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 30, 1997
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 12, 1997 the registrant had outstanding an aggregate of
63,575,158 shares of its Common Stock, $.01 par value.
1
<PAGE>
Computervision Corporation
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Consolidated Balance Sheets at December 31, 1996 and
March 30, 1997 (Unaudited) 3
Consolidated Statements of Operations (Unaudited) for the
Three Months Ended March 31, 1996 and March 30, 1997 4
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 1996 and March 30, 1997 5
Notes to Consolidated Financial Statements (Unaudited) 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
Review by Independent Public Accountants 13
Report on Review by Independent Public Accountants 14
PART II. OTHER INFORMATION 15
Signatures 16
EXHIBIT INDEX 17
</TABLE>
2
<PAGE>
COMPUTERVISION CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
(Unaudited)
December 31, March 30,
ASSETS 1996 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $38,565 $27,557
Accounts receivable, less allowance for doubtful
accounts of $2,929 and $2,823, respectively 102,509 76,792
Current deferred income taxes 7,448 7,190
Prepaid expenses and other current assets 16,019 16,654
-------- --------
TOTAL CURRENT ASSETS 164,541 128,193
PROPERTY AND EQUIPMENT, NET 31,055 26,765
DEFERRED INCOME TAX ASSETS 4,113 3,769
CAPITALIZED SOFTWARE 1,276 1,186
DEFERRED FINANCE COSTS 3,734 3,332
OTHER ASSETS 3,626 3,375
-------- --------
$208,345 $166,620
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $19,776 $21,753
Notes payable and current portion of
long-term debt 9,888 10,298
Accrued compensation, severance and related
Costs 57,482 50,659
Deferred revenue and customer advances 40,503 45,279
Accrued and deferred income taxes 15,019 14,661
Other current liabilities and accrued expenses 81,822 81,083
-------- --------
TOTAL CURRENT LIABILITIES 224,490 223,733
-------- --------
DEFERRED INCOME TAXES 30,174 30,078
LONG-TERM DEBT, LESS CURRENT PORTION 217,346 217,367
OTHER LONG-TERM LIABILITIES 53,110 48,961
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; 63,509,999 and 63,572,899
shares, respectively, issued and outstanding 635 636
Capital in excess of par value 1,186,109 1,186,331
Retained deficit (1,511,148)(1,545,092)
Cumulative translation adjustment 7,629 4,606
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (316,775) (353,519)
--------- ---------
$208,345 $166,620
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
COMPUTERVISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 30,
1996 1997
<S> <C> <C>
SOFTWARE REVENUE
Product $40,039 $16,609
Services 28,678 24,752
-------- --------
Total Software Revenue 68,717 41,361
OTHER SERVICES REVENUE 44,518 36,448
-------- --------
Total Revenue 113,235 77,809
COST OF SALES
Software
Product 3,963 2,077
Services 16,454 16,789
Other services 32,290 33,494
-------- --------
Total Cost of Sales 52,707 52,360
-------- --------
GROSS PROFIT 60,528 25,449
SELLING AND ADMINISTRATIVE EXPENSE
Software 27,052 28,586
Other Services 5,893 5,582
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSE
Software 10,324 10,303
Other Services 175 131
NON-RECURRING CHARGES
Software 0 0
Other Services 0 7,000
-------- --------
OPERATING INCOME (LOSS)
Software 10,924 (16,394)
Other Services 6,160 (9,759)
-------- --------
Total Operating Income (Loss) 17,084 (26,153)
INTEREST AND OTHER EXPENSE, NET 7,805 7,791
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 9,279 (33,944)
PROVISION FOR INCOME TAXES 1,111 -
-------- --------
NET INCOME (LOSS) $8,168 ($33,944)
======== ========
EARNINGS (LOSS) PER SHARE $0.13 ($0.53)
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 64,944 63,567
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
COMPUTERVISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 30,
CASH FLOWS FROM (USED FOR) OPERATIONS 1996 1997
<S> <C> <C>
Net Income (Loss) $8,168 ($33,944)
Add items not requiring cash:
Depreciation of property and equipment 5,186 4,144
Amortization of intangibles 732 154
Amortization of finance costs and debt discounts 726 727
Provision for doubtful accounts (134) 56
Changes in assets and liabilities:
Accounts receivable (6,549) 21,164
Prepaid expenses and other (2,803) (111)
Accounts payable, accrued expenses and
income taxes (19,125) 2,846
-------- --------
Cash flows used for continuing operations (13,799) (4,964)
-------- --------
