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Previous: UNC INC, 10-Q, 1994-05-13 |
Next: SPIEGEL INC, 10-Q, 1994-05-13 |
<PAGE>
UNITED STATES
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 April 1, 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 0-8771
-------------------------------
Evans & Sutherland Computer Corporation
(Exact name of registrant as specified in its charter)
UTAH 87-0278175
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Komas Drive, Salt Lake City, Utah 84108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 582-5847
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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding Shares at April 29, 1994
- - ------------------------------------ ------------------------------------
Common Stock, $0.20 par value 8,524,904
<PAGE>
Form 10-Q
Evans & Sutherland Computer Corporation
QUARTER ENDED APRIL 1, 1994
<TABLE>
<CAPTION>
Page No.
<S> <C>
TABLE OF CONTENTS 2
PART I - FINANCIAL INFORMATION
General Statement 3
ITEM 1. Financial Statements
Consolidated Statements of Earnings - Three Months Ended
April 1, 1994 and April 2, 1993 4
Consolidated Balance Sheets - April 1, 1994 and
December 31, 1993 5-6
Consolidated Abbreviated Statements of Cash Flows - Three
Months Ended April 1, 1994 and April 2, 1993 7
Notes to Financial Statements 8-9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-12
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
</TABLE>
-2-
<PAGE>
Evans & Sutherland Computer Corporation
PART I - FINANCIAL INFORMATION
General Statement:
The following Consolidated Statements of Earnings, Consolidated Balance Sheets,
and Consolidated Abbreviated Statements of Cash Flows have been prepared from
the accounting records of Evans & Sutherland Computer Corporation without audit
(except where presented data is specifically identified as audited) in
accordance with Securities and Exchange Commission regulations.
The financial statements were prepared in conformity with generally accepted
accounting principles applied on a basis consistent with prior periods. All
adjustments reflected in the statements are of a normal recurring nature and are
necessary for a fair statement of results for the interim periods presented. It
is management's opinion that the information presented herein reflects a fair
statement of the results of the interim period(s) in all material respects.
-3-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended
April 1, 1994 and April 2, 1993
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
----------------------------
April 1, April 2,
1994 1993
------------ ------------
<S> <C> <C>
Net sales $ 26,860 $ 29,916
Cost of sales 12,277 14,967
--------- --------
Gross profit 14,583 14,949
Expenses:
Marketing, general and administrative 8,336 9,391
Research and development 7,886 7,869
--------- --------
16,222 17,260
Operating loss -1,639 -2,311
Other income (expense), net 1,504 -38
--------- --------
Loss before income taxes, extraordinary gain,
and cumulative effect of change in accounting principle -135 -2,349
Income tax benefit (note 2) -52 -940
--------- --------
Loss before extraordinary gain and
cumulative effect of change in accounting principle -83 -1,409
Extraordinary gain from repurchase of convertible
debentures, net of income taxes of $56 91 -
Cumulative effect at December 26, 1992 of change in
accounting for income taxes - 2,267
--------- --------
Net earnings $ 8 $ 858
========= ========
Earnings (loss) per common and common equivalent share:
Before extraordinary gain and cumulative effect
of change in accounting for income taxes $ -0.01 $ -0.17
Extraordinary gain from repurchase of convertible debentures 0.01 -
Cumulative effect of change in accounting principle - 0.27
--------- --------
Total earnings per share $ 0.00 $ 0.10
========= ========
Weighted average number of
shares used for per share
earnings computation: 8,474 8,224
</TABLE>
-4-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
April 1, 1994 and December 31, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
April 1, December 31,
1994 1993
Assets (Unaudited) (Audited)
------ -------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,610 $ 3,250
Temporary cash investments 70,659 75,286
Receivables:
Trade accounts, less allowance for
doubtful receivables of $389 in
1994 and $406 in 1993 29,721 30,667
Interest 1,076 1,076
Employees and other 1,953 399
-------------- --------------
Total receivables 32,750 32,142
Inventories, net (note 1) 32,403 32,839
Costs and estimated earnings in excess of
billings on uncompleted contracts, net 9,797 10,048
Deferred income tax 4,885 6,050
Prepaid expenses and deposits 3,154 1,573
-------------- --------------
Total current assets 165,258 161,188
-------------- --------------
Property, plant, and equipment, at cost 109,750 113,366
Less accumulated depreciation and amortization 64,583 65,119
-------------- --------------
Net property, plant, and equipment 45,167 48,247
Long-term investments:
Marketable equity securities at cost - 3,178
Marketable equity securities
available-for-sale, at fair value (note 2) 14,018 -
Other, at cost 35 35
-------------- --------------
Total long-term investments 14,053 3,213
Other assets, at cost, less
accumulated amortization 2,819 3,539
-------------- --------------
$ 227,297 $ 216,187
============== ==============
</TABLE>
Certain 1993 amounts have been reclassified to conform with 1994 presentation.
