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 29, 1998.
[ ] 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]
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(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.
On March 2, 1998, the Company signed a letter of intent with Gores
Technology Group to sell the assets of the Company's real-time business for
approximately $5.5 million. The transaction is subject to the satisfactory
completion of due diligence by Gores, the negotiation and execution of a
definitive asset purchase agreement and the satisfaction of any closing
conditions set forth in such agreement, including Encore shareholder
approval.
The definitive agreement is expected to signed within the extension period,
and accordingly, appropriate comments need to be incorporated in the 10Q
PART IV -- OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification:
Linda J. Matthews 954
316-4421
(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.
<PAGE>
ENCORE COMPUTER CORPORATION
has caused this notification to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: May 14, 1998 By: KENNETH G. FISHER
Kenneth G.Fisher,
Chairman of the Board
Chief Executive Officer
By:LINDA J. MATTHEWS
Linda J. Matthews,
Corporate Controller
ENCORE COMPUTER CORPORATION
Attachment per Instructions to Part IV(3)
Net sales for the three month periods ended March 29, 1998 and March 30, 1997
were $4,722,000 and $8,333,000, respectively. For the three month period ended
March 29, 1998, equipment sales decreased 63% to $1,543,000 when compared to
$4,183,000 for the three month period ended March 30, 1997. Service revenues for
the three month periods ended March 29, 1998 and March 30, 1997 were $3,179,000
and $4,150,000, respectively. Real-time equipment sales for the three month
period ended March 29, 1998 were $1,543,000 compared to $2,949,000 for the same
period in 1997. Storage product equipment sales for the three months ended March
30, 1997 were $1,234,000. The Company had no storage product equipment sales for
the three month period ended March 29, 1998 as a result of the Sun Transaction.
Real-time service revenues were $3,179,000 for the three month period ended
March 29, 1998, compared to $4,150,000 for the same period of 1997. No service
revenues were derived from the storage product business in the first three
months of either 1998 or 1997. The Company's operating loss for the three month
period in 1998 was $652,000 compared to an operating loss of $18,019,000 for the
same period in 1997.
Equipment sales as a percentage of total net sales for the three months ended
March 29, 1998 and March 30, 1997 were 33%, and 50%, respectively. For real-time
equipment sales, the respective percentages were 33%, and 35% of total net sales
in the three month periods ended March 29, 1998 and March 30, 1997,
respectively. Storage product sales for the three months ended March 30, 1997
were 15% of total net sales. The decrease in equipment sales for the three month
period in 1998 is primarily due to certain of the Company's traditional
real-time products having reached the end of their product life cycle.
International equipment sales decreased 37% to $870,000 for the three months
ended March 29, 1998. International real-time product sales decreased 63% to
$870,000 from $2,327,000 for the period ended March 30, 1997. Domestic equipment
sales decreased 76% to $673,000 for the period ended March 29, 1998 compared to
the period ended March 30, 1997, with storage product sales decreasing to $0
from
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$2,177,000.
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; and (iii) the completion of long running
government programs and subsequent deinstallation of systems. The Company
expects this trend to continue. International service sales decreased 29% to
$1,818,000 for the three month period ended March 29, 1998, while domestic
service sales decreased 14% to $1,361,000 compared to the three month period in
1997. No service sales were derived from the storage product business for the
periods ended March 29, 1998 and March 30, 1997.
International net sales decreased 32% (45% for real-time) for the three month
period ended March 29, 1998 when compared to the same period in 1997. Domestic
net sales decreased 54% (8% for real-time) for the three month period ended
March 29, 1998 when compared to the 1997 three month period. International sales
for the three months ended March 29, 1998 were $2,688,000, or 57% of total net
sales. International real-time net sales for the three months ended March 30,
1997 were $4,888,000, or 59% of total net sales.
Total cost of sales decreased in the three month period ended March 29, 1998 to
$2,562,000 ($2,562,000 for real-time and $0 for storage product), from
$11,445,000 ($7,212,000 for real-time and $4,233,000 for storage product) from
the same period in 1997. The decrease was due generally to lower sales volumes
and lower spending resulting from the Sun Transaction.
Cost of equipment sales for the three month period ended March 29, 1998 were
$590,000 or 12% of net sales. Cost of real-time equipment sales for the three
month period ended March 30, 1997 were $2,943,000 or 35% of net sales. Cost of
storage product sales exceeded storage product sales by $2,999,000 for the three
month period ended March 30, 1997. Gross margins on real-time equipment sales
were $953,000 and $6,000, or 62% and .2% for the three month periods ended March
29, 1998 and March 30, 1997, respectively. A negative gross margin was generated
by the storage product business of $2,999,000 for the three month period ended
March 30, 1997.
Equipment gross margins for the three months ended March 29, 1998 were $953,000
or 62% of equipment sales. Equipment gross margins were negatively impacted for
the same period in 1997 due to the discounting of storage products in order to
penetrate the marketplace and establish reference accounts. Warranty costs
related to the Storage Product in 1997 were also higher than anticipated due to
engineering changes on current installations and spare part inventory. Factory
variances related to lower production volumes and underutilization of
manufacturing capacity also lowered gross margin in the three month period ended
March 30, 1997.
For the three month period ended March 29, 1998, service gross margins were
$1,207,000 compared to a loss of $119,000 for the same period in 1997. For the
three month period in 1997, service margins were reduced for investments in
various programs and infrastructure necessary to support the storage product
line. The Company invested $1,400,000 (34% of service sales) in the three month
period ended March 30, 1997. Sun purchased all fixed assets and spares inventory
related to the storage product and hired all storage product service personnel.
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. Therefore, as revenues decline, costs decline
as well. Moreover, management continues to reduce fixed costs on an ongoing
basis. Gross margins on real-time service sales were $1,207,000 (38%), and
$1,281,000 (31%) for the three month periods ended March 29,
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1998 and March 30, 1997, respectively.
Research and development expenses for the three month period ended March 29,
1998 were $416,000 compared to $7,269,000 for the same period in 1997. The
decrease in 1998 expenses is primarily the result of the Sun Transaction. Sun
either hired or contracted 147 or 68% of total research and development
personnel. Research and development expenses as a percentage of net sales
decreased to 9% for the three month period in 1998, compared to 87% in 1997.
In December 1997, the Company established a separate research and development
organization to focus on opportunities in the Microsoft NT environment. However,
in January 1998, as more fully discussed in Note C of the Notes to Condensed
Consolidated Financial Statements, the Board of Directors voted not to pursue
the NT opportunity.
Sales, general and administrative ("SG&A") expenses for the three month period
ended March 29, 1998 were $1,652,000 compared to $7,638,000 for the same period
in 1997. The decrease in expenses was due primarily to the Sun Transaction. As a
percentage of net sales, SG&A expenses were 35% and 92% for the three month
periods ended March 29, 1998 and March 30, 1997, respectively.
Sun hired 65 storage product sales and marketing personnel or 45% of the
Company's total sales and marketing employees. Subsequently, the Company
downsized the real-time sales and marketing organization to 30 employees.
Interest expense decreased in the three month period ended March 29, 1998 to
$12,000 from $1,399,000 in the same period of 1997 due to the repayment of the
Gould debt in connection with the Sun Transaction.
Other expense, net, was lower for the three month period of 1998 than the same
period in 1997 due principally to lower foreign exchange losses and losses on
the sale of certain fixed assets.
Income taxes provided for the three month periods in 1998 and 1997 relate to
operations of foreign subsidiaries.
