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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 March 25, 1995
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 shorter 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 registrant's classes of common
stock, as of April 21, 1995:
Common Stock, par value $.01 37,166,851
(Title of each class) (Number of shares)
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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 six months ended March 25, 1995 and March 26, 1994, condensed
consolidated balance sheets as of March 25, 1995 and September 24, 1994,
condensed consolidated statements of cash flows for six months ended March 25,
1995 and March 26, 1994, and related notes to condensed consolidated financial
statements, are incorporated herein by reference to pages 3 through 6 of the
company's Second Quarter 1995 Interim Report. The Second Quarter 1995 Interim
Report has been included as Exhibit 19 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
B-221, 4400 Computer Drive, Westboro, MA 01580.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
Cash and temporary cash investments as of March 25, 1995 were $110.6
million, a decrease of $31.9 million from the end of fiscal 1994. In addition,
the company holds $111.0 million in marketable securities, a net increase of
$63.1 million during the current six-month period. These securities, which
supplemented cash and temporary cash investments, are primarily invested in
United States Treasury bills and notes. The increase in marketable securities
is primarily due to funds received from a software copyright infringement
settlement received in the first quarter of the current fiscal year. Net cash
provided from operations for the six months ended March 25, 1995 totaled $90.3
million, expenditures for property, plant, and equipment were $48.2 million,
capitalized software development costs totaled $12.7 million, and cash provided
from stock plans totaled $3.7 million. The company made a $.6 million
investment in an unaffiliated entity and repaid $2.7 million of long-term debt
during the current six-month period. The effect of foreign currency rate
fluctuations on cash and temporary cash investments was an increase of $1.5
million.
Net receivables increased $10.6 million from fiscal year-end 1994.
Revenues were lower than that of the quarter ended September 24, 1994,
resulting in an increase in days sales outstanding from 80 days to 86 days.
Total inventories at March 25, 1995 decreased $4.7 million from fiscal year-end
1994 levels. The decrease was primarily due to a worldwide decrease in work in
process inventory. Fixed asset dispositions for the current six-month period
totaled $3.6 million, primarily due to the sale of demonstration equipment to
end-users. Management expects that sales of demonstration equipment will
continue in the future. 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.
Accounts payable increased $24.8 million from fiscal year-end 1994 levels,
primarily as a result of the timing of purchases from vendors in the current
quarter and an increase in Value Added Taxes to be paid by the company's
foreign subsidiaries. Other current liabilities increased $1.8 million from
fiscal year-end 1994, primarily as a result of the income tax provision of $7
million recorded for the quarter ended December 24, 1994, an increase in
deferred revenues from systems integration activities, and employee related
accruals. These increases were partially offset by the settlement of certain
obligations accrued as part of restructuring charges recorded in previous
years. Long-term debt, including the current portion of long-term debt,
decreased a total of $2.7 million during the current six-month period as a
result of the company reacquiring a portion of the 8 3/8% Sinking Fund
Debentures due in 2002.
Effective December 21, 1994 the company entered into a $30 million
unsecured letter of credit facility with a group of banks. This agreement,
which is available to secure issuance of letters of credit, has a duration of
364 days. The facility contains certain covenants, including restrictions on
the sale or pledge of certain assets, the declaration of dividends, and the
incurrence of other debt. At March 25, 1995 there were $8.2 million letters of
credit secured by this facility. The new agreement replaced the company's
unsecured $40 million revolving credit facility and $30 million letter of
credit facility.
During fiscal years 1994 and 1993, the company recorded restructuring
charges of $35 million and $25 million, respectively. No additional charges or
material changes in estimates to prior provisions were recorded during the
first six-month period of fiscal 1995. The following table sets forth the
company's restructuring charges for the period ended March 25, 1995. All
charges, excluding asset writedowns and certain other charges, are cash in
nature and are funded from operations.