-5-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
April 1, 1994 and December 31, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
April 1, December 31,
1994 1993
Liabilities and Stockholders' Equity (Unaudited) (Audited)
- - --------------------------------------- ------------- -------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 2,918 $ 2,685
Accounts payable 1,573 5,095
Accrued expenses 15,864 19,321
Customer deposits 17,756 11,303
Income taxes payable 977 2,112
--------- ---------
Total current liabilities 39,088 40,516
--------- ---------
Convertible subordinated debentures 35,956 37,066
Deferred income taxes 5,767 1,575
Stockholders' equity:
Common stock, $.20 par value; authorized
30,000,000 shares; issued and outstanding
8,520,757 shares at April 1, 1994 and
8,352,525 shares at December 31, 1993 1,704 1,671
Additional paid-in capital 14,571 11,899
Retained earnings 122,959 122,951
Net unrealized gain on
marketable equity securities (note 2) 6,825 -
Equity adjustment from foreign
currency translation 427 509
--------- ---------
Total stockholders' equity 146,486 137,030
--------- ---------
$ 227,297 $ 216,187
========= =========
</TABLE>
Certain 1993 amounts have been reclassified to conform with 1994 presentation.
-6-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED ABBREVIATED STATEMENTS OF CASH FLOWS
Three Months Ended
April 1, 1994 and April 2, 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
---------------------------------------
April 1, April 2,
1994 1993
-------------- -------------
<S> <C> <C>
Net cash provided by operating activities $ 1,567 $ 8,405
Cash flows from investing activities:
Capital expenditures -883 -3,522
Proceeds from sale of marketable securities 1,575 -
Proceeds from temporary cash investments 4,627 51
Other -372 -262
------------ ------------
Net cash provided by (used in) investing activities 4,947 -3,733
Cash flows from financing activities:
Payments for repurchase of convertible debentures -945 -
Net proceeds from issuance of common stock 2,732 184
Net borrowings under line of credit agreements 165 335
Other -27 -
------------ ------------
Net cash provided by financing activities 1,925 519
Effect of foreign exchange rate changes on cash -79 13
------------ ------------
Net increase in cash and cash equivalents 8,360 5,204
Cash and cash equivalents at beginning of year 3,250 1,494
------------ ------------
Cash and cash equivalents at end of period $ 11,610 $ 6,698
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 1,188 $ 1,177
Income taxes $ 205 $ 4,035
</TABLE>
-7-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
(1) Inventories are summarized as follows:
<TABLE>
<CAPTION>
April 1, December 25,
1994 1993
(Unaudited) (Audited)
--------------- -------------
<S> <C> <C>
Raw materials and supplies $ 13,382 $ 15,035
Work-in-process 13,894 14,470
Finished Goods 6,013 4,738
Inventory reserve -886 -1,404
------------ ------------
$ 32,403 $ 32,839
============ ============
</TABLE>
(2) Marketable equity securities available-for-sale
During the quarter ended April 1, 1994, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 115
Accounting for Certain Investments in Debt and Equity Securities. Under
Statement 115, available-for-sale securities are recorded at fair value.
Unrealized holding gains & losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings and are reported
as a separate component of stockholders' equity until realized.
Realized gains and losses for securities classified as available-for-sale
are included in earnings and are calculated using the specific
identification method for determining the cost of securities sold.
