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
For the quarter ended MARCH 30, 2000 Commission File No. 0-10394
DATA I/O CORPORATION
(Exact name of registrant as specified in its charter)
Washington 91-0864123
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10525 Willows Road N.E., Redmond, Washington, 98052
(address of principal executive offices, Zip Code)
(425) 881-6444
(Registrant's telephone number, including area code)
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
7,373,439 shares of no par value Common Stock outstanding as of April 28, 2000
Page 1 of 17
Exhibit Index on Page 17
DATA I/O CORPORATION
FORM 10-Q
For the Quarter Ended March 30, 2000
INDEX
Part I - Financial Information Page
Item 1. Financial Statements (unaudited) 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Part II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
Exhibit Index 16
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DATA I/O CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Mar. 30, Dec. 30,
2000 1999
- -----------------------------------------------------------------------------------------------------------------------
(in thousands, except share data) (unaudited) (note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,738 $3,597
Marketable securities 8,955 9,614
Trade accounts receivable, less allowance for
doubtful accounts of $442 and $464 5,585 5,548
Inventories 7,379 6,237
Recoverable income taxes 203 205
Other current assets 394 545
----------- -------------
TOTAL CURRENT ASSETS 24,254 25,746
Property, plant and equipment - net 1,994 2,180
Other assets 1,866 2,124
----------- -------------
TOTAL ASSETS $28,114 $30,050
=========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $1,778 $1,592
Accrued compensation 2,088 2,080
Deferred revenue 2,657 2,626
Other accrued liabilities 2,218 2,204
Accrued costs of business restructuring 433 493
Income taxes payable 541 572
----------- -------------
TOTAL CURRENT LIABILITIES 9,715 9,567
Deferred gain on sale of property 2,342 2,425
----------- -------------
TOTAL LIABILITIES 12,057 11,992
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock -
Authorized, 5,000,000 shares, including
200,000 shares of Series A Junior Participating
Issued and outstanding, none - -
Common stock, at stated value -
Authorized, 30,000,000 shares
Issued and outstanding, 7,371,813
and 7,290,165 shares 17,951 17,813
Retained earnings (1,774) 366
Accumulated other comprehensive income (loss) (120) (121)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 16,057 18,058
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $28,114 $30,050
============ =============
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE>
DATA I/O CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Mar. 30, Apr. 01,
For the quarters ended 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)
<S> <C> <C>
Net sales $6,602 $7,758
Cost of goods sold 3,944 4,101
------------ ------------
Gross margin 2,658 3,657
Operating expenses:
Research and development 2,421 2,008
Selling, general and administrative 2,528 2,968
------------ ------------
Total operating expenses 4,949 4,976
------------ ------------
Operating loss (2,291) (1,319)
Non-operating income (expense):
Interest income 176 269
Interest expense (9) (10)
Foreign currency exchange (3) (1)
Net gain on dispositions - 1,113
------------ ------------
Total non-operating income (expense) 164 1,371
------------ ------------
Income (loss) from continuing operations before income taxes (2,127) 52
Income tax expense 13 14
------------ ------------
Income (loss) from continuing operations (2,140) 38
Income from discontinued operations, net of taxes - 326
------------ ------------
Net income (loss) ($2,140) $364
============ ============
Basic and diluted earnings (loss) per share:
From continuing operations ($0.29) $0.01
From discontinued operations - 0.04
------------ ------------
Total basic and diluted earnings (loss) per share ($0.29) $0.05
============ ============
Weighted average shares outstanding 7,347 7,221
============ ============
Weighted average and potential shares outstanding 7,347 7,248
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE>
DATA I/O CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Mar. 30, Apr. 01,
For the quarters ended 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Income (loss) from continuing operations ($2,140) $38
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating activities:
Depreciation and amortization 527 533
Net loss on dispositions - (1,113)
Equity earnings from investee - (42)
Deferred income taxes - (202)
Deferred revenue 31 (321)
Amortization of deferred gain on sale (83) (83)
Net change in:
Trade accounts receivable (37) 55
Inventories (1,142) (2,201)
Recoverable income taxes 2 (79)
Other current assets 151 296
Business restructure (60) (892)
Accounts payable and accrued liabilities 178 (2,877)
