-----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, Nw+KTeivDZjVrUZbUc1muSbzzhJQZRBuspI84oMoaBS+RZXwPH5jdVSr35mNlm2L fDbEvkndOc1lVqLEQkUdBw== 0000026999-94-000011.txt : 19940901 0000026999-94-000011.hdr.sgml : 19940901 ACCESSION NUMBER: 0000026999-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940625 FILED AS OF DATE: 19940804 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA GENERAL CORP CENTRAL INDEX KEY: 0000026999 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94541711 BUSINESS ADDRESS: STREET 1: 4400 COMPUTER DR CITY: WESTBORO STATE: MA ZIP: 01580 BUSINESS PHONE: 5088985000 10-Q 1 Q3 FY94 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 June 25, 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 1-7352 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 shor- ter 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 issuer's classes of common stock, as of July 22, 1994: Common Stock, par value $.01 35,997,278 (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 nine months ended June 25, 1994 and June 26, 1993, condensed consolidated balance sheets as of June 25, 1994 and September 25, 1993, condensed consolidated statements of cash flows for the nine months ended June 25, 1994 and June 26, 1993, and related notes to condensed consolidated financial statements, are incorporated herein by reference to pages 3 through 6 of the company's Third Quarter 1994 Interim Report. The Third Quarter 1994 Interim Report has been included as Exhibit 20 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 A-235, 4400 Computer Drive, Westboro, MA 01580. During the first quarter of fiscal 1994, the company adopted Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes". See Item 1. "Financial Statements" to the company's Form 10-Q for the quarter ended December 25, 1993. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Financial Condition Cash and temporary cash investments as of June 25, 1994 were $112.4 million, a decrease of $7.2 million from the end of fiscal 1993. In addition, as of June 25, 1994, the company held $48.7 million in marketable securities, a net decrease of $23.7 million during the current nine-month period. These securities, which supplemented cash and temporary cash investments, are primarily invested in United States Treasury bills and notes. Net cash provided from operations for the nine months ended June 25, 1994 totaled $44.6 million, expenditures for property, plant, and equipment were $71.3 million, capitalized software development costs totaled $13.1 million, and cash provided from stock plans totaled $4.1 million. Net proceeds from the sale of non-operating assets totaled $6.8 million. These non-operating assets were comprised of vacant real estate and investments in an unaffiliated entity. The company also made a $2.0 million investment in an unaffiliated entity during the current nine-month period. The company repaid $1.2 million of long-term debt in the current nine-month period. The effect of foreign currency rate fluctuations on cash and temporary cash investments was an increase of $1.3 million. Net receivables decreased $26.1 million from fiscal year-end 1993, primarily as a result of increased collection efforts worldwide and a decrease in revenues in the European marketplace which generally has a longer collection cycle than the domestic operation. In addition, due to a change in the general composition of the outstanding receivables portfolio, bad debt reserve requirements have increased 12% over fiscal year-end 1993 levels. Total inventories at June 25, 1994 increased $16.4 million from year-end 1993 levels, primarily due to a shift in the timing of inventory procurements. Accounts payable increased $7.8 million from fiscal year-end 1993, primarily due to the increase in overall inventory levels. Fixed asset dispositions for the first nine-month period totaled $12.8 million, primarily as a result of sales of demonstration equipment to end-users and approximately a $4.0 million writedown of net book value of fixed assets to their realizable value as part of the consolidation of certain activities in the European marketplace. Management expects that sales of demonstration equipment will continue in the future. The writedown as a result of the consolidation activities is included in the restructuring charge recorded during the first nine-month period of fiscal 1994. 