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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(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 2, 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 0-11626
LOTUS DEVELOPMENT CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2757702
---------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
55 Cambridge Parkway, Cambridge, Massachusetts 02142
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(Address of principal executive offices)
(Zip Code)
(617) 577-8500
--------------------------------
(Registrant's telephone number, including area code)
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.
Outstanding at
Class July 31, 1994
----- --------------
Common Stock, 47,583,858
$.01 par value shares
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PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
LOTUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
---------------------------
July 2, 1994 July 3, 1993
------------ ------------
Net sales .................................. $224,009 $235,785
Cost of sales .............................. 38,868 51,034
-------- ---------
Gross margin ............................ 185,141 184,751
Expenses:
Research and development ................ 36,105 30,115
Sales and marketing ..................... 118,345 112,140
General and administrative .............. 17,259 17,161
Other (income) / expense, net (Note D) ... (1,754) 19,386
-------- ---------
Total expenses ........................ 169,955 178,802
Income before provision for income taxes ... 15,186 5,949
Provision for income taxes ................. 5,467 10,598
-------- ---------
Net income (loss) ...................... $9,719 ($4,649)
======== =========
Net income (loss) per share ........... $0.20 ($0.11)
======== =========
Weighted average common and common
equivalent shares outstanding ............. 49,257 42,551
======== =========
The accompanying notes are an integral part of
the consolidated financial statements.
1
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LOTUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Six Months Ended
---------------------------
July 2, 1994 July 3, 1993
------------ ------------
Net sales .................................. $471,001 $462,789
Cost of sales .............................. 85,276 101,413
--------- --------
Gross margin ............................ 385,725 361,376
Expenses:
Research and development ................ 70,589 61,935
Sales and marketing ..................... 236,165 218,252
General and administrative .............. 33,507 35,131
Other (income) / expense, net (Note D) ... (3,068) 19,318
--------- ---------
Total expenses ........................ 337,193 334,636
Income before provision for income taxes ... 48,532 26,740
Provision for income taxes ................. 17,472 19,122
--------- ---------
Net income ............................ $31,060 $7,618
========= =========
Net income per share .................. $0.64 $0.18
========= =========
Weighted average common and common
equivalent shares outstanding ............. 48,489 43,275
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
2
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LOTUS DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
July 2, 1994 December 31, 1993
------------ -----------------
(unaudited)
Current assets:
Cash and short-term investments (Note B) .. $452,048 $416,693
Accounts receivable, net of allowances of
$41,235 and $30,002 ..................... 168,570 217,336
Inventory (Note C) ........................ 15,220 21,220
Other current assets ...................... 28,866 20,817
-------- --------
Total current assets .................. 664,704 676,066
-------- --------
Property and equipment, net of accumulated
depreciation and amortization of $169,085
and $153,768................................. 128,230 127,437
Software and other intangibles, net of
accumulated amortization of $123,037
and $123,016 ............................... 83,779 88,625
Investments and other assets .................. 16,412 13,217
-------- --------
Total assets .......................... $893,125 $905,345
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks .................... $ 480 $ --
Current portion of long-term debt .......... -- 28,480
Accrued compensation ....................... 25,020 36,368
Accounts payable, accrued expenses and
deferred revenue.......................... 143,546 163,558
Accrued and deferred income taxes .......... 30,985 49,017
-------- --------
Total current liabilities ............. 200,031 277,423
-------- --------
Deferred income taxes ......................... 48,936 49,531
Long-term debt ................................ 50,000 50,000
Stockholders' equity:
Preferred stock, $1.00 par value,
5,000 shares authorized, none issued .... -- --
Common stock, $.01 par value,
200,000 and 100,000 shares authorized;
63,575 and 62,152 shares issued;
47,580 and 44,928 shares outstanding .... 636 622
Additional paid-in capital ................ 264,233 251,414
Retained earnings ......................... 559,319 526,554
Treasury stock, 15,995 and 17,224 shares
at an average cost of $14.44 per share .. (230,990) (248,728)
Translation adjustment .................... 960 (1,471)
-------- --------
Total stockholders' equity ............ 594,158 528,391
-------- --------
Total liabilities and stockholders'
equity .............................. $893,125 $905,345
======== ========
The accompanying notes are an integral part of
the consolidated financial statements.
