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, 1997
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.)
2101 West Cypress Creek Road, Ft. Lauderdale, FL 33309
Telephone: (954) 974-1700
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 6, 1998 were 47,301,531.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
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CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 28, DECEMBER 31, DECEMBER 28,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales
Computer systems . . . . . . . . . . $ 9,759 $ 12,870 $ 18,625 $ 26,244
Service and other. . . . . . . . . . 11,257 13,755 22,996 28,138
-------------- -------------- -------------- --------------
Total. . . . . . . . . . . . . . . 21,016 26,625 41,621 54,382
Cost of sales
Computer systems . . . . . . . . . . 4,516 6,796 8,793 13,905
Service and other. . . . . . . . . . 5,737 7,156 12,182 14,914
Transition . . . . . . . . . . . . . - 64 - 802
-------------- -------------- -------------- --------------
Total. . . . . . . . . . . . . . . 10,253 14,016 20,975 29,621
-------------- -------------- -------------- --------------
Gross margin . . . . . . . . . . . . . 10,763 12,609 20,646 24,761
Operating expenses:
Research and development . . . . . . 2,694 3,443 5,514 6,799
Selling, general and administrative. 5,870 7,797 11,894 15,028
Transition/restructuring . . . . . . - 872 (607) 2,106
Post-retirement benefit reversal . . - (1,200) - (2,181)
-------------- -------------- -------------- --------------
Total operating expenses . . . . . . . 8,564 10,912 16,801 21,752
Operating income . . . . . . . . . . . 2,199 1,697 3,845 3,009
Interest expense . . . . . . . . . . . (188) (532) (450) (1,191)
Interest income. . . . . . . . . . . . 36 29 58 81
Other non-recurring charge . . . . . . - 2,192 420 (1,876)
Other income (expense) - net . . . . . (41) (161) (242) (420)
-------------- -------------- -------------- --------------
Income (loss) before provision . . . . 2,006 3,225 3,631 (397)
for income taxes
Provision for income taxes . . . . . . 583 530 908 970
-------------- -------------- -------------- --------------
Net income (loss). . . . . . . . . . . $ 1,423 $ 2,695 $ 2,723 $ (1,367)
Preferred stock dividends and
accretion of preferred shares. . . . - - (18) -
-------------- -------------- -------------- --------------
Net income (loss) available to . . . . $ 1,423 $ 2,695 $ 2,705 $ (1,367)
============== ============== ============== ==============
common shareholders
Basic income (loss) per share. . . . . $ 0.03 $ 0.06 $ 0.06 $ (0.03)
============== ============== ============== ==============
Diluted income per share . . . . . . . $ 0.03 $ 0.06 $ 0.06
============== ============== ==============
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1997
-------------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 4,992 $ 4,024
Trading securities . . . . . . . . . . . . . . . . . . . . . - 2,718
Accounts receivable - net. . . . . . . . . . . . . . . . . . 19,665 25,720
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 7,262 8,399
Prepaid expenses and other current assets. . . . . . . . . . 1,705 2,286
-------------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . 33,624 43,147
Property, plant and equipment - net. . . . . . . . . . . . . . 13,032 14,207
Facilities held for disposal . . . . . . . . . . . . . . . . . - 4,700
Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,377 1,474
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,033 $ 63,528
============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . $ 4,478 $ 5,399
Current portion of long-term debt. . . . . . . . . . . . . . 1,529 1,668
Revolving credit facility. . . . . . . . . . . . . . . . . . - 3,118
Accounts payable and accrued expenses. . . . . . . . . . . . 14,123 23,866
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 3,100 4,402
-------------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . 23,230 38,453
Long term debt . . . . . . . . . . . . . . . . . . . . . . . . 434 4,493
Other long-term liabilities. . . . . . . . . . . . . . . . . . 1,574 1,219
Total liabilities. . . . . . . . . . . . . . . . . . . . . 25,238 44,165
-------------- ----------
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . - 1,243
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 472 461
Capital in excess of par value . . . . . . . . . . . . . . . 94,728 92,650
Accumulated deficit after eliminating accumulated deficit of
$81,826 at December 31, 1991, date of quasi-reorganization (71,882) (74,587)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (58) (58)
Cumulative translation adjustment. . . . . . . . . . . . . . (465) (346)
Total stockholders' equity . . . . . . . . . . . . . . . . 22,795 18,120
-------------- ----------
Total liabilities and stockholders' equity . . . . . . . . . . $ 48,033 $ 63,528
============== ==========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
<S> <C> <C>
DECEMBER 31, DECEMBER 28,
1997 1996
------------------ --------------
Cash flows provided by (used by) operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ 2,723 $ (1,367)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Unrealized loss on CyberGuard Stock. . . . . . . . . . . . . - 2,666
Realized loss on CyberGuard Stock. . . . . . . . . . . . . . (420) (735)
Gain on sale of facility . . . . . . . . . . . . . . . . . . (706) -
Depreciation, amortization and other . . . . . . . . . . . . 2,962 2,409
Other non-cash expenses. . . . . . . . . . . . . . . . . . . 857 2,025
Decrease (increase) in current assets:
Accounts receivable. . . . . . . . . . . . . . . . . . . . 6,055 775
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 1,137 (2,215)
Prepaid expenses and other current assets. . . . . . . . . (65) 318
Decrease in current liabilities other than debt obligations. (11,061) (5,957)
Decrease in other long-term assets . . . . . . . . . . . . . 69 1,745
Increase (decrease) in other long-term liabilities . . . . . 355 (2,360)
------------------ --------------
Total adjustments to net income (loss) . . . . . . . . . . . . (817) (1,329)
------------------ --------------
Net cash provided by (used by) operating activities. . . . . . . 1,906 (2,696)
------------------ --------------
Cash flows provided by investing activities:
Net additions to property, plant and equipment . . . . . . . . (1,470) (2,435)
Net proceeds from sale of trading securities . . . . . . . . . 2,668 4,308
Proceeds from sale of facility . . . . . . . . . . . . . . . . 5,406 -
Net cash provided by investing activities. . . . . . . . . . . . 6,604 1,873
------------------ --------------
Cash flow used by financing activities:
Net proceeds (payments) of notes payable . . . . . . . . . . . (292) 410
Net payments of revolving credit facility. . . . . . . . . . . (3,118) (970)
Repayment of long-term debt. . . . . . . . . . . . . . . . . . (4,194) (612)
Net proceeds from sale and
issuance of common stock . . . . . . . . . . . . . . . . . . 457 1,161
------------------ --------------
Net cash used by financing activities. . . . . . . . . . . . . . (7,147) (11)
------------------ --------------
Effect of exchange rates on cash
and cash equivalents . . . . . . . . . . . . . . . . . . . . . (395) (56)
------------------ --------------
Increase (decrease) in cash and cash equivalents . . . . . . . . $ 968 $ (890)
================== ==============
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 422 $ 961
================== ==============
Income taxes (net of refunds). . . . . . . . . . . . . . . . $ 668 $ 615
================== ==============
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<PAGE>
CONCURRENT COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity 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.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these consolidated
financial statements be read in conjunction with the audited consolidated
financial statements and the notes included in the Annual Report on Form 10-K
as filed with the Securities and Exchange Commission.
