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, 1998
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 5, 1999 was 47,942,504.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
-------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales:
Computer systems . . . . . . . . . . . . . $ 9,068 $ 9,759 $15,796 $18,625
Service and other. . . . . . . . . . . . . 10,113 11,257 20,259 22,996
-------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . 19,181 21,016 36,055 41,621
Cost of sales:
Computer systems . . . . . . . . . . . . . 4,244 4,516 7,258 8,793
Service and other. . . . . . . . . . . . . 5,103 5,737 10,214 12,182
-------- -------- -------- --------
Total. . . . . . . . . . . . . . . . . . 9,347 10,253 17,472 20,975
-------- -------- -------- --------
Gross margin . . . . . . . . . . . . . . . . 9,834 10,763 18,583 20,646
Operating expenses:
Research and development . . . . . . . . . 2,545 2,694 5,249 5,514
Selling, general and administrative. . . . 6,750 5,870 12,583 11,894
Restructuring. . . . . . . . . . . . . . . - - - (607)
-------- -------- -------- --------
Total operating expenses . . . . . . . . . . 9,295 8,564 17,832 16,801
-------- -------- -------- --------
Operating income . . . . . . . . . . . . . . 539 2,199 751 3,845
Interest expense . . . . . . . . . . . . . . (71) (188) (149) (450)
Interest income. . . . . . . . . . . . . . . 41 36 93 58
Other income (expense) - net . . . . . . . . 492 (41) (120) 178
-------- -------- -------- --------
Income before provision for income taxes . . 1,001 2,006 575 3,631
Provision for income taxes . . . . . . . . . 86 583 86 908
-------- -------- -------- --------
Net income . . . . . . . . . . . . . . . . . $ 915 $ 1,423 $ 489 $ 2,723
Preferred stock dividends and accretion of
mandatory redeemable preferred shares. . . - - - (18)
-------- -------- -------- --------
Net income available to common shareholders. $ 915 $ 1,423 $ 489 $ 2,705
======== ======== ======== ========
Basic and diluted net income per share . . . $ 0.02 $ 0.03 $ 0.01 $ 0.06
======== ======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DEC. 31, JUNE 30,
1998 1998
------------ ----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 5,777 $ 5,733
Accounts receivable - net. . . . . . . . . . . . . . . . . . 16,675 18,571
Notes receivable - net . . . . . . . . . . . . . . . . . . . 722 425
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 6,183 6,263
Prepaid expenses and other current assets. . . . . . . . . . 1,466 1,487
------------ ----------
Total current assets . . . . . . . . . . . . . . . . . . . 30,823 32,479
Property, plant and equipment - net. . . . . . . . . . . . . . 12,993 12,419
Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,212 1,337
Total assets . . . . . . . . . . . . . . . . . . . . . . . $ 45,028 $ 46,235
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . $ 440 $ 365
Revolving credit facility. . . . . . . . . . . . . . . . . . 922 1,123
Accounts payable and accrued expenses. . . . . . . . . . . . 10,866 13,321
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 3,249 4,018
------------ ----------
Total current liabilities. . . . . . . . . . . . . . . . . 15,477 18,827
Other long-term liabilities. . . . . . . . . . . . . . . . . . 2,095 1,898
Total liabilities. . . . . . . . . . . . . . . . . . . . . 17,572 20,725
------------ ----------
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 479 476
Capital in excess of par value . . . . . . . . . . . . . . . 97,523 97,136
Accumulated deficit after eliminating accumulated deficit of
$81,826 at December 31, 1991, date of quasi-reorganization (70,702) (71,191)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (58) (58)
Cumulative translation adjustment. . . . . . . . . . . . . . 214 (853)
Total stockholders' equity . . . . . . . . . . . . . . . . 27,456 25,510
------------ ----------
Total liabilities and stockholders' equity . . . . . . . . . . $ 45,028 $ 46,235
============ ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
DECEMBER 31,
1998 1997
--------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flows provided by operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 489 $ 2,723
Adjustments to reconcile net income
to net cash provided by operating activities:
Realized gain on trading securities . . . . . . . . - (420)
Gain on sale of facility. . . . . . . . . . . . . . - (706)
Loss on dissolution of subsidiary . . . . . . . . . 429 -
Depreciation, amortization and other. . . . . . . . 2,551 2,962
Other non-cash expenses . . . . . . . . . . . . . . 12 857
Decrease (increase) in assets:
Accounts and notes receivable . . . . . . . . . . 1,592 6,055
Inventories . . . . . . . . . . . . . . . . . . . 75 1,137
Prepaid expenses and other current assets . . . . (433) (65)
Other long-term assets. . . . . . . . . . . . . . 98 69
Increase (decrease) in liabilities:
Accounts payable, accrued expenses and
other current liabilities . . . . . . . . . (3,224) (11,061)
