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: 0-26494
---------
GSE SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1868008
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8930 Stanford Boulevard, Columbia, Maryland, 21045
(Address of principal executive office and zip code)
Registrant's telephone number,
including area code: (410) 312-3700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
----- -----
As of May 14, 1997, there were 5,065,688 shares of the Registrant's common
stock (par value $ .01 per share) outstanding.
GSE SYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II. OTHER INFORMATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GSE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents........ $ 1,207 $ 2,450
Contract receivables............. 25,658 27,457
Inventories...................... 3,095 3,538
Prepaid expenses and other
current assets................... 2,796 2,701
Deferred income taxes............ 2,034 1,454
------ ------
Total current assets...... 34,790 37,600
Property and equipment, net............ 5,391 5,318
Software development costs, net........ 6,025 5,176
Goodwill and other intangible
assets, net............................ 2,011 2,059
Deferred income taxes.................. 383 569
Other assets........................... 266 284
------ ------
Total assets.............. $ 48,866 $ 51,006
====== ======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit................... $ 6,637 $ 2,582
Accounts payable.................. 6,819 8,604
Accrued expenses.................. 3,534 4,430
Notes payable to related parties.. 17 -
Obligations under capital lease... 161 186
Accrued severance costs........... 1,349 -
Billings in excess of revenues
earned............................ 3,989 5,358
Accrued contract reserve.......... 40 233
Accrued warranty reserve.......... 709 1,408
Other current liabilities......... 91 281
Income taxes payable.............. 150 651
------ ------
Total current liabilities.. 23,496 23,733
Notes payable to related parties........ 181 202
Obligations under capital lease......... 431 420
Billings in excess of revenues earned... 794 803
Accrued contract and warranty reserves.. 1,104 687
Other liabilities....................... 446 468
------ ------
Total liabilities.......... 26,452 26,313
------ ------
Stockholders' equity:
Common stock $.01 par value,
8,000,000 shares authorized,
5,065,688 shares issued and
outstanding....................... 50 50
Additional paid-in capital........ 21,378 21,378
Retained earnings (deficit) -
at formation...................... (5,112) (5,112)
Retained earnings -
since formation................... 6,475 8,464
Cumulative translation adjustment. (377) (87)
------ ------
Total stockholders' equity.. 22,414 24,693
------ ------
Total liabilities &
stockholders' equity........ $ 48,866 $ 51,006
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
GSE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
Contract revenue........................ $ 19,327 $ 22,303
Cost of revenue......................... 13,763 14,699
------- -------
Gross profit...................... 5,564 7,604
------- -------
Operating expenses:
Selling, general and
administrative.................... 6,249 464
Depreciation and amortization..... 568 479
Employee severance and termination
costs............................. 1,349 -
------- -------
Total operating expenses.......... 8,166 5,943
------- -------
Operating income (loss)........... (2,602) 1,661
Interest expense........................ 187 139
Other expense (income).................. 210 (174)
------- -------
Income (loss) before income taxes. (2,999) 1,696
Provision for income taxes.............. (1,010) 605
------- -------
Net income........................ $ (1,989) $ 1,091
======= =======
Earnings (loss) per common share........ $ (0.39) $ 0.22
======= =======
Weighted average common shares
outstanding............................. 5,065,700 5,078,700
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
GSE SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................... $ (1,989) $ 1,091
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization.......... 712 639
Accrued facility costs................. - (82)
Accrued severance...................... 1,349 -
Deferred income taxes.................. (390) 452
Changes in assets and liabilities:
Contract receivables................... 1,520 1,132
Inventories............................ 438 (81)
Prepaid expenses and other
current assets......................... (307) 110
Other assets........................... 83 117
Accounts payable and accrued expenses.. (2,050) (2,297)
Billings in excess of revenue earned... (1,371) (999)
Accrued contract and warranty reserves. (328) 129
Other current liabilities.............. (584) 5
Income taxes payable................... (532) 36
Other liabilities...................... (1) (59)
------- -------
Net cash (used in) provided by operating
activities.................................. (3,450) 193
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................... (340) (410)
Capitalization of software development
costs.................................. (993) (1,298)
------- -------
Net cash (used in) investing activities..... (1,333) (1,708)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in lines of credit with bank.. 4,056 (16)
Repayments under capital lease
obligations............................ (285) (25)
Principal payments under term-note..... (23) -
Decrease in borrowings from related
parties................................ (4) (14)
Net repayment of amounts due from
stockholders........................... - 2
------- -------
Net cash (used in) provided by financing
activities.................................. 3,744 (53)
Effect of exchange rate changes on cash..... (204) (105)
------- -------
Net decrease in cash and cash
equivalents................................. (1,243) (1,673)
Cash and cash equivalents at beginning
of period................................... 2,450 9,016
------- -------
Cash and cash equivalents at end of period.. $ 1,207 $ 7,343
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
GSE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by the Company without independent audit. In the opinion of the
Company's management, all adjustments and reclassifications of a normal and
recurring nature necessary to present fairly the financial position, results
of operations and cash flows for the periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements 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 period ended December 31, 1996 filed with
Securities and Exchange Commission on March 31, 1997. The results of
operations for the period ended March 31, 1997 are not necessarily indicative
of what the operating results for the full year will be.
