-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S0jHgB42BV3DyNqKyjAHhPutSyyNVT9K96bEvq+I7kAfQKiYeED+WRXzwjAMsjr2 HetEIz7R8tXszcmX3Lsy9w== 0000950135-96-002092.txt : 19960515 0000950135-96-002092.hdr.sgml : 19960515 ACCESSION NUMBER: 0000950135-96-002092 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PICTURETEL CORP CENTRAL INDEX KEY: 0000755095 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 042835972 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09434 FILM NUMBER: 96563861 BUSINESS ADDRESS: STREET 1: 222 ROSEWOOD DR CITY: DANVERS STATE: MA ZIP: 01923 BUSINESS PHONE: 5087625000 MAIL ADDRESS: STREET 1: 222 ROSEWOOD DR CITY: DANVERS STATE: MA ZIP: 01923 FORMER COMPANY: FORMER CONFORMED NAME: PICTEL CORP DATE OF NAME CHANGE: 19870505 10-Q 1 PICTURETEL CORPORATION 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION ---------------------------------- Washington, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 30, 1996 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- -------------- For the Quarter ended MARCH 30, 1996 Commission File Number 1-9434 -------------- PICTURETEL CORPORATION (Exact name of Registrant as specified in its charter) Delaware 04-2835972 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 222 Rosewood Drive, Danvers, MA. 01923 - -------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number: 508-762-5000 - ------------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practical date. As of May 8, 1996, there were issued and outstanding 33,133,992 shares of common stock of the registrant. 2 PICTURETEL CORPORATION Consolidated Balance Sheets ($000's)
March 30, December 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 37,536 $ 39,476 Marketable securities 13,833 20,463 Accounts receivable less allowance for doubtful accounts of $1,871 and $1,791 102,710 97,735 Inventories (Note 2) 43,089 43,791 Deferred taxes, net 6,513 6,665 Other current assets 12,022 5,781 -------- -------- Total current assets 215,703 213,911 Marketable securities 43,931 34,084 Deferred taxes, net 6,000 6,000 Property and equipment, net 28,971 22,515 Capitalized software costs, net (Note 3) 5,620 5,073 Other assets 3,884 6,558 -------- -------- Total assets $304,109 $288,141 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term borrowings $ 541 $ 557 Accounts payable 29,607 25,639 Accrued compensation and benefits 9,902 9,881 Accrued expenses 23,129 16,646 Current portion of capital lease obligations 1,801 2,283 Deferred revenue 16,149 19,509 -------- -------- Total current liabilities 81,129 74,515 Long-term borrowings 9,691 12,226 Capital lease obligations 339 578 Stockholders' equity: Preference stock, $.01 par value; 15,000,000 shares authorized; none issued Common stock, $.01 par value; 80,000,000 shares authorized; 33,028,061 and 32,723,744 shares issued and outstanding at March 30, 1996 and December 31, 1995, respectively 330 328 Additional paid-in capital 177,817 173,379 Retained earnings 34,891 27,422 Cumulative translation adjustment (595) (531) Unrealized gain on marketable securities, net 507 224 -------- -------- Total stockholders' equity 212,950 200,822 -------- -------- Total liabilities and stockholders' equity $304,109 $288,141 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. 3 PICTURETEL CORPORATION Consolidated Statement of Income ($000's except per share amounts)
Three Months Ended ------------------ March 30, April 1, 1996 1995 Revenues $105,001 $74,156 54,109 36,358 Cost of sales -------- ------- Gross margin 50,892 37,798 Operating expenses: Selling, general and administrative 27,738 23,947 Research and development 13,924 10,393 -------- ------- Total operating expenses 41,662 34,340 -------- ------- Income from operations 9,230 3,458 Interest income, net 1,077 617 Other income, net 677 275 -------- ------- Income before taxes 10,984 4,350 Provision for income taxes 3,515 1,262 -------- ------- Net income $ 7,469 $ 3,088 ======== ======= Net income per common and common equivalent share $ 0.21 $ 0.09 ======== ======= Weighted average common and common equivalent shares outstanding 36,115 33,202 ======== =======
The accompanying notes are an integral part of the consolidated financial statements. 4 PICTURETEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS ($000's)
Three Months Ended March 30, April 1, 1996 1995 ---- ---- Cash flows from operating activities: Net income ........................................ $ 7,469 $ 3,088 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................... 4,545 4,886 Deferred taxes, net ............................... 152 -- Other non-cash items .............................. (195) (269) Changes in operating assets and liabilities: Accounts receivable ............................... (5,622) (1,511) Inventories ....................................... 539 (2,843) Other assets ...................................... (4,838) (130) Accounts payable .................................. 4,075 (2,132) Accrued compensation and benefits and accrued expenses .............................. 6,625 4,288 Income taxes, net ................................. 242 (803) Deferred revenue .................................. (3,309) 1,078 -------- ------- Net cash provided by operating activities ........................................ 9,683 5,652 Cash flows from investing activities: Purchase of marketable securities ................. (11,321) (6,385) Proceeds from marketable securities ............... 9,770 4,085 Additions to property and equipment ............... (10,077) (4,007) Capitalized software costs ........................ (1,348) (882) -------- ------- Net cash used in investing activities ........................................ (12,976) (7,189) Cash flows from financing activities: Change in short-term borrowings ................... (16) 993 Payments on long-term borrowings ................. (2,535) -- Principal payments under capital lease obligations..................................... (721) (1,100) Proceeds from exercise of stock options ......... 3,538 2,777 Proceeds from stock purchase plan ................ 883 -- -------- ------- Net cash provided by financing activities ........... 1,149 2,670 Effect of exchange rate changes on cash ............. 204 (436) -------- ------- Net increase (decrease) in cash and cash equivalents ....................................... (1,940) 697 Cash and cash equivalents at beginning of period .... 39,476 24,347 ======== ======= Cash and cash equivalents at end of period .......... $ 37,536 $25,044 ======== ======= Interest paid ....................................... $ 158 $ 129 ======== ======= Income taxes paid ................................... $ 584 $ 1,090 ======== =======
The accompanying notes are an integral part of the consolidated financial statements. 5 PICTURETEL CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Management's Representation --------------------------- The information furnished has been prepared from the accounts without audit. In the opinion of management, the accompanying financial statements contain all adjustments (consisting of normal and recurring accruals) necessary to present fairly the consolidated financial statements. The financial disclosures herein should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1995. 2. Inventories ----------- Inventories consist of the following (in thousands):
March 30, December 31, 1996 1995 ---- ---- Purchased Parts $11,238 $11,492 Work in Process 2,832 3,252 Finished Goods 29,019 29,047 ------- ------- $43,089 $43,791 ======= =======
3. Capitalized Software Costs -------------------------- Amortization of software costs totaled $801,000 and $913,000 for the quarters ended March 30, 1996 and April 1, 1995, respectively. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- Results of Operations THREE MONTHS ENDED MARCH 30, 1996 COMPARED TO THREE MONTHS ENDED APRIL 1, 1995 REVENUES. The Company's revenues increased $30,845,000 or 42%, in the three month period ended March 30, 1996 from the comparable period in 1995. The increase in revenue was primarily a result of increased videoconferencing system unit shipments. This growth was partially offset by a reduction in the average selling price of videoconferencing systems resulting from a shift towards lower priced models, especially the personal desktop products, as well as a shift in distribution channel mix with approximately 76% of revenue now coming from the indirect channels. Videoconferencing system sales accounted for approximately 83% of the Company's revenues for the three month period ended March 30, 1996 and 84% for the comparable period in 1995. Sales of group and desktop videoconferencing products accounted for 64% and 19%, respectively, of revenues for the three month period ended March 30, 1996 compared with 72% and 12%, respectively, for the comparable period in 1995. In addition, sales of bridge products accounted for approximately 8% of the Company's revenues for the three month period ended March 30, 1996 compared to approximately 6% for the comparable period in 1995. The balance of the revenues in 1996 and 1995 were primarily from maintenance services, licensing/development agreements and the sales of stand-alone codecs and video modems. The Company's revenues from sales to foreign markets were approximately $50,610,000 in the three month period ended March 30, 1996 compared to approximately $31,507,000 from the comparable period in 1995, representing 48% and 42%, respectively, of total revenues. The Company expects that international revenues will continue to account for a significant portion of total revenues. GROSS MARGIN. The Company's gross margin increased $13,094,000 or 35%, in the three month period ended March 30, 1996 compared to the comparable period in 1995. Gross margin as a percentage of revenues was 48% for the three month period ended March 30, 1996 compared with 51% for the comparable period in 1995. Gross margin as a percentage of revenues decreased slightly as a result of the increased percentage of volume through the indirect channels and a reduction in the average selling price of videoconferencing systems. These two trends are expected to continue and may impact future gross margins. SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative expenses increased $3,791,000 or 16% from the comparable period in 1995 and decreased as a percentage of revenues to 26% from 32%. The dollar increase in spending resulted primarily from the worldwide marketing focus associated with expanding indirect channels and new product launches, as well as increased commission expense. In addition, the Company has provided additional sales, general and administrative personnel in order to support the Company's overall growth. RESEARCH AND DEVELOPMENT. Research and development expenses increased $3,531,000, or 34% in the three month period ended March 30, 1996 from the comparable period in 1995 and were 13% and 14%, respectively, of revenues for the three month period ended March 30, 1996 and the comparable period in 1995. Research and development expenditures, prior to the capitalization of software costs, were $15,309,000 in the three month period ended March 30, 1996 and $11,275,000 in the comparable period in 1995 or 15% of revenues, respectively. The dollar increase in expenditures primarily reflects the Company's continuing investment in new product and software development for existing and future videoconferencing products. The Company capitalized software costs of $1,348,000 in the three month