Marketable equity securities at December 31, 1993, are stated at the
lower of cost or market.
-8-
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
The following table summarizes changes in operations for the periods indicated
and presents the percentage of increase (decrease) by listed items compared to
the indicated prior period:
<TABLE>
<CAPTION>
(Unaudited)
Quarters
Ended April 1, 1994
And April 2, 1993
---------------------------------
<S> <C> <C>
Net sales $ -3,056 -10.2%
Cost of sales -2,690 -18.0%
---------- ----------
Gross profit -366 -2.4%
Expenses:
Marketing, general and administrative -1,055 -11.2%
Research and development 17 0.2%
---------- ----------
-1,038 -6.0%
Operating earnings (loss) 672 29.1%
Other income (expense), net 1,542 4057.9%
---------- ----------
Earnings (loss) before income taxes, extraordinary gain,
and cumulative effect of change in accounting principle 2,214 94.3%
Income tax expense (benefit) 888 94.5%
---------- ----------
Earnings (loss) before extraordinary gain and
cumulative effect of change in accounting principle 1,326 94.1%
Extraordinary gain from repurchase of
convertible debentures, net of income taxes 91 100.0%
Cumulative effect at December 26, 1992 of
change in accounting for income taxes -2,267 -100.0%
---------- ----------
Net earnings $ -850 -99.1%
========== ==========
</TABLE>
-9-
<PAGE>
RESULTS OF OPERATIONS
- - ---------------------
Sales
- - -----
The following table summarizes sales for the first three months of 1994 and 1993
in the five market sectors served by the Company. Sales for the first three
months of 1994 were 10% below those of the corresponding 1993 period.
<TABLE>
<CAPTION>
S A L E S
--------------------------------------------
First Three Months % Change
---------------------------- Increase
1994 1993 (Decrease)
-------- -------- ----------
<S> <C> <C> <C>
U.S. government and engineering $ 10,130 $ 13,977 -28%
International government and
engineering 8,250 4,979 66%
Design systems 7,518 8,058 -7%
World civil pilot training 640 2,158 -70%
Education and entertainment 322 744 -57%
------- -------
$ 26,860 $ 29,916 -10%
======= =======
</TABLE>
U.S. government and engineering sales are lower in the first quarter of 1994
compared to the corresponding 1993 period, however, orders during the period
were strong and backlog increased. The Evans & Sutherland ESIG/(R)/1/ 2000 is
proving to be an ideal product for ground combat simulation and sales growth is
expected to continue in this area. The U.S. military services and intelligence
agencies are becoming increasingly interested in mission planning and rehearsal
where very rapid production of complex, mission-specific databases are a
critical requirement. The Company's ESIG 4000 is a well positioned product to
meet this need.
International government and engineering sales increased 66% during the first
quarter of 1994 over the same period of 1993. Continued growth is expected,
with increases possible if worldwide economic conditions improve. In Europe,
lower priced product offerings by the Company have spurred interest in the
commercial market.
Design systems first quarter sales were below those of the same period of 1993.
In a Company-wide restructuring announcement January 12, 1994, it was
announced that the Design Systems Division was reorganized to serve the
graphics accelerator market entirely as an OEM supplier. On October 19,
1993 the Company announced an important OEM agreement with IBM, where IBM
will market selected E&S high-end graphics accelerators that support
IBM's RISC System/6000/TM/2/ workstations. The Company anticipates
improved sales performance when IBM begins marketing this product later
this year. The Company expects that its current agreement with SUN will
be renegotiated as an OEM agreement.
Design Software (CDRS) sales were significantly higher in the first quarter
of 1994 over 1993. On April 12, 1994 the Design Software Group announced a
significant upgrade to its software design setting new standards for
curvature continuity which is essential for accurate surface modeling.
- - ----------------------------------------
/1/ ESIG/(R)/ is a registered trademark of the Company.
/2/ RISC System/6000/TM/ is a trademark of IBM.
