-----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, rg2+Nzb0wpw13yYgMb+NUo34uBg8gT8ihzk+/vjWRlwwR/t0ecNKmSF9WzuRkhwd uU4fX6Dg4b4eWYSSpyQ1Fg== 0000749038-95-000005.txt : 19950530 0000749038-95-000005.hdr.sgml : 19950530 ACCESSION NUMBER: 0000749038-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 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: 95539576 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 March 31, 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 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 May 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 Nine Months Ended March 31, March 31, 1995 1994* 1995 1994* Net Sales: Computer systems $13,597 $24,616 $57,872 $73,658 Service and other 16,747 19,443 51,766 60,449 Total 30,344 44,059 109,638 134,107 Cost of sales: Computer systems 8,523 14,946 30,420 40,195 Service and other 10,437 11,582 31,771 37,746 Total 18,960 26,528 62,191 77,941 Gross margin 11,384 17,531 47,447 56,166 Operating expenses: Research and development 4,707 5,585 15,455 18,360 Selling, general and administrative 8,665 10,318 28,949 37,597 Provision for restructuring 2,700 - 2,700 12,000 Sales and use tax credit - - (1,000) (1,440) Total operating expenses 16,072 15,903 46,104 66,517 Operating income (loss) (4,688) 1,628 1,343 (10,351) Interest expense (737) (686) (2,109) (2,827) Interest income 101 132 412 437 Other non-recurring charge(1,000) - (1,000) - Other income (expense)-net 339 (195) 483 (287) Income (loss) before provision for income taxes, extraordinary loss and cumulative effect of change in accounting principles (5,985) 879 (871) (13,028) Provision for income taxes (1,000) 300 1,400 900 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles (4,985) 579 (2,271) (13,928) 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) ($4,985) $579 ($2,271) ($42,121) Income (loss) per share Income (loss) before extraordinary loss and cumulative effect of change in accounting principles ($0.17) $0.02 ($0.08) ($0.51) Extraordinary loss on early extinguishment of debt - - - (0.84) Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (0.18) Net income (loss) ($0.17) $0.02 ($0.08) ($1.53) * 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) March 31, June 30, 1995, 1994 ASSETS Current assets:, , Cash and cash equivalents $9,773 $9,374 Accounts receivable - net 23,665 34,519 Inventories 17,381 17,829 Prepaid expenses and other current assets 4,630 5,334 Total current assets 55,449 67,056 Property plant and equipment - net 40,362 42,742 Other long-term assets 9,758 13,372 Total assets $105,569 $123,170 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $7,399 $5,749 Current portion of long-term debt 15,438 11,000 Accounts payable and accrued expenses 34,341 44,687 Deferred revenue 6,500 6,236 Total current liabilities 63,678 67,672 Long-term debt 1,160 13,240 Other long-term liabilities 6,198 7,210 Stockholders' equity: Common stock 301 296 Capital in excess of par value 72,754 71,547 Accumulated deficit after eliminating accumulated deficit of $81,826 at December 31, 1991, date of quasi- reorganization (37,293) (35,022) Treasury stock (58) (58) Cumulative translation adjustment (1,171) (1,715) Total stockholders' equity 34,533 35,048 Total liabilities and stockholders' equity $105,569 $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) Nine Months Ended March 31, 1995 1994 Cash flows provided by (used by) operating activities: Net loss ($2,271) ($42,121) Adjustments to reconcile net loss to net cash provided by (used by) operating activities: Depreciation, amortization and other 9,564 9,038 Non-cash taxes 100 - Non-cash interest and amortization of financing costs 330 931 Extraordinary loss on early extinguishment of debt - 23,193 Cumulative effect of change in accounting principles - 5,000 Provision for restructuring 2,700 12,000 Other non-recurring charge 1,000 - Sales and use tax credit (1,000) (1,440) Decrease (increase) in current assets: Accounts receivable 12,196 4,472 Inventories (813) 2,944 Prepaid expenses and other current assets 762 906 Decrease in current liabilities other than debt obligations (10,961) (13,578) Decrease (increase) in other long-term assets 939 (1,446) (Decrease) increase in other long-term liabilit (1,307) 717 Total adjustments to net loss 13,510 42,737 Net cash provided by operating activities 11,239 616 Cash flows used by investing activities: Cash flow provided by (used by) financing activities: Net proceeds of notes payable 742 2,544 Repayment of long-term debt (7,873) (74,412) Issuance of long-term debt - 708 Net proceeds from sale and issuance of common stock 150 55,001 Net cash used by financing activities (6,981) (16,159) Effect of