----------- --------------
Cash used in operating activities of continuing operations (2,573) (6,888)
Cash provided by operating activities of discontinued operations - 326
----------- --------------
Net cash used in operating activities (2,573) (6,562)
INVESTING ACTIVITIES:
Additions to property, plant and equipment (83) (284)
Additions to other assets - -
Proceeds on sale of subsidiary - 72
Purchases of marketable securities (2,340) (588)
Proceeds from sales of marketable securities 2,999 4,688
----------- --------------
Cash provided by investing activities 576 3,888
FINANCING ACTIVITIES:
Sale of common stock 82 106
Proceeds from exercise of stock options 56 -
----------- --------------
Cash provided by in financing activities 138 106
Decrease in cash and cash equivalents (1,859) (2,568)
Effects of exchange rate changes on cash - (109)
Cash and cash equivalents at beginning of year 3,597 4,008
----------- --------------
Cash and cash equivalents at end of year $1,738 $1,331
=========== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $10 $88
Income taxes $38 $50
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE>
DATA I/O CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - FINANCIAL STATEMENT PREPARATION
The financial statements as of March 30, 2000 and April 1, 1999, have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (SEC). These statements are unaudited but, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments and accruals) necessary to present fairly the results for the
periods presented. The balance sheet at December 30, 1999 has been derived
from the audited financial statements at that date. Certain information an
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to such SEC rules and regulations.
Operating results for the quarter ended March 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending
December 28, 2000. These financial statements should be read in conjunction with
the annual audited financial statements and the accompanying notes included in
the Company's Form 10-K for the year ended December 30, 1999.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 ('SAB 101'), Revenue Recognition in Financial
Statements. SAB 101 was amended by SAB 101A which delayed the implementation
date of SAB 101 for calendar year end reporting companies, including
Data I/O Corporation, to the quarter ending June 29, 2000. The Company is
currently evaluating SAB 101 and is uncertain as to what impact, if any, SAB 101
will have on its revenues and results of operations for the quarter ending
June 29, 2000 and subsequent periods. The impact of SAB 101, if any, will be
reported as a change in accounting principle in accordance with FASB Statement
No. 3, and will be reflected in the Company's results of operations for the six
months ended June 29, 2000.
NOTE 2 - INVENTORIES
Inventories consisted of the following components (in thousands):
Mar. 30, Dec. 30,
2000 1999
------------ --------------
Raw material $3,146 $2,567
Work-in-process 2,662 1,665
Finished goods 1,571 2,005
------------ --------------
$7,379 $6,237
============ ==============
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following components
(in thousands):
Mar. 30, Dec. 30,
2000 1999
------------- ---------------
Building and improvements $ 196 $ 179
Equipment 12,023 2,030
------------- ---------------
12,219 12,209
Less accumulated depreciation 10,225 10,029
------------- ---------------
$ 1,994 $ 2,180
============= ===============
Page 6
<PAGE>
NOTE 4 - DISCONTINUED OPERATIONS
In November 1997 the Company entered into a licensing agreement and an
agreement to sell certain assets of its Synario Design Automation Division to
MINC Washington Incorporated. This transaction discontinued the Synario
Design Automation Division operations of the Company. However, the Company
received certain licensing revenues related to its Synario, ABEL and ECS
products through the second quarter 1999, and recognized net earnings of
$326,000 from source code sales and training and support services provided
during the first quarter 1999. Operating results of this discontinued division
are classified as discontinued operations in the financial statements.
NOTE 5 - BUSINESS RESTRUCTURING PROGRESS
During the third quarter of 1998, the Company recorded a restructuring charge of
$2.0 million as the Company began the implementation of a plan to restructure
its Redmond and foreign subsidiary operations to a level more in line with the
lower sales it was experiencing. During the fourth quarter of 1998, the Company
recorded further restructuring charges of $2.4 million related to the continuin
restructure of the Company's Redmond operations and foreign subsidiaries and
related to activities directly associated with the fourth quarter 1998
acquisition of SMS Holding GmbH ('SMS'). The acquisition of SMS created certain
redundancies in product offerings and in the operations of the combined company.
