-----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, dyNSICTx2h9LB+vzbg2uCnuDyDGcmhK2Yy7uSailYM3U/QLhKcvyh1QxkVJvCLgX hysjfXyZA62EoK9JbB5bJQ== 0000950109-94-001473.txt : 19940812 0000950109-94-001473.hdr.sgml : 19940812 ACCESSION NUMBER: 0000950109-94-001473 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940701 FILED AS OF DATE: 19940811 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: 94543157 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 July 1, 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 July 29, 1994 - ----------------------------------- ----------------------------------- Common Stock, $0.20 par value 8,533,005 Form 10-Q Evans & Sutherland Computer Corporation QUARTER ENDED July 1, 1994 Page No. TABLE OF CONTENTS 2 PART I - FINANCIAL INFORMATION General Statement 3 ITEM 1. Financial Statements Consolidated Statements of Earnings - Six Months Ended July 1, 1994 and July 2, 1993 4 Consolidated Balance Sheets - July 1, 1994 and December 31, 1993 5-6 Consolidated Abbreviated Statements of Cash Flows - Six Months Ended July 1, 1994 and July 2, 1993 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 1. Legal Proceedings 12 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 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 EARNINGS Three Months and Six Months Ended July 1, 1994 and July 2, 1993 (Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended (Unaudited) (Unaudited) -------------------------- -------------------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Net sales $ 22,839 $ 36,009 $ 49,699 $ 65,925 Cost of sales 11,354 17,162 23,631 32,129 ---------- ---------- ---------- ---------- Gross profit 11,485 18,847 26,068 33,796 Expenses: Marketing, general, and administrative 8,580 9,798 16,916 19,189 Research and development 6,814 8,591 14,700 16,460 ---------- ---------- ---------- ---------- 15,394 18,389 31,616 35,649 Operating earnings (loss) -3,909 458 -5,548 -1,853 Other income, net 1,365 987 2,869 949 ---------- ---------- ---------- ---------- Earnings (loss) before income taxes, extraordinary gain, and cumulative effect of change in accounting principle -2,544 1,445 -2,679 -904 Income tax expense (benefit) -966 578 -1,019 -362 ---------- ---------- ---------- ---------- Earnings (loss) before extraordinary gain and cumulative effect of change in accounting principle -1,578 867 -1,660 -542 Extraordinary gain from repurchase of convertible debentures, net of income taxes of $226 and $282 369 - 459 - Cumulative effect at December 26, 1992 of change in accounting for income taxes - - - 2,267 ---------- ---------- ---------- ---------- Net earnings (loss) $ -1,209 $ 867 $ -1,201 $ 1,725 ========== ========== ========== ========== Earnings (loss) per common and common equivalent shares: Before extraordinary gain and cumulative effect of change in accounting principle $ -0.18 $ 0.11 $ -0.19 $ -0.06 Extraordinary gain from repurchase of convertible debentures 0.04 - 0.05 - Cumulative effect of change in accounting for income tax - - - 0.27 ---------- ---------- ---------- ---------- Total earnings (loss) per share $ -0.14 $ 0.11 $ -0.14 $ 0.21 ========== ========== ========== ========== Weighted average number of shares used for per share earnings computation: 8,526 8,235 8,500 8,229
-4- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS July 1, 1994 and December 31, 1993 (Dollars in Thousands)
July 1, December 31, 1994 1993 Assets (Unaudited) (Audited) ------ ------------ ------------- Current assets: Cash and cash equivalents $ 5,215 $ 3,250 Temporary cash investments 64,719 75,286 Receivables: Trade accounts, less allowance for doubtful receivables of $173 in 1994 and $406 in 1993 17,643 30,667 Interest 838 1,076 Other 455 399 ----------- ----------- Total receivables 18,936 32,142 Inventories, net (note 1) 36,336 32,839 Costs and estimated earnings in excess of billings on uncompleted contracts, net 13,715 10,048 Deferred income tax 4,330 6,050 Prepaid expenses and deposits 2,819 1,573 ----------- ----------- Total current assets 146,070 161,188 ----------- ----------- Property, plant, and equipment, at cost 103,961 113,366 Less accumulated depreciation and amortization 61,800 65,119 ----------- ----------- Net property, plant, and equipment 42,161 48,247 Long-term investments: Marketable equity securities at cost - 3,178 Marketable equity securities available-for-sale, at fair value 9,652 - Other, at cost 35 35 ----------- ----------- Total long-term investments 9,687 3,213 Other assets, at cost, less accumulated amortization 785 3,539 ----------- ----------- $ 198,703 $ 216,187 =========== ===========
