-----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, WA7InkyYIHE1Aog5IKtmZ3og4hqv9uNOj2tqlL16p5CuZx1TKOc257SZ/S7bPYMt 8SPU2T1e7UO+kOBfgpfO+Q== 0000802019-95-000005.txt : 19950517 0000802019-95-000005.hdr.sgml : 19950517 ACCESSION NUMBER: 0000802019-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950401 FILED AS OF DATE: 19950516 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATARI CORP CENTRAL INDEX KEY: 0000802019 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 770034553 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09281 FILM NUMBER: 95540289 BUSINESS ADDRESS: STREET 1: 1196 BORREGAS AVE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087452000 MAIL ADDRESS: STREET 1: 1196 BORREGAS AVE CITY: SUNNYVALE STATE: CA ZIP: 94087 10-Q 1 UNITED STATES SECURITY AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------- FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For Quarterly Period 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 Number I-9281 ATARI CORPORATION (Exact name as specified in its charter) NEVADA 77-0034553 (State or other jurisdiction (IRS Employer incorporation or organization) Identification No.) 1196 Borregas Avenue, Sunnyvale, CA 94089 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (408) 745-2000 NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports 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 SHARES OUTSTANDING AT APRIL 10, 1995 Common Stock 63,701,035 ATARI CORPORATION TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS March 31, 1995; and December 31, 1994 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTER ENDED March 31, 1995 and March 31, 1994 4 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTER ENDED March 31, 1995 and March 31, 1994 5 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 7 PART II.OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 9 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURE 10 ATARI CORPORATION CONSOLIDATED BALANCE SHEETS MARCH 31, 1995 AND DECEMBER 31, 1994 March 31, Dec 31, (In Thousands, Except Share Amounts) 1995 1994 (Unaudited) ASSETS CURRENT ASSETS: Cash and equivalents (including $1,875 and $4,450 held as restricted balances at March 31, 1995 and December 31, 1994) $ 9,522 $ 22,592 Marketable securities 59,823 58,432 Accounts receivable (less allowances for returns and doubtful accounts: March 31, 1995 $1,712; December 31, 1994 $1,957) 4,297 9,262 Inventories (See Note 2) 22,236 18,185 Other current assets 4,474 4,717 Total current assets 100,352 113,188 GAME SOFTWARE DEVELOPMENT COSTS - Net 7,417 5,145 EQUIPMENT AND TOOLING - Net 1,361 1,315 REAL ESTATE HELD FOR SALE 10,666 10,741 OTHER ASSETS 629 653 TOTAL $120,425 $131,042 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 6,583 $ 15,341 Accrued Liabilities 5,933 5,177 TOTAL CURRENT LIABILITIES 12,516 20,518 LONG-TERM OBLIGATIONS 43,354 43,454 SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value - authorized, 10,000,000 shares; none outstanding Common stock, $.01 par value - authorized, 100,000,000 shares; (outstanding : March 1995, 63,701,035; December 1994, 63,648,535) 637 636 Additional paid-in capital 196,222 196,138 Unrealized gain on marketable securities 2,378 542 Accumulated translation adjustments (1,735) (1,724) Accumulated deficit (132,947) (128,522) Total shareholders' equity 64,555 67,070 TOTAL $ 120,425 $ 131,042 (See Condensed Notes to Consolidated Financial Statements) ATARI CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS MARCH 31, 1995 AND MARCH 31, 1994 (Amounts in Thousands, Except Per Share Amounts) Quarter Ended March 31, March 31, 1995 1994 NET SALES $ 4,874 $ 8,156 COST AND EXPENSES: Cost of sales 3,846 6,778 Research and development 1,815 1,310 Marketing and distribution 2,576 1,730 General and administrative 1,795 1,710 Total operating expenses 10,032 11,528 OPERATING LOSS $ (5,158) $ (3,372) Exchange gain 5 272 Other income(expense), net (See note 3 and 4) 355 2,392 Interest income 953 353 Interest expense (581) (572) Loss before income taxes $ (4,426) $ (927) Provision for Income Taxes --- --- NET LOSS $ (4,426) $ (927) LOSS PER COMMON SHARE: $ (0.07) $ (0.02) Number of shares used in computations 63,701 57,219 (See Condensed notes to Consolidated Financial Statements) ATARI CORPORATION (Unaudited) CONSOLIDATED STATEMENTS OF CASH FLOWS Quarter Ended (in thousands) March 31, March 31, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net cash provided (used) by operations $ (10,813) $ 1,596 CASH FLOWS FROM INVESTING ACTIVITIES: Sale of marketable securities 492 - Property purchases (51) (70) Stock dividend received on investment 82 - Increase in other assets 99 111 Increase in Software Development Costs (2,864) (536) Net cash provided (used) by investing activities (2,242) (495) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of borrowings (100) --- Proceeds on early debt retirement (46) --- Issuance of common stock 84 19 Net cash provided (used) by financing activities (62) 19 EFFECT OF EXCHANGE RATE CHANGES ON CASH & EQUIVALENTS 47 63 NET INCREASE (DECREASE) IN CASH & EQUIVALENTS (13,070) 1,183 CASH & EQUIVALENTS: Beginning of period 22,592 23,059 End of period $ 9,522 $ 24,242 OTHER CASH FLOW INFORMATION FROM CONTINUING OPERATIONS: Interest paid $ 581 $ --- Income taxes paid --- 63 NON CASH INVESTING ACTIVITIES: Unrealized gain on marketable securities $ 1,836 $ 514 (See Condensed Notes to Consolidated Financial Statements) ATARI CORPORATION CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Basis of Presentation The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1994 Annual Report on Form 10-K, filed with the Securities and Exchange Commission. The unaudited condensed financial statements included herein reflect all adjustments (which include only normal, recurring adjustments), which are, in the opinion of management, necessary to state fairly the results for the periods presented. The results for such periods are not necessarily indicative of the results to be expected for the full fiscal year. The Company operates with a 52/53 week fiscal calendar. Both quarters covered by this report have 13 weeks and for simplicity of presentation, the calendar quarter date is used to represent the quarter end. The actual fiscal closing date for the first quarter of 1995 and 1994 was April 1, and April 2, respectively. Note 2. INVENTORIES Inventories consist of the following (in thousands): March 31, December 31, 1995 1994 Finished goods $ 20,988 $ 15,799 Raw materials and work-in-process 1,248 2,386 Total $ 22,236 $ 18,185 Note 3. Repurchase of 5 1/4% Subordinated Convertible Debentures. In the first quarter of 1995, the Company repurchased a portion of its 5 1/4% subordinated convertible debentures. The Company repurchased 100 bonds at face value of $1,000 each, and recorded a gain of $47,250, which is included in Other Income (Expense), net for the quarter. Note 4. Settlement of Patent Litigation. In the first quarter of 1994, the Company settled with one of its competitors certain patent litigation and received $2.2 million. This amount is reflected in Other Income (Expense), net for the first quarter of 1994. Management Discussion and Analysis for the First Quarter of 1995 Compared to the First Quarter of 1994 Net Sales for the first quarter 1995 were $4.9 million as compared to $8.2 million for the first quarter of 1994, a reduction of $3.3 million. Sales of Jaguar, the Company's 64-bit multimedia entertainment system, represented 72% of total revenue as compared to 70% of total sales in 1994. Partially as a result of impending higher priced ($300-$450) new product introductions from Sony and Sega the video game industry is in a state of flux. With close to 30 million units of installed base in the United States, the older 16-bit systems with price points between $99 - $129 presently make up the vast majority of video game sales and which have slowed considerably in recent months. As a result of the Company's technology advances, cost savings and its marketing opportunity, the Company lowered the wholesale price of Jaguar, 64-bit technology, to allow retailers to sell Jaguar in a price range of $149-$159. The Company commenced the sale of Jaguar at this new price late in the quarter allowing for existing retail inventories to sell out. As a result of this strategy, the Company had lower unit volumes and lower average selling prices for Jaguar than compared to the first quarter of 1994. The Company currently markets seventeen titles for Jaguar. In addition, independent software vendors publish seven titles, bringing the grand total of titles between Atari and third parties to twenty four. During the first quarter of 1995, the Company achieved a 4:1 software to hardware ratio on its sales. The Company believes the development of game software and Jaguar's new low price point to be critical parts to make Jaguar a mass market success. The Company has taken measures to improve the timeliness of software introductions by adding and repositioning key personnel and focusing more of its efforts on the development of titles. Gross margin for the first quarter of 1995 was 21% of sales as compared to 17% for the first quarter of 1994. The improvement in the gross margin was mainly a result of improved sales mix between hardware and software in 1995 over the comparable period of 1994. As stated above, the Company currently markets 17 titles for Jaguar as compared to 4 titles during the first quarter of 1994. Research and Development expenses were $1.8 million as compared to $1.3 million in the first quarter of 1994. In addition, during the quarter the Company expended an additional $2.9 million for software development that was capitalized as Game