UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1997
-------------
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
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TeleVideo, Inc.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2383795
- -------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2345 Harris Way, San Jose, California 95131
-------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (408) 954-8333
----------------------------
___________________________
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
September 10, 1997 is: 45,404,745.
-----------
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS.
TELEVIDEO, INC.
---------------
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------
1997 and 1996 Quarterly Data
- ----------------------------
The condensed consolidated financial statements included herein have been
prepared by the management of TeleVideo, 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, 1996.
The results of operations for the three and nine-month period ended July
31, 1997, are not necessarily indicative of the results to be expected for the
entire fiscal year ending October 31, 1997.
[The remainder of this page is intentionally left blank.]
<PAGE>
TELEVIDEO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
July 31, Oct. 31,
ASSETS 1997 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents
(including restricted cash of $3,000 in 1997
and $2,000 in 1996) $ 4,260 $ 4,496
Accounts receivable, less allowance of $931 in 1997 and $888 in 1996 4,156 4,394
Receivable from related parties,
net of allowance of $307 in 1997 and $391 in 1996 -- --
Inventories 2,611 5,834
Prepayments and other 2,441 62
Note receivable from sale of building -- 5,000
-------- --------
Total current assets 13,468 19,786
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 890 890
Building 1,035 1,035
Production equipment 497 1,263
Office furniture and equipment 1,140 1,753
Building improvements 1,105 1,105
-------- --------
4,667 6,046
Less accumulated depreciation and amortization 1,849 2,968
-------- --------
Property, plant and equipment, net 2,818 3,078
INVESTMENTS IN AFFILIATES 2,601 226
-------- --------
Total assets $ 18,887 $ 23,090
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 637 $ 3,080
Accrued liabilities 710 855
Income taxes 611 611
-------- --------
Total current liabilities 1,958 4,546
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
Authorized--75,000,000 shares
Outstanding--45,404,745 shares in 1997 and 45,402,245
shares in 1996 454 454
Additional paid-in capital 95,635 95,634
Accumulated deficit (79,160) (77,544)
-------- --------
Total stockholders' equity 16,929 18,544
-------- --------
Total liabilities and stockholders' equity $ 18,887 $ 23,090
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
TELEVIDEO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JULY 31, 1997 AND JULY 31, 1996
(In thousands, except per share amounts)
1997 1996
-------- --------
NET SALES $ 4,983 $ 5,369
COST OF SALES 4,328 4,871
-------- --------
GROSS PROFIT 655 498
-------- --------
OPERATING EXPENSES:
Sales and Marketing 830 484
Research and development 185 236
General and administration 329 334
-------- --------
Total operating expenses 1,344 1,054
-------- --------
Loss from operations (689) (556)
INTEREST INCOME, net 99 191
OTHER INCOME, net 1 (195)
-------- --------
Net loss $ (589) $ (560)
======== ========
Net loss per share $ (0.01) $ (0.01)
======== ========
Average shares outstanding 45,405 45,391
======== ========
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TELEVIDEO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND JULY 31, 1996
(In thousands, except per share amounts)
1997 1996
-------- --------
NET SALES $ 13,558 $ 13,994
COST OF SALES 11,847 12,830
-------- --------
GROSS PROFIT 1,711 1,164
-------- --------
OPERATING EXPENSES:
Sales and Marketing 2,091 1,902
Research and development 612 868
General and administration 948 960
-------- --------
Total operating expenses 3,651 3,730
-------- --------
Loss from operations (1,940) (2,566)
INTEREST INCOME, net 374 529
OTHER INCOME, net (49) 1,124
-------- --------
Net loss $ (1,615) $ (913)
======== ========
Net loss per share $ (0.04) $ (0.02)
======== ========
Average shares outstanding 45,405 45,304
======== ========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TELEVIDEO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND JULY 31, 1996
(In thousands)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $(1,615) $ (913)
Charges (credits) to operations not affecting cash:
Depreciation and amortization 276 203
Changes in operating assets and liabilities:
Accounts receivable 238 (1,003)
Inventories 3,223 1,515
Prepayments and other (79) 218
Accounts payable (2,443) (763)
Accrued liabilities and royalties (146) (115)
------- -------
Net cash provided by (used in) operating activities (546) (858)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net retirements of (additions to) property, plant and equipment (16) (16)
Investment in marketable securities -- 79
Decrease (increase) in other assets (2,300) --
Investments in affiliate (2,375) (180)
Payments received on notes receivable from affiliate and other 5,000 1,349
------- -------
Net cash provided by (used in) investing activities 309 1,232
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1 76
------- -------
Net cash provided by financing activities 1 76
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (236) 450
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE YEAR 4,496 5,145
------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 4,260 $ 5,595
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TELEVIDEO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Principles of Consolidation
---------------------------
The condensed consolidated financial statements include the accounts of the
Company and certain of its majority owned subsidiaries, after elimination of
intercompany accounts and transactions. The Company's investments in joint
ventures in the Commonwealth of Independent States, some of which represent a
majority interest in the joint venture, are not consolidated due to the lack
of reliable financial information from the entity. Such investments are
carried at cost.