A restructuring plan was implemented after the acquisition was completed to
eliminate such redundant operations and to phase out overlapping products.
The total number of employees terminated due to the restructure was 133
(approximately 39% of the total workforce). Employees were terminated from
almost all areas of the Company. Total involuntary termination benefits paid
and charged against the restructure reserve were approximately $2.0 million.
Total facility consolidation and abandonment costs incurred and charged against
the restructure reserve were approximately $280,000. Other exit costs paid and
charged against the restructure reserve, including legal and consulting fees,
settlements with suppliers and fixed asset disposals, were approximately $1.7
million. The remaining reserve at March 30, 2000 of $433,000 relates primarily
to facility abandonment and foreign subsidiary operations realignment. With the
exception of payments on abandoned leased space, all reserve amounts are
expected to be paid out by the end of 2000.
NOTE 6 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share (in thousands except per share data):
<TABLE>
<CAPTION>
For the first quarter
2000 1999
------------- -------------
<S> <C> <C>
Numerator for basic and diluted earnings per share:
Income from continuing operations ($2,140) $38
Income from discontinued operations - 326
------------- -------------
Net income (loss) ($2,140) $364
============= =============
Denominator:
Denominator for basic earnings per share -
weighted-average shares 7,347 7,221
Employee stock options (1) - 27
------------- -------------
Denominator for diluted earnings per share -
adjusted weighted-average shares and
assumed conversion of stock options 7,347 7,248
============= =============
Basic earnings (loss) per share
From continuing operations ($0.29) $0.01
From discontinued operations 0.00 0.04
------------- -------------
Total basic earnings per share ($0.29) $0.05
============= =============
Diluted earnings (loss) per share
From continuing operations ($0.29) $0.01
From discontinued operations 0.00 0.04
------------- -------------
Total diluted earnings per share ($0.29) $0.05
============= =============
(1) Excludes 249,395 employee stock options which were antidilutive in the
first quarter of 2000.
</TABLE>
Page 7
<PAGE>
NOTE 7 - ACCOUNTING FOR INCOME TAXES
The Company's effective tax rate for the first quarter of 2000 differed from the
statutory 34% tax rate primarily due to operating losses for which no tax
benefit was recorded. Tax valuation reserves increased by approximately $686,000
during the quarter. As of March 30, 2000 the Company has valuation reserves of
$7,602,000.
NOTE 8 - COMPREHENSIVE INCOME
During the first quarter of 2000 and 1999 total comprehensive income (loss) was
comprised of the following (in thousands):
For the First Quarter
2000 1999
------------- ------------
Net income (loss) ($2,140) $ 364
Foreign currency translation gain 1 22
------------ ------------
Total comprehensive income (loss) ($2,139) $ 386
============ ============
Page 8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. This Act
provides a 'safe harbor' for forward-looking statements to encourage companies
to provide prospective information about themselves as long as they identify
these statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results. All statements other than statements of historical fact made
in this Quarterly Report on Form 10-Q are forward looking. In particular,
statements herein regarding industry prospects; future results of operations or
financial position; integration of acquired products and operations; market
acceptance of the Company's newly introduced or upgraded products; development,
introduction and shipment of new products; and any other guidance on future
periods are forward-looking statements. Forward-looking statements reflect
management's current expectations and are inherently uncertain. The Company's
actual results may differ significantly from management's expectations.
The following discussions and discussions under the caption
"Business - Cautionary Factors That May Affect Future Results" in Item 1
in the Company's Annual report on Form 10-K for the year ended December 30,1999,
describe some, but not all, of the factors that could cause these differences.
Results of Continuing Operations
For all periods presented, results of operations reflect the classification of
the Company's Synario Design Automation Division as discontinued operations
(see "Discontinued Operations").