period ended March 30, 1996 and $882,000 in the comparable period in 1995 representing 9% and 8% of research and development expenditures, respectively. OPERATING INCOME. Although gross margin as a percentage of sales was less than the comparable period in 1995, operating income as a percentage of sales increased due to a decline in operating expenses as a percentage of sales. NET INTEREST INCOME. Net interest income increased to $1,077,000 in the three month period ended March 30, 1996 from $617,000 in the comparable period in 1995. The increase was primarily the result of higher portfolio balances and lower interest expense. OTHER INCOME, NET. Other income, net of $677,000 in the three month period ended March 30, 1996 consists primarily of gains on sales of securities and net gains on foreign currency transactions. Other income of $275,000 in the comparable period in 1995 consists primarily of net gains on foreign currency transactions. 7 INCOME TAXES. The Company's effective tax rate for the three month period ended March 30, 1996 and the comparable period in 1995 was 32% and 29% respectively, and the rate for the three month period ended March 30, 1996 was lower than the federal statutory rate primarily due to state tax credits, foreign tax rates and foreign losses not tax benefited. FORWARD-LOOKING STATEMENTS. This section includes certain forward-looking statements about the Company's business and new products, sales and expenses, effective tax rate and operating and capital requirements. Any such statements are subject to risks that could cause the actual results or needs to vary materially. These risks are discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Report on Form 10-K for the year ended December 31, 1995. Liquidity and Capital Resources - ------------------------------- At March 30, 1996 the Company had $37,536,000 in cash and cash equivalents, $13,833,000 in short-term marketable securities and $43,931,000 in long-term marketable securities. During the three month period ended March 30, 1996 the Company generated $9,683,000 in net cash from operating activities. The primary use of cash during the three month period ended March 30, 1996 was to fund the growth in working capital items such as accounts receivable, as well as additions to property and equipment. Capital expenditures for 1996 are projected to be approximately $30,000,000 including leasehold improvements related to the newly leased property for the Company's corporate office and manufacturing facilities, of which $3,930,000 was spent in the first quarter. The Company has available for borrowing up to $17,000,000 under its revolving credit agreement and approximately $4,341,000 available under local foreign guaranteed lines of credit to certain of its foreign subsidiaries. At March 30, 1996 there was $9,691,000 outstanding under the revolving credit agreement and $541,000 outstanding under the foreign lines of credit. At March 30, 1996, the Company had $2,140,000 outstanding and $15,000,000 available to be borrowed under various leasing lines. The Company believes that funds from operations, equipment lease financing, borrowings under its various credit agreements and existing cash, cash equivalents and marketable securities will be sufficient to meet the Company's foreseeable operating and capital requirements. 8 PART II - OTHER INFORMATION Item 1 - Legal Proceedings - -------------------------- In December 1993, the Company was sued by Datapoint Corporation in the United States District Court for the Northern District of Texas. Datapoint alleges that certain of the Company's products infringe patent rights allegedly owned by Datapoint. The complaint seeks approximately $51 million in damages for alleged past infringement and an injunction against alleged future infringement. The Company believes that it has meritorious defenses to the allegations of the complaint. On April 25, 1996, a special master appointed by the Court to consider the Company's motion for summary judgment of non-infringement filed his report, which is subject to review by the court, recommending that the Company's motion be denied on the grounds that the Company's claims raise factual issues that cannot be decided without a trial. The Company has objected to certain aspects of the master's report and continues to vigorously defend against the lawsuit. In the event the Company is found to be infringing a valid patent or patents in such proceedings, the Company could be required to pay damages for past infringement and cease the sale of products incorporating the infringing feature (or be required to take a license and pay royalties with respect to such patents). While there can be no assurance that the Company will prevail, the Company believes that it is unlikely that the outcome of the lawsuit would have a material adverse effect on the business or the financial condition of the Company. Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibits None (b) Reports on Form 8-K None 9 SIGNATURE --------- Pursuant to 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. PICTURETEL CORPORATION /s/ Les B. Strauss ` -------------------------------------------- Les B. Strauss Vice President, Chief Financial Officer (Principal Financial and Accounting Officer) May 14, 1996. EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PICTURETEL'S BALANCE SHEET & INCOME STATEMENT FOR THE PERIOD ENDED MARCH 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q FILING. 1,000 US DOLLARS 3-MOS DEC-31-1995 JAN-01-1996 MAR-30-1996 1 37,536 57,764 104,581 (1,871) 43,089 18,535 76,294 (47,323) 304,109 81,129 0 330 0 0 212,620 212,950 105,001 105,001 54,109 54,109 41,662 0 0 10,984 3,515 7,469 0 0 0 7,469 0.21 0
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