UNITED STATES
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 June 30, 2004
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 0-25186
CAPTARIS, INC.
(Name of Registrant as Specified in Its Charter)
| Washington | 91-1190085 | |
| (State of Incorporation) | (I.R.S. Employer Identification Number) | |
| 10885 N.E. 4th Street, Suite 400 Bellevue, WA |
98004 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s telephone number, including area code: (425) 455-6000
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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
The number of outstanding shares of the registrant’s common stock as of August 2, 2004 was 31,548,235.
CAPTARIS, INC.
FORM 10-Q
For the Quarter Ended June 30, 2004
| Page | ||||||
| PART I. |
Financial Information |
|||||
| Item 1. |
3 | |||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | ||||
| Item 3. |
25 | |||||
| Item 4. |
26 | |||||
| PART II. |
Other Information |
|||||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
27 | ||||
| Item 4. |
27 | |||||
| Item 6. |
28 | |||||
| 29 | ||||||
2
PART I.
FINANCIAL INFORMATION
| Item 1. | FINANCIAL STATEMENTS (UNAUDITED) |
CAPTARIS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
| June 30, 2004 |
December 31, 2003 | ||||||
| ASSETS | |||||||
| Current assets: |
|||||||
| Cash and cash equivalents |
$ | 3,315 | $ | 41,896 | |||
| Short-term investments, available for sale |
55,354 | 28,081 | |||||
| Accounts receivable, net |
12,857 | 13,638 | |||||
| Inventories |
905 | 1,973 | |||||
| Prepaid expenses and other |
2,595 | 2,516 | |||||
| Deferred income tax assets |
2,686 | 1,770 | |||||
| Total current assets |
77,712 | 89,874 | |||||
| Long-term investments, available for sale |
30,161 | 25,684 | |||||
| Restricted cash |
1,000 | 1,000 | |||||
| Equipment and leasehold improvements, net |
5,480 | 4,605 | |||||
| Intangible and other assets, net |
6,096 | 6,705 | |||||
| Goodwill |
15,440 | 15,541 | |||||
| Deferred income tax assets |
1,603 | 1,346 | |||||
| Total assets |
$ | 137,492 | $ | 144,755 | |||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
| Current liabilities: |
|||||||
| Accounts payable |
$ | 3,489 | $ | 4,875 | |||
| Accrued compensation and benefits |
2,876 | 4,403 | |||||
| Other accrued liabilities |
1,137 | 1,393 | |||||
| Income taxes payable |
1,647 | 2,999 | |||||
| Deferred revenue |
12,918 | 10,257 | |||||
| Total current liabilities |
22,067 | 23,927 | |||||
| Commitments and contingencies (Note 6) |
|||||||
| Redeemable common stock |
3,000 | 3,000 | |||||
| Shareholders’ equity: |
|||||||
| Preferred stock, par value $0.01 per share, 2,000 shares authorized; none issued and outstanding |
— | — | |||||
| Common stock, par value $0.01 per share, 120,000 shares authorized; 31,542 and 32,358 outstanding, respectively |
310 | 318 | |||||
| Additional paid-in capital |
62,662 | 67,453 | |||||
| Retained earnings |
49,605 | 49,681 | |||||
| Accumulated other comprehensive income (loss) |
(152 | ) | 376 | ||||
| Total shareholders’ equity |
112,425 | 117,828 | |||||
| Total liabilities and shareholders’ equity |
$ | 137,492 | $ | 144,755 | |||
See the accompanying notes to unaudited condensed consolidated financial statements.
