<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
------- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
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 0-26496
CYBEX COMPUTER PRODUCTS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ALABAMA 63-0801728
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4912 Research Drive
Huntsville, Alabama 35805
(Address of principal executive offices)
(205) 430-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
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 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 February 12, 1997, 5,412,383 shares of the Registrant's Common Stock
$.001 par value, were outstanding.
<PAGE> 2
CYBEX COMPUTER PRODUCTS CORPORATION
FORM 10-Q
DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION NUMBER
------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1996 3
Condensed Consolidated Statements of Income for the three and
nine months ended December 31, 1995 and 1996 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended December 31, 1995 and 1996. 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 13
SIGNATURES 14
INDEX OF EXHIBITS 15
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
CYBEX COMPUTER PRODUCTS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1996
--------- ------------
<S> <C> <C>
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 862,878 $ 4,214,628
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . 36,907,899 28,957,146
Accounts receivable- trade, less allowance for doubtful accounts
of $131,383 and $302,178, respectively . . . . . . . . . . . . . . . . . . . . . 4,276,640 4,785,942
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,103 103,024
Income tax receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,651 ---
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,487,043 3,568,774
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,926 120,875
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393,639 393,639
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,105,779 42,144,028
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 2,154,423
Property and equipment, net of accumulated depreciation . . . . . . . . . . . . . . 1,109,918 2,125,252
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,065 208,553
----------- -----------
$47,417,762 $46,632,256
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000,000 $ ---
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 962,867 1,013,525
Accrued salaries and bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,726 729,808
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- 41,349
Liability for sales and warranty returns . . . . . . . . . . . . . . . . . . . . . 200,000 279,000
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,124 390,705
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,711,717 2,454,387
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,024 85,024
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,796,741 2,539,411
Shareholders' equity:
Preferred stock, par value $.001 per share; 5,000,000 shares
authorized; no shares issued
Common stock, par value $.001 per share; 25,000,000 shares
authorized; March 31, and December 31, 1996 -- 6,068,008
shares issued, 5,504,383 and 5,453,283 shares
outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,069 6,069
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,079,719 34,079,719
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,370,114 14,606,713
Treasury stock, at cost; 563,625 and 614,725 shares, respectively . . . . . . . . . . (3,834,881) (4,599,656)
----------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,621,021 44,092,845
----------- -----------
$47,417,762 $46,632,256
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
CYBEX COMPUTER PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1996 1995 1996
---- ---- ---- -----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . $6,487,668 $8,916,858 $18,142,018 $24,395,100
Cost of sales . . . . . . . . . . . . . . . . . . . . . . 3,002,268 4,221,921 8,190,770 11,479,877
---------- ---------- ----------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . 3,485,400 4,694,937 9,951,248 12,915,223
Selling, general and administrative expenses . . . . . . 1,499,232 2,214,989 4,470,978 6,027,580
Research and development expenses . . . . . . . . . . . . 433,786 634,025 1,185,612 1,658,407
---------- ---------- ----------- -----------
Operating income . . . . . . . . . . . . . . . . . 1,552,382 1,845,923 4,294,658 5,229,236
Interest income . . . . . . . . . . . . . . . . . . . . . 461,927 560,328 809,061 1,417,363
---------- ---------- ----------- -----------
Income before provision for income taxes . . . . . 2,014,309 2,406,251 5,103,719 6,646,599
Provision for income taxes . . . . . . . . . . . . . . . 680,126 873,000 1,745,747 2,410,000
---------- ---------- ----------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . $1,334,183 $1,533,251 $ 3,357,972 $ 4,236,599
========== ========== =========== ===========
Net income per common and common
equivalent share . . . . . . . . . . . . . . . . . . . $ .23 $ .27 $ .68 $ .75
========== ========== =========== ===========
Weighted average common and common