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. Other current liabilities increased $16.9 million from fiscal year-end 1993 due primarily to increased personnel and commission related accruals and the $35 million restructure charge taken in the current nine-month period, offset by payments made relating to the current as well as previously recorded restructuring accruals. Other liabilities increased $4.3 million from fiscal year-end 1993, primarily as a result of normal accruals recorded for the company's pension plans and an increase in deferred service revenues. Effective December 30, 1993, the company replaced a $70 million revolving credit facility with an unsecured $40 million revolving credit facility and an unsecured $30 million letter of credit facility with the same group of banks as the original credit facility. The revolving credit facility has a duration of one year; the letter of credit facility has a duration of 364 days and provides for automatic renewal on a daily basis. The facilities include certain covenants, including restrictions on the sale or pledge of certain assets, the declaration of dividends and the incurrence of other debt. The interest rate for borrowings under each facility is 1.5% per annum above the London Interbank Offered Rate (LIBOR). Commitment fees paid on available funds are not material and there were $11.6 million of letters of credit secured by the letter of credit facility at June 25, 1994. There were no borrowings under the revolving credit facility as of June 25, 1994. Results of Operations Total revenues for the quarter ended June 25, 1994 increased 12% from the same quarter of the previous year. Domestic revenues, excluding U.S. direct export sales, were $161.6 million for the cur- rent quarter, a 19% increase from $135.4 million for the comparable period of fiscal 1993. Domestic revenues were 57% of total revenues in the current quarter, compared with 54% of total revenues for the third quarter of fiscal 1993. European revenues were $77.6 million for the current quarter, a 7% decrease from $83.7 million for the comparable period in fiscal 1993. European revenues represented 27% of total revenues in the current quarter and 33% of total revenues in the prior-year period. Other international revenues were $44.7 million for the current quarter, a 34% increase from $33.3 million for the comparable period in fiscal 1993. Other international revenues represented 16% and 13% of total revenues in the current quarter and prior-year period, respectively. The increase in total revenues for the current quarter was primarily due to the increase in demand for the company's AViiON products and CLARiiON products sold for use with other vendors' hardware (Open CLARiiON), along with an increase in demand for personal computers and related equipment. The increase in these product sales offset the continuing decrease in sales of proprietary MV products. These increases were partially offset by a decrease resulting from the strengthening of the U.S. dollar in relation to foreign currencies. Domestic revenues of $470.5 million for the nine months ended June 25, 1994 increased 12% from $421.9 million for the first nine-month period of fiscal 1993. Domestic revenues were 57% of total revenues in the current nine-month period and 53% of the total revenues for the comparable prior-year period. European revenues were $227.2 million for the first nine-month period of the current year, compared with $261.0 million for the first nine-month period of fiscal 1993. European revenues represented 27% of total revenues in the current nine-month period and 33% of total revenues in the prior-year period. Other international revenues were $130.2 million for the current nine-month period, compared with $116.5 million for the comparable period in fiscal 1993. Other international revenues represented 16% of total revenues in the current nine-month period and 15% of total revenues in the prior-year period. Product revenues for the current quarter increased 21% from the comparable prior-year period. Revenues from the company's AViiON family of open systems products grew 24% during the current quarter when compared with the third quarter of fiscal 1993. The company's new line of Open CLARiiON mass storage systems produced significant revenue growth compared to the third quarter of fiscal 1993 and comprised 9% of total product revenues in the current quarter. The company is making a conscious effort to expand distribution channels for these products. Proprietary MV system revenues declined 36% from the same period in the prior year. Revenues from personal computers and other equipment increased 28% over the same quarter of the prior year. It is anticipated that the revenues generated from the MV product line will continue to be negatively impacted by the industry's transition to open systems technology. Domestic product revenues, which were $103.3 million for the current quarter, increased 32% from $78.2 million for the comparable period in fiscal 1993. Domestic product revenues were 56% of total product revenues in the current quarter and 51% of total product revenues in the comparable prior-year period. The increase in domestic product revenues was due to the increase in demand for the company's newest generation of AViiON products and increases in both personal computer and Open CLARiiON equipment sales. European product revenues were $47.6 million for the current quarter, a 