 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| þ |
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
|
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: 1-13521
HYPERCOM CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
86-0828608 (I.R.S. Employer Identification Number) |
2851 West Kathleen Road
Phoenix, Arizona 85053
(Address of principal executive offices) (Zip Code)
(602) 504-5000
(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 þ No
Number of shares of the registrant’s common stock, $.001 par value per share, outstanding as of August 6, 2002, was 47,985,196.
INDEX
| Page | ||||||||
| PART I. | FINANCIAL INFORMATION | |||||||
| Item 1. | Financial Statements | 3 | ||||||
| Notes to Consolidated Financial Statements | 6 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 | ||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 | ||||||
| PART II. | OTHER INFORMATION | |||||||
| Item 1. | Legal Proceedings | 15 | ||||||
| Item 4. | Submission of Matters to a Vote of Security Holders | 15 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K | 16 | ||||||
| SIGNATURES | 17 | |||||||
| EXHIBIT INDEX | 18 | |||||||
2
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
HYPERCOM CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, | |||||||||
| 2002 | December 31, | ||||||||
| (unaudited) | 2001 | ||||||||
ASSETS |
|||||||||
Current assets: |
|||||||||
Cash and cash equivalents |
$ | 13,908 | $ | 13,402 | |||||
Restricted cash |
6,885 | 6,367 | |||||||
Accounts receivable, net of allowance for
doubtful accounts of $3,610 and $4,029 |
78,847 | 70,860 | |||||||
Current portion of net investment in direct financing leases |
14,480 | 16,242 | |||||||
Inventories, net |
61,581 | 62,411 | |||||||
Deferred income taxes |
16,125 | 16,090 | |||||||
Prepaid taxes |
858 | 762 | |||||||
Prepaid expenses and other current assets |
28,710 | 26,568 | |||||||
Total current assets |
221,394 | 212,702 | |||||||
Property, plant and equipment, net |
38,184 | 37,964 | |||||||
Long-term marketable securities, at market |
153 | 155 | |||||||
Long-term portion of net investment in direct financing leases |
19,379 | 24,761 | |||||||
Deferred income taxes |
10,003 | 10,003 | |||||||
Goodwill, net of amortization of $3,293 |
— | 21,766 | |||||||
Intangible assets, net of amortization of $12,392 and $9,873 |
13,131 | 13,537 | |||||||
Other assets |
13,935 | 16,806 | |||||||
Total assets |
$ | 316,179 | $ | 337,694 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||||||
Current liabilities: |
|||||||||
Accounts payable |
$ | 29,226 | $ | 31,761 | |||||
Accrued liabilities |
24,733 | 22,744 | |||||||
Deferred revenue |
3,980 | 2,180 | |||||||
Income taxes payable |
— | 1,495 | |||||||
Current portion of long-term debt |
15,994 | 20,716 | |||||||
Total current liabilities |
73,933 | 78,896 | |||||||
Long-term debt |
16,669 | 47,172 | |||||||
Other non-current liabilities |
165 | 257 | |||||||
Total liabilities |
90,767 | 126,325 | |||||||
Stockholders’ equity: |
|||||||||
Common stock, $.001 par value; 100,000,000 shares authorized;
47,936,090 and 39,795,554 shares issued and outstanding for
June 30, 2002 and December 31, 2001, respectively |
27 | 19 | |||||||
Additional paid-in capital |
213,691 | 175,628 | |||||||
Receivables from stockholder |
(1,498 | ) | (1,498 | ) | |||||
Retained earnings |
15,694 | 39,722 | |||||||
| 227,914 | 213,871 | ||||||||
Treasury stock, 230,088 shares (at cost) at June 30, 2002
and December 31, 2001 |
(2,502 | ) | (2,502 | ) | |||||
Total stockholders’ equity |
225,412 | 211,369 | |||||||
Total liabilities and stockholders’ equity |
$ | 316,179 | $ | 337,694 | |||||
The accompanying notes are an integral part of the consolidated financial statements.
