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 June 25, 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 1-7352
Data General Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2436397
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Computer Drive, Westboro, Massachusetts 01580
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508)898-5000
Former name, former address and former fiscal year if changed since
last report: Not Applicable
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 (or for such shor-
ter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of each of the issuer's classes of
common stock, as of July 22, 1994:
Common Stock, par value $.01 35,997,278
(Title of each class) (Number of shares)
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements of Data General
Corporation (the "company"), consisting of condensed consolidated
statements of operations for the three and nine months ended June 25,
1994 and June 26, 1993, condensed consolidated balance sheets as of
June 25, 1994 and September 25, 1993, condensed consolidated
statements of cash flows for the nine months ended June 25, 1994 and
June 26, 1993, and related notes to condensed consolidated financial
statements, are incorporated herein by reference to pages 3 through 6
of the company's Third Quarter 1994 Interim Report. The Third Quarter
1994 Interim Report has been included as Exhibit 20 to copies of this
Report filed with the Securities and Exchange Commission. Copies of
the Interim Report may be obtained by written request to the company,
Attn: Investor Relations, MS A-235, 4400 Computer Drive, Westboro, MA
01580.
During the first quarter of fiscal 1994, the company adopted
Statement of Financial Accounting Standards ("SFAS") 109, "Accounting
for Income Taxes". See Item 1. "Financial Statements" to the
company's Form 10-Q for the quarter ended December 25, 1993.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Financial Condition
Cash and temporary cash investments as of June 25, 1994 were
$112.4 million, a decrease of $7.2 million from the end of fiscal
1993. In addition, as of June 25, 1994, the company held $48.7
million in marketable securities, a net decrease of $23.7 million
during the current nine-month period. These securities, which
supplemented cash and temporary cash investments, are primarily
invested in United States Treasury bills and notes. Net cash provided
from operations for the nine months ended June 25, 1994 totaled $44.6
million, expenditures for property, plant, and equipment were $71.3
million, capitalized software development costs totaled $13.1 million,
and cash provided from stock plans totaled $4.1 million. Net proceeds
from the sale of non-operating assets totaled $6.8 million. These
non-operating assets were comprised of vacant real estate and
investments in an unaffiliated entity. The company also made a $2.0
million investment in an unaffiliated entity during the current
nine-month period. The company repaid $1.2 million of long-term debt
in the current nine-month period. The effect of foreign currency rate
fluctuations on cash and temporary cash investments was an increase of
$1.3 million.
Net receivables decreased $26.1 million from fiscal year-end
1993, primarily as a result of increased collection efforts worldwide
and a decrease in revenues in the European marketplace which generally
has a longer collection cycle than the domestic operation. In
addition, due to a change in the general composition of the
outstanding receivables portfolio, bad debt reserve requirements have
increased 12% over fiscal year-end 1993 levels. Total inventories at
June 25, 1994 increased $16.4 million from year-end 1993 levels,
primarily due to a shift in the timing of inventory procurements.
Accounts payable increased $7.8 million from fiscal year-end 1993,
primarily due to the increase in overall inventory levels.
Fixed asset dispositions for the first nine-month period totaled
$12.8 million, primarily as a result of sales of demonstration
equipment to end-users and approximately a $4.0 million writedown of
net book value of fixed assets to their realizable value as part of
the consolidation of certain activities in the European marketplace.
Management expects that sales of demonstration equipment will continue
in the future. The writedown as a result of the consolidation
activities is included in the restructuring charge recorded during the
first nine-month period of fiscal 1994. Approximately 20% of the
company's net fixed assets relate to the company's proprietary ECLIPSE
MV ("MV") family of products and are primarily comprised of spare
parts required to support the MV service base of over 19,000 installed
units worldwide as well as those MVs which are serviced by third
parties.
Other current liabilities increased $16.9 million from fiscal
year-end 1993 due primarily to increased personnel and commission
related accruals and the $35 million restructure charge taken in the
current nine-month period, offset by payments made relating to the
current as well as previously recorded restructuring accruals. Other
liabilities increased $4.3 million from fiscal year-end 1993,
primarily as a result of normal accruals recorded for the company's
pension plans and an increase in deferred service revenues.