equivalent shares outstanding . . . . . . . . . . . . . 5,819,939 5,602,126 4,921,679 5,611,969
========== ========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE> 5
CYBEX COMPUTER PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,357,972 $ 4,236,599
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,037 238,074
Amortization of discount on investments . . . . . . . . . . . . . . . (337,391) (852,138)
Provision for losses on accounts receivable . . . . . . . . . . . . . 25,035 170,795
Gain on sale of investments . . . . . . . . . . . . . . . . . . . . . --- (206,874)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . (58,202) ---
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (1,328,284) (680,097)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (905,249) (81,731)
Prepaid expenses, other receivables and other assets . . . . . . . (303,383) (171,358)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . (492,695) 50,658
Accrued expenses and other liabilities . . . . . . . . . . . . . . 372,934 650,663
Income taxes payable/receivable . . . . . . . . . . . . . . . . . . (30,246) 160,000
------------ -----------
Net cash provided by operating activities . . . . . . . . . . . . 468,528 3,514,591
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . . . . . . . . (373,357) (1,253,408)
Purchases of investments available for sale . . . . . . . . . . . . . . (39,272,624) (45,543,784)
Proceeds from sale of investments . . . . . . . . . . . . . . . . . . . --- 3,185,468
Proceeds from maturity of investments . . . . . . . . . . . . . . . . . 11,320,000 49,213,658
------------ -----------
Net cash (used in) provided by investing activities . . . . . . . . . (28,325,981) 5,601,934
Cash flows from financing activities:
Borrowings from line of credit . . . . . . . . . . . . . . . . . . . . 1,100,000 ---
Repayments of line of credit . . . . . . . . . . . . . . . . . . . . . (1,100,000) ---
Repayment of note payable . . . . . . . . . . . . . . . . . . . . . . . --- (5,000,000)
Proceeds from initial public offering . . . . . . . . . . . . . . . . . 32,578,262 ---
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . 533,000 ---
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (2,572,000) (764,775)
------------ -----------
Net cash provided by (used in) financing activities . . . . . . . . . 30,539,262 (5,764,775)
------------ -----------
Net increase in cash and cash equivalents . . . . . . . . . . . . . 2,681,809 3,351,750
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . 202,817 862,878
------------ -----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . $ 2,884,626 $ 4,214,628
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest . . . . . . . . . . . . . . . $ 1,975 $ 8,021
============ ===========
Cash paid during the period for income taxes . . . . . . . . . . . . . $ 2,127,500 $ 2,250,000
============ ===========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE> 6
CYBEX COMPUTER PRODUCTS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Cybex Computer Products Corporation (the Company) have been prepared by
management in accordance with generally accepted accounting principles for
interim financial information and in conjunction with the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair presentation of the interim condensed
consolidated financial statements have been included, and all adjustments are of
a normal and recurring nature. The condensed consolidated financial statements
as of and for the interim period ended December 31, 1996 should be read in
conjunction with the Company's consolidated financial statements as of and for
the year ended March 31, 1996 included in the Company's Form 10-K filed June 27,
1996. Operating results for the three and nine months ended December 31, 1996
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1997. The March 31, 1996 balance sheet data presented herein was
derived from audited financial statements but does not include all disclosures
required by generally accepted accounting principles.
2. INVENTORIES
At March 31, 1996 and December 31, 1996, inventories consisted of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1996
--------- ------------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . $2,035,335 $2,384,668
Work in process . . . . . . . . . . . . . . . . . . . . . . 903,883 749,008
Finished goods . . . . . . . . . . . . . . . . . . . . . . 547,825 435,098
---------- ----------
$3,487,043 $3,568,774
========== ==========
</TABLE>
3. EUROPEAN FACILITY
In June 1996, the Company announced its selection of Shannon, Ireland
as the site for it's European subsidiary, Cybex Europe, Ltd. (the Subsidiary).
The Company reached an agreement in principle with the Shannon Development
Authority for long-term leased facilities to be located in the Shannon Free
Trade Zone (SFTZ). The definitive agreement is subject to final negotiations and
execution.
In July 1996, the Company subsequently entered into a month to month
lease with the Shannon Development Authority for temporary startup facilities
located within the SFTZ. The lease is for a 12,500 square foot facility and will
expire when the Subsidiary occupies the long-term lease facility. The Subsidiary
became operational during the quarter with the first products being shipped in
December 1996.
