-----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, TU0470kYIPs2t02E6NFu0CvnAMDJauH1IpUUPEJ7L04ZBA0nks8A0bjszqsxGD7A +4ggN6iXokpTCUd+JI4l2Q== 0000914190-00-000149.txt : 20000508 0000914190-00-000149.hdr.sgml : 20000508 ACCESSION NUMBER: 0000914190-00-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIPRICO INC CENTRAL INDEX KEY: 0000720145 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 411749708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11336 FILM NUMBER: 619879 BUSINESS ADDRESS: STREET 1: 2800 CAMPUS DRIVE CITY: PLYMOUTH STATE: MN ZIP: 55441 BUSINESS PHONE: 6125514000 MAIL ADDRESS: STREET 1: 2800 CAMPUS DRIVE CITY: PLYMOUTH STATE: MN ZIP: 55441 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------------------- FORM 10-Q [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File Number 0-11336 CIPRICO INC. (Exact name of Registrant as specified in its charter) DELAWARE 41-1749708 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2800 Campus Drive Plymouth, Minnesota 55441 (Address of principal executive offices) Registrant's telephone number, including area code: (612) 551-4000 Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ The number of shares outstanding of the registrant's Common Stock, $.01 par value, as of April 17, 2000 was 4,985,300 shares. 1 CIPRICO INC. AND SUBSIDIARIES FORM 10-Q INDEX Page PART I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets at March 31, 2000 and September 30, 1999 3 Condensed Consolidated Statements of Earnings for Three and Six Months Ended March 31, 2000 and 1999 4 Condensed Consolidated Statements of Cash Flows for Six Months Ended March 31, 2000 and 1999 5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 8-9 Item 3. Quantitative and Qualitative Disclosures about Market Risk 10 PART II Other Information Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 EXHIBIT INDEX 13 2 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands) March 31, September 30, 2000 1999 ASSETS --------- ------------- Current assets: Cash and cash equivalents $ 6,407 $ 3,539 Marketable securities 18,901 23,363 Accounts receivable, less allowance 6,149 6,962 Inventories 5,091 4,603 Deferred income taxes 1,155 1,155 Other current assets 616 455 ---------- ----------- Total current assets 38,319 40,077 Property and equipment, net 3,198 3,743 Marketable securities 10,069 9,003 Other assets 419 415 ---------- ----------- Total assets $ 52,005 $ 53,238 ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,479 $ 2,641 Accrued expenses 1,411 2,063 Deferred revenue 837 1,244 ---------- ----------- Total current liabilities 4,727 5,948 Shareholders' equity: Capital stock 50 49 Additional paid-in capital 35,941 35,929 Retained earnings 11,360 11,409 Deferred compensation from restricted stock (73) (97) ---------- ----------- Total shareholders' equity 47,278 47,290 ---------- ----------- Total liabilities and shareholders' equity $ 52,005 $ 53,238 ========== ===========
See accompanying notes to condensed consolidated financial statements. 3 CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands except Three Months Ended Six Months Ended per share amounts) March 31, March 31, -------- -------- 2000 1999 2000 1999 --------- --------- --------- --------- NET SALES $ 8,191 $ 8,615 $ 15,038 $ 16,389 Cost of sales 4,355 4,185 8,092 8,051 -------- -------- --------- -------- GROSS PROFIT 3,836 4,430 6,946 8,338 OPERATING EXPENSES: Research and development expenses 1,025 1,061 1,913 2,201 Sales and marketing expenses 2,702 2,234 5,016 4,316 General and administrative expenses 473 767 1,018 1,443 -------- -------- --------- -------- Total operating expenses 4,200 4,062 7,947 7,960 -------- -------- --------- -------- INCOME (LOSS) FROM OPERATIONS (364) 368 (1,001) 378 Other income, primarily interest 454 421 926 844 -------- --------- --------- -------- INCOME (LOSS) BEFORE INCOME TAXES 90 789 (75) 1,222 Income tax expense (benefit) 30 267 (26) 418 -------- -------- --------- -------- NET INCOME (LOSS) $ 60 $ 522 $ (49) $ 804 ======== ======== ========= ======== Shares used to calculate net earnings (loss) per share: Basic 4,983 4,897 4,970 4,898 Diluted 5,083 5,003 4,970 4,999 NET EARNINGS (LOSS) PER SHARE - BASIC $ .01 $ .11 $ (.01) $ .16 ======== ======== ========= ======== NET EARNINGS (LOSS) PER SHARE - DILUTED $ .01 $ .10 $ (.01) $ .16 ======== ======== ========= ========
