-----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, Q8C0hTBO9It9fk6EEbZRJvS0xPmGUVDu1U5SVhgTeee5aLT6hn1b0HO38tdhs08Y M9IqG0PfJf/SGI44AEUP2Q== 0000930661-96-001618.txt : 19961118 0000930661-96-001618.hdr.sgml : 19961118 ACCESSION NUMBER: 0000930661-96-001618 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: USDATA CORP CENTRAL INDEX KEY: 0000943895 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 752405152 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25936 FILM NUMBER: 96664308 BUSINESS ADDRESS: STREET 1: 2435 NORTH CENTRAL EXPRESSWAY CITY: RICHARDSON STATE: TX ZIP: 75080 BUSINESS PHONE: 2146809700 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended September 30, 1996 Commission File Number 0-25936
USDATA Corporation (Exact name of registrant as specified in its charter) DELAWARE 75-2405152 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2435 N, Central Expressway, Richardson, TX 75080 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 680-9700 ----------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such 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 October 31, 1996: Class Number of Shares Outstanding Common Stock, Par Value $.01 Per Share 11,040,229 shares This is Page 1 of a document consisting of 12 pages. -- The exhibit index appears on page 10. -- USDATA CORPORATION FORM 10-Q QUARTER ENDED September 30, 1996 TABLE OF CONTENTS
Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at 3 September 30, 1996 and December 31, 1995 Consolidated Statements of Income 4 for the Three and Nine Months Ended September 30, 1996 and 1995 Consolidated Statements of Cash Flows 5 for the Nine Months Ended September 30, 1996 and 1995 Notes to Consolidated Financial 6 Statements Item 2. Management's Discussion and Analysis 7 of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
2 USDATA CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share data) - -------------------------------------------------------------------------------
September 30, 1996 December 31, 1995 ------------------ ----------------- ASSETS Current Assets Cash and cash equivalents $ 7,099 $ 1,504 Accounts receivable, net of allowance for doubtful accounts of $523 and $467, respectively 7,369 9,203 Note receivable from related party - 7,040 Inventories 1,474 2,122 Income tax receivable 1,190 - Deferred income taxes 773 267 Other current assets 862 706 ------------ ------------ Total current assets 18,767 20,842 ------------ ------------ Property and equipment, net 3,055 2,099 Other assets 1,156 555 ------------ ------------ Total assets $ 22,978 $ 23,496 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 2,574 $ 2,115 Deferred revenue 2,144 2,136 Accrued compensation and benefits 777 1,185 Other accrued liabilities 884 605 Current portion of capital lease obligations 79 124 ------------ ------------ Total current liabilities 6,458 6,165 ------------ ------------ Stockholders' equity Preferred stock, $.01 par value, 2,200,000 shares authorized; none issued or outstanding - - Common stock, $.01 par value, 22,000,000 shares authorized; 14,343,550 shares issued 143 143 Additional paid-in capital 16,274 16,306 Subscription receivable from officer (1,076) (1,021) Retained earnings 12,522 13,665 Treasury stock, 3,304,571 and 3,450,484 shares at cost, respectively (11,343) (11,762) ------------ ------------ Total stockholders' equity 16,520 17,331 ------------ ------------ Total liabilities and stockholders' equity $ 22,978 $ 23,496 ============ ============
See accompanying notes to consolidated financial statements. 3 USDATA CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUD ITED) (In thousands, except income per common share data) - -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 ----------------------------------- --------------------------------- Net sales Software $ 4,807 $ 5,609 $ 17,070 $ 17,731 Systems 4,875 5,013 13,317 14,306 --------- --------- ---------- --------- Total sales 9,682 10,622 30,387 32,037 Cost of sales 3,922 3,381 9,361 9,288 --------- --------- ---------- --------- Gross profit 5,760 7,241 21,026 22,749 Operating expenses Selling 5,857 5,023 16,739 14,546 Product development 1,133 1,186 3,437 3,656 General and administrative 1,158 972 2,817 2,929 --------- --------- ---------- --------- Total operating expenses 8,148 7,181 22,993 21,131 --------- --------- ---------- --------- Income (loss) from oper ations (2,388) 60 (1,967) 1,618 Interest income (expense) 105 116 342 (17) --------- --------- ---------- --------- Income (loss) before income taxes (2,283) 176 (1,625) 1,601 Income tax provision (benefit) (696) 63 (482) 546 --------- --------- ---------- --------- Net income (loss) $ (1,587) $ 113 $ (1,143) $ 1,055 ========= ========= ========== ========= Income (loss) per common share $ (0.14) $ 0.01 $ (0.10) $ 0.11 ========= ========= ========== ========= Weighted average number of shares outstanding 11,037 10,998 11,004 9,675 ========= ========= ========== =========