exchange rate changes on cash and cash equivalents (167) 93 Increase (decrease) in cash and cash equivalents $399 ($20,923) Cash paid during the period for: Interest $1,752 $2,162 Income taxes (net of refunds) $610 $400 * 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 March 31, 1995, the outstanding balance of the Company's senior bank debt (the "Debt") was approximately $15.4 million, excluding up to $3.0 million in standby letters of credit in connection with overseas lines of credit. Prior to the amendment during the quarter ended March 31, 1995, the Debt carried monthly amortization payments of $687,500 through June 1995. The Debt also carries 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 March 31, 1995 to modify certain financial covenants and the principal amortization payments schedule. One financial covenant was also waived for the quarter ended March 31, 1995. The $687,500 monthly amortization payments for February, March and April 1995 were rescheduled to July, August, and September 1995, months during which no payment was previously required. Additional covenant modifications or waivers and monthly amortization payment deferrals may be required depending on actual financial results through the maturity date and if such modifications, waivers or deferrals are necessary, there can be no assurance that they will be obtained or granted. Note 3: Provision for Restructuring In January 1995, the Company's senior management approved a plan to restructure its operations. The restructuring plan provided for a reduction of approximately 150 worldwide employees and the downsizing or closing of office locations. In connection with the restructuring, the Company recorded a $2.7 million provision for restructuring during the quarter ended March 31, 1995. Such provision is net of a $0.5 million release of an excess restructuring reserve previously recorded during the three months ended September 30, 1993. During the quarter ended March 31, 1995, the actual cash payments related to this restructuring was approximately $1.5 million. Note 4: 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 5: Other Non-recurring Charge During the three months ended March 31, 1995, the Company recorded a $1.0 million, or $.03 per share, other non-recurring charge in order to adjust the carrying value of its Tinton Falls, New Jersey facility to its net realizable value based on current market conditions. The Company is pursuing the sale of this facility. 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. Note 6: Income (Loss) Per Share Income (loss) per share for the three and nine months ended March 31, 1995 and 1994, respectively, is based on the weighted average number of shares of common stock outstanding. Income per share on a primary and fully diluted basis for the three and nine months ended March 31, 1995 and 1994 are equivalent. The number of shares used in computing earnings per share were as follows: (Shares in thousands) Three Months Ended Nine Months Ended March 31 March 31 1995 1994 1995 1994 Primary 30,126 29,585 29,994 27,544 Fully Diluted 30,126 29,585 29,994 27,544 Supplemental net loss per share for the nine months ended March 31, 1994, which is calculated assuming the Company's comprehensive refinancing (completed on July 21, 1993) took place on July 1, 1993, was as follows: Nine Months Ended March 31, 1994 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) ($0.47) 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 ($1.43) Note 7: Inventories (Dollars in thousands) March 31, 1995, June 30,1994 Raw materials $10,262 $ 9,270 Work-in-process 1,904 2,872 Finished goods 5,215 5,687 $17,381 $17,829 Note 8: Accumulated Depreciation Accumulated depreciation at March 31, 1995 and June 30, 1994 was $36,812,000 and $26,644,000, respectively. Note 9: 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 and intends to vigorously defend against any claim. 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. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview The Company had indicated at the beginning of the quarter that the quarter ended March 31, 1995, would be difficult. The operating loss reflects lower revenues and only the partial benefit of the cost reduction initiatives implemented during the quarter. Sales cycles in many of the Company's markets tend to be protracted thus delaying certain orders and revenues. The Company is continuing to realign its cost structure based on anticipated revenues. Intensified sales and marketing programs have identified significant new prospective business that should lead to sustained revenue growth. During the quarter ended March 31, 1995, revenues from computer systems sales in international markets exceeded those in North America. International sales and business opportunities for the Company's industry leading, standards based, POSIX compliant MAXION multiprocessor system appear to be gaining momentum. The decline in North America business is due to the anticipated decline in sales of proprietary systems, reduced shipments under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program and less than anticipated open systems business. 