-----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, VMJSidqJO9kJV0tZeIMFq8LqxOn7MXYDXn2MJ57ZE7kO0YLOeR1HDtttWVG3q43a o6ZdT9ZXu6QFn4AXL2hSEQ== 0000927356-94-000073.txt : 19941117 0000927356-94-000073.hdr.sgml : 19941117 ACCESSION NUMBER: 0000927356-94-000073 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVANS & SUTHERLAND COMPUTER CORP CENTRAL INDEX KEY: 0000276283 STANDARD INDUSTRIAL CLASSIFICATION: 3690 IRS NUMBER: 870278175 STATE OF INCORPORATION: UT FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08771 FILM NUMBER: 94558639 BUSINESS ADDRESS: STREET 1: 600 KOMAS DR CITY: SALT LAKE CITY STATE: UT ZIP: 84108 BUSINESS PHONE: 8015825847 MAIL ADDRESS: STREET 1: 600 KOMAS DR CITY: SALT LAKE CITY STATE: UT ZIP: 84108 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _____________________ Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended 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 0-8771 ____________________________ Evans & Sutherland Computer Corporation (Exact name of registrant as specified in its charter) UTAH 87-0278175 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 Komas Drive, Salt Lake City, Utah 84108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (801) 582-5847 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding Shares at October 21, 1994 --------------------------------- ---------------------------------------- Common Stock, $0.20 par value 8,543,258 Form 10-Q Evans & Sutherland Computer Corporation QUARTER ENDED SEPTEMBER 30, 1994
Page No. TABLE OF CONTENTS 2 PART I - FINANCIAL INFORMATION General Statement 3 ITEM 1. Financial Statements Consolidated Statements of Earnings - Nine Months Ended September 30, 1994 and October 1, 1993 4 Consolidated Balance Sheets - September 30, 1994 and December 31, 1993 5-6 Consolidated Abbreviated Statements of Cash Flows - Nine Months Ended September 30, 1994 and October 1, 1993 7 Notes to Financial Statements 8-9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation 10-13 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings 14 ITEM 6. Exhibits and Reports on Form 8-K 14 Signature Page 15
-2- Evans & Sutherland Computer Corporation PART 1 - FINANCIAL INFORMATION General Statement: The following Consolidated Statements of Earnings, Consolidated Balance Sheets, and Consolidated Abbreviated Statements of Cash Flows have been prepared from the accounting records of Evans & Sutherland Computer Corporation without audit (except where presented data is specifically identified as audited) in accordance with Securities and Exchange Commission regulations. The financial statements were prepared in conformity with generally accepted accounting principles applied on a basis consistent with prior periods. All adjustments reflected in the statements are of a normal recurring nature and are necessary for a fair statement of results for the interim periods presented. It is management's opinion that the information presented herein reflects a fair statement of the results of the interim period(s) in all material respects. -3- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Three Months and Nine Months Ended September 30, 1994 and October 1, 1993 (Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended (Unaudited) (Unaudited) ------------------------ ---------------------- Sept. 30, Oct. 1, Sept. 30, Oct. 1, 1994 1993 1994 1993 --------- ------- --------- ------- Net sales $21,934 $33,368 $71,633 $99,293 Cost of sales 11,452 14,989 35,083 47,118 ------- ------- ------- ------- Gross profit 10,482 18,379 36,550 52,175 Expenses: Marketing, general, and administrative 6,878 10,064 23,794 29,253 Research and development 6,341 7,552 21,041 24,012 ------- ------- ------- ------- 13,219 17,616 44,835 53,265 ------- ------- ------- ------- Operating earnings (loss) (2,737) 763 (8,285) (1,090) Other income, net 2,086 5,313 4,955 6,262 ------- ------- ------- ------- Earnings (loss) before income taxes, extraordinary gain, and cumulative effect of change in accounting principle (651) 6,076 (3,330) 5,172 Income tax expense (benefit) (246) 2,430 (1,265) 2,068 ------- ------- ------- ------- Earnings (loss) before extraordinary gain and cumulative effect of change in accounting principle (405) 3,646 (2,065) 3,104 Extraordinary gain from repurchase of convertible debentures, net of income taxes of $778 and $1,060 1,270 - 1,729 - Cumulative effect at December 26, 1992 of change in accounting for income taxes - - - 2,267 ------- ------- ------- ------- Net earnings (loss) $ 865 $ 3,646 $ (336) $ 5,371 ======= ======= ======= ======= Earnings (loss) per common and common equivalent shares: Before extraordinary gain and cumulative effect of change in accounting principle $ (0.05) $ 0.44 $ (0.24) $ 0.38 Extraordinary gain from repurchase of convertible debentures 0.15 - 0.20 - Cumulative effect of change in accounting for income tax - - - 0.27 ------- ------- ------- ------- Total earnings (loss) per share $ 0.10 $ 0.44 $ (0.04) $ 0.65 ======= ======= ======= ======= Weighted average number of shares used for per share earnings computation: 8,535 8,253 8,511 8,266