Effective December 30, 1993, the company replaced a $70 million
revolving credit facility with an unsecured $40 million revolving
credit facility and an unsecured $30 million letter of credit facility
with the same group of banks as the original credit facility. The
revolving credit facility has a duration of one year; the letter of
credit facility has a duration of 364 days and provides for automatic
renewal on a daily basis. The facilities include certain covenants,
including restrictions on the sale or pledge of certain assets, the
declaration of dividends and the incurrence of other debt. The
interest rate for borrowings under each facility is 1.5% per annum
above the London Interbank Offered Rate (LIBOR). Commitment fees paid
on available funds are not material and there were $11.6 million of
letters of credit secured by the letter of credit facility at June 25,
1994. There were no borrowings under the revolving credit facility as
of June 25, 1994.
Results of Operations
Total revenues for the quarter ended June 25, 1994 increased 12%
from the same quarter of the previous year. Domestic revenues,
excluding U.S. direct export sales, were $161.6 million for the cur-
rent quarter, a 19% increase from $135.4 million for the comparable
period of fiscal 1993. Domestic revenues were 57% of total revenues
in the current quarter, compared with 54% of total revenues for the
third quarter of fiscal 1993. European revenues were $77.6 million
for the current quarter, a 7% decrease from $83.7 million for the
comparable period in fiscal 1993. European revenues represented 27%
of total revenues in the current quarter and 33% of total revenues in
the prior-year period. Other international revenues were $44.7
million for the current quarter, a 34% increase from $33.3 million for
the comparable period in fiscal 1993. Other international revenues
represented 16% and 13% of total revenues in the current quarter and
prior-year period, respectively. The increase in total revenues for
the current quarter was primarily due to the increase in demand for
the company's AViiON products and CLARiiON products sold for use with
other vendors' hardware (Open CLARiiON), along with an increase in
demand for personal computers and related equipment. The increase in
these product sales offset the continuing decrease in sales of
proprietary MV products. These increases were partially offset by a
decrease resulting from the strengthening of the U.S. dollar in
relation to foreign currencies.
Domestic revenues of $470.5 million for the nine months ended
June 25, 1994 increased 12% from $421.9 million for the first
nine-month period of fiscal 1993. Domestic revenues were 57% of
total revenues in the current nine-month period and 53% of the total
revenues for the comparable prior-year period. European revenues
were $227.2 million for the first nine-month period of the current
year, compared with $261.0 million for the first nine-month period of
fiscal 1993. European revenues represented 27% of total revenues in
the current nine-month period and 33% of total revenues in the
prior-year period. Other international revenues were $130.2 million
for the current nine-month period, compared with $116.5 million for
the comparable period in fiscal 1993. Other international revenues
represented 16% of total revenues in the current nine-month period and
15% of total revenues in the prior-year period.
Product revenues for the current quarter increased 21% from the
comparable prior-year period. Revenues from the company's AViiON
family of open systems products grew 24% during the current quarter
when compared with the third quarter of fiscal 1993. The company's
new line of Open CLARiiON mass storage systems produced significant
revenue growth compared to the third quarter of fiscal 1993 and
comprised 9% of total product revenues in the current quarter. The
company is making a conscious effort to expand distribution channels
for these products. Proprietary MV system revenues declined 36% from
the same period in the prior year. Revenues from personal computers
and other equipment increased 28% over the same quarter of the prior
year. It is anticipated that the revenues generated from the MV
product line will continue to be negatively impacted by the industry's
transition to open systems technology.
Domestic product revenues, which were $103.3 million for the
current quarter, increased 32% from $78.2 million for the comparable
period in fiscal 1993. Domestic product revenues were 56% of total
product revenues in the current quarter and 51% of total product
revenues in the comparable prior-year period. The increase in
domestic product revenues was due to the increase in demand for the
company's newest generation of AViiON products and increases in both
personal computer and Open CLARiiON equipment sales. European product
revenues were $47.6 million for the current quarter, a 7% decrease
from $51.3 million for the comparable period in fiscal 1993. European
product revenues represented 26% of total product revenues in the
current quarter and 34% in the comparable prior-year period. Other
international product revenues were $33.6 million for the current
quarter, a 50% increase from $22.4 million for the comparable period
in fiscal 1993. Other international product revenues represented 18%
of total product revenues in the current quarter and 15% in the
comparable prior-year period. The decrease in European product
revenues was primarily due to the strengthening of the U.S. dollar in
relation to European currencies and the impact of transitioning from
the company's traditional proprietary product line to open systems
technology. The increase in other international product revenues was
primarily in the Asia and Pacific Rim marketplaces.