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 may not be realized for more than six months. 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 Nine Months Ended March 31 March 31 1995 1994 1995 1994 Net sales: Computer systems 44.8 55.9% 52.8% 54.9% Service and other 55.2 44.1 47.2 45.1 Total net sales 100.0 100.0 100.0 100.0 Cost of sales (% of respective sales category): Computer systems 62.7 60.7 52.6 54.6 Service and other 62.3 59.6 61.4 62.4 Total cost of sales 62.5 60.2 56.7 58.1 Gross margin 37.5 39.8 43.3 41.9 Operating expenses: Research and development 15.5 12.7 14.1 13.7 Selling, general and administrative 28.5 23.4 26.4 28.3 Provision for restructuring 8.9 - 2.5 9.0 Sales and use tax credit - - (0.9) (1.1) Total operating expenses 52.9 36.1 42.1 49.6 Operating income (loss) (15.4) 3.7 1.2 (7.7) Interest expense (2.4) (1.6) (1.9) (2.1) Interest income 0.3 0.3 0.4 0.3 Other non-recurring charge (3.3) - (0.9) - Other income (expense) - net 1.1 (0.4) 0.4 (0.2) Income (loss) before provision for income taxes extraordinary loss and cumulative effect of change in accounting principles (19.7) 2.0 (0.8) (9.7) Provision for income taxes (3.3) 0.7 1.3 0.7 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles (a) (16.4)% 1.3% (2.1)% (10.4)% (a) The percentage for the nine months ended March 31, 1994 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 March 31, 1995 in Comparison to Three Months Ended March 31, 1994 Net Sales Net sales for the three months ended March 31, 1995 were $30.3 million, a decrease of $13.7 million from the prior year period. This decrease was due to a decrease of $11.0 million, or 44.8%, in computer systems sales and a decrease of $2.7 million, or 13.9%, in service and other revenues. The decrease in computer system sales was primarily due to the anticipated decline in sales of proprietary systems, reduced shipments under the U.S. Department of Commerce's Next Generation Weather Radar (NEXRAD) program and reduced sales of open systems (other than 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 $0.8 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 $11.4 million and 37.5%, respectively, for the three months ended March 31, 1995 compared to $17.5 million and 39.8%, respectively, for the prior year period. The decrease in gross margin dollars and percentage was primarily due to the aforementioned decline in net sales partially offset by cost savings resulting from the operational restructurings implemented during fiscal year 1994 and the three months ended March 31, 1995. Operating Income (Loss) Operating loss for the current year period was $4.7 million compared to operating income of $1.6 million for the prior year period. The $6.3 million decrease in operating income was due to the aforementioned $6.1 million decrease in gross margin and a $2.7 million provision for restructuring recorded in the current period partially offset by a $2.5 million reduction in operating expenses. The $2.5 million decrease in operating expenses was primarily due to a $1.6 million decrease in selling, general and administrative expenses and a $0.9 million decrease in net research and development expenses. The $0.9 million decrease in net research and development expenses reflects a $1.4 million decrease in gross research and development expenses partially offset by a $0.5 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 restructurings implemented during fiscal year 1994 and the three months ended March 31, 1995. Income (Loss) Before Extraordinary Loss and Cumulative Effect of Change in Accounting Principles Loss before extraordinary loss and cumulative effect of change in accounting principles was $5.0 million in the current year period compared to income of $0.6 million for the prior year period. The $5.6 million change results from the $6.3 million decrease in operating income partially offset by a $0.7 million net decrease in non-operating expenses. The decrease in non- operating expenses was primarily due to an $1.3 million decrease in the provision for income taxes and a $0.4 million increase in income related to minority interest partially offset by a $1.0 million other non-recurring charge incurred in the current year period. The decrease in