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UNITED STATES
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
<S> <C> <C>
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 COMMISSION FILE NUMBER 0-26778
APPLIED MICROSYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
---------------
WASHINGTON 91-1074996
(State of incorporation) (I.R.S. Employer Identification Number)
5020 148TH AVENUE N.E. 98052
REDMOND, WASHINGTON (Zip Code)
(Address of principal executive offices)
(425) 882-2000
(Registrant's telephone number, including area code)
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
(Title of Class)
</TABLE>
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 filing requirements for the past 90 days. Yes X No
------ ------
The number of shares of the registrant's Common Stock outstanding as of
August 1, 1997, was 6,797,934.
This report including exhibits consists of 16 pages. The exhibit index
appears on page 14.
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APPLIED MICROSYSTEMS CORPORATION
INDEX TO FORM 10-Q
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<S> <C> <C>
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Income for the quarter and six months
ended June 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . .3
Consolidated Balance Sheets as of June 30, 1997 and December 31,
1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1997 and 1996. . . . . . . . . . . . . . . . . . . . . . . . . . .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. . . . . . . . . . . . . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Exhibit 10.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit 11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
-2-
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
(IN THOUSANDS , EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . $10,009 $9,750 $18,911 $18,454
Cost of sales. . . . . . . . . . . . . . . . 2,698 2,806 5,154 5,363
------- ------ ------- -------
Gross profit . . . . . . . . . . . . . . . . 7,311 6,944 13,757 13,091
Operating expenses:
Sales, general and administrative.. . . . 4,609 3,716 8,968 7,163
Research and development . . . . . . . . 2,104 2,000 4,290 3,807
------- ------ ------ --------
Total operating expenses . . . . . . . . . . 6,713 5,716 13,258 10,970
------- ------ ------ --------
Income from operations . . . . . . . . . . . 598 1,228 499 2,121
Interest income and other. . . . . . . . . . 167 139 331 292
Interest expense . . . . . . . . . . . . . . (4) (12) (8) (26)
------- ------ ------ --------
Income before income taxes . . . . . . . . . 761 1,355 822 2,387
Income taxes . . . . . . . . . . . . . . . . 114 359 133 689
------- ------ ------ --------
Net income . . . . . . . . . . . . . . . . . $647 $996 $689 $1,698
------- ------ ------ --------
------- ------ ------ --------
Net income per share . . . . . . . . . . . . $0.09 $0.14 $0.10 $0.24
Shares used in per share calculation . . . . 7,259 7,106 7,217 7,093
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-3-
<PAGE>
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------------ --------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . $7,571 $7,208
Short term investments . . . . . . . . . . 5,966 5,931
Accounts receivable. . . . . . . . . . . . 9,799 10,261
Inventories. . . . . . . . . . . . . . . . 3,504 3,197
Prepaid and other current assets . . . . . 936 1,020
------------------- ----------------
Total current assets. . . . . . . . . . . 27,776 27,617
Property and equipment, net . . . . . . . . . 2,873 2,441
Other assets. . . . . . . . . . . . . . . . . 789 766
------------------- ----------------
Total assets . . . . . . . . . . . . . . $31,438 $30,824
------------------- ----------------
------------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable. . . . . . . . . . . . . . $3,108 $2,394
Accrued payroll . . . . . . . . . . . . . . 1,274 1,839
Other accrued expenses . . . . . . . . . . 712 1,220
Deferred revenue . . . . . . . . . . . . . 2,849 2,696
Current portion of long-term obligations . 43 53
------------------- ----------------
Total current liabilities . . . . . . . 7,986 8,202
Long-term obligations, less current portion. . - 15
Shareholders' equity:
Preferred stock, par value $.01
Authorized - 5,000,000 shares - -
Common stock, par value $.01
Authorized - 25,000,000 shares
Issued - 6,796,000 and 6,634,000 shares at
June 30, 1997 and December 31, 1996,
respectively . . . . . . . . . . . . . . 26,259 26,068
Cumulative translation adjustment. . . . . . . (367) (332)
Accumulated deficit . . . . . . . . . . . . . (2,440) (3,129)
-------------------- -----------------
Total shareholders'
equity. . . . . . . . . . . . . . . . . 23,452 22,607
-------------------- -----------------
Total liabilities and shareholders' equity $31,438 $30,824
-------------------- -----------------
-------------------- -----------------
The accompanying notes are an integral part of these consolidated financial statements.