2. Pooling of Interests
On May 22, 1996, the Company acquired all of the outstanding shares of
capital stock of Erudite Software & Consulting, Inc. ("Erudite Software"), a
leading supplier of cost-effective client/server technology providing
consulting services, custom applications, software development, training
services, and hardware-software sales. Erudite Software is headquartered in
Salt Lake City, Utah, with a primary development facility in Provo, Utah.
This acquisition was accomplished through the issuance of approximately
840,700 shares of the Company's Common Stock in exchange for all outstanding
shares of capital stock of Erudite Software. The acquisition was accounted
for under the pooling-of-interests method of accounting.
The accompanying condensed consolidated financial statements of the Company
have been prepared giving retroactive effect to the acquisition of Erudite
Software. All prior period historical consolidated financial statements
presented herein have been restated to include the financial position,
results of operations, and cash flows of Erudite Software.
3. Earnings Per Share
Net income per common share is based on the weighted average number of shares of
Common Stock outstanding during the period and the assumed issuance of
approximately 840,700 shares of Common Stock, at the beginning of each period
presented, in connection with the acquisition of Erudite Software. The
difference between primary and fully-diluted per share amounts is
insignificant.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128). FAS 128
simplifies the existing earnings per share (EPS) computations under Accounting
Principles Board Opinion No. 15, "Earnings Per Share" (APB 15), revises
disclosure requirements, and increases the comparability of EPS data on an
international basis. In simplifying the EPS computations, the presentation
of primary EPS is replaced with basic EPS, with the principal difference
being that common stock equivalents are not considered in computing basic
EPS. In addition, FAS 128 requires dual presentation of basic and diluted
EPS. FAS 128 is effective for financial statements issued for periods ending
after December 15, 1997. The Company does not expect the EPS amounts
calculated under FAS 128 to be materially different from the amounts
presented in the financial statements under APB 15.
4. Inventories
Inventories are stated at the lower of cost, as determined by the average cost
method, or market. Obsolete or unsaleable inventory is reflected at its
estimated net realizable value.
Inventories, net, consist of the following at:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
(in thousands)
Raw materials.............................. $ 1,664 $ 2,115
Service parts.............................. 1,431 1,423
------ ------
Total.................................. $ 3,095 $ 3,538
====== ======
</TABLE>
5. Software Development Costs
Certain computer software development costs are capitalized in the
accompanying consolidated balance sheets. Capitalization of computer software
development costs begins upon the establishment of technological feasibility.
Capitalization ceases and amortization of capitalized costs begins when the
software product is commercially available for general release to customers.
Amortization of capitalized computer software development costs is included
in cost of revenues and is provided at the greater of the amount computed
using (a) the ratio of current gross revenues for a product to the total of
current and anticipated future gross revenues or (b) the straight-line method
over the remaining estimated economic life of the product, not to exceed five
years. Software development costs capitalized were $993,000, and $1,298,000 for
the three months ended March 31, 1997 and 1996, respectively. Total
amortization expense was $144,000 and $161,000 for the three months ended
March 31, 1997 and 1996, respectively.
