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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 July 1, 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
(State or other jurisdiction of Incorporation or organization)
04-2436397
(I.R.S. Employer Identification Number)
4400 Computer Drive, Westboro, Massachusetts 01580
(Address of principal executive offices) (Zip Code)
Registrants 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 Secton 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 registrants classes of
common stock, as of July 28, 1995:
Common Stock, par value $.01 37,280,952
(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 nine months ended July 1,
1995 and June 25, 1994, condensed consolidated balance sheets as of
July 1, 1995 and September 24, 1994, condensed consolidated statement
of cash flows for nine months ended July 1, 1995 and June 25, 1994, and
related notes to condensed consolidated financial statements, are
incorporated herein by reference to pages 3 through 6 of the company's
Third Quarter 1995 Interim Report. The Third 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 9S, 3400 Computer Drive, Westboro, MA 01580.
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations.
Financial Condition
Cash and temporary cash investments as of July 1, 1995 were $89.6
million, a decrease of $52.9 million from the end of fiscal 1994. In
addition, the company holds $92.7 million in marketable securities, a net
increase of $44.9 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. 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 nine
months ended July 1, 1995 totaled $83.4 million, expenditures for property,
plant, and equipment were $73.9 million, capitalized software development
costs totaled $20.6 million, and cash provided from stock plans totaled
$4.0 million. The company made a $.6 million investment in an unaffiliated
entity and repaid $2.7 million of long-term debt during the current
nine-month period. The effect of foreign currency rate fluctuations on
cash and temporary cash investments was an increase of $2.5 million.
Net receivables decreased $15.3 million from fiscal year-end 1994 due to
lower revenue than that of the quarter ended September 24, 1994. Total
inventories at July 1, 1995 increased $23.6 million from fiscal year-end
1994 levels due to an increase in domestic work in process and finished
systems inventory, primarily related to orders for the companys Open
CLARiiON product line. Open CLARiiON sales cycles require inventory
purchasing patterns to be earlier than those of traditional server
procurement cycles. Fixed asset dispositions for the current nine-month
period totaled $7.4 million, primarily due to the sale of demonstration
equipment to end-users. Management expects that sales of demonstration
equipment will continue in the future. Fewer than 20% of the company's net
fixed assets relate to the companys 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.
The increase of $29.7 million in accounts payable from fiscal year-end
1994 levels was mainly a result of the timing of purchases from vendors of
Open CLARiiON inventory. Other current liabilities increased $22.1 million
from fiscal year-end 1994, primarily as a result of the $43 million
restructure charge and the income tax provision of $7 million recorded for
the quarter ended December 24,1994. This increase was partially offset by
payments made relating to the current as well as previously recorded
restructuring accruals. Long-term debt, including the current portion of
long-term debt, decreased a total of $2.7 million during the current
nine-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 July 1, 1995 there were
$9.1 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 1995, 1994, and 1993, the company recorded
restructuring charges of $43 million, $35 million, and $25 million,
respectively. The current year charge is for estimated expenses resulting
from costs associated with a worldwide work-force reduction, which was
approved by the company's executive management and communicated to
employees in April. The real estate restructuring provision relates
primarily to leased facilities located throughout Europe, Australia, and
New Zealand as part of the company's continuing centralization of its
international service and administrative organizations. The provision
relating to the workforce reduction is primarily for salary and benefit
continuation and outplacement service. The following table sets forth
the company's restructuring activities for the nine-month period ended
July 1, 1995. All charges, excluding asset writedowns and certain other
charges, are cash in nature and funded from operations and there were no
material changes in estimates relating to the prior fiscal years'
provisions.