6
<PAGE> 7
4. LINE OF CREDIT
The Company renegotiated its line of credit on July 2, 1996, to provide
borrowings of up to $2.5 million at the bank's prime rate. The line of credit
expires July 1, 1997. There were no borrowings outstanding under the Company's
line of credit as of March 31, 1996 and December 31, 1996.
5. STOCK OPTIONS
Options to purchase 2,000 shares and 10,000 shares of common stock were
issued effective September 30, 1996 and October 28, 1996 respectively, to
employees under the 1995 Employee Stock Option Plan at the market price as of
the effective date.
6. FACILITIES
On January 24, 1997, the Company purchased approximately three acres of
land adjacent to land already owned by the Company for $105,000. The Company
intends to use this land for future facility expansion.
7. STOCK REPURCHASE PLAN
During the third quarter of fiscal year 1997, the Company purchased
51,100 shares of treasury stock at prices ranging from $14.50 to $15.13 a share.
Also, during January, 1997, the Company purchased an additional 40,900 shares of
treasury stock at prices ranging from $14.38 to $14.63 a share. The treasury
stock was purchased under a plan approved by the Board of Directors during
December of 1995 authorizing the purchase of up to 500,000 shares of treasury
stock. As of the date of this filing, 326,000 shares of treasury stock have been
purchased under the stock repurchase plan.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included in the Company's
Form 10-K for year ended March 31, 1996 filed on June 27, 1996.
GENERAL
The Company develops, produces and markets keyboard, video monitor and
mouse ("KVM") switch and extension products for use in the computer industry.
The Company's KVM switch products ("KVM Switch Products"), the first of which
was introduced in 1989, provide up to four users, each with a separate keyboard,
video monitor and mouse, with the capability to control up to 3,000 personal
computers ("PCs"), thereby eliminating the need for individual keyboards, video
monitors or mice for the controlled PCs. Elimination of separate keyboards,
video monitors and mice can provide significant cost reduction (lower initial
investment and ongoing utility costs) and space savings as well as more
efficient technical support capabilities. The Company's KVM Switch Products
allow users to control IBM-compatible, Macintosh and Sun computers functioning
either as stand-alone systems or as file, communications or print servers
("Servers") operating within a local area network ("LAN"). The Company recently
designed computer interfaces for its Autoboot 4XP and 1XP which are designed to
work with Hewlett Packard systems with HP-HIL (Human Interface Link), including
the 9000 and 3000 models; IBM's RS/6000; DEC's Alpha; and Silicon Graphics'
Indigo Platforms. The Company's KVM Switch Products are particularly useful in
networking environments where multiple computers are dedicated as Servers and in
situations where multiple computers need to be controlled from one location to
facilitate network management. Certain KVM Switch Products were recently
certified by Novell Corporation for use with its network software Netware(TM)
4.1.
The Company's family of KVM extension products ("KVM Extension
Products"), the first of which was introduced in 1987, allow users to separate
the keyboard, video monitor and mouse up to 600 feet from the PC. In addition,
certain KVM Extension Products allow multiple users shared access to the same PC
from different keyboards, video monitors and mice. KVM Extension Products
introduced in the third quarter of Fiscal 1996 utilize standard category 5 UTP
cabling which is the most common cable used in PC networks, either installed or
for planned installations. KVM Extension Products are particularly useful in
congested work areas, where working conditions may be hazardous to the function
of the computer or where computer security issues are important.
The Company's net sales have increased in each fiscal year due
primarily to increases in the number of units sold to both new and existing
customers. These annual net sales increases reflect the Company's strategy of
increasing unit volume and market share through the introduction of new products
and through the introduction of increasingly enhanced generations of already
accepted products which have increased functionality and yet are price
competitive as compared to prior generations of the Company's products and to
the products of competitors. As a part of this strategy, the Company seeks to be
price competitive and to be the high quality provider of products in its
markets. This strategy has enabled the Company to sell succeeding generations of
products to existing customers as well as to increase its market share by
selling products to new customers.
