-----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, Py4FAy66i2ZG6kE+UtuQJNI3IGbnLc0MyPsM1EOaOVn9aBwMBXy5n0Bfupc00wfO K8wEHtJP3/51P/G8PuF2Mg== 0000950123-97-004289.txt : 19970530 0000950123-97-004289.hdr.sgml : 19970530 ACCESSION NUMBER: 0000950123-97-004289 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COHERENT COMMUNICATIONS SYSTEMS CORP CENTRAL INDEX KEY: 0000921147 STANDARD INDUSTRIAL CLASSIFICATION: 3661 IRS NUMBER: 112162982 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24308 FILM NUMBER: 97604236 BUSINESS ADDRESS: STREET 1: 44084 RIVERSIDE PRKWY STREET 2: LANDSDOWNE BUSINESS CENTER CITY: LEESBURG STATE: VA ZIP: 22075 BUSINESS PHONE: 7037296400 MAIL ADDRESS: STREET 1: 60 COMMERCE DRIVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-Q 1 COHERENT COMMUNICATIONS SYSTEMS CORP 1 COHERENT COMMUNICATIONS SYSTEMS CORPORATION 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 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from__________________to________________. Commission file no. 0-24303 COHERENT COMMUNICATIONS SYSTEMS CORPORATION (Exact Name of Registrant as Specified in Its Charter) Delaware 11-2162982 (State of Incorporation or Other Jurisdiction (I.R.S. Employer of Incorporation of Organization) Identification No.)
44084 Riverside Parkway Landsdowne Business Center, Leesburg, VA 22075 - - ------------------------------------------------------------------- -------------- (Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code: (703) 729-6400 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 May 7, 1997: Class Number of Shares Outstanding Common Stock, Par Value $.01 Per Share 15,147,072 Shares 2 COHERENT COMMUNICATIONS SYSTEMS CORPORATION PAGE ---- PART I: FINANCIAL INFORMATION ----------------------------- ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS March 31, 1997 (Unaudited) and December 31, 1996.........................3 CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, 1997 and 1996...............................4 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)..........................5 Three Months Ended March 31, 1997 and 1996 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited).....................6-7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................8-9 PART II: OTHER INFORMATION -------------------------- ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K...................................10 SIGNATURES.................................................................11 EXHIBIT- 11 COMPUTATION OF NET INCOME PER SHARE............................12 EXHIBIT- 27 FINANCIAL DATA SCHEDULE........................................13 2 3
COHERENT COMMUNICATIONS SYSTEMS CORPORATION CONSOLIDATED BALANCE SHEETS (AMOUNTS IN THOUSANDS EXCEPT SHARES) MARCH 31, DECEMBER 31, ASSETS 1997 1996 ---------------------- ---------------------- (UNAUDITED) Current assets: Cash and cash equivalents $ 10,592 $ 9,251 Short term investments 7,608 7,518 Accounts receivable - trade, less allowances ($752 -1997 and $684 -1996) 12,549 10,065 Inventories 3,167 3,301 Other current assets 1,157 1,109 ---------------------- ---------------------- Total current assets 35,073 31,244 Property, plant and equipment Building and leasehold improvements 314 314 Machinery and equipment 5,958 5,115 Furniture and fixtures 1,009 970 ---------------------- ---------------------- 7,281 6,399 Less accumulated depreciation 2,970 2,577 ---------------------- ---------------------- 4,311 3,822 Other long term assets 2,431 2,492 ---------------------- ---------------------- Total Assets $ 41,815 $ 37,558 ====================== ====================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 768 $ 733 Accrued expenses 2,643 2,675 Income taxes payable 3,443 2,184 ---------------------- ---------------------- Total current liabilities 6,854 5,592 Non-current liabilities: Deferred taxes 167 167 ---------------------- ---------------------- Total liabilities 7,021 5,759 ---------------------- ---------------------- Stockholders' equity: Common stock, par value $.01 a share; authorized - 100,000,000 shares; issued and outstanding,15,498,000 shares - 1997 and 15,128,000 shares - 1996 155 151 Additional paid-in capital 10,743 10,657 Retained earnings (from December 31, 1993) 23,896 20,991 ---------------------- ---------------------- Total stockholders' equity 34,794 31,799 ---------------------- ---------------------- Total Liabilities and Stockholders' Equity $ 41,815 $ 37,558 ====================== ====================== See accompanying notes to the unaudited consolidated financial statements.
