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 fiscal quarter ended: June 30, 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: 1-10386
CONVEX COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1838006
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3000 Waterview Parkway
Richardson, Texas 75080
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (214)497-4000
________________________________________
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 at July 31, 1994
Common Stock - $0.01 par value 25,902,344
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CONVEX COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, Dec. 31,
Assets 1994 1993
--------- ---------
(Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 39,516 $ 43,094
Short-term investments 3,852 13,820
Receivables, net 43,077 60,145
Inventory 25,069 29,150
Current portion of long-term receivables 10,505 13,622
Prepaid expenses and other current assets 15,629 18,671
--------- ---------
Total current assets 137,648 178,502
--------- ---------
Fixed assets, net 34,592 38,910
Long-term receivables 20,121 20,566
Long-term investments 7,123 13,389
Other assets, net 4,058 2,909
--------- ---------
Total assets $ 203,542 $ 254,276
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 14,079 $ 13,529
Accrued payroll and related taxes 7,128 5,358
Current portion of notes payable 9,781 11,347
Deferred revenue 13,113 14,387
Other current liabilities 27,640 29,677
--------- ---------
Total current liabilities 71,741 74,298
--------- ---------
Long-term liabilities:
Notes payable 10,381 14,093
6% convertible subordinated debentures 53,500 53,500
--------- ---------
Total long-term liabilities 63,881 67,593
Shareholders' equity:
Preferred stock ($.01 par value); 5,000,000 shares authorized, -- --
and none outstanding
Common stock ($.01 par value); 40,000,000 shares authorized;
25,883,477 shares and 25,522,883 shares outstanding
in 1994 and 1993, respectively 259 255
Additional capital 150,685 148,973
Accumulated (deficit) (80,958) (33,283)
Cumulative translation adjustment (2,066) (3,560)
--------- ---------
Total shareholders' equity 67,920 112,385
--------- ---------
Total liabilities and shareholders' equity $ 203,542 $ 254,276
========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
CONVEX COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ---------------------
1994 1993 1994 1993
--------- --------- --------- ----------
Revenue:
<S> <C> <C> <C> <C>
Product and other revenue $ 16,380 $ 28,650 26,742 $ 70,372
Service revenue 18,647 16,440 36,704 33,802
--------- --------- --------- ----------
Total revenue 35,027 45,090 63,446 104,174
Costs and expenses:
Cost of product and other revenue 11,938 17,497 20,218 38,435
Cost of service revenue 12,403 11,824 24,718 23,831
Research and development 8,205 8,757 16,074 17,334
Selling, general and administrative 15,441 18,177 30,877 35,026
Restructuring and other charges 18,345 31,500 18,345 31,500
--------- --------- --------- ----------
Total costs and expenses 66,332 87,755 110,232 146,126
--------- --------- --------- ----------
Operating income (loss) (31,305) (42,665) (46,786) (41,952)
Other income (expense), net (488) (752) (775) (1,398)
--------- --------- --------- ----------
Income (loss) before provision
for income taxes (31,793) (43,417) (47,561) (43,350)
Provision (benefit) for income taxes 50 (1,596) 114 (1,575)
--------- --------- --------- ----------
Net income (loss) $(31,843) $(41,821) (47,675) $ (41,775)
========= ========= ========= ==========
Net income (loss) per common and common
equivalent share $ (1.23) $ (1.67) (1.85) $ (1.67)
========= ========= ========= ==========
Weighted average number of common and common
equivalent shares outstanding 25,854 25,110 25,762 25,024
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
CONVEX COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
----------------------
1994 1993
Operating activities: --------- ---------
<S> <C> <C>
Net income (loss) ($47,675) ($41,775)
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization 15,337 15,632
Deferred income taxes 223 2,000
Foreign currency (gains) losses (488) 146
Changes in assets and liabilities:
Decrease in receivables 18,617 2,900
Decrease in inventory 4,289 2,857
Decrease (increase) in prepaid expenses and other current assets 4,077 (3,068)
Decrease in long-term receivables 3,652 2,768
Increase (decrease) in accounts payable 390 (7,101)
(Decrease) in income taxes payable (1,563) (521)
Increase in other current liabilities 631 16,773
(Decrease) increase in deferred revenue (2,325) 2,364
--------- --------
Total adjustments 42,840 34,750
--------- --------
Net cash (used for) operating activities (4,835) (7,025)
--------- --------
Investing activities:
(Additions) to fixed assets, net (9,909) (7,103)
Decrease in short-term investments 9,968 9,872
Decrease (increase) in long-term investments 6,266 (1,714)
(Increase) in other assets (1,947) (438)