Certain 1993 amounts have been reclassified to conform with 1994 presentation. -5- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED BALANCE SHEETS July 1, 1994 and December 31, 1993 (Dollars in Thousands)
July 1, December 31, 1994 1993 Liabilities and Stockholders' Equity (Unaudited) (Audited) ------------------------------------------- ------------ ------------- Current liabilities: Notes payable to banks $ - $ 2,685 Accounts payable 2,438 5,095 Accrued expenses 13,781 19,321 Customer deposits 16,047 11,303 Income taxes payable 303 2,112 ---------- ----------- Total current liabilities 32,569 40,516 ---------- ----------- Convertible subordinated debentures 32,412 37,066 Deferred income taxes 3,341 1,575 Stockholders' equity: Common stock, $.20 par value; authorized 30,000,000 shares; issued and outstanding 8,529,757 shares at July 1, 1994 and 8,352,525 shares at December 31, 1993 1,706 1,671 Additional paid-in capital (note 2) 2,278 11,899 Retained earnings 121,750 122,951 Net unrealized gain on marketable equity securities 4,200 - Equity adjustment from foreign currency translation 447 509 ---------- ----------- Total stockholders' equity 130,381 137,030 ---------- ----------- $ 198,703 $ 216,187 ========== ===========
Certain 1993 amounts have been reclassified to conform with 1994 presentation. -6- EVANS & SUTHERLAND COMPUTER CORPORATION CONSOLIDATED ABBREVIATED STATEMENTS OF CASH FLOWS Six Months Ended July 1, 1994 and July 2, 1993 (Dollars in Thousands)
Six Months Ended (Unaudited) ------------------------------------ July 1, July 2, 1994 1993 ------------ ------------ Net cash provided by operating activities $ 2,344 $ 21,969 Cash flows from investing activities: Capital expenditures -1,985 -5,700 Proceeds from sale of marketable sucurities 2,777 1,433 Proceeds from (purchases of) temporary cash investments 2,082 -19,876 Other -389 -559 ---------- ---------- Net cash provided by (used in) investing activities 2,485 -24,702 Cash flows from financing activities: Payments for repurchase of convertible debentures -3,831 - Net proceeds from issuance of common stock 4,056 355 Net borrowings (payments) under line of credit agreements -2,765 1,382 Other -26 - ---------- ---------- Net cash provided by (used in) financing activities -2,566 1,737 Effect of foreign exchange rate changes on cash -298 141 ---------- ---------- Net increase (decrease) in cash and cash equivalents 1,965 -855 Cash and cash equivalents at beginning of year 3,250 1,494 ---------- ---------- Cash and cash equivalents at end of period $ 5,215 $ 639 ========== ========== Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 1,287 $ 1,276 Income taxes $ 316 $ 4,849
-7- EVANS & SUTHERLAND COMPUTER CORPORATION NOTES TO FINANCIAL STATEMENTS (Dollars in Thousands) (1) Inventories are summarized as follows: July 1, December 25, 1994 1993 (Unaudited) (Audited) ----------- ------------ Raw materials and supplies $ 15,173 $ 15,035 Work-in-process 16,069 14,470 Finished Goods 6,002 4,738 Inventory reserve -908 -1,404 ---------- ----------- $ 36,336 $ 32,839 ========== =========== (2) The Tripos, Inc. Spin-off Effective June 1, 1994, net assets of Tripos, Inc. totalling $13,300,000 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. -8- 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 periods indicated and presents the percentage of increase (decrease) by listed items compared to the indicated prior period:
(Unaudited) (Unaudited) Quarters Six Months Ended July 1, 1994 Ended July 1, 1994 And July 2, 1993 And July 2, 1993 -------------------------------- -------------------------------- Net sales $ -13,170 -37% $ -16,226 -25% Cost of sales -5,808 -34% -8,498 -26% ------------ ----------- ------------ ----------- Gross profit -7,362 -39% -7,728 -23% Expenses: Marketing, general and administrative -1,218 -12% -2,273 -12% Research and development -1,777 -21% -1,760 -11% ------------ ----------- ------------ ----------- -2,995 -16% -4,033 -11% Operating earnings (loss) -4,367 -953% -3,695 -199% Other income (expense), net 378 38% 1,920 202% ------------ ----------- ------------ ----------- Earnings (loss) before income taxes, extraordinary gain, and cumulative effect of change in accounting principle -3,989 -276% -1,775 -196% Income tax expense (benefit) -1,544 -267% -656 -181% ------------ ----------- ------------ ----------- Earnings (loss) before extraordinary gain and cumulative effect of change in accounting principle -2,445 -282% -1,119 -206% Extraordinary gain from repurchase of convertible debentures, net of income taxes 369 100% 460 100% ------------ ----------- ------------ ----------- Cumulative effect at December 26, 1992, of change in accounting for income taxes - - -2,267 -100% ------------ ----------- ------------ ----------- Net earnings $ -2,076 -239% $ -2,926 -170% ============ =========== ============ ===========
-9- RESULTS OF OPERATIONS - --------------------- Sales - ----- The following table summarizes sales for the six months of 1994 and 1993 and also for the second quarters of 1994 and 1993. As shown, sales are lower in 1994 compared with 1993 in most all market sectors served by the Company.
SALES Quarter Ended Six Months Ended ------------------------------------ ----------------------------------- % Change % Change July 1, July 2, increase July 1, July 2, increase 1994 1993 (decrease) 1994 1993 (decrease) ---- ---- ---------- ---- ---- ---------- World civil pilot training 1,997 4,590 -56% 2,637 6,748 -61% U.S. government & engineering 9,787 12,070 -19% 19,917 26,047 -24% International government & engineering 4,756 8,311 -43% 13,006 13,290 -2% Education & entertainment 605 41 1376% 927 785 18% Design systems 3,363 5,674 -41% 7,257 9,814 -26% Tripos * 2,331 5,323 -56% 5,955 9,241 -36% -------- -------- -------- -------- $ 22,839 $ 36,009 -37% $ 49,699 $ 65,925 -25% ======== ======== ======== ========
* Tripos numbers for 1994 represent results for two months & five months respectively because the Tripos Spin-off occurred June 1, 1994 Sales decreased $13,170,000 in the second quarter of 1994 as compared with the same period in 1993. Of this amount, 23% or $2,992,000 is related to the spin- off of Tripos which took place on June 1, 1994. For the six months ended July 1, 1994 sales decreased $16,226,000 from the comparable period in 1993. Tripos accounted for 20% of this reduction. Sales in the civil pilot training sector continue to reflect the weak condition of the aerospace industry. The Company announced during the quarter the termination of its agreement with Thomson-CSF for the exclusive sale of E&S image generators in the civil pilot training market. At the same time, it was also announced that the Company is now offering a full range of integrated visual systems to the civil pilot training market. With these developments, as the civil pilot training market begins to recover, the Company will be well positioned to serve this market with superior products and services. Sales in the U. S. and International Government sectors are slower than expected. However, second half sales in the U.S. should increase as delivery of systems for the Close Combat Tactical Training (CCTT) program occur. Sales for the international sector are expected to remain at their present rate through the balance of the year. Growth in the education and entertainment market is slower than expected, although sales are up from the previous year's second quarter. The first commercial installation of Virtual Adventures is now open at the Nauticus Museum in Norfolk, Virginia and public reaction -10- is positive. Jointly developed with Iwerks, this location-based entertainment attraction is scheduled for its second installation in Connecticut in the fourth quarter. Orders for the Company's Digistar II system continue to be received with three systems to be delivered during the remainder of 1994. Design systems sales are lower for the second quarter by $2,311,000 from the previous year's