7% decrease from $51.3 million for the comparable period in fiscal 1993. European product revenues represented 26% of total product revenues in the current quarter and 34% in the comparable prior-year period. Other international product revenues were $33.6 million for the current quarter, a 50% increase from $22.4 million for the comparable period in fiscal 1993. Other international product revenues represented 18% of total product revenues in the current quarter and 15% in the comparable prior-year period. The decrease in European product revenues was primarily due to the strengthening of the U.S. dollar in relation to European currencies and the impact of transitioning from the company's traditional proprietary product line to open systems technology. The increase in other international product revenues was primarily in the Asia and Pacific Rim marketplaces. For the current nine-month period, domestic product revenues were $298.4 million compared with $251.6 million for the comparable nine-month period of fiscal 1993. Domestic product revenues were 56% of total product revenues in the current nine-month period and 51% of total product revenues in the comparable prior-year period. European product revenues were $137.4 million for the current nine-month period compared with $160.3 million for the first nine-month period of fiscal 1993. European product revenues were 26% of total product revenues in the current nine-month period and 32% of total product revenues in the comparable prior-year period. Other international product revenues were $96.7 million for the current nine-month period compared with $83.0 million for the first nine-month period of fiscal 1993. Other international product revenues were 18% of total product revenues in the current nine-month period and 17% of total product revenues in the comparable prior-year period. The decrease in European product revenues was primarily due to generally weak economic conditions and the impact of transitioning from the company's traditional proprietary product line to open systems technology and the impact of the strengthening of the U.S. dollar in relation to European currencies. Open CLARiiON revenues have contributed the largest increase to domestic product revenues and have accounted for 10% of these revenues in the current nine-month period. AViiON revenue increases continue to offset decreases from proprietary systems in all geographic segments. Service revenues for the current quarter decreased slightly from the comparable period of fiscal 1993. Domestic service revenues for the current quarter were $58.3 million, a 2% increase from $57.2 million for the third quarter of fiscal 1993. European service revenues for the current quarter were $30.0 million, a 7% decrease from $32.4 million for the prior-year period. Other international service revenues for the current quarter and prior-year period were $11.0 million and $10.9 million, respectively. For the current nine-month period, domestic service revenues were $172.1 million, relatively unchanged from $170.3 million in the first nine-month period of fiscal 1993. European service revenues for the current nine-month period were $89.8 million, an 11% decrease from $100.7 million reported for the first nine-month period of fiscal 1993. Other international service revenues were $33.5 million for the current nine-month period, relatively unchanged from the $33.6 million reported for the first nine-month period of fiscal 1993. A decrease in hardware maintenance service revenues has been partially offset by increased revenues from systems integration and consulting activities, as the company positions itself as a full service provider. The decrease in European service revenues resulted primarily from the strengthening of the U.S. dollar in relation to European currencies in the current nine-month period when compared to the same prior-year period. Cost of product revenues were 68% and 67% of product revenues, respectively, for the current quarter and current nine month period ended June 25, 1994, respectively, compared with 64% and 61% for the same periods of the prior year. Competitive pricing pressures worldwide and the continued transition to the lower margin AViiON family of open systems and Open CLARiiON family of mass storage systems more than offset the benefits resulting from the company's continuing cost reduction and restructuring programs. Cost of service revenues for the current quarter and first nine-month period represented 64% and 62% of service revenues, respectively, compared with 60% and 58% of service revenues, respectively, for the same periods of fiscal 1993. The increase in cost of service revenues as a percentage of total service revenues was primarily a result of the increase in revenues from systems integration activities which yield a lower margin than traditional service contract revenues. Research and development expenses for