NINE MONTHS ENDED
FY94 RESERVE BALANCE JULY 1, 1995 BALANCE
IN MILLIONS SEPT. 24, 1994 CHARGES JULY 1, 1995
Provisions related to
terminated employees:
Termination payments $15.2 $12.2 $3.0
Pension and OPEB costs
(curtailment loss) 1.5 -- 1.5
Other costs 1.1 .4 .7
Provisions related to employees
not terminated 1.9 -- 1.9
Provisions for leases 14.0 6.6 7.4
Writedown of assets to be sold
or discarded .7 .2 .5
Other 2.3 1.7 .6
Total $36.7 $21.1 $15.6
NINE MONTHS ENDED
FY95 RESERVE BALANCE JULY 1,1995 BALANCE
IN MILLIONS SEPT. 24, 1994 PROVISION CHARGES JULY 1, 1995
Provisions related to
terminated employees:
Termination payments -- $21.8 $8.2 $13.6
Pension and OPEB costs
(curtailment loss) -- -- -- --
Other costs -- 1.2 .1 1.1
Provisions related to employees
not terminated -- -- -- --
Provisions for leases -- 12.9 .1 12.8
Writedown of assets to be sold
or discarded -- 2.2 -- 2.2
Other -- 4.9 .9 4.0
Total -- $43.0 $9.3 $33.7
During the first nine months of the current year there were approximately
320 employee terminations, primarily relating to the fiscal 1994 and 1995
restructuring charges. The remaining reserves at July 1, 1995 are for the
future termination of approximately 300 employees as part of the continuing
realignment of the company's worldwide sales, service, and other
operations. The number of employee terminations noted above refer only to
those impacted by restructuring actions. They are not indicative of the
change in total worldwide headcount which also reflects attrition and new
hires. The charges and remaining provisions for leases are for the
closure of various domestic branch sales offices and excess vacant rental
properties, primarily located throughout Europe.
Results of Operations
Total revenues for the quarter ended July 1, 1995 were $280.5 million,
relatively unchanged from the same quarter of the previous year. Domestic
revenues, excluding U.S. direct export sales, were $156.3 million for the
current quarter, a 3% decrease from $161.6 million for the comparable period
of fiscal 1994. Domestic revenues were 56% of total revenues for the
current quarter and 57% of total revenues for the third quarter of fiscal
1994. European revenues, including U.S. direct export sales into the
European marketplace, were $79.2 million, an increase of 2% from $77.6
million for the comparable period in fiscal 1994. European revenues
represented 28% and 27% of total revenues in the current and prior-year
periods, respectively. Other international revenues, including U.S.
direct export sales, were $45.0 million for the current quarter, relatively
unchanged from $44.7 million for the comparable period in fiscal 1994.
Other international revenues represented 16% of total revenues for both the
current quarter and the comparable prior-year period.
Total domestic revenues of $455.2 million for the nine months ended
July 1, 1995 decreased 3% from $470.5 million for the first nine-month
period of fiscal 1994. Domestic revenues were 54% of total revenues in
the current nine-month period and 57% of total revenues for the comparable
prior-year period. European revenues increased 12% to $254.2 million for
the first nine-month period of the current year, compared with $227.2
million for the first nine-month period of fiscal 1994. European revenues
represented 30% of total revenues in the current nine-month period and 27%
of total revenues in the prior-year period. Other international revenues
increased 5% to $137.1 million for the current nine-month period, compared
with $130.2 million for the comparable period in fiscal 1994. Other
international revenues represented 16% of total revenues for both the
current nine-month period and the comparable prior-year period.
Product revenues of $179.7 million for the current quarter ended
July 1, 1995 decreased 3% from the comparable prior-year period. Revenues
from the company's AViiON family of open systems server products decreased
22% from the comparable period of the prior year. The decrease is
attributed to a combination of sales force and product transition issues.
The sales force transition was completed during the current quarter and
the company intends to commence shipments of its new Intel-based AViiON
servers later this year. Revenues from the company's Open CLARiiON storage
systems were more than double the level of the comparable quarter in the
prior year and accounted for 31% of total product revenues in the current
quarter. Open CLARiiON is sold primarily through the company's Original
Equipment Manufacturer ("OEM") and distributor channels. Revenues have been
concentrated in a limited number of customers. For the current
quarter, a significant portion of the company's Open CLARiiON revenues
were to a single OEM. The growth in Open CLARiiON may not be indicative
of future Open CLARiiON revenue trends. Proprietary MV systems revenues
declined $10.0 million from the same period in the prior year and currently
represent less than 7% of total product revenues compared to 12% for the
comparable prior-year period. The company will continue to see a decline
in its proprietary MV product line as it completes its transition to open
systems. Revenues from personal computers and peripheral equipment
declined 26% from the same quarter of the prior year.