-4- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 1994 and December 31, 1993 (Dollars in Thousands)
September 30, December 31, 1994 1993 Assets (Unaudited) (Audited) - - - ------ ------------- ------------ Current assets: Cash and cash equivalents $ 6,359 $ 3,250 Temporary cash investments 51,579 75,286 Receivables: Trade accounts, less allowance for doubtful receivables of $148 in 1994 and $406 in 1993 16,601 30,667 Interest 825 1,076 Other 231 399 -------- -------- Total receivables 17,657 32,142 Inventories, net (note 1) 42,518 32,839 Costs and estimated earnings in excess of billings on uncompleted contracts, net 11,826 10,048 Deferred income taxes 4,061 6,050 Prepaid expenses and deposits 2,233 1,573 -------- -------- Total current assets 136,233 161,188 -------- -------- Property, plant, and equipment, at cost 103,616 113,366 Less accumulated depreciation and amortization 62,416 65,119 -------- -------- Net property, plant, and equipment 41,200 48,247 Long-term investments: Marketable equity securities at cost - 3,178 Marketable equity securities available-for-sale, at fair value 7,041 - Other, at cost 35 35 -------- -------- Total long-term investments 7,076 3,213 Other assets, at cost, less accumulated amortization 576 3,539 -------- -------- $185,085 $216,187 ======== ========
Certain 1993 amounts have been reclassified to conform with 1994 presentation. -5- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 1994 and December 31, 1993 (Dollars in Thousands)
September 30, December 31, 1994 1993 Liabilities and Stockholders' Equity (Unaudited) (Audited) - - - ----------------------------------------- ------------- ------------ Current liabilities: Notes payable to banks $ 944 $ 2,685 Accounts payable 1,361 5,095 Accrued expenses 13,637 19,321 Customer deposits 15,879 11,303 Income taxes payable 46 2,112 -------- -------- Total current liabilities 31,867 40,516 -------- -------- Convertible subordinated debentures 21,123 37,066 Deferred income taxes 2,425 1,575 Stockholders' equity: Common stock, $.20 par value; authorized 30,000,000 shares; issued and outstanding 8,540,591 shares at September 30, 1994 and 8,352,525 shares at December 31, 1993 1,708 1,671 Additional paid-in capital (note 2) 2,205 11,899 Retained earnings 122,615 122,951 Net unrealized gain on marketable equity securities 2,701 - Equity adjustment from foreign currency translation 441 509 -------- -------- Total stockholders' equity 129,670 137,030 -------- -------- $185,085 $216,187 ======== ========
Certain 1993 amounts have been reclassified to conform with 1994 presentation. -6- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED ABBREVIATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 1994 and October 1, 1993 (Dollars in Thousands)
Nine Months Ended (Unaudited) ----------------------------- September 30, October 1, 1994 1993 ------------- ---------- Net cash provided by (used in) operating activities $ (1,847) $ 28,805 Cash flows from investing activities: Capital expenditures (3,354) (6,983) Proceeds from sale of marketable securities 4,502 2,835 Purchase of long-term investments - (2,000) Proceeds from (purchases of) temporary cash investments 15,222 (18,773) Other (341) (824) -------- -------- Net cash provided by (used in) investing activities 16,029 (25,745) Cash flows from financing activities: Payments for repurchase of convertible debentures (12,872) - Net proceeds from issuance of common stock 4,192 760 Net borrowings (payments) under line of credit agreements (1,946) 1,369 Other (233) - -------- -------- Net cash provided by (used in) financing activities (10,859) 2,129 Effect of foreign exchange rate changes on cash (214) (2) -------- -------- Net increase (decrease) in cash and cash equivalents 3,109 5,187 Cash and cash equivalents at beginning of year 3,250 1,494 -------- -------- Cash and cash equivalents at end of period $ 6,359 $ 6,681 ======== ======== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 2,514 $ 2,385 Income taxes $ 358 $ 5,022