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.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements, as well as revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. Approximately $3.0 million,
invested in short term certificates of deposit, are pledged as security under
letter of credit agreements.
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-process and includes material, labor and
manufacturing overhead costs. The cost of purchased parts is determined on a
first-in, first-out basis. Amounts shown are net of reserves for obsolescence
of $414,000 and $663,000 in 1997 and 1996, respectively:
July 31, Oct. 31,
1997 1996
------ ------
Purchased parts and subassemblies $1,148 $4,040
Work-in-process 794 422
Finished goods 669 1,372
------ ------
$2,611 $5,834
====== ======
6
<PAGE>
Property, Plant and Equipment
-----------------------------
Depreciation and amortization are provided over the estimated useful lives of
the assets using both straight-line and accelerated methods.
Building 40 years
Production equipment 1-10 years
Office furniture 1-10 years
Net Income (Loss) Per Share
---------------------------
Net income (loss) per share is based on the weighted average number of shares
of Common Stock outstanding during each period.
2. ACQUISITIONS AND DIVESTITURES:
------------------------------
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, 1997 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, the Company further loaned AdMOS $384,000 at an interest
rate of 10% per annum. Approximately $204,000 was repaid to the Company in
fiscal 1995 and fiscal 1996. In December 1996, the Company received another
$100,000 from AdMOS. The Company has fully reserved the unpaid balance of
$80,000 plus accrued interest as of July 31, 1997.
TLK, Inc.
---------
In November 1996, the Company invested $150,000 in exchange for a 20%
ownership in TLK, Inc. for the China Power Plant projects in Lin Zhang, Quin
Yuan and Henan Provinces in China. The Company expects to have a return on
investment within the next twelve months.
Koram, Inc.
-----------
On March 3, 1997, the Company invested $224,820 (equivalent to
KRW200,000,000) in exchange for a 50% ownership in Koram, Inc. which will
conduct food services in Seoul of Korea. The investment is carried at cost.
Applied Photonics Technology, Inc.
----------------------------------
On April 16, 1997, the Company entered into a Common Stock Purchase Agreement
with Applied Photonics Technology, Inc., a California Corporation ("APT")
whereby the Company purchased 30% of the Common Stock of APT. In
consideration for the issuance of the APT stock, the Company agreed to pay
$3,000,000 to APT: $2,000,000 payable on the day of closing and the remaining
$1,000,000 payable in September 1997.
7
<PAGE>
Founded in October 1996, APT is a high-tech engineering firm specializing in
the development of electronics display technology. The markets for APT's
Outdoor Media Display system include the high end of the billboard and
illuminated sign markets, sports stadiums and arenas, transportation
terminals, volume retailers and malls, and safety/public information
displays.
The authorized capital of APT consists of no shares of Preferred Stock and
20,000,000 shares of Common Stock, of which 5,593,800 shares are issued and
outstanding. Except for options representing an aggregate of 1,000,000 shares
issuable in the future in consideration of contributions by key employees and
certain consultants of APT, TeleVideo received Common Stock equal to 30% of
all issued and outstanding shares as of closing date, for a total of
1,678,140 shares. The Company funded the purchase of the Common Stock through
the retirement of its Time Deposits.
