-----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, DvMpbbv5i47z8qPDKXuhwvYjKSdTugqJt4otIFNQGbOq0kqShM7fQ+IUL3VIMydO WENR1fX9b+5Du+Vr03P/8w== 0000749038-95-000002.txt : 19950517 0000749038-95-000002.hdr.sgml : 19950517 ACCESSION NUMBER: 0000749038-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONCURRENT COMPUTER CORP/DE CENTRAL INDEX KEY: 0000749038 STANDARD INDUSTRIAL CLASSIFICATION: 3571 IRS NUMBER: 042735766 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13150 FILM NUMBER: 95510358 BUSINESS ADDRESS: STREET 1: 2 CRECENT PLACE CITY: OCEANPORT STATE: NJ ZIP: 07757 BUSINESS PHONE: 9088704500 MAIL ADDRESS: STREET 1: 2 CRECENT PLACE CITY: OCEANPORT STATE: NJ ZIP: 07757 FORMER COMPANY: FORMER CONFORMED NAME: MASSACHUSETTS COMPUTER CORP DATE OF NAME CHANGE: 19881018 10-Q 1 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 Quarter Ended December 31, 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 No. 0-13150 _____________ CONCURRENT COMPUTER CORPORATION Delaware 04-2735766 (State of Incorporation) (I.R.S. Employer Identification No.) 2 Crescent Place, Oceanport, New Jersey 07757 Telephone: (908) 870-4500 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___ Number of shares of the Registrant's Common Stock, par value $0.01 per share, outstanding as of February 1, 1995 were 30,208,396. PART I. Financial Information Item 1. Financial Statements Concurrent Computer Corporation Consolidated Statements of Operations (Dollars in thousands, except per share amounts) Three Months Ended Six Months Ended December 31, December 31, 1994 1993* 1994 1993* Net Sales: Computer systems $20,402 $21,254 $44,275 $49,042 Service and other 17,384 19,434 35,019 41,006 Total 37,786 40,688 79,294 90,048 Cost of sales: Computer systems 9,718 12,131 21,897 25,249 Service and other 10,782 12,774 21,334 26,164 Total 20,500 24,905 43,231 51,413 Gross margin 17,286 15,783 36,063 38,635 Operating expenses: Research and development 5,327 6,551 10,748 12,775 Selling, general and administrative 10,086 13,371 20,284 27,279 Provision for restructuring - - - 12,000 Sales and use tax credit (1,000) (1,440) (1,000) (1,440) ________ _______ _______ _______ Total operating expenses 14,413 18,482 30,032 50,614 Operating income (loss) 2,873 (2,699) 6,031 (11,979) Interest expense (648) (640) (1,372) (2,141) Interest income 129 144 311 305 Other income (expense)-net (14) (147) 144 (92) Income (loss) before provision for income taxes,extraordinary loss and cumulative effect of change in accounting principles 2,340 (3,342) 5,114 (13,907) Provision for income taxes 1,300 150 2,400 600 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles 1,040 (3,492) 2,714 (14,507) Extraordinary loss on early extinguishment of debt - - - (23,193) Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (5,000) Net income (loss) $1,040 ($3,492) $2,714 ($42,700) Income (loss) per share: Income (loss) before extraordinary loss and cumulative effect of change in accounting principles $0.03 ($0.12) $0.09 ($0.55) Extraordinary loss on early extinguishment of debt - - - (0.87) Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (0.19) Net income (loss) $0.03 ($0.12) $0.09 ($1.61) * Reclassified to conform to current year presentation. The accompanying notes are an integral part of the consolidated financial statements. Concurrent Computer Corporation Consolidated Balance Sheets (Dollars in thousands) December 31, June 30, 1994 1994 ASSETS Current assets: Cash and cash equivalents $8,249 $9,374 Accounts receivable - net 26,759 34,519 Inventories 19,834 17,829 Prepaid expenses and other current assets 5,099 5,334 Total current assets 59,941 67,056 Property plant and equipment - net 39,510 42,742 Other long-term assets 12,722 13,372 Total assets $112,173 $123,170 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $6,193 $5,749 Current portion of long-term debt 16,125 11,000 Accounts payable and accrued expenses 35,485 44,687 Deferred revenue 5,337 6,236 Total current liabilities 63,140 67,672 Long-term debt 1,125 13,240 Other long-term liabilities 6,982 7,210 Stockholders' equity: Common stock 301 296 Capital in excess of par value 74,456 71,547 Accumulated deficit after eliminating accumulated deficit of $81,826 at December 31, 1991, date of quasi-reorganization (32,308) (35,022) Treasury stock (58) (58) Cumulative translation adjustment (1,465) (1,715) _______ _________ Total stockholders' equity 40,926 35,048 Total liabilities and stockholders' equity $112,173 $123,170 The accompanying notes are an integral part of the consolidated financial statements. Concurrent Computer Corporation Consolidated Statements of Cash Flows (Dollars in thousands) Six Months Ended December 31, 1994 1993 * Cash flows provided by (used by) operating activities: Net income (loss) $2,714 ($42,700) _______ _________ Adjustments to reconcile net income (loss) to net cash provided