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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
____X______ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended June 30, 1994
or
_________ Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 [No Fee Reqired]
For the Transition Period From _________ to __________
Commission file number 0-13150
CONCURRENT COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2735766
(State of Incorporation) (I.R.S. Employer Identification No.)
2 Crescent Place, Oceanport, NJ 07757, (908) 870-4500
(Address and telephone number of principal executive offices)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $0.01 per share)
(Title of class)
Indicate by check mark whether 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 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes _X_ No ___
As of September 23, 1994, there were 30,208,396 shares of Common Stock
outstanding. The aggregate market value of shares of such Common Stock
(based upon the last sale price of $1.625 of a share as reported for such
date on the Nasdaq National Market System) held by non-affiliates (i.e.,
shares held by other than entities identified as beneficial owners of more
than 5% of the Common Stock and, without determining such status, including
shares held by directors and executive officers of the Company) was
approximately $38,252,704.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ x ]
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's Proxy Statement dated October 1, 1994 in
connection with Registrant's 1994 Annual Meeting of Stockholders scheduled to
be held on November 3, 1994 are incorporated by reference in Part III hereof.
PART I
Item 1. BUSINESS
(a) General Development of Business
Concurrent Computer Corporation ("Concurrent" or the "Company")
is the world's leading provider of high-performance real-time
computer systems and services, based on 1993 net sales of companies
focused on providing real-time systems. A "real-time" system must
be able to meet guaranteed rapid response times, acquire, process,
store and display large amounts of rapidly changing data as the
changes occur, and have high system reliability. Concurrent has
over 25 years of experience in real- time systems, including
specific expertise in systems, applications software, productivity
tools and networking. Its systems provide real-time applications
for gaming, simulation, air traffic control, weather analysis and
mission critical data services such as financial market
information.
(b) Financial Information About Industry Segments
The Company considers its products to be one class of products
which accounted for 50.8%, 55.1% and 53.0% of total revenues in
the 1994, 1993 and 1992 fiscal years, respectively. Service and
other operating revenues (including maintenance, support and
training) accounted for 49.2%, 44.9% and 47.0% of total revenues in
the 1994, 1993 and 1992 fiscal years, respectively.
Financial information about the Company's foreign operations is
included in Note 16 to the financial statements included herein.
The Company's Tokyo-based subsidiary, a joint venture with Nippon
Steel Corporation, provides for marketing and sales in the Japanese
market and accounted for approximately $11.8 million in net sales
6.7% for the 1994 fiscal year. The Company and Nippon Steel
Corporation consider the renewal of the joint venture agreement on
an annual basis, which was recently renewed through the end of
fiscal year 1995.
(c) Narrative Description of Business
Concurrent's vision is to be the premier supplier of high
technology real-time computer systems and services through customer
focus, total quality and the rapid development of standard and
custom products with the objective of strong, profitable growth.
Real-time systems concurrently acquire, analyze, store, display and
control within a predictable time, analog, digital and network data
to provide time critical information as real world events occur.
Concurrent decentralized and restructured its operations in
January 1994 to achieve its vision and objective of strong,
profitable growth. The restructured organization focuses on the
customer through a Field Operations organization combining all
sales and services functions staffed with additional support
functions such as contracts, finance and human resources. All other
functions (manufacturing, development and engineering, marketing,
business development, finance, law, human resources, quality and
program management) are considered corporate Operations with Field
Operations as their number one customer. In an environment
encouraging constant improvement consistent with the Company's
Basic Beliefs (a credo for a worldwide organization operating to
the highest standards of ethics, quality and teamwork to generate
profits and long-term vitality of the business), the Company
believes the restructuring has resulted in greater customer focus,
process improvement and more efficient allocation of resources.
Successful strategic alliances will be instrumental in achieving
the objective of strong, profitable growth.
Concurrent has over 25 years of real-time systems experience,
including specific design, development and manufacturing expertise
in systems, applications software, productivity tools and
networking. Concurrent's real-time systems offer networked and
distributed computing solutions which include software controlled
configurations to provide fault tolerance. The Company sells its
systems worldwide to end-users as well as to original equipment
manufacturers, systems integrators, independent software vendors
and value-added resellers who combine the Company's products with
other equipment or with additional application software for resale
to end-users. End uses of the Company's systems include product
design and testing; flight simulation; head end servers for cable
networks;
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power plant simulation; air traffic control and weather
forecasting; intelligence data acquisition and analysis; financial
trading; lottery/gaming; automated mass transit control and
hospital information management.
The Company designs, manufactures, sells, and supports real-time
proprietary systems and standards-based open systems. The Company
has a long and successful history and a core competency of
customizing its systems with both specialized hardware and software
to meet unique customer requirements. It also offers worldwide,
traditional hardware and software maintenance and support services
("Traditional Services") and professional services, such as
performance and capacity analysis, system migration and systems
integration ("Professional Services"). The Company routinely offers
long term service and support of its products for up to fifteen
years. Currently, Traditional Services and Professional Services
account for approximately 95% and 5%, respectively, of total
service revenues. The Company anticipates a shift in end-user
demand from proprietary to open systems and, accordingly, has
developed a strategy to be the premier supplier of high technology
real-time computer systems and services through customer focus,
total quality and the rapid development of standard open and custom
products. The Company's strategy requires that it upgrade and
service its proprietary computing platforms while investing heavily
in developing its real-time open system computing platforms. The
Company is also leveraging its investment in research and
development and enhancing market penetration through strategic
alliances.
In October 1993, the Company introduced its new MAXION
multiprocessor system, its next generation open system based on the
new MIPS R4400 reduced instruction set (RISC) microprocessor. This
new system supports Concurrent's real-time enhanced UNIX operating
system including real-time extensions to the UNIX SVR4.2
multiprocessor operating system through a partnership with the
Novell UNIX Systems Group. The Company also introduced in October
1993, a new proprietary high-end Series 3200 multiprocessing
system, the Model 3200-850. This new system is an upgrade to
Concurrent's Model 3280 MPS and MicroFive MPS systems. Full-scale
production shipments of the new MAXION system and the new Model
3200-850 system began on schedule during the quarter ended March
31, 1994.
Markets
The Company focuses its business on its installed base of
proprietary systems and five strategic target markets and alternate
channels for its open systems. Although its installed base of
proprietary systems is currently its largest market, accounting for
approximately 75% of total systems sales for fiscal year 1994, the
growth of the business and the long-term financial performance of
the Company will depend largely on its ability to continue to
develop and market industry-leading real-time open systems such as
its MAXION multiprocessor system. The Company believes the MAXION
system has strengthened its competitive position. The Company is
focusing on the target markets because of their growth potential
for networked and distributed real-time open systems and because of
Concurrent's experience in meeting customer requirements.
Concurrent's strategic target markets include its proprietary
systems installed base, multimedia communications, simulation and
training, weather and airspace management, wagering and gaming, and
data acquisition, analysis and control. Summaries of these markets
follows:
Series 3200 Systems Installed Base. Concurrent's reputation in
the industry is largely attributable to its proprietary real-time
computing systems. Now in their fifth generation, these proprietary
systems meet customers' needs in extremely demanding real-time
environments. Many of the applications using the Series 3200
systems, including the U.S. Department of Commerce's Next
Generation Radar (NEXRAD) program, are unique with long life cycles
and "mission critical" demands and are the result of a significant
investment in application software by the customer. The Company's
goal is to work with these customers so that they can maximize
their return on investment and to assure them a competitive total
cost of ownership through Professional Services and products that
provide compatible upgrade paths. The Company considers its Series
3200 customer base a critical market and is committed to meeting
the needs of this installed base regardless of whether the
customer's application is related to the target niche markets
listed below. The first production units of the Company's next
generation higher performance Series 3200-850 proprietary system
were shipped in the quarter ended March 31, 1994.
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Multimedia Communications. Concurrent has identified the
network server resident in multimedia interactive applications as
a business opportunity where its Maxion multiprocessor systems
offer unique advantages. Concurrent's strategy is to position
itself as a supplier of communication server technology for these
interactive, time critical video/image on demand applications.
This horizontal strategy focuses on a range of applications having
requirements where the Maxion system offers price performance and
a technical competitive advantage. Concurrent has targeted a
number of initial multimedia markets that include both business to
business applications (e.g., financial information servers,
telemedicine and simulation and training) and business to consumer
applications (e.g., interactive gaming and interactive home
shopping). These interactive applications require fast response,
medium to high system compute capabilities, high network bandwidth
and high disk input/output bandwidth, all areas in which the Maxion
system technology offers unique advantages over competing systems.
Concurrent is seeking a strategic partner to provide market
presence and additional financial resources to exploit
opportunities using Concurrent's Maxion system technology in
multimedia networks.
Simulation and Training. Concurrent is a recognized leader in
real-time systems for simulation and training, particularly for
flight simulation, nuclear power plant operations training,
military battle management training and command and control
analysis. The Company's Maxion system architecture is uniquely
positioned to satisfy the trend in the simulation and training
industry towards a networked and interactive environment in which
training simulators are networked with other training simulators to
represent a virtual reality interactive environment. Maxion
systems are being used by customers to create this virtual reality
networked and interactive simulation and training environment.
Weather and Airspace Management. Air traffic control and weather
analysis and forecasting require the ability to gather, analyze and
display continuous flows of information from simultaneous sources
and distribute them electronically. This market demands real-time
computing solutions because there is little or no margin for error
where lives and property are at risk. Concurrent offers a fault-
tolerant system with the ability to simultaneously provide high
throughput, high speed graphics, deterministic response and
computational capacity for these demanding applications. The
Company provides the computer systems which power the computing
requirements for the Department of Commerce's highly regarded Next
Generation Radar (NEXRAD) weather program. The Company's success in
this market has led to significant sales accomplishments with the
U.S. Navy and the U.S. Air Force and to an international joint
marketing agreement with Lockheed Corporation to market a series of
jointly developed meteorological commercial open systems to weather
systems users worldwide.
Wagering and Gaming. Concurrent is a leading provider of
systems for the wagering and gaming industry. Concurrent has
provided the processing systems for the wagering and gaming
industry's largest provider of public lottery systems (GTech) and
the majority of tabulator (off-track betting) systems in Australia
and Asia/Pacific. In both applications, the number of simultaneous
users is measured in thousands with data analysis required in real-
time. High system availability is assured using Concurrent's Fault
Tolerant Network Computing remote network-based and redundant
system architecture.
Data Acquisition, Analysis and Control. Concurrent is a leading
supplier of systems to users requiring simultaneous multi-channel
acquisition, processing, display and archiving of analog and
digital signals at throughput rates in excess of 1 million samples
per second, in stand-alone or networked environments. Engineers and
scientists use the systems to collect, control, analyze and
distribute test data from multiple high speed data sources.
Concurrent, together with its value-added resellers, provides both
programming development tools and complete solutions for
applications such as engine and turbine testing, vibration control
and flight and aerodynamics analysis. The Company believes that it
is a leading supplier of real-time systems used for intelligence
data acquisition and processing. The Company's balanced system
performance combined with graphics and data acquisition also
provide solutions for applications in communications and
electronic, acoustic and image intelligence.
Products and Services
The Company considers its products and services a total package
to provide complete value-added real-time solutions. The Company
offers two types of systems, proprietary and open, as well as
Traditional Services and Professional Services.
-3-
Series 3200 Real-Time Proprietary Systems. The Company has a
large installed base of its Series 3200 real-time proprietary
systems. A central feature of the Company's strategic plan is to
work closely with these existing proprietary system users to meet
their needs for improvements and upgrades and, should they decide
to switch to a real-time open system, to be their vendor of choice.
The Series 3200 system product line uses the Company's proprietary
OS/32 operating system and processor technology. Below is a list of
the Company's current proprietary systems product offerings.
Performance currently ranges from 3.9 to 70 MIPS (million
instructions per second) and price ranges from $55,000 to
approximately $1.3 million. The Company's 3200-850 system was
introduced in October 1993 with the first production units shipped
on schedule in the quarter ended March 31, 1994.
Series 3200 Product Line
Performance Typical Price
Model (MIPS)* Range
3200-400/A 3.9 $55,000
3200-400 3.9 $65,000
3200-600 6.8 to 35.6 $160,000 to $585,000
3280 6.4 to 35.6 $300,000 to $900,000
3200-650 13.6 to 35.6 $230,000 to $570,000
3280E 6.4 to 70 $360,000 to $1,350,000
3200-850** 13.6 to 35.6 $330,000 to $810,000
*MIPS - Million Instructions Per Second
**MIPS rate is the same but delivered performance increases
dramatically over 3200-650
UNIX-Based Real-Time Open Systems. The emergence of industry-
standard operating systems, high-performance microprocessors and
networking technology has dramatically lowered the cost of
providing real-time open systems to the marketplace, thus greatly
expanding the universe of potential real-time systems purchasers.
The Company plans to capitalize on this trend by focusing on its
target markets and alternate channels as well as by developing
internally or arranging strategic alliances with third parties to
bring to market new solutions and software applications for new and
existing customers. The current product line uses the Company's
real-time UNIX (RTU ) operating system with the processor
technology identified below. Performance currently ranges from 3 to
420 SPECmarks with typical price ranging from $22,000 to
approximately $516,000. The MAXION multiprocessor system, the first
model of the Company's new next-generation open systems using the
MIPS R4400 microprocessor, was introduced in October 1993.
Open Systems Product Line
Performance Typical Price Processor
Model (SPECMarks)* Range Technology
7150 11 to 21 $24,725 to $ 68,725 MC68040
7250 11 to 21 $36,495 to $ 75,505 MC68040
7550 11 to 21 $44,295 to $143,305 MC68040
7552 11 to 21 $52,495 to $151,505 MC68040
MAXION 105 to 420 (estimated) $24,995 to $148,900 MIPS R4400
*SPECMarks - Independently developed industry standard benchmark.
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Traditional Services. One of the largest benefits to the Company
of its extensive installed customer base is the large and generally
predictable revenue stream generated from Traditional Services.
While Traditional Services revenue has declined and is expected to
further decline as a result of the industry shift to open systems,
the Company expects this business to be a significant source of
revenues and cash flow for the foreseeable future. The Company
offers a variety of service and support programs to meet the
customer's maintenance needs for both its hardware and software
products. The Company also offers contract service for selected
third party equipment. The service and support programs offered by
Concurrent include spare parts sales, rentals and exchanges and
used goods sales; diagnostic and repair service; resident service;
and preventive maintenance. The Company routinely offers long term
service and support of its products for up to fifteen years. The
Company has approximately 650 employees in its worldwide Field
Operations providing and supporting Traditional and Professional
Services.
Professional Services. Professional Services accounted for
approximately $4 million or approximately 5% of total service
revenues for fiscal year 1994. The growth of the Company's business
and its long-term financial performance will depend, in part, on
its ability to grow Professional Services. The Company's strategic
plan emphasizes Professional Services which will utilize the
Company's expertise in UNIX-based real-time open systems, data
acquisition and graphics as well as its traditional strengths of
systems integration, custom hardware design and packaging, data
communications and program management. Customers often purchase
Professional Services together with a real-time computing system
and the services are targeted at vertical niches as part of a
customized total solution offering. Professional Services include
education and training; application development; software and
system integration; network planning, design, integration and
implementation; and performance training and measurement.
Additionally, the Company has a long and successful history of
customizing its systems with both specialized hardware and software
to meet unique customer requirements.
Systems and Technology
Concurrent has made a considerable investment in developing its
product lines and today offers computer systems satisfying a broad
range of high-performance requirements for real-time applications.
Both the Company's proprietary and open systems incorporate a wide
range of integrated capabilities, including operating systems,
languages, distributed computing and networking, data acquisition,
graphics, system software and application software. The Company's
open systems, particularly the Maxion multiprocessor system, are
designed to incorporate widely accepted industry-standard
technologies. Below is a summary of some of the features of
Concurrent's real-time systems and technology.
Distributed Computing & Networking. Concurrent's fault-tolerant
distributed computing and networking system architecture allows a
user's real-time application to operate in a heterogeneous network
in conjunction with other computer operating systems. Distributed
features can be used to deploy computing resources to meet, in
real-time, the ebb and flow of real world demands on the system.
The Company's networked computing lets users choose and design a
fault-tolerant solution which is scalable to the level of fault
tolerance required and uses the Company's Fault-Tolerant Networked
Computing (FTNC) software products.
System Software. The Company's real-time operating systems
software (OS/32 and RTU) operates within a distributed architecture
to provide multiprocessing, preemptive scheduling and deterministic
event notification. This allows applications to be constantly in
touch with moment-to-moment user demands and to provide the
guaranteed response times that are a critical requirement of real-
time applications.
Hardware Architecture. An increasing portion of Concurrent's open
system hardware architecture uses industry-standard components and
technology to provide exceptional price/performance and real-time
features in an open system. Real-time hardware is designed to
ensure scalable high-performance processing, using state-of-the-art
CISC (complex instruction set computing) and RISC (reduced
instruction set computing) technology. For example, the Company's
Series 7000 open systems product line features support for VME bus-
based I/O (input/output) with data throughput of 39 MB/second per
VME64 bus and integrated precision timers for fast response. The
Company's new next-generation Maxion open system is based on the
MIPS R4400 microprocessor providing superior throughput and high-
speed event detection. Concurrent's proprietary system hardware
architecture is based on a custom CISC
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architecture designed for scalable real-time application requirements.
The Company's next-generation proprietary Series 3200-850 system is designed to
achieve even higher performance using a similar architecture.
Graphics. Powerful graphics are essential in many real-time
applications. In addition to offering its own applications,
Concurrent's open systems graphics strategy is to work with
suppliers to integrate powerful graphics systems into its
distributed architecture to maximize display responsiveness without
adversely impacting processing. The Company's graphics interfaces
are standards-based "windows" environments with real-time
enhancements.
