-----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, Cbxk1s4qSwC+yNe1OzPJ4bq/RR19JC2fTTp4dAzkTjo8K/v751+CCE6LiVvdFrC+ kLWRuDGTymkkfHLuM+6hMA== 0000927356-97-001298.txt : 19971111 0000927356-97-001298.hdr.sgml : 19971111 ACCESSION NUMBER: 0000927356-97-001298 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970926 FILED AS OF DATE: 19971110 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: SEC FILE NUMBER: 000-08771 FILM NUMBER: 97711687 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 26, 1997 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 October 31, 1997 ----- -------------------------------------- COMMON STOCK, $0.20 PAR VALUE 9,090,758 FORM 10-Q EVANS & SUTHERLAND COMPUTER CORPORATION QUARTER ENDED SEPTEMBER 26, 1997 Page No. PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Statements of Operations - Three Months and Nine Months Ended September 26, 1997 and September 27, 1996 3 Condensed Consolidated Balance Sheets - September 26, 1997 and December 27, 1996 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 26, 1997 and September 27, 1996 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10 SIGNATURE PAGE 10
2 PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS EVANS & SUTHERLAND COMPUTER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands except per share amounts)
Three Months Ended Nine Months Ended ------------------------------ --------------------------------- September 26, September 27, September 26, September 27, 1997 1996 1997 1996 ------------- ------------- ------------- ---------------- Net sales $ 38,451 $ 33,712 $ 110,000 $ 91,305 Cost of sales 19,167 16,948 58,164 47,332 ------------- ------------- ------------- ---------------- Gross profit 19,284 16,764 51,836 43,973 ------------- ------------- ------------- ---------------- Expenses: Marketing, general and administrative 8,679 7,632 25,155 22,196 Research and development 5,822 4,975 18,414 15,793 ------------- ------------- ------------- ---------------- Total expenses 14,501 12,607 43,569 37,989 ------------- ------------- ------------- ---------------- Operating earnings 4,783 4,157 8,267 5,984 Other income, net 319 1,144 1,557 2,942 ------------- ------------- ------------- ---------------- Earnings before income taxes 5,102 5,301 9,824 8,926 Income tax expense 1,277 2,015 2,613 3,392 ------------- ------------- ------------- ---------------- Net earnings $ 3,825 $ 3,286 $ 7,211 $ 5,534 ============= ============= ============= ================ Earnings per share (note 1): Primary $ 0.40 $ 0.35 $ 0.76 $ 0.60 Fully diluted $ 0.39 $ 0.35 $ 0.74 $ 0.60 Weighted average common and common equivalent shares outstanding: Primary 9,597 9,257 9,477 9,206 Fully diluted 9,731 9,295 9,722 9,236
See accompanying notes to condensed consolidated financial statements. 3 EVANS & SUTHERLAND COMPUTER CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except share data)
September 26, December 27, 1997 1996 ------------ ------------ Assets (Unaudited) ------- Current assets: Cash and cash equivalents $ 5,357 $ 16,521 Marketable securities 50,398 46,454 Accounts receivable, less allowance for doubtful receivables of $876 in 1997 and $563 in 1996 34,483 34,842 Inventories (note 2) 26,938 20,202 Costs and estimated earnings in excess of billings on uncompleted contracts 43,695 34,166 Deferred income taxes 5,085 4,841 Prepaid expenses and deposits 2,593 2,187 ------------ ------------ Total current assets 168,549 159,213 Property, plant, and equipment, at cost 121,302 115,358 Less accumulated depreciation and amortization 77,898 72,687 ------------ ------------ Net property, plant, and equipment 43,404 42,671 Investment securities 10,483 7,057 Other assets 1,904 1,950 ------------ ------------ Total assets $ 224,340 $210,891 ============ ============ Liabilities and Stockholders' Equity ------------------------------------- Current liabilities: Notes payable to banks $ 998 $ 5,334 Accounts payable 8,943 6,370 Accrued expenses 15,843 13,933 Customer deposits 5,322 2,058 Income taxes payable 1,682 - Billings in excess of costs and estimated earnings on uncompleted contracts 6,364 4,595 ------------ ------------ Total current liabilities 39,152 32,290 Long-term debt 18,015 18,015 Deferred income taxes - 114 Stockholders' equity: Common stock, $.20 par value; authorized 30,000,000 shares; issued and outstanding 9,079,990 shares at September 26, 1997 and 9,056,871 shares at December 27, 1996 1,816 1,811 Additional paid-in capital 8,103 8,639 Retained earnings 157,707 150,496 Net unrealized loss on marketable securities (691) (541) Cumulative translation adjustment 238 67 ------------ ------------ Total stockholders' equity 167,173 160,472 ------------ ------------ Total liabilities and stockholders' equity $ 224,340 $210,891 ============ ============
See accompanying notes to condensed consolidated financial statements. 4 EVANS & SUTHERLAND COMPUTER CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited (In thousands)