by (used by) operating activities: Depreciation, amortization and other 6,502 6,067 Non-cash taxes 1,800 200 Non-cash interest and amortization of financing costs 230 801 Extraordinary loss on early extinguishment of debt - 23,193 Cumulative effect of change in accounting principles - 5,000 Provision for restructuring - 12,000 Sales and use tax credit (1,000) (1,440) Decrease (increase) in current assets: Accounts receivable 7,970 4,538 Inventories (1,751) (2,338) Prepaid expenses and other current assets 52 (70) Decrease in current liabilities, other than debt obligations (8,359) (7,668) Increase in other long-term assets (88) (1,457) (Decrease) increase in other long- term liabilities (310) 461 ________ _______ Total adjustments to net income (loss) 5,046 39,287 ________ _______ Net cash provided by (used by) operating activities 7,760 (3,413) ________ _______ Cash flows used by investing activities: Additions to property, plant and equipment (2,626) (3,497) Cash flow provided by (used by) financing activities: Net proceeds of notes payable 488 1,908 Repayment of long-term debt (7,065) (73,615) Issuance of long-term debt - 708 Net proceeds from sale and issuance of common stock 150 55,001 _______ ________ Net cash used by financing activities (6,427) (15,998) _______ ________ Effect of exchange rate changes on cash and cash equivalents 168 238 Decrease in cash and cash equivalents ($1,125) ($22,670) ________ _________ Cash paid during the year for: Interest $1,189 $1,642 _______ _________ Income taxes (net of refunds) $551 $204 _____ _____ * Reclassified to conform to current year presentation. The accompanying notes are an integral part of the consolidated financial statements. Concurrent Computer Corporation Notes To Consolidated Financial Statements ___________________________ Note 1: Basis of Presentation The accompanying consolidated financial statements are unaudited and have been prepared in accordance with generally accepted accounting principles. The foregoing financial information reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the periods presented. All such adjustments are of a normal, recurring nature. These results, however, are not necessarily indicative of the results to be expected for the full fiscal year. Note 2: Debt Agreement At December 31, 1994, the outstanding balance of the Company's senior bank debt (the "debt") was approximately $16.1 million, excluding up to $3.0 million in standby letters of credit in connection with overseas lines of credit. The debt carries monthly amortization payments of $687,500 through June 1995 and a final maturity payment of $12 million on October 1, 1995. The debt bears interest, at the Company's option, at the prime rate plus 1% or the London Interbank Rate plus 3%. The debt is secured by a first security interest in the Company's domestic assets and a security interest in two-thirds of the Company's ownership interest in its subsidiaries. The debt may be prepaid at any time without penalty. The term loan agreement covering the debt was amended during the quarter ended September 30, 1994 to modify certain financial covenants. The amendment also extended the maturity date from June 30, 1995 to October 1, 1995. The Company is in discussions with its lenders to amend the term loan agreement to modify certain financial covenants. The amendments are expected to be necessary based on anticipated financial results for the remainder of fiscal year 1995. Note 3: Change in Accounting Estimate During the three months ended December 31, 1994, the Company recorded a sales and use tax credit of $1.0 million, or $.03 per share, related to a change in estimate of state sales and use tax reserves based on a final state audit determination. Note 4: Income (Loss) Per Share Income (loss) per share for the three and six months ended December 31, 1994 and 1993, respectively, is based on the weighted average number of shares of common stock outstanding and for the three and six months ended December 31, 1994 includes common stock equivalents (dilutive stock options). Income per share on a primary and fully diluted basis for the three and six months ended December 31, 1994 are equivalent. The number of shares used in computing earnings per share were as follows: (Shares in thousands) Three Months Ended Six Months Ended December 31, December 31, 1994 1993 1994 1993 Primary 30,127 29,585 29,991 26,524 Fully Diluted 30,127 29,585 29,991 26,524 Supplemental net loss per share for the six months ended December 31, 1993, which is calculated assuming the Company's comprehensive refinancing (completed on July 21, 1993) took place on July 1, 1993, was as follows: Six Months Ended December 31, 1993 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles (including a $12.0 million, or $0.41 per share, provision for restructuring) ($0.49) Extraordinary loss on early extinguishment