For the current nine-month period, domestic product revenues were
$298.4 million compared with $251.6 million for the comparable
nine-month period of fiscal 1993. Domestic product revenues were 56%
of total product revenues in the current nine-month period and 51% of
total product revenues in the comparable prior-year period. European
product revenues were $137.4 million for the current nine-month period
compared with $160.3 million for the first nine-month period of fiscal
1993. European product revenues were 26% of total product revenues in
the current nine-month period and 32% of total product revenues in the
comparable prior-year period. Other international product revenues
were $96.7 million for the current nine-month period compared with
$83.0 million for the first nine-month period of fiscal 1993. Other
international product revenues were 18% of total product revenues in
the current nine-month period and 17% of total product revenues in the
comparable prior-year period. The decrease in European product
revenues was primarily due to generally weak economic conditions and
the impact of transitioning from the company's traditional proprietary
product line to open systems technology and the impact of the
strengthening of the U.S. dollar in relation to European currencies.
Open CLARiiON revenues have contributed the largest increase to
domestic product revenues and have accounted for 10% of these revenues
in the current nine-month period. AViiON revenue increases continue
to offset decreases from proprietary systems in all geographic
segments.
Service revenues for the current quarter decreased slightly from
the comparable period of fiscal 1993. Domestic service revenues for
the current quarter were $58.3 million, a 2% increase from $57.2
million for the third quarter of fiscal 1993. European service
revenues for the current quarter were $30.0 million, a 7% decrease
from $32.4 million for the prior-year period. Other international
service revenues for the current quarter and prior-year period were
$11.0 million and $10.9 million, respectively.
For the current nine-month period, domestic service revenues were
$172.1 million, relatively unchanged from $170.3 million in the first
nine-month period of fiscal 1993. European service revenues for the
current nine-month period were $89.8 million, an 11% decrease from
$100.7 million reported for the first nine-month period of fiscal
1993. Other international service revenues were $33.5 million for the
current nine-month period, relatively unchanged from the $33.6 million
reported for the first nine-month period of fiscal 1993. A decrease
in hardware maintenance service revenues has been partially offset by
increased revenues from systems integration and consulting activities,
as the company positions itself as a full service provider. The
decrease in European service revenues resulted primarily from the
strengthening of the U.S. dollar in relation to European currencies in
the current nine-month period when compared to the same prior-year
period.
Cost of product revenues were 68% and 67% of product revenues,
respectively, for the current quarter and current nine month period
ended June 25, 1994, respectively, compared with 64% and 61% for the
same periods of the prior year. Competitive pricing pressures
worldwide and the continued transition to the lower margin AViiON
family of open systems and Open CLARiiON family of mass storage
systems more than offset the benefits resulting from the company's
continuing cost reduction and restructuring programs. Cost of service
revenues for the current quarter and first nine-month period
represented 64% and 62% of service revenues, respectively, compared
with 60% and 58% of service revenues, respectively, for the same
periods of fiscal 1993. The increase in cost of service revenues as a
percentage of total service revenues was primarily a result of the
increase in revenues from systems integration activities which yield a
lower margin than traditional service contract revenues.
Research and development expenses for the current quarter de-
creased 8% from the third quarter of fiscal 1993 to $22.1 million, and
represented 8% of total revenues in the current quarter. For the
current nine-month period, research and development expenses were also
8% of total revenues, decreasing 10% to $68.4 million from the
comparable prior-year period. The decrease results primarily from the
company continuing to focus its research and development efforts on
its core business technology, multi-user computer systems, servers,
and mass storage devices. Also, a change in product mix to open
systems architecture has increased the use of industry-standard
components purchased from third parties, which has reduced spending
for research and development in hardware. In addition to the
reduction of research and development expenses, the company has also
seen a reduction in capitalized software development costs of $3.5
million in the current nine-month period when compared to the same
period in the prior year.