3
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LOTUS DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
--------------------------
July 2, 1994 July 3, 1993
------------ ------------
Cash flows from operating activities:
Net income .................................... $31,060 $ 7,618
Depreciation and amortization ................. 42,709 43,275
Charge for purchased research and development . -- 19,900
Change in assets and liabilities, net of
effects from acquisitions:
Decrease in accounts receivable ........... 53,122 8,566
Decrease in inventory ..................... 6,856 2,829
Decrease in accrued compensation .......... (11,713) (2,700)
Decrease in accounts payable, accrued
expenses and deferred revenue............. (21,822) (955)
Increase (decrease) in accrued and
deferred income taxes..................... (18,867) 11,354
Net change in other working capital items . (9,590) (1,377)
--------- --------
Net cash provided by operating activities ......... 71,755 88,510
--------- --------
Cash flows from investing activities:
Purchases of property and equipment ........... (17,175) (13,603)
Payments for software and other intangibles ... (19,515) (18,214)
Payments for Approach acquisition ............. -- (15,363)
Proceeds from sales of (purchases of)
short-term investments, net................... 78,137 (32,324)
Other ......................................... (2,142) 3,111
--------- --------
Net cash provided by (used for) investing activities 39,305 (76,393)
--------- --------
Cash flows from financing activities:
Repayment of long-term debt .................. (28,480) (30,260)
Issuance of common stock ..................... 30,557 25,481
Purchase of common stock for treasury ......... -- (374)
Increase (decrease) in short-term borrowings .. 355 (724)
-------- --------
Net cash provided by (used for) financing activities 2,432 (5,877)
-------- --------
Net increase in cash and cash equivalents ......... 113,492 6,240
Cash and cash equivalents, beginning of year ...... 164,849 121,133
-------- --------
Cash and cash equivalents, end of second quarter .. $278,341 $127,373
======== ========
Supplemental Cash Flow Information Six Months Ended
--------------------------
July 2, 1994 July 3, 1993
------------ ------------
Interest received ............................ $6,428 $3,602
Interest paid ................................ $3,587 $5,330
Income taxes paid ............................ $36,099 $6,798
The accompanying notes are an integral part of
the consolidated financial statements.
4
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LOTUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
A) Basis of Presentation
---------------------
The accompanying unaudited consolidated balance sheets,
statements of operations, and statements of cash flows reflect
all adjustments (consisting only of normal recurring items)
which are, in the opinion of management, necessary for a fair
statement of the consolidated financial position at July 2,
1994, and of consolidated operations and cash flows for the
interim periods ended July 2, 1994 and July 3, 1993.
The accompanying unaudited condensed financial statements have
been prepared in accordance with the instructions for Form 10-Q
and therefore do not include all information and footnotes
necessary for a complete presentation of operations, the
financial position, and cash flows of the Company, in conformity
with generally accepted accounting principles. The Company
filed audited consolidated financial statements which included
all information and footnotes necessary for such presentation
for the years ended December 31, 1993 and December 31, 1992 in
conjunction with its 1993 Annual Report on Form 10-K, as
amended.
The results of operations for the interim period ended July 2,
1994 are not necessarily indicative of the results to be
expected for the year.
