-----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, QD0WACh5jwCiB4ukiGZTy6SnIrC7V9JNiWMoDZpajkuUsukAyt/qGePzYqhwBvHZ PtiZMGKDpMUNNl6c10plbg== 0001009448-97-000002.txt : 19970115 0001009448-97-000002.hdr.sgml : 19970115 ACCESSION NUMBER: 0001009448-97-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961130 FILED AS OF DATE: 19970114 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: 97505394 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 November 30, 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: January 10, 1997. Class of Number of Common Equity Shares Common Stock, 13,645,288 par value $.01 PERIPHONICS CORPORATION AND SUBSIDIARIES INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - November 30, 1996 3 and May 31, 1996 Consolidated Statements of Earnings - Six Months 4 Ended November 30, 1996 and November 30, 1995 Consolidated Statements of Earnings - Three Months 5 Ended November 30, 1996 and November 30, 1995 Consolidated Statements of Cash Flows - Six Months 6 Ended November 30, 1996 and November 30, 1995 Notes to Consolidated Financial Statements 7-8 Item 2. Managements's Discussion and Analysis of Financial 9-13 Condition and Results of Operations Part II. Other Information 14-15 Signatures 16 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
November 30, 1996 May 31, 1996 (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents............................................ $ 16,479 $ 18,664 Short-term investments............................................... 5,313 8,603 Accounts receivable, less allowance for doubtful accounts of $890 and $750 respectively . . . . . . . . . . .................... 32,736 23,829 Inventories.......................................................... 12,150 11,097 Deferred income taxes................................................ 1,151 1,261 Prepaid expenses and other current assets............................ 938 935 --------- --------- TOTAL CURRENT ASSETS............................................. 68,767 64,389 PROPERTY, PLANT AND EQUIPMENT, net..................................... 12,775 10,426 OTHER ASSETS........................................................... 283 288 --------- --------- $ 81,825 $ 75,103 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable..................................................... $ 6,073 $ 4,247 Accrued expenses and other current liabilities....................... 11,292 11,666 --------- --------- TOTAL CURRENT LIABILITIES........................................ 17,365 15,913 DEFERRED INCOME TAXES.................................................. 140 409 --------- --------- 17,505 16,322 --------- --------- STOCKHOLDERS' EQUITY Preferred Stock, par value $.01 per share, 1,000,000 authorized, none issued Common stock, par value $.01 per share, 30,000,000 shares authorized 13,627,132 shares outstanding as of November 30, 1996 13,598,164 shares outstanding as of May 31, 1996 . . . . .......... 136 136 Additional Paid-in Capital.......................................... 41,955 41,770 Retained Earnings................................................... 64,320 58,781 --------- --------- $ 81,825 $ 75,103 ========= =========
3 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data)
Six Months Ended November 30, 1996 1995 (Unaudited) System sales........................................................................ $ 40,449 $ 31,422 Service revenues.................................................................... 11,493 7,669 -------- -------- Total revenues.................................................................... 51,942 39,091 -------- -------- Cost of system sales................................................................ 18,929 14,595 Cost of service revenues............................................................ 6,951 4,934 -------- -------- Cost of revenues.................................................................. 25,880 19,529 -------- -------- Gross profit........................................................................ 26,062 19,562 -------- -------- Operating expenses: Selling, general and administrative............................................... 13,279 10,339 Research and development.......................................................... 5,035 3,466 -------- -------- 18,314 13,805 -------- -------- Earnings from operations............................................................ 7,748 5,757 -------- -------- Other income (expense): Interest and other income......................................................... 701 293 Foreign exchange gain (loss) ..................................................... 328 (132) -------- -------- 1,029 161 -------- -------- Earnings before provision for income taxes.......................................... 8,777 5,918 Provision for income taxes.......................................................... 3,423 2,426 -------- -------- Net earnings . . . . . . . . . . . . . ............................................. $ 5,354 $ 3,492 ======== ========= Net earnings per common and common equivalent share. . . . ......................... $ 0.38 $ 0.27 ======== ======== Weighted average number of common and common equivalent shares...................... 13,951 12,764 ======== ========
4 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data)
