-----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, IaMjeH6uSHB+JZgLJcTCqViitTABh4Oy7tDY1Jhwmxppd//xWxStTEcJ6gke8Nun v4xhKDZBwIK/Y5KwVPPzoA== 0000914190-00-000074.txt : 20000211 0000914190-00-000074.hdr.sgml : 20000211 ACCESSION NUMBER: 0000914190-00-000074 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000210 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: 531814 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 FOR FIRST QUARTER 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 December 31, 1999 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 January 27, 2000 was 4,977,604 shares. CIPRICO INC. AND SUBSIDIARIES FORM 10-Q INDEX Page PART I Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets at December 31, 1999 and September 30, 1999 3 Condensed Consolidated Income Statements for Three Months Ended December 31, 1999 and 1998 4 Condensed Consolidated Statements of Cash Flows for Three Months Ended December 31, 1999 and 1998 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 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands) December 31, September 30, 1999 1999 ASSETS Current assets: Cash and cash equivalents $ 2,916 $ 3,539 Marketable securities 24,902 23,363 Accounts receivable, less allowance 5,692 6,962 Inventories 4,933 4,603 Deferred income taxes 1,155 1,155 Other current assets 514 455 -------- -------- Total current assets 40,112 40,077 Property and equipment, net 3,419 3,743 Marketable securities 7,503 9,003 Other assets 426 415 -------- -------- Total assets $ 51,460 $ 53,238 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,809 $ 2,641 Accrued expenses 1,285 2,063 Deferred revenue 1,106 1,244 -------- -------- Total current liabilities 4,200 5,948 Shareholders' equity: Capital stock 50 49 Additional paid-in capital 35,988 35,929 Retained earnings 11,300 11,409 Deferred compensation from restricted stock (78) (97) -------- -------- Total shareholders' equity 47,260 47,290 -------- -------- Total liabilities and shareholders' equity $ 51,460 $ 53,238 ======== ========
See accompanying notes to condensed consolidated financial statements. CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (Unaudited)
(In thousands except Three Months Ended per share amounts) December 31, 1999 1998 ------- ------- NET SALES $ 6,847 $ 7,774 Cost of sales 3,737 3,866 ------- ------- GROSS PROFIT 3,110 3,908 OPERATING EXPENSES: Research and development expense 888 1,140 Sales and marketing expenses 2,314 2,082 General and administrative expenses 545 676 ------- ------- Total operating expenses 3,747 3,898 ------- ------- INCOME (LOSS) FROM OPERATIONS (637) 10 Other income, primarily interest 472 423 ------- ------- INCOME (LOSS) BEFORE INCOME TAXES (165) 433 Income tax expense (benefit) (56) 151 ------- ------- NET INCOME (LOSS) $ (109) $ 282 ======= ======= NET EARNINGS (LOSS) PER SHARE - BASIC $ (.02) $ .06 ======= ======= NET EARNINGS (LOSS) PER SHARE - DILUTED $ (.02) $ .06 ======= ======= Shares used to calculate net earnings (loss) per share: Basic 4,958 4,899 Diluted 4,958 4,997
See accompanying notes to condensed consolidated financial statements. CIPRICO INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) Three Months Ended December 31, 1999 1998 -------- -------- Cash flows from operating activities: Net income (loss) $ (109) $ 282 Depreciation and amortization 672 652 Changes in operating assets and liabilities (878) 564 -------- -------- NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (315) 1,498 Cash flows from investing activities: Equipment purchases (383) (535) Purchases of marketable securities (8,903) (12,781) Proceeds from sale or maturity of marketable securities 8,864 11,300 -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (422) (2,016) Cash flows from financing activities: Repurchase of common stock -- (576) Proceeds from issuance of common stock 114 94 -------- -------- NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES 114 (482) -------- -------- Net decrease in cash and cash equivalents (623) (1,000) Cash and cash equivalents at beginning of period 3,539 9,030 -------- -------- Cash and cash equivalents at end of period 2,916 8,030 Marketable securities, current 24,902 18,928 Marketable securities, non-current 7,503 6,514 -------- -------- Total cash and marketable securities $ 35,321 $ 33,472 ======== ========
See accompanying notes to condensed consolidated financial statements. CIPRICO INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1999 (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 December 31, 1999 and the results of operations and cash flows for the three-month periods ended December 31, 1999 and 1998. The results of operations for the three months ended December 31, 1999 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 December 31, 1999 and September 30, 1999, amortized cost approximates fair value of held-to-maturity investments which consist of the following: (In thousands) December 31, September 30, 1999 1999 ------- ------- Current marketable securities: Commercial Paper $14,895 $14,854 U.S. Government Agencies 10,007 8,509 ------- ------- 24,902 23,363 Non-current marketable securities: U.S. Government Agencies 7,503 9,003 ------- ------- $32,405 $32,366 ======= ======= NOTE C - SHAREHOLDERS' EQUITY During 1998, the Company initiated a stock buyback program of up to $6.0 million. As of December 31, 1999, 492,900 shares of common stock have been repurchased for $5.3 million. 