Foreign currency hedging activity (1,093) (135)
--------- --------
Net cash provided by investing activities 3,285 482
--------- --------
Financing activities:
Issuance of common stock under stock option and purchase plans, net 1,716 1,895
Proceeds from long-term debt 917 4,366
Principal payments on long-term debt (6,195) (6,486)
--------- --------
Net cash (used for) financing activities (3,562) (225)
--------- --------
Effect of exchange rate fluctuations on cash and cash equivalents 1,534 361
--------- --------
(Decrease) in cash and cash equivalents (3,578) (6,407)
Cash and cash equivalents, beginning of period 43,094 52,599
--------- --------
Cash and cash equivalents, end of period $39,516 $46,192
========= ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
CONVEX COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation of Interim Financial Statements
The accompanying unaudited consolidated financial statements
of Convex Computer Corporation and subsidiaries (the "Company")
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information in
footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted pursuant to
those rules and regulations. However, the Company believes that
the disclosures contained herein are adequate to make the
information presented not misleading. It is suggested that these
financial statements be read in connection with the financial
statements and notes thereto included in the Company's most recent
annual report to shareholders.
While the financial information furnished is unaudited, the
financial statements included in this report reflect all
adjustments (consisting of normal, recurring adjustments except
those provided for during 1993 and 1994 as part of the
restructuring) which the Company considers necessary for a fair
presentation of the results of operations for the interim periods
covered and of the financial condition of the Company at the
interim balance sheet dates. In order to maintain consistency and
comparability between periods presented, certain amounts have been
reclassified from the previously reported 1993 financial
statements in order to conform to 1994 presentation.
Inventory
Inventory is recorded at the lower of cost (on a first-in,
first-out basis) or market. Cost includes purchased materials,
manufacturing labor and manufacturing overhead. Inventory
consists of the following (in thousands):
June 30, Dec. 31,
1994 1993
-------- ---------
Raw material $13,100 $ 9,489
Work-in-process 4,272 5,044
Finished goods 7,697 14,617
--------- ---------
$25,069 $29,150
========= =========
Income Taxes
The provision for income taxes for the three months ended
June 30, 1994 is $50,000 on a pretax net operating loss of
$31,793,000. The provision for the same period of 1993 was
$1,596,000 tax benefit on a pretax net operating loss of
$43,417,000. This provision reflects anticipated income (loss)
before taxes, including an estimate of income by taxing
jurisdiction. The Company estimates that it will have no tax
benefit for the year from domestic net operating losses, but
certain foreign subsidiaries with net operating income will have
tax expense. The Company has unused foreign and domestic net
operating losses available to offset future income.
Earnings per Common and Common Equivalent Share
The computation of primary earnings per share is based on the
weighted average number of common and common equivalent (stock
options) shares assumed to be outstanding during the period. In
periods of net loss, common stock equivalents have been excluded
from the computation since the effect of their inclusion would be
anti-dilutive.
The number of shares used in the computation of primary
earnings per share is determined as follows (in thousands):
Three Months Ended Six Months Ended
------------------- --------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
--------- --------- --------- --------
Weighted average
common shares
outstanding during
the period 25,854 25,110 25,762 25,024
Dilutive common share
equivalents related to
outstanding stock options -- -- -- --
--------- --------- --------- --------
Weighted average shares
used in computations 25,854 25,110 25,762 25,024
========= ========= ========= =========
Legal Proceedings
On August 2 and 7, 1991, two separate complaints were filed
against the Company and certain of its officers and directors in
the United States District Court for the Northern District of
Texas. The two cases were consolidated. Plaintiffs filed a
Consolidated Amended Complaint (the "Amended Complaint") on
October 18, 1991, which purports to be a class action lawsuit on
behalf of persons who purchased the Company's stock between
January 31, 1991 and July 29, 1991. The Amended Complaint alleges
that defendants violated specific provisions of the federal
securities laws, namely Sections 10(b) and 20(a) of the Securities
and Exchange Act of 1934 and Rule 10b-5 promulgated thereunder,
and Texas common law.