Three Months Ended November 30, 1996 1995 (Unaudited) System sales........................................................................ $ 22,694 $ 17,535 Service revenues.................................................................... 5,989 4,012 -------- Total revenues.................................................................... 28,683 21,547 -------- -------- Cost of system sales................................................................ 10,907 8,187 Cost of service revenues............................................................ 3,647 2,667 -------- -------- Cost of revenues.................................................................. 14,554 10,854 -------- -------- Gross profit........................................................................ 14,129 10,693 -------- -------- Operating expenses: Selling, general and administrative............................................... 7,114 5,474 Research and development.......................................................... 2,615 1,854 -------- -------- 9,729 7,328 -------- -------- Earnings from operations............................................................ 4,400 3,365 -------- -------- Other income (expense): Interest and other income......................................................... 372 102 Foreign exchange gain (loss) ..................................................... 210 (7) -------- -------- 582 95 -------- -------- Earnings before provision for income taxes.......................................... 4,982 3,460 Provision for income taxes.......................................................... 1,943 1,418 -------- -------- Net earnings . . . . . . . . . . . . . ............................................. $ 3,039 $ 2,042 ======== ======== Net earnings per common and common equivalent share. . . . ......................... $ 0.22 $ 0.16 ======== ======== Weighted average number of common and common equivalent shares...................... 13,956 12,838 ======== ========
5 PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Six Months Ended November 30, 1996 1995 (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings......................................................................... $ 5,354 $ 3,492 Adjustments to reconcile net earnings to net cash and cash equivalents used in operating activities: Depreciation and amortization...................................................... 1,679 1,147 Deferred income taxes.............................................................. (159) (12) Changes in operating assets and liabilities: Increase in accounts receivable . . . . . ...................................... (8,907) (1,415) Increase in inventories......................................................... (1,053) (5,249) (Increase) Decrease in prepaid expenses and other current assets................ (3) 288 Decrease (Increase) in other assets............................................. 5 (86) Increase in accounts payable and accrued expenses and other current liabilities.......................................................... 1,452 1,640 -------- -------- Net cash and cash equivalents used in operating activities .......... . . . . (1,632) (195) --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment......................................... (4,028) (1,842) Proceeds from sale of short-term investments....................................... 9,573 --- Purchases of short-term investments................................................ (6,283) --- -------- -------- Net cash and cash equivalents used in investing activities................... (738) (1,842) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock options exercised........................................... 185 156 Proceeds from Secondary Public Offering of Common Stock.......................... --- 14,131 -------- -------- Net cash and cash equivalents provided by financing activities............... 185 14,287 -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................... (2,185) 12,250 CASH AND CASH EQUIVALENTS, beginning of period.......................................... 18,664 8,753 -------- -------- CASH AND CASH EQUIVALENTS, end of period................................................ $ 16,479 $ 21,003 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ............................................................................. --- --- Income Taxes.......................................................................... $ 2,534 $ 1,654
6 PERIPHONICS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In the opinion of Periphonics Corporation and subsidiaries (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 November 30, 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 and six months ended November 30, 1996 and 1995 are not necessarily indicative of the results to be expected for the full year. Dollar amounts are presented in thousands except per share amounts. 2. 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 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 increased from approximately 6,812,566 to approximately 13,625,132. All historical share and per share data appearing in the consolidated financial statements and notes thereto have been retroactively adjusted for the stock split. 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 was submitted for shareholder approval. Shareholder approval was announced on November 8, 1996 at the 1996 Annual Meeting of Stockholders. 