-----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, Y7GUQXDA/tbjkYNxqzZOgGobbmhJciYgDfpj91nFAw+rl0M1eRkzELZTX6q+OC6j 7OAl7VF4Jzjo1UOcJR0oKw== 0000026999-95-000007.txt : 19950508 0000026999-95-000007.hdr.sgml : 19950508 ACCESSION NUMBER: 0000026999-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950325 FILED AS OF DATE: 19950505 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA GENERAL CORP CENTRAL INDEX KEY: 0000026999 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 042436397 STATE OF INCORPORATION: DE FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07352 FILM NUMBER: 95534698 BUSINESS ADDRESS: STREET 1: 4400 COMPUTER DR CITY: WESTBORO STATE: MA ZIP: 01580 BUSINESS PHONE: 5088985000 10-Q 1 Q2 FY95 10Q ====================================================================== 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 March 25, 1995 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 1-7352 Data General Corporation (Exact name of registrant as specified in its charter) Delaware 04-2436397 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4400 Computer Drive, Westboro, Massachusetts 01580 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508)898-5000 Former name, former address and former fiscal year if changed since last report: Not Applicable 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 Number of shares outstanding of each of the registrant's classes of common stock, as of April 21, 1995: Common Stock, par value $.01 37,166,851 (Title of each class) (Number of shares) ====================================================================== PART I -- FINANCIAL INFORMATION Item 1. Financial Statements. The condensed consolidated financial statements of Data General Corporation (the "company"), consisting of condensed consolidated statements of operations for the three and six months ended March 25, 1995 and March 26, 1994, condensed consolidated balance sheets as of March 25, 1995 and September 24, 1994, condensed consolidated statements of cash flows for six months ended March 25, 1995 and March 26, 1994, and related notes to condensed consolidated financial statements, are incorporated herein by reference to pages 3 through 6 of the company's Second Quarter 1995 Interim Report. The Second Quarter 1995 Interim Report has been included as Exhibit 19 to copies of this Report filed with the Securities and Exchange Commission. Copies of the Interim Report may be obtained by written request to the company, Attn: Investor Relations, MS B-221, 4400 Computer Drive, Westboro, MA 01580. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Financial Condition Cash and temporary cash investments as of March 25, 1995 were $110.6 million, a decrease of $31.9 million from the end of fiscal 1994. In addition, the company holds $111.0 million in marketable securities, a net increase of $63.1 million during the current six-month period. These securities, which supplemented cash and temporary cash investments, are primarily invested in United States Treasury bills and notes. The increase in marketable securities is primarily due to funds received from a software copyright infringement settlement received in the first quarter of the current fiscal year. Net cash provided from operations for the six months ended March 25, 1995 totaled $90.3 million, expenditures for property, plant, and equipment were $48.2 million, capitalized software development costs totaled $12.7 million, and cash provided from stock plans totaled $3.7 million. The company made a $.6 million investment in an unaffiliated entity and repaid $2.7 million of long-term debt during the current six-month period. The effect of foreign currency rate fluctuations on cash and temporary cash investments was an increase of $1.5 million. Net receivables increased $10.6 million from fiscal year-end 1994. Revenues were lower than that of the quarter ended September 24, 1994, resulting in an increase in days sales outstanding from 80 days to 86 days. Total inventories at March 25, 1995 decreased $4.7 million from fiscal year-end 1994 levels. The decrease was primarily due to a worldwide decrease in work in process inventory. Fixed asset dispositions for the current six-month period totaled $3.6 million, primarily due to the sale of demonstration equipment to end-users. Management expects that sales of demonstration equipment will continue in the future. Approximately 20% of the company's net fixed assets relate to the company's proprietary ECLIPSE MV ("MV") family of products and are primarily comprised of spare parts required to support the MV service base of over 19,000 installed units worldwide as well as those MVs which are serviced by third parties. Accounts payable increased $24.8 million from fiscal year-end 1994 levels, primarily as a result of the timing of purchases from vendors in the current quarter and an increase in Value Added Taxes to be paid by the company's foreign subsidiaries. Other current liabilities increased $1.8 million from fiscal year-end 1994, primarily as a result of the income tax provision of $7 million recorded for the quarter ended December 24, 1994, an increase in deferred revenues from systems integration activities, and employee related accruals. These increases were partially offset by the settlement of certain obligations accrued as part of restructuring charges recorded in previous years. Long-term debt, including the current portion of long-term debt, decreased a total of $2.7 million during the current six-month period as a result of the company reacquiring a portion of the 8 3/8% Sinking Fund Debentures due in 2002. Effective December 21, 1994 the company entered into a $30 million unsecured letter of credit facility with a group of banks. This agreement, which is available to secure issuance of letters of credit, has a duration of 364 days. The facility contains certain covenants, including restrictions on the sale or pledge of certain assets, the declaration of dividends, and the incurrence of other debt. At March 25, 1995 there were $8.2 million letters of credit secured by this facility. The new agreement replaced the company's unsecured $40 million revolving credit facility and $30 million letter of credit facility. During fiscal years 1994 and 1993, the company recorded restructuring charges of $35 million and $25 million, respectively. No additional charges or material changes in estimates to prior provisions were recorded during the first six-month period of fiscal 1995. The following table sets forth the company's restructuring charges for the period ended March 25, 1995. All charges, excluding asset writedowns and certain other charges, are cash in nature and are funded from operations. SIX MONTHS ENDED BALANCE MAR. 25, 1995 BALANCE IN MILLIONS SEP. 24, 1994 CHARGES MAR. 25, 1995 Provision related to terminated employees: Termination payments $15.2 $11.1 $4.1 Pension and OPEB costs (curtailment loss) 1.5 -- 1.5 Other costs 1.1 -- 1.1 Provisions related to employees not terminated 1.9 -- 1.9 Provisions for leases 14.0 4.5 9.5 Writedown of assets to be sold and discarded .7 -- .7 Other 2.3 1.3 1.0 Total $36.7 $16.9 $19.8 During the first six months of the current year there were approximately 268 terminations, primarily relating to the fiscal 1994 restructuring charge. The remaining provision at March 25, 1995 is for the future terminations of approximately 100 employees, as part of the continuing realignment of the company's worldwide sales, service, and other operations. The charges and remaining provision for leases are for the closure of various domestic branch sales offices and excess vacant rental properties, primarily located in the United Kingdom. In light of the current quarter results, the company has identified and begun implementing additional cost reduction steps. These measures include further worldwide workforce reductions of between 400 and 500 employees (in addition to the approximately 100 employees described in the preceeding paragraph and included in an earlier restructure provision). The costs associated with this workforce reduction along with other cost reduction actions, primarily related to real estate, will be reported in the quarter ending June 24, 1995 as a restructuring charge. Management expects this charge to be approximately $40 million. Results of Operations Total revenues for the quarter ended March 25, 1995 were $283.8 million, relatively unchanged from the same quarter of the previous year. Domestic revenues, excluding U.S. direct export sales, were $150.1 million for the current quarter, a 7% decrease from $161.0 million for the comparable period of fiscal 1994. Domestic revenues were 53% of total revenues for the current quarter and 57% of total revenues for the second quarter of fiscal 1994. European revenues, including U.S. direct export sales into the European marketplace, were $92.2 million, an increase of 20% from $77.1 million for the comparable period in fiscal 1994. European revenues represented 32% and 27% of total revenues in the current and prior-year periods, respectively. Other international revenues, including U.S. direct export sales, were $41.5 million for the current quarter, a 7% decrease from $44.8 million for the comparable period in fiscal 1994. Other international revenues represented 15% of total revenues in the current quarter and 16% of total revenues in the comparable prior-year period. The decrease in domestic revenues is primarily due to longer sales cycles required by large corporate enterprises which the company focused its efforts on during the current quarter. The increase in European revenues is primarily a result of the weakening of the U.S. dollar in relation to foreign currencies, and the growing acceptance of Open CLARiiON, the company's mass-storage systems, in this marketplace. Total domestic revenues of $298.9 million for the six months ended March 25, 1995 decreased 3% from $309.1 million for the first six-month period of fiscal 1994. Domestic revenues were 53% of total revenues in the current six-month period and 57% of total revenues for the comparable prior-year period. European revenues were $175.0 