The Company has broadened its marketing strategy to further penetrate
the Original Equipment Manufacturer (OEM) market and the worldwide catalog
market The Company recently announced its first product designed specifically
for the OEM market. This product is intended to expand the Company's share of
the OEM marketplace. Also the Company recently began shipping certain KVM Switch
Products to a major worldwide catalog marketer under a private label. The
broadened strategy is expected to expand the Company's distribution channels and
increase the market segments.
The Company contracts with third parties to provide completed
subassemblies of its products. The Company also outsources entire products
(turnkey) for certain stable high volume products. The Company believes that
outsourcing manufacturing generally enables the Company to control product costs
more effectively.
8
<PAGE> 9
The Company continually evaluates new product opportunities and engages
in substantial research and product development efforts. The Company expenses
all product research and development costs as incurred. Additionally, the
Company also incurs substantial expenses related to advertising and
participation in trade shows.
Another important part of the Company's strategy is to emphasize
customer service and support. The Company offers a 30-day money back guarantee
for all of its products and a one year warranty on parts. To date, the Company
has not incurred significant sales and warranty returns expense. The Company
also offers sales discounts to its customers based on the level of sales to the
customers. Such discounts have historically not had a significant impact on the
Company's results of operations.
The Company believes that increasing its international sales continues
to be important to future revenue growth. International sales comprised 20.8% of
the Company's total sales for the nine months ended December 31, 1996, and 20.4%
and 15.4% of the Company's total sales in Fiscal 1996 and Fiscal 1995,
respectively. All international sales are made in US dollars.
In June 1996, the Company announced its selection of Shannon, Ireland
as the site for it's European subsidiary, Cybex Europe, Ltd. ( the Subsidiary).
The Company reached an agreement in principle with The Shannon Development
Authority for long-term leased facilities to be located in the Shannon Free
Trade Zone (SFTZ). The definitive agreement is subject to final negotiations and
execution.
In July 1996, the Company subsequently entered into a month to month
lease with the Shannon Development Authority for temporary startup facilities
located within the SFTZ. The lease is for a 12,500 square foot facility, which
will expire when the Subsidiary occupies the long-term lease facility. The
Subsidiary became operational during the quarter with the first products being
shipped in December 1996.
RESULTS OF OPERATIONS
The following table presents selected financial information derived
from the Company's statements of income expressed as a percentage of net sales
for the fiscal years indicated:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED DECEMBER 31, ENDED DECEMBER 31,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . . . . . . 46.3 47.3 45.1 47.1
----- ----- ----- -----
Gross profit . . . . . . . . . . . . . . . . . . . . 53.7 52.7 54.9 52.9
Research and development expenses . . . . . . . . . 6.7 7.1 6.5 6.8
Selling, general and administrative expenses . . . 23.1 24.9 24.7 24.7
----- ----- ----- -----
Operating income . . . . . . . . . . . . . . . . . . 23.9 20.7 23.7 21.4
Other income . . . . . . . . . . . . . . . . . . . 7.1 6.3 4.4 5.8
----- ----- ----- -----
Income before income taxes . . . . . . . . . . . . . 31.0 27.0 28.1 27.2
Provision for income taxes . . . . . . . . . . . . 10.4 9.8 9.6 9.9
----- ----- ----- -----
Net income . . . . . . . . . . . . . . . . . . . . . 20.6% 17.2% 17.4% 17.3%
===== ===== ===== =====
</TABLE>
Three Months Ended December 31, 1996 Compared to the Three Months Ended December
31, 1995
Net sales increased 37.4% to $8.9 million in the three months ended
December 31, 1996 from $6.5 million in the three months ended December 31, 1995.
The increased sales resulted from increased sales volume to existing customers
and from an increase in sales volume to new customers of the Company's KVM
Switch Products. Sales of KVM Switch Products increased 44.8% to $7.5 million in
the three months ended December 31, 1996 from $5.2 million in the three months
ended December 31, 1995.
