statements include allowances for accounts receivable, net realizable values of inventories and tax valuation reserves. Actual results could differ from these estimates. B. 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 March 31, 1997 1996 Revenues 100.0% 100.0% Cost and expenses: Cost of goods sold 38.1 40.5 Research and development expenses 21.5 18.2 Selling, general and administrative expenses 32.2 27.7 Interest (income) - Net (0.6) (1.5) Realized (gains) on available for sale securities - Net --- (19.0) ------ ------- Income before provision for income taxes 8.8 34.1 Provision for income taxes 3.1 12.3 ------ ------ Net income 5.7% 21.8% ====== ======= 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 March 31,1997 Compared With Three Months Ended March 31, 1996 Revenues 17.1% Cost and expenses: Cost of goods sold 10.2 Research and development expenses 38.0 Selling, general and administrative expenses 36.3 Interest (income) - Net NSM(1) Realized (gains) on available for sale securities - Net NSM(1) Income before provision for income taxes (69.7) Provision for income taxes (69.8) Net income (69.6) ====== (1) Not statistically meaningful The Company's revenues increased by 17% during the first quarter of 1997, as compared with the same period in 1996. These revenue gains were primarily attributable to a growth in International business. International revenues increased 40% to $20 million as compared to $14.5 million during the quarter ended March 31, 1996. During the first quarter of 1997, sales growth was particularly strong in the Company's Asia/Pacific and Latin American markets. Domestic revenues, although below expectations, increased 7.9% to $36.5 million as compared to $34.2 million for the comparable quarter ended March 31, 1996. The shortfall from expectation is primarily attributable to timing related issues, delays in closing 1997 design wins and product availability. The following table reflects the Company's revenues segregated between domestic and international markets for the periods presented. Three Months Ended March 31, 1997 1996 (Dollars in millions) Domestic: Amount $36.9 $34.2 Percentage of total revenues 64.6% 70.2% International: Amount $20.2 $14.5 Percentage of total revenues 35.4% 29.8% Gross margins for the quarter ended March 31, 1997 were 61.9 % as compared to 59.5% for the quarter ended March 31, 1996. The increase in margins reflects the continued effects of Dialogic's cost reduction efforts across all product lines and general component cost reductions, offset partially by foreign exchange losses on intercompany purchases. The Company anticipates further cost reductions for the balance of 1997, through moving a larger proportion of production to a selected turnkey manufacturing subcontractor. The move is anticipated to be substantially complete by the end of the fourth quarter 1997. These statements regarding the timing and cost savings of such move represent Forward-Looking Statements. The actual efficiencies and cost savings could differ materially from the Company's expectations as a result of a variety of factors, including the time required to complete such transactions, the Company's relationship with the manufacturer, the manufacturing process, component availability, or the effect of issues internal to the manufacturer. Research and development expenses increased by $3.4 million or 38% to $12.3 million and represented 21.5% of revenues during the three months ended March 31, 1997 as compared to 18.2% of revenues for the quarter ended March 31, 1996. The increase in the dollar amount of such expenses reflect the continued expansion of the Company's engineering staff and related overhead; and continued substantial investment of engineering resources related to Dialogic's announcement of its DM3 Mediastream Resource Architecture ("DM3") announced in February 1997. DM3 represents a new set of specifications, hardware and core firmware modules that are intended to govern how the Company's next generation of products will be designed. The Company anticipates that research and development expenditures for the remainder of the year as a percentage of revenue will be below the 21.5% reported in the first quarter. This estimate regarding future research and development expenditures represents a Forward-Looking Statment. The actual cost of research and development as a percentage of revenue could differ materially from the Company's expectations as a result of a variety of factors including the timing of future revenue recognition, product market conditions and the availability of required resources. Selling, general and administrative expenses increased by $4.9 million or 36% and represented 32% of revenues for the three months ended march 31, 1997 as compared to 28% of revenues for the first quarter of 1996. The increase in Selling, General and Administrative expense is partially