million for the first six-month period of the current year, compared with $145.4 million for the first six-month period of the fiscal 1994. European revenues represented 31% of total revenues in the current six-month period and 27% of total revenues in the prior-year period. Other international revenues were $92.1 million for the current six-month period, compared with $89.7 million for the comparable period in fiscal 1994. Other international revenues represented 16% of total revenues for both the current six-month period and the prior-year period. Product revenues for the current quarter remained relatively unchanged from the comparable prior-year period. Revenues from the company's Open CLARiiON storage systems produced significant revenue growth from the comparable quarter in fiscal year 1994 and accounted for 18% of total product revenues in the current quarter. Revenues from the company's AViiON family of open systems server products remained relatively unchanged compared with the same period of the prior year. Proprietary MV system revenues declined almost $12 million from the same period in the prior year and currently represent only 7% of total product revenues. Revenues from personal computers and other low margin equipment declined 24% from the same quarter of the prior year. Domestic product revenues, which were $93.6 million for the current quarter, decreased 10% from $103.5 million for the comparable period in fiscal 1994. Domestic product revenues were 51% of total product revenues in the current quarter and 56% of total product revenues in the comparable prior-year period. European product revenues were $59.8 million for the current quarter, a 26% increase from $47.3 million in the comparable prior year quarter. European product revenues represented 33% and 26% of total product revenues for the current and comparable prior-year period, respectively. Other international product revenues were $30.6 million for the current quarter, a 9% decrease from $33.5 million for the comparable period in fiscal 1994. Other international product revenues represented 17% of total product revenues in the current quarter and 18% of total product revenues in the comparable prior-year period. The increase in European product revenues was due to increased demand and acceptance of the company's Open CLARiiON storage line and from the weakening of the U.S. dollar in relation to European currencies. Product revenues of $365.2 million for the six months ended March 25, 1995 increased 5% from $348.0 million for the first six-month period of fiscal 1994. Domestic product revenues of $185.8 million for the first six-month period of the current year decreased 5% from $195.2 million for the first six-month period of the fiscal 1994. Domestic product revenues represented 51% of total product revenues in the current six-month period and 56% of total revenues in the prior-year period. European product revenues of $110.0 million for the first six-month period of the current year increased 29% from $85.6 million for the first six-month period of the fiscal 1994. European product revenues represented 30% of total product revenues in the current six-month period and 25% of total revenues in the prior-year period. Other international revenues were $69.3 million for the current six-month period, compared with $67.3 million for the comparable period in fiscal 1994. Other international revenues represented 19% of total revenues for both the current six-month period and the prior-year period. Service revenues for the current quarter were $99.8 million, a slight increase from $98.6 in the comparable period of fiscal 1994. Domestic service revenues for the current quarter were $56.5 million, relatively unchanged from $57.5 million in the comparable prior-year period. European service revenues were $32.4 million, an 8% increase from $29.9 million for the comparable prior year period. Other international service revenues for the current quarter were $10.9 million, compared to $11.3 million for the comparable prior-year period. The increase in European service revenues was primarily a result of an increase in systems integration revenue and the weakening of the U.S. dollar in relation to European currencies in the current quarter as compared to the same prior-year period. Service revenues for the current six-month period were $200.8 million, compared to $196.2 million for the first six-month period of fiscal year 1994. For the current six-month period, domestic service revenues were $113.0 million, relatively unchanged from the $113.9 million in the first six-month period of the fiscal 1994. European service revenues for the current six-month period were $65.0 million, a 9% increase from $59.8 million reported for the first six-month period of fiscal 1994. Other international service revenues were $22.8 million for the current six-month period, relatively unchanged from the $22.5 million reported for the first six-month period of fiscal year 1994. The increase in European service revenues resulted primarily from the weakening of the