INVESTING ACTIVITIES
Expenditures for property and equipment (2,159) (3,268)
Increase in other assets (12) (259)
-------- --------
Total cash flows used for investments (2,171) (3,527)
-------- --------
FINANCING ACTIVITIES
Increase in notes payable 848 366
Payments on long-term borrowings (622) (260)
Issuance of common stock under Stock Option Plan 944 223
-------- --------
Total cash flows from financing activities 1,170 329
-------- --------
Foreign exchange impact on cash (850) (2,846)
-------- --------
Net decrease in cash and cash equivalents (15,650) (11,008)
Cash and cash equivalents at beginning of period 50,979 38,565
-------- --------
Cash and cash equivalents at end of period $35,329 $27,557
======== ========
Supplementary data requirements:
Cash interest paid $11,147 $10,648
Cash taxes paid $186 $28
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
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. The unaudited results of operations for the quarter ended
March 30, 1997 are not necessarily an indication of the results of
operations for the full year. 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, 1996 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 31, March 30,
1996 1997
<S> <C> <C>
Notes Payable:
Notes Payable to Banks $3,277 $3,643
Revolving Credit Arrangement - -
-------- --------
Total Notes Payable $3,277 $3,643
Long-Term Debt:
8% Convertible Subordinated Debentures,
due 2009, net of unamortized discount
of $17,456 and $17,147, and current
portion of $5,500 and $5,500, respectively 31,154 31,463
11 3/8% Senior Subordinated Notes, due 1999 175,000 175,000
Other Long-Term Debt, less current portion
of $1,111 and $1,155 11,192 10,904
-------- --------
Total Long-Term Debt, less current portion $217,346 $217,367
======== ========
</TABLE>
Notes Payable to Banks
Notes payable to banks consist 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
In 1995, the Company entered into a three-year, $50,000 credit facility
(the "Revolving Credit Facility") with its lending banks. The Revolving
Credit Facility provided for a revolving line of credit of $50,000 for
working capital and for sinking fund payments on the Company's 8%
Convertible Subordinated Debentures (unpaid principal balance of
$54,110 at December 31, 1996), of which $20,000 is available for
letters of credit. Pursuant to the terms of the Revolving Credit
Facility, the Company has granted the lenders a security interest in
all of the Company's U.S. assets. Letters of credit outstanding at
March 30, 1997 were $3,800 and there were no borrowings outstanding.
The Revolving Credit Facility requires the Company to satisfy certain
financial and other covenants. As a result of non-recurring charges
of $19,500 in the fourth quarter of 1996 and the non-recurring
charge of $7,000 in the first quarter of 1997, the Company would not
have satisfied the financial covenants of its Revolving Credit
Facility. As a result, in March 1997, the Company and its lending
banks signed an amendment which modifies the financial covenants through
December 31, 1997. The Company also agreed with its banks that it would
amend the Revolving Credit Facility to provide for a borrowing base
limitation. Loans under the Revolving Credit Facility will bear interest
at a Base Rate or Eurodollar rate, as selected by the Company, plus an
Applicable Margin. On March 30, 1997, the rates ranged from 8.19% to 10%.
Due to the substantial shortfall in revenue for the quarter ended March
30, 1997, the Company was unable to satisfy certain of the financial
covenants, as amended, under the Revolving Credit Facility (under which
no borrowings were outstanding) ("Bank Covenants"). On April 15, 1997,
the Company reached an agreement with its lending banks to waive the
default in the Bank Covenants for the quarter ended March 30, 1997, to
amend the Bank Covenants to conform with the Company's revised business
plan for 1997, and to implement a borrowing base limitation (the "April
1997 Amendment"). Pursuant to the terms of the April 1997 Amendment,
the Company may borrow funds secured by the accounts receivable of the
6
<PAGE>
Company, Computervision Pty. Limited (Australia), Computervision SA
(France), Computervision GmbH (Germany) and Computervision Limited
(U.K.). Until such time as the April 1997 Amendment is executed (which
the parties have agreed to execute by May 23, 1997), the Company may
borrow on its U.S. accounts receivable ($8,800 at March 30, 1997).
