-----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, AFVUs0WZvEN2BSBBfuLuUk8AmNK9ZR2HuEXMETazUIWSAE4pELoNXl2oEXV0dE7V 1Uh2xMle1PiSb3cGnbQSrw== 0000950109-95-001346.txt : 19950424 0000950109-95-001346.hdr.sgml : 19950424 ACCESSION NUMBER: 0000950109-95-001346 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950228 FILED AS OF DATE: 19950421 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMAGRAPHICS CORP CENTRAL INDEX KEY: 0000818470 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 060888312 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16071 FILM NUMBER: 95530433 BUSINESS ADDRESS: STREET 1: 8500 CAMERON ROAD CITY: AUSTIN STATE: TX ZIP: 78754-3999 BUSINESS PHONE: 2038815400 MAIL ADDRESS: STREET 1: 60 SILVERMINE ROAD CITY: SEYMOUR STATE: CT ZIP: 06483 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------------- For the Quarter ended February 28, 1995 Commission file number 0-16071 Summagraphics Corporation (Exact name of Registrant as specified in its charter) ---------------------- Delaware 3573 06-0888312 (State or other (Primary standard (I.R.S. Employer jurisdiction incorporation industrial classification identification No.) or organization) code number) 8500 Cameron Road Austin, Texas 78754 (512) 835-0900 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) (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 required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of common shares outstanding at February 28, 1995 - 4,606,785 --------- PAGE 1 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q FEBRUARY 28, 1995 Part I. Financial Information Page No. Consolidated Balance Sheets - May 31, 1994 and February 28, 1995........ 3 Consolidated Statements of Operations for the Three and Nine Months ended February 28, 1994 and February 28, 1995........................ 4 Consolidated Statements of Cash Flows for the Nine Months ended February 28, 1994 and February 28, 1995.............................. 5 Notes to Consolidated Financial Statements.............................. 6 Management's Discussion and Analysis of Financial Condition and Results of Operations................................................ 7 Part II. Other Information Item 1. Legal Proceedings.............................................. 10 Item 5. Other Information.............................................. 10 Item 6. Exhibits and Reports on Form 8-K............................... 10 Signatures................................................................ 11 PAGE 2 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
May 31, February 28, Assets 1994 1995 Unaudited ----------- ----------- Cash $ 819,000 $ 717,000 Accounts receivable (less allowance for doubtful accounts: May 31, 1994 - $1,090,000 February 28, 1995 - $906,000) 17,914,000 22,150,000 Inventories: Materials 5,269,000 11,513,000 Work-in-process 1,043,000 3,200,000 Finished goods 5,224,000 5,147,000 ----------- ----------- 11,536,000 19,860,000 Prepaid expenses and other current assets 1,117,000 1,215,000 ----------- ----------- Total current assets 31,386,000 43,942,000 Fixed assets: Land 290,000 325,000 Building 1,319,000 1,524,000 Machinery and equipment 12,133,000 12,633,000 Furniture and fixtures 1,228,000 1,240,000 Leasehold improvements 1,009,000 1,014,000 Construction in progress 187,000 1,074,000 ----------- ----------- 16,166,000 17,810,000 Less accumulated depreciation and amortization (9,725,000) (11,765,000) ----------- ----------- Net fixed assets 6,441,000 6,045,000 Intangible and other assets, net of accumulated amortization 9,509,000 9,858,000 ----------- ----------- $47,336,000 $59,845,000 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 9,583,000 $12,474,000 Accrued liabilities 9,274,000 7,048,000 Notes payable to banks - 9,579,000 Current portion of long-term debt 148,000 492,000 Current obligations under capital leases 458,000 312,000 ----------- ----------- Total current liabilities 19,463,000 29,905,000 Long-term liabilities, less current portion: Long-term debt 947,000 1,605,000 Capital lease obligations 535,000 349,000 Deferred gain on sale of building 510,000 485,000 Restructuring charges 1,804,000 1,443,000 ----------- ----------- Total liabilities 23,259,000 33,787,000 ----------- ----------- Stockholder's equity: Preferred stock, $.01 par value, authorized 5,000,000 shares - - Common stock, $.01 par value; authorized 20,000,000 shares, issued 4,455,000 and 4,606,000 shares, respectively 45,000 46,000 Additional paid-in capital 38,639,000 38,989,000 Accumulated deficit (13,830,000 (13,413,000) Cumulative translation adjustment (302,000) 911,000 Less: Treasury stock at cost - 48,720 shares (465,000) (465,000) Stockholder note receivable (10,000) (10,000) ----------- ----------- Total stockholders' equity 24,077,000 26,058,000 ----------- ----------- $47,336,000 $59,845,000 =========== ===========