B) Cash and Short-term Investments
-------------------------------
Cash and short-term investments consist of the following:
July 2, 1994 December 31, 1993
------------ -----------------
Cash and cash equivalents $278,341 $164,849
Short-term investments 173,707 251,844
-------- --------
Cash and short-term investments $452,048 $416,693
======== ========
C) Inventory
---------
Inventory consists of the following:
July 2, 1994 December 31, 1993
------------ -----------------
Finished goods $ 7,658 $13,962
Raw materials 7,562 7,258
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Total $15,220 $21,220
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5
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LOTUS DEVELOPMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
D) Other (income) / expense , net
------------------------------
Other (income) / expense, net consists of the following:
Three Months Ended
------------------------------------
July 2, 1994 July 3, 1993
------------ ------------
Interest income ($4,131) ($2,763)
Interest expense 1,631 2,238
Currency transaction (gains)/losses 488 (87)
Charge for purchased research and
development -- 19,900
Other, net 258 98
------- -------
Total ($1,754) $19,386
======= =======
Six Months Ended
------------------------------------
July 2, 1994 July 3, 1993
------------ ------------
Interest income ($7,904) ($ 5,663)
Interest expense 3,392 5,069
Currency transaction (gains)/losses 711 (254)
Charge for purchased research and
development -- 19,900
Other, net 733 266
------- -------
Total ($3,068) $19,318
======= =======
E) Acquisition
-----------
In May 1994, the Company acquired all outstanding shares of
Iris Associates, Inc. ("Iris"), the privately held developer of
Lotus Notes ("Notes"), by issuing approximately 1.4 million
shares of Lotus common stock. The transaction was accounted for
as a pooling of interests. Acquired net assets of approximately
$1.7 million have been recorded at historical amounts. Prior
periods were not restated due to immateriality, and,
accordingly, results of operations have been included since the
date of acquisition. Prior to the combination, the Company
funded the development of Notes and made royalty payments to
Iris based upon product sales.
F) Subsequent Event
----------------
On July 28, 1994, the Company acquired Soft-Switch Inc., a
privately held developer of electronic mail message switches
that link disparate electronic messaging systems, for
approximately $63 million in cash. The acquisition will be
accounted for in the third quarter of 1994 using the purchase
method. A significant portion of the purchase price will be
allocated to purchased research and development, which will
result in a one-time charge to the Company's third quarter
operations. The charge will not be deductible for tax purposes.
G) Income Taxes
------------
The Internal Revenue Service ("IRS") is examining the Company's
U.S. income tax returns for the years 1985 through 1989. The
IRS has proposed adjustments to the income tax returns for that
period. The Company will contest these adjustments and believes
that any sustained adjustments from the IRS examination will not
be material to the financial statements, as it believes it has
provided adequate reserves.
6
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ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
- - ---------------------
Revenue for the second quarter of 1994 decreased 5% over the
comparable period in 1993. The overall revenue decline reflects a 19%
decrease in desktop applications revenue and an $8 million
reduction in revenue (3% of total second quarter 1993 revenue)
from the One Source business, which was sold in September 1993,
partially offset by a 106% increase in revenue from
communications products and services.
Lotus' desktop applications include spreadsheets, word
processing, graphics, end-user database and personal information
management software products. Revenue from desktop applications
represented 67% of total revenue in the second quarter of 1994
compared to 82% of revenue in the second quarter of 1993. The
decline in desktop revenue over the same period in 1993 is
attributable to a number of factors, including the continued
migration of users from DOS-based to Windows-based applications,
the Company's position in its product cycle compared to its
competitors, and the transition by the Company to a new sales
program for large volume customers. These factors are expanded
upon below.
DOS desktop revenues, primarily spreadsheets, declined
approximately $25 million over the corresponding period in 1993.
The marketplace migration from DOS to Windows adversely affects
the Company, as its current market share for Windows
spreadsheets is lower than that for DOS spreadsheets. However,
the Company believes that the magnitude of the decline in
DOS-based revenue in 1994 should not be as dramatic as that
experienced in 1993 as DOS-based revenue continues to represent
a smaller share of overall revenue.
The Company was in a stronger product cycle in the second
quarter of 1993 as compared to the second quarter of 1994.
