-----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, W1/sFx8gNrJEoWSwJoUEM5SfreoLP+QEcFxd5j6orQpSwDj+cuXGIRq1VjwKJ9M8 67LAtTCXsicNCg89khLn9w== 0000950124-97-002786.txt : 19970513 0000950124-97-002786.hdr.sgml : 19970513 ACCESSION NUMBER: 0000950124-97-002786 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIPRICO INC CENTRAL INDEX KEY: 0000720145 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 411749708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11336 FILM NUMBER: 97600289 BUSINESS ADDRESS: STREET 1: 2800 CAMPUS DRIVE CITY: PLYMOUTH STATE: MN ZIP: 55441 BUSINESS PHONE: 6125514000 MAIL ADDRESS: STREET 1: 2800 CAMPUS DRIVE CITY: PLYMOUTH STATE: MN ZIP: 55441 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended March 31, 1997 Commission File No. 0-11336 -------------------- CIPRICO INC (Exact name of Small Business Issuer as specified in its charter) DELAWARE 41-1749708 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2800 Campus Drive Plymouth, Minnesota 55441 (Address of principal executive offices) Issuer's telephone number, including area code: (612) 551-4000 Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No . --- --- Shares of Common Stock outstanding at May 7, 1997, 5,057,450 shares. Transitional Small Business Disclosure Format (check one): Yes No X . --- --- 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements CIPRICO INC AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited)
March 31 September 30 (In thousands) 1997 1996* Assets Current Assets: Cash and cash equivalents $ 3,361 $ 13,398 Marketable securities 20,854 13,871 Receivables - net 8,942 4,599 Inventories 5,574 3,018 Deferred income taxes 623 507 Other current assets 217 262 ----------- --------- Total current assets 39,571 35,655 Property and equipment - net 2,617 2,348 Marketable securities 7,474 9,988 Other assets 18 13 ----------- --------- Total assets $ 49,680 $ 48,004 =========== ========= Liabilities and Stockholders' Equity Current Liabilities: Current installments of obligations under capital leases $ 30 $ 25 Accounts payable 3,065 2,975 Accrued expenses 906 1,209 Income taxes payable 6 792 Deferred revenue 505 518 ----------- --------- Total current liabilities 4,512 5,519 Long-term installments of obligations under capital lease 30 14 Deferred income taxes - 15 Deferred rent 16 29 ----------- --------- Total liabilities 4,558 5,577 Stockholders' Equity: Common stock 51 50 Additional paid-in capital 38,431 37,952 Retained earnings 6,643 4,441 Accumulated translation adjustments (3) (16) ----------- --------- Total stockholders' equity 45,122 42,427 ----------- --------- Total liabilities & stockholders' equity $ 49,680 $ 48,004 =========== =========
*Amounts derived from September 30, 1996 audited consolidated financial statements. See Accompanying Notes to Condensed Consolidated Financial Statements. -2- 3 CIPRICO INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited)
Three Months Ended March 31 Six Months Ended March 31 (In thousands, except per share data) 1997 1996 1997 1996 Net sales $ 9,003 $ 6,696 $ 17,599 $ 12,783 Cost of sales 4,919 3,404 9,374 6,708 ----- ----- ------ ------ Gross profit 4,084 3,292 8,225 6,075 Sales & marketing expenses 1,470 1,174 3,063 2,329 General & administrative expenses 663 550 1,292 1,088 Research & development expenses 817 603 1,543 1,116 ----- ----- ------ ------ Earnings from operations 1,134 965 2,327 1,542 Other income, primarily interest 432 99 1,026 233 ----- ----- ------ ------ Earnings before taxes 1,566 1,064 3,353 1,775 Income tax expense 502 155 1,151 160 ----- ----- ------ ------ Net earnings $ 1,064 $ 909 $ 2,202 $ 1,615 ===== ===== ====== ====== Earnings per common share $ .20 $ .24 $ .41 $ .43 ===== ===== ====== ====== Weighted average common shares 5,353 3,831 5,385 3,776
See Accompanying Notes to Condensed Consolidated Financial Statements. -3- 4 CIPRICO INC AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended March 31 (In thousands) 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,202 $ 1,615 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization 825 439 Deferred income taxes - (308) Loss on retirement of fixed assets 29 2 Gain on sale of marketable securities - (60) Changes in operating assets & liabilities: Receivables - net (4,343) (200) Inventories (2,556) (874) Other current assets 45 (25) Accounts payable 90 470 Accrued expenses (303) 297 Income taxes payable (562) 454 Deferred revenue (13) 78 Other, net (5) (17) ------- ------- NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (4,591) 1,871 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Property and equipment purchases (1,171) (728) Proceeds from sale of furniture and 94 - equipment Purchases of marketable securities (21,969) - Proceeds from sale or maturities of marketable securities 17,500 1,268 Other assets - net (6) (2) ------- ------- NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES (5,552) 538 ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under capital lease obligations (19) (16) Proceeds from issuance of common stock 125 223 ------- ------- NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 106 207 ------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,037) 2,616 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,398 3,425 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,361 $ 6,041 ======= =======
