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 December 31, 1995
or
Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Transition Period from ____ to ____
Commission File 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 February 1, 1996 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 Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Net Sales:
Computer systems $10,332 $20,402 $21,865 $44,275
Service and other 14,151 17,384 29,070 35,019
Total 24,483 37,786 50,935 79,294
Cost of sales:
Computer systems 5,892 9,718 12,363 21,897
Service and other 8,004 10,782 16,780 21,334
Total 13,896 20,500 29,143 43,231
Gross margin 10,587 17,286 21,792 36,063
Operating expenses:
Research and development 3,339 5,327 7,054 10,748
Selling, general and
administrative 7,319 10,086 15,271 20,284
Provision for
restructuring 1,300 - 1,300 -
Sales and use tax credit - (1,000) - (1,000)
Total operating expenses 11,958 14,413 23,625 30,032
Operating income (loss) (1,371) 2,873 (1,833) 6,031
Interest expense (626) (648) (1,320) (1,372)
Interest income 70 129 181 311
Other non-recurring charge - - (1,700) -
Other income (expense)-net (30) (14) (517) 144
Income (loss) before
provision for income
taxes (1,957) 2,340 (5,189) 5,114
Provision for income taxes 600 1,300 1,000 2,400
Net income (loss) ($2,557) $1,040 ($6,189) $2,714
Net income (loss) per
share ($0.08) $0.03 ($0.20) $0.09
The accompanying notes are an integral part of the consolidated financial
statements.
Concurrent Computer Corporation
Consolidated Balance Sheets
(Dollars in thousands)
December 31, June 30,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $3,433 $5,728
Accounts receivable - net 23,092 25,456
Inventories 12,835 14,510
Prepaid expenses and other current assets 3,749 4,303
Total current assets 43,109 49,997
Property plant and equipment - net 33,930 38,567
Other long-term assets 5,983 9,795
Total assets $83,022 $98,359
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $5,124 $6,716
Current portion of long-term debt 1,668 1,529
Revolving credit facility 4,931 5,761
Accounts payable and accrued expenses 23,590 29,285
Deferred revenue 4,349 4,841
Total current liabilities 39,662 48,132
Long-term debt 8,508 9,536
Other long-term liabilities 5,275 5,521
Stockholders' equity:
Common stock 306 302
Capital in excess of par value 73,736 73,112
Accumulated deficit after eliminating
accumulated deficit of $81,826 at
December 31, 1991, date of quasi-
reorganization (43,217) (37,028)
Treasury stock (58) (58)
Cumulative translation adjustment (1,190) (1,158)
Total stockholders' equity 29,577 35,170
Total liabilities and stockholders'
equity $83,022 $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)
Six Months Ended
December 31,
1995 1994*
Cash flows (used by) provided by
operating activities:
Net (loss) income ($6,189) $2,714
Adjustments to reconcile net (loss)
income to net cash (used by) provided
by operating activities:
Depreciation, amortization and other 5,977 6,502
Provision for inventory reserves 1,219 1,910
Non-cash taxes - 1,800
Non-cash interest and amortization
of financing costs 146 230
Provision for restructuring 1,300 -
Other non-recurring charge 1,700 -
Sales and use tax credit - (1,000)
Decrease (increase) in current assets:
Accounts receivable 1,750 7,970
Inventories 400 (3,661)
Prepaid expenses and other current
assets (25) 52
Decrease in current liabilities, other
than debt obligations (6,532) (8,359)
Decrease (increase )in other
long-term assets 934 (88)
Decrease in other long-term liabilities (86) (310)
Total adjustments to net (loss) income 6,783 5,046
Net cash provided by operating activities 594 7,760
Cash flows used by investing activities:
Additions to property, plant and
equipment (1,230) (2,626)
Cash flow (used by) provided by
financing activities:
Net (payments) proceeds of notes payable (307) 488
Net payments of revolving credit facility (830) -
Repayment of long-term debt (875) (7,065)
Net proceeds from sale and issuance
of common stock 109 150
Net cash used by financing activities (1,903) (6,427)
Effect of exchange rate changes on cash
and cash equivalents 244 168
Decrease in cash and cash equivalents ($2,295) ($1,125)
Cash paid during the period for:
Interest $921 $1,189
Income taxes (net of refunds) $1,261 $551
* 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 and six months ended
December 31, 1995 and 1994, respectively, is based on the
weighted average number of shares of common stock outstanding and
for the three and six months ended December 31, 1994 includes
common stock equivalents (dilutive stock options). Income per
share on a primary and fully diluted basis for the three and six
months ended December 31, 1994 are equivalent. The number of
shares used in computing earnings per share were as follows:
(Shares in thousands)
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Primary 30,567 30,127 30,439 29,991
Fully Diluted 30,567 30,127 30,439 29,991
Note 3: Inventories
(Dollars in thousands) December 31, June 30,
1995 1995
Raw materials $ 6,767 $ 7,111
Work-in-process 623 753
Finished goods 5,445 6,646
$12,835 $14,510
Note 4: Accumulated Depreciation
Accumulated depreciation at December 31, 1995 and June 30, 1995
was $41,312,000 and $37,573,000, respectively.
