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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-Q
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): OCTOBER 20, 1994
CONTROL DATA SYSTEMS, INC.
(Exact name of Registrant as Specified in Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-20252 41-1718075
(Commission File Number) (I.R.S. Employer Identification Number)
4201 Lexington Avenue North
Arden Hills, Minnesota 55126-6198
(Address of principal executive offices) (Zip Code)
(612) 482-2100
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS
Control Data Systems, Inc. (the "Registrant" or the "Company") has
announced results of its third quarter for fiscal 1994. The Company reported
a third quarter net loss of $5.0 million, or $0.36 per share on revenues of
$113.6 million. This compares to net earnings of $1.0 million, or $.07 per
share, on revenues of $97.1 million for the third quarter of 1993. The
Company also anticipates recording restructuring and asset revaluation
charges of approximately $95 million that will be taken in the fourth
quarter.
The restructuring charges will include expenses for reducing the
worldwide employee population by approximately 600 people and consolidating
operations in selected locations. In addition, related charges will include
the revaluation of intangible assets associated with several acquisitions and
certain proprietary hardware assets. The cash portion of the restructuring
charge will be about half of the total charge.
``
The Company normally experiences revenue and profit weakness in its
third quarter, primarily due to the seasonal slowdown of its European
operations,''
said Joe Killoran, chief financial officer of the Company. ``The
primary factors for the third quarter net loss were the slowdown of our
European operations, shortfalls in our Asian and North American markets, and
margin erosion worldwide. While we did see continued growth in contracts
with major international companies for our electronic messaging solutions,
these factors have not offset the decline in our other sectors.''
``
Our future direction is based on certain key technologies,
particularly in electronic commerce and network reengineering, as well as our
ability to fulfill large, geographically dispersed integration projects,''
said Jim Ousley, president and CEO of the Company. ``
We are focusing our
resource base to align with this direction.
``
We have had to make some difficult decisions in order to transition
our business,''
said Ousley. ``We believe these actions will allow us to more
rapidly complete our transition from a proprietary computer manufacturer into
a systems integration company focused in the rapidly expanding electronic
commerce marketplace.''
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Control Data Systems, Inc.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Total Revenues $ 113,646 $ 97,091 $ 390,550 $ 314,737
Total Cost of Revenues 83,429 60,246 281,158 192,943
Gross Profit 30,217 36,845 109,392 121,794
Operating Expenses:
Selling, General and
Administrative 32,985 33,604 102,901 101,544
Technical 3,190 4,632 10,420 19,347
Total Operating
Expenses 36,175 38,236 113,321 120,891
Earnings (Loss) from
Operations (5,958) (1,391) (3,929) 903
Other Income (Expenses):
Interest Expense (316) (507) (979) (1,640)
Interest Income 1,058 1,404 3,351 4,793
Other Income (Expenses), Net 790 78 104 3,662
Total Other Income, Net 1,532 975 2,476 6,815
Earnings (Loss) Before
Income Taxes (4,426) (416) (1,453) 7,718
Provision for
Income Taxes 549 (1,398) 1,480 1,081
Net Earnings (Loss) $ (4,975) $ 982 $ (2,933) $ 6,637
Net Earnings (Loss)
per Common Share and
Common Share
Equivalents $ (0.36) $ 0.07 $ (0.21) $ 0.49
Weighted Average
Common Shares
Outstanding (in thousands) 13,780 14,250 13,734 13,616
</TABLE>
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CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Control Data Systems, Inc.
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and Short-Term Investments $ 76,650 $ 81,635
Trade and Other Receivables 113,392 125,470
Inventories 47,894 56,222
Prepaid Expenses and Other Current Assets 7,904 7,898
Total Current Assets 245,840 271,225
Property and Equipment, Net 28,250 28,058
Leased and Data Center Equipment, Net 2,564 4,779
Other Noncurrent Assets 54,469 48,861
Total Assets $ 331,123 $ 352,923
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-Term Debt $ 8,415 $ 1,891
Restructure Reserves, Current Portion 10,968 21,722
Other Accrued Expenses 95,865 113,744
Total Current Liabilities 115,248 137,357
Deferred Income Taxes 1,118 1,123
Restructure Reserves, less Current Portion 5,501 10,554
Pension Liabilites 29,706 27,870
Other Noncurrent Liabilities 5,361 843
Total Liabilities 156,934 177,747
Stockholders' Equity 174,189 175,176
Total Liabilities and Stockholders' Equity $ 331,123 $ 352,923
</TABLE>
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Control Data Systems, Inc.
<TABLE>
<CAPTION>
Nine Months
Ended
October 1, October 2,
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ (2,933) $ 6,637
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation 11,251 12,558
Amortization 3,437 1,195
Restructure reserves utilized (16,276) (18,864)
Net change in working capital items 3,967 (15,693)
Other 511 (799)
Net cash used in operating activities (43) (14,966)
Cash Flows from Investing Activities:
Expended for property and equipment (6,725) (8,859)
Investment in affiliates (518) (80)
Proceeds from sales of property and equipment 795 1,631
Proceeds from sale of Silicon Graphics, Inc.
common stock - 3,244
Acquisitions of businesses, net of cash provided (3,844) (10,687)
Change in short-term investments 1,679 43,852
Net cash (used in) provided by investing
activities (8,613) 29,101
Cash Flows from Financing Activities:
Borrowings under short-term financing
arrangements, net 3,732 (1,342)
Repayment of long-term obligations - (7,125)
Proceeds from issuance of common stock,
net of issuance costs 1,296 1,836
Proceeds from issuance of a nonrefundable
equity option - 2,813
Net cash provided by (used in) financing
activities 5,028 (3,818)
Effect of Exchange Rate Changes on Cash 322 (674)
Net change in cash and cash equivalents (3,306) 9,643
Cash and cash equivalents, beginning of period 19,164 5,142
Cash and cash equivalents, end of period 15,858 14,785
Short-term investments 60,792 85,429
Cash and Short-Term Investments, End of Period $ 76,650 $ 100,214
</TABLE>
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SIGNATURE
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 hereunto duly authorized.
_____
______________________________
CONTROL DATA SYSTEMS, INC._____
Registrant
Date: October 20, 1994 _____
___________________
/s/ James E. Ousley_
_____
_____
_____
James E. Ousley
President and Chief Executive Officer
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