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 Quarter Ended September 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 No. 0-13150
_____________
CONCURRENT COMPUTER CORPORATION
Delaware 04-2735766
(State of Incorporation) (I.R.S. Employer Identification No.)
2 Crescent Place, Oceanport, New Jersey 07757
Telephone: (908) 870-4500
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 _____
Number of shares of the Registrant's Common Stock, par value $0.01
per share, outstanding as of November 1, 1994 were 30,208,396.
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
Concurrent Computer Corporation
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended
September 30,
1994 1993 *
Net Sales:
Computer systems $23,873 $27,788
Service and other 17,635 21,572
Total 41,508 49,360
Cost of sales:
Computer systems 12,179 13,118
Service and other 10,552 13,390
_______ ______
Total 22,731 26,508
Gross margin 18,777 22,852
Operating expenses:
Research and development 5,421 6,224
Selling, general and administrative 10,198 13,908
Provision for restructuring - 12,000
________ ________
Total operating expenses 15,619 32,132
Operating income (loss) 3,158 (9,280)
Interest expense (724) (1,501)
Interest income 182 161
Other income (expense) - net 158 55
Income (loss) before provision for income taxes,
extraordinary loss and cumulative effect of
change in accounting principles 2,774 (10,565)
Provision for income taxes 1,100 450
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles 1,674 (11,015)
Extraordinary loss on early extinguishment
of debt - (23,193)
Cumulative effect of change in accounting
principles for income taxes and
postretirement benefits - (5,000)
__________ _________
Net income (loss) $1,674 ($39,208)
Income (loss) per share:
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principles $0.06 ($0.47)
Extraordinary loss on early extinguishment
of debt - (0.99)
Cumulative effect of change in accounting
principles for income taxes and
postretirement benefits - (0.21)
_________ _________
Net income (loss) $0.06 ($1.67)
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
Concurrent Computer Corporation
Consolidated Balance Sheets
(Dollars in thousands)
September 30, June 30,
1994 1994
ASSETS
Current assets:
Cash and cash equivalents $10,439 $9,374
Accounts receivable - net 33,186 34,519
Inventories 18,012 17,829
Prepaid expenses and other
current assets 4,745 5,334
_______ ______
Total current assets 66,382 67,056
Property plant and equipment - net 41,417 42,742
Other long-term assets 13,108 13,372
Total assets $120,907 $123,170
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $6,450 $5,749
Current portion of long-term debt 8,643 11,000
Accounts payable and accrued
expenses 40,865 44,687
Deferred revenue 6,093 6,236
________ ________
Total current liabilities 62,051 67,672
Long-term debt 13,203 13,240
Other long-term liabilities 7,058 7,210
Stockholders' equity:
Common stock 301 296
Capital in excess of par value 73,356 71,547
Accumulated deficit after
eliminating accumulated deficit of
$81,826 at December 31, 1991, date of
quasi-reorganization (33,348) (35,022)
Treasury stock (58) (58)
Cumulative translation adjustment (1,656) (1,715)
Total stockholders' equity 38,595 35,048
Total liabilities and stockholders'
equity $120,907 $123,170
---------- --------
---------- --------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Concurrent Computer Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
Three Months Ended
September 30,
1994 1993 *
Cash flows provided by (used by) operating
activities:
Net income (loss) $1,674 ($39,208)
Adjustments to reconcile net income (loss)
to net cash provided by (used by) operating
activities:
Depreciation, amortization and other 3,167 3,053
Non-cash taxes 700 200
Non-cash interest and amortization of
financing costs 130 701
Extraordinary loss on early extinguishment
of debt - 23,193
Cumulative effect of change in accounting
principles - 5,000
Provision for restructuring - 12,000
Decrease (increase) in current assets:
Accounts receivable 1,505 (3,021)
Inventories (60) (403)
Prepaid expenses and other current assets 493 (316)
Decrease in current liabilities,
other than debt obligations (3,199) (6,084)
Increase in other long-term assets (34) (1,174)
(Decrease) increase in other long-term liabilities (229) 1,077
-------- ---------
Total adjustments to net income (loss) 2,473 34,226
------- -------
Net cash provided by (used by) operating activities 4,147 (4,982)
------- -------
Cash flows used by investing activities:
Additions to property, plant and equipment (1,468) (1,630)
------- ------
Cash flow provided by (used by) financing
activities:
Net proceeds (payments) of notes payable 689 (90)
Repayment of long-term debt (2,478) (69,823)
Issuance of long-term debt - 708
Net proceeds from sale and issuance of common stock 150 55,000
-------- --------
Net cash used by financing activities (1,639) (14,205)
---------- ---------
Effect of exchange rate changes on cash
and cash equivalents 25 65
Increase (decrease) in cash and cash equivalents $1,065 ($20,752)
--------- -----------
--------- -----------
Cash paid during the year for:
Interest $568 $1,057
--------- ---------
--------- ---------
Income taxes (net of refunds) $347 ($35)
---------- ---------
---------- ---------
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
Concurrent Computer Corporation
Notes To Consolidated Financial Statements
__________________________________________________________________
Note 1: Basis of Presentation
The accompanying consolidated financial statements are unaudited and
have been prepared in accordance with generally accepted accounting
principles. The foregoing financial information reflects all
adjustments which are, in the opinion of management, necessary for a
fair presentation of the results for the periods presented. All such
adjustments are of a normal, recurring nature. These results, however,
are not necessarily indicative of the results to be expected for the
full fiscal year.