See accompanying notes to condensed consolidated financial statements. 4 CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) Six Months Ended March 31, -------- 2000 1999 ---------- ---------- Cash flows from operating activities: Net income $ (49) $ 804 Depreciation and amortization 1,294 1,297 Changes in operating assets and liabilities (1,057) 1,506 --------- ---------- NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 188 3,607 --------- ---------- Cash flows from investing activities: Equipment purchases (722) (1,104) Purchases of marketable securities (23,697) (27,670) Proceeds from sale or maturity of marketable securities 27,093 26,170 --------- ---------- NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES 2,674 (2,604) --------- ---------- Cash flows from financing activities: Repurchase of common stock (263) (576) Proceeds from issuance of common stock 269 303 --------- ---------- NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 6 (273) --------- ---------- Net increase in cash and cash equivalents 2,868 730 Cash and cash equivalents at beginning of period 3,539 9,030 --------- ---------- Cash and cash equivalents at end of period 6,407 9,760 Marketable securities, current 18,901 17,449 Marketable securities, long-term 10,069 8,012 --------- ---------- Total cash and marketable securities $ 35,377 $ 35,221 ========= ==========
See accompanying notes to condensed consolidated financial statements. 5 CIPRICO INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (Unaudited) NOTE A - BASIS OF PRESENTATION The principal business activity of Ciprico Inc. and subsidiaries (the Company) is the design, manufacture, and marketing of high performance, direct attached and networked storage solutions, including intelligent disk array hardware, software and services for visual computing applications. The Company markets its products worldwide through a direct sales force and various distribution channels. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all necessary adjustments, consisting only of a recurring nature, and disclosures to present fairly the financial position as of March 31, 2000 and the results of operations and cash flows for the three-month and six-month periods ended March 31, 2000 and 1999. The results of operations for the six months ended March 31, 2000 are not necessarily indicative of the results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report to Shareholders for fiscal 1999. In preparation of the Company's consolidated financial statements, management is required to make estimates and assumptions that affect reported amounts of assets and liabilities and related revenues and expenses. Actual results could differ from the estimates used by management. NOTE B - MARKETABLE SECURITIES The Company has invested its excess cash in commercial paper and government agencies. These investments are classified as held-to-maturity given the Company's intent and ability to hold the securities to maturity and are carried at amortized cost. Investments that have maturities of less than one year have been classified as current marketable securities. At March 31, 2000 and September 30, 1999, amortized cost approximates fair value of held-to-maturity investments which consist of the following: (In thousands) March 31, September 30, 2000 1999 ---- ---- Current marketable securities: Commercial Paper $ 9,898 $ 14,854 U.S. Government Agencies 9,003 8,509 ---------- ----------- 18,901 23,363 Non-current marketable securities: Commercial Paper 5,066 -0- U.S. Government Agencies 5,003 9,003 10,069 9,003 $ 28,970 $ 32,366 ========== =========== NOTE C - SHAREHOLDERS' EQUITY During 1998, the Company initiated a stock buyback program of up to $6.0 million. As of March 31, 2000, 517,900 shares of common stock have been repurchased for $5.6 M. 6 NOTE D - NET EARNINGS (LOSS) PER SHARE The Company's basic net earnings (loss) per share amounts have been computed by dividing net earnings (loss) by the weighted average number of outstanding common shares. The Company's diluted net earnings (loss) per share is computed by dividing net earnings (loss) by the weighted average number of outstanding common shares and common share equivalents relating to stock options, when dilutive. For the three months ended March 31, 2000 and 1999, 100,201 and 105,685 shares of common stock equivalents were included in the computation of diluted net earnings per share. Options to purchase 469,375 and 608,325 shares of common stock with a weighted average exercise price of $13.82 and $13.38 were outstanding at March 31, 2000 and 1999, but were excluded from the computation of