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, 1995
or
Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the Transition Period from to
Commission File 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, 1995 were 30,569,159.
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,
1995 1994
Net Sales:
Computer systems $11,533 $23,873
Service and other 14,919 17,635
Total 26,452 41,508
Cost of sales:
Computer systems 6,471 12,179
Service and other 8,776 10,552
Total 15,247 22,731
Gross margin 11,205 18,777
Operating expenses:
Research and development 3,715 5,421
Selling, general and administrative 7,952 10,198
Total operating expenses 11,667 15,619
Operating income (loss) (462) 3,158
Interest expense (694) (724)
Interest income 111 182
Other non-recurring charge (1,700) -
Other income (expense) - net (487) 158
Income (loss) before provision for income taxes (3,232) 2,774
Provision for income taxes 400 1,100
Net income (loss) ($3,632) $1,674
Net income (loss) per share ($0.12) $0.06
The accompanying notes are an integral part of the consolidated
financial statements.
Concurrent Computer Corporation
Consolidated Balance Sheets
(Dollars in thousands)
September 30, June 30,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $3,345 $5,728
Accounts receivable - net 24,646 25,456
Inventories 13,559 14,510
Prepaid expenses and
other current assets 3,845 4,303
Total current assets 45,395 49,997
Property plant and equipment - net 35,899 38,567
Other long-term assets 7,336 9,795
Total assets $88,630 $98,359
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $6,118 $6,716
Current portion of long-term debt 1,668 1,529
Revolving credit facility 3,471 5,761
Accounts payable and accrued expenses 25,714 29,285
Deferred revenue 5,119 4,841
Total current liabilities 42,090 48,132
Long-term debt 9,012 9,536
Other long-term liabilities 5,313 5,521
Stockholders' equity:
Common stock 306 302
Capital in excess of par value 73,729 73,112
Accumulated deficit after
eliminating accumulated deficit of
$81,826 at December 31, 1991,
date of quasi-reorganization (40,660) (37,028)
Treasury stock (58) (58)
Cumulative translation adjustment (1,102) (1,158)
Total stockholders' equity 32,215 35,170
Total liabilities and stockholders'
equity $88,630 $98,359
The accompanying notes are an integral part of the
consolidated financial statements.
Concurrent Computer Corporation
Consolidated Statements of Cash Flows
(Dollars in thousands)
Three Months Ended
September 30,
1994 1995
Cash flows provided by
(used by) operating activities:
Net income (loss) ($3,632) $1,674
Adjustments to reconcile net income (loss)
to net cash provided by (used by)
operating activities:
Depreciation, amortization and other 3,067 3,167
Provision for inventory reserves 636 815
Non-cash taxes - 700
Non-cash interest and amortization
of financing costs 93 130
Other non-recurring charge 1,700 -
Decrease (increase) in current assets:
Accounts receivable 266 1,505
Inventories 233 (875)
Prepaid expenses and other current assets 246 493
Decrease in current liabilities,
other than debt obligations (2,416) (3,199)
Increase in other long-term assets (50) (34)
Decrease in other long-term liabilities (122) (229)
Total adjustments to net income (loss) 3,653 2,473
Net cash provided by operating activities 21 4,147
Cash flows used by investing activities:
Additions to property, plant and equipment (704) (1,468)
Cash flow provided by (used by)
financing activities:
Net proceeds of notes payable 476 689
Net proceeds (payments) of
revolving credit facility (2,290) -
Repayment of long-term debt (368) (2,478)
Net proceeds from sale and
issuance of common stock
Net cash used by financing activities (2,080) (1,639)
Effect of exchange rate changes on cash
and cash equivalents 380 25
Increase (decrease) in cash and cash
equivalents ($2,383) $1,065
Cash paid during the period for:
Interest $400 $568
Income taxes (net of refunds) $685 $347
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of the consolidated
financial statements.
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: Income (Loss) Per Share
Income (loss) per share for the three months ended September 30,
1995 and 1994, 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 30,311,000 and 29,946,000 for the three months ended
September 30, 1995 and 1994, respectively.
Note 3: Inventories
(Dollars in thousands) September 30, June 30,
1995 1995
Raw materials $ 6,727 $ 7,111
Work-in-process 891 753
Finished goods 5,941 6,646
$13,559 $14,510
Note 4: Accumulated Depreciation
Accumulated depreciation at September 30, 1995 and June 30, 1995
was $39,242,000 and $37,573,000, respectively.