SIX MONTHS ENDED
BALANCE MAR. 25, 1995 BALANCE
IN MILLIONS SEP. 24, 1994 CHARGES MAR. 25, 1995
Provision related to terminated employees:
Termination payments $15.2 $11.1 $4.1
Pension and OPEB costs
(curtailment loss) 1.5 -- 1.5
Other costs 1.1 -- 1.1
Provisions related to employees
not terminated 1.9 -- 1.9
Provisions for leases 14.0 4.5 9.5
Writedown of assets to be
sold and discarded .7 -- .7
Other 2.3 1.3 1.0
Total $36.7 $16.9 $19.8
During the first six months of the current year there were approximately
268 terminations, primarily relating to the fiscal 1994 restructuring charge.
The remaining provision at March 25, 1995 is for the future terminations of
approximately 100 employees, as part of the continuing realignment of the
company's worldwide sales, service, and other operations. The charges and
remaining provision for leases are for the closure of various domestic branch
sales offices and excess vacant rental properties, primarily located in the
United Kingdom.
In light of the current quarter results, the company has identified and
begun implementing additional cost reduction steps. These measures include
further worldwide workforce reductions of between 400 and 500 employees (in
addition to the approximately 100 employees described in the preceeding
paragraph and included in an earlier restructure provision). The costs
associated with this workforce reduction along with other cost reduction
actions, primarily related to real estate, will be reported in the quarter
ending June 24, 1995 as a restructuring charge. Management expects this charge
to be approximately $40 million.
Results of Operations
Total revenues for the quarter ended March 25, 1995 were $283.8 million,
relatively unchanged from the same quarter of the previous year. Domestic
revenues, excluding U.S. direct export sales, were $150.1 million for the
current quarter, a 7% decrease from $161.0 million for the comparable period of
fiscal 1994. Domestic revenues were 53% of total revenues for the current
quarter and 57% of total revenues for the second quarter of fiscal 1994.
European revenues, including U.S. direct export sales into the European
marketplace, were $92.2 million, an increase of 20% from $77.1 million for the
comparable period in fiscal 1994. European revenues represented 32% and 27% of
total revenues in the current and prior-year periods, respectively. Other
international revenues, including U.S. direct export sales, were $41.5 million
for the current quarter, a 7% decrease from $44.8 million for the comparable
period in fiscal 1994. Other international revenues represented 15% of total
revenues in the current quarter and 16% of total revenues in the comparable
prior-year period. The decrease in domestic revenues is primarily due to
longer sales cycles required by large corporate enterprises which the company
focused its efforts on during the current quarter. The increase in European
revenues is primarily a result of the weakening of the U.S. dollar in relation
to foreign currencies, and the growing acceptance of Open CLARiiON, the
company's mass-storage systems, in this marketplace.
Total domestic revenues of $298.9 million for the six months ended March
25, 1995 decreased 3% from $309.1 million for the first six-month period of
fiscal 1994. Domestic revenues were 53% of total revenues in the current
six-month period and 57% of total revenues for the comparable prior-year
period. European revenues were $175.0 million for the first six-month period
of the current year, compared with $145.4 million for the first six-month
period of the fiscal 1994. European revenues represented 31% of total revenues
in the current six-month period and 27% of total revenues in the prior-year
period. Other international revenues were $92.1 million for the current
six-month period, compared with $89.7 million for the comparable period in
fiscal 1994. Other international revenues represented 16% of total revenues
for both the current six-month period and the prior-year period.
Product revenues for the current quarter remained relatively unchanged from
the comparable prior-year period. Revenues from the company's Open CLARiiON
storage systems produced significant revenue growth from the comparable quarter
in fiscal year 1994 and accounted for 18% of total product revenues in the
current quarter. Revenues from the company's AViiON family of open systems
server products remained relatively unchanged compared with the same period of
the prior year. Proprietary MV system revenues declined almost $12 million
from the same period in the prior year and currently represent only 7% of total
product revenues. Revenues from personal computers and other low margin
equipment declined 24% from the same quarter of the prior year.
