SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 10549
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended November 29, 1996 or
( ) Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-10843
CSP Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2441294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
40 Linnell Circle, Billerica, Massachusetts
(Address of principal executive offices)
Registrant's telephone number, including area code:(508)663-7598
NONE
(Former name, former address, former fiscal year, if changed
since last report)
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 past 90 days. Yes (X) No ( )
APPLICABLE ONLY TO CORPORATE USERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding January 7, 1997
Common stock, $.01 par value 2,661,970 shares
INDEX
PAGE
NUMBER
PART 1. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets...........................3
Consolidated Statements of Operations.................4
Consolidated Statements of Cash Flows.................5
Notes to 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 & Reports on Form 8-K.........................11
CSP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
November 29, August 30,
1996 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $10,549 $10,928
Marketable securities 7,477 6,127
Accounts receivable, net 2,918 4,147
Inventories (Note 2) 2,618 2,405
Deferred income taxes 481 481
Prepaid expenses 433 351
Total current assets 24,476 24,439
Property, equipment and improvements, net 3,507 3,607
Other assets:
Land held for future development 163 163
Deferred income taxes 407 409
Other assets 919 918
Total other assets 1,489 1,490
Total assets $29,472 $29,536
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $1,403 $1,425
Income taxes payable 93 214
Total current liabilities 1,496 1,639
Deferred compensation and retirement
plans
Shareholders' equity:
Common stock,$.01 par,authorized
7,500,000 shares; issued 2,962,284
and 2,957,284 shares 29 29
Paid in capital 10,422 10,411
Retained earnings 17,405 17,397
27,856 27,837
Less treasury stock, at cost, 301,314
shares (Note 3) 2,033 2,033
Total shareholders' equity 25,823 25,804
Total liabilities and shareholders'equity $29,472 $29,536
See notes to consolidated financial statements.
CSP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands,except per share data)
(Unaudited)
/----For the three months---/
ended
November December 1,
29,
1996 1995
Sales $4,010 $4,370
Costs and expenses:
Cost of sales 1,725 1,755
Engineering and development 842 703
Marketing and sales 1,194 1,201
General and administrative 442 523
Total cost and expenses 4,203 4,182
Operating income (loss) (193) 188
Other income 198 223
Income before income taxes 5 411
Income tax expense (benefit) (3) 193
Net income $8 $218
Earnings per share $0.00 $0.08
Weighted average shares
outstanding 2,686 2,795
See accompanying notes to consolidated financial statements.
CSP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
/-For the three months
ended-/
November December
29, 1,
1996 1995
Cash flows from operating activities:
Net income $8 $218
Adjustments to reconcile net income to
net cash provided by(used in)operating
activities:
Depreciation 286 237
Deferred compensation and retirement
plans 60 58
Deferred income taxes 2 (13)
Other 1 --
Changes in current assets and liabilities:
Decrease in accounts receivable 1,229 354
Increase in inventories (213) (193)
(Increase)decrease in prepaid expenses (82) 54
Increase(decrease) in accounts payable
and accrued expenses (22) 11
Increase(decrease) in income taxes payable (121) 187
Net cash provided by operating activities 1,148 913
Cash flows from investing activities:
Purchase of marketable securities (59,565) (55,154)
Sale of marketable securities 58,214 56,742
Property,equipment and improvements (186) (199)
Other assets (1) (1)
Net cash provided by(used in)investing
activities (1,538) 1,388
Cash flows from financing activities:
Proceeds from stock options 11 209
Purchase of treasury stock -- (253)
Net cash provided by(used in)financing
activities 11 (44)
Net increase(decrease) in cash (379) 2,257
Cash and cash equivalents, beginning of year 10,928 11,069
Cash and cash equivalents, end of year $10,549 $13,326
Supplementary cash flow information:
Cash paid for income taxes, net -- $138
See accompanying notes to consolidated financial statements.
CSP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the
Company, without audit, and reflect all adjustments which in the
opinion of management, are necessary for a fair statement of the
results of the interim periods presented. All adjustments were
of a normal recurring nature. Certain information and footnote
disclosures normally included in the annual financial statements
which are prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
Accordingly, the Company believes that although the disclosures
are adequate to make the information presented not misleading,
the financial statements should be read in conjunction with the
footnotes contained in the Company's Annual Report on Form 10-K
for the fiscal year ended August 30, 1996.
