-----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, KX3vNKm2sSuWcuOgHdALFcQlpjMPYRmuUtDhyKj6JUJ2Gcvx513Rwr4ERCR2ZQ/f NqBIEPgeJyuYlXy2ikP4gg== 0000950130-96-001239.txt : 19960417 0000950130-96-001239.hdr.sgml : 19960417 ACCESSION NUMBER: 0000950130-96-001239 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960416 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: 96547402 BUSINESS ADDRESS: STREET 1: 8500 CAMERON ROAD CITY: AUSTIN STATE: TX ZIP: 78754-3999 BUSINESS PHONE: 5128731540 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 February 29, 1996 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) 835-0900 (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.0 Yes X No --- --- Number of common shares outstanding at February 29, 1996 - 4,666,000 --------- Page 1 of 12 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES INDEX TO FORM 10-Q FEBRUARY 29, 1996 PART I. FINANCIAL INFORMATION PAGE NO. Consolidated Balance Sheets - May 31, 1995 and February 29, 1996..... 3 Consolidated Statements of Operations for the Three Months and Nine Months ended February 28, 1995 and February 29, 1996.......... 4 Consolidated Statements of Cash Flows for the Nine Months ended February 28, 1995 and February 29, 1996............................ 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, February 29, 1995 1996 Unaudited -------------- --------------- Current Assets Cash $ 560,000 $ 916,000 Accounts receivable (less allowance for doubtful accounts: May 31, 1995 -- $954,000 February 29, 1996 -- $921,000) 18,039,000 15,672,000 Inventories: Materials 9,881,000 5,699,000 Work-in-process 2,504,000 1,161,000 Finished goods 6,998,000 4,600,000 -------------- --------------- 19,383,000 11,460,000 Prepaid expenses and other current assets 1,136,000 1,049,000 -------------- --------------- Total current assets 39,118,000 29,097,000 Fixed assets: Land 344,000 324,000 Building 1,616,000 1,227,000 Machinery and equipment 13,861,000 13,440,000 Furniture and fixtures 1,241,000 1,598,000 Leasehold improvements 1,044,000 819,000 Construction in progress 389,000 552,000 -------------- --------------- 18,495,000 17,960,000 Less accumulated depreciation and amortization (13,188,000) (13,708,000) -------------- --------------- Net fixed assets 5,307,000 4,252,000 Intangible and other assets, net of accumulated amortization 9,176,000 8,543,000 -------------- --------------- $ 53,601,000 $ 41,892,000 ============== =============== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 12,500,000 $ 9,637,000 Accrued liabilities 10,619,000 7,050,000 Notes payable to banks 9,548,000 9,957,000 Current portion of long-term debt 561,000 768,000 Current obligations under capital leases 277,000 290,000 -------------- -------------- Total current liabilities 33,505,000 27,702,000 Long-term liabilities, less current portion: Long-term debt 1,579,000 1,323,000 Capital lease obligations 282,000 133,000 Deferred gain on sale of building 476,000 451,000 Restructuring, lease abandonment and other charges 3,355,000 2,575,000 -------------- -------------- Total liabilities 39,197,000 32,184,000 -------------- -------------- Stockholder's equity: Preferred stock, $.01 par value, authorized 5,000,000 shares Common stock, $.01 par value; authorized 20,000,000 shares, issued 4,645,000 and 4,666,000 shares, respectively 46,000 47,000 Additional paid-in capital 39,111,000 39,155,000 Accumulated deficit (25,879,000) (29,863,000) Cumulative translation adjustment 1,601,000 844,000 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 9,708,000 -------------- -------------- $ 53,601,000 $ 41,892,000 ============== ==============
See accompanying notes to consolidated financial statements. Page 3 of 12 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Ended Nine Months Ended February 28, February 29, February 28, February 29, 1995 1996 1995 1996 ------------ ------------- ------------ ------------- Net sales $ 22,273,000 $ 14,106,000 $ 61,343,000 $ 48,138,000 Cost of sales 14,981,000 10,795,000 40,274,000 36,286,000 ------------ ------------- ------------ ------------- Gross profit 7,292,000 3,311,000 21,069,000 11,852,000 Selling, general and administrative 5,143,000 3,871,000 14,868,000 12,198,000 Research and development 1,633,000 823,000 4,904,000 2,992,000 ------------ ------------- ------------ ------------- Operating income (loss) 516,000 (1,383,000) 1,297,000 (3,338,000) Other income (expense): Interest income 6,000 6,000 19,000 14,000 Interest expense (184,000) (328,000) (327,000) (880,000) Miscellaneous, net (158,000) 111,000 (122,000) 220,000 ------------ ------------- ------------ ------------- (336,000) (211,000) (430,000) (646,000) Income (loss) before income taxes 180,000 (1,594,000) 867,000 (3,984,000) Provision (benefit) for income taxes --- --- --- --- ------------ ------------- ------------ ------------- Net income (loss) $ 180,000 $ (1,594,000) $ 867,000 $ (3,984,000) ============ ============= ============ ============= Net income (loss) per common share $ 0.04 $ (0.35) $ 0.18 (0.87) ============ ============= ============ ============= Weighted average shares used in computing net income (loss) per common share 4,838,000 4,618,000 4,802,000 4,605,000
