<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: July 31, 1996
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 July 31, 1996 is: 45,402,245 .
<PAGE> 2
TELEVIDEO SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JULY 31, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
PART I. Financial Information 3
ITEM 1. FINANCIAL STATEMENTS
<S> <C> <C>
Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets -
July 31, 1996 and October 31, 1995 4
Condensed Consolidated Statements of
Operations - Three Months Ended July 31,
1996, and July 31, 1995 5
Condensed Consolidated Statements of
Operations - Nine Months Ended July 31,
1996, and July 31, 1995 6
Condensed Consolidated Statements of Cash
Flows - Nine Months Ended July 31, 1996,
and July 31, 1995 7
Notes to Condensed Consolidated Financial
Statements - July 31, 1996 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 13
PART II. Other Information 17
ITEM 1. LEGAL PROCEEDINGS 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1996 AND 1995 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, 1995.
The results of operations for the three and nine-month period ended
July 31, 1996, are not necessarily indicative of the results to be expected for
the entire fiscal year ending October 31, 1996.
[The remainder of this page is intentionally left blank]
3
<PAGE> 4
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
July 31, October 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,595 $ 5,145
(including restricted cash of
$2,430 in 1996 and $3,500 in 1995)
Marketable securities 0 40
Accounts receivable, net 4,596 3,593
Receivables from related parties,
net of allowance of $384 in 1996
and $363 in 1995 (Note 6) 92 1,441
Inventories 4,220 5,735
Prepayments and other 5,118 336
-------- ------
Total current assets 19,621 16,290
-------- ------
Property, plant and equipment:
Property, plant and equipment 5,965 5,961
Less accumulated depreciation (2,896) (2,705)
-------- -------
Net property, plant and equipment 3,069 3,256
-------- ------
Investment in affiliates (Note 2) 234 54
Other assets 0 5,000
-------- ------
Total assets $22,924 $24,600
======== =======
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 899 $ 1,662
Accrued liabilities 867 982
Income taxes 611 611
--------- -------
Total current liabilities 2,377 3,255
--------- -------
Stockholders' equity:
Common stock 454 451
Additional paid in capital 95,634 95,560
Unrealized loss on marketable securities 0 (39)
Accumulated deficit (75,541) (74,627)
--------- -------
Total stockholders' equity 20,547 21,345
--------- --------
Total liabilities & stockholders' equity $ 22,924 $24,600
========= =========
</TABLE>
4
<PAGE> 5
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1996 AND JULY 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Net sales $ 5,369 $ 5,475
Cost of sales 4,871 4,462
-------- -------
Gross profit 498 1,013
-------- -------
Operating expenses:
Marketing 484 823
Research and development 236 441
General and administrative 334 318
-------- -------
Total operating expenses 1,054 1,582
-------- -------
Loss from operations (556) (569)
-------- --------
Interest income 191 202
Other income (193) (146)
-------- --------
Net income (loss) before income tax (558) (513)
Income taxes (2) (5)
-------- --------
Net income (loss) after income tax $ (560) $ (518)
======== ========
Net income (loss) per share $ (0.01) $ (0.01)
======== ========
Average shares outstanding 45,391 44,948
======== ========
</TABLE>
5
<PAGE> 6
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND JULY 31, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Net sales $13,994 $12,096
Cost of sales 12,830 9,598
-------- -------
Gross profit 1,164 2,498
-------- -------
Operating expenses:
Marketing 1,902 2,320
Research and development 868 1,405
General and administrative 960 833
-------- -------
Total operating expenses 3,730 4,558
-------- -------
Loss from operations (2,566) (2,060)
-------- --------
Interest income 529 615
Other income 1,133 1,948
-------- -------
Net income (loss) before income tax (904) 503
Income taxes (9) (6)
-------- --------
Net income (loss) after income tax $ (913) $ 497
======== ========
Net income (loss) per share $ (0.02) $ 0.01
======== ========
Average shares outstanding 45,304 44,804
======== ========
</TABLE>
6
<PAGE> 7
TELEVIDEO SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND JULY 31, 1995
(In thousands)
<TABLE>
<CAPTION>
1996 1995
----------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (913) $ 496
