-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Uraya+IEGcoQinHAVw/7+qmfz+WEQtBGVY+U0qmKJQby7EHXnJHfOZVBSejC/z6F eu+5wxsYI9GsPpctnI0S5Q== 0000950130-96-000279.txt : 19960129 0000950130-96-000279.hdr.sgml : 19960129 ACCESSION NUMBER: 0000950130-96-000279 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951130 FILED AS OF DATE: 19960126 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: 96507757 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 Quarter ended November 30, 1995 Commission file number 0-16071 Summagraphics Corporation (Exact name of Registrant as specified in its charter) Delaware 3573 06-0888312 (State or other jurisdiction (Primary standard industrial (I.R.S. Employer incorporation or organization) classification code number) identification No.) 8500 Cameron Road Austin, Texas 78754 (512) 835-9000 (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 November 30, 1995 - 4,613,000 Page 1 of 12 Summagraphics Corporation and Subsidiaries Index to Form 10-Q November 30, 1995 Part I. Financial Information Page No. Consolidated Balance Sheets - May 31, 1995 and November 30, 1995 3 Consolidated Statements of Operations for the Three Months and Six Months ended November 30, 1994 and November 30, 1995 4 Consolidated Statements of Cash Flows for the Six Months ended November 30, 1994 and November 30, 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 8 Item 6. Exhibits and Reports on Form 8-K 8 Signatures 9 Page 2 of 12 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS MAY 31, NOVEMBER 30, 1995 1995 UNAUDITED ------------ ------------- Current Assets Cash $ 560,000 $ 584,000 Accounts receivable (less allowance for doubtful accounts: May 31, 1995-$954,000 November 30, 1995-$856,000) 18,039,000 15,786,000 Inventories: Materials 9,881,000 5,763,000 Work-in-process 2,504,000 3,243,000 Finished goods 6,998,000 3,987,000 ----------- ----------- 19,383,000 12,993,000 Prepaid expenses and other current assets 1,136,000 1,217,000 ----------- ----------- Total current assets 39,118,000 30,580,000 Fixed assets: Land 344,000 332,000 Building 1,616,000 1,586,000 Machinery and equipment 13,861,000 14,257,000 Furniture and fixtures 1,241,000 1,138,000 Leasehold improvements 1,044,000 818,000 Construction in progress 389,000 566,000 ----------- ----------- 18,495,000 18,697,000 Less accumulated depreciation and amortization (13,188,000) (14,046,000) ----------- ----------- Net fixed assets 5,307,000 4,651,000 Intangible and other assets, net of accumulated amortization 9,176,000 8,626,000 ----------- ----------- $53,601,000 $43,857,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $12,500,000 $9,668,000 Accrued liabilities 10,619,000 6,692,000 Notes payable to banks 9,548,000 9,850,000 Current portion of long-term debt 561,000 620,000 Current obligations under capital leases 277,000 273,000 ----------- ------------ Total current liabilities 33,505,000 27,373,000 Long-term liabilities, less current portion: Long-term debt 1,579,000 1,458,000 Capital lease obligations 282,000 147,000 Deferred gain on sale of building 476,000 459,000 Restructuring, lease abandonment and other charges 3,355,000 2,835,000 Total Liabilities 39,197,000 32,272,000 ----------- ------------ Stockholders's equity: Preferred stock, $.01 par value, authorized 500,000 shares Common stock, $.01 par value; authorized 20,000,000 shares, issued 4,465,000 and 4,645,000 shares, respectively 46,000 46,000 Additional paid-in capital 39,111,000 39,143,000 Accumulated deficit (25,879,000) (28,269,000) Cumulative translation adjustment 1,601,000 1,140,000 Less:Treasury stock at cost-49,000 shares (465,000) (465,000) Stockholder note receivable (10,000) (10,000) ----------- ------------ Total stockholders' equity 14,404,000 11,585,000 ----------- ------------ $53,601,000 $ 43,857,000 =========== ===========
