-----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, VBQu9jfOr4bZkp6SLST14ddsoNbTT+fx4K/qzKd7R9/cv9MWEtAUkafbIgK1TAoQ Horj+rCo24lVXQj0LdUQDw== 0001009448-98-000040.txt : 19980415 0001009448-98-000040.hdr.sgml : 19980415 ACCESSION NUMBER: 0001009448-98-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980414 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: SEC FILE NUMBER: 000-25592 FILM NUMBER: 98592927 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 STREET 2: PERIPHONICS CORP CITY: BOHEMIA STATE: NY ZIP: 11716 10-Q 1 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 February 28, 1998 [ ] 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: April 2, 1998 Class of Number Common Equity of Shares Common Stock, 13,804,184 par value $.01 PERIPHONICS CORPORATION AND SUBSIDIARIES INDEX
Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - February 28, 1998 and May 31, 1997 3 Consolidated Statements of Earnings - Nine Months Ended February 28, 1998 and February 28, 1997 4 Consolidated Statements of Earnings - Three Months Ended February 28, 1998 and February 28, 1997 5 Consolidated Statements of Cash Flows - Nine Months Ended February 28, 1998 and February 28, 1997 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-13 Part II. Other Information 14 Signatures 15
PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data)
February 28, 1998 May 31, 1997 (Unaudited) (Audited) ASSETS Current Assets: Cash and cash equivalents................................................. $10,989 $25,092 Short-term investments.................................................... 11,033 --- Accounts receivable, less allowance for doubtful accounts of $1,000 and $1,000, respectively.................................... 37,289 35,735 Inventories............................................................... 13,631 12,858 Deferred income taxes..................................................... 1,412 1,357 Prepaid expenses and other current assets................................. 1,256 1,211 ------ ------- Total Current Assets 75,610 76,253 Property, plant and equipment, net........................................ 19,133 16,952 Other assets.............................................................. 412 378 ------ ------- TOTAL ASSETS.............................................................. $95,155 $93,583 ====== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable.......................................................... $ 5,258 $ 5,928 Accrued expenses and other current liabilities............................ 12,804 15,125 ------- ------- Total Current Liabilities............................................ 18,062 21,053 Deferred Income Taxes..................................................... 691 322 ------- ------- TOTAL LIABILITIES......................................................... 18,753 21,375 ------- ------- Shareholders' Equity: Preferred stock, par value $.01 per share, --- --- 1,000,000 shares authorized, none issued Common stock, par value $.01 per share, 137 137 30,000,000 shares authorized; 13,801,684 shares outstanding as of February 28, 1998; 13,693,758 shares outstanding as of May 31, 1997 Additional Paid-in Capital................................................ 43,394 42,559 Retained Earnings......................................................... 32,871 29,512 ------- ------- Total Shareholders' Equity.............................................. 76,402 72,208 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................ $95,155 $93,583 ======= =======
PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)
Nine Months Ended February 28 1998 1997 System sales.............................................................. $63,021 $63,910 Service revenues.......................................................... 21,777 17,678 ------ ------ Total revenues........................................................ 84,798 81,588 ------ ------ Cost of system sales...................................................... 30,768 29,412 Cost of service revenues.................................................. 12,723 10,912 ------ ------ Cost of revenues...................................................... 43,491 40,324 ------ ------ Gross profit.............................................................. 41,307 41,264 ------ ------ Operating expenses: Selling, general and administrative................................... 26,012 20,552 Research and development.............................................. 10,729 7,832 ------ ------ 36,741 28,384 ------ ------ Earnings from operations.................................................. 4,566 12,880 ------ ------ Other income (expense): Interest and other income............................................. 1,032 953 Foreign exchange (loss) gain ......................................... (224) 32 ------ ------ 808 985 ------ ------ Earnings before provision for income taxes................................ 5,374 13,865 Provision for income taxes................................................ 2,015 5,407 ------ ------ Net earnings ............................................................. $ 3,359 $ 8,458 ======= ====== Per Share Data: Basic earnings............................................................ $ 0.24 $ 0.62 ======= ======= Diluted earnings.......................................................... $ 0.24 $ 0.60 ======= ======= Weighted Average Shares: Basic..................................................................... 13,744 13,627 ======= ====== Diluted................................................................... 13,931 14,031 ======= ======
PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands, except per share data) (Unaudited)
Three Months Ended February 28, 1998 1997 System sales.............................................................. $25,852 $23,461 Service revenues.......................................................... 7,795 6,185 ------ ------ Total revenues........................................................ 33,647 29,646 ------ ------ Cost of system sales...................................................... 12,159 10,483 Cost of service revenues.................................................. 4,371 3,961 ------ ------ Cost of revenues...................................................... 16,530 14,444 ------ ------ Gross profit.............................................................. 17,117 15,202 ------ ------ Operating expenses: Selling, general and administrative................................... 9,546 7,273 Research and development.............................................. 3,968 2,797 ------ ------ 13,514 10,070 ------ ------ Earnings from operations.................................................. 3,603 5,132 ------ ------ Other income (expense): Interest and other income............................................. 322 252 Foreign exchange loss ................................................ (162) (296) ------ ------ 160 (44) ------ ------ Earnings before provision for income taxes................................ 3,763 5,088 Provision for income taxes................................................ 1,411 1,984 ------ ------ Net earnings.............................................................. $ 2,352 $ 3,104 ====== ====== Per Share Data: Basic earnings............................................................ $ 0.17 $ 0.23 ====== ====== Diluted earnings.......................................................... $ 0.17 $ 0.22 ====== ====== Weighted Average Shares: Basic..................................................................... 13,784 13,650 ====== ====== Diluted................................................................... 13,909 14,102 ====== ======
PERIPHONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended February 28, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings............................................................. $ 3,359 $ 8,458 Adjustments to reconcile net earnings to net cash and cash equivalents used in operating activities: Depreciation and amortization.......................................... 3,918 2,709 Deferred income taxes.................................................. 314 (382) Changes in operating assets and liabilities: Increase in accounts receivable ...................................... (1,554) (9,695) Increase in inventories............................................. (773) (284) Increase in prepaid expenses and other current assets............... (45) (239) Increase in other assets............................................ (34) (40) (Decrease) increase in accounts payable and accrued expenses and other current liabilities...................................... (2,991) 4,859 ------ ------ Net cash and cash equivalents provided by operating activities...... 2,194 5,386 ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment.......................... (6,099) (7,894) Proceeds from sales of short-term investments....................... 10,691 10,039 Purchases of short-term investments................................. (21,724) (6,283) ------ ------ Net cash and cash equivalents used in investing activities.......... (17,132) (4,138) ------ ------ CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from stock options exercised............................... 835 548 ------ ------ Net cash and cash equivalents provided by financing activities...... 835 548 ------ ------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................. (14,103) 1,796 CASH AND CASH EQUIVALENTS, beginning of period.............................. 25,092 18,664 ------ ------ CASH AND CASH EQUIVALENTS, end of period.................................... $10,989 $20,460 ====== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest ................................................................. --- --- Income Taxes.............................................................. $ 3,294 $ 3,723