Note 5: Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of:
(Dollars in thousands)
December 31, June 30,
1995 1995
Accounts payable -trade $7,759 $11,023
Accrued payroll, vacation and other
employee expenses 6,332 8,510
Restructuring costs 2,055 2,568
Other accrued expenses 7,444 7,184
$23,590 $29,285
Note 6: Sale/Leaseback
On September 26, 1995, the Company entered into a contract
providing for the sale/leaseback of its Oceanport, New Jersey
facility. Due to the change in circumstances resulting from the
anticipated business combination referred to in Note 9 it is
unlikely that this transaction will be completed as contemplated.
Pending completion of the business combination, the Company is
reviewing its facilities requirements and may explore the
possible sale or sale leaseback of the facility.
Note 7: Provision for Restructuring
In October 1995, the Company's management approved a plan to
restructure its operations. In connection with the
restructuring, the Company recorded a $1.3 million provision for
restructuring during the quarter ended December 31,1995. The
restructuring plan provided for a reduction of approximately 55
employees worldwide and the downsizing or closing of certain
office locations which represents approximately 85% and 15% of
the provision, respectively. During the quarter ended December
31,1995, the actual cash payments related to this restructuring
amounted to approximately $0.7 million and were primarily related
to employee termination costs.
Note 8: Other Non-recurring Charge
On November 14, 1995, the Company accepted an offer for the
purchase of its Tinton Falls, New Jersey facility. Completion of
the transaction has been delayed in order for the buyer to obtain
suitable mortgage financing. The transaction is expected to
close during the fiscal year. The net proceeds from this
transaction are expected to be approximately $2.3 million. As a
result, the Company adjusted its results for the three months
ended September 30, 1995 and recorded a non-recurring charge of
$1.7 million in order to adjust the book value of this facility
to its estimated net realizable value. Upon completion of this
transaction, the Company is required to make a prepayment of its
outstanding 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.
Note 9: Subsequent Event
On February 8, 1996 the Company and Harris Computer Systems
Corporation ("HCSC") jointly announced that the companies'
respective boards of directors had unanimously approved a
Memorandum of Understanding between the two companies to modify
the proposed transaction structure previously announced on
November 6, 1995. The modified transaction will result in a
combination of the real-time businesses of both companies. Under
the modified transaction structure, HCSC will sell its real-time
computing business (retaining its trusted systems computing
business) and approximately 230,000 shares of HCSC common stock
to Concurrent, in exchange for approximately 10 million shares of
Concurrent common stock and $10 million liquidation preference of
Concurrent convertible, exchangeable preferred stock (the
"Preferred Stock") with a 9% coupon, convertible into Concurrent
common stock at $2.50 per share subject to mandatory redemption
in ten years unless previously converted. Upon completion of the
modified transaction, Concurrent and HCSC shareholders will own
approximately 75% and 25%, respectively, of Concurrent , and HCSC
shareholders and Concurrent will own approximately 90% and 10%,
respectively, of HCSC. HCSC shareholders could increase their
ownership interest in Concurrent to approximately 32% upon full
conversion of the Preferred Stock. The modified transaction is
subject to a number of conditions including execution of
definitive documentation and approval of the board of directors
and shareholders of both companies. For additional information
on the transaction, refer to the press release filed herewith as
Exhibit 99.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
On February 8, 1996 the Company and Harris Computer Systems
Corporation ("HCSC") jointly announced that the companies'
respective boards of directors had unanimously approved a
Memorandum of Understanding between the two companies to modify the
proposed transaction structure previously announced November
6, 1995. The modified transaction will result in a combination
of the real-time businesses of both companies. The initial
transaction would have resulted in the merger of HCSC into a
subsidiary of Concurrent with each HCSC shareholder receiving
9.56 shares of Concurrent common stock for each share of HCSC
common stock. If completed, Concurrent and HCSC shareholders
would have owned approximately 61% and 39%, respectively, of the
combined company. Under the modified transaction structure, HCSC
will sell its real-time computing business (retaining its trusted
systems computing business) and approximately 230,000 shares of
HCSC common stock to Concurrent, in exchange for approximately 10
million shares of Concurrent common stock and $10 million
liquidation preference of Concurrent convertible, exchangeable
preferred stock (the "Preferred Stock") with a 9% coupon,
convertible into Concurrent common stock at $2.50 per share
subject to mandatory redemption in ten years unless previously
converted. Upon completion of the modified transaction,
Concurrent and HCSC shareholders will own approximately 75% and
25% respectively, of Concurrent , and HCSC shareholders and
Concurrent will own approximately 90% and 10%, respectively, of
HCSC. HCSC shareholders could increase their ownership interest
in Concurrent to approximately 32% upon full conversion of the
Preferred Stock. The modified transaction is subject to a number
of conditions including execution of definitive documentation and
approval of the board of directors and shareholders of both
companies.
