<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
_____ Exchange Act of 1934
For the quarterly period ended September 30, 1994 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 1-6435
____________________________________________
Bolt Beranek and Newman Inc.
__________________________________________________________________
(Exact name of registrant as specified in its charter)
Massachusetts 04-2164398
____________________________________ ________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 CambridgePark Drive, Cambridge, Massachusetts 02140
___________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 873-2000
_______________
___________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the company (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 (or for such shorter period that the
company 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.
Number of shares of common stock, $1.00 par value, outstanding as of
October 31, 1994: 16,784,777
Exhibit index appears on page 13
Page 1 of 15 pages <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
INDEX
Page No.
________
Part I. Financial Information
Consolidated Statements of Operations -
Three Months Ended September 30, 1994 and 1993 ..3
Consolidated Balance Sheets -
as of September 30, 1994 and June 30, 1994 ......4
Consolidated Statements of Cash Flows -
Three Months Ended September 30, 1994 and 1993 ..5
Notes to Consolidated Financial Statements ..........6
Management's Discussion and Analysis of Financial
Condition and Results of Operations .............8
Part II.Other Information
Item 4. Submission of Matters to a Vote of Security
Holders....................................12
Item 6. Exhibits and Reports on Form 8-K ..........12
Signatures .........................................12 <PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Dollars in thousands, except per-share data
Three Months Ended
___________________________
September 30 September 30
1994 1993
___________ ____________
Revenue:
Services $ 44,376 $ 42,795
Products 7,367 7,135
___________ ___________
51,743 49,930
___________ ___________
Costs and expenses:
Cost of services 28,660 30,218
Cost of products 2,585 2,825
Research and development expenses 5,955 5,304
Selling, general and administrative expenses 16,035 13,107
___________ ___________
53,235 51,454
___________ ___________
Loss from operations (1,492) (1,524)
Interest income 617 689
Interest expense (1,126) (1,201)
Minority interests 296
Other income (expense), net (3) 89
___________ ___________
Loss before income taxes (1,708) (1,947)
Provision for income taxes 100
___________ ___________
Net loss $ (1,808) $ (1,947)
=========== ===========
Net loss per share $ (.11) $ (.12)
=========== ===========
Shares used in per-share calculations 16,614,000 15,978,000
The accompanying notes are an integral
part of the consolidated financial statements <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED BALANCE SHEETS
September 30 June 30
1994 1994
Dollars in thousands ____________ __________
(Unaudited) (Audited)
ASSETS
______
Current assets:
Cash and temporary investments $ 57,923 $ 67,115
Accounts receivable, net 49,053 41,503
Inventories, net 413 1,114
Other current assets 4,337 3,592
_________ __________
Total current assets 111,726 113,324
Property, plant and equipment, net 20,885 19,658
Other assets 7,867 2,958
_________ __________
$140,478 $135,940
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
____________________________________
Current liabilities:
Accounts payable $ 4,983 $ 4,279
Accrued compensation and retirement plan 5,522 5,198
Accrued restructuring charges 11,404 12,566
Other accrued costs 20,589 19,832
Deferred revenue 14,181 11,112
_________ _________
Total current liabilities 56,679 52,987
6% convertible subordinated debentures
due 2012 73,510 73,510
Commitments and contingencies
Minority interests 1,924 2,172
Shareholders' equity:
Common stock, $1 par value, authorized:
100,000,000 shares; issued: 21,298,178
shares at September 30, 1994 and
21,253,890 shares at June 30, 1994 21,298 21,254
Additional paid-in capital 56,962 55,916
Foreign currency translation adjustment 227 337
Accumulated deficit (37,935) (36,127)
_________ _________
40,552 41,380
Less shares in treasury, at cost: 4,527,464
shares at September 30, 1994 and
4,797,734 shares at June 30, 1994 32,187 34,109
_________ _________
Total shareholders' equity 8,365 7,271
_________ _________
$140,478 $135,940
========= =========
The accompanying notes are an integral
part of the consolidated financial statements <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Dollars in thousands
Three Months Ended
____________________________
September 30 September 30
1994 1993
____________ _____________
Cash flows from operating activities:
Net loss $ (1,808) $ (1,947)
Adjustments to reconcile net loss to net cash
(used) by operating activities:
Depreciation and amortization 2,393 2,246
Amortization of goodwill and capitalized
software 146 352
Change in assets and liabilities:
Accounts receivable (7,050) (7,153)
Inventories 675 1,372
Other assets (992) 2,779
Accounts payable and other liabilities 1,085 5,930
Accrued restructuring charges (1,162) (1,803)
Deferred revenue 2,269 (2,308)
Other (667) (933)
_________ _________
Total adjustments (3,303) 482
_________ _________
Net cash (used) by operating activities (5,111) (1,465)
Cash (used) by investing activities:
Additions to property, plant and equipment (2,229) (831)
Acquisition of BARRNET (2,000)
_________ _________
Cash (used) by investing activities (4,229) (831)
Cash provided by financing activities:
Proceeds from Stock Option Plan 148 742
_________ _________
Net (decrease) in cash and temporary investments (9,192) (1,554)
Cash and temporary investments-
beginning of period 67,115 56,835
_________ _________
Cash and temporary investments-
end of period $ 57,923 $ 55,281
========= =========
Supplemental cash flow information:
Interest paid $ 7 $ 3
========= =========
The accompanying notes are an integral
part of the consolidated financial statements <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation
The financial information included herein, with the exception of the
consolidated balance sheet at June 30, 1994, has not been audited.
However, in the opinion of management, all material adjustments,
consisting only of normal recurring accruals necessary for a fair
presentation of the results for these periods, have been reflected. The
results for these periods are not necessarily indicative of the results
for the full fiscal year. Certain amounts reported for the prior
periods presented have been reclassified to be consistent with the
current year's presentation.
B. Commitments and Contingencies
The company, like other companies doing business with the U.S.
government, is subject to routine audit, and in certain circumstances to
inquiry, review, or investigation, by U.S. government agencies, of its
compliance with government procurement policies and practices. In April
1991, the company was informed that it was the subject of an
investigation by U.S. government agencies of its compliance with certain
government procurement policies and practices. No allegations have been
made by the government agencies. Based upon government procurement
regulations, under certain circumstances a contractor violating or not
complying with procurement regulations can be subject to legal or
administrative proceedings, including fines and penalties, as well as be
suspended or debarred from contracting with the government. The
company's policy has been and continues to be to conduct its activities
in compliance with all applicable rules and regulations.
The company is subject to other legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management,
the results of these other legal proceedings and claims will not have a
material effect on the company's consolidated financial position and
results of operations.
C. Segment Information
The following is a summary of business segments information for the three
months ended September 30, 1994 and 1993, respectively. All data are
shown net of intersegment transactions.
Dollars in thousands Three Months Ended
__________________________________________________________________________
September 30 September 30
1994 1993
____________ ____________
Revenue:
Internetworking $ 23,657 $ 20,122
Data analysis software 8,053 8,548
Collaborative systems and acoustic technologies 20,033 21,260
____________ ____________
$ 51,743 $ 49,930
============ ============
Operating income (loss):
Internetworking $ (697) $ (1,743)
Data analysis software (381) 359
Collaborative systems and acoustic technologies (147) 179
Unallocated corporate costs (267) (319)
____________ _____________
$ (1,492) $ (1,524)
============ =============
<PAGE>
BOLT BERANEK AND NEWMAN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
D. BARRNET Acquisition
On August 19, 1994, BBN Internet Services Corporation acquired, from Stanford
University, the Bay Area Regional Research Network ("BARRNET"), a leading
provider of Internet services in the San Francisco Bay Area, for
approximately $6.5 million consisting principally of $2.0 million of cash,
270,270 shares of BBN's common stock and 200,000 shares of BBN Internet
Services Corporation's common stock. The common stocks issued were valued
at their fair value which reflects a discount attributable to their
restricted nature. The transaction was accounted for using the purchase
method of accounting. Accordingly, the acquired assets and liabilities
were recorded at their estimated fair values on the date of the
acquisition. The aggregate cost in excess of net assets acquired of
approximately $4.5 million is being amortized over ten years. <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary
_______
For the three months ended September 30, 1994, the company reported a
loss of $1.8 million, or $.11 per share, on revenue of $51.7 million,
compared to a loss of $1.9 million, or $.12 per share, on revenue of $49.9
million for the same period a year ago.