-4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
APPLIED MICROSYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
1997 1996
------------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $689 $1,698
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 567 567
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . 462 (1,225)
Inventories . . . . . . . . . . . . . . . . . . (307) 30
Prepaid expenses . . . . . . . . . . . . . . . 84 (663)
Other assets . . . . . . . . . . . . . . . . . 30 62
Deferred revenue . . . . . . . . . . . . . . . 153 336
Accounts payable and accrued expenses . . . . . (313) (248)
------------- ------------
Net cash provided by operating activities. . 1,365 557
Cash flows from investing activities:
Purchase of short-term investments. . . . . . . (35) (5,918)
Property and equipment additions. . . . . . . . (1,052) (578)
------------- ------------
Net cash used in investing activities. . . . (1,087) (6,496)
Cash flows from financing activities:
Stock options exercised . . . . . . . . . . . . 136 19
Repayment of long-term obligations. . . . . . . (15) (40)
------------- ------------
Net cash provided by (used in)
financing activities . . . . . . . . . . . . 121 (21)
Effects of foreign exchange rate changes on cash . . . (36) (105)
------------- ------------
Increase (decrease) in cash and cash equivalents . . . 363 (6,065)
Cash and cash equivalents at beginning of period . . . 7,208 12,771
------------- ------------
Cash and cash equivalents at end of period . . . . . . $7,571 $6,706
------------- ------------
------------- ------------
Supplemental disclosures of cash paid:
Interest . . . . . . . . . . . . . . . . . . . $8 $26
Income Taxes . . . . . . . . . . . . . . . . . $582 $434
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
</TABLE>
<PAGE>
APPLIED MICROSYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements for the six month period ended June
30, 1997 and 1996 and the related footnote information are unaudited and have
been prepared on a basis substantially consistent with the 1996 audited
consolidated financial statements. In the opinion of management, the
financial statements include all adjustments (consisting of only normal
recurring adjustments) necessary for fair presentation of the results of this
interim period. These statements should be read in conjunction with the
consolidated financial statements and related notes included in the Company's
1996 Annual Report to Shareholders. The results of operations for the six
months ended June 30, 1997 and 1996 are not necessarily indicative of the
results to be expected for the entire year.
Certain prior year amounts have been reclassified to conform to the
current year presentation. Such reclassifications have no effect on
previously reported results of operations.
2. COMPUTATION OF EARNINGS PER SHARE
Net income per share is based on the weighted average number of common
and common equivalent shares outstanding during each period. Common
equivalent shares include the effect of all outstanding stock options and
warrants. Common equivalent shares are not included in the per share
calculations where the effect of their inclusion would be antidilutive using
the treasury stock method.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an increase in primary earnings per share for the
Second Quarter ended June 30, 1996 of $0.01, while the impact of Statement
128 on the calculation of primary earnings per share for the Second Quarter
ended June 30, 1997 and fully diluted earnings per share for these quarters
is not expected to be material.
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
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(IN THOUSANDS)
<S> <C> <C>
Finished goods $1,371 $1,282
Work in process 239 168
Purchased parts 1,894 1,747
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$3,504 $3,197
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-6-
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Conditions and Results of
Operations should be read in conjunction with the accompanying financial
statements for the periods specified and the associated notes. Further
reference should be made to the Company's 1996 Annual Report to Shareholders.
RESULTS OF OPERATIONS
The following table sets forth for the period indicated the percentage of
total revenue represented by each line item in the Company's condensed
consolidated statements of income and the percentage change from comparative
prior period in each line item.