of debt (0.79) Cumulative effect of change in accounting principles for income taxes and postretirement benefits (0.17) Net loss ($1.45) Note 5: Inventories (Dollars in thousands) December 31, June 30, 1994 1994 Raw materials $10,883 $9,270 Work-in-process 1,799 2,872 Finished goods 7,152 5,687 ________ ________ $19,834 $17,829 Note 6: Accumulated Depreciation Accumulated depreciation at December 31, 1994 and June 30, 1994 was $33,274,000 and $26,644,000, respectively. Note 7: Contingency The U.S. government has asserted that the Company's prices for shipments of spare parts prior to 1994 under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program were too high. No claim or action has been filed against the Company. The Company believes that its pricing practices are in compliance with applicable regulations. The Company and the government are in discussions to resolve the matter. Although there can be no assurance, the Company expects that any resolution of the matter will not have a material adverse affect on the Company's financial condition or liquidity. Note 8: Subsequent Event Commencing during January 1995, the Company began the process of restructuring its operations. The restructuring plan includes a reduction in headcount and the closing of certain offices. The plan will result in the recording of a provision for restructuring during the three months ending March 31, 1995. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview During the first and second quarters of fiscal year 1995, Concurrent achieved profitability despite declining revenues. The Company's profit performance reflects the benefits from continued tight cost controls and focused investment. The decline in revenues results from the continued shift in market demand from higher unit-priced proprietary systems to lower unit-priced open systems, such as the MAXION systems. The MAXION systems continue to be well received by customers who have purchased them. However, sales of the MAXION systems have not increased as expected and declined in the quarter ended December 31, 1994. Management believes the reason sales of the MAXION systems have not reached the initially anticipated levels is that not enough potential customers are aware of the MAXION systems, its capabilities and benefits. Therefore, the Company is in the process of streamlining operations and realigning resources to focus even more intently on its MAXION system business. The Company is initiating new efforts to position, market and sell its MAXION systems to customers who, like existing customers who have purchased them, require high-performance, high-throughput and real-time capabilities to stay competitive in their industries. In connection with restructuring efforts, the Company will record a provision for restructuring during the quarter ending March 31, 1995. Although revenues for the quarter ending March 31, 1995 are expected to be lower than the quarter ended December 31, 1994 (reflecting, in part, a reduction in shipments of spare parts under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program), management believes that the Company's focused investment and cost containment efforts will result in future revenue growth and profitability. However, there can be no assurance that these goals will be achieved. The Company is pursuing a number of major program opportunities for its MAXION systems. Prospects are promising but uncertain. Given the long (6-18 months) selling cycle for such programs, should the Company be selected as a supplier, the benefits from such programs are not likely to be realized in fiscal year 1995. During the quarter ended December 31, 1994 the Company shipped MAXION systems to a number of strategic customers, including the 120th MAXION system to Lockheed Austin for its work on the U.S. Navy's Tactical Environmental Support System (TESS) program, initial units of the MAXION/ATR "flyable" MAXION multiprocessor system to Loral Electronic Systems, and other MAXION systems to such customers as the U.S. Government, CAE, Fuji Heavy Industries, Ltd., and Boeing. The Company continues to expand its product offerings through strategic alliances, such as those with Oracle in data acquisition and Bull Information Systems in networking, and is pursuing additional distribution and marketing alliances. The Company's objective is to increase revenues by providing real-time computer systems and services to its installed base of proprietary systems and to its open systems target markets. The achievement of these objectives requires that the Company continue to enhance its proprietary hardware and operating system platforms, while investing in the development of its real-time open system hardware and operating systems and providing industry standard product enhancements, such as networking, graphics and data acquisition. The future growth of the