<PAGE>
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 December 31, 1995
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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
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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 14,074,219
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Class Shares outstanding on December 31, 1995
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PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Statements of Operations - Three and Nine
Months Ended December 31, 1995 and
January 1, 1995......................................... 1
Balance Sheets - December 31, 1995 and
April 02, 1995.......................................... 2-3
Statements of Cash Flows - Nine Months Ended
December 31, 1995 and January 01, 1995.................. 4
Notes to Financial Statements........................... 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations / Liquidity and Capital
Resources............................................... 6-7
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>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
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DEC. 31 JAN. 1 DEC. 31 JAN. 1
1995 1995 1995 1995
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<S> <C> <C> <C> <C>
REVENUES
Sales............................................ $ 10,073 $ 11,469 $ 30,400 $ 34,622
Rentals and services............................. 2,971 2,240 8,821 6,008
----------- ----------- ----------- -----------
TOTAL.............................................. 13,044 13,709 39,221 40,630
COSTS AND EXPENSES
Cost of revenues................................. 4,468 3,784 12,227 12,731
Research, development and engineering............ 3,585 3,144 9,522 7,688
Selling, general and administrative.............. 6,376 4,299 16,529 13,483
Other charges.................................... - - 5,820 -
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TOTAL.............................................. 14,429 11,227 44,098 33,902
INCOME (LOSS) FROM OPERATIONS...................... (1,385) 2,482 (4,877) 6,728
INTEREST INCOME.................................... 155 206 572 429
INCOME TAX EXPENSE................................. (100) (75) (203) (75)
----------- ----------- ----------- -----------
NET INCOME (LOSS).................................. $ (1,330) $ 2,613 $ (4,508) $ 7,082
=========== =========== =========== ===========
EARNINGS PER SHARE
Net Income (Loss)................................ $ (.09) $ .18 $ (.33) $ .50
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING.................... 14,014,000 14,485,000 13,858,000 14,302,000
=========== =========== =========== ===========
</TABLE>
See accompany Notes to Financial Statements.
1
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BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
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DEC. 31 April 2
1995 1995
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................ $ 8,498 $13,140
Cash in escrow - current portion......... 106 106
Marketable securities.................... 3,838 6,310
Accounts receivable-net.................. 16,479 14,067
Installment receivables-Current Portion.. 1,595 150
Inventories.............................. 3,794 3,126
Other.................................... 787 453
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Total current assets................... 35,097 37,352
PROPERTY AND EQUIPMENT-NET................. 4,062 3,709
NOTE RECEIVABLE............................ 8,700 8,700
CAPITALIZED SOFTWARE - NET................. 5,951 3,917
CASH IN ESCROW - NET OF CURRENT PORTION.... 1,415 757
INSTALLMENT RECEIVABLES - NET OF CURRENT
PORTION.................................. 1,677 49
GOODWILL - NET............................. 1,967 -
OTHER...................................... 886 842
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TOTAL.................................. $59,755 $55,326
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</TABLE>
See accompanying Notes to Financial Statements
2
<PAGE>
BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNAUDITED
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DEC. 31 April 2
1995 1995
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable...................... $ 5,864 $ 2,932
Accrued expenses...................... 6,507 6,437
Deferred revenue...................... 4,828 3,863
Notes Payable......................... 999 -
Current portion of long-term debt..... 151 151
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Total current liabilities........... 18,349 13,383
LONG-TERM DEBT.......................... 8,863 8,976
SHAREHOLDERS' EQUITY
Common stock--authorized, 30,000,000
shares at $.05 par value; shares
outstanding at:
December 31, 1995 - 14,074,219
April 02, 1995 - 13,526,800...... 704 676
Additional paid-in-capital............ 57,242 53,231
Accumulated deficit................... (25,255) (20,747)
Deferred compensation................. (148) (193)
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Total shareholders' equity.......... 32,543 32,967
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Total............................... $ 59,755 $ 55,326
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</TABLE>
See accompanying Notes to Financial Statements
3
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STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
