-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, G+lpCLf6AMkIVHpD37LaRNZL9sJvlNeuGDWuTBy7XjrJl+7XAAhmaBTEomu3FTSE PyGRaMKrg20t7UEhCtftMw== 0000013021-94-000025.txt : 19941129 0000013021-94-000025.hdr.sgml : 19941129 ACCESSION NUMBER: 0000013021-94-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOLT BERANEK & NEWMAN INC CENTRAL INDEX KEY: 0000013021 STANDARD INDUSTRIAL CLASSIFICATION: 7373 IRS NUMBER: 042164398 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06435 FILM NUMBER: 94560001 BUSINESS ADDRESS: STREET 1: 150 CAMBRIDGEPARK DR CITY: CAMBRIDGE STATE: MA ZIP: 02140 BUSINESS PHONE: 6178732000 10-Q 1 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 September 30, 1994 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 1-6435 ____________________________________________ Bolt Beranek and Newman Inc. __________________________________________________________________ (Exact name of registrant as specified in its charter) Massachusetts 04-2164398 ____________________________________ ________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 CambridgePark Drive, Cambridge, Massachusetts 02140 ___________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 873-2000 _______________ ___________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the company (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 company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _________ _________ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of common stock, $1.00 par value, outstanding as of October 31, 1994: 16,784,777 Exhibit index appears on page 13 Page 1 of 15 pages BOLT BERANEK AND NEWMAN INC. INDEX Page No. ________ Part I. Financial Information Consolidated Statements of Operations - Three Months Ended September 30, 1994 and 1993 ..3 Consolidated Balance Sheets - as of September 30, 1994 and June 30, 1994 ......4 Consolidated Statements of Cash Flows - Three Months Ended September 30, 1994 and 1993 ..5 Notes to Consolidated Financial Statements ..........6 Management's Discussion and Analysis of Financial Condition and Results of Operations .............8 Part II.Other Information Item 4. Submission of Matters to a Vote of Security Holders....................................12 Item 6. Exhibits and Reports on Form 8-K ..........12 Signatures .........................................12 PART I. FINANCIAL INFORMATION BOLT BERANEK AND NEWMAN INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Dollars in thousands, except per-share data Three Months Ended ___________________________ September 30 September 30 1994 1993 ___________ ____________ Revenue: Services $ 44,376 $ 42,795 Products 7,367 7,135 ___________ ___________ 51,743 49,930 ___________ ___________ Costs and expenses: Cost of services 28,660 30,218 Cost of products 2,585 2,825 Research and development expenses 5,955 5,304 Selling, general and administrative expenses 16,035 13,107 ___________ ___________ 53,235 51,454 ___________ ___________ Loss from operations (1,492) (1,524) Interest income 617 689 Interest expense (1,126) (1,201) Minority interests 296 Other income (expense), net (3) 89 ___________ ___________ Loss before income taxes (1,708) (1,947) Provision for income taxes 100 ___________ ___________ Net loss $ (1,808) $ (1,947) =========== =========== Net loss per share $ (.11) $ (.12) =========== =========== Shares used in per-share calculations 16,614,000 15,978,000 The accompanying notes are an integral part of the consolidated financial statements BOLT BERANEK AND NEWMAN INC. CONSOLIDATED BALANCE SHEETS September 30 June 30 1994 1994 Dollars in thousands ____________ __________ (Unaudited) (Audited) ASSETS ______ Current assets: Cash and temporary investments $ 57,923 $ 67,115 Accounts receivable, net 49,053 41,503 Inventories, net 413 1,114 Other current assets 4,337 3,592 _________ __________ Total current assets 111,726 113,324 Property, plant and equipment, net 20,885 19,658 Other assets 7,867 2,958 _________ __________ $140,478 $135,940 ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY ____________________________________ Current liabilities: Accounts payable $ 4,983 $ 4,279 Accrued compensation and retirement plan 5,522 5,198 Accrued restructuring charges 11,404 12,566 Other accrued costs 20,589 19,832 Deferred revenue 14,181 11,112 _________ _________ Total current liabilities 56,679 52,987 6% convertible subordinated debentures due 2012 73,510 73,510 Commitments and contingencies Minority interests 1,924 2,172 Shareholders' equity: Common stock, $1 par value, authorized: 100,000,000 shares; issued: 21,298,178 shares at September 30, 1994 and 21,253,890 shares at June 30, 1994 21,298 21,254 Additional paid-in capital 56,962 55,916 Foreign currency translation adjustment 227 337 Accumulated deficit (37,935) (36,127) _________ _________ 40,552 41,380 Less shares in treasury, at cost: 4,527,464 shares at September 30, 1994 and 4,797,734 shares at June 30, 1994 32,187 34,109 _________ _________ Total