UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
(Check One):
[ ] Form 10-K [ ] Form 20-F [ ] Form 11-K [ X] Form 10-Q
[ ] Form N-SAR [ ] for period ended: March 30, 1997.
[ ] Transition Report on Form 10-K
[ ] Transition Report on Form 20-F
[ ] Transition Report on Form 11-K
[ ] Transition Report on Form 10-Q
[ ] Transition Report on Form N-SAR
For the Transition Period Ended:
Nothing in this form shall be construed to imply that the
Commission has verified any information contained herein.
If notification relates to a portion of the filing checked
above, identify the Item(s) to which the notification relates:
PART I -- REGISTRANT INFORMATION
Full Name of Registrant: Encore Computer Corporation
Former Name if Applicable:
Address of Principal Executive Office (Street and Number)
6901 West Sunrise Boulevard
Fort Lauderdale, Florida 33313
PART II -- RULES 12b-25(b) and (c)
If the subject report could not be filed without unreasonable
effort or expense and the registrant seeks relief pursuant to
Rule 12b-25(b), the following should be completed. (Check box
if appropriate) [X]
(a) The reasons described in reasonable detail in Part III
of this form could not be eliminated without unreasonable effort
or expense;
(b) The subject annual report, semi-annual report,
transition report on Form 10-K, Form 20-F, 11-K or Form N-SAR,
or portion thereof, will be filed on or before the fifteenth
calendar day following the prescribed due date; or the subject
quarterly report or transition report on Form 10-Q, or
portion thereof, will be filed on or before the fifth calendar
day following the prescribed due date; and
(c) The accountant's statement or other exhibit required
by Rule 12b-25(c) has been attached if applicable.
PART III -- NARRATIVE
State below in reasonable detail the reasons why Form 10-K, 20-
F, 11-K, 10-Q, N-SAR or the transition report or portion
thereof could not be filed within the prescribed time period.
Since 1989, the principal source of financing for the Company
has been provided by the Japan Energy Corporation, through its
wholly owned subsidiaries, Gould Electronics, Inc. ("Gould") and
EFI International ("EFI") (collectively, the "Japan Energy
Group"). The Japan Energy Group is a related party due to the
significant financial interests of Gould and EFI in the Company.
Assuming full conversion of preferred stock holdings as of March
30, 1997, the Japan Energy Group beneficially owns 83% of the
Company's common stock. The Company is dependent on the
continued financial support of the Japan Energy Group. Should
the Japan Energy Group withdraw its financial support, the
Company may be unable to continue its normal operations.
On March 19, 1997, Gould as authorized by Japan Energy
Corporation, agreed to cancel $40,000,000 of indebtedness
pursuant to their loan agreement (the "Credit Agreement") in
exchange for the issuance to Gould of 400,000 shares of the
Company's Series I Convertible Preferred Stock ("Series I"), as
discussed in more detail in Note E of Notes to Condensed
Consolidated Financial Statements. The Company and Gould also
agreed to amend the Credit Agreement to (i) reduce the maximum
amount which can be borrowed by the Company from $80,000,000 to
$50,000,000, and (ii) provide that any borrowings in excess of
$41,915,869 (the principal amount outstanding on March 19, 1997
after giving effect to the exchange of indebtedness for shares
of Series I) may be made only at the discretion of Gould. As of
May 13, 1997 the Company owed to Gould $49,641,927 under the
Credit Agreement, plus $13,502,088 in accrued interest. All
borrowings under the Credit Agreement, plus accrued interest,
are due and payable on May 31, 1997. The Company is currently
in the process of negotiating with Gould to increase the maximum
allowed under the Credit Agreement and to extend the maturity
date of the agreement.
PART IV -- OTHER INFORMATION
(1) Name and telephone number of person to contact in
regard to this notification:
Edward J. Baker 954 797-5750
(Name) (Area Code) (Telephone Number)
(2) Have all other periodic reports required under Section
13 or 15(d)of the Securities Exchange Act of 1934 or Section 30
of the Investment Company Act of 1940 during the preceding 12
months or for such shorter period that the registrant was
required to file such report(s) been filed? If the answer is no,
identify report(s).
[X] Yes [ ] No
(3) Is it anticipated that any significant change in
results of operations from the corresponding period for the last
fiscal year will be reflected by the earnings statements to be
included in the subject report or portion thereof?
[X] Yes [ ] No
If so: attach an explanation of the anticipated change,
both narratively and quantitatively, and, if appropriate, state
the reasons why a reasonable estimate of the results cannot be
made.
