<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 March 31, 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 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 May 4, 1995
----------------------------- ---------------------------------
Common Stock, $0.20 par value 8,629,319
<PAGE>
FORM 10-Q
EVANS & SUTHERLAND COMPUTER CORPORATION
QUARTER ENDED MARCH 31, 1995
Page No.
TABLE OF CONTENTS 2
PART I - FINANCIAL INFORMATION
GENERAL STATEMENT 3
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Earnings - Three Months Ended
March 31, 1995 and April 1, 1994 4
Consolidated Balance Sheets - March 31, 1995 and
December 30, 1994 5-6
Consolidated Condensed Statements of Cash Flows - Three
Months Ended March 31, 1995 and April 1, 1994 7
Notes to Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-11
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURE PAGE 13
2
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
PART I - FINANCIAL INFORMATION
GENERAL STATEMENT:
The following Consolidated Statements of Earnings, Consolidated Balance Sheets,
and Consolidated Condensed 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 presentation 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.
The results of operations for any interim period are not necessarily indicative
of results for a full year. These condensed financial statements should be read
in conjunction with the financial statements and notes thereto contained in the
Company's annual report on Form 10-K for the year ended December 30, 1994 as
filed with the Securities and Exchange Commission.
3
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED
MARCH 31, 1995 AND APRIL 1, 1994
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
-----------------------
March 31, April 1,
1995 1994
--------- ---------
<S> <C> <C>
Net sales $19,286 $26,860
Cost of sales 8,522 12,277
---------- ---------
Gross profit 10,764 14,583
Expenses:
Marketing, general and administrative 7,938 8,336
Research and development 6,208 7,886
---------- ---------
Total expenses 14,146 16,222
Operating loss (3,382) (1,639)
Other income (expense), net 4,339 1,504
---------- ---------
Earnings (loss) before income taxes and extraordinary gain 957 (135)
Income tax expense (benefit) 359 (52)
---------- ---------
Earnings (loss) before extraordinary gain 598 (83)
Extraordinary gain from repurchase of
convertible debentures, net of income taxes - 91
Net earnings $ 598 $ 8
========== =========
Earnings (loss) per common and common equivalent share:
Before extraordinary gain $ 0.07 $ (0.01)
Extraordinary gain from repurchase of convertible debentures - 0.01
---------- ---------
Total earnings per share $ 0.07 $ 0.00
========== =========
Weighted average number of
shares used for per share
earnings computation: 8,563 8,474
</TABLE>
4
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 30, 1994
(U.S. Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 30,
1995 1994
Assets (Unaudited) (Audited)
- - -------- ----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 33,001 $ 25,213
Short-term investments 21,557 26,597
Receivables:
Trade accounts, less allowance for
doubtful receivables of $135 in
1995 and $144 in 1994 19,801 20,724
Income taxes 2,345 1,633
Interest 827 1,142
Employees and other 1,179 150
----------- -----------
Total receivables 24,152 23,649
Inventories, net (note 1) 29,937 26,192
Costs and estimated earnings in excess of
billings on uncompleted contracts, net 12,186 18,549
Deferred income tax 5,422 6,561
Prepaid expenses and deposits 634 1,425
----------- -----------
Total current assets 126,889 128,186
----------- -----------
Property, plant, and equipment, at cost 105,513 104,466
Less accumulated depreciation and amortization 64,571 62,802
----------- -----------
Net property, plant, and equipment 40,942 41,664
Long-term investments:
Marketable equity securities
available-for-sale, at fair value 6,168 7,277
Other 35 35
----------- -----------
Total long-term investments 6,203 7,312
Other assets, at cost, less
accumulated amortization 1,797 1,578
----------- -----------
Total assets $175,831 $178,740
=========== ===========
</TABLE>
5
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 30, 1994
(U.S. Dollars in Thousands)
<TABLE>
<CAPTION>
March 31, December 30,
1995 1994
Liabilities and Stockholders' Equity (Unaudited) (Audited)
- - -------------------------------------- ----------- ------------
<S> <C> <C>
Current liabilities:
Notes payable to banks $ 3,041 $ 1,817
Accounts payable 1,561 2,401
Accrued expenses 11,512 15,556
Customer deposits 9,387 9,182
----------- ------------
Total current liabilities 25,501 28,956
----------- ------------
Convertible subordinated debentures 20,375 20,375
Deferred income taxes 2,008 2,291
