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 April 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 ____.
Commission file number 0-21342
WIND RIVER SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-2873391
(State of incorporation) (I.R.S. Employer Identification No.)
1010 ATLANTIC AVENUE, ALAMEDA, CALIFORNIA 94501
(Address of principal executive office)
(510) 748-4100
(Telephone number)
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.
(1) Yes X No
------- -------
(2) Yes X No
------- -------
Indicate the number of shares outstanding of each of each of the issuers classes
of common stock, as of the latest practicable date.
COMMON STOCK: 9,252,584 SHARES OUTSTANDING AS OF APRIL 30, 1996
WIND RIVER SYSTEMS, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying financial information is unaudited but, in the opinion of
management, reflects all adjustments (which include only normally recurring
adjustments) necessary for a fair presentation of the results for the periods
shown. The unaudited financial statements and analyses should be read in
conjunction with the audited financial statements and notes thereto for the year
ended January 31, 1996 included in the Form 10-K Annual Report previously filed
with the Securities and Exchange Commission.
The results for the quarter ended April 30, 1996, are not necessarily indicative
of the results to be expected for the entire year.
2
WIND RIVER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED APRIL 30,
----------------------------
1996 1995
---- ----
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
Revenues:
Product $ 8,531 $ 6,032
Services 4,069 2,668
-------- --------
Total revenues 12,600 8,700
-------- --------
Costs and expenses:
Cost of product 1,089 674
Cost of services 1,561 1,187
Selling and marketing 5,139 3,935
Product development and engineering 1,595 1,234
General and administrative 1,018 756
-------- --------
Total cost and expenses 10,402 7,786
-------- --------
Operating income 2,198 914
-------- --------
Other income (expense):
Interest income 201 192
Interest expense (11) (13)
Minority interest in consolidated subsidiary and other 2 (17)
-------- --------
Total other income (expense) 192 162
-------- --------
Income before income taxes 2,390 1,076
Provision for income taxes 920 409
-------- --------
Net income $ 1,470 $ 667
-------- --------
-------- --------
Net income per share $ 0.14 $ 0.07
-------- --------
-------- --------
Weighted average common and common equivalent shares 10,661 10,043
-------- --------
-------- --------
See accompanying notes to
consolidated financial statements.
WIND RIVER SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
APRIL 30, JANUARY 31,
1996 1996
----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
ASSETS
Current assets:
Cash $ 9,143 $ 9,205
Short-term investments 18,766 20,632
Accounts receivable, net of allowance for
doubtful accounts of $435 and $378, respectively 11,307 9,216
Prepaids and other current assets 1,313 1,108
--------- ---------
Total current assets 40,529 40,161
Equipment and furniture, net
accumulated depreciation of $4,014 and $3,599, respectively 4,630 4,059
Computer software development costs, net of
accumulated amortization of $1,940 and $1,782, respectively 750 721
Deposits and other assets 555 539
--------- ---------
$ 46,464 $ 45,480
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,341 $ 1,345
Accrued liabilities 2,192 2,374
Accrued compensation 2,434 2,642
Accrued taxes 1,209 1,271
Deferred tax liabilities, net 488 498
Deferred software support and development revenue 5,632 4,214
--------- ---------
Total current liabilities 13,296 12,344
Deferred rent 127 116
--------- ---------
Total liabilities 13,423 12,460
--------- ---------
Minority interest in consolidated subsidiary 211 207
--------- ---------
Stockholders' equity:
Common stock, par value $.001, 20,000 shares authorized,
9,453 and 9,411 shares issued, respectively, and
9,253 and 9,261 shares outstanding, respectively 9 9
Additional paid in capital 25,043 24,805
Cumulative translation adjustments (198) (74)
Retained earnings 12,808 11,338
Less treasury stock, 200 and 150 shares, at cost, respectively (4,832) (3,265)
--------- ---------
Total stockholders' equity 32,830 32,813
--------- ---------
$ 46,464 $ 45,480
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements.
WIND RIVER SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30,
----------------------------
1996 1995
---- ----
(IN THOUSANDS)
Cash flows from operating activities:
Net income $ 1,470 $ 667
Adjustments to reconcile net income to net cash
provided (used) by operations:
Depreciation 435 415
Amortization of capitalized software 150 90
Deferred rent 11 (9)
Deferred income taxes (10) (19)
Minority interest in consolidated subsidiary 4 3
Change in assets and liabilities:
Accounts receivable (2,091) 2,096
Prepaids, deposits and others (221) 149
Accounts payable and accrued liabilities (186) 488
Accrued compensation (208) (143)
Accrued taxes (62) (621)
Deferred revenue 1,418 (206)
--------- ---------
Net cash provided (used) by operating activities 710 2,910
--------- ---------
Cash flows from investing activities:
Capital expenditures (1,006) (607)
Capitalized computer software development costs (179) (115)
Sales (purchases) of short-term investments 1,866 (1,556)
--------- ---------
Net cash used in investing activities 681 (2,278)
--------- ---------
Cash flows from financing activities:
Payments of bank and lease line-of-credit obligations 0 (64)
Issuance of common stock 238 732
Purchase of treasury stock (1,567) 0
--------- ---------
Net cash provided by financing activities (1,329) 668
--------- ---------
Effect of exchange rate changes on cash (124) 206
--------- ---------
Net increase (decrease) in cash (62) 1,506
Cash and cash equivalents at beginning of period 9,205 3,964
--------- ---------
Cash and cash equivalents at end of period $ 9,143 $ 5,470
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1 $ 9
--------- ---------
--------- ---------
Cash paid for income taxes $ 1,513 $ 621
--------- ---------
--------- ---------
See accompanying notes to consolidated financial statements.