-7- EVANS & SUTHERLAND COMPUTER CORPORATION NOTES TO FINANCIAL STATEMENTS (In thousands, except per share data) (1) Inventories are summarized as follows:
Sept. 30, 1994 Dec. 31, 1993 (Unaudited) (Audited) ----------- --------- Raw materials and supplies $15,164 $15,035 Work-in-process 22,598 14,470 Finished goods 5,863 4,738 Inventory reserve (1,107) (1,404) ------- ------- $42,518 $32,839 ======= =======
Inventories as of September 30, 1994 are $42,518,000 as compared to $32,839,000 for year ended December 31, 1993. The increase of $9,679,000 or 29% is primarily the result of buildup in work-in-process inventories associated with the U.S. Government and the Design Systems sectors. It is anticipated that the fourth quarter deliveries in both these sectors will reduce inventory to approximately 1993 levels. (2) The Tripos, Inc. Spin-off Effective June 1, 1994, net assets of Tripos, Inc. totalling $12,700,000 were spun-off to E&S shareholders in the form of a special dividend. Each Evans & Sutherland shareholder received one share of Tripos common stock for every three shares of Evans & Sutherland common stock held on May 25, 1994, the record date for the spin-off. As a part of this transaction, the Company forgave Tripos of inter-company debt owed to the Company of $6,421,000 and made a cash contribution to Tripos of $6,909,000. Included in the Consolidated Statements of Operations for the three months ended October 1, 1993 is a full quarter's results for Tripos and included in the nine months ended September 30, 1994 and October 1, 1993 is five months and nine months respectively of Tripos operations. The following Pro Forma statement reflects operations without Tripos. -8- EVANS & SUTHERLAND COMPUTER CORPORATION PROFORMA STATEMENT OF EARNINGS (Without Tripos, Inc.)
Three Months Ended Nine Months Ended ------------------ ----------------------------- Oct. 1, 1993 Sept. 30, 1994 Oct. 1, 1993 ------------ -------------- ------------ Net sales $29,885 $65,678 $87,468 Cost of sales 14,282 33,499 43,187 ------- ------- ------- Gross profit 15,603 32,179 44,281 Expenses 14,683 39,540 45,137 ------- ------- ------- Operating earnings (loss) 920 (7,367) (856) Other income, net 5,315 4,955 6,261 Income tax expense (benefit) 2,407 (1,265) 1,985 Extraordinary items -- 1,729 2,267 ------- ------- ------- Net earnings $ 3,828 $ 582 $ 5,687 ======= ======= ======= Earnings per share $0.46 $0.07 $0.69 ======= ======= =======
-9- EVANS & SUTHERLAND COMPUTER CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in Thousands) The following table summarizes changes in operations for the three month and nine month periods ending September 30, 1994 and October 1, 1993. This table compares the respective periods and presents the amount and percentage increase (decrease) by the listed items.
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended ----------------------- ------------------------ Sept. 30, and Oct. 1, Sept. 30, and Oct. 1, 1994 1993 1994 1993 ----------------------- ------------------------ $ Increase % $ Increase % (Decrease) Change (Decrease) Change ----------------------- ------------------------ Net sales $(11,434) (34%) $(27,660) (28%) Cost of sales (3,537) (24%) (12,035) (26%) -------- ------- -------- ------- Gross profit (7,897) (43%) (15,625) (30%) Expenses: Marketing, general and administrative (3,186) (32%) (5,459) (19%) Research and development (1,211) (16%) (2,971) (12%) -------- ------- -------- ------- (4,397) (25%) (8,430) (16%) Operating earnings (loss) (3,500) (459%) (7,195) (660%) Other income (expense), net (3,227) (61%) (1,307) (21%) -------- ------- -------- ------- Earnings (loss) before income taxes, extraordinary gain, and cumulative effect of change in accounting principle (6,727) (111%) (8,502) (164%) Income tax expense (benefit) (2,676) (110%) (3,333) (161%) -------- ------- -------- ------- Earnings (loss) before extraordinary gain and cumulative effect of change in accounting principle (4,051) (111%) (5,169) (16%) Extraordinary gain from repurchase of convertible debentures, net of income taxes 1,270 100% 1,729 100% Cumulative effect at December 26, 1992, of change in accounting for income taxes - - (2,267) (100%) -------- ------- -------- ------- Net earnings $ (2,781) (76%) $ (5,707) (106%) ======== ======= ======== =======
-10- RESULTS OF OPERATIONS - - - --------------------- Sales - - - ----- The following table summarizes sales for the nine months of 1994 and 1993 and also for the third quarters of 1994 and 1993. As shown, total sales are lower in 1994 compared with 1993 in both quarter and nine month periods.
