SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
__________
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
_ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-7760/0-20290
Computervision Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2491912
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
100 Crosby Drive, Bedford, Massachusetts 01730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 275-1800
(Former name, former address and former fiscal year, if changed
since last report.)
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 twelve months (or such shorter period that
the registrant was required to file such reports), and (2) has been subject
to the filing requirements for the past 90 days.
Yes X No
At May 10, 1996 the registrant had outstanding an aggregate of 63,189,351
shares of its Common Stock, $.01 par value.
1
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Computervision Corporation
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION Page
<S> <C>
Consolidated Balance Sheets at December 31, 1995 and
March 31, 1996 (Unaudited) 3
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended April 2, 1995 and March 31, 1996 4
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended April 2, 1995 and March 31, 1996 5
Notes to Consolidated Financial Statements (Unaudited) 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Review by Independent Public Accountants 10
Report on Review by Independent Public Accountants 11
PART II. OTHER INFORMATION 12
Signatures 13
EXHIBIT INDEX 14
</TABLE>
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COMPUTERVISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 31,
ASSETS 1995 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $50,979 $35,329
Accounts receivable, less allowance for
doubtful accounts of $3,623 and $3,437,
respectively 92,271 97,980
Current deferred income taxes 16,444 16,327
Prepaid expenses and other current assets 18,003 22,082
TOTAL CURRENT ASSETS 177,697 171,718
PROPERTY AND EQUIPMENT, NET 49,026 44,358
DEFERRED INCOME TAX ASSETS 10,766 10,660
CAPITALIZED SOFTWARE 2,105 1,373
DEFERRED FINANCE COSTS 5,344 4,941
OTHER ASSETS 4,597 4,435
$249,535 $237,485
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $27,259 $26,143
Notes payable and current portion of
long-term debt 8,211 8,717
Accrued compensation, severance and
related costs 61,722 49,737
Deferred revenue and customer advances 39,148 43,330
Accrued and deferred income taxes 31,910 32,787
Other current liabilities and accrued
expenses 90,977 81,504
TOTAL CURRENT LIABILITIES 259,227 242,218
DEFERRED INCOME TAXES 27,284 27,304
LONG-TERM DEBT, LESS CURRENT PORTION 223,616 223,660
OTHER LONG-TERM LIABILITIES 77,134 73,826
STOCKHOLDERS' DEFICIT
Preferred stock, $0.01 par value;
5,000,000 shares authorized; none issued
and outstanding
Common stock, $0.01 par value;
100,000,000 shares authorized; 62,815,017
and 63,056,577 shares, respectively, issued
and outstanding 628 630
Capital in excess of par value 1,183,056 1,183,998
Retained deficit (1,533,351) (1,525,183)
Cumulative translation adjustment 11,941 11,032
TOTAL STOCKHOLDERS' DEFICIT (337,726) (329,523)
$249,535 $237,485
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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COMPUTERVISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
April 2, March 31,
1995 1996
<S> <C> <C>
SOFTWARE REVENUE
Product $33,013 $40,039
Services 28,632 27,881
TOTAL SOFTWARE REVENUE 61,645 67,920
Other Services Revenue 57,830 45,315
TOTAL REVENUE 119,475 113,235
COST OF SALES
Software
Product 3,871 3,963
Services 16,608 16,454
Other services 39,765 32,290
TOTAL COST OF SALES 60,244 52,707
GROSS PROFIT 59,231 60,528
SELLING AND ADMINISTRATIVE
EXPENSE 34,728 32,945
RESEARCH, DEVELOPMENT AND
ENGINEERING EXPENSE 9,956 10,499
OPERATING INCOME 14,547 17,084
INTEREST INCOME (154) (539)
INTEREST EXPENSE 11,621 7,989
OTHER (INCOME) EXPENSE, NET (376) 355
EARNINGS BEFORE INCOME TAXES 3,456 9,279
