CSP INC /MA/ — Interim / Quarterly Report 2000

Apr 17, 2000

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 10549 _______ FORM 10-Q/A

Amendment Number 1

(Mark One)

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended November 30, 1999

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 01821-3901 (Address of principal executive offices) (Zip Code)

(978) 663-7598 (Registrant's telephone number, including area code)

None (Former name, former address, former fiscal year, if changed since last report)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 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. [X] Yes [ ] No

APPLICABLE ONLY TO CORPORATE ISSUERS: 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, 2000 Common Stock, $.01 par value 3,567,548 shares

This amendment is being filed to correct Part I, Item I, Financial Statements. We are amending Part I, Item 1, Financial Statements, solely to correct a typographical error in Note 4 to the Financial Statements. For convenience, the entire text of the Financial Statements is set forth below.

As originally filed, Note 4, "Stock Repurchase", stated that at November 30, 1999, the Company had repurchased 281,195 or 52% of the total shares authorized to be purchased. The figures of 281,195 and 52% were stated in error. The correct numbers were 481,645 or 65% of the total shares authorized to be purchased.

As a result, the number of shares repurchased by the Company during the second fiscal quarter, when the cumulative total of shares purchased increased from 481,645 to 482,823, was 1,178 shares.

CSP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except par value)

	November 30,	August 27,
	1999	1999
	(Unaudited)	(Audited)
Assets
Current assets:
Cash and cash equivalents	$2,861	$3,749
Short-term investments	9,946	10,046
Accounts receivable, net	9,779	7,395
Refundable income taxes	565	--
Inventories	5,688	5,805
Deferred income taxes	1,104	1,104
Prepaid expenses	1,508	1,545
Total current assets	31,451	29,644
Property, equipment and improvements, net	3,324	3,497
Other assets:
Long-term investments	470	470
Land held for future development	163	163
Deferred income taxes	735	735
Goodwill, net	1,164	1,226
Other assets	1,441	1,378
Total other assets	3,973	3,972
Total assets	$38,748	$37,113
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$8,317	$6,128
Income taxes payable	--	47
Total current liabilities	8,317	6,175
Deferred compensation and retirement plans	3,557	3,573
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par; authorized, 7,500 shares; issued 4,027
and 4,020 shares	40	40
Additional paid-in capital	10,848	10,812
Retained earnings	18,957	19,287
Accumulated other comprehensive income	(480)	(456)
	29,365	29,683
Less treasury stock, at cost, 481 and 449 shares	2,491	2,318
Total shareholders' equity	26,874	27,365
Total liabilities and shareholders' equity	$38,748	$37,113
See accompanying notes to consolidated financial statements.

CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except for per share data) (Unaudited)

/-----------For the three months ended--------/

	November 30,	November 27,
	1999	1998
Sales:
Systems	$2,259	$5,044
Service and system integration	12,625	5,884
E-Commerce software	407	126
Other software	443	461
Total sales	15,734	11,515
Cost of Sales:
Systems	1,105	1,965
Service and system integration	10,760	3,958
E-Commerce software	161	60
Other software	163	94
Total cost of sales	12,189	6,077
Gross profit	3,545	5,438
Operating expenses:
Engineering and development	1,093	1,129
Selling, general & administration	3,189	3,348
Total operating expenses	4,282	4,477
Operating income (loss)	(737)	961
Other income	78	86
Income (loss) before income taxes	(659)	1,047
Provision (benefit) for income taxes	(329)	572
Net income (loss)	($330)	$475
Net income (loss) per share - basic	($0.09)	$0.13
Weighted average shares outstanding - basic	3,566	3,590
Net income (loss) per share - diluted	($0.09)	$0.13
Weighted average shares outstanding - diluted	3,566	3,642

See accompanying notes to consolidated financial statements.

CSP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)