Note 5: Sale/Leaseback
On September 26, 1995, the Company entered into a contract
providing for the sale/leaseback of its Oceanport, New Jersey
facility. The transaction is contingent upon the buyer obtaining
satisfactory financing by November 25, 1995. Due to this
contingency and the change in circumstances resulting from the
merger referred to in Note 6, it is unlikely that this transaction
will be completed as contemplated. The Company, assuming
completion of the merger, is reviewing its facilities requirements
and is exploring the possible sale or sale and partial leaseback of
the facility.
Note 6: Subsequent Event
During October 1995, the Company approved and implemented a plan to
restructure its operations. The restructuring plan includes
primarily a reduction in headcount. The plan will result in the
recording of a provision for restructuring during the three months
ended December 31, 1995.
On November 6, 1995, the Company and Harris Computer Systems
Corporation jointly announced that the companies' respective boards
of directors have unanimously approved a definitive agreement to
merge the two companies. Under the terms of the agreement, the
shareholders of Harris Computer Systems will receive 9.56 shares of
the Company's common stock for each share of Harris Computer
Systems common stock they own. The merger will result in the
Company's shareholders owning 61% and Harris Computer Systems'
shareholders owning 39% of the combined company. The merger is
subject to a number of conditions, including approval by the
shareholders of each company and the effectiveness of the
registration statement covering the shares of the Company to be
issued in the merger. The transaction is expected to be accounted
for as a purchase and to be completed during the three months ended
March 31, 1996.
On November 14, 1995, the Company accepted an offer for the purchase
of
its Tinton Falls, New Jersey facility. The transaction is
expected to close during the quarter ended December 31, 1995. The
net proceeds from this transaction are expected to be approximately
$2.3 million. As a result, the Company has
adjusted its results for the three months ended September 30, 1995
and has recorded a non-recurring charge of $1.7 million in order to
adjust the book value of this facility to its net realizable value.
Upon completion of this transaction, the Company, pursuant to its
term loan agreement, is required to make a prepayment of the term
loan up to an amount equal to 75% of the net sale proceeds. There
can be no assurance that this transaction will be completed as
contemplated.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
On November 6, 1995, the Company and Harris Computer Systems
Corporation jointly announced that the companies' respective boards
of directors have unanimously approved a definitive agreement to
merge the two companies. Under the terms of the agreement, the
shareholders of Harris Computer Systems will receive 9.56 shares of
the Company's common stock for each share of Harris Computer
Systems common stock they own. The merger will result in the
Company's shareholders owning 61% and Harris Computer Systems'
shareholders owning 39% of the combined company. The merger is
subject to a number of conditions, including approval by the
shareholders of each company and the effectiveness of the
registration statement covering the shares of the Company to be
issued in the merger. The transaction is expected to be accounted
for as a purchase and to be completed during the three months ended
March 31, 1996. For additional information on the merger, refer to
the press release filed herewith as Exhibit 99.1.
During the quarter ended September 30, 1995, the Company
continued to experience a decline in net sales. The current
quarter revenue was affected by the traditional summer slowdown of
business in Europe, which had a greater than typical impact since
revenues from international business continued to represent more
than half of total revenues with a majority of international
business coming from Europe. The quarter was also affected by the
timing of some major shipments which moved out of the first quarter
and into the second quarter. Further, sales cycles in many of the
Company's markets tend to be protracted thus delaying certain
orders and revenues. In addition, competition, rapid advances in
technology, government spending levels and general economic
conditions impact the Company's business. The Company continues to
manage its resources and to focus its revenue generating activities
with the objectives to achieve sustained growth and profitability.
In connection with cost reduction efforts, the Company will record
a provision for restructuring during the quarter ending December
31, 1995. In addition to the sale of its Tinton Falls, New Jersey
facility, the Company continues to pursue various additional
financing alternatives, including a possible sale or sale and
partial leaseback of its Oceanport, New Jersey facility, to improve
its financial flexibility. The Company believes that it will be
able to meet its obligations when due through its operating and
financing efforts.
During the past three quarters, revenues from international
markets have exceeded those of North America. The decline in North
America business is due to the anticipated decline in sales of
proprietary systems, reduced shipments under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program and less
than anticipated open systems business.
