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 August 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No.: 0-25592
PERIPHONICS CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 11-2699509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Veterans Memorial Highway, Bohemia, New York 11716
(Address of principal executive offices)
Registrant's telephone number, including are code: (516) 468-9000
Check 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(s), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, including treasury shares, as of the latest practicable date:
October 12, 1998
Class of Number
Common Equity of Shares
Common Stock,
Par value $.01 13,477,046
<PAGE>
PERIPHONICS CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information Page No.
Item 1. Financial Statements
Consolidated Balance Sheets - August 31, 1998 3
and May 31, 1998
Consolidated Statements of Earnings - Three Months 4
Ended August 31, 1998 and August 31, 1997
Consolidated Statements of Cash Flows -Three Months 5
Ended August 31, 1998 and August 31, 1997
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7-12
Condition and Results of Operations
Part II. Other Information 13
Signatures 14
</TABLE>
<PAGE>
PERIPHONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
(Unaudited) (Audited)
--------------- ------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents................................................ $ 10,439 $ 14,810
Short-term investments................................................... 11,214 11,033
Accounts receivables, less allowance for doubtful
accounts of $1,466 and $1,266, respectively.......................... 38,052 37,721
Inventories.............................................................. 16,036 14,066
Deferred income taxes.................................................... 1,794 1,687
Prepaid expenses and other current assets................................ 1,272 1,367
------- -------
Total current assets.................................................. 78,807 80,684
Property, plant and equipment, net....................................... 19,822 19,498
Other assets............................................................. 458 425
------- --------
TOTAL ASSETS............................................................. $ 99,087 $ 100,607
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payables........................................................ $ 6,612 $ 8,273
Accrued expenses and other current liabilities........................... 15,706 14,328
------- -------
Total current liabilities............................................ 22,318 22,601
Deferred income taxes.................................................... 51 146
------- -------
TOTAL LIABILITIES...................................................... 22,369 22,747
Stockholders' Equity:
Preferred stock, par value $.01 per share, --- ---
1,000,000 shares authorized, none issued
Common stock, par value $.01 per share, 138 138
30,000,000 shares authorized, 13,846,305 issued and
13,519,305 shares outstanding as of August 31, 1998;
13,843,305 shares issued and outstanding as of May 31, 1998
Additional paid-in capital............................................... 43,785 43,780
Retained earnings......................................................... 35,058 33,942
------- -------
78,981 77,860
Treasury stock, 327,000 shares......................................... (2,263) ---
------- -------
Total stockholders' equity........................................... 76,718 77,860
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........................... $ 99,087 $100,607
======= ========
</TABLE>
<PAGE>
PERIPHONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1998 1997
---- ----
<S> <C> <C>
System revenues............................................................... $ 22,166 $ 15,416
Maintenance revenues.......................................................... 8,239 7,144
------- -------
Total revenues............................................................. 30,405 22,560
------- -------
Cost of system revenues....................................................... 10,380 7,857
Cost of maintenance revenues.................................................. 4,360 4,009
------- -------
Cost of revenues........................................................... 14,740 11,866
------- -------
Gross profit.................................................................. 15,665 10,694
------- -------
Operating expenses:
Selling, general and administrative....................................... 9,777 7,449
Research and development.................................................. 4,610 3,213
------- -------
14,387 10,662
------- -------
Earnings from operations...................................................... 1,278 32
------- -------
Other income (expense):
Interest and other income................................................. 333 379
Foreign exchange gain (loss).............................................. 234 (280)
------- -------
567 99
------- -------
Earnings before provision for income taxes.................................... 1,845 131
Provision for income taxes.................................................... 729 49
------- -------
Net earnings.................................................................. $ 1,116 $ 82
======== ========
Per share data:
Basic earnings................................................................ $ 0.08 $ 0.01
======== ========
Diluted earnings.............................................................. $ 0.08 $ 0.01
======== ========
Weighted average shares:
Basic......................................................................... 13,852 13,720
======== ========
Diluted....................................................................... 13,937 14,026
======== ========
</TABLE>
<PAGE>
PERIPHONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings........................................................................ $ 1,116 $ 82
Adjustments to reconcile net earnings to net cash and cash
equivalents used in operating activities:
Depreciation and amortization.................................................... 1,628 1,266
Deferred income taxes............................................................ (202) (157)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivables...................................... (331) 9,739
Increase in inventories.......................................................... (1,970) (891)
Decrease in prepaid expenses and other current assets............................ 95 103
Increase in other assets......................................................... (34) (64)
Decrease in accounts payable and accrued expenses
and other current liabilities................................................... (277) (7,167)
------- -------
Net cash and cash equivalents provided by operating activities................... 25 2,911
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.................................... (1,952) (1,680)
Proceeds from sales of short-term investment.................................. 7,615 ---
Purchases of short-term investment............................................ (7,796) (10,788)
------- -------
Net cash and cash equivalents used in financing activities.................... (2,133) (12,468)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock.................................................... (2,263) ---
Proceeds from stock options exercised......................................... --- 426
------- -------
Net cash and cash equivalents (used in) provided by financing activities...... (2,263) 426
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS........................................... (4,371) (9,131)
CASH AND CASH EQUIVALENTS beginning of year......................................... 14,810 25,092
------- ------
CASH AND CASH EQUIVALENTS, end of period............................................ $10,439 $15,961
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest............................................................................ $ --- $ ---
Income Taxes........................................................................ $ 2,183 $ 2,490
</TABLE>
<PAGE>
PERIPHONICS CORPORATION AND SUBSIDIATIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
In the opinion of Periphonics Corporation and subsidiaries (the "Company"),
the accompanying unaudited consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position, the results of operations, and the cash
flows at August 31, 1998 and for all periods presented.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. These financial statements should be read in
conjunction with the Consolidated Financial Statements and Notes included in the
Company's May 31, 1998 Annual Report and Form 10-K as filed with the Securities
and Exchange Commission.
The results of operations for the three months ended August 31, 1998 and
August 31, 1997 are not necessarily indicative of the results to be expected for
the full year. Dollar amounts are presented in thousands except per share
amounts.
2. EARNINGS PER SHARE
------------------
In the third quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". Basic income per
share is determined using the weighted average number of shares of common stock
outstanding during each period. Diluted income per share further assumes the
issuance of common shares for all dilutive securities including stock options.
3. INVENTORIES
-----------
Inventories consist of the following:
August 31, 1998 May 31, 1998
--------------- ------------
Raw material $ 9,735 $ 8,528
Work-in-process 6,301 5,538
------- -------
$16,036 $14,066
======= =======
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended August 31,1998 compared to Three Months Ended August 31,1997
- -------------------------------------------------------------------------------
Total Revenues. Total revenues increased by 34.8% to $30.4 million in the
first three months of fiscal 1999 from $22.6 million in the comparable period of
the prior fiscal year. System revenues increased by 43.8% to $22.2 million in
the first three months of fiscal 1999 compared with $15.4 million in the same
period in the prior fiscal year. The increase in system revenues was due to a
44.7% increase in domestic sales and a 42.1% increase in international sales.
The increase in system revenues was primarily due to an increase in unit sales
volume. Maintenance revenues increased by 15.3% to $8.2 million in the first
three months of fiscal 1999 compared with $7.1 million in the same period of the
prior fiscal year, primarily due to additions to the service base.
Gross Profit. The Company's gross profit increased by $5.0 million to $15.7
million in the first three months of fiscal 1999 compared with $10.7 million in
the comparable period of the prior fiscal year. Gross profit as a percentage of
total revenues increased to 51.5% in the first three months of fiscal 1999
compared with 47.4% in the comparable period of the prior year. Gross profit on
system revenues increased by $4.2 million to $11.8 million in the first three
months of fiscal 1999 compared with $7.6 million in the comparable period of the
prior fiscal year. The gross margin on system revenues increased to 53.2% in the
first three months of fiscal 1999 compared with 49.0% in the same period of the
prior fiscal year. The Company attributes this increase primarily to the product
mix during the current three month period, with a larger percentage of higher
margin standard hardware and software products and to an improved margin on
custom programming revenues.
Gross profit on maintenance revenues increased by $0.7 million, or 23.7% to
$3.9 million in the first three months of fiscal 1999 compared with $3.1 million
in the comparable period of the prior fiscal year. Gross margins on maintenance
revenues increased to 47.1% in the first three months of fiscal 1999 compared
with 43.9% in the comparable period of the prior fiscal year. The increase in
margin was attributed to the addition of more units to the service base
partially offset by higher costs to support organizational growth.