Domestic product revenues, which were $93.6 million for the current
quarter, decreased 10% from $103.5 million for the comparable period in fiscal
1994. Domestic product revenues were 51% of total product revenues in the
current quarter and 56% of total product revenues in the comparable prior-year
period. European product revenues were $59.8 million for the current quarter,
a 26% increase from $47.3 million in the comparable prior year quarter.
European product revenues represented 33% and 26% of total product revenues for
the current and comparable prior-year period, respectively. Other
international product revenues were $30.6 million for the current quarter, a 9%
decrease from $33.5 million for the comparable period in fiscal 1994. Other
international product revenues represented 17% of total product revenues in the
current quarter and 18% of total product revenues in the comparable prior-year
period. The increase in European product revenues was due to increased demand
and acceptance of the company's Open CLARiiON storage line and from the
weakening of the U.S. dollar in relation to European currencies.
Product revenues of $365.2 million for the six months ended March 25, 1995
increased 5% from $348.0 million for the first six-month period of fiscal
1994. Domestic product revenues of $185.8 million for the first six-month
period of the current year decreased 5% from $195.2 million for the first
six-month period of the fiscal 1994. Domestic product revenues represented
51% of total product revenues in the current six-month period and 56% of total
revenues in the prior-year period. European product revenues of $110.0 million
for the first six-month period of the current year increased 29% from $85.6
million for the first six-month period of the fiscal 1994. European product
revenues represented 30% of total product revenues in the current six-month
period and 25% of total revenues in the prior-year period. Other international
revenues were $69.3 million for the current six-month period, compared with
$67.3 million for the comparable period in fiscal 1994. Other international
revenues represented 19% of total revenues for both the current six-month
period and the prior-year period.
Service revenues for the current quarter were $99.8 million, a slight
increase from $98.6 in the comparable period of fiscal 1994. Domestic service
revenues for the current quarter were $56.5 million, relatively unchanged from
$57.5 million in the comparable prior-year period. European service revenues
were $32.4 million, an 8% increase from $29.9 million for the comparable prior
year period. Other international service revenues for the current quarter were
$10.9 million, compared to $11.3 million for the comparable prior-year period.
The increase in European service revenues was primarily a result of an increase
in systems integration revenue and the weakening of the U.S. dollar in relation
to European currencies in the current quarter as compared to the same
prior-year period.
Service revenues for the current six-month period were $200.8 million,
compared to $196.2 million for the first six-month period of fiscal year 1994.
For the current six-month period, domestic service revenues were $113.0
million, relatively unchanged from the $113.9 million in the first six-month
period of the fiscal 1994. European service revenues for the current six-month
period were $65.0 million, a 9% increase from $59.8 million reported for the
first six-month period of fiscal 1994. Other international service revenues
were $22.8 million for the current six-month period, relatively unchanged from
the $22.5 million reported for the first six-month period of fiscal year 1994.
The increase in European service revenues resulted primarily from the weakening
of the U.S. dollar in relation to European currencies in the current six-month
period when compared to the same prior-year period and an increase in systems
integration revenues.
Cost of product revenues was 66% of product revenues for both the current
quarter and current six-month period ended March 25, 1995, relatively unchanged
from 67% for the same periods of the prior year. Cost of service revenues for
both the current quarter and first six-month period represented approximately
65% of service revenues, compared with 64% and 61% of service revenues,
respectively, for the same periods of fiscal 1994. The company continues to
see a shift in service revenues towards increased systems integration
activities, which yield a lower margin than traditional contract support
service revenues.
Research and development expenses for the current quarter decreased 14% to
$19.6 million from the second quarter of fiscal 1994. Research and development
expenses represented 7% of total revenues in the current quarter, as compared
to 8% for the same prior-year period. For the current six-month period,
research and development expenses were 7% of total revenues, decreasing 11% to
$41.3 million from the comparable prior-year period. The company continues to
focus its research and development efforts on its core business technology,
multi-user computer systems, servers, and mass storage devices. The research
and development expense decrease for the current six-month period as compared
to the same period in the prior year was primarily caused by the company
dedicating a higher proportion of its resources to capitalizable software
development. Gross expenditures on research and development, before
capitalization, were down only 1% for the current quarter and 2% for the
current six-month period compared to the same prior-year periods.