3. INVENTORIES Inventories consist of the following: November 30, 1996 May 31, 1996 Raw materials $ 7,723 $ 6,218 Work-in-process 4,427 4,879 ------- ------- $12,150 $11,097 ======= ======= 7 4. INITIAL PUBLIC OFFERING On March 30, 1995, the Company consummated an initial public offering ("IPO") of 5,500,000 shares of common stock at a price of $7.00 per share. Of the shares offered, 4,300,000 were sold by the Company and 1,200,000 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 825,000 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 4,300,000 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 1,500,000 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, was used for general corporate purposes, including working capital. 4. SECONDARY PUBLIC OFFERING On November 17, 1995, the Company consummated a secondary public offering of 2,510,000 shares of common stock at a price of $12.75 per share. Of the shares offered, 1,200,000 were sold by the Company and 1,310,000 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 376,500 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 1,200,000 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. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Six Months Ended November 30, 1996 compared to Six Months Ended November 30, 1995 Total Revenues. Total revenues increased by 32.9% to $51.9 million in the first six months of fiscal 1997 from $39.1 million in the first six months of fiscal 1996. System sales increased by 28.7% to $40.4 million in the first six months of fiscal 1997 from $31.4 million in the first six months of fiscal 1996. The increase in system sales was primarily due to an increase in unit sales volume. Service revenues increased by 49.9% to $11.5 million in the first six months of fiscal 1997 from $7.7 million in the first six months of fiscal 1996, primarily due to the addition of more units to the service base as well as an increase in installation revenues. Gross Profit. The Company's gross profit increased by $6.5 million, or 33.2%, to $26.1 million in the first six months of fiscal 1997 from $19.6 million in the first six months of fiscal 1996. Gross profit as a percentage of total revenues increased to 50.2% in the first six months of fiscal 1997 from 50.0% in the first six months of fiscal 1996. Gross profit on system sales increased by $4.7 million, or 27.9%, to $21.5 million in the first six months of fiscal 1997 from $16.8 million in the first six months of fiscal 1996. The gross margin on system sales decreased to 53.2% in the first six months of fiscal 1997 from 53.6% in the first six months of fiscal 1996. The Company attributes this decrease primarily to the product mix during the current six month period. Gross profit on service revenues increased by $1.8 million, or 66.1%, to $4.5 million in the first six months of fiscal 1997 from $2.7 million in the first six months of fiscal 1996. Gross margin on service revenues increased to 39.5% in the first six months of fiscal 1997 from 35.7% in the first six months of fiscal 1996. This increase was attributable to growth in the service base, as well as an increase in installation revenues. Selling, General and Administrative Expenses. Selling, General and Administrative ("SG&A") expenses were $13.3 million and $10.3 million for the first six months of fiscal 1997 and 1996, respectively, or 25.6% and 26.4% 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 $5.0 million and $3.5 million for the first six months of fiscal 1997 and 1996, respectively, or 9.7% and 8.9% 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 114 from 88 between November 30, 1995 and November 30, 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. 9 Other Income (Expense). Other income was $1.0 million and 0.2 million for the six months ended November 30, 1996 and 1995 respectively. Interest and other income increased to $0.7 million in the six months ended November 30, 1996 from $0.3 million in the six months ended November 30, 1995 primarily due to increased cash balances. The Company had a foreign exchange gain of $0.3 million in the six months ended November 30, 1996 compared to a foreign exchange loss of $0.1 million for the six months ended November 30, 1995. 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 fluctuations in international currency transactions. Income Taxes. Variations in the customary relationship between the provision for income taxes and the statutory 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 six months ended November 30, 1996 and 1995, respectively. Foreign Operations. The Company's European subsidiary operated at approximately a $0.6 million loss during the six months ended November 30, 1996 as compared to a loss of $0.4 million during the six months ended November 30, 1995. The increase in such losses was attributed to a decrease in the gross margin and an increase in the dollar amount of SG&A expenses to support the expansion of the sales and marketing effort partially offset by a decrease in the exchange loss in the six months ended November 30, 1996. Transfers from the Company's North American operations to its European subsidiary are accounted for at cost, plus a reasonable profit. The cost of revenues for the Company's European subsidiary includes approximately $0.2 million and $0.2 million of intercompany gross profit earned by the Company's North American operations on system sales by the European subsidiary to third parties during the six months ended November 30, 1996 and 1996, respectively. Three Months Ended November 30, 1996 compared to Three Months ended November 30, 1995 Total Revenues. Total revenues increased by 33.1% to $28.7 million in the three months ended November 30, 1996 from $21.5 million in the three months ended November 30, 1995. System sales increased by 29.4% to $22.7 million in the three months ended November 30, 1996 from $17.5 million in the three months ended