<PAGE>
- ------------------------------------------------------------------------------
UNITED STATES
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 March 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 0-20191
* * * * * *
ODS NETWORKS, INC.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 75-1911917
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1101 EAST ARAPAHO ROAD, RICHARDSON, TEXAS 75081
-----------------------------------------------
(Address of principal executive offices)
(Zip Code)
(972) 234-6400
---------------------------------------------------
(Registrant's telephone number, including area code)
OPTICAL DATA SYSTEMS, INC.
-------------------------------------------
(Former name, 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
--- ---
* * * * * *
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, on April 30, 1997 was 16,403,171.
- ------------------------------------------------------------------------------
<PAGE>
ODS NETWORKS, INC.
INDEX
PART I - FINANCIAL INFORMATION
PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three
months ended March 31, 1997 and March 31, 1996. . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and March 31, 1996. . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . . 7-12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 13
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . 14
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<PAGE>
ODS NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)
March 31, Dec. 31,
1997 1996
----------- --------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 7,732 $ 6,565
Short-term investments 10,118 13,790
Accounts receivable (net) 13,054 16,573
Income taxes receivable 430 85
Inventories 26,395 25,573
Deferred tax assets 1,991 1,499
Other assets 1,112 840
------- -------
Total current assets 60,832 64,925
Property and equipment (net) 12,065 11,739
Long-term investments 7,538 5,050
Other assets 220 221
------- -------
TOTAL ASSETS $80,655 $81,935
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,625 $ 5,440
Accrued expenses 4,529 4,956
------- -------
Total current liabilities 10,154 10,396
Deferred tax liabilities 577 601
Stockholders' Equity:
Preferred stock, $.01 par value,
Authorized shares - 5,000
No shares issued and outstanding
Common stock, $.01 par value,
Authorized shares - 80,000
Issued and outstanding shares - 16,383
in 1997 and 16,328 in 1996 164 163
Additional paid-in capital 19,072 18,908
Retained earnings 50,791 51,969
Foreign currency translation adjustments (103) (102)
------- -------
Total stockholders' equity 69,924 70,938
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $80,655 $81,935
------- -------
------- -------
See accompanying notes.
-3-
<PAGE>
ODS NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
-----------------------
March 31, March 31,
1997 1996
--------- ---------
Net sales $20,161 $29,505
Cost of sales 11,165 15,139
------- -------
Gross profit 8,996 14,366
Operating expenses:
Sales and marketing 7,141 5,929
Research and development 2,830 2,161
General and administrative 1,262 887
------- -------
Operating income (loss) (2,237) 5,389
Interest income, net 337 247
------- -------
Income (loss) before income taxes (1,900) 5,636
Income tax (benefit) provision (722) 2,142
------- -------
Net income (loss) $(1,178) $ 3,494
------- -------
------- -------
Net income (loss) per share $ (0.07) $ .21
------- -------
------- -------
Weighted average common and common
equivalent shares outstanding 16,360 16,865
------- -------
------- -------
See accompanying notes.
-4-
<PAGE>
ODS NETWORKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
------------------------
March 31, March 31,
1997 1996
--------- ---------
Operating Activities:
Net income (loss) $(1,178) $ 3,494
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation 739 554
Deferred income taxes (516) (133)
Provision for doubtful accounts and returns 20 80
Changes in operating assets and liabilities:
Accounts receivable 3,499 (7,236)
Income taxes receivable (345) -
Inventories (822) (3,418)
Other assets (271) (278)
Accounts payable and accrued expenses (242) 1,120
Income taxes payable - 1,576
------- -------
Net cash provided by (used in)
operating activities 884 (4,241)
------- -------
Investing Activities:
Purchases of short-term investments (2,200) (6,112)
Maturities of short-term investments 5,872 5,000
Purchases of long-term investments (2,488) -
Purchases of property and equipment (1,065) (1,210)
------- -------
Net cash provided by (used in) investing activities 119 (2,322)
------- -------
Financing Activities:
Exercise of employee stock options 165 235
------- -------
Net cash provided by financing activities 165 235
------- -------
Effect of foreign currency translation
adjustment on cash and cash equivalents (1) (1)
------- -------
Net increase (decrease) in cash and cash
equivalents 1,167 (6,329)
Cash and cash equivalents at beginning of
period 6,565 10,397
------- -------
Cash and cash equivalents at end of period $ 7,732 $ 4,068
------- -------
------- -------
Supplemental disclosure of income taxes paid $ 179 $ 699
------- -------
------- -------
See accompanying notes.
