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 quarterly period ended June 30, 2002
or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from ______ to ______
Commission File No. 0-26844
RADISYS CORPORATION
(Exact name of registrant as specified in its charter)
Oregon (State of Incorporation) |
93-0945232 (I.R.S. Employer Identification No.) |
5445 NE Dawson Creek Drive, Hillsboro, Oregon 97124
(Address of principal executive offices, including zip code)
(503) 615-1100
(Registrant’s telephone number, including area code)
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 [ ]
The number of shares of the registrant’s common stock outstanding on August 9, 2002 was 17,529,312 shares.
RADISYS CORPORATION
PART I. FINANCIAL INFORMATION
| Page No. | ||||||||
| Item 1. | Consolidated Financial Statements (Unaudited) | |||||||
| Consolidated Statements of Operations — Three, and six months ended June 30, 2002 and 2001 | 3 | |||||||
| Consolidated Balance Sheets — June 30, 2002 and December 31, 2001 | 4 | |||||||
| Consolidated Statement of Changes in Shareholders’ Equity — December 31, 2001 through June 30, 2002 | 5 | |||||||
| Consolidated Statements of Cash Flows — Six months ended June 30, 2002 and 2001 | 6 | |||||||
| Notes to Consolidated Financial Statements | 7 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 43 | ||||||
| PART II. OTHER INFORMATION | ||||||||
| Item 4. | Submission of Matters to Vote of Security Holders | 44 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K | 46 | ||||||
| Signatures | 47 | |||||||
2
RadiSys Corporation
Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||
Revenues |
$ | 52,163 | $ | 61,803 | $ | 104,915 | $ | 117,962 | ||||||||
Cost of sales |
37,086 | 51,513 | 75,122 | 97,924 | ||||||||||||
Gross margin |
15,077 | 10,290 | 29,793 | 20,038 | ||||||||||||
Research and development |
8,405 | 9,167 | 16,502 | 18,451 | ||||||||||||
Selling, general, and administrative expense |
9,108 | 8,704 | 17,174 | 18,105 | ||||||||||||
Goodwill amortization |
— | 1,385 | — | 2,670 | ||||||||||||
Intangible
assets, amortization |
765 | 275 | 1,549 | 551 | ||||||||||||
Restructuring charges |
4,281 | 3,219 | 4,281 | 13,062 | ||||||||||||
Loss from operations |
(7,482 | ) | (12,460 | ) | (9,713 | ) | (32,801 | ) | ||||||||
Interest (expense) income, net |
(642 | ) | 70 | (1,450 | ) | 594 | ||||||||||
Other expense, net |
(188 | ) | (17 | ) | (410 | ) | (724 | ) | ||||||||
Gain on early extinguishments of convertible
subordinated notes, net of discount |
1,504 | — | 2,859 | — | ||||||||||||
Loss before income tax benefit |
(6,808 | ) | (12,407 | ) | (8,714 | ) | (32,931 | ) | ||||||||
Income tax benefit |
(3,736 | ) | (2,945 | ) | (4,989 | ) | (14,991 | ) | ||||||||
Net loss |
$ | (3,072 | ) | $ | (9,462 | ) | $ | (3,725 | ) | $ | (17,940 | ) | ||||
Net loss per share (basic) |
$ | (0.18 | ) | $ | (0.55 | ) | $ | (0.21 | ) | $ | (1.04 | ) | ||||
Net loss per share (diluted) |
$ | (0.18 | ) | $ | (0.55 | ) | $ | (0.21 | ) | $ | (1.04 | ) | ||||
Weighted average shares outstanding (basic) |
17,492 | 17,218 | 17,450 | 17,174 | ||||||||||||
Weighted average shares outstanding (diluted) |
17,492 | 17,218 | 17,450 | 17,174 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
3
RadiSys Corporation
Consolidated Balance Sheets
(In thousands)
| June 30, | December 31, | |||||||||||
| 2002 | 2001 | |||||||||||
| (Unaudited) | ||||||||||||
ASSETS |
||||||||||||
Current assets |
||||||||||||
Cash and cash equivalents (Note 1) |
$ | 29,650 | $ | 29,036 | ||||||||
Short-term investments, net (Note 2) |
68,768 | 71,117 | ||||||||||
Accounts receivable, net (Note 3) |
33,710 | 41,694 | ||||||||||
Inventories, net (Note 4) |
26,108 | 32,651 | ||||||||||
Other current assets |
4,117 | 3,937 | ||||||||||
Deferred tax assets (Note 8) |
12,578 | 13,474 | ||||||||||
Total current assets |
174,931 | 191,909 | ||||||||||
Property and equipment, net (Notes 5 and 15) |
28,170 | 30,205 | ||||||||||
Goodwill (Notes 6 and 15) |
29,737 | 30,679 | ||||||||||
Intangible assets, net (Notes 7 and 15) |
12,668 | 14,188 | ||||||||||
Long-term investments, net (Note 2) |
12,091 | 13,197 | ||||||||||
Long-term deferred tax assets (Notes 1 and 8) |
16,807 | 20,284 | ||||||||||
Other assets (Notes 1 and 9) |