Note 2: Debt Agreement
At September 30, 1994, the outstanding balance of the Company's senior
bank debt (the "debt") was approximately $20.6 million, including
approximately $1.0 million of payments one of the lenders was
authorized to debit from the Company's bank account on September 30,
1994 which was not debited until October 3, 1994. The debt carries
monthly amortization payments of $687,500 through June 1995, an
additional amortization payment of $1.375 million on December 31,1994,
and a final maturity payment of $12 million on October 1, 1995. The
debt bears interest, at the Company's option, at the prime rate plus 1%
or the London Interbank Rate plus 3%. The debt is secured by a first
security interest in the Company's domestic assets and a security interst
in two-thirds of the Company's ownership interest in its subsidiaries.
The debt may be prepaid at any time without penalty.
The term loan agreement covering the debt was amended during the
quarter ended September 30, 1994 to modify certain financial covenants.
The amendment also extended the maturity date from June 30, 1995 to
October 1, 1995. The amendment was obtained to provide the Company
with greater financial flexibility in light of anticipated financial
results for fiscal year 1995. Additional flexibility may be required
depending on actual financial results. The Company is in discussions
with asset based lenders to refinance the debt to include a term loan
and revolving credit facility. There can be no assurance that any such
refinancing will be achieved.
Note 3: Income (Loss) Per Share
Income (loss) per share for the three months ended September 30, 1994
and 1993, respectively, is based on the weighted average number of
shares of common stock outstanding and for the three months ended
September 30, 1994 includes common stock equivalents (dilutive stock
options). Income per share on a primary and fully diluted basis for
the three months ended September 30, 1994 are equivalent. The number
of shares used in computing earnings per share were 29,946,000 and
23,463,000 for the three months ended September 30, 1994 and 1993,
respectively.
<PAGE>
Supplemental net loss per share for the three months ended September
30, 1993, which is calculated assuming the Company's comprehensive
refinancing (completed on July 21, 1993) took place on July 1, 1993,
was as follows:
Three Months Ended
September 30, 1993
Income (loss) before extraordinary
loss and cumulative effect of change
in accounting principles (including
a $12.0 million, or $0.41 per share,
provision for restructuring) ($0.38)
Extraordinary loss on early
extinguishment of debt (0.79)
Cumulative effect of change in
accounting principles for income taxes
and postretirement benefits (0.17)
--------
Net loss ($1.34)
Note 4: Inventories
(Dollars in thousands)
September 30, June 30,
1994 1994
Raw materials $ 9,554 $ 9,270
Work-in-process 3,250 2,872
Finished goods 5,208 5,687
--------- ---------
$18,012 $17,829
Note 5: Accumulated Depreciation
Accumulated depreciation at September 30, 1994 and June 30, 1994 was
$29,896,000 and $26,644,000, respectively.
Note 6: Contingency
The U.S. government has asserted that the Company's prices for
shipments of spare parts prior to 1994 under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program were too
high. No claim or action has been filed against the Company. The
Company believes that its pricing practices are in compliance with
applicable regulations. At the government's request, the Company and
the government are pursuing settlement. Although there can be no
assurance, the Company expects that any resolution of the matter will
not have a material adverse affect on the Company's financial
condition or liquidity.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
During the first quarter of fiscal year 1995, Concurrent continued
to be profitable despite a decline in revenues from the fiscal quarter
ended June 30, 1994. The Company's profit performance reflects the
benefits from continued tight cost controls and focused investment,
particularly to promote its new MAXION real-time multiprocessor system
and other products and services. Although sales of the MAXION systems
are growing, a decline in sales of other systems resulted in a decline
in revenue in the quarter ended September 30, 1994. As the market
demand for computer systems continues to shift from proprietary to open
systems, the Company continues to experience a decline in sales of
proprietary systems and traditional services such as maintenance. The
goals for fiscal year 1995 include achievement of sustained
profitability and revenues with continued growth in MAXION system
sales. The Company plans to continue to evaluate and manage its
existing cost structure to anticipated revenue levels to achieve
sustained profitability. There can be no assurance that these goals
will be achieved. The Company is pursuing a number of major program
opportunities for its MAXION system. Prospects are promising but
uncertain. Given the long (6-18 months) selling cycle for such
programs, should the Company be selected as a supplier, the benefits
from such programs are not likely to be realized in fiscal year 1995.
