SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 28, 1999 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 0-10843
CSP Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2441294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
40 Linnell Circle, Billerica, Massachusetts
(Address of principal executive offices)
Registrant's telephone number, including area code:(978)663-7598
NONE
(Former name, former address, former fiscal year, if changed since last
report)
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 ( )
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding July 8, 1999
Common stock, $.01 par value 3,591,628 shares
<TABLE>
INDEX
PAGE
NUMBER
<C> <C> <C>
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets...........................3
Consolidated Statements of Operations.................4
Consolidated Statements of Cash Flows.................5
Notes to Consolidated Financial Statements............6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................8
PART II. OTHER INFORMATION:
Item 6. Exhibits & Reports on Form 8-K.........................15
</TABLE>
CSP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
May 28, August 28,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,586 $3,913
Marketable securities 10,231 9,635
Accounts receivable, net 9,755 7,698
Inventories 5,486 6,308
Deferred income taxes 1,068 1,068
Prepaid expenses 1,738 1,248
Total current assets 29,864 29,870
Property, equipment and improvements, net 3,296 3,367
Other assets:
Land held for future development 163 163
Deferred income taxes 1,168 1,168
Goodwill, net 1,402 1,257
Other assets 1,341 1,703
Total other assets 4,074 4,291
Total assets $37,234 $37,528
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $5,956 $6,399
Income taxes payable 503 1,375
Total current liabilities 6,459 7,774
Deferred compensation and retirement
Plans 3,514 3,363
Shareholders' equity:
Common stock, $.01 par, authorized
7,500 shares; issued 4,020
and 3,986 shares 40 36
Additional paid in capital 10,813 10,631
Retained earnings 19,208 18,032
Foreign currency translation (596) (248)
29,465 28,451
Less treasury stock, at cost, 429
and 386 shares 2,204 2,060
Total shareholders' equity 27,261 26,391
Total liabilities and shareholders' equity $37,234 $37,528
</TABLE>
See accompanying notes to consolidated financial statements
CSP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
/-Three Months Ended--/ /-Nine Months Ended-/
May 28, May 29, May 28, May 29,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Sales
Systems $3,258 $4,498 $12,318 $12,590
Software 2,004 1,087 4,050 3,202
Service and system
integration 8,124 9,490 24,118 35,816
Total sales 13,386 15,075 40,486 51,608
Cost of sales
Systems 1,300 1,960 5,140 5,768
Software 992 419 1,621 1,170
Service and system
integration 6,174 7,004 18,185 28,369
Total cost of sales 8,466 9,383 24,946 35,307
Engineering and development 1,008 1,183 3,113 3,158
Sales, general and
administration 3,309 3,611 10,155 11,033
Restructuring 310 168 310 168
Total costs and expenses 13,093 14,345 38,524 49,666
Operating income 293 730 1,962 1,942
Other income 268 124 497 413
Income before income taxes 561 854 2,459 2,355
Income tax expense 292 405 1,279 1,303
Net income $269 $449 $1,180 $1,052
Earnings per share
Basic $0.07 $0.13 $0.33 $0.32
Diluted $0.07 $0.12 $0.33 $0.31
Weighted average shares
Basic 3,597 3,570 3,599 3,334
Diluted 3,648 3,602 3,630 3,411
</TABLE>
See accompanying notes to consolidated financial statements.