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DEC. 31 Jan. 1
1995 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss).................................. $(4,508) $ 7,082
Adjustments to reconcile net income (loss)
to net cash from operations:
Depreciation and amortization.................... 2,745 3,299
Other Charges.................................... 5,820 -
Accounts receivable.............................. (1,068) (2,711)
Installment receivables.......................... (96) 684
Inventories...................................... (668) (378)
Other assets..................................... (234) 10
Accounts payable................................. (393) (137)
Accrued expenses................................. (360) 1,506
Deferred Revenue................................. 965 4,713
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Net cash flows provided by operating activities 2,203 14,068
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INVESTING ACTIVITIES:
Purchase of Company (net of cash acquired)......... (4,547) -
Purchases of marketable securities................. (5,854) (5,546)
Maturities of marketable securities................ 8,325 5,769
Purchases of property and equipment................ (1,235) (1,169)
Capitalized software............................... (2,428) (1,784)
Change in cash held in escrow...................... (658) 81
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Net cash flows used in investing
activities..................................... (6,397) (2,649)
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FINANCING ACTIVITIES:
Debt transactions:
Repayments....................................... (112) (102)
Capital transactions:
Stock options exercised.......................... 450 715
Stock repurchased by Company..................... (786) -
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Net cash flows (used in)/provided
by financing activities.......................... (448) 613
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Net increase (decrease) in cash and
cash equivalents................................. (4,642) 12,032
Beginning cash and cash equivalents.................. 13,140 2,040
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Ending cash and cash equivalents..................... $ 8,498 $14,072
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Supplemental disclosures of cash flow information:
Cash paid for interest............................. $ 613 $ -
Cash paid for income taxes......................... 275 70
</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 April 2, 1995.
2. EARNINGS PER SHARE
Earnings per common and common equivalent shares was computed by dividing
net income/(loss) by the weighted average number of shares of common stock
outstanding plus common stock equivalents (if applicable).
3. INVENTORIES
Inventories consisted of: (Dollars in thousands)
DEC. 31 April 2
1995 1995
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Raw material $ 749 $ 499
Work-in-process 1,239 1,161
Finished goods 1,806 1,466
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$3,794 $3,126
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4. ACQUISITION OF BLUELINE SOFTWARE INC.
Effective the close of business on June 30, 1995, the Company purchased the
stock of BlueLine Software Inc. The total purchase price was $8,750,000 of
which approximately 50% was paid in cash and 50% was in issued Apertus
common stock. BlueLine develops and markets a suite of products for the
centralized management of enterprise networks. The acquisition was accounted
for under the purchase method with the operations of BlueLine included in
the financial statements from the date of acquisition. The acquisition,
based on preliminary information, resulted in goodwill which is being
amortized on a straight-line basis over 7 years. The purchase included a
charge to earnings in the first quarter of fiscal 1996 of $5,390,000 related
to the write-down of purchased research and development and other
acquisition costs.
5. OTHER CHARGES
Other charges of $5,820,000 includes $5,390,000 of purchased R&D related to
the BlueLine acquisition. Additionally, the Company recorded a charge to
earnings of $430,000 for the closure of an office in Oregon.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
RESULTS OF OPERATIONS
Net revenues for the three month period ending December 31, 1995 decreased $665
thousand (-4.8%) over the comparable period from the prior year. Net revenues
for the nine month period ending December 31, 1995 decreased $1.4 million
(-3.5%) over the comparable period from the prior year. The revenue decreases
in the three and nine month periods are associated with a softening in the
market for the Company's traditional network connectivity products and a
lengthening sales cycle for certain key accounts. As a result, the Company
expects modest growth in revenue over the next year.
Growth in the international marketplace has offset some of the decline in the
domestic arena and resulted in 28% and 16% of total revenues for the three month
period ending December 31, 1995 and January 1, 1995 respectively. Total revenue
for the nine month period ending December 31, 1995 and January 1, 1995 included
30% and 13% respectively of international revenue. The Company expects the
international component of revenue to remain at current levels for the balance
of the current fiscal year.