During fiscal year 1994, the Company took steps to restructure its
operations to reduce its cost structure and to focus its revenue
generating activities with the objectives to fund growth and ongoing
development programs, particularly related to its new MAXION
multiprocessor open system and Series 3200-850 product lines. The
actions are intended to enhance revenue growth by decentralizing and
localizing appropriate decision-making authority to be more competitive
and responsive to customers. The Company is also focusing on a variety
of growth initiatives, including its recently announced entry into the
multimedia interactive server market and other new markets for the
MAXION open system. The Company continues to expand its product
offerings through strategic alliances, such as those with Oracle and
Bull Information Systems, and is working on new high-potential
distribution and marketing alliances.
The Company's objective is to increase revenues by providing real-
time computer systems and services to its installed base of proprietary
systems and to its open systems target markets. The achievement of
these objectives requires that the Company continue to enhance its
proprietary hardware and operating system platforms, while investing in
the development of its real-time open system hardware and operating
systems and providing industry standard product enhancements, such as
networking, graphics and data acquisition. The future growth of the
Company's business and its future financial performance will depend, to
a significant extent, upon its ability to continue to develop and
market competitive open systems which meet the real-time computing
needs of its targeted customers.
During the quarter ended March 31, 1994, the first full-scale
production units of the MAXION open system and Series 3200-850
proprietary system were shipped on time to customers. Both products
were introduced during the quarter ended December 31, 1993. The Series
3200-850 proprietary system provides improved price/performance and an
upward growth path for the Company's Series 3200 customers -- a
significant portion of its installed base. The MAXION open system is
the world's first multiprocessor system employing crosspoint
architecture. The Company believes the MAXION system has strengthened
its competitive position in the marketplace.
One of the goals of the Company's strategy is to minimize the
effect of the anticipated decline in sales of the Company's proprietary
systems and traditional maintenance and support services, while
increasing sales of its open systems and professional services, such as
performance and capacity analysis and systems integration. Since the
average selling price of an open system is considerably less than the
average selling price of a proprietary system, the number of total
systems sold must increase to maintain and grow revenues. A shift in
sales from proprietary systems, however, is likely to result in lower
gross margins. Currently, gross margins on open systems are lower than
gross margins on proprietary systems. The Company's operating income
would be adversely affected by such a shift unless total net sales
increase, the gross margins on its open systems improve and/or total
operating expenses are further reduced. Although there can be no
assurance that this will be the case, the Company believes gross
margins on its open systems will improve with the continued
implementation of its value-added market strategy. This strategy
involves the continued introduction of new next generation open system
products, which the Company believes will generate higher gross margins
than its older open systems products. It also involves the development
and sale of value-added products and services such as software
productivity and development tools, and packaged services comprised of
traditional services and professional services, which sales are
expected to have an aggregate positive impact on total gross margins.
<PAGE>
Selected Operating Data as a Percentage of Net Sales
The Company considers its computer systems and service business (including
maintenance, support and training) to be one class of products which
accounted for the percentages of net sales set forth below. The following
table sets forth selected operating data as a percentage of net sales for
certain items in the Company's consolidated statements of operations for the
periods indicated.
Three Months Ended
September 30,
1994 1993
Net sales:
Computer systems 57.5% 56.3%
Service and other 42.5 43.7
------ ------
Total net sales 100.0 100.0
Cost of sales (% of respective sales
category):
Computer systems 51.0 47.2
Service and other 59.8 62.1
------ ------
Total cost of sales 54.8 53.7
Gross margin 45.2 46.3
Operating expenses:
Research and development 13.0 12.6
Selling, general and administrative 24.6 28.2
Provision for restructuring - 24.3
------ ------
Total operating expenses 37.6 65.1
----- -----
Operating income (loss) 7.6 (18.8)
Interest expense (1.7) (3.0)
Interest income 0.4 0.3
Other income (expense) - net 0.4 0.1
----- ------
Income (loss) before provision for income
taxes, extraordinary loss and cumulative
effect of change in accounting principles 6.7 (21.4)
Provision for income taxes 2.7 0.9
---- -----
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles (a) 4.0% (22.3)%
------ ------
------ ------
(a) The percentage for the three months ended September 30, 1993
excludes a $23.2 million extraordinary loss on early extinguishment
of debt and a $5.0 million non-cash charge for the cumulative
effect of change in accounting principles.