The execution of the Memorandum of Understanding follows a
number of marketplace-related events, including a significant
increase in the current market price of HCSC common stock
relative to Concurrent common stock, public statements by a large
holder of HCSC common stock that it would not support the merger
transaction as originally structured, and recent successful
initial public offerings by other companies in the trusted
systems computing business. Additionally, the merger transaction
as originally constituted required that the fairness opinions
delivered to both Concurrent and HCSC in November 1995 by their
respective financial advisors be confirmed prior to completion of
the transaction, and it was determined that this condition was
not likely to be satisfied. For additional information on the
transaction, refer to the press release filed herewith as Exhibit
99.
Although the Company continued to experience a decline in
net sales for the quarter ended December 31, 1995, the backlog
for computer systems at the end of the quarter was higher than at
any point in the past year. The decline in net sales from the
previous quarter was largely due to a delay of approximately $2
million in customer orders previously expected to ship during the
quarter. In addition, certain customers may also have delayed
purchase decisions until completion of the anticipated
combination of the Company and HCSC. The Company is pursuing a
number of significant opportunities which, if it is selected,
will result in long-term revenues. Since the sales cycles for
these major program opportunities tend to be protracted, the
resulting revenue, if any, may be delayed to future quarters.
The Company is cautiously optimistic about its results for
the next 12 months for a number of reasons. The Company recently
met a major product development milestone with the completion of
a new configuration for its MAXION real time computer that can
support up to 64 processors. The new configuration is expected
to make the Company more competitive in several key markets such
as simulation and training and C4I (command, control,
communications, computers, and intelligence). The Company also
expects to announce a new product delivery schedule in the
upcoming months with new products scheduled to be available by
the end of the fiscal year. In addition, there has been
increased activity by potential customers exploring the benefits
of the MAXION system for multimedia opportunities, especially in
support of interactive video-on-demand and multimedia server
applications. This is especially true in international markets
where the Company's revenues have exceeded those of North America
for the past four quarters.
The Company continues to manage its resources and to focus
on its revenue generating activities with the objectives to
achieve sustained growth and profitability. In connection with
its cost reduction efforts, the Company recorded a provision for
restructuring of $1.3 million during the quarter ended December
31, 1995. In addition to the anticipated sale of the Company's
Tinton Falls, New Jersey facility, the Company continues to
pursue various additional financing alternatives to improve its
financial flexibility. The Company expects to be able to meet
its obligations when due through its operating and financing
efforts.