Thereafter, when the amendment is executed and the security interests
are perfected, the Company may borrow up to a maximum of $50,000, subject
to borrowing base requirements which at March 30, 1997 limited the borrowing
capacity to approximately $30,000. In addition, the April 1997 Amendment
also limits the borrowings outstanding at the end of each fiscal quarter
($18,000 for the second quarter of 1997, $21,000 for the third quarter of
1997 and $16,000 for each subsequent quarter), and increases the interest
rate to LIBOR plus 2.5% for borrowings of $25,000 or less and LIBOR plus
3% for borrowings greater than $25,000.
Because the Company's borrowings under the amended Revolving Credit
Facility will be limited to a fixed percentage of the Company's
accounts receivable, the Company's ability to fund its operations over
the short-term is dependent upon its success in achieving its revised
business plan for 1997. (See Short-term Liquidity section of Management's
Discussion and Analysis of Financial Condition and Results of Operations.)
Interest and Other Expense, net
Interest and Other Expense, net for the periods ended March 31, 1996
and March 30, 1997 consists of the following:
<TABLE>
<CAPTION>
March 31, March 30,
1996 1997
<S> <C> <C>
Interest income $(539) $(385)
Interest expense 7,989 8,013
Other expense, net 355 163
------- -------
Interest and other expense, net $7,805 $7,791
======= =======
</TABLE>
(2) Non-recurring Charge
The results for the first quarter of 1997 include a non-recurring
charge of $7,000 related primarily to the reorganization of the OSS
business as a stand alone business unit (primarily personnel reductions
of approximately 60 positions in OSS and the closing of facilities), as
well as expenses incurred in connection with the terminated agreement to
sell the OSS business to J.F. Lehman.
Of the $11,000 of restructuring costs included in the non-recurring charge
of $14,500 recorded in the fourth quarter of 1996, the Company paid out
approximately $1,600 during the first quarter of 1997.
As discussed in the Company's Form 10-K for the year ended December 31,
1996, the Company undertook restructuring its software business due
principally to the Company's failure to meet its revenue plan for the first
quarter of 1997 and reflects revisions to its 1997 business plan.
The restructuring efforts are focussed on reducing the costs in its
business. While the Company previously estimated that the charge would be
approximately $12,000, it has not yet finalized the components or the amount
of the charge and the charge could be substantially larger than previously
estimated.
(3) Industry Segment and Geographic Operations
The Company operates in two industry segments: Software - providing
CAD/CAM solutions and services including training and consulting
services incident to those products; and OSS - providing services and
training for other hardware and software products. Segment income statement
financial information is broken out separately on the face of the income
statement. Segment balance sheet financial information is as follows:
7
<PAGE>
<TABLE>
<CAPTION>
Software OSS Total
<S> <C> <C> <C>
Balance Sheet and Cash Flow:
December 31, 1996
Accounts Receivable 76,563 25,946 102,509
Fixed Assets 18,072 12,983 31,055
Other 1,276 - 1,276
Corporate Assets - - 73,505
--------
Total Assets 208,345
March 30, 1997
Accounts Receivable 50,539 26,253 76,792
Fixed Assets 17,004 9,761 26,765
Other 1,186 - 1,186
Corporate Assets - - 61,877
--------
Total Assets 166,620
Capital Expenditures 1,789 1,479 3,268
Depreciation and Amortization 2,348 1,950 4,298
</TABLE>
(4) 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.
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, 1996.
(5) 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.
(6) Earnings Per Share
Fully diluted earnings per share for the three months ended March 30,
1997 would have been the same as primary earnings per share and,
therefore, have not been presented separately.
During 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128),
"Earnings per Share," which specifies a new computation for earnings
per share. SFAS 128 is effective for periods ending after December 15,
1997. Had SFAS 128 been adopted as of January 1, 1996, there would
have been no effect on the Company's reported earnings per share for
the quarters ended March 30, 1997 and March 31, 1996.
(7) Reclassifications
Certain prior year balances in the financial statements have been
reclassified to conform to the current year financial statement
presentation.
8
<PAGE>
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 30, 1997 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, 1996, filed with the
Securities and Exchange Commission.
Software Revenue and Gross Margins
Total software revenue for the first quarter of 1997 decreased $27,356
or 40%, as product revenue decreased $23,430 or 59% and service revenue
decreased $3,926 or 14% from the corresponding period in 1996. Total
software revenue for the first quarter of 1997 included unfavorable
foreign exchange impacts of $650 and $1,200, attributable to product
revenue and service revenue, respectively.
