-----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, WVNiBJTPz+/yNSsO+5YseimJCets8xnrcGyiZPX9PaNuu2VeWtqfmqC36lCBAMND ++2fiGRgb6fdT9HgCrk3gw== 0000950134-98-004456.txt : 19980518 0000950134-98-004456.hdr.sgml : 19980518 ACCESSION NUMBER: 0000950134-98-004456 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: SEC FILE NUMBER: 000-25936 FILM NUMBER: 98622890 BUSINESS ADDRESS: STREET 1: 2435 NORTH CENTRAL EXPRESSWAY CITY: RICHARDSON STATE: TX ZIP: 75080 BUSINESS PHONE: 2146809700 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 1998 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 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 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 12 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 April 30, 1998 Class Number of Shares Outstanding Common Stock, Par Value $.01 Per Share 11,210,166 shares 2 USDATA CORPORATION FORM 10-Q QUARTER ENDED MARCH 31, 1998 TABLE OF CONTENTS
Page Number PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 3 Consolidated Statements of Operations for the Three Months Ended March 31, 1998 and 1997 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1998 and 1997 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10 Computation of Per Share Earnings 11
2 3 USDATA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1998 1997 ================================================================================================ ASSETS Current assets: Cash and cash equivalents $ 4,616 $ 5,204 Accounts receivable, net of allowance for doubtful accounts of $1,315 and $1,158, respectively 5,271 4,573 Deferred income taxes 2,345 2,345 Other current assets 697 436 - ------------------------------------------------------------------------------------------------ Total current assets 12,929 12,558 - ------------------------------------------------------------------------------------------------ Property and equipment, net 3,359 2,416 Capitalized computer software development costs, net of accumulated amortization of $2,346 and $2,161, respectively 2,326 1,938 Other assets 92 90 Net assets of discontinued operations 207 2,252 - ------------------------------------------------------------------------------------------------ Total assets $ 18,913 $ 19,254 ================================================================================================ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,673 $ 952 Deferred revenue 1,369 1,257 Accrued compensation and benefits 766 955 Other accrued liabilities 2,189 1,488 - ------------------------------------------------------------------------------------------------ Total current liabilities 5,997 4,652 - ------------------------------------------------------------------------------------------------ Deferred income taxes 731 729 - ------------------------------------------------------------------------------------------------ Total liabilities 6,728 5,381 - ------------------------------------------------------------------------------------------------ Commitments and contingencies -- -- 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 issued in 1998 and 1997 143 143 Additional paid-in capital 16,430 16,365 Retained earnings 6,754 8,919 Treasury stock at cost, 3,179,684 shares in 1998 and 3,321,894 shares in 1997 (11,142) (11,554) - ------------------------------------------------------------------------------------------------ Total stockholders' equity 12,185 13,873 - ------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 18,913 $ 19,254 ================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 3 4 USDATA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1998 1997 ===================================================================================================== Net sales $ 5,640 $ 5,917 Cost of sales 368 533 - ----------------------------------------------------------------------------------------------------- Gross profit 5,272 5,384 - ----------------------------------------------------------------------------------------------------- Operating expenses: Selling 3,784 4,622 Product development 822 884 General and administrative 1,168 1,246 - ----------------------------------------------------------------------------------------------------- Total operating expenses 5,774 6,752 - ----------------------------------------------------------------------------------------------------- Loss from operations (502) (1,368) Interest income 58 50 - ----------------------------------------------------------------------------------------------------- Loss from continuing operations before income taxes (444) (1,318) Income tax (provision) benefit (2) 440 - ----------------------------------------------------------------------------------------------------- Loss from continuing operations (446) (878) - ----------------------------------------------------------------------------------------------------- Discontinued operations: Income (loss) from discontinued Systems Operations (net of income taxes of $21 in 1997) (219) 41 Estimated loss on disposal of discontinued System Operations, including provision for operating losses of $250 (1,500) -- - ----------------------------------------------------------------------------------------------------- Income (loss) from discontinued Systems Operations (1,719) 41 - ----------------------------------------------------------------------------------------------------- Net Loss $ (2,165) $ (837) ===================================================================================================== Earnings per share (basic & dilutive): Loss from continuing operations $ (0.04) $ (0.08) Loss from discontinued operations (0.16) -- - ----------------------------------------------------------------------------------------------------- Net Loss $ (0.20) $ (0.08) ===================================================================================================== Weighted average shares outstanding: 11,100 11,085 =====================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 4 5 USDATA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS) 1998 1997 ================================================================================================================ Cash flows from operating activities: Net loss from continuing operations $ (446) $ (878) - ---------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) continuing operations: Depreciation and amortization 507 312 Changes in assets and liabilities: Accounts receivable (698) 696 Income tax receivable -- 1,050 Deferred income taxes 2 (826) Accounts