<TABLE>
<CAPTION>
Percent of Period-to-Period
Net Sales Percentage Change
------------------ ------------------
Three months Ended Three months Ended
June 30, June 30, 1997
1997 1996 Compared to 1996
------ ------ ------------------
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . 100.0% 100.0% 2.7%
Cost of sales. . . . . . . . . . . . 27.0 28.8 (3.8)
------ ------
Gross profit . . . . . . . . . . . . 73.0 71.2 5.3
Operating expenses:
Sales, general
and administrative . . . . . . 46.0 38.1 24.0
Research and development . . . . 21.0 20.5 5.2
------ ------
Total operating expenses. . . . . . 67.0 58.6 17.4
------ ------
Income from operations. . . . . . . 6.0 12.6 (51.3)
Interest income and other . . . . . 1.7 1.4 20.1
Interest expense. . . . . . . . . . - (0.1) -
------ ------ -----
Income before income taxes. . . . . 7.7 13.9 (43.8)
Income taxes. . . . . . . . . . . . 1.2 3.7 (68.2)
------ ------
Net income. . . . . . . . . . . . . 6.5% 10.2% (35.0)%
------ ------
------ ------
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percent of Period-to-Period
Net Sales Percentage Change
------------------ ------------------
Six months Ended Six months Ended
June 30, June 30, 1997
1997 1996 Compared to 1996
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<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . 100.0% 100.0% 2.5%
Cost of sales. . . . . . . . . . . 27.3 29.1 (3.9)
------ ------
Gross profit . . . . . . . . . . . 72.7 70.9 5.1
Operating expenses:
Sales, general
and administrative . . 47.4 38.8 25.2
Research and development . . . 22.7 20.6 12.7
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Total operating expenses . . . . . 70.1 59.4 20.9
------ ------
Income from operations . . . . . . 2.6 11.5 (76.5)
Interest income and other. . . . . 1.7 1.5 13.4
Interest expense . . . . . . . . . - (0.1) -
------ ------
Income before income taxes . . . . 4.3 12.9 (65.6)
Income taxes . . . . . . . . . . . 0.7 3.7 (80.7)
------ ------
Net income . . . . . . . . . . . . 3.6% 9.2% (59.4)%
------ ------
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</TABLE>
NET SALES
Net sales increased by 2.7% to $10.0 million from $9.8 million for the
quarters ended June 30, 1997 and 1996, respectively. For the first six months
of 1997, revenue increased by 2.5% to $18.9 million from $18.5 million for
the same period of 1996. These increases were primarily attributable to the
growth in sales of low cost debug tools and service revenues. The increases
were partially offset by a decline in unit sales of higher priced debug
tools and to a lesser extent currency exchange rate fluctuations affecting
international sales. The Company's net sales are presently derived
predominantly from sales of software design, debugging, testing tools and
product support revenues. The Company generally recognizes revenues from
product sales upon shipment. Product support revenues increased by 50.8% and
54.8% over the prior three month and six month periods, respectively, and
increased as a percentage of sales to 11.7% from 8.0% of net sales for the
quarters ended June 30, 1997 and 1996, respectively, and to 12.1% from 8.0%
of net sales for the six months ended June 30, 1997 and 1996, respectively.
These increases result from higher revenue levels in prior quarters being
accompanied by higher sales of associated service contracts from which
support revenues are recognized ratably over the contract life, as well as
the Company's recently expanded focus on support and service sales.
International sales expressed in U.S. dollars increased by 8.9% for the
quarter ended June 30, 1997 over the comparable period of 1996, to 49.6% of
net sales as compared to 46.8% of net sales in the prior comparable quarter.