Second quarter 1993 desktop application sales were boosted by
the shipment of the latest version of 1-2-3 for Windows in June
1993. Additionally, in the prior year period, there was a
higher demand for standalone applications as compared to suites
and the Company was selling relatively new versions of each
standalone product. In the current period, market demand
continued to shift from standalone applications to suites and
the Company's suite offering, SmartSuite, had not been updated
since September 1993.
The Company had anticipated that certain desktop products would
ship in the second quarter of 1994. These products did not ship
during the quarter, and the Company believes these delays
contributed to a decrease in sales as end users deferred
purchases in anticipation of new product offerings by the
Company or purchased competitive products. This, in turn,
reduced orders from resellers at the end of the quarter when
inventories are customarily replenished. The Company believes
that these effects were magnified by the introduction in 1994 of
several competitive product upgrades by the Company's largest
competitor, Microsoft. The Company will ship upgrades of 1-2-3
for Windows, SmartSuite, Lotus Approach, 1-2-3 for DOS, as well
as point releases of Ami Pro and Freelance Graphics, during the
third quarter of 1994. Product delays are common in the computer
software industry because product development, quality assurance
testing and debugging are very complex and often take longer than
expected. The delays experienced by Lotus in the second quarter
of 1994 were the result of delays in the quality assurance and
debugging process.
In May 1994, the Company launched Passport, a new channel
sales program aimed to strengthen its competitive position in
selling to large volume customers. Prior to Passport,
contract-based sales activity was consummated through the
Company's own direct sales force. Through Passport, the
Company is seeking to expand sales coverage to these customers
by enlisting the considerable selling resources of its reseller
channel partners. The program implementation period was
lengthier than expected, which adversely affected revenue in the
second quarter of 1994.
Windows desktop revenue declined slightly in the second quarter
of 1994 compared to the corresponding period in 1993. Demand in
the Windows desktop applications market is shifting from
standalone applications to integrated suites. Windows
standalone desktop applications revenue declined significantly
in the current quarter, but was largely offset by a 76% increase
in revenues from SmartSuite. SmartSuite represented 46% of
Windows desktop revenue in the second quarter of 1994 compared
to 25% in the same prior year period. The Company anticipates
that sales of desktop suites will continue to account for a
growing percentage of all Windows desktop applications sales.
Consequently, the Company's ability to capture suite market
share as the market migrates from standalone applications to
suites will be a critical factor in maintaining and growing
desktop revenues.
While competition for market share remains intense for Windows
desktop applications and prices have declined in the second
quarter of 1994 compared to the same quarter in 1993, prices
have remained relatively stable during the first half of 1994.
The Company anticipates that downward pressure on pricing for
Windows applications will continue in 1994.
7
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ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations (continued)
- - ---------------------------------
Lotus' communications products and services include Notes,
cc:Mail and consulting services. Revenue from communications
products and services represented 33% of total revenue in the
second quarter of 1994 compared to 15% in the second quarter of
1993. Increased sales of communications products and services
reflect the growing momentum behind workgroup and networked
computing. While the Company is not aware of any significant
competition with respect to Notes, which was last updated in May
1993, it anticipates that its competitors will offer competing
workgroup computing products in the future.
Revenue outside the U.S. accounted for 49% of worldwide revenue
compared with 50% for the same period in 1993. The impact of
foreign currency fluctuations on international revenues was
insignificant.
The gross margin percentage of 83% for the second quarter of
1994 compares with 78% for the same period in 1993. The rate
was favorably affected by the achievement of manufacturing
efficiencies resulting from higher unit production volumes, the
closing of the Puerto Rican manufacturing plant in mid-1993, and
material cost reductions. The margin improvement was also
attributable to reduced manufacturing and delivery costs
resulting from an increase in license sales, the sale of the One
Source business in September 1993, and the elimination of
royalties to Iris as a result of the May 1994 merger.
