SECURITIES AND EXCHANGE COMMISSIOON
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pusuant to Section 13 or 15(d) of the Securities
- ----- Exchange Act of 1934
For the quarterly period ended March 31, 1995 or
_____ Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission file number 1-6435
---------------------------------
Bolt Beranek and Newman Inc.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2164398
- ------------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 CambridgePark Drive, Cambridge, Massachusetts 02140
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 873-2000
---------------------
__________________________________________________________________________
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Number of shares of common stock, $1.00 par value, outstanding as of
April 30, 1995: 17,283,345
Exhibit index appears on page 17
BOLT BERANEK AND NEWMAN INC.
INDEX
Page No.
--------
Part I. Financial Information
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 ......3
Consolidated Statements of Operations -
Nine Months Ended March 31, 1995 and 1994 .......4
Consolidated Balance Sheets -
as of March 31, 1995 and June 30, 1994 ..........5
Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1995 and 1994 .......6
Notes to Consolidated Financial Statements ..........7
Management's Discussion and Analysis of Financial
Condition and Results of Operations ............10
Part II.Other Information
Item 6. Exhibits and Reports on Form 8-K ..........16
Signatures .........................................16
PART I. FINANCIAL INFORMATION
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Dollars in thousands, except per-share data
Three Months Ended
--------------------------
March 31 March 31
1995 1994
----------- -----------
Revenue:
Services $ 42,996 $ 40,847
Products 8,961 7,678
----------- -----------
51,957 48,525
----------- -----------
Costs and expenses:
Cost of services 31,398 29,314
Cost of products 2,117 2,937
Research and development expenses 6,662 5,954
Selling, general and administrative expenses 17,377 12,676
----------- -----------
57,554 50,881
----------- -----------
Loss from operations (5,597) (2,356)
Interest income 1,724 494
Interest expense (1,103) (1,142)
Minority interests (11,826) 743
Other income (expense), net 105,096 2
----------- -----------
Income (loss) before income taxes 88,294 (2,259)
Provision for income taxes 13,827
----------- -----------
Net income (loss) $ 74,467 $ (2,259)
=========== ===========
Net income (loss) per share $ 4.11 $ (.14)
=========== ===========
Shares used in per-share calculations 18,118,000 16,295,000
The accompanying notes are an integral
part of the consolidated financial statements
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Dollars in thousands, except per-share data
Nine Months Ended
--------------------------
March 31 March 31
1995 1994
----------- -----------
Revenue:
Services $ 128,366 $ 124,090
Products 26,506 22,772
----------- -----------
154,872 146,862
----------- -----------
Costs and expenses:
Cost of services 87,493 86,815
Cost of products 9,096 9,031
Research and development expenses 18,980 17,179
Selling, general and administrative expenses 51,498 40,245
----------- -----------
167,067 153,270
----------- -----------
Loss from operations (12,195) (6,408)
Interest income 2,933 1,718
Interest expense (3,323) (3,478)
Minority interests (11,085) 1,328
Other income (expense), net 108,631 968
----------- -----------
Income (loss) before income taxes 84,961 (5,872)
Provision for income taxes 14,227
----------- -----------
Net income (loss) $ 70,734 $ (5,872)
=========== ===========
Net income (loss) per share $ 3.96 $ (.36)
=========== ===========
Shares used in per-share calculations 17,864,000 16,116,000
The accompanying notes are an integral
part of the consolidated financial statements
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED BALANCE SHEETS
Dollars in thousands March 31 June 30
1995 1994
----------- -----------
(Unaudited) (Audited)
ASSETS
- ------
Current assets:
Cash and temporary investments $ 118,576 $ 67,115
Restricted cash 12,069
Accounts receivable, net 47,160 41,503
Inventories, net 1,416 1,114
Other current assets 3,739 3,592
----------- -----------
Total current assets 182,960 113,324
Property, plant and equipment, net 25,841 19,658
Goodwill, net 18,357
Other assets 3,202 2,958
----------- -----------
$ 230,360 $ 135,940
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 6,147 $ 4,279
Accrued compensation and retirement plan 5,695 5,198
Accrued restructuring charges 9,598 12,566
Income taxes payable 12,594
Other accrued costs 19,192 19,832
Deferred revenue 15,809 11,112
----------- -----------
Total current liabilities 69,035 52,987
6% convertible subordinated debentures due 2012 73,510 73,510
Commitments and contingencies
Minority interests 3,362 2,172
Shareholders' equity:
Common stock, $1 par value, authorized:
100,000,000 shares; issued: 21,802,090
shares at March 31, 1995 and 21,253,890
shares at June 30, 1994 21,802 21,254
Additional paid-in capital 59,083 55,916
Foreign currency translation adjustment 1,148 337
Retained earnings (deficit) 34,607 (36,127)
----------- -----------