Software Development. The Company develops software both internally through its development staff as well as through third party developers under contract with the Company. As of March 31, 1995, the Company has capitalized $7.4 million of development costs. These costs will be recovered through sales of the related products. Marketing and Distribution expenses were $2.6 million as compared to $1.8 million for the first quarter of 1994. These expenses reflect the Company's continued investment in television and print advertising and other promotional activity for Jaguar. The Company believes these investments are necessary to insure the long term success of Jaguar. General and Administrative expenses for the first quarter 1995, were $1.8 million as compared to $1.7 million for the same period in 1994. The Company has consolidated many of its operations around the world and now maintains operations in California and in the United Kingdom. Other Income (Expense), net for the first quarter of 1995 was $0.4 million. During the quarter the Company re-purchased a portion of its 5 1/4 % Convertible Subordinated Debentures and recorded a gain of $47,250, and included that amount in Other Income (Expense), net for the quarter. For the same quarter of 1994, the Company settled certain patent litigation with one of its competitors and recorded a gain of $2.2 million which together with other income items brought Other Income (Expense), net for 1994 to $2.4 million. In addition, during the 1995 quarter the Company sold a portion of its Marketable Securities and realized a gain from these sales of $0.1 million. Interest Income for the quarter was $1.0 million as compared to $0.4 million for the 1994 first quarter, reflecting the Company's significantly greater cash balances during the first quarter of 1995, which were derived from agreements reached with Sega Enterprises, Ltd. in the fourth quarter of 1994. Interest expenses for the 1995 and 1994 quarters were $0.6 million which represents interest due on the Company's 5 1/4% Convertible Subordinated Debentures. In April 1995, the Company made an annual payment of interest on its bonds that totaled $2.2 million. For the first quarter of 1995, the Company incurred a loss of $4.4 million as compared to $.9 million loss for the first quarter of 1994. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1995 , the Company had cash and marketable securities balances totaling $69.3 million as compared to $81.0 million as of December 31, 1994 for a reduction of $11.7 million. In the first quarter of 1995, the Company used $10.8 million in operating activities. The use of cash was substantially attributable to the Net Loss of $4.4 million for the quarter and an increased inventory of $4.0 million. Changes in other working capital items accounted for the remaining use of funds totaling $2.4 million. A major portion of the Company's investing activities related to the development of game software for the Jaguar. During the quarter, the Company invested $2.9 million in the further development of over 75 game titles. The Company expects to publish most of these titles during 1995 and the first quarter of 1996. In addition, during the first quarter of 1995, the Company commenced the sale of a portion of its holdings of Dixon PLC common shares and recorded a gain in the amount of $0.1 million and transfered to cash $0.5 million. In the first quarter, the Company repurchased a portion of its 5 1/4% convertible subordinated debentures and reduced its debt obligations by $0.1 million substantially representing the cash flow from financing activities for the quarter. FINANCIAL CONDITION PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company is not aware of any other pending legal proceedings against the Company and its consolidated subsidiaries other than routine litigation incidental to their normal business. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - None (b) Reports on Form 8-K - None SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. ATARI CORPORATION ----------------------------------- (Registrant) DATE: May 15, 1995 By /S/ August J. Liguori AUGUST J. LIGUORI Vice President, Finance (Duly authorized Officer Chief Financial Officer, Chief Accounting Officer) EX-27 2
5 3-MOS DEC-30-1995 APR-01-1995 9,522 59,823 4,297 0 22,236 12,520 12,027 0 120,425 12,516 43,354 637 0 0 63,918 120,425 4,874 4,874 3,846 10,032 1,313 0 (581) (4,426) 0 (4,426) 0 0 0 (4,426) (0.07) (0.07) Includes PP&E (net) $1,361 and Real Estate held for Sale $10,666. Includes Accounts Payable $6,583 and Accrued Liabilities $5,933. Includes Paid in Capital $196,222; Accumulated Deficit $132,947; Accumulated Tran. Adjustment $1,735; and Gain Market Securities $2,378. Includes Exchange Gain $5; Other Income $355; and Interest Income $953.
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