3,432 | 4,398 | ||||||||||
Total assets |
$ | 277,836 | $ | 304,860 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||||
Current liabilities |
||||||||||||
Accounts payable (Note 12) |
$ | 19,537 | $ | 24,512 | ||||||||
Accrued restructuring (Note 10) |
9,700 | 7,490 | ||||||||||
Accrued interest payable |
1,668 | 2,068 | ||||||||||
Accrued wages and bonuses |
4,430 | 5,463 | ||||||||||
Other accrued liabilities |
6,569 | 10,436 | ||||||||||
Total current liabilities |
41,904 | 49,969 | ||||||||||
Long-term liabilities (Note 12) |
||||||||||||
Convertible subordinated notes, net (Note 9) |
78,312 | 97,521 | ||||||||||
Mortgage payable |
6,629 | 6,659 | ||||||||||
Total long-term liabilities |
84,941 | 104,180 | ||||||||||
Total liabilities |
126,845 | 154,149 | ||||||||||
Commitments and contingencies (Note 13) |
— | — | ||||||||||
Shareholders’ equity (Note 14): |
||||||||||||
Common stock - 100,000 shares authorized;
17,524 and 17,347 shares
outstanding at June 30, 2002 and December 31,
2001 |
161,132 | 158,716 | ||||||||||
Accumulated deficit |
(10,445 | ) | (6,720 | ) | ||||||||
Accumulated other comprehensive loss: |
||||||||||||
Cumulative translation adjustments |
311 | (1,285 | ) | |||||||||
Unrealized loss on security available for
sale (Note 1 and 9) |
(7 | ) | — | |||||||||
Total shareholders’ equity |
150,991 | 150,711 | ||||||||||
Total liabilities and shareholders’ equity |
$ | 277,836 | $ | 304,860 | ||||||||
The accompanying notes are an integral part of these financial statements.
4
RadiSys Corporation
Consolidated Statement of Changes in Shareholders’ Equity
(In thousands, unaudited)
| Cumulative | Unrealized | Total | ||||||||||||||||||||||||||
| Common Stock | translation | (loss) gain on | Accumulated | comprehensive | ||||||||||||||||||||||||
| Shares | Amount | adjustments | securities | deficit | Total | income (loss) | ||||||||||||||||||||||
Balances, December 31, 2001 |
17,347 | $ | 158,716 | $ | (1,285 | ) | $ | — | $ | (6,720 | ) | $ | 150,711 | |||||||||||||||
Shares issued pursuant to
benefit plans |
105 | 1,387 | — | — | — | 1,387 | — | |||||||||||||||||||||
Tax benefits of options
exercised |
— | 153 | — | — | — | 153 | — | |||||||||||||||||||||
Translation adjustments |
— | — | 784 | — | — | 784 | 784 | |||||||||||||||||||||
Unrealized loss on
securities
available for sale |
— | — | — | (20 | ) | — | (20 | ) | (20 | ) | ||||||||||||||||||
Net loss for the period |
— | — | — | — | (653 | ) | (653 | ) | (653 | ) | ||||||||||||||||||
Balances, March 31, 2002 |
17,452 | 160,256 | (501 | ) | (20 | ) | (7,373 | ) | 152,362 | |||||||||||||||||||
Total comprehensive
income, three months ended
March 31, 2002 |
$ | 111 | ||||||||||||||||||||||||||
Shares issued pursuant to
benefit plans |
72 | 844 | — | — | — | 844 | ||||||||||||||||||||||
Tax benefits of options
exercised |
— | 32 | — | — | — | 32 | ||||||||||||||||||||||
Translation adjustments |
— | — | 812 | — | — | 812 | 812 | |||||||||||||||||||||
Unrealized gain on
securities
available for sale |
— | — | — | 13 | — | 13 | 13 | |||||||||||||||||||||
Net loss for the period |
— | — | — | — | (3,072 | ) | (3,072 | ) | (3,072 | ) | ||||||||||||||||||
Balances, June 30, 2002 |
17,524 | $ | 161,132 | $ | 311 | $ | (7 | ) | $ | (10,445 | ) | $ | 150,991 | |||||||||||||||
Total comprehensive loss,
three months ended June
30, 2002 |
$ | (2,247 | ) | |||||||||||||||||||||||||
Total comprehensive loss,
six months ended June 30,
2002 |
$ | (2,136 | ) | |||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
5
RadiSys Corporation
Consolidated Statements of Cash Flows
(In thousands, unaudited)
| Six Months Ended June 30, | |||||||||||
| 2002 | 2001 | ||||||||||
Cash flows from operating activities: |
|||||||||||
Net loss |
$ | (3,725 | ) | $ | (17,940 | ) | |||||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|||||||||||
Depreciation and amortization |
6,058 | 8,856 | |||||||||
Non-cash interest expense (income), net |
1,075 | (1,315 | ) | ||||||||
Gain on early extinguishments of convertible subordinated notes |
(2,859 | ) | — | ||||||||
Realized loss on security available for sale |
— | 390 | |||||||||
Impairment of fixed assets |
540 | 2,620 | |||||||||
Write-off of capitalized software |
|||||||||||