PROVISION FOR INCOME TAXES 510 1,111
NET INCOME $2,946 $8,168
EARNINGS PER SHARE $0.06 $0.13
WEIGHTED AVERAGE SHARES
OUTSTANDING 49,145 64,944
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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COMPUTERVISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
April 2, March 31,
1995 1996
<S> <C> <C>
CASH FLOWS USED FOR OPERATIONS
Net earnings $2,946 $8,168
Add items not requiring cash:
Depreciation of property and equipment 6,849 5,186
Amortization of intangibles 1,683 732
Amortization of finance costs and debt
discounts 855 726
Provision for doubtful accounts 474 (134)
Changes in assets and liabilities:
Accounts receivable 6,678 (6,549)
Prepaid expenses and other current assets (7,185) (2,803)
Accounts payable, accrued expenses and
income taxes (14,297) (19,125)
Other long-term liabilities 392 0
Cash flows used for continuing operations (1,605) (13,799)
Cash flows used for discontinued operations (281) 0
Total cash flows used for operations (1,886) (13,799)
INVESTING ACTIVITIES
Expenditures for property and equipment (1,768) (2,159)
(Increase) decrease in other assets 440 (12)
Total cash flows used for investments (1,328) (2,171)
FINANCING ACTIVITIES
Increase in notes payable 1,642 848
Payments on long-term borrowings (512) (622)
Issuance of common stock under Stock
Option Plan - 944
Total cash from financing activities 1,130 1,170
Foreign exchange impact on cash 6,357 (850)
Net increase (decrease) in cash and cash
equivalents 4,273 (15,650)
Cash and cash equivalents at beginning
of period 15,240 50,979
Cash and cash equivalents at end of period $19,513 $35,329
Supplementary data requirements:
Cash interest paid $18,404 $11,147
Cash taxes paid (refunded) ($733) $186
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments (all of which are of a normal
recurring nature) which, in the opinion of management, are necessary for a
fair statement of the results of the interim periods presented. These
financial statements do not include all disclosures associated with annual
financial statements and, accordingly, should be read in conjunction with
the financial statements and footnotes for the year ended December 31, 1995
included in the Company's Form 10-K where certain terms have been defined.
(1) Notes Payable and Long-Term Debt (In Thousands)
<TABLE>
<CAPTION>
December March
31, 1995 31, 1996
<S> <C> <C>
Notes Payable:
Notes Payable to Banks $2,812 $3,660
Revolving Credit Arrangement - -
Total Notes Payable $2,812 $3,660
Long-Term Debt:
8% Convertible Subordinated
Debentures, due 2009 36,066 36,376
11 3/8% Senior Subordinated
Notes, due 1999 175,000 175,000
Other Long-Term Debt, less current
portion of $5,399 and $5,057 12,550 12,284
Total Long-Term Debt, less current
portion $223,616 $223,660
</TABLE>
Notes Payable to Banks
Notes payable to banks consists of borrowings by the Company's international
subsidiaries under certain of the Company's lines of credit. Borrowings under
such lines bear interest at prevailing or negotiated rates.
Revolving Credit Arrangement
The Company has a revolving credit facility with a bank, which expires in
1998. There were no borrowings outstanding against the facility at December
31, 1995 or March 31, 1996.
(2) Litigation
The Company is currently involved in lawsuits which could have an adverse
impact upon the Company's short-term liquidity and results of operations if
unfavorable judgments are rendered against the Company. With respect to the
lawsuit brought against the Company by Joseph and Josephine Dieter, the trial
has been rescheduled for September, 1996.
Other than as described above, there have been no significant changes to the
Company's outstanding litigation since the filing of the Company's Form 10-K
for the twelve months ended December 31, 1995.
(3) Related Party Transaction
The Company recognized $11,200 of software product revenue from Peugeot SA
during the quarter ended March 31, 1996. A member of senior management of
Peugeot SA is also a director of the Company.