Other long-term liabilities . . . . . . . . . . . 197 355
--------- ---------
Total adjustments to net income . . . . . . . . . . . 1,297 (817)
--------- ---------
Net cash provided by operating activities . . . . . . . 1,786 1,906
--------- ---------
Cash flows (used in) provided by investing activities:
Net additions to property, plant and equipment. . . . (2,238) (1,470)
Proceeds from sale of facility. . . . . . . . . . . . - 5,406
Proceeds from sale of trading securities. . . . . . . - 2,668
--------- ---------
Net cash (used in) provided by investing activities . . (2,238) 6,604
--------- ---------
Cash flows provided by (used in) financing activities:
Payments of notes payable . . . . . . . . . . . . . . (5) (292)
Proceeds of revolving credit facility . . . . . . . . 28,054 36,476
Payments of revolving credit facility . . . . . . . . (28,255) (39,594)
Repayment of long-term debt . . . . . . . . . . . . . - (4,194)
Proceeds from sale and issuance of common stock . . . 390 457
--------- ---------
Net cash provided by (used in) financing activities . . 184 (7,147)
--------- ---------
Effect of exchange rates on cash and cash equivalents . 312 (395)
--------- ---------
Increase in cash and cash equivalents . . . . . . . . . $ 44 $ 968
========= =========
Cash paid during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . $ 148 $ 422
========= =========
Income taxes (net of refunds) . . . . . . . . . . . $ 318 $ 668
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
CONCURRENT COMPUTER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements of Concurrent
Computer Corporation ("Concurrent" or the "Company") 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 condensed
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. EARNINGS 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 is computed by dividing income after deduction of preferred stock
dividends by the weighted average number of common shares outstanding during
each year. Diluted EPS is computed by dividing income after deduction of
preferred stock dividends by the weighted average number of shares including
common share equivalents. Under the treasury stock method, incremental shares
representing the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been issued are included
in the computation.
The number of shares used in computing basic and diluted EPS for the three
months ended December 31, 1998 was 47,852,000 and 49,214,000, respectively. The
number of shares used in computing basic and fully diluted EPS 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 fully diluted EPS for the six
months ended December 31, 1998 was 47,763,000 and 49,220,000, respectively. The
number of shares used in computing basic and fully diluted EPS for the six
months ended December 31, 1997 was 46,598,000 and 47,364,000, respectively.
<PAGE>
3. 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>
DEC. 31, JUNE 30,
1998 1998
--------- ---------
<S> <C> <C>
Raw materials . $ 4,831 $ 4,780
Work-in-process 925 959
Finished goods. 427 524
--------- ---------
$ 6,183 $ 6,263
========= =========
</TABLE>
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows:
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DEC. 31, JUNE 30,
1998 1998
--------- ---------
<S> <C> <C>
Accounts payable, trade . . . $ 3,687 $ 4,946
Accrued payroll, vacation and
other employee expenses . . 3,764 4,695
Restructuring reserve . . . . 349 661
Other accrued expenses. . . . 3,066 3,019
--------- ---------
$ 10,866 $ 13,321
========= =========
</TABLE>
5. PROVISION FOR RESTRUCTURING
As of June 30, 1998, the Company's restructuring reserve consisted of
$177,000 of accrued severance payments and $484,000 of estimated payments to be
made to the Industrial Development Authority of Ireland (the "IDA") during
fiscal year 1999. On May 5, 1992, the Company entered into an agreement with
the IDA to maintain a presence in Ireland through April 30, 1998. The Company
closed its Ireland operations in December 1996. As a result of the closing, the
Company is required to repay grants to the IDA of approximately $500,000.
During the first quarter of fiscal year 1999, the severance payments were made
and taken against the restructuring reserve, leaving $484,000 as of September
30, 1998. During the second quarter of fiscal year 1999, IDA payments of
$135,000 were made, leaving $349,000 of restructuring reserve as of December 31,
1998.
6. DISSOLUTION OF SUBSIDIARY
During the quarter ended September 30, 1998, the Company dissolved one of
its French subsidiaries, Concurrent Computer Corporation France (the "French
Branch"). The Company continues to operate in France through its other French
subsidiary, Concurrent Computer Corporation S.A. In connection with the
dissolution of the French Branch, all of its assets and liabilities were assumed
by the Company. A loss of $429,000, representing the write off of the French
Branch's cumulative translation adjustment, was recorded as other expense in the
condensed consolidated statement of operations.