On August 1, 1994, the court approved an agreement to settle
this class action lawsuit. The Company included a charge for the
$2.5 million estimated cost of settlement in the fourth quarter
1993.
Restructuring and Other Charges
The Company has implemented restructuring actions in 1993
and 1994 both primarily related to the C3 product line. These
actions were designed to reduce costs and increase the efficiency
of the Company's operations. The actions included, among other
items, severance of employees, the consolidation and elimination
of certain facilities, the estimated costs of the write-down of
certain of the Company's assets including inventory and fixed
assets, as well as miscellaneous charges for other matters.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company reported revenues of $35 million in the second
quarter of 1994, and a net loss of $32 million, including
restructuring and other charges of $18 million. While customer
demand was below the levels of a year ago, product revenue showed
improvement from the low level experienced in the first quarter of
1994. Margins were 31% for the quarter versus 35% in the same
quarter a year ago and 28% in the previous quarter. Excluding the
restructuring and other charges, expenses were down $3 million
from the second quarter of 1993 and about equal to the first
quarter of 1994. The combination of the low revenue, fixed
overhead expenses and the restructuring and other charges resulted
in the large loss for the quarter.
In June the Company announced the shipment of the first
C4600, which represents the second major product introduction in
1994. This fourth generation C Series system typically provides
up to ten times the performance of the mid-range Convex product
offerings. Unit shipments of the Company's new PA-RISC based
Exemplar systems, introduced in March of 1994, increased
approximately 50% over the first quarter of 1994. While the
Company plans to increase the level of shipments of both products
in the second half of 1994, the Company expects overall order
rates for at least the next quarter to remain below the level
needed to achieve break-even operating results.
The Company believes that order rates for the Company's
products will continue to be adversely affected by economic
uncertainties and tight customer budgets. In addition, customers
in the high-performance technical marketplace are faced with a
wide array of choices of technology which the Company believes
will also result in delayed buying decisions, lengthened sales
cycles and intense price competition. As a result, the Company
expects to see continued pricing pressure throughout 1994.
Cash and investments decreased $8 million in the second
quarter of 1994. The Company expects cash to continue to decrease
as a result of below break-even operating results and the working
capital requirements associated with the anticipated increase in
production of both the C4600 and the Exemplar product families.
Revenue
Total revenue for the second quarter of 1994 was $35 million,
a 22% decrease from the $45 million reported for the second
quarter of 1993 and a 23% increase from the $28 million reported
for the first quarter of 1994, as shown in the table below:
Quarter ended
____________________________
Revenue ($000,000) 6/30/94 6/30/93 3/31/94
_________________ _______ _______ _______
Product and Other 16 29 10
Service 19 16 18
Total 35 45 28
6/30/94 Quarter Revenue -
Percent change from quarter ended
_________________________________
Product and Other Revenue - -43% 58%
Service Revenue - 13% 3%
Total Revenue - -22% 23%
Unit Shipments
_____________
C4600 1 - -
C3800 1 5 2
C3400/3200 5 19 4
Meta Series 3 7 4
Exemplar SPP 11 - 7
The 43% decline in product revenue versus the second quarter
of 1993 and the 58% increase versus the previous quarter reflect
the shift from the C3 product lines to the new C4 and Exemplar
scalable parallel SPP products. The Company continues to
experience a high level of competition from workstations in the C3
series compute-server markets, and generally has not been able to
increase the revenue levels from the new product shipments fast
enough to offset declining revenues from the C3 product lines.
Product revenues in the second quarter of 1994 did increase from
the low level experienced in the first quarter of 1994, but remain
below the levels of a year ago.
The Company introduced the C4600, the fourth generation of
the C Series product line in June 1994. Initial customer
shipments were single processor systems, with availability of full
scalability planned for the third quarter of 1994. The C4600 uses
high density gallium arsenide technology, scales up to four
processors, and is fully compatible with all C Series software.
