-----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, PeMzfM4GlibVLEqtAdSBEv75g7bbg95KXLlUlgAHSCI7YzKg3vMWulxWuNZpi+kX tZPct/8q4/27O70Gr0ZMYQ== 0000950132-95-000407.txt : 19951030 0000950132-95-000407.hdr.sgml : 19951030 ACCESSION NUMBER: 0000950132-95-000407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950831 FILED AS OF DATE: 19951027 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: 95584611 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 August 31, 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 August 31, 1995 - 4,596,000 --------- Page 1 of 11 Summagraphics Corporation and Subsidiaries Index to Form 10-Q August 31, 1995
Part I. Financial Information Page No. Consolidated Balance Sheets - May 31, 1995 and August 31, 1995...........3 Consolidated Statements of Operations for the Three Months ended August 31, 1994 and August 31, 1995..............................4 Consolidated Statements of Cash Flows for the Three Months ended August 31, 1994 and August 31, 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 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS August 31, May 31, 1995 1995 Unaudited ------------ ------------ Current Assets Cash $ 560,000 $ 1,122,000 Accounts receivable (less allowance for doubtful accounts: May 31, 1995 - $954,000 August 31, 1995 - $913,000) 18,039,000 12,676,000 Inventories: Materials 9,881,000 5,628,000 Work-in-process 2,504,000 3,809,000 Finished goods 6,998,000 6,010,000 ------------ ------------ 19,383,000 15,447,000 Prepaid expenses and other current assets 1,136,000 1,778,000 ------------ ------------ Total current assets 39,118,000 31,023,000 Fixed assets: Land 344,000 325,000 Building 1,616,000 1,525,000 Machinery and equipment 13,861,000 14,137,000 Furniture and fixtures 1,241,000 1,139,000 Leasehold improvements 1,044,000 818,000 Construction in progress 389,000 523,000 ------------ ------------ 18,495,000 18,467,000 Less accumulated depreciation and amortization (13,188,000) (13,523,000) ------------ ------------ Net fixed assets 5,307,000 4,944,000 Intangible and other assets, net of accumulated amortization 9,176,000 8,629,000 ------------ ------------ $ 53,601,000 $ 44,596,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,500,000 $ 9,556,000 Accrued liabilities 10,619,000 7,250,000 Notes payable to banks 9,548,000 9,749,000 Current portion of long-term debt 561,000 617,000 Current obligations under capital leases 277,000 274,000 ------------ ------------ Total current liabilities 33,505,000 27,446,000 Long-term liabilities, less current portion: Long-term debt 1,579,000 1,551,000 Capital lease obligations 282,000 213,000 Deferred gain on sale of building 476,000 468,000 Restructuring, lease abandonment and other charges 3,355,000 3,095,000 ------------ ------------ Total liabilities 39,197,000 32,773,000 ------------ ------------ 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 4,645,000 shares, respectively 46,000 46,000 Additional paid-in capital 39,111,000 39,117,000 Accumulated deficit (25,879,000) (27,771,000) Cumulative translation adjustment 1,601,000 906,000 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 11,823,000 ------------ ------------ $ 53,601,000 $ 44,596,000 ============ ============
See accompanying notes to consolidated financial statements. Page 3 of 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED
Three Months Ended August 31, August 31, 1994 1995 ----------- ----------- Net sales $18,651,000 $15,789,000 Cost of sales 12,533,000 12,217,000 ----------- ----------- Gross profit 6,118,000 3,572,000 Selling, general and administrative 4,255,000 4,114,000 Research and development 1,569,000 1,155,000 ----------- ----------- Operating income 294,000 (1,697,000) Other income (expense): Interest income 4,000 3,000 Interest expense (51,000) (278,000) Miscellaneous, net 56,000 80,000 ----------- ----------- 9,000 (195,000) Income before income taxes 303,000 (1,892,000) Provision for income taxes -- -- ----------- ----------- Net income $ 303,000 $(1,892,000) =========== =========== Net income per common share $ 0.06 $ (0.41) =========== =========== Weighted average shares used in computing net income per common share 4,768,000 4,596,000
See accompanying notes to consolidated financial statements. Page 4 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW REPRESENTING INCREASES (DECREASED) IN CASH UNAUDITED