The 20% increase in research and development expense quarter
over quarter reflects a constant level of desktop development
spending and significantly higher spending associated with the
development and enhancement of the Company's communications
products. To a lesser degree, higher spending was driven by
development efforts to translate and localize products for
international markets. International development organizations
have continued their efforts to develop products in parallel
with U.S. product development, with the goal of achieving
simultaneous release of various language versions of new U.S.
products. Capitalized software costs for the second quarter of
1994 were $9.0 million compared with $6.0 million for the same
period in 1993. The increase was due to the number of new
products that qualified for capitalization in the current year
quarter.
Sales and marketing expenses grew 6% in the second quarter of
1994 compared with the same 1993 period. The growth was
driven by the Company's investment in its communications
business and in SmartSuite. Increased spending on advertising
and marketing programs for SmartSuite reflects the market shift
from standalone applications to integrated suites. In addition,
the Company has continued its efforts to attract users
transitioning from DOS to Windows, to expand the worldwide
support organization, and to grow the consulting services
business.
Other income and expense in 1994 consists primarily of interest
income and interest expense, and the effect of currency
transaction gains and losses. Interest income was higher in the
second quarter of 1994 compared with the second quarter of 1993
because of higher average cash and short-term investment
balances. Interest expense declined primarily due to scheduled
debt repayments.
Other income and expense in 1993 includes a second quarter
charge of $19.9 million for purchased research and development
related to the acquisition of Approach. Net income for the
three months and six months ended July 3, 1993, excluding the
$19.9 million charge, was $15.3 million or $0.35 per share and
$27.5 million or $0.64 per share, respectively.
The estimated tax rate for 1994 of 36% compares with 41% for
the second quarter of 1993. The decrease in the rate reflects
the benefit from the reinstatement of the research and
development credit in the second half of 1993 and benefits
derived from the Company's manufacturing operation in Dublin,
Ireland.
8
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ITEM 2:
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition
- - -------------------
Cash and short-term investments increased $35 million during
the first six months of 1994 to $452 million at July 2, 1994.
The two primary sources of cash flow in the first half of 1994
were $72 million of cash generated by operations and $31 million
in proceeds from the issuance of common stock under the
Company's employee stock plans. The Company used a portion of
the cash for investing and financing activities, including $17
million for the purchase of property and equipment, $20 million
for payments for software and other intangibles, and a scheduled
debt repayment of $28 million in the second quarter of 1994.
A substantial portion of the Company's cash and short-term
investments are either deposited in financial institutions
located in Puerto Rico or held by subsidiaries outside the
United States. These investments can be readily transferred to
the United States as required, subject to income and/or
withholding taxes upon repatriation. Taxes have already been
provided for the tax liability which would result.
The Company's financial reserves are represented by cash,
short-term investments and unused portions of credit facilities.
Concurrent with the maturity of one of the Company's $75
million multi-currency revolving credit agreements in June 1994,
the Company canceled its other $75 million multi-currency
revolving credit agreement. These agreements were replaced with
a new $150 million multi-currency revolving credit agreement
which expires in June 1997. The Company believes its financial
reserves and funds provided by ongoing operations are adequate
to meet future liquidity requirements.
9
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PART II. OTHER INFORMATION
ITEM 1:
LEGAL PROCEEDINGS
The Company commenced an action on July 2, 1990 in the U.S.
District Court in Boston against Borland International, Inc.