Selling, general, and administrative expenses for the current
quarter decreased 2% from the same prior year period and remained
relatively flat for the first nine-month period when compared to the
prior-year period. Benefits resulting from the continuing cost
reduction and restructuring programs, were for the most part offset by
the increase in commissions resulting from the 21% increase in product
revenues in the current quarter when compared to the same prior-year
period. Selling, general, and administrative expenses represented 29%
and 31%, respectively, of total revenues in the current quarter and
nine-month period and 34% and 32% of total revenues, respectively, for
the comparable prior-year periods.
While the company has made significant progress towards becoming
a supplier of open systems products and services, the company
continues to have a cost structure that is out of line with an open
systems business model. In a prior quarter, the company had
identified additional cost reduction steps which include the
continuing realignment of the company's worldwide sales and service
organizations. As a result, income from operations for the current
nine-month period includes a $35 million charge for estimated costs
associated with a worldwide workforce reduction, of which
approximately $4.0 million relates to the writedown of net book value
of fixed assets associated with consolidating certain activities in
the European marketplace. The provision relating to the workforce
reduction is primarily for salary and benefit continuation and
outplacement service. At June 25, 1994 the number of employees
totaled 5,955, a reduction of 755 employees from June 26, 1993.
There have been no material changes in the company's previously
announced restructuring actions or the estimates accrued at June 25,
1994.
Interest income for the current quarter and the first nine-month
period decreased 26% and 32%, respectively, from the comparable
periods of fiscal 1993, primarily due to an overall decrease in the
levels of invested funds. Interest expense for the current quarter
was relatively flat while the first nine-month period decreased 4%
from the comparable periods of fiscal 1993 primarily due to the
retirement of two separate industrial revenue bonds. Other income of
$2.4 million in the nine-month period ended June 25, 1994 resulted
from the sale of an investment held by the company in an unaffiliated
entity.
The income tax provision for the current quarter and first
nine-month period was $0.5 million and $1.6 million respectively,
compared with $1.2 million and $4.4 million for the same prior-year
periods. The provisions resulted primarily from foreign and state
taxes.
In November 1992, the Financial Accounting Standards Board
("FASB") issued SFAS 112, "Employers' Accounting for Post-Employment
Benefits". In May 1993, the FASB issued SFAS 114 and 115, "Accounting
by Creditors for Impairment of a Loan" and "Accounting for Certain
Investments in Debt and Equity Securities", respectively. SFAS 112
and SFAS 115 are effective for fiscal years beginning after December
15, 1993. SFAS 114 is effective for fiscal years commencing after
December 15, 1994. The company will implement these statements as
required. The future adoption of SFAS 112, SFAS 114 and SFAS 115 are
not expected to have a material effect on the company's consolidated
financial position or results of operations.
The revenue improvement during the current quarter reinforces
management's belief in the company's product and marketing strategy.
Management expects revenues from the MV proprietary product line to
continue to contribute only a small percentage of the company's
overall revenues in future quarters. In light of the significant
change in industry trends from proprietary to open systems technology
and general economic conditions in the European marketplace, the
company remains cautious for the remainder of fiscal 1994.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
In a previously reported action, in the U.S. District Court for
the District of Massachusetts, a jury, on January 28, 1993, awarded
the company $52.3 million in damages and related interest from Grumman
Systems Support Corporation ("Grumman") for infringing the company's
copyrights and misappropriating trade secrets relating to the
company's proprietary MV/ADEX diagnostic software. The award includes
approximately $15.9 million in pre-judgment interest. On May 13,
1993, Grumman's motion for judgment notwithstanding the verdict and/or
for a new trial was rejected. Grumman has appealed and on December 8,
1993, the appeal was argued to the United States First Circuit Court
of Appeals. The appeal remains undecided. The company will not
recognize the award in its financial statements until it is received
or assured. The company has deferred legal costs incurred subsequent
to the jury verdict in order to match these costs with the award when
recognized.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11. Computation of primary and fully diluted earnings per share.
20. Third Quarter 1994 Interim Report of Data General Corpora-
tion.
(b) No reports on Form 8-K were filed during the current quarter
ended June 25, 1994.
SIGNATURE
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.
DATA GENERAL CORPORATION
(Registrant)
/s/ Arthur W. DeMelle
Arthur W. DeMelle
Vice President
Chief Financial Officer
Chief Accounting Officer
Dated: August 3, 1994
EXHIBITS
Index to Exhibits.