6. Financing Arrangements
The Company maintains, through it subsidiaries, two lines of credit that provide
for borrowings up to $14.0 million to support foreign letters of credit, margin
requirements on foreign exchange contracts and working capital needs. The lines
of credit expire January 1, 1998, subject to earlier termination upon the
expiration of the EXIM Bank guaranty (currently effective through January 1,
1998).
At March 31, 1997, there were $6,637,000 of borrowings under the lines of
credit, and letters of credit issued in the ordinary course of business
amounted to approximately $894,000. Although the Company was not in
compliance with its cash flow coverage ratio covenant at March 31, 1997, the
Company has received a waiver of such covenant from its lender.
7. Contract Receivables
The components of contract receivables are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
<S> <C> <C>
Billed receivables............................ $ 16,358 $ 18,041
Recoverable costs and accrued profit
not billed.................................... 9,588 9,714
Allowance for doubtful accounts............... (288) (298)
------- -------
Total contract receivables.................... $ 25,658 $ 27,457
======= =======
</TABLE>
Recoverable costs and accrued profit not billed represent costs incurred and
profit accrued on contracts that will become billable upon future milestones
or completion of contracts.
Revisions in estimated contract costs at completion are reflected in the
period during which facts and circumstances necessitating such a change first
become known. Revenue under long-term, fixed-price contracts generally is
accounted for on the percentage-of-completion method, based on contract costs
incurred to date and estimated costs to complete. The effect of changes in
estimates of contract profits was to decrease gross profit by $54,000 during
during the three months ended March 31, 1997 and to increase gross profit by
$224,000 in the corresponding period of 1996, from that which would have been
reported had the revised estimates been used as the basis of recognition of
contract profits in the preceding periods.
8. Income Taxes
The Company's effective tax rate is based on the best current estimate of its
expected annual effective tax rate. The difference between the statutory U.S.
tax rate and the Company's effective tax rate for the three months ended March
31, 1997 and 1996 is primarily the result of the effects of foreign operations
at different tax rates and state income taxes. The Company has recorded a tax
benefit for the three months ended March 31, 1997 based on the fact that the
Company anticipates income before income taxes for the year ending December 31,
1997.
9. Employee Severance and Termination Costs
During the three months ended March 31, 1997, the Company approved a charge for
severance and other employee obligations of $1,349,000 corresponding to a
reduction in its workforce of approximately 5%.
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Results of Operations
- ---------------------
The following table sets forth the results of operations for the periods
presented expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
Contract revenue............... $19,327 100.0% $22,303 100.0%
Cost of revenue................ 13,763 71.2 14,699 65.9
------ ----- ------ -----
Gross profit........... 5,564 28.8 7,604 34.1
Operating expenses:
Selling, general and
administrative............ 6,249 32.3 5,464 24.5
Depreciation and
amortization.............. 568 3.0 479 2.1
Employee severance and
termination costs......... 1,349 7.0 - -
----- ---- ----- ----
Total operating expenses.. 8,166 42.3 5,943 26.6
----- ---- ----- ----
Operating income...... (2,602) (13.5) 1,661 7.4
Interest expense............... 187 1.0 139 0.6
Other expense (income)......... 210 1.1 (174) (0.8)
----- ---- ----- ----
Income before income
taxes................. (2,999) (15.5) 1,696 7.6
Provision for income taxes..... (1,010) (5.2) 605 2.7
----- ---- ----- ----
Net income............ $(1,989) (10.3)% $ 1,091 4.9 %
===== ==== ===== ====
</TABLE>
______________________________________
Revenues. Revenues for the three months ended March 31, 1997 amounted to
$19.3 million as compared with revenues of $22.3 million in the three months
ended March 31, 1996. This decrease was mainly due to a decrease in nuclear
simulation revenues of approximately 47% for the three months ended March 31,
1997 compared to the corresponding period in 1996, which was also partially
offset by increases in the Process and Oil & Gas businesses.