Data Acquisition. The Company's open systems platform provides
integrated, multi-source data acquisition systems that it believes
are superior to systems of other providers at acquiring, analyzing
and displaying high volumes of complex data, in real-time. Through
a scalable front end architecture, users can interface application-
specific devices while having a growth path to take advantage of
emerging technologies.
Productivity Tools. Concurrent's software productivity tools are
tailored to optimize the productivity of application development
and operations staffs, offering computer-assisted software
engineering (CASE) tools and language systems via user interfaces
with graphics. Likewise, real-time performance monitoring and
tuning tools provide information about the utilization of the
application and the ability to optimize the application and
eliminate bottlenecks.
Management
Executive officers of Concurrent are elected by the Board of
Directors to hold office until their successors have been chosen
and qualified or until earlier resignation or removal. Set forth
below are the names, positions and ages of the Company's executive
officers as of the September 28, 1994 Form 10-K filing date:
Director or
Executive
Name Position Age Officer
- - ---- -------- --- -----------
John T. Stihl Chairman of the Board, President 61 1991
Chief Executive Officer
Acting Chief Financial Officer (1)
George E. Chapman Vice President, Marketing 60 1994
David S. Cowie Vice President, 47 1993
Development and Engineering
Kevin J. Dell Vice President, General Counsel
and 38 1993
Assistant Secretary
Robert S. Kovarcik Vice President, Manufacturing 47 1994
Thomas D. Robinson Vice President, Field Operations 49 1992
David L. Vienneau Vice President, Human Resources 40 1994
(1) Effective September 16, 1994, James P. McCloskey (former vice
president, finance and treasurer, chief financial officer)
accepted an offer to join a company in an unrelated industry and
stepped down as an employee of the Company.
John T. Stihl, Chairman of the Board, President and Chief
Executive Officer, Director. Mr. Stihl was elected to the
additional positions of Chairman of the Board and Chief Executive
Officer in August 1993 (continuing as President). As of September
19, 1994, he is serving as acting Chief Financial Officer until
that position is filled. In April 1992 he was elected President
and Chief Operating Officer. Prior to that he served as
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Executive Vice President of the Company, a position to which he was
elected upon joining the Company in May 1991. In 1988, after retiring
as a Major General from the United States Air Force, he was elected
President and Chief Executive Officer of G&H Technology, Inc., a
division of Penn Central Corporation, which designs, develops,
manufactures and markets electromechanical components for the
defense and aerospace industries. His experience includes over 20
years in high level executive positions with the United States Air
Force managing large scale telecommunications, computer and air
traffic control operations, including from 1986 to 1988, commander
(CEO) of the 58,000 persons worldwide, Air Force Communications
Command, headquartered at Scott Air Force Base, Illinois. Prior to
his retirement, he had been an officer in the United States Air
Force since 1955.
George E. Chapman, Vice President, Marketing. Mr. Chapman was
elected to this position in January 1994. He joined Concurrent in
1992 as Director, Business Development for Weather and Airspace
Management. In 1988, after retiring as a Brigadier General from the
United States Air Force, he joined Lockheed Corporation's Austin
Division as Senior Staff Engineer working toward the worldwide
commercial application of high technoogy systems developed for the
U.S. Government. In December 1989, he received an appointment as
Executive Director to the newly legislated Texas Workers
Compensation Commission. His career with the U.S. Air Force
spanned 36 years, with the last six years devoted to leadership of
a 5,000 person organization responsible for the long-range
technology, investment and training requirements for the nation's
weather prediction and warning capability supporting U.S. forces
throughout the world.
David S. Cowie, Vice President, Development and Engineering. Mr.
Cowie was elected to this position in August 1993. Mr. Cowie
joined the Company in 1982 as Senior Manager, Commercial Systems
Software Development and advanced to Director, European Software
Development in 1983. In 1991, Mr. Cowie was promoted to the
position of Senior Director, Systems Engineering. Prior to joining
the Company, he held systems development, project management, and
systems consultancy positions with ICL Systems, Gemini Computer
Systems, and ICL Dataskil.
Kevin J. Dell, Vice President, General Counsel and Assistant
Secretary. Mr. Dell was elected to the position of Vice President,
General Counsel in August 1993 (continuing as Assistant Secretary).
As Concurrent's chief legal officer, he is responsible for the
Company's legal and contractual requirements worldwide. Mr. Dell
joined the Company in 1987 as Senior Corporate Attorney and
advanced to Assistant General Counsel in 1988. Prior to joining
the Company, he was an associate at the law firm of Finley, Kumble,
Wagner, Underberg, Manley, Myerson & Casey in New York.
Robert S. Kovarcik, Vice President, Manufacturing. Mr. Kovarcik
was elected to the position of Vice President, Manufacturing in
June 1994. He joined Concurrent in 1991 as Director, Program
Management. Prior to joining Concurrent, he served for 12 years in
management positions with several high technology companies: Vice
President/General Manager of the Cubic Division of Cubic
Corporation, a public manufacturer of electro-optical equipment;
Vice President/General Manager of New Brunswick Scientific, Inc.,
a public manufacturer of bio-technology processing equipment; and Program
Director of ITT, a public diversified electronics company.
Thomas D. Robinson, Vice President, Field Operations. Mr.
Robinson was elected to this position in January 1994. Mr. Robinson
joined the Company in September 1992 as Vice President, Worldwide
Customer Services. Prior to joining Concurrent, he served for
nearly 10 years as a Vice President with two other public computer
system manufacturers with responsibility for worldwide customer
service (from 1988 with Sequoia Systems Inc., and prior thereto
from 1983 with Stratus Computer). He also has 13 years experience
with Honeywell Information Systems, Inc., a public computer system
manufacturer, in customer service and engineering and two years
engineering experience with IBM Corporation, a public computer
system manufacturer.
David L. Vienneau, Vice President, Human Resources. Mr. Vienneau
was elected to this position in May 1994. He is also President and
founder of Performance Based Solutions, a human resources
consulting services company. Prior to forming Performance Based
Solutions, Mr. Vienneau was Director, Human Resources at Akzo
America, Inc., a diversified manufacturer of chemical products, and
Director, Compensation and Benefits at Penn Central Corporation,
which designs, develops, manufactures and markets electromechanical
components for the defense and aerospace industries
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Sales and Service
The Company sells its systems in key markets worldwide through
direct field sales and services offices as well as through a
network of software suppliers, distributors and system integrators.
The Company does not believe the loss of any particular distributor
or system integrator would have a material impact on the Company's
operating results. The Company's principal customers are original
equipment manufacturers (OEMs), systems integrators, independent
software vendors (ISVs) and value-added resellers (VARs) who
combine the Company's products with other equipment or with
additional application software for resale to end-users.
Collectively, these customers account for approximately 60-70% of
sales, with sales to end-users accounting for the remaining 30-40%.
Several major customer accounts historically have provided a stable
and generally predictable contribution to revenues.
Servicing the Company's large installed base, particularly its
proprietary systems, is an important element in Concurrent's
business strategy and generates significant revenue and cash flow
to the Company. Total service revenues in fiscal year 1994 were $88
million (49.2% of total revenues). Approximately 86% of Traditional
Services revenues are generated from maintenance and support
contracts which generally run from one to three years with annual
renewal provisions. The Company's existing installed base of
proprietary systems also represents an opportunity for incremental
sales of both systems and Traditional and Professional Services.
No customer, other than the U.S. Government (including sales to
UNISYS Corp. in connection with the NEXRAD program), has accounted
for 10% or more of Concurrent's net sales in the three fiscal years
ended June 30, 1994. For the 1994 fiscal year, approximately $54.8
million of the Company's revenues were attributable directly or
indirectly to entities related to branches of the U.S. Government.
This amount represented approximately 31% of the Company's
worldwide revenues, compared to 29% and 21% for the 1993 and 1992
fiscal years, respectively. However, the Company's revenues related
to sales to the U.S. Government are derived from various Federal
agencies, no one of which accounted for more than 5% of total
revenues. The NEXRAD program contributed approximately $23 and $35
million in revenues in fiscal years 1994 and 1993, respectively.
The program has been funded by the Government and, based on the
program as currently contemplated, the Company expects to earn
additional revenue in fiscal year 1995 of at least $17 million.
In an effort to reduce total program costs, sales of spare parts by
Concurrent under the program are now being made directly to the
Government. Reaching an agreement on the sale of spare parts
directly to the Government delayed approximately $9 million in
spare parts shipments from fiscal year 1994 to fiscal year 1995.
The basic ordering agreement ("BOA") with UNISYS Corp. as prime
contractor under the NEXRAD program provides for Concurrent to
deliver its Micro5 proprietary systems for installation at up to
175 NEXRAD sites throughout the United States and at selected
international locations. Each installation includes at least three
Micro5 systems. The installations are expected to be concluded by
the end of fiscal year 1995. U.S. Government contracts and
subcontracts generally contain provision for cancellation at the
convenience of the Government. Substantially all of the Company's
U.S. Government related orders are subcontracts and most are for
standard catalog equipment which would be available for sale to
others in the event of cancellation. To date, there have been no
cancellations that have had a material impact on the Company's
business or results of operations.
Research and Development
During the three fiscal years ended June 30, 1994, Concurrent has
invested in the aggregate approximately $77 million in research and
development which, as a percentage of sales, represented 13.3%,
12.2%, and 11.8% in fiscal years 1994, 1993, and 1992,
respectively. Research and development investment was made across
all of Concurrent's key technology areas for both proprietary
systems and open systems. New networking products, graphics, data
acquisition sub-systems, enhancements to the proprietary OS/32 and
UNIX-based operating systems, and three new proprietary Series 3200
systems (32-400, 32-600 and 32-850 Series) and the Series 7000 and
MAXION open computer systems and other products resulted from this
investment. Although in terms of absolute dollar amounts total
research and development investment has declined over the past
several years, the Company expects a greater return on its total
research and development investment for two reasons. First,
research and development investment is now focused solely on
products and applications for its target markets--investment in
projects not satisfying this focused investment requirement has
stopped. Second, the Company's increasing use of joint research and
development and technology sharing arrangements is expected to
leverage the Company's investment in research and development. The
Company's strategy is to acquire or co-develop technology when the
market requires parity with
-8-
competitive technology and to develop technology internally when
market leadership is possible. This strategy is expected to give
the Company greater flexibility in meeting the technology requirements
of its customers and to allow it to provide increasingly higher
performance products by focusing its research and development resources
where it can add the most value.
Manufacturing Operations
The Company's manufacturing operation is located at its
Oceanport, New Jersey facility. The Oceanport facility has
approximately 285,000 square feet of space of which approximately
85,000 square feet is used for manufacturing. Utilization of
manufacturing capacity was approximately 70% based on a two shift
operation in fiscal year 1994. Management believes that the
manufacturing capacity available at the Oceanport facility could be
significantly increased (with minimal capital spending) to meet
increased manufacturing requirements either by raising the
utilization rate or by adding assembly personnel on its second
shift or by adding a third shift. The Company outsources several
subassembly operations, including all printed circuit board
subassemblies, which has resulted in significant cost savings. The
Company's manufacturing operations are now limited to assembly,
systems integration and systems test. Extensive testing and burn-in
conditioning is performed at the board and subassembly levels and
at final system integration. Because of the wide range of product
configurations, final assembly and test usually occur when a
specific customer order is being prepared for shipment. As a result
of the successful outsourcing activities and significant reductions
in manufacturing inventories, the Oceanport manufacturing
operations have been consolidated into a focused factory layout
which includes assembly cells and a focused warehouse to minimize
non-value-added material movement, improve manufacturing quality,
and reduce assembly cycle times.
Sources of Supply
Concurrent has multiple commercial sources of supply throughout
the world for most of the materials and components it uses to
produce its products. In some cases, components are being purchased
by the Company from a single supplier to obtain the required
technology and the most favorable price and delivery terms.
Although the Company has not experienced any materially adverse
impact on its operating results as a result of a delay in supplier
performance, any delay in delivery of components may cause a delay
in shipments by the Company of certain products. The Company
estimates that a lead time of up to 16-24 weeks may be necessary to
switch to an alternate supplier of certain custom application
specific integrated circuits and printed circuit assemblies. A
change in the supplier of these circuits without the appropriate
lead time would result in a delay in shipments by the Company of
certain products. Since revenue is recognized typically upon
shipment, any delay in shipment may also result in a delay in
revenue recognition, possibly outside the fiscal period originally
planned, and, as a result, may adversely affect the Company's
financial results for that particular period. A transition from one
single supplier to another could have a similar impact. The Company
carefully monitors the ability of any single supplier to timely
meet the Company's requirements, including the supplier's financial
condition. Management believes it has good relationships with its
suppliers, including alternative suppliers, and expects that
adequate sources of supply for components and peripheral equipment
will continue to be available.
Competition
The shift from proprietary systems to standards-based open
systems is expected both to expand market demand for systems with
performance characteristics previously only found in proprietary
real-time computing systems and to increase competition, making
product differentiation a more important factor. Due in part to the
range of performance and applications capabilities of its products,
the Company competes in various markets against a number of
companies, many of which have greater financial and operating
resources than the Company. Competition in the high performance
real-time computing systems and applications market comes from five
sources: (1) major computer companies that participate in the real-
time marketplace by layering specialized hardware and software on
top of or as an extension of their general purpose product
platforms--these are principally Digital Equipment Corporation and
Hewlett-Packard Corporation; (2) companies like Concurrent that
target the high performance, real-time market with specialized
systems designed uniquely for real-time application--Harris
Corporation's Systems Division is a competitor in certain markets
in this category; (3) other computer companies that provide
solutions for applications that address a specific characteristic
of real-time, such as fault tolerance or high-performance graphics--
-9-
these computer companies include Silicon Graphics Inc., Stratus
Computer, Inc., and Tandem Computers, Inc. ; (4) general purpose
computing companies that provide a platform on which third party
vendors add real-time capabilities--these computer companies
include International Business Machines Corp. and Sun Microsystems,
Inc.; and (5) single board computer companies that provide board-
level processors that are typically integrated into a customer's
computer system--these computer companies include Force, MIZAR and
Motorola, Inc.
Intellectual Property
The Company relies on a combination of contracts and copyright,
trademark and trade secret laws to establish and protect its
proprietary rights in its technology. The Company distributes its
products under software license agreements which grant customers
perpetual licenses to the Company's products and which contain
various provisions protecting the Company's ownership and
confidentiality of the licensed technology. The source code of the
Company's products is protected as a trade secret and as an
unpublished copyright work. In addition, in limited instances the
Company licenses its products under licenses that give licensees
limited access to the source code of certain of the Company's
products, particularly in connection with its strategic alliances.
Despite precautions taken by the Company, however, there can be no
assurance that the Company's products or technology will not be
copied or otherwise obtained and used without authorization. In
addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries.
The Company believes that, due to the rapid pace of innovation
within its industry, factors such as the technological and creative
skills of its personnel are more important to establishing and
maintaining a technology leadership position within the industry
than are the various legal protections of its technology.
Concurrent has entered into licensing agreements with several
third-party software developers and suppliers. Generally, such
agreements grant to the Company non-exclusive, worldwide licenses
with respect to certain software provided as part of computers and
systems marketed by the Company and terminate on varying dates.
Concurrent is licensed by USL to use and sublicense USL's UNIX
operating system in the Company's computer systems. The Company has
entered into licensing agreements with USL for internal use of
source code version of the UNIX operating system and for the
sublicensing of binary version of the UNIX operating system. Both
licenses are perpetual unless terminated in accordance with the
notice provisions and address versions of the UNIX operating system
through and including System V, Release 4.0 (SVR4). The Company
pays a royalty to USL for each computer systems shipped using the
UNIX operating system equal to 2% of the list price of the basic
(minimum) configuration of the system.
Employees
As of June 30, 1994, the Company employs approximately 1,250
employees worldwide of whom approximately 900 were employed in the
United States, compared to approximately 1,600 and 1,800 employees
worldwide at June 30, 1993 and 1992, respectively. The Company's
employees are not unionized.
Backlog
Generally, the Company records in "backlog" computer orders which
it is anticipated will be shipped during the subsequent six months
or, where special engineering is required, in the subsequent 12
months. The backlog of unfilled computer systems orders was
approximately $21.9 million on June 30, 1994 compared to
approximately $46.2 million a year earlier. While the Company
anticipates shipping the majority of backlog during subsequent
periods, the amount of orders in backlog is not necessarily a
meaningful indicator of business trends for the Company because
orders may be canceled before shipment or rescheduled for a
subsequent period which may affect the amount of backlog that may
be realized in revenue in any succeeding period.
-10-
(d) Financial Information About Foreign and Domestic
Operations and Export Sales
A summary of net sales (consolidated net sales reflects sales
to unaffiliated customers), attributable to Concurrent's foreign
and domestic operations for the fiscal years ended June 30, 1994,
1993 and 1992, respectively, is presented at Note 16 to the
financial statements of the Registrant included herein.
Item 2. PROPERTIES
Listed below are Concurrent's principal facilities as of
June 30, 1994. Management considers all facilities listed below to
be suitable for the purpose(s) for which they are used, including
manufacturing, research and development, sales, marketing, service
and administration. Management believes that its Oceanport, New
Jersey manufacturing facility has sufficient capacity to meet the
Company's projected manufacturing requirements.
Approximate
Owned or Expiration Date Floor Area
Location Principal Use Leased of Lease (square feet)
- - -------- ------------- ------- ---------- --------------
2 Crescent Place Manufacturing/ Owned -- 285,000
Oceanport, NJ Service/Marketing
Corporate Head
106 Apple Street Held for Owned -- 132,000
Tinton Falls, NJ Disposition
One Technology Way Research & Leased 1998 88,500
Westford, MA Development/Marketing
227 Bath Rd.,
Berkshire Sales/Research Leased 1995(1) 36,000
Slough, England & Development
_____________
(1) Renewable at the Company's option through March 1998.