3 4 COHERENT COMMUNICATIONS SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, ------------------------------------------------- 1997 1996 ------------------------- ------------------ (UNAUDITED) Net sales $ 16,007 $11,109 Cost of sales 5,499 4,087 ------------------------- ------------------ Gross profit 10,508 7,022 ------------------------- ------------------ Expenses: Selling 3,039 1,655 Product development and engineering 1,907 1,208 General and administrative 1,216 949 Interest income, net (193) (119) ------------------------- ------------------ Total expenses 5,969 3,693 ------------------------- ------------------ Pre-tax income 4,539 3,329 Income tax expense 1,634 1,211 ------------------------- ------------------ Net income $ 2,905 $ 2,118 ========================= ================== Net income per common share $ 0.19 $ 0.14 ========================= ================== Average common shares outstanding 15,510 15,457 ========================= ================== See accompanying notes to the unaudited consolidated financial statements.
4 5
COHERENT COMMUNICATIONS SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED MARCH 31, ---------------------------------------- 1997 1996 ------------------ ---------------- OPERATING ACTIVITIES: Net income $ 2,905 $2,118 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization 459 233 Changes provided by (used in) operating activities: Receivables (2,484) (3,557) Inventories 134 (695) Other current assets and other assets (53) 19 Accounts payable 35 (232) Accrued expenses (32) (562) Income taxes payable 1,259 1,017 ------------------ ---------------- Cash provided by (used in) operating activities 2,223 (1,659) ------------------ ---------------- Investing activities: Decrease in notes receivable from related parties, net - 5,125 Purchase of short term investments (90) Expenditures for property, plant and equipment (882) (471) ------------------ ---------------- Cash provided by (used in) investing activities (972) 4,654 ------------------ ---------------- Financing activities: Exercise of stock options 90 245 Debt repayment related to TTI purchase - (249) ------------------ ---------------- Cash provided by (used in) financing activities 90 (4) ------------------ ---------------- Increase in cash and cash equivalents 1,341 2,991 Cash and cash equivalents - beginning of year 9,251 3,352 ------------------ ---------------- Cash and cash equivalents-end of period $10,592 $6,343 ================== ================ Supplemental disclosure of cash flow information Cash paid for: Interest - $ 25 Income taxes $ 144 $ 203 See accompanying notes to unaudited consolidated financial statements.