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 systems, while
investing in the development of its real-time open system hardware
and operating system 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.
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 associated
services. 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 as the gross
margins on open systems are currently 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 reduced. Although there can be no assurance
that this will be the case, the Company believes gross margins on
its open systems will improve as the shift to customer purchases of
larger multiprocessor and server-class systems increases.
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,
1995 1994
Net sales:
Computer systems 43.6% 57.5%
Service and other 56.4 42.5
Total net sales 100.0 100.0
Cost of sales (% of respective sales category):
Computer systems 56.1 51.0
Service and other 58.8 59.8
Total cost of sales 57.6 54.8
Gross margin 42.4 45.2
Operating expenses:
Research and development 14.0 13.0
Selling, general and administrative 30.1 24.6
Total operating expenses 44.1 37.6
Operating income (loss) (1.7) 7.6
Interest expense (2.6) (1.7)
Interest income 0.4 0.4
Other non-recurring charge (6.4) -
Other income (expense) - net (1.9) 0.4
Income (loss) before provision for income taxes (12.2) 6.7
Provision for income taxes 1.5 2.7
Net income (loss) (13.7)% 4.0%
Results of Operations
Three Months Ended September 30, 1995 in Comparison to Three Months Ended
September 30, 1994
Net Sales
Net sales for the three months ended September 30, 1995 were
$26.5 million, a decrease of $15.0 million from the prior year
period. This decrease was due to a decrease of $12.3 million, or
51.7%, in computer systems sales and a decrease of $2.7 million, or
15.4%, in service and other revenues. The decrease in computer
system sales was primarily due to reduced shipments under the U.S.
Department of Commerce's Next Generation Weather Radar (NEXRAD)
program and reduced sales of open systems. The decline in sales of
open systems is attributable to a decline in North America business
partially offset by an increase in international business. 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 partially offset by approximately $0.4
million related to the impact of favorable exchange rates.
Gross Margin
Gross margin, as measured in dollars and as a percentage of
net sales, was $11.2 million and 42.4%, respectively, for the three
months ended September 30, 1995 compared to $18.8 million and
45.2%, respectively, for the prior year period. The decrease in
gross margin dollars and percentage was primarily due to the
aforementioned decline in net sales partially offset by cost
savings resulting from the operational restructurings implemented
during the prior year.
Operating Income (Loss)
Operating loss for the three months ended September 30, 1995
was $0.5 million compared to operating income of $3.2 million for
the prior year period. The $3.7 million change was due to the
aforementioned $7.6 million decrease in gross margin partially
offset by a $3.9 million reduction in operating expenses.
The $3.9 million decrease in operating expenses was primarily
due to a $2.2 million decrease in selling, general and
administrative expenses and a $1.7 million decrease in research and
development expenses. The decrease in selling, general and
administrative and research and development expenses is primarily
due to cost savings resulting from the operational restructurings
implemented during the prior year.
Net Income (Loss)
Net loss for the three months ended September 30, 1995 was
$3.6 million compared to net income of $1.7 million for the prior
year period. The $5.3 million change results from the $3.7
million decrease in operating income and a $1.6 million net
increase in non-operating expenses. The increase in non-operating
expenses was primarily due to a non-recurring charge of $1.7
million incurred during the current period, a $0.4 million
increase in foreign exchange losses and a $0.2 million decrease in
income related to minority interest partially offset by a $0.7
million decrease in the provision for income taxes. The non-
recurring charge of $1.7 million incurred during the current
period was recorded in order to adjust the book value of the
Company's Tinton Falls, New Jersey facility to its net realizable
value as a result of the acceptance of an offer to purchase the facility.
The decrease
in the provision for income taxes relates primarily to domestic
operations.
Financial Resources and Liquidity
The liquidity of the business is dependent on many factors,
including sales volume, operating profit ratio, debt service and
the efficiency of asset use and turnover. The future liquidity of
the Company's business will depend to a significant extent on: 1)
the actual versus anticipated decline in sales of proprietary
systems and traditional services; 2) its ongoing cost control
efforts; 3) its ability to generate revenue growth from its open
systems; and 4) its ability to pursue various additional financing
alternatives.