In addition to the facilities listed above, Concurrent also leases
space in various domestic and international industrial centers for use as
sales and service offices and warehousing and also engages in certain
research and development activities at a Florida facility. The Company
has placed the Tinton Falls facility for sale.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending to which the Company or any
of its subsidiaries is aarty or to which any of the Company's or any of its
subsidiaries' property is subject. To Concurrent's Knowledge there are no
material legal proceedings to which any director, officer or affiliate of
Concurrent, orny owner of record or beneficially of more than five percent of
Common Stock, or any associate of any of the foregoing, is a party adverse
to Concurrent or any of its subsidiaries. No material legal proceedings were
terminated during the fourth quarter of the fiscal year ended June 30, 1994.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.
-11-
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Common Stock is currently authorized for quotation under the
symbol "CCUR" on the NASDAQ National Market System. The following table sets
forth the high and low closing bid prices for the Common Stock for the periods
indicated, as reported in published financial journals or otherwise available
from NASDAQ. The price quotations below reflect interdealer prices, without
retail mark-up, mark-down or commission and may not necessarily reflect
actual transactions.
High Low
Fiscal Year 1993:
First Quarter 4 1 3/4
Second Quarter 7 1/2 1 1/4
Third Quarter 6 3/4 4
Fourth Quarter 4 3/4 3 1/2
Fiscal Year 1994:
First Quarter 3 9/16 2 1/2
Second Quarter 3 1/4 1 1/2
Third Quarter 2 5/16 1
Fourth Quarter 2 3/8 1 3/8
Fiscal Year 1995:
First Quarter
(through September 23, 1994) 2 7/16 1 3/8
As of September 23, 1994, there were 30,208,396 shares of Common Stock
outstanding, held of record by approximately 2,300 stockholders.
The Company has never declared or paid any cash dividends on its
capital stock. The Company's present policy is to retain earnings to finance
expansion and growth, and no change in the policy is anticipated. In
addition, the terms of the Company's credit agreement with its banks prohibit
the Company from payment of cash dividends on its capital stock until the term
loan under the credit agreement is paid in full. As a result, it is not
anticipated that cash dividends will be paid in the foreseeable future.
On July 31, 1992, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common
Stock and then outstanding Convertible Preferred Stock of the Company to
stockholders of record at the close of business on August 14, 1992. Each Right
entitles the registered holder to purchase from the Company one one-
hundredth of a share of Series A Participating Cumulative Preferred Stock,
par value $.01 per share, at a cash purchase price of $30.00 per Right,
subject to adjustment, which become exercisable upon the occurrence of
certain events. (See Note 20 of Notes to Consolidated Financial Statements.)
Item 6. SELECTED FINANCIAL DATA
This information is set forth in the Selected Financial Data section of the
Consolidated Financial Statements in Item 8.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
This information is set forth in the Selected Financial Data section of
the Consolidated Financial Statements in Item 8.
-12-
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements and supplementary data
for Concurrent are attached and incorporated into Item 8.
Report of Independent Accountants
Consolidated Statements of Operations for the years ended
June 30, 1994, 1993 and 1992
Consolidated Balance Sheets as of June 30, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
June 30, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity (deficiency) for the years ended
June 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Selected Financial Data
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-13-
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
Proxy Statement to be dated October 1, 1994 in connection with its Annual
Meeting of Stockholders to be held on November 3, 1994 ("Registrant's 1994
Proxy Statement").
(b) Identification of Executive Officers
The information called for hereunder is included in Part I of this Form 10-K
under the caption "Executive Officers of Registrant".
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
There is no family relationship between any director and/or
executive officer of the Company.
(e) Business Experience
The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
1994 Proxy Statement with respect to the business experience of Registrant's
directors. The information called for by this Item 10 with respect to
executive officers of Registrant is included in Part I of this Form 10-K under
the caption "Management".
(f) Involvement in Certain Legal Proceedings
The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
1994 Proxy Statement.
(g) Compliance with Section 16(a) of the Exchange Act
The Registrant hereby incorporates by reference in this Form
10-K certain information contained under the caption "Election of Directors"
in Registrant's 1994 Proxy Statement.
Item 11. EXECUTIVE COMPENSATION
The Registrant hereby incorporates by reference in this Form
10-K certain information contained under the caption "Executive Compensation"
in Registrant's 1994 Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
-14-
The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Principal Stockholders" in
Registrant's 1994 Proxy Statement.
(b) Security Ownership of Management.
The Registrant hereby incorporates by reference in this Form
10-K certain information contained under the caption "Election of Directors"
in Registrant's 1994 Proxy Statement.
(c) Changes in Control
The Registrant knows of no contractual arrangements, including any pledge by
any person of securities of the Registrant, the operation of which may at a
subsequent date result in a change in control of the Registrant.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the captions "Security Ownership of Certain
Beneficial Owners and Management," "Election of Directors" and "Executive
Compensation" in Registrant's 1994 Proxy Statement.
-15-
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements filed as part of this report:
Report of Independent Accountants
Consolidated Statements of Operations for the years ended
June 30, 1994, 1993 and 1992
Consolidated Balance Sheets as of June 30, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
June 30, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity (deficiency) for the years
ended June 30, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Selected Financial Data
(2) Financial Statement Schedules
Schedule Number Description
- - -------------- -----------
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation and
Amortization of Property, Plant and Equipment
Schedule VIII Valuation and Qualifying Accounts
Schedule IX Short-term Borrowings
Schedule X Supplementary Income Statement
Information
All other financial statements and schedules not listed have been omitted
since the required information is included in the Consolidated Financial
Statements or the Notes thereto, or is not applicable, material or required.
-16-
(3) Exhibits
Exhibit No. Description
- - ---------- -----------
4.1 Restated Certificate of Incorporation of the Company. (a)
4.2 Registration Rights Agreement dated March 3, 1992 between the Company
and the Selling Securityholders named therein.(b)
4.3 Registration Rights Agreement dated September 27, 1988 between the
Company and the Selling Securityholders named therein.(c)
4.4 Warrant Termination Agreement dated February 19, 1992 between the
Company and the holders of Series A and Series C Warrants of the
Company named therein.(b)
4.5 Warrant Agreements dated September 27, 1988 between the Company and
Ameritrust Company, N.A. (f/k/a MTrust Company N.A.) in connection
with the Company's Series A and Series B Warrants.(c)
4.6 Form of Warrant and Registration Rights Agreement to be dated as of
the closing of the Offering attached as an Annex to the "lock-up"
agreements with the holders of Convertible Preferred Stock that
have entered into lock-up agreements.(a)
4.7 Rights Agreement dated as of July 31, 1992 between the Company and The
First National Bank of Boston, as rights agent.(d)
10.1(a) 1991 Restated Stock Option Plan.(e)
10.1(b) Amendment No. 1 to 1991 Restated Stock Option Plan.(e)
10.2(a) Employee Stock Purchase Plan.(e)
10.2(b) Amendment No. 1 to Employee Stock Purchase Plan.(f)
10.3 Retirement Savings Plan (f/k/a Profit Sharing and Savings Plan) of
former Concurrent dated August 1, 1985, as restated.(g)
10.4 Form of Severance Agreement between the Company and its executive
officers. All agreements contain substantially the same terms
other than annual base salary and annual target bonus percentage.(h)
10.5 Form of Incentive Stock Option Agreement between the Company and its
executive officers. All agreements contain the same terms with the
exception of the number or shares subject to the option and the
vesting schedules.(b)
10.6(a) Amended and Restated Credit Agreement dated October 11, 1991 among
the Company and the banks named therein, as amended by Amendment No. 1
dated November 14, 1991.(i)
10.6(b) Amendment No. 2 dated as of January 13, 1992 to Amended and Restated
Credit Agreement. (b)
10.6(c) Amendment No. 3 dated as of March 1, 1993 to Amended and Restated
Credit Agreement. (h)
10.7(a) Second Amended and Restated Credit Agreement.(m)
10.7(b) Amendment No. 1 dated September 28, 1993 to Second Amended and
Restated Credit Agreement.(m)
-17-
10.7(c) Amendment No. 2 dated November 10, 1993 to Second Amended and Restated
Credit Agreement.
10.7(d) Amendment No. 3 dated November 18, 1993 to Second Amended and Restated
Credit Agreement.
10.7(e) Amendment No. 4 dated February 18, 1994 to Second Amended and Restated
Credit Agreement.
10.7(f) Amendment No. 5 dated August 19, 1994 to Second Amended and Restated
Credit Agreement.
10.8 (a) Slough, England real property lease.(j)
10.8 (b) Form of renewal agreement of Slough, England real property lease.(m)
10.9 Settlement Agreement dated June 30, 1992 by and between the Company,
Teachers Insurance and Annuity Association of America and other
named parties in connection with the disposition of the Company's
Westford, Massachusetts facility.(k)
10.10 Lease dated June 30, 1992 between WRC Properties, Inc. (Lessor) and
the Company (Lessee) in connection with Westford, Massachusetts
office space.(k)
10.11 Settlement and Release Agreement dated June 30, 1992 between Albert L.
Nardone and Anthony B. Nardone, individually, and as Trustees of One
Robbins Realty Trust and the Company in connection with the
disposition of the Company's Westford, Massachusetts facility.(k)
10.12(a) Indenture dated as of November 22, 1991 between the Company and
Ameritrust Texas N.A., as trustee.(l)
10.12(b) Amendment to Indenture.(m)
10.13 AT&T Information Systems Sublicensing Agreement.(a)
10.14 Basic Ordering Agreement No. GN-NEXRAD-101. (a)
11.0 Statement re computation of per share earnings.
22.0 Subsidiaries of Registrant.
24.1 Consent of Coopers & Lybrand L.L.P.
______________
(a) Incorporated herein by reference to the Exhibits to the Company's
Amendment No. 3 to Registration Statement on Form S-2 dated
July 14, 1993 (No. 33-62440).
(b) Incorporated herein by reference to the Exhibits to the Company's
Amendment No. 1 to Registration Statement on Form S-1 dated
April 20, 1992. (No. 33-45871).
(c) Incorporated herein by reference to Exhibit 4.5 of Item 16 of the
Company's Registration Statement on Form S-2 dated June 5, 1989.
(No. 33-27776.)
(d) Incorporated herein by reference to the Company's Current Report on
Form 8-K dated August 20, 1992 (File No. 0-13150).
(e) Incorporated herein by reference to Notice of 1991 Annual Meeting
of Stockholders and Proxy Statement, dated January 10, 1992.
(File No. 0-13150.)
-18-
(f) Incorporated by reference to Notice of 1992 Annual Meeting of
Stockholders and Proxy Statement, dated October 2, 1992.
(File No. 0-13150.)
(g) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year ended
July 2, 1988.
(h) Incorporated herein by reference to Exhibit Number 10 of Item 14
of the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1991. (File No. 0-13150.)
(i) Incorporated hereby by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1991.
(j) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1989. (File No. 0-13150.)
(k) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1992. (File No. 0-13150).
(l) Incorporated herein by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1991.
(File No. 0-13150).
(m) Incorporated herein by reference to Exhibit Number 10 of Item 14 of
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993. (File No. 0-13150)
-19-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CONCURRENT COMPUTER CORPORATION
Date: September 16, 1994 By: /s/ Kevin J. Dell
_____________________
Kevin J. Dell
Vice President
General Counsel
and Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of
Registrant and in the capacities and on the date indicated.
Name Capacity
/s/ John T. Stihl Chairman of the Board,President and
- - -------------------------- Chief Executive Officer
John T. Stihl
/s/ James P. McCloskey Vice President, Finance and Treasurer
- - -------------------------- Chief Financial Officer and Chief
James P. McCloskey Accounting Officer
/s/ Phillip W. Arneson Director
- - --------------------------
Phillip W. Arneson
/s/ C. Michael Carter Director
- - --------------------------
C. Michael Carter
/s/ Kevin N. Clowe Director
- - --------------------------
Kevin N. Clowe
/s/ C. Forbes Dewey, Jr. Director
- - --------------------------
C. Forbes Dewey, Jr.
/s/ Morton E. Handel Director
- - --------------------------
Morton E. Handel
/s/ Leonard N. Hecht Director
- - --------------------------
Leonard N. Hecht
/s/ Richard P. Rifenburgh Director
- - --------------------------
Richard P. Rifenburgh
Date: September 16, 1994
-20-
REPORT OF INDEPENDENT ACCOUNTANTS
____________
To the Shareholders and the Board of Directors
of Concurrent Computer Corporation
We have audited the accompanying consolidated balance sheets
of Concurrent Computer Corporation as of June 30, 1994 and 1993,
and the related consolidated statements of operations,
shareholders' equity (deficiency) and cash flows for each of the
three years in the period ended June 30, 1994, and the financial
statement schedules listed in Item 14(a) of the Company's 1994
Annual Report on Form 10-K. These financial statements and
financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Concurrent Computer Corporation as of June
30, 1994 and 1993, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended June 30, 1994, in conformity with generally
accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information
required to be included therein.
As discussed in Notes 15 and 18 to the consolidated
financial statements, in 1994 the Company changed its method of
accounting for income taxes and changed its method of accounting
for postretirement benefits other than pensions.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
August 19, 1994
CONCURRENT COMPUTER CORPORATION
-------------------------------
FINANCIAL STATEMENTS
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Years ended June 30,
---------------------------------------
1994 1993 1992
--------- ---------- ----------
Net sales:
Computer systems $91,035 $121,578 $117,516
Service and other 87,996 98,886 104,056
--------- ---------- ----------
Total 179,031 220,464 221,572
--------- ---------- ----------
Cost of sales:
Computer systems 51,198 55,556 56,454
Service and other 51,792 60,067 60,407
--------- ---------- ----------
Total 102,990 115,623 116,861
Gross margin 76,041 104,841 104,711
--------- ---------- ----------
Operating expenses:
Research and development 23,823 26,824 26,115
Selling, general and administrative 48,651 59,279 61,813
Provision for restructuring 12,000 - -
Sales and use tax credit (1,440) - -
---------- ---------- ----------
Total 83,034 86,103 87,928
---------- ---------- ----------
Operating income (loss) (6,993) 18,738 16,783
Interest expense (3,486) (13,553) (16,228)
Interest income 634 1,167 1,559
Other income (expense) - net (486) (183) (269)
---------- ---------- ----------
Income (loss) before provision for income taxes,
extraordinary gain (loss) and cumulative effect
of change in accounting principles (10,331) 6,169 1,845
Provision for income taxes 1,300 2,300 2,800
---------- ---------- ----------
Income (loss) before extraordinary gain (loss) and
cumulative effect of change in accounting princ (11,631) 3,869 (955)
Extraordinary gain (loss) on early extinguishment o (23,193) - 61,102
Cumulative effect of change in accounting principles
for income taxes and postretirement benefits (5,000) - -
---------- ---------- ----------
Net income (loss) ($39,824) $3,869 $60,147
========== ========== ==========
Income (loss) per share:
Income (loss) before extraordinary gain (loss) and
cumulative effect of change in accounting pr ($0.41) $0.40 ($0.13)
Extraordinary gain (loss) on early extinguishme (0.83) - 8.13
Cumulative effect of change in accounting principles
for income taxes and postretirement benefits (0.18) - -
---------- ---------- ----------
Net income (loss) ($1.42) $0.40 $8.00
========== ========== ==========
The accompanying notes are an integral part of
the consolidated financial statements.
F-1
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Pro Forma
June 30,
June 30, June 30, 1993 *
1994 1993 * (See Note 3)
------------ ------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $9,374 $30,422 $18,162
Accounts receivable, less allowance for doubtful
accounts of $3,405 - 1994; $2,173 - 1993 34,519 37,502 37,502
Inventories 17,829 21,920 21,920
Facility held for disposal - 6,000 6,000
Prepaid expenses and other current assets 5,334 6,771 6,771
------------ ------------ ------------
Total current assets 67,056 102,615 90,355
Property, plant and equipment - net 42,742 46,323 46,323
Facility held for disposal 6,000 - -
Other long-term assets 7,372 8,148 8,948
------------ ------------ ------------
Total assets $123,170 $157,086 $145,626
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $5,749 $2,783 $2,783
Current portion of long-term debt 11,000 8,250 8,250
Accounts payable and accrued expenses 44,687 47,334 47,334
Deferred revenue 6,236 7,575 7,575
------------ ------------ ------------
Total current liabilities 67,672 65,942 65,942
Long-term debt 13,240 67,938 24,731
Other long-term liabilities 7,210 4,703 4,703
Commitments and contingencies - - -
Stockholders' Equity:
Shares of preferred stock, par value $.01; authorized
25,000,000 - 1994 and 1993; issued 6,981,706 - 1993 - 70 -
Shares of common stock, par value $.01; authorized
100,000,000 - 1994 and 1993; issued 29,585,388
- 1994 and 2,579,026 - 1993 296 26 293
Capital in excess of par value 71,547 15,626 70,429
Accumulated earnings (deficit) after eliminating
accumulated deficit of $81,826 at December
31, 1991, date of quasi-reorganization (35,022) 4,802 (18,451)
Shares of treasury stock, at cost (58) (58) (58)
(840 - 1994 and 1993)
Cumulative translation adjustment (1,715) (1,963) (1,963)
------------ ------------ ------------
Total stockholders' equity 35,048 18,503 50,250
------------ ------------ ------------
Total liabilities and stockholders' equity $123,170 $157,086 $145,626
============ ============ ============
* Reclassified to conform to current year presentation.
