<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
COMMISSION FILE NUMBER 0-25882
-----------
VIDEOSERVER, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3114212
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
NORTHWEST PARK, 63 THIRD AVENUE, BURLINGTON, MASSACHUSETTS 01803
(Address of principal executive offices, including Zip Code)
(781) 229-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock as of
October 30, 1998 was 13,302,805.
================================================================================
<PAGE> 2
VIDEOSERVER, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1 Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
December 31, 1997 and September 30, 1998.............................3
Condensed Consolidated Statements of Operations
Three and nine months ended September 30, 1997 and 1998............. 4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1998........................5
Notes to Condensed 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 and Reports on Form 8-K.....................................13
SIGNATURE............................................................14
This Report contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
the Company's 1997 Annual Report to Shareholders in the section titled "Other
factors which may affect future operations" (which section is incorporated by
reference into the Company's Annual Report on Form 10-K for the year ended
December 31, 1997). Such forward-looking statements speak only as of the date on
which they are made, and the Company cautions readers not to place undue
reliance on such statements.
2
<PAGE> 3
VIDEOSERVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE RELATED DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 24,866 $ 21,276
Marketable securities 21,665 27,787
Accounts receivable, net of allowance for doubtful
accounts of $1,338 and $1,339 at December 31, 1997
and September 30, 1998 7,244 7,106
Inventories 3,882 3,571
Deferred income taxes 2,619 2,619
Other current assets 941 1,469
-------- --------
Total current assets 61,217 63,828
Equipment and improvements, net 5,142 6,199
Deferred income taxes 4,341 4,341
Other assets, net 2,199 2,129
-------- --------
Total assets $ 72,899 $ 76,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 11,677 $ 13,280
Other current liabilities 1,131 1,708
-------- --------
Total current liabilities 12,808 14,988
Stockholders' Equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized,
none issued and outstanding
Common stock, $.01 par value, 40,000,000 shares authorized;
13,122,843 issued and outstanding at December 31, 1997;
13,271,878 issued and outstanding at September 30, 1998 131 133
Capital in excess of par value 54,584 55,803
Retained earnings 5,493 5,755
Cumulative translation adjustment (117) (182)
-------- --------
Total stockholders' equity 60,091 61,509
-------- --------
Total liabilities and stockholders' equity $ 72,899 $ 76,497
======== ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
VIDEOSERVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE RELATED DATA)
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $12,903 $14,717 $39,657 $ 39,477
Cost of sales 4,942 5,477 14,121 15,365
------- ------- -------- --------
Gross profit 7,961 9,240 25,536 24,112
Operating expenses:
Research and development 3,594 3,743 9,313 11,104
Sales and marketing 3,220 3,315 8,829 9,189
General and administrative 1,109 1,304 3,324 3,736
Purchased research and development 14,000
Non-recurring expenses 657
------- ------- -------- --------
Total operating expenses 7,923 8,362 35,466 24,686
------- ------- -------- --------
Income (loss) from operations 38 878 (9,930) (574)
Interest income, net 383 569 1,317 1,508
------- ------- -------- --------
Income (loss) before income taxes 421 1,447 (8,613) 934
Provision (benefit) for income taxes (64) 405 (3,316) 672
------- ------- -------- --------
Net income (loss) $ 485 $ 1,042 ($ 5,297) $ 262
======= ======= ======== ========
Net income (loss) per share:
Basic $ 0.04 $ 0.08 ($ 0.41) $ 0.02
Diluted $ 0.04 $ 0.08 ($ 0.41) $ 0.02
Shares used in computing net income
(loss) per share:
Basic 12,931,000 13,251,000 12,797,000 13,203,000
Diluted 13,295,000 13,538,000 12,797,000 13,500,000
</TABLE>
See accompanying notes.