Selling, general, and administrative expenses for the current quarter and
current six-month period were relatively unchanged from the comparable periods
of fiscal 1994. Selling, general, and administrative expenses represented 31%
of total revenues in both the current quarter and in the comparable prior-year
period and 31% and 32%, respectively, for the current six-month period and the
same period in the prior year. The company has responded to increasingly
competitive industry conditions through ongoing cost reduction and containment
programs. Reductions in selling, general and administrative expenses for these
programs have been primarily offset by the weakening of the U.S. dollar in
relation to foreign currencies and increased expenditures for advertising and
other marketing related programs. At March 25, 1995 the number of employees
totaled 5,585, a reduction of 660 employees from March 26, 1994.
Interest income for the current quarter almost doubled to $2.6 million from
the comparable period of fiscal 1994, due to higher levels of invested cash and
increasing market interest rates. Interest expense remained relatively
unchanged from the same period of fiscal 1994.
The income tax provisions for the current quarter and first six-month
period were $.5 million and $7.5 million, respectively, compared with $.5
million and $1.1 million for the comparable prior year periods, respectively.
The provision in the first six months of the current year resulted primarily
from the settlement of the Grumman lawsuit, deferred tax on undistributed
earnings for certain foreign subsidiaries, and foreign and state taxes.
In the first quarter of fiscal 1995, the company adopted Statement of
Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for
Post-Employment Benefits" and SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS 112 requires the accrual of liabilities for
the estimated cost of benefits provided by the employer to former or inactive
employees. SFAS 115 addresses accounting and reporting for investments in
certain debt and equity securities that will not be held until maturity. All
of the company's marketable securities at September 24, 1994 and March 25, 1995
have maturities of less than one year, and have been classified as being
'held-to-maturity'. The implementation of SFAS 112 and SFAS 115 did not have a
material effect on the company's consolidated financial position or results of
operations.
In May 1993, the Financial Accounting Standards Board ("FASB") issued SFAS
114, "Accounting by Creditors for Impairment of a Loan". In October 1994, the
FASB issued SFAS 119, "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments". SFAS 114 is effective for fiscal years
commencing after December 15, 1994 and SFAS 119 is effective for fiscal years
ending after December 15, 1994. The company will implement these statements as
required. The future adoption of SFAS 114 and SFAS 119 are not expected to
have a material effect on the company's consolidated financial position or
results of operations.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
In the first quarter of fiscal 1995, the company settled with Northrop
Grumman Corporation its six-year copyright infringement and trade secrets
litigation against Grumman Systems Support Corporation ("Grumman"). Under the
terms of this settlement, Grumman paid the company $53 million and the parties
have dismissed all pending litigation. The settlement resulted in a pre-tax
gain, net of related legal fees and other expenses, of $44.5 million.
In November, 1994, the company commenced an action against IBM Corporation
in the Federal District Court in Boston, Massachusetts claiming several IBM
products including the AS/400 mid-range systems and System/390 mainframe line
infringed various company patents. The suit seeks, among other relief,
compensatory damages. In January, 1995, IBM answered the complaint, denied the
company's infringement claims and counterclaimed against the company, alleging
that the company's AViiON and CLARiiON products infringed various IBM patents.
This action is in the discovery stage.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11. Computation of primary and fully diluted earnings per share.
19. Second Quarter 1995 Interim Report of Data General Corporation.
(b) No reports on Form 8-K were filed during the current quarter ended
March 25, 1995.
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: May 4, 1995
EXHIBITS
Index to Exhibits.