Net Sales
<TABLE>
<CAPTION>
(in thousands) First Quarter First Quarter
Net Sales by Product Line: 2000 Change 1999
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Non-automated programming systems $4,331 (21.5%) $5,516
Automated programming systems 2,271 1.3% 2,242
------------------ ------------------- ------------
Total Programming Systems Division $6,602 (14.9%) $7,758
================== =================== ==============
Net Sales by location:
United States $2,593 (25.1%) $3,462
% of total 39.3% 44.6%
International $4,009 (6.7%) $4,296
% of total 60.7% 55.4%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Sales decreased but orders increased in the first quarter of 2000 compared to
the first quarter of 1999. Orders in the first quarter of 2000 increased
approximately 15% to $10.7 million, compared with $9.3 million in 1999. The
increase in orders during the first quarter of 2000 is primarily due to higher
orders for the PP100 automated programming systems, offset partially by
decreased orders for the Company's non-automated programming systems. The higher
orders for the PP100 products are due primarily to the introduction of the
Company's new FlashTOP product that was introduced in February 2000.
Revenues for the first quarter 2000 were believed to be negatively impacted by
the announcement of three new products during the quarter: FlashTOP, as
mentioned above, TaskLink for Multisyte and Optima, and the ProLINE-RoadRunner.
The negative impact relates to customers delaying orders until the new products
were released or where new product production
Page 9
<PAGE>
was just beginning so they were unavailable for delivery during the first
quarter. The Company expects that it will be able to ship most of the orders
booked during the first quarter in the second quarter.
The introduction of three new products during the first quarter, as listed
above, should result in higher orders and sales during subsequent quarters.
However, there can be no assurance that these new products will be accepted in
the market and will result in higher orders and sales in future quarters.
Gross Margin
<TABLE>
<CAPTION>
(in thousands) First Quarter First Quarter
2000 Change 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross Margin $2,658 (27.3%) $3,657
Percentage of net sales 40.3% 47.1%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Gross margin percentage for the first quarter of 2000 decreased compared to the
first quarter of 1999 due primarily to the lower sales volume. The relatively
high fixed component of cost of goods sold causes any shift in total volume to
have a significantimpact on gross margin. Also, the manufacturing organization
realized inefficiencies during the quarter as it prepared for the introduction
of the Company's new products introduced during the first quarter.
Research and Development
<TABLE>
<CAPTION>
(in thousands) First Quarter First Quarter
2000 Change 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Research and development $2,421 20.6% $2,008
Percentage of net sales 36.7% 25.9%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
The increase in research and development spending for the first quarter of 2000
as compared to the first quarter of 1999 is primarily due to increased headcount
as the Company continued its higher rate of investment in new product
development, including ProLINE-RoadRunner, FlashTOP and Tasklink, which were
introduced during the quarter, and in the enhancement of the Sprint and PP100
products, as well as in enhanced device support processes. Spending in research
and development is expected to continue at this rate during the remainder of
2000 as the Company continues to invest in new product development and new
technologies.
Selling, General and Administrative
<TABLE>
<CAPTION>
(in thousands) First Quarter First Quarter
2000 Change 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Selling, general & administrative $2,528 (14.8%) $2,968
Percentage of net sales 38.3% 38.2%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in selling, general and administrative expenditures in the first
quarter of 2000 as compared with the first quarter of 1999 is due primarily to
lower sales commissions paid on lower sales volume, to lower facility costs due
to subletting of a portion of the Company's leased space in its Redmond
facility, and to lower employee benefit costs due to lower overall headcount.
Also, the sale of the Company's Japan subsidiary in February 1999 resulted in
lower spending in selling, general and administrative expenses as compared to
the first quarter of 1999.
Page 10
<PAGE>
Interest
<TABLE>
<CAPTION>
(in thousands) First Quarter First Quarter
2000 Change 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $176 (34.6%) $269
Interest expense $9 (10.0%) $10
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in interest income for the first quarter of 2000 as compared to the
first quarter of 1999 is due to the decrease in cash, cash equivalents and
marketable securities, due primarily to the funding of operating losses during
the past four quarters.
Net Gain on Dispositions - Sale of Japan Subsidiary
In connection with the Company's restructuring, during the first quarter of 1999
the Company sold its Japan sales subsidiary to Synchro-Work Corporation, one of
its sub-distributors in Japan, for total consideration of approximately
$100,000. The sale resulted in a gain before taxes of approximately $1,113,000
primarily due to previously unrecognized accumulated currency translation. In
connection with this sale, the Company and Synchro-Work also entered into a new
distribution agreement for sales into Japan. See 'Business Restructuring
Progress.'