-5-
<PAGE>
ODS NETWORKS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all the adjustments
(consisting of normal recurring adjustments) considered necessary for fair
presentation have been included.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, EARNINGS PER SHARE, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to have no effect on
primary earnings per share for the quarter ended March 31, 1997 and to result in
an increase in primary earnings per share for the quarter ended March 31, 1996
of $0.01 per share. The impact of Statement 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be significant.
The results of operations for the three month period ending March 31, 1997 are
not necessarily indicative of the results which may be achieved for the full
fiscal year or for any future period. The condensed consolidated financial
statements included herein should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1996.
Note B - Inventories (in Thousands)
Inventories consist of:
March 31, Dec. 31,
1997 1996
--------- --------
Raw materials $ 4,899 $ 6,138
Work in process 3,227 2,308
Finished products 14,529 13,530
Demonstration systems 3,740 3,597
------- -------
$26,395 $25,573
------- -------
------- -------
Note C - Accrued Expenses (in Thousands)
Included in accrued expenses are the following:
March 31, Dec. 31,
1997 1996
--------- --------
Accrued sales commissions $ 621 $ 681
Accrued property taxes 174 631
Accrued vacation expense 727 538
Deferred maintenance revenue 1,392 1,714
Other (individually less than
5% of current liabilities) 1,615 1,392
------ ------
$4,529 $4,956
------ ------
------ ------
-6-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data as a percentage of net sales:
Three Months Ended March 31,
----------------------------
1997 1996
------ ------
Net sales 100.0% 100.0%
Cost of sales 55.4 51.3
----- -----
Gross profit 44.6 48.7
Sales and marketing expenses 35.4 20.1
Research and development expenses 14.0 7.3
General and administrative expenses 6.3 3.0
----- -----
Operating income (loss) (11.1) 18.3
Interest income, net 1.7 0.8
----- -----
Income (loss) before income tax (9.4) 19.1
Income taxes (3.6) 7.3
----- -----
Net income (loss) (5.8)% 11.8%
----- -----
----- -----
Ethernet sales 57.3% 63.1%
Token Ring sales 24.3 17.3
FDDI sales 15.5 14.5
ATM sales 1.7 3.3
Other sales 1.2 1.8
----- -----
Net sales 100.0% 100.0%
----- -----
----- -----
Domestic sales 78.4% 84.3%
Export sales to:
Europe 10.2 9.0
Canada 5.2 3.8
Asia 4.1 2.6
Latin America 2.1 0.3
----- -----
Net sales 100.0% 100.0%
----- -----
----- -----
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
FIRST QUARTER OF 1997 COMPARED WITH FIRST QUARTER OF 1996
NET SALES. Net sales for the first quarter ended March 31, 1997 decreased
to $20.2 million compared to $29.5 million for the first quarter ended March 31,
1996 as sales of the Company's new network switching products did not increase
quickly enough to offset the decrease in sales of its prior generation shared
bandwidth intelligent hubs.
Export sales decreased to $4.3 million for the first quarter of 1997 from
$4.6 million for first quarter of 1996.
During the first quarter of 1997, 14.3% of net sales were to Electronic
Data Systems Corporation ("EDS") compared to 21.2% of net sales in the first
quarter of 1996. Sales to AT&T Corp. ("AT&T") were 3.4% of net sales during the
first quarter of 1997 compared to 19.6% of net sales during the first quarter of
1996.
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<PAGE>
GROSS PROFIT. Gross profit decreased to $9.0 million or 44.6% of net sales
for the first quarter of 1997 compared to $14.4 million or 48.7% of net sales
for the first quarter of 1996. Gross profit as a percentage of net sales in
the first quarter of 1997 was impacted by lower sales volume and the market
transition to higher performance switch products. Gross profit margins in
future periods may be affected by several factors such as continued product
transition, sales volume, shifts in product mix, fluctuation in manufacturing
costs, pricing strategies of the Company and its competitors and fluctuations
in sales of integrated third-party products. Gross profit margins are
typically lower on sales of integrated third-party products.
SALES AND MARKETING. Sales and marketing expenses increased to
$7.1 million or 35.4% of net sales for the first quarter of 1997 from $5.9
million or 20.1% of net sales for the first quarter of 1996. The increase in
sales and marketing expense was primarily due to higher levels of staffing in
sales, marketing and technical support and associated costs. The Company
expects sales and marketing expenses to continue to increase in amount, but may
vary as a percentage of net sales in the future.