9
<PAGE> 10
Sales of KVM Extension Products increased 15.8% to $1.2 million in the
three months ended December 31, 1996 from $1.1 million in the three months ended
December 31, 1995. The increased sales volume resulted primarily from sales of
the new Keyview, SNAP and Power Control Products, which had limited sales during
the third quarter of Fiscal 1996.
As a percentage of net sales, the Company's KVM Switch Products
increased to 83.9% from 79.7% and KVM Extension Products declined to 13.7% from
16.3% during the same period in fiscal 1996. Management anticipates that sales
of KVM Extension Products will continue to be a substantial portion of the
Company's net sales. International sales increased 36.7% to $1.9 million (22.2%
of net sales) in the three months ended December 31, 1996 from $1.4 million in
the three months ended December 31, 1995.
Gross profit increased 34.7% to $4.7 million in the three months ended
December 31, 1996, from $3.5 million in the three months ended December 31,
1995. Gross profit as a percentage of net sales declined to 52.7% from 53.7%
during the same period. The decline in gross profit was primarily attributed to
costs incurred by the new Irish Subsidiary. The costs were approximately
$160,000 or 1.8% of net sales. These costs were partially offset by increased
sales volume of newer KVM Switch Products whose margins improved over prior year
quarter.
Selling, general and administrative expenses increased 47.8% to $2.2
million (24.9% of net sales) in the three months ended December 31, 1996, from
$1.5 million (23.1% of net sales) in the three months ended December 31, 1995.
This increase reflects the increased level of expenditures in administration,
sales, customer support, channel development, and marketing activities required
to support the Company's expanded sales base. The increase also reflects the
added selling, general and administrative costs of the new Irish Subsidiary.
Management anticipates that the dollar amount of selling, general and
administrative expenses will continue to increase, however, the anticipated
expanding sales volume should cause these expenses to remain relatively constant
as a percentage of net sales.
Research and development expenses increased 46.2% to $0.6 million or
7.1% of net sales in the three months ended December 31, 1996, as compared to
$0.4 million or 6.7% of net sales in the three months ended December 31, 1995.
Management anticipates that the dollar amount of research and development
expenses will increase but will remain relatively constant as a percentage of
net sales.
As a result of the factors discussed above, operating income increased
18.9% to $1.8 million and was 20.7% of net sales for the three months ended
December 31, 1996, as compared to $1.6 million and 23.9% of net sales for the
three months ended December 31, 1995.
Other income increased to $560,000 or 6.3% of net sales in the three
months ended December 31, 1996 from $462,000 and was 7.1% of net sales in the
three months ended December 31, 1995. This increase is related primarily to
realized gains on the sale of certain investments.
Net income increased 14.9% to $1.5 million and was 17.2% of net sales
in the three months ended December 31, 1996, from $1.3 million and 20.6% of net
sales in the three months ended December 31, 1995, as a result of the factors
discussed above.
Nine Months Ended December 31, 1996 Compared to the Nine Months Ended December
31, 1995.
Net sales increased 34.5% to $24.4 million for the nine months ended
December 31, 1996 from $18.1 million for the nine months ended December 31,
1995. The increase in net sales was due to increased sales of the Company's KVM
Switch and KVM Extension Products. Sales of KVM Switch Products increased 40.8%
to $20.1 million in the nine months ended December 31, 1996 from $14.3 million
in the nine months ended December 31, 1995. Sales of KVM Extension Products
increased 17.6% to $3.7 million in the nine months ended December 31, 1996 from
$3.1 million in the nine months ended December 31, 1995 primarily due to sales
of Keyview, SNAP, and Power Control Products which had limited sales during the
nine months ended December 31, 1995. As a percentage of net sales, the Company's
KVM Switch Products increased to 82.3% from 78.6% and KVM Extension Products
declined to 15.1% from 17.3% during the same period. International sales
increased 40.2% to $5.0 million and was 20.4% of net sales in the nine months
ended December 31, 1996 as compared to $3.6 million and 19.6% of net sales in
the nine months ended December 31, 1995.