The current period losses reflect investments in new products and
services, including continuing development expenditures and increased
spending on sales and marketing. The higher revenue reflects increases at
LightStream Corporation and BBN Internet Services Corporation, which were
partially offset by a decline in the company's defense-related activities.
The company intends to increase its investment in its Internet services
and data analysis and visualization software activities. The company
anticipates these increased investments will delay its return to
profitability.
Revenue
_______
Revenue increased $1.8 million in the first quarter of FY1995 compared
to the comparable FY1994 period reflecting increases at both LightStream
Corporation and BBN Internet Services Corporation. These increases were
partially offset by declines in the company's defense-related activities.
Services revenue from LightStream Corporation included up-front technology
license and initial development fees from previously announced strategic
partnering agreements.
The company, like other companies doing business with the Department of
Defense, has been adversely affected by reduced defense spending and
expects this general decline and attendant increased competition within the
defense industry to continue over the next several years. Uncertainty
continues to exist on the size and scope of reductions in future defense
budgets and their impact on the company's defense-related business.
Further, there is the possibility that funding limitations could result in
a reduction, delay, or cancellation of existing or emerging programs.
These factors have reduced the company's U.S. government revenue and
operating margins in recent fiscal years, and this trend is expected to
continue at least through FY1995, particularly in the defense
communications systems and acoustic and sensor systems areas.
In FY1991, the Defense Information Systems Agency awarded the company a
one-year contract in support of the Defense Data Network, with up to four
one-year optional extensions. In September 1994, the company completed the
third option year of the contract which was valued at approximately $20
million. In October 1994, the company was awarded the fourth and last
option year of the contract, valued at approximately $15 million, which
will continue these activities through October 1995. There can be no
assurance that this activity will continue beyond October 1995.
Approximately $5 million and $6 million of revenue has been recorded under
the contract in the first quarters of FY1995 and FY1994, respectively. <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The company conducts its commercial businesses in environments
characterized by intense competition, shortened product cycles and rapid
technological change, which require significant research and development
expenditures to develop new products which address emerging market
requirements and to improve its existing products. The company's
traditional commercial businesses, consisting principally of RS/Series(TM)
data analysis and visualization software products and X.25 network
systems, continue to experience substantially lower revenue. In recent
years, the company has been investing heavily in the development of
products, primarily the LightStream(TM) Asynchronous Transfer Mode ("ATM")
switch and the T/10(TM) Integrated Access Device in the networking area and
BBN/Cornerstone(TM) data analysis and visualization software. During the
first quarter of FY1995, revenue from the company's BBN/Cornerstone and
T/10 products was not significant.
In October 1993, LightStream Corporation released the LightStream 2010
ATM switch as its initial product offering. To date, sales of the
LightStream 2010 ATM switch have not been financially significant. In
September 1994, LightStream Corporation began initial shipments of the
LightStream 2020 ATM switch which is expected to be generally available in the
fall of 1994.
The emerging market for ATM products is very competitive, particularly
from companies with marketing, distribution, and resources significantly
greater than those available to LightStream Corporation. Recently there
have been a number of announcements of strategic alliances relating to ATM
products, including alliances involving major networking companies,
which the company anticipates will result in increased competition for
LightStream Corporation. Currently, LightStream Corporation has only
modest direct sales capabilities and is actively pursuing distribution
arrangements as well as increasing its direct sales effort.