Domestic product revenues, which were $99.1 million for the current
quarter, decreased 4% from $103.3 million for the comparable period in
fiscal 1994. Domestic product revenues were 55% of total product revenues
in the current quarter and 56% of total product revenues in the comparable
prior-year period. European product revenues were $46.4 million for the
current quarter, a 2% decrease from $47.6 million in the comparable
prior-year period. European product revenues represented 26% of total
product revenues for both the current and comparable prior-year period.
Other international product revenues were $34.2 million for the current
quarter, an increase of 2% from $33.6 million for the comparable period in
fiscal 1994. Other international product revenues represented 19% of total
product revenues in the current quarter and 18% of total product revenues
in the comparable prior-year period.
Product revenues of $544.9 million for the nine months ended July 1,
1995 increased 2% from $532.5 million for the first nine-month period of
fiscal 1994. Domestic product revenues of $284.9 million for the first
nine-month period of the current year decreased 4% from $298.4 million for
the first nine-month period of fiscal 1994. Domestic product revenues
represented 52% of total product revenues in the current nine-month period
and 56% of total revenues in the prior-year period. European product
revenues were $156.5 million for the current nine-month period, an increase
of 14% from the $137.4 million reported for the first nine-month period of
fiscal 1994. European product revenues were 29% of total product revenues
in the current nine-month period and 26% of total product revenues in the
comparable prior-year period. Other international revenues were $103.5
million for the current nine-month period, an increase of 7% from the $96.7
million reported for the first nine-month period of fiscal 1994. Other
international revenues represented 19% and 18% of total revenues for the
current nine-month period and comparable prior-year period, respectively.
Service revenues for the current quarter were $100.8 million, a slight
increase from $99.3 million in the comparable period of fiscal 1994.
Domestic service revenues for the current quarter were $57.2 million,
relatively unchanged from $58.3 million in the comparable prior-year
period. European service revenues were $32.7 million, a 9% increase from
$30.0 million for the comparable prior-year period. The increase in
European service revenue is due to the company's focus on the emerging
systems integration market. Other international service revenues for the
current quarter were $10.8 million for the current nine-month period,
compared to $11.0 million for the comparable prior-year period.
Service revenues for the current nine-month period were $301.6 million,
compared with $295.4 million for the first nine-month period of fiscal year
1994. For the current nine-month period, domestic service revenues were
$170.2 million, relatively unchanged from the $172.1 million in the first
nine-month period of fiscal 1994. European service revenues for the current
nine-month period were $97.7 million, a 9% increase from $89.8 million
reported for the first nine-month period of fiscal 1994. Other
international service revenues were $33.7 million for the current
nine-month period, relatively unchanged from the $33.5 million reported
for the first nine-month period of fiscal 1994.
Cost of product revenues was 70% and 68% of product revenues for current
quarter and current nine-month period, respectively, compared with 68% and
67% of product revenues, respectively, for the same periods of the prior
year. Overall product margins were negatively impacted as a result of the
shift to lower margin, higher volume open systems. Cost of service
revenues for both the current quarter and first nine-month period
represented approximately 64% of service revenues, compared with 64% and
62% for the third quarter and first nine-month period of fiscal 1994,
respectively. The company continues to see a shift in service revenues
towards increased systems integration activities, which yield a lower
margin than traditional contract revenues.
Research and development expenses for the current quarter were $22.8
million, an increase of 3% from the comparable quarter of fiscal 1994.
Research and development expenses represented 8% of total revenues in the
current quarter and the same prior-year period. For the current nine-month
period, research and development expenses were 8% of total revenues,
decreasing 6% to $64.1 million from the comparable prior-year period. The
company continued 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 nine-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, increased 17% for the
current quarter and 4% for the current nine-month period compared to the
same prior-year periods. The change in the level of expenditures was a
result of material purchases relating to the prototyping of the new
Intel-based product line, the porting of DG/UX (Data General's UNIX
Operating System) to the new architecture, and the impact of the inclusion
of an additional (14th) week that resulted in an extra week of costs.
Data General closes each fiscal year on the final Saturday in September,
resulting in a 53-week year for fiscal 1995.