Gross Profit. Gross profit decreased to $5.6 million, a gross margin of 28.8%,
in the three months ended March 31, 1997 from $7.6 million, a gross margin of
34.1%, in the corresponding period of 1996. The decrease in the gross profit
amount is primarily attributable to lower revenues and increased sales and
marketing costs; the decrease in the gross profit percentage was also affected
by lower utilization and training start-up costs associated with the Business
Systems business unit, as well as a higher percentage of government
contract-related revenues in the power simulation business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $6.2 million, or 32.3% of revenues,
during the three months ended March 31, 1997 from $5.5 million, or 24.5% of
revenues, during the corresponding period in 1996. The increase in selling,
general and administrative expenses is primarily attributable to increased
sales force, bid and proposal activities, and business expansion efforts.
During the quarters ended March 31, 1997 and 1996, gross research and product
development expenditures were $1.4 million and $1.5 million, respectively.
Capitalized software development costs totaled $1.0 million and $1.3 million,
during the quarters ended March 31, 1997 and 1996. Net research and
development costs expensed and included within selling, general and
administrative expenses were $360,000 and $242,000 during the quarters ended
March 31, 1997 and 1996, respectively. The Company continued investing in the
conversion of its DCS product to the Windows NT platform, conversion of its
SCADA system to the Windows NT platform and the productization of its
SimSuite software tools.
Employee Severance and Termination Costs. For the three months ending March
31, 1997, there was a charge for severance and other employee
obligations of $1,349,000 in connection with cost reduction efforts initiated
to offset the impact of a decrease in project revenues.
Depreciation and Amortization. Depreciation expense amounted to $514,000 and
$435,000 during the three months ended March 31, 1997 and 1996, respectively.
This increase was attributable to higher levels of capital expenditures in
1996.
Amortization of goodwill and intangibles was $54,000 and $43,000 during the
three months ended March 31, 1997 and 1996, respectively. This increase was
attributable to the amortization of the costs associated with SimSuite.
Operating Income. Operating income (loss) decreased $4.3 million to ($2.6)
million, or (13.5%) of revenues, during the three months ended March 31, 1997
from $1.7 million, or 7.4% of revenues, during the corresponding period of
1996. This decrease in operating income is attributable to the decline in
simulation revenues and higher expenses relating to selling and marketing
efforts and the employee severance and termination costs.
Interest Expense. Interest expense increased to $187,000 during the three
months ended March 31, 1997, from $139,000 during the three months ended
March 31, 1996. This increase is attributable to a higher level of borrowings
during the current quarter.
Other Income. Other income (expense) decreased significantly to ($210,000)
during the three months ended March 31, 1997 from $174,000 during the
corresponding period in 1996 primarily due to the effect of foreign currency
exchange and a decrease in the interest earned on short-term investments.
Liquidity and Capital Resources
- -------------------------------
During the three months ended March 31, 1997, the Company's operations used
$3.5 million of net cash, primarily resulting from the net loss and an increase
in contract receivables, which were offset by an increase in payments of
accounts payable and accrued expense payments and reductions in customer
advances. In 1996, net cash provided by operations was $.2 million during the
first quarter.
At March 31, 1997, the Company had cash and cash equivalents totaling
approximately $1.2 million.
The Company continues to maintain its lines of credit amounting to $14.0 million
with CoreStates Bank ("CoreStates"). At March 31, 1997, there were $6,637,000
in borrowings under these lines of credit, and letters of credit issued in the
ordinary course of business amounted to $894,000. For further discussion, see
Note 7 of "Notes to Condensed Consolidated Financial Statements". Although
the Company was not in compliance with its cash flow coverage ratio covenant as
of March 31, 1997, the Company has received a waiver of such covenant from
CoreStates.
Management believes the Company has sufficient liquidity and working capital
resources necessary to conduct planned business operations, debt service
requirements, planned investments, and capital expenditures.