the current quarter de- creased 8% from the third quarter of fiscal 1993 to $22.1 million, and represented 8% of total revenues in the current quarter. For the current nine-month period, research and development expenses were also 8% of total revenues, decreasing 10% to $68.4 million from the comparable prior-year period. The decrease results primarily from the company continuing to focus its research and development efforts on its core business technology, multi-user computer systems, servers, and mass storage devices. Also, a change in product mix to open systems architecture has increased the use of industry-standard components purchased from third parties, which has reduced spending for research and development in hardware. In addition to the reduction of research and development expenses, the company has also seen a reduction in capitalized software development costs of $3.5 million in the current nine-month period when compared to the same period in the prior year. Selling, general, and administrative expenses for the current quarter decreased 2% from the same prior year period and remained relatively flat for the first nine-month period when compared to the prior-year period. Benefits resulting from the continuing cost reduction and restructuring programs, were for the most part offset by the increase in commissions resulting from the 21% increase in product revenues in the current quarter when compared to the same prior-year period. Selling, general, and administrative expenses represented 29% and 31%, respectively, of total revenues in the current quarter and nine-month period and 34% and 32% of total revenues, respectively, for the comparable prior-year periods. While the company has made significant progress towards becoming a supplier of open systems products and services, the company continues to have a cost structure that is out of line with an open systems business model. In a prior quarter, the company had identified additional cost reduction steps which include the continuing realignment of the company's worldwide sales and service organizations. As a result, income from operations for the current nine-month period includes a $35 million charge for estimated costs associated with a worldwide workforce reduction, of which approximately $4.0 million relates to the writedown of net book value of fixed assets associated with consolidating certain activities in the European marketplace. The provision relating to the workforce reduction is primarily for salary and benefit continuation and outplacement service. At June 25, 1994 the number of employees totaled 5,955, a reduction of 755 employees from June 26, 1993. There have been no material changes in the company's previously announced restructuring actions or the estimates accrued at June 25, 1994. Interest income for the current quarter and the first nine-month period decreased 26% and 32%, respectively, from the comparable periods of fiscal 1993, primarily due to an overall decrease in the levels of invested funds. Interest expense for the current quarter was relatively flat while the first nine-month period decreased 4% from the comparable periods of fiscal 1993 primarily due to the retirement of two separate industrial revenue bonds. Other income of $2.4 million in the nine-month period ended June 25, 1994 resulted from the sale of an investment held by the company in an unaffiliated entity. The income tax provision for the current quarter and first nine-month period was $0.5 million and $1.6 million respectively, compared with $1.2 million and $4.4 million for the same prior-year periods. The provisions resulted primarily from foreign and state taxes. In November 1992, the Financial Accounting Standards Board ("FASB") issued SFAS 112, "Employers' Accounting for Post-Employment Benefits". In May 1993, the FASB issued SFAS 114 and 115, "Accounting by Creditors for Impairment of a Loan" and "Accounting for Certain Investments in Debt and Equity Securities", respectively. SFAS 112 and SFAS 115 are effective for fiscal years beginning after December 15, 1993. SFAS 114 is effective for fiscal years commencing after December 15, 1994. The company will implement these statements as required. The future adoption of SFAS 112, SFAS 114 and SFAS 115 are not expected to have a material effect on the company's consolidated financial position or results of operations. The revenue improvement during the current quarter reinforces management's belief in the company's product and marketing strategy. Management expects revenues from the MV proprietary product line to continue to contribute only a small percentage of the company's overall revenues in future quarters. In light of the significant change in industry trends from proprietary to open systems technology and general economic conditions in the European marketplace, the company remains cautious for the remainder of fiscal 1994. PART II -- OTHER INFORMATION