<PAGE>
7. COMPREHENSIVE INCOME
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" ("FAS No. 130"). FAS No. 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. The Company's total comprehensive
is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
------ ------- ------ -------
<S> <C> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . $ 915 $1,423 $ 489 $2,723
Other comprehensive income (loss):
Foreign currency translation gains (losses) $ 247 $ (104) $1,067 $ (119)
------ ------- ------ -------
Total comprehensive income. . . . . . . . . . $1,162 $1,319 $1,556 $2,604
====== ======= ====== =======
</TABLE>
8. YEAR 2000
The Company converted its computer systems and believes such systems
are Year 2000 compliant. The Year 2000 problem is the result of computer
programs being written using two digits rather than four to define the
applicable year. The Company has expensed all costs associated with these
systems changes.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE QUARTER ENDED DECEMBER 31, 1998 COMPARED WITH THE QUARTER ENDED DECEMBER 31,
1997.
Net Sales. Net sales decreased to $19.2 million for the quarter ended
December 31, 1998 from $21.0 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 $9.1 million for the quarter ended December 31, 1998 as
compared with $9.8 million for the quarter ended December 31, 1997. Sales of
proprietary systems continue to decline, and the selling price of open systems
is significantly lower than the selling price of proprietary products.
Maintenance sales decreased from $11.3 million in the quarter ended December 31,
1997 to $10.1 million in the quarter ended December 31, 1998, 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 approximately $1.0 million during the
current quarter to $9.8 million compared to $10.8 million for the three months
ended December 31, 1997. The decrease reflects the Company's lower sales this
quarter. The gross margin as a percentage of sales for the quarter ended
December 31, 1998 is consistent with the quarter ended December 31, 1997.
Operating Income. Operating income decreased $1.7 million to $0.5 million
in the current quarter compared with an income of $2.2 million in the quarter
ended December 31, 1997 due to the decrease in gross margin discussed above and
a $0.7 million increase in operating expenses. The increase in operating
expenses is largely due to increased legal expenses relating to subsequently
resolved lawsuits, and an increase in marketing expenses primarily relating to
Interactive Video on Demand ("IVOD") products.
Net Income. Net income decreased from $1.4 million in the quarter ended
December 31, 1997 to $0.9 million in the current quarter. The decrease of $0.5
million is due to the $1.7 million decrease in operating income which was
partially offset by a $0.5 million increase in other income (expense) - net, a
$0.5 million decrease in the income tax provision, and a $0.1 million decrease
in interest expense. The increase in other income (expense) - net is primarily
due to an exchange gain resulting from the settlement of a subsidiary's short
term loan to the Company; the decrease in the income tax provision resulted from
an income shift towards subsidiaries with net operating losses sufficient to
offset the gains; and the decrease in interest expense resulting from decreased
borrowings.
<PAGE>
THE SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 31, 1997.
Net Sales. Net sales decreased to $36.1 million for the six months ended
December 31, 1998 from $41.6 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 $15.8 million for the six months ended December 31, 1998
as compared with $18.6 million for the six months ended December 31, 1997.
Sales of proprietary systems continue to decline, and the selling price of open
systems is significantly lower than that of proprietary products. In the first
quarter of fiscal year 1999, International Sales were low due to the economic
crisis in Asia, as well as a slow summer in Europe due to vacation periods.
During that period, US sales were also lower than expected due to delays in
government programs.
Maintenance sales decreased from $23.0 million in the six months ended December
31, 1997 to $20.3 million for the comparable six months of 1998, continuing the
decline experienced over the past years as customers move from proprietary to
open systems which require less maintenance.
Gross Margin. Gross margin decreased $2.0 million during the current
six-month period to $18.6 million compared to $20.6 million for the six months
ended December 31, 1997. The decrease reflects the Company's lower sales this
quarter. The gross margin as a percentage of sales increased from 50% in the
six months ended December 31, 1997 to 52% in the current six months due to the
Company's ongoing cost reduction efforts.
Operating Income. Operating income decreased $3.0 million to a profit of
$0.8 million in the current six-month period compared with an income of $3.8
million in the six months ended December 31, 1997 due to the decrease in gross
margin discussed above and a $1.0 million increase in operating expenses. The
increase in operating expenses is largely due to a $0.6 million gain on the sale
of the building recorded as an offset to restructuring expense in the prior six
month period, increased legal expenses in the current period relating to
subsequently resolved lawsuits, and an increase in marketing expenses in the
current six months primarily relating to IVOD products. This increase was
partially offset by a slight decrease in research and development costs
resulting from cost reduction efforts.
