-----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, VDkvRAzprYeAwHdDirczrMhBdrQHgbgqdPY8lU4XRMXAwDB5H+cLMGNmjRTTnTmq RE9iD1hUzPrL1uY6gf4UvQ== 0000950123-97-006702.txt : 19970820 0000950123-97-006702.hdr.sgml : 19970820 ACCESSION NUMBER: 0000950123-97-006702 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97656618 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 FORM 10-Q 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 June 30, 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 Identification No.) of Incorporation of Organization) 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 August 8, 1997: Class Number of Shares Outstanding Common Stock, Par Value $.01 Per Share 15,272,522 Shares 2 COHERENT COMMUNICATIONS SYSTEMS CORPORATION PAGE PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS June 30, 1997 (Unaudited) and December 31, 1996...................... 3 CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three and Six Months Ended June 30, 1997 and 1996...................... 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)...................... 5 Six Months Ended June 30, 1997 and 1996 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)................. 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 7-9 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)
JUNE 30, DECEMBER 31, ASSETS 1997 1996 ------- ------- (UNAUDITED) Current assets: Cash and cash equivalents $10,659 $ 9,251 Short term investments 7,699 7,518 Accounts receivable - trade, less allowances ($708-1997 and $684 -1996) 15,041 10,065 Inventories 3,256 3,301 Other current assets 1,204 1,109 ------- ------- Total current assets 37,859 31,244 Property, plant and equipment Building and leasehold improvements 411 314 Machinery and equipment 6,253 5,115 Furniture and fixtures 1,068 970 ------- ------- 7,732 6,399 Less accumulated depreciation 3,390 2,577 ------- ------- 4,342 3,822 Other long term assets 2,361 2,492 ------- ------- Total Assets $44,562 $37,558 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,217 $ 733 Accrued expenses 2,755 2,675 Income taxes payable 2,181 2,184 ------- ------- Total current liabilities 6,153 5,592 Non-current liabilities: Deferred taxes 167 167 ------- ------- Total liabilities 6,320 5,759 ------- ------- Stockholders' equity: Common stock, par value $.01 a share; authorized - 100,000,000 shares; issued and outstanding,15,243,000 shares - 1997 and 15,128,000 shares - 1996 152 151 Additional paid-in capital 11,064 10,657 Retained earnings (from December 31, 1993) 27,026 20,991 ------- ------- Total stockholders' equity 38,242 31,799 ------- ------- Total Liabilities and Stockholders' Equity $44,562 $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)
(Unaudited) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 1997 1996 1997 1996 -------- -------- -------- -------- Net sales $ 17,768 $ 13,165 $ 33,775 $ 24,274 Cost of sales 6,559 4,804 12,058 8,891 -------- -------- -------- -------- Gross profit 11,209 8,361 21,717 15,383 -------- -------- -------- -------- Expenses: Selling 2,949 2,105 5,988 3,760 Product development and engineering 2,328 1,696 4,234 2,904 General and administrative 1,311 1,106 2,528 2,055 Interest income, net (270) (106) (463) (225) -------- -------- -------- -------- Total expenses 6,318 4,801 12,287 8,494 -------- -------- -------- -------- Pre-tax income 4,891 3,560 9,430 6,889 Income tax expense 1,761 1,280 3,395 2,491 -------- -------- -------- -------- Net income $ 3,130 $ 2,280 $ 6,035 $ 4,398 ======== ======== ======== ======== Net income per common share $ 0.20 $ 0.15 $ 0.39 $ 0.28 ======== ======== ======== ======== Average common shares outstanding 15,520 15,478 15,515 15,466 ======== ======== ======== ========
See accompanying notes to the unaudited consolidated financial statements. 4 5 COHERENT COMMUNICATIONS SYSTEMS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)
(UNAUDITED) SIX MONTHS ENDED JUNE 30, --------------------- 1997 1996 -------- -------- OPERATING ACTIVITIES: Net income $ 6,035 $ 4,398 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization 935 567 Changes provided by (used in) operating activities: Receivables (4,976) (3,173) Inventories 45 (1,354) Other current assets and other assets (86) 317 Accounts payable 484 (176) Accrued expenses 80 (158) Income taxes payable (3) (205) -------- -------- Cash provided by operating activities 2,514 216 -------- -------- Investing activities: Decrease in notes receivable from related parties, net -- 6,125 Purchase of short term investments (181) Expenditures for property, plant and equipment (1,333) (1,009) -------- -------- Cash provided by (used in) investing activities (1,514) 5,116 -------- -------- Financing activities: Exercise of stock options 408 350 Decrease in notes payable -- (1,249) -------- -------- Cash provided by (used in) financing activities 408 (899) -------- -------- Increase in cash and cash equivalents 1,408 4,433 Cash and cash equivalents- beginning of period 9,251 3,352 -------- -------- Cash and cash equivalents - end of period $ 10,659 $ 7,785 ======== ======== Supplemental disclosure of cash flow information Cash paid for: Interest $ -- $ 48 Income taxes $ 3,026 $ 2,726