Nine Months Ended ---------------------------------------- September 26, September 27, 1997 1996 ----------------- ------------------ Net cash provided by (used in) operating activities $ 8,592 $ (21,461) Cash flows from investing activities: Capital expenditures (8,184) (7,860) Purchases of marketable securities (59,479) (51,342) Proceeds from sale of marketable securities 55,558 81,587 Purchases of investment securities (3,650) - Proceeds from sale of investment securities - 1,070 Purchases of other long-term assets - (1,625) ----------------- ------------------ Net cash provided by (used in) investing activities (15,755) 21,830 Cash flows from financing activities: Net proceeds from issuance of common stock 2,443 2,650 Net borrowings (payments) under line of credit agreement (3,816) 2,030 Purchases of treasury stock (2,974) - ----------------- ------------------ Net cash provided by (used in) financing activities (4,347) 4,680 Effect of foreign exchange rate changes on cash 346 (56) ----------------- ------------------ Net decrease in cash and cash equivalents (11,164) 4,993 Cash and cash equivalents at beginning of year 16,521 5,023 ----------------- ------------------ Cash and cash equivalents at end of period $ 5,357 $ 10,016 ================= ================== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 1,325 $ 1,303 Income taxes $ 1,909 $ 11,967
See accompanying notes to condensed consolidated financial statements. 5 EVANS & SUTHERLAND COMPUTER CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (In thousands) 1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - --------------------- The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes necessary for a complete presentation of the results of operations, the financial position, and cash flows, in conformity with generally accepted accounting principles. This report on Form 10-Q for the three months and nine months ended September 26, 1997 should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 27, 1996. The accompanying unaudited condensed consolidated balance sheets and statements of operations and cash flows reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the Company's financial position, results of operations and cash flows. The results of operations for the interim period ended September 26, 1997 are not necessarily indicative of the results to be expected for the full year. The Company has changed its fiscal year end from the last Friday in December to a calendar year end. Earnings Per Share - ------------------ Earnings per share is computed based on the weighted average number of common shares and, as appropriate, dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). SFAS 128 establishes a different method of computing earnings per share than is currently required under the provisions of Accounting Principles Board Opinion No. 15. Under SFAS 128, the Company will be required to present both basic earnings per share and diluted earnings per share. Basic earnings per share is expected to be higher than the currently presented primary earnings per share as the effect of dilutive stock options will not be considered in computing basic earnings per share. Diluted earnings per share is expected to be comparable or slightly lower than the currently presented primary earnings per share. The Company plans to adopt SFAS 128 in its fiscal fourth quarter and at that time all historical earnings per share data presented will be restated to conform to the provisions of SFAS 128. 2. INVENTORIES Inventories consist of the following: September 26, December 27, 1997 1996 ------------- ------------ (Unaudited) Raw materials and supplies $12,671 $ 8,117 Work-in-process 11,352 11,211 Finished Goods 2,915 874 ------- ------- $26,938 $20,202 ======= ======= 4. STOCK REPURCHASE PROGRAM On September 19, 1996, the Company announced that its board of directors had authorized the repurchase of up to 500,000 shares of its common stock, either in the open market or in private transactions. As of November 6, 1997, the Company has repurchased and retired 152,000 shares since the announcement of the repurchase program. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere herein. All data in the tables are in thousands except for percentages. Except for the historical information contained herein, this report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. The Company's actual results may differ materially. OVERVIEW - -------- Evans & Sutherland Computer Corporation (E&S or the Company) develops and manufactures hardware and software for visual systems that produce vivid and highly realistic 3D (three-dimensional) graphics and synthetic environments. The Company's product offerings include a full range of high-performance visual systems for simulation, training, and virtual reality applications, as well as graphic accelerator products for workstations and personal computers. E&S is organized into six business units. Each business unit develops and markets its products for a worldwide customer base. These business units can be grouped into two areas: core businesses and new start-ups. The core businesses are the simulation-related units in which E&S has an established market presence with significant market share, and has historically been profitable. The start- ups are in high growth markets where E&S has superior technology which can be applied to new applications. Core businesses: . Government Simulation provides visual systems for flight and ground --------------------- training and related services to U.S. and international armed forces, NASA, and aerospace companies. . Commercial Simulation is the world's leading independent supplier of --------------------- visual