The results of interim periods are not necessarily indicative of the
results to be expected for the full fiscal year.
2. CHANGES IN ACCOUNTING POLICY
Post-retirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Post-retirement Benefits Other Than Pensions" ("FAS No. 106"). This standard
requires companies to accrue post-retirement benefits throughout the
employees' active service periods until they attain full eligibility for those
benefits. The transition obligation (the accumulated post-retirement benefit
obligation at the date of adoption) may be recognized either immediately or by
amortization over the longer of the average remaining service period of active
employees or 20 years.
In connection with the adoption of this standard in fiscal year 1994, the
Company recorded a non-cash charge of $3.0 million representing the immediate
recognition of the accumulated post-retirement benefit obligation at the date
of the adoption.
As a result of the Acquisition as defined in Management's Discussion and
Analysis, the Company terminated the retirement benefits of current employees
and former employees who are not yet retired. In the quarter and six months
ended December 28, 1996, curtailment gains of $1.2 million and $2.2 million,
respectively, were recognized. The total year-to-date curtailment gain during
fiscal year 1997 was $2.5 million. The Company believes there will be no
material expenses in connection with this Plan.
Stock-Based Compensation
Prior to July 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. During fiscal year 1997, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"), which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures (which for the Company would
include employee stock option grants made in fiscal year 1996 and future
years) as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
3. EARNINGS (LOSS) PER SHARE
In the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS No. 128"),
which supersedes APB Opinion No. 15, "Earnings Per Share", and specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock or potential common
stock. FAS No. 128 replaces primary and fully diluted EPS with basic and
diluted EPS, respectively. It also requires dual presentation of Basic EPS
and Diluted EPS on the face of the income statement and requires a
reconciliation of the numerator and denominator of the Basic EPS computation
to the numerator and denominator of the Diluted EPS computation.
Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS,
like Fully Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
The number of shares used in computing basic and fully diluted earnings
per share for the three months ended December 31, 1997 was 47,022,000 and
48,100,000, respectively. The number of shares used in computing basic and
diluted earnings per share for the three months ended December 28, 1996 was
44,466,000 and 45,317,000, respectively. The number of shares used in
computing basic and fully diluted earnings per share for the six months ended
December 31, 1997 was 46,598,000 and 47,364,000, respectively. The number of
shares used on computing net loss per share for the six months ended December
28, 1996 was 43,417,000.
4. TRADING SECURITIES
As of June 30, 1996, the Company held 683,173 shares of CyberGuard stock
with a market value of $14.75 per share. During the quarter ended September
30, 1996 the Company sold 91,500 shares at $10.645 per share, resulting in a
realized loss of $376 thousand. The value of the stock as of September 30,
1996 was $8.50 per share, resulting in an unrealized loss of $3.7 million for
the quarter then ended. During the quarter ended December 28, 1996, the
Company sold 261,500 shares at an average price of $12.748 per share resulting
in a realized gain of $1.1 million, and sold a call option on an additional
300,000 shares. As of December 28, 1996, the value of the stock was $11.625,
resulting in an unrealized gain for the quarter of $1.0 million. During the
remainder of fiscal year 1997, the Company sold 24,995 shares leaving 305,178
shares at June 30, 1997, valued at $2.7 million or $8.91 per share.
During the quarter ended September 30, 1997, 259,352 shares of CyberGuard
stock were sold, resulting in a realized gain for the period of $358 thousand.
On September 4, 1997, the remaining 45,826 shares valued at $10.25 per share
were issued as bonuses to Company employees. This resulted in a realized gain
of $62 thousand.
<PAGE>
5. INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by using the first-in, first-out ("FIFO") method. The components
of inventories are as follows:
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
------------- ---------
<S> <C> <C>
Raw Materials . $ 5,012 $ 5,823
Work-in-process 1,458 2,191
Finished Goods. 792 385
------------- ---------
$ 7,262 $ 8,399
============= =========
</TABLE>
6. ACCUMULATED DEPRECIATION
Accumulated depreciation for property, plant and equipment at December
31, 1997 and June 30, 1997 was $22,371,000 and $23,062,000 respectively. The
decrease primarily reflects exchange rate fluctuations.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1997
------------- ---------
<S> <C> <C>
Accounts payable, trade . . . $ 4,535 $ 7,451
Accrued payroll, vacation and
other employee expenses . . 4,332 5,891
Restructuring reserve . . . . 736 2,876
Other accrued expenses. . . . 4,520 7,648
------------- ---------
$ 14,123 $ 23,866
============= =========
</TABLE>
8. SALE OF FACILITY
During fiscal year 1996, in connection with the Acquisition (as
hereinafter defined) and the resulted planned disposition of the Company's
Oceanport, New Jersey facility, the book value of land and building related to
this facility was written down by $6.8 million to its estimated fair value of
$4.7 million, based on a valuation by independent appraisers, and classified
as a facility held for sale. In the quarter ended September 30, 1997, the
sale of this facility was finalized. $5.5 million less closing costs of $0.1
million was received by the Company and applied against the Company's debt.
The Company realized a gain of $0.7 million that is reflected in the statement
of operations in the six months ended December 31, 1997.
9. PROVISION FOR RESTRUCTURING
The Company recorded a restructuring provision of $24.5 million during
the year ended June 30, 1996. This charge included the estimated costs
related to the rationalization of facilities, workforce reductions, asset
writedowns and other costs. The balance of the restructuring reserve at June
30, 1996 was $13.0 million. During fiscal year 1997, expenditures related to
this restructuring amounted to approximately $10.1 million leaving a balance
$2.9 million at June 30, 1997.
During the quarter and six months ended December 31, 1997, restructuring
expenditures amounted to $0.7 million and $2.1 million, respectively,
representing workforce reductions and lease terminations. The balance of the
restructuring reserve at December 31, 1997 was $0.7 million.
On May 5, 1992, the Company had entered into an agreement with the
Industrial Development Authority (the "IDA") to maintain a presence in Ireland
through April 30, 1998. In connection with the Acquisition, the Company
closed its Ireland operations in December 1996. As a result of the closing,
the Company may be required to repay grants to the IDA. Current negotiations
with the IDA indicate that the potential liability is approximately $150,000
(100,000 Irish Pounds).