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 June 30, 1997, the consolidated statements of income for the three and six months ended June 30, 1997 and 1996, and the consolidated statements of cash flows for the six months ended June 30, 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) JUNE 30, DECEMBER 31, 1997 1996 -------- ------------ Raw materials $2,235 $2,263 Work-in-progress 487 786 Finished goods 534 252 ------ ------ $3,256 $3,301 ====== ======
(C) OTHER ASSETS In June 1996, the Company exercised its Warrants to purchase 1,380,304 (as adjusted for stock split) preferred shares of Seattle Silicon, using a $1,000,000 note due from Seattle Silicon to fund the purchase. The Company re-negotiated the remaining $400,000 note from Seattle Silicon (dated July 14, 1994) to defer payment until December 31, 1997. The interest accrued on the $400,000 note, at 7%, is paid to the Company monthly. 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 June 30, 1997 increased 35% compared to the same period in 1996. Net income increased by 37%, primarily the result of higher sales which have been partially offset with increased operating expenses. While operating expenses increased overall, they remained relatively flat as a percentage of revenue. The following table sets forth, for the periods indicated, selected statements of income data as a percentage of net sales:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------- -------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net Sales Transmission products 94% 85% 93% 85% Teleconferencing products 6 15 7 15 ---- ---- ---- ---- Total net sales 100 100 100 100 Cost of sales 37 36 36 37 ---- ---- ---- ---- Gross Profit 63 64 64 63 Operating expenses Selling 17 16 18 15 Product development and engineering 13 13 13 12 General and administrative 7 9 7 9 Interest income, net (1) (1) (1) (1) ---- ---- ---- ---- Total expenses 36 37 36 35 ---- ---- ---- ---- Pre-tax income 28% 27% 28% 28% ==== ==== ==== ====
Sales of transmission products increased by 49% over the prior year for the quarter and 52% for the six month period. The majority of the transmission product increases came from the integrated and EC-6000 product lines, which together, increased 53% over the prior year for the quarter and 67% for the six month period. Sales growth was particularly strong in the Europe, Pacific Rim and North America. The revenue increases were attributable to large shipments to several large customers in Europe and North America. Teleconferencing sales decreased from the second quarter of 1996 by 44% and 36% for the six month period. Sales declined 39% and 43% for the quarter and six month period for the Conference Master, and there was a 90% and 68% decline in Callport sales for the quarter and six month period, respectively. These were partially offset by a 33% and 36% increase in Voicecrafter sales for the same periods. Sales declines for these product lines were primarily due to increased competition in this marketplace. 7 8 COHERENT COMMUNICATIONS SYSTEMS CORPORATION Backlog as of June 30, 1997 was $10.0 million compared to December 31, 1996 of $5.7 million. 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. Gross profit as a percentage of net sales was 63% and 64% for the quarter and the six month period ended June 30, 1997, respectively, as compared to 64% for the quarter and 63% for the comparable six month period in 1996. Despite price competition and the introduction of the product in new territories the increase of integrated and software products has enabled the Company to maintain its margins. Selling and marketing expenses increased for the three and six months ended June 30, 1997 by $844 and $2,228, respectively, at 17% of net sales for the quarter and 18% for the six months ended June 30, 1997 compared to 16% and 15% of net sales in the comparable periods in 1996. The increase in selling and marketing expenses was a result of the acceleration in hiring in China, Singapore and Japan. There was also additional hiring related to the Technical Assistance Center and the addition of product managers as compared to last year. Product development expenses increased for the three and six months ended June 30, 1997 by $632 and $1,330, while increasing as a percentage of net sales to 13% for the quarter and six month period as compared to 12% for the quarter ended and six month period in 1996. Most of this increase was due to the continued investment in the Consortium(TM) product, new product development and the hiring of consultants. Recruitment activities have increased significantly as the Company has added experienced personnel to the department. General and administrative expense increased for the three and six months ended June 30, 1997 by $205 and $473, respectively, at 7% of net sales for the three and six months ended June 30, 1997 compared to 9% in the comparable periods in 1996. There has been an increase in general and administrative personnel to support the overall Company growth, including Investor Relations, Director of Mergers and Acquisitions and additional MIS personnel. 