The accompanying notes are an integral part of
the consolidated financial statements
F-2
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Years ended June 30,
1994 1993 1992
---------- ---------- ----------
Cash flows provided by (used by) operating activities:
Net income (loss) ($39,824) $3,869 $60,147
Adjustments to reconcile net income (loss) to net ---------- ---------- ----------
cash provided by (used by) operating activities:
Depreciation, amortization and other 12,527 14,075 18,824
Non-cash interest and amortization of financin 1,061 9,265 4,948
Extraordinary (gain) loss on extinquishment of 23,193 - (61,102)
Cumulative effect of change in accounting prin 5,000 - -
Provision for restructuring 12,000 - -
Sales and use tax credit (1,440) - -
Decrease (increase) in current assets:
Accounts receivable 3,690 4,782 11,301
Inventories 4,142 (2,041) 4,980
Prepaid expenses and other current assets 1,238 1,698 1,172
Decrease in current liabilities, other than
debt obligations (14,797) (2,361) (5,987)
(Increase) decrease in other long-term assets (1,790) 391 (3,058)
Increase (decrease) in other long-term liabili 193 (264) (1,930)
---------- ---------- ----------
Total adjustments to net income (loss) 45,017 25,545 (30,852)
---------- ---------- ----------
Net cash provided by operating activities 5,193 29,414 29,295
---------- ---------- ----------
Cash flows used by investing activities:
Additions to property, plant and equipment (7,584) (10,569) (9,980)
---------- ---------- ----------
Cash flows provided by (used by) financing activities:
Net proceeds (payments) of notes payable 2,511 588 (7,033)
Repayment of long-term debt (76,602) (8,460) (14,084)
Issuance of long-term debt 708 - -
Net proceeds from sale and issuance of common sto 55,001 291 24
---------- ---------- ----------
Net cash used by financing activities (18,382) (7,581) (21,093)
---------- ---------- ----------
Effect of exchange rate changes on cash
and cash equivalents (275) (1,453) (1,050)
---------- ---------- ----------
(Decrease) increase in cash and cash equivalents ($21,048) $9,811 ($2,828)
========== ========== ==========
Cash and cash equivalents - Beginning of Year $30,422 $20,611 $23,439
---------- ---------- ----------
Cash and cash equivalents - End of Year $9,374 $30,422 $20,611
========== ========== ==========
Cash paid during the year for:
Interest $2,731 $4,282 $5,690
========== ========== ==========
Income taxes (net of refunds) $659 $1,510 $3,898
========== ========== ==========
The accompanying notes are an integral part of
the consolidated financial statements.
F-3
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Dollars in thousands)
Preferred Stock Common Stock Capital in Accumulated Cumulative Treasury Stock
Par Par Excess of Earnings Translation
Shares Value Shares Value Par Value (Deficit) Adjustment Shares Cost Total
---------- ----- ---------- ----- ---------- ----------- ----------- ---------- ---- ---------
Balance June 30, 1991 - - 19,178,396 192 $ 72,414 ($141,040) ($694) (43,151) ($67) ($69,195)
Loss before extraordinary
gain for six months
ended December 31, 1991 (1,888) (1,888)
Other (20,000) 18 18
Foreign currency translation
adjustment 455 455
Recapitalization adjustments:
Issuance of preferred
stock 6,983,284 70 33,107 33,177
Conversion of redeemable
preferred stock 818,273 8 892 900
Extraordinary gain on
early extinguishment
of debt 61,102 61,102
Quasi-reorganization
adjustments:
Elimination of cost
in excess of net
assets acquired (14,235) (14,235)
Elimination of accumulated
deficit (81,826) 81,826 -
Elimination of foreign
currency translation
adjustment (239) 239 -
---------- ----- ---------- ----- ---------- ----------- ----------- ---------- ---- ---------
Balance December 31,
1991 (effective date
of quasi-
reorganization) 6,983,284 70 19,976,699 200 10,131 - - (43,151) (67) 10,334
1 for 10 reverse stock split (17,979,606) (180) 180 38,105 -
Issuance of common
stock under retirement
savings plan 171,763 2 1,157 1,159
Other 3,057 16 4,206 9 25
Net income for the six
months ended June 30,
1992 933 933
Foreign currency translation
adjustment (465) (465)
Quasi-reorganization
related adjustments:
Adjustment to accrued
interest related to the
transfer of title of the
Westford, Ma. facility 1,353 1,353
Tax settlement 1,400 1,400
---------- ----- ---------- ----- ---------- ----------- ----------- ---------- ---- ---------
Balance June 30, 1992 6,983,284 70 2,171,883 22 14,237 933 (465) (840) (58) 14,739
Sale of common stock
under stock plans 67,021 1 284 285
Issuance of common stock
under retirement savings plan 336,404 3 527 530
Conversion of preferred stock (1,578) 1,578
Other 2,140 6 6
Net income 3,869 3,869
Foreign currency translation
adjustment (1,498) (1,498)
Quasi-reorganization
related adjustments:
Utilization of net operating
loss carryforwards 572 572
---------- ----- ---------- ----- ---------- ----------- ----------- ---------- ---- ---------
Balance June 30, 1993 6,981,706 70 2,579,026 26 15,626 4,802 (1,963) (840) (58) 18,503
Issuance of common stock
under retirement savings plan 324,377 3 1,057 1,060
Issuance of common stock 19,700,000 197 54,803 55,000
Conversion of preferred
stock (6,981,706) (70) 6,981,706 70
Other 279 61 61
Net loss (39,824) (39,824)
Foreign currency translation
adjustment 248 248
---------- ----- ---------- ----- ---------- ----------- ----------- ---------- ---- ---------
Balance June 30, 1994 29,585,388 $296 71,547 ($35,022) ($1,715) (840) ($58) $35,048
========== ===== ========== ===== ========== =========== =========== ========== ==== =========
The accompanying notes are an integral part of
the consolidated financial statements.
F-4
CONCURRENT COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
During fiscal year 1994, the Company sustained a significant
unexpected decline in business resulting in a $25.7 million
decline in operating income (loss) and a $24.2 million decline in
net cash from operations. In response to the decline in business,
the Company restructured its operations to reduce its cost
structure and to focus its revenue generating activities with the
objectives to achieve growth and improve profitability. In
addition, the Company obtained various amendments to its bank term
loan which provided the Company with greater financial flexibility
under its debt agreement allowing the Company to meet its
financial covenant compliance requirements.
Although the Company's operating results improved during the
second half of fiscal year 1994, the Company may not be able to
fund, from cash flow from operations, the $12.0 million maturity
payment on its bank term loan due October 1, 1995. The Company is
currently in discussions with its banks to restructure its term
loan to provide for the repayment of the $12.0 million due at
maturity over a 24 month period and to establish a revolving
credit facility. The Company plans to continue to evaluate and
manage its existing cost structure to anticipated revenue levels
to achieve improved profitability and quarter to quarter revenue
growth during fiscal year 1995. However, there can be no
assurance that the Company's operating efforts or the
restructuring of its term loan will be achieved.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned domestic and foreign subsidiary companies. All
intercompany transactions and balances have been eliminated.
Foreign Currency
The functional currency of substantially all of the Company's
foreign subsidiaries is the applicable local currency. The
translation of the applicable foreign currencies into U.S. dollars
is performed for balance sheet accounts using current exchange
rates in effect at the balance sheet date and for revenue and
expense accounts using average rates of exchange prevailing during
the fiscal year. Adjustments resulting from the translation of
foreign currency financial statements are accumulated in a
separate component of stockholders' equity until the entity is
sold or substantially liquidated. Gains or losses resulting from
foreign currency transactions are included in the results of
operations, except for those relating to intercompany transactions
of a long-term investment nature which are accumulated in a
separate component of stockholders' equity.
F-5
2. Summary of Significant Accounting Policies, Continued
Foreign Currency, Continued
Gains (losses) on foreign currency transactions of ($360,000),
$606,000 and $1,091,000 for the fiscal years ended June 30, 1994,
1993 and 1992, respectively, are included in Other income
(expense) - net.
Cash and Cash Equivalents
For financial statement purposes, short-term investments with
original maturities of ninety days or less from the date of
purchase are considered cash equivalents.
Cash equivalents are stated at cost plus accrued interest, which
approximates market, and represents cash invested in U.S.
Government securities, bank certificates of deposit, or commercial
paper. Such short-term investments amounted to $2,591,000 and
$18,178,000 at June 30, 1994 and 1993, respectively.
Inventories
Inventories are stated at the lower of cost or market, with cost
determined on the first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at acquired cost.
Depreciation is provided on a straight-line basis over the
estimated useful lives of assets ranging from three to forty
years.
Leasehold improvements are amortized over the shorter of the
useful lives of the improvements or the terms of the related
lease. Gains and losses resulting from the disposition of
property, plant and equipment are included in Other income
(expense) - net.
Expenditures for repairs and maintenance are charged to operations
as incurred and expenditures for major renewals and betterments
are capitalized.
Revenue Recognition
Computer systems sales (hardware and software, including bundled
software) are recorded when the earnings process is complete,
typically upon shipment to customers.
Service contract revenue related to hardware and software is
recognized separately and as earned over the respective
maintenance period in accordance with the terms of the applicable
contract.
F-6
2. Summary of Significant Accounting Policies, Continued
Income Taxes
The Company and its domestic subsidiaries file a consolidated
Federal income tax return. Certain items of revenue and expense
are reported for Federal income tax purposes in different periods
than for financial reporting purposes and are accounted for under
the asset and liability method as required by the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("FAS No. 109").
On July 1, 1993, the Company adopted the provisions of FAS No.
109. This standard requires a change from the deferred method to
the asset and liability method of accounting for income taxes.
Under the asset and liability method, a deferred tax asset or
liability is recognized for temporary differences between
financial reporting and income tax bases of assets and
liabilities, tax credit carryforwards and operating loss
carryforwards. A valuation allowance is established to reduce
deferred tax assets if it is more likely than not that such
deferred tax assets will not be realized. Utilization of net
operating loss carryforwards, which originated prior to the
Company's quasi-reorganization effected on December 31, 1991, are
recorded as adjustments to capital in excess of par value. Prior
years' financial statements have not been restated.
The cumulative effect of adopting this standard resulted in the
Company recording a $2.0 million non-cash charge reducing its
deferred tax assets as of the date of adoption.
Investment and research and development tax credits are recorded
under the flow-through method of accounting. Under the Tax Reform
Act of 1986, the investment tax credit was repealed as of January
1, 1986, subject to certain transition rules. The repeal of the
investment tax credit did not have a material impact on the
Company's financial statements.
Capitalized Software
The Company, in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software
to be Sold, Leased, or Otherwise Marketed", commences
capitalization of software production costs upon the achievement
of technological feasibility and ceases capitalization upon the
achievement of customer availability. Such costs are amortized
over the greater of the ratio of the product's current to total
revenue stream or the straight-line method over its estimated
useful life. Such amortization period generally does not exceed
three years. For the years ended June 30, 1994, 1993 and 1992,
amortization expense relating to software production costs which
is included as a component of cost of sales amounted to $445,000,
$436,000 and $1,204,000, respectively. Accumulated amortization
amounted to $165,000 and $389,000, respectively, at June 30, 1994
and 1993. Capitalized software (net) amounted to $1,985,000 and
$494,000 at June 30, 1994 and 1993, respectively.
F-7
2. Summary of Significant Accounting Policies, Continued
Research and Development
Research and development expenditures, other than capitalized
software, are expensed when incurred.
Income (Loss) per Share
Primary earnings per share (including convertible participating
preferred stock, dilutive stock options and common stock purchase
warrants) is computed on the basis of the weighted average number
of common shares outstanding during each year and includes shares
assumed issued upon the exercise of all dilutive stock options and
common stock purchase warrants and the purchase of treasury stock
with the proceeds at the average market price for the period.
Fully diluted earnings per share assumes the exercise of all
dilutive stock options and common stock purchase warrants and the
purchase of treasury stock at the higher of the market price at
the end of the year or the average market price during the year.
For fiscal years 1993 and 1992, the computation of fully diluted
earnings per share did not have a dilutive effect on earnings per
share.
The number of shares used in computing income (loss) per share was
28,054,000, 9,765,000, and 7,517,000 for the years ended June 30,
1994, 1993 and 1992, respectively.
Supplemental income per share for the year ended June 30, 1993 was
calculated assuming the Company's comprehensive refinancing (as
described in Note 3) took place on July 1, 1992. The Company's
supplemental net income per share for the year ended June 30, 1993
was $0.32.
Postretirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" ("FAS No. 106").
This standard requires companies to accrue postretirement benefits
throughout the employees' active service periods until they attain
full eligibility for those benefits. The transition obligation
(the accumulated postretirement benefit obligation at the date of
adoption) may be recognized either immediately or by amortization
over the longer of the average remaining service period for active
employees or 20 years.
In connection with the adoption of this standard, the Company
recorded a non-cash charge of $3.0 million representing the
immediate recognition of the accumulated postretirement benefit
obligation at the date of adoption.
F-8
2. Summary of Significant Accounting Policies, Continued
Postemployment Benefits
The Company has not adopted the provisions of Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("FAS No. 112"). This standard requires
that companies providing postemployment benefits to their
employees accrue the cost of such benefits throughout the
employees' service period. The Company is currently analyzing the
standard to determine the impact, if any, on the Company's
reported results of operations or financial condition. The
Company believes this standard will not have a material impact on
the Company's liquidity and results of operations. The Company is
required to adopt this standard in fiscal year 1995.
3. Refinancing
On July 21, 1993, the Company completed a comprehensive
refinancing (the "Refinancing"). The Refinancing consisted of the
following: a) the sale and issuance of $59.1 million in common
stock (the "Offering"); b) the modification of the Company's
existing bank term loan (the "Existing Term Loan") to, among other
things, extend the maturity date and reduce the interest rate (the
"Amended Term Loan") (see Note 6); and c) the conversion of all of
the outstanding shares of the Company's convertible participating
preferred stock (the "Convertible Preferred Stock") into shares of
common stock at a ratio of one to one.
The net proceeds of the Offering ($55.0 million) together with
$11.9 million of Company cash were used to redeem in full the
Company's outstanding 12.08% Senior Subordinated Notes due 1997
(the "Subordinated Debt") at face amount, plus accrued interest,
as of July 21, 1993. The Subordinated Debt was originally
recorded with an original issue discount resulting in an effective
yield-to-maturity of 25%. The redemption of the Subordinated Debt
resulted in an extraordinary charge reducing net income by $23.2
million during the first quarter of fiscal year 1994 based on an
aggregate cash redemption price of $66.9 million and a book value
of $43.7 million. The Refinancing, including the effect of the
redemption of the Subordinated Debt and related $23.2 million
extraordinary charge, resulted in a $31.8 million increase to
stockholders' equity as of the date the transactions were
completed.
The following unaudited pro forma balance sheet gives effect to
the Refinancing of the Company as if the transaction had occurred
as of June 30, 1993.
F-9
3. Refinancing, Continued
Pro Forma Consolidated Balance Sheet
(Dollars in thousands)
(Unaudited)
As
Reported Pro Forma
June 30, June 30,
1993 * Adjustments 1993 *
------------ ----------- ---------
Assets
Cash and cash equivalents $ 30,422 $(12,260)(a) $ 18,162
Accounts receivable - net 37,502 37,502
Inventories 21,920 21,920
Facility held for disposal 6,000 6,000
Prepaid expenses and other
current assets 6,771 6,771
-------- --------- --------
Total current assets 102,615 (12,260) 90,355
Property, plant and
equipment - net 46,323 46,323
Other long-term assets 8,148 800 (a) 8,948
-------- --------- --------
Total assets $157,086 $(11,460) $145,626
======== ========= ========
Liabilities and
Stockholders' Equity
Notes payable $ 2,783 $ $ 2,783
Current portion of
long-term debt 8,250 8,250
Accounts payable and
accrued expenses 47,334 47,334
Deferred revenue 7,575 7,575
-------- --------- --------
Total current liabilities 65,942 65,942
Long-term debt 67,938 (43,207)(a) 24,731
Other long-term liabilities 4,703 4,703
Commitments and contingencies - -
Stockholders' equity
Shares of preferred stock 70 (70)(b) -
Shares of common stock 26 197 (a) 293
70 (b)
Capital in excess of par value 15,626 54,803 (a) 70,429
Accumulated earnings after
eliminating accumulated
deficit of $81,826 at
December 31, 1991, date of
quasi-reorganization 4,802 (23,253)(a) (18,451)
Shares of treasury stock (58) (58)
Cumulative translation adjustment (1,963) (1,963)
-------- --------- --------
Total stockholders' equity 18,503 31,747 50,250
-------- --------- --------
Total liabilities and
stockholders' equity $157,086 $(11,460) $145,626
======== ========= ========
* Reclassified to conform to current year presentation.
See accompanying notes to Pro Forma Consolidated Balance Sheet.
F-10
3. Refinancing, Continued
Notes to Pro Forma Consolidated Balance Sheet
The following adjustments were made to the balance sheet at June
30, 1993 to give effect to the Refinancing as if the transaction
had occurred as of such date.
(a) To reflect (i) the redemption of $66,430,000 of Subordinated
Debt (face amount plus accrued interest as of June 30, 1993)
with a book value of $43,177,000 (the redemption of the
Subordinated Debt prior to maturity results in an
extraordinary loss of $23,253,000 on the early extinguishment
of debt); (ii) the modification of the Existing Term Loan and
the deferred financing fees related to the Amended Term Loan
(approximately $800,000); (iii) the issuance of 19,700,000
shares of common stock, with a par value of $0.01, at a price
of $3.00 per share for $59,100,000 (less issuance costs of
approximately $4,100,000) and (iv) the repayment of $30,000
of the principal amount outstanding under the Existing Term
Loan.
The extraordinary loss on the early extinguishment of debt is
determined as follows:
(Dollars in thousands)
Face amount of Subordinated Debt $64,158
Accrued interest on Subordinated Debt 2,272
-------
Sub-total 66,430
Book value of Subordinated Debt (43,177)
-------
Extraordinary loss $23,253
=======
The extraordinary loss on the early extinguishment of debt,
if effected on June 30, 1993, does not result in the
recognition of a tax benefit due to a difference in the
financial reporting and tax bases of the underlying
subordinated debt.