The liquidity of the business is also affected by: 1) the
timing of shipments which predominantly occur during the last month
of the quarter; 2) the increasing percentage of sales derived from
outside of the United States where there are generally longer
accounts receivable collection patterns; 3) the sales level in the
United States where related accounts receivable are included in the
borrowing base of the Company's revolving credit facility; and 4)
the number of countries in which the Company operates resulting in
the requirement to maintain minimum cash levels in each country
and, in certain cases, requirements which restrict cash, such as
cash supporting building rental deposits.
As of September 30, 1995, the Company had a current ratio of
1.08 to 1, an inventory turnover ratio of 4.3 times and net working
capital of $3.3 million. At September 30, 1995, cash and cash
equivalents amounted to $3.3 million and accounts receivable
amounted to $24.6 million. The Company purposefully manages its
cash and cash equivalents at minimum levels and borrows under its
Revolver (as described below) as needed.
The Company's current bank arrangement provides for a $18.0
million credit facility. The facility includes a $10.0 million
term loan (the "Term Loan") and a $8.0 million revolving credit
facility (the "Revolver"). At September 30, 1995, the outstanding
balances under the Term Loan and the Revolver were $9.7 and $3.5
million, respectively. At September 30, 1995, the borrowing
availability under the Revolver was $4.9 million. The outstanding
balance of the Revolver is classified as a current liability. Both
the Term Loan and the Revolver bear interest at the prime rate plus
2.0%. The Term Loan is payable in 36 equal monthly installments of
$139,000 each, commencing August 1, 1995, with a final payment of
approximately $5.0 million payable August 1, 1998. The Revolver
may be repaid and reborrowed, subject to certain collateral
requirements, at any time during the term ending August 1, 1998.
The Company has pledged substantially all of its domestic assets as
collateral for the Term Loan and the Revolver. The Company may
repay the Term Loan at any time without penalty. In the event of a
possible sale or sale and partial leaseback of its Oceanport and
Tinton Falls, New Jersey facilities, the Company is required to
make a prepayment of the Term Loan up to an amount equal to 75% of
the net sale proceeds. Certain early termination fees apply if the
Company terminates the facility in its entirety prior to August 1,
1998.
On November 14, 1995, the Company accepted an offer for the
purchase of
its Tinton Falls, New Jersey facility. The
transaction is expected to close during the quarter ended December
31, 1995. The net proceeds from this transaction are expected to
be approximately $2.3 million. As a result,
the Company has adjusted its results for the three months ended
September 30, 1995 and has recorded a non-recurring charge of $1.7
million in order to adjust the book value of this facility to its
net realizable value. Upon completion of this transaction, the
Company, pursuant to its term loan agreement, is required to make a
prepayment of the term loan up to an amount equal to 75% of the net
sale proceeds. There can be no assurance that this transaction
will be completed as contemplated.
The Company anticipates substantial merger related costs to
close the transaction and merge the two companies. The Company
believes that it will be able to fund the costs of the transaction
and the merger through operating results, ongoing cost control
actions, the sales of certain facilities and the existing bank
revolver arrangement. The Company currently has borrowings
available based on the existing borrowing base under the Revolver.
In addition, the Company believes that incremental borrowings will
be available based on a higher borrowing base from the combined
company.
Although management believes that improvements in cash flow
will result from the refinancing of the bank term loan during June
1995, restructuring of operations and other actions which 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, the Company's ongoing
cost control actions and the Company's ability to manage the merger
with Harris Computer Systems. The Company plans to continue to
evaluate and invest its resources available at anticipated revenue
levels to achieve profitability and quarter to quarter revenue
growth during fiscal year 1996. In addition to the sale of its
Tinton Falls, New Jersey facility, the Company is also pursuing
various additional financing alternatives, including a possible
sale or sale and partial leaseback of its Oceanport, New Jersey
facility, to improve its financial flexibility. The Company
believes that it will be able to meet its obligations when due
through its operating and financing efforts. However, there can be
no assurance that the Company's operating and financing efforts
will be achieved.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Computation of Primary Earnings Per Share
27 Financial Data Schedule
99 Press Release dated November 6, 1995
(b) No reports on Form 8-K were filed during the fiscal
quarter ended September 30, 1995.