November 30, 1995. The increase in system sales was primarily due to an increase in unit sales volume. Service revenues increased by 49.3% to $6.0 million in the three months ended November 30, 1996 from $4.0 million in the three months ended November 30, 1995, primarily due to the addition of more units to the service base as well as an increase in installation revenues. Gross Profit. The Company's gross profit increased by $3.4 million, or 32.1%, to $14.1 million in the three months ended November 30, 1996 from $10.7 million in the three months ended November 30, 1995. Gross profit as a percentage of total revenues decreased to 49.3% in the three months ended November 30, 1996 from 49.6% in the three months ended November 30, 1995. Gross profit on system sales increased by $2.4 million, or 26.1%, to $11.8 million in the three months ended November 30, 1996 from $9.4 million in the three months ended November 30, 1995. The gross margin on system sales decreased to 51.9% in the three months ended November 30, 1996 from 53.3% in the three months ended November 30, 1995. 10 The Company attributes this decrease primarily to the product mix during the current three month period. Gross profit on service revenues increased by $1.0 million, or 74.1 % to $2.3 million in the three months ended November 30, 1996 from $1.3 million in the three months ended November 30, 1995. Gross margin on service revenues increased to 39.1% in the three months ended November 30, 1996 from 33.5% in the three months ended November 30, 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 $7.1 million and $5.5 million for the three months ended November 30, 1996 and 1995, respectively, or 24.8% and 25.4% 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 $2.6 million and $1.9 million for the three months ended November 30, 1996 and 1995, respectively, or 9.1% and 8.6% 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 114 from 88 between November 30, 1995 and November 30, 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 $0.6 and $0.1 million for the three months ended November 30, 1996 and 1995 respectively. Interest and other income increased to $0.4 million in the three months ended November 30, 1996 from $0.1 million in the three months ended November 30, 1995 primarily due to increased cash balances. The Company had a foreign exchange gain of $0.2 million for the three months ended November 30, 1996. 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 November 30, 1996 and 1995, respectively. 11 Liquidity and Capital Resources 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. Historically, the Company has primarily financed this requirement through cash flow from operations, bank borrowings and two public offerings for the Company's common stock in 1995, which resulted in an aggregate of $41.1 million of net proceeds to the Company. Cash flow from operations was $(1.6) million and $(0.2) million for the six months ended November 30, 1996 and 1995, respectively. At November 30, 1996, the Company had working capital of $51.4 million, including $21.8 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 November 30, 1996, current assets and current liabilities increased by $4.4 million and $1.5 million, respectively, compared to May 31, 1996. Current assets increased principally as a result of an increase in accounts receivable. During the period ended November 30, 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 104 days and 83 days at November 30, 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 November 30, 1996 was $11.1 million and $12.1 million respectively. The increase in inventory from May 31, 1996 to November 30, 1996 reflects an investment by the Company to support future sales growth. 12 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, 1997. As of November 30, 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 $4.0 million and $1.8 million during the six months ended November 30, 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. Recent Accounting Pronouncements In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement No. 123, "Accounting for Stock-Based Compensation," which must be adopted by the Company in fiscal 1997. The Company has chosen not to implement the fair value based accounting method for employee stock options, but has elected to disclose, commencing with its fiscal 1997 Annual Report, the pro forma net earnings and net earnings per share as if such method had been used to account for stock-based compensation costs as described in Statement No. 123. 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 November 30, 1996 and its Form 10-K for the fiscal year ended May 31, 1996. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities The Company declared a 2-for-1 stock split in the form of a stock dividend, which was paid on October 31, 1996 to holders of record on October 15, 1996. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders (a) On November 8, 1996 the Company held its Annual Meeting of Stockholders (the "Meeting"). (b) At the Meeting, the Stockholders of the Company elected Edward H. Blum and Richard A. Daniels as Class II directors. (c) In addition to electing directors at the Meeting, the Stockholders of the Company amended the Company's Amended and Restated Certificate of incorporation to increase the number of authorized shares from 16,000,000 shares consisting of 15,000,000 shares of common stock and 1,000,000 shares of preferred stock, to 31,000,000 shares consisting of 30,000,000 shares of common stock and 1,000,000 shares of preferred stock. (d) At the Meeting, the Stockholders of the Company approved the amendment of the Company's 1995 Stock Option Plan to increase the number of shares reserved for issuance thereunder from 800,000 to 1,200,000. (e) The Stockholders of the Company then ratified the selection of Deloitte & Touche LLP as the Company's independent auditors for the fiscal year ending May 31, 1997. The following sets forth the results of voting on each matter voted upon at the meeting: 1. Election of Directors For Against Edward H. Blum 4,817,065 37,450 Richard A. Daniels 4,817,065 37,450 2. Amendment of the Company's Amended and Restated Certificate of Incorporation. For Against 4,672,605 79,200 14 3. Amendment of the Company's 1995 Stock Option Plan. For Against 4,539,589 175,680 4. Ratification of Deloitte & Touche LLP as the Company's independent auditor's for the fiscal year ending May 31, 1997. For Against 4,831,740 4,690 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3 Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company 10 1995 Stock Option Plan, As Amended 27 Financial Data Schedule (b) Reports on Form 8-K None 15 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 Vice President-Finance and Administration (Principal Accounting Officer), Secretary Dated: January 14, 1997 16 EX-3 2 CERTIFICATE OF AMENDMENT Exhibit 3 CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF PERIPHONICS CORPORATION --------------------------------------------------------- Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware --------------------------------------------------------- The undersigned, Peter J. Cohen and Kevin J. O'Brien, being the President and Secretary, respectively, of PERIPHONICS CORPORATION, a corporation organized and existing under the laws of the State of Delaware, do hereby certify as follows: FIRST, that the Certificate of Incorporation of said corporation be amended as follows: 2. By striking out the first paragraph of ARTICLE FOURTH, as it now exists, and inserting in lieu and instead thereof a new first paragraph of ARTICLE FOURTH, reading as follows: "The total number of shares of stock which the corporation shall have authority to issue is Thirty-One Million (31,000,000), consisting of Thirty Million (30,000,000) shares of Common Stock, all of a par value of One Cent ($.01) each, and One Million (1,000,000) shares of Preferred Stock, all of a par value of One Cent ($.01) each." SECOND, that such amendment has been duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware by the written consent of the holders of not less than a majority of the outstanding stock entitled to vote thereon and that written notice of the corporate action has been given to those stockholders who have not consented in writing, all in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, we have signed this Certificate this 13th day of November, 1996. \s\ Peter J. Cohen ---------------------------- Peter J. Cohen, President \s\ Kevin J. O'Brien --------------------------- Kevin J. O'Brien, Secretary EX-10 3 STOCK OPTION PLAN Exhibit 10 PERIPHONICS CORPORATION 1995 STOCK OPTION PLAN, AS AMENDED 1. PURPOSE. The purpose of this Stock Option Plan, to be known as the 1995 Stock Option Plan (the "Plan"), is to advance the interests of Periphonics Corporation (the "Company") by enhancing the ability of the Company to attract and retain selected employees, consultants, advisors to the Board of Directors and qualified directors (collectively the "Participants") by creating for such Participants incentives and rewards for their contributions to the success of the Company, and by encouraging such Participants to become owners of shares of the Company's Common Stock, par value $0.01 per share, as the title or par value may be amended (the "Common Stock"). Options granted pursuant to the Plan may be incentive stock options ("Incentive Options") as defined in the Internal Revenue Code of 1986, as amended (the "Code") or non-qualified options, or both. The proceeds received from the sale of Shares pursuant to the Plan shall be used for general corporate purposes. 2. EFFECTIVE DATE OF PLAN. The Plan will become effective upon approval by the Board of Directors (the "Board"), and shall be subject to the approval of the shareholders of the Company as provided under the Securities Act of 1933, as amended (the "Act"). 3. AVAILABLE SHARES. The total number of shares of Common Stock for which options may be granted under the Plan shall not exceed 1,200,000 shares, subject to adjustment in accordance with Paragraph 12 of the Plan. Shares of Common Stock subject to the Plan are authorized but unissued shares of Common Stock or shares of Common Stock that were once issued and subsequently reacquired by the Company. If any options granted under the Plan are surrendered before exercise or lapse without exercise, in whole or in part, the shares of Common Stock reserved therefor shall continue to be available under the Plan. 4. ADMINISTRATION. The Plan shall be administered by the Board or by a committee appointed by the Board (the "Committee"). In the event the Board fails to appoint or refrains from appointing a Committee, the Board shall have all power and authority to administer the Plan. In such event, the word "Committee" wherever used shall be deemed to mean the Board. The Committee shall, subject to the provisions of the Plan, have the power to construe the Plan, to determine all questions hereunder, and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. The Committee shall consist of not fewer than two members. Each of the members of the Committee must be a "disinterested person" as that term is defined in Rule 16b-3 adopted pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). A majority of the members of the Committee shall constitute a quorum, and all determinations of the Committee shall be made by the majority of its members present at a meeting. Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by all of the Committee members. 5. ELIGIBILITY. The Participants in the Plan shall be all employees, consultants, advisors to the Board of Directors and qualified directors of the Company or any of its present or future subsidiaries whether or not they are also officers of the Company. Members of the Committee are eligible only if they do not exercise any discretion in selecting Participants who receive grants of options, in determining the number of shares to be granted to any Participant or in determining the exercise price of any options, or if counsel to the Company may otherwise advise the Committee that the taking of any such action does not impair the status of such eligible Committee members as "disinterested persons" within the meaning of Exchange Act Rule 16b-3. 6. GRANTING OF OPTIONS. (a) Subject to the provisions of the Plan, the Committee, with the approval of the Chief Executive Officer of the Company, shall determine and designate from time to time those persons to whom options are to be granted. Options shall be granted on such terms as the Committee, with the approval of the Chief Executive Officer of the Company, shall determine except that Incentive Options shall be granted on terms that comply with the Code and Regulations thereunder. (b) No options shall be granted after February 8, 2005 but options previously granted may extend beyond that date. 7. EXERCISE PRICE. The purchase price of the Common Stock covered by an option granted pursuant to the Plan shall be 100% of the fair market value per share of a share of Common Stock on the day the option is granted (the "Exercise Price"). Notwithstanding the foregoing, if any person to whom an option is to be granted owns in excess of ten percent of the outstanding capital stock of the Company, then no option may be granted to such person for less than 110% of the fair market value on the date of grant as determined by the Board. The Exercise Price will be subject to adjustment in accordance with the provisions of Paragraph 10 of the Plan. For purposes of the Plan, "fair market value" shall be (i) the closing price of the Company's Common Stock appearing on a national securities exchange if the Company's Common Stock is listed on such an exchange, or if not listed, the closing bid price appearing on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"); or (ii) if the Shares are not listed on NASDAQ, then the closing bid price for the Company's Common Stock as listed in the National Quotation Bureau's pink sheets; or (iii) if there are no listed bid prices published in the pink sheets, then the market value shall be based upon the closing bid price as determined following a polling of all dealers making a market in the Company's Common Stock. 8. PERIOD OF OPTION. Unless sooner terminated in accordance with the provisions of Paragraph 10 of the Plan, an option granted hereunder shall be for a term of five (5) years. 9. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. (a) Vesting. Options granted under the Plan shall not be exercisable until they become vested. Options granted shall vest in the optionee and become immediately exercisable by the optionee in four annual installments of 25% each on the first, second, third and fourth anniversaries of the date of grant. (b) Legend on Certificates. The certificates representing such shares of Common Stock shall carry such appropriate legends, and such written instructions shall be given to the Company's transfer agent, as may be deemed necessary or advisable by counsel to the Company in order to comply with the requirements of the Securities Act of 1933 or any state securities laws. 2 (c) Non-transferability. Any option granted pursuant to the Plan shall not be assignable or transferable other than by will or the laws of descent and distribution or pursuant to a qualified domestic relations order as defined by the Code, or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder, and shall be exercisable during the optionee's lifetime only by him or her. 10. TERMINATION OF OPTION RIGHTS. All previously unexercised options including options which have not vested shall terminate and be forfeited automatically upon the termination for any reason whatsoever of a Participant's status as an employee, consultant or advisor to the Board other than termination by reason of the Participant's death or permanent disability. If a Participant dies or becomes permanently disabled at a time when he is entitled to exercise an option, then at any time or times within one year after his death or permanent disability such options may be exercised, as to all or any of the Shares which the Participant was entitled to purchase immediately prior to his death or Permanent Disability, by the Participant or, in the case of death, by his personal representative or the person or persons to whom the options are transferred by will or the applicable laws of descent and distribution, and except as so exercised such options will expire at the end of such period. 