Charges (credits) to operations not
affecting cash:
Depreciation 203 237
Changes in certain current assets and liab.:
Accounts receivable (1,003) (1,162)
Inventories 1,515 (410)
Prepayments and other 218 215
Accounts payable (763) (623)
Accrued liabilities (115) (268)
Income taxes - -
-------- -------
Net cash provided by (used in)
operating activities (858) (1,515)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net retirements of (additions to) property,
plant & equipment (16) 5,986
Decrease (Increase) in other assets - (5,000)
Investment in marketable securities 79 22
Investment in affiliate (180) 403
Loan to affiliate - (777)
Payment received on notes receivable 1,349 3,434
Proceeds from investment gain - -
-------- -------
Net cash provided by (used in) investing
activities 1,232 4,068
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 76 80
Equity adjustment from foreign
currency translation - -
-------- -------
Net cash provided by (used in)
financing activities 76 80
-------- -------
Increase (decrease) in cash
and cash equivalents 450 2,633
-------- -------
Cash and cash equivalents at the
beginning of the period 5,145 2,131
-------- -------
Cash and cash equivalents at the
end of the period $ 5,595 $ 4,764
======= =======
</TABLE>
7
<PAGE> 8
TELEVIDEO SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1996
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 $2,430,000, invested in
short term certificates of deposit, are pledged as security under a letter of
credit agreement.
Marketable Securities
Marketable securities were carried at the lower of aggregate cost or
quoted market value. The marketable securities of approximately $80,483 was sold
in July 1996 and a loss of $44,283 was recognized.
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 components of inventory consist of the
following (in thousands):
8
<PAGE> 9
<TABLE>
<CAPTION>
July 31, October 31,
1996 1995
----------- -----------
<S> <C> <C>
Purchased parts $ 2,713 $ 3,390
Work-in-process 809 1,170
Finished goods 698 1,175
----------- -----------
$ 4,220 $ 5,735
=========== ===========
</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>
<CAPTION>
<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 and the total investments were approximately $3.3 million. Since
Kabil continued to sustain losses from operations, the Company wrote off its
investments in Kabil in fiscal 1990 and fiscal 1993. In December 1994, the
Company sold its 35% interest in Kabil to the majority owners for $1.4 million,
less expenses, which were paid in installments over the 1995 and 1996 fiscal
year. Approximately $552,848 was received in fiscal 1995. An additional $866,652
was received in January 1996.
9
<PAGE> 10
AdMOS Technologies Inc.
During fiscal 1991, the Company acquired through its wholly owned
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
had 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 July 31, 1996 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 at an
interest rate of 10% per annum. Approximately $104,000 was repaid to the Company
in August 1995. In November 1995, the Company received another $100,000 from
AdMOS. The Company has fully reserved the unpaid balance of $180,000 plus
accrued interest as of July 31, 1996.
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 was carried at cost. Indigo had incurred only minor operations in
fiscal 1994 and 1995. The investment was written off in the second quarter of
fiscal 1996.
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 $16,000. In
July 1996, the Company further invested $60,000 in the joint venture.
In February 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 Company received
another $170,000 from "Three H" in November 1995. The remaining balance of
$30,000 plus accrued interest of approximately $62,000 will be repaid to the
Company in fiscal 1996.
10
<PAGE> 11
InterTerminal
In April 1994, TeleVideo acquired a 51% ownership of the
"InterTerminal" joint venture in exchange for a $5,100 cash investment and a
commitment to fund a $3.65 million loan, 20% interest rate, to the venture. The
main purpose of the "InterTerminal" joint venture was the construction of a
truck terminal (approximately 100,000 square feet) approximately 25 miles
outside of Moscow, and the construction was complete in early 1995. TeleVideo
sold its 51% ownership in May 1995. The $3.65 million loan was repaid to the
Company in fiscal 1995. An additional $1,369,500 was received and recognized as
a gain in the first and second quarters of fiscal 1996.
