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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 September 29, 1996
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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 012378
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APERTUS TECHNOLOGIES INCORPORATED
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(Exact name of registrant as specified in its charter)
MINNESOTA 41-1349953
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7275 FLYING CLOUD DRIVE, EDEN PRAIRIE, MINNESOTA 55344
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 828-0300
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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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.05 par value 14,119,988
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Class Shares outstanding on September 29, 1996
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statement of Operations - Three
and Six Months Ended September 29, 1996 and
October 01, 1995........................................ 1
Consolidated Balance Sheets - September 30, 1996
and March 31, 1996...................................... 2-3
Consolidated Statements of Cash Flows - Six
Months Ended September 29, 1996 and
October 01, 1995........................................ 4
Notes to Financial Statements........................... 5-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations................................... 7
Liquidity and Capital Resources......................... 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 8
ITEM 2. CHANGES IN SECURITIES.......................... 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS............................... 8
ITEM 5. OTHER INFORMATION.............................. 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 8
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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SEPT 29 Oct 01 SEPT 29 Oct 01
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
Sales.................. $ 7,999 $11,609 $15,522 $20,327
Rentals and services... 2,539 3,500 5,493 5,850
------- ------- ------- -------
TOTAL.................... 10,538 15,109 21,015 26,177
COSTS AND EXPENSES
Cost of revenues....... 3,745 5,009 7,376 8,788
Research, development
and engineering...... 2,054 2,674 4,530 4,908
Selling, general and
administrative....... 5,476 5,434 11,037 10,153
Other charges.......... - - - 5,820
------- ------- ------- -------
TOTAL.................... 11,275 13,117 22,943 29,669
INCOME (LOSS) FROM
OPERATIONS............. (737) 1,992 (1,928) (3,492)
Interest Expense......... (20) - (38) -
Interest Income.......... 122 167 252 417
Income Tax Expense....... (50) (78) (100) (103)
------- ------- ------- -------
NET INCOME (LOSS)........ $ (685) $ 2,081 $(1,814) $(3,178)
======= ======= ======= =======
EARNINGS PER SHARE
Net Income / (Loss).... $(.05) $.14 $(.13) $(.23)
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING............ 14,120,000 15,016,000 14,083,000 14,018,000
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
1
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CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED AUDITED
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SEPT 29 March 31
1996 1996
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 5,717 $ 5,455
Cash in escrow.......................... 781 1,539
Marketable securities................... 552 4,318
Accounts receivable - net............... 17,452 14,216
Current portion of installment
receivables - net..................... 646 1,018
Note receivable......................... - 8,700
Inventories............................. 3,844 3,881
Other................................... 511 388
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Total current assets.................. 29,503 39,515
PROPERTY AND EQUIPMENT - NET.............. 4,586 5,005
CAPITALIZED SOFTWARE - NET................ 6,633 6,286
INSTALLMENT RECEIVABLES - NET OF CURRENT
PORTION................................. 1,255 1,310
GOODWILL - NET............................ 1,561 1,697
OTHER..................................... - 876
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TOTAL................................. $43,538 $54,689
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</TABLE>
See accompanying Notes to Financial Statements.
2
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CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAUDITED AUDITED
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SEPT 29 March 31
1996 1996
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable...................... $ 4,850 $ 5,100
Accrued expenses...................... 6,134 6,029
Deferred revenue...................... 3,746 4,255
Notes payable......................... 1,000 1,000
Current portion of long-term debt..... - 8,976
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Total current liabilities........... 15,730 25,360
SHAREHOLDERS' EQUITY
Common stock--authorized, 30,000,000
shares at $.05 par value; shares
outstanding at:
September 29, 1996 - 14,119,988
March 31, 1996 - 14,028,455...... 706 701
Additional paid-in-capital............ 57,312 57,062
Accumulated deficit................... (30,051) (28,237)
Deferred compensation................. (159) (197)
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Total shareholders' equity.......... 27,808 29,329
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Total............................... $ 43,538 $ 54,689
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</TABLE>
See accompanying Notes to Financial Statements.
3
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
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SEPT 29 Oct 01
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $(1,814) $(3,178)
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization................... 2,362 1,675
Other charges................................... - 5,820
Accounts receivable............................. (3,236) (1,778)
Installment receivables......................... 427 (194)
Inventories..................................... 37 (252)
Other assets.................................... 753 (371)
Accounts payable, accrued expenses, deferred
revenue and income taxes...................... (654) (368)
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Net cash flows from, (used in) operating
activities.................................... (2,125) 1,354
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INVESTING ACTIVITIES:
Purchase of Company (net of cash acquired)........ - (4,547)
Purchases of marketable securities................ - (2,574)
Maturities of marketable securities............... 3,766 4,557
Purchases of property and equipment............... (413) (816)
Capitalized software.............................. (1,703) (1,708)
Note Receivable................................... 8,700 -
Change in cash held in escrow..................... 758 (685)
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Net cash flows from, (used in) investing
activities....................................... 11,108 (5,773)
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FINANCING ACTIVITIES:
Debt transactions:
Repayments...................................... (8,976) (74)
Capital transactions:
Stock repurchased by Company.................... - (362)
Stock options exercised......................... 255 93
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Net cash flows from, (used in) financing
activities...................................... (8,721) (343)
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Net increase (decrease)in cash and
cash equivalents.................................. 262 (4,762)
Beginning cash and cash equivalents................. 5,455 13,140
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Ending cash and cash equivalents.................... $ 5,717 $ 8,378
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Supplemental disclosures of cash flow information:
Cash paid for interest............................ $ 182 $ 409
Cash paid (received) for income taxes............. 13 207
</TABLE>
See accompanying Notes to Financial Statements.