payable and accrued liabilities 640 1,006 Deferred revenue 112 (189) Accrued compensation and benefits (189) 66 Accrued income taxes -- -- Other - net (292) 39 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) continuing operations (364) 1,276 - ---------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (53) (521) Purchase of MES software (400) -- Capitalized software development costs (573) (524) - ---------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (1,026) (1,045) - ---------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of common shares 477 171 - ---------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 477 171 - ---------------------------------------------------------------------------------------------------------------- Cash flows from discontinued operations 326 (51) - ---------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (587) 351 Cash and cash equivalents, beginning of period 5,203 6,398 - ---------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $ 4,616 $ 6,749 ================================================================================================================
The accompanying notes are an integral part of the consolidated financial statements. 5 6 USDATA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) 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, 1997. In the opinion of management, all 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. (2) DISCONTINUED OPERATIONS During the first quarter of 1998, the Systems Operations incurred an operating loss of $219,000. In addition, the Company revised its previous estimate related to the disposal of this business and recorded an additional $1,500,000 loss, which included estimated operating losses from March 31, 1998 through disposal date of $250,000. (3) RECENT ACCOUNTING PRONOUNCEMENTS Effective January 1, 1998, the Company adopted pronouncements issued by the Financial Accounting Standards Board ("FASB") relating to the presentation and disclosure of information related to comprehensive income (SFAS 130), segment data (SFAS 131) and pensions and other postretirement benefits (SFAS 132). The adoption of these provisions did not have a material effect on the Company's financial position or results of operations for the first quarter of 1998 and the Company does not anticipate it will have a material impact in the future, but may change the presentation of certain of the Company's financial statements and related notes and data thereto. Also, effective 1-1-98, the Company adopted a Statement of Position (SOP) on software revenue recognition (SOP 97-2) issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants that supersedes SOP 91-1. The adoption of SOP 97-2 did not have a material effect on the Company's financial position or results of operations for the first quarter of 1998 and the Company does not anticipate it will have a material impact in the future. 6 7 USDATA CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW USDATA Corporation (the "Company") is a global supplier of real-time manufacturing application software and development tools, and related consulting services. The Company's products and services help automate manufacturing and process control applications. Its real-time data management capabilities enable customers to reduce operating costs, shorten cycle times, improve product quality and increase productivity. 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"). In early 1998, the Company disclosed its intention to dispose of its system integration and hardware servicing business (the "Systems Operations"). This business has historically been engaged in the sale of automatic identification (Auto ID) equipment, distributed management software and related integration services that allow remote, real-time data collection using a variety of automatic identification techniques. The System Operations' net sales are generated from sales of third-party automated data collection equipment, distributed management software and related repair, installation and integration services. As a result of this decision, the Company's revenues and operating expenses for the periods presented herein reflect only the Software Operations with the net results of the Systems Operations reported on its statements of operations under the caption Discontinued Operations. The Company currently derives all of its net sales from the Software Operations. The Software Operations' net sales are generated substantially from licenses of the FactoryLink family of products and also from related integration services, training classes, 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 11%, and 10% of Software Operations' net sales during the three months ended March 31, 1998 and 1997, respectively. In February 1998, the Company began shipping FactoryLink ECS 6.5, which provides a number of enhancements and is year 2000 compliant. FactoryLink ECS 6.5 is the server platform for FactoryLink ECS WebClient, which allows users to view and control their production processes using a simple Web browser. FactoryLink ECS 6.5 supports OPC (Object Linking and Embedding for Process Control) to provide connectivity to data collection devices such as PLC's (Programmable Logic Controllers) and RTU's (Remote Terminal Units). FactoryLink ECS 6.5 also supports MicroSoft Windows Terminal Server. Effective January 12, 1998, the Company entered into an agreement to purchase a Manufacturing Execution Systems ("MES") software product, for $400,000 cash and 165,000 shares of the Company's common stock for $.01 per share. The common stock is expected to be issued in the second quarter of 1998 and will be restricted from sale. Restrictions on the sale of the stock will lapse upon the achievement of certain performance factors and time. The Company recorded $782,000 in accrued liabilities at March 31, 1998, which reflects the value of the stock to be issued based upon the closing price of the Company's common stock on January 12, 1998. The total purchase price of $1,182,000 is included in property and equipment at March 31, 1998. 7 8 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, selected statements of income data as a percentage of net sales:
THREE MONTHS ENDED MARCH 31, 1998 1997 ========================================================================================================= Net sales 100.0% 100.0% Cost of sales 6.5% 9.0% - --------------------------------------------------------------------------------------------------------- Gross profit 93.5% 91.0% - --------------------------------------------------------------------------------------------------------- Operating expenses: Selling 67.1% 78.1% Product development 14.6% 14.9% General and administrative 20.7% 21.1% - --------------------------------------------------------------------------------------------------------- Total operating expenses 102.4% 114.1% - --------------------------------------------------------------------------------------------------------- Loss from operations (8.9)% (23.1)% Interest income 1.0% 0.8% - --------------------------------------------------------------------------------------------------------- Loss from continuing operations before income taxes (7.9)% (22.3)% Income tax (provision) benefit (0.0)% 7.4% - --------------------------------------------------------------------------------------------------------- Loss from continuing operations (7.9)% (22.3)% - --------------------------------------------------------------------------------------------------------- Discontinued operations: Income (loss) from discontinued Systems Operations (3.9)% 0.7% Estimated loss on disposal of discontinued System Operations, (26.6)% 0.0% - --------------------------------------------------------------------------------------------------------- Income (loss) from discontinued Systems Operations (30.5)% 0.7% - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Net Loss (38.4)% (14.1)% =========================================================================================================
Net sales for the quarter ended March 31, 1998 decreased 5% compared to the same period in 1997 primarily as a result of lower consulting revenues partially offset by higher software product sales. Gross profit as a percentage of net sales increased primarily due to the replacement of printed product documentation with CD based product documentation. Selling expenses decreased in 1998 compared to 1997 primarily related to cost reduction efforts and organizational changes, as the Company focuses its sales efforts on selected distributors and VARs. Gross product development expenditures, including capitalized software development costs of $573,000 and $524,000, in the quarter ended March 31, 1998 and 1997, respectively, were approximately the same in both periods. During 1998, the Company will continue to capitalize development costs related to its next major version of FactoryLink ECS software. General and administrative expenses decreased slightly in 1998 compared to 1997. The decrease is primarily due to lower consulting fees, salaries and bonuses partially offset by an increase in the provision for doubtful accounts. 8 9 The Company did not record an income tax benefit for the first quarter of 1998, as it would be based upon the future operating results of the Company. During the first quarter of 1997, the company recorded a deferred income tax benefit based on its ability to carryback losses to profitable periods LIQUIDITY AND CAPITAL RESOURCES The Company's operating activities used $364,00 of cash during the quarter ended March 31, 1998. Also, during the first quarter of 1998, the Company invested $53,000 in capital equipment, primarily computers, $400,000 for the purchase of an MES software product and $573,000 in capitalized software development costs as described above. The Company also received $477,000 related to proceeds from exercise of stock options during the first quarter of 1998. Total cash usage for the first quarter of 1998 was $587,000. The Company believes cash on hand and cash generated from operations will be sufficient to satisfy its operating cash needs into the future. The Company is in the process of establishing a new credit facility which could be used to fund operating and capital requirements should the business expand more rapidly than expected. The Company is also in the process of selling the Systems Operations and believes such sale could generate additional cash available for use in the business. In addition, the Company could consider seeking additional public or private debt or equity financing to fund future growth opportunities or acquisitions FORWARD LOOKING STATEMENTS This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this report, including without limitation, certain statements in this Item 2 under the captions "Results of Operations" and "Liquidity and Capital Resources" may constitute forward looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company's expectations ("cautionary statements") are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. 9 10 USDATA CORPORATION AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (filed as part of this report). Number Description 11.1 Computation of Per Share Earnings 27 Financial Data Schedule (EDGAR Version only) (b) Reports on Form 8-K No reports on Form 8-K have been filed by the Registrant during the quarter ended March 31, 1998. 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: May 15, 1998 /s/ Robert A. Merry --------------------------------------- Robert A. Merry President and Chief Executive Officer Date: May 15, 1998 /s/ Robert L. Drury --------------------------------------- Robert L. Drury Vice President Finance, Chief Financial Officer Treasurer and Secretary (Principal Financial and Accounting Officer) 10 11 INDEX TO EXHIBITS
Number Description - ------ ----------- 11.1 Computation of Per Share Earnings 27 Financial Data Schedule (EDGAR Version only)
EX-11.1 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 USDATA CORPORATION AND SUBSIDIARIES EXHIBIT 11.1 - COMPUTATION OF PER SHARE EARNINGS (in thousands, expect per share data)
THREE MONTHS ENDED, MARCH 31, ---------------------------- 1998 1997 ---------------------------- Net earnings (loss): Continuing operations $ (446) $ (878) Discontinued operations (1,719) 41 ---------------------------- Net loss $ (2,165) $ (837) ============================ Weighted average common shares outstanding 11,100 11,085 Common share equivalents -- -- ---------------------------- Weighted average common shares and common share equivalents (if dilutive) outstanding 11,100 11,085 ============================ Net loss per common share (Basic & Dilutive) Continuing operations $ (0.04) $ (0.08) Discontinued operations (0.16) -- ---------------------------- Net loss $ (0.20) $ (0.08) ============================
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 4,616 0 6,586 1,315 275 12,929 9,051 5,692 18,913 5,997 0 0 0 143 23,184 12,185 5,640 5,640 368 5,774 0 0 0 (444) (2) (446) (1,719) 0 0 (2,165) (0.20) (0.20)
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