Results of Operations
Three Months Ended September 30, 1994 in Comparison to Three Months
Ended September 30, 1993
Net Sales
Net sales for the three months ended September 30, 1994 were $41.5
million, a decrease of $7.8 million from the prior year period. This
decrease was due to a decrease of $3.9 million, or 14.1%, in computer
systems sales and a decrease of $3.9 million, or 18.3%, in service and
other revenues. The decrease in computer system sales was primarily due
to the anticipated worldwide decline in sales of proprietary systems,
partially offset by shipments of spare parts under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program and sales of
the Company's new MAXION open systems. The decrease in service and
other revenues was primarily due to the decline in computer system
sales experienced in prior periods which resulted in fewer maintenance
contracts and a decline in renewal rates on maturing contracts.
Gross Margin
Gross margin, as measured in dollars and as a percentage of net
sales, was $18.8 million and 45.2%, respectively, for the three months
ended September 30, 1994 compared to $22.8 million and 46.3%,
respectively, for the prior year period. The decrease in gross margin
dollars and percentage was primarily due to the decline in net sales,
partially offset by cost savings resulting from the operational
restructuring implemented during fiscal year 1994.
Operating Income (Loss)
Operating income for the current year period was $3.2 million
compared to operating loss of $9.3 million for the prior year period.
The $0.5 million increase in operating income (net of the one-time
$12.0 million provision for restructuring incurred in the prior year)
was due to a $4.5 million reduction in operating expenses, partially
offset by the $4.0 million decrease in gross margin.
The $4.5 million decrease in operating expenses was primarily due
to a $3.7 million decrease in selling, general and administrative
expenses and a $1.2 million decrease in gross research and development
expenses, partially offset by a $0.4 million increase in software
production costs. The decrease in selling, general and administrative
and gross research and development expenses is primarily due to cost
savings resulting from the operational restructuring implemented during
fiscal year 1994.
Income (Loss) Before Extraordinary Loss and Cumulative Effect of Change
in Accounting Principles
Income before extraordinary loss and cumulative effect of change in
accounting principles was $1.7 million in the current year period
compared to loss of $11.0 million for the prior year period. The $12.7
million change results from the $12.5 million increase in operating
income and a $0.2 million net decrease in non-operating expenses. The
decrease in non-operating expenses was primarily due to a $0.8 million
decrease in interest expense resulting from the reduction of the
Company's indebtedness, partially offset by an $0.6 million increase in
the provision for income taxes. The increase in the provision for
income taxes relates primarily to domestic operations. Such increase
represents non-cash taxes which are offset in capital in excess of par
value through the utilization of net operating loss carryforwards which
originated prior to the Company's quasi-reorganization on December 31,
1991.
<PAGE>
Financial Resources and Liquidity
Liquidity of the business is dependent on many factors, including
sales volume, operating profit ratio, debt service and the efficiency
of asset utilization and turnover. The future liquidity of the
Company's business will depend to a significant extent on: 1) its
ability to sustain significant revenue growth of its MAXION systems; 2)
the actual versus anticipated decline in sales of proprietary systems
and traditional services; 3) its ongoing cost control efforts; and 4)
refinancing of the existing senior bank debt and access to additional
equity, if necessary.
The Company has restructured its operations to reduce its cost
structure and to focus its revenue generating activities with the
objective to fund revenue growth and ongoing development programs,
particularly related to the new MAXION system and Series 3200-850
product lines.
As of September 30, 1994, the Company had a current ratio of 1.1
to 1, an inventory turnover ratio of 5.1 times and net working capital
of $4.3 million. At September 30, 1994, cash and cash equivalents
amounted to $10.4 million and accounts receivable amounted to $33.2
million.
At September 30, 1994, the outstanding balance of the Company's
senior bank debt (the "debt") was approximately $20.6 million,
including approximately $1.0 million of payments one of the lenders was
authorized to debit from the Company's bank account on September 30,
1994 which was not debited until October 3, 1994. The debt carries
monthly amortization payments of $687,500 through June 1995, an
additional amortization payment of $1.375 million on December 31,1994,
and a final maturity payment of $12 million on October 1, 1995.
