<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: April 28, 1995
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: 0-11552
TELEVIDEO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2383795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2345 Harris Way, San Jose, California 95131
(Address of principal executive offices)
(Zip Code)
(408) 954-8333
(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
---- ----
The number of shares outstanding of registrant's Common Stock, as of April
28, 1995 is: 44,850,870.
(Consisting of 21 pages.)
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TELEVIDEO SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED APRIL 28, 1995
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I. Financial Information 3
---------------------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets -
April 28, 1995 and October 31, 1994 4
Condensed Consolidated Statements of
Operations - Three Months Ended April 28,
1995, and April 29, 1994 5
Condensed Consolidated Statements of
Operations - Six Months Ended April 28,
1995, and April 29, 1994 6
Condensed Consolidated Statements of Cash
Flows - Six Months Ended April 28, 1995,
and April 29, 1994 7
Notes to Condensed Consolidated Financial
Statements - April 28, 1995 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 14
PART II. Other Information 18
-----------------
ITEM 1. LEGAL PROCEEDINGS 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
SIGNATURES 19
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</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1995 AND 1994 QUARTERLY DATA
The condensed consolidated financial statements included herein have been
prepared by the management of TeleVideo Systems, Inc. (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, pursuant to such rules and
regulations, although the Company believes the disclosures which are made are
adequate to make the information presented not misleading. Further, the
condensed consolidated financial statements reflect, in the opinion of
management, all adjustments (which included only normal recurring adjustments)
necessary to present fairly the financial position and results of operations as
of and for the periods indicated.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's Report on Form 10-K for the fiscal year ended October
31, 1994.
The results of operations for the three and six-month period ended April 28,
1995, are not necessarily indicative of the results to be expected for the
entire fiscal year ending October 31, 1995.
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TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
April 28, October 31,
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,361 $ 2,131
(including restricted cash of
$2,500 in 1995 and $1,500 in 1994)
Marketable securities 51 68
Accounts receivable, net 2,388 2,045
Inventories 5,567 5,757
Prepayments and other 187 458
----------- ----------
Total current assets 12,554 10,459
----------- ----------
Property, plant and equipment:
Property, plant and equipment 5,321 16,419
Less accumulated depreciation (2,548) ( 6,983)
----------- ----------
Net property, plant and equipment 2,773 9,436
----------- ----------
Investment in affiliates (Note 2) 644 644
Notes and interest receivable from
related parties (Note 6) 4,361 3,506
Other assets 5,000 -
----------- ----------
Total assets $ 25,332 $ 24,045
============ ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,798 $ 1,363
Accrued liabilities 1,027 1,239
Income taxes 611 611
----------- ----------
Total current liabilities 3,436 3,213
----------- ----------
Stockholders' equity:
Common stock 449 446
Additional paid in capital 95,476 95,428
Accumulated deficit (74,029) (75,042)
----------- ----------
Total stockholders' equity 21,896 20,832
----------- ----------
Total liabilities & stockholders' equity $ 25,332 $ 24,045
============ ===========
</TABLE>
4
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TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 28, 1995 AND APRIL 29, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Net sales $ 4,022 $ 3,507
Cost of sales 3,257 2,329
---------- ----------
Gross profit 765 1,178
---------- ----------
Operating expenses:
Marketing 835 596
Research and development 531 416
General and administrative 257 403
---------- ----------
Total operating expenses 1,623 1,415
---------- ----------
Loss from operations (858) (237)
---------- ----------
Interest income 284 100
Other income 813 (182)
---------- ----------
Net income (loss) before income tax 239 (319)
Income taxes 0 (3)
---------- ----------
Net income (loss) after income tax $ 239 $ (322)
========== ==========
Net income (loss) per share $ 0.01 $ (0.01)
========== ==========
Average shares outstanding 44,823 44,589
========== ==========
</TABLE>
5
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TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 28, 1995 AND APRIL 29, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Net sales $ 6,621 $ 6,963
Cost of sales 5,136 4,924
---------- ----------
Gross profit 1,485 2,039
---------- ----------
Operating expenses:
Marketing 1,497 1,245
Research and development 965 848
General and administrative 514 815
---------- ----------
Total operating expenses 2,976 2,908
---------- ----------
Loss from operations (1,491) (869)
----------- ----------
Interest income 412 220
Other income 2,095 (56)
----------- ----------
Net income (loss) before income tax 1,016 (705)
Income taxes (1) (6)
----------- ----------
Net income (loss) after income tax $ 1,015 $ (711)
=========== ==========
Net income (loss) per share $ 0.02 $ (0.02)
=========== ==========
Average shares outstanding 44,732 44,587
=========== ==========
</TABLE>
6
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TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 28, 1995 AND APRIL 29, 1994
(In thousands)
<TABLE>
<CAPTION> 1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,014 $ (711)
Charges (credits) to operations not
affecting cash:
Depreciation 156 306
Changes in certain current assets and liab.:
Accounts receivable (343) 306
Inventories 190 (326)
Prepayments and other 270 (96)
Accounts payable 434 365
Accrued liabilities (211) (499)
Income taxes - (1,544)
----------- ----------
Net cash provided by (used in)
operating activities 1,510 (2,199)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net retirements of (additions to) property,
plant & equipment 6,507 (8)
Decrease (Increase) in other assets (5,000) (23)
Investment in marketable securities 17 2,479
Investment in affiliate - 180
Loan to affiliate (855) (3,227)
Payment received on notes receivable - 2,213
Proceeds from investment gain - -
----------- ----------
Net cash provided by (used in) investing
activities 669 1,614
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 51 2
Equity adjustment from foreign
currency translation - (8)
----------- ----------
Net cash provided by (used in)
financing activities 51 (6)
----------- ----------
Increase (decrease) in cash
and cash equivalents 2,230 (591)
----------- ----------
Cash and cash equivalents at the
beginning of the period 2,131 3,148
----------- ----------
Cash and cash equivalents at the
end of the period $ 4,361 $ 2,557
=========== ==========
</TABLE>
7
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TELEVIDEO SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 28, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The condensed consolidated financial statements include the accounts
of the Company and its majority owned subsidiaries, after elimination of
intercompany accounts and transactions.
Translation
The Company applies Statement of Financial Accounting Standards No. 52
for purposes of translating foreign currency financial statements of its
foreign subsidiaries. Translation gains and losses resulting from the
translation of foreign currency financial statements are deferred and
classified as adjustments to stockholders' equity.
Cash and Cash Equivalents
For purposes of the condensed consolidated statements of cash flows,
the Company considers all highly liquid investments with a maturity of three
months or less to be cash equivalents. Approximately $2.5 million, invested in
short term certificates of deposit, are pledged as security under a letter of
credit agreement.
Marketable Securities
Marketable securities are carried at the lower of aggregate cost or
quoted market value. The aggregate cost of marketable securities at April 28,
1995 was $76,854, while the quoted market value was $50,734. Unrealized losses
through April 28, 1995 were $26,120.
Inventories
Inventories are stated at the lower of cost or market. Costs are
computed on a currently adjusted standard basis (which approximates average
cost) for both finished goods and work-in-progress and includes material, labor
and manufacturing overhead costs. The
8
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components of inventory consist of the following (in thousands):
<TABLE>
<CAPTION>
April 28, October 31,
1995 1994
----------- -----------
<S> <C> <C>
Purchased parts $ 2,899 $ 3,562
Work-in-process 1,614 959
Finished goods 1,054 1,236
----------- -----------
$ 5,567 $ 5,757
=========== ===========
</TABLE>
Property, Plant & Equipment
Depreciation and amortization are provided over the estimated useful
lives of the assets using both straight-line and accelerated methods.
Estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings 40 years
Production equipment 1-10 years
Office furniture 1-10 years
Leasehold improvements Terms of lease
</TABLE>
Net Income (Loss) Per Share
Net income and loss per share is based on the weighted average number
of shares of Common Stock outstanding during the period.
2. ACQUISITIONS AND DIVESTITURES:
Kabil Electronics Company, Ltd.
The Company owned a 35% interest in Kabil Electronics Company, Ltd. of
South Korea. The Company had written its investment in Kabil down to zero in
the previous years due to significant losses sustained by Kabil. In December
1994, the Company accepted an offer to sell its 35% interest in Kabil to the
majority owners for $1.4 million which is to be paid in installments over the
1995 calendar year. Approximately $300,000 was received in February 1995.
AdMOS Technologies Inc.