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On June 27, 1996, the Company acquired the Real-Time Division of Harris
Computer Systems Corporation ("HCSC"), along with 683,178 shares of newly
issued shares of HCSC, which was renamed CyberGuard Corporation, in exchange
for 10,000,000 shares of Concurrent common stock, 1,000,000 shares of
convertible exchangeable preferred stock of Concurrent with a 9% cumulative
annual dividend payable quarterly in arrears and a mandatory redemption value
of $6,263,000 and the assumption of certain liabilities related to the HCSC
Real-Time Division ("Acquisition"). The aggregate purchase price of the
Acquisition was approximately $18.7 million. The Acquisition has been
accounted for as a purchase effective June 30, 1996.
RESULTS OF OPERATIONS
THE QUARTER ENDED DECEMBER 31, 1997 COMPARED WITH THE QUARTER ENDED DECEMBER
28, 1996.
Net Sales. Net sales decreased to $21.0 million for the quarter ended
December 31, 1997 from $26.6 million in the comparable period a year ago. The
Company considers its computer systems and service business to be one class of
products.
Net product sales were $9.8 million for the quarter ended December 31, 1997 as
compared with $12.9 million for the quarter ended December 28, 1996. Sales of
proprietary systems continue to decline, and the selling price of open systems
is significantly lower than that of proprietary products. Maintenance sales
decreased from $13.8 million in the quarter ended December 28, 1996 to $11.3
million in the quarter ended December 31, 1997 continuing the decline
experienced over the past years as customers move from proprietary systems to
open systems which require less maintenance.
Gross Margin. Gross margin decreased $1.8 million during the current
quarter to $10.8 million (51.2% as a percentage of sales) compared with $12.6
million (47.4%) for the three months ended September 30, 1996. The improved
margin resulted from increased efficiencies and economies of scale brought
about by combining the Company's manufacturing and maintenance facilities with
those of HCSC. The overall decrease in gross margin reflects the Company's
lower sales this quarter.
Operating Income. Operating income increased $0.5 million to $2.2
million in the current quarter compared with an income of $1.7 million in the
quarter ended December 28, 1996. Expenses decreased $2.3 million in the
current quarter compared with the quarter ended December 28, 1996, which is
primarily due to continued cost reduction efforts and the reduction of
transition costs as the transition process relating to the Acquisition has
been completed. This was partially offset by an increase resulting from the
reversal of a $1.2 million post-retirement benefit accrual that occurred in
the quarter ended December 28, 1996.
Net Income. Net income decreased from $2.7 million in the quarter ended
December 28, 1996 to $1.4 million in the current quarter. The decrease of
$1.3 million is due to the $2.2 million gain on CyberGuard stock in the prior
quarter. This was offset by the increase in operating income discussed above
and a reduction in interest expense due to decreased borrowings.
<PAGE>
THE SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 28, 1996.
Net Sales. Net sales decreased to $41.6 million for the six months ended
December 31, 1997 from $54.4 million in the comparable period a year ago. The
Company considers its computer systems and service business to be one class of
products.
Net product sales were $18.6 million for the six months ended December 31,
1997 as compared with $26.2 million for the six months ended December 28,
1996. Sales of proprietary systems continue to decline, while open system
products are increasing. Maintenance sales decreased from $28.1 million in
the six months ended December 28, 1996 to $23.0 million for the comparable six
months of 1997, continuing the decline experienced over the past years as
customers move from proprietary to open systems which require less
maintenance.
Gross Margin. Gross margin as a percentage of sales increased to 49.6%
in the current six month period from 45.5% for the six months ended December
28, 1996. This increase reflects the Company's increased efficiencies and
cost improvement efforts.
Operating Income. Operating income increased $0.8 million to a profit of
$3.8 million compared with an income of $3.0 million in the six months ended
December 28, 1996. Expenses decreased $5.0 million in the current six months
compared with the six months ended December 28, 1996 which is primarily due to
continued cost reduction efforts, the reduction of transition costs as the
transition process relating to the Acquisition has been completed and a gain
on the sale of the building recorded as an offset to restructuring expense in
the current six months. This was partially offset by an increase resulting
from the reversal of a $2.2 million post-retirement benefit accrual that
occurred in the six months ended December 28, 1996.
Net Income. Net income increased from a loss of $1.4 million in the six
months ended December 28, 1996 to an income of $2.7 million in the current six
months. This increase of $4.1 million is due to the $0.8 million increase in
operating income discussed above, the $0.4 million gain on CyberGuard stock in
the current six months as compared to the $1.9 million loss on CyberGuard
stock in the prior year, and a significant decrease in interest expense
resulting from decreased borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company sold its Oceanport, New Jersey facility in July 1997 for $5.5
million. The net proceeds for the sale ($5.4 million) were used to reduce
debt. During the first quarter of fiscal year 1998, the Company sold 259,352
shares of CyberGuard stock for $2.7 million which was used in operations. The
Company's liquidity 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 depends to a significant extent
on (i) the actual versus anticipated decline in sales of proprietary systems
and service maintenance revenue; (ii) revenue growth from open systems; and
(iii) ongoing cost control actions. Liquidity will also be affected by: (i)
timing of shipments which predominately occur during the last month of the
quarter; (ii) the percentage of sales derived from outside the United States
where there are generally longer accounts receivable collection cycles and
which receivables are not included in the Company's borrowing base under its
revolving credit facility; (iii) the sales level in the United States where
related accounts receivable are included in the borrowing base of the
Company's revolving credit facility; (iv) the number of countries in which the
Company will operate, which may require maintenance of minimum cash levels in
each country and, in certain cases, may restrict the repatriation of cash,
such as cash held on deposit to secure office leases. The Company believes
that it will be able to fund fiscal year 1998 operations through its operating
results and existing financing facilities. There is no assurance that the
Company's plans will be achieved.
On June 28, 1996, the Company entered into a new agreement providing for
a $19.9 million credit facility which matures August 1, 1999. The facility
includes a $7.2 million term loan (the "Term Loan") and a $12.7 million
revolving credit facility (the "Revolver"). The Revolver represents a $4.7
million increase to the maximum revolver amount, subject to certain
restrictions.
At December 31, 1997, the outstanding balances under the Term Loan and
the Revolver were $1.8 million and $0, respectively. Both the Term Loan and
the Revolver bear interest at the prime rate plus 2.0%. The Term Loan is
payable in 28 monthly installments of approximately $139,000 each, commencing
October 1, 1996 and ending January 1, 1999, with the final balance payable
August 1, 1999. The Revolver may be repaid and reborrowed, subject to certain
collateral requirements, at any time during the term ending August 1, 1999.
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. Certain early termination fees apply if the Company
terminates the facility in its entirety prior to August 1, 1999.