11. Computation of primary and fully diluted earnings per share.
20. Third Quarter 1994 Interim Report of Data General Corporation.
EXHIBIT 11
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands except per share amounts)
Quarter Ended Nine months Ended
June 25, June 26, June 25, June 26,
1994 1993 1994 1993
Primary earnings per share:
Net loss. . . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240)
Weighted average shares outstanding 35,915 34,774 35,632 34,255
Incremental shares from use of treasury
stock method for stock options. . -- -- -- 566
Common and common equivalent
shares, where applicable. . . . . 35,915 34,774 35,632 34,821
Net loss per share. . . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67)
Earnings per share assuming full
dilution:(a)
Net loss . . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240)
Weighted average shares outstanding 35,915 34,774 35,632 34,255
Incremental shares from use of treasury
stock method for stock options. . -- -- -- 566
Common and common equivalent
shares assuming full dilution . . 35,915 34,774 35,632 34,821
Net loss per share. . . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67)
(a) For the quarters and nine-month periods ended June 25, 1994 and June 26,
1993, the assumed conversion of convertible debentures, giving effect to the
incremental shares and the adjustment to reduce interest expense, was anti-
dilutive and has therefore been excluded from the computation.
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES:
Data General Corporation reported a net loss of $12.4 million, or $.34 per
share, for its third quarter of fiscal 1994, which ended June 25th, 1994. For
the third quarter last year, the company reported a net loss of $16.4 million,
or $.47 per share.
For the second consecutive quarter, total revenues increased when compared
to the comparable quarter of the prior year. The third quarter revenues were
$283.8 million, an increase of 12.4 percent over last year's third quarter,
when the company reported revenues of $252.4 million.
The revenue growth is most encouraging, particularly as it came during a
quarter that is traditionally weak for us. This reinforces the belief that the
strategy of focusing on the high-end commercial enterprise marketplace is on
target. The principle area of growth continues to be our AViiON product line,
primarily at the high-end. AViiON revenues were up 24 percent in the quarter
over the third quarter of last year. In addition, we saw solid revenue
contribution from our Open CLARiiON storage line.
Revenues from sales of our proprietary systems represented just 12 percent
of product revenues during the quarter. In last year's third quarter,
proprietary systems were 22 percent of product revenues.
Going forward, the key to returning to profitability is to continue to grow
revenues while insuring that our costs are in line with an open systems
business model.
Since 1989, we have established an installed base of more than 25,000 AViiON
systems, with a total value of over $1.25 billion. The AViiON line's
capabilities were highlighted again with the announcement in July that our
high-end AV 9500 servers had produced the fastest Transaction Processing
Council Benchmark-C (TPC-C) results ever achieved on a product that is
currently shipping. In addition, results from the tests showed that the AV
9500 Plus 8-processor model offers the best Informix-based TPC-C price/
performance.
During the quarter, we strengthened our AViiON line with additional
applications software from key enterprise software vendors, including Oracle
and Sybase. Oracle's new Oracle 7 Release 7.1 parallel database server
software and several components of Sybase's System 10 Enterprise Client/Server
software family are now available on the AViiON line.
The CLARiiON Business Unit also announced several new reseller agreements
during the quarter, including a strategic partnership with Access Graphics, one
of Sun Microsystems' leading distributors. In addition, in July Data General
and Invincible Technologies Corporation (ITC) announced that ITC's Ultimate-5
RAID disk array, which is based on CLARiiON, is now available on both VMS and
UNIX-based Digital Equipment Alpha platforms.
For the first nine months of fiscal 1994, Data General reported a net loss
of $81.4 million, or $2.29 per share, including a restructuring charge of $35
million recorded in the second quarter, primarily for costs associated with a
workforce reduction. For the same period last year, the company reported a net
loss of $23.2 million, or $.67 per share.
Revenues for the first three quarters of 1994 totaled $827.9 million,
compared to $799.5 million for the first nine months of fiscal 1993.
Data General's financial position remains strong with cash and marketable
securities of $161.1 million at the end of the third quarter. As we complete
the transition to an open systems company, we will continue to closely manage
our balance sheet. While we continue to be cautious for the short-term, we
believe that our ability to grow revenues with our industry-leading products,
together with aggressive management of our cost structure, should result in
meeting our objective of returning to profitability.