See Accompanying Notes to Condensed Consolidated Financial Statements -4- 5 CIPRICO INC AND SUBSIDIARIES Notes to the Condensed Consolidated Financial Statements March 31, 1997 (Unaudited) Note 1 Unaudited Statements The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles, pursuant to the rules and regulations of the Securities and Exchange Commission. Pursuant to such rules and regulations, certain financial information and footnote disclosures normally included in the financial statements have been condensed or omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all necessary adjustments, consisting only of a recurring nature, and disclosures to present fairly the financial position as of March 31, 1997 and the results of operations for the three-month and six-month periods ended March 31, 1997 and 1996, and cash flows for the six-month periods ended March 31, 1997 and 1996. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report to Shareholders for fiscal 1996. In preparation of the Company's consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management. Note 2 Investments The Company has invested its excess cash from the public offering completed in the third quarter of fiscal 1996 in commercial paper and mortgage backed government federal agency securities. These investments are classified as held-to-maturity given the Company's intent and ability to hold the securities to maturity and are carried at amortized cost. Investments that have maturities of less than one year have been classified as short-term investments. Note 3 Inventories Inventories were comprised of the following:
March 31, September 30, (In thousands) 1997 1996 Finished Goods $ 2,579 $ 1,215 Work-in-Process 1,469 497 Raw Materials 1,526 1,306 ----- -------- $ 5,574 $ 3,018 ===== =====
-5- 6 Note 4 Offering of Common Stock In June 1996, the Company received net proceeds of approximately $30,776,000 from the sale of 1,500,000 shares of its common stock through a public offering. Note 5 - New Accounting Pronouncements The FASB has issued Statement No. 123 "Accounting for Stock-Based Compensation", which is effective for fiscal 1997. Under this Statement, the Company must either adopt the fair value-based method of accounting for employee stock options or continue to account for employee stock options using the intrinsic value-based method. Management intends to continue with the intrinsic value-based method which, under the new standard, will require additional disclosure. The FASB has also issued Statement No. 128, "Earnings Per Share", which is effective for financial statements issued after December 15, 1997. Early adoption of the new standard is not permitted. The new standard eliminates primary and fully diluted earnings per share and requires presentation of basic and diluted earnings per share together with disclosure of how the per share amounts are computed. The adoption of these standards is not expected to have a material effect on the consolidated financial statements of the Company. -6- 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS (Three months and six months ended March 31, 1997 compared to three months and six months ended March 31, 1996.) Net sales for the three-month period ended March 31, 1997 increased by 34% to $9 million when compared to sales of $6.7 million for the same period last year. Net sales for the six-month period ended March 31, 1997 increased 38% to $17.6 million when compared to $12.8 million for the same period last year. The increase in net sales is attributed to shipments of the Company's new 7000 Series Fibre Channel and 6500 Series entry-level disk arrays. Continued leadership in the film/video production and satellite telemetry markets which represented 43% and 24%, respectively, of the net sales for the six-month period, was also a contributing factor. The Company continues to add new customers resulting in no customer for the three-month and six-month periods ended March 31, 1997 representing 10% or more of total sales. The Company's export sales totaled $4.4 million or 25% of net sales during the six-month period ended March 31, 1997 compared to $4.8 million or 38% of net sales for the same period last year. Management anticipates improved sales over the previous fiscal year subject to continued product acceptance and growth in new market opportunities for its new disk array products. Gross profit, as a percent of net sales, for the three-month and six-month periods ended March 31, 1997 was 45.4% and 46.7% respectively, compared to 49.2% and 47.5%, for the same periods last year. The decrease in current period gross margin is related to a "one-time" competitive situation for a large quantity order of 6700 disk arrays and higher than anticipated prices on new generation disk drives. Management anticipates gross margins for the remainder of fiscal 1997 to be in the mid to upper forty percent range due to favorable drive prices. Gross profit margins are dependent on a number of factors including customer and product mix and disk drive costs. Disk drives are a significant cost component of total disk array costs. There is no assurance the Company can sustain the current gross margin levels given the price fluctuations of new generation disk drives. Sales and marketing expenses were 16.3% and 17.4% of net sales for the three-month and six-month periods ended March 31, 1997 compared to 17.5% and 18.2% for the same respective periods last year. The percentage decrease was primarily due to the increased sales volume when compared to the same periods last year. Actual dollars of spending for the current periods was higher than the same periods last year due to expenses associated with additional sales and marketing staff. Management anticipates sales and marketing expense dollars for the remainder of