shareholders' equity 8,365 7,271 _________ _________ $140,478 $135,940 ========= ========= The accompanying notes are an integral part of the consolidated financial statements BOLT BERANEK AND NEWMAN INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Dollars in thousands Three Months Ended ____________________________ September 30 September 30 1994 1993 ____________ _____________ Cash flows from operating activities: Net loss $ (1,808) $ (1,947) Adjustments to reconcile net loss to net cash (used) by operating activities: Depreciation and amortization 2,393 2,246 Amortization of goodwill and capitalized software 146 352 Change in assets and liabilities: Accounts receivable (7,050) (7,153) Inventories 675 1,372 Other assets (992) 2,779 Accounts payable and other liabilities 1,085 5,930 Accrued restructuring charges (1,162) (1,803) Deferred revenue 2,269 (2,308) Other (667) (933) _________ _________ Total adjustments (3,303) 482 _________ _________ Net cash (used) by operating activities (5,111) (1,465) Cash (used) by investing activities: Additions to property, plant and equipment (2,229) (831) Acquisition of BARRNET (2,000) _________ _________ Cash (used) by investing activities (4,229) (831) Cash provided by financing activities: Proceeds from Stock Option Plan 148 742 _________ _________ Net (decrease) in cash and temporary investments (9,192) (1,554) Cash and temporary investments- beginning of period 67,115 56,835 _________ _________ Cash and temporary investments- end of period $ 57,923 $ 55,281 ========= ========= Supplemental cash flow information: Interest paid $ 7 $ 3 ========= ========= The accompanying notes are an integral part of the consolidated financial statements BOLT BERANEK AND NEWMAN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Basis of Presentation The financial information included herein, with the exception of the consolidated balance sheet at June 30, 1994, has not been audited. However, in the opinion of management, all material adjustments, consisting only of normal recurring accruals necessary for a fair presentation of the results for these periods, have been reflected. The results for these periods are not necessarily indicative of the results for the full fiscal year. Certain amounts reported for the prior periods presented have been reclassified to be consistent with the current year's presentation. B. Commitments and Contingencies The company, like other companies doing business with the U.S. government, is subject to routine audit, and in certain circumstances to inquiry, review, or investigation, by U.S. government agencies, of its compliance with government procurement policies and practices. In April 1991, the company was informed that it was the subject of an investigation by U.S. government agencies of its compliance with certain government procurement policies and practices. No allegations have been made by the government agencies. Based upon government procurement regulations, under certain circumstances a contractor violating or not complying with procurement regulations can be subject to legal or administrative proceedings, including fines and penalties, as well as be suspended or debarred from contracting with the government. The company's policy has been and continues to be to conduct its activities in compliance with all applicable rules and regulations. The company is subject to other legal proceedings and claims which arise in the ordinary course of its business. In the opinion of management, the results of these other legal proceedings and claims will not have a material effect on the company's consolidated financial position and results of operations. C. Segment Information The following is a summary of business segments information for the three months ended September 30, 1994 and 1993, respectively. All data are shown net of intersegment transactions. Dollars in thousands Three Months Ended __________________________________________________________________________ September 30 September 30 1994 1993 ____________ ____________ Revenue: Internetworking $ 23,657 $ 20,122 Data analysis software 8,053 8,548 Collaborative systems and acoustic technologies 20,033 21,260 ____________ ____________ $ 51,743 $ 49,930 ============ ============ Operating income (loss): Internetworking $ (697) $ (1,743) Data analysis software (381) 359 Collaborative systems and acoustic technologies (147) 179 Unallocated corporate costs (267) (319) ____________ _____________ $ (1,492) $ (1,524) ============ ============= BOLT BERANEK AND NEWMAN INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) D. BARRNET Acquisition On August 19, 1994, BBN Internet Services Corporation acquired, from Stanford University, the Bay Area Regional Research Network ("BARRNET"), a leading provider of Internet services in the San Francisco Bay Area, for approximately $6.5 million consisting principally of $2.0 million of cash, 270,270 shares of BBN's common stock and 200,000 shares of BBN Internet Services