U.S. dollar in relation to European currencies in the current six-month period when compared to the same prior-year period and an increase in systems integration revenues. Cost of product revenues was 66% of product revenues for both the current quarter and current six-month period ended March 25, 1995, relatively unchanged from 67% for the same periods of the prior year. Cost of service revenues for both the current quarter and first six-month period represented approximately 65% of service revenues, compared with 64% and 61% of service revenues, respectively, for the same periods of fiscal 1994. The company continues to see a shift in service revenues towards increased systems integration activities, which yield a lower margin than traditional contract support service revenues. Research and development expenses for the current quarter decreased 14% to $19.6 million from the second quarter of fiscal 1994. Research and development expenses represented 7% of total revenues in the current quarter, as compared to 8% for the same prior-year period. For the current six-month period, research and development expenses were 7% of total revenues, decreasing 11% to $41.3 million from the comparable prior-year period. The company continues to focus its research and development efforts on its core business technology, multi-user computer systems, servers, and mass storage devices. The research and development expense decrease for the current six-month period as compared to the same period in the prior year was primarily caused by the company dedicating a higher proportion of its resources to capitalizable software development. Gross expenditures on research and development, before capitalization, were down only 1% for the current quarter and 2% for the current six-month period compared to the same prior-year periods. Selling, general, and administrative expenses for the current quarter and current six-month period were relatively unchanged from the comparable periods of fiscal 1994. Selling, general, and administrative expenses represented 31% of total revenues in both the current quarter and in the comparable prior-year period and 31% and 32%, respectively, for the current six-month period and the same period in the prior year. The company has responded to increasingly competitive industry conditions through ongoing cost reduction and containment programs. Reductions in selling, general and administrative expenses for these programs have been primarily offset by the weakening of the U.S. dollar in relation to foreign currencies and increased expenditures for advertising and other marketing related programs. At March 25, 1995 the number of employees totaled 5,585, a reduction of 660 employees from March 26, 1994. Interest income for the current quarter almost doubled to $2.6 million from the comparable period of fiscal 1994, due to higher levels of invested cash and increasing market interest rates. Interest expense remained relatively unchanged from the same period of fiscal 1994. The income tax provisions for the current quarter and first six-month period were $.5 million and $7.5 million, respectively, compared with $.5 million and $1.1 million for the comparable prior year periods, respectively. The provision in the first six months of the current year resulted primarily from the settlement of the Grumman lawsuit, deferred tax on undistributed earnings for certain foreign subsidiaries, and foreign and state taxes. In the first quarter of fiscal 1995, the company adopted Statement of Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for Post-Employment Benefits" and SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities". SFAS 112 requires the accrual of liabilities for the estimated cost of benefits provided by the employer to former or inactive employees. SFAS 115 addresses accounting and reporting for investments in certain debt and equity securities that will not be held until maturity. All of the company's marketable securities at September 24, 1994 and March 25, 1995 have maturities of less than one year, and have been classified as being 'held-to-maturity'. The implementation of SFAS 112 and SFAS 115 did not have a material effect on the company's consolidated financial position or results of operations. In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS 114, "Accounting by Creditors for Impairment of a Loan". In October 1994, the FASB issued SFAS 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments". SFAS 114 is effective for fiscal years commencing after December 15, 1994 and SFAS 119 is effective for fiscal years ending after December 15, 1994. The company will implement these statements as required. The future adoption of SFAS 114 and SFAS 119 are not expected to have a material effect on the company's consolidated financial position or results of operations. PART II -- OTHER INFORMATION Item 1. Legal Proceedings In the first quarter of fiscal 1995, the company settled with Northrop Grumman Corporation its six-year copyright infringement and trade secrets litigation against Grumman Systems