Income Taxes
<TABLE>
<CAPTION>
(in thousands First Quarter First Quarter
2000 1999
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense $13 $14
Effective tax rate 0.6% 26.9%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
Tax expense recorded for the first quarter of 2000 was due to foreign taxes.
The Company's effective tax rate for the first quarter of 2000 differed from the
statutory 34% tax rate primarily due to operating losses for which no tax
benefit was recorded. Tax valuation reserves increased by approximately $686,000
during the quarter. As of March 30, 2000 the Company has valuation reserves
of $7,602,000.
Net Income and Earnings Per Share
<TABLE>
<CAPTION>
First Quarter First Quarter
(in thousands except per share data) 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income (loss) from continuing operations ($2,140) $38
Percentage of net sales (32.4%) 0.5%
Basic and diluted earnings (loss) per share
from continuing operations ($0.29) $0.01
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company recognized a loss from continuing operations for the first quarter
of 2000 as compared to income from continuing operations for the first quarter
of 1999 due primarily to lower sales and the $1.1 million gain on the sale of
the Company's Japan subsidiary recognized in the first quarter of 1999.
Page 11
<PAGE>
Business Restructuring Progress
During the third quarter of 1998, the Company recorded a restructuring charge of
$2.0 million as the Company began the implementation of a plan to restructure
its Redmond and foreign subsidiary operations to a level more in line with the
lower sales it was experiencing. During the fourth quarter of 1998, the Company
recorded further restructuring charges of $2.4 million related to the
continuing restructure of the Company's Redmond operations and foreign
subsidiaries and related to activities directly associated with the fourth
quarter 1998 acquisition of SMS Holding GmbH ('SMS'). The acquisition of SMS
created certain redundancies in product offerings and in the operations of the
combined company. A restructuring plan was implemented after the acquisition was
completed to eliminate such redundant operations and to phase out overlapping
products.
The total number of employees terminated due to the restructure was 133
(approximately 39% of the total workforce). Employees were terminated from
almost all areas of the Company. Total involuntary termination benefits paid
and charged against the restructure reserve were approximately $2.0 million.
Total facility consolidation and abandonment costs incurred and charged against
the restructure reserve were approximately $280,000. Other exit costs paid and
charged against the restructure reserve, including legal and consulting fees,
settlements with suppliers and fixed asset disposals, were approximately
$1.7 million. The remaining reserve at March 30, 2000 of $433,000 relates
primarily to facility abandonment and foreign subsidiary operations realignment.
With the exception of payments on abandoned leased space, all reserve amounts
are expected to be paid out by the end of 2000.
Discontinued Operations
In November 1997 the Company entered into a licensing agreement and an agreement
to sell certain assets of its Synario Design Automation Division to MINC
Washington Incorporated. This transaction discontinued the Synario Design
Automation Division operations of the Company. However, the Company received
certain licensing revenues related to its Synario, ABEL and ECS products through
the second quarter 1999, and recognized net earnings of $326,000 from source
code sales and training and support services provided during the first quarter
1999. Operating results of this discontinued division are classified as
discontinued operations in the financial statements.
Financial Condition
Liquidity and Capital Resources
<TABLE>
<CAPTION>
Mar. 30, Dec. 30,
(in thousands) 2000 Change 1999
- ------------------------------------------------------------- --------------------- -------------------- -------------------
<S> <C> <C> <C>
Working capital $14,539 ($1,640) $16,179
Total debt $0 $0 $0
- ------------------------------------------------------------- --------------------- -------------------- -------------------
</TABLE>
Working capital decreased during the first quarter of 2000 due to funding of the
loss for the quarter. Cash, cash equivalents and marketable securities, which
decreased approximately $2.5 million during the quarter, were used to increase
inventory by approximately $1.1 million as the Company prepares for production
of its newly introduced products, and to fund operating losses in the quarter.
