<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: SEPTEMBER 30, 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 0-26496
CYBEX COMPUTER PRODUCTS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
ALABAMA 63-0801728
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
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 NOVEMBER 12, 1997, 5,440,383 SHARES OF THE REGISTRANT'S COMMON STOCK
$.001 PAR VALUE, WERE OUTSTANDING.
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CYBEX COMPUTER PRODUCTS CORPORATION
FORM 10-Q
SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1997 and
September 30, 1997 .............................................. 3
Condensed Consolidated Statements of Income for the three and six
months ended September 30, 1996 and 1997 ....................... 4
Condensed Consolidated Statements of Cash Flows for the six
months ended September 30, 1996 and 1997 ........................ 5
Notes to Condensed Consolidated Financial Statements ............ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ....................................... 7
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, SEPTEMBER 30,
1997 1997
--------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................... $ 2,424,385 $ 8,666,064
Short-term investments ............................................ 38,688,836 25,816,297
Accounts receivable- trade, less allowance for doubtful accounts of
$350,837 and $461,277, respectively ............................. 5,409,706 7,035,553
Inventories ..................................................... 3,835,356 4,637,680
Other current assets .............................................. 698,163 585,313
----------- -----------
Deferred income taxes ............................................. 623,000 623,000
Total current assets ................................... 51,679,446 47,363,907
Investments ......................................................... 2,196,218 2,453,576
Property and equipment, net of accumulated depreciation ............. 2,422,292 2,931,460
Other assets ........................................................ 228,757 232,956
----------- -----------
$56,526,713 $52,981,899
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable ...................................................... $ 8,000,000
Accounts payable and accrued expenses ............................. 2,151,371 $ 2,421,773
Income taxes payable .............................................. 158,734 230,769
Other current liabilities ......................................... 1,149,419 1,498,855
----------- -----------
Total current liabilities ............................. 11,459,524 4,151,397
Deferred income taxes ............................................... 80,000 80,000
----------- -----------
Total liabilities ..................................... 11,539,524 4,231,397
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, 1997 -- 6,090,508 shares issued,
5,429,383 shares outstanding; September 30, 1997 -- 6,101,508
shares issued, 5,440,383 shares outstanding.................... 6,091 6,102
Additional paid in capital .......................................... 34,119,697 34,166,356
Unrealized loss on investments ...................................... (77,669) --
Retained earnings ................................................... 16,209,614 19,848,588
Treasury stock, at cost; 661,125 shares ............................ (5,270,544) (5,270,544)
----------- -----------
Total shareholders' equity .......................... 44,987,189 48,750,502
----------- -----------
$56,526,713 $52,981,899
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
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CYBEX COMPUTER PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales .................................. $8,050,329 $11,267,460 $15,478,242 $21,962,154
Cost of sales .............................. 3,771,377 5,344,454 7,257,956 10,393,375
---------- ----------- ----------- -----------
Gross profit ........................... 4,278,952 5,923,006 8,220,286 11,568,779
Selling, general and administrative expenses 1,936,797 2,740,046 3,812,591 5,452,069
Research and development expenses .......... 501,896 794,268 1,024,382 1,568,980
---------- ----------- ----------- -----------
Operating income ....................... 1,840,259 2,388,692 3,383,313 4,547,730
Interest income ............................ 469,731 597,858 857,034 1,083,244
---------- ----------- ----------- -----------
Income before provision for income taxes 2,309,990 2,986,550 4,240,347 5,630,974
Provision for income taxes ............. 837,000 1,050,000 1,537,000 1,992,000
---------- ----------- ----------- -----------
Net income ............................... $1,472,990 $ 1,936,550 $ 2,703,347 $ 3,638,974