PART II - OTHER INFORMATION
Item 3. Legal Proceedings
In January 1997, GSE Power Systems, Inc. ("Power Systems") filed a lawsuit in
the U.S. District Court for the District of Maryland in Baltimore against
J.L. Ryan, Inc., of Columbia, Maryland, Yankee Atomic Electric Co., of
Bolton, Massachusetts, and North Coast Software, Inc., of Oswego, New York,
among others (in April 1997, Power Systems arrived at settlements with Yankee
Atomic and North Coast and has dismissed claims against those parties.) In
the suit, Power Systems alleges that the defendants committed copyright
infringement, misappropriation of trade secrets, false designation of origin
under the Lanham Act, breach of contract and unfair competition. The subject
matter of the suit is the defendants' use of a simulation executive system
which Power Systems believes to be an infringement of its simulation
executive product. The Company cannot reasonably predict the likely outcome
of this suit at this time.
Various other actions and proceedings are presently pending to which the
Company is a party. In the opinion of management, the aggregate liabilities,
if any, arising from such actions are not expected to have a material adverse
effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Forward-Looking Statements
This Form 10-Q contains certain "forward-looking statements," within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are subject to
the safe harbors created by those Acts. These statements include the plans and
objectives of management for futures operations, including plans and objectives
relating to the development of the Company's business in the domestic and
international marketplace. All forward-looking statements involve risks and
uncertainties, including, without limitation, risks relating to the Company's
ability to enhance existing software products and to introduce new products in
a timely and cost-effective manner, reduced development of nuclear power plants
that may utilize the Company's products, a long pay-back cycle from the
investment in software development, uncertainties regarding the ability of the
Company to grow its revenues and successfully integrate operations through
expansion of its existing business and strategic acquisitions, the ability of
the Company to respond adequately to rapid technological changes in the markets
for process control, data acquisition and simulation software and systems,
significant quarter-to-quarter volatility in revenues and earnings as a results
of customer purchasing cycles and other factors, dependence upon key personnel,
and general market conditions and competition. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties as set forth herein, the failure of any one of which could
materially adversely affect the operations of the Company. The Company's plans
and objectives are also based on the assumptions that market conditions and
competitive conditions within the Company's business areas will not change
materially or adversely and that there will be no material adverse change in
the Company's operations or business. Assumptions relating to the foregoing
involve judgments with respect, among other things, to future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and there can, therefore, be no assurance that
the forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such information should
not be regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit 11.1 Statement Regarding Computation of Earnings per Share
(b) Reports on Form 8-K
None
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.
Date: May 14, 1997 GSE SYSTEMS, INC.
----------------------------
Jerome I. Feldman
Chairman of the Board
(Principal Executive Officer)
-----------------------------
Michael J. Cromwell III
Vice Chairman of the Board and Senior Vice President
(Principal Financial and Accounting Officer)
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.
Date: May 14, 1997 GSE SYSTEMS, INC.
/S/ Jerome I. Feldman
----------------------------
Jerome I. Feldman
Chairman of the Board
(Principal Executive Officer)
/S/ Michael J. Cromwell III
-----------------------------
Michael J. Cromwell III
Vice Chairman of the Board and Senior Vice President
(Principal Financial and Accounting Officer)
EXHIBIT 11.1
GSE SYSTEMS, INC. AND SUBSIDIARIES
(in thousands, except per share data)
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1997 1996
---- ----
<S> <C> <C>
Net income (loss) available to common
shares..................................... $(1,989) $ 1,091
====== ======
Weighted average common shares
outstanding................................ 5,066 5,066
Dilutive effect of common stock
equivalents - stock options................ - 13
------ ------
Total shares used for earnings per share... 5,066 5,079
====== ======
Earnings (loss) per share.................. $ (0.39) $ 0.22
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<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> 1,207
<SECURITIES> 0
<RECEIVABLES> 25,946
<ALLOWANCES> 288
<INVENTORY> 3,095
<CURRENT-ASSETS> 34,790
<PP&E> 5,391
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,866
<CURRENT-LIABILITIES> 23,496
<BONDS> 0
0
0
<COMMON> 50
<OTHER-SE> 22,364
<TOTAL-LIABILITY-AND-EQUITY> 48,866
<SALES> 19,327
<TOTAL-REVENUES> 19,327
<CGS> 13,763
<TOTAL-COSTS> 13,763
<OTHER-EXPENSES> 8,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 187
<INCOME-PRETAX> (2,999)
<INCOME-TAX> (1,010)
<INCOME-CONTINUING> (1,989)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,989)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