Russian Joint Ventures
----------------------
In fiscal 1995, 1996 and 1997, the Company acquired interests in various
joint ventures, primarily in the Commonwealth of Independent States. These
investments are accounted for on the cost method.
Three H
-------
Three H Partners (owned equally by TeleVideo and a Russian entity) was formed
in fiscal 1991 for the purpose of conducting short term commodities trading
and the initial investment was $16,000. In July 1996, the Company further
invested $60,000 in the joint venture.
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.
Risks of Operations in the Commonwealth of Independent States
-------------------------------------------------------------
There are a number of risks involved in TeleVideo's participation in foreign
joint ventures located in the Commonwealth of Independent States. These risks
include the ability to execute and enforce the agreements, the future
regulations governing the repatriation of funds, the political and economic
instability and the dependence on future events which can influence the
success or failure of the ventures and, thus, may affect the recoverability
of the amounts invested by TeleVideo. Management of the Company is aware of
the attendant risks relating to these ventures and continually monitors the
conditions in the CIS and the activities of the joint ventures. Management
further believes the investments to be secure and thus no reserves are
required as of July 31, 1997. However, there can be no assurance that
conditions in the CIS will not deteriorate and place the Company's investment
in jeopardy.
At the indicated dates the Company had the following investments in
affiliates and joint ventures: (in thousands)
July 31, Oct. 31,
1997 1996
-------- --------
TLK, Inc. $ 150 $ -
Koram, Inc. 225 -
Applied Photonics Technology, Inc. 2,000 -
Three H 76 76
TeleVideo-RUS 150 150
------ ------
$2,601 $ 226
====== ======
8
<PAGE>
3. LETTER OF CREDIT AGREEMENT:
---------------------------
The Company has a letter of credit agreement with a bank whereby the bank
will issue up to $4.0 million of standby and sight letters of credit. This
agreement is contingent upon the Company maintaining cash deposits of $3.0
million at the bank as collateral. These funds are held in three month
certificates of deposits and earn interest at the rate of approximately 5.25%
per annum. At July 31, 1997, the Company had letters of credit outstanding of
approximately $3,048,219.
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, 1997.
As of July 31, 1997, 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 a resolution of
one or both of these audits could occur in fiscal 1997 and its maximum
exposure, collectively will not exceed $600,000. The Company has accrued this
full amount at July 31, 1997.
5. LITIGATION AND OTHER:
---------------------
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 video 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 in which the actual viewable size of the
video screens were smaller than they were claimed.
On October 3, 1996, a complaint was filed by Carol Levy in the Marin County
Superior Court claiming that the advertising content of the "TeleVideo Model
EX-16," a computer sound card which includes an amplifier, was untrue. This
case alleges that the Company advertised that the power output of the signal
was 6 watts per channel, for a total of 12 watts, but the actual power output
to each speaker was less than 6 watts. The Company paid $4,000 in July 1997
for the final settlement of this case.
On May 7, 1997, Rocky Mountain Fire Casualty Company and Grange Insurance
Association filed suit against the Company and other two defendants in the
Los Angeles Superior Court of California claiming that the defendants
designed, manufactured and sold computer equipment to Michael Bowman and
Automotive Paint Supply, that on or about September 7, 1995, a fire involving
said computer equipment and/or its monitor with its parts and systems,
erupted in fire damaging and destroying the insured's property in an amount
not less than $55,441.
On May 8, 1997, Activision, Inc. filed suit against the Company in the
Superior Court of California (County of Los Angeles) alleging deficiency in
royalty payment of $112,500. The case is finalized in August 1997. The
Company agreed to pay the said amount in full in exchange for a comparable
amount of multimedia products.