TeleVideo-RUS
In January 1996, TeleVideo set up a company called "TeleVideo- RUS" in
the Commonwealth of Independent States with an initial investment of $150,000.
The main purpose of this company is to act as a liaison between TeleVideo and
the authorities in the CIS. One of the projects that the Company is anticipating
will be the construction of truck terminals similar to the "InterTerminal" joint
venture.
At the indicated dates the Company had the following investments in
affiliates and joint ventures (in thousands):
<TABLE>
<CAPTION>
July 31, October 31,
1996 1995
<S> <C> <C>
TeleVideo-RUS $ 150 $ 0
Three H Joint Venture 76 16
Pan Asian Bank 8 8
InterTerminal 0 5
Indigo 0 25
----------- -----------
Total $ 234 $ 54
=========== ===========
</TABLE>
3. RESTRICTED CASH:
The Company has a letter of credit agreement with a bank whereby the
bank will issue up to $2,430,000 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 5.205% per annum. At July 31, 1996, the Company had letters of
credit outstanding of approximately $1,180,000 which were secured by an
equivalent amount of cash deposits.
11
<PAGE> 12
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 July 31, 1996.
As of July 31, 1996, the only tax issues pending are the Massachusetts
State Tax audit and the California Franchise Tax exposure resulting from the
previous Federal Income Tax audits. The Company believes that its maximum
exposure, collectively, will not exceed $600,000. The Company has accrued this
full amount at July 31,
1996.
5. LITIGATION:
The Company has been named, along with dozens of other manufacturers,
designers, and distributors of computer equipment, as a defendant in several
lawsuits regarding product liability in connection with the alleged defective
design of computer terminal keyboards and the size of the computer monitor
screens. The first issue alleges that the various plaintiffs have suffered some
form of severe wrist injury from the use of said keyboards. The second issue
alleges that there was false advertising which claimed that the video screens
were 17 inches in size, when in reality they were only 15 inches. The Company's
attorneys have prepared a defense for these cases and the Company's insurance
carriers are informed of the plaintiff's claims. The Company intends to
vigorously defend against the allegations of these suits. Management believes
that the ultimate outcome of these lawsuits will not have a material adverse
effect on the Company's financial position.
6. RELATED PARTY TRANSACTIONS:
The Company's outstanding receivables from related parties are
summarized below (in thousands):
12
<PAGE> 13
<TABLE>
<CAPTION>
July 31, October 31,
Notes Receivable: 1996 1995
- ----------------- ----------- --------
<S> <C> <C>
Three H Joint Venture $ 30 $ 200
InterTerminal 0 213
Kabil 0 866
AdMOS 104 (1) 104 (1)
AdMOS 180 (1) 280 (2)
Interest Receivable:
Three H Joint Venture 62 62
AdMOS 63 (1) 55 (1)
AdMOS 37 (1) 24 (1)
----------- -----------
Total $ 476 $ 1,804
=========== ===========
</TABLE>
- ------------------------
(1) Amounts are fully reserved.
(2) Approximately $180,000 was reserved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Results of Operations
Operating loss for the three months ended July 31, 1996 of
approximately $556,000 was approximately 2.3% lower as comparing with the same
period in fiscal 1995 which totaled approximately $569,000. Operating loss for
the nine months ended July 31, 1996 of approximately $2.57 million was
approximately 24.6% higher comparing with the same period in fiscal 1995 which
totaled approximately $2.06 million, primarily the results of low profit margin
of the multimedia products.