Corporation's common stock. The common stocks issued were valued at their fair value which reflects a discount attributable to their restricted nature. The transaction was accounted for using the purchase method of accounting. Accordingly, the acquired assets and liabilities were recorded at their estimated fair values on the date of the acquisition. The aggregate cost in excess of net assets acquired of approximately $4.5 million is being amortized over ten years. BOLT BERANEK AND NEWMAN INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Summary _______ For the three months ended September 30, 1994, the company reported a loss of $1.8 million, or $.11 per share, on revenue of $51.7 million, compared to a loss of $1.9 million, or $.12 per share, on revenue of $49.9 million for the same period a year ago. The current period losses reflect investments in new products and services, including continuing development expenditures and increased spending on sales and marketing. The higher revenue reflects increases at LightStream Corporation and BBN Internet Services Corporation, which were partially offset by a decline in the company's defense-related activities. The company intends to increase its investment in its Internet services and data analysis and visualization software activities. The company anticipates these increased investments will delay its return to profitability. Revenue _______ Revenue increased $1.8 million in the first quarter of FY1995 compared to the comparable FY1994 period reflecting increases at both LightStream Corporation and BBN Internet Services Corporation. These increases were partially offset by declines in the company's defense-related activities. Services revenue from LightStream Corporation included up-front technology license and initial development fees from previously announced strategic partnering agreements. The company, like other companies doing business with the Department of Defense, has been adversely affected by reduced defense spending and expects this general decline and attendant increased competition within the defense industry to continue over the next several years. Uncertainty continues to exist on the size and scope of reductions in future defense budgets and their impact on the company's defense-related business. Further, there is the possibility that funding limitations could result in a reduction, delay, or cancellation of existing or emerging programs. These factors have reduced the company's U.S. government revenue and operating margins in recent fiscal years, and this trend is expected to continue at least through FY1995, particularly in the defense communications systems and acoustic and sensor systems areas. In FY1991, the Defense Information Systems Agency awarded the company a one-year contract in support of the Defense Data Network, with up to four one-year optional extensions. In September 1994, the company completed the third option year of the contract which was valued at approximately $20 million. In October 1994, the company was awarded the fourth and last option year of the contract, valued at approximately $15 million, which will continue these activities through October 1995. There can be no assurance that this activity will continue beyond October 1995. Approximately $5 million and $6 million of revenue has been recorded under the contract in the first quarters of FY1995 and FY1994, respectively. BOLT BERANEK AND NEWMAN INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The company conducts its commercial businesses in environments characterized by intense competition, shortened product cycles and rapid technological change, which require significant research and development expenditures to develop new products which address emerging market requirements and to improve its existing products. The company's traditional commercial businesses, consisting principally of RS/Series(TM) data analysis and visualization software products and X.25 network systems, continue to experience substantially lower revenue. In recent years, the company has been investing heavily in the development of products, primarily the LightStream(TM) Asynchronous Transfer Mode ("ATM") switch and the T/10(TM) Integrated Access Device in the networking area and BBN/Cornerstone(TM) data analysis and visualization software. During the first quarter of FY1995, revenue from the company's BBN/Cornerstone and T/10 products was not significant. In October 1993, LightStream Corporation released the LightStream 2010 ATM switch as its initial product offering. To date, sales of the LightStream 2010 ATM switch have not been financially significant. In September 1994, LightStream Corporation began initial shipments of the LightStream 2020 ATM switch which is expected to be generally available in the fall of 1994. The emerging market for ATM products is very competitive, particularly from companies with marketing, distribution, and resources significantly greater than those available to