As of March 30, 2000, the Company had no debt outstanding. No borrowings were
outstanding under the German subsidiary line of credit and the $4.0 million U.S.
line of credit which matures in May 2000.
The Company estimates that capital expenditures for property, plant and
equipment during the remainder of 2000 will be between $1.5 and $3.5 million.
The Company believes that cash, cash equivalents and marketable securities and
cash flows expected to be generated from operations will be sufficient to meet
current and anticipated future capital expenditures. Although the Company
expects that such expenditures will be made, it has purchase commitments for
only a small portion of this amount.
At March 30, 2000, the Company's material short-term unused sources of liquidity
consisted of approximately $10.7 million in cash, cash equivalents and
marketable securities and available borrowings of approximately $400,000 under
its German subsidiary line of credit and $4.0 million under its U.S. line of
credit. The Company believes these sources and cash flow from operations will be
sufficient during 2000 to fund working capital needs and finance planned capital
acquisitions.
Page 12
Share Repurchase Program
Under a previously announced share repurchase program, the Company is authorized
to repurchase up to 1,123,800 shares (approximately 15.2%) of its outstanding
common stock. These purchases may be executed through open market purchases at
prevailing market prices, through block purchases or in privately negotiated
transactions, and may commence or be discontinued at any time. As of March 30,
2000, the Company has repurchased 1,016,200 shares under this repurchase program
at a total cost of approximately $7.1 million. The Company has not repurchased
shares under this plan since the second quarter of 1997 although it still has
the authority to do so.
General
Impact of Year 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $300,000 through December 30, 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the products and services of third parties. The Company will continue to
monitor its mission critical computer applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
European monetary conversion
On January 1, 1999, the European Economic and Monetary Union (the 'EMU')
introduced the Euro, which became a functional legal currency of the EMU
countries. From 1999 to 2001 business in the EMU member states has been and
will be conducted in both the existing national currency, such as the Franc or
Deutsche Mark, and the Euro.
The Company has taken certain steps to ensure that its financial and other
software systems are capable of processing transactions and properly handling
EMU currencies, including the Euro. The Company will continue to assess what
further impact the EMU formation will have on both its internal systems and its
products sold. The costs related to addressing this issue have not been
determined, however, management believes that this issue and its related costs
will not have a material adverse effect on the Company's business,
financial condition and operating results.
Page 13
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
(a) Exhibits
None
(b) Reports on Form 8-K
None
Page 14
<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.
DATA I/O CORPORATION
(REGISTRANT)
DATED: May 10, 2000
By://S//Joel S. Hatlen
----------------------
Joel S. Hatlen
Vice President - Finance
Chief Financial Officer
Secretary and Treasurer
Page 15
<PAGE>
EXHIBIT INDEX
Exhibit Number Title Page Number
27 Financial Data Schedule which is submitted 17
electronically to the Securities and
Exchange Commission for information purposes
only and not filed.
Page 16
[TYPE] EX-27
[DESCRIPTION] FDS--
[ARTICLE] 5
[CIK] 0000351998
[NAME] Data I/O Corporation
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-28-2000
[PERIOD-START] DEC-31-1999
[PERIOD-END] MAR-30-2000
[CASH] 1,738
[SECURITIES] 8,955
[RECEIVABLES] 6,027
[ALLOWANCES] 442
[INVENTORY] 7,379
[CURRENT-ASSETS] 24,254
[PP&E] 12,219
[DEPRECIATION] 10,225
[TOTAL-ASSETS] 28,114
[CURRENT-LIABILITIES] 9,715
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 17,951
[OTHER-SE] (1,894)
[TOTAL-LIABILITY-AND-EQUITY] 28,114
[SALES] 6,602
[TOTAL-REVENUES] 6,602
[CGS] 3,944
[TOTAL-COSTS] 4,943
[OTHER-EXPENSES] (173)
[LOSS-PROVISION] 6
[INTEREST-EXPENSE] 9
[INCOME-PRETAX] (2,127)
[INCOME-TAX] 13
[INCOME-CONTINUING] (2,140)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (2,140)
[EPS-BASIC] (.29)
[EPS-DILUTED] (.29)
</TABLE>
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