========== =========== =========== ===========
Net income per common and common
equivalent share ......................... $ .26 $ .34 $ .48 $ .65
========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary ................................ 5,620,613 5,621,711 5,620,337 5,579,159
========== =========== =========== ===========
Fully Diluted .......................... 5,620,613 5,641,323 5,620,337 5,635,569
========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements
4
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CYBEX COMPUTER PRODUCTS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1996 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 2,703,347 $ 3,638,974
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 149,459 249,195
Amortization of discount on investments ......................... (585,546) (706,986)
Provision for losses on accounts receivable ..................... 34,023 226,000
Gain on sale of investments ..................................... (55,835) (203,742)
Changes in operating assets and liabilities:
Accounts receivable- trade .................................... (1,104,730) (1,851,849)
Inventories 332,017 (802,324)
Accounts payable and accrued expenses ......................... 269,855 270,402
Other ......................................................... (190,269) 458,087
Income taxes payable .......................................... 137,000 72,035
----------- -----------
Net cash provided by operating activities ....................... 1,689,321 1,349,792
Cash flows from investing activities:
Purchases of property and equipment ............................... (821,680) (758,361)
Purchases of investments available for sale ....................... (33,197,752) (18,803,969)
Proceeds from the sale of investments ............................. 874,334 3,758,547
Proceeds from maturities of investments ........................... 39,189,514 28,649,000
----------- -----------
Net cash provided by investing activities 6,044,416 12,845,217
Cash flows from financing activities:
Repayment of note payable ......................................... (5,000,000) (8,000,000)
Proceeds from issuance of common stock ............................ 46,670
----------- -----------
Net cash (used in) financing activities.......................... (5,000,000) (7,953,330)
----------- -----------
Net increase in cash and cash equivalents ........................ 2,733,737 6,241,679
Cash and cash equivalents, beginning of period ...................... 862,878 2,424,385
----------- -----------
Cash and cash equivalents, end of period ............................ $ 3,596,615 $ 8,666,064
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .......................... $ 8,021 $ 13,216
=========== ===========
Cash paid during the period for taxes ............................ $ 1,400,000 $ 1,960,000
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements
5
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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 September 30, 1997 should be read in
conjunction with the Company's consolidated financial statements as of and for
the year ended March 31, 1997 included in the Company's Form 10-K filed June 25,
1997. Operating results for the three and six months ended September 30, 1997
are not necessarily indicative of the results that may be expected for the year
ended March 31, 1998. The March 31, 1997 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, 1997 and September 30, 1997, inventories consisted of the
following:
<TABLE>
<CAPTION>
March 31, September 30,
1997 1997
----------- --------------
<S> <C> <C>
Raw materials ....................................................... $ 2,358,877 $ 3,399,855
Work in process ..................................................... 888,089 645,315
Finished goods ...................................................... 588,390 592,510
----------- -----------
$ 3,835,356 $ 4,637,680
=========== ===========
</TABLE>
3. LINE OF CREDIT
The Company renegotiated its line of credit on July 1, 1997, to
provide borrowings of up to $5.0 million at the bank's prime rate. The line of
credit expires July 1, 1998. There were no borrowings outstanding under the
Company's line of credit as of September 30, 1997.
4. STOCK OPTIONS
The Company issued 7,500 options to purchase shares of common stock on
July 15, 1997 to the outside members of the Board of Directors under the 1995
Outside Directors Stock Option Plan at the market price as of the effective
date. Also, 6,000 options to purchase shares of common stock were exercised
during the quarter.
6
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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 fiscal year ended March 31, 1997 filed on June 25, 1997.