Company's business and its future financial performance will depend, to a significant extent, upon its ability to continue to develop and market competitive open systems which meet the real-time computing needs of its targeted customers. One of the goals of the Company's strategy is to minimize the effect of the anticipated decline in sales of the Company's proprietary systems and traditional maintenance and support services, while increasing sales of its open systems and associated services. Since the average selling price of an open system is considerably less than the average selling price of a proprietary system, the number of total systems sold must increase to maintain and grow revenues. A shift in sales from proprietary systems, however, is likely to result in lower gross margins. Currently, gross margins on open systems are lower than gross margins on proprietary systems. The Company's operating income would be adversely affected by such a shift unless total net sales increase, the gross margins on its open systems improve and/or total operating expenses are further reduced. Although there can be no assurance that this will be the case, the Company believes gross margins on its open systems will improve with the continued implementation of its value-added market strategy. This strategy involves the continued introduction of new next generation open system products, which the Company believes will generate higher gross margins than its older open systems products. It also involves the development and sale of value-added products and services such as software productivity and development tools, and packaged services, which sales are expected to have an aggregate positive impact on total gross margins. Selected Operating Data as a Percentage of Net Sales The Company considers its computer systems and service business (including maintenance, support and training) to be one class of products which accounted for the percentages of net sales set forth below. The following table sets forth selected operating data as a percentage of net sales for certain items in the Company's consolidated statements of operations for the periods indicated. Three Months Ended Six Months Ended December 31, December 31, 1994 1993 1994 1993 Net sales: Computer systems 54.0% 47.7% 55.8% 48.5% Service and other 46.0 52.3 44.2 51.5 _____ _____ _____ _____ Total net sales 100.0 100.0 100.0 100.0 Cost of sales (% of respective sales category): Computer systems 47.6 58.6 49.5 53.9 Service and other 62.0 63.6 60.9 60.1 _____ _____ _____ _____ Total cost of sales 54.3 61.2 54.5 57.1 Gross margin 45.7 38.8 45.5 42.9 Operating expenses: Research and development 14.1 16.1 13.6 14.2 Selling, general and administrative 26.7 32.8 25.6 30.3 Provision for restructuring - - - 13.3 Sales and use tax credit (2.7) (3.5) (1.3) (1.6) ______ ______ ______ _____ Total operating expenses 38.1 45.4 37.9 56.2 ______ ______ ______ _____ Operating income (loss) 7.6 (6.6) 7.6 (13.3) Interest expense (1.7) (1.6) (1.7) (2.4) Interest income 0.3 0.4 0.3 0.4 Other income (expense) - net - (0.4) 0.2 (0.1) ____ ____ _____ ______ Income (loss) before provision for income taxes, extraordinary loss and cumulative effect of change in accounting principles 6.2 (8.2) 6.4 (15.4) Provision for income taxes 3.4 0.4 3.0 0.7 ____ ____ ____ ______ Income (loss) before extraordinary loss and cumulative effect of change in accounting principles (a) 2.8% (8.6)% 3.4% (16.1)% _____ ______ ____ _______ (a) The percentage for the six months ended December 31, 1993 excludes a $23.2 million extraordinary loss on early extinguishment of debt and a $5.0 million non-cash charge for the cumulative effect of change in accounting principles. Results of Operations Three Months Ended December 31, 1994 in Comparison to Three Months Ended December 31, 1993 Net Sales Net sales for the three months ended December 31, 1994 were $37.8 million, a decrease of $2.9 million from the prior year period. This decrease was due to a decrease of $0.9 million, or 4.0%, in computer systems sales and a decrease of $2.0 million, or 10.5%, in service and other revenues. The decrease in computer system sales was primarily due to the anticipated decline in sales of proprietary systems substantially offset by shipments of spare parts under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program and sales of the Company's new MAXION open systems. The decrease in service and other revenues was primarily due to the decline in computer system sales experienced in prior periods which resulted in fewer maintenance contracts and a decline in renewal rates on maturing contracts partially offset by approximately $1.0 million related to the impact of favorable exchange rates. Gross Margin Gross margin, as measured in dollars and as a percentage of net sales, was $17.3 million and 45.7%, respectively, for the three months