Stockholders' equity:
Common stock, $.20 par value; authorized
30,000,000 shares; issued and outstanding
8,624,774 shares at March 31, 1995 and
8,522,106 shares at December 30, 1994 1,725 1,710
Additional paid-in capital 3,823 2,850
Retained earnings 119,849 119,251
Net unrealized gain on securities
available-for-sale. 2,437 2,847
Cumulative translation adjustment 413 460
Common stock in treasury (300) -
----------- ------------
Total stockholders' equity 127,947 127,118
----------- ------------
Total liabilities and stockholders' equity $175,831 $178,740
=========== ============
</TABLE>
6
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
MARCH 31, 1995 AND APRIL 1, 1994
(U.S. Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
(Unaudited)
-------------------------------
March 31, April 1,
1995 1994
--------- ---------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (1,027) $ 1,567
Cash flows from investing activities:
Capital expenditures (1,390) (883)
Proceeds from sale of marketable securities 3,479 1,575
Proceeds from temporary cash investments 5,040 4,627
Other - (372)
-------- -------
Net cash provided by investing activities 7,129 4,947
Cash flows from financing activities:
Payments for repurchase of convertible debentures - (945)
Net proceeds from issuance of common stock 687 2,732
Net borrowings under line of credit agreements 930 165
Other - (27)
-------- -------
Net cash provided by financing activities 1,617 1,925
Effect of foreign exchange rate changes on cash 69 (79)
-------- -------
Net increase in cash and cash equivalents 7,788 8,360
Cash and cash equivalents at beginning of year 25,213 3,250
-------- -------
Cash and cash equivalents at end of period $ 33,001 $11,610
======== =======
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $626 $1,188
Income taxes $ 38 $ 205
</TABLE>
7
<PAGE>
EVANS & SUTHERLAND COMPUTER CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Dollars in Thousands)
(1) Inventories are summarized as follows:
<TABLE>
<CAPTION>
March 31, December 30,
1995 1994
(Unaudited) (Audited)
----------- -------------
<S> <C> <C>
Raw materials and supplies $ 9,610 $10,498
Work-in-process 17,843 13,491
Finished Goods 2,484 2,203
------- -------
$29,937 $26,192
======= =======
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(U.S. 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 March 31, 1995
And April 1, 1994
------------------------
<S> <C> <C>
Net sales ($7,574) (28.2%)
Cost of sales (3,755) (30.6%)
------- --------
Gross profit (3,819) (26.2%)
Expenses:
Marketing, general and administrative (398) (4.8%)
Research and development (1,678) (21.3%)
------- --------
Total expenses (2,076) (12.8%)
Operating loss (1,743) (106.3%)
Other income (expense), net 2,835 188.5%
------- --------
Earnings (loss) before income taxes and extraordinary gain 1,092 808.9%
Income tax expense (benefit) 411 790.4%
------- --------
Earnings (loss) before extraordinary gain 681 820.5%
Extraordinary gain from repurchase of
convertible debentures, net of income taxes (91) (100.0%)
------- --------
Net earnings $ 590 7,375.0%
======= ========
</TABLE>
9
<PAGE>
RESULTS OF OPERATIONS
- - ---------------------
SALES
- - -----
The following table summarizes sales for the first three months of 1995 and 1994
in the four market sectors served by the Company. Sales for the first three
months of 1995 were 28% below those of the corresponding 1994 period.
Included in the first quarter of 1994 is $3,624,000 of Tripos, Inc. sales.
Tripos, Inc., a wholly owned subsidiary was spun-off June 1, 1994. In addition,
first quarter 1994 sales included a one-time favorable contract termination
settlement of $3,300,000. Excluding Tripos and the one-time settlement from the
first quarter of 1994, sales for 1995 first quarter were 3% below those of 1994.
<TABLE>
<CAPTION>
N E T S A L E S
-----------------------------------------------
First Three Months % Change
---------------------------- Increase
1995 1994 (Decrease)
----------- ---------- -----------
<S> <C> <C> <C>
Government Simulation $14,592 $18,380 ** (21)% **
Graphics Systems 3,538 7,518 * (53)% *
Commercial Simulation 403 640 (37)%
Education and Entertainment 753 322 134 %
------- -------
$19,286 $26,860 (28)%
======= =======
</TABLE>
** Includes a $3.3 million one-time favorable contract settlement.
* Includes $3.6 million in Tripos sales.
The Company previously reported in five sectors. Beginning in 1995 U.S.
Government and Engineering and International Government and Engineering sectors
are combined and reported under Government Simulation. The Government
Simulation sector in 1995, excluding the one-time contract settlement in 1994,
is 3% below 1994 sales. This sector continues to be the strongest as orders
remain strong.