The decrease in software product revenue was attributable in large part
to the Company's failure to consummate several large EPD contracts in the
quarter. In the comparable quarter in 1996, the Company's software product
revenue included $11,200 related to a contract with Peugeot SA, including
Automobiles Peugeot and Citroen. Revenue from the Company's product data
management software products decreased $3,900 or 48% and revenue from CADDS
software products decreased $13,900 or 59%. In addition, revenue from several
older mechanical CAD software products continued to decline year over year,
as planned.
The decrease in software service revenue for the three month period
ended March 30, 1997 was due to an unfavorable foreign exchange impact
and reduced maintenance revenue, offset by increased consulting
revenue. The maintenance revenue decrease reflected primarily the
impact of lower pricing on new products and upgrades within the
existing customer base. The shortfall in product revenue in the first
quarter of 1997 will have a negative impact on maintenance in future
quarters.
Software product margins for the first quarter of 1997 were 87.5%
compared to 90.1% for the corresponding period in 1996. The decrease
in software product margins primarily resulted from unabsorbed fixed
costs due to lower revenue, as well as increased royalties for software
licensed from third parties. Software service margins for the first
quarter of 1997 were 32% compared to 43% for the corresponding period
in 1996. The decline in software service margin for the first quarter
of 1997 primarily resulted from decreased maintenance margins, due to
decreased maintenance revenue, offset in part by increased training and
consulting margins.
Other Revenue and Gross Margins
Other services revenue (representing the OSS business unit) for the
first quarter of 1997 decreased $8,070 or 18% from the corresponding
period in 1996 and included an unfavorable period over period foreign
exchange impact of $1,100. The decrease in other services revenue was
primarily due to the expected continuing reduction in hardware
services, which declined $8,718 or 25%. These decreases were partially
offset by increases in system integration and networking services
revenue.
Other services margins for the first quarter of 1997 were 8% , compared
to 27% for the corresponding period in 1996. The decrease in margins
was attributable to several factors, including unabsorbed fixed costs
as a result of a declining service base, certain reserve provisions and
increased value added services which contribute a lower margin.
On September 25, 1996, the Company signed a definitive Asset Purchase
Agreement to sell its Open Service Solutions ("OSS") business to an
affiliate of J.F. Lehman & Company ("J.F. Lehman"). On March 19, 1997,
the Company announced the termination of its agreement with J.F. Lehman
and the signing of a non-binding letter of intent with M.D. Sass
Investors Services, Inc. ("Sass"), a 17% shareholder of the Company.
The Company is currently engaged in negotiating the terms of the proposed
OSS transaction, including the amount of the consideration to be received
by the Company if the transaction is consummated ("OSS Transaction").
Also, the OSS Transaction is expected to involve a significant bank
borrowing by the OSS business and therefore is subject to the successful
negotiation and execution of
9
<PAGE>
financing documents satisfactory to the Company and the banks. Accordingly,
the Company can give no assurance that the OSS Transaction will be
consummated.
Selling and Administrative Expense
Total selling and administrative expense for the first quarter of 1997
increased $1,223 or 4% from the corresponding period in 1996 and
included a favorable foreign exchange impact of $900. The increase in
the first quarter was primarily due to increased net selling
expenditures.
Research, Development and Engineering Expense
Total research, development and engineering expense for the first
quarter of 1997 was flat with the corresponding period in 1996.
Non-recurring Charge
The results for the first quarter of 1997 include a non-recurring
charge of $7,000 related primarily to the reorganization of the OSS
business as a stand alone business unit (primarily personnel reductions
of approximately 60 positions in OSS and the closing of facilities), as
well as expenses incurred in connection with the terminated agreement to
sell the OSS business to J.F. Lehman.
Of the $11,000 of restructuring costs included in the non-recurring charge
of $14,500 recorded in the fourth quarter of 1996, the Company paid out
approximately $1,600 during the first quarter of 1997.
As discussed in the Company's Form 10-K for the year ended December 31,
1996, the Company undertook restructuring its software business due
principally to the Company's failure to meet its revenue plan for the first
quarter of 1997 and reflects revisions to its 1997 business plan.
The restructuring efforts are focussed on reducing the costs in its
business. While the Company previously estimated that the charge would be
approximately $12,000, it has not yet finalized the components or the amount
of the charge and the charge could be substantially larger than previously
estimated.