10
<PAGE> 11
Gross profit increased 29.8% to $12.9 million in the nine months ended
December 31, 1996 from $10.0 million in the nine months ended December 31, 1995.
Gross profit as a percent of net sales decreased to 52.9% from 54.9% during the
same period. The decline in gross profit was attributed in part to the costs
incurred by the new Irish Subsidiary in the third quarter of fiscal year 1997,
which were approximately $160,000. The decrease also reflects an increase in the
sales mix of certain KVM Switch Products, which yield an overall lower margin
than our more mature products.
Selling, general and administrative expenses increased 34.8% to $6.0
million and were 24.7% of net sales in the nine months ended December 31, 1996
from $4.5 million and 24.7% of net sales in the nine months ended December 31,
1995. This increase in dollars spent reflects the increased level of
expenditures in administration, sales, customer support, channel development,
and marketing activities required to support the Company's expanded sales base.
The increase also reflects the added selling, general and administrative costs
of the new Irish Subsidiary during the third quarter.
Research and development expenses increased 39.9% to $1.7 million and
6.8% of net sales in the nine months ended December 31, 1996, as compared to
$1.2 million and 6.5% of net sales for the nine months ended December 31, 1995.
Management anticipates that the dollar amount of research and development
expenses will increase but will remain relatively constant as a percentage of
net sales.
As a result of the factors discussed above, operating income increased
21.8% to $5.2 million and 21.4% of net sales for the nine months ended December
31, 1996 as compared to $4.3 million and 23.7% of net sales for the nine months
ended December 31, 1995.
Other income increased to $1.4 million or 5.8% of net sales in the nine
months ended December 31, 1996 from $0.8 million or 4.4% of net sales in the
nine months ended December 31, 1995. This increase is related primarily to
interest income from the investment of the proceeds from the initial public
offering completed July 27, 1995. Realized gains on the sale of certain
investments also contributed to the increase in other income.
Net income increased 26.2% to $4.2 million and was 17.3% of net sales
for the nine months ended December 31, 1996 from $3.4 million and 17.4% of net
sales for the and nine months ended December 31, 1995 due to the factors
described above.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering in July 1995, the Company financed
its operations primarily through cash flow from operations, supplemented with
borrowings under its line of credit as needed. As of December 31, 1996, the
Company had an available line of credit of $2.5 million with no outstanding
borrowings. The Company negotiated an increase in the line of credit in July,
1996, from $1.85 million at the bank's prime rate.
The Company's working capital position improved from $39,394,062 as of
March 31, 1996 to $41,844,064 as of December 31, 1996 (adjusted to include
$2,154,423 of long term-investments). This improvement in the Company's working
capital position was due primarily to increased earnings and realized gains on
sales of investments during the nine months ended December 31, 1996.
Cash from operating activities increased from approximately $470,000
for the nine months ended December 31, 1995 to $3.5 million for the nine months
ended December 31, 1996. This increase was caused primarily by an increase in
net income, an increase in accounts receivable, although at a lower rate, and by
the change in inventory from a substantial increase for the nine months ended
December 31, 1995, to remaining relatively flat for the nine months ended
December 31, 1996. The inventory growth remained relatively flat primarily due
to improved inventory turn rate and the increased level of turnkey products,
which reduced the level of raw components needed for production.
11
<PAGE> 12
Capital expenditures totaled $1.3 million in the first nine months of
Fiscal 1997. The expenditures included the purchase of approximately 14 acres of
land adjacent to existing Corporate facilities for approximately $600,000. The
Company also made an initial investment in the Irish Subsidiary of approximately
$300,000. The remaining amounts were used to purchase equipment for the Company
to support its continued growth.
The Company expects to begin construction of additional facilities in
Huntsville, Alabama during the fourth quarter of FY 1997 on the land purchased
during FY 1997. The new facility will approximate 110,000 square feet with space
for future expansion. The facility will house the Company's manufacturing,
selling, general and administrative functions. Occupancy is expected during the
third quarter of FY 1998. As of the date of this filing, there are no executed
contracts for the construction of the facility. Although the total cost of the
project is not definite, it is expected to approximate $6.5 million. Proceeds
from the initial public offering will be used to fund the construction of the
facility.
