<PAGE 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 1/31/99 or
/ / 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 1-8266
DATARAM CORPORATION
_________________________________________________________
(Exact name of registrant as specified in its charter)
New Jersey 22-1831409
_________________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 7528, Princeton, NJ 08543
____________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 799-0071
______________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
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
___ ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date. Common Stock ($1.00 par
value): As of March 3, 1999, there were 5,313,110 shares outstanding.
<PAGE 2>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Dataram Corporation And Subsidiary
Consolidated Balance Sheets
January 31, 1999 and April 30, 1998
(Unaudited) (Audited)
January 31, 1999 April 30, 1998
Assets
Current Assets:
Cash and cash equivalents $ 9,882,485 $ 7,529,906
Trade receivables, less allowance
for doubtful accounts and sales returns
of $450,000 at January 31, 1999
and at April 30, 1998 7,838,563 10,075,838
Inventories 3,512,992 2,923,165
Other current assets 659,499 493,013
__________ __________
Total current assets 21,893,539 21,021,922
Property and equipment, at cost:
Land 875,000 875,000
Machinery and equipment 9,669,253 8,805,875
__________ __________
10,544,253 9,680,875
Less: accumulated depreciation
and amortization 7,151,979 6,245,979
__________ __________
Net property and equipment 3,392,274 3,434,896
Other assets 8,655 7,380
__________ __________
$ 25,294,468 $ 24,464,198
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,771,607 $ 4,698,786
Accrued liabilities 1,880,350 1,548,315
Income taxes payable 0 236,116
__________ __________
Total current liabilities 4,651,957 6,483,217
Deferred income taxes 1,013,000 1,013,000
Stockholders' Equity:
Common stock, par value $1.00 per share.
Authorized 18,000,000 shares; issued
5,562,810 at January 31,
1999 and issued and outstanding
2,781,405 at April 30, 1998 5,562,810 2,781,405
Additional paid in capital 0 2,125,871
Retained earnings 15,534,761 12,060,705
Treasury stock, at cost (192,200 shares) (1,468,060) 0
__________ __________
Total stockholders' equity 19,629,511 16,967,981
__________ __________
$ 25,294,468 $ 24,464,198
========== ==========
See accompanying notes to consolidated financial statements
<PAGE 3>
<TABLE>
Dataram Corporation and Subsidiary
Consolidated Statements of Earnings
Three and Nine Months Ended January 31, 1999 and 1998
(Unaudited)
1999 1998
3rd Quarter Nine Months 3rd Quarter Nine Months
<C> <C> <C> <C>
Revenues $ 18,921,906 $ 52,933,927 $ 19,844,043 $ 58,059,070
Costs and expenses:
Cost of sales 13,869,310 37,234,581 14,690,712 44,853,570
Engineering and development 354,489 1,057,923 283,608 808,575
Selling, general and administrative 2,660,858 8,407,900 3,255,737 8,319,558
__________ __________ __________ __________
16,884,657 46,700,404 18,230,057 53,981,703
Earnings from operations 2,037,249 6,233,523 1,613,986 4,077,367
Other income (expense), net
Other income, net 0 0 1,200 3,200
Interest income, net 109,982 362,067 81,094 220,841
__________ __________ __________ __________
109,982 362,067 82,294 224,041
Earnings before income taxes 2,147,231 6,595,590 1,696,280 4,301,408
Income tax provision 725,000 2,466,000 664,000 1,655,000
__________ __________ __________ __________
Net earnings $ 1,422,231 $ 4,129,590 $ 1,032,280 $ 2,646,408
========== ========== ========== ==========
Net earnings per share of common stock
Basic $ .26 $ .75 $ .18 $ .44
========== ========== ========== ==========
Diluted $ .22 $ .66 $ .17 $ .42
========== ========== ========== ==========
Weighted average number of common
shares outstanding
Basic 5,405,421 5,503,775 5,872,410 5,994,780
========== ========== ========= =========
Diluted 6,395,249 6,268,914 6,150,158 6,257,674
========== ========== ========= =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE 4>
Dataram Corporation and Subsidiary
Consolidated Statements of Cash Flows
Nine Months Ended January 31,1999 and 1998
(Unaudited)
1999 1998
Cash flows from operating activities:
Net earnings $ 4,129,590 $ 2,646,408
Adjustments to reconcile net earnings
to net cash provided by
operating activities:
Depreciation and amortization 906,000 495,300
Bad debt expense (181,363) 271,086
Changes in assets and liabilities:
(Increase) decrease in trade receivables 2,418,638
(1,310,834)
(Increase) decrease in inventories (589,827) 900,134
(Increase) decrease in other current assets (166,486) 63,789
Increase in other assets (1,275)
(1,650)
Decrease in accounts payable (1,927,179)
(773,192)
Increase in accrued liabilities 332,035 231,430
Increase(decrease) in income taxes payable (236,116) 34,116
__________ __________
Net cash provided by
operating activities 4,684,017 2,556,587
__________ __________
Cash flows from investing activities:
Purchase of property and equipment (863,378)
(1,424,129)
__________ __________
Net cash used in investing activities (863,378)
(1,424,129)
Cash flows from financing activities:
Proceeds from sale of common shares under
stock option plan (including tax benefits) 0 329,875
Purchase and cancellation of common stock 0
(1,605,327)
Purchase of common stock held in treasury (1,468,060) 0
__________ __________
Net cash used in financing activities (1,468,060)
(1,275,452)
__________ __________
Net increase (decrease) in cash
and cash equivalents 2,352,579
(142,994)
Cash and cash equivalents at
beginning of year 7,529,906 6,835,671
__________ __________
Cash and cash equivalents at
end of period $ 9,882,485 $ 6,692,677
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 38,751 $ 37,453
Income taxes $ 2,750,200 $ 1,473,058
See accompanying notes to consolidated financial statements.
<PAGE 5>
Notes to Consolidated Financial Statements
January 31, 1999 and 1998
(Unaudited)
Basis of Presentation
The information at January 31, 1999 and for the three and nine months ended
January 31, 1999 and 1998, is unaudited but includes all adjustments
(consisting only of normal recurring adjustments) which, in the opinion of
management, are necessary to state fairly the financial information set forth
therein in accordance with generally accepted accounting principles. The
interim results are not necessarily indicative of results to be expected for
the full fiscal year. These financial statements should be read in conjuction
with the audited financial statements for the year ended April 30, 1998
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
Stock Split
On November 11, 1998 the Company's Board of Directors announced a two-for-one
stock split effected in the form of a dividend for shareholders of record at
the close of business on November 23, 1998 and payable December 3, 1998. The
accompanying per share amounts in the financial statements have been restated
(as a credit to common stock) to give retroactive effect to this stock split.
The stock split has been charged to additional paid in capital in the amount
of $2,125,871 and retained earnings in the amount of $655,534.
Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Dataram International Sales Corporation (a
Domestic International Sales Corporation (DISC)). All significant intercompany
transactions and balances have been eliminated.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash, money market preferred
stock and commercial paper with original maturities of three months or less.
Inventory valuation
Inventories are valued at the lower of cost or market, with costs determined
by the first-in, first-out method. Inventories at January 31, 1999 and April
30, 1998 consist of the following categories:
January 31, 1999 April 30, 1998
________________ ______________
Raw material $ 1,536,000 $ 1,759,000
Work in process 324,000 61,000
Finished goods 1,653,000 1,103,000
________________ ______________
$ 3,513,000 $ 2,923,000
================ ==============
<PAGE 6>
Property and equipment
Property and equipment is recorded at cost. Depreciation is generally computed
on the straight-line basis. Depreciation rates are based on the estimated
useful lives which range from three to five years for machinery and equipment.
When property or equipment is retired or otherwise disposed of, related costs
and accumulated depreciation are removed from the accounts. Repair and
maintenance costs are charged to operations as incurred.
Revenue recognition
Revenue from product sales is recognized when the related goods are shipped to
the customer and all significant obligations of the Company have been
satisfied. Estimated warranty costs are accrued.
Product development and related engineering
The Company expenses product development and related engineering costs as
incurred. Engineering effort is directed to development of new or improved
products as well as ongoing support for existing products.