SALES Three Months Ended Nine Months Ended ------------------------------------------- --------------------------------------- % Change % Change increase increase Sept. 30, 1994 Oct. 1, 1993 (decrease) Sept. 30, 1994 Oct. 1, 1993 (decrease) -------------- ------------ ---------- -------------- ------------ ---------- World civil pilot training $ 1,345 $ 4,028 (67%) $ 3,982 $10,776 (63%) U.S. Government 9,337 8,572 9% 29,254 34,619 (15%) International Government 3,429 11,575 (70%) 16,435 24,865 (34%) Education & Entertainment 231 296 (22%) 1,158 1,081 7% Design Systems 7,592 5,414 40% 14,849 16,127 ( 8%) Tripos, Inc. * -- 3,483 (100%) 5,955 11,825 (50%) ------- ------- ------- ------- $21,934 $33,368 (34%) $71,633 $99,293 (28%) ======= ======= ======= =======
* The sales of Tripos for 1994 represent results for only five months due to the Tripos Spin-off which occurred June 1, 1994. See notes to Financial Statements (2). Sales decreased $11,434,000 in the third quarter of 1994 as compared with the same period in 1993. Of this amount, 30% or $3,483,000 is related to the spin- off of Tripos which took place on June 1, 1994. For the respective nine month periods, the absence of Tripos accounts for 21% of the $27,660,000 decrease in sales. The world civil pilot training market showed continued weakness during the quarter with sales of $1,345,000 compared to $4,028,000 for the same quarter in 1993. It is expected that orders in this sector will strengthen based upon renewed market demand. The Company's announcement that it will serve its worldwide customers as an independent supplier of fully integrated visual systems is expected to provide a welcome alternative to purchasers of simulation equipment. There are, of course, risks in this course of action and certain start-up costs are involved. Part of this plan to better serve the Company's worldwide customer base was announced in August, 1994 when the Company announced plans to establish a sales, engineering, manufacturing, and support facility in Europe. -11- U.S. Government sales for the quarter were up 9% over the third quarter of 1993. International Government sales were $8,146,000 lower in the third quarter of 1994 as compared to the same period of 1993. Many contract announcements have been delayed as international government budgets have been restricted. Sales in the education and entertainment market continued to be slow during the third quarter. Sales for the third quarter were $231,000 compared with $296,000 for the same quarter last year. Sales during the quarter included installation and training on three Digistar planetarium systems. The first Digistar II system, a new generation of planitarium systems, is scheduled to be installed during the fourth quarter. Design Systems sales increased $2,178,000, 40% more than 1993's third quarter. Sales of Freedom Series accelerators are slightly ahead of last year. The Company's industrial design software product (CDRS) continues to experience increased sales. The Ford Motor Company took delivery of a multimillion dollar worldwide site license of CDRS during the quarter. Third quarter sales of CDRS were $3,510,000, an increase of $1,868,000 when compared with the same quarter of 1993. Cost of Sales - - - ------------- Cost of sales for the quarter, as a percentage of sales, was 52% as compared to the 45% for the corresponding third quarter of 1993. By removing the Tripos cost of sales amounts for the third quarter of 1993, cost of sales as a percentage of sales would have been 48%. In addition to the absence of low cost Tripos sales in the third quarter 1994, higher costs can be attributed to the mix of sales in U.S. Government and International Government. The third quarter of 1993 saw a high proportion of high margin International sales and a relatively low number of higher cost U.S. government sales, while the third quarter of 1994 had a large proportion of U.S. Government and a smaller proportion of International Government sales. Cost of sales as a percentage of sales for the nine month period of 1994 is 49% compared to 47% for the comparable period in 1993. By removing the Tripos cost of sales amounts from the nine months figures, the cost of sales as a percentage of sales would have been 51% for 1994 compared with 49% for 1993. -12- Expenses - - - -------- Expenses for the third quarter of 1994 are lower than the same quarter of 1993 