Support Corporation ("Grumman"). Under the terms of this settlement, Grumman paid the company $53 million and the parties have dismissed all pending litigation. The settlement resulted in a pre-tax gain, net of related legal fees and other expenses, of $44.5 million. In November, 1994, the company commenced an action against IBM Corporation in the Federal District Court in Boston, Massachusetts claiming several IBM products including the AS/400 mid-range systems and System/390 mainframe line infringed various company patents. The suit seeks, among other relief, compensatory damages. In January, 1995, IBM answered the complaint, denied the company's infringement claims and counterclaimed against the company, alleging that the company's AViiON and CLARiiON products infringed various IBM patents. This action is in the discovery stage. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 11. Computation of primary and fully diluted earnings per share. 19. Second Quarter 1995 Interim Report of Data General Corporation. (b) No reports on Form 8-K were filed during the current quarter ended March 25, 1995. SIGNATURE 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. DATA GENERAL CORPORATION (Registrant) /s/ Arthur W. DeMelle Arthur W. DeMelle Vice President Chief Financial Officer Chief Accounting Officer Dated: May 4, 1995 EXHIBITS Index to Exhibits. 11. Computation of primary and fully diluted earnings per share. 19. Second Quarter 1995 Interim Report of Data General Corporation. EX-11 2 COMPUTATION OF PRIMARTY AND FULLY DILUTED EARNINGS PER SHARE EXHIBIT 11 DATA GENERAL CORPORATION COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE (Unaudited) (In thousands except per share amounts) Quarter Ended Six Months Ended March 25, March 26, March 25, March 26, 1995 1994 1995 1994 Primary earnings per share: Net income (loss) . . . . . . $(11,061) $(47,989) $13,145 $(69,080) Weighted average shares outstanding. . . . . . . . . . 36,906 35,649 37,559 35,491 Incremental shares from use of treasury stock method for stock options. . . -- -- -- -- Common and common equivalent shares, where applicable. . .36,906 35,649 37,559 35,491 Net income (loss) per share . . $(0.30) $(1.35) $0.35 $(1.95) Earnings per share assuming full dilution:(a) Net income (loss) . . . . . . $(11,061) $(47,989) $13,145 $(69,080) Weighted average shares outstanding . . . . . . . . 36,906 35,649 37,559 35,491 Incremental shares from use of treasury stock method for stock options.. -- -- -- -- Common and common equivalent shares assuming full dilution 36,906 35,649 37,559 35,491 Net income (loss) per share . . $(0.30) $(1.35) $0.35 $(1.95) (a) For the quarters and six-month periods ended March 25, 1995 and March 26, 1994, the assumed conversion of convertible debentures, giving effect to the incremental shares and the adjustment to reduce interest expense, was anti-dilutive and has therefore been excluded from the computation. EX-19 3 2ND QUARTER 1995 INTERIM REPORT Data General Corporation Second Quarter 1995 Interim Report Period Ending March 25, 1995 Data General Bringing Common Sense to Computing TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES: Data General reported a net loss of $11.1 million, or $.30 per share, for its second quarter of fiscal 1995, which ended March 25, 1995. For the second quarter of last year, the company reported a net loss of $48.0 million, or $1.35 per share, including a restructuring charge of $35.0 million. Revenues for the second quarter were $283.8 million. For the comparable quarter last year the company reported revenues of $282.9 million. The second quarter results were disappointing, particularly in terms of revenue performance. Revenues for our AViiON server line were flat, both year over year and compared to the first quarter. We have been focusing our sales efforts on larger enterprises which are moving to client/server technology. These efforts involve investments in longer sales cycles and in stronger relationships with key software providers. Although the benefits of these investments are not yet reflected in our revenues, we remain convinced that this sales strategy is essential to future revenue growth. As we introduce new AViiON products later this year and further strengthen our software partnerships, we will have significant opportunity to attract new enterprise server-class customers. In light of the disappointing results, we have identified and begun implementing additional cost reduction steps. These include further worldwide workforce reductions, the majority of which will be completed during our third fiscal quarter, which ends in June. Between 500 and 600 employees will be affected by the workforce reductions. At the end of the second quarter, Data General had approximately 5,600 employees. The costs associated with the workforce reduction along with other cost reduction activities, primarily related to real estate, will be reported in the third quarter as a restructuring charge. We expect the charge to be approximately $40 million. While undertaking these cost reduction actions, we