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 Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Net sales:
Computer systems 42.2% 54.0% 42.9% 55.8%
Service and other 57.8 46.0 57.1 44.2
Total net sales 100.0 100.0 100.0 100.0
Cost of sales (% of
respective sales category):
Computer systems 57.0 47.6 56.5 49.5
Service and other 56.6 62.0 57.7 60.9
Total cost of sales 56.8 54.3 57.2 54.5
Gross margin 43.2 45.7 42.8 45.5
Operating expenses:
Research and development 13.6 14.1 13.8 13.6
Selling, general and
administrative 29.9 26.7 30.0 25.6
Provision for
restructuring 5.3 - 2.6 -
Sales and use tax credit - (2.7) - (1.3)
Total operating expenses 48.8 38.1 46.4 37.9
Operating income (loss) (5.6) 7.6 (3.6) 7.6
Interest expense (2.6) (1.7) (2.6) (1.7)
Interest income 0.3 0.3 0.4 0.3
Other non-recurring charge - - (3.3) -
Other income (expense) - net (0.1) - (1.0) 0.2
Income (loss) before
provision for income taxes (8.0) 6.2 (10.2) 6.4
Provision for income taxes 2.5 3.4 2.0 3.0
Net income (loss) (10.5)% 2.8% (12.2)% 3.4%
Results of Operations
Three Months Ended December 31, 1995 in Comparison to Three
Months Ended December 31, 1994
Net Sales
Net sales for the three months ended December 31, 1995 were
$24.5 million, a decrease of $13.3 million from the prior year
period. This decrease was due to a decrease of $10.0 million, or
49.4%, in computer systems sales and a decrease of $3.2 million,
or 18.5%, 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 ongoing 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 $0.2 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 $10.6 million and 43.2%, respectively, for the
three months ended December 31, 1995 compared to $17.3 million
and 45.7%, 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 Company's operational restructurings.
Operating Income (Loss)
Operating loss for the three months ended December 31, 1995
was $1.4 million compared to operating income of $2.9 million for
the prior year period. The $4.3 million change was due to the
aforementioned $6.7 million decrease in gross margin and a $1.3
million provision for restructuring recorded in the current
period partially offset by a $3.7 million reduction in operating
expenses.
The $3.7 million decrease in operating expenses was
primarily due to a $2.7 million decrease in selling, general and
administrative expenses and a $2.0 million decrease in research
and development expenses offset by a $1.0 million decrease in the
sales and use tax credit. The decrease in selling, general and
administrative and research and development expenses is primarily
due to cost savings resulting from the Company's operational
restructurings.
Net Income (Loss)
Net loss for the three months ended December 31, 1995 was
$2.6 million compared to net income of $1.0 million for the prior
year period. The $3.6 million change results from the $4.3
million decrease in operating income and a $0.7 million net
decrease in non-operating expenses. The decrease in non-
operating expenses was primarily due to $0.7 million decrease in
the provision for income taxes. The decrease in the provision
for income taxes relates primarily to domestic operations.
Six Months Ended December 31, 1995 in Comparison to Six Months
Ended December 31, 1994
Net Sales
Net sales for the six months ended December 31, 1995 were
$50.9 million, a decrease of $28.4 million from the prior year
period. This decrease was due to a decrease of $22.4 million, or
50.6%, in computer systems sales and a decrease of $6.0 million,
or 17.0%, 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 and
refurbished products. The decline in sales of open systems is
primarily attributable to a decline in North America 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 $0.6 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 $21.8 million and 42.8%, respectively, for the six
months ended December 31, 1995 compared to $36.0 million and
45.5%, 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 Company's operational restructurings.
Operating Income (Loss)
Operating loss for the six months ended December 31, 1995
was $1.8 million compared to operating income of $6.0 million for
the prior year period. The $7.8 million change was due to the
aforementioned $14.2 million decrease in gross margin and a $1.3
million provision for restructuring recorded in the quarter
ending December 31,1995 partially offset by a $7.7 million
reduction in operating expenses.
The $7.7 million decrease in operating expenses was
primarily due to a $5.0 million decrease in selling, general and
administrative expenses and a $3.7 million decrease in research
and development expenses offset by a $1.0 million decrease in the
sales and use tax credit. The decrease in selling, general and
administrative and research and development expenses is primarily
due to cost savings resulting from the Company's operational
restructurings.