The ATM switch market currently consists of three segments, comprised of
the carrier central office ATM switch segment, the ATM enterprise switch
segment, and the LAN workstation ATM switch segment. While the overall
market for ATM communications products is expected to grow substantially
over the next several years, the ATM enterprise switch market segment,
which is the market segment addressed by the LightStream 2020 ATM switch,
is developing at a slower rate than the other two market segments. The market
for LightStream Corporation's ATM products is characterized by long sales
cycles including equipment trials.
The success of LightStream Corporation's products, including the
LightStream 2020 ATM switch, will depend upon the development of strategic
alliances and distribution channels, the timely development of the ATM
market and in particular the ATM enterprise switch market segment, the
technological superiority and interoperability of LightStream Corporation's
products, and their cost competitiveness. In the event these conditions are
not achieved on a timely basis, the company's financial results will be
adversely impacted. <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The T/10 Integrated Access Device, which the company has been developing
and marketing for several years, is designed to help customers consolidate
traffic over a single enterprise network. Development delays, and limited
functionality and distribution channels, have unfavorably affected the
company's ability to generate sales, and revenue from the T/10 during the
current quarter has not been financially significant. The T/10 effort is
now being primarily focused on a few reseller opportunities, and the future
success of the T/10 is highly dependent on these opportunities.
The company's data analysis software products business has been affected
by the growth of distributed processing and the associated use of personal
computers, workstations, and other desktop computers. Many of the
company's data analysis software products, primarily the RS/Series
software, currently operate on minicomputer systems. As demand for
minicomputer-based software continues to decline, the company is
experiencing substantially lower RS/Series software revenue and downward
pressure on prices.
During the fourth quarter of FY1993, Software Products Corporation
introduced its BBN/Cornerstone data analysis and visualization
software specifically designed for use on desktop computers in a
client/server environment. The initial release of BBN/Cornerstone software
operates on Unix-based workstations, utilizing a number of established
graphical user interfaces. Planned subsequent releases will operate on
personal computers. In the current quarter, sales of BBN/Cornerstone were
not financially significant. Software Products Corpooration also develops
and markets health industry applications software.
The company has recently begun to more tightly integrate BBN/Cornerstone
software with its RS/Series products to provide platform migration
and ease of use for the existing RS/Series customer base, and to provide
greater capabilities and flexibility in client/server computing environments.
As part of this effort, the company is also investing in additional
engineering and sales personnel.
The company believes that the future success of its data analysis and
visualization software will primarily depend upon the timely integration
of its BBN/Cornerstone and RS/Series software and the release of software
applications that permit operation on platforms, including personal
computers, which are not currently supported.
The company is significantly increasing its investment in the emerging
market for Internet services. Such investments, which may include
acquisitions, could adversely affect the company's financial results for
FY1995. The company's strategy is to build upon its base of nearly 600
organizational customers to become a major supplier of Internet services.
The market for Internet services is rapidly expanding, and there are
considerable uncertainties as to how the market will develop. The
company's success in the Internet services market will depend heavily upon
its ability to timely establish geographic coverage and related support
capabilities, provide high quality managed Internet connectivity and
value-added services, and to attract additional experienced personnel.<PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Cost of Sales
_____________
Cost of services and products as a percentage of revenue was 60% in
FY1995 compared to 66% in FY1994. The decrease in the cost of sales
percentage is principally due to the technology license and initial
development fees from strategic partnering agreements and lower costs
associated with fixed-price government contracts.
Research and Development Expenses
_________________________________
The majority of the company's internally funded research and development
spending is currently directed principally toward the LightStream ATM
products, BBN/Cornerstone and the T/10. Research and development expenses
in the first quarter of FY1995 were $6.0 million compared to $5.3 million
in the comparable period in FY1994. The increase in FY1995 relates
primarily to several projects at the Systems and Technologies Division.
The company's continued significant investment in research and development
is dependent upon the timely market acceptance of its new products.
Selling, General and Administrative Expenses
____________________________________________
Selling, general and administrative expenses increased $2.9 million in
FY1995 from FY1994 reflecting the investment the company is making
primarily in the sales and marketing of its new products and services as
well as expenditures on commercial business opportunities. The company
expects that this trend will continue through FY1995.