(4) Accounting for Stock-Based Compensation
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock Based
Compensation". Under SFAS 123, Companies can elect to apply fair value
accounting to grants of employee stock options and other stock based
compensation awards or can continue to apply the intrinsic value
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accounting under APB Opinion No. 25 with pro forma disclosure of fair value
compensation expense and effect on earnings per share. The Company has
elected to continue to apply APB Opinion No. 25.
(5) Earnings Per Share
Fully diluted earnings per share for the three months ended March 31, 1996
would have been the same as primary earnings per share and, therefore, have
not been presented separately.
(6) Reclassifications
Certain prior year balances in the financial statements have been reclassified
to conform to the current year financial statement presentation.
7
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Management's Discussion and Analysis of Financial Condition and Results
of Operations (In Thousands, Except Per Share Data)
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the financial
statements and footnotes contained in the Company's Form 10-Q for the
three months ended March 31, 1996 and the Form 10-K, including the Factors
That May Affect Future Results section of Management's Discussion and
Analysis of Financial Condition and Results of Operations, for the year ended
December 31, 1995, filed with the Securities and Exchange Commission.
Software Revenue and Gross Margins
Total software revenue for the first quarter of 1996 increased $6,275 or
10%, over the corresponding period in 1995, and included $11,200 related
to a first quarter contract with Peugeot SA, including Automobiles Peugeot
and Citroen. Software product revenue increased $7,026 or 21%, over the
corresponding period in 1995. Revenue from the Company's product data
management software products increased $4,100 or 102%. In addition, revenue
from PELORUS-based products (introduced in the second quarter of 1995) and
revenue from CADDS software products continued to increase over 1995, while
revenue from several older mechanical CAD software products continued its
expected decline. Software services revenue decreased $751 or 3% over the
corresponding period in 1995 primarily due to a decrease in training revenue.
Total software revenue for the first quarter of 1996 included unfavorable
foreign exchange impacts during the period of $700 attributable to product
revenue and $300 attributable to services revenue.
Software product margins for the first quarter of 1996 were 90% compared to
88% for the corresponding period in 1995. The improvement in software
product margins primarily resulted from a decrease in amortization of
previously capitalized software costs. Software service margins for the first
quarter of 1996 were 41% compared to 42% for the corresponding period in
1995. The decline in software service margin for the first three months of
1996 primarily resulted from declines in training and consulting margins.
Other Revenue and Gross Margins
Other services revenue for the first quarter of 1996 decreased $12,515 or 22%
from the corresponding period in 1995 and included an unfavorable period over
period foreign exchange impact of $300. The decrease in other services
revenue was primarily due to the expected continuing reduction in hardware
services, which declined $12,731 or 33% period over period.
Other services margins for the first quarter of 1996 were 29% compared
to 31% for the corresponding period in 1995. The decrease in margins was
attributable to several factors, including lower prices due to increased
competition, reduced service requirements attributable to increased hardware
reliability and unabsorbed fixed costs as a result of a declining service base.
Selling and Administrative Expense
Total selling and administrative expense for the first quarter of 1996
decreased $1,783 or 5% from the corresponding period in 1995 due to the
cost benefits associated with the continued resizing of the Company's
administrative operations. Total selling and administrative expense for the
first quarter of 1996 included a favorable foreign exchange impact of $200.
Research, Development and Engineering Expense
Total research, development and engineering expense for the first quarter of
1996 increased $543 or 5% from the corresponding period in 1995. The
increase was primarily due to one-time increases in travel, relocation and
recruitment costs partially offset by continued reductions in operating costs
resulting from reallocation of development to the Company's development
facility in India.
Interest and Other
Interest expense for the first quarter of 1996 decreased $3,632 or 31%
compared to the corresponding period in 1995. This decrease was primarily
due to the repayment in the fourth quarter of 1995 of the 10 7/8% Senior
Notes, due in 1997. Interest income increased $385 over the corresponding
period in 1995 primarily due to increased cash balances in 1996.
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Other (income) expense for the first quarter of 1996 and the corresponding
period of 1995 primarily relates to the Company's foreign currency hedging
program.