WIND RIVER SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDING APRIL 30, 1996 AND 1995, UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In accordance with the rules and regulations of the Securities and Exchange
Commission, the preceding unaudited financial statements omit or condense
certain information and footnote disclosure normally required for complete
financial statements prepared in accordance with generally accepted accounting
principles.
2. NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common and
dilutive common equivalent shares outstanding. Dilutive common equivalent
shares are calculated using the treasury stock method and consist of common
stock issuable upon the exercise of stock options and warrants.
6
WIND RIVER SYSTEMS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Except for the historical information contained herein, the following discussion
may contain forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially from those discussed here.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this section, as well as in the sections included
in the Form 10-K Annual Report previously filed with the Securities Exchange
Commission entitled "Competition", "Proprietary Rights", and "Management's
Discussion and Analysis of Financial Condition and Results of Operation".
On May 24, 1996, a three-for-two stock split was effected by means of payment of
a stock dividend with respect to all of the Company's Common Stock outstanding
on May 10, 1996. All shares numbers and prices in this report have not been
adjusted to give effect to the stock dividend.
RESULTS OF OPERATIONS
FIRST QUARTER OF FISCAL 1997 COMPARED TO THE FIRST QUARTER OF FISCAL 1996
REVENUES
Total revenues for the first quarter of fiscal 1997 of $12.6 million increased
45% over revenues of $8.7 million in the first quarter of fiscal 1996. Product
revenue increases of $2.5 million, which represents an increase of 41%, resulted
primarily from the increase in sales and marketing activities generated by the
addition of 14 new sales representatives since the first quarter of fiscal year
1996 and increasing market acceptance of the Company's new flagship product,
Tornado. Sales under a minimum guarantee agreement with Innotech Corporation,
one of the Company's three master distributors and joint venture partners in
Japan, amounted to approximately $.56 million. No significant product revenues
were received from Innotech in the first quarter of fiscal 1997.
7
Increases in service revenues for the first quarter of fiscal 1997 compared to
the first quarter of fiscal 1996 amounting to approximately $1.4 million, which
represents an increase of 52%, were due to an increased number of customers
under maintenance agreements and to increases in consulting and custom software
design services.
COSTS AND EXPENSES
The overall cost of products and services as a percentage of total revenues was
consistent at 21% for both first quarter fiscal year 1996 and the same period
fiscal year 1997.
Selling and marketing expenses decreased as a percentage of sales from 45% in
the first of quarter of fiscal 1996 to 41% in the first quarter of fiscal 1997.
However, in gross dollars, selling and marketing expenses for the same periods
increased $1.2 million. The decrease in the percentage was due to revenue
increasing at a faster rate than sales and marketing costs. The increase in
overall dollar costs resulted primarily from increases in sales personnel and
commissions and increases in marketing and advertising programs. Management
expects to continue investing heavily in sales and marketing over the current
year to expand its customer base and successfully introduce new products.
Product development and engineering expenses, which consist primarily of
personnel costs, decreased slightly as a percentage of sales from 14% to 13% for
first quarter of fiscal year 1996 and 1997, respectively; however, in gross
dollars, product development and engineering expenses for the same periods
increased $.36 million. The decrease in percentage is due to revenue increasing
at a higher rate than engineering expenses. The Company believes it will be
necessary to make significant investments in engineering and product development
for the foreseeable future.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
The Company typically charges a one-time fee for a development license and a
run-time license fee for each copy of the Company's operating system embedded in
the customer's product. A key component of the Company's strategy is to
increase revenue through run-time license fees. Any increase in the percentage
of revenues attributable to run-time licenses will depend on the Company's
successful negotiation of run-time license agreements and on the successful
commercialization by the Company's customers of the underlying products. In
addition, the Company has experienced significant period-to-period fluctuations
in revenues and operating results and anticipates that such fluctuations will
continue. These fluctuations have been caused by a number
8
of factors, including customer buying patterns, product development cycles,
delays in shipments of new products and the timing of significant sales of the
Company's products.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1996, the Company had working capital in excess of $27 million, and
approximately $28 million in cash and short-term investments.
In the first quarter of fiscal year 1997, the Company repurchased and held as
treasury stock 50,000 shares at a cost of $1.5 million. On May 24, 1996, a
three-for-two stock split was effected by means of payment of a stock dividend
with respect to all of the Company's Common Stock outstanding on May 10, 1996.
All shares numbers and prices in this report have not been adjusted to give
effect to the stock dividend.
Management believes that the Company's working capital, cash flow generated from
operations and borrowing capacity are sufficient to meet its working capital
requirements for planned expansion, product development and capital expenditures
through fiscal 1997.
9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - none.
(b) No reports on form 8-K have been filed for the quarter ended April 30,
1996.
No other items.
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 authorized.
WIND RIVER SYSTEMS, INC.
Date: June 14, 1996 /s/ RICHARD W. KRABER
--------------------------------
Richard W. Kraber
Chief Financial Officer
10