See accompanying notes to consolidated financial statements. PAGE 3 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Ended Nine Months Ended February 28, February 28, February 28, February 28, 1994 1995 1994 1995 ----------- ----------- ----------- ----------- Net sales $19,460,000 $22,273,000 $56,069,000 $61,343,000 Cost of sales 12,467,000 14,981,000 36,719,000 40,274,000 ----------- ----------- ----------- ----------- Gross profit 6,993,000 7,292,000 19,350,000 21,069,000 Selling, general and administrative 4,827,000 5,143,000 13,893,000 14,868,000 Research and development 1,314,000 1,633,000 4,123,000 4,904,000 ----------- ----------- ----------- ----------- Operating income 852,000 516,000 1,334,000 1,297,000 Other income (expense): Interest income 24,000 6,000 60,000 19,000 Interest expense (104,000) (184,000) (328,000) (327,000) Miscellaneous, net (93,000) (158,000) (185,000) (122,000) ----------- ----------- ----------- ----------- (173,000) (336,000) (453,000) (430,000) Income before income taxes 679,000 180,000 881,000 867,000 Provision for income taxes - - - - ----------- ----------- ----------- ----------- Net income $ 679,000 $ 180,000 $ 881,000 $ 867,000 =========== =========== =========== =========== Net income per common share $ 0.15 $ 0.04 $ 0.20 $ 0.18 =========== =========== =========== =========== Weighted average shares used in computing net income per common share 4,581,000 4,838,000 4,482,000 4,802,000
See accompanying notes to consolidated financial statements. PAGE 4 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS REPRESENTING INCREASES (DECREASES) IN CASH UNAUDITED
Nine Months Ended February 28, February 28, 1994 1995 ----------- ----------- Cash flows from operating activities: Net income $ 881,000 $ 867,000 Adjustments to reconcile net income to net cash used in (provided by) operating activities: Depreciation and amortization 2,681,000 2,494,000 Loss on sale of fixed assets 19,000 23,000 Compensation in form of stock 8,000 18,000 Changes in assets and liabilities: Accounts receivable 4,341,000 (3,474,000) Inventories 2,335,000 (7,812,000) Prepaid and other current assets (112,000) (241,000) Accounts payable 1,102,000 2,701,000 Accrued liabilities (4,675,000) (2,286,000) Other liabilities - (361,000) ----------- ----------- Net cash (used in) provided by operating activities 6,580,000 (8,071,000) ----------- ----------- Cash flows from investing activities: Capital expenditures (958,000) (1,423,000) Proceeds from sale of fixed assets 47,000 10,000 Intangible assets, principally patent costs 13,000 - ----------- ----------- Net cash used in investing activities (898,000) (1,413,000) ----------- ----------- Cash flows from financing activities: Net proceeds from notes payable (2,837,000) 9,401,000 Proceeds from sale of common stock 89,000 332,000 Proceeds from long-term debt - 977,000 Payment of cash dividends (661,000) (450,000) Repayments of long-term debt and capital lease obligations (502,000) (462,000) ----------- ----------- Net cash (used in) provided by financing activities (3,911,000) 9,798,000 ----------- ----------- Effect of exchange rate changes on cash 248,000 (416,000) ----------- ----------- Net change in cash 2,019,000 (102,000) ----------- ----------- Cash at beginning of period 2,649,000 819,000 ----------- ----------- Cash at end of period $ 4,668,000 $ 717,000 =========== ===========
See accompanying notes to consolidated financial statements. PAGE 5 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 1995 1) Financial Statement Presentation The financial statements of Summagraphics Corporation and its subsidiaries (the Company) included herein have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments necessary, such adjustments being of a normal or recurring nature, to present fairly the financial condition and the results of operations for such interim periods. 