2. Inventories:
Inventories consist of the following:
November 29, December 1,
1996 1995
Raw materials $1,180 $1,083
Work in process 730 739
Finished goods 708 583
Total $2,618 $2,405
3. Stock Repurchase:
On October 9, 1986 the Board of Directors authorized the Company
to repurchase up to 282,723 of the outstanding stock at market
prices. On September 28, 1995, the Board of Directors
authorized the Company to repurchase up to an additional 150,000
shares of the outstanding stock at market prices. The timing of
stock purchases are made at the discretion of management.
Through November 29 1996, the Company has repurchased 301,314 or
70% of the total authorized.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
A summary of the period to period changes in principal items
included in the Statement of Operations is shown in Schedule I
and II ( page 12 and 13 ).
Results of Operations - 1997 Compared to 1996:
Sales revenues of $4,010,000 for the three month period ended
November 29, 1996 represents a decline of approximately 8% from
the prior comparable period of fiscal year 1996. This decline is
primarily due to a decrease in sales volume of the CSP product
group. Sales of this product group represented approximately
$1,894,000 or 48% of total sales for the current quarter compared
to approximately 75% for the first quarter of fiscal 1996. This
decline is mainly due to lower sales of Supercard products.
The Supercard family of products accounted for 43% of total
sales compared to 70% in the prior comparable period of fiscal
1996. Sales of older attached processor products such as the MAP-
4000 and the MiniMAP continue to represent approximately 1% of
total sales. These older products are sold only to existing
customers. CSP product service revenue and software sales each
represented approximately 2% of total revenue which is consistent
with the prior comparable period of fiscal 1996.
Scanalytics products(Bio-technology instrument product group)
sales represented 28% of total revenues compared to 25% for the
prior comparable quarter. The increase in sales was due to the
increase in shipments of the CELLscan and software package
products, which represented approximately 25% compared to 20% in
the prior comparable quarter.
Vision Systems product group sales represented approximately 26%
of total sales for the quarter ended November 29, 1996 compared
to 1% for the first quarter of fiscal 1996. The current quarter
sales were for approximately 28 machine code readers shipped to
United Parcel Service (UPS). During the first quarter of fiscal
1996 there were no shipments of machine code readers.
North American sales represented 96% of total sales for the
quarter, an increase of 7% over the prior comparable quarter.
This was due to increased domestic shipments of Vision Systems
and Scanalytics products. Sales to other geographic areas
continued to decline representing 4% for the first quarter of
fiscal 1997 compared to approximately 11% in the prior comparable
period.
Cost of sales as a percentage of sales increased to 43%. This 3%
increase over the prior comparable quarter was due primarily to a
change in product mix with increased revenue from the Vision
Systems and Scanalytics business' which have higher per unit cost
of goods sold compared to the CSP products.
Engineering and development expenses increased approximately 20%
from the prior comparable quarter. This increase relates
primarily to an increase in CSP product group development to get
the next generation of product, the MAP 2000 series, released.
This increased effort resulted in a 20% increase in CSP product
group outside services and purchased parts expenses for the
quarter compared to the first quarter of fiscal 1996. Vision
Systems product group expenses for the improvement of the machine
code reader nearly doubled but only represented 13% of total
engineering and development expense. Scanalytics expenses
remained consistent with the prior comparable period.
Sales and marketing expense remained consistent with the prior
comparable quarter. CSP product group expense increased
approximately 15% due to a reclassification in expense of sales
and marketing personnel which were reported in the first quarter
of fiscal 1996 as general and administrative expense. This
increase was partially offset by a 20% decline in expense related
to the closure of the French sales office.
General and administrative expenses decreased approximately 16%
from the prior comparable quarter. This decline is primarily due
to a reclassification in expense of CSP product group sales and
marketing personnel which were reported in the first quarter of
fiscal 1996 as general and administrative expense.