Shipments of the Company's new PA-RISC based Exemplar SPP
increased approximately 50% over the first quarter of 1994,
including the first shipments of the Company's CD (Compact Design)
model. The Exemplar product line is the Company's new scalable
parallel product, first announced and shipped in mid-March of this
year. Each system consists of a single eight processor hypernode,
with larger configurations planned for introduction in the second
half of 1994, based on the anticipated completion of product
enhancements which add scalabilty and flexibility features.
Service revenue increased 13% in the second quarter of 1994
versus the same quarter in 1993 and was 3% above the first quarter
of 1994. Service revenue includes both maintenance contracts as
well as systems integration revenue, and accounted for 53% of the
Company's total revenue in the second quarter of 1994. Systems
integration is a line of business the Company entered during 1992
in which it performs a service for the customer by integrating
hardware and software from other vendors with Convex hardware and
software. Systems integration revenue includes the third party
integration components of both the data management business and
the Meta Series product line. The change in the service revenue
across these periods is primarily due to the fluctuations in the
level of systems integration business. The Company believes the
amount of systems integration revenue will fluctuate from
quarter-to-quarter and will depend to a large degree on the
success of the data management business. In addition, the Company
believes that in 1994, maintenance contract revenue will show
little or negative growth unless the Company is able to achieve
growth in product revenues.
The Company believes the current economic and competitive
environment is causing its customers and prospects to reduce their
capital spending levels and to delay making decisions to purchase
high dollar capital goods such as the Company's products. While
the Company has introduced two new product families in 1994, the
Company expects customers to continue their conservative buying
habits and to link their commitments to the availability of full
product features and third party software availability, both of
which are expected to improve through the second half of 1994.
The Company manufactures and ships its products as promptly
as practicable upon receipt of a purchase order, and generally
does not maintain a significant backlog. At the end of the second
quarter of 1994, the Company had received orders for five C4600's,
had recognized revenue on one system, and had delivered two
additional systems to customers. For the Exemplar family, the
Company delivered six Exemplar SPP hypernodes to customers in the
second quarter of 1994 in addition to the 11 shown in the Unit
Shipment Table. Revenue on the shipments of both the additional
C4600's and the SPP nodes is dependent on product enhancements
which are expected to be available in the second half of 1994.
The Company's future financial performance will depend to a large
degree on its ability to complete these product enhancements for
both product families and its ability to generate new orders for
shipment in the same quarter in which the orders are received.
Finally, because a significant portion of the Company's
shipments occur in the last month of a quarter, minor timing
differences in the receipt of customer purchase orders and in the
Company's shipments can have a significant impact on the Company's
quarterly financial results. Due to the high average selling
price and low unit volume of the Company's sales, failure to
complete a small number of sales transactions before the end of a
quarter can have a significant negative impact on financial
results.
Gross Margin
Gross margins declined to 31% of revenue in the second
quarter of 1994 versus 35% in the second quarter of 1993 and 28%
in the first quarter of 1994. The change in total margin is primarily
due to a change in product margin.
Quarter ended
____________________________
Gross Margins % Revenue 6/30/94 6/30/93 3/31/94
______________________ ________ _______ ________
Product Margin 27 39 20
Service Margin 33 28 32
Total Margin 31 35 28
Product margin declined to 27% in the second quarter of 1994
versus the 39% achieved in the second quarter of 1993. While
approximately 4 points of this decline is attributable to the
fixed overhead absorption on the lower volume, the remaining
decrease is believed to be due to increased pricing competition on
the C3 product lines and higher than expected start up costs for
the Exemplar SPP product line. Improvement in the Company's
product margin is dependent on two factors: Market acceptance and
the general competitiveness of the new products and higher total
product volume which would improve fixed overhead absorption
compared to the second quarter.
Gross margin on the service business has not shown the same
volatility although the slightly higher margin percentage in the
second quarter of 1994 was due primarily to higher than normal
margins on the systems integration business.
Expenses
Expenses for the second quarter of 1994 were held constant
with the previous quarter, after adjusting for Restructuring and
Other charges. Expenses were $3 million below the same quarter in
1993, with reductions in all areas. The Company intends to
tightly manage resources and overhead expense levels through the
balance of 1994. The restructuring actions taken in July are
intended to achieve a $12 million reduction in expenses on an
annual basis.