("Borland") (Civ. Action No. 90-11662-K), alleging infringement
of its copyrights in the Lotus 1-2-3 software program by
Borland's "Quattro" and "Quattro Pro" software products. The
action against Borland alleges that the "1-2-3 compatible modes"
of Quattro and Quattro Pro identically recreate substantial and
significant elements of 1-2-3's user interface, including its
menu structure and command choices. The action sought an
injunction preventing further sale of the infringing products
and seeks an award of damages, attorney's fees and costs. On
July 31, 1992, the Court found that Borland infringed the
Company's copyrights by copying the menu commands, menu command
structure, macro language and keystroke sequences of Lotus
1-2-3. On June 30, 1993, the Court ruled in the Company's favor
on all remaining liability issues except the Company's claim
that the macro "Key Reader" for Quattro Pro for DOS and Quattro
Pro for Windows infringes the Company's copyrights in 1-2-3. On
August 19, 1993, the Court found that the Key Reader infringed
the Company's copyrights, and permanently enjoined Borland from
developing, manufacturing or selling versions of Quattro Pro,
Quattro Pro SE and Quattro Pro for Windows that include
Borland's 1-2-3 compatible modes and/or its Key Reader
facility. The Court has scheduled a jury trial to determine
the amount of damages Borland owes the Company because of its
infringements. On September 10, 1993, Borland filed an appeal
from the Court's decision and the permanent injunction
pertaining to the infringing products in the United States Court
of Appeals for the First Circuit. This appeal was argued before
the Court of Appeals on April 6, 1994, before a panel that
included Chief Judge Stephen Breyer. Upon Judge Breyer's
nomination to the U.S. Supreme Court and his recusal from the
case, the First Circuit has scheduled reargument of the appeal
for October 1994.
A suit was filed against the Company on July 27, 1989, in the
U.S. District Court in New York City by REFAC International,
Ltd. ("REFAC"). The suit alleges that the Company has committed
patent infringement with respect to a U.S. patent issued in 1983
entitled "A Process and Apparatus for Converting A Source
Program Into An Object Program". The Court has determined to
resolve issues concerning validity of the patent before
addressing the alleged infringement. In July 1993, a trial was
held on one of those issues, the Company's claim that the patent
is unenforceable by reason of inequitable conduct before the
Patent Office. That issue is pending the judge's decision. If
the Company prevails on this issue, judgment will be entered on
its behalf. If it does not prevail, the Company intends to
file one or more motions for summary judgment on other grounds
claiming that the subject patent is invalid or unenforceable.
The Company believes that the claim of infringement is without
merit.
10
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PART II. OTHER INFORMATION
ITEM 1:
LEGAL PROCEEDINGS (Continued)
Commencing on June 23, 1994, six complaints were filed in the
U.S. District Court, District of Massachusetts, against the
Company and various of its officers and directors, captioned
"Jefferson Heritage Partners v. Lotus Development Corp., Jim
Manzi and Edwin Gillis" (Civ. Action No. 94-11279 (PBS)); "Fecht
v. Jim P. Manzi, Edwin J. Gillis, John B. Landry and Lotus
Development Corp." (Civ. Action No. 94-11280 (PBS)); "Cohen v.
Lotus Development Corp., Thomas Lemberg, James Manzi, Edwin J.
Gillis, John Landry, Robert Weiler and Robert P. Schechter"
(Civ. Action No. 94-11281 (PBS)); "Dollinger v. Lotus
Development Corp., Thomas Lemberg, James P. Manzi, Edwin J.
Gillis, John B. Landry, Robert K. Weiler and Robert P.
Schechter" (Civ. Action No. 94-11291 (PBS)); "Rosenbaum v. Lotus
Development Corp., James M. Manzi and Edwin J. Gillis" (Civ.
Action No. 94-11303 (PBS)); and "Weisman v. Lotus Development
Corp., James M. Manzi and Edwin J. Gillis" (Civ. Action No.
94-11308 (PBS)). Each complaint purports to state a claim for
violation of Section 10(b) of the Securities Exchange Act of
1934 and SEC Rule 10b-5 promulgated thereunder, arising out of
the alleged non-disclosure by the Company of adverse information
concerning its anticipated revenues and earnings for the second
quarter of 1994, which ended on July 2, 1994. Each complaint
also purports to be brought on behalf of a class of persons who
purchased Lotus stock during periods commencing on various dates
in April and May 1994 and terminating on June 20, 1994, when the
Company made certain public disclosures concerning its
anticipated revenues and earnings. The defendants' time within
which to respond to each complaint has been extended by
stipulation to September 9, 1994, in contemplation of
plaintiffs' filing a consolidated amended complaint. The
Company believes that the allegations of each complaint are
without merit and intends to defend these actions vigorously.