Income taxes
The Company follows the asset and liability method of accounting for income
taxes in accordance with the provisions of Statement of Financial Accounting
Standards SFAS No. 109, "Accounting for Income Taxes". Under the asset and
liability method, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in earnings
in the period that the tax rate changes.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of cash and cash equivalents. The Company
maintains its cash and cash equivalents in financial institutions and
brokerage accounts. To the extent that such deposits exceed the maximum
insurance levels, they are uninsured. The Company performs ongoing evaluations
of its customers' financial condition, as well as general economic conditions
and, generally, requires no collateral from its customers.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE 7>
Long-term debt
During the second quarter of fiscal 1999, the Company amended and restated its
credit facility with its bank. Under the amended agreement, the Company
modified certain financial covenants and increased the revolving credit
facility to $12,000,000 until October 31, 1999, at which point it will
decrease to $6,000,000 until October 31, 2000. The agreement provides for
Eurodollar rate loans, CD rate loans and base rate loans at an interest rate
no higher than the bank's base commercial lending rate less 1/2%. The Company
is required to pay a commitment fee equal to 1/16 of one percent per annum on
the unused commitment. The agreement contains certain restrictive financial
covenants including a minimum current ratio, minimum tangible net worth
requirement, minimum interest coverage ratio, maximum debt to equity ratio and
certain other covenants, as defined by the agreement. There were no borrowings
during fiscal 1999 and 1998. As of January 31, 1999, the amount available for
borrowing under the revolving credit facility was $12,000,000.
Treasury stock
On September 9, 1998, the Company announced an Open Market Repurchase Plan.
The plan provides for repurchases of up to 500,000 shares of the Company's
common stock. The shares may be repurchsed from time to time either on the
American Stock Exchange or through block purchases. As of January 31, 1999,
192,200 shares had been purchased under the plan at a total cost of $1,468,060
and are held as treasury stock.
<PAGE 8>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of January 31, 1999, working capital amounted to $17.2 million
reflecting a current ratio of 4.7 compared to working capital of $14.5 million
and a current ratio of 3.2 as of April 30, 1998.
During fiscal 1999, the Company amended and restated its $12 million
unsecured revolving credit line with its bank. The credit facility was unused
during fiscal 1999. On October 31, 1999, $6 million of the facility is
scheduled to expire and on October 31, 2000, the remaining $6 million of the
facility is scheduled to expire. The Company intends to renew any expiring
portion of the facility by the expiration date and maintain a $12 million
total facility.
Management believes that its working capital together with internally
generated funds and its bank line of credit are adequate to finance the
Company's operating needs and future capital requirements.
Year 2000
The Company's products are all year 2000 compliant. The Company has
completed its upgrade of its manufacturing, accounting, production and
inventory control systems and software and these systems and software are now
year 2000 compliant. The Company has numerous personal computers and
peripheral devices used in information technology and non-information
technology applications which are currently being tested for year 2000
compliance. The Company intends to upgrade or replace any non year 2000
compliant devices by the end of the current fiscal year. Management estimates
that the financial impact of the upgrade will not have a material effect on
the Company's consolidated financial condition, results of operations and
liquidity.
As part of the Company's Year 2000 readiness program, the Company has
identified its key vendors and suppliers and is attempting to ascertain their
stage of year 2000 readiness primarily through questionaires and interviews.
The Company has a diverse and ever changing customer base, with no single
customer typically accounting for 10% or more of its revenue. At this time,
the Company has no plans to ascertain the stage of year 2000 readiness of its
current customers.
The possible consequences of the Company, its key vendors, certain
customers, governments or government agencies, financial institutions,
utilities, etc. of not being year 2000 compliant by January 1, 2000 include
but are not limited to, among other things, a temporary plant closing, delays
in the delivery of products, delays in collection of recievables, and
inventory and supply obsolescence. Because of the widespread nature of this
problem, no assurances can be made that the Company will not be materially
adversely affected by a temporary inability of the Company to conduct its
business in the ordinary course for a period of time after January 1, 2000.
However, management believes that the actions it has taken should
significantly reduce the adverse effect any such disruptions may have.