Respectfully submitted,
(signature)
Ronald L. Skates
President and Chief Executive Officer
August 3, 1994
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended
in thousands, except June 25, June 26, June 25, June 26,
net loss per share 1994 1993 1994 1993
Revenues:
Product . . . . . . . . . . . . $184,497 $151,916 $532,528 $494,906
Service . . . . . . . . . . . . 99,279 100,472 295,401 304,580
Total revenues. . . . . . . . 283,776 252,388 827,929 799,486
Costs and expenses:
Cost of product revenues. . . . 124,637 96,656 359,054 302,635
Cost of service revenues. . . . 63,150 60,018 183,676 177,752
Research and development. . . . 22,121 24,126 68,357 75,979
Selling, general, and
administrative . . . . . . . . 83,713 85,303 257,773 257,376
Restructure charge. . . . . . . -- -- 35,000 --
Total costs and expenses. . . 293,621 266,103 903,860 813,742
Loss from operations. . . . . . . (9,845) (13,715) (75,931) (14,256)
Interest income . . . . . . . . . 1,531 2,070 4,302 6,368
Interest expense. . . . . . . . . 3,546 3,573 10,564 10,952
Other income. . . . . . . . . . . -- -- 2,353 --
Loss before income taxes. . . . . (11,860) (15,218) (79,840) (18,840)
Income tax provision. . . . . . . 500 1,200 1,600 4,400
Net loss. . . . . . . . . . . . . $(12,360) $(16,418) $(81,440) $(23,240)
Net loss per share. . . . . . . . $(0.34) $(0.47) $(2.29) $(0.67)
Weighted average shares outstand-
ing, including common stock
equivalents where applicable. . 35,915 34,774 35,632 34,821
No cash dividends have been declared or paid since inception.
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of these financial statements.
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 25, Sept. 25,
dollars in thousands 1994 1993
Assets
Current assets:
Cash and temporary cash investments . . . . . . . . . . $112,406 $119,560
Marketable securities . . . . . . . . . . . . . . . . . 48,679 72,395
Receivables, net. . . . . . . . . . . . . . . . . . . . 259,395 285,481
Inventories . . . . . . . . . . . . . . . . . . . . . . 118,262 101,827
Other current assets. . . . . . . . . . . . . . . . . . 36,120 32,397
Total current assets. . . . . . . . . . . . . . . . . 574,862 611,660
Property, plant, and equipment, net . . . . . . . . . . . 179,349 177,551
Other assets. . . . . . . . . . . . . . . . . . . . . . . 70,937 77,118
$825,148 $866,329
Liabilities and stockholders' equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . . $ 2,377 $ 2,267
Accounts payable. . . . . . . . . . . . . . . . . . . . 93,366 85,571
Other current liabilities . . . . . . . . . . . . . . . 231,998 215,070
Total current liabilities . . . . . . . . . . . . . . 327,741 302,908
Long-term debt. . . . . . . . . . . . . . . . . . . . . . 158,359 158,352
Other liabilities . . . . . . . . . . . . . . . . . . . . 32,275 27,992
Stockholders' equity:
Common stock:
Outstanding -- 35,976,000 shares at June 25, 1994
and 35,267,000 shares at Sept. 25, 1993 (net of
deferred compensation of $10,977 at June 25, 1994
and $11,619 at Sept. 25, 1993). . . . . . . . . . . . 430,604 422,589
Accumulated deficit . . . . . . . . . . . . . . . . . . (110,670) (29,230)
Cumulative translation adjustment . . . . . . . . . . . (13,161) (16,282)
Total stockholders' equity. . . . . . . . . . . . . . 306,773 377,077
$825,148 $866,329
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 25, June 26,
in thousands 1994 1993
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . .$(81,440) $(23,240)
Adjustments to reconcile net loss to
net cash provided from (used by) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . 57,298 60,672
Amortization of capitalized software development costs 15,006 12,826
Other non-cash items, net . . . . . . . . . . . . . . 23,744 27,255
Change in operating assets and liabilities (net of
effect from sale of facility in fiscal 1993 and sale
of land in fiscal 1994). . . . . . . . . . . . . . . 30,004 (12,489)
Net cash provided from operating activities . . . . . 44,612 65,024
Cash flows from investing activities:
Expenditures for property, plant, and equipment . . . . (71,340) (72,195)
Net proceeds from (purchases of) marketable securities. 23,716 (15,788)
Capitalized software development costs. . . . . . . . . (13,075) (16,563)
Net proceeds from (purchases of) non-operating assets . 4,839 1,883
Net cash used by investing activities . . . . . . . . . (55,860) (102,663)