Net Income (Loss)
Net loss for the six months ended December 31, 1995 was
$6.2 million compared to net income of $2.7 million for the
prior year period. The $8.9 million change results from the
$7.8 million decrease in operating income and a $1.2 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 prior period, a $0.3
million increase in foreign exchange losses and a $0.3 million
decrease in income related to minority interest partially
offset by a $1.4 million decrease in the provision for income
taxes. The non-recurring charge of $1.7 million incurred
during the prior period was recorded in order to adjust the
book value of the Company's Tinton Falls, New Jersey facility
to its estimated net realizable value based on 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) if necessary, 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 December 31, 1995, the Company had a current ratio of
1.09 to 1, an inventory turnover ratio of 4.3 times and net
working capital of $3.4 million. At December 31, 1995, cash and
cash equivalents amounted to $3.4 million and accounts receivable
amounted to $23.1 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 December 31, 1995, the outstanding
balances under the Term Loan and the Revolver were $9.3 and $4.9
million, respectively. At December 31, 1995, the additional
borrowing availability under the Revolver was $2.5 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 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. The Company is in discussions with the
lender to modify the lending arrangement, specifically to
increase the amount available under the Revolver and to modify
various covenants to become effective upon completion of the
acquisition of HCSC's real-time computing business. In the event
the Company experiences a loss prior to the effectiveness of such
modifications, the Company may not be able to satisfy a certain
financial covenant in which case it will seek a waiver. There
can be no assurance that such a waiver, if necessary, will be
granted or that the Company will be able to modify the lending
arrangement as contemplated.
On November 14, 1995, the Company accepted an offer for the
purchase of its Tinton Falls, New Jersey facility. Completion of
the transaction has been delayed in order for the buyer to obtain
suitable mortgage financing. The transaction is expected to
close during the fiscal year. The net proceeds from this
transaction are expected to be approximately $2.3 million. As a
result of this agreement, the Company adjusted its results for
the three months ended September 30, 1995 and recorded a non-
recurring charge of $1.7 million in order to adjust the book
value of this facility to its estimated net realizable value.
Upon completion of this transaction, the Company 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 costs to close the
acquisition of HCSC's real-time computing business. The Company
believes that it will be able to fund the costs of the
transaction through operating results, ongoing cost control
actions, the sale of certain facilities, the existing Revolver
and cash that is expected to be available from HCSC in the
acquisition transaction. Depending on the available borrowing
base, from time to time the Company has borrowings available
under the Revolver. In addition, the Company believes that
incremental borrowings will be available as a result of a higher
borrowing base from the acquisition of HCSC's real-time computing
business.
Although management believes that improvements in cash flow
will result from the 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 costs related to the acquisition
of HCSC's real-time computing business. The Company plans to
continue to evaluate and invest its resources based on
anticipated revenue levels to achieve profitability and quarter
to quarter revenue growth during calendar year 1996. In addition
to the sale of its Tinton Falls, New Jersey facility, the Company
is also pursuing various additional financing alternatives to
improve its financial flexibility. The Company expects to be
able to meet its obligations when due through its operating and financing
efforts. 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 February 8, 1996
(b) No reports on Form 8-K were filed during the fiscal
quarter ended December 31, 1995.
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 December 31, 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
(Principal Accounting Officer)
Dated: February 14, 1996
Exhibit Index
Exhibit No. Description
11 Computation of primary earnings per share
27 Financial data schedule
99 Press Release dated February 8, 1996
Concurrent Computer Corporation
Exhibit 11
Primary Earnings Per Share Computation
(Dollars and shares in thousands, except per share amounts)
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
Net income (loss) ($2,557) $1,040 ($6,189) $2,714
Weighted average number
of common shares 30,567 30,126 30,439 29,928
Increase in weighted
average number of
common shares upon
assumed exercise of
stock options - 1 - 63
Total 30,567 30,127 30,439 29,991
Net income (loss)
per share ($0.08) $0.03 ($0.20) $0.09
Income per share on a primary and fully diluted basis for the
three and six months ended December 31, 1994 are equivalent.
Exhibit 99
NEWS RELEASE
FOR IMMEDIATE RELEASE
Concurrent Computer Corporation and Harris Computer Systems Corporation
Announce Revised Combination Transaction Structure
Oceanport, New Jersey/Ft. Lauderdale, Florida, February 8, 1996 -
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 Memorandum of Understanding to modify the proposed
transaction structure between the two companies that would result
in a combination of the real-time businesses of both companies.
Under the revised transaction structure Harris Computer Systems
Corporation (HCSC), would sell its real-time computing business
and approximately 230,000 shares of HCSC common stock to
Concurrent Computer Corporation (CCC), in exchange for
approximately 10 million shares of CCC common stock and $10
million liquidation preference of convertible, exchangeable
preferred stock of CCC with a 9% coupon, convertible into CCC
common stock at $2.50 per share. The transaction is subject to a
number of conditions including execution of definitive
documentation and approval of the board of directors and
shareholders of each company.