<PAGE 9>
Results of Operations
Revenues for the three month period ended January 31, 1999 were
$18,922,000 compared to revenues of $19,844,000 for the comparable prior year
period. Fiscal 1999 nine month revenues totaled $52,934,000 versus nine month
revenues of $58,059,000 for the prior fiscal year. The decrease in revenues
was the result of declining average selling prices for the Company's products
reflecting a year over year decrease in the price of dynamic random access
memory chips (DRAMs)which are the primary raw material in memory boards,
offset by increased unit volume.
Cost of sales for the third quarter and nine months of fiscal 1999 were
73% and 70%, respectively of revenues versus 74% and 77% for the same prior
year periods. The decrease in cost of sales as a percentage of revenues is
attributable to favorable product mix as users continue to shift from 16
megabit based product to higher capacity 64 megabit product which command more
favorable margins.
Engineering and development costs in fiscal 1999's third quarter and nine
months were $354,000 and $1,058,000, respectively versus $284,000 and $809,000
for the same prior year periods. The Company intends to maintain its
commitment to the timely introduction of new memory products as new
workstations and computers are introduced.
Selling, general and administrative costs in this year's second quarter
and nine months were 14% and 16% of revenues, respectively versus 16% and 14%,
for the comparable prior year periods. Three month total expenditures
decreased by $595,000 from the comparable prior year period. Nine month
selling, general and administrative costs decreased by $88,000 in fiscal 1999
versus fiscal 1998. Fiscal 1999 three and nine month expense includes a
$300,000 recovery of an account receivable previously charged to allowance for
doubtful accounts in the fourth quarter of fiscal 1998. Fiscal 1998 third
quarter S,G&A costs included approximately $525,000 of legal expenses incurred
related to a Complaint filed by Sun Microsystems, Inc., which has since been
resolved. The change in nine month costs is primarily attributable to an
expansion of the Company's sales force initiated in the beginning of fiscal
1998 as well as an increase in certain marketing and promotional programs,
offset by the reduction in legal expense.
Other income (expense),net for the third quarter and nine months of
fiscal 1999 and 1998 consisted primarily of interest income on short term
investments.
Income tax expense for the third quarter and nine months of fiscal 1999
include a $116,000 benefit (net of Federal income tax benefit) from a
reduction in the Company's effective state tax rate.
Safe Harbor Statement
The information provided in this interim report may include forward-
looking statements relating to future events, such as the development of new
products, the commencement of production or the future financial performance
of the Company. Actual results may differ from such projections and are
subject to certain risks including, without limitation, risks arising from:
changes in the price of memory chips, changes in the demand for memory systems
for workstations and servers, increased competition in the memory systems
industry, delays in developing and commercializing new products and other
factors described in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
<PAGE 10>
PART II: OTHER INFORMATION
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 (a). Financial Data Schedule
28 (a). Press Release reporting results of Third Quarter, Fiscal Year
1999 (Attached).
B. Reports on Form 8-K
No reports on Form 8-K have been filed during the current quarter.
<PAGE 11>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATARAM CORPORATION
Date: March 8, 1999 By: MARK E. MADDOCKS
________________________
Mark E. Maddocks
Vice President, Finance
(Principal Financial Officer)
Page 8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 9,882,485
<SECURITIES> 0
<RECEIVABLES> 8,288,563
<ALLOWANCES> 450,000
<INVENTORY> 3,512,992
<CURRENT-ASSETS> 21,893,539
<PP&E> 10,544,253
<DEPRECIATION> 7,151,979
<TOTAL-ASSETS> 25,294,468
<CURRENT-LIABILITIES> 4,651,957
<BONDS> 0
0
0
<COMMON> 5,562,810
<OTHER-SE> 14,066,701
<TOTAL-LIABILITY-AND-EQUITY> 25,294,468
<SALES> 52,933,927
<TOTAL-REVENUES> 52,933,927
<CGS> 37,234,581
<TOTAL-COSTS> 37,234,581
<OTHER-EXPENSES> 1,057,923
<LOSS-PROVISION> (181,363)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,595,590
<INCOME-TAX> 2,466,000
<INCOME-CONTINUING> 4,129,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,129,590
<EPS-PRIMARY> .75
<EPS-DILUTED> .66
</TABLE>
<PAGE>
FOR: Dataram Corporation
APPROVED BY: Mark E. Maddocks
Chief Financial Officer
Dataram Corporation
(609) 799-0071
CONTACT: Investor Relations:
John Blackwell/Sandra O'Keefe
Press: Michael McMullan
Morgen-Walke Associates, Inc.