See accompanying notes to consolidated financial statements. 4
USDATA CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) - --------------------------------------------------------------------------------------- Nine months ended September 30, 1996 1995 --------------------------------- Cash flows from operating activities: Net Income (loss) $ (1,143) $ 1,055 Adjustments to reconcile net income to cash flow from operating activities: Depreciation and amortization 989 752 Changes in operating assets and liabilities: Accounts receivable 1,834 (1,259) Inventories 648 (1,313) Accounts payable 459 671 Deferred revenue 8 132 Accrued liabilities (129) 626 Income tax receivable (1,190) - Other - net (725) (431) ---------- --------- Net cash provided by operating activities 751 233 ---------- --------- Cash flows from investing activities: Capital expenditures (1,819) (908) Related party note receivable 7,040 (7,041) Capitalized software development costs (719) (260) ---------- --------- Net cash provided by (used in) investing activities 4,502 (8,209) ---------- --------- Cash flow from financing activities: Payments on long-term debt - (4,000) Proceeds from issuance of common shares 387 13,682 Payments on capital lease obligations (45) (58) ---------- --------- Net cash provided by financing activities 342 9,624 ---------- --------- Net increase in cash and cash equivalents 5,595 1,648 Cash and cash equivalents, beginning of period 1,504 939 ---------- --------- Cash and cash equivalents, end of period $ 7,099 $ 2,587 ========== =========
See accompanying notes to consolidated financial statements. 5 USDATA CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (A) Basis of Presentation --------------------- The accompanying unaudited interim consolidated financial statements were prepared in accordance with generally accepted accounting principles for interim financial statements. These financial statements do not include all disclosures associated with annual financial statements. Accordingly, these statements should be read in conjunction with the Company's financial statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1995. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. Interim results are not necessarily indicative of results expected for the full year. (B) Earnings Per Share ------------------- Earnings per common share were computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Weighted average common and common equivalent shares include common shares, stock options and warrants using the treasury method except when such inclusion is dilutive in effect. (C) Related Party Transactions -------------------------- Effective January 1, 1996, the Company and Safeguard Scientifics, Inc. ("Safeguard"), a stockholder of the Company, renewed an administrative services agreement whereby Safeguard provides the Company with day-to-day business and organizational strategy, legal, financial, investment management, merchant and investment banking services. The agreement provides for the payment of an administrative services fee of $30,000 per month and will expire on December 31, 1996. It is renewable for one year terms thereafter by mutual agreement between the parties. In August 1995, Safeguard and the Company entered into an agreement whereby the Company would lend to Safeguard a portion of its excess cash and receive a negotiated interest rate which was higher than the rate the Company might realize by independently investing the funds, but which was less than Safeguard's cost of funds. The loan was fully repaid to the Company on March 8, 1996. (D) Credit Arrangements ------------------- In June 1996, the Company negotiated a $5 million line of credit which is renewed on a yearly basis with interest payable on the unpaid balance at the LIBOR rate plus 2.0%. The credit facility contains restrictions on the Company's ability to pay dividends on its common stock and also contains a number of financial covenants, including certain working capital requirements. The Company does not have any borrowing under the facility. 