See accompanying notes to consolidated financial statements. Page 3 of 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Ended Six Months Ended November 30, November 30, November 30, November 30, 1994 1995 1994 1995 ------------ ------------ ------------ ------------ Net sales $ 20,421,000 $ 18,243,000 $ 39,072,000 $ 34,032,000 Cost of sales 12,762,000 13,274,000 25,295,000 25,491,000 ------------ ------------ ------------ ------------ Gross profit 7,659,000 4,969,000 13,777,000 8,541,000 Selling, general and administrative 5,470,000 4,213,000 9,724,000 8,327,000 Research and development 1,702,000 1,014,000 3,272,000 2,169,000 ------------ ------------ ------------ ------------ Operating income (loss) 487,000 (258,000) 781,000 (1,995,000) Other income (expense): Interest income 9,000 5,000 13,000 8,000 Interest expense (92,000) (273,000) (143,000) (551,000) Miscellaneous, net (20,000) 28,000 36,000 108,000 ------------ ------------ ------------ ------------ (103,000) (240,000) (94,000) (435,000) Income (loss) before income taxes and cumulative effect of change in accounting method 384,000 (498,000) 687,000 (2,390,000) Provision (benefit) for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Income (loss) before cumulative effect of change in accounting method 384,000 (498,000) 687,000 (2,390,000) Cumulative effect of change in method of accounting for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net income (loss) $ 384,000 $ (498,000) $ 687,000 $ (2,390,000) ============ ============ ============ ============ Net income (loss) per common share: Income (loss) before cumulative effect of change in accounting method $ 0.08 $ (0.11) $ 0.14 $ (0.52) ------------ ------------ ------------ ------------ Cumulative effect of change in method of accounting for income taxes -- -- -- -- ------------ ------------ ------------ ------------ Net income (loss) per common share $ 0.08 $ (0.11) $ 0.14 $ (0.52) ============ ============ ============ ============ Weighted average shares used in computing net income (loss) per common share 4,840,000 4,598,000 4,800,000 4,597,000
See accompanying notes to consolidated financial statements. Page 4 of 12 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS REPRESENTING INCREASES (DECREASES) IN CASH UNAUDITED
SIX MONTHS ENDED NOVEMBER 30, NOVEMBER 30, 1994 1995 ------------- --------------- Cash flows from operating activities: Net income (loss) $ 687,000 $ (2,390,000) Adjustments to reconcile net income (loss) to net cash used in (provided by) operating activities: Cumulative effect of change in accounting method -- -- Depreciation and amortization 1,736,000 1,248,000 Restructuring Charges (240,000) (240,000) Loss (gain) on sale of fixed assets 34,000 (52,000) Compensation in form of stock (5,000) 6,000 Changes in assets and liabilities: Accounts receivable (211,000) 2,034,000 Inventories (4,296,000) 6,188,000 Prepaid and other current assets (61,000) (112,000) Accounts payable 685,000 (2,775,000) Accrued liabilities (1,205,000) (3,877,000) ------------- --------------- Net cash (used in) provided by operating activities (2,876,000) 30,000 ------------- --------------- Cash flows from investing activities: Capital expenditures (1,063,000) (352,000) Proceeds from sale of fixed assets 8,000 40,000 ------------- --------------- Net cash used in investing activities (1,055,000) (312,000) ------------- --------------- Cash flows from financing activities: Proceeds (Repayments) from short-term borrowings 4,103,000 (22,000) Proceeds from sale of common stock 291,000 26,000 Payment of cash dividends (450,000) 0 Proceeds (Repayments) of long-term debt and capital lease obligations (256,000) 262,000 ------------- --------------- Net cash used in financing activities 3,688,000 266,000 ------------- --------------- Effect of exchange rate changes on cash (193,000) 40,000 ------------- --------------- Net change in cash (436,000) 24,000 ------------- --------------- Cash at beginning of period 819,000 560,000 ------------- --------------- Cash at end of period $ 383,000 $ 584,000 ============= ===============
See accompanying notes to consolidated financial statements. Page 5 of 12 Summagraphics Corporation and Subsidiaries Notes to Consolidated Financial Statements November 30, 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 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, 1995 included in the Company's filing with the SEC on Form 10-K. The results for these interim periods are not necessarily indicative of the results for the respective fiscal years. Page 6 of 12 Summagraphics Corporation and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations For the Three and Six Months Ended November 30, 1995 Results of Operations Net sales in the second quarter of fiscal 1996 decreased 12% to $18,243,000 from $20,421,000 in the comparable period last year. For the six months ended November 30, 1995, net sales decreased 13% to $34,032,000 from $39,072,000 in the prior year. Sales in Europe