(212) 850-5600
DATARAM REPORTS STRONG EARNINGS INCREASE
FOR FISCAL 1999 THIRD QUARTER
PRINCETON, NJ, February 9, 1999: Dataram Corporation (AMEX:
DTM) today announced favorable financial results for its third
quarter and first nine months of fiscal 1999, ended January 31, 1999.
For the fiscal 1999 third quarter, net earnings increased 38% to
$1,422,000, or $0.22 per diluted share, versus $1,032,000, or $0.17
per diluted share. Revenues totaled $18.9 million versus $19.8
million in the prior year's third quarter.
For the 1999 nine-month period, net earnings rose 56% to
$4,130,000, or $0.66 per diluted share, versus $2,646,000, or $0.42
per diluted share. Revenues were $52.9 million compared to $58.1
million in the comparable period of fiscal 1998. Net earnings for
the fiscal 1999 third quarter and nine months results included a
$116,000, or approximately $0.02 per diluted share, benefit from a
reduction in the Company's effective state tax rate. This was
primarily the result of a change in New Jersey tax law. Going
forward, the Company's net effective tax rate will be reduced by
approximately 1%..
-more-
<PAGE>
DATARAM REPORTS STRONG EARNINGS INCREASE Page 2
FOR FISCAL 1999 THIRD QUARTER
The Company noted that higher volumes shipped in the fiscal 1999
third quarter were offset by a lower purchase price, for DRAMs, the
primary raw material used in its products. The average purchase price
of DRAMS in the third quarter of fiscal 1999 was approximately 57%
lower than in the comparable prior year period while gigabytes
shipped increased by approximately 72%. On a sequential quarterly
basis, DRAM prices in the 1999 third quarter were approximately 12%
higher than in the second quarter.
Additionally, the Company continued to participate in its
previously announced share repurchase program. As of January 31,
1999, the Company purchased 192,200 shares of the 500,000 share
repurchase authorization. The purchases were financed using funds
generated by operating cash flow.
Robert V. Tarantino, Dataram's president and chief executive
officer, commented, "This quarter is indicative of the sustained
worldwide demand for workstation and network server memory. By
remaining focused on high capacity memory products, Dataram has
maintained its profit margins, expanded its business and, once again,
demonstrated improved earnings. Although DRAM pricing was lower
compared to a year ago, it has risen from its second quarter lows and
we have increased our selling prices accordingly. Looking ahead, we
expect DRAM prices to remain stable throughout the fourth quarter."
Mr. Tarantino continued, "In addition, we achieved several
milestones. Specifically, we broadened our distribution channel by
signing agreements with two major channel partners, expanded our
international sales team and introduced and received Intel
qualification for several products for the Intel network server
marketplace. We are in the process of building a sales organization
that will exclusively market these Intel products to channel
assemblers and
-more-
<PAGE>
DATARAM REPORTS STRONG EARNINGS INCREASE Page 3
FOR FISCAL 1999 THIRD QUARTER
original equipment manufacturers. Jay Litus, Vice President of
Business Development, will spearhead this effort."
In conclusion, Mr. Tarantino said, "As we enter our fiscal 1999
fourth quarter, we remain confident in our ability to sustain
favorable financial performance and we expect to realize the benefit
of our growth initiatives in the upcoming fiscal year."
Dataram Corporation is a leading provider of gigabyte memory
upgrades for workstations and network servers. The Company
specializes in the manufacture of large-capacity memory boards for
Compaq, Digital, Hewlett-Packard, IBM, Intel, Silicon Graphics and
Sun Microsystems computers.
The information provided in this press release may include forward-looking
statements relating to future events, such as the development of new products,
the commencement of production, or the future financial performance of the
Company. Actual results may differ from such projections and are subject to
certain risks including, without limitation, risks arising from: changes in
the price of memory chips, changes in the demand for memory systems for
workstations and servers, increased competition in the memory systems
industry, delays in developing and commercializing new products and other
factors described in the Company's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission which can be reviewed at
http://www.sec.gov.