/----------For the three months ended---------/

	November 30,	November 27,
	1999	1998
Cash flows from operating activities:
Net income (loss)	($330)	$475
Adjustments to reconcile net income (loss) to net cash
Used in operating activities:
Depreciation and amortization	346	456
Deferred compensation and retirement plans	(16)	202
Deferred income taxes	--	(44)
Other	(63)	(166)
Changes in current assets and liabilities:
Increase in accounts receivable, net	(2,384)	(84)
Increase in refundable income taxes	(565)	--
Decrease in inventories	117	518
(Increase) decrease in prepaid expenses	37	(175)
Increase (decrease) in accounts payable and accrued expenses	2,189	(1,057)
Decrease in income taxes payable	(47)	(158)
Net cash used in operating activities	(716)	(33)
Cash flows from investing activities:
Purchases of available-for-sale securities	(79)	--
Purchases of held-to-maturity securities	(8,742)	(6,427)
Sales of available-for-sale securities	47	--
Maturities of held-to-maturity securities	8,874	5,446
Property, equipment and improvements	(111)	(231)
Net cash used in investing activities	(11)	(1,212)
Cash flows from financing activities:
Proceeds from issuance of shares under employee
stock purchase plan	36	90
Purchase of treasury stock	(173)	--
Net cash provided by (used in) financing activities	(137)	90
Effects of exchange rate on cash	(24)	74
Net decrease in cash	(888)	(1,081)
Cash and cash equivalents, beginning of period	3,749	3,913
Cash and cash equivalents, end of period	$2,861	$2,832
Supplementary cash flow information:
Cash paid for income taxes, net	$293	$223
Cash paid for interest	$17	$--

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 27, 1999.

	November 30,	August 27,
	1999	1999
Raw materials	$1,604	$1,422
Work in process	410	227
Finished goods	3,675	4,156
Total	$5,688	$5,805

Stock Repurchase:

On October 9, 1986 the Board of Directors authorized the Company to repurchase up to 344,892 additional shares of the outstanding stock at market price. On September 28, 1995 the Board of Directors authorized the Company to repurchase up to 199,650 additional shares of the outstanding stock at market price. The timing of stock purchases are made at the discretion of management. On October 19, 1999 the Board of Directors authorized the Company to repurchase up to 200,000 additional shares of the outstanding stock at market price. At November 30, 1999, the Company has repurchased 481,645 or 65% of the total shares authorized to be purchased.

Earnings Per Share Reconciliation

The reconciliation of the numerators and denominators of the basic and diluted net income (loss) per common share computations for the Company's reported net income (loss) is as follows:

/--------Three Months Ended------/

	November	November
(In thousands, except per share amounts)	1999	1998
Basic net income (loss)	($330)	$475
Weighted average number of shares outstanding - basic	3,566	3,590
Incremental shares from the assumed exercise of stock options	--	52
Weighted average number of shares outstanding - dilutive	3,566	3,642
Net income (loss) per share - basic	($0.09)	$0.13
Net income (loss) per share - diluted	($0.09)	$0.13

Comprehensive Income:

The Company's comprehensive income is as follows:

/------Three Months Ended-------/

	November 30,	November 27,
	1999	1998
Net income (loss)	($330)	$475
Other comprehensive income:
Foreign translation adjustment	(98)	75
Unrealized gain on investments	74	71
Total comprehensive income (loss)	($354)	$621

Segment Information:

The following table presents certain operating segment information (Amounts in thousands).

		System and — Service	E-Commerce	Other
	Systems	Integration	Software	Software	Total
Quarter Ended 11/30/99
Net Sales	$2,259	$12,625	$407	$443	$15,734
Profit(loss) from operations	(468)	549	(594)	(224)	(737)
Identifiable assets	20,831	15,306	770	1,841	38,748
Capital expenditures	62	30	1	18	111
Depreciation	197	76	2	9	284
Quarter Ended 11/27/98
Net Sales	$5,044	$5,884	$126	$461	$11,515
Profit(loss) from operations	852	370	(237)	(24)	961
Identifiable assets	22,001	13,017	234	2,122	37,374
Capital expenditures	129	93	2	7	231
Depreciation	170	49	1	9	229

Each segment is broken down by related business activities, which crosses different business operations. These segments are based on the different customer activity of the Company. CSPI has four major segments: systems which includes company manufactured hardware products, systems integration and services which includes maintenance of the Company and other systems sold and integration and sale of third party hardware products and services, E-Commerce software, and other software products which are developed by the Company.

Profit from operations is sales less cost of sales, engineering and development, selling, general and administrative expenses but is not affected by either non-operating charges/income or by income taxes. Non operating charges/income consists principally of investment income and interest expense.

In calculating profit from operations for individual operating segments, substantial administration expenses incurred at the operating level are common to more than one segment and are allocated based on a sales basis except for those related to E-Commerce software which is allocated based upon employee headcount.

All intercompany transactions have been eliminated.

Identifiable assets include deferred income tax assets and other financial instruments managed by the Company. Capital expenditures common to more than one segment are allocated on a sales basis.

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: April 17, 2000 By: /s/ Alexander R. Lupinetti Chief Executive Officer, President and Chairman

Date: April 17, 2000 By: /s/ Gary W. Levine Vice President of Finance, Chief Financial Officer