4
<PAGE> 5
VIDEOSERVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1997 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($ 5,297) $ 262
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Purchased research and development 14,000 -
Depreciation and amortization 2,183 2,769
Provision for doubtful accounts 136 1
Deferred taxes (4,680) -
Tax benefit related to employee stock plans 180 -
Changes in operating assets and liabilities:
Accounts receivable 3,379 137
Inventories (309) 311
Other current assets 31 (528)
Accounts payable and accrued expenses (3,589) 1,603
Other current liabilities 157 721
-------- --------
Net cash provided by operating activities 6,191 5,276
INVESTING ACTIVITIES
Purchases of equipment and improvements (2,136) (3,368)
Proceeds from sale of marketable securities 7,777 -
Purchases of marketable securities - (6,122)
Acquisition of business, net (15,416) -
Increases in other assets (196) (388)
-------- --------
Net cash used in investing activities (9,971) (9,878)
FINANCING ACTIVITIES
Repayment of debt (460) (144)
Net proceeds from stock issued under
employee stock benefit plans 904 1,221
-------- --------
Net cash provided by financing activities 444 1,077
Effect of exchange rate on cash and
cash equivalents (55) (65)
Decrease in cash and cash equivalents (3,391) (3,590)
Cash and cash equivalents at beginning of year 27,876 24,866
-------- --------
Cash and cash equivalents at end of period $ 24,485 $ 21,276
======== ========
Supplemental schedule of non-cash
investing activities:
Common stock issued to acquire NAC business,
net of issuance costs $ 3,415 -
======== ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
VIDEOSERVER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. In the opinion of
management, these financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
results of these interim periods. Certain footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted, although the Company
believes the disclosures in these financial statements are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the Company's audited financial statements included in the
Company's 1997 Annual Report to Shareholders and incorporated by reference into
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
The results of operations for the interim periods shown are not necessarily
indicative of the results for any future interim period or for the entire fiscal
year.
2. BUSINESS COMBINATION
On April 28, 1997, the Company purchased the network access card ("NAC")
business unit of Promptus Communications, Inc. ("Promptus"). The purchase price
of $18.8 million was allocated to the tangible and intangible assets acquired
based upon their estimated fair market values, resulting in an allocation of
$2.8 million to the tangible net assets, and $2.0 million to purchased software
which had reached technological feasibility and is being amortized over a five
year period. In addition, $14.0 million was allocated to purchased research and
development, which had not reached technological feasibility and had no
alternative future use. This amount was charged to operations at the acquisition
date.
Operating results of the NAC business unit are included for the quarter and nine
months ended September 30, 1998. The following pro forma information presents
the results of operations for the nine months ended September 30, 1997 as if the
NAC business unit had been acquired as of January 1, 1997, including the charge
to operations of $14.0 million related to purchased in-process research and
development, as if expensed on that date.
NINE MONTHS
ENDED
SEPTEMBER 30,
1997
--------------
(In thousands, except for share related data)
Total revenues $43,284
Net loss ($ 5,257)
Net loss per share ($ 0.40)
The unaudited pro forma results do not purport to be indicative of the results
which actually would have been obtained had the acquisition been effected on the
date indicated, or of results which may be achieved in the future.
6
<PAGE> 7
3. INVENTORIES
Inventories consist of:
DECEMBER 31, SEPTEMBER 30,
1997 1998
(In thousands) ------ ------
Raw materials and subassemblies $2,673 $1,783
Work in process 761 845
Finished goods 448 943
------ ------
$3,882 $3,571
====== ======
4. NEWLY ISSUED ACCOUNTING STANDARD
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"), and Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share excludes any dilutive effect of stock options.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. For the Company, the difference between the shares
used in computing basic and diluted net income (loss) per share is entirely the
result of dilutive stock options. All net income (loss) per share amounts have
been presented, and where appropriate restated, in accordance with SFAS 128.