5 6 COHERENT COMMUNICATIONS SYSTEMS CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (A) BASIS OF PRESENTATION The consolidated balance sheet as of March 31, 1997, the consolidated statements of income for the three months ended March 31, 1997 and 1996, and the consolidated statements of cash flows for the three months ended March 31, 1997 and 1996 have been prepared in accordance with generally accepted accounting principles by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flows for all periods presented have been made. Interim results are not necessarily indicative of results expected for the full year. These financial statements do not include all disclosures associated with annual financial statements. Accordingly, these statements should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1996. (B) INVENTORIES Inventories are stated at the lower of cost, on a FIFO basis, or market and consist of the following:
($000's) MARCH 31, DECEMBER 31, 1997 1996 ------------------ ---------------- Raw materials $2,309 $2,263 Work-in-progress 631 786 Finished goods 227 252 ------------------ ---------------- $3,167 $3,301 ================== ================
6 7 COHERENT COMMUNICATIONS SYSTEMS CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales for the quarter ended March 31, 1997 increased 44% compared to the same period in 1996. Net income increased by 37%, primarily the result of higher sales and higher gross margins which have been offset with increased operating expenses. The following table sets forth, for the periods indicated, selected statements of income data as a percentage of net sales:
QUARTER ENDED MARCH 31, --------------------------------------- 1997 1996 ---------------- ------------------ Net Sales Transmission products 92 % 85 % Teleconferencing products 8 15 ---------------- ------------------ Total net sales 100 100 Cost of sales 34 37 ---------------- ------------------ Gross Profit 66 63 Operating expenses Selling 19 15 Product development and engineering 12 11 General and administrative 7 8 Interest income, net (1) (1) ---------------- ------------------ Total expenses 37 33 ---------------- ------------------ Pre-tax income 28 % 30 % ================ ==================
Sales of transmission products were strong in all regions, all registering double-digit growth. Sales were particularly strong in the Pacific Rim where sales growth was in excess of 200%. The revenue increases were attributable to large shipments to Alcatel, Nokia, and Lier Electronics in Europe, and to Cisco, DSC and AT&T Wireless in North America. The majority of the transmission product increases came from the integrated and EC-6000 product lines, which combined, increased 78% over the prior year. It is anticipated that the Company will continue to benefit from the growth in worldwide digital telecommunications markets by capitalizing on the Company's voice enhancement product strategies. Teleconferencing sales decreased from the first quarter of 1996 by 25% due to a 46% decline in sales for the Conference Master, a 39% decline in Callport sales, partially offset by a 40% increase in Voicecrafter sales. Sales declines for these product lines were primarily due to increased competition in this marketplace. This increased competition resulted in decreased volume and decreased selling price. 7 8 COHERENT COMMUNICATIONS SYSTEMS CORPORATION Backlog may fluctuate since transmission products represent capital purchases for the Company's customers and may be affected by seasonal and other business cycles and order cancellation. The Company typically fills orders for its products within 7 to 60 days of the receipt of the purchase order. Customers usually purchase products on an as-needed basis, and accordingly, the Company generally has less than two-months net sales in backlog. Backlog consists of purchase orders received by the Company with a schedule of deliveries within twelve months of the purchase order date. Written commitments without delivery schedules are not considered in calculating backlog. Backlog as of March 31, 1997 were $7.6 million compared to December 31, 1996 of $5.7 million. Gross profit as a percentage of net sales improved to 66% for the quarter ended March 31, 1997 as compared to 63% for the comparable period in 1996. The increase in gross profit margins of 3% over last year is due primarily to favorable overhead and labor variances. The mix of higher margin products, including software products contributed to this increased margin. Selling expenses increased by $1.4 million, while increasing to 19% of sales compared to 15% in the comparable period of 1996. The increase in selling and marketing expenses was a result of significant expansion in both marketing and sales personnel. This included the hiring of the vice-president of marketing, expansion in the Technical Assistance Center and staffing to support China, Singapore and Japan. General and administrative expenses remained constant at 8% of sales in 1997. Product development and engineering expenses were at 12% of sales during the first quarter 1997 compared to 11% during the same quarter of 1996. The Company continues to increase its investments in product development to remain competitive in the telecommunications market, which has resulted in slightly increased expenses as a percentage of net sales. During the first quarter, the Company announced several new products at the Cellular Telephone Industry Association (CTIA) show in San Francisco. Coherent's new wireless echo cancelling platform is the industry's first product that not only eliminates traditional wireline echo in digital wireless systems like PCS, but also cancels acoustic echo and