RESEARCH AND DEVELOPMENT. Research and development expenses increased to
$2.8 million or 14.0% of net sales for the first quarter of 1997 from $2.2
million or 7.3% of net sales for the first quarter of 1996. The increase in
research and development expense was primarily due to an increase in the number
of development personnel and increased costs related to the development and
testing of new switching products. The Company expects to continue to invest
in research and development activities in the future in order to broaden its
family of switching products.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $1.3 million or 6.3% of net sales for the first quarter of 1997 from
$0.9 million or 3.0% of net sales for the first quarter of 1996. As the
Company continues to expand its domestic and foreign operations, general and
administrative expenses are expected to increase in amount, but may vary as a
percentage of net sales in the future.
INTEREST. Net interest income increased to $0.3 million for the first
quarter of 1997 from $0.2 million for the first quarter of 1996. Net interest
income may vary in the future based on the Company's cash flow and rate of
return on investments.
INCOME TAXES. The Company's effective income tax rate remained constant at
38.0% for the first quarter of 1997 compared to the first quarter of 1996.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity at March 31, 1997 were
$7.7 million of cash and cash equivalents, $10.1 million of short-term
investments, and $7.5 million of highly liquid investments with a stated
maturity beyond one year. As of March 31, 1997, working capital was
$50.6 million compared to $54.5 million as of December 31, 1996.
Cash flows provided by operations for the first three months of 1997 were
$0.9 million, primarily due to a decrease in accounts receivable balances
partially offset by an increase in inventory balances and a net loss for the
period. The decrease in accounts receivable reflects the decrease in net sales
to $20.2 million during the first quarter of 1997 compared to $26.0 million
during the fourth quarter of 1996.
Future fluctuations in accounts receivable and inventory balances will be
dependent upon several factors, including but not limited to quarterly sales,
ability to collect accounts receivable timely, the Company's strategy as to
building inventory in advance of receiving orders from customers, and the
accuracy of the Company's forecasts of product demand and component
requirements.
Cash provided by investing activities in the first three months of 1997
consisted of net maturities of short-term investments of $3.7 million offset by
purchases of long-term investments of $2.5 million and property and equipment
purchases of $1.1 million.
Cash provided by financing activities in the first three months of 1997 was
$0.2 million, which consisted of the issuance of common stock relating to the
exercise of certain employee stock options.
During the first three months of 1997 the Company funded its operations
solely through cash flow from operations. As of March 31, 1997, the Company's
revolving bank credit facility provided an unsecured line of credit of up to
$5.0 million, subject to certain limitations and conditions. At March 31, 1997,
the Company had no borrowings outstanding under this bank credit facility which
expired on April 14, 1997. Subsequent to March 31, 1997, the Company renewed
the line of credit agreement and increased the maximum available borrowings
under the credit facility to $15.0 million. Borrowings under this line are
subject to certain limitations and conditions, including the maintenance of
certain financial ratios such as debt-to-equity and fixed charge coverage
ratios. Borrowings on this line accrue interest at prime with interest due
monthly and principal due April 12, 1999.
The Company believes that its cash, cash equivalents and investment
balances, cash expected to be generated from operations and the availability of
borrowings under its bank credit facility will provide sufficient cash resources
to finance its operations and currently projected capital expenditures through
the remainder of 1997.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
TECHNOLOGICAL CHANGES. The market for the Company's products is characterized
by frequent product introductions, rapidly changing technology and continued
evolution of new industry standards. The market for network intelligent hubs and
switches requires the Company's products to be compatible and interoperable with
products and architectures offered by various vendors, including other
networking
-9-
<PAGE>
products, workstation and personal computer architectures and computer and
network operating systems. The Company's success will depend to a
substantial degree upon its ability to develop and introduce in a timely
manner new products and enhancements to its existing products that meet
changing customer requirements and evolving industry standards. The
development of technologically advanced products is a complex and uncertain
process requiring high levels of innovation as well as the accurate
anticipation of technological and market trends. There can be no assurance
that the Company will be able to identify, develop, manufacture, market and
support new or enhanced products successfully in a timely manner. Further,
the Company or its competitors may introduce new products or product
enhancements that shorten the life cycle of or obsolete the Company's
existing product lines which could have a material adverse effect on the
Company's business, operating results and financial condition.
COMPETITION AND MARKET ACCEPTANCE. The market for network intelligent hubs and
switches is intensely competitive and subject to frequent product introductions
with improved price/performance characteristics. Even if the Company does
introduce advanced products which meet evolving customer requirements in a
timely manner, there can be no assurance that the new Company products will gain
market acceptance. Many networking companies, including Cisco Systems, Inc.