Signatures
Pursuant to the requirements of the Securities and Exchange Act of
934, the Registrant has duly caused this quarterly report for the
quarter ended September 30, 1995 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, 1995
Exhibit Index
Exhibit No. Description
11 Computation of primary
earnings per share
27 Financial data schedule
99 Press Release dated November 6, 1995
Concurrent Computer Corporation
Exhibit 11
Primary Earnings Per Share Computation
(Dollars and shares in thousands, except per share amounts)
Three Months Ended
September 30,
1995 1994
Net income (loss) ($3,632) $1,674
Weighted average number of common shares 30,311 29,729
Increase in weighted average number of
common shares upon assumed exercise
of stock options - 217
Total 30,311 29,946
Net income (loss) per share ($0.12) $0.06
Concurrent Computer Corporation
Exhibit 99
Press Release dated November 6, 1995
Concurrent Computer Corporation and Harris Computer
Systems Corporation
Announce Merger
Merger of the two companies creates the worldwide
leader in real-time computing
Oceanport, New Jersey/Ft. Lauderdale, Florida, November 6,
1995 - Concurrent Computer Corporation (NASDAQ-CCUR) and
Harris Computer Systems Corporation (NASDAQ: NHWK) today
jointly announced that the companies' respective boards of
directors have unanimously approved a definitive agreement
to merge and create the worldwide leader in real-time
computing.
Under the terms of the merger agreement, Harris Computer
Systems Corporation shareholders will receive 9.56 shares of
Concurrent Computer Corporation common stock for each share
of Harris Computer System common stock they own. The merger
will result in Concurrent Computer's shareholders owning 61%
and Harris Computer Systems' shareholders owning 39% of the
combined company. The transaction is expected to be tax-
free to both companies' shareholders and to be accounted for
on a purchase accounting basis. The merger is subject to a
number of conditions, including approval by the stockholders
of each company and the effectiveness of the registration
statement covering the shares of Concurrent common stock to
be issued in the merger. Management of both companies
believes that the merger will create substantial synergies
and will result in significant benefits for stockholders and
customers. In addition, the combined company will be better
positioned to grow the emerging business opportunities of
each company, such as Concurrent Computer's multimedia
business and Harris Computer System's secure computing
business.
Complementary Strengths
The two companies are recognized leaders in real-time
computing technology. More than two decades of experience
in solving real-time computing problems has led the two
companies to develop product lines with many similarities.
Each, however, has also developed unique advantages that
will now be available to their combined customers, providing
the merged company with greater depth to meet a broader
range of application needs.
John Stihl, Concurrent Computer's Chairman, President and
Chief Executive Officer commented, This merger will create
the worldwide leader in real-time computing. Separately,
Concurrent Computer and Harris Computer Systems now have the
leadership position in key real-time computing areas, such
as military and commercial simulation, data acquisition for
range and telemetry, wagering and gaming systems and
acquisition and processing of weather related information.
The combination of the two companies into a single company
will result in a stronger company than either of the two
separate companies. The merger will strengthen our
distribution and product solutions from a single board
computer, up to an 8-way symmetric multiprocessor. In
addition, there will be substantial cost savings resulting
from the combination that can be invested for future
growth."
The benefits of the merger are highlighted best by the
synergies of the growth markets being pursued by each
company. Concurrent Computer is a formidable competitor in
the emerging market for multimedia applications such as
video-on-demand and in-flight entertainment, winning
competitions against such recognized computer giants as IBM
and DEC. At the same time, Harris Computer Systems has
developed a reputation for the finest security software and
firewall systems on the market today and has been selected
by numerous Fortune 1000 companies for network security.
Other customers include Internet providers, NASA, and DoD.
The company has licensed its secure software to other
computer companies including SCO (Novell) and Bull.
Concurrent Computer's prospects for rapid growth in the
expanding multimedia market and Harris Computer Systems'
prospects for rapid growth in the trusted systems and secure
software markets are excellent.
E. Courtney (Corky) Siegel, Harris Computer Systems'
Chairman, President, and Chief Executive Officer observed,
Not only does this merger create the world's largest real-
time computer company but it will accelerate, through new
distribution channels, Harris Computer Systems' revenue for
secure computing. In addition to the attractive prospects
for growth for multimedia and trusted systems separately,
the combination should be ideal for a world now exploding
into network communications and applications.
Company Operations
Under the terms of the merger agreement, Concurrent
Computer's John Stihl will serve as Chairman of the Board of
the combined company and Harris Computer Systems' Corky
Siegel will serve as President and Chief Executive Officer.