Liquidity and Capital Resources
_______________________________
As of September 30, 1994, the company's cash and temporary investments,
which consisted primarily of money market funds and short term U.S.
government securities, were $57.9 million, a decrease of $9.2 million from
June 30, 1994. The decrease is primarily attributable to higher working
capital requirements, mainly related to accounts receivable and the BARRNET
acquisition.
The company's continuing ability to increase investment in its commercial
business units is dependent upon revenue growth and adequate margins.
Management Changes
__________________
In October 1994, Julie Donahue joined BBN Hark Systems Corporation as
its chief executive officer and on November 15 1994, Paul Gudonis will join
BBN Internet Services Corporation as its chief executive officer. The
company continues to recruit for a number of marketing and sales positions
throughout the company. <PAGE>
<PAGE>
PART II. OTHER INFORMATION
BOLT BERANEK AND NEWMAN INC.
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of shareholders of the company held on
November 3, 1994, the shareholders authorized the following
proposals by the vote as noted:
Number of Shares Voted
______________________________
Proposal For Withheld
________ ___________ _____________
Election as Director of
John M. Albertine 14,700,564 495,574
Election as Director of
Roger D. Wellington 14,682,697 513,441
Abstain or
For Against Not Voting
_________ ________ __________
To amend the company's 1986 Stock Incentive
Plan relative to increase in shares, extension
of period of awards, and changes to conform
to the tax code 7,207,141 2,245,486 5,743,511
To amend the company's 1986 Stock Incentive
Plan relative to non-employee director
options 7,515,355 1,896,756 5,784,027
Ratification of Coopers & Lybrand
as auditors 15,060,834 73,510 61,794
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11.1 Computation of Net Loss Per Share
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOLT BERANEK AND NEWMAN INC.
By Ralph A. Goldwasser
_________________________
Ralph A. Goldwasser
Senior Vice President and Chief Financial Officer
Date: November 14, 1994 <PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
LIST OF EXHIBITS
11.1 Computation of Net Loss Per Share (page 14)
27.1 Financial Data Schedule (page 15) <PAGE>
<PAGE>
<PAGE>
<PAGE>
BOLT BERANEK AND NEWMAN INC.
EXHIBIT 11.1
COMPUTATION OF NET LOSS PER SHARE
(000's except per-share data)
Three Months Ended
____________________________________________
September 30, 1994 September 30, 1993
___________________ ___________________
Fully Fully
Primary Diluted Primary Diluted
________ _______ _______ _______
Weighted average
shares outstanding 16,614 16,614 15,978 15,978
Incremental shares from use
of treasury stock method
for stock options (a) (a) (a) (a)
________ ________ ________ ________
Shares used in per-share
calculations 16,614 16,614 15,978 15,978
======== ======== ======== ========
Net loss $(1,808) $(1,808) $(1,947) $(1,947)
======== ======== ======== ========
Net loss per share $ (.11) $ (.11) $ (.12) $ (.12)
======== ======== ======== ========
(a) Incremental shares were not used as their effect would be antidilutive. <PAGE>
<PAGE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF OPERATIONS AND BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000013021
<NAME> BOLT BERANEK AND NEWMAN, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<CASH> 57,923
<SECURITIES> 0
<RECEIVABLES> 57,839
<ALLOWANCES> 8,786
<INVENTORY> 413
<CURRENT-ASSETS> 111,726
<PP&E> 109,665
<DEPRECIATION> 88,780
<TOTAL-ASSETS> 140,478
<CURRENT-LIABILITIES> 56,679
<BONDS> 73,510
<COMMON> 21,298
0
0
<OTHER-SE> (12,933)
<TOTAL-LIABILITY-AND-EQUITY> 140,478
<SALES> 51,743
<TOTAL-REVENUES> 51,743
<CGS> 31,245
<TOTAL-COSTS> 31,245
<OTHER-EXPENSES> 21,990
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,126
<INCOME-PRETAX> (1,708)
<INCOME-TAX> 100
<INCOME-CONTINUING> (1,808)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,808)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> 0
<PAGE>
</TABLE>
