UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 12b-25
NOTIFICATION OF LATE FILING
(Check One):
[ X ] Form 10-K [ ] Form 20-F [ ] Form 11-K [ ] Form 10-Q [ ]
Form N-SAR [ ] for period ended: December 31, 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:
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Address of Principal Executive Office (Street and Number)
7786 Wiles Road
Coral Springs, Florida 33067
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.
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On December 31, 1998, the sale of substantially all of the assets associated
with the real-time business to Gores Technology Group was completed. We are
currently in the process of reconciling the full balance owed under the
Management Agreement in accordance with the Reconciliation agreement and hope to
complete the process prior to filing the 10K.
PART IV -- OTHER INFORMATION
(1) Name and telephone number of person to contact in regard to this
notification:
Linda J. Matthews 954 757-0166
(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.
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Date: April 1, 1999
By: MICHAEL C. VEYSEY
Michael C. Veysey,
President
By: THOMAS N. RICH
Thomas N. Rich,
Treasurer
ENCORE COMPUTER CORPORATION
Attachment per Instructions to Part IV(3)
Comparison of 1998 and 1997
Net sales for 1998 were $20,435,000 compared to net sales for 1997 of
$29,486,000, a decrease of $9,051,000 or 31%. 1998 equipment sales decreased 42%
to $8,263,000 when compared to $14,163,000 in 1997. 1998 equipment sales were
entirely derived from real-time products while 1997 equipment sales included
$4,764,000 in storage product revenue. Therefore, 1998 real-time equipment sales
decreased by $1,136,000 or 12% from $9,399,000 in 1997. The decrease in
real-time equipment sales is primarily due to a lack of new product development
and reliance by the Company on modifications to existing products nearing the
end of the life-cycles. Real-time equipment sales as a percentage of total net
sales were 40% in 1998. In 1997 real-time equipment sales were 38% of reported
net sales less storage product equipment sales. International equipment sales
decreased 64% to $1,933,000 in 1998. In 1997 international storage product sales
were $440,000 while there were no international storage product sales in 1998.
Service revenues for 1998 were $12,172,000, a decrease of $3,151,000 or 21% from
service revenues of $15,323,000 in 1997. Continued declining service
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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. Service revenues as a percentage of net
sales for 1998 and 1997 were 60% and 52%, respectively. International and
domestic real-time service sales were $5,070,000 and $7,102,000, respectively,
for 1998, down 24% and 15%, respectively, from 1997 international real-time
service sales of $9,357,000 and domestic real-time service sales of $5,966,000.
During 1998 one of the Company's customers accounted for approximately 16% of
its sales. During 1997, the Company had not been dependent upon any one customer
for a material part of its business with no single customer accounting for more
than 10% of its sales. However, sales to various U.S. government agencies have
represented approximately 40% and 21% of net sales in 1998 and 1997,
respectively. For the real-time business, the respective percentages were 100%
and 84% of total government sales in 1998 and 1997. The Company recognizes that
reductions in current levels of U.S. government agency spending on computers and
computer related services could adversely affect its traditional sources of
revenue.
Total cost of sales decreased in 1998 to $12,738,000 from $37,332,000 in 1997.
Cost of storage product net sales were $18,708,000 in 1997 compared to $0 in
1998. The decline in real-time net cost of sales in 1998 was $5,886,000 or 32%
from $18,624,000 in 1997. Cost of real-time equipment sales decreased from
$8,668,000 in 1997 to $4,492,000 in 1998, or 48%. Reduced equipment cost of
sales are attributed to the significant reduction in capacity variances as a
result of consolidating manufacturing in Ft. Lauderdale from the Company's
Melbourne, Florida manufacturing facility which was highly underutilized and
sold to Sun in November, 1997, as well as lower product volumes. Real-time
product gross margins increased to 46% of product sales from 8% in 1997 as a
result of these reduced costs.
Cost of service sales decreased from $15,921,000 in 1997 to $8,246,000 in 1998.