Cash flows from financing activities:
Cash provided from stock plans. . . . . . . . . . . . . 4,063 6,636
Decrease in notes payable . . . . . . . . . . . . . . . -- (1,195)
Repayment of long-term debt . . . . . . . . . . . . . . (1,234) --
Net cash provided from financing activities . . . . . 2,829 5,441
Effect of foreign currency rate fluctuations
on cash and temporary cash investments. . . . . . . . . 1,265 (7,306)
Decrease in cash and temporary cash investments . . . . . (7,154) (39,504)
Cash and temporary cash investments - beginning of period 119,560 139,445
Cash and temporary cash investments - end of period . . .$112,406 $ 99,941
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . .$ 11,498 $ 11,505
Income taxes paid . . . . . . . . . . . . . . . . . . .$ 2,138 $ 2,279
Certain prior year amounts have been reclassified to conform to current year
presentation.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
DATA GENERAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Consolidated Balance Sheet Details
June 25, Sept. 25,
in thousands 1994 1993
Inventories:
Raw materials . . . . . . . . . . . . . . . . . . . . . $ 9,389 $ 6,665
Work in process . . . . . . . . . . . . . . . . . . . . 39,178 27,778
Finished systems. . . . . . . . . . . . . . . . . . . . 34,541 31,566
Field engineering parts and components. . . . . . . . . 35,154 35,818
$118,262 $101,827
Property, plant, and equipment:
Property, plant, and equipment. . . . . . . . . . . . . $673,454 $659,439
Accumulated depreciation. . . . . . . . . . . . . . . . (494,105) (481,888)
$179,349 $177,551
Note 2. Restructuring
Loss from operations for the nine months ended June 25, 1994,includes a $35
million provision for estimated expenses resulting from costs associated with
a worldwide workforce reduction and the writedown of net book value of fixed
assets resulting from the consolidation of certain activities in the European
marketplace. The provision relating to the workforce reduction is
primarily for salary and benefit continuation and outplacement service.
Note 3. Income Taxes
In the first quarter of fiscal 1994, the company adopted Statement of
Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes".
SFAS 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the company's financial statements or
tax returns. In estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of changes in the
tax law or rates. Previously, the company used the SFAS 96 asset and
liability approach that gave no recognition to future events other than the
recovery of assets and settlement of liabilities at their carrying amounts.
The implementation of SFAS 109 did not have a material effect on either the
company's consolidated financial position or results of operations. The
company has a valuation allowance which offsets, in all material respects,
gross deferred tax assets existing as of June 25, 1994.
Note 4. Litigation
In a previously reported action, in the U.S. District Court for the District
of Massachusetts, a jury, on January 28, 1993, awarded the company $52.3
million in damages and related interest from Grumman Systems Support
Corporation ("Grumman") for infringing the company's copyrights and
misappropriating trade secrets relating to the company's proprietary MV/ADEX
diagnostic software. The award includes approximately $15.9 million in
pre-judgment interest. On May 13, 1993, Grumman's motion for judgment
notwithstanding the verdict and/or for a new trial was rejected. Grumman has
appealed and on December 8, 1993, the appeal was argued to the United
States First Circuit Court of Appeals. The appeal remains undecided. The
company will not recognize the award in its financial statements until it is
received or assured. The company has deferred legal costs incurred subsequent
to the jury verdict in order to match these costs with the award when
recognized.
Note 5. Basis of Presentation
In the opinion of management, the accompanying unaudited condensed consol-
idated financial statements reflect all adjustments, consisting of normal re-
curring accruals, considered necessary for a fair presentation. The company's
accounting policies are described in the Notes to Consolidated Financial
Statements in the company's 1993 Annual Report. The results of operations for
the quarter ended June 25, 1994, are not necessarily indicative of the results
for the entire fiscal year.