The Company's joint venture agreement regarding its Japanese subsidiary
has been renewed through June 1998. In the event such agreement is not
further extended, the Company could be required to satisfy the then
outstanding amount of demand notes which are guaranteed by the Company ($2.5
million at December 31, 1997). There can be no assurance that the agreement
will be extended or, in the event the agreement is not extended, that the
Company will be able to fully satisfy its demand note requirements.
The Company had cash and cash equivalents on hand of $5.0 million
representing an increase from $4.0 million as of June 30, 1997 primarily due
to the sale of the Oceanport building and the sale of the remaining CyberGuard
stock. Accounts receivable decreased by $6.1 million due to improved
collections. Accounts payable and accrued expenses decreased by $9.7 million
primarily due to reductions in spending, timely vendor payments, and a
reduction of the restructure reserve.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This Form 10-Q contains forward-looking statements that are subject to
risks and uncertainties. Statements indicating that the Company "expects,"
"estimates" or "believes" are forward-looking as are all other statements
concerning future financial results, product offerings or other events that
have not yet occurred. There are several important factors that could cause
actual results or events to differ materially from those anticipated by the
forward-looking statements contained herein. Such factors include, but are
not limited to: the growth rates of the Company's market segments; the
positioning of the Company's products in those segments; the Company's ability
to effectively manage its business, and the growth of its business, in a
rapidly changing environment; the timing of new product introductions;
inventory risks due to changes in market conditions; the competitive
environment in the computer industry; the Company's ability to establish
successful strategic relationships; and general economic conditions.
<PAGE>
SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 28, DECEMBER 31, DECEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales
Computer systems . . . . . . . . . . 46.4% 48.3% 44.7% 48.3%
Service and other. . . . . . . . . . 53.6% 51.7% 55.3% 51.7%
------------- ------------- ------------- -------------
Total. . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales
Computer systems . . . . . . . . . . 46.3% 52.8% 47.2% 53.0%
Service and other. . . . . . . . . . 51.0% 52.0% 53.0% 53.0%
Transition . . . . . . . . . . . . . 0.0% 0.5% 0.0% 3.1%
------------- ------------- ------------- -------------
Total. . . . . . . . . . . . . . . 48.8% 52.6% 50.4% 54.5%
------------- ------------- ------------- -------------
Gross margin . . . . . . . . . . . . . 51.2% 47.4% 49.6% 45.5%
Operating expenses:
Research and development . . . . . . 12.8% 12.9% 13.2% 12.5%
Selling, general and administrative. 27.9% 29.3% 28.6% 27.6%
Transition/restructuring . . . . . . 0.0% 3.3% (1.5%) 3.9%
Post-retirement benefit reversal . . 0.0% (4.5%) 0.0% (4.0%)
------------- ------------- ------------- -------------
Total operating expenses . . . . . . . 40.7% 41.0% 40.4% 40.0%
Operating income (loss). . . . . . . . 10.5% 6.4% 9.2% 5.5%
Interest expense . . . . . . . . . . . (0.9%) (2.0%) (1.1%) (2.2%)
Interest income. . . . . . . . . . . . 0.2% 0.1% 0.1% 0.1%
Other non-recurring charge . . . . . . 0.0% 8.2% 1.0% (3.4%)
Other income (expense) - net . . . . . (0.2%) (0.6%) (0.6%) (0.8%)
------------- ------------- ------------- -------------
Income (loss) before provision . . . . 9.5% 12.1% 8.7% (0.7%)
for income taxes
Provision for income taxes . . . . . . 2.8% 2.0% 2.2% 1.8%
------------- ------------- ------------- -------------
Net income (loss). . . . . . . . . . . 6.8% 10.1% 6.5% (2.5%)
============= ============= ============= =============
</TABLE>
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On December 19, 1997, the United States filed suit against the Company in
the United States District Court for the Eastern District of Virginia,
alleging that the Company filed false and/or fraudulent claims in connection
with the pricing of the Company's spare parts in 1991 under the Company's
subcontract to Unisys Corporation as prime contractor for the U.S. Department
of Commerce's Next Generation Weather Radar (NEXRAD) program. The government
is seeking treble its unspecified damages, all allowable civil penalties,
fees, and costs. The Company denies these allegations and intends to
vigorously defend against these claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Matters as specified in the Company's Proxy Statement dated October 1,
1997 were considered and approved by the Company's stockholders at the Annual
Meeting of Stockholders held on October 30, 1997. The results of such matters
were as follows:
Proposal 1: Election of Directors.
<TABLE>
<CAPTION>
Total Votes
---------------
Total Votes For Against or Withheld
--------------- -------------------
<S> <C> <C>
Michael A. Brunner. . 41,357,476 286,243
Morton E. Handel. . . 41,327,688 316,051
C. Shelton James. . . 41,353,526 290,193
Michael F. Maguire. . 41,382,134 261,585
Richard P. Rifenburgh 41,312,969 330,750
E. Courtney Siegel. . 41,270,440 373,279
</TABLE>
Proposal 2: Ratification of the selection by the Board of Directors of
KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal
year ending June 30, 1998.
<TABLE>
<CAPTION>
Total Votes Number of
Total Votes For Against or Withheld Abstentions
- --------------- ------------------- -----------
<S> <C> <C>
41,343,021. . . 160,869 139,829
</TABLE>
Proposal 3: Amendment of the Concurrent Computer Corporation 1991 Restated
Stock Option Plan.
<TABLE>
<CAPTION>
Total Votes Number of
Total Votes For Against or Withheld Abstentions
- --------------- ------------------- -----------
<S> <C> <C>
34,951,374. . . 5,813,134 442,134
</TABLE>
<PAGE>
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits:
(10) 1991 Restated Stock Option Plan
(12) Statement on computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On January 6, 1998, the Company filed a Current Report on Form 8-K with
respect to the lawsuit described in Part II, Item 1 of this Report on Form
10-Q.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report for the quarter ended
December 31, 1997 to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: February 9, 1998 CONCURRENT COMPUTER CORPORATION
By: /s/ E. Courtney Siegel
-----------------------------
E. COURTNEY SIEGEL
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Daniel S. Dunleavy
-----------------------------
DANIEL S. DUNLEAVY
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
As amended as of
October 30, 1997
CONCURRENT COMPUTER CORPORATION
EXHIBIT 10
1991 RESTATED STOCK OPTION PLAN
SECTION 1. Purpose. The purpose of the Concurrent Computer Corporation
-------
1991 Restated Stock Option Plan is to advance the interests of Concurrent
Computer Corporation (the "Company") by enabling officers, employees,
non-employee directors and consultants of the Company and its Affiliates to
participate in the Company's future and to enable the Company to attract and
retain such persons by offering them proprietary interests in the Company.
