<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 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
- ------------------------------- ------------------------------------
(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
- ---------------------------- ----------------------------------------
Class Shares outstanding on December 29, 1996
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<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Consolidated Statement of Operations - Three
and Nine Months Ended December 29, 1996 and
December 31, 1995....................................... 1
Consolidated Balance Sheets - December 29, 1996
and March 31, 1996...................................... 2-3
Consolidated Statements of Cash Flows - Nine
Months Ended December 29, 1996 and
December 31, 1995....................................... 4
Notes to Financial Statements........................... 5-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations................................... 7
Liquidity and Capital Resources......................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.............................. 9
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ITEM 2. CHANGES IN SECURITIES.......................... 9
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES................ 9
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS............................... 9
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ITEM 5. OTHER INFORMATION.............................. 9
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 9
--------------------------------
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ ------------------
DEC 29 Dec 31 DEC 29 Dec 31
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
REVENUES
Sales...................... $ 6,802 $ 10,073 $ 22,323 $ 30,400
Rentals and services....... 2,228 2,971 7,721 8,821
------- -------- -------- --------
TOTAL........................ 9,030 13,044 30,044 39,221
COSTS AND EXPENSES
Cost of revenues........... 3,735 4,988 11,111 13,776
Research, development
and engineering.......... 2,429 3,065 6,959 7,973
Selling, general and
administrative........... 5,642 6,376 16,679 16,529
Other charges.............. - - - 5,820
------- -------- -------- --------
TOTAL........................ 11,806 14,429 34,749 44,098
INCOME (LOSS) FROM
OPERATIONS................. (2,776) (1,385) (4,705) (4,877)
Interest Expense............. (21) - (59) -
Interest Income.............. 100 155 353 572
Income Tax Expense........... (50) (100) (150) (203)
------- -------- -------- --------
NET INCOME (LOSS)............ $(2,747) $ (1,330) $ (4,561) $ (4,508)
======= ======== ======== ========
EARNINGS PER SHARE
Net Income / (Loss)........ $ (.19) $ (.09) $ (.32) $ (.33)
======= ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING................ 14,120,000 14,014,000 14,095,000 13,858,000
========== ========== ========== ==========
</TABLE>
See accompanying Notes to Financial Statements.
1
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CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
UNAUDITED
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DEC 29 March 31
1996 1996
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<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............... $ 6,713 $ 5,455
Cash in escrow.......................... 793 1,539
Marketable securities................... - 4,318
Accounts receivable - net............... 15,439 14,216
Current portion of installment
receivables - net..................... 270 1,018
Note receivable......................... - 8,700
Inventories............................. 3,456 3,881
Other................................... 440 388
-------- ------
Total current assets.................. 27,111 39,515
PROPERTY AND EQUIPMENT - NET.............. 4,346 5,005
CAPITALIZED SOFTWARE - NET................ 6,633 6,286
INSTALLMENT RECEIVABLES - NET OF CURRENT
PORTION................................. 1,234 1,310
GOODWILL - NET............................ 1,493 1,697
OTHER..................................... - 876
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TOTAL................................. $40,817 $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
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DEC 29 March 31
1996 1996
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable...................... $ 4,223 $ 5,100
Accrued expenses...................... 6,583 6,029
Deferred revenue...................... 3,930 4,255
Notes payable......................... 1,000 1,000
Current portion of long-term debt..... - 8,976
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Total current liabilities........... 15,736 25,360
SHAREHOLDERS' EQUITY
Common stock--authorized, 30,000,000
shares at $.05 par value; shares
outstanding at:
December 29, 1996 - 14,119,988
March 31, 1996 - 14,028,455...... 706 701
Additional paid-in-capital............ 57,313 57,062
Accumulated deficit................... (32,798) (28,237)
Deferred compensation................. (140) (197)
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Total shareholders' equity.......... 25,081 29,329
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Total............................... $ 40,817 $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>
Nine Months Ended
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DEC 29 Dec 31
1996 1995
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................ $(4,561) $(4,508)
Adjustments to reconcile net income
to net cash from operations:
Depreciation and amortization................... 3,524 2,745
Other charges................................... - 5,820
Accounts receivable............................. (1,223) (1,068)
Installment receivables......................... 824 (96)
Inventories..................................... 425 (668)
Other assets.................................... 824 (234)
Accounts payable, accrued expenses, deferred
revenue and income taxes...................... (648) 212
-------- --------
Net cash flows from, (used in) operating
activities.................................... (835) 2,203
-------- --------
INVESTING ACTIVITIES:
Purchase of Company (net of cash acquired)........ - (4,547)
Purchases of marketable securities................ - (5,854)
Maturities of marketable securities............... 4,318 8,325
Purchases of property and equipment............... (589) (1,235)
Capitalized software.............................. (2,361) (2,428)
Note Receivable................................... 8,700 -
Change in cash held in escrow..................... 746 (658)
-------- --------
Net cash flows from, (used in) investing
activities....................................... 10,814 (6,397)
-------- --------
FINANCING ACTIVITIES:
Debt transactions:
Repayments...................................... (8,976) (112)
Capital transactions:
Stock repurchased by Company.................... - (786)
Stock options exercised......................... 255 450
-------- --------
Net cash flows from, (used in) financing
activities...................................... (8,721) (448)
-------- --------
Net increase (decrease)in cash and
cash equivalents.................................. 1,258 (4,642)
Beginning cash and cash equivalents................. 5,455 13,140
-------- --------
Ending cash and cash equivalents.................... $ 6,713 $ 8,498
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest............................ $ 203 $ 613
Cash paid (received) for income taxes............. 72 275
</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 nine month periods ended December 29, 1996 and December