6 USDATA CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview - -------- USDATA Corporation (the "Company") provides a wide range of software, hardware, consulting services, and technical support used by its customers to improve the overall productivity of their businesses and to monitor their automated processes. Specifically, the Company produces automation software tools, marketed under the name FactoryLink(R), that enable an organization's information systems to supervise, monitor and control manufacturing and other automated processes and to interface with corporate information systems (the "Software Operations"). The Company is also engaged in the sale of automatic identification (Auto ID) equipment, warehouse management software and related integration services (the "Systems Operations"). The Company currently derives all of its net sales from the Software Operations and the Systems Operations. The Software Operations' net sales are generated substantially from licenses of the FactoryLink family of products and also from related consulting services, training classes and technical support and service agreements. These support and services agreements are generally one-year, renewable contracts entitling a customer to certain software upgrades and technical support. Support and service revenue represented 12.0% and 7.8% of Software Operations' net sales during the quarters ended September 30, 1996 and September 30, 1995 respectively. The System Operations' net sales are generated from sales of third-party automated data collection equipment, warehouse management software and related repair, installation and integration services. In the latter part of the first quarter of 1996, the Company began marketing FactoryLink ECS for PC platforms. Although the Company had initially planned a second quarter release of the UNIX version of FactoryLink ECS, the Company decided to delay this release because of the time required to launch and support the PC platform version. The Company released the HP and Sun versions of UNIX in September 1996 and it believes that the remaining UNIX versions will be released in the fourth quarter of 1996. For the second consecutive quarter, revenues fell below expectation as the Company continues its transition from old to new product. The Company is finding that enterprise wide deployments of its product, which generally involve multiple sites, is producing a longer sales cycle than the traditional industry selling model of single site licenses. While both products (Windows NT and UNIX versions) have been well received by end users, system integrators and the worldwide distribution network, volume orders for FactoryLink ECS have taken longer than anticipated. The Company believes this is largely a function of a more complex decision making process by Fortune 1000 class customers. The Company's profitability declined during both the three and nine months ended September 30, 1996 compared to September 30, 1995 due primarily to lower Systems Operations' sales margin and increased selling and marketing expenses. The Company believes that FactoryLink ECS has been well received in the marketplace and continued to invest in selling and marketing expenses during the third quarter. The decline in profitability during the three months ended September 30, 1996 versus the comparable period in 1995 was also affected by a decrease in software sales, which carry a higher margin, as a percent of total sales. 7 USDATA CORPORATION ------------------ Results of Operations - --------------------- The following table sets forth, for the periods indicated, selected statement of income data as a percentage of net sales:
Three Months Ended Nine Months Ended September 30 September 30, 1996 1995 1996 1995 ------------------ ---------------- Net Sales Software 49.6% 52.8% 56.2% 55.3% Systems 50.4 47.2 43.8 44.7 -------- ------ ------ ------ Total sales 100.0 100.0 100.0 100.0 Cost of sales 40.5 31.8 30.8 29.0 -------- ------ ------ ------ Gross profit 59.5 68.2 69.2 71.0 Operating expenses Selling 60.5 47.3 55.1 45.4 Product development 11.7 11.2 11.3 11.4 General and administrative 12.0 9.1 9.3 9.1 -------- ------ ------ ------ Total operating expenses 84.2 67.6 75.7 65.9 -------- ------ ------ ------ Income (loss) from operations (24.7) 0.6 (6.5) 5.1 Interest income (expense) 1.1 1.1 1.1 (0.1) -------- ------ ------ ------ Income (loss) before income taxes (23.6)% 1.7% (5.4)% 5.0% ======== ======= ====== ======
Net sales for the quarter and nine months ended September 30, 1996 decreased 8.9% and 5.2% respectively compared to the same period in 1995. Software Operations' net sales for the quarter and nine months ended September 30, 1996 decreased 14.3% and 3.7% respectively compared to the same period in 1995. The Company believes the decrease in net sales, which has occurred primarily in North America, is a result of customers evaluating the new version of FactoryLink ECS and thus postponing purchases of the older version along with the delay in the UNIX release of FactoryLink ECS. International sales represented 50.6% of Software Operations' net sales for the quarter ended September 30, 1996, as compared to 45.6% the same quarter last year. The international growth has occurred in the Pacific Rim, while sales to Europe and Latin America remained flat. Systems Operations' net sales for the quarter ended September 30, 1996 decreased 2.8% compared to the same period in 1995. Gross profit as a percentage of net sales for the quarter ended September 30, 1996 decreased to 59.5% compared to 68.2% in the comparable quarter of 1995. Gross profit as a percent of sales decreased for the nine months ended September 30, 1996 to 69.2% from 71.0% in 1995. The decrease in gross profit margin for the quarter was primarily attributable to lower software sales, which carry a higher margin, as a percent of total sales and lower hardware margins. 