SECTION 2. Amendment and Restatement of Prior Plans. The Concurrent
---------------------------------------------
Computer Corporation 1982 Stock Option Plan ("1982 Plan") and the Concurrent
Computer Corporation 1984 Non-Qualified Common Stock Option Plan ("NSO Plan")
are hereby amended and restated on a combined basis into the Plan.
SECTION 3. Definitions. For purposes of the Plan, the following terms are
-----------
defined as set forth below:
a. "Affiliate" means a corporation or other entity controlled directly, or
---------
indirectly through one or more intermediaries, by the Company and designated
by the Committee as such.
b. "Award" means an award granted to a Participant in the form of a Stock
-----
Appreciation Right, Stock Option, or Restricted Stock, or any combination of
the foregoing.
c. "Board" means the Board of Directors of the Company.
-----
d. "Cause" shall have the meaning set forth in Section 10.
-----
e. "Change in Control" shall have the meaning set forth in Section 13.
-------------------
f. "Code" means the Internal Revenue Code of 1986, as amended from time to
----
time, and any successor thereto.
g. "Commission" means the Securities and Exchange Commission or any successor
----------
agency.
h. "Committee" means the Committee referred to in Section 6.
---------
i. "Common Stock" means common stock, $.01 per share par value, of the
------ -----
Company.
---
j. "Company" means Concurrent Computer Corporation, a Delaware corporation.
-------
k. "Disability" means permanent and total disability as determined under
----------
procedures established by the Committee for purposes of the Plan.
-
l. "Disinterested Person" shall mean a director who is not, during the one
---------------------
year prior to service as an administrator of the Plan, or during such service,
granted or awarded equity securities pursuant to the Plan or any other plan of
the Company or any of its affiliates, except as permitted by Rule 16b-3(c)(2),
as promulgated by the Commission under the Exchange Act, or as such term is
defined under any successor rule adopted by the Commission.
m. "Exchange Act" means the Securities Exchange Act of 1934, as amended from
-------------
time to time, and any successor thereto.
n. "Fair Market Value" means the average, as of any given date, between the
-------------------
highest and lowest reported closing bid and asked prices of the Stock on
NASDAQ or the closing sale price as of any given date if the Stock is listed
on a national securities exchange or quoted on the NASDAQ National Market
System. If there is no regular public trading market for such Stock under
circumstances specified above, the Fair Market Value of the Stock shall be
determined by the Committee in good faith.
o. "Incentive Stock Option" means any Stock Option intended to be and
------------------------
designated as an "incentive stock Option" within the meaning of Section 422 of
the Code.
p. "Non-Qualified Stock Option" means any Stock Option that is not an
----------------------------
Incentive Stock Option.
q. "Normal Retirement" means retirement from active employment with the
------------------
Company or an Affiliate at or after age 65 or at such other age as may be
specified by the Committee.
r. "Participant" means an employee or non-employee director or consultant of
-----------
the Company or of an Affiliate to whom an Award has been granted which has not
terminated, expired or been fully exercised.
s. "Plan" means the Concurrent Computer Corporation 1991 Restated Stock Option
----
Plan, as set forth herein and as hereinafter amended from time to time.
t. "Restricted Period" means the period of time, which may be a single period
-----------------
or multiple periods, during which Restricted Stock awarded to a Participant
remains subject to the restrictions imposed on such Stock, as determined by
the Committee.
u. "Restrictions" means the restrictions and conditions imposed on Restricted
------------
Stock awarded to a Participant, as determined by the Committee, which must be
satisfied in order for the Restricted Stock to vest, in whole or in part, in
the Participant.
v. "Restricted Stock" means an Award of Stock on which are imposed Restriction
----------------
Period(s) and Restrictions whereby the Participant's rights to full enjoyment
of the Stock are conditioned upon the future performance of substantial
services by any individual or are otherwise subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code, as amended.
w. "Restricted Stock Agreement" means a written agreement between a
----------------------------
Participant and the Company evidencing an award of Restricted Stock.
x. "Restricted Stock Award Date" means the date on which the Committee awarded
---------------------------
Restricted Shares to the Participant.
y. "Retirement" means Normal Retirement or early retirement if the Company's
----------
Profit Sharing and Savings Plan provides for same.
z. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission granted
-----------
under Section 16(b) of the Exchange Act, as amended from time to time.
aa. "Stock" means the Common Stock.
-----
bb. "Stock Appreciation Right" means a right granted under Section 11.
--------------------------
cc. "Stock Option" or "Option" means an Option granted under Section 8 or 10.
------------ ------
dd. "Termination of Employment" means the termination of the Participant's
---------------------------
employment with the Company and any Affiliate. A Participant employed by an
Affiliate shall also be deemed to incur a Termination of Employment if the
Affiliate ceases to be an Affiliate and the Participant does not immediately
thereafter become an employee of the Company or another Affiliate.
In addition, certain other terms used herein have definitions given to them in
the first place in which they are used.
SECTION 4. Effective Date. The effective date of the Plan shall be the
--------------
date upon which the Plan is approved by the stockholders of the Company.
SECTION 5. Stock Subject to Plan. The total number of shares of Stock
---------------------
reserved and available for distribution pursuant to Awards under the Plan
shall be 9,000,000 shares of Stock. Such shares may consist, in whole or in
part, of authorized and unissued shares or treasury shares.
If any shares of Stock that have been Optioned cease to be subject to a Stock
Option, if any shares of Stock that are subject to any Award are forfeited or
if any Award otherwise terminates without a distribution being made to the
Participant in the form of Stock, such shares shall again be available for
distribution in connection with Awards under the Plan. In addition, any Stock
purchased by a Participant upon exercise of an Option under the Plan which is
subsequently repurchased by the Company pursuant to the terms of such Option
may again be the subject of an Option under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization (including but not limited to the issuance of Stock or any
securities convertible into Stock in exchange for securities of the Company),
stock dividend, stock split or reverse stock split, extraordinary distribution
with respect to the Stock or other similar change in corporate structure
affecting the Stock, such substitution or adjustments shall be made in the
aggregate number of shares reserved for issuance under the Plan, in the number
and Option price of shares subject to outstanding Stock Options and Stock
Appreciation Rights, and in the number of shares subject to other outstanding
Awards granted under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted
Option price shall also be used to determine the amount payable by the Company
upon the exercise of any Stock Appreciation Right associated with any Stock
Option.
SECTION 6. Administration.
--------------
The Plan shall be administered by the Stock Award Committee
("Committee") of the Board or such other committee of the Board, composed of
not less than three Disinterested Persons, each of whom shall be appointed by
and serve at the pleasure of the Board. If at any time no Committee shall be
in place, the functions of the Committee specified in the Plan shall be
exercised by the Board.