Selling, General and Administrative Expenses. Selling, General and
Administrative ("SG&A") expenses were $9.8 million, or 32.2% of total revenues,
compared with $7.4 million, or 33.0% of total revenues, for the first three
months of fiscal 1999 and 1998, respectively. The increased expense level can be
attributed primarily to the Company's continued expansion of its sales and
marketing efforts designed to increase its market penetration and market share
on a global basis.
<PAGE>
Research and Development Expenses. Research and Development ("R&D")
expenses, primarily for new products and features, increased 43.5% to $4.6
million, or 15.2% of total revenues, compared with $3.2 million, or 14.2% of
total revenues, for the first three months of fiscal 1998. The increase in the
dollar amount of R&D expenses reflects the continued efforts of the Company to
broaden the scope of its product offerings in order to address growth
opportunities in the marketplace. R&D expenses are charged to operations as
incurred, and no software development costs have been capitalized. The Company
expects such expenditures to continue to increase, although such expenses as a
percentage of total revenues may vary from period to period.
Other Income (Expense). Other income was $0.6 million and $0.1 million for
the three months ended August 31, 1998 and 1997, respectively. Interest and
other income decreased to $0.3 million in the three months ended August 31, 1998
compared with $0.4 million in the three months ended August 31, 1997. The
Company had a foreign exchange gain of $0.2 million in the three months ended
August 31, 1998 compared to a foreign exchange loss of $0.3 million for the
three months ended August 31, 1997. To the extent the Company is unable to match
revenue received in foreign currencies with expenses paid in the same currency,
it is exposed to fluctuations in international currency transactions.
Income Taxes. Variations in the customary relationship between the
provision for income taxes and the statutory income tax rate primarily result
from the utilization of research and development tax credits, state and local
income taxes, and exempt income of the Company's foreign sales corporation. The
Company's effective income tax rates were 39.5% and 37.5% for the three months
ended August 31, 1998 and August 31, 1997, respectively.
Foreign Operations. The Company's European subsidiary operated at a profit
of approximately $0.7 million during the three months ended August 31, 1998 as
compared to a loss of $1.1 million during the three months ended August 31,
1997. This profit was attributed to an increase in gross profit primarily
attributable to an increase of approximately 200% in increased system revenues
and an increase of approximately 27% in maintenance revenues, offset in part by
increased SG&A expenses to support the expansion of the sales and marketing
effort. Transfers from the Company's North American operations to its European
subsidiary are accounted for at cost, plus a reasonable profit. The cost of
revenues for the Company's European subsidiary includes approximately $0.2
million and $0.1 million of intercompany gross profit earned by the Company's
North American operations on system revenues by the European subsidiary to third
parties during the three months ended August 31, 1998 and August 31, 1997,
respectively.
<PAGE>
Liquidity and Capital Resources
The Company's principal cash requirement to date has been to fund working
capital and capital expenditures in order to support the growth of revenues.
Historically, the Company has primarily financed this requirement through cash
flow from operations, bank borrowings and two public offerings for the Company's
common stock in 1995, which resulted in an aggregate of $41.1 million of net
proceeds to the company. Cash flow from operations was breakeven and $2.9
million for the three months ended August 31, 1998 and 1997, respectively. At
August 31, 1998 the Company had working capital of $56.5 million, including
$21.7 million of cash and cash equivalents and short-term investments. The
Company expects its working capital needs to increase along with future revenue
growth.
At August 31, 1998, current assets and current liabilities decreased by
$1.9 million and $0.3 million, respectively, compared to May 31, 1998. Current
assets decreased primarily as a result of a decrease in cash and cash
equivalents resulting primarily from the authorized repurchase of 327,000 shares
of the Company's common stock, discussed below. Current liabilities decreased
primarily due to lower accounts payable.
The average days sales outstanding (calculated by dividing the net accounts
receivable at the balance sheet date for each period by the average sales per
day during the quarter immediately preceding the balance sheet date) for this
period were approximately 115 days. The average days sales outstanding were 107
days, 111 days, and 83 days at May 31, 1998, 1997 and 1996 respectively.
The Company's inventory increased to $16.0 million as of August 31, 1998
from $14.1 million as of May 31, 1998.
The Company has a $15.0 million unsecured line of credit with a bank which
expires on November 30, 1998. As of August 31, 1998 the Company had no
borrowings under this line of credit. Any borrowing on this line of credit will
bear interest at the prime rate.
The Company made capital expenditures totaling $2.0 million and $1.7
million during the three months ended August 31, 1998 and August 31, 1997,
respectively.