Quarter ended
____________________________
Expenses ($000,000) 6/30/94 6/30/93 3/31/94
____________________ _________ ________ ________
Research and Development 8 9 8
Selling, General and Administrative 15 18 15
Restructuring and Other 18 32 -
Quarter ended
____________________________
Expenses % Revenue 6/30/94 6/30/93 3/31/94
______________________ _______ ________ ________
Research and Development 23 19 28
Selling, General and Administrative 44 40 54
Restructuring and Other 52 70 -
Research and Development
Research and development expenditures were $8 million in the
second quarter of 1994, down 6% from the second quarter of 1993
and up 4% from the first quarter of 1994. These expenditures have
decreased as a percentage of revenue versus the first quarter of
this year but are still above the rate of a year ago. The Company
has achieved the aggressive goal of bringing two new product
families to market in the first half of 1994 and remains committed
to aggressive efforts to complete the enhancements needed to reach
full product capability.
The Company's new scalable parallel Exemplar product family,
announced in mid-March and based on Hewlett-Packard Company's
PA-RISC technology, introduced both a completely new hardware
platform and a completely new suite of software products. The
software products include a new operating system that incorporates
components from several sources. The integration and performance
tuning of these components is critical to the overall success of
the product. These efforts will continue throughout 1994 as the
development efforts for the top-end of the product line are
completed. There can be no assurance that overall performance of
the new operating system will reach satisfactory levels as a
result of these efforts. Market acceptance of this product family
is also highly dependent on third party software vendors porting
their applications to the product. While the Company is working
with a number of vendors to accomplish this result, there can be
no assurance that the third-party vendors will undertake the
necessary efforts, or that the porting efforts will yield
competitive software applications on the Company's new product.
In June the Company also announced the C4600, the next
generation C Series. This generation is intended to replace the
existing C3 Series products. The C4600 is compatible with
existing C Series products and delivers improved performance at
approximately the same prices as the existing products. Delivery
of this product line is dependent on the Company receiving a
number of key leading edge semiconductor components from its
supplier. While the Company believes that it will receive the
necessary devices, there can be no assurance that the supplier
will be capable of manufacturing these devices in quantities
sufficient to allow the Company to achieve volume production.
In addition, there are still significant technical and
manufacturing uncertainties involved in the Company successfully
bringing these new products to the market. There can be no
assurance that the Company's new products, once introduced, will
gain market acceptance, or that the Company will receive adequate
supplies of critical components.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the second
quarter of 1994 were equal to expenses in the first quarter of
1994 and $3 million below the second quarter of 1993. The $3
million decrease from second quarter of 1993 is approximately
equal to the expected result of the restructuring actions taken in
1993. These expenses as a percentage of revenue have decreased in
the second quarter of 1994 versus the first quarter of 1994, but
are still above the rate of a year ago. The Company believes the
current selling resources are sufficient to support the new
products introduced in 1994.
Restructuring and Other Charges
In July the Company implemented a restructuring program
designed to lower the Company's break-even point by
reducing annualized costs by approximately $12 million. The
expense reductions include payroll and benefit expenses of
approximately $6 million and depreciation and miscellaneous
expense reductions of $6 million. The charge for restructuring
and other expenses taken in the second quarter of 1994 reflected a
decision to write down certain assets based on projections of
reduced prices and demand for both the C3800 and C3400 product
families. The $18 million charge taken in the second quarter
comprised $2 million for severance costs of approximately 65
employees and $16 million for costs associated with reducing the
value of inventory for the C3 product lines as well as assets
associated with the work force reduction and the phase down of the
C3 product line.
The Company also provided $36 million for restructuring and
other charges in 1993, with $32 million of the total provided in
the second quarter of 1993. The 1993 charge required cash
expenditures of $17 million and at the end of the second quarter
of 1994, approximately $5 million of this charge had not been
spent, primarily the $2.5 million provided to settle the class
action lawsuit. The $18 million charge for restructuring and
other expenses taken in the second quarter of 1994 will require
cash expenditures of approximately $3 million, all funded from
working capital. Of this amount, none had been spent at the end
of the second quarter of 1994. The Company expects the remaining
1993 balance of $5 million and the additional $3 million required
by the 1994 charge to be substantially spent by the end of 1994.