ended December 31, 1994 compared to $15.8 million and 38.8%, respectively, for the prior year period. The increase in gross margin dollars and percentage was primarily due to a favorable mix of higher margin products and cost savings resulting from the operational restructuring implemented during fiscal year 1994 partially offset by the decline in net sales. Operating Income (Loss) Operating income for the current year period was $2.9 million compared to operating loss of $2.7 million for the prior year period. The $5.6 million increase in operating income was due to the aforementioned $1.5 million increase in gross margin and a $4.5 million reduction in operating expenses partially offset by a $0.4 million reduction in the sales and use tax credit as compared to a similar credit in the prior year period. The sales and use tax credit in both periods relates to a change in the estimate of state sales and use tax reserves. The $4.5 million decrease in operating expenses was primarily due to a $3.3 million decrease in selling, general and administrative expenses and a $1.2 million decrease in net research and development expenses. The $1.2 million decrease in net research and development expenses reflects a $1.5 million decrease in gross research and development expenses partially offset by a $0.3 million decrease in the amount of software production costs which were capitalized during the period. The decrease in selling, general and administrative and gross research and development expenses is primarily due to cost savings resulting from the operational restructuring implemented during fiscal year 1994. Income (Loss) Before Extraordinary Loss and Cumulative Effect of Change in Accounting Principles Income before extraordinary loss and cumulative effect of change in accounting principles was $1.0 million in the current year period compared to a loss of $3.5 million for the prior year period. The $4.5 million change results from the $5.6 million increase in operating income partially offset by a $1.1 million net increase in non-operating expenses. The increase in non-operating expenses was primarily due to an $1.1 million increase in the provision for income taxes. The increase in the provision for income taxes relates primarily to domestic operations. Such increase represents non-cash taxes which are offset in capital in excess of par value through the reversal of temporary differences which originated prior to the Company's quasi-reorganization on December 31, 1991. Six Months Ended December 31, 1994 in Comparison to Six Months Ended December 31, 1993 Net Sales Net sales for the six months ended December 31, 1994 were $79.3 million, a decrease of $10.8 million from the prior year period. This decrease was due to a decrease of $4.8 million, or 9.7%, in computer systems sales and a decrease of $6.0 million, or 14.6%, in service and other revenues. The decrease in computer system sales was primarily due to the anticipated decline in sales of proprietary systems substantially offset by shipments of spare parts under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program and sales of the Company's new MAXION open systems. The decrease in service and other revenues was primarily due to the decline in computer system sales experienced in prior periods which resulted in fewer maintenance contracts and a decline in renewal rates on maturing contracts partially offset by approximately $1.6 million related to the impact of favorable exchange rates. Gross Margin Gross margin, as measured in dollars and as a percentage of net sales, was $36.1 million and 45.5%, respectively, for the six months ended December 31, 1994 compared to $38.6 million and 42.9%, respectively, for the prior year period. The decrease in gross margin dollars was primarily due to the decline in net sales partially offset by a favorable mix of higher margin products and cost savings resulting from the operational restructuring implemented during fiscal year 1994. The increase in gross margin as a percentage of net sales was primarily due to a favorable mix of higher margin products and cost savings resulting from the operational restructuring implemented during fiscal year 1994 partially offset by the decline in net sales. Operating Income (Loss) Operating income for the current year period was $6.0 million compared to an operating loss of $12.0 million for the prior year period. The $6.0 million increase in operating income (net of the one-time $12.0 million provision for restructuring incurred in the prior year) was due to a $9.0 million reduction in operating expenses partially offset by the $2.6 million decrease in gross margin and a $0.4 million reduction in the sales and use tax credit as compared to a similar credit in the prior year period. The sales and use tax credit in both periods relates to a change in the estimate of state sales and