-----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, MMJ7TTrWG5V1fE+4l6AVzxPQHLmN+Hq1hpflRAl+Qee9UyuWYPrVaFcBiAF+jBlS TxzUvT9OCEUhbMN7JkI4/A== 0001009448-96-000031.txt : 19961016 0001009448-96-000031.hdr.sgml : 19961016 ACCESSION NUMBER: 0001009448-96-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERIPHONICS CORP CENTRAL INDEX KEY: 0000937598 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 112699509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-89294 FILM NUMBER: 96643576 BUSINESS ADDRESS: STREET 1: 4000 VETERANS MEMORIAL HIGHWAY CITY: BOHEMIA STATE: NY ZIP: 11716 BUSINESS PHONE: 5164670500 MAIL ADDRESS: STREET 1: 4000 VETERANS MEMORIAL HIGHWAY CITY: BOHEMIA STATE: NY ZIP: 11716 10-Q 1 QUARTERLY REPORT ON FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 1996 [ ] 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.: 0-25592 PERIPHONICS CORPORATION (exact name of registrant as specified in its charter) Delaware 11-2699509 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4000 Veterans Memorial Highway, Bohemia, New York 11716 (Address of principal executive offices) Registrant's telephone number, including area code: (516) 468-9000 Check 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(s), 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: October 10, 1996 Class of Number of Common Equity Shares Common Stock, 6,812,566 par value $.01 PERIPHONICS CORPORATION AND SUBSIDIARIES INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - August 31, 1996 3 and May 31, 1996 Consolidated Statements of Earnings - Three 4 Months Ended August 31, 1996 and August 31, 1995 Consolidated Statements of Cash Flows - Three 5 Months Ended August 31, 1996 and August 31, 1995 Notes to Consolidated Financial Statements 6-7 Item 2. Managements's Discussion and Analysis of Financial 8-11 Condition and Results of Operations Part II. Other Information 12 Signatures 13 2 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
August 31, 1996 May 31, 1996 (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents............................................ $ 23,655 $ 18,664 Short-term investments............................................... 4,697 8,603 Accounts receivable, less allowance for doubtful accounts of $890 and $750 respectively . . . . . . . . . . .................... 23,458 23,829 Inventories........................................................... 13,102 11,097 Deferred income taxes................................................ 1,217 1,261 Prepaid expenses and other current assets............................ 1,055 935 -------- ------- TOTAL CURRENT ASSETS............................................. 67,184 64,389 PROPERTY, PLANT AND EQUIPMENT, net..................................... 11,076 10,426 OTHER ASSETS........................................................... 295 288 ------- ------- $ 78,555 $ 75,103 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable..................................................... $ 5,804 $ 4,247 Accrued expenses and other current liabilities....................... 11,292 11,666 ------- ------- TOTAL CURRENT LIABILITIES........................................ 17,096 15,913 DEFERRED INCOME TAXES.................................................. 237 409 -------- ------- 17,333 16,322 ------- ------- STOCKHOLDERS' EQUITY Preferred Stock, par value $.01 per share, 1,000,000 authorized, none issued Common stock, par value $.01 per share, 15,000,000 shares authorized 6,810,166 shares outstanding as of August 31, 1996 6,799,082 shares outstanding as of May 31, 1996 . . . . ........... 68 68 Additional paid-in capital............................................ 41,964 41,838 Retained earnings..................................................... 19,190 16,875 ------- ------- 61,222 58,781 ------- ------- $ 78,555 $ 75,103 ======= =======
3 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data)
Three Months Ended August 31, 1996 1995 ------ ----- (Unaudited) System sales........................................................................ $ 17,755 $ 13,887 Service revenues.................................................................... 5,504 3,657 ------- ------- Total revenues.................................................................... 23,259 17,544 ------- ------ Cost of system sales................................................................ 8,022 6,408 Cost of service revenues............................................................ 3,304 2,267 ------- ------- Cost of revenues.................................................................. 11,326 8,675 ------- ------- Gross profit........................................................................ 11,933 8,869 ------- ------- Operating expenses: Selling, general and administrative............................................... 6,165 4,865 Research and development.......................................................... 2,420 1,612 ------- ------- 8,585 6,477 ------- ------- Earnings from operations............................................................ 