will continue to invest in key strategic areas that generate revenue growth. During the quarter, the CLARiiON Business Unit strengthened its worldwide distribution channel with the addition of several new partners. Included was an agreement with Silicon Graphics, Inc., which will use CLARiiON disk arrays with its CHALLENGE line of network resource servers. We again experienced solid growth from our Open CLARiiON storage line, which posted a revenue increase of more than 40 percent over the first quarter. Our expectation is that CLARiiON will continue to experience strong growth throughout the remainder of fiscal 1995. Data General's financial position continues to be strong, with cash and marketable securities of $221.6 million at the end of the second quarter. For the first six months of fiscal 1995, Data General reported net income of $13.1 million, or $.35 per share. This includes a one-time pre-tax gain of $44.5 million resulting from the settlement of a software copyright infringement and trade secret lawsuit against Northrop Grumman Corporation. For the same period last year, the company reported a net loss of $69.1 million, or $1.95 per share, including the restructuring charge. Revenues for the first two quarters of 1995 totaled $566.0 million, compared to $544.1 million for the first two quarters of fiscal 1994. Data General is committed to returning to and sustaining profitability and we believe we are taking the necessary steps and have the right strategy and product direction to accomplish these goals. Respectfully submitted, Ronald L. Skates President and Chief Executive Officer May 3, 1995 DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Quarter Ended Six Months Ended in thousands, except Mar. 25, Mar. 26, Mar. 25, Mar. 26, net income (loss) per share 1995 1994 1995 1994 Revenues: Product . . . . . . . . . . . . $184,031 $184,335 $365,224 $348,032 Service . . . . . . . . . . . . 99,760 98,592 200,772 196,122 Total revenues . . . . . . 283,791 282,927 565,996 544,154 Costs and expenses: Cost of product revenues. . . . 122,273 122,814 241,731 234,417 Cost of service revenues. . . . 64,474 62,970 128,969 120,526 Research and development. . . . 19,588 22,720 41,252 46,236 Selling, general, and administrative . . . . . . . . 87,098 87,037 173,088 174,060 Restructure charge. . . . . . . -- 35,000 -- 35,000 Total costs and expenses . 293,433 330,541 585,040 610,239 Loss from operations. . . . . . . . (9,642) (47,614) (19,044) (66,085) Interest income . . . . . . . . . . 2,581 1,317 4,773 2,771 Interest expense. . . . . . . . . . 3,500 3,545 7,056 7,019 Other income, net . . . . . . . . . -- 2,353 41,972 2,353 Income (loss) before income taxes . (10,561) (47,489) 20,645 (67,980) Income tax provision. . . . . . . . 500 500 7,500 1,100 Net income (loss) . . . . . . . . . $(11,061) $(47,989) $ 13,145 $(69,080) Net income (loss) per share . . . . $(0.30) $(1.35) $ 0.35 $(1.95) Weighted average shares outstand- ing, including common stock equivalents where applicable. . . 36,906 35,649 37,559 35,491 No cash dividends have been declared or paid since inception. The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. DATA GENERAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) Mar. 25, Sept. 24, dollars in thousands 1995 1994 Assets Current assets: Cash and temporary cash investments . . . . . . . . . $110,552 $142,448 Marketable securities . . . . . . . . . . . . . . . . 111,009 47,865 Receivables, net. . . . . . . . . . . . . . . . . . . 269,279 258,709 Inventories . . . . . . . . . . . . . . . . . . . . . 113,732 118,412 Other current assets. . . . . . . . . . . . . . . . . 32,510 30,642 Total current assets . . . . . . . . . . . . . . . . 637,082 598,076 Property, plant, and equipment, net. . . . . . . . . . 170,775 164,777 Other assets . . . . . . . . . . . . . . . . . . . . . 62,832 59,011 $870,689 $821,864 Liabilities and stockholders' equity Current liabilities: Notes payable . . . . . . . . . . . . . . . . . . . . $ 2,625 $ 2,461 Accounts payable. . . . . . . . . . . . . . . . . . . 117,112 92,338 Other current liabilities . . . . . . . . . . . . . . 233,889 232,066 Total current liabilities. . .. . . . . . . 353,626 326,865 Long-term debt . . . . . . . . . . . . . . . . . . . . 154,872 156,942 Other liabilities. . . . . . . . . . . . . . . . . . . 31,015 29,445 Stockholders' equity: Common stock: Outstanding -- 37,139,000 shares at Mar. 25, 1995 and 36,457,000 shares at Sept. 24, 1994 (net of deferred compensation of $8,045 at Mar. 25, 1995 and $9,348 at Sept. 24, 1994). . . . . . . . . . . 440,827 434,757 Accumulated deficit. . . . . . . . . . . . . . . . (103,778) (116,923) Cumulative translation adjustment. . . . . . . . . (5,873) (9,222) Total stockholders' equity . . . . . . . . 331,176 308,612 $870,689 $821,864 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended Mar. 25, Mar. 26, in thousands 1995 1994 Cash flows from operating activities: Net income (loss) . . . . . . . . . . . . . . . . . . .$13,145 $(69,080) Adjustments to reconcile net income (loss) to net cash provided from operating activities: Depreciation. . . . . . . . . . . . . . . . . . . . . 