The Company ended the second quarter of 1994 with 957
employees, 223 fewer than the previous year. The work force
reduction implemented in July 1994 will reduce the number of
employees to less than 900.
Other Income and Expense
Other income for the second quarter of 1994 was a $.5 million
expense, which is slightly lower than the expense level in the
second quarter of 1993 and slightly higher than the expense level
in the first quarter of 1994. This item consists of interest
earned less interest expenses incurred and certain costs
associated with implementing the Company's foreign currency
hedging program.
The first quarter of 1994 benefited from an increase in
interest income due to an adjustment based on a U.S. tax refund;
however, interest income will continue to decline in line with the
decreasing cash balances.
Income Taxes
The operating loss for the Company in the second quarter of
1994 is anticipated to result in no U.S. tax benefit in the
current year. The Company believes it may incur tax expenses in
various foreign subsidiaries which could result in a net tax
expense for the year. At June 30, 1994, the Company had foreign
and domestic operating loss carryforwards which are available to
offset future taxable income. The realization of the tax
benefits related to the loss carryforwards is dependent on the
future profitability of the Company and its foreign subsidiaries.
Liquidity and Capital Resources
During the second quarter of 1994, the Company's cash and
investments balance declined by $8 million. This follows a
decline of $11 million in the first quarter of 1994. The Company
made progress in reducing the utilization of current assets from
the high rates reported in the first quarter of 1994, including a
reduction in receivable days from 143 to 111. The Company spent
$6 million during the quarter for fixed asset additions,
reflecting the higher level of investment required to support the
introduction of the two new product families. This brings the
total fixed asset additions for the first half of 1994 to $10
million. The Company expects the rate of capital expenditures in
the second half of 1994 to be at or slightly below the rate of the
first half.
The Company's cash, cash equivalents and investment balances
totaled approximately $50 million at the end of the second quarter
of 1994. With financial performance in the near term expected to
be below break-even, the Company expects cash balances to
decrease. If the Company is able to successfully execute its
plans to improve the utilization of current assets, then the
Company believes its current sources of liquidity will be
sufficient to fund the growth in revenue and margin levels to
reach the rates needed to achieve break-even operation by the end
of 1994. The Company will work to secure lines of credit or other
funding sources in the second half of 1994 to fund possible
additional working capital requirements that would result from higher
anticipated new product revenues.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May
12, 1994. At the Annual Meeting, the following matters were voted
upon and approved: (i) the election of Robert J. Paluck
(19,536,776 shares voted for such matters and 658,586 negative
votes were cast), H. Berry Cash (19,550,053 shares voted for such
matters and 645,309 negative votes were cast), Erich Bloch
(19,550,956 shares voted for such matters and 644,406 negative
votes were cast), Sam K. Smith (19,544,486 shares voted for such
matters and 650,876 negative votes were cast), Stephen J. Wallach
(19,538,634 shares voted for such matters and 656,728 negative
votes were cast) and Howard D. Wolfe (19,550,653 shares voted for
such matters and 644,709 negative votes were cast) as directors of
the Company to serve until the next Annual Meeting of Stockholders
and until each director's successor has been elected and
qualified; (ii) the approval and ratification of an amendment to
the 1991 Stock Option Plan that would increase the number of
shares reserved for issuance thereunder from 3,760,000 to
4,960,000 (15,799,808 shares voted for such matters, 4,298,906
negative votes were cast and 96,648 abstained); and (iii) the
ratification of the appointment of Ernst & Young as independent
public accountants of the Company for the 1994 fiscal year
(19,894,267 shares voted for such matters, 143,117 negative votes
were cast and 157,978 abstained).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
No exhibits are required with this 10-Q filing.
b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the fiscal quarter ended June 30, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CONVEX COMPUTER CORPORATION
Registrant
BY: J. CAMERON MCMARTIN
---------------------
J. Cameron McMartin
Chief Financial Officer and
Vice President, Finance
(Principal Finance and
Accounting Officer)
Dated: August 12, 1994