For the six months ending June 30, 1997, international sales increased 7.8%
over the same period in 1996, representing 49.7% of total sales versus 47.2%
in the prior comparable period. The growth rate for international sales as
expressed in U.S. dollars is attributable to increased unit sales, due
primarily to increased sales and marketing efforts. The Company's sales
through its foreign subsidiaries are generally denominated in local
currencies, and as a result, fluctuations in currency exchange rates can have
a significant effect on the Company's reported net sales. Had the exchange
rates remained the same from the prior comparable periods, especially in
Japan, overall sales would have increased an additional 3.3 percentage points
for the quarter ended June 30, 1997 and
-8-
<PAGE>
increased an additional 4.0 percentage points for the six months ended June
30, 1997. The Company is unable to predict currency exchange rate
fluctuations and anticipates that such fluctuations will continue to affect
its net sales to varying degrees in the future. The Company expects
international sales, especially in Japan, to continue to account for a
significant percentage of its net sales.
GROSS PROFIT
The Company's gross profit increased to $7.3 million, or 73.0% of net
sales, from $6.9 million, or 71.2% of net sales, in the quarters ended June
30, 1997 and 1996, respectively. For the six months ending June 30, 1997, the
Company's gross profit increased to $13.8 million from $13.1 million in the
prior comparable period, representing 72.7% and 70.9% of net sales,
respectively. The increases in gross profit as a percentage of net sales
were primarily attributable to an increase in the higher margin product
support revenues, an increase of net sales of newer debug products that have
lower material and labor costs, and to a lesser extent, favorable cost
reductions on certain hardware components. These margin improvements were
partially offset by declines in sales revenue due to unfavorable currency
exchange rate fluctuations.
SALES, GENERAL AND ADMINISTRATIVE
Sales, general and administrative expenses were $4.6 million or 46.0% of
net sales, and $3.7 million, or 38.1% of net sales, for the quarters ended
June 30, 1997 and 1996, respectively. For the six month periods ended June
30, 1997 and 1996, sales, general and administrative expenses were $9.0
million or 47.4% of net sales, and $7.2 million or 38.8% of net sales,
respectively. The dollar amount increase between comparable periods was
primarily attributable to increased compensation-related expenses resulting
principally from increased sales force headcount, and to a lesser extent,
increased promotional and travel related expenses. The percentage increase
between comparable periods was primarily attributable to lower than
anticipated revenues for the quarter ending June 30, 1997. Sales are
difficult to predict and the majority occur late in the quarter, at which
time budgets are already committed. The Company expects its sales and
marketing expenditures to continue to increase in absolute dollars in the
future as it introduces and markets new products, and continues to expand its
sales, general and administrative organization.
Foreign exchange gains and losses are included in sales, general and
administrative expenses. In order to mitigate certain intercompany risks
associated with exchange rate fluctuations, the Company, does from time to
time, hedge a portion of its foreign exchange risk in Japan as it relates to
the trade debt the Company's Japanese subsidiary owes to the Company.
Although the Company generally plans to continue to engage in exchange rate
hedging activities with respect to certain exchange rate risks, there can be
no assurance that it will do so or that any such activities will successfully
protect the Company against such risks.
RESEARCH AND DEVELOPMENT
Research and development expenses were $2.1 million, or 21.0% of net
sales, and $2.0 million, or 20.5% of net sales, for the quarters ended June
30, 1997 and 1996, respectively. For the six month periods ending June 30,
1997 and June 30, 1996, research and development expenses were $4.3 million,
or 22.7% of net sales, and $3.8 million, or 20.6% of net sales, respectively.
The 5.2% and 12.7% increases in the dollar amount of research and development
expenses between comparable periods was primarily attributable to a decrease
in external development funding received from third parties and, to a lesser
extent, an increase in proto typing expenses, offset by a decrease in
compensation related expenses. The Company intends to continue to make
substantial investments in product development,
-9-
<PAGE>
including development of software design, debugging and test tools for
additional embedded microprocessors as well as continued advanced
development in future directions. As a result, the Company anticipates that
net research and development expenses are likely to increase for the
foreseeable future.
OTHER
The Company's interest (net) and other income increased by $27,000
between the comparable three month periods and $38,000 between the comparable
six month periods due primarily to an increase in cash and marketable
securities generated from operations.