by $4,397,000 or 25%. The exclusion of Tripos expenses for the third quarter of 1993 accounts for $2,993,000 of this reduction, and the balance is due to restructuring efforts that took place in January of this year. The Company is continuing to review expenses and may make further reductions in the future. Other Income (Expense), Net - - - --------------------------- Other income decreased during the quarter over the previous year's third quarter by $3,227,000. The primary reason for the decrease is due to the significant gains attributed to sales of marketable equity securities during the third quarter of 1993 of $5,096,000 as compared to gains in the third quarter of 1994 of $1,533,000. Other income resulting from interest income and expense (net) and foreign currency gains are higher in 1994 for the respective third quarters by $336,000. This is due to reduced interest expense due to the Company's repurchasing of interest-bearing convertible debentures and foreign currency gains recognized during the third quarter of 1994 which were greater than those of the third quarter 1993. Income Taxes - - - ------------ A tax rate of 38% was utilized for income tax transactions in 1994 compared with a 40% rate used in 1993. The rate for 1994 is estimated to be lower due to improved performance from our foreign subsidiaries. LIQUIDITY & CAPITAL COMMITMENTS - - - ------------------------------- Funds to support the Company's operations come mainly from net cash provided by operating activities, sales of marketable securities, and proceeds from employee stock purchases and option plans. The Company also has cash equivalents and temporary cash investments which can be used as needed for operating funds. Cash and cash equivalents and temporary cash investments decreased $20,598,000 to $57,938,000 during the first nine months of 1994, principally due to the cash expenditures and contributions related to the Tripos spin-off and due to the repurchase of the Company's subordinated debt. The value of company owned marketable securities declined $7,166,000 to $7,041,000 during the same nine month period. Approximately $3,100,000 of the decline is due to the sale of VLSI shares and the balance is a result of changing market values of other securities held. INFLATION - - - --------- Inflation has not had a significant impact in the Company's results of operations during any of the last three fiscal years. -13- PART II - OTHER INFORMATION Item 1. Legal Proceedings - - - -------------------------- The Company has previously announced the fact that it has terminated its exclusive arrangement with Thomson Training and Simulation Limited for the marketing of the Company's products to the civil airline training market. As provided by the terms of the Agreement, the Company has now filed with the American Arbitration Association a "Notice of Intention to Arbitrate" the matters involved in the termination. The Company claims damages in excess of $26 million exclusive of costs against Thomson Training & Simulation Limited and Thomson-CSF, S.A. in the Arbitration. Thomson Training & Simulation has filed counterclaims claiming damages in excess of $30 million. The Company believes these counterclaims are without merit and intends to vigorously defend against them. Item 6. Exhibits and Reports on Form 8-K - - - ----------------------------------------- (b) The Company filed a Form 8-K on October 6, 1994. This filing provided the following Proforma Financial Information relative to the Tripos spin-off effective June 1, 1994. . Consolidated Pro Forma Statement of Earnings - Year Ended December 31, 1993 . Consolidated Pro Forma Statement of Earnings - 3 Months Ended April 1, 1994 . Consolidated Pro Forma Balance Sheet dated April 1, 1994 -14- Evans & Sutherland Computer Corporation SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EVANS & SUTHERLAND COMPUTER CORPORATION --------------------------------------- Registrant Date November 9, 1994 /s/ -------------------------------------------- Gary E. Meredith, Vice President, Secretary, and Chief Financial Officer -15- EX-27 2 ARTICLE 5 FDS 3RD QTR 10-Q
5 1,000 9-mos Dec-30-1994 Sep-30-1994 57,938 7,076 16,749 148 42,518 136,233 103,616 62,416 185,085 31,867 21,123 1,708 0 0 127,962 185,085 21,934 21,934 11,452 13,219 0 0 298 (651) 246 (2,737) 0 1,270 0 865 0.10 0.10
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