9
<PAGE>
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:
---------------------------
During 1997 and 1996 the Company has had transactions with its affiliates as
follows (in thousands):
July 31, Oct. 31,
1997 1996
-------- --------
Note receivable:
AdMOS (1) $ 104 $ 104
AdMOS (1) 80 180
Interest receivable:
AdMOS (1) 68 65
AdMOS (1) 55 42
(1) Amounts are fully reserved.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Net sales for the third quarter of fiscal 1997 were approximately $4.98
million, or a decrease of approximately 7.2% from the approximately $5.37
million in net sales reported in the third quarter of fiscal 1996. The decrease
in net sales was principally due to the decrease in the sales volume of
multimedia products from $3.03 million in the third quarter of fiscal 1996 to
$1.45 million in the third quarter of fiscal 1997 but partially offset by the
introduction of the monitor business which amounted to $0.97 million in the
third quarter of fiscal 1997. Net sales for the nine months ended July 31, 1997
of approximately $13.56 million were approximately 3.1% below the same period of
time a year ago which totaled approximately $13.99 million.
Cost of sales decreased from approximately $4.87 million in the third
quarter of fiscal 1996 to approximately $4.33 million in the third quarter of
fiscal 1997, and decreased as a percentage of sales from approximately 90.7% to
approximately 86.9% during the same period. The percentage decrease in cost of
sales and the corresponding increase in gross margins in fiscal 1997 (an
increase from approximately 9.3% to 13.1%) were primarily the results of the
elimination of those unprofitable product lines, a strategy that the Company
expects to continue.
Cost of sales were approximately $11.85 million for the nine months ended
July 31, 1997, or 7.7% lower than the approximately $12.83 million reported in
the same period a year ago. Cost of sales also decreased as a percentage of
sales from approximately 91.7% in fiscal 1996 to approximately 87.4% in fiscal
1997.
Sales and marketing expenses increased as a percentage of sales from
approximately 9.0% in the third quarter of fiscal 1996 to 16.7% in the third
quarter of fiscal 1997, while actual sales and marketing expenses increased from
$484,000 in the third quarter of fiscal 1996 to $830,000 in the third quarter of
fiscal 1997, an increase of 71.5% from the prior year. On a nine month basis,
sales and marketing expenses increased as a percentage of sales from
approximately 13.6% in fiscal 1996 to 15.4% in fiscal 1997, while actual
expenses increased approximately 9.9%. The increase in sales and marketing
expenses was due primarily to increased expenditures in advertising from 368,000
in the first nine months of 1996 to $846,000 in the first nine months of fiscal
1997.
10
<PAGE>
Research and development expenses decreased as a percentage of sales from
approximately 4.4% in the third quarter of fiscal 1996 to 3.7% in the third
quarter of fiscal 1997, while actual research and development expenses decreased
from $236,000 in fiscal 1996 to 185,000 in fiscal 1997 on a comparative
quarter-to-quarter basis, a decrease of 21.6% from the fiscal 1996 levels. On a
nine month basis, research and development expenses decreased as a percentage of
sales from approximately 6.2% in fiscal 1996 to 4.5% in fiscal 1997, while
actual expenses decreased approximately 29.5%. The decrease in percentage and
actual research and development expenses in fiscal 1997 compared to the same
period in the prior year was primarily a result of the decrease in employee
staffing levels from 10 in fiscal 1996 to 6 in fiscal 1997 while actual
compensation expense decreased from $640,000 in the first nine months of fiscal
1996 to $376,000 in fiscal 1997 on a comparative period-to-period basis.
General and administrative expenses increased as a percentage of sales
from approximately 6.2% in the third quarter of fiscal 1996 to 6.6% in the third
quarter of fiscal 1997, while actual expenses decreased approximately 1.5% over
this same three month period. On a nine month basis, general and administrative
expenses increased as a percentage of sales from approximately 6.9% in fiscal
1996 to 7.0% in fiscal 1997, while actual expenses decreased approximately 1.3%
over this same nine month period.
The loss from operations increased approximately 23.9%, from $556,000 in
the third quarter of fiscal 1996 to $689,000 in the third quarter of fiscal
1997. Operating loss for the nine months ended July 31, 1997 of approximately
$1.94 million was approximately 24.4% lower comparing the same period in fiscal
1996 which totaled approximately 2.57 million. This decrease was primarily due
to the increase in gross profit from $1.16 million to $1.71 million on a
comparative period-to-period basis.