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 December 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 three months ended December 31, 1998, 97,930 shares of common stock equivalents were included in the computation of diluted net earnings per share. Options to purchase 953,037 and 689,325 shares of common stock with a weighted average exercise price of $10.98 and $12.75 were outstanding at December 31, 1999 and 1998, but were excluded from the computation of common share equivalents for the three-month period because they were antidilutive. NOTE E - SEGMENT INFORMATION The Company operates in a single reportable segment. Net sales by geographic area for the three months ended December 31, 1999 and 1998 (in thousands) are as follows: Geographic Area 1999 1998 - --------------- --------- --------- North America $ 5,121 $ 6,087 Europe 364 969 Japan 753 399 Other foreign 609 319 ---------- ---------- $ 6,847 $ 7,774 ======== ======== The Company has no material long-lived assets outside of the United States. The following presents net sales to significant customers for the three months ended December 31, 1999 and 1998 (in thousands). Major Customers 1999 % 1998 % ------- --- ------- --- Customer A $ 2,031 30% $ 2,473 32% Customer B 58 1 % 813 10% ------- --- ------- --- Total $ 2,089 31% $ 3,286 42% ======= === ======= === CIPRICO INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Three Months Ended December 31, 1999 Compared to Three Months Ended December 31, 1998 Net sales for the three-month period ended December 31, 1999 decreased 12% to $6.8 million compared to $7.8 million for the same period last fiscal year due to delays in customer programs. Revenues for the first quarter of fiscal 1999 included one large order of approximately $800,000; there were no similar large orders in the first quarter of fiscal 2000. Sales in the Company's key markets are shown in the chart below (in millions). Market 1999 % of Total 1998 % of Total - ------ ---- ---------- ---- ---------- Entertainment $2.9 43 $2.8 36 Geospatial Imaging 2.2 32 3.3 42 Other 1.7 25 1.7 22 ---- ---------- ---- ---------- $6.8 100 % $7.8 100 % ==== ========== ==== ========== Export sales represented 27% of total sales for the three months ended December 31, 1999 and 1998. Sales through Silicon Graphics Inc. (SGI) totaled $2.0 million or 30% of total sales for the three months ended December 31, 1999 compared to $2.5 million or 32% for the same prior year period. 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 the success of programs which specify Ciprico products. Gross profit of $3.1 million represented a 45% gross profit margin for the three months ended December 31, 1999, compared to 50% for the same prior year period. This decrease in the margin percentage is the result of an unfavorable mix of products, combined with the impact of spreading fixed manufacturing costs 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 of approximately $.9 million for the three months ended December 31, 1999 decreased by $252,000 compared to the same period last 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 as headcount is added and prototype expenses are incurred. Sales and marketing expenses of $2.3 million for the three months ended December 31, 1999 increased 11% compared to the same period last year reflecting the costs associated with additional headcount. The Company expects that sales and marketing expenses in fiscal 2000 will increase with the addition of headcount. General and administrative expenses of $545,000 for the three months ended December 31, 1999 decreased $131,000 compared to the same period last year primarily attributable to collection of a previously reserved account, as well as reduced compensation expense. Other Income of $472,000 for the three months ended December 31, 1999 increased 12% compared to the same period last year due to interest income on higher average cash and investment balances. As a result of the factors described above, the Company had a net loss of $109,000 for the three months ended December 31, 1999 compared to net income of $282,000 for the three months ended December 31, 1998. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1999, the Company had cash, cash equivalents and marketable securities totaling $35.3 million compared to $33.5 million at December 31, 1998. Cash used in operating activities was $.3 million for the three months ended December 31, 1999 compared to cash generated of $1.5 million for the same period last year. The change in cash from operations primarily relates to the timing of payments on accounts payable and accrued expenses. The Company made capital expenditures totaling $383,000 during the three months ended December 31, 1999 compared to $535,000 for the prior year period. 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 three months ended December 31, 1998, 80,000 shares of common stock were purchased for $576,000; there were no share repurchases in the three months ended December 31, 1999. The remaining authorization as of December 31, 1999 is for $.7 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. IMPACT OF YEAR 2000 ISSUE The Company has not experienced and does not anticipate any impact to its operations resulting from the Year 2000 computer date issue. However, the Company will continue to monitor the output of its systems and those of its business partners for Year 2000 issues. 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 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. 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. CIPRICO INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of the Registrant's shareholders was held on Thursday, January 27, 2000. (b) At the Annual Meeting, the number of directors was set at six by a vote of 4,320,506 for and 423,423 against. (c) Gary L. Deaner and Robert H. Kill were elected to serve as Class II directors for a term of three years and until their successors have been duly elected and qualified. Mr. Deaner and Mr. Kill each received at least 4,673,595 shares voted in his favor. The term of office of Donald H. Soukup and William N. Wray continues until the 2001 Annual Meeting. The term of office of Bruce J. Bergman and Thomas F. Burniece continues until the 2002 Annual Meeting. 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 December 31, 1999. 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: February 7, 2000 /s/ Robert H. Kill Robert H. Kill, President (Principal Executive Officer) Dated: February 7, 2000 /s/ Joan K. Berg Joan K. Berg, Vice President of Finance/Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 ART 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 U.S. Dollars 3-MOS SEP-30-2000 OCT-01-1999 DEC-31-1999 1 2,916 32,405 6,236 544 4,933 40,112 11,932 8,513 51,460 4,200 0 0 0 36,038 11,222 51,460 6,847 6,847 3,737 7,484 0 (9) 0 (165) (56) (109) 0 0 0 (109) (.02) (.02)
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