Item 1. Legal Proceedings In a previously reported action, in the U.S. District Court for the District of Massachusetts, a jury, on January 28, 1993, awarded the company $52.3 million in damages and related interest from Grumman Systems Support Corporation ("Grumman") for infringing the company's copyrights and misappropriating trade secrets relating to the company's proprietary MV/ADEX diagnostic software. The award includes approximately $15.9 million in pre-judgment interest. On May 13, 1993, Grumman's motion for judgment notwithstanding the verdict and/or for a new trial was rejected. Grumman has appealed and on December 8, 1993, the appeal was argued to the United States First Circuit Court of Appeals. The appeal remains undecided. The company will not recognize the award in its financial statements until it is received or assured. The company has deferred legal costs incurred subsequent to the jury verdict in order to match these costs with the award when recognized. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: 11. Computation of primary and fully diluted earnings per share. 20. Third Quarter 1994 Interim Report of Data General Corpora- tion. (b) No reports on Form 8-K were filed during the current quarter ended June 25, 1994. 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: August 3, 1994 EXHIBITS Index to Exhibits. 11. Computation of primary and fully diluted earnings per share. 20. Third Quarter 1994 Interim Report of Data General Corporation. EX-11 2 Q3 FY94 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 Nine months Ended June 25, June 26, June 25, June 26, 1994 1993 1994 1993 Primary earnings per share: Net loss. . . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240) Weighted average shares outstanding 35,915 34,774 35,632 34,255 Incremental shares from use of treasury stock method for stock options. . -- -- -- 566 Common and common equivalent shares, where applicable. . . . . 35,915 34,774 35,632 34,821 Net loss per share. . . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67) Earnings per share assuming full dilution:(a) Net loss . . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240) Weighted average shares outstanding 35,915 34,774 35,632 34,255 Incremental shares from use of treasury stock method for stock options. . -- -- -- 566 Common and common equivalent shares assuming full dilution . . 35,915 34,774 35,632 34,821 Net loss per share. . . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67) (a) For the quarters and nine-month periods ended June 25, 1994 and June 26, 1993, 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-20 3 Q3 FY94 INTERIM TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES: Data General Corporation reported a net loss of $12.4 million, or $.34 per share, for its third quarter of fiscal 1994, which ended June 25th, 1994. For the third quarter last year, the company reported a net loss of $16.4 million, or $.47 per share. For the second consecutive quarter, total revenues increased when compared to the comparable quarter of the prior year. The third quarter revenues were $283.8 million, an increase of 12.4 percent over last year's third quarter, when the company reported revenues of $252.4 million. The revenue growth is most encouraging, particularly as it came during a quarter that is traditionally weak for us. This reinforces the belief that the strategy of focusing on the high-end commercial enterprise marketplace is on target. The principle area of growth continues to be our AViiON product line, primarily at the high-end. AViiON revenues were up 24 percent in the quarter over the third quarter of last year. In addition, we saw solid revenue contribution from our Open CLARiiON storage line. Revenues from sales of our proprietary systems represented just 12 percent of product revenues during the quarter. In last year's third quarter, proprietary systems were 22 percent of product revenues. Going forward, the key to returning to profitability is to continue to grow revenues while insuring that our costs are in line with an open systems business model. Since 1989, we have established an installed base of more than 25,000 AViiON systems, with a total value of over $1.25 billion. The AViiON line's capabilities were highlighted again with the announcement in July that our high-end AV 9500 servers had produced the fastest Transaction Processing Council Benchmark-C (TPC-C) results ever achieved on a product that is currently shipping. In addition, results from the tests showed that the AV 9500 Plus 8-processor model offers the best Informix-based TPC-C price/ performance. During the quarter, we strengthened our AViiON line with additional applications software from key enterprise software vendors, including Oracle and Sybase. Oracle's new Oracle 7 Release 7.1 parallel database server software and several components of Sybase's System 10 Enterprise Client/Server software