Selling, general, and administrative expenses for the current quarter
and current nine-month period were relatively unchanged from the comparable
periods of fiscal 1994. Selling, general, and administrative
expenses represented 30% and 29% of total revenues in the current quarter
and in the comparable prior-year period, respectively, and 30% and 31% of
total revenues for the current nine-month period and the same period in
the prior year, respectively. The company has responded to increasingly
competitive conditions through on-going cost reductions. Reductions in
selling, general, and administrative expenses have been primarily offset
by the weakening of the U.S. dollar in relation to foreign currencies and
the impact of the inclusion of the additional week in the current fiscal
quarter. At July 1, 1995 the number of employees totaled 5,180, a
reduction of 775 employees from June 25, 1994.
Interest income for the current quarter increased $1.3 million from the
comparable period of fiscal 1994 due to higher levels of invested cash and
increasing market interest rates during the current nine-month period.
Interest expense remained relatively unchanged from the comparable period
of fiscal 1994.
The income tax provisions for the current quarter and
first nine-month period were $.5 million and $8.0 million, respectively,
compared with $.5 million and $1.6 million for the comparable prior-year
periods, respectively. The provision in the first nine 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 July 1, 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 $44.5
million.
The company's patent infringement suit against IBM Corporation, and
IBM's counterclaim against the company, remains in the discovery stage
in the Federal District Court of Boston, Massachusetts. See Item 1 "Legal
Proceedings" to the company's Quarterly Report on Form 10-Q for the quarter
ended December 24, 1994.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11. Computation of primary and fully diluted earnings per share.
19. Third Quarter 1995 Interim Report of Data General Corporation.
(b) No reports on Form 8-K were filed during the current quarter ended
July 1, 1995.
SIGNATURE
Persuant to the requirements of the Securities Exchange Act of 1934, the
registrant has only caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATA GENERAL CORPORATION
(Registrant)
/s/ Arthur W. DeMelle
Arthur W. DeMelle
Vice President
Chief Financial Officer
Chief Accounting Officer
Dated: August 10, 1995
EXHIBITS
Index to Exhibits.
11. Computation of primary and fully diluted earnings per share.
19. Third Quarter 1995 Interim Report of Data General Corporation.
EXHIBIT 11
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands except per share amounts)
Quarter Ended Nine Months Ended
July 1, June 25, July 1, June 25,
1995 1994 1995 1994
Primary earnings per share:
Net loss . . . . . . . . .$(61,384) $(12,360) $(48,239) $(81,440)
Weighted average shares
outstanding . . . . . . . . 37,192 35,915 37,437 35,632
Incremental shares from use
of treasury stock method for
stock options . . . . . . . -- -- -- --
Common and common equivalent
shares, where applicable. . 37,192 35,915 37,437 35,632
Net loss per share . . . . . $(1.65) $(0.34) $(1.29) $(2.29)
Earnings per share assuming
full dilution: (a)
Net loss. . . . . . . . . .$(61,384) $(12,360) $(48,329) $(81,440)
Weighted average shares
outstanding . . . . . . . . 37,192 35,915 37,437 35,632
Incremental shares from use
of treasury stock method for
stock options . . . . . . . -- -- -- --
Common and common equivalent
shares assuming full
dilution. . . . . . . . . . 37,192 35,915 37,437 35,632
Net loss per share . . . . . $(1.65) $(0.34) $(1.29) $(2.29)
(a) For the quarters and nine-month periods ended July 1, 1995 and
June 25, 1994, the assumed conversion of convertible debentures and
the use of treasury stock method for stock options, giving effect to
the incremental shares and the adjustment to reduce interest expense,
results in anti-dilution and has therefore been excluded from the
computation.
DATA GENERAL CORPORATION THIRD QUARTER 1995 INTERIM REPORT
Period Ending July 1, 1995
DATA GENERAL
Bringing Common Sense to Computing
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES:
Data General reported a net loss of $61.4 million, or $1.65 per share,
including a previously announced restructuring charge of $43.0 million
for a workforce reduction and other cost reduction activities primarily
related to real estate, for it's third quarter of fiscal 1995, which ended
July 1. For the third quarter of last year, the company reported a net
loss of $12.4 million, or $.34 per share.
Revenues for the third quarter were $280.5 million. For the comparable
quarter last year the company reported revenues of $283.8 million.
Revenues for our AViiON(R) server line declined during the third
quarter. This was due to a combination of sales force and product
transition issues. The sales force transition has been completed and
we are confident that as we introduce and begin to ship our new
Intel-based AViiON servers later this year, we will be well positioned
to again see AViiON revenue growth.