Short-term Liquidity and Capital Resources
The Company expects that cash generated from operations and from factoring
arrangements which may be entered into from time to time, as well as
borrowings under its Revolving Credit Arrangements will be sufficient to fund
its principal short-term liquidity requirements, including debt service,
restructuring payments, normal working capital and other cash requirements.
On November 17, 1995, the Company entered into a three-year, $50,000 credit
facility (the "New Credit Facility") with Bankers Trust Company (Fleet Bank
of Massachusetts later became a co-agent). The New Credit Facility provides
for a revolving line of credit (the "Revolving Credit Line") of $50,000 for
working capital and for sinking fund payments on the Company's 8% Convertible
Subordinated Debentures, of which $20,000 is available for letters of credit.
Letters of credit outstanding at March 31, 1996 were $9,315. Pursuant to the
terms of the New Credit Facility, the Company has granted the lenders a
security interest in all of the Company's U.S. assets. The New Credit Facility
is not subject to any borrowing base restrictions. The New Credit Facility
requires the Company to satisfy certain financial and other covenants. Loans
under the New Credit Facility will bear interest at a Base Rate or Eurodollar
rate, as selected by the Company, plus an Applicable Margin. On March 31,
1996, the rates ranged from 7.44% to 9.25%.
Despite a significant reduction in the Company's long term indebtedness in
1995, the Company remains highly leveraged and has a stockholders' deficit.
This indebtedness requires the Company to dedicate a significant portion of
its cash flow from operations to service its indebtedness and makes the
Company more vulnerable to unfavorable changes in general economic conditions.
A substantial portion of the Company's orders and shipments typically occur
in the last two weeks of each quarter. Therefore, the timing of orders and
shipments, including unexpected delays in receiving large orders or competitors
introducing new competitive products, could result in significant quarterly
fluctuations in the Company's operating results and cash flow. Historically,
the Company has experienced a seasonal decline in revenue in the first and
third quarters of each fiscal year, primarily due to capital budgeting cycles
and the European holiday schedule, respectively.
Long-term Liquidity
The Company's principal long-term liquidity requirements are payments
for interest, previously accrued restructuring obligations, capital
expenditures and the repayment of the Senior Subordinated Notes which
mature in 1999. The Company expects to meet its long-term liquidity
requirements, including repayment of its Senior Subordinated Notes,
primarily through funds generated from operations, bank borrowings or sales
of equity and/or debt securities. The Company believes that it may require
additional funds in 1999 to satisfy these obligations, in which event it would
seek to obtain such funds through a further sale of equity and/or debt
securities or other financing arrangements. However, no assurances can be
given that such funds will be available when required or on terms favorable
to the Company.
Operations and Investments
Cash and cash equivalents were $35,329 at March 31, 1996 compared with
$50,979 at December 31, 1995. The decrease of $15,650 in cash and cash
equivalents is primarily due to cash used for operations ($13,799) and cash
used for the purchase of property and equipment ($2,159). Cash used for
operations was significantly impacted by an increase in net accounts
receivable during the quarter.
Legal
The Company is currently involved in lawsuits which could have an adverse
impact upon the Company's short-term liquidity and results of operations if
unfavorable judgments are rendered against the Company. With respect to the
lawsuit brought against the Company by Joseph and Josephine Dieter, the
trial has been rescheduled for September, 1996.
Other than as described above, there have been no significant changes to the
Company's outstanding litigation since the filing of the Company's Form 10-K
for the twelve months ended December 31, 1995.
9
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Report on Review by Independent Public Accountants
The financial statements included in this filing on Form 10-Q, as listed in
the accompanying index, have been reviewed by Arthur Andersen LLP,
independent public accountants, in accordance with established professional
standards and procedures for such a review. Their report on the review is
included on page 11 of the Form 10-Q.
