-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tht69J9Xcvl8sPhBD5/QJKqZcxlkB70eys461SmAaaozRrk58JaLzwrs+Jvc8mbM qWCjhtDZr9hPhEAYNSzi+A== 0000927356-95-000303.txt : 19951119 0000927356-95-000303.hdr.sgml : 19951119 ACCESSION NUMBER: 0000927356-95-000303 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950929 FILED AS OF DATE: 19951113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EVANS & SUTHERLAND COMPUTER CORP CENTRAL INDEX KEY: 0000276283 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [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: 95590480 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 29, 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 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) 588-1000 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 November 3, 1995 - ----------------------------------- -------------------------------------- COMMON STOCK, $0.20 PAR VALUE 8,698,754 FORM 10-Q EVANS & SUTHERLAND COMPUTER CORPORATION QUARTER ENDED SEPTEMBER 29, 1995 Page No. TABLE OF CONTENTS 2 PART I - FINANCIAL INFORMATION GENERAL STATEMENT 3 ITEM 1. Financial Statements Consolidated Statements of Earnings - Three Months & Nine Months Ended September 29, 1995 and September 30, 1994 4 Consolidated Balance Sheets - September 29, 1995 and December 30, 1994 5-6 Consolidated Condensed Statements of Cash Flows - Nine Months Ended September 29, 1995 and September 30, 1994 7 Notes to Financial Statements 8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II - OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K 12 Signature Page 13 -2- EVANS & SUTHERLAND COMPUTER CORPORATION PART I - FINANCIAL INFORMATION GENERAL STATEMENT: The following Consolidated Statements of Earnings, Consolidated Balance Sheets, and Consolidated Condensed 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 presentation of results for the interim periods presented. It is management's opinion that the information presented herein reflects a fair presentation of the results of the interim period(s) in all material respects. -3- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED STATEMENTS OF EARNINGS Three Months and Nine Months Ended September 29, 1995 and September 30, 1994 (In thousands except per share amounts)
Three Months Ended Nine Months Ended (Unaudited) (Unaudited) ----------------------- ----------------------- Sept. 29, Sept. 30, Sept. 29, Sept. 30, 1995 1994 1995 1994 --------- --------- --------- --------- Net sales $33,662 $21,934 $78,029 $71,633 Cost of sales 17,245 11,452 44,145 35,083 ------ ------ ------ ------ Gross profit 16,417 10,482 33,884 36,550 Expenses: Marketing, general and administrative 6,721 6,878 21,919 23,794 Research and development 4,451 6,341 15,370 21,041 ------ ------ ------ ------ Total expenses 11,172 13,219 37,289 44,835 Gain from sale of business unit - - 20,188 - ------ ------ ------ ------ Operating earnings (loss) 5,245 (2,737) 16,783 (8,285) Other income 959 2,086 9,580 4,955 ------ ------ ------ ------ Earnings (loss) before income and extraordinary gain 6,204 (651) 26,363 (3,330) Income tax expense (benefit) 2,605 (246) 11,072 (1,265) ------ ------ ------ ------ Earnings (loss) before extraordinary gain 3,599 (405) 15,291 (2,065) Extraordinary gain from repurchase of convertible debentures, net of income taxes 111 1,270 311 1,729 ------ ------ ------ ------ Net earnings (loss) $ 3,710 $ 865 $15,602 $ (336) ====== ====== ====== ====== Earnings (loss) per common and common equivalent share: Before extraordinary gain $ 0.42 $ (0.05) $ 1.77 $ (0.24) Extraordinary gain from repurchase of convertible debentures: 0.01 0.15 0.04 0.20 ------ ------ ------ ------ Total earnings per share $ 0.43 $ 0.10 $ 1.81 $ (0.04) ====== ====== ====== ====== Weighted average number of shares used for per share earnings computation: 8,659 8,535 8,618 8,511
-4- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS September 29, 1995 and December 30, 1994 (U.S. Dollars in Thousands)
September 29, December 30, 1995 1994 Assets (Unaudited) (Audited) ------ ------------ ------------ Current assets: Cash and cash equivalents $ 51,141 $ 25,213 Short-term investments 43,481 26,597 Receivables: Trade accounts, less allowance for doubtful receivables of $2,073 in 1995 and $144 in 1994 18,466 20,724 Income taxes 3,683 1,633 Interest 1,629 1,142 Other 390 150 ------------ ------------ Total receivables 24,168 23,649 Inventories, net (note 1) 18,456 26,192 Costs and estimated earnings in excess of billings on uncompleted contracts, net 11,126 18,549 Deferred income tax 6,949 6,561 Prepaid expenses and deposits 989 1,425 ------------ ------------ Total current assets 156,310 128,186 ------------ ------------ Property, plant, and equipment, at cost 107,634 104,466 Less accumulated depreciation and amortization 64,698 62,802 ------------ ------------ Net property, plant, and equipment 42,936 41,664 Long-term investments: Marketable equity securities available-for-sale, at fair value 3,791 7,277 Other 3,035 35 ------------ ------------ Total long-term investments 6,826 7,312 Other assets, at cost, less accumulated amortization 1,606 1,578 ----------- ------------ Total assets $207,678 $178,740 =========== ============