In June, we announced a plan to expand our AViiON server family with
new systems based on Intel processors. First shipments will start in
the fall. The Intel-based AViiON systems will complement Data General's
current Motorola-based AViiON line, which also will be expanded this year
with the addition of a new high-end 32-processor system.
We again saw significant growth in our Open CLARiiON(R) storage line,
which posted a revenue increase of more than 70 percent over the second
quarter. CLARiiON is becoming an increasingly important part of our
business.
The CLARiiON Business Unit recently reached a milestone with the
shipment of its 10,000th system and in June, broadened its line with the
introduction of the Model 150 disk array, which is targeted at low-end
UNIX and PC server applications. Virtually all open systems platforms in
the marketplace are supported by the Model 150.
The majority of the workforce reduction announced in April has been
completed as planned. At the end of the third quarter, Data General had
fewer than 5,200 employees.
Our third quarter results were negatively impacted by the inclusion of
an additional (14th) week that resulted in an extra week of overhead
expenses. Data General closes each fiscal year on the last Saturday in
September, resulting in a 53-week year for fiscal 1995.
Data General's financial position continues to be strong with cash and
marketable securities of $182.3 million at the end of the third quarter.
For the first nine months of fiscal 1995, Data General reported a loss
of $48.2 million, or $1.29 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 as well as the $43.0 million restructuring charge. For the
same period last year, Data General reported a net loss of $81.4 million,
or $2.29 per share, including a restructuring charge of $35.0 million.
Revenues for the first three quarters of 1995 totaled $846.5 million,
compared to $827.9 million for the first three quarters of fiscal 1994.
Data General is committed to returning to and sustaining profitability.
While we remain cautious for the remainder of 1995, we are confident that
our AViiON and CLARiiON businesses will generate future revenue growth and
enable us to accomplish this goal.
Respectfully submitted,
Ronald L. Skates
President and Chief Executive Officer
August 9, 1995
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended Nine Months Ended
in thousands, except July 1, June 25, July 1, June 25,
net loss per share 1995 1994 1995 1994
Revenues:
Product . . . . . . . . . . . . $179,708 $184,497 $544,931 $532,528
Service . . . . . . . . . . . . 100,786 99,279 301,559 295,401
Total revenues . . . . . . . 280,494 283,776 846,490 827,929
Costs and expenses:
Cost of product revenues. . . . 126,491 124,637 368,222 359,054
Cost of service revenues. . . . 64,191 63,150 193,160 183,676
Research and development. . . . 22,807 22,121 64,059 68,357
Selling, general, and
administrative . . . . . . . . 84,268 83,713 257,356 257,773
Restructure charge. . . . . . . 43,000 -- 43,000 35,000
Total costs and expenses. . . 340,757 293,621 925,797 903,860
Loss from operations. . . . . . . (60,263) (9,845) (79,307) (75,931)
Interest income . . . . . . . . . 2,811 1,531 7,584 4,302
Interest expense. . . . . . . . . 3,427 3,546 10,483 10,564
Other income, net . . . . . . . . -- -- 41,972 2,353
Loss before income taxes. . . . . (60,879) (11,860) (40,234) (79,840)
Income tax provision. . . . . . . 505 500 8,005 1,600
Net loss. . . . . . . . . . . . . $(61,384) $(12,360) $(48,239) $(81,440)
Net loss per share . . . . . . . $(1.65) $(0.34) $(1.29) $(2.29)
Weighted average shares outstand-
ing, including common stock
equivalents where applicable . . 37,192 35,915 37,437 35,632
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)
July 1, Sept. 24,
dollars in thousands 1995 1994
Assets
Current assets:
Cash and temporary cash investments . . . . . . . . $ 89,598 $142,448
Marketable securities . . . . . . . . . . . . . . . 92,742 47,865
Receivables, net. . . . . . . . . . . . . . . . . . 243,411 258,709
Inventories . . . . . . . . . . . . . . . . . . . . 141,987 118,412
Other current assets. . . . . . . . . . . . . . . . 30,923 30,642
Total current assets. . . . . . . . . . . . . . . 598,661 598,076
Property, plant, and equipment, net . . . . . . . . 173,722 164,777
Other assets. . . . . . . . . . . . . . . . . . . . 65,867 59,011
$838,250 $821,864
Liabilities and stockholders' equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . . $ 2,678 $ 2,461