("Cisco"), Cabletron Systems, Inc. ("Cabletron"), Bay Networks, Inc.("Bay
Networks") and others, have substantially greater financial, technical, sales
and marketing resources, better name recognition and a larger customer base than
the Company. In addition, many of the Company's large competitors offer
customers a broader product line which provides a more comprehensive networking
solution than the Company currently offers. Increased competition in the
networking industry could result in significant price competition, reduced
profit margins or loss of market share, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition.
PRODUCT TRANSITIONS. Once current networking products have been in the market
place for a period of time and begin to be replaced by higher performance
products (whether of the Company's or a competitor's design), the Company
expects the net sales of such networking products to decrease. In order to
achieve revenue growth in the future the Company will be required to design,
develop and successfully commercialize higher performance products in a timely
manner. For example, the Company believes that the market for shared bandwidth
intelligent hubs, sales of which have represented the vast majority of the
Company's net sales over the past several years, decreased over the past several
quarters and may continue to decrease as switching products with enhanced
price/performance characteristics gain market acceptance. There can be no
assurance that the Company will be able to introduce new products and gain
market acceptance quickly enough to avoid adverse revenue transition patterns
during current or future product transitions.
MANUFACTURING AND AVAILABILITY OF COMPONENTS. The Company's manufacturing
operations consist primarily of final assembly, testing and quality control of
subassemblies and finished units. Materials used by the Company in its
manufacturing processes include semiconductors such as microprocessors, memory
chips and application-specific integrated circuits, printed circuit boards,
power supplies and enclosures. All of the materials used in the Company's
products are purchased under contracts and purchase orders with third parties.
While the Company believes that many of the materials used in the production of
its products
-10-
<PAGE>
are generally readily available from a variety of sources, certain components
are available from one or a limited number of suppliers. The lead times for
delivery of components vary significantly and exceed ten weeks for certain
components. If the Company should fail to forecast its requirements accurately
for components, it may experience excess inventory or shortages of certain
components which could have an adverse effect on the Company's business and
operating results. Further, any interruption in the supply of any of these
components, or the inability of the Company to procure these components from
alternative sources at acceptable prices within a reasonable time, could have
an adverse effect on the Company's business and operating results.
DEPENDENCE OF KEY CUSTOMERS. A relatively small number of customers has
accounted for a significant portion of the Company's revenue. U.S. Government
agencies and strategic network integrators, such as EDS, which purchase the
Company's products for internal use and offer the Company's products for resale,
are expected to continue to account for a substantial portion of the Company's
net revenue. The Company continuously faces competition from Cisco, Cabletron,
Bay Networks and others for U.S. Government networking projects and corporate
networking installations. Any reduction or delay in sales of the Company's
products to these customers could have a material adverse effect on the
Company's operating results.
INTERNATIONAL OPERATIONS. Export sales accounted for approximately 21.6% of the
Company's revenue for the three months ended March 31, 1997. The Company
intends to expand its international presence and expects that export sales will
represent a significant portion of its business in the future. While the
Company's current products are designed to meet relevant regulatory requirements
of the foreign markets in which they are sold, any inability to obtain any
required foreign regulatory approvals on a timely basis could have a material
adverse effect on the Company's operating results. Additionally, the Company's
international operations may be affected by changes in demand resulting from
fluctuations in currency exchange rates and local purchasing practices,
including seasonal fluctuations in demand, as well as by risks such as increases
in duty rates, difficulties in distribution and other constraints upon
international trade.
INTELLECTUAL PROPERTY. The Company's success and its ability to compete are
dependent, in part, upon its proprietary technology. The Company does not hold
any issued patents and currently relies on a combination of contractual rights,
trade secrets and copyright laws to establish and protect its proprietary rights
in its products. There can be no assurance that the steps taken by the Company
to protect its intellectual property will be adequate to prevent
misappropriation of its technology or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology.
The Company is also subject to the risk of adverse claims and litigation
alleging infringement of intellectual property rights of others. The Company
could incur substantial costs in defending itself and its customers against any
such claim regardless of the merits of such claims. In the event of a
successful claim of infringement, the Company may be required to obtain one or
more licenses from third parties. There can be no assurance that the Company
could obtain the necessary licenses on reasonable terms.