-10-
<PAGE>
Molecular Design (TRIPOS) sales were slightly lower in the first quarter of
1994 than the corresponding period in 1993. Sales of third party hardware
are down from the 1993 level, and higher margin software sales are slightly
ahead of 1993. The SEC is currently reviewing a FORM 10 filing made March
16, 1994 for the proposed spin-off of Tripos in the form of a tax free
dividend to shareholders.
The sales decline in the world civil training business in the first quarter of
1994 compared to the corresponding 1993 period continues to reflect the general
weak condition of the world's airlines and the uncertainty caused by the
purchase of Hughes Rediffusion Simulation Limited, the Company's long term
marketing outlet, by Thomson CSF, a large French simulation company.
Discussions between Thomson and the Company continue as both parties seek a
solution to Thomson's desire to cancel the marketing agreement that existed with
Rediffusion prior to Thomson's acquisition. Based on the orders for new
equipment in the civil airlines industry, the market should experience some
recovery, but not in 1994.
Education and entertainment sales are down, but are expected to respond
positively as jointly developed installations with Iwerks Entertainment begin
operating near mid-year.
Cost of Sales
- - -------------
Cost of sales, as a percentage of sales, were 45.7% for the three months of 1994
compared to the 50.0% rate experienced during the corresponding 1993 period.
Costs were lower during the quarter due to: 1) percentage of completion type
contracts in the Simulation business coming in with lower than estimated costs;
2) a larger number of higher-margin CDRS shipments during the quarter; 3) cost
reductions resulting from the Company restructuring that took place in January.
Expenses
- - --------
Total expenses for the three months of 1994 decreased $1,039,000 (6%) below the
corresponding 1993 period.
Marketing, General, and Administrative: Marketing, general, and
---------------------------------------
administrative expense decreased $1,055,000 (11%) in 1994, however, as a
percent of sales, the costs remained constant at 31%. The overall cost
decrease was primarily due to the restructuring efforts that took place
in January of 1994.
Research and Development: Company-funded research and development
-------------------------
increased $17,000 in 1994 and was 29% as a percentage of sales, compared
to 26% in 1993. A $251,000 cost increase in the Design systems group was
mostly offset by a Tripos cost decrease of $239,000.
Other Income (Expense), Net
- - ---------------------------
Other income increased from a $38,000 loss in the first quarter of 1993 to a
$1,504,000 gain in 1994, due primarily to a gain of $1,408,000 from the sale of
marketable securities. Interest income increased by $48,000 as the amount of
temporary cash investments increased. The Company repurchased some of its
interest-bearing convertible debentures resulting in an interest expense
decrease of $25,000. There was also an increase in the gain from foreign
currency exchange from $4,000 in 1993 to $41,000 in 1994.
Income Taxes
- - ------------
A tax rate of 38% was utilized for income tax transactions in both the first
quarter of 1993 and 1994.
-11-
<PAGE>
LIQUIDITY & CAPITAL COMMITMENTS
- - -------------------------------
Funds to support the Company's operations come mainly from: net cash provided by
operating activities, sales of marketable securities, and proceeds from employee
stock purchase and option plans. The Company also has cash equivalents and
temporary cash investments which can be used as needed for operating funds.
Cash and cash equivalents and temporary cash investments increased $3,733,000 to
$82,269,000 during the first quarter of 1994 principally due to the increase in
customer deposits, the sale of stock to employees, and the sale of marketable
securities. The value of company-owned marketable securities declined $189,000
to $14,018,000 during the same period.
There were no material capital commitments as the fiscal year 1994 began, and no
major commitments were extended during the first quarter of 1994.
The Company believes that, through internal cash generation plus the cash
investments and marketable securities identified above, it has sufficient
resources to cover its cash needs during fiscal year 1994.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- - -----------------------------------------
(b) There were no reports on Form 8-K filed for the three-month period
ended April 1, 1994.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-12-
<PAGE>
Evans & Sutherland Computer Corporation
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
EVANS & SUTHERLAND COMPUTER CORPORATION
---------------------------------------
Registrant
Date May 13, 1994 /s/ Gary E. Meredith
------------ -------------------------------------------
Gary E. Meredith, Vice President, Secretary,
and Chief Financial Officer
-13-
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