31, 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>
DEC 29 March 31
1996 1996
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<S> <C> <C>
Raw material $ 954 $ 652
Work-in-process 1,248 1,542
Finished goods 1,254 1,687
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$3,456 $3,881
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</TABLE>
5. SALE OF MQVIEW PRODUCT LINE.
On January 10, 1997, Apertus Technologies Incorporated (the "Company") sold
its MQView product line to Candle Corporation, a California corporation
("Candle"). As a result of the sale, Candle paid to the Company $7,400 in
cash for assets, including technology, intellectual property, hardware,
software and goodwill, related to the Company's MQView product. The results
of this transaction will be reflected in the Company's fourth quarter
earnings release.
5
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6. SALE OF LAND.
During the second quarter of fiscal 1997 Apertus sold land which was
adjacent to the former headquarters for approximately $700. This land was
not included in the original sale of the former headquarters property to
Best Buy (see note 7).
7. 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.
8. 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.
9. 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 8) and the closing of a West coast location.
6
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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 and nine month periods ended December 29,1996
decreased $4,014 or 31% and $9,177 or 23% from the comparable periods of
fiscal 1996. These decreases were due primarily to two factors. First, sales of
the Company's more mature connectivity products declined for the three and nine
month periods to 39% and 38% of total revenues from 46% and 49% for the
comparable periods of fiscal 1996. This is further evidenced by the decline in
international revenues for the three and nine month periods to 12% and 20%
from 28% and 30% for the comparable periods of fiscal 1996. Second, revenue
associated with the conclusion of a large GTE license and professional services
contract was recognized in the first half of fiscal 1996.
The cost of revenues for the three and nine months ended December 29, 1996,
while declining in real dollars, increased as a percentage of revenues to 41%
and 37% from 38% and 35% in the comparable periods of fiscal 1996. These
increases were also due primarily to two factors. First, the GTE license
revenue referred to above was recognized in the first half of fiscal 1996 and
had minimal associated costs. Second, while revenues related to the mature
connectivity products declined, certain fixed expenses did not correspondingly
decline yielding an increase in the percentage of costs to revenues.
Research, development, and engineering costs for the three and nine month
periods ended December 29, 1996, while declining in real dollars, increased as a
percentage of revenue to 27% and 23% as compared with 23% and 20% in the
comparable periods of fiscal 1996. These increases are due principally to the
decline in revenues noted above. A further contributing factor was the addition
of BlueLine R&D expenses included in operations for the full nine month period
in fiscal 1997 but only for the period after acquisition (6/30/95) or six months
in fiscal 1996. In contrast, the reduction in expenses associated with the
revamping of the Company at the end of fiscal 1996 helps offset some of this
increase.
Selling, general, and administrative costs declined in dollar terms for the
quarter but increased for the nine month period ended December 29,1996. These
costs represented 62% and 56% of revenues in the three and nine month periods
ended December 29, 1996 as compared to 49% and 42% in the comparable periods of
fiscal 1996. This increase reflects the additional costs associated with the
BlueLine acquisition which are reflected for the full nine month period in
fiscal 1997 but only for the period after acquisition(6/30/95) or six months in
fiscal 1996. This result is further exacerbated by the decline in revenues.
Interest income decreased due to a lower average balance in cash and marketable
securities between periods.
7
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash, cash equivalents and marketable securities were $7,506 and $11,312 at
December 29, 1996 and March 31, 1996 respectively. The Company currently
anticipates making capital expenditures of approximately $100 during the rest of
fiscal year 1997. These capital expenditures will relate 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. Additionally, the Company sold its MQView product to Candle in
the fourth quarter of fiscal 1997. This sale generated $7,400 of cash which will
be reflected in the fourth quarter results (see note 5).
8
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
None
ITEM 2. CHANGES IN SECURITIES
- ------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
ITEM 5. OTHER INFORMATION
- --------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
In January 1997 the Company filed an 8-K related to the sale of its
MQView product line to Candle. The results of this transaction will be
reflected in Apertus' fourth quarter earnings.
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.
9
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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: February 11, 1997 By /s/Sue Hogue
-------------
Sue Hogue
Vice President Finance
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<CASH> 7,506
<SECURITIES> 0
<RECEIVABLES> 16,655
<ALLOWANCES> 1,216
<INVENTORY> 3,456
<CURRENT-ASSETS> 27,111
<PP&E> 16,274
<DEPRECIATION> 11,928
<TOTAL-ASSETS> 40,817
<CURRENT-LIABILITIES> 15,736
<BONDS> 1,000
0
0
<COMMON> 58,019
<OTHER-SE> (32,938)
<TOTAL-LIABILITY-AND-EQUITY> 40,817
<SALES> 6,802
<TOTAL-REVENUES> 9,030
<CGS> 3,735
<TOTAL-COSTS> 11,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (21)
<INCOME-PRETAX> (2,697)
<INCOME-TAX> (50)
<INCOME-CONTINUING> (2,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,747)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