Immediately following the transaction, CCC's shareholders are
expected to own approximately 75% of CCC's outstanding common
stock, with the balance to be owned by HCSC. HCSC shareholders
will own approximately 90% of HCSC's common stock, with CCC
owning approximately 10%. HCSC could increase its position in
CCC from approximately 25% to approximately 32% upon full
conversion of the preferred stock.
In November 1995, both companies agreed to a transaction in which
HCSC would merge with CCC and each HCSC shareholder would receive
9.56 shares of CCC common stock for each share of HCSC common
stock. The execution of the Memorandum of Understanding follows
a number of marketplace-related events, including a significant
increase in the current market price of HCSC common stock
relative to CCC common stock, public statements by a large holder
of HCSC common stock that they would not support the merger
transaction as originally constituted, and recent successful
initial public offerings by other companies in the trusted
systems computing business. Additionally, the merger transaction
as originally constituted required that the fairness opinions
delivered to both CCC and HCSC in November 1995 by their
respective financial advisors be confirmed, and it was determined
that this condition was not likely to be satisfied.
HCSC intends to change its name and will be totally focused on
its leading edge secure business. Corky Siegel, HCSC's Chairman,
President and Chief Executive Officer stated, "Our two
divisions, Real-time and Trusted, needed to be separated. It is
the culmination of a strategy initiated last April when we broke
the corporation into two separate divisions. This is a
significant win for both divisions. By combining our real-time
business with Concurrent we create the world leader in real-time
computing and at the same time the Trusted Systems Division will
be free to focus solely on its secure computing business
including access to both private and public equity."
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 combined operations with
greater depth to meet a broader range of application needs.
John Stihl, CCC's Chairman, President and Chief Executive Officer
commented, "The revised transaction represents an opportunity to
strengthen our leadership position in real-time computing and
obtain an interest in the secure computing market through our
ownership interest in Harris Computer Systems. Currently,
Concurrent and Harris Computer Systems have leadership positions
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, as well as a strong position in the emerging
multimedia marketplace. This transaction will strengthen our
distribution and product solutions."
Company Operations
Under the terms of the revised transaction, CCC's John Stihl will
serve as Chairman of the Board and HCSC's Corky Siegel will serve
as President and Chief Executive Officer of Concurrent Computer
Corporation. Principal executive offices will be in the south
Florida area. An active search has been initiated to replace Mr.
Siegel as President and Chief Executive Officer of HCSC.
Corky Siegel added, "I am pleased to accept the challenging
opportunity that will be provided to me as the President and
Chief Executive Officer of Concurrent at the close of the
transaction. At this time we are seeking a recognized leader in
network computing to lead HCSC as it capitalizes on its growing
market position in secure computing. A complete team that has
been working in the Trusted Division has been assembled for more
than one year. This team includes heads of sales, marketing, and
engineering. The Chief Financial Officer of HCSC has already
been selected from within the Trusted Systems Division. Harris
Computer Systems' head of International Operations, with 2 years
of experience with HCSC and over 30 years with IBM, will remain
as head of the international business. Our search for a new
President and Chief Executive Officer is well underway and will
be concluded prior to this transaction."
The parties do not intend to make any further press announcements
concerning the merger or the revised transaction prior to the
execution of a definitive agreement for the revised transaction.
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 computer
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/UX 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 Harris Computer Systems
Corporation
Analyst/Investor Contact: Analyst/Investor Contact:
Ron Baker 908-870-5888 Beth Alonzo 954-973-5100
{PAGE|5}
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Balance Sheet at December 31, 1995 and Consolidated
Statement of Operations for the six months ended December 31, 1995, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 3,433
<SECURITIES> 0
<RECEIVABLES> 24,662
<ALLOWANCES> 1,570
<INVENTORY> 12,835
<CURRENT-ASSETS> 45,109
<PP&E> 75,242
<DEPRECIATION> 41,312
<TOTAL-ASSETS> 83,022
<CURRENT-LIABILITIES> 39,662
<BONDS> 8,508
<COMMON> 306
0
0
<OTHER-SE> 29,271
<TOTAL-LIABILITY-AND-EQUITY> 83,022
<SALES> 21,865
<TOTAL-REVENUES> 50,935
<CGS> 12,363
<TOTAL-COSTS> 29,143
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 99
<INTEREST-EXPENSE> 1,320
<INCOME-PRETAX> (5,189)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (6,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,189)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