The Committee shall have plenary authority to grant Awards to officers,
employees, non-employee directors and consultants of the Company or an
Affiliate.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select the officers, employees, non-employee directors and
consultants to whom Awards may from time to time be granted;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights and Restricted
Stock, or any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each Award
granted hereunder;
(d) to determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the Option price, any vesting restriction
or limitation, any repurchase rights in favor of the Company and any
vesting acceleration or forfeiture waiver regarding any Award and the
shares of Stock relating thereto, based on such factors as the Committee
shall determine);
(e) to adjust the terms and conditions, at any time or from time to time,
of any Award, including with respect to performance goals and measurements
applicable to performance-based Awards pursuant to the terms of the Plan;
(f) to determine under what circumstances an Award may be settled in cash
or Stock;
(g) if appropriate, to determine Fair Market Value; and
(h) to substitute new Stock Options for previously granted Stock Options,
including previously granted Stock Options having higher Option prices.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of
the Plan and any Award issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office, except
that the members thereof may authorize any one or more of their number or any
officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee pursuant to the provisions of the Plan
with respect to any Award shall be made in its sole discretion at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee pursuant to
the provisions of the Plan shall be final and binding on all persons,
including the Company and Participants.
SECTION 7. Eligibility.
-----------
Officers, employees, non-employee directors, and consultants of the
Company and its Affiliates (but excluding members of the Committee other than
as expressly provided by Section 8) who are responsible for or contribute to
the management, growth and profitability of the business of the Company and
its Affiliates are eligible to be granted Awards under the Plan. Any person
who files with the Committee, in a form satisfactory to the Committee, a
written waiver of eligibility to receive any Award under the Plan shall not be
eligible to receive an Award under the Plan for the duration of the waiver.
SECTION 8. Options Granted to Non-Employee Directors.
---------------------------------------------
The provisions of this Section 8 govern the granting and terms of Options
for any director of the Company who is not an employee of the Company or any
of its Affiliates ("Eligible Director"). No Option may be granted to Eligible
Directors other than pursuant to this Section 8.
Upon the initial election of an Eligible Director to the Board, without
further action by the Board or the stockholders of the Company, such Eligible
Director shall be automatically granted Options to purchase 20,000 shares of
stock (subject to adjustment in accordance with the provisions of Section 5 of
the Plan). On the date of each annual meeting of stockholders of the Company,
each Eligible Director who has previously been awarded an Option under the
preceding sentence shall be granted automatically, without further action by
the Board or the stockholders of the Company, Options to purchase 10,000
shares of stock (subject to adjustment in accordance with the provisions of
Section 5 of the Plan).
The purchase price per share deliverable upon the exercise of such Options
under this Section 8 shall be 100% of the Fair Market Value of such shares as
of the date of such Option. Each Option granted under this Section 8 shall
become immediately exercisable and no Option shall be exercisable after the
expiration of ten (10) years from the date of grant. Each Option granted
pursuant to this Section 8 shall be exercisable during the period the Eligible
Director remains a member of the Board and for a period of three (3) years
following retirement, provided that only those Options exercisable at the date
of retirement may be exercised during the period following retirement, and,
provided further, that in no event shall any such Option be exercisable beyond
the tenth (10th) anniversary of the date of grant.
SECTION 9. Duration of the Plan.
-----------------------
The Plan shall terminate ten (10) years from the effective date specified
in Section 4 of the Plan, unless terminated earlier pursuant to Section 14
hereto, and no Options may be granted thereafter.
SECTION 10. Stock Options.
--------------
Stock Options granted under the Plan may be of two types: Incentive Stock
Options and Non-Qualified Stock Options. Any Stock Option granted under the
Plan shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive Stock
Options, Non-Qualified Stock Options or both types of Stock Options (in each
case with or without Stock Appreciation Rights). Incentive Stock Options may
be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified
Stock Option.
Stock Options shall be evidenced by Option agreements, the terms and
provisions of which may differ. An Option agreement shall indicate on its face
whether it is an agreement for an Incentive Stock Option or a Non-Qualified
Stock Option. The grant of a Stock Option shall occur on the date the
Committee by resolution selects an individual to be a participant in any grant
of a Stock Option, determines the number of shares of Stock to be subject to
such Stock Option to be granted to such individual and specifies the terms and
provisions of the Option agreement. The Company shall notify a Participant of
any grant of a Stock Option, and a written Option agreement or agreements
shall be duly executed and delivered by the Company to the Participant. Such
agreement or agreements shall become effective upon execution by the
participant. Anything in the Plan to the contrary notwithstanding, no term of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the optionee affected, to disqualify any Incentive
Stock Option under such Section 422.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions as the
Committee shall deem desirable:
(a) Option Price. The Option price per share of Stock purchasable under an
-------------
Option shall be determined by the Committee and set forth in the Option
agreement, and shall not be less than the Fair Market Value of the Stock
subject to the Option on the date of grant in the case of Incentive Stock
Options and not less than 50% of the Fair Market Value of the Stock subject to
the Option on the date of grant in the case of Non-Qualified Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by the
------------
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date of grant; and no Non-Qualified Stock Option shall be
exercisable more than 10 years and one day after the date the Stock Option is
granted.
(c) Exercisability. Subject to Section 13, Stock Options shall otherwise be
--------------
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee. If the Committee provides that any Stock
Option is exercisable only in installments, the Committee may at any time
waive such installment exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the Committee may at any
time accelerate the exercisability of any Stock Option.
(d) Method of Exercise. Subject to the provisions of this Section 10, Stock
--------------------
Options may be exercised, in whole or in part, at any time during the Option
period by giving written notice of exercise to the Company specifying the
number of shares of Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the purchase price by
certified or bank check or such other instrument as the Company may accept. If
approved by the Committee, payment in full or in part may also be made in the
form of unrestricted Stock already owned by the optionee of the same class as
the Stock subject to the Stock Option provided, however, that, in the case of
an Incentive Stock Option, the right to make a payment in the form of already
owned shares of Stock of the same class as the Stock subject to the Stock
Option shall be authorized only at the time the Stock Option is granted.
An optionee shall have all of the rights of a stockholder of the
Company holding the class or series of Stock that is subject to such Stock
Option (including, if applicable, the right to vote the shares and the right
to receive dividends), when the optionee has given written notice of exercise,
and has paid in full for such shares. In the discretion of the Committee,
payment for any Stock subject to an Option may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the purchase price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms. The value of previously owned Stock
exchanged in full or partial payment for the shares purchased upon the
exercise of an Option shall be equal to the aggregate Fair Market Value of
such shares on the date of the exercise of such Option.
(e) Non-transferability of Options. No Stock Option shall be transferable
------------------------------
by the optionee other than by will or by the laws of descent and distribution,
and all Stock Options shall be exercisable, during the optionee's lifetime,
only by the optionee or by the guardian or legal representative of the
optionee, it being understood that the terms "holder" and "optionee" include
the guardian and legal representative of the optionee named in the Option
agreement and any person to whom an Option is transferred by will or the laws
of descent and distribution.