11. EXERCISE OF OPTION. Subject to the terms and conditions of the Plan and the option agreements, an option granted hereunder shall, to the extent then exercisable, be exercisable in whole or in part by giving written notice to the Company by mail or in person addressed to Periphonics Corporation, 4000 Veterans Memorial Highway, Bohemia, New York 11716, Attention: Chief Financial Officer, stating the number of shares of Common Stock with respect to which the option is being exercised, accompanied by payment in full for such shares of Common Stock. Payment may be made: (a) in United States dollars in cash or by certified check; or (b) by tendering shares of Common Stock of the Company already owned by the person or persons exercising the option (provided that such shares of Common Stock have been owned for at least six months prior to tender), valued at fair market value determined in accordance with the provisions of Paragraph 7; or (c) by a combination of cash or certified check and Common Stock as provided in (a) and (b) above; or (d) in the discretion of the Committee, by the issuance by an optionee of a promissory note, which shall be payable in more or more installments and over such period of time (not in excess of five years) as determined by the Committee and shall bear interest at such rate as shall be determined by the Committee, which in no event shall be less than the minimum rate required by the provisions of Section 483 of the Code to award the imputation of income to such optionee. The Company's transfer agent shall, on behalf of the Company, prepare a certificate or certificates representing such shares of Common Stock acquired pursuant to exercise of the option, shall register the optionee as the owner of such shares of Common Stock on the books of the Company and shall cause the fully executed certificate(s) representing such shares of Common Stock to be delivered to the optionee as soon as practicably after payment of the option price in full. The holder of an option shall not have any rights of a stockholder with respect to the shares of Common Stock covered by the option, except to the extent that one or more certificates for such 3 shares of Common Stock shall be delivered to him or her upon the due exercise of the option. 12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS. Upon the occurrence of any of the following events, an optionee's rights with respect to options granted to him or her hereunder shall be adjusted as hereinafter provided: (a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) Merger; Consolidation; Liquidation; Sale of Assets. In the event the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if the Company is liquidated or sells or otherwise disposes of all or substantially all of its assets to another corporation while unexercised options remain outstanding under the Plan: (i) subject to the provisions of clauses (iii), (iv) and (v) below, after the effective date of such merger, consolidation or sale, as the case may be, each holder of an outstanding option shall be entitled, upon exercise of such option, to receive in lieu of shares of Common Stock, shares of such stock or other securities as the holders of the shares of Common Stock received pursuant to the terms of the merger, consolidation or sale; or (ii) the Committee may waive any discretionary limitations imposed with respect to the exercise of the option so that all options from and after a date prior to the effective date of such merger, consolidation, liquidation or sale, as the case may be, specified by the Committee, shall be exercisable in full; or (iii) all outstanding options may be cancelled by the Committee as of the effective date of any such merger, consolidation, liquidation or sale, provided that notice of such cancellation shall be given to each holder of an option, and each holder thereof shall have the right to exercise such option in full (without regard to any discretionary limitations imposed with respect to the option) during a 30-day period preceding the effective date of such merger, consolidation, liquidation or sale; or (iv) all outstanding options may be cancelled by the Committee as of the date of any such merger, consolidation, liquidation or sale, provided that notice of such cancellation shall be given to each holder of an option and each such holder thereof shall have the right to exercise such option but only to the extent exercisable in accordance with any discretionary limitations imposed with respect to the option prior to the effective date of such merger, consolidation, liquidation or sale; or (v) the Committee may provide for the cancellation of all outstanding options and for the payment to the holders of some part or all of the amount by which the value thereof exceeds the payment, if any, which the holder would have been required to make to exercise such option. (c) Issuance of Securities. Except as expressly provided herein, no issuance by the 4 Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to options, provided, however, in the event the Company issues or sells any Common Stock or Common Stock Equivalents without consideration or for consideration per share less than the current fair market value per share (as defined in Paragraph 7 above) on the date of such issuance or sale, or fixes a record date for the issuance of subscription rights, options or warrants to all holders of Common Stock entitling them to purchase Common Stock (or Common Stock Equivalents) at a price per share (or having an exercise or conversion price per share) less than the then current fair market value per share, the Exercise Price shall be adjusted so that it will equal the price determined by multiplying the Exercise Price