-5- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS September 29, 1995 and December 30, 1994 (U.S. Dollars in Thousands)
September 29, December 30, 1995 1994 Liabilities and Stockholders' Equity (Unaudited) (Audited) - ------------------------------------ -------------- ------------- Current liabilities: Notes payable to banks $ 5,428 $ 1,817 Accounts payable 2,197 2,401 Accrued expenses 17,565 15,556 Customer deposits 7,141 9,182 Income taxes payable 14,038 - ------------- ------------- Total current liabilities 46,369 28,956 Convertible subordinated debentures 18,015 20,375 Deferred income taxes 1,210 2,291 Stockholders' equity: Common stock, $.20 par value; authorized 30,000,000 shares; issued and outstanding 8,682,442 shares at September 29, 1995 and 8,552,106 shares at December 30, 1994 1,736 1,710 Additional paid-in capital 4,645 2,850 Retained earnings 134,853 119,251 Net unrealized gain on securities available-for-sale. 1,028 2,847 Cumulative translation adjustment (178) 460 -------------- ------------- Total stockholders' equity 142,084 127,118 -------------- ------------- Total liabilities and stockholders' equity $207,678 $178,740 ============== =============
-6- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS Nine Months Ended September 29, 1995 and September 30, 1994 (U.S. Dollars in Thousands)
Nine Months Ended (Unaudited) ----------------------------- September 29, September 30, 1995 1994 ------------ ------------- Net cash provided by (used in) operating activities $43,886 $(1,847) Cash flows from investing activities: Capital expenditures (9,009) (3,354) Proceeds from sale of marketable equity securities 7,930 4,502 Net sales (purchases) of short-term investments (16,884) 15,222 Long-term investment (3,000) 0 Other 0 (341) ------------ ------------- Net cash provided by (used in) investing activities (20,963) 16,029 Cash flows from financing activities: Payments for repurchase of convertible debentures (1,832) (12,872) Net proceeds from issuance of common stock 1,821 4,192 Net borrowings (payments) under line of credit agreement 3,442 (1,946) Other 0 (233) ------------ ------------- Net cash provided by (used in) financing activities 3,431 (10,859) Effect of foreign exchange rate changes on cash (426) (214) ------------ ------------- Net increase in cash and cash equivalents 25,928 3,109 Cash and cash equivalents at beginning of year 25,213 3,250 ------------ ------------- Cash and cash equivalents at end of period $51,141 $ 6,359 ============ ============= Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 1,191 $ 2,514 Income taxes $ 264 $ 358
-7- EVANS & SUTHERLAND COMPUTER CORPORATION NOTES TO FINANCIAL STATEMENTS (Dollars in Thousands) (1) Inventories are summarized as follows: September 29, December 30, 1995 1994 (Unaudited) (Audited) ------------- ------------ Raw materials and supplies $ 9,718 $10,498 Work-in-process 4,815 13,491 Finished Goods 3,923 2,203 ------ ------ $18,456 $26,192 ====== ====== -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (U.S. Dollars in Thousands) The following table summarizes changes in operations for the periods indicated and presents the percentage of increase (decrease) by listed items compared to the indicated prior period:
(Unaudited) (Unaudited) Quarters Nine Months ended Sept. 29, 1995 ended Sept. 29, 1995 and Sept. 30, 1994 and Sept. 30, 1994 -------------------- -------------------- Net sales $11,728 53.5% $ 6,396 8.9% Cost of sales 5,793 50.6% 9,062 25.8% -------- -------- Gross profit 5,935 56.6% (2,666) (7.3%) Expenses: Marketing, general and administrative (157) (2.3%) (1,875) (7.9%) Research and development (1,890) (29.8%) (5,671) (27.0%) -------- -------- Total expenses (2,047) (15.5%) (7,546) (16.8%) Gain from sale of business unit - 0.0% 20,188 100.0% -------- -------- Operating earnings 7,982 291.6% 25,068 302.6% Other income (expense), net (1,127) (54.0%) 4,625 93.3% -------- -------- Earnings before income taxes and extraordinary gain 6,855 1,053.0% 29,693 891.7% Income tax expense 2,851 1,158.9% 12,337 975.3% -------- -------- Earnings before extraordinary gain 4,004 988.6% 17,356 840.5% Extraordinary gain from repurchase of convertible debentures, net of income taxes (1,159) (91.3%) (1,418) (82.0%) -------- -------- Net earnings $ 2,845 328.9% $15,938 4,743.5% ======== ========