use tax reserves. The $9.0 million decrease in operating expenses was primarily due to a $7.0 million decrease in selling, general and administrative expenses and a $2.0 million decrease in net research and development expenses. The $2.0 million decrease in net research and development expenses reflects a $2.8 million decrease in gross research and development expenses partially offset by a $0.8 million decrease in the amount of software production costs which were capitalized during the period. The decrease in selling, general and administrative and gross research and development expenses is primarily due to cost savings resulting from the operational restructuring implemented during fiscal year 1994. Income (Loss) Before Extraordinary Loss and Cumulative Effect of Change in Accounting Principles Income before extraordinary loss and cumulative effect of change in accounting principles was $2.7 million in the current year period compared to loss of $14.5 million for the prior year period. The $17.2 million change results from the $18.0 million increase in operating income partially offset by a $0.8 million net increase in non-operating expenses. The increase in non-operating expenses was primarily due to an $1.8 million increase in the provision for income taxes partially offset by a $0.8 million decrease in interest expense resulting from the reduction of the Company's indebtedness and a $0.03 million decrease in foreign exchange losses. The increase in the provision for income taxes relates primarily to domestic operations. Such increase represents non-cash taxes which are offset in capital in excess of par value through the reversal of temporary differences which originated prior to the Company's quasi-reorganization on December 31, 1991. Financial Resources and Liquidity The liquidity of the business is dependent on many factors, including sales volume, operating profit ratio, debt service and the efficiency of asset utilization and turnover. The future liquidity of the Company's business will depend to a significant extent on: 1) its ability to generate significant revenue growth of its MAXION systems; 2) the actual versus anticipated decline in sales of proprietary systems and traditional services; 3) its ongoing cost control efforts; and 4) refinancing of its existing senior bank debt and access to additional equity, if necessary. The liquidity of the business is also affected by: 1) the timing of shipments which predominantly occur during the last month of the quarter; 2) the increasing percentage of sales derived from outside of the United States where there is generally longer accounts receivable collection patterns; 3) the number of countries in which the Company operates resulting in the requirement to maintain minimum cash levels in each country; and 4) restrictions in some countries where the Company operates which limit its ability to repatriate cash. As of December 31, 1994, the Company had a current ratio of .95 to 1, an inventory turnover ratio of 4.3 times and negative net working capital of $3.2 million. Current liabilities include the final maturity payment on the Company's senior bank debt of $12.0 million due on October 1, 1995. The reduction in the inventory turnover ratio (from 5.2 at June 30, 1994) is due primarily to the timing of shipments and inventory purchases made in anticipation of orders for certain business opportunities in process. At December 31, 1994, cash and cash equivalents amounted to $8.2 million and accounts receivable amounted to $26.8 million. At December 31, 1994, the outstanding balance of the Company's senior bank debt (the "debt") was approximately $16.1 million, excluding up to $3.0 million in standby letters of credit in connection with overseas lines of credit. The debt carries monthly amortization payments of $687,500 through June 1995 and a final maturity payment of $12 million on October 1, 1995. Amortization payments during the quarters ended September 30, 1994 and December 31, 1994 included the regular $687,500 monthly payments and additional payments of $1.375 million on September 30, 1994 and December 31, 1994, respectively. The September 30, 1994 and December 31, 1994 payments of $1.375 million resulted from the bank approved deferral of the four regular monthly amortization payments from November 1993 through February 1994. In consideration of the deferral, the Company granted stock purchase warrants to the senior banks to purchase an aggregate of 600,000 shares of Common Stock at an exercise price of $1.50, the fair market value of a share of Common Stock at the time of the applicable bank term loan amendment. The warrants expired unexercised on September 30, 1994. The debt bears interest, at the Company's option, at the prime rate plus 1% or the London Interbank Rate plus 3%. The debt is secured by a first security interest in the Company's domestic