were up slightly over last year, while the sales decline occurred in the North America and Asia/Pacific sales regions. The increased sales in Europe represent an increase in cutter sales and the introduction of the Company's SummaChrome Vinyl printer. The Company has continued to experience lower than expected sales of pen plotters and has not been able to offset this sales decline with sales of its SummaJet inkjet printer which, as previously disclosed, was introduced later than scheduled and has hindered the Company's efforts to recover its delayed market opportunity. Sales were also adversely affected by price reductions and continuing efforts to reduce customer on-hand inventories of the Company's products primarily in North America. Gross margin for the second quarter declined to 27% or $4,969,000 versus 38% or $7,659,000 in the previous year due to the lower sales volumes as well as price reductions taken since last year primarily on small format digitizers, inkjet and pen plotters. For the six month period gross margin decreased to 25% compared to 35% in the prior year. Selling, general and administrative expense (SG+A), as a percentage of net sales, decreased from 27% or $5,470,000 in the second quarter of 1995 to 23% or $4,213,000 in the second quarter of 1996. For the six month period ended November 30, 1995, SG+A as a percentage of net sales (24%) decreased one percent from last year ($8,327,000 and $9,724,,000, respectively). These percentage decreases were due to continued strong cost controls and lower sales levels during the current fiscal year. Research and development expenditures for the second quarter of 1995 as a percentage of net sales decreased from 8% or $1,702,000 in 1995 to 6% or $1,014,000 in 1996. For the six months ended November 30, 1995, research and development expenditures as a percentage of net sales decreased from 8% to 6% in the six months end November 30, 1995 ($3,272,000 and $2,169,000, respectively). These reductions reflect cost reduction programs put in place by the Company as well as the absence of any major development programs for output products in the current year. Net interest expense in the second quarter of fiscal 1996 increased to $273,000 from $92,000 in the same period in 1995. For the six months ended November 30, 1995 interest expense increased to $551,000 compared to $143,000 in the prior year. These increases reflect the increase in average short-term debt outstanding from the prior periods. Other miscellaneous income and expense in the second quarter of 1996 reflected Page 7 of 12 income of $28,000 versus expense of $20,000 in 1994. For the six months ended November 30, 1995, other miscellaneous income and expense reflected income of $108,000 compared to income of $36,000 in the prior year. These changes in miscellaneous income and expense are primarily due to currency transaction gains and losses. The Company had pre-tax loss of $498,000 in the second quarter compared to pre-tax income of $384,000 in last year's second quarter. For the six months ended November 30, 1995, the Company had a pre-tax loss of $2,390,000 compared to pre-tax income of $687,000 in the prior year. The Company did not record a tax provision for the three or six month period ended November 30, 1995 as a result of the current period losses recorded by the Company. Liquidity and Capital Resources The Company's sources of liquidity consist of on-hand cash balances, a $4,000,000 revolving credit facility in Belgium, vendor credit and cash generated from operations. The Company's availability under its Belgian bank credit line is calculated based upon percentages, as determined by the bank, of certain eligible receivables and to a lesser extent inventories. The Company does not have any availability under its current domestic credit facility and is funding operations from operating cash flows. As of November 30, 1995 cash and short-term investments totaled $584,000 and $1,137,000 was available under its Belgian revolving credit line. During the three and six-month periods, the Company utilized its cash balances and bank credit facilities to fund operations, working capital, capital expenditures and other costs. Charges against the restructuring reserve established in 1993 and the lease abandonment reserve established in 1995, both related to the former corporate office lease space in Connecticut, and for the three and six-month