common share equivalents for the three-month period because they were antidilutive. For the six months ended March 31, 1999, the Company reported a net loss and as such no common share equivalents were included in the computation of diluted net loss per share. For the six months ended March 31, 1999, 100,974 shares of common stock equivalents were included in the computation of diluted net earnings per share. Options to purchase 940,100 and 719,825 shares of common stock with a weighted average exercise price of $12.10 and $12.58 were outstanding at March 31, 2000 and 1999, but were excluded from the computation of common share equivalents for the six-month period because they were antidilutive. NOTE E - SEGMENT INFORMATION The Company operates in a single reportable segment. The following presents net sales for the six months ended March 31, 2000 and 1999 by geographic area. The Company has no material long-lived assets outside of the United States. (In thousands) 2000 1999 --------- --------- Geographic Area North America $ 11,704 $ 12,471 Europe 1,139 2,547 Japan 1,231 970 Other foreign 964 401 -------- -------- $ 15,038 $ 16,389 ======== ======== Sales to one customer accounted for 25% and 31% of the total sales for the six months ended March 31, 2000 and 1999. 7 CIPRICO INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Three and Six Months Ended March 31, 2000 Compared to Three and Six Months Ended March 31, 1999 Net sales for the three-month period ended March 31, 2000 decreased 5% to $8.2 million compared to $8.6 million for the same period last year. For the six-month period ended March 31, 2000, net sales decreased 8% to $15.0 million compared to $16.4 million for the same prior year period. The decrease is primarily attributable to a decrease in sales in the Geospatial Imaging Market where the timing of large orders impacts quarterly results. Sales in the Company's key markets for the six-month period ending March 31, 2000 are shown in the chart below (in millions). Market 2000 % of Total 1999 % of Total - ------ ---- ---------- ---- ---------- Entertainment $ 6.9 46% $ 6.4 39% Geospatial Imaging 4.9 33 6.7 41 Other 3.2 21 3.3 20 ----- ---- ---- ---- $15.0 100% $16.4 100% ===== ==== ===== ==== Revenues in the Entertainment market increased 7% in the six months ended March 31, 2000 compared to the six months ended March 31, 1999. This increase relates to the Company's focus on digital broadcast applications. International sales represented 23% and 27% of total sales for the six months ended March 31, 2000 and 1999. Sales through Silicon Graphics Inc. (SGI) totaled $3.7 million or 25% of total sales for the six-month period ended March 31, 2000, compared to $5.1 million or 31% for the same period last year. The Company's revenue growth in fiscal 2000 is dependent on market acceptance of new products, expansion of products into new applications within its targeted market segments, and success of programs which specify Ciprico products. Gross profit, as a percentage of net sales, was 47% and 46% for the three-month and six-month periods ended March 31, 2000 compared to 51% for the same periods last year. This decrease in the margin percentage is the result of an unfavorable mix of products combined with the impact of spreading fixed manufacturing cost over a lower sales volume. Gross profit margins are highly dependent on the Company's ability to transition to new generation disk drives and to manage the rapid decline in disk drive prices. The Company anticipates fiscal 2000 gross profit, as a percentage of net sales, to continue in the high forty percent range. Research and development expenses decreased $36,000 and $288,000 for the three months and six months ended March 31, 2000 as compared to the same period last fiscal year, primarily due to reduction in the use of outside consultants and prototypes between periods. The Company expects that research and development expenses in fiscal 2000 will increase from the current levels as headcount is added and prototype expenses are incurred. Sales and marketing expenses increased $468,000, or 21%, for the current quarter as compared to the same quarter of last year and $700,000, or 16%, for the six months ended March 31, 2000 as compared to the same period last fiscal year primarily due to the addition of headcount. The Company expects that sales and marketing expenses in Fiscal 2000 will increase with the addition of headcount. 