3
CAPTARIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net revenue |
$ | 18,191 | $ | 18,139 | $ | 36,366 | $ | 33,839 | ||||||||
| Cost of revenue |
6,104 | 6,440 | 12,272 | 12,235 | ||||||||||||
| Gross profit |
12,087 | 11,699 | 24,094 | 21,604 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
2,260 | 2,441 | 4,391 | 4,798 | ||||||||||||
| Selling, general and administrative |
10,046 | 8,577 | 20,117 | 18,403 | ||||||||||||
| Amortization of intangibles |
103 | 57 | 206 | 113 | ||||||||||||
| Stock compensation expense |
215 | 508 | 219 | 992 | ||||||||||||
| Total operating expenses |
12,624 | 11,583 | 24,933 | 24,306 | ||||||||||||
| Operating income (loss) |
(537 | ) | 116 | (839 | ) | (2,702 | ) | |||||||||
| Other income (expense): |
||||||||||||||||
| Interest |
332 | 358 | 671 | 810 | ||||||||||||
| Other, net |
(216 | ) | (8 | ) | (285 | ) | (51 | ) | ||||||||
| Other income, net |
116 | 350 | 386 | 759 | ||||||||||||
| Income (loss) from continuing operations before income tax (benefit) |
(421 | ) | 466 | (453 | ) | (1,943 | ) | |||||||||
| Income tax (benefit) expense |
(161 | ) | 134 | (173 | ) | (755 | ) | |||||||||
| Income (loss) from continuing operations |
(260 | ) | 332 | (280 | ) | (1,188 | ) | |||||||||
| Discontinued operations: |
||||||||||||||||
| Income from operations of MediaLinq, net of income taxes |
— | 376 | — | 918 | ||||||||||||
| Gain on sale of MediaLinq, net of income taxes |
204 | — | 204 | — | ||||||||||||
| Income from discontinued operations, net of taxes |
204 | 376 | 204 | 918 | ||||||||||||
| Net income (loss) |
$ | (56 | ) | $ | 708 | $ | (76 | ) | $ | (270 | ) | |||||
| Income (loss) per common share: |
||||||||||||||||
| Basic and diluted income (loss) per common share from continuing operations |
$ | (0.01 | ) | 0.01 | (0.01 | ) | (0.04 | ) | ||||||||
| Basic and diluted income per common share from discontinued operations |
0.01 | 0.01 | 0.01 | 0.03 | ||||||||||||
| Basic and diluted net income (loss) per common share |
$ | (0.00 | ) | $ | 0.02 | $ | (0.00 | ) | $ | (0.01 | ) | |||||
| Weighted average basic common shares |
31,860 | 30,311 | 32,076 | 30,274 | ||||||||||||
| Weighted average diluted common shares |
31,860 | 30,816 | 32,076 | 30,274 | ||||||||||||
See the accompanying notes to unaudited condensed consolidated financial statements.
4
CAPTARIS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (76 | ) | $ | (270 | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: |
||||||||
| Depreciation and amortization |
1,900 | 2,192 | ||||||
| Gain on sale of MediaLinq |
(204 | ) | — | |||||
| Stock compensation expense |
219 | 1,297 | ||||||
| Stock issued for consulting services |
— | 6 | ||||||
| Bad debt provision |
31 | — | ||||||
| Changes in assets and liabilities: |
||||||||
| Accounts receivable |
729 | 2,629 | ||||||
| Inventories |
1,049 | 907 | ||||||
| Prepaid expenses and other |
(96 | ) | (306 | ) | ||||
| Deferred income tax assets |
(772 | ) | 110 | |||||
| Accounts payable |
(1,315 | ) | (1,786 | ) | ||||
| Accrued compensation and benefits |
(1,503 | ) | (365 | ) | ||||
| Other accrued liabilities |
(245 | ) | (1,266 | ) | ||||
| Income taxes payable |
(1,352 | ) | — | |||||
| Deferred revenue |
2,680 | 838 | ||||||
| Net cash flow provided by operating activities |
1,045 | 3,986 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchase of equipment and leasehold improvements |
(2,181 | ) | (1,856 | ) | ||||
| Purchase of investments |
(60,328 | ) | (47,165 | ) | ||||
| Purchase of businesses, net of cash acquired |
(170 | ) | — | |||||
| Proceeds from sale of MediaLinq |
204 | — | ||||||
| Proceeds from sale and maturities of investments |
28,277 | 37,010 | ||||||
| Net cash flow used by investing activities |
(34,198 | ) | (12,011 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of common stock options |
911 | 602 | ||||||
| Repurchase of common stock |
(6,329 | ) | (177 | ) | ||||
| Net cash flow (used) provided by financing activities |
(5,418 | ) | 425 | |||||
| Net decrease in cash flow |
(38,571 | ) | (7,600 | ) | ||||
| Effect of exchange rate changes on cash |
(10 | ) | 79 | |||||
| Cash and cash equivalents at beginning of period |
41,896 | 21,971 | ||||||