PERIPHONICS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION In the opinion of management, 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 February 28, 1998 and for all periods presented. Certain information and footnote disclosures normally included in annual 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, 1997 Annual Report and Form 10-K as filed with the Securities and Exchange Commission. The results of operations for the three and nine months ended February 28, 1998 and February 28, 1997 are not necessarily indicative of the results to be expected for the full year. Amounts are presented in thousands except share and 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. EARNINGS PER SHARE In the third quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128 "Earnings Per Share". Basic income per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted income per share further assumes the issuance of common shares for all dilutive securities including stock options. 4. INVENTORIES Inventories consist of the following: February 28, 1998 May 31, 1997 ----------------- ------------ Raw materials $ 7,617 $ 7,624 Work-in-process 6,014 5,234 --------- --------- $ 13,631 $ 12,858 ======== ======== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Nine Months Ended February 28, 1998 compared to Nine Months Ended February 28, 1997 Total Revenues. Total revenues increased by 3.9% to $84.8 million in the first nine months of fiscal 1998 from $81.6 million in the comparable period of the prior fiscal year. System sales were $63.0 million in the first nine months of fiscal 1998 compared with $63.9 million in the same period in the prior fiscal year. Service revenues increased by 23.2% to $21.8 million in the first nine months of fiscal 1998 from $17.7 million in the comparable period of the prior fiscal year, primarily due to the addition of more units to the service base. Gross Profit. Gross profit of $41.3 million for the first nine months of fiscal 1998 was unchanged from the comparable period of the prior fiscal year. Gross profit as a percentage of total revenues was 48.7% in the first nine months of fiscal 1998 compared with 50.6% in the same period in the prior fiscal year. Gross profit on system sales decreased by $2.2 million to $32.3 million in the first nine months of fiscal 1998 from $34.5 million in the comparable period of the prior fiscal year. The gross margin on system sales was 51.2% in the first nine months of fiscal 1998 compared with 54.0% in the same period of the prior fiscal year. The Company attributes this decrease primarily to the normal variations in product mix and the continued investments in application development infrastructure to support growth in all markets. Gross profit on service revenues increased by $2.3 million, or 33.8%, to $9.1 million in the first nine months of fiscal 1998 from $6.8 million in the comparable period of the prior fiscal year. Gross margin on service revenues increased to 41.6% in the first nine months of fiscal 1998 from 38.3% in the comparable period of the prior fiscal year. This increase was primarily attributable to the addition of more units to the service base partially offset by higher cost to support organizational growth. Selling, General and Administrative Expenses. Selling, General and Administrative ("SG&A") expenses were $26.0 million and $20.6 million for the first nine months of fiscal 1998 and 1997, respectively, or 30.7% and 25.2% of total revenues, respectively. The increase in the dollar amount of SG&A expenses was primarily related to the continued expansion of the Company's sales and marketing efforts in domestic and international markets and to increases in SG&A expenses necessary to support anticipated future increases in the level of sales. Research and Development Expenses. Research and Development ("R&D") expenses were $10.7 million and $7.8 million for the first nine months of fiscal 1998 and 1997, respectively, or 12.7 % and 9.6% 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 170 from 119 between February 28, 1998 and 1997, respectively to support continuing new product development. 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 $0.8 million and $1.0 million for the nine months ended February 28, 1998 and 1997, respectively. Interest and other income of $1.0 million for the nine months ended February 28, 1998 was unchanged from the prior year period. The Company had a foreign exchange loss of $0.2 million in the nine months ended February 28, 1998 compared to a foreign exchange gain of $0.03 million for the nine months ended February 28, 1997. 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 the utilization of research and development tax credits, state and local income taxes, and exempt income of the Company's foreign sales corporation. The Company's effective income tax rates were 37.5% and 39.0% for the nine months ended February 28, 1998 and 1997, respectively. Foreign Operations. The Company's European subsidiary operated at a loss of approximately $1.2 million during the nine months ended February 28, 1998 as compared to a profit of $0.1 million during the nine months ended February 28, 1997. The increase in such losses was attributed to an increase in the dollar amount of SG&A expenses to support the expansion of the sales and marketing effort. 