11. Computation of primary and fully diluted earnings per share.
19. Second Quarter 1995 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 Six Months Ended
March 25, March 26, March 25, March 26,
1995 1994 1995 1994
Primary earnings per share:
Net income (loss) . . . . . . $(11,061) $(47,989) $13,145 $(69,080)
Weighted average shares
outstanding. . . . . . . . . . 36,906 35,649 37,559 35,491
Incremental shares from
use of treasury stock
method for stock options. . . -- -- -- --
Common and common equivalent
shares, where applicable. . .36,906 35,649 37,559 35,491
Net income (loss) per share . . $(0.30) $(1.35) $0.35 $(1.95)
Earnings per share
assuming full dilution:(a)
Net income (loss) . . . . . . $(11,061) $(47,989) $13,145 $(69,080)
Weighted average shares
outstanding . . . . . . . . 36,906 35,649 37,559 35,491
Incremental shares from
use of treasury stock
method for stock options.. -- -- -- --
Common and common equivalent
shares assuming full dilution 36,906 35,649 37,559 35,491
Net income (loss) per share . . $(0.30) $(1.35) $0.35 $(1.95)
(a) For the quarters and six-month periods ended March 25, 1995 and March 26,
1994, 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.
Data General Corporation Second Quarter 1995 Interim Report
Period Ending March 25, 1995
Data General
Bringing Common Sense to Computing
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES:
Data General reported a net loss of $11.1 million, or $.30 per share, for
its second quarter of fiscal 1995, which ended March 25, 1995. For the second
quarter of last year, the company reported a net loss of $48.0 million, or
$1.35 per share, including a restructuring charge of $35.0 million.
Revenues for the second quarter were $283.8 million. For the comparable
quarter last year the company reported revenues of $282.9 million.
The second quarter results were disappointing, particularly in terms of
revenue performance. Revenues for our AViiON server line were flat, both year
over year and compared to the first quarter. We have been focusing our sales
efforts on larger enterprises which are moving to client/server technology.
These efforts involve investments in longer sales cycles and in stronger
relationships with key software providers. Although the benefits of these
investments are not yet reflected in our revenues, we remain convinced that
this sales strategy is essential to future revenue growth.
As we introduce new AViiON products later this year and further strengthen
our software partnerships, we will have significant opportunity to attract new
enterprise server-class customers.
In light of the disappointing results, we have identified and begun
implementing additional cost reduction steps. These include further worldwide
workforce reductions, the majority of which will be completed during our third
fiscal quarter, which ends in June. Between 500 and 600 employees will be
affected by the workforce reductions. At the end of the second quarter, Data
General had approximately 5,600 employees.
The costs associated with the workforce reduction along with other cost
reduction activities, primarily related to real estate, will be reported in the
third quarter as a restructuring charge. We expect the charge to be
approximately $40 million.
While undertaking these cost reduction actions, we will continue to invest
in key strategic areas that generate revenue growth.
During the quarter, the CLARiiON Business Unit strengthened its worldwide
distribution channel with the addition of several new partners. Included was an
agreement with Silicon Graphics, Inc., which will use CLARiiON disk arrays with
its CHALLENGE line of network resource servers.
We again experienced solid growth from our Open CLARiiON storage line,
which posted a revenue increase of more than 40 percent over the first quarter.
Our expectation is that CLARiiON will continue to experience strong growth
throughout the remainder of fiscal 1995.
Data General's financial position continues to be strong, with cash and
marketable securities of $221.6 million at the end of the second quarter.
For the first six months of fiscal 1995, Data General reported net income
of $13.1 million, or $.35 per share. This includes a one-time pre-tax gain of
$44.5 million resulting from the settlement of a software copyright
infringement and trade secret lawsuit against Northrop Grumman Corporation. For
the same period last year, the company reported a net loss of $69.1 million, or
$1.95 per share, including the restructuring charge.
Revenues for the first two quarters of 1995 totaled $566.0 million,
compared to $544.1 million for the first two quarters of fiscal 1994.
Data General is committed to returning to and sustaining profitability and
we believe we are taking the necessary steps and have the right strategy and
product direction to accomplish these goals.