(b) To reflect the conversion of 6,981,706 shares of Convertible
Preferred Stock into shares of common stock at a ratio of 1
to 1.
4. Recapitalization
On November 22, 1991, the Company completed a recapitalization
(the "Recapitalization") of its debt with its senior lenders
(the "Bank Group") and the holders of 100% of its Senior
Subordinated Notes due 1998 (the "Noteholders" and the
"Cancelled Notes", respectively). The Recapitalization
included the restructuring of the Company's then outstanding
F-11
4. Recapitalization, Continued
$53.3 million term loan and $110.6 million in principal amount
of the Cancelled Notes. The recapitalization also included the
conversion of 9,001 shares of the Company's redeemable Class A
preferred stock into 818,273 shares of the Company's common
stock. The Noteholders tendered their Cancelled Notes in
exchange for new notes and Convertible Preferred Stock pursuant
to the private placement exchange offer (the "Exchange Offer")
commenced by the Company on September 12, 1991 and completed on
November 22, 1991.
The Exchange Offer resulted in the exchange of $55 million in
principal amount of Subordinated Debt and 6,983,284 shares of
Convertible Preferred Stock for the then outstanding $110.6
million in principal amount of Cancelled Notes and accrued and
unpaid interest thereon (approximately $22.9 million as of
November 22, 1991). The Convertible Preferred Stock, after
giving effect to the Company's February 1992 one for ten reverse
stock split (as described in Note 5), was convertible into
common stock at a ratio of one to one and represented, at the
time of the recapitalization, in the aggregate, approximately a
70% fully diluted equity interest in the Company (assuming all
then existing warrants and certain options to acquire common
stock were cancelled or expired unexercised).
5. Reverse Stock Split
On January 31, 1992, the Company received stockholder approval
to effect a one for ten reverse stock split of its common stock.
The terms (e.g., par value, voting rights, etc.) of the shares
of the post-split common stock are the same as the pre-split
common stock. The reverse stock split became effective at the
close of business on February 7, 1992. In connection with the
reverse stock split, the Company reclassified $180,000 (the
aggregate amount in excess of the par value of the outstanding
shares of common stock) from common stock to capital in excess
of par value.
All share and per share data in these financial statements have
been restated to give effect to the one for ten reverse stock
split.
6. Debt and Lines of Credit
As described in Notes 3 and 4, the Company completed the
Refinancing on July 21, 1993 and the Recapitalization on
November 22, 1991, respectively. The following describes the
terms and conditions of both the Amended Term Loan and the
Existing Term Loan agreements.
F-12
6. Debt and Lines of Credit, Continued
The Amended Term Loan resulted from the modification of various
terms of the Existing Term Loan, including the interest rate,
maturity date and principal amortization schedule of the
Company's then outstanding $31.5 million (as of June 30, 1993)
term loan facility.
At June 30, 1994, the outstanding balance under the Amended Term
Loan was $23.0 million and bears interest, at the Company's
option, at an annual rate equal to either the prime rate plus
1.0%, or the London Interbank Offered Rate (LIBOR) plus 3.0%.
The Amended Term Loan is payable in 24 equal monthly
installments of $687,500 each, commencing July 30, 1993, with a
final payment of $12.0 million (reduced from $15 million as
described below) payable October 1, 1995. On August 19, 1994,
the maturity date of the Amended Term Loan was extended from the
original maturity date of June 30, 1995 to October 1, 1995. The
Company has pledged substantially all of its domestic assets as
collateral for the Amended Term Loan. The Company may prepay
the Amended Term Loan at any time without penalty.
At June 30, 1993, the then outstanding balance under the
Existing Term Loan was $31.5 million and bore interest at an
annual rate equal to (1) the prime rate plus 1.9% (7.9% at June
30, 1993) or (2) prime rate plus 1.5% when the outstanding
balance was equal to or less than $25 million. Principal and
interest payments on the then Existing Term Loan were payable
monthly. Scheduled monthly amortization payments were to reduce
the balance due at maturity to $23.1 million on May 31, 1994.
The classification of the then Existing Term Loan balance as of
June 30, 1993 was based upon the maturity date of the Amended
Term Loan.
The Amended Term Loan contains various covenants and
restrictions, which among other things (1) place certain limits
on corporate acts of the Company such as fundamental changes in
the corporate structure of the Company, investments in other
entities, incurrence of additional indebtedness, creation of
liens or certain distributions or dispositions of assets,
including cash dividends, and (2) require the Company to meet
financial tests on a periodic basis, the most restrictive of
which relate to the maintenance of collateral coverage and debt
coverage all as defined in the Amended Term Loan agreement.
On September 28 and November 18, 1993 and on February 18 and
August 19, 1994, the Company's Amended Term Loan agreement was
amended to modify certain financial covenants. The amendments
on November 18, 1993 and February 18, 1994 also waived the
Company's requirements with respect to certain financial
covenants for the three months ended September 30 and December
31, 1993, respectively.
F-13
6. Debt and Lines of Credit, Continued
On November 10, 1993, the Amended Term Loan agreement was
amended to allow the Company to defer up to four monthly
principal amortization payments, depending on cash balances,
until April 1, 1994 and to provide for up to $3 million in
standby letters of credit in connection with overseas lines of
credit. In consideration of the amendment, the Company made a
$3 million principal prepayment, which was applied to the term
loan amortization payment due on the October 1, 1995 maturity
date, from the proceeds of borrowings under such overseas lines
of credit.
The February 18, 1994 amendment allowed the Company to further
defer the four monthly principal amortization payments until
September 30, 1994, at which time two of the deferred monthly
principal amortization payments are due, and December 31, 1994,
at which time the remaining two deferred monthly principal
amortization payments are due. The deferred payments are in
addition to the regular monthly amortization payments due on
these dates. In connection with this amendment, the Company
granted an aggregate of 600,000 of stock purchase warrants to
the banks. The warrants were issued with an exercise price per
share of $1.50 (the fair market value of a share of the
Company's common stock on February 18, 1994) and expire on
September 30, 1994. The warrants provide for the possibility of
an extension, at the option of the banks, of the expiration date
of these warrants in consideration of further extensions of the
four monthly principal amortization payments and a restructuring
of the Amended Term Loan. The Company and the banks are in
discussions to provide for the repayment of the four deferred
monthly payments over the time period ending October 1, 1995.
An extended payment plan would provide the Company with
additional flexibility to fund its revenue growth initiatives.
The amendments to the Amended Term Loan were obtained to provide
the Company with greater financial flexibility in light of: 1)
lower than expected revenues and financial results for the first
six months of fiscal year 1994, 2) a $12 million provision for
restructuring recorded during the three months ended September
30, 1993 and 3) anticipated financial results for the remainder
of fiscal year 1994 and for fiscal year 1995. Depending on the
revenue levels attained during fiscal year 1995, the Company may
need to seek additional flexibility with respect to its
obligations under its Amended Term Loan.
The Company is currently in discussions with its banks in an
attempt to restructure its bank term loan to provide for the
repayment of the $12.0 million due at maturity over a 24 month
period and to establish a revolver credit facility. The Company
is also exploring a refinancing of the bank term loan with other
lenders. However, there can be no assurance that any such
agreements will be reached.
F-14
6. Debt and Lines of Credit, Continued
Although the Company's original term loan agreement had been
terminated as part of the Recapitalization, the terms of an
interest rate swap agreement remained in effect until bought-out
at the time of the Refinancing. The fixed rate under the swap
agreement resulted in additional interest expense of $822,000
and $1,227,000 for the years ended June 30, 1993 and 1992,
respectively.
The net proceeds of the July 93 offering ($55.0 million)
together with approximately $12 million of Company cash were
used to redeem in full the Subordinated Debt. The
Subordinated Debt of $55 million in principal amount issued on
November 22, 1991 bore interest at an annual rate of 12.08%,
payable semi-annually on March 15 and September 15 and payable
in additional Subordinated Debentures in lieu of cash for up to
the first three years, but not less than the first two years.
The Subordinated Debt was recorded net of a $25.5 million
discount based upon its estimated fair value at the time of
issuance, resulting in an effective yield to maturity of 25%.
The principal amount of the Subordinated Debt, including notes
issued in lieu of payment of cash interest, was payable in a
lump sum at maturity on December 31, 1997. Subordinated Debt
issued and accrued amounted to approximately $.6 million, $7.4
million and $4.0 million for the years ended June 30, 1994, 1993
and 1992, respectively. The unamortized discount of the
Subordinated Debt amounted to $23.3 million at June 30, 1993.
The Company's foreign subsidiaries have certain bank borrowing
arrangements in local currencies which provide for borrowings of
up to $8,056,000 at prevailing rates of interest ranging from
3.0% to 16.0% at June 30, 1994. At June 30, 1994, $5,749,000 of
demand notes were outstanding under such arrangements of which
$2,689,000 is guaranteed by the minority shareholder in the
Company's Japanese subsidiary. The remaining amounts are
guaranteed by the Company. Foreign unused lines of credit can
be withdrawn at any time at the option of either the Company or
the lending institutions.
Annual maturities of all the Company's debt for the fiscal years
ended June 30, 1995 through 1999, and thereafter, are as
follows:
(Dollars in thousands) Annual
Maturities
----------
1995 $ 16,749
1996 12,294
1997 338
1998 391
1999 217
Thereafter -
--------
Total $ 29,989
========
F-15
7. Quasi-Reorganization
In connection with the Recapitalization, a corporate
readjustment of the accounts was effected on December 31, 1991,
in the form of a quasi-reorganization ("fresh-start"
accounting). The readjustment resulted in the revaluation, as
necessary, of all assets and liabilities to estimated fair
values and the elimination of the excess of cost over net assets
acquired and the elimination of the accumulated deficit and
cumulative translation adjustment balances against capital in
excess of par value.
The following schedule and accompanying notes show the effect of
the Recapitalization and the quasi-reorganization on
stockholders' equity at December 31, 1991:
Schedule of Stockholders' Equity (Deficiency)
(Dollars in thousands)
Unadjusted Adjusted
December 31, Recapital- Quasi- December 31,
1991 ization Reorg. 1991
----------- --------- --------- ------------
Stockholders' equity
(deficiency)
Preferred stock $ - $ 70 (a)$ $ 70
Common stock 192 8 (b) 200
Capital in excess
of par value 72,432 33,107 (a) (96,300)(c) 10,131
892 (b)
Accumulated deficit (142,928) 61,102 (a) 81,826 (c) -
Treasury stock (67) (67)
Cumulative
translation adj. (239) 239 (c) -
-------- -------- -------- --------
Total stockholders'
equity
(deficiency) $(70,610) $ 95,179 $(14,235) $ 10,334
======== ======== ======== ========
(a) To reflect the issuance of the Subordinated Debt in the
amount of $55,000,000, recorded net of a $25,497,000
valuation discount, and the issuance of 6,983,284 shares of
Convertible Preferred Stock, with a par value of $.01, in
exchange for all of the outstanding Cancelled Notes in the
amount of $110,600,000, plus accrued interest of $22,850,000
and less unamortized issue costs of $3,668,000. The
resulting gain, net of $6,000,000 in capital restructuring
costs, was credited to the accumulated deficit. The net gain
on debt restructuring was determined as follows:
F-16
7. Quasi-Reorganization, Continued
(Dollars in thousands)
Face amount of Cancelled Notes $110,600
Accrued interest on Cancelled Notes 22,850
Unamortized bond issue costs (3,668)
--------
Sub-total 129,782
Subordinated Debt, net of discount (29,503)
Fair value of Convertible
Preferred Stock (33,177)
Capital restructuring costs (6,000)
--------
Extraordinary gain on early
extinguishment of debt $ 61,102
========
(b) To reflect the conversion of the redeemable Class A preferred
stock into 818,273 shares of common stock.
(c) To effect a quasi-reorganization, approved by the Board of
Directors, by eliminating the excess of cost over net assets
acquired and eliminating the accumulated deficit and
cumulative translation adjustment balances against capital in
excess of par value.
Subsequent to June 30, 1992, the Company completed the transfer
of title of its Westford, Massachusetts facility to the mortgagee
and settled certain tax matters with the parent company of the
former Concurrent which have been accounted for through
adjustments to capital in excess of par value as part of the
Company's quasi-reorganization.
During the year ended June 30, 1993, the Company utilized net
operating loss carryforwards, which originated prior to the
quasi-reorganization. The utilization of these net operating
loss carryforwards have been accounted for through adjustments to
capital in excess of par value.
8. Recapitalization Pro Forma Financial Information (Unaudited)
The following unaudited pro forma financial information gives
effect to the Recapitalization and quasi-reorganization of the
Company as if such transactions had occurred at the beginning of
fiscal year 1992. This information as set forth below does not
reflect the nonrecurring credit of $61,102,000 related to an
extraordinary gain on early extinguishment of debt recorded
during the year ended June 30, 1992.
F-17
8. Recapitalization Pro Forma Financial Information (Unaudited),
Continued
(Dollars in thousands)
1992
--------
Net sales $221,572
========
Net income (loss) $ 1,661
========
Net income (loss)
per share $ 0.18
========
9. Provision for Restructuring
During the three months ended September 30, 1993, the Company
recorded a provision for restructuring of $12.0 million in
connection with its operational restructuring to bring costs in
line with current and anticipated revenue levels. The provision
includes employee terminations, office closings or downsizings
and other related costs which are approximately 65%, 25% and 10%
of the provision, respectively.
10. Change in Accounting Estimate
During the three months ended December 31, 1993, the Company
recorded a sales and use tax credit of $1.4 million, or $.05 per
share, related to a change in the estimate of state sales and use
tax reserves.
11. Concentration of Credit Risk
Concentration of credit risk with respect to trade receivables is
limited due to the large number of customers comprising the
Company's customer base. Ongoing credit evaluations of
customers' financial condition are performed and collateral is
generally not required.
12. Inventories
Inventories consist of:
(Dollars in thousands)
1994 1993
------- -------
Raw materials $10,770 $11,177
Work-in-process 2,872 6,633
Finished goods 4,187 4,110
------- -------
$17,829 $21,920
======= =======
F-18
13. Property, Plant and Equipment and Facility Held for Disposal
Property, plant and equipment consists of:
(Dollars in thousands)
1994 1993
-------- --------
Land $ 5,275 $ 5,244
Buildings 16,530 16,569
Machinery and equipment 47,581 41,638
-------- --------
69,386 63,451
Less: Accumulated depreciation
and amortization (26,644) (17,128)
-------- --------
$ 42,742 $ 46,323
======== ========
For the years ended June 30, 1994, 1993 and 1992, depreciation
and amortization expense for property plant and equipment
amounted to $11,685,000, $12,668,000 and $15,691,000,
respectively.
Based on the Company's experience to date, the estimated
disposal date of the Tinton Falls, New Jersey facility is
uncertain, therefore the estimated net realizable value of such
asset has been classified as a non-current facility held for
disposal at June 30, 1994.
14. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of:
(Dollars in thousands)
1994 1993
-------- --------
Accounts payable - trade $ 13,327 $ 14,975
Accrued payroll, vacation
and other employee expenses 12,775 16,291
Restructuring costs 6,274 1,932
Other accrued expenses 12,311 14,136
-------- --------
$ 44,687 $ 47,334
======== ========
F-19
15. Income Taxes
On July 1, 1993, the Company adopted the provisions of FAS No.
109. The cumulative effect of adopting this standard resulted
in the Company recording a $2.0 million non-cash charge reducing
its deferred tax assets as of the date of adoption. Prior
years' financial statements have not been restated.
The domestic and foreign components of income (loss) before
provision for income taxes, extraordinary gain (loss) on early
extinguishment of debt, and the cumulative effect of change in
accounting principles are as follows:
(Dollars in thousands)
1994 1993 1992
-------- -------- --------
United States $ (5,758) $ 5,797 $ (3,504)
Foreign (4,573) 372 5,349
-------- -------- --------
$(10,331) $ 6,169 $ 1,845
======== ======== ========
The components of the provision for income taxes are as
follows:
(Dollars in thousands)
1994 1993 1992
-------- -------- --------
Current:
Federal $ - $ 300 $ 130
Foreign 1,300 1,692 2,712
State - 72 70
-------- -------- --------
Total $ 1,300 $ 2,064 $ 2,912
-------- -------- --------
Deferred:
Federal $ - $ - $ -
Foreign - 236 (112)
State - - -
-------- -------- --------
Total $ - $ 236 $ (112)
-------- -------- --------
$ 1,300 $ 2,300 $ 2,800
======== ======== ========
For the fiscal year ended June 30, 1993, the current provision
for income taxes includes an equivalent charge of $572,000,
(federal: $430,000 and state: $142,000) which was fully
offset in capital in excess of par value due to the utilization
of tax loss carryforwards which originated prior to the
Company's quasi-reorganization effected on December 31, 1991.
F-20
15. Income Taxes, Continued
A reconciliation of the Federal statutory tax provision to the
Company's provision for income taxes is as follows:
(Dollars in thousands)
1994 1993 1992
-------- -------- --------
Income (loss) before provision for
income taxes, extraordinary gain
(loss) and cumulative effect of
change in accounting principles $(10,331) $ 6,169 $ 1,845
-------- -------- --------
Tax at Federal statutory rate (3,513) 2,097 627
U.S. Federal and non U.S. net
operating losses for which no
tax benefit was recorded 4,466 1,472 1,553
Difference between U.S. and non
U.S. income tax rates 10 329 420
Tax benefit related to permanent
differences - (1,496) -
State income tax - 54 70
Other 337 (156) 130
-------- -------- --------
Provision for income taxes $ 1,300 $ 2,300 $ 2,800
======== ======== ========
As of June 30, 1994, the Company's deferred tax assets were
comprised of the following:
(Dollars in thousands)
June,30
1994
Gross deferred tax assets related to: -------
Net operating loss carryforwards $34,170
Accumulated depreciation 5,042
Restructuring reserves 4,276
Inventory reserves 3,557
Accrued compensation 1,544
Post-retirement benefits 1,010
Other 3,009
-------
Total Gross deferred tax assets 52,608
Valuation Allowance (52,608)
-------
Net deferred tax assets $ 0
=======
F-21
15. Income Taxes, Continued
During fiscal year 1994, the deferred tax liability related to the
Company's Subordinated Debt was reversed upon the early
extinguishment of such debt. In connection with this reversal,
the Company recorded a corresponding increase to its deferred tax
asset valuation allowance.