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, management believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the audited financial statements and notes thereto for the year ended May 31, 1994 included in the Company's filing with the SEC on Form 10-K and the CompanyOs Form 8-K-1 filed on January 30, 1995. The results for these interim periods are not necessarily indicative of the results for the respective fiscal years. PAGE 6 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 28, 1995 Results of Operations Net sales in the third quarter of fiscal 1995 increased 14% to $22,273,000 from $19,460,000 last year. For the nine months ended February 28, 1995, net sales increased 9% to $61,343,000 from $56,069,000 in the prior year. The net sales increase reflects positive results of new distribution alliances in Asia, record sales in Europe, increased sales of the CompanyOs cutter products and the introduction in the third quarter of a new line of ink-jet plotters. Gross margin percentage for the third quarter and nine months ended February 28, 1995 decreased as compared to the prior year to 33% versus 36% and 34% compared to 35%, respectively, due to high startup and manufacturing costs related to the new large format ink jet plotter as well as lower selling prices on the CompanyOs older line of pen plotters. The Company expects margins to continue to be under pressure in the fourth quarter due to competitive pricing actions on the recently introduced ink-jet plotters taken early in the fourth quarter to which the Company has recently responded with similar price decreases. Selling, general and administrative expense (SG&A), as a percentage of net sales, decreased from 25% or $4,827,000 in the third quarter of 1994 to 23% or $5,143,000 in the third quarter of 1995. This percentage decrease was due to the increase in net sales as these expenses increased on an absolute basis from the prior year by 7% due to increased sales and promotional costs incurred in the third quarter of this year. For the nine month period ended February 28, 1995, SG&A as a percentage of net sales was 24% or $14,868,000, as compared to 25% or $13,893,000 last year. Sales and promotional costs are expected to remain at a higher level in the fourth quarter of fiscal 1995, as the product delays associated with the introduction of the ink-jet product will cause additional expenses to be incurred to stimulate sales of this product against several competitive products that were introduced to the market in the third quarter. As a percentage of net sales, research and development expenditures in the third quarter of 1995 were 7%, the same as in 1994. Actual expenditures increased 24% in the third quarter of 1995 to $1,633,000 versus $1,314,000 in 1994, reflecting the increased spending associated with the development of new large format ink jet plotters and new digitizer products. For the nine months ended February 28, 1995, research and development expenditures as a percentage of net sales increased to 8% versus 7% in the prior year. Actual spending increased from $4,123,000 to $4,904,000 in the current year (19%), due to the development expenses associated with the ink-jet products. Net interest expense in the third quarter increased 77% reflecting the increase in debt over last year as well as higher interest rates. Net interest expense for the first nine months of 1995 remained essentially the same as last year. Other miscellaneous expense in the third quarter of 1995 was $158,000, versus $93,000 in 1994. The $65,000 change in miscellaneous income and expense is primarily due to foreign currency losses recorded in the current year. For the nine month period, other miscellaneous income and expense improved by $63,000 from an expense of $185,000 last year to an expense of $122,000 in the current year. The Company had pre-tax income of $180,000 and $867,000 in the third quarter and nine month period ended February 28, 1995, respectively, compared to pre-tax income of $679,000 and $881,000 in the third quarter and nine month period ended February 28, 1994. The Company did not record a tax provision for the three and nine month periods ended February 28, 1995 as a result of the utilization of tax loss/credit carryforwards and a related change in valuation allowance which offset current taxable income. PAGE 7 OF 11 The Company had net income of $180,000 ($.04 per share) for the third quarter ended February 28, 1995, compared to $679,000 last year ($.15 per share). For the nine month period, net income was $867,000 ($.18 per share), compared to $881,000 last year ($.20 per share). Liquidity and Capital Resources During the quarter the Company borrowed $5.8 million under its bank credit facilities, primarily to fund increases in inventories and accounts receivable, and currently owes $9.6 million to its banks. The inventory build up is due to the delayed sales introduction of the CompanyOs new line of large format ink-jet plotters, receipt of inventory for a new plotter product (SummaColor) that began initial shipment in the third quarter, and a slow-down in demand for the CompanyOs line of pen plotters caused by several new ink-jet products introduced in the third quarter, including the CompanyOs. The increase in