During fiscal 1991, the Company acquired through its wholly owned
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subsidiary, Silicon Logic, Inc., a 20% equity interest in a chip engineering
firm (AdMOS Technologies Inc.) in exchange for certain assets and a nominal
cash payment, the total value of which was $145,000. The acquisition of this
interest has been accounted for on the cost method. This investment was
written off in fiscal 1992 due to the continued economic difficulties
experienced by AdMOS.
In fiscal 1991 and 1992, the Company loaned AdMOS a total of $470,000,
which has been partially repaid. The outstanding balance at April 28, 1995 was
$104,000. The repayment of a portion of this loan is personally guaranteed by
the President and controlling shareholders of AdMOS. Due to the economic
difficulties AdMOS is currently experiencing, the principal and interest
balances due on this note have been fully reserved.
In February 1995, TeleVideo further loaned AdMOS $384,000 which bears
interest at 10% per annum, for a period of six months. If AdMOS cannot repay
the loan in August 1995 when the payment is due, AdMOS will give TeleVideo the
right to purchase 1,785,714 shares of the stocks of AdMOS at $0.215 per share
which is equivalent to the principal amount of the loan.
Indigo, International
During the first quarter of fiscal 1994, the Company acquired a 40%
interest in Indigo, International in exchange for a cash investment of $25,000.
The investment is carried at cost. Indigo has incurred only minor operations
through April 28, 1995. The Company also signed a lease agreement with Indigo
which leases a total of 320 square feet space from the Company at a monthly
rental payment of $200.
Ordynka
In fiscal 1990 to 1992, the Company acquired a 50% joint venture
interest in "Ordynka" in exchange for the contribution of cash (approximately
$187,000) and obsolete inventory that was fully reserved. The purpose of the
joint venture is the renovation of an office building of 30,000 square feet
located in the city of Moscow, Russia. Construction was completed in the last
quarter of fiscal 1993. In April 1995, the building was sold and one million
dollars was sent to TeleVideo as a partial payment for the sale of the
building. The remaining balance of $1.5 million will be sent to the Company in
July 1995.
Three H
In fiscal 1992, the Company acquired a 50% joint venture interest in
"Three H" in exchange for the contribution of cash of approximately
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$16,000. In February of 1993, the Company loaned the Three H Joint Venture
$1.0 million as working capital for the purpose of conducting short term
commodities trading. The loan is unsecured and bears interest at 20% per
annum. In fiscal 1994, a total amount of $800,000 was repaid to the Company.
The remaining balance of $200,000 will be repaid to the Company in October
1995.
Nordgran, Pharmaplant and Tatiana
In November of 1993, the Company withdrew its $1.0 million investment
fund from the Nordgran Joint Venture in the Commonwealth of Independent States,
and reallocated the fund to alternate venture proposals: (a) "Pharmaplant,"
which involves the cultivation and processing of herb and ginseng products to
be sold both domestically and abroad, a proposed investment of $392,000,
represents 49% ownership of the joint venture. As of the end of April 1995,
approximately $123,288 had been contributed to the venture; (b) "Tatiana,"
which involves the manufacturing of meat/sausage food products and the
development of a two-story department store located at the suburban area of
Moscow, a proposed investment of $390,000, represents 48% ownership of the
joint venture. As of the end of April 1995, approximately $280,000 had been
contributed to the venture; and (c) approximately $392,712 was committed to the
"InterTerminal" joint venture (see below) in the form of a loan. The remaining
$204,000 was refunded to the Company in cash.
InterTerminal
The main purpose of the "InterTerminal" joint venture is the
construction of a truck terminal (approximately 100,000 square feet)
approximately 25 miles outside of Moscow. In April 1994, the Company acquired
a 51% ownership of the joint venture in exchange for a $5,100 cash investment
and a commitment to fund a $3.0 million loan, 20% interest rate, interest free
for one year, to the venture, the proceeds of which were to be used to fund
construction of the truck terminal. In the first quarter of fiscal 1995,
TeleVideo further agreed to loan the joint venture an additional $650,000 at an
interest rate of 20% per annum. As of April 28, 1995, approximately $647,000
had been loaned to the venture. The $647,000 was funded in part from the
$392,712 reallocation from the Nordgran venture noted above and the balance
from TeleVideo's cash reserves. The building was sold in May 1995 and
approximately $2.94 million was sent to the Company as the first installment.