During the fiscal year ended June 30, 1992, the Company received
a favorable private letter ruling from the Internal Revenue
Service which permitted the Company to utilize existing net
operating loss carryforwards less Alternative Minimum Tax
limitations to offset the gain on the early extinguishment of debt
resulting from the Recapitalization. Approximately $61,100,000
and $12,000,000 of the Company's net operating loss carryforwards
for financial reporting and income tax purposes, respectively,
were utilized to offset the gain on the Recapitalization.
As of June 30, 1994, the Company has remaining net operating loss
carryforwards of approximately $79 million for income tax
purposes. Approximately $60 million of these net operating loss
carryforwards originated prior to the Company's
quasi-reorganization effected on December 31, 1991.
Any future benefits attributable to the net operating loss
carryforwards which originated prior to the Company's
quasi-reorganization effected on December 31, 1991 are accounted
for through adjustments to capital in excess of par value. Under
Section 382 of the Internal Revenue code, future benefits
attributable to the net operating loss carryforwards and tax
credits which originated prior to the quasi-reorganization are
limited to approximately $1.3 million per year. The Company's
net operating loss carryforwards begin to expire in 2004. As of
June 30, 1994, after giving effect to the aforementioned Internal
Revenue Code limitation, the Company has remaining utilizable net
operating loss carryforwards of approximately $45 million for
income tax purposes.
Deferred income taxes have not been provided on approximately $7
million of undistributed earnings of foreign subsidiaries, which
originated subsequent to the Company's quasi-reorganization
effected on December 31, 1991, primarily due to either the
Company's required investment in certain subsidiaries or foreign
tax rates which exceed the U.S. tax rate.
F-22
15. Income Taxes, Continued
Additionally, deferred income taxes have not been provided on
approximately $3 million of undistributed earnings of foreign
subsidiaries which originated prior to the Company's
quasi-reorganization effected on December 31, 1991. The impact of
both the subsequent repatriation of such earnings and the
resulting offset, in full, from the utilization of net operating
loss carryforwards will be accounted for through adjustments to
capital in excess of par value. The Company has sufficient net
operating loss carryforwards remaining to offset such subsequent
repatriation.
16. Geographic Information
Below is a summary of the Company's 1994, 1993 and 1992 financial
data by geographic area.
(Dollars in thousands) 1994 1993 1992
-------- -------- --------
Net Sales:
United States $106,256 $141,355 $129,072
Intercompany 17,241 20,938 25,517
-------- -------- --------
123,497 162,293 154,589
-------- -------- --------
Europe 43,807 47,031 52,871
Intercompany 38 19 241
-------- -------- --------
43,845 47,050 53,112
-------- -------- --------
Asia/Pacific 26,139 28,350 35,377
Other 2,829 3,728 4,252
-------- -------- --------
196,310 241,421 247,330
Eliminations (17,279) (20,957) (25,758)
-------- -------- --------
Total $179,031 $220,464 $221,572
======== ======== ========
Operating income (loss):
United States $ (3,836) $ 18,440 $ 7,968
Europe (2,432) (493) 5,231
Asia/Pacific 1,907 2,730 5,098
Other 853 1,050 1,073
General corporate expenses (2,976) (3,179) (3,043)
Eliminations (509) 190 456
-------- -------- --------
Total $ (6,993) $ 18,738 $ 16,783
======== ======== ========
F-23
16. Geographic Information, Continued
(Dollars in thousands) 1994 1993
-------- --------
Identifiable assets:
United States $128,147 $141,054
Europe 26,748 32,264
Asia/Pacific 18,228 18,754
Other 1,815 1,936
Corporate 8,285 23,703
Eliminations (60,053) (60,625)
-------- --------
Total $123,170 $157,086
======== ========
Intercompany transfers between geographic areas are accounted for
at prices similar to those available to comparable unaffiliated
customers. Sales to unaffiliated customers outside the U.S.,
including U.S. export sales, were $73,893,000, $83,134,000 and
$96,218,000 for the years ended June 30, 1994, 1993 and 1992,
respectively, which amounts represented 41%, 38%, and 43% of
total sales for the respective years.
Sales to the U.S. Government and its agencies amounted to
$54,757,000, $64,340,000 and $45,772,000, respectively, for the
years ended June 30, 1994, 1993 and 1992, which amounts
represented 31%, 29% and 21% of total sales for the respective
years. The Company's revenues are derived from various customer
sources including Unisys Corp., the prime contractor under the
U.S. Department of Commerce's Next Generation Radar (NEXRAD)
program. Sales to Unisys Corp. amounted to $22,245,000 and
$35,723,000, respectively, for the years ended June 30, 1994 and
1993, which amounts represented 12% and 16%, respectively, of
total revenues.
17. Retirement Benefits
The Company has a retirement savings plan (the "Plan") available
to U.S. employees which qualifies as a defined contribution plan
under Section 401(k) of the Internal Revenue Code. Annual
Company contributions currently are determined based upon the
achievement of certain return on equity objectives with the
minimum contribution being 2% of employees' eligible earnings, as
defined by the Plan. The Company also matches a portion of
employees' before-tax savings.
F-24
17. Retirement Benefits, Continued
The Company's annual and matching contributions under this plan
are as follows:
(Dollars in thousands)
1994 1993 1992
Annual contribution: ------- ------- -------
Cash $ - $ - $ 530
Common stock 767 1,100 530
Matching contribution 333 359 437
------- ------- -------
Total $ 1,100 $ 1,459 $ 1,497
======= ======= =======
The Company's annual contribution under this Plan for the year
ended June 30, 1994 will be funded in common stock of the Company
in the three months ended September 30, 1994.
Certain foreign subsidiaries of the Company maintain pension
plans for their employees which conform to the common practice in
their respective countries. The pension expense related to these
plans amounted to $213,000, $286,000 and $33,000 for the years
ended June 30, 1994, 1993 and 1992, respectively.
The Company's net pension expense (income) for the years ended
June 30, 1994, 1993 and 1992 consists of the following
components:
(Dollars in thousands) 1994 1993 1992
-------- -------- -------
Service cost $ 522 $ 509 $ 478
Interest cost 546 539 560
Return on plan assets (707) (1,324) (685)
Net amortization and deferral (148) 562 (320)
------- ------- -------
$ 213 $ 286 $ 33
======= ======= =======
Net pension expense for the year ended June 30, 1992, includes
(1) a curtailment gain of $160,000 as a result of the reduction
in work force in connection with the restructuring of the Company
and (2) a settlement gain of $69,000 as a result of the
conversion of a subsidiary's defined benefit plan to a defined
contribution plan.
F-25
17. Retirement Benefits, Continued
The funded status of the Company's international pension plans at
June 30, 1994 and 1993 was as follows:
(Dollars in thousands) 1994 1993
------- -------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 6,048 $ 4,840
Accumulated benefit obligation 6,207 4,938
Projected benefit obligation 7,486 6,566
Plan assets at fair value 8,718 7,769
------- -------
Plan assets in excess of projected
benefit obligation $ 1,232 $ 1,203
Unrecognized net asset at transition (479) (540)
Unrecognized net gain (1,499) (1,367)
------- -------
Accrued pension liability $ (746) $ (704)
======= =======
In determining the present value of benefit obligations and the
expected return on plan assets for the Company's foreign pension
plans, the following assumptions were used for the years ended
June 30, 1994, 1993 and 1992:
1994 1993 1992
------------- ------------- -------------
Discount rate 6.0% to 9.0% 7.5% to 9.0% 8.0% to 9.0%
Rate of increase
in future compen-
sation levels 4.0% to 6.0% 5.5% to 6.0% 6.0%
Expected long-term
rate of return 7.0% to 10.0% 7.5% to 10.0% 7.5% to 10.0%
Plan assets are comprised primarily of investments in managed
funds consisting of common stock, money market and real estate
investments.
18. Postretirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of FAS No.
106. In connection with the adoption of this standard, the
Company recorded a non-cash charge of $3.0 million representing
the immediate recognition of the accumulated postretirement
benefit obligation at
the date of adoption.
F-26
18. Postretirement Benefits Other Than Pensions, Continued
The Company has a plan for retiree medical and life insurance
benefits for its U.S. employees but does not have any significant
foreign plans. Based on the terms of the U.S. plan, participants
must be age 55 with at least 10 years of service to be eligible
for medical benefits. If the retiree is age 55 and has a minimum
of five years of service, but less than 10 years of service,
coverage of certain medical benefits can be purchased through the
Company.
The comprehensive plan, which may be amended at the Company's
discretion, provides lifetime coverage for retirees and coverage
for spouses until one year after the death of the retiree. The
plan provides that the Company's costs will be capped at the 1993
level. Eligibility for life insurance is restricted to employees
who retired prior to January 1993.
The unfunded status of the plan at June 30, 1994 was as follows:
Accumulated Postretirement Benefit Obligation:
(Dollars in thousands)
June 30,
1994
-------
Active Ineligible Plan Participants $1,115
Active Eligible Plan Participants 516
Retirees and Dependents 1,356
------
$2,987
======
The Company's net periodic postretirement benefit expense
(income) for the year ended June 30, 1994 consists of the
following components:
(Dollars in thousands)
1994
-------
Service cost $ 188
Interest cost 238
Return on plan assets -
Curtailment gain (300)
-------
$ 126
=======
F-27
18. Postretirement Benefits Other Than Pensions, Continued
For the years ended June 30, 1993 and 1992, the Company
recognized postretirement benefit costs as incurred, thus the
amounts recognized as expense in prior years are not comparable.
During the year ended June 30, 1994, the Company recorded a
curtailment gain of $300,000 as a result of the reduction in work
force in connection with the restructuring of the Company.
For the year ended June 30, 1994, the weighted-average discount
rate and the rate of increase in compensation levels used in
determining the accumulated postretirement benefit obligation was
7.5% and 5.0%, respectively.
Assumed health care cost increases, estimated to be 10% for the
fiscal year 1995, decline at a rate of approximately 0.5% to 1.0%
per year to the ultimate trend rate of 5.0% in the year 2001.
Notwithstanding the above, a 1% increase in the health care cost
trend rate would not have an effect on the accumulated
postretirement benefit obligation since the plan provides that
the Company's future costs will be capped at the 1993 level.
19. Employee Stock Plans
The Company has a Stock Option Plan providing for the grant of
incentive stock options to employees and non-qualified stock
options (NSOs) to employees, non-employee directors and
consultants. The Stock Option Plan is administered by the Stock
Award Committee comprised of members of the Management Resources
Committee of the Board of Directors or the Board of Directors, as
the case may be. Under the plan, the Stock Award Committee may
award, in addition to stock options, shares of Common Stock on
a restricted basis. The plan also specifically provides for
stock appreciation rights and authorizes the Stock Award
Committee to provide, either at the time of the grant of an
option or otherwise, that the option may be cashed out upon terms
and conditions to be determined by the Committee or the Board.
Only stock options, which for the most part contain limited stock
appreciation rights in connection with a change of control
followed by certain subsequent events, have been granted under
the plan. The plan terminates on January 31, 2002. Stockholders
have approved the purchase of up to 3,164,725 shares under the
plan.
During fiscal year 1994, stock options to purchase an aggregate
of 1,785,822 shares of Common Stock were granted, with an
exercise price equal to at least the fair market value on the
effective date of grant. During fiscal year 1994, options to
purchase 283 shares were exercised.
F-28
19. Employees Stock Plans, Continued
After giving retroactive effect to the February 1992 one for ten
reverse stock split, changes in options outstanding under these
plans during the years ended June 30, 1992, 1993 and 1994 are as
follows:
Number of Price
Options Per Option
--------- ----------------
Outstanding at June 30, 1991 359,299 $ .10 - $150.00
Granted 792,556 $ 2.13 - $ 9.06
Exercised (6,531) $ 1.88 - $ 3.75
Cancelled (158,008) $ 1.88 - $150.00
---------- ----------------
Outstanding at June 30, 1992 987,316 $ .10 - $ 58.75
Granted 759,663 $ 2.13 - $ 6.50
Exercised (2,140) $ 1.88 - $ 4.38
Cancelled (41,648) $ 1.88 - $ 53.75
---------- ----------------
Outstanding at June 30, 1993 1,703,191 $ .10 - $ 58.75
Granted 1,785,822 $ 1.63 - $ 3.31
Exercised (283) $ 1.88 - $ 2.13
Cancelled (697,713) $ 1.88 - $ 58.75
---------- ----------------
Outstanding at June 30, 1994 2,791,017 $ .10 - $ 56.25
========== ================
Included in the options granted in fiscal year 1992 are 670,168
options granted during fiscal year 1991 which were contingent
upon the completion of the Recapitalization. The exercise price
of these options approximated the fair market value of the
Company's common stock at the date of the Recapitalization.
Included in the 1,785,822 options granted in fiscal year 1994 are
777,850 options granted in consideration of the eight-month
deferral of worldwide annual merit salary increases and 117,728
options granted in consideration of the cancellation of a like
number of previously granted stock options and the restarting of
the vesting schedule associated with the cancelled options.
Options with respect to 899,270 shares of common stock, with an
average exercise price of $3.67, were exercisable at June 30,
1994.
F-29
19. Employees Stock Plans, Continued
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan (the "Purchase
Plan") pursuant to which the Company is authorized to grant
rights to employees to purchase up to an aggregate of 1,000,000
shares of common stock in a series of offerings, each of which
generally lasts six to twelve months. Unless extended by the
stockholders, the Purchase Plan expires December 31, 1997.
Substantially all employees are eligible to participate in the
Purchase Plan. The purchase price of shares of common stock is
limited to the lesser of 85% of the fair market value of the
common stock on the commencement of the offering and the last day
of the offering. As of June 30, 1994, the Company had issued
250,073 shares and had 749,927 shares of common stock available
for issuance pursuant to the Purchase Plan.
20. Rights Plan
On July 31, 1992, the Board of Directors of the Company declared
a dividend distribution of one Series A Participating Cumulative
Preferred Right for each share of the Company's common stock and
Convertible Preferred Stock. The dividend was made to
stockholders of record on August 14, 1992. Under the rights
plan, each Right becomes exercisable unless redeemed (1) after a
third party owns 20% or more of the outstanding shares of the
Company's voting stock and engages in one or more specified
self-dealing transactions, (2) after a third party owns 30% or
more of the outstanding voting stock or (3) following the
announcement of a tender or exchange offer that would result in a
third party owning 30% or more of the Company's voting stock.
Any of these events would trigger the rights plan and entitle
each right holder to purchase from the Company one one-hundredth
of a share of Series A Participating Cumulative Preferred Stock
at a cash price of $30 per right.
Under certain circumstances following satisfaction of third party
ownership tests of the Company's voting stock, upon exercise each
holder of a right would be able to receive common stock of the
Company or its equivalent, or common stock of the acquiring
entity, in each case having a value of two times the exercise
price of the right. The rights will expire on August 14, 2002
unless earlier exercised or redeemed, or earlier termination of
the plan.
The adoption of the plan reinstated a similar rights plan put in
place in July 1989, which was terminated in connection with the
Recapitalization to avoid its inadvertent trigger.
F-30
21. Quarterly Consolidated Financial Information (Unaudited)
The following is a summary of quarterly financial results for
the years ended June 30, 1994 and 1993:
(Dollars in thousands, except per share amounts)
1994
---- Three Months Ended
-----------------------------------------
September December March 31, June 30,
30, 1993 31, 1993 1994 1994
--------- -------- -------- --------
Net sales $ 49,360 $40,688 $44,059 $44,924
Gross margin $ 22,852 $15,783 $17,531 $19,875
Income (loss) before
extraordinary loss and
cumulative effect of
change in accounting
principles $(11,015) $(3,492) $ 579 $ 2,297
Net income (loss) (a) $(39,208) $(3,492) $ 579 $ 2,297
Income (loss) per share: (b)
Income (loss) before
extraordinary loss and
cumulative effect of
change in accounting
principles $ (0.47) $ (0.12) $ 0.02 $ 0.08
Net income (loss) $ (1.67) $ (0.12) $ 0.02 $ 0.08
(a) Net loss for the three months ended September 30, 1993
reflects an extraordinary loss on early extinguishment of debt
of $23,193,000 ($0.99 per share), a cumulative effect of
change in accounting principles of $5.0 million ($0.21 per
share) and a provision for restructuring of $12.0 million.
Net loss for the three months ended December 31, 1993 reflects
a sales and use tax credit of $1,440,000. Net income for the
three months ended June 30, 1994 reflects a non-recurring
provision for inventory reserves of $1.5 million.
(b) Net income (loss) per share when added does not equal the
reported fiscal year amount primarily due to the effect on
average shares outstanding from the issuance of 324,377 shares
of common stock during the three months ended September 30,
1993 in connection with the annual contribution to the
Company's retirement savings plan for fiscal year 1993 and the
issuance of 19,700,000 shares of common stock and the
conversion of 6,981,706 shares of Convertible Preferred Stock
to common stock during the three months ended
September 30, 1993 in connection with the Refinancing (see
Note 3).