Cost of revenues, as a percentage of revenue, was 34% and 31% for the three and
nine month periods ended December 31, 1995 as compared to 28% and 31% for the
three and nine month periods ended January 1, 1995. Excluding a $1.2 million
write-off of capitalized IBM software in the second quarter of the prior year,
the trend toward a higher cost of revenue reflects the payment of international
royalties associated with BlueLine revenue, profit margin pressures
internationally and the impact of lower sales volume as it relates to the fixed
overhead base. Subject to the normal business risks associated with a technology
company combined with the current mix of product sales, it is anticipated that
margins will remain at their current levels for the balance of the fiscal year.
Research, development and engineering costs as a percentage of revenue were 27%
and 24% during the three and nine month periods ending December 31, 1995
respectively as compared to 23% and 19% in the comparable period of fiscal 1995.
These increases period over period are principally attributable to the
additional development costs associated with the BlueLine acquisition coupled
with weakened sales in the connectivity marketplace. Selling, general, and
administrative costs were 49% and 42% of revenues during the three and nine
month periods ending December 31, 1995 respectively as compared to 31% and 33%
in the comparable periods of the prior year. These increases period over period
are due principally to the acquisition of BlueLine whose costs are reflected as
of July 1, 1995 coupled with increased investments in the selling and
distribution channels.
Interest income for the nine month period ended December 31, 1995 increased over
the comparable period last year due to a higher average balance in cash and
marketable securities coupled with a higher average return.
The Company calculates income tax expense based on an alternative minimum tax
computation done quarterly.
6
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At the end of the third quarter the Company announced changes in both
organization and product direction. The Company outlined a new organization
structure moving from a multiple business unit model to a functional
organization with new corporate vice presidents of sales, marketing and
development reporting directly to the CEO. The Company is shifting its product
focus from the mature network connectivity products to newer data and
application management products. The next year is expected to be one of modest
growth in both revenue and profitability during the transition.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and marketable securities were $13,857,000 and
$20,313,000 at December 31, 1995 and April 2, 1995, respectively. The Company
currently anticipates making capital expenditures of $600 thousand during the
fourth quarter of fiscal year 1996. These capital expenditures will relate to
research and development, data processing, software and leasehold improvements
in the New York and Minnesota facilities. The company has repurchased 90,500
shares of common stock in the open market which are to be retired. Additionally,
the Company believes that the current cash on hand plus the cash to be generated
from its operations in FY'97 will be adequate to cover the projected cash needs
for working capital and capital expenditures in FY'97.
7
<PAGE>
PART I. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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None
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
A vote to approve the employee stock purchase plan was approved
at the Annual Meeting of Shareholders held in July of 1995.
A vote to approve a resolution to change the Company's Savings and
Investment Plan ("Plan") trustee from Marshall & Illsley to
Piper Jaffray was unanimously approved.
ITEM 4. OTHER INFORMATION
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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A form 8-K outlining the BlueLine acquisition was filed in July,
1995. This filing included financial statements of the business
acquired and pro-forma consolidated statements as of March 31, 1995.
8
<PAGE>
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: February 14, 1996 By /s/ Sue Hogue
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Sue Hogue
Chief Financial Officer
Corporate V.P. Administration
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> MAR-31-1996 APR-02-1995
<PERIOD-START> APR-03-1995 APR-04-1994
<PERIOD-END> DEC-31-1995 JAN-01-1995
<CASH> 8,604,000 13,246,000
<SECURITIES> 3,838,000 6,310,000
<RECEIVABLES> 16,479,000 14,067,000
<ALLOWANCES> 0 0
<INVENTORY> 3,794,000 3,126,000
<CURRENT-ASSETS> 35,097,000 37,352,000
<PP&E> 4,062,000 3,709,000
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 59,755,000 55,326,000
<CURRENT-LIABILITIES> 18,349,000 13,383,000
<BONDS> 0 0
<COMMON> 704,000 676,000
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 59,755,000 55,326,000
<SALES> 39,221,000 40,630,000
<TOTAL-REVENUES> 39,221,000 40,630,000
<CGS> 12,227,000 12,731,000
<TOTAL-COSTS> 44,098,000 33,902,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (4,305,000) 7,157,000
<INCOME-TAX> (203,000) (75,000)
<INCOME-CONTINUING> (4,508,000) 7,082,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,508,000) 7,082,000
<EPS-PRIMARY> (.33) .50
<EPS-DILUTED> (.33) .50
</TABLE>