11
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PART II. OTHER INFORMATION
ITEM: 4
Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of the Company was held
on May 25, 1994.
(c) At the Annual Meeting, the shareholders of the Company
voted to approve the following proposals:
1.) With 30,385,769 votes in the affirmative, 8,077,505 in the
negative, 353,115 abstentions and 130,702 broker non-votes, the
shareholders approved the amendment of the Company's 1986 Stock
Option Plan for Non-Employee Directors to provide for an
automatic grant of options to purchase 10,000 shares of the
Company's Common Stock to newly elected directors of the Company.
2.) With 36,345,232 votes in the affirmative, 1,115,564 votes
in the negative, 355,593 abstentions and 1,130,702 broker
non-votes, the shareholders approved certain performance-based
compensation payable to the Company's Chief Executive Officer in
order to retain its deductibility for U.S. Federal Income Tax
purposes.
3.) With 30,086,792 votes in the affirmative, 8,393,925 votes
in the negative, 335,672 abstentions and 130,702 broker
non-votes, the shareholders approved an amendment to the
Company's Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock from 100 million
shares to 200 million shares.
4.) With 38,773,372 votes in the affirmative, 27,732 votes in
the negative and 145,987 abstentions, shareholders ratified the
selection of Coopers & Lybrand as auditors for the Company for
the fiscal year ending December 31, 1994.
12
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PART II. OTHER INFORMATION
ITEM 6:
Exhibits and Reports on Form 8-K
(a) Exhibits
Part I:
Exhibit 11* - Computation of Primary and Fully Diluted
Earnings per Share - page 14
Part II:
None.
(b) Reports on Form 8-K
None.
___________________
*filed herewith
SIGNATURES
----------
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.
LOTUS DEVELOPMENT CORPORATION
(Registrant)
By /s/ Edwin J. Gillis
------------------------------
Edwin J. Gillis, Senior Vice President
of Finance and Operations
(Chief Financial Officer)
By /s/ Lyn L. Benton
------------------------------
Lyn L. Benton, Vice President of
Finance and Corporate Services and
Corporate Controller
(Principal Accounting Officer)
Date: October 17, 1994
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Exhibit 11
LOTUS DEVELOPMENT CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
(in thousands, except per share data)
Three Months Ended
--------------------------
July 2, 1994 July 3, 1993
------------ ------------
Net income (loss) ................................ $9,719 ($4,649)
======= ========
Weighted average shares outstanding during
the period .................................. 47,387 42,551
Common stock equivalent shares .................. 1,870 --
------- --------
Common and common stock equivalent shares
outstanding for purpose of calculating
primary net income per share ................ 49,257 42,551
Incremental shares to reflect full dilution ..... -- --
------- --------
Total shares for purpose of calculating fully
diluted net income per share ................ 49,257 42,551
======= ========
Primary net income (loss) per share ............. $0.20 ($0.11)
======= ========
Fully diluted net income per (loss) share ....... $0.20 ($0.11)
======= ========
Six Months Ended
--------------------------
July 2, 1994 July 3, 1993
------------ ------------
Net income ...................................... $31,060 $7,618
======= ======
Weighted average shares outstanding during
the period .................................. 46,333 42,254
Common stock equivalent shares .................. 2,156 1,021
------- ------
Common and common stock equivalent shares
outstanding for purpose of calculating
primary net income per share ................ 48,489 43,275
Incremental shares to reflect full dilution ..... -- --
------- ------
Total shares for purpose of calculating fully
diluted net income per share ................ 48,489 43,275
======= ======
Primary net income per share .................... $0.64 $0.18
======= ======
Fully diluted net income per share .............. $0.64 $0.18
======= ======
14
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