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") provide up to four
users, each with a separate keyboard, video monitor and mouse, with the
capability to control up to 2160 personal computers ("PCs"), thereby eliminating
the need for individual keyboards, video monitors or mice ("KVM Peripherals")
for the controlled PCs. Elimination of KVM Peripherals 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 and Macintosh PCs and
many Sun, Hewlett Packard, Digital Equipment Corporation (DEC), IBM, and Silicon
Graphics workstations functioning either as stand-alone systems or as file,
communications or print servers ("Servers") operating within a local area
network ("LAN"). The Company also has computer interfaces for its Autoboot
Commander 4xPTM/1xPTM, which operate with models of IBM RS/6000, Hewlett
Packard, DEC's Alpha, and Silicon Graphic's Indigo workstations. The Company's
AutoView CommanderTM, introduced in mid Fiscal 1997, utilizes a cost reduced
design, which was the basis for the following KVM Switch Product introductions:
AutoView CommanderTM, Personal CommanderTM II, Autoboot CommanderTM II, a
six-port switch for original equipment manufacturers (OEM), Duette CommanderTM,
AutoView Pro and QuickSwitch CommanderTM. The Company introduced SwitchViewTM, a
two and four port KVM Switch Product, in October, 1997, the Company's first
product designed for the retail channel of distribution. Certain KVM Switch
Products are certified by Novell Corporation for use with its network operating
system software Netware 4.1. 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.
The Company's family of KVM extension products ("KVM Extension Products")
allow users to separate the KVM Peripherals up to 600 feet from the PC. In
addition, certain KVM Extension Products allow multiple users shared access to
the same PC from different KVM Peripherals. The latest version of the PC
ExtenderTM SNAP, introduced in late Fiscal 1997, reduces cabling costs by half
and utilizes standard Category 5 UTP cabling, a commonly installed cable in
Ethernet networks. KVM Extension Products are particularly useful in congested
work areas or where working conditions may be hazardous to the function of the
computer.
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 as well as
continuous enhancement of already accepted products with increased functionality
which 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 of expanding channels of
distribution by increased penetration in the OEM market and the worldwide
catalog market. During late Fiscal 1997, the Company announced its first
products designed specifically for the OEM market. These products are intended
to expand the
7
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Company's share of sales in the OEM marketplace. During this same period, the
Company began shipping certain KVM Switch Products to a major worldwide catalog
marketer under private label. This broadened channel distribution strategy is
expected to expand the Company's distribution channels and increase market
share.
The Company expanded its marketing strategy to include the retail channel
of distribution with the introduction of SwitchViewTM , which targets the
desktop market. SwitchViewTM was designed to address the high volume sales
channels and is the Company's first product packaged for the retail market. The
Company is the only KVM Switch Product manufacturer offering products ranging
from the entry level PC single user switch to multi-user, multiplatform switches
that can control thousands of computers in data centers and server farms.
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.
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 plus a one year limited warranty on parts. The Company has not
incurred significant sales and warranty returns expense to date. 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 will be an
important aspect of future revenue growth. International sales comprised 23% of
the Company's total sales for the six months ended September 30, 1997, and 21%
and 20% of the Company's total sales in Fiscal 1997 and Fiscal 1996,
respectively. All international sales are made in U.S. dollars.
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 quarters ended indicated:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- -----------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales .................................... 100.0% 100.0% 100.0% 100.0%
Cost of sales .............................. 46.8 47.4 46.9 47.3
------- ------- ------- -------
Gross profit ................................. 53.2 52.6 53.1 52.7
Research and development expenses .......... 6.2 7.1 6.6 7.2
Selling, general and administrative expenses 24.1 24.3 24.6 24.8
------- ------- ------- -------
Operating income ............................. 22.9 21.2 21.9 20.7
Interest income ............................ 5.8 5.3 5.5 4.9
------- ------- ------- -------
Income before income taxes ................... 28.7 26.5 27.4 25.6
Provision for income taxes ................. 10.4 9.3 9.9 9.0
------- ------- ------- -------
Net income ................................... 18.3% 17.2% 17.5% 16.6%
======= ======= ======= =======
</TABLE>
Three Months Ended September 30, 1997 Compared to the Three Months Ended
September 30, 1996
Net sales increased 40.0% to $11.3 million in the three months ended
September 30, 1997 from $8.1 million in the three months ended September 30,
1996. The net sales increase 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 and
8
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Extension Products. Sales of KVM Switch Products increased 41.4% to $9.4 million
in the three months ended September 30, 1997 from $6.6 million in the three
months ended September 30, 1996, primarily due to sales growth of the high-end
Switch segment of products including the Auotboot Commander 4xPTM/1xPTM and also
sales of the Autoview CommanderTM and other products based on its cost reduced
design. Sales of KVM Extension Products increased 31.1% to $1.6 million in the
three months ended September 30, 1997 from $1.2 million in the three months
ended September 30, 1996. The PC ExtenderTM Snap and the PC Plus line were
primarily responsible for the growth in KVM Extension Product sales.