3,348 2,392 ------- ------- Other income (expense): Interest and other income......................................................... 329 191 Foreign exchange gain (loss) ..................................................... 118 (125) ------- ------- 447 66 ------- -------- Earnings before provision for income taxes.......................................... 3,795 2,458 Provision for income taxes.......................................................... 1,480 1,008 ------- ------- Net earnings . . . . . . . . . . . . . ............................................. $ 2,315 $ 1,450 ======= ======= Net earnings per common and common equivalent share. . . . ......................... $ .33 $ .23 ======== ======== Weighted average number of common and common equivalent shares...................... 6,991 6,279 ======= =======
4 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Three Months Ended August 31, 1996 1995 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings.......................................................................... $ 2,315 $ 1,450 Adjustments to reconcile net earnings to net cash and cash equivalents provided by operating activities: Depreciation and amortization....................................................... 823 578 Deferred income taxes............................................................... (128) (28) Changes in operating assets and liabilities: Decrease in accounts receivable . . . . . ....................................... 371 889 Increase in inventories.......................................................... (2,005) (2,937) Increase in prepaid expenses and other current assets............................ (120) (138) Increase in other assets......................................................... (7) (20) Increase in accounts payable and accrued expenses other current liabilities........................................................... 1,183 1,067 ------ ------ Net cash and cash equivalents provided by operating activities ....... . . . . 2,432 861 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment.......................................... (1,473) (725) Proceeds from sale of short-term investments........................................ 4,876 --- Purchases of short-term investments................................................. (970) --- ------ ------ Net cash and cash equivalents used in investing activities.................... 2,433 (725) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock options exercised............................................... 126 156 ------ ------ Net cash and cash equivalents provided by financing activities................ 126 156 ------ ------ NET INCREASE IN CASH AND CASH EQUIVALENTS................................................ 4,991 292 CASH AND CASH EQUIVALENTS, beginning of period........................................... 18,664 8,753 ------ ------ CASH AND CASH EQUIVALENTS, end of period................................................. $ 23,655 $ 9,045 ====== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest .............................................................................. --- --- Income Taxes........................................................................... $ 593 $ 754
5 PERIPHONICS CORPORATION NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position, the results of operations, and the cash flows at August 31, 1996 and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes included in the Company's May 31, 1996 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the three months ended August 31, 1996 and 1995 are not necessarily indicative of the results to be expected for the full year. Dollar amounts are presented in thousands. 2. INVENTORIES Inventories consist of the following: August 31, 1996 May 31, 1996 Raw materials $7,040 $6,218 Work-in-process 6,062 4,879 ------ ------ $13,102 $11,097 ======= ======= 3. INITIAL PUBLIC OFFERING On March 30, 1995, the Company consummated an initial public offering ("IPO") of 2,750,000 shares of common stock at a price of $14.00 per share. Of the shares offered, 2,150,000 were sold by the Company and 600,000 shares were sold by shareholders of the Company. In April 1995, the underwriters of the IPO exercised their over allotment option to purchase an additional 412,500 shares from the selling shareholders. The Company did not receive any of the proceeds from the exercise of the over allotment option. The net proceeds to the Company from the sale of the 2,150,000 shares of Common Stock offered was approximately $27.1 million (after deducting the underwriting discount and offering expenses payable by the Company). The net proceeds to the Company were used to repay indebtedness of $14.2 million and to redeem 750,000 shares of its Common Stock from Exxon Corporation for approximately $8.8 million (plus the payment to Exxon of approximately $0.2 million of accumulated dividends on the Series A Preferred Stock which was converted into such Common Stock). The balance of the net proceeds, approximately $3.9 million, is to be used for general corporate purposes, including working capital. 