attributable to the continuing growth of domestic and international sales and marketing efforts associated with new product launches and new sales offices. In addition during the period ended March 31, 1997 the Company recognized amortization expense of goodwill associated with the acquisition of Dianatel Corporation on June 27, 1996. Amortization will continue to be expensed over its useful life not to exceed sixty months. Interest income for the period decreased $371,000 over the comparable period ended March 31, 1996. The decrease reflects the loss of interest income due to the conversion of the VCS (Voice Control Systems Inc.) note into capital stock of VCS in January of 1997. Dialogic will no longer receive interest income benefits for this transaction as the Company no longer holds an interest bearing obligation from VCS. Future gains or losses will be realized on disposition of the VCS equity. During the first quarter of 1996, the Company realized a pretax gain of $ 9.1 million on the sale of VCS stock. Net income for the first quarter of 1997 was $3.2 million or $.20 per share. For the comparable three month period ended March 31, 1996, excluding the after tax effect of realized gains on available for sale securities, net income was $ 4.8 million or $.30 per share. Earnings for the three months ended March 31, 1996, including the above mentioned item were $10.6 million or $.65 per share. Management believes that this additional measurement of earnings (excluding such gains) 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 operations, performance, or to cash flows as an indicator of liquidity. Weighted average shares outstanding increased from 16.3 million for the first quarter of 1996 to 16.5 million for the first quarter of 1997. C. Financial Condition As of March 31,1997 and December 31, 1996, Dialogic had working capital of $100 million and a current ratio (i.e., the ratio of current assets to current liabilities) of 5.3 to 1 and 5.9 to 1, respectively. For the three months ended March 31, 1997, Dialogic's cash and cash equivalents decreased by $1.1 million. Cash flows provided by operating activities amounted to $3.0 million. Increases from net income, depreciation and amortization were partially offset by an increase in accounts receivable of $5.0 million. The average period during which accounts receivable are outstanding increased to 56 days. The increase is primarily due to the mix of international business. International accounts receivable generally remain outstanding for a period greater than 45 days. Cash flow used in investing activities was $4.5 million primarily for capital expenditures. Capital expenditures reflect the expansion of the Company's headquarters and costs associated with Dialogic's move of its GammaLink and Dianatel operations from Sunnyvale to Santa Clara, California. Cash provided by financing activities was $.4 million, consisting primarily of proceeds from the exercise of stock options and the issuance of common stock, offset by debt repayments. 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 For information regarding certain pending legal proceedings, see Item 3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11.1 - Calculation of income per share March 31, 1997 11.2 - Calculation of income per share March 31, 1996 27.1 - Financial Data Schedule (b) A Current Report on Form 8-K was filed on March 27, 1997 disclosing (under Items 5 and 7) the Company's March 27, 1997 press release. 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: May 14, 1997 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 March 31, 1997 Income applicable to shares used in calculation of income per share $ 3,227 ====== Shares used in calculation of income per share: Weighted average shares outstanding 15,802 Dilutive effect of stock options after application of treasury stock method 709 Number of shares used in calculation of income per share 16,511 Income per share $ 0.20 -------- E-1 EX-11 3 CALCULATION OF INCOME PER SHARE EXHIBIT 11.2 DIALOGIC CORPORATION AND SUBSIDIARIES CALCULATION OF INCOME PER SHARE (In thousands, except per share amounts) Three Months Ended March 31, 1996 Income applicable to shares used in calculation of income per share $ 10,612 ========= Shares used in calculation of income per share: Weighted average shares outstanding 15,518 Dilutive effect of stock options after application of treasury stock method 738 Number of shares used in calculation of income per share 16,256 ------ Income per share $ .65 ------ E-2 EX-27 4 FDS --
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. 0000899042 DIALOGIC CORPORATION 1,000 US DEC-31-1997 MAR-31-1997 3-MOS 1 10,749 35,059 39,579 982 28,643 123,389 40,267 (17,679) 152,652 23,073 0 0 0 204 126,604 152,652 57,089 57,089 21,769 21,769 30,278 0 32 5,042 1,815 0 0 0 0 3,227 0.20 0
-----END PRIVACY-ENHANCED MESSAGE-----