(f) Termination by Death. If an optionee's employment terminates by reason
--------------------
of death, any Stock Option held by such optionee may thereafter be exercised,
to the extent then exercisable or on such accelerated basis as the Committee
may determine, for a period of one year and one day (or such other period as
the Committee may specify) from the date of such death or until the expiration
of the stated term of such Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. If any optionee's employment
---------------------------------------
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at
the time of termination or on such accelerated basis as the Committee may
determine, for a period of one year and one day (or such shorter period as the
Committee may specify at grant) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee dies
within such one year and one day period (or such shorter period ending upon
the expiration of the stated term of the Stock Option), any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration of such one
year and one day period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of one year and one day from
the date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of
Section 422 of the Code, such Stock Option will thereafter be treated as a
Non-Qualified Stock Option.
(h) Other Termination. Unless otherwise determined by the Committee
------------------
and subject to the provisions of Section 13 of the Plan, if an optionee incurs
a Termination of Employment for any reason other than death or Disability, any
Stock Option held by such optionee shall thereupon terminate, except that such
Stock Option, to the extent then exercisable, may be exercised for the lesser
of three months and one day from the date of such Termination of Employment or
the balance of such Stock Option's term if such Termination of Employment of
the optionee is involuntary and without Cause. Unless otherwise determined by
the Committee, for the purposes of the Plan "Cause" shall have the same
meaning as that set forth in any employment or severance agreement, in effect
between the Company and the Participant. Otherwise, it shall mean (1) the
conviction of the optionee for committing a felony under Federal law or the
law of the state in which such action occurred, (2) dishonesty in the course
of fulfilling the optionee's employment duties or (3) willful and deliberate
failure on the part of the optionee to perform his employment duties in any
material respect.
(i) Cashing Out of Option. On receipt of written notice of exercise, the
---------------------
Committee may elect to cash out all or part of any Stock Option to be
exercised by paying the optionee an amount, in cash or Stock, equal to the
excess of the Fair Market Value of the Stock that is the subject of the Option
over the Option price times the number of shares of Stock subject to the
Option on the effective date of such cash out.
Cash outs relating to Options held by optionees who are actually or
potentially subject to Section 16(b) of the Exchange Act shall comply with the
"window period" provisions of Rule 16b-3, to the extent applicable, and, in
the case of cash outs of Non-Qualified Stock Options held by such optionees,
the Committee may determine Fair Market Value with reference to the pricing
provision of Section 11(b)(ii)(2).
SECTION 11. Stock Appreciation Rights.
---------------------------
(a) Grant and Exercise. Stock Appreciation Rights may be granted in
------------------
conjunction with all or part of any Stock Option granted under the Plan. In
the case of a Non-Qualified Stock Option, such rights may be granted either at
or after the time of grant of such Stock Option. In the case of an Incentive
Stock Option, such rights may be granted only at the time of grant of such
Stock Option. A Stock Appreciation Right shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance with
Section 11(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 11(b). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
--------------------
such terms and conditions as shall be determined by the Committee, including
the following:
(i) Stock Appreciation Rights shall be exercisable only at such time
or times and to the extent that the Stock Options to which they
relate are exercisabIe in accordance with the provisions of
Section 10 and this Section 11; provided, however, that a
Stock Appreciation Right shall not be exercisable during the first
six months of its term by an optionee who is actually or potentially subject
to Section 16(b) of the Exchange Act, except that this
limitation shall not apply in the event of death or Disability
of the optionee prior to the expiration of the six- month
period.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive an amount in cash, shares of Stock or both
equal in value to the excess of the Fair Market Value of one
share of Stock over the option price per share specified in
the related Stock Option multiplied by the number of shares in respect
of which the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.
In the case of Stock Appreciation Rights relating to Stock Options held by
optionees who are actually or potentially subject to Section 16 (b) of the
Exchange Act, the Committee:
(1) may require that such Stock Appreciation Rights be exercised only
in accordance with the applicable "window period"
provisions of Rule 16b- 3; and
(2) in the case of Stock Appreciation Rights relating to
Non-Qualified Stock Options, may provide that the
amount to be paid upon exercise of such Stock
Appreciation Rights during a Rule 16b-3 "window period" shall be
based on the highest mean sales price of the Stock on NASDAQ, or on
such national securities exchange upon which the Stock may be traded, on
any day during such "window period".
(iii) Stock Appreciation Rights shall be transferable only when and to the
extent that the underlying Stock Option would be transferable
under Section 10 (e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of
determining the number of shares of Stock available for issuance
under the Plan in accordance with Section 5 of the Plan, but only to
the extent of the number of shares resulting from dividing the value of the
Stock Appreciation Right at the time of exercise by the Fair
Market Value of one share of Stock determined in accordance with
this Section 11.
SECTION 12. Terms of Restricted Stock Awards.
------------------------------------
Subject to and consistent with the provisions of the Plan, with respect
to each Award of Restricted Stock to a Participant, the Committee shall
determine:
(a) the terms and conditions of the Restricted Stock Agreement between the
Company and the Participant evidencing the Award;
(b) the Restriction Period for all or a portion of the Award;
(c) the Restrictions applicable to the Award, including, but not limited
to, continuous employment with the Company for a specified term or the
attainment of specific corporate, divisional or individual performance
standards or goals, which Restriction Period and Restrictions may differ with
respect to each Participant;
(d) whether the Participant shall receive the dividends and other
distributions paid with respect to an award of the Restricted Stock as
declared and paid to the holders of the stock during the Restriction Period or
shall be withheld by the Company for the account of the Participant until the
Restriction Periods have expired or the Restrictions have been satisfied, and
whether interest shall be paid on such dividends and other distributions
withheld, and if so, the rate of interest to be paid;
(e) the percentage of the Award which shall vest in the Participant in the
event of death, Disability or Retirement prior to the expiration of the
Restriction Period or the satisfaction of the Restrictions applicable to an
award of Restricted Stock; and
(f) notwithstanding the Restriction Period and the Restrictions imposed on
the Restricted Shares, as set forth in a Restricted Stock Agreement, whether
to shorten the Restriction Period or waive any Restrictions, if the Committee
concludes that it is in the best interests of the Company to do so.
Upon an award of Restricted Stock to a Participant, the stock certificate
representing the Restricted Stock shall be issued and transferred to and in
the name of the Participant, whereupon the Participant shall become a
stockholder of the Company with respect to such Restricted Stock and shall be
entitled to vote the Stock. Such stock certificates shall be held in custody
by the Company, together with stock powers executed by the Participant in
favor of the Company, until the Restriction Period expires and the
Restrictions imposed on the Restricted Stock are satisfied.