Three Months Ended August 31, August 31, 1994 1995 ----------- ------------ Cash flows from operating activities: Net income $ 303,000 $(1,892,000) Adjustments to reconcile net income to net cash used in (provided by) operating activities: Depreciation and amortization 901,000 609,000 Loss on sale of fixed assets (17,000) (4,000) Compensation in form of stock -- 6,000 Changes in assets and liabilities: Accounts receivable 2,475,000 5,118,000 Inventories (375,000) 3,628,000 Prepaid and other current assets (171,000) (709,000) Accounts payable (1,983,000) (2,870,000) Accrued liabilities (917,000) (3,301,000) Other liabilities (120,000) (260,000) ----------- ----------- Net cash provided by operating activities 96,000 325,000 ----------- ----------- Cash flows from investing activities: Capital expenditures (245,000) (184,000) Proceeds from sale of fixed assets 8,000 -- Intangible assets, principally patent costs -- 21,000 ----------- ----------- Net cash used in investing activities (237,000) (163,000) ----------- ----------- Cash flows from financing activities: Net proceeds from notes payable 1,052,000 358,000 Proceeds from sale of common stock 22,000 -- Proceeds from long-term debt -- 91,000 Payment of cash dividends (220,000) -- Repayments of long-term debt and capital lease obligations (129,000) (67,000) ----------- ----------- Net cash provided by financing activities 725,000 382,000 ----------- ----------- Effect of exchange rate changes on cash (126,000) 18,000 ----------- ----------- Net change in cash 458,000 562,000 ----------- ----------- Cash at beginning of period 819,000 560,000 ----------- ----------- Cash at end of period $ 1,277,000 $ 1,122,000 =========== ===========
See accompanying notes to consolidated financial statements. Page 5 OF 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 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 11 SUMMAGRAPHICS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 31, 1995 Results of Operations Net sales in the first quarter of fiscal 1996 decreased 16% to $15,789,000 from $18,651,000 in the comparable period last year. Sales in Europe were flat with last year and the sales decline occurred in the North America and Asia/Pacific sales regions. 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 first quarter declined to 23% or $3,572,000 versus 32% or $6,117,000 in the previous year due to the lower sales volumes as well as price reductions taken since last year primarily on pen plotters and small format digitizers. Selling, general and administrative expense (SG+A), as a percentage of net sales, increased from 22% or $4,255,000 in the first quarter of 1995 to 26% or $4,114,000 in the first quarter of 1996. This percentage increase was due to the lower sales level during the most recent quarter. SG+A on an actual expenditure basis decreased from the preceding year by $141,000 reflecting cost reduction programs put in place by the Company. Research and development expenditures as a percentage of net sales decreased from 8% or $1,569,000 in 1995 to 7% or $1,115,000 in 1996. This reduction reflects 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 quarter. Net interest expense in the first quarter of fiscal 1996 increased to $278,000 from $51,000 in the same period in 1995, reflecting the increase in average short-term debt outstanding from the prior year. Other miscellaneous income and expense in the first quarter of 1996 reflected income of $80,000 versus expense of $57,000 in 1994. The change in miscellaneous income and expense is primarily due to currency transaction gains and losses. The Company had pre-tax loss of $1,892,000 in the first quarter compared to pre-tax income of $303,000 in last year's first quarter. The Company did not record a tax provision for the three month period ended August 31, 1995 as a result of the current period losses recorded by the Company. Page 7 of 11 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. The Company has substantial investment in inventories for its ink jet plotter, thermal wax printer and pen plotters. Because of this investment, the Company will not be required to purchase a substantial portion of the materials required to build these output devices during the first two quarters of fiscal 1996. As of August 31, 1995 cash and short-term investments totaled $1,122,000 and $1,246,000 was available under its Belgian revolving credit line. During the three month period, 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, for the quarter ended August 31, 1995 was $266,000. The Company experienced a significant loss in the first quarter 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. 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 to assist the Company with matters relating to its strategic direction. However, there can be no assurance that any such alternatives can be successfully consummated. 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, Asian and Pacific Rim countries. In Europe, the Company prices its products in Page 8 of 11 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. 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 Company is currently in the process of completing amendments with these parties evidencing such waivers. Page 9 of 11 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 None. 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: October 26, 1995 By: /s/ David G. Osowski ________________________ David G. Osowski, Senior Vice President, Controller and Treasurer Page 11 of 11 EX-27 2 ART. 5 FDS FOR FIRST QUARTER 10Q
5 1,000 3-MOS MAY-31-1996 JUN-01-1995 AUG-31-1995 1,122 0 13,589 913 15,447 31,023 18,467 13,523 44,596 27,446 1,551 46 0 0 11,777 44,596 15,789 15,789 12,217 12,217 5,269 0 278 (1,892) 0 (1,892) 0 0 0 (1,892) (.41) (.41)
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