In 1997, the Company invested $5,965,000 in various programs and infrastructure
to support the storage product. Real-time service cost of sales decreased
$1,710,000 or 17% from $9,956,000 in 1997. This decrease is a result of lower
service sales. Real-time gross margins decreased to 32% in 1998 when compared to
35% in 1997.
Research and development expenses in 1998 were $1,213,000 compared to
$23,953,000 in 1997. This decrease is a direct result of Sun hiring or
contracting 68% of the total existing research and development personnel at
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November 24, 1997, the Board of Directors decision not to pursue development
of clustering technology in the Windows NT environment and the subsequent
consolidation of technical resources into a shared organization responsible for
manufacturing support as well as pre/post sales support. Research and
development expenses as a percentage of net sales decreased from 81% in 1997 to
6% in 1998.
Sales, general and administrative expenses in 1998 were $8,489,000 compared to
$27,044,000 in 1997. Sun hired 65 storage product sales and marketing personnel
or 45% of the Company's existing sales and marketing employees at November 24,
1997. Subsequently, the Company downsized the real-time sales and marketing and
administrative functions to levels more in line with future sales expectations.
As a result, SG&A expenses as a percentage of net sales decreased from 92% in
1997 to 42% in 1998.
In the fourth quarter of 1997, in conjunction with the Sun Transaction and
subsequent reorganization, the Company recorded a termination charge of
$17,685,000 related to: (i) severance and benefit pay of $6,323,000 as a result
of a 542 person reduction in workforce, including severance for employees
contracted by Sun, as the Company agreed to pay the difference between the
completion bonus offered to contractors by Sun at the end of their contract and
the amount of severance they were entitled to had they been terminated by the
Company, (ii) $4,722,000 of retention payments pursuant to agreements between
the Company and each of approximately 49 employees, (iii) $1,000,000 of
incentive bonuses to certain key employees, (iv) $3,390,000 relating to the
termination of European facility and automobile leases, and $350,000 relating to
a domestic equipment lease, (v) an estimated $500,000 for leasehold improvements
to be made at the Company's Fort Lauderdale facility which is leased from Sun,
(vi) $1,150,000 in estimated legal and other fees associated with the Sun
Transaction, and (vii) $250,000 accrued for legal fees in connection with the
shareholders suit. (See Item 3 Legal Proceedings). Termination charges relating
to the Sun Transaction amounting to $1,656,000 were reversed in the fourth
quarter of 1998, as original estimates were revised.
In the first quarter of 1998, the Company recorded a termination charge of
$743,500 related to severance and benefit pay as a result of a 13 person
reduction in workforce associated with the Board of Directors decision not to
pursue the NT opportunity.
In December 1998, in conjunction with the Gores Transaction and anticipated
liquidation, subject to shareholder's approval, the Company recorded a charge
for estimated liquidation costs of $5,531,000 related to: (i)
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severance and benefit pay of $1,211,000 as a result of a 7 person reduction in
workforce, (ii) $300,000 of retention payments pursuant to agreements between
the Company and each of approximately 16 employees, (iii) $1,824,000 in
estimated costs for professional services related to the Company's winddown,
(iv) $500,000 of estimated international taxes which may be required to be paid
to remit cash in Europe to the United States, (v) $481,000 in accrued interest
through July 31, 1999 on the $9,692,000 due to Gould, (vi) $516,000 of
additional accounts receivable reserves and additional accrued expenses, and
(vii) $699,000 of miscellaneous costs related to shutdown of various facilities
including real estate and other taxes.
Interest expense decreased to $374,000 in 1998 from $6,218,000 in 1997 as a
result of the Company's payment to Gould in conjunction with the Sun
Transaction. The 1998 interest expense relates to interest payable to Gould
based on the $9,692,000 owed to Gould as a result of Sun's set-off in the second
payment.
Provision for income taxes decreased $2,216,000 in 1998 from 1997 as a result of
the reversal of an overestimate of the alternative minimum tax to be paid in
connection with the 1997 profit from the Sun Transaction, offset by taxes
payable by foreign subsidiaries.