noise that is generated on the handset side of the wireless system. Also announced at CTIA was c/mor(TM), the Company's network management system for the centralized configuration and management of all echo cancellers in a system. This new product is especially useful in helping a network operator reduce costs by keeping expert staff to a minimum and reducing the need to travel to remote locations. In light of the anticipated development of new wireless service markets, the Company will increase its operating expenses to position the Company for future growth, especially in the United States, Latin America and Asia. The Company intends to increase expenses in personnel and related operating expenses only to the extent that it is able to maintain the current return on sales. The Company's forward looking statements of expected growth revenue are subject to various risks, such as an unanticipated general decline in infrastructure investment in developing countries or worldwide reductions in telecommunications expenditures. LIQUIDITY AND CAPITAL RESOURCES The Company has cash and short term investments totaling $18.2 million. Short term investments are generally limited to obligations of the U.S. Government and its agencies with a maturity of less than one year. The Company continues to generate sufficient cash from operations to fund its working capital needs and capital expenditures. The Company's operating activities provided $2.2 million of cash for the three months ended March 31, 1997 as compared to using cash of $1.7 million during the same period in 1996. The increase in net income, slightly lower levels of inventory and improved cash collections contributed to the positive cash flow from operating activities. Days outstanding in accounts receivable increased from approximately 40 days at the quarter ended December 31, 1996 to 52 days for the quarter ended March 31, 1997 due to various administrative processing delays in collections from several major customers. There have been subsequent cash receipts on these delayed collections. Inventory turns remain at approximately 7. Capital expenditures for the quarter ended March 31, 1997 were $882,000. Management anticipates that capital expenditures for 1997 will approximate three to five million dollars, predominantly for the investment in product development and improvements related to the new facility, as described below. 8 9 COHERENT COMMUNICATIONS SYSTEMS CORPORATION The Company has agreed to lease a new facility for its worldwide headquarters in Leesburg, Virginia. Construction of the facility commenced in September 1996 and is expected to be completed in September 1997. The Company's lease will be for a term of 15 years, beginning upon the completion date of the facility. The Company has terminated the lease of the existing Virginia headquarters in accordance with the lease provision and is not subject to significant cancellation costs. The Company currently anticipates that cash generated from operations, existing cash balances and amounts available under an unused, uncommitted $10,000,000 bank line of credit will be sufficient to satisfy its operating cash needs through 1997. Should the business progress more rapidly than expected, the Company believes that additional bank credit would be available to fund operating and capital requirements. In addition, the Company could consider additional public or private debt or equity financing to fund future growth opportunities. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share". This statement establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly held common stock or potential common stock. This Statement is effective for financial statements issued for periods ending after December 15, 1997, earlier application is not permitted. This Statement requires restatement of all prior-period EPS data presented. The Company is currently evaluating the impact, if any, adoption of SFAS No. 128 will have on its financial statements. 9 10 COHERENT COMMUNICATIONS SYSTEMS CORPORATION PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Computation of net income per share Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None No other applicable items. 10 11 COHERENT COMMUNICATIONS SYSTEMS CORPORATION 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. COHERENT COMMUNICATIONS SYSTEMS CORPORATION By: /s/ Joan E. Cominski --------------------------- Joan E. Cominski Principal Financial Officer Date: May 14, 1997 11 12 EXHIBIT INDEX Exhibit No. Description 11 Computation of Net Income Per Share 27 Financial Data Scheudle EX-11 2 COMPUTATION OF NET INCOME PER COMMON SHARE 1 COHERENT COMMUNICATIONS SYSTEMS CORPORATION NET INCOME PER COMMON SHARE-EXHIBIT 11
QUARTER ENDED MARCH 31, --------------------------------------------------- 1997 1996 ----------------------- ----------------------- Net income available for common stockholders $2,905,000 $2,118,000 ======================= ======================= Average common shares outstanding 15,127,000 14,733,000 Average common share equivalents: Options 383,000 724,000 ----------------------- ----------------------- Average number of common and common share equivalents outstanding 15,510,000 15,457,000 ======================= ======================= Net income per common share 0.19 0.14 ----------------------- -----------------------
12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT MARCH 31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 MAR-31-1997 10,592 7,608 13,301 752 3,167 35,073 7,281 2,970 41,815 6,854 0 0 0 155 34,639 41,815 16,007 16,007 5,499 5,499 6,162 0 0 4,539 1,634 2,905 0 0 0 2,905 .19 .19
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