An additional $2.28 million, which includes the principal and interest balance
of $800,000 and a profit of $1.48 million, will be sent to the Company during
the calendar year of 1995.
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At the indicated dates the Company had the following investments in
affiliates and joint ventures (in thousands):
<TABLE>
<CAPTION>
April 28, October 31,
1995 1994
----------- -----------
<S> <C> <C>
Ordynka Joint Venture $ 187 $ 187
Three H Joint Venture 16 16
Pan Asian Bank 8 8
Pharmaplant 123 123
Tatiana 280 280
InterTerminal 5 5
Indigo 25 25
----------- -----------
Total $ 644 $ 644
=========== ===========
</TABLE>
3. RESTRICTED CASH:
The Company has a letter of credit agreement with a bank whereby the
bank will issue up to $2.5 million of standby and sight letters of credit.
This agreement is contingent upon the Company maintaining cash deposits at the
bank as collateral in an amount no less than the outstanding borrowings.
These funds are held in three month certificates of deposits and earn interest
at the rate of approximately 6.06% per annum. At April 28, 1995, the Company
had letters of credit outstanding of approximately $1,363,420 which were
secured by an equivalent amount of cash deposits.
4. INCOME TAXES:
The Company adopted, effective November 1, 1993, Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes,"
issued in February 1992. Under the liability method specified by SFAS 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these
differences reverse. Deferred tax expense is the result of changes in deferred
tax assets and liabilities. The change from the deferred method to the
liability method of accounting for income taxes had no material impact on the
financial position or results of operations of the Company for the quarter
ended April 28, 1995.
The only state income tax audit issue that is still open is with the
State of Massachusetts. The Company has recorded the full amount of the
proposed state assessment and is not contesting any of the issues. The Company
has also accrued for California State income taxes that may become due as a
result of adjustments arising from prior year IRS audits. In total the Company
has accrued $600,000 to cover these potential liabilities.
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The sales tax issues relate to the audit period from April 1990
through June 1994 have been finalized. A total amount of $270,000 was paid to
the California State Board of Equalization during the first and second quarters
of fiscal 1995 for the settlement of tax liability and interest.
5. LITIGATION:
As of today, the Company does not have any pending lawsuits.
6. RELATED PARTY TRANSACTIONS:
The Company's outstanding receivables from related parties are
summarized below (in thousands):
<TABLE>
<CAPTION>
April 28, October 31,
Notes Receivable: 1995 1994
- ----------------- ----------- -----------
<S> <C> <C>
Three H Joint Venture $ 200 $ 200
InterTerminal 3,647 3,284
AdMOS 384 -
Interest Receivable:
- --------------------
Three H Joint Venture 42 22
InterTerminal 88 -
----------- -----------
Total $ 4,361 $ 3,506
=========== ===========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Operating loss for the three months ended April 28, 1995 of
approximately $858,000 was approximately 262% higher comparing with the same
period in fiscal 1994 which totaled approximately $237,000. Operating loss for
the six months ended April 28, 1995 of approximately $1.5 million was
approximately 71.6% higher comparing with the same period in fiscal 1994 which
totaled approximately $869,000, primarily the results of large amount of
investment in market planning and engineering of the multimedia products.
The net income for the second quarter of fiscal 1995 totaled
approximately $239,000, or $0.01 per share, compared to a net loss of $322,000,
or $0.01 per share, a year ago for the same three month period. The net income
for the six months ended April 28, 1995 totaled approximately $1,015,000, or
$0.02 per share, compared to a net loss of $711,000, or $0.02 per share, for
the same period a year ago. The net income for the fiscal year of 1995 was due
to: (a) a gain of $1.3 million from the sale of the Company's headquarters
located at Brokaw Road, San Jose, California in December 1994; (b) a gain of
$290,000 from the sale of the Kabil business in February 1995; and (c) a gain
of $1.0 million from the sale of the Ordynka building in April 1995 but
partially offset by a loss of $346,000 from the sale of the SMS product line in
March 1995.
Net income per share for the second quarter of fiscal 1995 was $0.01
per share based on 44,823,000 weighted average shares outstanding, compared to
a net loss of $0.01 per share based on 44,589,000 weighted average shares
outstanding in the second quarter of fiscal 1994.