Interest and Other
Interest expense for the first quarter of 1997 was relatively flat with
the corresponding period in 1996, as there were no significant changes
in the debt structure. Other (income) expense for the first quarter of
1997 and the corresponding period of 1996 primarily relates to the
Company's foreign currency hedging program.
Short-term Liquidity and Capital Resources
In 1995, the Company entered into a three-year, $50,000 credit facility
(the "Revolving Credit Facility") with its lending banks. The Revolving
Credit Facility provided for a revolving line of credit of $50,000 for
working capital and for sinking fund payments on the Company's 8%
Convertible Subordinated Debentures (unpaid principal balance of
$54,110 at December 31, 1996), of which $20,000 is available for
letters of credit. Pursuant to the terms of the Revolving Credit
Facility, the Company has granted the lenders a security interest in
all of the Company's U.S. assets. Letters of credit outstanding at
March 30, 1997 were $3,800 and there were no borrowings outstanding.
The Revolving Credit Facility requires the Company to satisfy certain
financial and other covenants. As a result of non-recurring charges of
$19,500 in the fourth quarter of 1996 and the non-recurring charge of
$7,000 in the first quarter of 1997, the Company would not have satisfied
the financial covenants of its Revolving Credit Facility. As a result,
in March 1997, the Company and its lending banks signed an amendment
which modifies the financial covenants through December 31, 1997. The
Company also agreed with its banks that it would amend the Revolving
Credit Facility to provide for a borrowing base limitation. Loans under
the Revolving Credit Facility will bear interest at a Base Rate or
Eurodollar rate, as selected by the Company, plus an Applicable Margin.
On March 30, 1997, the rates ranged from 8.19% to 10%.
Due to the substantial shortfall in revenue for the quarter ended March
30, 1997, the Company was unable to satisfy certain of the financial
covenants, as amended, under the Revolving Credit Facility (under which
no borrowings were outstanding) ("Bank Covenants"). On April 15, 1997,
the Company reached an agreement with its lending banks to waive the
default in the Bank Covenants for the quarter ended March 30, 1997, to
amend the Bank Covenants to conform with the Company's
10
<PAGE>
revised business plan for 1997, and to implement a borrowing base limitation
(the "April 1997 Amendment"). Pursuant to the terms of the April 1997
Amendment, the Company may borrow funds secured by the accounts receivable of
the Company, Computervision Pty. Limited (Australia), Computervision SA
(France), Computervision GmbH (Germany) and Computervision Limited (U.K.).
Until such time as the April 1997 Amendment is executed (which the parties
have agreed to execute by May 23, 1997), the Company may borrow on its U.S.
accounts receivable ($8,800 at March 30, 1997). Thereafter, when the amendment
is executed and the security interests are perfected, the Company may borrow
up to a maximum of $50,000, subject to borrowing base requirements which at
March 30, 1997 limited the borrowing capacity to approximately $30,000. In
addition, the April 1997 Amendment also limits the borrowings outstanding at
the end of each fiscal quarter ($18,000 for the second quarter of 1997,
$21,000 for the third quarter of 1997 and $16,000 for each subsequent
quarter), and increases the interest rate to LIBOR plus 2.5% for borrowings
of $25,000 or less and LIBOR plus 3% for borrowings greater than $25,000.
The Company expects that cash generated from operations, supplemented
by borrowings under its Revolving Credit Facility and from factoring
arrangements which may be entered into from time to time will be
sufficient to fund its principal short-term liquidity requirements,
including debt service, restructuring payments, normal working capital
and other cash requirements. The Company expects to utilize a
substantial portion of its available borrowing capacity during certain
periods of 1997. On August 15, 1997, the Company is obligated to make a
$10,000 semi-annual interest payment on its outstanding Senior Subordinated
Notes which mature in 1999 (the "Senior Subordinated Notes"). The ability
of the Company to make this interest payment on the due date is dependent
on the success of the Company in (i) achieving its revised second quarter
business plan or (ii) consummating the OSS Transaction. If the Company is
unsuccessful or if it is not able to raise additional funds through an equity
or debt financing, the Company would be in default under the terms of the
Senior Subordinated Notes, causing an acceleration of their repayment, which
would impact the solvency of the Company. No assurances can be given that
the Company will achieve its second quarter business plan or that the OSS
Transaction will be consummated, and therefore no assurance can be given
that the required interest payment will be made when due.