10
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(Arthur Andersen LLP letterhead)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Computervision Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Computervision Corporation and subsidiaries as of March 31, 1996, and the
related consolidated statements of operations and cash flows for the
three-month periods ended March 31, 1996 and April 2, 1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Computervision Corporation
and subsidiaries as of December 31, 1995 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for
the year then ended (not presented separately herein), and in our report dated
January 22, 1996, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1995 is fairly stated,
in all material respects, in relation to the consolidated balance sheet from
which it has been derived.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 18, 1996
11
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently involved in lawsuits which could have an adverse
impact upon the Company's short-term liquidity and results of operations if
unfavorable judgments are rendered against the Company. With respect to the
lawsuit brought against the Company by Joseph and Josephine Dieter, the
trial has been rescheduled for September, 1996.
Other than as described above, there have been no significant changes to the
Company's outstanding litigation since the filing of the Company's Form 10-K
for the twelve months ended December 31, 1995.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits.
Exhibit 11 - Calculation of Shares Used in Determining Earnings Per Share.
Exhibit 15 - Letter re: Unaudited Interim Financial Information.
(b) Reports on Form 8-K.
A report on Form 8-K was filed on January 30, 1996 to report the Company's
financial results for the fourth quarter and year ended December 31, 1995.
A report on Form 8-K was filed on March 11, 1996 to report the appointment
of William A. Foniri to the position of Treasurer, replacing Kevin F.
McLaughlin who left the Company.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Computervision Corporation
(Registrant)
Date: May 9, 1996
/S/ Douglas P. Smith
Douglas P. Smith
Vice-President, Finance and
Chief Financial Officer
13
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<TABLE>
<CAPTION>
Exhibit Index
Page
<S> <C>
11(a) - Computervision Corporation - Calculation of Shares
Used in Determining Earnings Per Share 15
15 - Letter re: Unaudited Interim Financial Information 16
</TABLE>
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Computervision Corporation
Calculation of Shares Used in Determining Earnings Per Share
For the Three Months Ended April 2, 1995 and March 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
April 2, March 31,
Primary Earnings Per Share 1995 1996
<S> <C> <C>
Weighted average number of common
shares outstanding during the period 48,416 62,979
Common stock equivalents 729 1,965
Total 49,145 64,944
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
April 2, March 31,
Fully Diluted Earnings Per Share 1995 1996
<S> <C> <C>
Weighted average number of common
shares outstanding during the period 48,416 62,979
Common stock equivalents 729 1,965
Total 49,145 64,944
</TABLE>
15
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(Arthur Andersen LLP letterhead)
May 10, 1996
Computervision Corporation
100 Crosby Drive
Bedford, MA 01730
To Computervision Corporation:
We are aware that Computervision Corporation has incorporated by reference
in its registration statements filed on Forms S-8 and S-3 its Form 10-Q for
the three month period ended March 31, 1996, which includes our report
dated April 18, 1996, covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933,
this report is not considered a part of the registration statements on Forms
S-8 and S-3 prepared or certified by our firm or a report prepared or
certified by our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the financial statements included in the Form 10-Q for the
Quarter ended March 31, 1996 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 35,329
<SECURITIES> 0
<RECEIVABLES> 101,417
<ALLOWANCES> 3,437
<INVENTORY> 0
<CURRENT-ASSETS> 171,718
<PP&E> 169,660
<DEPRECIATION> 125,302
<TOTAL-ASSETS> 237,485
<CURRENT-LIABILITIES> 242,218
<BONDS> 223,660
0
0
<COMMON> 630
<OTHER-SE> (330,153)
<TOTAL-LIABILITY-AND-EQUITY> 237,485
<SALES> 40,039
<TOTAL-REVENUES> 113,235
<CGS> 3,963
<TOTAL-COSTS> 52,707
<OTHER-EXPENSES> 43,444
<LOSS-PROVISION> (134)
<INTEREST-EXPENSE> 7,989
<INCOME-PRETAX> 9,279
<INCOME-TAX> 1,111
<INCOME-CONTINUING> 8,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,168
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