the provision for income taxes relates primarily to domestic operations. Such decrease 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. The $1.0 million other non-recurring charge incurred in the current year was necessary in order to adjust the carrying value of the Company's Tinton Falls, New Jersey facility to its net realizable value based on current market conditions. Nine Months Ended March 31, 1995 in Comparison to Nine Months Ended March 31, 1994 Net Sales Net sales for the nine months ended March 31, 1995 were $109.6 million, a decrease of $24.5 million from the prior year period. This decrease was due to a decrease of $15.8 million, or 21.4%, in computer systems sales and a decrease of $8.7 million, or 14.4%, in service and other revenues. The decrease in computer system sales was primarily due to the anticipated decline in sales of proprietary systems and reduced sales of open systems (other than the Company's new MAXION open systems) partially offset by 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 $2.4 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 $47.4 million and 43.3%, respectively, for the nine months ended March 31, 1995 compared to $56.2 million and 41.9%, respectively, for the prior year period. The decrease in gross margin dollars was primarily due to the aforementioned decline in net sales partially offset by a favorable mix of higher margin products and cost savings resulting from the operational restructurings implemented during fiscal year 1994 and the three months ended March 31, 1995. 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 restructurings implemented during fiscal year 1994 and the three months ended March 31, 1995 partially offset by the decline in net sales. Operating Income (Loss) Operating income for the current year period was $1.3 million compared to an operating loss of $10.4 million for the prior year period. The $11.7 million increase in operating income was due to a $11.5 million reduction in operating expenses and a net reduction of $9.3 million in the provision for restructuring (a $2.7 million provision for restructuring in the current year period offset by a $12.0 million provision for restructuring in the prior year period) partially offset by the $8.7 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 $11.5 million decrease in operating expenses was primarily due to a $8.6 million decrease in selling, general and administrative expenses and a $2.9 million decrease in net research and development expenses. The $2.9 million decrease in net research and development expenses reflects a $4.2 million decrease in gross research and development expenses partially offset by a $1.3 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 restructurings implemented during fiscal year 1994 and the three months ended March 31, 1995. Income (Loss) Before Extraordinary Loss and Cumulative Effect of Change in Accounting Principles Loss before extraordinary loss and cumulative effect of change in accounting principles was $2.3 million in the current year period compared to loss of $13.9 million for the prior year period. The $11.6 million change results from the $11.7 million increase in operating income partially offset by a $0.1 million net increase in non-operating expenses. The increase in non-operating expenses was primarily due to a $1.0 million other non-recurring charge incurred in the current year period and a $0.5 million increase in the provision for income taxes partially offset by a $0.7 million decrease in interest expense resulting from the reduction of the Company's indebtedness, a $0.4 million increase in income related to minority interest and a $0.3 million decrease in foreign exchange losses The $1.0 million other non- recurring charge incurred in the current year was necessary in order to adjust the carrying value of the Company's Tinton Falls, New Jersey facility to its net realizable value based on current market conditions. The increase in the provision for income taxes relates primarily to international operations. 