F-31
21. Quarterly Consolidated Financial Information (Unaudited), Continued
1993
---- Three Months Ended
------------------------------------------
September December March 31, June 30,
30, 1992 31, 1992 1993 1993
--------- --------- --------- ---------
Net sales $ 54,217 $ 54,479 $ 56,090 $ 55,678
Gross margin $ 25,494 $ 25,193 $ 26,122 $ 28,032
Net income $ 1,028 $ 705 $ 1,014 $ 1,122
Net income per share(a) $ 0.11 $ 0.07 $ 0.10 $ 0.11
(a) Net income per share when added does not equal the reported
yearly amount primarily due to the effect on average shares
outstanding from the issuance of 336,404 shares of common
stock during the three months ended December 31, 1992 in
connection with the annual contribution to the Company's
retirement savings plan for fiscal year 1992, along with the
issuance of 67,021 shares of common stock during the three
months ended June 30, 1993 under the Employee Stock Purchase
Plan.
22. Commitments and Contingencies
The Company leases certain sales and service offices, warehousing,
and equipment. The leases expire at various dates through 2005 and
generally provide for the payment of taxes, insurance and
maintenance costs. Additionally, certain leases contain escalation
clauses which provide for increased rents resulting from the pass
through of increases in operating costs, property taxes and
consumer price indexes.
At June 30, 1994, future minimum payments under noncancellable
operating leases for the fiscal years ending June 30 of each year
are as follows:
(Dollars in thousands)
1995 $5,021
1996 4,138
1997 3,074
1998 1,962
1999 672
2000 and thereafter 278
-------
$15,145
=======
F-32
22. Commitments and Contingencies, Continued
Rent expense amounted to $8,369,000, $9,731,000, and $10,012,000
for the years ended June 30, 1994, 1993 and 1992, respectively.
The Company, from time to time, is involved in litigation
incidental to the conduct of its business. The Company and its
counsel believe that such pending litigation will not have a
material adverse effect on the Company's results of operations or
financial condition.
The Company has entered into employment agreements with its
executive officers. In the event an executive officer is
terminated directly by the Company without cause or in certain
circumstances constructively by the Company, the terminated officer
will be paid severance compensation for a one-year period (a
two-year period in the case of the Chief Executive Officer) in an
annualized amount equal to the respective officer's annual salary
then in effect plus an amount equal to the then most recent annual
bonus paid or, if determined, payable, to such officer. Based on
annual salaries as of August 1994 and stock awards granted in
August 1994, in respect of fiscal year 1994, the maximum contingent
liability at June 30, 1994 under these agreements is approximately
$1.8 million. The Company's employment agreements with its
executive officers contain certain offset provisions, as defined in
their respective agreements.
On May 5, 1992, the Company completed the sale of its Cork, Ireland
facility to the Industrial Development Authority (IDA). Under the
terms of this agreement, the Company is required to maintain its
European service/repair center in Ireland through April 30, 1998
and maintain minimum employment levels. In the event the Company
does not meet these requirements, the IDA may require payment of up
to approximately $550,000 (360,000 Irish pounds). The Company's
contingent obligation to the IDA is collateralized by the machinery
and equipment of the Company's Ireland subsidiary.
F-33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
During the second half of fiscal year 1994, Concurrent returned to
profitability and achieved revenue growth (compared to the fiscal quarter
ended December 31, 1993) after two quarters of losses and declining revenues
during the six months ended December 31, 1993. The losses and declining
revenues resulted from the effects of a significant unexpected decline in
incoming business during the fiscal quarter ended September 30, 1993. The
Company's profit performance during the second half of fiscal year 1994
reflects the combination of improved revenues and a substantial cost
reduction effort. Positive sales momentum is building for new MAXION
systems but may fall short of plan goals which may effect revenue growth in
fiscal year 1995. Although sales of new MAXION systems are growing, a
decline in sales of systems other than MAXION systems may result in a
decline in revenue in the quarter ending September 30, 1994 compared to the
previous quarter. Nevertheless, the goals for fiscal year 1995 are to
achieve improved profitability and revenue growth. The Company plans to
continue to evaluate and manage its existing cost structure to anticipated
revenue levels to achieve improved profitability and quarter to quarter
revenue growth during fiscal year 1995. However, there can be no assurance
that these goals will be achieved.
The Company believes the decline in incoming business during its quarter
ended September 30, 1993 reflected worldwide economic conditions which had
not been conducive to the capital goods investment cycle as customers delayed
spending until signs of recovery were stronger. This trend was particularly
noticeable in the Company's previously predictable proprietary systems
business. The business has also been affected by further declines and
delays in certain government spending around the world, including shipments
of spare parts under the U.S. Department of Commerce's Next Generation
Weather Radar (NEXRAD) program, and the highly competitive nature of the
real-time computer industry.
In reaction to the decline in incoming business, the Company took steps
to restructure its operations to reduce its cost structure and to focus its
revenue generating activities with the objectives to fund growth and ongoing
development programs, particularly related to its new MAXION multiprocessor
open system and Series 3200-850 product lines, and to achieve
profitability. Restructuring and other actions taken since the first fiscal
quarter have reduced the Company's cost structure by approximately $8.0
million per quarter. Such cost savings began during the second quarter of
fiscal year 1994 and were fully realized during the fourth quarter of fiscal
year 1994. Total cash flow savings from these actions began during the
third quarter of fiscal year 1994 and will be significantly realized after
the fourth quarter of fiscal 1994. Cost reduction actions taken included
reducing the Company's worldwide work force by about 300 employees;
consolidating certain field offices; and reducing spending. Actions taken
to focus revenue generating activities include restructuring the sales,
services and marketing field operations. The actions are intended
F-34
to enhance revenue growth by decentralizing and localizing appropriate
decision-making authority to be more competitive and responsive to customers.
The Company is also focusing on a variety of growth initiatives, including
its recently announced entry into the multimedia interactive server market
and other new markets for the MAXION open system. The Company continues to
expand relationships with strategic partners and is working on new high-
potential distribution and marketing alliances.
The Company's objective is to increase revenues by providing real-time
computer systems and services to its installed base of proprietary systems
and to its open systems target markets. The achievement of these objectives
requires that the Company continue to enhance its proprietary hardware and
operating system platforms, while investing in the development of its real-
time open system hardware and operating systems and providing industry
standard product enhancements, such as networking, graphics and data
acquisition. The future growth of the Company's business and its future
financial performance will depend, to a significant extent, upon its ability
to develop and market competitive open systems which meet the real-time
computing needs of its targeted customers.
During the quarter ended March 31, 1994, the first full-scale production
units of the MAXION open system and Series 3200-850 proprietary system were
shipped on time to customers. Both products were introduced during the
quarter ended December 31, 1993. The Series 3200-850 proprietary system
provides improved price/performance and an upward growth path for the
Company's Series 3200 customers -- a significant portion of its installed
base. The MAXION open system is the world's first multiprocessor system
employing crosspoint architecture. It is among the most price/performance
competitive multiprocessing systems available in the market today. The
MAXION system technology has been well received in the market and the Company
believes the MAXION system has strengthened its competitive position in the
marketplace.
One of the goals of the Company's strategy is to minimize the effect of
the anticipated decline in sales of the Company's proprietary systems and
traditional maintenance and support services, while increasing sales of its
open systems and professional services, such as performance and capacity
analysis and systems integration. A shift in sales from proprietary systems
is likely to result in lower gross margins. Currently, gross margins on
open systems are lower than gross margins on proprietary systems. The
Company's operating income would be adversely affected by such a shift
unless total net sales increase, the gross margins on its open systems
improve and/or total operating expenses are further reduced. Although there
can be no assurance that this will be the case, the Company believes gross
margins on its open systems will improve with the continued implementation
of its value-added market strategy. This strategy involves the continued
introduction of new next generation open system products, which the Company
believes will generate higher gross margins than its older open systems
products. It also involves the development and sale of
F-35
value-added products and services such as software productivity and
development tools, and packaged services comprised of Traditional Services
and Professional Services, which sales are expected to have an aggregate
positive impact on total gross margins.
Effective September 16, 1994, James P. McCloskey (former Vice President,
Finance and Treasurer, Chief Financial Officer) accepted an offer to join a
company in an unrelated industry and stepped down as an employee of the
Company.
F-36
Selected Operating Data as a Percentage of Net Sales
The Company considers its computer systems and service business
(including maintenance, support and training) to be one class of products
which accounted for the percentages of net sales set forth below. The
following table sets forth selected operating data as a percentage of net
sales for certain items in the Company's consolidated statements of
operations for the periods indicated.
Years Ended June 30,
----------------------
1994 1993 1992
----- ----- -----
Net sales:
Computer systems 50.8% 55.1% 53.0%
Service and other 49.2 44.9 47.0
----- ----- -----
Total net sales 100.0 100.0 100.0
Cost of sales (% of respective sales
category):
Computer systems 56.2 45.7 48.0
Service and other 58.9 60.7 58.1
----- ----- -----
Total cost of sales 57.5 52.4 52.7
Gross margin 42.5 47.6 47.3
Operating expenses:
Research and development 13.3 12.2 11.8
Selling, general and administrative 27.2 26.9 27.9
Provisionfor restructuring 6.7 - -
Sales and use tax credit (0.8) - -
----- ----- -----
Total operating expenses 46.4 39.1 39.7
----- ---- -----
Operating income (loss) (3.9) 8.5 7.6
Interest expense (1.9) (6.1) (7.3)
Interest income 0.3 0.5 0.7
Other income (expense) - net (0.3) (0.1) (0.1)
----- ----- -----
Income (loss) before provision for income
taxes, extraordinary gain (loss) and
cumulative effect of change in
accounting principles (5.8) 2.8 0.9
Provision for income taxes 0.7 1.0 1.3
----- ----- -----
Income (loss) before extraordinary gain
(loss) and cumulative effect of change
in accounting principles (a) (6.5)% 1.8% (0.4)%
===== ===== =====
(a) The percentage for the year ended June 30, 1994 excludes a
$23.2 million extraordinary loss on early extinguishment of
debt and a $5.0 million non-cash charge for the cumulative
effect of change in accounting principles. The percentage for
the year ended June 30, 1992 excludes a $61.1 million
extraordinary gain on early extinguishment of debt.
F-37
Results Of Operations
Fiscal Year 1994 in Comparison to Fiscal Year 1993
Net Sales
Net sales for fiscal year 1994 were $179.0 million, a decrease of $41.5
million from fiscal year 1993. This decrease was due to a decrease of $30.6
million, or 25.1%, in computer systems sales and a decrease of $10.9
million, or 11.0%, in service and other revenues. The decrease in computer
system sales was primarily due to a decline in worldwide business resulting
from declines and delays in certain government spending around the world,
including shipments of spare parts under the U.S. Department of Commerce's
Next Generation Weather Radar (NEXRAD) program, and the highly competitive
nature of the real-time computer industry. The decrease in service and other
revenues was primarily due to the decline in computer system sales
experienced in prior periods which resulted in fewer maintenance contracts, a
decline in renewal rates on maturing contracts and approximately $.7 million
related to the impact of unfavorable foreign exchange rates.
Gross Margin
Gross Margin, as measured in dollars and as a percentage of net sales,
was $76.0 million and 42.5%, respectively, for fiscal year 1994 compared to
$104.8 million and 47.6%, respectively, for fiscal year 1993. The decrease
in gross margin dollars and percentage was primarily due to the
aforementioned decline in net sales, unfavorable discounting of older
products, unfavorable product mix and manufacturing expenses associated with
the ramp-up of full-scale production of the MAXION multiprocessor system
partially offset by cost savings resulting from the operational
restructuring during fiscal year 1994.
Operating Income (Loss)
Operating loss for fiscal year 1994 was $7.0 million compared to
operating income of $18.7 million for fiscal year 1993. The $25.7 million
decrease in operating income was due to the aforementioned $28.8 million
decrease in gross margin and a $12.0 million provision for restructuring
partially offset by a sales and use tax credit of $1.4 million related to a
change in the estimate of state sales and use tax reserves and a $13.7
million reduction in operating expenses.
The $13.7 million decrease in operating expenses was primarily due to a
$10.6 million decrease in selling, general and administrative expenses, a
$1.5 million decrease in gross research and development expenses and a $1.5
million increase in capitalized software production costs. The decrease in
selling, general and administrative and gross research and development
expenses is primarily due to cost savings resulting from the operational
restructuring during fiscal year 1994 and the completion of extensive
development effort on the MAXION multiprocessor system.
F-38
Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of
Change in Accounting Principles
Loss before extraordinary gain (loss) and cumulative effect of change in
accounting principles was $11.6 million for fiscal year 1994 compared to
income of $3.9 million for fiscal year 1993. The $15.5 million change
results from the aforementioned $25.7 million decrease in operating income
partially offset by a $10.2 million net decrease in non-operating expenses.
The decrease in non-operating expenses was primarily due to a $10.1 million
decrease in interest expense resulting from the reduction of the Company's
indebtedness and a decrease in the provision for income taxes partially
offset by an increase in foreign exchange losses.
Fiscal Year 1993 in Comparison to Fiscal Year 1992
Net Sales
Net sales for fiscal year 1993 were $220.5 million, a decrease of $1.1
million from fiscal year 1992. This decrease was due to a decrease of $5.2
million, or 5.0%, in service and other revenues partially offset by an
increase of $4.1 million, or 3.5%, in computer systems sales. The decrease
in service and other revenues was due to fewer maintenance contracts
resulting from the decline in computer systems sales experienced in prior
periods and approximately $1.7 million related to the impact of unfavorable
foreign exchange rates. The increase in computer systems sales was due to an
increase in domestic systems sales partially offset by a decline in
international systems sales. The decline in international systems sales was
primarily due to poor economic conditions worldwide and approximately $1.0
million related to the impact of unfavorable foreign exchange rates.
Domestic sales increased primarily due to shipments under the U.S. Department
of Commerce's Next Generation Weather Radar (NEXRAD) program.
Gross Margin
Gross Margin, as measured in dollars and as a percentage of net sales,
was $104.8 million and 47.6%, respectively, for fiscal year 1993 compared to
$104.7 million and 47.3%, respectively, for fiscal year 1992. The increase
in both gross margin dollars and percentage was primarily attributable to an
increase in computer systems sales and a $1.1 million decrease in non-cash
charges (attributable to the completion during fiscal year 1992 of
amortization and depreciation of certain assets associated with the
acquisition of former Concurrent), partially offset by the reduction in
service and other revenues.
F-39
Operating Income
Operating income for fiscal year 1993 was $18.7 million compared to
$16.8 million for fiscal year 1992. The $1.9 million increase in operating
income was primarily attributable to a decrease in operating expenses.
Operating expenses decreased to $86.1 million for fiscal year 1993 from
$87.9 million for fiscal year 1992. The decrease was primarily due to a $2.2
million decrease in non-cash charges (attributable to the completion during
fiscal year 1992 of amortization and depreciation of certain assets
associated with the acquisition of former Concurrent) and a decrease in
selling, general and administrative expenses of $1.0 million partially
offset by an increase in research and development expenses of $1.4 million
primarily due to investment in the Company's next generation of
products.
Income (Loss) Before Extraordinary Gain (Loss)
Income before extraordinary gain (loss) was $3.9 million for fiscal year
1993 compared to a loss before extraordinary gain of $1.0 million for fiscal
year 1992. Income (loss) before extraordinary gain (loss) improved by $4.9
million as a result of a decrease in non-operating expenses of $3.0 million
and an increase in operating income of $1.9 million. The $3.0 million
decrease in non-operating expenses was primarily due to a decrease in
interest expense of $2.7 million primarily related to the overall reduction
of the Company's indebtedness and a decrease in the provision for income
taxes.
F-40
Financial Resources and Liquidity
Liquidity of the business is dependent on many factors, including sales
volume, operating profit ratio, debt service and the efficiency of asset
utilization and turnover. Historically, the Company has derived
approximately 75% of its total computer systems and service revenues from
its installed base and from long-term programs which, until recently,
provided a stable and generally predictable source of revenue and cash flow.
The future liquidity of the Company's business will depend to a significant
extent on: 1) its ability to develop and achieve significant growth of open
systems while revenues attributable to sales and service of proprietary
systems decline; 2) whether sales and services to its installed base,
particularly of proprietary systems, decline more rapidly than anticipated;
3) its ongoing cost containment efforts; and 4) efforts to raise additional
debt or equity if necessary.
As a result of lower than expected sales and orders volume in the first
quarter of fiscal year 1994, the Company restructured its operations and
recorded a provision for restructuring of $12.0 million. The provision
includes employee terminations, office closings or downsizings and other
related costs which are approximately 65%, 25% and 10% of the provision,
respectively. The Company is restructuring its operations to reduce its
cost structure and to focus its revenue generating activities with the
objective to fund growth and ongoing development programs, particularly
related to the new MAXION system and Series 3200-850 product lines, and to
achieve profitability.
The Company estimates that the cost savings related to the restructuring
of operations and other actions taken since the first fiscal quarter will be
approximately $8 million per quarter when fully realized. Such cost savings
began during the second quarter of fiscal year 1994 and were substantially
realized during the fourth quarter of fiscal year 1994. The cost savings
actions primarily include reductions in work force, office closings or
downsizings and reduced or controlled spending on items such as salaries,
employee benefits, consulting, auto leases, travel and other costs.
Primarily due to employee termination costs which are paid out over a period
of time following termination, total cash outlays related to the cost savings
actions did not decline until the quarter ending June 30, 1994, and will not
significantly decline until after that quarter. The Company believes that
it will be able to fund the cash outlays related to the cost savings actions
through cash flow from operations under the restructured organization and by
managing the timing of certain restructuring payments (e.g., office lease
buy-outs).
On July 21, 1993, the Company completed a comprehensive refinancing (the
"Refinancing"). The objectives of the Refinancing were to reduce and improve
the terms of the Company's indebtedness, improve the Company's capital
structure and financial flexibility,
F-41
reduce interest expense and improve profitability, and increase the market
liquidity of the Common Stock.