In the Graphics Systems market, sales are 25% higher in the first quarter of
1995 than in the respective quarter of 1994. In November of 1994, a memorandum
of understanding with DEC was announced. The final agreement with DEC was
signed March 31, 1995. With the signing of the DEC agreement, the Company has
now formalized OEM agreements with HP, Sun Microsystems, IBM, and DEC, the four
major worldwide suppliers of computer workstations.
Design Software (CDRS), which is reported as part of the Graphics Systems
sector, had sales of $722,000 for the quarter ending March 31, 1995, compared to
$1,654,000 for the quarter ending April 1, 1994. The Company believes this
reduction in sales was due to the March 1, 1995 announcement that the Company
would sell this business to Parametric Technology Corporation (PTC). The
closing of the sale took place and was announced on April 13, 1995. Under the
sale, PTC acquired the Company's CDRS and 3D Paint software business for $34.5
million, subject to post closing adjustments.
The Commercial Simulation sales are lower in 1995 than in 1994 for the
respective first quarters. Activity in this sector reflects the continued
decline in the number of world civil aviation visual systems ordered in the last
several years. With a growth in air traffic miles and orders for new equipment,
this market is expected to begin a slight recovery in 1995 and the Company is
now positioned to offer a complete range of fully-integrated visual systems,
support, and services directly to the civil aviation marketplace.
Education and Entertainment sales increased 134% for the quarter to $753,000
compared to $322,000 for the first quarter of 1994, due largely to sales of the
Company's new DIGISTAR II planetarium system.
10
<PAGE>
COST OF SALES
- - -------------
Cost of sales, as a percentage of sales, averaged 44.2% for the three months of
1995 compared to the 45.7% rate for the corresponding 1994 period. The decrease
is attributed to the Company's restructuring activites in January of 1995 which
significantly reduced expenses.
EXPENSES
- - --------
Total expenses for the three months of 1995 decreased $2,076,000 (13%) below the
corresponding 1994 period.
Marketing, General, and Administrative: Marketing, general, and
---------------------------------------
administrative expense decreased $398,000 (5%) in 1995. Adjusting expenses
for Tripos, Inc. of $2,100,000 which were in the first quarter of 1994,
actual expenses for 1995 first quarter are higher than the respective first
quarter 1994 by $1,702,000. Increased expenses reflect efforts to re-start
our Commercial Simulation and Education & Entertainment businesses.
Research and Development: Company-funded research and development
-------------------------
decreased $1,678,000 in 1995 and was 32% as a percentage of sales, compared
to 29% in 1994. Tripos, Inc. had research and development costs of $889,000
in the first quarter of 1994 which accounted for some of this decrease and
the balance of the decrease is due to January 1995 restructuring.
OTHER INCOME (EXPENSE), NET
- - ---------------------------
Other income increased $1,504,000 from the first quarter of 1994 to a $4,339,000
gain in 1995, due primarily to an increased gain of $2,534,000 from the sale of
marketable securities. Net interest income was higher for the first quarter of
1995 compared to 1994 by $372,000. This increase was due to reduced interest
obligations on fewer convertible debentures.
INCOME TAXES
- - ------------
A book tax rate of 37.5% was utilized for income tax transactions in the first
quarter of 1995 and 38% for 1994.
LIQUIDITY & CAPITAL COMMITMENTS
- - -------------------------------
Funds to support the Company's operations come mainly from: proceeds from the
sale of temporary cash investments, sales of marketable securities, and proceeds
from employee stock purchase and option plans.
Cash and cash equivalents and short-term investments increased $2,748,000 to
$54,558,000 during the first quarter of 1995 principally due to the sale of
stock to employees and the sale of marketable securities. The value of company-
owned marketable securities declined $1,109,000 to $6,168,000 during the
quarter.
11
<PAGE>
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
March 31, 1995.
[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 11, 1995 /S/
------------ -------------------------------------------
Gary E. Meredith, Vice President, Secretary,
and Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> MAR-31-1995
<CASH> 54,568
<SECURITIES> 6,203
<RECEIVABLES> 19,936
<ALLOWANCES> 135
<INVENTORY> 29,937
<CURRENT-ASSETS> 126,889
<PP&E> 105,513
<DEPRECIATION> 64,571
<TOTAL-ASSETS> 175,831
<CURRENT-LIABILITIES> 25,501
<BONDS> 20,375
<COMMON> 1,725
0
0
<OTHER-SE> 126,222
<TOTAL-LIABILITY-AND-EQUITY> 175,831
<SALES> 19,286
<TOTAL-REVENUES> 19,286
<CGS> 8,522
<TOTAL-COSTS> 14,146
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 317
<INCOME-PRETAX> 957
<INCOME-TAX> 359
<INCOME-CONTINUING> (3,382)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 598
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