8 General and administrative expenses decreased $294,000 and $425,000 for the three months and six months ended March 31, 2000 as compared to the same periods last fiscal year. These decreases reflect collection of previously reserved accounts as well as reduced compensation expense. Other Income of $454,000 and $926,000 for the three-month and six-month periods ended March 31, 2000 increased 8% and 10% compared to the same periods last year due to higher interest rates and interest income on higher average cash and investment balances. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2000, the Company had cash, cash equivalents and marketable securities totaling $35.4 million compared to $35.9 million at the end of fiscal 1999. Cash flows from operating activities were $.2 million for the six months ended March 31, 2000 compared to $3.6 million for the same period last year. The Company made capital expenditures totaling $.7 million during the six months ended March 31, 2000 compared to $1.1 million for the same period in the prior year. The Company anticipates that capital expenditures for fiscal 2000 will approximate $2 million. During fiscal 1998, the Company initiated a stock buyback program of up to $6.0 million. During the six months ended March 31, 2000, 25,000 shares of common stock were purchased for $262,500. The remaining authorization as of March 31, 2000 is for $.5 million. Management believes that current cash balances and cash generated from operations will be adequate to fund requirements for working capital and capital expenditures, as well as any potential acquisition in fiscal 2000. FORWARD-LOOKING STATEMENTS Certain statements in this Form 10-Q are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements relate to levels of future sales and expenditures and imply continued financial improvement. Because of numerous risks and uncertainties in the Company's business activity, actual results could differ materially from those implied. Investors should consider: the impact on revenues and earnings of the timing of product enhancements and new product releases; market acceptance of new products; sales and distribution issues; competition; dependence on suppliers; dependence on the cost of disk drives; limited backlog; and the historic and recurring pattern of a disproportionate percentage of total quarterly sales occurring in the last month and weeks of a quarter. For a more complete description, see "Forward-looking Information" under Management's Discussion and Analysis included in the Annual Report for the year ended September 30, 1999. 9 CIPRICO INC. AND SUBSIDIARIES ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company invests its excess cash in commercial paper and highly rated U.S. government agencies. All investments are held-to-maturity. The market risk on such investments is minimal. Receivables from sales to foreign customers are denominated in U.S. Dollars. If the currencies of these countries were to fall significantly against the U.S. Dollar, there can be no assurance that such companies would be able to repay the receivables in full. Transactions at the Company's foreign subsidiaries, Ciprico International Limited and Ciprico Asia-Pacific Inc. are denoted in pound sterling and yen, respectively. The Company has historically had minimal exposure to changes in foreign currency exchange rates, and as such, has not used derivative financial instruments to manage foreign currency fluctuation risk. 10 CIPRICO INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 - Financial Data Schedule (filed in electronic format only) (b) No report on Form 8-K was filed during the quarter ended March 31, 2000. 11 CIPRICO INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CIPRICO INC. Dated: May 4, 2000 /s/ Robert H. Kill ------------------------------------------------- Robert H. Kill, President (Principal Executive Officer) Dated: May 4, 2000 /s/ Joan K. Berg ------------------------------------------------- Joan K. Berg, Vice President of Finance/Chief Financial Officer (Principal Financial and Accounting Officer) 12 CIPRICO INC. AND SUBSIDIARIES EXHIBIT INDEX Exhibit Number Description - -------------- ----------- 27 Financial Data Schedule (filed in electronic format only) EX-27 2 FDS FOR 2ND QUARTER 10-Q
5 1,000 U.S. Dollars 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 1 6,407 28,970 6,690 540 5,091 38,319 11,951 8,753 52,005 4,727 0 0 0 35,991 11,287 52,005 15,038 15,038 8,092 16,039 0 0 0 (75) (26) (49) 0 0 0 (49) (.01) (.01)
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