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 sales level from within the United States where such related accounts receivable are included in the borrowing base of the Company's existing bank debt; 4) the number of countries in which the Company operates resulting in the requirement to maintain minimum cash levels in each country; and 5) restrictions in some countries where the Company operates which limit its ability to repatriate cash. As of March 31, 1995, the Company had a current ratio of .87 to 1, an inventory turnover ratio of 4.1 times and negative net working capital of $8.2 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 March 31, 1995, cash and cash equivalents amounted to $9.8 million and accounts receivable amounted to $23.7 million. At March 31, 1995, the outstanding balance of the Company's senior bank debt (the "Debt") was approximately $15.4 million, excluding up to $3.0 million in standby letters of credit in connection with overseas lines of credit. Prior to the amendment during the quarter ended March 31, 1995, the Debt carried monthly amortization payments of $687,500 through June 1995. The Debt also carries 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 March 31, 1995 to modify certain financial covenants and the principal amortization payments schedule. One financial covenant was also waived for the quarter ended March 31, 1995. The $687,500 monthly amortization payments for February, March and April 1995 were rescheduled to July, August, and September 1995, months during which no payment was previously required. Additional covenant modifications or waivers and monthly amortization payment deferrals may be required depending on actual financial results through the maturity date and if such modifications, waivers or deferrals are necessary, there can be no assurance that they will be obtained or granted. Amortization payments during the quarters ended September 30, 1994 and December 31, 1994 included the regular $687,500 monthly amortization payments and additional amortization payments of $1.375 million on the last day of each quarter. The additional amortization payments resulted from the bank approved deferral of the four regular monthly amortization payments from November 1993 through February 1994. A final maturity payment of $12 million is due on October 1, 1995. The Company does not expect to be in a position to make this payment in full through internally generated funds and is pursuing two alternatives: (1) the sale of its Tinton Falls, New Jersey facility and the sale/leaseback of its Oceanport, New Jersey facility and (2) the refinancing of this debt through current or other lenders. However, there can be no assurance that this will be completed as contemplated. In the event the Company is unable to repay the final maturity payment in full, the banks would have the right to treat the loan as in default and to exercise certain rights. In connection with the restructuring of its operations, the Company recorded a provision for restructuring of $2.7 million during the quarter ended March 31, 1995. The restructuring plan provided for a reduction of approximately 150 worldwide employees and the downsizing or closing of office locations. The Company estimates that the cost savings related to the restructuring of its operations will be approximately $2.2 million per quarter when fully realized. Such savings began during the third quarter of fiscal year 1995 and will be fully realized during the fourth quarter of fiscal year 1995. Total cash savings are expected to begin during the quarter ending June 30, 1995 and will not be substantially realized until the quarter thereafter primarily due to employee termination costs. The Company believes that it will be able to fund the cash outlays through cash flow from operations under the restructured operations and by managing the timing of certain cash payments. 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. 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 March 31, 1995. 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 March 31, 1995 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: May 15, 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 Nine Months Ended March 31 March 31 1995 1994 1995 1994 Income (loss) before extraordinary loss and cumulative effect of change in accounting principles ($4,985) $579 ($2,271) ($13,928) 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) ($4,985) $579 ($2,271) ($42,121) Weighted average number of common shares 30,126 29,585 29,994 27,544 Increase in weighted average number of common shares upon assumed exercise of stock options - - - - Total 30,126 29,585 29,994 27,544 Income (loss) per share: Income (loss) before extraordinary loss and cumulative effect of change in accounting principles ($0.17) $0.02 ($0.08) ($0.51) Extraordinary loss on early extinguishment - - - (0.84) of debt Cumulative effect of change in accounting principles for income taxes and postretirement benefits - - - (0.18) Net income (loss) ($0.17) $0.02 ($0.08) ($1.53) {PAGE|19} EX-27 2
5 1000 9-MOS JUN-30-1995 MAR-31-1995 9,773 0 25,394 1,729 17,381 55,449 77,174 36,812 105,569 63,678 1,160 301 0 0 34,232 105,569 57,872 109,638 30,420 62,191 0 320 2,109 (871) 1,400 (2,271) 0 0 0 (2,271) (0.08) (0.08)
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