In July 1996, the Company entered into a month to month lease with the
Shannon Development Authority for temporary startup facilities located within
the SFTZ. The lease is for a 12,500 square foot facility, which will expire when
the Subsidiary occupies the long-term lease facility. The Subsidiary became
operational during the quarter with the first products being shipped in December
1996.
The Company believes that its current financial position and existing
cash and investments along with earnings and amounts available under its line of
credit will be sufficient to meet the Company's cash requirements over the next
twelve months.
FINANCIAL ACCOUNTING DEVELOPMENTS
In 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" (SFAS 121) was issued. SFAS 121 requires that long-lived assets
and certain identifiable intangibles held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. SFAS 121 is effective for
fiscal years beginning after December 15, 1995. The Company believes that the
adoption of SFAS 121 will not have a material effect on the Company's financial
position or results of operations.
In 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123) was issued. SFAS 123
requires the Company to either account for the estimated fair value of stock
options granted as compensation expense or continue to account for them under
the present rules. If the Company chooses to continue to account for stock
options granted under present rules, as the Company believes is likely,
disclosure will be required of the compensation expense. SFAS 123 is effective
for fiscal years beginning after December 15, 1995. The Company believes that
the adoption of SFAS 123 will not have a material effect on the Company's
financial position or results of operations.
FORWARD LOOKING STATEMENTS
When used in this Form 10-Q , the words "believe," "anticipate,"
"think," "intend," "will be," and similar expressions identify forward looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward looking statements
which speak only as of the date hereof. Readers are also urged to carefully
review and consider the various disclosures made by the Company which attempt to
advise interested parties of the factors which affect the Company's business,
including the disclosures made in other periodic reports on Forms 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. Exhibits
(a) The following exhibit is being filed with this report:
Exhibit No. Description
---------- -----------
[S] [C]
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule (For SEC use only)
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CYBEX COMPUTER PRODUCTS CORPORATION
/s/ Doyle C. Weeks
------------------------------------
Doyle C. Weeks
Senior Vice President - Finance and
Chief Financial Officer and Treasurer
Date: February 12, 1997
<PAGE> 15
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
<S> <C> <C>
11 Statement Regarding Computation of Per Share Earnings 16
27 Financial Data Schedule (For SEC use only)
</TABLE>
15
<PAGE> 1
EXHIBIT 11
CYBEX COMPUTER PRODUCTS CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average common shares outstanding..... 5,563,160 5,491,523 4,566,225 5,500,081
Net weighted average common stock options
outstanding under the treasury stock method.. 256,779 110,603 355,454 111,888
---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares outstanding................ 5,819,939 5,602,126 4,921,679 5,611,969
========== ========== ========== ==========
Net income..................................... $1,334,183 $1,533,251 $3,357,972 $4,236,599
========== ========== ========== ==========
Net income per common and common
equivalent share............................. $ .23 $ .27 $ .68 $ .75
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE NINE MONTHS
ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 4,214,628
<SECURITIES> 31,111,569
<RECEIVABLES> 5,088,121
<ALLOWANCES> 302,178
<INVENTORY> 3,568,774
<CURRENT-ASSETS> 42,144,028
<PP&E> 2,892,911
<DEPRECIATION> 767,659
<TOTAL-ASSETS> 46,632,256
<CURRENT-LIABILITIES> 2,454,387
<BONDS> 0
0
0
<COMMON> 6,069
<OTHER-SE> 48,686,432
<TOTAL-LIABILITY-AND-EQUITY> 46,632,256
<SALES> 24,395,100
<TOTAL-REVENUES> 24,395,100
<CGS> 11,479,877
<TOTAL-COSTS> 11,479,877
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 170,795
<INTEREST-EXPENSE> 3,500
<INCOME-PRETAX> 6,646,599
<INCOME-TAX> 2,410,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,236,599
<EPS-PRIMARY> 0.75
<EPS-DILUTED> 0.75
</TABLE>