8 USDATA CORPORATION Selling expenses increased to 60.5% of net sales for the quarter ended September 30, 1996 compared to 47.3% in the comparable period in 1995. This increase is a result of lower sales and the continued investment and spending in selling and marketing in order to promote FactoryLink ECS. These expenditures include advertising, international and domestic trade shows, sales collateral material, demonstration CD's, sales videos, travel and training expenses for new salespeople. Product development expenses as a percent of net sales for the quarter ended September 30, 1996 were slightly higher at 11.7% versus 11.2% in the comparable period in 1995. The increase in expenses as a percent of sales was due to lower sales as the absolute dollars spent on product development were less due to fewer developers on staff. General and administrative expenses increased to 12.0% of net sales for the quarter ended September 30, 1996 compared to 9.1% in the comparable period in 1995. This increase is due to lower sales, higher travel, compensation and professional fees. For the nine months ended September 30, 1996, general and administrative costs are lower in absolute dollars than the comparable period in 1995. The Company's interest income in 1996 is a result of the continued investment of the proceeds of its July 1995 public offering. Interest expense in 1995 was a result of a bank term loan which was repaid with the proceeds of the Company's public offering. Liquidity and Capital Resources - ------------------------------- The Company's operating activities provided $751,000 of cash during the nine months ended September 30, 1996, primarily a result of decreased inventories and accounts receivable and an increase in outstanding accounts payable partially offset by an income tax receivable. Management anticipates that capital expenditures for 1996 will be higher than 1995 due to computer system upgrades in the product development and customer service areas and the expansion of the corporate computer systems and databases. The Company believes cash on hand and cash generated from operations together with the existing unused bank line of credit will be sufficient to satisfy its operating cash needs in 1996. Should the business expand more rapidly than expected, the Company believes that additional bank credit facility would be available to fund operating and cash requirements. In addition, the Company could consider seeking additional public or private debt or equity financing to fund future growth opportunities or acquisitions. 9 USDATA CORPORATION PART II. OTHER INFORMATION ITEM 6. EXHIBITS (a) Exhibits (filed as part of this report). Number Description ------ ----------- 11 Computation of Income Per Common Share 27 Financial Data Schedule (EDGAR Version only) (b) Reports on 8-K No reports on 8-K have been filed by the Registrant during the quarter ended September 30, 1996. 10 USDATA CORPORATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on behalf by the undersigned thereunto duly authorized. USDATA CORPORATION, INC. Date: November 13, 1996 /s/ Jay B. Shipowitz --------------------- ------------------------------------------ Jay B. Shipowitz Vice President of Finance, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Principal Accounting Officer) 11 EX-11 2 COMPUTATION OF INCOME PER COMMON SHARE USDATA CORPORATION EXHIBIT 11 - COMPUTATION OF INCOME PER COMMON SHARE (in thousands, except income per common share data)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- --------------------- 1996 1995 1996 1995 Net income (loss) $ (1,587) $ 113 $ (1,143) $ 1,055 ======== ========= ======== ========== Average common shares outstanding 11,037 9,410 11,004 8,445 Average common share equivalents net of shares assumed to be repurchased - 1,588 - 1,230 -------- --------- -------- --------- Average number of common shares and common share equivalents outstanding 11,037 10,998 11,004 9,675 ======== ========= ======== ========== Income (loss) per common share $ (0.14) $ 0.01 $ (0.10) $ 0.11 ======== ========= ======== ==========
12 EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 7,099 0 7,369 523 1,474 18,767 7,709 4,654 22,978 6,458 0 0 0 143 16,377 22,978 30,387 30,387 9,361 22,993 0 0 0 (1625) (482) 0 0 0 0 (1143) (.10) (.10)
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