family are now available on the AViiON line. The CLARiiON Business Unit also announced several new reseller agreements during the quarter, including a strategic partnership with Access Graphics, one of Sun Microsystems' leading distributors. In addition, in July Data General and Invincible Technologies Corporation (ITC) announced that ITC's Ultimate-5 RAID disk array, which is based on CLARiiON, is now available on both VMS and UNIX-based Digital Equipment Alpha platforms. For the first nine months of fiscal 1994, Data General reported a net loss of $81.4 million, or $2.29 per share, including a restructuring charge of $35 million recorded in the second quarter, primarily for costs associated with a workforce reduction. For the same period last year, the company reported a net loss of $23.2 million, or $.67 per share. Revenues for the first three quarters of 1994 totaled $827.9 million, compared to $799.5 million for the first nine months of fiscal 1993. Data General's financial position remains strong with cash and marketable securities of $161.1 million at the end of the third quarter. As we complete the transition to an open systems company, we will continue to closely manage our balance sheet. While we continue to be cautious for the short-term, we believe that our ability to grow revenues with our industry-leading products, together with aggressive management of our cost structure, should result in meeting our objective of returning to profitability. Respectfully submitted, (signature) Ronald L. Skates President and Chief Executive Officer August 3, 1994 DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Quarter Ended Nine Months Ended in thousands, except June 25, June 26, June 25, June 26, net loss per share 1994 1993 1994 1993 Revenues: Product . . . . . . . . . . . . $184,497 $151,916 $532,528 $494,906 Service . . . . . . . . . . . . 99,279 100,472 295,401 304,580 Total revenues. . . . . . . . 283,776 252,388 827,929 799,486 Costs and expenses: Cost of product revenues. . . . 124,637 96,656 359,054 302,635 Cost of service revenues. . . . 63,150 60,018 183,676 177,752 Research and development. . . . 22,121 24,126 68,357 75,979 Selling, general, and administrative . . . . . . . . 83,713 85,303 257,773 257,376 Restructure charge. . . . . . . -- -- 35,000 -- Total costs and expenses. . . 293,621 266,103 903,860 813,742 Loss from operations. . . . . . . (9,845) (13,715) (75,931) (14,256) Interest income . . . . . . . . . 1,531 2,070 4,302 6,368 Interest expense. . . . . . . . . 3,546 3,573 10,564 10,952 Other income. . . . . . . . . . . -- -- 2,353 -- Loss before income taxes. . . . . (11,860) (15,218) (79,840) (18,840) Income tax provision. . . . . . . 500 1,200 1,600 4,400 Net loss. . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240) Net loss per share. . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67) Weighted average shares outstand- ing, including common stock equivalents where applicable. . 35,915 34,774 35,632 34,821 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) June 25, Sept. 25, dollars in thousands 1994 1993 Assets Current assets: Cash and temporary cash investments . . . . . . . . . . $112,406 $119,560 Marketable securities . . . . . . . . . . . . . . . . . 48,679 72,395 Receivables, net. . . . . . . . . . . . . . . . . . . . 259,395 285,481 Inventories . . . . . . . . . . . . . . . . . . . . . . 118,262 101,827 Other current assets. . . . . . . . . . . . . . . . . . 36,120 32,397 Total current assets. . . . . . . . . . . . . . . . . 574,862 611,660 Property, plant, and equipment, net . . . . . . . . . . . 179,349 177,551 Other assets. . . . . . . . . . . . . . . . . . . . . . . 70,937 77,118 $825,148 $866,329 Liabilities and stockholders' equity Current liabilities: Notes payable . . . . . . . . . . . . . . . . . . . . . $ 2,377 $ 2,267 Accounts payable. . . . . . . . . . . . . . . . . . . . 93,366 85,571 Other current liabilities . . . . . . . . . . . . . . . 231,998 215,070 Total current liabilities . . . . . . . . . . . . . . 327,741 302,908 Long-term debt. . . . . . . . . . . . . . . . . . . . . . 158,359 158,352 Other liabilities . . . . . . . . . . . . . . . . . . . . 32,275 27,992 Stockholders' equity: Common stock: Outstanding -- 35,976,000 shares at June 25, 1994 and 35,267,000 shares at Sept. 25, 1993 (net of deferred compensation of $10,977 at June 25, 1994 and $11,619 at Sept. 25, 1993). . . . . . . . . . . . 430,604 422,589 Accumulated deficit . . . . . . . . . . . . . . . . . . (110,670) (29,230) Cumulative translation adjustment . . . . . . . . . . . (13,161) (16,282) Total stockholders' equity. . . . . . . . . . . . . . 306,773 377,077 $825,148 $866,329 The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements. DATA GENERAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 25, June 26, in thousands 1994 1993 Cash flows from operating activities: Net loss. . . . . . . . . . . . . . . . . . . . . . . .