second quarter. The recent announcement of an OEM agreement with Hewlett-Packard to supply high performance Freedom Series graphics accelerators with Hewlett-Packard workstations combined with earlier and similar announcements with IBM and Sun Microsystems now places the Company in a position to show improved performance in this sector. With these agreements, the Company is provided the most substantial OEM marketing channel available for high performance graphics accelerators. These OEM agreements along with the just announced signing of a letter of intent to purchase Portable Graphics, Inc. (PGI) of Austin, Texas should accelerate sales of graphics hardware and software solutions. PGI is a small company and a leading supplier of GL-based software development libraries and tool kits for developing 3D graphics applications for all major hardware platforms. Cost of Sales - ------------- Cost of sales, as a percentage of sales, was 49.7% for the three months of 1994 compared to the 47.7% rate experienced during the corresponding 1993 period. The main reason for the increase is due to lower cost of sales with Tripos software sales. Since the Tripos spin-off was effective June 1, 1994, only two months are included in the second quarter 1994 figures as compared with three months for 1993. Cost of sales in the other sectors have remained at the same levels for all periods when Tripos costs are discounted. Expenses - -------- Expenses for the second quarter of 1994 are lower than the same quarter of 1993 by $2,995,000 (16%). All expenses are lower as a result of restructuring efforts that took place in January of this year. Cost reductions have improved the Company's efficiency and have not impaired its ability to operate. Other Income (Expense), Net - --------------------------- Other income increased during the quarter over the second quarter of the previous year by $373,000. The primary reasons for the increase is due to foreign currency exchange gains in 1994 of $103,000 compared to losses of $87,000 in 1993 and interest expense reductions in 1994 due to the Company's repurchasing of interest-bearing convertible debentures. Income Taxes - ------------ Tax expense for 1994 is based on an effective tax rate of 38% compared to an effective rate of 40% for 1993. The rate for 1994 is estimated to be lower due to improved performance from the Company's foreign subsidiaries. Inflation - --------- Inflation has not had a significant impact in the Company's results of operations during any of the last three fiscal years. LIQUIDITY & CAPITAL COMMITMENTS - ------------------------------- Funds to support the Company's operations are generated primarily from net cash provided by operating activities, sales of marketable securities, and proceeds from employee stock purchase and option plans. The Company also has cash equivalents and temporary cash investments which can be used as needed for operating funds. No major capital expenditures are expected for the balance of the year. -11- Cash and cash equivalents and temporary cash investments decreased $8,602,000 to $69,934,000 during the first six months of 1994 principally due to cash expenditures 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 $4,555,000 to $9,652,000 during the same six month period. Approximately $2,000,000 of the decline is due to the sale of VLSI shares and the balance is a result of changing market values of shares held. 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. The Company has now filed a "Notice of Intention to Arbitrate" the matters involved in the termination with the American Arbitration Association as provided by the terms of the agreement. The Company claims damages in excess of $26 million exclusive of costs as a result of this dispute. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- (b) There were no reports on Form 8-K filed for the six-month period ended July 1, 1994. [THIS SPACE INTENTIONALLY LEFT BLANK] -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 August 10, 1994 /s/ . --------------- --------------------------------------- Gary E. Meredith, Vice President, Secretary, and Chief Financial Officer -13- -----END PRIVACY-ENHANCED MESSAGE-----