LightStream Corporation. Recently there have been a number of announcements of strategic alliances relating to ATM products, including alliances involving major networking companies, which the company anticipates will result in increased competition for LightStream Corporation. Currently, LightStream Corporation has only modest direct sales capabilities and is actively pursuing distribution arrangements as well as increasing its direct sales effort. The ATM switch market currently consists of three segments, comprised of the carrier central office ATM switch segment, the ATM enterprise switch segment, and the LAN workstation ATM switch segment. While the overall market for ATM communications products is expected to grow substantially over the next several years, the ATM enterprise switch market segment, which is the market segment addressed by the LightStream 2020 ATM switch, is developing at a slower rate than the other two market segments. The market for LightStream Corporation's ATM products is characterized by long sales cycles including equipment trials. The success of LightStream Corporation's products, including the LightStream 2020 ATM switch, will depend upon the development of strategic alliances and distribution channels, the timely development of the ATM market and in particular the ATM enterprise switch market segment, the technological superiority and interoperability of LightStream Corporation's products, and their cost competitiveness. In the event these conditions are not achieved on a timely basis, the company's financial results will be adversely impacted. BOLT BERANEK AND NEWMAN INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The T/10 Integrated Access Device, which the company has been developing and marketing for several years, is designed to help customers consolidate traffic over a single enterprise network. Development delays, and limited functionality and distribution channels, have unfavorably affected the company's ability to generate sales, and revenue from the T/10 during the current quarter has not been financially significant. The T/10 effort is now being primarily focused on a few reseller opportunities, and the future success of the T/10 is highly dependent on these opportunities. The company's data analysis software products business has been affected by the growth of distributed processing and the associated use of personal computers, workstations, and other desktop computers. Many of the company's data analysis software products, primarily the RS/Series software, currently operate on minicomputer systems. As demand for minicomputer-based software continues to decline, the company is experiencing substantially lower RS/Series software revenue and downward pressure on prices. During the fourth quarter of FY1993, Software Products Corporation introduced its BBN/Cornerstone data analysis and visualization software specifically designed for use on desktop computers in a client/server environment. The initial release of BBN/Cornerstone software operates on Unix-based workstations, utilizing a number of established graphical user interfaces. Planned subsequent releases will operate on personal computers. In the current quarter, sales of BBN/Cornerstone were not financially significant. Software Products Corpooration also develops and markets health industry applications software. The company has recently begun to more tightly integrate BBN/Cornerstone software with its RS/Series products to provide platform migration and ease of use for the existing RS/Series customer base, and to provide greater capabilities and flexibility in client/server computing environments. As part of this effort, the company is also investing in additional engineering and sales personnel. The company believes that the future success of its data analysis and visualization software will primarily depend upon the timely integration of its BBN/Cornerstone and RS/Series software and the release of software applications that permit operation on platforms, including personal computers, which are not currently supported. The company is significantly increasing its investment in the emerging market for Internet services. Such investments, which may include acquisitions, could adversely affect the company's financial results for FY1995. The company's strategy is to build upon its base of nearly 600 organizational customers to become a major supplier of Internet services. The market for Internet services is rapidly expanding, and there are considerable uncertainties as to how the market will develop. The company's success in the Internet services market will depend heavily upon its ability to timely establish geographic coverage and related support capabilities, provide high quality managed Internet connectivity and value-added services, and to attract additional experienced personnel. BOLT BERANEK AND NEWMAN INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Cost of Sales _____________ Cost of services and products