fiscal 1997 will be higher than last year, but lower as a percentage of net sales when compared to last year. General and administrative expenses were 7.4% and 7.3% of net sales for the three-month and six-month periods ended March 31, 1997 as compared to 8.2% and 8.5% for the same respective periods last year. Actual dollars of spending for the current periods was higher than the same periods last year due to a general increase in spending to support company growth. Management anticipates general and administrative expenses for the remainder of the fiscal year to be approximately 7% to 9% of net sales. -7- 8 Research and development expenses, as a percent of net sales, for the three-month and six-month periods ended March 31, 1997 remained constant with the same periods last year at 9.1% and 8.7%, respectively. Actual dollars of spending for the current periods were higher than the same periods last year due to an increase in engineering staff and product development expenses related to the Company's two new products introduced in fiscal 1997 and future products to be released. Management anticipates research and development expenses for the remainder of the fiscal year to be approximately 8% to 9% of net sales. Other income mainly consists of interest income from investment of excess cash balances. The increase for the current periods of fiscal 1997 compared to the same periods last year is due primarily to income generated from investment of secondary offering proceeds received in the third quarter of fiscal 1996. Income tax expense was $1.2 million for the first six months of fiscal 1997 compared to $160,000 for the same period last year. This increase reflects the change in operating results of $2.2 million of pre-tax earnings for the six months ended March 31, 1997 compared to $1.6 million for the same period last year. It also reflects an increase in the Company's effective tax rate to approximately 34% for the current period. Net earnings for the same period last year were not fully taxed due to utilization of a $1.7 million net operating loss carryforward. Management anticipates the current period tax rate to approximate 34% of pre-tax earnings. LIQUIDITY AND CAPITAL RESOURCES The Company's Annual Report on Form 10-KSB for the year ended September 30, 1996 contains a detailed discussion of Ciprico's liquidity and capital resources. In conjunction with this Quarterly Report on Form 10-QSB, investors should read the 1996 Form 10-KSB. During the first six months of fiscal year 1997, the level of cash and cash equivalents decreased by $10 million. Operating activities used $4.6 million primarily as a result of a $4.3 million increase in receivables and a $2.6 million increase in inventories, both attributable to the rising level of sales. These uses of cash were largely offset by net income for the period of $2.2 million and a $560,000 decrease in income taxes payable due to a refund of prior year taxes. Investing activities used $5.5 million as a result of net purchases of marketable securities for the period of $4.5 million and a $1.2 million investment in capital equipment. Management feels there is adequate liquidity to meet the immediate on-going operating needs of the company. -8- 9 FORWARD-LOOKING INFORMATION The statements in this report that are forward-looking involve risks and uncertainties. The Company's actual results could differ materially from those expressed in any forward-looking statements. Certain of these risks and uncertainties are discussed below. The Company sells its products into seven visual computing vertical markets which include: film/video production, oil/gas exploration, digital prepress, medical imaging, satellite telemetry, broadcast/video services and mechanical CAD/CAM/CAE. Continued growth in sales in these markets is essential to Company growth. Gross margins on product sales are highly dependent on the cost of disk drives. There is no assurance the Company can sustain the current gross margin levels given the price fluctuations of new generation disk drives. Component parts for the Company's products have been on allocation from time to time from its suppliers which means parts could become difficult to obtain, thus having an adverse effect on the Company's results of operations. The Company's products are characterized by rapidly changing technology, evolving industry standards and relatively short product life cycles. Delays in product enhancements and developments, failure to gain market acceptance of new or enhanced products, or emergence of new products or technologies by others, would have an adverse effect on the Company's business and results of operations. -9- 10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 - Financial Data Schedule (filed in electronic format only) (b) Reports on Form 8-K No report on Form 8-K was filed during the quarter ended March 31, 1997. -10- 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Issuer has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. CIPRICO INC (the "Issuer") Date: May 7, 1997 /s/ Robert H. Kill -------------------------------- Robert H. Kill, President (Principal Executive Officer) /s/ Cory J. Miller -------------------------------- Cory J. Miller, Vice President of Finance/Chief Financial Officer (Principal Financial and Accounting Officer) -11- EX-27.1 2 FDS
5 1,000 3-MOS SEP-30-1997 JAN-01-1997 MAR-01-1997 3,361 28,328 9,037 360 5,574 39,571 7,519 4,902 49,680 4,512 0 0 0 38,482 6,640 49,680 9,003 9,003 4,919 4,919 0 22 2 1,566 502 1,064 0 0 0 1,064 .20 .20
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