-9- RESULTS OF OPERATIONS - --------------------- Sales - ----- The following table summarizes sales for the first nine months of 1995 and 1994 and also for the third quarters of 1995 and 1994
NET SALES (U.S. Dollars in Thousands) ---------------------------------------------------------------- Quarter Ended Nine Months Ended ------------------------------- ------------------------------- Sept. 29, Sept. 30, increase Sept. 29, Sept. 30, increase 1995 1994 (decrease) 1995 1994 (decrease) --------- --------- ---------- --------- --------- ---------- Commercial Simulation $ 5,478 $ 1,345 307% $ 7,205 $ 3,982 81% Government Simulation 23,272 12,766 82% 56,337 45,689 23% Education & Entertainment 1,518 231 557% 4,633 1,158 300% Graphics Systems a) b) 3,394 7,592 (55%) 9,854 20,804 (53%) ------- ------- ------- -------- $33,662 $21,934 53% $78,029 $71,633 9% ====== ====== ====== ======
- ----------- a) Includes $5,955 of Tripos, Inc. (Tripos) sales in the nine months ended 9/30/94. (Tripos spun-off to Evans & Sutherland shareholders June 1, 1994.) b) Includes $3,510 of Design Systems (CDRS) sales in the quarter ended 9/30/94 and includes $815 in CDRS sales in the nine months ended 9/29/95 and $6,550 in CDRS sales for the nine months ended 9/30/94. (CDRS sold to Parametric Technology Corporation April 12, 1995.) The above table shows an increase of sales of 53% for the quarter ended September 29, 1995 as compared with the same period last year, and an increase of sales of 9% for the nine month period ended September 29, 1995 compared with the same period last year. Excluding CDRS and Tripos sales, the quarter, in comparison, would have reflected an 83% increase in sales and for the nine month comparison, a 31% increase in sales would have been reflected. Without Tripos and CDRS, the Graphics Systems sector would show a 17% decrease for the quarter rather than 55% decrease and a 18% increase versus a 53% decrease for the nine month period. This sector slowly continues to improve. Work on the Company's 3-D graphics PC product is on schedule. Mitsubishi Electronics and Evans & Sutherland previously announced an agreement to develop a 3-D graphics product in this sector. The Government Simulation business continues to demonstrate growth led by the strength of the international market with an 82% increase for the quarter and a 23% nine month improvement over the previous years respective periods. The Company's Commercial Simulation business also reported strong revenue growth, particularly when compared with its startup in the third quarter of 1994. Sales for the nine month period were 81% higher than the same period in 1994. In September, the Company reached an agreement with Thomson Training & Simulation which will allow each company to pursue opportunities in the civil pilot market on a non-exclusive basis. During the period, $3.25M in disputed revenue was paid to the Company at termination of the market agreement. In October, the Company announced the acquisition of Dallas-based Xionix Simulation, Inc. Xionix is a small operation which specializes in the supply of low-cost flight management training systems and provides a low end product opportunity to the company. This combination further strengthens the Company's position in this market sector. -10- The Education and Entertainment business delivered four DIGISTAR II systems during the quarter and received orders for two more. These deliveries drive the 557% sales growth in the quarter compared with the third quarter of 1994. Interest continues to be strong with the DIGISTAR II and other virtual reality technology products. In October, the Company announced a preliminary agreement with United Artists Theatre Circuit Inc. to install its Virtual Glider product in its location-based entertainment venues. COST OF SALES - ------------- Cost of sales, as a percentage of sales, was 51% for the third quarter ended September 29, 1995 compared with 52% for the same period in 1994. During the third quarter of 1995, a large number of high margin, short term Government Simulation units were delivered. This product mix coupled with lower manufacturing costs stemming from the Company's previously announced restructure partially offset a $2 million bad debt provision booked near the end of