CSP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
/--Three Months-/ /--Nine Months--/
Ended Ended
May 28, May 29, May 28, May 29,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $269 $449 $1,180 $1,052
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 338 336 900 1,096
Deferred compensation and retirement
plans (51) 2,152 151 3,312
Deferred income taxes 138 (28) -- (101)
Other 133 146 254 116
Changes in current assets and liab.:
(Increase)Decrease in accounts
receivable 2,003 1,193 (2,057) 1,435
Decrease in inventories 6 244 822 445
Increase(Decrease) in prepaid (271) 17 (490) 10
expenses
Decrease in accounts payable
and accrued expenses (3,245) (994) (443) (3,597)
Increase(Decrease) in income taxes
payable 13 288 (872) 1,132
Net cash provided by (used in)
operating activities (667) 3,803 (555) 4,900
Cash flows from investing activities:
Purchase of marketable securities (2,886) (4,263) (15,961) (16,983
Sale of marketable securities 2,487 2,207 15,392 12,830
Property, equipment and (310) (256) (893) (407)
improvements
Net cash used in investing
activities (709) (2,312) (1,462) (4,560)
Cash flows from financing activities:
Proceeds from exercise of stock
options and employee stock 65 12 182 27
purchases
Purchase of treasury stock (144) -- (144) --
Net cash provided by (used in)
financing activities (79) 12 38 27
Effect of exchange rate change on (239) 78 (348) (32)
cash
Net increase (decrease) in cash (1,694) 1,581 (2,327) 335
Cash and cash equivalents, beginning
of period 3,280 3,098 3,913 4,344
Cash and cash equivalents,end of $1,586 $4,679 $1,586 $4,679
period
</TABLE>
See accompanying notes to consolidated financial statements.
CSP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company,
without audit, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the
interim periods presented. All adjustments were of a normal recurring
nature. Certain information and footnote disclosures normally included
in the annual financial statements, which are prepared in accordance with
generally accepted accounting principles, have been condensed or omitted.
Accordingly, the Company believes that although the disclosures are
adequate to make the information presented not misleading, the financial
statements should be read in conjunction with the footnotes contained in
the Company's Annual Report on Form 10-K for the fiscal year ended August
28, 1998.
1. Reclassification:
Certain reclassifications were made to the fiscal 1998 financial
statements to conform to the fiscal 1999 presentation.
2. Inventories:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
May 28, August 28,
1999 1998
<S> <C> <C>
Raw materials $1,939 $1,502
Work in process 498 1,138
Finished goods 3,049 3,668
Total $5,486 $6,308
</TABLE>
3. Stock Repurchase:
On October 9, 1986 the Board of Directors authorized the Company to
repurchase up to 344,892 shares of the outstanding stock at market
prices. On September 28, 1995, the Board of Directors authorized the
Company to repurchase up to an additional 199,650 shares of the
outstanding stock at market prices. The timing of stock purchases are
made at the discretion of management. Through May 28, 1999 the Company
has repurchased 428,943, or 79% of the total authorized.
4. New Accounting Standards
Effective August 29, 1998, the Company adopted Financial Accounting
Standards Board Statement No. 130, "Reporting Comprehensive Income"
("SFAS 130") which establishes standards for reporting and display of
comprehensive income and its components in a full set of financial
statements. For the Company, comprehensive income includes net income
and unrealized gains and losses from foreign currency translation.
In June 1997, the Financial Accounting Standards Board issued Statement
131 ("SFAS No. 131"), "Disclosures about Segments of an Enterprise and
Related Information", which establishes standards for the way that public
business enterprises report selected information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. This Statement becomes effective for the Company in its
fiscal year ending August 27, 1999. The Company is in the process of
determining the impact of SFAS 131 on its footnote disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and
Hedging Activities", which requires that all derivatives be recorded on
the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded for each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
The Company is required to adopt SFAS No. 133 for the year ending August
27, 1999. Management has determined there will be no impact on its
results of operations or financial position resulting from the adoption
of SFAS No. 133 because the Company currently does not hold derivative
instruments. On May 20, 1999, a proposed Statement of Financial
Accounting Standards was issued for public comment in which the FASB
proposed delaying the effective date of SFAS No. 133 such that the
Company would not be required to adopt this standard until fiscal year
2001.
5. EPS Reconciliation
The reconciliation of the numerators and denominators of the basic and
diluted income per common share computations for the Company's reported
net income is as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 28 May 29 May 28 May 29
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Basic net income $269 $449 $1,180 $1,052
Weighted Average shares
outstanding, basic 3,597 3,570 3,599 3,334
Net additional common shares upon
exercise of common stock options 51 32 31 77
Weighted average shares
outstanding-diluted 3,648 3,602 3,630 3,411
Net income per share-basic $0.07 $0.13 $0.33 $0.32
Net income per share-diluted $0.07 $0.12 $0.33 $0.31
</TABLE>
6. Comprehensive Income
The Company's comprehensive income is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
May 28 May 29 May 28 May 29
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income $269 $449 $1,180 $1,052
Other comprehensive income:
Foreign translation adjustment (239) 78 (348) (32)
Total comprehensive income $30 $527 $832 $1,020
</TABLE>
7. Restructuring Expense
In March, 1999 and 1998, MODCOMP had reductions of 15 and 20 individuals,
respectively, in its domestic workforce. The expenses related to the
action were approximately $310,000 and $168,000 for severance costs.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
A summary of the period to period changes in principal items included in
the Statements of Operations is shown in Schedules I and II (pages 14 and
15).