Principal executive offices will be in Florida. The Board
of Directors for the merged company will be composed of six
members designated by Concurrent Computer and three members
designated by Harris Computer Systems.
The merged company will continue its commitment to
leadership in real-time, networking and secure computing.
Current products of the merged company will continue to be
supported throughout their life cycle. The companies enjoy
an excellent reputation in supporting and servicing
customers around the world. The enhanced support
capabilities of the combined companies will continue this
unparalleled support for customers of both open and
proprietary systems. The open systems product lines for
both companies are very complementary. The combined product
lines will provide even greater flexibility for existing
customers and new prospects. The continuing commitment to
open systems by both Concurrent Computer and Harris Computer
Systems will be clearly demonstrated in the planned next
generation of products. These products will combine the
product strengths of both companies with a clear transition
path for all current products to the next generation.
John Stihl added, The path for merging our technologies is
clear. The biggest winners are our customers. They will
have the best of both worlds -- today and tomorrow -- from a
company with greater support capability.
Concurrent Computer and Harris Computer Systems will
leverage their respective distribution strengths. Both
companies market their products through a worldwide network
of direct sales forces, distributors, OEMs, VARs and systems
integrators. The combined distribution strength of the
merged company will have over 70 North American sales and
service offices and will operate in more than 25 countries
around the world.
In addition to a broader product line, greater technological
capability, a stronger presence in real-time markets, the
combination and synergies of new growth markets, and a
larger support presence for customers, the merger will also
result in substantial cost savings. Significant reduction
of costs through the elimination of redundancies between the
two companies is anticipated. In addition, the similarities
of the two companies' goals provides an opportunity to
achieve greater effectiveness and efficiency through the
combined knowledge and experience of their work forces. The
resulting increase in productivity and decrease in costs
compared to the two companies operating independently are
expected to be substantial.
Financial
For the first quarter of their fiscal year ended September
30, 1995, Concurrent Computer reported a net loss of $1.9
million on revenue of $26.5 million compared to a net income
of $1.7 million on revenue of $41.5 million in the same
quarter last year. Loss per share for the quarter was
$0.06, compared with earnings per share of $0.06 a year ago.
For the fourth quarter of the fiscal year ended September
30, 1995, Harris Computer Systems Corporation reported a net
loss of $5.3 million on revenue of $8.7 million compared to
a net loss of $7.6 million on revenue of $7.7 million for
the same quarter last year. Loss per share for the quarter
was $2.38, compared with loss per share of $3.41 a year ago.
During 1995 the company changed its fiscal year to September
30 from June 30. For the fiscal year ended September 30,
1995, Harris Computer Systems Corporation reported a net
loss of $11.1 million on revenue of $45.1 million, compared
to a proforma 12 months ended September 30, 1994 loss of
$3.6 million on $58.2 million of revenue. Loss per share
for the year was $4.97, compared to a proforma loss per
share of $1.61 a year ago.
The companies have combined revenues over the last twelve
months of approximately $170 million.
Concurrent Computer is being advised in this transaction by
Berenson Minella & Company. Harris Computer Systems is
being advised by Bear, Stearns & Co. Inc. The merger is
targeted to be completed during the first quarter of
calendar year 1996.
Concurrent Computer Corporation, headquartered in Oceanport,
New Jersey is the leading worldwide supplier of networked
and distributed, high-performance, real-time, fault-tolerant
computing systems supported by technology-based customer
services. The Company provides real-time solutions in
simulation, weather, wagering and gaming, measurement and
control, C3I (command, control, communications, and
intelligence), financial services, insurance services and
transaction processing, electronic transfer, paging systems,
transportation control systems, multimedia, and network
security systems. Concurrent produces the industry-leading,
standards-based, POSIX compliant MAXION multiprocessor
system and MAXION/OS real-time UNIX operating system. The
company also provides support to its worldwide Series 3200
system and UNIX system customers. Concurrent Computer has
achieved ISO 9000 quality certification for its design,
development, manufacturing and support processes. The
company provides sales and support worldwide from offices
throughout North America, Europe, and Asia, as well as
through authorized distributors.