systems for flight simulators for commercial airline pilot training. . Display Systems provides a complete suite of avionics displays for --------------- cockpit and flight training. New business start-ups: . Desktop Graphics provides graphic accelerator technology for the ---------------- world's leading workstation manufacturers and NT-based personal computers. . Digital Studio provides virtual studio products and services for -------------- digital content production in the television, film, video, corporate training, and multimedia industries. . Entertainment and Education is the world's leading supplier of digital --------------------------- planetarium projection systems, and provides virtual reality experiences for location-based entertainment centers, including entertainment simulators. 7 RESULTS OF OPERATIONS - --------------------- 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):
Quarters Nine Months Ended Sept. 26, 1997 Ended Sept. 26, 1997 and Sept. 27, 1996 and Sept. 27, 1996 -------------------- -------------------- (Unaudited) (Unaudited) Net Sales $4,739 14.1% $18,695 20.5% Cost of Sales 2,219 13.1% 10,832 22.9% ------- ------- Gross Profit 2,520 15.0% 7,863 17.9% ------- ------- Expenses: Marketing, general & administrative 1,047 13.7% 2,959 13.3% Research & development 847 17.0% 2,621 16.6% ------- ------- Total expenses 1,894 15.0% 5,580 14.7% ------- ------- Operating earnings 626 15.1% 2,283 38.2% Other income, net (825) (72.1%) (1,385) (47.1%) ------- ------- Earnings before income taxes (199) (3.8%) 898 10.1% Income tax expense (738) (36.6%) (779) (23.0%) ------- ------- Net earnings $ 539 16.4% $ 1,677 30.3% ======= =======
SALES - ----- Sales for the third quarter of 1997 increased 14.1% to $38.5 million compared to $33.7 million for the third quarter of 1996. Sales for the nine month period ended September 26, 1997 increased 20.5% to $110.0 million compared to $91.3 million for the nine month period ended September 27, 1996. Domestic sales for the third quarter increased approximately 47% over the third quarter of 1996 as a result of increased sales to the civil airline market and of the REALImage product. Foreign sales for the third quarter increased approximately 2% over the third quarter of 1996. COST OF SALES - ------------- Cost of sales as a percentage of sales was 49.8% for the third quarter of 1997 compared to 50.3% for the third quarter 1996. For the nine month period ended September 26, 1997, cost of sales as a percentage of sales was 52.9% compared to 51.8% for the nine month period ended September 27, 1996. The decrease in cost of sales as a percentage of sales for the third quarter is due primarily to lower cost of sales as a percentage of sales in the non-simulation business units in 1997 compared to 1996. This is primarily due to royalties and commissions of REALImage product that have relatively low associated costs. EXPENSES - -------- Total expenses for the third quarter of 1997 increased 15.0% to $14.5 million compared to $12.6 million for the third quarter of 1996, and increased as a percentage of sales to 37.7% from 37.4% for the respective periods. Total expenses for the nine month period ended September 26, 1997 increased 14.7% to $43.6 million compared to $38.0 million for the nine month period ended September 27, 1996, but decreased as a percentage of sales to 39.6% from 41.6% for the respective periods. 8 Marketing, General, and Administrative: Marketing, general, and administrative - --------------------------------------- expenses for the third quarter of 1997 increased 13.7% to $8.7 million compared to $7.6 million for the third quarter of 1996, but stayed constant as a percentage of sales at 22.6% for the respective periods. Marketing, general, and administrative expenses for the nine month period ended September 26, 1997 increased 13.3% to $25.2 million compared to $22.2 million for the nine month period ended September 27, 1996, but decreased as a percentage of sales to 22.9% from 24.3% for the respective periods. The increase in marketing, general, and administrative expenses during the third quarter is primarily due to increased labor costs related to increased headcount and wages, travel costs, tradeshow activity, and marketing and administrative costs related to the start-up of the new business units. Research and Development: Research and development expenses for the third - ------------------------- quarter of 1997 increased 17.0% to $5.8 million compared to $5.0 million for the third quarter of 1996, and increased as a percentage of sales to 15.1% from 14.8% for the respective periods. Research and development expense for the nine month period ended September 26, 1997 increased 16.6% to $18.4 million compared to $15.8 million for the nine month period ended September 27, 1996, but decreased as a percentage of sales to 16.7% from 17.3% for the respective periods. The increase in research and development expenses during the third quarter is primarily due to increased activity related to the development of the next generation of the image generator product, Harmony. OTHER INCOME, NET - ----------------- Other income for the third quarter of 1997 decreased 72.1% to $0.3 million compared to $1.1 million for the third quarter of 1996. For the nine month period ended September 26, 1997, other income