TAXES
The Company's estimated annualized 1997 effective tax rate was reduced
from 31% to 15% (1996 actual rate was 30%.) in the second quarter of 1997 due
to a new tax code regulation that allows for a restructuring, for tax
purposes only, of some of its foreign subsidiaries so as to enable the
Company to recognize a portion of the net operating losses of certain foreign
operations. The Company anticipates this lower rate will be sustained
through 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for the financing of inventory,
capital equipment and accounts receivable, and for investment in product
development activities, new technologies and potential company or product line
acquisitions. The Company's net assets changed considerably as a result of the
initial public offering in November 1995, which resulted in net proceeds to the
Company of $13.0 million. Among other things, these proceeds were used to pay
off certain debts, purchase equipment and short-term investments. For the six
months ended June 30, 1997 and 1996, the Company generated $1.4 million and
$557,000, respectively, of cash from operations, and utilized $1.1 and $6.5
million, respectively, of cash for purchases of short-term investments and
equipment. As of June 30, 1997, the Company had working capital of $19.8
million, including $13.5 million of cash, cash equivalents and short-term
investments
The Company believes that its existing working capital, together with
funds from operations and available revolving credit line, will provide the
Company with sufficient funds to finance its operations for at least the next
12 months. The Company's future capital requirements will, however, depend on
a number of factors, including costs associated with product development
efforts, the success of the commercial introduction of the Company's new
products and the acquisition of complementary businesses, products or
technologies. To the extent additional capital is required, the Company may
sell additional equity, debt or convertible securities, or obtain additional
credit facilities.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Statements in this report concerning sales, costs, expenses, adequacy of
working capital and other matters which are not historical facts, constitute
forward-looking statements which are subject to a number of risks and
uncertainties which might cause actual results to differ materially from
stated expectations. Such risks and uncertainties include delays in shipments
of the Company's new products, declining product prices and margins, ability
of its suppliers to provide components and assemblies, uncertain market
acceptance of new products, growth in the marketplace in which the Company
operates, competitive product offerings, unfavorable foreign currency
fluctuations and adverse changes in general economic conditions in any of the
countries in which the Company does business, and other risks set
-10-
<PAGE>
forth in the Company's filings with the Securities and Exchange
Commission, including its annual report for the year ended December 31, 1996
on Form 10-K. During the last twelve months, the Company's competitors have
continued to make a variety of product announcements and offerings. The
Company continues to release new versions of its product lines and the
successful acceptance of these products will be a key determinant of future
growth. The impact of any of these factors is difficult to predict or
forecast.
The Company's future earnings and stock price may be subject to
significant volatility, particularly on a quarterly basis, due to a variety
of factors, including factors noted above. Any shortfall in revenue or
earnings from levels expected by securities analysts could have an immediate
and significant adverse effect on the trading price of the Company's common
stock in any given period. Additionally, the Company often does not learn of
such shortfalls until late in the fiscal quarter, or even after the quarter
is over, at which time budgeted expenses have already been committed, which
could result in an even more immediate and adverse effect on the trading
price of the Company's common stock. The Company participates in a highly
dynamic industry, which often results in significant volatility of the
Company's common stock price. Consequently, purchasing or holding of the
Company's stock involves a high degree of risk.
-11-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Shareholders was held on May 30, 1997. The
following matters were voted upon by the shareholders with the following
results:
(1) The following persons were elected to serve as directors until
the next Annual Meeting of Shareholders or until their earlier
retirement, resignation or removal: Robert L. Deinhammer, Elwood
D. Howse, Jr, Anthony Miadich, Paul N. Risinger and David
E.Stitt.