As a percentage of net sales, the Company's KVM Switch Products increased
to 83.2% from 82.4% and KVM Extension Products declined to 14.3% from 15.3%
during the same period in Fiscal 1997. Management anticipates that sales of KVM
Extension Products will continue to be a substantial portion of the Company's
net sales.
International sales increased 88.2% to $2.5 million in the three months
ended September 30, 1997 from $1.3 million in the three months ended September
30, 1996 and accounted for 22.6% of total revenues. Sales to customers in Europe
increased 52.0% in the three months ended September 30, 1997 from the three
months ended September 30, 1996 and represented approximately 12% of total
revenues for the quarter. All European shipments for the quarter were made from
the Company's subsidiary in Shannon, Ireland, Cybex Europe Ltd. (the
Subsidiary).
Gross profit increased 38.4% to $5.9 million in the three months ended
September 30, 1997, from $4.3 million in the three months ended September 30,
1996. Gross profit as a percentage of net sales declined slightly to 52.6% from
53.2% during the same period in Fiscal 1997. Although down slightly as a
percentage of net sales from the prior year quarter due to increased volume of
overall lower margin product in the mix, gross profits have remained strong over
the last three preceding quarters reflecting volume increases of the Autoview
line which is designed for strong margin retention although discounted for
volume distributions. The gross margin also reflects the absence of Ireland
startup costs and reduced incremental costs associated with the Subsidiary.
Selling, general and administrative (SG&A) expenses increased 41.5% to $2.7
million (24.3% of net sales) in the three months ended September 30, 1997, from
$1.9 million (24.1% of net sales) in the three months ended September 30, 1996.
The increase in SG&A reflects the increased level of expenditures in
administration, sales, customer support, advertising, and marketing activities
required to support the Company's expanded sales base domestically as well as
the additional SG&A costs for the Subsidiary. Management anticipates that the
dollar amount of selling, general and administrative expense will continue to
increase, however, the anticipated expanding sales volume should cause the
expenses to continue to remain relatively constant as a percentage of net sales.
Research and development (R&D) expense grew 58.5% to $.8 million or 7.1%
of net sales in the three months ended September 30, 1997, from $.5 million or
6.2% of net sales in the three months ended September 30, 1996. The increase in
R&D reflects Management's commitment to new product development and existing
product enhancement. Management anticipates that the dollar amount of research
and development expenses will increase and the percentage of net sales to
increase slightly.
As a result of the factors discussed above, operating income increased
29.8% to $2.4 million (21.2% of net sales) in the three months ended September
30, 1997, from $1.8 million (22.9% of net sales) in the three months ended
September 30, 1996.
Other income increased 27.3% to $.6 million (5.3% of net sales) in the
three months ended September 30, 1997, compared to $.5 million in the three
months ended September 30, 1996. The increase is attributed to realized gains on
investments in equities as well as an increase in the amount of funds invested.
Net income increased 31.5% to $1.9 million (17.2% of net sales) in the
three months ended September 30, 1997, from $1.5 million (18.3% of net sales) in
the three months ended September 30, 1996, as a result of the factors discussed
above.
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Six Months Ended September 30, 1997 Compared to the Six Months Ended September
30, 1996.