decreased 47.1% to $1.6 million compared to $2.9 million for the nine month period ended September 27, 1996. The decrease in other income for the third quarter and nine month period is due to a decrease in interest income due to lower average cash and marketable securities balances and gains recognized on the sale of investment securities in 1996. INCOME TAXES - ------------ The Company's combined federal, state, and foreign effective income tax rate was 26.6% for the first nine months of 1997. The tax rate for the same period in 1996 was 38.0%. These rates are calculated based on an estimated annual effective tax rate applied to income before income taxes. The improvement in 1997 over 1996 is attributable to utilization of foreign loss carryforwards against U.S. taxable income and increased benefit of the foreign sales corporation. LIQUIDITY & CAPITAL RESOURCES - ----------------------------- Working capital at September 26, 1997 was $129.4 million compared to $126.9 million at December 27, 1996. This includes cash, cash equivalents, and marketable securities of $55.8 million and $63.0 million at September 26, 1997 and December 27, 1996, respectively. The Company's operations provided $8.6 million of cash during the first nine months of 1997, compared to $21.5 million of cash used in operations during the first nine months of 1996. Cash was also provided from proceeds of sales of marketable securities and proceeds from employee stock purchase and option plans. Cash was principally used to purchase marketable securities, capital equipment, investment securities and treasury stock, and to make payments on the line of credit. On September 19, 1996, the Company announced that its Board of Directors had authorized a plan that allows the Company to repurchase up to 500,000 shares of its common stock. As of November 6, 1997, the Company has repurchased and retired 152,000 shares of its common stock. Management believes that existing cash and marketable securities balances, borrowings available under the line of credit and cash generated from operations will be adequate to meet the Company's anticipated cash requirements through September 1998. This quarterly report on Form 10-Q may be deemed to contain certain forward- looking statements. Any forward-looking statements involve risks and uncertainties, including but not limited to risk of product demand, market acceptance, economic conditions, competitive products and pricing, difficulties in product development, commercialization and technology, and other risks detailed in this filing. Although the Company believes it has the product offerings and resources for continuing success, future revenue and margin trends cannot be reliably predicted. Factors external to the Company can result in volatility of the Company's common stock price. Because of the foregoing factors, recent trends are not necessarily reliable indicators of future stock prices or financial performance. 9 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Regulation S-K Exhibit No. Description ----------- ----------- 11 Earnings Per Share Calculation 27 Financial Data Schedule (b) There were no reports on Form 8-K filed for the three-month period ended September 26, 1997. 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 10, 1997 /S/ ----------------- ------------------------------- JOHN T. LEMLEY, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER) 10 EX-11 2 EARNINGS PER SHARE CALCULATIONS EXHIBIT 11 EVANS & SUTHERLAND COMPUTER CORPORATION EARNINGS PER SHARE CALCULATION Unaudited (In thousands except per share amounts)
Three Months Ended Nine Months Ended -------------------------------- ------------------------------- September 26, September 27, September 26, September 27, 1997 1996 1997 1996 --------------- --------------- -------------- -------------- Net earnings applicable to common stock $ 3,825 $ 3,286 $ 7,211 $ 5,534 =============== =============== ============== ============== Primary shares outstanding: Weighted average number of common shares outstanding 9,056 9,025 9,047 8,907 Common equivalent shares outstanding 541 232 430 299 --------------- --------------- -------------- -------------- Weighted average common and common equivalent shares outstanding 9,597 9,257 9,477 9,206 =============== =============== ============== ============== Fully diluted shares outstanding: Weighted average number of common shares outstanding 9,056 9,025 9,047 8,907 Common equivalent shares outstanding 675 270 675 329 --------------- --------------- -------------- -------------- Weighted average common and common equivalent shares outstanding 9,731 9,295 9,722 9,236 =============== =============== ============== ============== Primary net earnings per common and common equivalent share outstanding $ 0.40 $ 0.35 $ 0.76 $ 0.60 =============== =============== ============== ============== Fully diluted net earnings per common and common equivalent share outstanding $ 0.39 $ 0.35 $ 0.74 $ 0.60 =============== =============== ============== ==============
11 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 DEC-28-1996 SEP-26-1997 5,357 50,398 34,483 876 26,938 168,549 121,302 77,898 224,340 39,152 18,015 0 0 1,816 165,357 224,340 110,000 110,000 58,164 58,164 41,937 1,632 991 9,824 2,613 7,211 0 0 0 7,211 .76 .74
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