SFAS 130 defines and provides rules for the reporting of comprehensive income, a
measure of all changes in stockholders' equity that result from recognized
transactions and other economic events of a period. For the quarters and nine
months ended September 30, 1997 and 1998, the Company's comprehensive income
(loss) was as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1997 1998
----- ------- ------- -----
<S> <C> <C> <C> <C>
(In thousands)
Net income (loss) $ 485 $ 1,042 ($5,297) $ 262
Increase in cumulative
translation adjustment (33) (50) (55) (65)
----- ------- ------- -----
Comprehensive income (loss) $ 452 $ 992 ($5,352) $ 197
===== ======= ======= =====
</TABLE>
5. NON-RECURRING EXPENSES
In March 1998, the Company recorded a charge of $1.3 million associated with a
plan to restructure certain of its operations to increasingly focus and
streamline its product offerings. The charge included $657,000 reported as
non-recurring expenses, primarily comprising severance costs, lease obligations,
and equipment write-downs, $450,000 reported as a part of cost of sales for
various write-downs of excess and obsolete inventory to their net realizable
values, and $193,000 for certain facilities costs reported as research and
development expenses. The Company currently estimates that approximately
$800,000 of the $1.3 million charge will require a cash outlay, of which
$600,000 had been expended as of September 30, 1998.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The Company's consolidated financial statements for the three and nine
months ended September 30, 1998 reflect the impact of the acquisition of the
network access card ("NAC") business unit from Promptus Communications on April
28, 1997. Results of operations in the nine month period also include the impact
of $1.3 million of non-recurring expenses recorded as a result of restructuring
actions undertaken in March, 1998.
RESULTS OF OPERATIONS
NET SALES Net sales increased 14% to $14.7 million in the quarter ended
September 30, 1998 from $12.9 million in the quarter ended September 30, 1997.
The increase was driven primarily by increased sales of Multimedia Conference
Server (MCS) products, due to what the Company believes to be an improved market
generally for conferencing products and to increases in sales volume through the
Company's major OEM customers.
Net sales of $39.5 million in the nine months ended September 30, 1998 were
approximately the same as the $39.7 million recorded in the nine months ended
September 30, 1997. Lower demand in the first quarter of 1998, particularly from
PictureTel, and lower sales to service providers were offset by increased sales
of NAC products and an increase in service revenues.
International sales, primarily in Europe, accounted for approximately 29%
of net sales for the quarters ended September 30, 1998 and 1997, and 30% and 35%
for the nine months ended September 30, 1998 and 1997. The Company expects that
international sales, which are currently denominated in U.S. dollars, will
continue to be a significant portion of the Company's business.
GROSS PROFIT Gross profit as a percentage of net sales increased to 62.8%
in the quarter ended September 30, 1998 from 61.7% in the quarter ended
September 30, 1997. For the nine month period ended September 30, the gross
profit rate decreased to 61.1% in 1998 from 64.4% in 1997. The modest increase
in the quarter ended September 30, 1998 was due primarily to improved coverage
of fixed manufacturing costs due to increased sales volumes. The decrease in the
nine month period ended September 30, 1998 was due to a greater proportion of
lower margin products and services in the sales mix than in 1997. Future changes
in product mix may continue to impact product margins.
RESEARCH AND DEVELOPMENT Research and development expenses increased 4% to
$3.7 million in the quarter ended September 30, 1998 from $3.6 million in the
quarter ended September 30, 1997, representing 25% and 28% of net sales for the
respective periods. For the nine months ended September 30, 1998 and 1997,
research and development expenses increased 19% to $11.1 million in 1998 from
$9.3 million in 1997, representing 28% and 23% of net sales for the respective
periods. Spending increases in 1998 were primarily the result of an increase in
engineering staffing to extend the Company's conferencing technologies to
emerging network platforms for conferencing, in line with new industry
standards, while continuing to invest in its traditional ISDN network based
conferencing products. Emerging network platforms for conferencing include local
area networks (LANs), corporate intranets, and the Internet, governed by the
H.323 industry standards for voice, video and data collaboration, as well as ATM
and frame relay. The nine month period in 1998 also includes a one-time charge
to research and development in March, 1998 in the amount of $193,000, undertaken
as a part of the Company's restructuring efforts. The Company expects to
continue to commit substantial resources to research and development in the
future.
SALES AND MARKETING Sales and marketing expenses increased 3% to
$3.3 million in the quarter ended September 30, 1998 from $3.2 million in the
quarter ended September 30, 1997, representing 23% and 25% of net sales for the
respective periods. For the nine months ended September 30, 1998 and 1997,
8
<PAGE> 9
sales and marketing expenses increased 4% to $9.2 million in 1998 from $8.8
million in 1997, representing 23% and 22% of net sales for the respective
periods. The increase in spending in 1998 is due to an expansion of the
Company's sales and marketing personnel and program resources to extend the
global distribution for its products. The Company expects increases in sales and
marketing expenses as it addresses broader markets and geographic territories
for its products, including the Asia/Pacific region.