The discussion below contains certain forward-looking statements related
to, among others but not limited to, among other things, statements
concerning future revenues and future business plans. Actual results may
vary from those contained in such forward-looking statements.
Results of Operation - 1999 Compared to 1998:
Revenue:
The Company's sales were $13,386,000 and $40,486,000 for the three month
and nine month periods ended May 28, 1999 compared to $15,075,000 and
$51,608,000 for the same periods in fiscal 1998. The decrease in revenue
was due primarily to a reduction in outsourcing and integration services
sales by MODCOMP and certain transition issues with our Multicomputer
business. The outsourcing business declined by approximately 38% from the
prior year. In the second quarter of fiscal 1998, MODCOMP's German
subsidiary had a $5.8 million outsourcing shipment from ARCOR, a German
telecommunication supplier. The sales of large integration systems are
individual orders. MODCOMP accounted for 74% and 70% of the total
revenue for the three and nine month periods compared to 74% and 80% in
the same periods of the prior fiscal year. CSP MultiComputer Division
(CSPI) products accounted for 21% and 26% for the three and nine month
periods compared to 22% and 17% for the prior fiscal year. The increase
for the nine month period is due to increased sales of CSPI's newest
product, the Series 2000. During the third quarter of fiscal 1999 CSPI
received a $4 million order to provide 2000 Series systems to Northrup
Grumman Norden Systems. This is a multi-year agreement for their General
Acoustic Stimulation System, which is a major upgrade to the stimulation
portion of the U.S. Navy's air Anti-Submarine Warfare trainers. During
the quarter, this represented 11% of total sales.
Scanalytics revenues were 5% and 4% of total sales for the three and nine
month periods compared to 4% and 3% for the prior fiscal year.
Sales for systems integration and services represented 61% and 60% of
sales for the quarter and nine month period compared to 63% and 69% for
the same period of the prior fiscal year. Systems sales, which includes
software and hardware products designed and developed by CSPI and
MODCOMP, represented 24% and 30% of total revenue for the third quarter
and nine month period compared to 30% and 24% in the same periods of the
prior fiscal year. CSPI's newest product offering, Series 2000 systems
products, are either based on the Power PC from IBM/Motorola or Analog
Devices SHARC processor and Myrinet networking technology from Myricom
Inc. Sales of the Series 2000 products have increased by approximately
129% for the nine months ended May 28, 1999 over the same period of the
prior fiscal year and accounted for 43% compared to 18% of the total
system sales for the nine month periods. SuperCard family of products
accounted for approximately 31% of total system sales for the nine month
period ended May 28, 1999 compared to 45% for the comparative period of
fiscal 1998. CSPI's Series 2000 high-performance products will provide
the future source of revenue growth in the division. CSPI results have
been affected by product transition issues related to the Series 2000
MultiComputer System. The deployment cycle of new products in the defense
market, as with the Series 2000 MutiComputers, can last several years and
result in periods of inconsistent revenue stream. This factor began to
affect results in the third quarter. We anticipate our financial
performance will continue to be affected through at least the fourth
quarter of fiscal 1999.
MODCOMP continues to ship its real-time process control classic product
line to it's existing customers which represented 12% of systems revenue
for the nine month period ended May 28, 1999 compared to 32% for the
comparative period of fiscal 1998.