The Refinancing reduced total indebtedness by an aggregate amount of
approximately $67 million and, consequently, reduced the Company's total
debt to total capitalization ratio from greater than 80% to approximately 42%
(on a pro forma basis) and 46% as of June 30, 1993 and June 30, 1994,
respectively. Additionally, the Refinancing reduced annual interest expense
by more than $10 million during fiscal year 1994 and will reduce annual
interest expense by more than $10 million during each of the next three
fiscal years (with a reduction in cash interest expense of more than $5
million in fiscal year 1994 and more than $7 million per year thereafter).
The Company also has tax basis net operating loss carryforwards available to
offset future U.S. federal, state and certain foreign taxable income.
As of June 30, 1994, the Company had a current ratio of 1.0 to 1, an
inventory turnover ratio of 5.2 times and negative working capital of $0.6
million. At June 30, 1994, cash and cash equivalents amounted to $9.4
million and accounts receivable amounted to $34.5 million.
At June 30, 1994, the outstanding balance of the Amended Term Loan was
$23.0 million. Pursuant to the Refinancing, the Amended Term Loan
amortization schedule was revised to provide for 24 equal installments of
$687,500 each commencing July 30, 1993 and each month thereafter, with a
final payment of $12 million payable October 1, 1995. On August 19, 1994,
the maturity date of the Amended Term Loan was extended from the original
maturity date of June 30, 1995 to October 1, 1995. The Company has the
right to prepay the Amended Term Loan at any time without penalty.
On September 28 and November 18, 1993 and on February 18 and August 19,
1994, the Company's Amended Term Loan agreement was amended to modify certain
financial covenants. The amendments on November 18, 1993 and February 18,
1994 also waived the Company's requirements with respect to certain
financial covenants for the three months ended September 30 and December 31,
1993, respectively.
On November 10, 1993, the Amended Term Loan agreement was amended to
allow the Company to defer up to four monthly principal amortization
payments, depending on cash balances, until April 1, 1994 and to provide for
up to $3 million in standby letters of credit in connection with overseas
lines of credit. In consideration of the amendment, the Company made a $3
million principal prepayment, which was applied to the term loan amortization
payment due on the October 1, 1995 maturity date, from the proceeds of
borrowings under such overseas lines of credit.
The February 18, 1994 amendment allowed the Company to further defer the
four monthly principal amortization payments until September 30, 1994, at
which time two of the deferred
F-42
monthly principal amortization payments are due, and December 31, 1994, at
which time the remaining two deferred monthly principal amortization payments
are due. The deferred payments are in addition to the regular monthly
amortization payments due on these dates. In connection with this
amendment, the Company granted an aggregate of 600,000 of stock purchase
warrants to the banks. The warrants were issued with an exercise price per
share of $1.50 (the fair market value of a share of the Company's common
stock on February 18, 1994) and expire on September 30, 1994. The warrants
provide for the possibility of an extension, at the option of the banks, of
the expiration date of these warrants in consideration of further extensions
of the four monthly principal amortization payments and a restructuring of
the Amended Term Loan. The Company and the banks are in discussions to
provide for the repayment of the four deferred monthly payments over the time
period ending October 1, 1995. An extended payment plan would provide the
Company with additional flexibility to fund its revenue growth initiatives.
The amendments to the Amended Term Loan were obtained to provide the
Company with greater financial flexibility in light of: 1) lower than
expected revenues and financial results for the first six months of fiscal
year 1994, 2) a $12 million provision for restructuring recorded during the
three months ended September 30, 1993 and 3) anticipated financial results
for the remainder of fiscal year 1994 and for fiscal year 1995. Depending
on the revenue levels attained during fiscal year 1995, the Company may need
to seek additional flexibility with respect to its obligations under its
Amended Term Loan.
The Company is currently in discussions with its banks in an attempt to
restructure its bank term loan to provide for the repayment of the $12.0
million due at maturity over a 24 month period and to establish a revolver
credit facility. The Company is also exploring a refinancing of the bank
term loan with other lenders. However, there can be no assurance that any
such agreements will be reached.
The Company has placed its Tinton Falls office facility for sale. In
the event the Company sells the facility, the Company will be required to
make a prepayment of the Amended Term Loan in an amount equal to 75% of the
net proceeds to the Company from such sale, after any payments to the lenders
under a prior term loan pursuant to a disposition proceeds sharing
arrangement. The prepayment would be applied to payments due in inverse
order of maturity.
Although management believes that anticipated improvements in cash flow
from operations resulting from the restructuring of operations and other
actions, together with reduced debt service requirements resulting from the
Refinancing, will enhance the Company's ability to manage its cash
requirements, the short term prospects for the Company's liquidity are
dependent to a significant degree upon the level of revenue from sales and
service of its computer systems and the Company's ongoing restructuring and
cost containment actions. The decline in
F-43
revenue during the six months ended December 31, 1993 adversely affected the
Company's liquidity. Although revenues for the three months ended March 31,
1994 and June 30, 1994, respectively, increased compared to the three months
ended December 31, 1993, future declines may adversely affect the Company's
ability to meet obligations when due. In addition, to the extent that sales
of the Company's new open systems significantly increase, the Company will
have increased working capital requirements to fund inventory and capital
equipment needs. Management believes its ability to fund this potential need
for increased working capital through internal cash flow will depend on the
rate of growth and there may be a need to obtain financing from outside
sources. There can be no assurance that such financing can be obtained.
The Company has not adopted the provisions of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits." This standard requires that companies providing postemployment
benefits to their employees accrue the cost of such benefits throughout the
employees service period. The Company is currently analyzing the standard to
determine the impact, if any, on the Company's reported results of operations
or financial condition. The Company is required to adopt this standard by
fiscal year 1995. The Company believes this standard will not have a
material impact on the Company's liquidity and results of operations.
F-44
CONCURRENT COMPUTER CORPORATION
SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share amounts)
Years Ended June 30,
----------------------------------------------------------
Income Statement Data 1994 1993 1992 1991 1990
--------- -------- -------- -------- ---------
Net Sales:
Computer systems $91,035 $121,578 $117,516 $142,635 $230,994
Service and other 87,996 98,886 104,056 112,310 109,119
--------- -------- -------- -------- ---------
Total 179,031 220,464 221,572 254,945 340,113
--------- -------- -------- -------- ---------
Cost of Sales:
Computer systems 51,198 55,556 56,454 90,883 116,694
Service and other 51,792 60,067 60,407 70,403 70,964
--------- -------- -------- -------- ---------
Total 102,990 115,623 116,861 161,286 187,658
--------- -------- -------- -------- ---------
Gross Margin 76,041 104,841 104,711 93,659 152,455
--------- -------- -------- -------- ---------
Operating expenses:
Research and development 23,823 26,824 26,115 38,064 43,038
Selling, general and administrative 48,651 59,279 61,813 72,595 94,442
Provisions for restructuring and
other non-recurring charges 12,000 - - 16,922 27,200
Sales and use tax credit (1,440) - - - -
--------- -------- -------- -------- ---------
Total 83,034 86,103 87,928 127,581 164,680
--------- -------- -------- -------- ---------
Operating income (loss) (6,993) 18,738 16,783 (33,922) (12,225)
Interest expense (3,486) (13,553) (16,228) (28,102) (26,666)
Interest income 634 1,167 1,559 1,395 973
Other income (expense) - net (486) (183) (269) (3,402) (1,186)
--------- -------- -------- -------- ---------
Income (loss) before provision for income taxes,
extraordinary gain (loss) and cumulative
effect of change in accounting principle (10,331) 6,169 1,845 (64,031) (39,104)
Provision for income taxes 1,300 2,300 2,800 2,803 2,550
--------- -------- -------- -------- ---------
Income (loss) before extraordinary gain (loss)
and cumulative effect of change in
accounting principles (11,631) 3,869 (955) (66,834) (41,654)
Extraordinary gain (loss) on early
extinguishment of debt (23,193) - 61,102 - -
Cumulative effect of change in accounting principles
for income taxes and postretirement bene (5,000) - - - -
--------- -------- -------- -------- ---------
Net income (loss) ($39,824) $3,869 $60,147 ($66,834) ($41,654)
========= ======== ======== ======== =========
Income (loss) per share:
Income (loss) before extraordinary gain (loss)
and cumulative effect of change in
accounting principles ($0.41) $0.40 ($0.13) ($35.46) ($22.85)
Extraordinary gain (loss) on early
extinguishment of debt (0.83) - 8.13 - -
Cumulative effect of change in accounting principles
for income taxes and postretirement be (0.18) - - - -
--------- -------- -------- -------- ---------
Net income (loss) (a) ($1.42) $0.40 $8.00 ($35.46) ($22.85)
========= ======== ======== ======== =========
(a) Net income (loss) per share for all periods has been restated for the effect of the Company's
one for ten reverse stock split.
F-45
CONCURRENT COMPUTER CORPORATION
SELECTED FINANCIAL DATA
(Dollars in Thousands, except per share amounts)
At June 30,
-----------------------------------------------------
Balance Sheet Data 1994 1993 1992 1991 1990
------ ------- ------- ------- -------
Cash and short-term investments $9,374 $30,422 $20,611 $23,439 $25,725
Working capital (616) 36,673 22,742 (146,937) (124,499)
Total assets 123,170 157,086 158,136 213,351 298,883
Long-term debt 13,240 67,938 61,613 2,131 13,632
Redeemable preferred stock - - - 900 900
Stockholders' equity (deficiency) 35,048 18,503 14,739 (69,195) (2,442)
Book value per share (a) $1.18 $1.94 $1.61 ($36.15) ($1.32)
* Reclassified to conform to current year presentation.
(a) Book value per share for all periods has been restated for the effect of the Company's
one for ten reverse stock split. Book value per share at June 30, 1993, includes 6,981,706 shares of
Convertible Preferred Stock which was converted, pursuant to the Company's comprehensive
refinancing on July 21, 1993, into the Company's common stock at a ratio of one to one.
F-46
Schedule V
Concurrent Computer Corporation
Property, Plant and Equipment
For the Years Ended June 30, 1994, 1993 and 1992
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
- - -------- -------- -------- -------- -------- --------
Other
Balance at Changes- Balance
Beginning Additions Retire- Add at End
Description of Year at Cost ments (Deduct)(a) of Year(b)
- - ---------- ---------- --------- -------- ----------- ----------
1994
- - ----
Land $ 5,244 $ - $ - $ 31 $ 5,275
Buildings 16,569 50 (181) 92 16,530
Machinery and
Equipment 41,638 7,534 (2,167) 576 47,581
-------- -------- -------- --------- --------
$ 63,451 $ 7,584 $(2,348) $ 699 $ 69,386
======== ======== ======== ========= ========
1993 (c)
- - ----
Land $ 5,311 $ - $ - $ (67) $ 5,244
Buildings 15,645 1,247 (176) (147) 16,569
Machinery and
Equipment 33,660 9,322 (307) (1,037) 41,638
-------- -------- -------- --------- --------
$ 54,616 $ 10,569 $ (483) $ (1,251) $ 63,451
======== ======== ======== ========= ========
1992 (c)
- - ----
Land $ 5,210 $ - $ - $ 101 $ 5,311
Buildings 19,247 1,014 (45) (4,571) 15,645
Machinery and
Equipment 113,626 8,966 (1,916) (87,016) 33,660
-------- -------- -------- --------- --------
$138,083 $ 9,980 $(1,961) $(91,486) $ 54,616
======== ======== ======== ========= ========
(a) Includes translation effect of $847, $(422), and $2,598 for the
years ended June 30, 1994, 1993 and 1992, respectively. For the year
ended June 30, 1992, includes the adjustment of $(93,407) of
aggregate accumulated depreciation which was eliminated at December
31, 1991 against gross property, plant, and equipment, to reflect
estimated fair value pursuant to the Company's quasi-reorganization.
(b) Property, Plant and Equipment is depreciated on a straight-line
basis over the estimated useful lives of assets ranging from three to
forty years. Leasehold Improvements are amortized over the shorter
of the useful life of the improvement or the term of the related
lease.
(c) Reclassified to conform to current year presentation.
S-1
Schedule VI
Concurrent Computer Corporation
Accumulated Depreciation and Amortization
of Property, Plant and Equipment
For the Years Ended June 30, 1994, 1993 and 1992
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
- - -------- -------- -------- -------- -------- --------
Additions Other
Balance at Charged to Changes- Balance
Beginning Costs and Retire- Add at End
Description of Year Expenses ments (Deduct)(a) of Year
- - ----------- ---------- --------- -------- ----------- --------
1994
- - ----
Buildings $ 2,125 $ 1,311 $ (154) $ 32 $ 3,314
Machinery and
Equipment 15,003 10,374 (1,797) (250) 23,330
------- ------- -------- ------- -------
$17,128 $11,685 $(1,951) $ (218) $26,644
======= ======= ======== ======= =======
1993 (b)
- - ----
Buildings $ 702 $ 1,454 $ (31) $ - $ 2,125
Machinery and
Equipment 4,551 11,214 (53) (709) 15,003
------- ------- -------- -------- -------
$ 5,253 $12,668 $ (84) $ (709) $17,128
======= ======= ======== ======== =======
1992 (b)
- - ----
Buildings $ 4,195 $ 1,551 $ (29) $ (5,015) $ 702
Machinery and
Equipment 78,721 14,140 (1,078) (87,232) 4,551
------- ------- -------- -------- -------
$82,916 $15,691 $(1,107) $(92,247) $ 5,253
======= ======= ======== ======== =======
(a) Includes translation effect of $357 and $1,444 for the years ended
June 30, 1994 and 1992, respectively. The translation effect for the
year ended June 30, 1993 was not material. For the year ended June
30, 1992, includes the adjustment of $(93,407) of aggregate
accumulated depreciation which was eliminated as of December 31,
1991, against gross property, plant and equipment, to reflect
estimated fair value pursuant to the Company's quasi-reorganization.
(b) Reclassified to conform to current year presentation.
S-2
Schedule VIII
Concurrent Computer Corporation
Valuation and Qualifying Accounts
For the Years Ended June 30, 1994, 1993 and 1992
(Dollars in thousands)
Balance at Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Deductions (a) of Year
- - ----------- ---------- ---------- ---------- -------- -------
Reserves and allowances
deducted from asset
accounts:
1994
- - ----
Reserve for inventory
obsolescence and
shrinkage $ 3,167 $ 4,461 $(1,753)(b) $ 263 $ 6,138
Allowance for
doubtful accounts 2,173 2,114 (882)(c) - 3,405
1993
- - ----
Reserve for inventory
obsolescence and
shrinkage $ 1,662 $ 1,840 $ (335)(b) $ - $ 3,167
Allowance for
doubtful accounts 2,121 52 - - 2,173
1992
- - ----
Reserve for inventory
obsolescence and
shrinkage $15,222 $ 2,387 $(3,469)(b) $(12,478) $ 1,662
Allowance for
doubtful accounts 4,972 738 (518)(c) (3,071) 2,121
(a) For the year ended June 30, 1992, includes the adjustments of
$(12,812) of inventory reserves and $(3,257) of allowance for doubtful
accounts, which were eliminated as of December 31, 1991, to reflect
estimated fair value of the related asset pursuant to the Company's
quasi-reorganization. In addition, includes adjustments to the reserve
account for foreign currency translation.
(b) Charges and adjustments to the reserve account primarily for inventory
write offs.
(c) Charges to the reserve account for uncollectible amounts written off
during the year.
S-3
Schedule IX
Concurrent Computer Corporation
Short-term Borrowings
For the Years Ended June 30, 1994, 1993 and 1992
(Dollars in thousands except percentages)
Column A Column B Column C Column D Column E Column F
- - -------- -------- -------- -------- -------- --------
Weighted Maximum Weighted
Category Average Month-end Average Average
of Aggregate Interest Amount Amount Interest
Short-term Balance Rate at Outstanding Outstanding Rate
Borrowings at End End of During the During the During the
(a) of Period Period Period Period (b) Period (c)
- - ----------- --------- -------- ----------- ----------- ----------
1994
- - ----
Bank
Borrowings $ 5,749 3.41% $ 5,749 $ 4,202 3.81%
1993
- - ----
Bank
Borrowings $ 2,783 5.93% $ 3,904 $ 2,548 5.18%
1992
- - ----
Bank
Borrowings $ 2,064 6.44% $ 8,946 $ 4,135 8.08%
(a) Bank Borrowings are generally non-collateralized debt obligations
including those due on demand, as well as those with fixed terms. With
respect to some Bank Borrowings, interest rates are fixed; in other
cases, interest floats in accordance with a prescribed index.
(b) The average amount outstanding during the period was determined on
the basis of average month-end balances of short-term borrowings.
(c) The weighted average interest rate during the period was computed by
dividing the interest expense on short-term borrowings by the average
month-end balances.
S-4
Schedule X
Concurrent Computer Corporation
Supplementary Income Statement Information
For the Years Ended June 30, 1994, 1993 and 1992
(Dollars in thousands)
The following items have been charged to costs and expenses as
stated:
1994 1993 1992
------ ------ ------
Maintenance and repairs $2,110 $2,342 $1,708
Advertising $1,862 $1,661 $1,447
The following items have been charged to costs and expenses but do
not exceed one percent of net sales by category:
- - -- Taxes, other than payroll and income taxes
- - -- Royalties
S-5
EXHIBIT INDEX
10.7(c) Amendment No. 2 dated November 10, 1993 to Second
Amended and Restated Credit Agreement.
10.7(d) Amendment No. 3 dated November 18, 1993 to Second
Amended and Restated Credit Agreement.
10.7(e) Amendment No. 4 dated February 18, 1994 to Second
Amended and Restated Credit Agreement.
10.7(f) Amendment No. 5 dated August 19, 1994 to Second Amended
and Restated Credit Agreement.
11.0 Statement re computation of per share earnings.
22.0 Subsidiaries of Registrant.
24.1 Consent of Coopers & Lybrand L.L.P.