GENERAL AND ADMINISTRATIVE General and administrative expenses increased
18% to $1.3 million in the quarter ended September 30, 1998 from $1.1 million in
the quarter ended September 30, 1997, representing 9% of net sales for both
periods. For the nine months ended September 30, 1998 and 1997, general and
administrative expenses increased 12% to $3.7 million in 1998 from $3.3 million
in 1997, representing 9% and 8% of net sales for the respective periods. The
increase in spending was primarily due to the addition of finance and
administrative personnel, including those to support the acquired NAC business.
NON-RECURRING EXPENSES In March 1998, the Company adopted a plan to
restructure certain of its operations to increasingly focus and streamline its
product offerings. As a result of these actions, the Company recorded charges of
approximately $1,300,000 in the quarter ended March 31, 1998. These one-time
charges include $657,000 reported as non-recurring expenses, comprising
estimated severance costs of $384,000 for various positions across all
departments of the Company, and $273,000 of estimated lease obligations (net of
estimated sublease income), the writedown of certain equipment, and other
expenses related to consolidations, $450,000 reported as a part of cost of sales
for various writedowns of excess and obsolete inventory to their net realizable
values, and $193,000 for certain facilities costs reported as research and
development expenses. The Company currently estimates that approximately
$800,000 of the $1.3 million charge will require a cash outlay, of which
$600,000 had been expended as of September 30, 1998.
INTEREST INCOME, NET Interest income, net, increased to approximately
$569,000 in the quarter ended September 30, 1998 from approximately $383,000 in
the quarter ended September 30, 1997. The increase was due primarily to a higher
proportion of the Company's cash equivalents and marketable securities being
invested in taxable securities, and to an increase in cash available for
investment. For the nine months ended September 30, 1998 and 1997, net interest
income was approximately $1,500,000 and $1,300,000.
PROVISION (BENEFIT) FOR INCOME TAXES For the nine months ended September
30, 1998, the income tax rate reflects the Company's partial recognition, in the
third quarter, of tax benefits associated with the loss incurred in the quarter
ended March 31, 1998. As a result of this, along with the generation of federal
and state research and development tax credits and interest earned on tax-exempt
U.S. and state government securities, the income tax rate for the quarter ended
September 30, 1998 was 28%. The Company will continue to assess the
realizability of the tax benefit associated with the first quarter loss in view
of its operating results during the balance of 1998 and adjust its tax rate
accordingly.
YEAR 2000 The Company is continuing efforts to ready itself for the impact
of Year 2000 related technology matters. The Company believes that current
releases of its products are Year 2000 compliant. However, the Company is
continually assessing Year 2000 compliance concerns of its products and their
ability to interoperate with products of its customers and suppliers. The
Company's products do interchange date information with other information
technologies and certain aspects of the Company's products are based on
user-supplied information and conventions. The proper operation of the Company's
products will depend on correct information being supplied by or to such
information technologies or users. The Company has not assessed the impact on
its operations should significant, currently unidentified, non-compliance issues
arise.
9
<PAGE> 10
Also, the majority of the Company's revenue stream is delivered through
videoconferencing equipment Original Equipment Manufacturers (OEMs), or through
Value Added Resellers (VAR's) which generally remarket the Company's products in
combination with other products to present an integrated conferencing solution
to end-users. The Company has not determined the current state of compliance of
its key customers. Should any key customer not be Year 2000 compliant, their
operations may be significantly impacted. The resultant impact on the Company's
operations may also be significant
In addition to reviewing the impact of the Year 2000 on its products, the
Company is currently assessing what impact the advent of the Year 2000 might
have on its internal systems and operations. To meet general requirements of the
business, the Company expects to complete the implementation of a new
company-wide financial accounting, manufacturing, sales and distribution system
in the first half of 1999. The Company believes this system will be fully Year
2000 compliant. Additionally, the Company is reviewing other internal systems -
both information technology systems and embedded systems - to determine their
state of Year 2000 readiness. The Company expects the initial review to be
completed during the first quarter of 1999 and further reviews will continue on
an ongoing basis. At this point, the Company believes that the incremental costs
of bringing its internal systems into compliance will not be materially greater
than its ongoing normal costs of maintaining and upgrading these systems.