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, such as occurred in the first quarter of 1997, 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
will require additional funds in 1999 to satisfy these obligations and,
as a result, will seek to obtain such funds through a 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 $27,557 at March 30, 1997 compared with
$38,565 at December 31, 1996. The decrease of $11,008 in cash and cash
equivalents is primarily due to cash used for operations ($4,964) and
cash used for the purchase of property and equipment ($3,268).
11
<PAGE>
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.
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, 1996.
12
<PAGE>
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 14 of the Form 10-Q.
13
<PAGE>
(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 30, 1997,
and the related consolidated statements of operations and the consolidated
statements of cash flows for the three-month periods ended March 30, 1997
and March 31, 1996. 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, 1996 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 March 27, 1997 (except with respect to
the matter discussed in Note 4, as to which the date is April 15, 1997),
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, 1996 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 24, 1997
14
<PAGE>
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.
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, 1996.
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.
On January 10, 1997, Computervision Corporation issued a preliminary
press release reporting on its financial results for the 1996 fourth
quarter.
On January 28, 1997, Computervision Corporation issued a press release
reporting on its financial results for the fourth quarter and full year
ending December 31, 1996.
On March 19, 1997, Computervision Corporation (the "Company") issued a
press release announcing the termination of the agreement with J.F.
Lehman & Co. to purchase its Open Service Solutions (OSS) business
unit. It also announced that it has signed a non-binding Letter of
Intent for the sale of 51% of OSS to M.D. Sass Investors Services,
Inc., an affiliate of the Company.
On March 19, 1997, Computervision Corporation also issued a press
release announcing the appointment of James P. Regan as President and
CEO of CV Services International.
On April 2, 1997, Computervision Corporation issued a press release
reporting on its preliminary financial results for the first quarter of
1997.
On April 2, 1997, Computervision Corporation also issued a press
release announcing the election of James B. Rubin, Senior Managing
Director of M.D. Sass Investors Services, Inc. a 17% shareholder of the
Company, as a member of its Board of Directors.
On April 24, 1997, Computervision Corporation issued a press release
reporting on its financial results for the first quarter of 1997.
15
<PAGE>
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 14, 1997
/S/ James E. Hayden
James E. Hayden
Vice-President, Corporate Controller
/S/ Anthony N. Fiore
Anthony N. Fiore
Vice-President and General Counsel
16
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
Page
<S> <C>
11(a) - Computervision Corporation - Calculation of Shares
Used in Determining Earnings Per Share 18
15 - Letter re: Unaudited Interim Financial Information 19
</TABLE>
17
<PAGE>
Computervision Corporation
Calculation of Shares Used in Determining Earnings Per Share
For the Three Months Ended March 31, 1996 and March 30, 1997
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 30,
Primary Earnings Per Share 1996 1997
<S> <C> <C>
Weighted average number of common shares
outstanding during the period 62,979 63,567
Common stock equivalents 1,965 0
------- -------
Total 64,944 63,567
======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 30,
Fully Diluted Earnings Per Share 1996 1997
<S> <C> <C>
Weighted average number of common shares
outstanding during the period 62,979 63,567
Common stock equivalents 1,965 0
------- -------
Total 64,944 63,567
======= =======
</TABLE>
17
<PAGE>
(Arthur Andersen LLP letterhead)
May 14, 1997
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 30, 1997, which
includes our report dated April 24, 1997, 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
18
<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 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-30-1997
<CASH> 27,557
<SECURITIES> 0
<RECEIVABLES> 79,615
<ALLOWANCES> 2,823
<INVENTORY> 0
<CURRENT-ASSETS> 128,193
<PP&E> 118,882
<DEPRECIATION> 92,117
<TOTAL-ASSETS> 166,620
<CURRENT-LIABILITIES> 223,733
<BONDS> 217,367
0
0
<COMMON> 636
<OTHER-SE> (354,155)
<TOTAL-LIABILITY-AND-EQUITY> 166,620
<SALES> 16,609
<TOTAL-REVENUES> 77,809
<CGS> 2,077
<TOTAL-COSTS> 52,360
<OTHER-EXPENSES> 51,602
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 8,013
<INCOME-PRETAX> (33,944)
<INCOME-TAX> 0
<INCOME-CONTINUING> (33,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (33,944)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