Net sales for the second quarter of fiscal 1995 of approximately $4.0
million were approximately 14.7% above the same quarter a year ago which
totaled approximately $3.5 million. Net sales for the six months ended April
28, 1995 of approximately $6.6 million were approximately 4.9% below the same
period of time a year ago which totaled approximately $7.0 million. The
increase in net sales during the second quarter of fiscal 1995 was principally
attributable to the increase in the sales volume of multimedia products but
partially offset by the severe price competition, the decline in the sales of
the SMS and older terminal products, and the increase of cost of the older
terminal products. The management of the Company expects that new multimedia
products will achieve significant sales volumes in the third and fourth
quarters of fiscal 1995.
Cost of sales were approximately $3.3 million in the second quarter of
fiscal 1995, or 39.8% higher than the approximately $2.3 million reported in
the second quarter of fiscal 1994. Cost of sales in the second quarter of
fiscal 1995 compared to the same period a
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year ago increased as a percentage of sales from approximately 66.4% (in fiscal
1994) to approximately 81.0% in fiscal 1995. The increase in cost of sales
percentage and the corresponding decrease in gross margin percentage for the
three month period ended April 28, 1995 (a decrease from approximately 33.6% to
19.0%) were primarily the results of severe price competition and lower profit
margin of the multimedia products.
Cost of sales were appproximately $5.1 million for the six months
ended April 28, 1995, or 4.3% higher than the approximately $4.9 million
reported in the same period a year ago. Cost of sales also increased as a
percentage of sales from approximately 70.7% (in fiscal 1994) to approximately
77.6% in fiscal 1995.
Marketing expense increased as a percentage of sales in the second
quarter of fiscal 1995 from approximately 17.0% in fiscal 1994 to 20.8% in
fiscal 1995 on a comparative quarter-to-quarter basis, while actual marketing
expenses increased approximately 40.1% over this same three month period. On a
six month basis, marketing expense increased as a percentage of sales from
approximately 17.9% in fiscal 1994 to 22.6% in fiscal 1995, while actual
marketing expenses increased approximately 20.2%. The increase in marketing
expense percentage and actual marketing expense was due primarily to the
increase in marketing and sales staffing levels and increase in purchased
services and advertising expenses on multimedia products.
Research and development expense increased as a percentage of sales in
the second quarter of fiscal 1995 from approximately 11.9% in fiscal 1994 to
13.2% in fiscal 1995, while actual research and development expense increased
approximately 27.6% over this same three month period. On a six month basis,
research and development expense increased as a percentage of sales from
approximately 12.2% in fiscal 1994 to 14.6% in fiscal 1995, while actual
expense increased approximately 13.8%. The increase in percentage and actual
research and development expenses for the three and six months ended April 28,
1995 compared to the same period last year was due primarily to the increase in
engineering staffing levels and increase in research and development expenses
on multimedia products..
General and administrative expense decreased as a percentage of sales
in the second quarter of fiscal 1995 from approximately 11.5% in fiscal 1994 to
6.4% in fiscal 1995, while actual expenses decreased approximately 36.2% over
this same three month period. On a six month basis, general and administrative
expense decreased as a percentage of sales from appproximately 11.7% in fiscal
1994 to 7.8% in fiscal 1995, while actual expense decreased approximately 36.9%
over this same six month period. Reductions in expense levels reflected
savings in compensation due to reduced employee levels, and the Company's
continued efforts to reduce administrative operating expenses.
Interest income earned in the three months ended April 28, 1995
increased approximately 184.0% over the same time period a year ago.
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This increase was due to the larger volume of funds loaned to related parties
at significantly high interest rates and higher cash levels.
The Company sold its headquarters in December of 1994 for $11 million
less certain expenses of sale. In order to match the current market value, the
net book value of the property was written down from $18.9 million to $9.4
million in October 1993. As a result of the sale, approximately $1.3 million
was recognized as a gain in the first quarter of fiscal 1995.
No income taxes were provided for in the quarter ended April 28, 1995,
as the Company believes that it has adequate net operating loss and credit
carryovers to offset any current corporate income tax liability.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled approximately $4.4 million at April
28, 1995, up $2.2 million (approximately 104.6%) from fiscal 1994 year-end
levels of $2.1 million. The increase in the cash and cash equivalent position
for the six month period ended April 28, 1995 resulted primarily from the sale
of the Ordynka building which provided $1.0 million in cash, the loan repayment
of $250,000 from Jazz Multimedia, an installment payment of approximately
$290,000 from the sale of the Kabil business and approximately $5.4 million
from the sale of the Company's real property, but partially offset by the
purchase of a real property of approximately $2.0 million, an operating loss of
$1.5 million, an additional loan of $384,000 to AdMOS and an additional loan of
$363,000 to the InterTerminal joint venture.