periods ended November 30, 1995 were $257,000 and $523,000, respectively. The Company experienced a significant loss in the first six months of fiscal 1996. The Company has developed a plan to return to profitable levels during fiscal 1996 which include outsourcing certain of its manufacturing and distribution requirements as well as reducing expenditures in all areas. The waiver received on the U.S. credit agreement was based, in part, on management's projections of future operations and cash flows. The ability of the Company to achieve its projections is dependent upon various factors, some of which may be outside the control of the Company, such as the continued cooperation of the Company's suppliers to provide an adequate amount of credit to enable the Company to purchase goods and services. Additionally, management is considering various other alternatives to raise additional funds, including debt or equity financing and/or sales of certain operating assets. The Company has retained the services of Broadview Associates (investment bankers) to assist the Company with matters relating to its strategic direction. Page 8 of 12 Subsequent Events In 1995 as a result of its U.S. operating losses, the Company violated certain financial covenants with its U.S. bank, the landlord of its Texas facility and a loan agreement for the Company's capital expenditures. In September 1995, all parties agreed to waive all events of default and to revise the respective agreements, as previously disclosed in the Company's Form 10-K for the fiscal year ended May 31, 1995. The U.S. bank agreement has been executed by the Company and is expected to be executed by the bank shortly pending final completion of documentation. The Company is currently in compliance with the terms of the amended credit agreement. Significant new provisions of this agreement include an extension of the agreement until September 30, 1996, repayment of the loan based remittance of certain percentages of daily cash collections, no new loan advances except for one minor exception, additional loan repayments required to be made based upon any proceeds from asset sales or equity proceeds, an increased borrowing rate, new financial covenants and the granting to the bank of warrants to purchase 37,500 shares of the Company's common stock at $1.75 per share. The Texas lease agreement is in the process of final documentation and should be executed shortly. New provisions of this agreement include a rent reduction through September 30, 1996 and the granting of 15,000 warrants to the landlord at a price of $2 per share as well as revised financial covenants. The Company is currently in compliance with the revised terms and conditions of the amended lease agreement. The lender associated with the capital expenditure credit line has agreed to extend its previous waiver to allow for finalization of amendments to this lending agreement. Other Matters Impact of Inflation 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 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 Company's 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. 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. Page 9 of 12 Accounting for Asset Impairment During March, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." The Company is required to adopt Statement 121 in the fiscal year beginning June 1, 1996. Statement 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has not completed all of the analyses required to estimate the impact of the new statement; however, the adoption of Statement 121 is not expected to have a material adverse impact on the Company's financial position or the results of its operations at the time of adoption. Page 10 of 12 PART II - Other Information Item 1. Legal Proceedings See Annual Report on Form 10-K for fiscal year 1995. Item 6. Exhibits and Reports on 8-K Exhibit 27 - Financial Data Schedule. Page 11 of 12 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: January 25, 1996 By: /s/ ------------------------- David G. Osowski, Senior Vice President, Controller and Treasurer Page 12 of 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS MAY-31-1996 JUN-01-1995 NOV-30-1995 584 0 16,642 856 12,993 30,580 18,697 14,046 43,857 27,373 1,458 0 0 46 11,539 43 34,032 34,032 25,491 35,987 0 0 551 (2,390) 0 (2,390) 0 0 0 (2,390) (.52) (.52)
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