4
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NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. MANAGEMENT REPRESENTATION
The accompanying unaudited interim financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The results of
operations for any interim period are not necessarily indicative of results
for the year. These statements should be read in conjunction with the
financial statements and related notes included in the Company's Annual
Report on Form 10-K for the year ended March 31, 1996.
2. RECLASSIFICATIONS
Certain reclassifications have been made to prior year amounts to conform to
the current year presentation.
3. INCOME PER SHARE
For the three and six month periods ended September 29, 1996 and October 1,
1995, net income per common and common equivalent share was determined by
dividing net income by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares,
resulting from dilutive stock options, were converted using the treasury
stock method if necessary.
4. INVENTORIES
Inventories consisted of: (Dollars in thousands)
<TABLE>
<CAPTION>
SEPT 29 March 31
1996 1996
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<S> <C> <C>
Raw material $ 940 $ 652
Work-in-process 1,505 1,542
Finished goods 1,399 1,687
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$3,844 $3,881
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5. SALE OF LAND.
During the second quarter of fiscal 1997 Apertus sold the remaining land
which was adjacent to the former headquarters for approximately $700. This
land was not sold in the original sale of the former headquarters property
to Best Buy (see note 6).
5
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6. SALE OF FORMER HEADQUARTERS.
Effective June 12, 1996 Apertus concluded the sale of its former
headquarters by paying off the $8,976 remaining on its mortgage with
Prudential and collecting the $8,700 note receivable from Best Buy. At this
time cash held in escrow totalling $776 was released to Apertus.
7. ACQUISITION OF BLUELINE SOFTWARE INC.
Effective the close of business on June 30, 1995, the Company purchased the
stock of BlueLine Software Inc (BlueLine). The total purchase price was
$8,750 of which approximately 50% was in cash and 50% was in Apertus common
stock. The acquisition was accounted for under the purchase method of
accounting. The acquisition resulted in goodwill of approximately $1,900
which is being amortized on a straight line basis over 7 years. The purchase
included a charge to earnings of $5,390 in quarter one fiscal 1996 related
to the write down of purchased research and development costs and other
acquisition costs.
8. OTHER CHARGES
In the first quarter of fiscal 1996 the Company recorded other charges of
$5,820. These charges related primarily to the acquisition of BlueLine (see
note 7) and the closing of a West coast location.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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RESULTS OF OPERATIONS
Net revenues for the three and six month periods ended September 29,1996
decreased ($4,571) or (30%) and ($5,162) or (20%) from the comparable periods of
fiscal year 1996. This is due principally to a decline in the sales of the
Company's more mature connectivity products as well as to revenue taken in
quarter one and two of fiscal 1996 associated with a large GTE license contract
which was concluded in quarter three of fiscal 1996. The mix of revenues between
domestic and international for the three and six months ended September 29, 1996
was 16% and 24% versus 38% and 31% for the comparable periods of fiscal 1996.
These declines are also due to declines in the older network connectivity
products.
The cost of revenues, as a percentage of revenues, increased to 36% and 35% for
the three and six months ended September 29, 1996 versus 33% and 34% in the
comparable quarters of fiscal 1996. This increase was due primarily to the GTE
license revenue recognized in quarter one and two of fiscal 1996 which had no
associated costs.
Research, development, and engineering costs remained relatively flat as a
percentage of revenue and accounted for 19% and 22% of the three and six month
periods ended September 29, 1996 as compared with 18% and 19% in the comparable
prior year periods. Significant activity in this category includes the addition
of BlueLine R&D expenses included in operations effective July 1, 1995 and the
reduction in expenses associated with the realigning of resources of the Company
at the end of fiscal 1996. Selling, general, and administrative costs were 52%
and 53% of revenues in the three and six month periods ended September 29, 1996
as compared to 36% and 39% in the prior year comparable periods. This increase
reflects the additional costs associated with the BlueLine acquisition effective
July 1, 1995 as well as the decline in revenues.
Interest income decreased due to a lower average balance in cash and marketable
securities between periods.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities were $7,050 and $11,312 at
September 29, 1996 and March 31, 1996 respectively. The Company currently
anticipates making capital expenditures of approximately $400 during the rest of
fiscal year 1997. These capital expenditures will relate primarily to research
and development, data processing and software. The Company believes that cash,
cash equivalents and marketable securities will be adequate to meet its
anticipated cash needs for working capital and capital expenditures for the
balance of fiscal year 1997.
7
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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None
ITEM 2. CHANGES IN SECURITIES
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None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None
ITEM 5. OTHER INFORMATION
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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During the second quarter of fiscal 1997 the Company amended its
shareholder rights plan as well as its bylaws and articles of
incorporation. These changes were documented in an 8-K filed on
September 4, 1996.
8
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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.
APERTUS TECHNOLOGIES INCORPORATED
Date: November 11, 1996 By /s/ Sue Hogue
_________________________
Sue Hogue
Vice President Finance
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 6,498
<SECURITIES> 552
<RECEIVABLES> 18,926
<ALLOWANCES> 1,474
<INVENTORY> 3,844
<CURRENT-ASSETS> 29,294
<PP&E> 16,098
<DEPRECIATION> 11,512
<TOTAL-ASSETS> 43,538
<CURRENT-LIABILITIES> 15,730
<BONDS> 1,000
<COMMON> 58,018
0
0
<OTHER-SE> (30,210)
<TOTAL-LIABILITY-AND-EQUITY> 43,538
<SALES> 7,999
<TOTAL-REVENUES> 10,538
<CGS> 3,745
<TOTAL-COSTS> 11,275
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (20)
<INCOME-PRETAX> (635)
<INCOME-TAX> (50)
<INCOME-CONTINUING> (685)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (685)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