6 4. SECONDARY PUBLIC OFFERING On November 17, 1995, the Company consummated a secondary public offering of 1,255,000 shares of common stock at a price of $25.50 per share. Of the shares offered, 600,000 were sold by the Company and 655,000 were sold by certain stockholders of the Company. Also in November 1995, the underwriters of the secondary offering exercised their over-allotment option to purchase an additional 188,250 shares from the selling stockholders. The Company did not receive any of the proceeds from the exercise of the over-allotment option. The net proceeds to the Company from the sale of the 600,000 shares of Common Stock offered was approximately $14.0 million (after deducting the underwriting discount and offering expenses payable by the Company). The net proceeds to the Company are to be used for general corporate purposes, including working capital, facilities expansion and possible acquisitions of businesses, products or technologies complementary to the Company's business. 5. ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115 & NO. 121 During the third quarter of fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The Company has determined that their investments should be classified as held-to-maturity because the Company has the positive intent and ability to hold the investments to maturity. Held-to-maturity investments are stated at amortized cost, adjusted for amortization of premiums and accretion of discounts to maturity. The aggregate fair value of the Company's investments as of August 31, 1996 was $4,780. During the fourth quarter of fiscal 1996, the Company adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived and for Long-Lived Assets to be Disposed Of ("SFAS 121"). The adoption of SFAS 121 has not had a material impact on the Company's Consolidated Financial Statements. 6. STOCK SPLIT AND CHANGES IN AUTHORIZED CAPITAL On September 20, 1996, the Board of Directors approved a two-for-one split of its common stock to be effected as a stock dividend on October 31, 1996 to shareholders of record at the close of business on October 15, 1996. After giving effect to the stock split, the shares outstanding will increase from 6,812,566 to 13,625,132. Also, on September 20, 1996, the Board of Directors determined it advisable to amend the Company's Certificate of Incorporation to increase the number of authorized shares of Common Stock from 15,000,000 shares to 30,000,000 shares. The proposed amendment to the Amended and Restated Certificate of Incorporation has been submitted for shareholder approval. The results of this matter will be announced at the 1996 Annual Meeting of Stockholders to be held on November 8, 1996. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended August 31, 1996 compared to Three Months ended August 31, 1995 Total Revenues. Total revenues increased by 32.6% to $23.3 million in the three months ended August 31, 1996 from $17.5 million in the three months ended August 31, 1995. System sales increased by 27.9% to $17.8 million in the three months ended August 31, 1996 from $13.9 million in the three months ended August 31, 1995. The increase in system sales was primarily due to an increase in unit sales volume. Service revenues increased by 50.5% to $5.5 million in the three months ended August 31, 1996 from $3.7 million in the three months ended August 31, 1995, primarily due to the addition of more units to the service base as well as an increase installation revenues. Gross Profit. The Company's gross profit increased by $3.0 million, or 34.5%, to $11.9 million in the three months ended August 31, 1996 from $8.9 million in the three months ended August 31, 1995. Gross profit as a percentage of total revenues increased to 51.3% in the three months ended August 31, 1996 from 50.6% in the three months ended August 31, 1995. Gross profit on system sales increased by $2.3 million, or 30.1%, to $9.7 million in the three months ended August 31, 1996 from $7.5 million in the three months ended August 31, 1995. The gross margin on system sales increased to 54.8% in the three months ended August 31, 1996 from 53.9% in the three months ended August 31, 1995. The Company attributes this increase primarily to manufacturing and productivity efficiencies of scale resulting from increased sales volume during the period. Gross profit on service revenues increased by $.8 million, or 58.3%, to $2.2 million in the three months ended August 31, 1996 from $1.4 million in the three months ended August 31, 1995. Gross margin on service revenues increased to 40.0% in the three months ended August 31, 1996 from 38.0% in the three months ended August 31, 1995. This increase was attributable to higher installation revenues and an increase in the service base. Selling, General and Administrative Expenses. Selling, General and