36,371 40,252 Amortization of capitalized software development costs 8,200 8,959 Other non-cash items, net . . . . . . . . . . . . . . 14,088 17,004 Change in operating assets and liabilities . . . . . 18,489 51,546 Net cash provided from operating activities . . . . . 90,293 48,681 Cash flows from investing activities: Expenditures for property, plant, and equipment . . (48,223) (47,714) Net proceeds from (purchases of) marketable securities(63,144) 11,010 Capitalized software development costs. . . . . . . . (12,733) (9,000) Net proceeds from (purchases of) investments. . . . . . (600) 3,793 Net cash used by investing activities . . . . . . . .(124,700) (41,911) Cash flows from financing activities: Cash provided from stock plans. . . . . . . . . . . . . 3,696 3,629 Repayment of long-term debt . . . . . . . . . . . . . (2,700) (1,234) Net cash provided from financing activities . . . . . 996 2,395 Effect of foreign currency rate fluctuations on cash and temporary cash investments. . . . . . . . . 1,515 56 Increase (decrease) in cash and temporary cash investments . . . . . . . . . . . . . . . . .(31,896) 9,221 Cash and temporary cash investments - - beginning of period . . . . . . . . . . . . . . . . 142,448 119,560 Cash and temporary cash investments - end of period . $110,552 $128,781 Supplemental disclosure of cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . $ 6,373 $ 6,513 Income taxes paid . . . . . . . . . . . . . . . . . . $ 1,117 $ 1,232 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. DATA GENERAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Consolidated Balance Sheet Details Mar. 25, Sept. 24, in thousands 1995 1994 Inventories: Raw materials . . . . . . . . . . . . . . . . . . . $ 10,132 $ 11,791 Work in process . . . . . . . . . . . . . . . . . . 30,940 36,282 Finished systems. . . . . . . . . . . . . . . . . . 32,697 35,521 Field engineering parts and components. . . . . . . 39,963 34,818 $113,732 $118,412 Property, plant, and equipment: Property, plant, and equipment. . . . . . . . . . . $631,016 $642,924 Accumulated depreciation. . . . . . . . . . . . . . (460,241) (478,147) $170,775 $164,777 Note 2. Letter of Credit and Reimbursement Agreement Effective December 21, 1994, the company entered into a $30 million unsecured letter of credit facility with a group of banks. This agreement, which is available to secure issuance of letters of credit, has a duration of 364 days. The facility contains certain covenants, including restrictions on the sale or pledge of certain assets, the declaration of dividends, and the incurrence of other debt. At March 25, 1995 there were $8.2 million letters of credit secured by this facility. The new agreement replaced the company's unsecured $40 million revolving credit facility and $30 million letter of credit facility. Note 3. Litigation In the first quarter of fiscal 1995, the company settled with Northrop Grumman Corporation its six-year software copyright infringement and trade secrets litigation against Grumman Systems Support Corporation ("Grumman"). Under the terms of this settlement, Grumman paid the company $53 million and the parties have dismissed all pending litigation. The company recognized a pre-tax gain, net of related legal fees and other expenses, of $44.5 million resulting from the settlement, which is included in other income, net, in the consolidated statement of operations. This amount has been partially offset by certain other non-operating expenses. Note 4. Basis of Presentation In the first quarter of fiscal 1995, the company adopted Statement of Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for Post-Employment Benefits" and SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities". SFAS 112 requires the accrual of liabilities for the estimated cost of benefits provided by the employer to former or inactive employees. SFAS 115 addresses accounting and reporting for investments in certain debt and equity securities that will not be held until maturity. All of the company's marketable securities at September 24, 1994 and March 25, 1995 have maturities of less than one year, and have been classified as being 'held-to-maturity'. The implementation of SFAS 112 and SFAS 115 did not have a material effect on the company's consolidated financial position or results of operations. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation. The company's accounting policies are described in the Notes to Consolidated Financial Statements in the company's 1994 Annual Report. The results of operations for the quarter ended March 25, 1995 are not necessarily indicative of the results for the entire fiscal year. EX-27 4 ART. 5 FDS 2ND QUARTER 10-Q
5 1,000 3-MOS SEP-30-1995 MAR-25-1995 110,552 111,009 283,468 14,189 113,732 32,510 631,016 460,241 870,689 353,626 154,872 440,827 0 0 (109,651) 870,689 184,031 283,791 122,274 186,748 106,686 0 3,500 ( 10,561) 500 ( 11,061) 0 0 0 ( 11,061) ( 0.30) 0
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