assets and a security interest in two-thirds of the Company's ownership interest in its subsidiaries. The debt may be prepaid at any time without penalty. The term loan agreement covering the debt was amended during the quarter ended September 30, 1994 to modify certain financial covenants. The amendment also extended the maturity date from June 30, 1995 to October 1, 1995. The Company is in discussions with its lenders to modify certain financial covenants based on anticipated financial results for the remainder of fiscal year 1995. The Company does not expect to be in a position to repay the final maturity payment of $12.0 million due on October 1, 1995 from internally generated funds and is pursuing options for refinancing the debt. There can be no assurance that any of the above will be obtained or achieved. The Company's Tinton Falls, New Jersey facility continues to be for sale. In the event of a sale, the Company is required to make a prepayment of the existing senior bank debt in an amount equal to 75% of the net sale proceeds. The prepayment would be applied to the payment due on the October 1, 1995 maturity date. Commencing during January 1995, the Company began the process of restructuring its operations. The restructuring plan will include a reduction in headcount and the closing of certain offices. The plan will result in the recording of a provision for restructuring during the three months ending March 31, 1995. Although management believes that improvements in cash flow will result from the restructuring of operations and other actions which will enhance the Company's ability to manage its cash requirements, the short term prospects for the Company's liquidity are dependent to a significant degree upon the level and stability of revenue from sales and service of its computer systems and the Company's ongoing cost control actions. To provide additional flexibility, the Company is in discussions with its lenders to reschedule future monthly debt amortization payments. PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11 Computation of Primary Earnings Per Share 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the fiscal quarter ended December 31, 1994. Signatures Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this quarterly report for the quarter ended December 31, 1994 to be signed on its behalf by the undersigned thereunto duly authorized. CONCURRENT COMPUTER CORPORATION (Registrant) By:/s/ John T. Stihl John T. Stihl Chairman of the Board President and Chief Executive Officer By:/s/ Roger J. Mason Roger J. Mason Vice President, Finance and Treasurer Chief Financial Officer Dated: February 14, 1995 Exhibit Index Exhibit No. Description 11 Computation of primary earnings per share 27 Financial data schedule Concurrent Computer Corporation Exhibit 11 Primary Earnings Per Share Computation (Dollars and shares in thousands, except per share amounts) Three Months Ended Six Months Ended December 31, December 31, 1994 1993 1994 1993 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles $1,040 ($3,492) $2,714 ($14,507) Extraordinary loss on early extinguishment of debt - - - (23,193) Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (5,000) _____ ______ ______ ________ Net income (loss) $1,040 ($3,492) $2,714 ($42,700) _______ ________ _______ __________ Weighted average number of common shares 30,126 29,585 29,928 26,524 Increase in weighted average number of common shares upon assumed exercise of stock options 1 - 63 - _______ _______ _______ _______ Total 30,127 29,585 29,991 26,524 _______ ______ ______ ______ Income (loss) per share: Income (loss) before extraordinary loss and cumulative effect of change in accounting principles $0.03 ($0.12) $0.09 ($0.55) Extraordinary loss on early extinguishment - - - (0.87) of debt Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (0.19) _______ _______ ______ _______ Net income (loss) $0.03 ($0.12) $0.09 ($1.61) February 14, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Concurrent Computer Corporation Q2 10-Q Filing Dear Sirs: On behalf of Concurrent Computer Corporation (the "Company"), we are filing by means of the EDGAR system a 10-Q for Fiscal Year 95 Q-2. Sincerely, /s/ Kevin J. Dell Vice President General Counsel and Secretary Concurrent Computer Corporation EX-27 2
5 This schedule contains summary financial information extracted from the Company's Consolidated Balance Sheet at December 31, 1994 and Consolidated Statement of Operations FOR THE SIX MONTHS ENDED DECEMBER 31, 1994, and is qualified in its entirety by reference to such financial statements. 1000 6-MOS JUN-30-1995 JUL-01-1994 DEC-31-1994 8,249 0 28,650 1,891 19,834 59,941 72,784 33,274 112,173 63,140 1,125 301 0 0 40,625 112,173 44,275 79,294 21,897 43,231 0 281 1,372 5,114 2,400 2,714 0 0 0 2,714 0.09 0.09
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