Software sales represented 15% and 10% of sales for the three and nine
month periods ended May 28, 1999 compared to 7% and 6% of sales for the
same periods of the prior fiscal year. Scanalytics accounted for 31% and
45% of the total software sales for the three and nine month periods
during fiscal 1999. Scanalytics sales increased by 6% for the first nine
months of the current fiscal year compared to the prior year. The
increased sales were due to the increased demand for the IP, Gel and scan
software product that is an imaging software product used by
biotechnology organizations. The MODCOMP internet product, ViewMax,
accounted for 17% of the total software sales for the nine month period
ended May 28, 1999 compared to 21% for the comparative period of fiscal
1998. ViewMax allows companies to easily integrate their IT systems with
Internet technology without modification to the underlying legacy
application code. Acting as a bridge between a company's legacy mainframe
and its network - includes extranets and the Internet-ViewMax
reconfigures information from green screen and allows users to view the
data on their PC's in a graphic-friendly format. As e-commerce continues
to expand, the ViewMax product will play an important role in the growth
and success of the Company.
European sales accounted for 54% of the total revenue for both the
quarter and nine month periods. The rest of the geographic revenue
breakdown was 45% and 38% for the Americas, and 1% and 8% for the rest of
the world (primarily Asia) for the three and nine month periods ended May
28, 1999.
Cost of Sales:
Cost of sales as a percentage of sales was 63% and 62% for the three and
nine month periods ended May 28, 1999. This compared to 62% and 68% for
the same periods of the prior fiscal year. The reduction in the cost of
sales for the nine month period was due to the change in product mix with
increased sales of high margin system and software products. The future
cost of sales as a percent of sales will fluctuate based on the mix of
business, but most probably will increase from the levels we have
historically experienced if MODCOMP outsourcing and integration systems
sales remain as a large percentage of the total revenue.
Operating Expense:
Engineering and development expenses for the three month period ended May
28, 1999 decreased approximately $175,000 or 15% from the same period of
fiscal 1998 while remaining consistent with the prior fiscal year for the
nine month period. The fluctuation in expense relates primarily to
decreases experienced by MODCOMP offset partially by increases in
Scanalytics. MODCOMP expenses decreased approximately $301,000 and
$245,000 for the three and nine month periods ended May 28, 1999 compared
to the same periods of fiscal 1998. This is mainly attributed to
reductions in staff and expenses associated with the older MODCOMP legacy
products. The Company is currently shifting its focus and resources to
the ViewMAX Internet Software products. This shift will take a number of
months to redeploy resources. Scanalytics expenses increased
approximately $90,000 and $178,000 for the three and nine month periods
ended May 28, 1999 compared to the same periods of fiscal 1998. This
increase is primarily due to the addition of three individuals to the
engineering and development staff. CSP expenditures for the three and
nine month periods ended May 28, 1999 remained consistent with the prior
comparative periods of fiscal 1998.
Sales, general and administrative expenses decreased $302,000 (8%) and
$878,000 (8%) for the three and nine month periods ended May 28, 1999
compared to the same periods of fiscal 1998. The nine month decrease
relates primarily to reductions in CSP and MODCOMP expenditures. The
decrease in the quarter's expenses relates mainly to reductions in CSP
offset by an increase experienced by MODCOMP. CSP expenses decreased
$595,000(45%) and $405,000 (55%) for the three and nine month periods
ended May 28, 1999, respectively. This decrease is mainly due to
reductions in depreciation expense related to assets becoming fully
depreciated, decreased sales commissions attributable to the lower sales
revenue, and a decrease in management bonus expense. MODCOMP expenses
increased $240,000 (12%) and decreased $395,000 (6%) for the three and
nine month periods ended May 28, 1999 compared to the same periods of the
prior fiscal year. The increase in MODCOMP's expense for the quarter
relates to the addition of sales and marketing staff and additional
expenses for the ViewMax product. The year to date decrease for MODCOMP
relates to reduced operating expenses associated with a reduction in
staff and reduced sales commissions related to lower sales revenue.
Scanalytics expenses remained fairly consistent with the comparative
periods of fiscal 1998.
During the third quarter of fiscal 1999 MODCOMP had a reduction in staff
of 15 domestic employees and had expenses of $310,000 for severance pay.
This will save the Company approximately $1.2 million annually.
Other Income Expenses and Taxes:
Other income increased by $144,000 and $84,000 for the three and nine
month periods ended May 28, 1999. The increase was due primarily to
realized gains recognized on the sale of investments. This represented
approximately 68% of the increase.