Financing activities during the first quarter of fiscal 1999 included the
repurchase of 327,000 shares of the Company's common stock at a cost of
approximately $2.3 million, pursuant to authorization by its Board of Directors
during fiscal 1999 to repurchase up to 1,300,000 shares. Subsequent to the end
of the first quarter of fiscal 1999, the Company repurchased an additional
99,500 shares of the Company's common stock at a cost of approximately $0.7
million.
The Company believes that its existing sources of working capital and
borrowing available under its revolving line of credit will be sufficient to
fund its operations and capital expenditures for at least 12 months.
Year 2000 Compliance
The Year 2000 issue exists because many computer systems and applications
use two-digit date fields to designate a year. As the century date change
occurs, date sensitive systems may not be able to recognize the year 2000 or may
do so incorrectly as the year 1900. This inability to recognize or properly
interpret the year 2000 may result in the incorrect processing of financial and
operational information.
<PAGE>
The Company has initiated a program to upgrade its internal information
systems to address any Year 2000 compliance issues. This program includes a
focus on internal policies, methods and tools, as well as coordination with
customers and suppliers. The Company expects its Year 2000 program to be
completed on a timely basis. However, there is no assurance that the Company
will identify and resolve any and all Year 2000 compliance issues with its
information systems in a timely manner, that the expenses associated with such
efforts will not be significant, or that such issues will not have a material
adverse effect on the Company's business, operating results and financial
condition.
The Company has made a thorough review and testing of its products and
believes that its current products are Year 2000 compliant. The Company's
assessment of its current products is partially dependent upon the accuracy of
representations concerning Year 2000 compliance made by its suppliers, such as
Sun and Microsoft, among others. Many of the Company's customers are, however,
using earlier versions of the Company's products, which may not be Year 2000
compliant. The Company has initiated programs to proactively notify such
customers of the risks associated with using these products and to actively
encourage such customers to migrate to the Company's current products.
In addition, the Company's products are generally integrated within a
customer's enterprise system, which may involve products and systems developed
by other vendors. A customer may mistakenly believe that Year 2000 compliance
problems with its enterprise system are attributable to products provided by the
Company. The Company may, in the future, be subject to claims based on Year 2000
compliance issues related to a customer's enterprise system or other products
provided by third parties, custom modifications to the Company's products made
by third parties, or issues arising from the integration of the Company's
products with other products. The Company has not been involved in any
proceeding involving its products or services in connections with Year 2000
compliance, however, there is no assurance that the Company will not, in the
future, be required to defend its products or services in such proceedings
against claims of Year 2000 compliance issues, and any resulting liability of
the Company for damages could have a material adverse effect on the Company's
business, operating results and financial condition.
Recent Financial Accounting Standards Board Statements
Recent pronouncements of the Financial Accounting Standards Board ("FASB")
which are not required to be adopted at this date include: Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information ("SFAS 131") and Statement of Financial
Accounting Standards No. 132, "Employers Disclosures about Pensions and Other
Postretirement Benefits" ("SFAS 132"). SFAS 131 and SFAS 132 are effective for
fiscal years beginning after December 15, 1997. The adoption of these
pronouncements is not expected to have a material impact on the Company's
consolidated financial statements.
The Company adopted Statement of Financial Accounting Standards No. 130
effective June 1, 1998 and the adoption had no effect on the Company's financial
statements as the Company had no components of comprehensive income.
In October of 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
97-2 "Software Revenue Recognition" ("SOP 97-2"). This Statement provides
guidance on applying generally accepted accounting principles in recognizing
revenues on software transactions. This Statement supercedes Statement of
Position 91-1 "Software Revenue Recognition". The Company adopted SOP 97-2
effective June 1, 1998.
<PAGE>
Based upon Periphonics' reading and interpretation of SOP 97-2, the
implementation of SOP 97-2 has not had a material adverse affect on revenues or
earnings. However, detailed implementation guidelines for this standard have not
yet been issued. Once issued, such detailed guidance could lead to unanticipated
changes in the Company's current revenue accounting practices and material
adverse changes in the Company's reported revenues and earnings. In the event
implementation guidance is contrary to the Company's revenue accounting
practices, the Company believes it may be possible to change its current
business practices to comply with this guidance and avoid any material adverse
effect on reported revenues and earnings. However, there can be no assurance
this will be the case.