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 $0.4 million and $0.3 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 nine months ended February 28, 1998 and 1997, respectively. Three Months Ended February 28, 1998 compared to Three Months Ended February 28, 1997 Total Revenues. Total revenues increased by 13.5% to $33.6 million in the three months ended February 28, 1998 from $29.6 million in the comparable period of the prior fiscal year. System sales increased by 10.2% to $25.9 million in the three months ended February 28, 1998 from $23.5 million in the comparable period of the prior fiscal year. The increase in system sales was due to a 45.0% increase in domestic sales which was partially and offset by a 29.2% decrease in international sales compared with the prior year period. The increase in system sales was primarily due to an increase in unit sales volume. Service revenues increased by 26.0% to $7.8 million in the three months ended February 28, 1998 from $6.2 million in the comparable period of the prior fiscal year, primarily due to the addition of more units to the service base. Gross Profit. The Company's gross profit increased by $1.9 million to $17.1 million in the three months ended February 28, 1998 compared with $15.2 million in the same period in the prior fiscal year. Gross profit as a percentage of total revenues was 50.9% in the three months ended February 28, 1998 compared with 51.3% in the same period in the prior year. Gross profit on system sales increased by $0.7 million to $13.7 million in the three months ended February 28, 1998 from $13.0 million in the comparable period of the prior fiscal year. The gross margin on system sales was 53.0% in the three months ended February 28, 1998 compared with 55.3% in the same period in the prior fiscal year. The Company attributes this decrease primarily to the normal variations in product mix and the continued investments in application development infrastructure to support growth in all markets. Gross profit on service revenues increased by $1.2 million, or 54.0%, to $3.4 million in the three months ended February 28, 1998 from $2.2 million in the comparable period of the prior fiscal year. Gross margin on service revenues increased to 43.9% in the three months ended February 28, 1998 from 36.0% in the comparable period of the prior fiscal year. This increase was attributable to the addition of more units to the service base partially offset by higher cost to support organizational growth. Selling, General and Administrative Expenses. Selling, General and Administrative ("SG&A") expenses were $9.5 million and $7.3 million for the three months ended February 28, 1998 and 1997, respectively, or 28.4% and 24.5% of total revenues, respectively. The increase in the dollar amount of SG&A expenses was primarily related to the continued expansion of the Company's sales and marketing efforts in domestic and international markets and to increases in SG&A expenses necessary to support anticipated future increases in the level of sales. Research and Development Expenses. Research and Development ("R&D") expenses were $4.0 million and $2.8 million for the three months ended February 28, 1998 and 1997, respectively, or 11.8% and 9.4% 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 170 from 119 between February 28, 1998 and 1997, respectively to support continuing new product development. 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 $0.1 million and other expense was $0.04 million for the three months ended February 28, 1998 and 1997, respectively. Interest and other income of $0.3 million for the three months ended February 28, 1998 was unchanged from the prior fiscal year period. The Company had a foreign exchange loss of $0.2 million in the three months ended February 28, 1998 compared to a loss of $0.3 million in the comparable period of the prior fiscal year. 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 the utilization of research and development tax credits, state and local income taxes, and exempt income of the Company's foreign sales corporation. The Company's effective income tax rates were 37.5% and 39.0% for the three months ended February 28, 1998 and 1997, respectively. 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 $2.2 million and $5.4 million for the nine months ended February 28, 1998 and 1997, respectively. At February 28, 1998, the Company had working capital of $57.5 million, including $22.0 million of cash and cash equivalents and short-term investments. The Company expects its working capital needs to increase along with planned future revenue growth. At February 28, 1998, current assets and current liabilities decreased by $0.6 million and $3.0 million, respectively, compared with May 31, 1997. Current assets decreased primarily as a result of a decrease in cash and cash equivalents and short term investments. Current liabilities decreased primarily due to reduced levels of accrued expenses. 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) for this period were approximately 100 days. The average days sales outstanding were 111 days, 83 days and 98 days at May 31, 1997, 1996 and 1995, respectively. The Company's inventory increased to $13.6 million as of February 28, 1998 from $12.9 million as of May 31, 1997. The Company has a $15.0 million unsecured line of credit with a bank which expires on November 30, 1998. As of February 28, 1998, the Company had no borrowings under this line of credit. Any borrowing on this line of credit will bear interest at the prime rate. The Company made capital expenditures totaling $6.1 million and $7.9 million during the nine months ended February 28, 1998 and February 28, 1997, respectively. 