Amortization payments during the quarter ended September 30, 1994
included the regular $687,500 monthly payments and an additional
payment of $1.375 million on September 30, 1994. The September 30 and
December 31, 1994 payments of $1.375 million result from the bank
approved deferral of the four regular monthly amortization payments
from November 1993 through February 1994. In consideration of the
deferral, the Company granted stock purchase warrants to the senior
banks to purchase an aggregate of 600,000 shares of Common Stock at an
exercise price of $1.50, the fair market value of a share of Common
Stock at the time of the applicable bank term loan amendment. The
warrants expired unexercised on September 30, 1994. The debt bears
interest, at the Company's option, at the prime rate plus 1% or the
London Interbank Rate plus 3%. The debt is secured by a first security
interest in the Company's domestic assets and a security interest in
two-thirds of the Company's ownership interest in its subsidiaries.
The debt may be prepaid at any time without penalty.
The term loan agreement covering the debt was amended during the
quarter ended September 30, 1994 to modify certain financial covenants.
The amendment also extended the maturity date from June 30, 1995 to
October 1, 1995. The amendment was obtained to provide the Company
with greater financial flexibility in light of anticipated financial
results for fiscal year 1995. Additional flexibility may be required
depending on actual financial results. The Company is in discussions
with asset based lenders to refinance the debt to include a term loan
and revolving credit facility. The refinancing, if completed as
contemplated, would significantly reduce the Company's regular monthly
amortization payments while giving the Company the flexibility provided
by a revolving credit facility. There can be no assurance that any
such refinancing will be achieved.
The Company's Tinton Falls, New Jersey office facility continues to
be for sale. In the event the Company sells the facility, the Company will
be required to make a prepayment of the existing senior bank debt in an
amount equal to 75% of the net proceeds to the Company from such sale.
The prepayment would be applied to the payment due on the October 1, 1995
maturity date.
Although management believes that anticipated improvements in cash
flow from operations resulting from the restructuring of operations in
fiscal year 1994 and other actions will enhance the Company's ability
to manage its cash requirements, the short term prospects for the
Company's liquidity are dependent to a significant degree upon the
level and stability of revenue from sales and service of its computer
systems and the Company's ongoing cost control actions.
<PAGE>
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Primary Earnings Per Share
(b) No reports on Form 8-K were filed during the fiscal quarter
ended September 30, 1994.
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this quarterly report for the
quarter ended September 30, 1994 to be signed on its behalf by the
undersigned thereunto duly authorized.
CONCURRENT COMPUTER CORPORATION
(Registrant)
By: /s/John T. Stihl
John T. Stihl
Chairman of the Board,
President and
Chief Executive Officer
By: /s/ Roger J. Mason
Roger J. Mason
Vice President,
Finance and Treasurer
Chief Financial Officer
Dated: November 14, 1994
Exhibit Index
Exhibit No. Description
11 Computation of primary earnings per share
<PAGE>
Concurrent Computer Corporation
Exhibit 11
Primary Earnings Per Share Computation
(Dollars and shares in thousands, except per share amounts)
Three Months Ended
September 30,
1994 1993
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles $1,674 ($11,015)
Extraordinary loss on early extinguishment of debt - (23,193)
Cumulative effect of change in accounting principles
for income taxes and postretirement benefits - (5,000)
________ _________
Net income (loss) $1,674 ($39,208)
Weighted average number of common shares 29,729 23,463
Increase in weighted average number of common
shares upon assumed exercise of stock options 217 -
_____ ______
Total 29,946 23,463
Income (loss) per share:
Income (loss) before extraordinary loss and
cumulative effect of change in accounting
principles $0.06 ($0.47)
Extraordinary loss on early extinguishment of debt - (0.99)
Cumulative effect of change in accounting
principles for income taxes and postretirement
benefits - (0.21)
______ _______
Net income (loss) $0.06 ($1.67)
<PAGE>
November 14, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Concurrent Computer Corporation
Q1 10Q Filing - Fiscal Year 1995
--------------------------------
Dear Sirs:
On behalf of Concurrent Computer Corporation (the "Company"), we
are filing by means of the EDGAR system a 10-Q for Q1 Fiscal Year 1995.
Please call me if you have any questions relating to this filing.
Sincerely,
/s/ Kevin J. Dell
Vice President
General Counsel and Secretary
Concurrent Computer Corporation