Net sales increased 41.9% to $22.0 million for the six months ended
September 30, 1997. 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 46.7% to $18.5 million in the six months ended September 30, 1997 from
$12.6 million in the six months ended September 30, 1996. Sales of KVM Extension
Products increased 21.3% to $3.0 million in the six months ended September 30,
1997 from $2.5 million in the six months ended September 30, 1996 primarily due
to increases in sales of PC ExtenderTM SNAP and PC Plus Products. As a
percentage of net sales, the Company's KVM Switch Products increased to 84.3%
from 81.4% and KVM Extension Products declined to 13.6% from 16.0% during the
same period. International sales increased 63.3% to $5.0 million or 22.8% of net
sales in the six months ended September 30, 1997 as compared to $3.0 million or
20.0% of net sales in the six months ended September 30, 1996.
Gross profit increased 40.7% to $11.6 million in the six months ended
September 30, 1997 from $8.2 million in the six months ended September 30, 1996.
Gross profit as a percent of net sales decreased to 52.7% from 53.1% during the
same period. Although down slightly as a percentage of net sales from the prior
year period due to increased volume of overall lower margin product in the mix,
gross profits have remained strong over the last three preceding quarters
reflecting volume increases of the Autoview line which is designed for strong
margin retention although discounted for volume distributions. The gross margin
also reflects the absence of Ireland startup costs and reduced incremental costs
associated with the Subsidiary.
Selling, general and administrative expenses increased 43.0% to $5.5
million or 24.8% of net sales in the six months ended September 30, 1997 from
$3.8 million or 24.6% of net sales in the six months ended September 30, 1996.
The increase in SG&A reflects the increased level of expenditures in
administration, sales, customer support, advertising, and marketing activities
required to support the Company's expanded sales base domestically as well as
the additional SG&A costs for the Subsidiary.
Research and development expense was $1.6 million or 7.2% of net sales in
the six months ended September 30, 1997 as compared to $1.0 million or 6.6% of
net sales for the six months ended September 30, 1996. The increase in R&D
reflects Management's commitment to new product development and existing product
enhancement. Management anticipates that the dollar amount of research and
development expenses will increase and the percentage of net sales to increase
slightly.
As a result of the factors discussed above, operating income increased
34.4% to $4.5 million or 20.7% of net sales for the six months ended September
30, 1997 as compared to $3.4 million or 21.9% of net sales for the six months
ended September 30, 1996.
Interest income increased to $1.1 million or 4.9% of net sales in the six
months ended September 30, 1997 from $.9 million or 5.5% of net sales in the six
months ended September 30, 1996. The increase is attributed to realized gains on
investments in equities as well as an increase in the amount of funds invested.
Net income increased 34.6% to $3.6 million or 16.6% of net sales for the
six months ended September 30, 1997 from $2.7 million or 17.5% of net sales for
the six months ended September 30, 1996 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 September 30, 1997, the
Company had an available line of credit of $5 million with no outstanding
borrowings. The Company negotiated an increase in the line of credit as of July
1, 1997 from $2.5 million at the bank's prime rate.
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<PAGE> 11
The Company's working capital position improved from $42,416,140 as of
March 31, 1997 to $45,666,086 as of September 30, 1997 (adjusted to include
$2,196,218 and $2,453,576 of long term-investments, respectively). This
improvement in the Company's working capital position was due primarily to
increased earnings during the six months ended September 30, 1997.
Cash provided from operating activities decreased from approximately $1.7
million for the six months ended September 30, 1996 to $1.3 million for the six
months ended September 30, 1997. This net decrease was caused by the offsetting
effect of increases in net income, accounts receivable, inventory and accounts
payable. The increase in net income and accounts receivable is attributed to the
increase in sales. The increase in inventory is attributed to the overall
anticipated demand for new products introduced in the products mix, as well as
additional inventory levels at the Subsidiary. The Company will continue to
increase the level of turnkey manufacturing of products as they mature and
designs stabilize, thereby reducing the level of inventory relative to those
products that the Company must maintain. The increase in accounts payable
relates directly to the increase in inventory.