SECTION 13. Change of Control.
-------------------
Upon the occurrence of an event of "Change of Control", as defined below
and subject to such additional conditions and restrictions as the Committee
may determine at the time of the granting of the Award:
(a) any and all outstanding Options shall become immediately exercisable;
(b) the Restriction Period and Restrictions imposed on the Restricted
Stock shall lapse, and the Restricted Stock shall vest in the Participant to
the extent determined by the Committee; and
(c) within ten business days after the occurrence of a Change of Control,
the certificates representing the Restricted Stock so vested, without any
restrictions or legend thereon, other than as required by law, shall be
delivered to the Participant, and any dividends and distributions paid with
respect to the Restricted Stock which were escrowed during the Restriction
Period and the earnings thereon shall be paid to the Participant.
A "Change of Control" shall occur when, in addition to the occurrence of such
other events as the Committee may determine at the time of the grant of the
Award:
(a) any "Person" (which term, when used in this Section 13, shall mean two
or more persons acting as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of securities
of the issuer or shall have such other meaning assigned to it in a successor
provision to Section 13(d) of the Exchange Act) is or becomes the "Beneficial
Owner" (which term, when used in this Section 13, shall include any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares (i) voting power which includes the
power to vote or to direct the voting of such security; and/or (ii) investment
power which includes the power to dispose or to direct the disposition of such
security, or such other meaning assigned to it in a successor provision to
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
Voting Stock (as defined below) representing twenty percent or more of the
votes entitled to be cast by the holders of all then outstanding Shares of the
Company; or
(b) the stockholders of the Company approve a definitive agreement or plan
to merge or consolidate the Company with or into another corporation, or to
sell, or otherwise dispose of, all or substantially all of the Company's
property and assets, or to liquidate the Company or the business of the
Company for which the Participant's services are principally performed is
disposed of by the Company pursuant to a sale of assets (including stock of a
subsidiary of the Company), a merger or consolidation or otherwise; or
(c) the individuals who are Continuing Directors of the Company (as
defined below) cease for any reason to constitute at least a majority of the
Board of the Company.
The term "Continuing Director" means (i) any member of the Board who is a
member of the Board on February 1, 1992, or (ii) any person who subsequently
becomes a member of the Board whose nomination for election or election to the
Board is recommended or approved by a majority of the Continuing Directors.
The term "Voting Stock" means all capital stock of the Company which by its
terms may be voted on all matters submitted to stockholders of the Company
generally.
SECTION 14. Amendments and Termination.
----------------------------
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights
of an Award theretofore granted without the Participant's consent, except such
an amendment made to cause the Plan to qualify for the exemption provided by
Rule 16b-3, or (ii) disqualify the Plan from the exemption provided by Rule
16b-3. In addition, no such amendment shall be made without the approval of
the Company's stockholders to the extent such approval is required by law or
agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any holder without the holder's consent except such
an amendment made to cause the Plan or Award to qualify for the exemption
provided by Rule 16b-3. The Committee may also substitute new Stock Options
for previously granted Stock Options, including previously granted Stock
Options having higher Option prices.
Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law and tax and accounting rules, as well
as other developments and to grant Awards which qualify for beneficial
treatment under such rules without shareholder approval.
SECTION 15. General Provisions.
-------------------
(a) Nothing contained in the Plan shall prevent the Company or an
Affiliate from adopting other or additional compensation arrangements for its
employees.
(b) The Plan shall not confer upon any employee any right to continued
employment nor shall it interfere in any way with the right of the Company or
an Affiliate to terminate the employment of any employee at any time.
(c) No later than the date as of which an amount first becomes includible
in the gross income of the Participant for Federal income tax purposes with
respect to any Award under the Plan, the Participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
Federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, withholding obligations may be settled with Stock, including Stock
that is part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the participant.
(d) The Committee shall establish such procedures as it deems appropriate
for a Participant to designate a beneficiary to whom any amounts payable in
the event of the participant's death are to be paid.
(e) Agreements entered into by the Company and Participants relating to
Awards under the Plan, in such form as may be approved by the Committee from
time to time, to the extent consistent with or permitted by the Plan shall
control with respect to the terms and conditions of the subject Award. If any
provisions of the Plan or any agreement entered into pursuant to the Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan or the subject agreement.
(f) The Plan and all Awards made and actions taken thereunder shall
be governed by and construed in accordance with the laws of the State of
Delaware.
SECTION 16. Certain Awards
---------------
The approval by the stockholders of the Company of the Plan shall be
deemed approval by said stockholders of the terms and conditions of the Awards
(including but not limited to terms and conditions relating to the Option
price, exercisability, vesting and acceleration of vesting, including
acceleration upon a change of control as defined in the option agreements
evidencing the Awards) previously made to non-employee Directors of the
Company which are designated on Annex A hereto and ratification of the terms
and conditions of the other Awards previously made which are designated on
Annex A hereto.
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
EXHIBIT 12
BASIC AND DILUTED EARNINGS PER SHARE COMPUTATION
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------- -------------------
FULLY FULLY
BASIC DILUTED BASIC DILUTED
------- -------- -------- ---------
<S> <C> <C> <C> <C>
Average outstanding shares: . . . . 47,021 47,021 46,599 46,599
Primary options outstanding . . . . - - - -
Fully diluted options outstanding . - 1,079 - 765
------- -------- -------- ---------
Equivalent Shares . . . . . . . . . 47,021 48,100 46,599 47,364
======= ======== ======== =========
Net income. . . . . . . . . . . . . $ 1,423 $ 1,423 $ 2,723 $ 2,723
Preferred stock dividends
and accretion of preferred shares - - (18) (18)
------- -------- -------- ---------
Net income available to common
stockholders. . . . . . . . . . . $ 1,423 $ 1,423 $ 2,705 $ 2,705
======= ======== ======== =========
Earnings per share. . . . . . . . . $ 0.03 $ 0.03 $ 0.06 $ 0.06
======= ======== ======== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet at December 31, 1997 and Consolidated
Statement of Operations for the six months ended December 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 20394
<ALLOWANCES> 729
<INVENTORY> 7262
<CURRENT-ASSETS> 33624
<PP&E> 35403
<DEPRECIATION> 22371
<TOTAL-ASSETS> 48033
<CURRENT-LIABILITIES> 23230
<BONDS> 434
<COMMON> 472
0
0
<OTHER-SE> 22323
<TOTAL-LIABILITY-AND-EQUITY> 48033
<SALES> 18625
<TOTAL-REVENUES> 41621
<CGS> 8793
<TOTAL-COSTS> 20975
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 450
<INCOME-PRETAX> 3631
<INCOME-TAX> 908
<INCOME-CONTINUING> 2723
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2723
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