The Company had an effective tax rate of 52% for both the three and nine
month periods ended May 28, 1999, which is above the normal US statutory
rate. This was due to the large portion of foreign-based revenue and
profits from Germany and France, which have high statutory tax rates. The
Company will continue to review with advisors the most effective tax
strategy to reduce the effective rate.
Financial Positions, Capital Resources and Liquidity:
The Company has a solid financial position with working capital of $23.4
million at May 28, 1999 compared to $22.1 million at August 28, 1998.
Accounts receivable increased to $9.8 million at May 28, 1999 compared to
$7.7 million at August 28, 1998. The increase in accounts receivable was
due to the timing of shipments and not collection issues. Accounts
payable and accrued expenses decreased to $5.9 million at May 28, 1999
from $6.4 million on August 28, 1998. The decrease was in accounts
payable for MODCOMP's German subsidiary.
Management believes that all the Company's current and foreseeable needs
can be met through working capital generated by operations and
investments.
Inflation and Changing Prices:
Management does not believe that inflation and changing prices had
significant impact on sales, revenues or operating income during fiscal
1999 or 1998. There is no assurance, however, that the Company's
business will not be materially and adversely affected by inflation and
changing prices in the future.
Factors That May Affect Future Performance:
This document contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The
factors that could cause actual results to differ materially include the
following: general economic conditions and growth rates in the
peripherals and computer products, biological imaging software and
instruments and machine code readers industries; competitive factors and
pricing pressures; changes in product mix; the timely development and
acceptance of new products; inventory risks due to shifts in market
demand; and component constraints and shortages. In response to
competitive pressures or new product introductions, the Company may take
certain pricing or marketing actions that could adversely effect the
Company's operating results. In addition, changes in the mix of old
products may cause fluctuations in the Company's gross margin. Due to the
potential quarterly fluctuations in operating results, the Company
believes that quarter to quarter comparisons of its results of operations
are not necessarily an indicator of future performance.
Markets for the Company's products are characterized by rapidly changing
technology, new products introduction and short product life cycles.
These changes can adversely affect the business and operating results.
The Company's success will depend upon its ability to enhance its
existing products and to develop and introduce, on a timely and cost
effective basis, new products that keep pace with technological
developments and address increasing customer requirements. The inability
to meet these demands could adversely effect the Company's business and
operating results.
Year 2000:
Historically, certain computer programs have been written using two
digits rather than four digits to define the year. This could result in a
computer recognizing a date using "00" as the year 1900 rather than the
year 2000, resulting in potential major system failures or
miscalculations. This problem will be referred to as the "Year 2000."
The Company has completed a review of both its internal computer systems
and its products that could be affected by the "Year 2000" issues.
Generally, on a stand alone basis, CSPI and Scanalytics software products
are not date dependent and therefore are not susceptible to the "Year
2000" issue like other general purpose computer companies. However, it
should be understood that the majority of the CSPI and Scanalytics
products performance is dependent upon third party host computer
environment. MODCOMP has provided their legacy systems customers with a
software upgrade which is "Year 2000" compliant. The Company believes
that all of the current versions of its products are "Year 2000"
compliant. The Company will continue its assessment of all current
versions of its products.
The Company developed a plan and has implemented the necessary remedial
efforts to correct the internal computer systems problems of its business
systems with certain upgrades in these systems that are "Year 2000"
compliant. The Company has been testing the various systems to assure
their compliance with test data. Testing of the various systems will be
completed by the end of July 1999. The Company has communicated and will
continue to communicate with all of its significant suppliers and large
customers to determine the extent to which the Company is vulnerable to
those third parties failure to correct their own "Year 2000" issues.
There can be no guarantee that the systems of other companies on which
significant suppliers and large customers rely upon will be timely
converted or failure to convert by another, will not have a material
impact on the Company.
The cost of implementing of all these solutions is anticipated not to be
material to the financial position or results of operations. We estimate
that the cost related to Year 2000 will be $100,000-$150,000, of which
approximatley $90,000 has been expended to date. The costs of such
conversions and updates are based on management's best estimates, which
were based on numerous assumptions of future activities such as, but not
limited to, availability and cost of personnel needed to correct and
train, ability to locate and correct relevant computer code.