$(81,440) $(23,240) Adjustments to reconcile net loss to net cash provided from (used by) operating activities: Depreciation. . . . . . . . . . . . . . . . . . . . . 57,298 60,672 Amortization of capitalized software development costs 15,006 12,826 Other non-cash items, net . . . . . . . . . . . . . . 23,744 27,255 Change in operating assets and liabilities (net of effect from sale of facility in fiscal 1993 and sale of land in fiscal 1994). . . . . . . . . . . . . . . 30,004 (12,489) Net cash provided from operating activities . . . . . 44,612 65,024 Cash flows from investing activities: Expenditures for property, plant, and equipment . . . . (71,340) (72,195) Net proceeds from (purchases of) marketable securities. 23,716 (15,788) Capitalized software development costs. . . . . . . . . (13,075) (16,563) Net proceeds from (purchases of) non-operating assets . 4,839 1,883 Net cash used by investing activities . . . . . . . . . (55,860) (102,663) Cash flows from financing activities: Cash provided from stock plans. . . . . . . . . . . . . 4,063 6,636 Decrease in notes payable . . . . . . . . . . . . . . . -- (1,195) Repayment of long-term debt . . . . . . . . . . . . . . (1,234) -- Net cash provided from financing activities . . . . . 2,829 5,441 Effect of foreign currency rate fluctuations on cash and temporary cash investments. . . . . . . . . 1,265 (7,306) Decrease in cash and temporary cash investments . . . . . (7,154) (39,504) Cash and temporary cash investments - beginning of period 119,560 139,445 Cash and temporary cash investments - end of period . . .$112,406 $ 99,941 Supplemental disclosure of cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . .$ 11,498 $ 11,505 Income taxes paid . . . . . . . . . . . . . . . . . . .$ 2,138 $ 2,279 Certain prior year amounts have been reclassified to conform to current year presentation. 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 June 25, Sept. 25, in thousands 1994 1993 Inventories: Raw materials . . . . . . . . . . . . . . . . . . . . . $ 9,389 $ 6,665 Work in process . . . . . . . . . . . . . . . . . . . . 39,178 27,778 Finished systems. . . . . . . . . . . . . . . . . . . . 34,541 31,566 Field engineering parts and components. . . . . . . . . 35,154 35,818 $118,262 $101,827 Property, plant, and equipment: Property, plant, and equipment. . . . . . . . . . . . . $673,454 $659,439 Accumulated depreciation. . . . . . . . . . . . . . . . (494,105) (481,888) $179,349 $177,551 Note 2. Restructuring Loss from operations for the nine months ended June 25, 1994,includes a $35 million provision for estimated expenses resulting from costs associated with a worldwide workforce reduction and the writedown of net book value of fixed assets resulting from the consolidation of certain activities in the European marketplace. The provision relating to the workforce reduction is primarily for salary and benefit continuation and outplacement service. Note 3. Income Taxes In the first quarter of fiscal 1994, the company adopted Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes". SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. Previously, the company used the SFAS 96 asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts. The implementation of SFAS 109 did not have a material effect on either the company's consolidated financial position or results of operations. The company has a valuation allowance which offsets, in all material respects, gross deferred tax assets existing as of June 25, 1994. Note 4. Litigation In a previously reported action, in the U.S. District Court for the District of Massachusetts, a jury, on January 28, 1993, awarded the company $52.3 million in damages and related interest from Grumman Systems Support Corporation ("Grumman") for infringing the company's copyrights and misappropriating trade secrets relating to the company's proprietary MV/ADEX diagnostic software. The award includes approximately $15.9 million in pre-judgment interest. On May 13, 1993, Grumman's motion for judgment notwithstanding the verdict and/or for a new trial was rejected. Grumman has appealed and on December 8, 1993, the appeal was argued to the United States First Circuit Court of Appeals. The appeal remains undecided. The company will not recognize the award in its financial statements until it is received or assured. The company has deferred legal costs incurred subsequent to the jury verdict in order to match these costs with the award when recognized. Note 5. Basis of Presentation In the opinion of management, the accompanying unaudited condensed consol- idated financial statements reflect all adjustments, consisting of normal re- curring 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 1993 Annual Report. The results of operations for the quarter ended June 25, 1994, are not necessarily indicative of the results for the entire fiscal year. -----END PRIVACY-ENHANCED MESSAGE-----