the quarter. For the nine month period ended September 29, 1995, the cost of sales percentage is 56% as compared with 49% for the nine month period ended September 30, 1994. The Cost of Sales was higher in the first nine months of 1995 compared with the same period of 1994 due to the sale of the CDRS software business and the spin off of the Tripos software business. Other one time charges included in Cost of Sales in the period were made during the second quarter and included $1,550,000 for a possible contract dispute in the Government Simulation business and a $2,000,000 inventory writedown charge. EXPENSES - -------- Total expenses for the third quarter of 1995 decreased $2,047,000 or 16% below the corresponding period of 1994. Marketing, General, and Administrative: Marketing, general, and --------------------------------------- administrative expenses are $157,000 lower or 2.3% less in the third quarter 1995 as compared to the same quarter of 1994. As a percent of sales, the rates for the third quarter 1995 and 1994 are respectively 20% and 31%. Excluding CDRS costs in 1994, expenses have increased 19%. The increase is a result of efforts to develop and strengthen the Commercial Simulation and Education & Entertainment businesses. Research and Development: Company-funded research and development costs ------------------------- decreased $1,890,000 in the third quarter 1995 as compared to the same period of 1994. Excluding research and development costs of CDRS, the reduction would be $1,462,000. This decrease is a result of the Company's efforts to strategically refocus its research and development program in January of 1995. OTHER INCOME (EXPENSE), NET - --------------------------- Other income decreased $1,127,000 in the third quarter of 1995 compared to the third quarter 1994. The principal reason for the decrease is that the results in the period do not include gains from the sale of investments. By contrast, in 1994 there was a $1,533,000 gain from the sale of VLSI stock. Interest income continues to run higher than in previous periods due to better performance of short-term cash investments. -11- INCOME TAXES - ------------ A tax rate of 42% was utilized for income tax transactions in 1995 as compared to 38% for 1994. A higher rate is due to greater taxable income and reduced benefits such as Research and Development credits and other credits. LIQUIDITY & CAPITAL COMMITMENTS - ------------------------------- Funds to support the Company's operations come mainly from net cash provided by operating activities and sales of marketable securities. The Company also has cash equivalents and temporary cash investments which can be used as needed for operating funds. Cash, cash equivalents and short-term investments increased $2,330,000 to $94,622,000 during the third quarter of 1995. Marketable equity securities remained relataively the same with other long-term investments increasing $3,000,000 due to the Company's investment in Strata, Inc. There were no material capital commitments as the fiscal year 1995 began, and no major commitments were extended during the third quarter of 1995. The Company's estimated capital budget for fiscal 1995 is $10,500,000. The Company believes that, through internal cash generation plus the cash investments and marketable securities identified above, it has sufficient resources to cover its cash needs during fiscal year 1995. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------------------------- The Company announced on September 14, 1995 the resolution of differences with Thomson Training and Simulation Limited and the dismissal of any and all legal actions resulting from contractual disputes related to prior distribution agreements to which the Company and Thomson had been parties. The settlement will allow the companies to proceed to supply their products to the market and will make it possible for each party to work with one or more other parties in serving the market. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- (b) There were no reports on Form 8-K filed for the three-month period ended September 29, 1995. -12- 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, 1995 /s/ GARY E. MEREDITH --------------------------------------- Vice President, Secretary, and Chief Financial Officer -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-29-1995 SEP-29-1995 94,622 3,791 24,168 2,073 18,456 156,310 107,634 64,698 207,678 46,369 18,015 1,736 0 0 140,348 207,678 33,662 33,662 17,245 11,172 0 0 360 6,204 2,605 3,599 0 111 0 3,710 0.43 0.43
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