Foreign Currency Transaction
The Company does not currently engage in international currency hedging
transactions to mitigate its foreign currency exposure. Included in the foreign
exchange gain (loss) are unrealized foreign exchange gains and losses resulting
from the currency remeasurement of the financial statements (primarily
inventories, accounts receivable and intercompany debt) of the foreign
subsidiaries of the Company into U.S. dollars. To the extent the Company is
unable to match revenue received in foreign currencies with expenses paid in the
same currency, it is exposed to possible losses on international currency
transactions.
Inflation
In the opinion of management, inflation has not had a material effect on
the operations of the Company.
Certain Factors That May Affect Future Results
From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange Commission (including this Form 10-Q) may contain statements which are
so-called "forward-looking statements" and not historical facts. These
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The Company's actual
future results may differ significantly from those stated in any forward-looking
statements. Forward-looking statements involve a number of risks and
uncertainties, including, but not limited to, product demand, pricing market,
acceptance, litigation, risks in product and technology development and other
risk factors detailed from time to time in the Company's Securities and Exchange
Commission reports including this Form 10-Q for the fiscal quarter ended August
31, 1998 and its Form 10-K for the fiscal year ended May 31, 1998.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
With particular regard to the possible variability of quarterly results,
fluctuations may occur as a result of factors including the length of the sales
cycle, the timing of orders from shipments to customers, delays in developments
and customer acceptance of custom software applications, new product
introductions or announcements by the Company and /or competitors, and the
hiring and training of additional staff as well as general economic conditions.
Historically, the size and timing of the Company's sales transactions have
varied substantially from quarter, with a substantial percentage of orders and
deliveries occurring in the final weeks of a quarter, and the Company expects
such variations to continue in future periods. Because a significant portion of
the Company's overhead is fixed in the short-term, the Company's results of
operations may be materially adversely affected if revenues fall below the
Company's expectations. Generally, the Company's inventory of computer and
telephony hardware is determined by the Company's forecast of sales during the
future periods. If management's forecast of product sales and product mix prove
to be inaccurate, the Company may not have the necessary inventory available to
deliver systems in a timely manner which may have a material adverse effect on
the Company's results of operations during such period.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On July 7, 1998 Lucent Technologies, Inc. ("Lucent") filed a patent
infringement action in the United States District Court in the District of
Delaware alleging that Periphonics infringed some nine patents of Lucent. The
Company believes the claims contained in the lawsuit are without merit and, in
an answer filed on September 24, 1998, denied the substantive elements of
Lucent's lawsuit and set forth affirmative defenses and made counterclaims
against Lucent. The Company is involved in certain other legal matters in the
normal course of business. The Company's management does not believe that
resolution of these matters will have a material adverse effect on the Company's
consolidated financial statements.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
On August 6, 1998, the Company filed a Form 8-K with respect to the
authorization by its Board of Directors to repurchase up to 1.3 million shares
of the Company's common stock and the Company's announcement of its plans to
repurchase the stock in the open market. The timing of repurchases and number of
shares actually repurchased will depend on a variety of factors, such as price
and other market considerations.
<PAGE>
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.
PERIPHONICS CORPORATION
Registrant
By: /s/Peter J. Cohen
---------------------------------
Peter J. Cohen
Chairman of the Board, President
And Chief Executive Officer
(Principal Operating Officer)
By: /s/Kevin J. O'Brien
---------------------------------
Kevin J. O'Brien
Chief Financial Officer, Vice
President-Finance and Administration
(Principal Account Officer), Secretary
and Director
Date: October 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000937598
<NAME> Periphonics Corporation
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 10,439
<SECURITIES> 11,214
<RECEIVABLES> 39,518
<ALLOWANCES> (1,466)
<INVENTORY> 16,036
<CURRENT-ASSETS> 78,807
<PP&E> 42,957
<DEPRECIATION> (23,135)
<TOTAL-ASSETS> 99,087
<CURRENT-LIABILITIES> 22,318
<BONDS> 0
0
0
<COMMON> 138
<OTHER-SE> 76,580
<TOTAL-LIABILITY-AND-EQUITY> 99,087
<SALES> 30,405
<TOTAL-REVENUES> 30,405
<CGS> 14,740
<TOTAL-COSTS> 14,740
<OTHER-EXPENSES> 14,387
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,845
<INCOME-TAX> 729
<INCOME-CONTINUING> 1,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,116
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