Net Income. Net income decreased from a profit of $2.7 million in the six
months ended December 31, 1997 to an income of $0.5 million in the current six
months. This decrease of $2.2 million is primarily due to the $3.0 million
decrease in operating income discussed above and a $0.3 million decrease in
other income (expense) - net. The decrease in other income (expense) - net is
primarily due to a $0.1 million loss in the current six months consisting of a
$0.4 million loss due to the dissolution of the Company's French Branch (defined
in Note 6 to the condensed consolidated financial statements) and a $0.3
exchange gain resulting from the settlement of a subsidiary's short term loan to
the Company, as compared to a $0.2 million gain in the six months ended December
31, 1997 primarily due to a gain on the sale of trading securities. These
decreases to net income were partially offset by a $0.8 million decrease in the
tax provision resulting from an income shift towards subsidiaries with net
operating losses sufficient to offset the gains and a $0.3 million decrease in
interest expense resulting from decreased borrowings.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
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; and (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 1999 operations through its operating results and existing financing
facilities.
On March 1, 1998, the Company entered into a new agreement providing for an
$8 million revolving credit facility through August 1, 2000. At December 31,
1998, the outstanding balance under the revolving credit facility was $0.9
million. The entire outstanding balance of the revolving credit facility has
been classified as a current liability at December 31, 1998. The revolving
credit facility bears interest at the prime rate plus .75% (8.5% at December 31,
1998). The revolving credit facility may be repaid and reborrowed, subject to
certain collateral requirements, at any time prior to its maturity. The Company
has pledged substantially all of its domestic assets as collateral for the
revolving credit facility. Certain early termination fees apply if the Company
terminates the facility in its entirety prior to June 30, 1999.
The Company had debt to outside financial institutions of $1.4 million at
December 31, 1998 as compared to $1.5 million at June 30, 1998.
The Company and Nippon Steel Corporation ("NSC") terminated the joint
venture in Concurrent Nippon Corporation ("CNC") in the quarter ended June 30,
1998, and the Company acquired 100% of the stock in CNC. In connection with
this transaction, NSC paid the Company $1.2 million and the Company paid off
debt owed to certain Japanese banks on behalf of CNC.
The Company had cash and cash equivalents on hand of $5.8 million at
December 31, 1998 representing a slight increase from $5.7 million as of June
30, 1998 primarily due to timing differences.
YEAR 2000
The Company has been aggressively addressing Year 2000 issues related to
the processing of date-sensitive data. A cross-functional team was assembled,
and a determination was made as to which systems were Year 2000 non-compliant.
The Company believes that all of the Company's critical financial,
manufacturing, R&D and other systems are fully compliant.
Concurrent has reviewed customer and supplier relationships, and has a Year
2000 software product available which many of its customers have implemented.
While the Company is taking all reasonable efforts, including direct mailings
and internet web site offerings, to make information on the Year 2000 readiness
of its products available to its customers, this information may not reach all
customers, particularly third-party customers. Although the Company believes it
has addressed Year 2000 readiness issues related to its products, there may be
disruptions and/or product failures that are unforeseen.
The Company is requesting assurances from its major suppliers that
they are addressing these issues and that products procured by the Company will
function properly in the Year 2000. It is expected that certain critical
suppliers may be unwilling or unable to provide such assurances. As a result,
it is difficult for the Company to assess the impact on its business of such
entities' failure to be Year 2000 compliant.
<PAGE>
Although Concurrent will incur additional time and effort in Year 2000
compliance, these costs are not expected to be material.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain matters discussed in this Form 10-Q may be "forward-looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. Concurrent
Computer Corporation cautions investors that any forward-looking statements made
herein are not guarantees of future performance and that a variety of factors
could cause its actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties which could affect Concurrent Computer
Corporation's performance or results include, without limitation, changes in
product demand; economic conditions; various inventory risks due to changes in
market conditions; uncertainties relating to the development and ownership of
intellectual property; uncertainties relating to the ability of Concurrent
Computer Corporation and other companies to enforce their intellectual property
rights; the pricing and availability of equipment, materials and inventories;
technological developments; delays in testing of new products; rapid technology
changes; the highly competitive environment in which Concurrent Computer
Corporation operates; the entry of new well-capitalized competitors into
Concurrent Computer Corporation's markets, and other risks and uncertainties.