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 Financial Accounting Standards Board Statements Recent pronouncements of the Financial Accounting Standards Board ("FASB") which are not required to be adopted at this date include, Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"), and Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 131 and SFAS 130 are effective for fiscal years beginning after December 15, 1997. The adoption of these pronouncements is not expected to have a material impact on the Company's consolidated financial statements. The Company adopted Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS 129") and Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") during the quarter ended February 28, 1998. In October of 1997, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 97-2 "Software Revenue Recognition" ("SOP 97-2"). This statement provides guidance on applying generally accepted accounting principles in recognizing revenues on software transactions. This Statement supercedes Statement of Position 91-1 "Software Revenue Recognition". This Statement is effective for transactions entered into in fiscal years beginning after December 15, 1997. Based upon Periphonics' reading and interpretation of SOP 97-2, the Company believes that the implementation of SOP 97-2 will not have a material adverse affect on expected revenues or earnings. However, detailed implementation guidelines for this standard have not yet been issued. Once issued, such detailed guidance could lead to unanticipated changes in the Company's current revenue accounting practices and material adverse changes in the Company's reported revenues and earnings. In the event implementation guidance is contrary to the Company's revenue accounting practices, the Company believes it may be possible to change its current business practices to comply with this guidance and avoid any material adverse effect on reported revenues and earnings. However, there can be no assurance this will be the case. 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 February 28, 1998 and its Form 10-K for the fiscal year ended May 31, 1997. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With particular regard to the possible variability of quarterly results, fluctuations may occur as a result of factors including the length of the sales cycle, the timing of orders from shipments to customers, delays in developments and customer acceptance of custom software applications, new product introductions or announcements by the Company and/or competitors, and the hiring and training of additional staff as well as general economic conditions. Historically, the size and timing of the Company's sales transactions have varied substantially from quarter, with a substantial percentage of orders and deliveries occurring in the final weeks of a quarter, and the Company expects such variations to continue in future periods. Because a significant portion of the Company's overhead is fixed in the short-term, the Company's results of operations may be materially adversely affected if revenues fall below the Company's expectations. Generally, the Company's inventory of computer and telephony hardware is determined by the Company's forecast of sales during the future periods. If management's forecasts of product sales and product mix prove to be inaccurate, the Company may not have the necessary inventory available to deliver systems in a timely manner which may have a material adverse effect on the Company's results of operations during such period. PART II - OTHER INFORMATION Item 1. Legal Proceedings In April, 1997, Lucent Technologies, Inc. ("Lucent") notified the Company that certain of the Company's products were, in Lucent's opinion, infringing certain Lucent patents. In September, 1997, Lucent advised the Company that in Lucent's opinion additional Lucent patents were being infringed by the Company's products and offered a license on the identified patents. The Company has reviewed the information which Lucent furnished concerning these patents, and the Company currently believes that its products do not violate any valid claims of the identified patents. If the Company does determine that, for business or legal reasons, it needs to obtain licenses from Lucent for the use of one or more patents, there can be no assurance that the terms of such licenses, including payments to Lucent for products previously sold and for future sales, would not have a material adverse affect on the Company's financial condition or results of operations. In the event the Company decides not to seek such licenses, or if the Company cannot reach a satisfactory agreement with Lucent as to the terms of one or more licenses, the Company could become involved in litigation which could be costly and distracting to its management. There can be no assurance as to the ultimate outcome of any litigation, or that the costs and effects of such litigation would not have a material adverse affect on the Company's business, financial condition or results of operations. 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 None 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: April 13, 1998 EX-27 2 FDS --
5 0000937598 PERIPHONICS CORPORATION 3-MOS MAY-31-1998 DEC-01-1997 FEB-28-1998 10,989 11,033 38,289 (1,000) 13,631 75,610 39,512 (20,379) 95,155 18,062 0 0 0 137 76,265 95,155 33,647 33,647 16,530 16,530 13,514 0 0 3,763 1,411 2,352 0 0 0 2,352 0.17 0.17
-----END PRIVACY-ENHANCED MESSAGE-----