Capital expenditures totaled $.8 million in the first six months of Fiscal
1997. Capital expenditures related primarily to the construction of the new
building for the Huntsville facility. The remaining capital expenditures were
used to purchase equipment for the Company and the Subsidiary.
The Company began construction of a new facility in Hunstville, Alabama
during the first quarter of Fiscal 1998 on land purchased in fiscal year 1997.
The new facility will contain approximately 120,000 square feet with space for
future expansion. The facility is designed to house the Company's sales,
marketing, research and development, manufacturing and administrative functions.
Occupancy is expected during the first quarter of Fiscal 1999. The project is
expected to cost aproximately $6.5 million.
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 February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS
No.128, which supersedes existing generally accepted accounting principles
relative to the calculation of earnings per share, is effective for years ending
after December 15, 1997, and requires restatement of all prior period earnings
per share information upon adoption. Generally, SFAS No.128 requires a
calculation of basic earnings per share, which takes into consideration income
(loss) available to common shareholders and the weighted average of common
shares outstanding. SFAS No. 128 also requires the calculation of a diluted
earnings per share, which takes into effect the impact of all additional common
shares that would have been outstanding if all dilutive potential common shares
relating to options, warrants, and convertible securities had been issued, as
long as their effect is dilutive, with a related adjustment of income available
for common shareholders, as appropriate. SFAS No. 128 requires dual presentation
of basic and diluted earnings per share on the face of the statement of income
and requires a reconciliation of the numerator and denominator of the basic
earnings per share computation. The Company does not expect the effect of its
adoption of SFAS No. 128 to be material.
YEAR 2000 COMPLIANCE
The Company has and will continue to make certain investments in its
software systems and applications to ensure the Company is year 2000 compliant.
The financial impact has not been and is not anticipated to be material to its
financial position or its results of operations in any given year.
11
<PAGE> 12
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
8K filed with the Securities and Exchange Commission.
12
<PAGE> 13
PART II - OTHER INFORMATION
Item 6. Exhibits
(a) The following exhibits are being filed with this
report:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- ------------
<S> <C>
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule (For SEC use only)
</TABLE>
13
<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: November 12, 1997
14
<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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Weighted average common shares outstanding 5,504,383 5,438,383 5,504,383 5,435,383
Net weighted average common stock options
outstanding under the treasury stock method 116,230 183,328 115,954 143,776
---------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 5,620,613 5,621,711 5,620,337 5,579,159
---------- ----------- ----------- -----------
Net income $1,472,990 $ 1,936,550 $ 2,703,347 $ 3,638,974
========== =========== =========== ===========
Net income per common and common
equivalent share ......................... $ .26 $ .34 $ .48 $ .65
========== =========== =========== ===========
Fully Diluted:
Weighted average common shares outstanding 5,504,383 5,438,383 5,504,383 5,435,383
Net weighted average common stock options
outstanding under the treasury stock method 116,230 202,940 115,954 200,186
---------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 5,620,613 5,641,323 5,620,337 5,635,569
========== =========== =========== ===========
Net income $1,472,990 1,936,550 $ 2,703,347 $ 3,638,974
========== =========== =========== ===========
Net income per common and common
equivalent share ......................... $ .26 $ .34 $ .48 $ .65
========== =========== =========== ===========
</TABLE>
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 8,666
<SECURITIES> 28,270
<RECEIVABLES> 7,497
<ALLOWANCES> 461
<INVENTORY> 4,638
<CURRENT-ASSETS> 47,364
<PP&E> 4,052
<DEPRECIATION> 1,120
<TOTAL-ASSETS> 52,982
<CURRENT-LIABILITIES> 4,151
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 54,015
<TOTAL-LIABILITY-AND-EQUITY> 52,982
<SALES> 21,962
<TOTAL-REVENUES> 21,962
<CGS> 10,393
<TOTAL-COSTS> 10,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 226
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 5,631
<INCOME-TAX> 1,992
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,639
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