Contingency plans are being developed in critical areas, to ensure that
any potential material business interruptions caused by Year 2000 issue
are mitigated. The contingency plan is being developed and should be
completed by July 1999. However, the foregoing statements are based on
management's best estimate at the present time which were derived
utilizing numerous assumptions of future events, which include third
party modification plans, certain resources and other factors. The
Company has taken and will continue to take the necessary corrective
action to mitigate any significant Year 2000 problems. There can be no
guarantee that the Company will not experience some disruption or loss of
business due to the Year 2000 issue.
CSP, INC. AND SUBSIDIARIES SCHEDULE I
CONSOLIDATED STATEMENTS OF OPERATIONS
PERCENTAGE OF SALES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
/--Three Months Ended----/ /----Nine Months Ended----/
May 28 May 29 May 28 May 29
1999 % 1998 % 1999 % 1998 %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 13,386 100% 15,075 100% 40,486 100% 51,608 100%
Costs and expenses:
Cost of sales 8,466 63% 9,383 62% 24,946 62% 35,307 68%
Engineering and
development 1,008 8% 1,183 8% 3,113 8% 3,158 6%
Selling, general
and administration 3,309 25% 3,611 24% 10,155 25% 11,033 21%
Restructuring 310 2% 168 1% 310 1% 168 --
Total costs and
expenses 13,093 98% 14,345 95% 38,524 95% 49,666 96%
Operating income 293 2% 730 5% 1,962 5% 1,942 4%
Other income 268 2% 124 1% 497 1% 413 1%
Income before taxes 561 4% 854 6% 2,459 6% 2,355 5%
Income tax expense 292 2% 405 3% 1,279 3% 1,303 3%
Net income $269 2% $449 3% $1,180 3% $1,052 2%
</TABLE>
CSP, INC. AND SUBSIDIARIES SCHEDULE II
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD TO PERIOD DOLLAR AND PERCENTAGE CHANGE
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
/--Three Months Ended--//--Nine Months Ended--/
May 28,1999 vs May 29, 1998
$ % $ %
Change Change Change Change
<S> <C> <C> <C> <C>
Sales (1,689) (11%) (11,122) (22%)
Costs and expenses:
Cost of sales (917) (10%) (10,361) (29%)
Engineering and development (175) (15%) (45) (1%)
Selling, general and
administration (302) (8%) (878) (8%)
Restructuring 142 85% 142 85%
Total costs and expenses (1,252) (9%) (11,142) (22%)
Operating income (437) (60%) 20 1%
Other income 144 116% 84 20%
Income before income taxes (293) (34%) 104 4%
Income tax expense (113) (28%) 24 2%
Net income ($180) (40%) $128 12%
</TABLE>
PART II. OTHER INFORMATION
Item 4. Submissions of Matters to a vote of Security
Holders
None
Item 6. Exhibit and Reports on Form 8-K
a) Reports on Form 8-K
b) Exhibits
27.0 Financial Data Schedule
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.
CSP Inc.
(Registrant)
Date: July 9, 1999 By: /s/Alexander R. Lupinetti
Chief Executive Officer
and President
Date: July 9, 1999 By: /s/Gary W. Levine
Vice President of Finance
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q 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> AUG-30-1999
<PERIOD-START> AUG-29-1998
<PERIOD-END> MAY-28-1999
<CASH> 1,586
<SECURITIES> 10,231
<RECEIVABLES> 10,107
<ALLOWANCES> 352
<INVENTORY> 5,486
<CURRENT-ASSETS> 29,864
<PP&E> 14,860
<DEPRECIATION> 11,564
<TOTAL-ASSETS> 37,234
<CURRENT-LIABILITIES> 6,459
<BONDS> 0
0
0
<COMMON> 40
<OTHER-SE> 27,221
<TOTAL-LIABILITY-AND-EQUITY> 37,234
<SALES> 40,486
<TOTAL-REVENUES> 40,486
<CGS> 24,946
<TOTAL-COSTS> 38,524
<OTHER-EXPENSES> (497)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,459
<INCOME-TAX> 1,279
<INCOME-CONTINUING> 1,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,180
<EPS-BASIC> .33
<EPS-DILUTED> .33
</TABLE>