3
HYPERCOM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except per share amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
Net revenue |
$ | 75,142 | $ | 75,095 | $ | 152,218 | $ | 146,169 | ||||||||||
Costs and expenses: |
||||||||||||||||||
Costs of revenue |
48,160 | 49,285 | 97,964 | 102,415 | ||||||||||||||
Research and development |
6,462 | 7,017 | 12,859 | 15,270 | ||||||||||||||
Selling, general and administrative |
17,260 | 20,873 | 35,538 | 42,342 | ||||||||||||||
Total costs and expenses |
71,882 | 77,175 | 146,361 | 160,027 | ||||||||||||||
Income (loss) from operations |
3,260 | (2,080 | ) | 5,857 | (13,858 | ) | ||||||||||||
Interest income |
32 | 200 | 52 | 455 | ||||||||||||||
Interest expense |
(767 | ) | (3,113 | ) | (2,769 | ) | (4,346 | ) | ||||||||||
Other expense |
(17 | ) | (537 | ) | (64 | ) | (1,795 | ) | ||||||||||
Foreign currency loss |
(2,008 | ) | (1,668 | ) | (3,588 | ) | (4,219 | ) | ||||||||||
Income (loss) before income taxes,
extraordinary item, and cumulative effect
of change in accounting principle |
500 | (7,198 | ) | (512 | ) | (23,763 | ) | |||||||||||
Income tax (expense) benefit |
(120 | ) | 1,439 | 83 | 4,753 | |||||||||||||
Income (loss) before extraordinary item and
cumulative effect of change in accounting
principle |
380 | (5,759 | ) | (429 | ) | (19,010 | ) | |||||||||||
Extraordinary loss on early retirement of
debt, net of tax benefit of $785 |
— | — | (1,833 | ) | — | |||||||||||||
Cumulative effect of change in accounting
principle |
— | — | (21,766 | ) | — | |||||||||||||
Net income (loss) |
$ | 380 | $ | (5,759 | ) | $ | (24,028 | ) | $ | (19,010 | ) | |||||||
Net earnings (loss) per share: |
||||||||||||||||||
Basic earnings (loss) per share: |
||||||||||||||||||
Income (loss) per share before extraordinary
item and accounting change |
$ | 0.01 | $ | (0.17 | ) | $ | (0.01 | ) | $ | (0.55 | ) | |||||||
Extraordinary item |
— | — | (0.04 | ) | — | |||||||||||||
Cumulative effect of change in accounting
principle |
— | — | (0.49 | ) | — | |||||||||||||
Net earnings (loss) |
$ | 0.01 | $ | (0.17 | ) | $ | (0.54 | ) | $ | (0.55 | ) | |||||||
Weighted average basic common shares |
47,834 | 34,390 | 44,256 | 34,358 | ||||||||||||||
Diluted earnings (loss) per share: |
||||||||||||||||||
Income (loss) per share before extraordinary
item and accounting change |
$ | 0.01 | $ | (0.17 | ) | $ | (0.01 | ) | $ | (0.55 | ) | |||||||
Extraordinary item |
— | — | (0.04 | ) | — | |||||||||||||
Cumulative effect of change in accounting
principle |
— | — | (0.49 | ) | — | |||||||||||||
Net earnings (loss) |
$ | 0.01 | $ | (0.17 | ) | $ | (0.54 | ) | $ | (0.55 | ) | |||||||
Weighted average diluted common shares |
51,212 | 34,390 | 44,256 | 34,358 | ||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
4
HYPERCOM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
| Six Months Ended | ||||||||||
| June 30, 2002 | June 30, 2001 | |||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (24,028 | ) | $ | (19,010 | ) | ||||
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
||||||||||
Amortization of discount on notes payable |
83 | 1,011 | ||||||||
Amortization of beneficial notes payable conversion feature |
— | 667 | ||||||||
Amortization of deferred financing costs |
1,073 | — | ||||||||
Depreciation/amortization |
7,384 | 7,502 | ||||||||
Bad debt expense |
312 | 582 | ||||||||