Accounts payable. . . . . . . . . . . . . . . . . . 122,016 92,338
Other current liabilities . . . . . . . . . . . . . 254,165 232,066
Total current liabilities . . . . . . . . . . . . 378,859 326,865
Long-term debt. . . . . . . . . . . . . . . . . . . . 154,873 156,942
Other liabilities . . . . . . . . . . . . . . . . . . 31,014 29,445
Stockholders' equity:
Common stock:
Outstanding -- 37,262,000 shares at July 1, 1995
and 36,457,000 shares at Sept. 24, 1994 (net of
deferred compensation of $7,272 at July 1, 1995
and $9,348 at Sept. 24, 1994). . . . . . . . . . 442,067 434,757
Accumulated deficit . . . . . . . . . . . . . . . . . (165,162) (116,923)
Cumulative translation adjustment . . . . . . . . . . (3,401) (9,222)
Total stockholders' equity. . . . . . . . . . . . 273,504 308,612
$838,250 $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)
Nine Months Ended
July 1, June 25,
in thousands 1995 1994
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $(48,239) $(81,440)
Adjustments to reconcile net loss to net cash
provided from operating activities:
Depreciation . . . . . . . . . . . . . . . . 55,759 57,298
Amortization of capitalized software
development costs . . . . . . . . . . . . . 13,178 15,006
Other non-cash items, net . . . . . . . . . . 16,612 23,744
Change in operating assets and liabilities
(net of effect from sale of land in fiscal
1994) . . . . . . . . . . . . . . . . . . . 46,118 30,004
Net cash provided from operating activities . 83,428 44,612
Cash flows from investing activities:
Expenditures for property, plant, and equipment. (73,943) (71,340)
Net proceeds from (purchases of) marketable
securities. . . . . . . . . . . . . . . . . . . (44,877) 23,716
Capitalized software development costs . . . . . (20,625) (13,075)
Net proceeds from (purchases of) non-operating
assets . . . . . . . . . . . . . . . . . . . . (600) 4,839
Net cash used by investing activities . . . . (140,045) (55,860)
Cash flows from financing activities:
Cash provided from stock plans . . . . . . . . . 3,955 4,063
Repayment of long-term debt . . . . . . . . . . (2,700) (1,234)
Net cash provided from financing activities . 1,255 2,829
Effect of foreign currency rate fluctuations
on cash and temporary cash investments . . . . 2,512 1,265
Decrease in cash and temporary cash investments . . (52,850) (7,154)
Cash and temporary cash investments -
beginning of period . . . . . . . . . . . . . . . 142,448 119,560
Cash and temporary cash investments -
end of period . . . . . . . . . . . . . . . . . . $ 89,598 $112,406
Supplemental disclosure of cash flow information:
Interest paid . . . . . . . . . . . . . . . . . $ 11,355 $ 11,498
Income taxes paid . . . . . . . . . . . . . . . $ 1,308 $ 2,138
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
July 1, Sept. 24,
in thousands 1995 1994
Inventories:
Raw materials . . . . . . . . . . . . . . . . . . . $ 13,017 $ 11,791
Work in process . . . . . . . . . . . . . . . . . . 42,589 36,282
Finished systems. . . . . . . . . . . . . . . . . . 49,151 35,521
Field engineering parts and components. . . . . . . 37,230 34,818
$141,987 $118,412
Property, plant, and equipment:
Property, plant, and equipment. . . . . . . . . . . $641,673 $642,924
Accumulated depreciation. . . . . . . . . . . . . . (467,951) (478,147)
$173,722 $164,777
Note 2. Restructuring
Loss from operations for the current quarter includes a $43 million
provision for estimated expenses resulting from costs associated
with a worldwide workforce reduction and real estate costs primarily
associated with the continuing consolidation of operations in the
European marketplace. The provision relating to the workforce
reduction is primarily for salary and benefit continuation and
outplacement service.
Note 3. 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 July 1,
1995 there were $9.1 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 4. 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 5. 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 July 1, 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.
Included in the results of the third quarter is an additional
(fourteenth) week. The company closes each fiscal year on the last
Saturday in September, resulting in a fifty-three week year for fiscal
1995. The results of operations for the quarter ended July 1, 1995
are not necessarily indicative of the results for the entire fiscal year.
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