Administrative ("SG&A") expenses were $6.2 million and $4.9 million for the three months ended August 31, 1996 and 1995, respectively, or 26.5% and 27.7% of total revenues, respectively. The increase in the dollar amount of SG&A expenses was primarily due to both the continued expansion of the Company's sales effort in domestic and international markets and to increases in SG&A expenses necessary to support the increased level of sales. SG&A expenses decreased as a percentage of total revenues due to the Company's ability to leverage certain fixed expenses over its growing revenue base. Research and Development Expenses. Research and Development ("R&D") expenses were $2.4 million and $1.6 million for the three months ended August 31, 1996 and 1995, respectively, or 10.4% and 9.2% of total revenues, respectively. The increase in the dollar amount of R&D expenses reflects the continued expansion of the Company's R&D staff which increased to 100 from 79 between August 31, 1995 and August 31, 1996. R&D expenses are charged to operations as incurred, and no software development costs have been capitalized. The Company expects the dollar amount of R&D expenditures to continue to increase, although such expenses as a percentage of total revenues will vary from period to period. Other Income (Expense). Other income was $.4 and $.1 million for the three months ended August 31, 1996 and 1995 respectively. Interest and other income increased to $.3 million 8 in the three months ended August 31, 1996 from $.2 million in the three months ended August 31, 1995 primarily due to increased cash balances. The Company had a foreign exchange gain of $.1 million for the three months ended August 31, 1996 compared to a foreign exchange loss of $.1 million for the three months ended August 1995. To the extent the Company is unable to match revenue received in foreign currencies with expense paid in the same currency it is exposed to fluctuations on international currency transactions. Income Taxes. Variations in the customary relationship between the provision for income taxes and the statutory federal income tax rate primarily result from foreign subsidiaries' net operating losses which did not produce current tax benefits, the utilization of research and development tax credits and state and local income taxes. The Company's effective income tax rates were 39.0% and 41.0% for the three months ended August 31, 1996 and 1995, respectively. Foreign Operations. The Company's European subsidiary operated at approximately a $.4 million loss during the three months ended August 31, 1996 as compared to approximately break-even during the three months ended August 31, 1995. The increase in such losses was attributed to a decrease in the gross margin and increase in the dollar amount of SG&A expenses to support the expansion of the sales and marketing effort in the three months ended August 31, 1996. Transfers from the Company's North American operations to its European subsidiary are accounted for at cost, plus a reasonable profit. Liquidity and Capital Resources On November 17, 1995, the Company consummated a secondary public offering of 1,255,000 share of common stock at a price of $25.50 per share. Of the shares offered, 600,000 were sold by the Company and 655,000 were sold by certain stockholders of the Company. Also in November 1995, the underwriters of the offering exercised their over allotment option to purchase an additional 188,250 shares from the selling stockholders. The Company did not receive any of the proceeds from the exercise of the over allotment option. The net proceeds to the Company from the sale of the 600,000 shares of Common Stock offered was approximately $14.0 million (after deducting the underwriting discount and offering expenses payable by the Company). The net proceeds to the Company are to be used for general corporate purposes, including working capital, facilities expansion and possible acquisitions of businesses, products or technologies complementary to the Company's business. The Company's principal cash requirement to date has been to fund working capital and capital expenditures in order to support the growth of revenues. The Company has historically financed this requirement primarily through cash flow from operations and bank borrowings. Cash flow from operations was $2.4 million and $.9 million for the three months ended August 31, 1996 and 1995, respectively. At August 31, 1996, the Company had working capital of $50.1 million, including $28.4 million of cash and cash equivalents and short-term investments. The Company expects its working capital needs to increase along with future revenue growth. At August 31, 1996 current assets and current liabilities increased by $2.8 million and 9 $1.2 million, respectively, compared to May 31, 1996. Current assets increased principally as a result of an increase in inventories to support higher production volumes offset, in part, by reduced accounts receivable. During the period ended August 31, 