Other income decreased approximately 12% compared to the first
quarter of fiscal 1996. This decline is primarily due to a
decrease in interest income. The Company invested a larger
percentage of its cash in non taxable instruments which have a
lower rate of return.
The Company continues its conservative investment strategy of
maintaining a short-term liquid position while maximizing
revenues on an after-tax basis with as limited an exposure of
principal as possible. The Company believes that as a result of
maintaining a liquid position, it has been able to avoid
borrowing for capital needs as well as augment its operating
results, and is well positioned to make an acquisition or a joint
venture if appropriate opportunities arise.
Financial Position, Capital Resources and Liquidity:
Working capital increased slightly to $22.9 million at the end of
November 1996 from $22.8 million at the end of August 1996.
Total cash and marketable securities increased approximately
$970,000 from August 30, 1996. This increase is mainly due to
the timing of cash receipts from customers. Accounts receivable
decreased approximately $1,229,000 from August 30, 1996. This
decrease is mainly due to cash receipts related to billings made
at the end of fiscal 1996 and a more even sales distribution
during the recent accounting period. Inventory increased
$213,000 from the level reported at August 30, 1996. This
increase is mainly due the purchase of long-lead time items in
anticipation of second quarter sales.
Management believes that all of the Company's current and
foreseeable needs can be met through working capital generated by
operations and investments.
Inflation and Changing Prices:
Management does not believe that inflation and changing prices
had significant impact on either sales or revenues or income from
continuing operations during the three month period ended
November 29, 1996. There is no assurance, however, that the
Company's business will not be materially and adversely affected
by inflation and changing prices in the future.
CSP, INC. AND SUBSIDIARIES SCHEDULE I
CONSOLIDATED STATEMENTS OF OPERATIONS
PERCENTAGE OF SALES
(Dollars in thousands)
(Unaudited)
/------For the three months ended---/
November 29, % Of December 1, % of
1996 Sales 1995 Sales
Sales $4,010 100% $4,370 100%
Costs and expenses:
Cost of sales 1,725 43% 1,755 40%
Engineering and development 842 21% 703 16%
Marketing and sales 1,194 30% 1,201 28%
General and administrative 442 11% 523 12%
Total cost and expenses 4,203 105% 4,182 96%
Operating income (loss) (193) (5%) 188 5%
Other income 198 5% 223 6%
Income before income taxes 5 1% 411 10%
Income tax expense (benefit) (3) -- 193 5%
Net income $8 1% $218 5%
CSP, INC. AND SUBSIDIARIES SCHEDULE II
CONSOLIDATED STATEMENTS OF OPERATIONS
PERIOD TO PERIOD DOLLAR AND PERCENTAGE CHANGE
(Dollars in thousands)
(Unaudited)
/---For the three months ended---/
November 29,1996 vs December 1,1995
$ %
Change Change
Sales ($360) (8.3)%
Costs and expenses:
Cost of sales (30) (1.7)%
Engineering and development 139 19.8%
Marketing and sales (7) (0.6)%
General and administrative (81) (15.5)%
Total cost and expenses 21 0.5%
Operating income (loss) (381) (202.7)%
Other income (25) (11.3)%
Income before income taxes (406) (98.8)%
Income tax expense (benefit) (196) (101.6)%
Net income ($210) (96.4)%
PART II. OTHER INFORMATION
Item 4. Submissions of Matters to a vote of Security
Holders
The Company held its Annual Meeting of
Stockholders on December 10, 1996. The
following matter was approved at the meeting.
1) Boruch B. Frusztajer and Sandford D. Smith
were elected as Class I members for a term of
three years and Alexander R. Lupinetti was
elected as a Class III member of the Board of
Directors for a two-year term.
Item 6. Exhibit and Reports on Form 8-K
a) Reports on Form 8-K
NONE
b) Exhibits
11.0 Data used in the calculation of net income
per share.
27.0 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of 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.
CSP Inc.
(Registrant)
Date: January 13, 1997 By: s/s Alexander R. Lupinetti
Chief Executive Officer
and President
Date: January 13, 1997 By: s/s Gary W. Levine
Vice President of Finance
and Chief Financial Officer