ENCORE COMPUTER CORPORATION
has caused this notification to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1997 By: KENNETH G. FISHER
__________________
Kenneth G.Fisher,
Chairman of the Board
Chief Executive Officer
By: EDWARD J. BAKER
_______________
Edward J. Baker,
Corporate Controller
Secretary
Chief Accounting Officer
ENCORE COMPUTER CORPORATION
Attachment per Instructions to Part IV(3)
Total net sales for the three month period of 1997 decreased 29%
to $8,333,000 from $11,714,000 for the three month period of
1996. International net sales declined 21% to $4,096,000.
International sales for the three months ended March 30, 1997
were 49% of total net sales as compared to 44% for the same
period in 1996.
During the three month period ended March 30, 1997, equipment
sales decreased $2,388,000 or 36% from the same period of 1996.
In the first quarter of 1997 net Storage Product sales were
$1,233,000, including the reversal of $954,000 associated with
an international installation which is expected to be returned,
compared to $1,400,000 in the first quarter of 1996. Sales of
the Company's real-time products declined by $2,221,000 to
$2,950,000 in the three month period ended March 30, 1997, from
$5,171,000 in the three month period ended March 31, 1996.
For the three month period ended March 30, 1997, service sales
declined $993,000, or 19% from the same period of 1996.
Continued declining service revenues reflect the effect on the
service business of (i) the Company's prolonged decline in
equipment sales, (ii) the price competitiveness of the
marketplace, (iii) the completion of long running government
programs and subsequent deinstallation of systems and (iv)
longer warranty periods for equipment sales required to compete
in the storage marketplace.
Cost of equipment sales for the three month period of 1997
increased from the three month comparable period of 1996 by
$1,297,000 or 22%, despite lower revenues. As a percentage of
net equipment sales, 1997 cost of equipment sales for the three
month period was 172% compared to 89% for the three month period
of 1996. These increases are the result of (i) continued heavy
discounting of Storage Products in an effort to penetrate the
marketplace, (ii) under utilization of manufacturing capacity,
(iii) higher warranty costs associated with the Storage Product
and (iv) the Company's policy of not reversing cost of sales on
returned equipment.
Cost of service sales for the three month period ended March 30,
1997 decreased from the comparable period of 1996 by $692,000 or
14%. All service sales are derived from installed real-time
products and the cost structure within the service department is
highly variable due to the utilization of service partners.
While the real-time service business continues to be profitable,
service margins were reduced for investments in various programs
and infrastructure necessary to support the Storage Product
line. For the three month period ended March 30, 1997, this
investment was $1,400,000. Therefore, cost of service sales
associated with real-time services was $2,869,000, resulting in
an adjusted gross margin of $1,281,000 or 31% of service
revenues.
Research and development costs for the three month period ended
March 30, 1997, decreased from the comparable period of 1996 by
$995,000 or 12% . The decrease in 1997 spending is attributable
to lower labor costs and reduced development material costs.
However, as a percentage of net sales, research and development
expenses were 87% for the three month period ended March 30,
1997 compared to 71% for the comparable period of 1996. The
Company expects research and development spending in the near
term, to remain relatively constant.
Selling, general and administrative expenses decreased by
$1,080,000 or 12% for the three month period of 1997 when
compared to 1996. The decrease is attributable to lower labor
costs in the administration functions and lower commissions due
to the decline in sales. As a percentage of net sales, selling,
general and administrative costs continue to remain high, 92%
for the three months ended March 30, 1997 compared to 74% for
the comparable period of 1996.
Interest expense for the three month period ended March 30, 1997
increased from 1996 levels by $709,000, reflecting the Company's
higher debt level during the first quarter of 1997 due to the
timing and value of the various recapitalizations occurring in
both years.
Other expense for the three month period of 1997 increased from
1996 by $523,000 due to higher foreign exchange losses.
During the past five years, the Company has incurred significant
operating losses and has been unable to generate cash flows from
operating activities. Cash used in operating activities for the
first quarter of 1997 amounted to $9,044,000 compared to
$14,356,000 for the same period in 1996.
During the three month period ended March 30, 1997, cash used in
operating activities decreased by $5,312,000 when compared to
the three month period ended March 31, 1996. For the three
month period ended March 30, 1997, the net loss, as adjusted for
non cash items, exceeded the net loss for the comparable period
of 1996 by $3,982,000. Accounts receivable and inventories
decreased $4,732,000 and $1,796,000, respectively, in the first
quarter of 1997, while in 1996, the Company invested heavily in
inventories to improve Storage Product availability, increasing
inventory by $6,284,000. Accounts payable and accrued
liabilities increased $1,823,000 and $6,363,000 for the first
quarter of 1997 and 1996, respectively.
Expenditures for property and equipment for the three months
ended March 30, 1997 and March 31, 1996 were $725,000 and
$1,877,000, respectively. Spare parts required to support
customer installations accounted for 43% of total property and
equipment spending in the first quarter of 1997. As of March
30, 1997, there were no material commitments for capital
expenditures.