Respectfully submitted,
Ronald L. Skates
President and Chief Executive Officer
May 3, 1995
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Six Months Ended
in thousands, except Mar. 25, Mar. 26, Mar. 25, Mar. 26,
net income (loss) per share 1995 1994 1995 1994
Revenues:
Product . . . . . . . . . . . . $184,031 $184,335 $365,224 $348,032
Service . . . . . . . . . . . . 99,760 98,592 200,772 196,122
Total revenues . . . . . . 283,791 282,927 565,996 544,154
Costs and expenses:
Cost of product revenues. . . . 122,273 122,814 241,731 234,417
Cost of service revenues. . . . 64,474 62,970 128,969 120,526
Research and development. . . . 19,588 22,720 41,252 46,236
Selling, general, and
administrative . . . . . . . . 87,098 87,037 173,088 174,060
Restructure charge. . . . . . . -- 35,000 -- 35,000
Total costs and expenses . 293,433 330,541 585,040 610,239
Loss from operations. . . . . . . . (9,642) (47,614) (19,044) (66,085)
Interest income . . . . . . . . . . 2,581 1,317 4,773 2,771
Interest expense. . . . . . . . . . 3,500 3,545 7,056 7,019
Other income, net . . . . . . . . . -- 2,353 41,972 2,353
Income (loss) before income taxes . (10,561) (47,489) 20,645 (67,980)
Income tax provision. . . . . . . . 500 500 7,500 1,100
Net income (loss) . . . . . . . . . $(11,061) $(47,989) $ 13,145 $(69,080)
Net income (loss) per share . . . . $(0.30) $(1.35) $ 0.35 $(1.95)
Weighted average shares outstand-
ing, including common stock
equivalents where applicable. . . 36,906 35,649 37,559 35,491
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)
Mar. 25, Sept. 24,
dollars in thousands 1995 1994
Assets
Current assets:
Cash and temporary cash investments . . . . . . . . . $110,552 $142,448
Marketable securities . . . . . . . . . . . . . . . . 111,009 47,865
Receivables, net. . . . . . . . . . . . . . . . . . . 269,279 258,709
Inventories . . . . . . . . . . . . . . . . . . . . . 113,732 118,412
Other current assets. . . . . . . . . . . . . . . . . 32,510 30,642
Total current assets . . . . . . . . . . . . . . . . 637,082 598,076
Property, plant, and equipment, net. . . . . . . . . . 170,775 164,777
Other assets . . . . . . . . . . . . . . . . . . . . . 62,832 59,011
$870,689 $821,864
Liabilities and stockholders' equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . . $ 2,625 $ 2,461
Accounts payable. . . . . . . . . . . . . . . . . . . 117,112 92,338
Other current liabilities . . . . . . . . . . . . . . 233,889 232,066
Total current liabilities. . .. . . . . . . 353,626 326,865
Long-term debt . . . . . . . . . . . . . . . . . . . . 154,872 156,942
Other liabilities. . . . . . . . . . . . . . . . . . . 31,015 29,445
Stockholders' equity:
Common stock:
Outstanding -- 37,139,000 shares at Mar. 25, 1995
and 36,457,000 shares at Sept. 24, 1994 (net of
deferred compensation of $8,045 at Mar. 25, 1995
and $9,348 at Sept. 24, 1994). . . . . . . . . . . 440,827 434,757
Accumulated deficit. . . . . . . . . . . . . . . . (103,778) (116,923)
Cumulative translation adjustment. . . . . . . . . (5,873) (9,222)
Total stockholders' equity . . . . . . . . 331,176 308,612
$870,689 $821,864
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)
Six Months Ended
Mar. 25, Mar. 26,
in thousands 1995 1994
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . .$13,145 $(69,080)
Adjustments to reconcile net income (loss) to
net cash provided from operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . 36,371 40,252
Amortization of capitalized software development costs 8,200 8,959
Other non-cash items, net . . . . . . . . . . . . . . 14,088 17,004
Change in operating assets and liabilities . . . . . 18,489 51,546
Net cash provided from operating activities . . . . . 90,293 48,681
Cash flows from investing activities:
Expenditures for property, plant, and equipment . . (48,223) (47,714)
Net proceeds from (purchases of) marketable securities(63,144) 11,010
Capitalized software development costs. . . . . . . . (12,733) (9,000)
Net proceeds from (purchases of) investments. . . . . . (600) 3,793
Net cash used by investing activities . . . . . . . .(124,700) (41,911)