The net loss for the third quarter of fiscal 1996 totaled approximately
$560,000, or $0.01 per share, compared to a net loss of $518,000, or $0.01 per
share, a year ago for the same three month period. The net loss for the nine
months ended July 31, 1996 totaled approximately $913,000, or $0.02 per share,
compared to a net income of $497,000, or $0.01 per share, for the same period a
year ago. The net loss in fiscal 1996 was lower than the operating loss in
fiscal 1996, due primarily to the gain of approximately $1,369,500 from the sale
of the InterTerminal joint venture. 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
13
<PAGE> 14
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 loss per share for the third quarter of fiscal 1996 was $0.01 per
share based on 45,391,000 weighted average shares outstanding, compared to a net
loss of $0.01 per share based on 44,948,000 weighted average shares outstanding
in the third quarter of fiscal 1995.
Net sales for the third quarter of fiscal 1996 of approximately $5.4
million were approximately 1.9% below the same quarter a year ago which totaled
approximately $5.5 million. Net sales for the nine months ended July 31, 1996 of
approximately $14.0 million were approximately 15.7% above the same period of
time a year ago which totaled approximately $12.1 million. The increase in net
sales during the first nine months of fiscal 1996 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.
Cost of sales were approximately $4.9 million in the third quarter of
fiscal 1996, or 9.2% higher than the approximately $4.5 million reported in the
third quarter of fiscal 1995. Cost of sales in the third quarter of fiscal 1996
compared to the same period a year ago increased as a percentage of sales from
approximately 81.5% (in fiscal 1995) to approximately 90.7% in fiscal 1996. The
increase in cost of sales percentage and the corresponding decrease in gross
margin percentage for the three month period ended July 31, 1996 (a decrease
from approximately 18.5% to 9.3%) were primarily the results of severe price
competition and lower profit margin of the multimedia products. The price of
certain multimedia products had dropped below cost.
Cost of sales were appproximately $12.8 million for the nine months
ended July 31, 1996, or 33.7% higher than the approximately $9.6 million
reported in the same period a year ago. Cost of sales also increased as a
percentage of sales from approximately 79.3% (in fiscal 1995) to approximately
91.7% in fiscal 1995.
Marketing expense decreased as a percentage of sales in the third
quarter of fiscal 1996 from approximately 15.0% in fiscal 1995 to 9.0% in fiscal
1996 on a comparative quarter-to-quarter basis, while actual marketing expenses
decreased approximately 41.2% over this same three month period. On a nine month
basis, marketing expense decreased as a percentage of sales from approximately
19.2% in fiscal 1995 to 13.6% in fiscal 1996, while actual marketing expenses
decreased approximately 18.0%. The decrease in marketing expense percentage and
actual marketing expense was due primarily to the decrease in marketing and
sales staffing levels and decrease in purchased services and advertising
expenses on multimedia products.
14
<PAGE> 15
Research and development expense decreased as a percentage of sales in
the third quarter of fiscal 1996 from approximately 8.1% in fiscal 1995 to 4.4%
in fiscal 1996, while actual research and development expense decreased
approximately 46.5% over this same three month period. On a nine month basis,
research and development expense decreased as a percentage of sales from
approximately 11.6% in fiscal 1995 to 6.2% in fiscal 1996, while actual expense
decreased approximately 38.2%. The decrease in percentage and actual research
and development expenses for the three and nine months ended July 31, 1996
compared to the same period last year was due primarily to the decrease in
engineering staffing levels.
General and administrative expense increased as a percentage of sales
in the third quarter of fiscal 1996 from approximately 5.8% in fiscal 1995 to
6.2% in fiscal 1996, while actual expenses increased approximately 5.0% over
this same three month period. On a nine month basis, general and administrative
expense as a percentage of sales of appproximately 6.9% in fiscal 1996 was about
the same as in fiscal 1995, while actual expense increased approximately 15.2%
over this same nine month period. The increase in expense levels for the three
and nine months ended July 31, 1996 was due primarily to the increase in
administrative staffing levels.