Deferred components of direct financing leases |
(248 | ) | (316 | ) | ||||||
Provision for losses on direct financing leases |
4,766 | 12,761 | ||||||||
Provision for excess and obsolete inventory |
2,542 | 1,040 | ||||||||
Extraordinary loss on early extinguishment of debt |
2,618 | — | ||||||||
Cumulative effect of change in accounting principle |
21,766 | — | ||||||||
Foreign currency loss |
3,588 | 4,219 | ||||||||
Deferred income taxes |
(35 | ) | (5 | ) | ||||||
Other |
289 | 130 | ||||||||
(Increase) decrease in accounts receivable, inventories, prepaid income taxes,
prepaid expenses and other current and noncurrent assets |
(13,832 | ) | 1,447 | |||||||
Decrease in accounts payable, accrued liabilities, deferred revenue
& income taxes payable |
(3,282 | ) | (2,826 | ) | ||||||
Net cash provided by operating activities |
2,996 | 7,202 | ||||||||
Cash flows from investing activities: |
||||||||||
Payments received on notes receivable |
349 | 492 | ||||||||
Principal payments received on direct financing leases |
6,425 | 6,256 | ||||||||
Funding of direct financing leases |
(4,196 | ) | (12,998 | ) | ||||||
Increase in restricted cash |
(518 | ) | (1,001 | ) | ||||||
Acquisition of other assets |
(1,238 | ) | (544 | ) | ||||||
Proceeds from disposal of property, plant & equipment |
139 | 184 | ||||||||
Purchase of property, plant & equipment |
(4,662 | ) | (1,177 | ) | ||||||
Net cash used in investing activities |
(3,701 | ) | (8,788 | ) | ||||||
Cash flows from financing activities: |
||||||||||
Proceeds from notes payable |
— | 18,400 | ||||||||
Repayment of notes payable |
— | (426 | ) | |||||||
Proceeds from long-term debt, net of restricted cash in 2001 |
89,156 | 30,415 | ||||||||
Repayment of long-term debt |
(124,989 | ) | (62,466 | ) | ||||||
Proceeds from sale of lease receivables |
— | 7,977 | ||||||||
Proceeds from issuance of common stock |
37,238 | 285 | ||||||||
Net cash provided by (used in) financing activities |
1,405 | (5,815 | ) | |||||||
Effect of exchange rate changes on cash |
(194 | ) | (385 | ) | ||||||
Net increase (decrease) in cash |
506 | (7,786 | ) | |||||||
Cash & cash equivalents, beginning of period |
13,402 | 13,008 | ||||||||
Cash & cash equivalents, end of period |
$ | 13,908 | $ | 5,222 | ||||||
The accompanying notes are an integral part of the consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair statement of results for the periods have been included and are considered of a normal recurring nature except for the impact on quarterly results and balance sheet amounts related to the extraordinary loss on early retirement of debt (see Note 6) and the cumulative effect of change in accounting principle (see Note 8). Operating results for the six months ended June 30, 2002, are not necessarily indicative of the results to be expected for the year ending December 31, 2002.
Certain prior year amounts have been reclassified to conform with the current period presentation.
This financial information is intended to be read in conjunction with Hypercom’s audited financial statements and footnotes thereto included in Hypercom’s Annual Report on Form 10-K for the year ended December 31, 2001.
NOTE 2 – INVENTORIES
Inventories consist of the following:
| June 30, | December 31, | |||||||
| 2002 | 2001 | |||||||
Purchased parts |
$ | 20,410 | $ | 21,502 | ||||
Work in progress |
7,879 | 8,560 | ||||||
Finished goods |
||||||||