<PAGE>
SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales:
Computer systems . . . . . . . . . . . 47.3% 46.4% 43.8% 44.7%
Service and other. . . . . . . . . . . 52.7% 53.6% 56.2% 55.3%
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales:
Computer systems . . . . . . . . . . . 46.8% 46.3% 45.9% 47.2%
Service and other. . . . . . . . . . . 50.5% 51.0% 50.4% 53.0%
Total. . . . . . . . . . . . . . . . 48.7% 48.8% 48.5% 50.4%
------ ------ ------ ------
Gross margin . . . . . . . . . . . . . . 51.3% 51.2% 51.5% 49.6%
Operating expenses:
Research and development . . . . . . . 13.3% 12.8% 14.6% 13.2%
Selling, general and administrative. . 35.2% 27.9% 34.9% 28.6%
Restructuring. . . . . . . . . . . . . 0.0% 0.0% 0.0% (1.5%)
------ ------ ------ ------
Total operating expenses . . . . . . . . 48.5% 40.7% 49.5% 40.4%
------ ------ ------ ------
Operating income . . . . . . . . . . . . 2.8% 10.5% 2.1% 9.2%
Interest expense . . . . . . . . . . . . (0.4%) (0.9%) (0.4%) (1.1%)
Interest income. . . . . . . . . . . . . 0.2% 0.2% 0.3% 0.1%
Other income (expense) - net . . . . . . 2.6% (0.2%) (0.3%) 0.4%
------ ------ ------ ------
Income before provision for income taxes 5.2% 9.5% 1.6% 8.7%
Provision for income taxes . . . . . . . 0.4% 2.8% 0.2% 2.2%
------ ------ ------ ------
Net income . . . . . . . . . . . . . . . 4.8% 6.8% 1.4% 6.5%
====== ====== ====== ======
</TABLE>
<PAGE>
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Matters as specified in the Company's Proxy Statement dated October 1, 1998
were considered and approved by the Company's stockholders at the Annual Meeting
of Stockholders held on October 30, 1998. 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. . 42,878,717 186,699
Morton E. Handel. . . 42,866,117 199,499
C. Shelton James. . . 42,859,555 205,863
Richard P. Rifenburgh 42,878,717 186,699
E. Courtney Siegel. . 42,739,815 265,601
</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, 1999.
<TABLE>
<CAPTION>
Total Votes Number of
Total Votes For Against or Withheld Abstentions
- --------------- ------------------- -----------
<S> <C> <C>
42,703,984. . . 55,834 305,598
</TABLE>
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits:
(11) Statement on computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K.
None.
<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, 1998 to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: February 10, 1999 CONCURRENT COMPUTER CORPORATION
By: /s/ Daniel S. Dunleavy
---------------------------
DANIEL S.DUNLEAVY
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
CONCURRENT COMPUTER CORPORATION
EXHIBIT 11
BASIC AND DILUTED EARNINGS PER SHARE COMPUTATION
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 DECEMBER 31, 1998
----------------- -----------------
BASIC DILUTED BASIC DILUTED
------- -------- ------- --------
<S> <C> <C> <C> <C>
Average outstanding shares: . . . . 47,852 47,852 47,763 47,763
Diluted options outstanding . . . . - 1,362 - 1,457
------- -------- ------- --------
Equivalent Shares . . . . . . . . . 47,852 49,214 47,763 49,220
======= ======== ======= ========
Net income. . . . . . . . . . . . . $ 915 $ 915 $ 489 $ 489
Preferred stock dividends
and accretion of preferred shares - - - -
------- -------- ------- --------
Net income available to common
stockholders. . . . . . . . . . . $ 915 $ 915 $ 489 $ 489
======= ======== ======= ========
Earnings per share. . . . . . . . . $ 0.02 $ 0.02 $ 0.01 $ 0.01
======= ======== ======= ========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Companys
Consolidated Balance Sheet at December 31, 1998 and Consolidated Statement of
Operations for the six months ended December 31, 1998, 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-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 5777
<SECURITIES> 0
<RECEIVABLES> 17833
<ALLOWANCES> 436
<INVENTORY> 6183
<CURRENT-ASSETS> 30823
<PP&E> 36235
<DEPRECIATION> 23242
<TOTAL-ASSETS> 45028
<CURRENT-LIABILITIES> 15477
<BONDS> 922
<COMMON> 479
0
0
<OTHER-SE> 26977
<TOTAL-LIABILITY-AND-EQUITY> 45028
<SALES> 15796
<TOTAL-REVENUES> 36055
<CGS> 7258
<TOTAL-COSTS> 17472
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 575
<INCOME-TAX> 86
<INCOME-CONTINUING> 489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 489
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