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
Nine Months Ended February 28, February 29, 1995 1996 ------------- ------------- Cash flows from operating activities: Net income (loss) $ 867,000 $ (3,984,000) Adjustments to reconcile net income (loss) to net cash used in (provided by) operating activities: Depreciation and amortization 2,494,000 1,827,000 Restucturing Charges (361,000) (361,000) Loss (gain) on sale of fixed assets 23,000 (80,000) Compensation in form of stoc 18,000 19,000 Changes in assets and liabilities: Accounts receivable (3,474,000) 1,938,000 Inventories (7,812,000) 7,574,000 Prepaid and other current assets (241,000) (256,000) Accounts payable 2,701,000 (2,733,000) Accrued liabilities (2,286,000) (3,866,000) ------------- ------------- Net cash (used in) provided by operating activities (8,071,000) 78,000 ------------- ------------- Cash flows from investing activities: Capital expenditures (1,423,000) (361,000) Proceeds from sale of fixed assets 10,000 70,000 ------------- ------------- Net cash used in investing activities (1,413,000) (291,000) ------------- ------------- Cash flows from financing activities: Proceeds (Repayments) from short-term borrowings 9,401,000 839,000 Proceeds from sale of common stock 332,000 26,000 Purchase of treasury stock --- --- Repayments of notes payable to banks --- --- Payment of cash dividends (450,000) Proceeds (Repayments) of long-term debt and capital lease obligation 515,000 (403,000) ------------- ------------- Net cash used in financing activities 9,798,000 462,000 ------------- ------------- Effect of exchange rate changes on cash (416,000) 107,000 ------------- ------------- Net change in cash (102,000) 356,000 ------------- ------------- Cash at beginning of period 819,000 560,000 ------------- ------------- Cash at end of period $ 717,000 $ 916,000 ============= =============
See accompanying notes to consolidated financial statements. Page 5 of 12 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 29, 1996 (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 NINE MONTHS ENDED FEBRUARY 29, 1996 RESULTS OF OPERATIONS Net sales in the third quarter of fiscal 1996 decreased 37% to $14,106,000 from $22,273,000 in the comparable period last year. For the nine months ended February 29, 1996, net sales decreased 22% to $48,138,000 from $61,343,000 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 significantly lower in the current quarter due principally to the lack of product availability precipitated by the Company's liquidity position. Gross margin for the third quarter declined to 23% or $3,311,000 versus 33% or $7,292,000 in the previous year due to the lower sales volumes. For the nine month period gross margin decreased to 25% compared to 34% in the prior year. Selling, general and administrative expense (SG+A), as a percentage of net sales, increased from 23% or $5,143,000 in the third quarter of 1995 to 27% or $3,871,000 in the third quarter of 1996. For the nine month period ended February 29, 1996, SG+A as a percentage of net sales (25%) increased one percent from last year ($14,868,000 and $12,198,000, respectively). These percentage increases were due to lower sales levels during the current fiscal year and were minimized by continued strong cost controls. Research and development expenditures for the third quarter of 1996 as a percentage of net sales decreased from 7% or $1,633,000 in 1995 to 6% or $823,000 in 1996. For the nine months ended February 29, 1996, research and development expenditures as a percentage of net sales decreased from 8% to 6% in the nine months end February 28, 1995 ($4,904,000 and $2,992,000, 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 third quarter of fiscal 1996 increased to $328,000 from $184,000 in the same period in 1995. For the nine months ended February 29, 1996 interest expense increased to $880,000 compared to $327,000 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 third quarter of 1996 reflected Page 7 of 12 income of $111,000 versus expense of $158,000 in 1995. For the nine months ended February 29, 1996, other miscellaneous income and expense reflected income of $220,000 compared to loss of $122,000 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 $1,594,000 in the third quarter compared to pre- tax income of $180,000 in last year's third quarter. For the nine months ended February 29, 1996, the Company had a pre-tax loss