Interest income earned decreased from $529,000 in the first nine months of
fiscal 1996 to $374,000 in the first nine months of fiscal 1997, a 29.3%
decrease from the prior year. Such decrease was primarily due to the retirement
of notes receivable which bore a higher interest rate and the lower of cash
level.
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.
Net loss for the third quarter of fiscal 1997 was approximately $589,000,
or $0.01 per share, compared to a net loss of $560,000 in the third quarter of
fiscal 1996, or $0.01 per share, a year ago for the same three month period. Net
loss for the nine months ended July 31, 1997 totaled approximately $1,615,000,
or $0.04 per share, compared to a net loss of $913,000, or $0.02 per share, for
the same period a year ago. The loss in fiscal 1997 was a result of the various
factors noted above.
As a result of the foregoing, net loss per share in the third quarter of
fiscal 1997 was $0.01, based on 45,404,745 weighted average shares outstanding,
compared to a net loss per share in the third quarter of fiscal 1996 of $0.01,
based on 45,391,287 weighted average shares outstanding.
No income tax expense or credit was provided for in the quarter ended July
31, 1997, as the Company believes that it has adequate net operating loss and
credit carryovers to offset future federal and state corporate income tax
liabilities. No net deferred tax asset has been recognized by the Company for
any future tax benefit to be provided from the loss carry forward since
realization of any such benefit is not assured.
Inflation had no significant impact on the Company's business or results
of operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled approximately $4.26 million at July 31,
1997, down $236,000 (approximately 5.2%) from fiscal 1996 year-end levels of
$4.50 million. The decrease in the cash and cash equivalents resulted primarily
from: (1) the investment of $2.0 million in Applied Photonics Technology, Inc.;
11
<PAGE>
(2) the investment of $150,00 in TLK, Inc.; (3) the investment of $225,000 in
Koram, Inc.; (4) the loan of $2.3 million to Applied Computer Technology, Inc.
and (5) net cash used in operating activities of $546,000, but partially offset
by the repayment of its note receivable of $5.0 million from the sale of its
former headquarters.
Approximately $3.0 million in certificates of deposit were pledged as
collateral with a bank whereby the bank will issue up to $4.0 million of
stand-by and sight letters of credit under the letter of credit agreements as of
the end of the third quarter of fiscal 1997. At July 31, 1997, the Company had
approximately $3,048,219 in outstanding letters of credit which were secured by
the pledged deposits under this agreement.
Net accounts receivable of $4.16 million at the end of the third quarter
of fiscal 1997 were down approximately 5.4% from the 1996 year-end level of
$4.39 million. Days sales outstanding in accounts receivable increased from 89
days in fiscal 1996 to 103 days in fiscal 1997.
Net inventories of approximately $2.61 million at the end of the quarter
ended July 31, 1997 were down approximately 55.2% from the 1996 year-end level
of $5.83 million.
Working capital at the end of the third quarter of fiscal 1997 was
approximately $11.51 million, down approximately 24.48% from the fiscal 1996
year-end level of approximately $15.24 million.
At the current consumption rate, the Company's cash balance of
approximately $4.26 million at July 31, 1997 (which includes $3.0 million
pledged as security for stand-by and sight letters of credit), together with
anticipated revenues from operations and other non-operating cash receipts, was
anticipated to be adequate to fund the Company's fiscal 1997 operations at
projected levels.
12
<PAGE>
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 Schedule.
(b) Reports on Form 8-K. None.
-------------------
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13
<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.
TELEVIDEO, INC.
--------------------------------
(Registrant)
Date: September 8, 1997 By: /s/ K. Philip Hwang
--------------------------------
Dr. K. Philip Hwang
Chairman of the Board and
Chief Executive Officer
/s/ David Kim
--------------------------------
David Kim
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TELEVIDEO, INC. FOR THE NINE MONTHS ENDED JULY 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
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