Cash flows from financing
activities:
Cash provided from stock plans. . . . . . . . . . . . . 3,696 3,629
Repayment of long-term debt . . . . . . . . . . . . . (2,700) (1,234)
Net cash provided from financing activities . . . . . 996 2,395
Effect of foreign currency rate fluctuations
on cash and temporary cash investments. . . . . . . . . 1,515 56
Increase (decrease) in cash and temporary
cash investments . . . . . . . . . . . . . . . . .(31,896) 9,221
Cash and temporary cash investments
- - beginning of period . . . . . . . . . . . . . . . . 142,448 119,560
Cash and temporary cash investments - end of period . $110,552 $128,781
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . . . . $ 6,373 $ 6,513
Income taxes paid . . . . . . . . . . . . . . . . . . $ 1,117 $ 1,232
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
Mar. 25, Sept. 24,
in thousands 1995 1994
Inventories:
Raw materials . . . . . . . . . . . . . . . . . . . $ 10,132 $ 11,791
Work in process . . . . . . . . . . . . . . . . . . 30,940 36,282
Finished systems. . . . . . . . . . . . . . . . . . 32,697 35,521
Field engineering parts and components. . . . . . . 39,963 34,818
$113,732 $118,412
Property, plant, and equipment:
Property, plant, and equipment. . . . . . . . . . . $631,016 $642,924
Accumulated depreciation. . . . . . . . . . . . . . (460,241) (478,147)
$170,775 $164,777
Note 2. Letter of Credit and Reimbursement Agreement
Effective December 21, 1994, the company entered into a $30 million
unsecured letter of credit facility with a group of banks. This agreement,
which is available to secure issuance of letters of credit, has a duration of
364 days. The facility contains certain covenants, including restrictions on
the sale or pledge of certain assets, the declaration of dividends, and the
incurrence of other debt. At March 25, 1995 there were $8.2 million letters of
credit secured by this facility. The new agreement replaced the company's
unsecured $40 million revolving credit facility and $30 million letter of
credit facility.
Note 3. Litigation
In the first quarter of fiscal 1995, the company settled with Northrop
Grumman Corporation its six-year software copyright infringement and trade
secrets litigation against Grumman Systems Support Corporation ("Grumman").
Under the terms of this settlement, Grumman paid the company $53 million and
the parties have dismissed all pending litigation. The company recognized a
pre-tax gain, net of related legal fees and other expenses, of $44.5 million
resulting from the settlement, which is included in other income, net, in the
consolidated statement of operations. This amount has been partially offset by
certain other non-operating expenses.
Note 4. Basis of Presentation
In the first quarter of fiscal 1995, the company adopted Statement of
Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for
Post-Employment Benefits" and SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities". SFAS 112 requires the accrual of liabilities for
the estimated cost of benefits provided by the employer to former or inactive
employees. SFAS 115 addresses accounting and reporting for investments in
certain debt and equity securities that will not be held until maturity. All
of the company's marketable securities at September 24, 1994 and March 25, 1995
have maturities of less than one year, and have been classified as being
'held-to-maturity'. The implementation of SFAS 112 and SFAS 115 did not have a
material effect on the company's consolidated financial position or results of
operations.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of normal
recurring 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 1994 Annual Report. The results of
operations for the quarter ended March 25, 1995 are not necessarily indicative
of the results for the entire fiscal year.
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-25-1995
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<SECURITIES> 111,009
<RECEIVABLES> 283,468
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