as a percentage of revenue was 60% in FY1995 compared to 66% in FY1994. The decrease in the cost of sales percentage is principally due to the technology license and initial development fees from strategic partnering agreements and lower costs associated with fixed-price government contracts. Research and Development Expenses _________________________________ The majority of the company's internally funded research and development spending is currently directed principally toward the LightStream ATM products, BBN/Cornerstone and the T/10. Research and development expenses in the first quarter of FY1995 were $6.0 million compared to $5.3 million in the comparable period in FY1994. The increase in FY1995 relates primarily to several projects at the Systems and Technologies Division. The company's continued significant investment in research and development is dependent upon the timely market acceptance of its new products. Selling, General and Administrative Expenses ____________________________________________ Selling, general and administrative expenses increased $2.9 million in FY1995 from FY1994 reflecting the investment the company is making primarily in the sales and marketing of its new products and services as well as expenditures on commercial business opportunities. The company expects that this trend will continue through FY1995. Liquidity and Capital Resources _______________________________ As of September 30, 1994, the company's cash and temporary investments, which consisted primarily of money market funds and short term U.S. government securities, were $57.9 million, a decrease of $9.2 million from June 30, 1994. The decrease is primarily attributable to higher working capital requirements, mainly related to accounts receivable and the BARRNET acquisition. The company's continuing ability to increase investment in its commercial business units is dependent upon revenue growth and adequate margins. Management Changes __________________ In October 1994, Julie Donahue joined BBN Hark Systems Corporation as its chief executive officer and on November 15 1994, Paul Gudonis will join BBN Internet Services Corporation as its chief executive officer. The company continues to recruit for a number of marketing and sales positions throughout the company. PART II. OTHER INFORMATION BOLT BERANEK AND NEWMAN INC. Item 4. Submission of Matters to a Vote of Security Holders At the annual meeting of shareholders of the company held on November 3, 1994, the shareholders authorized the following proposals by the vote as noted: Number of Shares Voted ______________________________ Proposal For Withheld ________ ___________ _____________ Election as Director of John M. Albertine 14,700,564 495,574 Election as Director of Roger D. Wellington 14,682,697 513,441 Abstain or For Against Not Voting _________ ________ __________ To amend the company's 1986 Stock Incentive Plan relative to increase in shares, extension of period of awards, and changes to conform to the tax code 7,207,141 2,245,486 5,743,511 To amend the company's 1986 Stock Incentive Plan relative to non-employee director options 7,515,355 1,896,756 5,784,027 Ratification of Coopers & Lybrand as auditors 15,060,834 73,510 61,794 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11.1 Computation of Net Loss Per Share 27.1 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended September 30, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOLT BERANEK AND NEWMAN INC. By Ralph A. Goldwasser _________________________ Ralph A. Goldwasser Senior Vice President and Chief Financial Officer Date: November 14, 1994 BOLT BERANEK AND NEWMAN INC. LIST OF EXHIBITS 11.1 Computation of Net Loss Per Share (page 14) 27.1 Financial Data Schedule (page 15) EX-11.1 2 BOLT BERANEK AND NEWMAN INC. EXHIBIT 11.1 COMPUTATION OF NET LOSS PER SHARE (000's except per-share data) Three Months Ended ____________________________________________ September 30, 1994 September 30, 1993 ___________________ ___________________ Fully Fully Primary Diluted Primary Diluted ________ _______ _______ _______ Weighted average shares outstanding 16,614 16,614 15,978 15,978 Incremental shares from use of treasury stock method for stock options (a) (a) (a) (a) ________ ________ ________ ________ Shares used in per-share calculations 16,614 16,614 15,978 15,978 ======== ======== ======== ======== Net loss $(1,808) $(1,808) $(1,947) $(1,947) ======== ======== ======== ======== Net loss per share $ (.11) $ (.11) $ (.12) $ (.12) ======== ======== ======== ======== (a) Incremental shares were not used as their effect would be antidilutive. EX-27.1 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000013021 BOLT BERANEK AND NEWMAN, INC. 1,000 QTR-1 JUN-30-1995 SEP-30-1994 57,923 0 57,839 8,786 413 111,726 109,665 88,780 140,478 56,679 73,510 21,298 0 0 (12,933) 140,478 51,743 51,743 31,245 31,245 21,990 0 1,126 (1,708) 100 (1,808) 0 0 0 (1,808) (.11) 0
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