The Company is also embarking on a project of surveying its key suppliers
and vendors to ascertain their preparedness for the Year 2000. The Company
currently does not have sufficient information to assess the potential resultant
impact to the Company's operations should one or more of those key suppliers not
be adequately prepared. However, as the Company has a limited number of key
suppliers, it believes the process of identifying potential issues will not be
unduly burdensome. In the event that the Company discovers issues that cannot be
readily addressed, the availability of alternative suppliers of its products may
provide the Company with other resolution options. The Company has not incurred
any significant costs to date in surveying key suppliers and vendors and is
unable to project the future costs of these efforts.
The Company's review of the full potential impact of Year 2000 issues is
not sufficiently complete to have constructed a most likely worst case scenario,
and the Company has not yet developed a contingency plan to address any such
scenario. The Company believes it is taking the appropriate actions to ensure
there is no significant Year 2000 impact on its operations and expects to
continue in its preparation efforts.
OTHER FACTORS WHICH MAY AFFECT FUTURE OPERATIONS There are a number of
business factors which singularly or combined may affect the Company's future
operating results. Some of them, including dependence on major customers, growth
in demand for videoconferencing products, risks and uncertainties related to an
evolving market, rapid technological change, competition, the difficulty in
assimilating the operations and personnel of businesses acquired previously or
in the future, variability of quarterly results, protection of proprietary
technology, retention of key employees, and uncertainties regarding patents,
have been outlined in the Company's 1997 Annual Report to Shareholders and
incorporated by reference into the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company has cash, cash equivalents and
marketable securities of $49.1 million. The Company regularly invests excess
funds in short-term money market funds, government securities, and commercial
paper.
The Company generated cash from operations of approximately $5.3 million in
the first nine months of 1998. The Company's primary investing activities in the
period related to the purchase of computers and equipment to support the
Company's development activities.
At September 30, 1998, the Company has available a bank revolving credit
facility providing for borrowings up to $7.5 million. Borrowings are limited to
a percentage of eligible accounts receivable, and are unsecured. Under this
credit facility, the Company is required to maintain certain financial ratios
and minimum levels of net worth and profitability, and is prohibited from paying
cash dividends without the Bank's consent. No borrowings have been made under
this facility.
The Company believes that its existing cash, cash equivalents and
marketable securities, together with cash generated from operations and
borrowings available under the Company's credit facility, will be sufficient to
meet the Company's cash requirements for the foreseeable future.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27: Financial Data Schedule.
(b) No reports on Form 8-K were filed during the three-month period ended
September 30, 1998.
12
<PAGE> 13
SIGNATURE
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.
VIDEOSERVER, INC.
Date: November 6, 1998 By: /s/ Stephen J. Nill
----------------------------------------------
Stephen J. Nill
Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer,
Authorized Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 21,276
<SECURITIES> 27,787
<RECEIVABLES> 8,445
<ALLOWANCES> (1,339)
<INVENTORY> 3,571
<CURRENT-ASSETS> 63,828
<PP&E> 6,199
<DEPRECIATION> 0
<TOTAL-ASSETS> 76,497
<CURRENT-LIABILITIES> 14,988
<BONDS> 0
0
0
<COMMON> 133
<OTHER-SE> 61,376
<TOTAL-LIABILITY-AND-EQUITY> 76,497
<SALES> 39,477
<TOTAL-REVENUES> 39,477
<CGS> 15,365
<TOTAL-COSTS> 15,365
<OTHER-EXPENSES> 24,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 934
<INCOME-TAX> 672
<INCOME-CONTINUING> 262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 262
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
<FN>
ADDITIONAL CURRENT ASSET - DEFERRED TAX 2,619
ADDITIONAL CURRENT ASSET - OTHER 1,469
OTHER ASSET - DEFERRED TAXES 4,341
OTHER ASSETS - NET 2,129
INTEREST INCOME 1,508
</FN>
</TABLE>