in effect immediately prior to the adjustment by a fraction, of which the numerator shall be (i) the number of shares outstanding on the record date for such sale or issuance, plus (ii) the number of additional shares which the aggregate consideration received by the Company upon such issuance or sale (plus the aggregate of any additional amount to be received by the Company upon the exercise of such subscription rights, options or warrants) would purchase at the fair market value, and of which the denominator shall be (x) the number of shares outstanding on the record date for such issuance or sale, plus (y) the number of additional shares offered for subscription or purchase (or into which the Common Stock Equivalents so offered are exercisable or convertible). Each adjustment shall become effective retroactively immediately after the record date for the issuance. To the extent that Common Stock (or Common Stock Equivalents) are not delivered after the expiration of such subscription rights, options or warrants, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights, options or warrants been made upon the basis of delivery of only the number of shares (or Common Stock Equivalents) actually delivered. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. (d) Adjustments. Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in Paragraph 3 of the Plan that are subject to options which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect such events. The Committee shall determine the specific adjustments to be made under this Paragraph 12 and its determination shall be conclusive. 13. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of Paragraphs 9 and 11 of the Plan, the Company shall not be obligated to deliver any Common Stock unless and until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, nor, if the outstanding Common Stock is at the time listed on any securities exchange, unless and until the Common Stock to be delivered has been listed (or authorized to be added to the list upon official notice of issuance) upon such exchange, nor unless or until all other legal matters in connection with the issuance and delivery of the Common Stock have been approved by the Company's counsel. 14. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee shall deliver to the Company written representations and warranties upon exercise of the option that are necessary to show compliance with Federal and state securities laws, including representations and warranties to the effect that a purchase of shares under the option is made for investment and not with a view to their distribution (as that term is used in Securities Act of 1933). 15. OPTION AGREEMENT. 5 Each option is granted under the provisions of the Plan shall be evidenced by an option agreement, which agreement shall be duly executed and delivered on behalf of the Company and by the optionee to whom such option is granted. The option agreement shall contain such terms, provisions and conditions not inconsistent with the Plan as may be determined by the Committee. 16. TERMINATION AND AMENDMENT OF PLAN. Options may no longer be granted under the Plan after February 8, 2005, and the Plan shall terminate when all options granted or to be granted hereunder are no longer outstanding. The Committee may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that the Committee may not, without approval by the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and entitled to vote at the meeting: (a) increase the maximum number of shares for which options may be granted under the Plan (except by adjustment pursuant to Section 12); (b) materially modify the requirements as to eligibility to participate in the Plan; (c) materially increase benefits accruing to option holders under the Plan; or (d) amend the Plan in any manner which would cause Rule 16b-3 to become inapplicable to the Plan; and provided further that the provisions of the Plan specified in Rule 16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof) under the Securities Exchange Act of 1934 (including, without limitation, provisions as to eligibility, amount, price, and timing of awards) may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, ERISA, or the rules thereunder. Termination or any modification or amendment of the Plan shall not, without consent of a participant, affect his or her rights under an option previously granted to him or her. 17. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the Company, in accordance with Section 3402(a) of the Internal Revenue Code, may require the optionee to pay withholding taxes in respect of amounts considered to be compensation includible in the optionee's gross income. 18. COMPLIANCE WITH REGULATIONS. It is the Company's intent that the Plan comply with all respects with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor or amended version thereof) and any applicable Securities and Exchange Commission interpretations thereof. If any provision of the Plan is deemed not be in compliance with Rule 16b-3, the provision shall be null and void. 19. GOVERNING LAW. The validity and construction of the Plan and the instruments evidencing options shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof. 6 EX-27 4 FINANCIAL DATA SCHEDULE
5 0000937598 Periphonics Corporation 6-MOS May-31-1997 Jun-1-1996 Nov-30-1996 16,479 5,313 33,626 (890) 12,150 68,767 26,950 (14,175) 81,825 17,365 0 0 0 136 64,184 81,825 51,942 51,942 25,880 25,880 18,314 0 0 8,777 3,423 5,354 0 0 0 5,354 0.38 0
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