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 $18.4 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 generated $1.4 million for six months ended June 30, 1997 as compared to generating cash of $4.4 million for the six months during the same period in 1996. The increase in net income and slightly lower levels of inventory were offset by increased accounts receivable levels and capital expenditures. Days outstanding in accounts receivable increased from approximately 40 days at December 31, 1996 to 58 days for the quarter ended June 30, 1997 due to various administrative processing delays in collections from several major customers. As of July 31, 1997 days outstanding decreased to 52 days. Inventory turns improved to approximately 8. Capital expenditures for the quarter ended June 30, 1997 were $0.5 million. Year to date expenses have been $1.3 million. Management anticipates that capital expenditures for 1997 will approximate three to five million dollars, predominantly for the investment in product development, management information systems 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 ("FASB") 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. In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure." The Company is required to adopt the provisions of this statement for the year ending December 31,1998. This statement continues the previous requirements to disclose certain information about an entity's capital structure found in APB Opinions No. 10, "Omnibus Opinion-1996," No. 15, "Earnings per Share." And FASB Statement No. 47, "Disclosure of Long Term Obligations," for entities that were subject to the requirements of those standards. As the Company has been subject to the requirements of each of those standards, adoption of SFAS No. 129 will have no impact on the Company's financial statements. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in the financial statements. The Company is required to adopt the provisions of the statement for the year ending December 31,1998. Earlier application is permitted; however, upon adoption the Company will be required to reclassify previously reported annual and interim financial statements. The Company is currently evaluating the impact, if any, adoption of SFAS No. 130 will have on its financial statements. In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS No. 131 requires the Company to present certain information about operating segments and related information, including geographic and major customer data, in its annual financial statements and in condensed financial statements for the interim periods. The Company is required to adopt the provisions of the statement for the year ending December 31, 1998. Earlier application is permitted; however, upon adoption the Company will be required to restate previously reported annual segment and related information in accordance with the provisions of SFAS No. 131. The Company is currently evaluating the impact, if any, adoption of SFAS No. 131 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 10.1- Contract Amendment to Value Added Reseller Agreement No. H7810/92 dated April 3,1997 between Nokia Telecommunications Oy and the Company* Exhibit 11 - Computation of net income per share Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K None No other applicable items. * Confidential portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. 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: August 12, 1997 11 12 EXHIBIT INDEX Exhibit 10.1- Contract Amendment to Value Added Reseller Agreement No. H7810/92 dated April 3,1997 between Nokia Telecommunications Oy and the Company* Exhibit 11 - Computation of net income per share Exhibit 27 - Financial Data Schedule No other applicable items. * Confidential portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment. EX-11 2 COMPUTATION OF NET INCOME PER SHARE 1 COHERENT COMMUNICATIONS SYSTEMS CORPORATION NET INCOME PER COMMON SHARE- EXHIBIT 11 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ------------------ 1997 1996 1997 1996 ------- ------- ------- ------- Net income available for common stockholders $ 3,130 $ 2,280 $ 6,035 $ 4,398 ======= ======= ======= ======= Average common shares outstanding 15,188 14,928 15,165 14,887 Average common share equivalents: Options 332 550 350 579 ------- ------- ------- ------- Average number of common and common share equivalents outstanding 15,520 15,478 15,515 15,466 ======= ======= ======= ======= Net income per common share 0.20 0.15 0.39 0.28 ------- ------- ------- -------
12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AT JUNE 30, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1997 JUN-30-1997 10,659 7,699 15,749 708 3,256 37,859 7,732 3,390 44,562 6,153 0 152 0 0 38,090 44,562 33,775 33,775 12,058 12,058 12,287 0 0 9,430 3,395 6,035 0 0 0 6,035 .39 .39
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