The number of votes cast for or withheld for each director
nominee was as follows:
<TABLE>
<CAPTION>
Nominee For Withheld
<S> <C> <C>
Robert L. Deinhammer 6,159,655 110,485
Elwood D. Howse, Jr. 6,160,605 109,535
Anthony Miadich 6,160,805 109,335
Paul N. Risinger 6,160,305 109,835
David E. Stitt 6,160,605 109,535
</TABLE>
(2) The shareholders voted 4,080,157 shares in the affirmative,
236,856 shares in the negative, 33,094 abstained and 2,374,619
broker non-votes to amend the existing Applied Microsystems
Corporation 1992 Performance Stock Plan (the "1992 Plan"), as
amended,to increase the number of shares issuable thereunder
from 1,775,317 shares to 2,175,317 shares.
(3) The shareholders voted 6,251,181 shares in the affirmative and
5,750 shares in the negative to ratify the appointment of Ernst &
Young LLP, as independent auditors for the Company's year ending
December 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) The following exhibits are filed as part of this report.
10.1 Amendment dated as of May 30, 1997, to Registrant's 1992
Performance Stock Plan, as amended.
11 Computation of Earnings Per Share.
(B) Report on Form 8-K
The registrant did not file any reports on Form 8-K during the
quarter ended June 30, 1997.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Redmond, State of Washington, on August 8, 1997.
APPLIED MICROSYSTEMS CORPORATION
(Registrant)
By /s/ A. James Beach
---------------------------------------------
A. James Beach
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
- ---------- ----------- --------
10.1 Amendment dated as of May 30, 1997, to 15
the Registrant's Performance Stock Plan,
as amended.
11 Computation of Earnings Per Share. 16
-14-
<PAGE>
EXHIBIT 10.1
THIRD AMENDMENT
TO
APPLIED MICROSYSTEMS CORPORATION
1992 PERFORMANCE STOCK PLAN
THIS THIRD AMENDMENT to the APPLIED MICROSYSTEMS CORPORATION 1992
PERFORMANCE STOCK PLAN is adopted as of May 30, 1997, by APPLIED MICROSYSTEMS
CORPORATION, a Washington corporation (the "Company"), subject to approval by
the shareholders of the Company.
The Company's 1992 Performance Stock Plan (the "1992 Plan") is hereby amended as
follows:
1. Section 2 of the 1992 Plan is amended by substituting "2,175,317
shares" in place of "1,775,317 shares."
2. Except as amended hereby, the 1992 Plan as previously amended shall
remain in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the date and
year first above written.
APPLIED MICROSYSTEMS CORPORATION
By /s/ A. James Beach
-----------------------
A. James Beach
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
-15-
<PAGE>
EXHIBIT 11
APPLIED MICROSYSTEMS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1997 1996
-------- --------
<S> <C> <C>
Average shares outstanding 6,772 6,508
Net effect of dilutive stock warrants and options based on the
treasury stock method using average market price 487 598
-------- ---------
Total 7,259 7,106
-------- ---------
-------- ---------
Net Income $647 $996
-------- ---------
-------- ---------
Per share amount $0.09 $0.14
-------- ---------
-------- ---------
SIX MONTHS ENDED JUNE 30,
1997 1996
-------- -------
<S> <C> <C>
Average shares outstanding 6,735 6,493
Net effect of dilutive stock warrants and options based
on the treasury stock method using average market price 482 600
-------- -------
Total 7,217 7,093
-------- -------
Net Income $689 $1,698
-------- --------
Per share amount $0.10 $0.24
-------- --------
-------- --------
</TABLE>
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 7571
<SECURITIES> 5966
<RECEIVABLES> 9799
<ALLOWANCES> 0
<INVENTORY> 3504
<CURRENT-ASSETS> 27776
<PP&E> 2873
<DEPRECIATION> 0
<TOTAL-ASSETS> 31438
<CURRENT-LIABILITIES> 7986
<BONDS> 0
0
0
<COMMON> 26259
<OTHER-SE> (2807)
<TOTAL-LIABILITY-AND-EQUITY> 31438
<SALES> 10009
<TOTAL-REVENUES> 10009
<CGS> 2698
<TOTAL-COSTS> 6713
<OTHER-EXPENSES> (167)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 761
<INCOME-TAX> 114
<INCOME-CONTINUING> 647
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 647
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