Approximately $2.5 million in certificates of deposit were pledged as
collateral for comparable amounts of stand-by and sight letters of credit under
a letter of credit agreement as of the end of the second quarter of 1995. At
April 28, 1995, the Company had approximately $1.36 million in outstanding
letters of credit which were secured by the pledged deposits under this
agreement.
Net accounts receivable of $2.4 million at the end of the second
quarter of fiscal 1995 were up approximately 16.8% from 1994 year-end level of
$2.0 million. Days sales outstanding in accounts receivable increased in 1995
from 58 days to 66 days. Trade accounts payable of $1.8 million at the end of
the second quarter of fiscal 1995 were up approximately 31.8% from the 1994
year-end level of $1.4 million.
Net inventories of approximately $5.6 million at the end of the second
quarter of fiscal 1995 were down approximately 3.3% from the 1994 year-end
level of $5.8 million. Inventory level was decreased due primarily to the
elimination of the SMS system products of approximately $406,000.
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Working capital at the end of the second quarter of fiscal 1995 was
$9.1 million, up approximately 26.4% from fiscal 1994 year-end level of $7.2
million.
The Company expects to generate cash in 1995 from its Russian venture
operations from the sale of its Ordynka and InterTerminal venture investments.
Approximately $1.0 million was received from Ordynda in April 1995 and $2.94
million was received from the InterTerminal joint venture in May 1995. An
addition of $3.2 million is expected to be generated from these activities,
including the expected repayment of its loan with InterTerminal. Management
also expects to generate $1.4 million in cash from the sale of its 35% interest
in Kabil in fiscal 1995.
On December 12, 1994, the Company sold its real property located at
550 East Brokaw Road, San Jose, California which consists of approximately 19.8
acres of real property containing a building of 292,800 square feet for $11
million. After netting certain expenses of sale, the Company received $5.4
million in cash upon close of escrow. The remaining $5.0 million is in the
form of a promissory note which shall be due and payable in twenty-four months
at an interest rate of $9.5% per annum. Approximately $475,000 in cash will be
generated as interest annually. Interest shall be paid on a monthly basis.
On December 14, 1994, the Company purchased real property located at
2345 Harris Way, San Jose, California which consists of approximately 2.5 acres
of real property containing a building of 69,630 square feet. The purchase
price for the property is $1,925,000 and the full amount was paid in cash.
This property will become the Company's new headquarters. The Company will
move its entire operations to this building during the third quarter of fiscal
1995. During this transitional period, the Company is leasing back 40,000
square feet from the new owner of the Brokaw building . Monthly rental payment
is approximately $20,000.
At the current consumption rate, the Company's cash balance of
approximately $4.4 million (which includes $2.5 million pledged as security for
stand-by and sight letters of credit) at April 28, 1995, together with
anticipated revenues from operations and other non- operating cash receipts,
are anticipated to be adequate to fund the Company's fiscal 1995 operations at
projected levels.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See Note 5 of "Notes to Condensed Consolidated Financial Statements."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of shareholders on March 28, 1995,
at which K. Philip Hwang, Stephen S. Kahng, W.K. Kim, Robert E. Larson and
Isaac Levanon were re-elected by the shareholders as Directors of the Company's
Board.
The shareholders also ratified the appointment of Grant Thornton as
the Company's independent public accountant for the fiscal year ending October
31, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit(s).
Exhibit 27.0 Financial Data Schedules
(b) Reports on Form 8-K. None.
[The remainder of this page is intentionally left blank]
18
<PAGE> 19
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.
TELEVIDEO SYSTEMS, INC.
May 19, 1995 /s/ K. Philip Hwang
Dr. K. Philip Hwang,
Chairman of the Board and,
Chief Executive Officer
/s/ David Kim
David Kim,
Chief Financial Officer
19
<PAGE> 20
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.
TELEVIDEO SYSTEMS, INC.
May 19, 1995 _________________________
Dr. K. Philip Hwang,
Chairman of the Board and,
Chief Executive Officer
_________________________
David Kim,
Chief Financial Officer
20
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