receivables is primarily due to the late-in-the quarter shipment of the new ink-jet product as well as a slow-down in payments by customers, primarily in North America due to the delayed product introduction and slow sell through of the CompanyOs pen plotters. The Company believes that it has adjusted its inventory intake, resolved its production delays and taken appropriate pricing action on pen plotters to alleviate these issues over the next several quarters. The Company's sources of liquidity consist of on-hand cash balances, $12,000,000 of revolving bank credit facilities ($8,000,000 in the U.S. and $4,000,000 in Belgium), a $2.5 million credit facility solely to finance capital expenditures which expires May 31, 1995 and cash generated from operations. The CompanyOs availability under its bank credit lines are calculated based upon percentages, as determined by the banks, of certain eligible receivables and to a much lesser extent inventories. Accordingly, if managementOs actions noted above, to reduce the recent high levels of inventories do not take effect on a timely basis, the Company may have to renegotiate certain provisions of its lending arrangements. As of February 28, 1995, cash and short-term investments totaled $717,000, and $2,421,000 was available under its revolving bank credit lines. During the three and nine month period ended February 28, 1995, the Company utilized its cash balances and credit facilities to fund operations, working capital, capital expenditures and restructuring costs. Charges against the restructuring reserve during the three and nine month periods ended February 28, 1995 totaled $567,000 and $1,605,000, respectively. At February 28, 1995, remaining restructuring reserves amounted to $2,280,000, of which $1,924,000 relates to the leased space which is only partially utilized at the CompanyOs former corporate headquarters in Connecticut. The Company expects that all restructuring reserves, other than those that relate to the leased space, will be fully utilized by the end of the fist quarter of fiscal 1996. The reserve for the leased space will be utilized over the remaining term of the lease, or approximately four years. The Company estimates that savings realized as a result of the restructuring in 1993 amounted to approximately $1,000,000 and $3,000,000 in the three and nine month periods ended February 28. 1995, respectively. Other Matters The Company believes that inflation has not had a material effect on the results of operations to date. However, since the Company sources a substantial portion of its production from Far East manufacturers, the cost of imported product is dependent on the inflation rate in those countries, fluctuations in the value of the U.S. dollar and import duties or restrictions. The Company does a substantial portion of its business internationally. The CompanyOs products are priced in dollars in all North American, Latin American, Asian and Pacific Rim countries. In Europe, the Company prices its products in local currencies in Germany, England, France, Belgium and in dollars in other European and Middle Eastern countries. Approximately 50% of sales are denominated in local currencies and 50% in dollars. The European operations incur approximately the same percentages of their expenses in either local currencies or dollars. PAGE 8 OF 11 Accordingly, the Company believes that it effectively matches cash inflows and outflows and is not subject to material cash flow impacts due to currency fluctuations. The recent substantial devaluation of the Mexican peso has slowed sales to Mexico and caused a slowdown in collections from customers in Mexico. However, the Company does not expect any material write-offs of receivables from this event. The Company is currently undergoing an audit of its 1991 through 1993 U.S. federal income tax returns. To date, there have been no deficiencies asserted against the Company and the Company is unaware of any deficiencies that may be asserted that would have a material impact on the results of operations or liquidity. PAGE 9 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings See Annual Report on Form 10-K for fiscal year 1994. Item 5. Other Information None. Item 6. Exhibits and Reports on 8-K See Form 8-K-1 dated January 30, 1995 filed on January 30, 1995. See Form S-3 dated January 30, 1995 filed on February 1, 1995. PAGE 10 OF 11 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. SUMMAGRAPHICS CORPORATION (Registrant) Date: April 19, 1995 By: // ------------------------------ David G. Osowski, Senior Vice President, Treasurer and Controller PAGE 11 OF 11 -----END PRIVACY-ENHANCED MESSAGE-----