-11-
<PAGE>
GENERAL. Sales of networking products fluctuate, from time to time, based on
numerous factors, including customers' capital spending levels and general
economic conditions. There can be no assurance as to the rate or extent of the
growth of the market for network intelligent hubs and switches or the potential
adoption of alternative technologies. Future declines in networking product
sales as a result of general economic conditions, adoption of alternative
technologies or any other reason could have a material adverse effect on the
Company's business, operating results and financial condition.
Due to the factors noted above and elsewhere in Management's Discussion and
Analysis of Financial Condition and Results of Operations, the Company's future
earnings and stock price may be subject to significant volatility, particularly
on a quarterly basis. Past financial performance should not be considered a
reliable indicator of future performance and investors should not use historical
trends to anticipate results or trends in future periods. Any shortfall in
revenue and earnings from the levels anticipated by securities analysts could
have an immediate and significant effect on the trading price of the Company's
common stock in any given period. Also, the Company participates in a highly
dynamic industry which often results in volatility of the Company's common stock
price.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This quarterly report, other than historical information, includes forward-
looking statements with respect to financial results, product introductions,
market demand, industry trends, sufficiency of cash resources and certain other
matters. These statements are made under the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 and involve risks and
uncertainties which could cause actual results to differ materially from those
in the forward-looking statements, including those discussed in the section
entitled "Factors That May Affect Future Results of Operations" and elsewhere in
this filing, as well as those discussed in the Company's Annual Report on Form
10-K and other filings with the Securities and Exchange Commission.
-12-
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A.) EXHIBITS. The following exhibits are included herein:
(11) Schedule of Computation of Per Share Earnings
(27) Financial Data Schedule
(B.) FORM 8-K. The Company filed no reports on Form 8-K and none were
required to be filed during the three months ended
March 31, 1997.
-13-
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
ODS NETWORKS, INC.
(Company)
Date: May 9, 1997 By: /s/ TIMOTHY W. KINNEAR
-----------------------------
Timothy W. Kinnear
Chief Financial Officer
(Principal Financial Officer)
By: /s/ KANDIS TATE THOMPSON
-----------------------------
Kandis Tate Thompson
Controller
(Principal Accounting Officer)
-14-
<PAGE>
EXHIBIT INDEX
EXHIBIT
- -------
11 Schedule of Computation of Per Share Earnings
27 Financial Data Schedule
-15-
<PAGE>
EXHIBIT 11
ODS NETWORKS, INC.
COMPUTATIONS OF PER SHARE EARNINGS
(In thousands, except per share amounts)
Three Months Ended
March 31,
---------------------
1997 1996
------- -------
PRIMARY
Weighted average common shares
outstanding 16,360 16,194
Net effect of dilutive stock
options and warrants based
on the treasury stock
method using
average market price - 671
------- -------
Weighted average common and
common equivalent shares
outstanding 16,360 16,865
------- -------
------- -------
Net income (loss) $(1,178) $ 3,494
------- -------
------- -------
Net income (loss) per share $ (0.07) $ .21
------- -------
------- -------
FULLY DILUTED*
Weighted average common shares
outstanding 16,360 16,194
Net effect of dilutive stock
options and warrants based
on the treasury stock method
using the year-end market
price, if higher than
average market price - 671
------- -------
Weighted average common and
common equivalent shares
outstanding 16,360 16,865
------- -------
------- -------
Net income (loss) $(1,178) $ 3,494
------- -------
------- -------
Net income (loss) per share $ (0.07) $ .21
------- -------
------- -------
- ------------------------
* Fully diluted earnings per share is not presented in the Consolidated
Statements of Income as the resulting dilution is less than 3% of primary
earnings per share.
-16-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES
3 AND 4 OF THE COMPANY'S 10Q FOR THE YEAR TO DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,732
<SECURITIES> 10,118
<RECEIVABLES> 13,844
<ALLOWANCES> 790
<INVENTORY> 26,395
<CURRENT-ASSETS> 60,832
<PP&E> 23,540
<DEPRECIATION> 11,475
<TOTAL-ASSETS> 80,655
<CURRENT-LIABILITIES> 10,154
<BONDS> 0
0
0
<COMMON> 164
<OTHER-SE> 69,760
<TOTAL-LIABILITY-AND-EQUITY> 80,655
<SALES> 20,161
<TOTAL-REVENUES> 20,161
<CGS> 11,165
<TOTAL-COSTS> 11,165
<OTHER-EXPENSES> 11,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,900)
<INCOME-TAX> (722)
<INCOME-CONTINUING> (1,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,178)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