1996, current liabilities increased primarily due to an increase in accounts payable due to higher operating levels offset, in part, by a decrease in accrued expenses resulting from the timing of payments. The average days sales outstanding (calculated by dividing the net accounts receivable at the balance sheet date for each period by the average sales per day during the quarter immediately preceding the balance sheet date) were approximately 93 days and 83 days at August 31, 1996 and May 31, 1996, respectively. The Company attributes the increase in days' sales outstanding primarily to increased sales to government agencies which generally have longer payment cycles. To the extent the Company's sales mix continues to shift towards government agencies, the average day's sales outstanding is expected to increase. The Company's inventory as of May 31, 1996 and August 31, 1996 was $11.1 million and $13.1 million respectively. The increase in inventory from May 31, 1996 to August 31, 1996 reflects an investment by the Company to support future sales growth. In January 1995, the Company increased its line of credit to $8.0 million with interest charged at the prime rate plus 0.25%. The line of credit expires on November 30, 1996. As of August 31, 1996, the Company had no borrowings under this line of credit. The Company is presently negotiating to increase and restructure the line of credit to a revolving line of credit, with a term loan option. The Company made capital expenditures totaling $1.5 million and $.7 million during the three months ended August 31, 1996 and 1995, respectively. The Company expects that its capital expenditures for facilities expansion, possible technology licenses and acquisitions, and additional computer equipment utilized for development and testing of the Company's products, will be substantially greater than its capital expenditures in the prior several years. The Company believes that its existing sources of working capital and borrowings available under its revolving line of credit will be sufficient to fund its operations and capital expenditures for at least 12 months. Foreign Currency Transaction The Company does not currently engage in international currency hedging transactions to mitigate its foreign currency exposure. Included in the foreign exchange gain (loss) are unrealized foreign exchange gains and losses resulting from the currency remeasurement of the financial statements of the Company's foreign subsidiaries into U.S. dollars. To the extent the Company is unable to match revenue received in foreign currencies with expenses paid in the same currency, it is exposed to possible losses on international currency transactions. Inflation In the opinion of management, inflation has not had a material effect on the operations of the Company. 10 Certain Factors That May Affect Future Results From time to time, information provided by the Company, statements made by its employees or information included in its filings with the Securities and Exchange Commission (including this Form 10-Q) may contain statements which are so-called "forward-looking statements" and not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual future results may differ significantly from those stated in any forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including, but not limited to, product demand, pricing, market acceptance, litigation, risks in product and technology development and other risk factors detailed from time to time in the Company's Securities and Exchange Commission reports including this Form 10-Q for the fiscal quarter ended August 31, 1996 and its Form 10-K for the fiscal year ended May 31, 1996. 11 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) Reports on Form 8-K A current report on Form 8-K was filed by the Company on August 13, 1996, with respect to the Company's approval of a rights agreement that was entered into by the Company and American Stock Transfer and Trust Company, as Rights Agent on July 31, 1996, setting forth the terms of a stockholder rights plan, and pursuant thereto declared a dividend of one preferred share purchase right for each outstanding share of common stock, par value $0.01 per share. 12 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. PERIPHONICS CORPORATION Registrant By: \s\ Peter J. Cohen ------------------------------------ Peter J. Cohen Chairman of the Board, President and Chief Executive Officer (Principal Operating Officer) By: \s\ Kevin J. O'Brien ------------------------------------ Kevin J. O'Brien Chief Financial Officer, Vice President-Finance and Administration (Principal Accounting Officer), Secretary and Director Dated: October 15, 1996 13 EX-27 2 FDS --
5 0000937598 Periphonics Corporation 3-MOS MAY-31-1996 JUN-1-1996 AUG-31-1996 23,655 4,697 24,348 (890) 13,102 67,184 24,395 (13,319) 78,555 17,096 0 0 0 68 61,154 78,555 23,259 23,259 11,326 11,326 8,585 0 0 3,795 1,480 2,315 0 0 0 2,315 0.33 0
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