Harris Computer Systems Corporation, a worldwide corporation
headquartered in Ft. Lauderdale, Florida is a leading supplier of
high-performance real-time and multi-level secure computer
systems, solutions and software for commercial and government
markets. The company's Real-time Systems Division designs,
manufactures and markets the Night Hawk series of real-time
computers for simulation, data acquisition and control
applications and the Power Hawk system for entry level real-time
applications. For embedded applications the company's Power UNIX
real-time operating system and development tools are available on
Motorola 604 based single board computers. The company's Trusted
Systems Division is the leading supplier of computer security
products that prevent break-ins over public networks such as the
Internet to Fortune 1000 companies and the government. Products
include secure operating systems, networking products and the
CyberGuard Firewall - the only commercial firewall available with
an operating system and networking product evaluated by the NCSC
at the B1 level of trust.
Concurrent Computer Corporation
Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
Three Months Ended
September 30,
1995 1994
Net Sales:
Computer systems $11,533 $23,873
Service and other 14,919 17,635
Total 26,452 41,508
Cost of sales:
Computer systems 6,471 12,179
Service and other 8,776 10,552
Total 15,247 22,731
Gross margin 11,205 18,777
Operating expenses:
Research and development 3,715 5,421
Selling, general and administrative 7,952 10,198
Total operating expenses 11,667 15,619
Operating income (loss) (462) 3,158
Interest expense (694) (724)
Interest income 111 182
Other non-recurring charge (1,700) -
Other income (expense) - net (487) 158
Income (loss) before provision
for income taxes (3,232) 2,774
Provision for income taxes 400 1,100
Net income (loss) ($3,632) $1,674
Net income (loss) per share ($0.12) $0.06
Harris Computer Systems Corporation
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands except earnings per share)
Three Months Ending Year Ending
Sept 30 Sept 30 Sept 30 Sept 30
1995 1994 1995 1994
Sales:
Equipment $5,259 $4,242 $31,184 $43,789
Maintenance 3,448 3,506 13,927 14,439
Total sales 8,707 7,748 45,111 58,228
Cost of sales:
Equipment 3,368 3,443 16,250 21,393
Reserve for inventory 0 0 2,300 0
Maintenance 1,787 2,023 7,214 8,280
Total cost of sales 5,155 5,466 25,764 29,673
Gross income 3,552 2,282 19,347 28,555
Other operating expense
Research and
development 1,933 1,517 7,903 6,538
Selling, general and
administrative 5,585 4,836 21,324 20,773
Restructuring 0 1,256 0 1,256
Total other operating
expenses 7,518 7,609 29,227 28,567
Operating income (loss) (3,966) (5,327) (9,880) (12)
Transaction costs 0 2,500 0 2,500
Interest income (expense) 95 (69) 456 (85)
Other income (expense) (1,432) (72) (1,664) (136)
Total other income
(expense) (1,337) 2,641 (1,208) (2,721)
Income before taxes (5,303) (7,968) (11,088) (2,733)
Provision for taxes 0 (2,117) 0 (1,034)
Provision for taxes on
$4,791 of cash from
German subsidiary
repatriated to the
United States 0 1,739 0 1,739
Net earnings before
cumulative effect of
change in accounting
principle (5,303) (7,590) (11,088) (3,438)
Cumulative effect of
change in accounting
principle 0 0 0 (135)
Net earnings (loss) (5,303) (7,590) (11,088) (3,573)
Earnings (loss) per
common and common
equivalent share ($2.38) ($3.41) ($4.97) ($1.61)
{PAGE|17}
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Dollars in thousand, except per share amounts)
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at September 30, 1995 and Consolidated
Statement of Operations for the three months ended September 30, 1995, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 3,345
<SECURITIES> 0
<RECEIVABLES> 26,062
<ALLOWANCES> 1,416
<INVENTORY> 13,559
<CURRENT-ASSETS> 45,395
<PP&E> 75,141
<DEPRECIATION> 39,242
<TOTAL-ASSETS> 88,630
<CURRENT-LIABILITIES> 42,090
<BONDS> 9,012
<COMMON> 306
0
0
<OTHER-SE> 31,909
<TOTAL-LIABILITY-AND-EQUITY> 88,630
<SALES> 11,533
<TOTAL-REVENUES> 26,452
<CGS> 6,471
<TOTAL-COSTS> 15,247
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 694
<INCOME-PRETAX> (3,232)
<INCOME-TAX> 400
<INCOME-CONTINUING> (3,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,632)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