Interest income earned in the three months ended July 31, 1996
decreased approximately 5.4% over the same time period a year ago. This decrease
was due to the lower volume of funds loaned to related parties which provide
significantly high interest rates but partially offset by higher cash levels.
The Company sold its 51% ownership in "InterTerminal" joint venture in
fiscal 1995 for approximately $1.3 million and the full amount was received and
recognized as a gain in the first and second quarters of fiscal 1996.
No income taxes were provided for in the quarter ended July 31, 1996,
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 $5.6 million at July
31, 1996, up $450,000 (approximately 8.7%) from fiscal 1995 year-end levels of
$5.1 million. The increase in the cash and cash equivalent position for the nine
month period ended July 31, 1996 resulted primarily from: (a) the sale of the
InterTerminal joint venture provided $1.3 million in cash; (b) the loan
repayment of $405,000, $170,000 and $100,000 from InterTerminal, Three H and
AdMOS, respectively; and (c) the final payment of approximately $866,000 from
the sale of the Kabil business, but partially offset by an operating
15
<PAGE> 16
loss of $2.6 million and the investments of $150,000 and $60,000 in
TeleVideo-RUS and Three H, respectively.
Approximately $2,430,000 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 third quarter of 1996. At July
31, 1996, the Company had approximately $1,180,000 in outstanding letters of
credit which were secured by the pledged deposits under this agreement.
Net accounts receivable of $4.6 million at the end of the third quarter
of fiscal 1996 were up approximately 27.9% from 1995 year-end level of $3.6
million. Days sales outstanding in accounts receivable increased in 1996 from 78
days to 94 days. Trade accounts payable of $899,000 at the end of the third
quarter of fiscal 1996 were down approximately 45.9% from the 1995 year-end
level of $1.7 million.
Net inventories of approximately $4.2 million at the end of the third
quarter of fiscal 1996 were down approximately 26.4% from the 1995 year-end
level of $5.7 million. Inventory level was decreased due primarily to the sale
of the multimedia products which accounted for approximately $6.2 million, or
43.7% of the total sales, during the first nine months of fiscal 1996.
Working capital at the end of the third quarter of fiscal 1996 was
$17.2 million, up approximately 32.3% from fiscal 1995 year-end level of $13.0
million.
The Company expects to generate cash in 1996 from the $5.0 million note
receivable from the sale of its real property.
At the current consumption rate, the Company's cash balance of
approximately $5.6 million (which includes $2,430,000 pledged as security for
stand-by and sight letters of credit) at July 31, 1996, together with
anticipated revenues from operations and other non-operating cash receipts, are
anticipated to be adequate to fund the Company's fiscal 1996 operations at
projected levels.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See Note 5 of "Notes to Condensed Consolidated Financial
Statements."
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]
17
<PAGE> 18
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.
September 4, 1996 /s/ K. Philip Hwang
-------------------
Dr. K. Philip Hwang,
Chairman of the Board and,
Chief Executive Officer
/s/ David Kim
-------------------
David Kim,
Chief Financial Officer
18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JUL-31-1996
<CASH> 5,595
<SECURITIES> 0
<RECEIVABLES> 4,805
<ALLOWANCES> 209
<INVENTORY> 4,220
<CURRENT-ASSETS> 19,621
<PP&E> 5,965
<DEPRECIATION> 2,896
<TOTAL-ASSETS> 22,924
<CURRENT-LIABILITIES> 2,377
<BONDS> 0
0
0
<COMMON> 454
<OTHER-SE> 20,093
<TOTAL-LIABILITY-AND-EQUITY> 22,924
<SALES> 13,994
<TOTAL-REVENUES> 13,994
<CGS> 12,830
<TOTAL-COSTS> 12,830
<OTHER-EXPENSES> 3,730
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (904)
<INCOME-TAX> 9
<INCOME-CONTINUING> (913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (913)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