of $3,984,000 compared to pre- tax income of $867,000 in the prior year. The Company did not record a tax provision for the three or nine month period ended February 29, 1996 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 February 29, 1996 cash and short-term investments totaled $916,000 and $829,000 was available under its Belgian revolving credit line. During the three and nine-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 February 29, 1996 were $267,000 and $790,000, respectively. As a result of its U.S. operating losses during fiscal 1996, Summagraphics violated certain financial covenants with its U.S. bank, the landlord of its Texas facility and a loan agreement for Summagraphics' capital expenditures. In September 1995, all parties agreed to waive all events of default and to revise the respective agreements, as previously disclosed in Summagraphics' Form 10-K for the fiscal year ended May 31, 1995. The U.S. bank agreement was executed in January 1996. Significant new provisions of this agreement included an extension of the agreement until September 30, 1996, repayment of the loan based on 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 Summagrpahics Common Stock at $1.75 per share. Subsequent to the signing of the bank agreement, Summagraphics reported a net loss of approximately $1.6 million in the third quarter ended February 29, 1996. This loss was caused primarily by Summagraphics' inability to finance inventory purchases during the quarter due to a severe tightening of vendor credit in the U.S., Page 8 of 12 the bankruptcy of a key European cutter supplier late in the quarter and the discontinuance of a contract manufacturing relationship in the third quarter that resulted in delayed and reduced product deliveries. As a result of this loss, Summagraphics breached certain financial covenants as revised by an amendment to the credit agreement effective in December 1995. In a further modification to the agreement made in March 1996, concurrent with the execution of the Exchange Agreement with Lockheed Martin, the bank agreed to forebear against declaring default with respect to certain financial covenants for the period ending February 29, 1996 until the maturity of the debt, the date of which is variable, depending upon certain circumstances. The revised Texas lease agreement was executed in March 1996 and also contained revisions to certain financial covenants to accommodate the third quarter losses. New provisions of this agreement include a rent reduction through September 30, 1996 and the granting of warrants to purchase 15,000 shares of Common Stock to the landlord at a price of $2.00 per share as well as revised financial covenants. Summagraphics is currently in compliance with the revised terms and conditions of the amended lease agreement. The capital expenditure credit line was also amended in March 1996 to accommodate the third quarter loss. In February 1996, Summagraphics announced that it had signed a letter of intent with Lockheed Martin Corporation ("Lockheed Martin") with respect to a proposal acquisition by Lockheed Martin of Summagraphics and on March 19, 1996, Summagraphics and Lockheed Martin signed a Plan of Reorganization and Agreement for the Exchange of Stock of CalComp Inc. ("CalComp") for stock of Summagraphics (the "Exchange Agreement"). The Exchange Agreement calls for Summagraphics to issue to Lockheed Martin approximately 40.7 million shares of Summagraphics common stock in exchange for all of the capital stock of CalComp. As a result of this share issuance, Lockheed Martin will own approximately 89.7% of the outstanding Common Stock (on a fully diluted basis) of Summagraphics. The Exchange Agreement, among other items, includes a provision for Lockheed Martin to provide $2.5 million of financing to Summagraphics during the period from the signing of the Exchange Agreement until the closing of the Exchange. The initial funding under this Agreement was received by Summagraphics in late March and has been used primarily to finance inventory purchases. 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 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 Company's products are priced in dollars in all North American, Latin American, Page 9 of 12 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. 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 See Form 8-K dated February 12, 1996 filed on February 21, 1996. 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: April 15, 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 9-MOS MAY-31-1996 JUN-01-1995 FEB-29-1996 916 0 16,593 921 11,460 29,097 17,960 13,708 41,892 27,702 1,323 0 0 47 9,661 41,892 48,138 48,138 36,286 36,286 15,190 0 880 (3,984) 0 (3,984) 0 0 0 (3,984) (.87) (.87)
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