116,640 41,380
Less shares in treasury, at cost: 4,527,464
shares at March 31, 1995 and 4,797,734
shares at June 30, 1994 32,187 34,109
----------- -----------
Total shareholders' equity 84,453 7,271
----------- -----------
$ 230,360 $ 135,940
=========== ===========
The accompanying notes are an integral
part of the consolidated financial statements
BOLT BERANEK AND NEWMAN INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Dollars in thousands Nine Months Ended
---------------------------
March 31 March 31
1995 1994
Cash flows from operating activities: ------------ ------------
Net income (loss) $ 70,734 $ (5,872)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 6,919 6,659
Amortization of goodwill and capitalized software 465 1,120
Contract adjustments (3,546)
Gain from LightStream sale (105,096)
Minority interest 11,826 743
Change in assets and liabilities:
Accounts receivable (6,163) 558
Inventories (516) 662
Other assets (100) 3,635
Accounts payable and other liabilities 2,169 3,535
Accrued restructuring charges (2,968) (4,319)
Income taxes payable 12,594
Deferred revenue 3,061 (70)
Other (639) (2,707)
------------ ------------
Total adjustments (81,994) 9,816
------------ ------------
Net cash provided (used) by operating
activities (11,260) 3,944
Cash provided (used) by investing activities:
Proceeds from LightStream sale 98,200
Restricted cash (12,069)
Additions to property, plant and equipment (11,313) (4,479)
Acquisition of SURAnet (12,960)
Acquisition of BARRnet (2,000)
------------ ------------
Net cash provided (used) by investing
activities 59,858 (4,479)
------------ ------------
Cash provided by financing activities:
Proceeds from employee stock purchase and
option plans 2,863 2,197
Proceeds from sale of LightStream stock to
minority shareholder 5,000
Sale of treasury shares 213
------------ ------------
Cash provided by financing activities 2,863 7,410
------------ ------------
Net increase in cash and temporary investments 51,461 6,875
Cash and temporary investments-beginning of period 67,115 56,835
------------ ------------
Cash and temporary investments-end of period $ 118,576 $ 63,710
============ ============
Supplemental cash flow information:
Interest paid $ 2,205 $ 2,225
============ ============
The accompanying notes are an integral
part of the consolidated financial statements
BOLT BERANEK AND NEWMAN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A.Basis of Presentation
The financial information included herein, with the exception of the
consolidated balance sheet at June 30, 1994, has not been audited.
However, in the opinion of management, all material adjustments,
consisting only of normal recurring accruals necessary for a fair
presentation of the results for these periods, have been reflected. The
results for these periods are not necessarily indicative of the results
for the full fiscal year.
Certain amounts reported for the prior periods presented have been
reclassified to be consistent with the current year's presentation.
These reclassifications primarily relate to the formation in FY1995 of
distinct commercial business units.
B.SURAnet Acquisition
On March 31, 1995, BBN Planet Corporation acquired, from the
Southeastern Universities Research Association, the SURAnet
Internet service organization, a provider of Internet services
in the Southeast. Substantially all of the SURAnet net assets were
acquired for approximately $12,960,000 in cash and the assumption of
certain operating liabilities of approximately $5,100,000. The
transaction was accounted for using the purchase method of accounting.
Accordingly, the acquired assets and liabilities were recorded at their
estimated fair values on the date of the acquisition. The aggregate
cost in excess of net assets acquired of approximately $14,000,000 is
being amortized over ten years.
C.Sale of LightStream Corporation
The sale of the assets of the company's majority-owned subsidiary
LightStream Corporation to Cisco Systems, Inc. ("Cisco") for a cash
consideration of $120,000,000, which was completed on January 11, 1995, is
reflected in the company's third quarter results. The company will receive
83% of the net proceeds and Ungermann-Bass Networks, Inc., which owns the
minority interest in LightStream, will receive the remainder. Of the cash
consideration paid to LightStream, $12,000,000 was placed in a restricted
escrow fund, and periodically declining portions of such amount together with
interest are to be maintained for up to two years following the closing of
the transaction, subject to any claims under the Asset Purchase Agreement by
Cisco. As part of the sale, Cisco hired substantially all of the employees
of LightStream, and is operating from the company's former facility in
Billerica, Massachusetts. The company recorded a pre-tax gain from the
sale of approximately $105,000,000 before minority interest of
$11,800,000 and income taxes of $13,800,000. LightStream's FY1995
results through the date of the sale include revenue of approximately
$8,400,000 and an operating loss of approximately $3,700,000. For the
comparable nine-month period of FY1994, the company's ATM activities
resulted in aggregated revenue of approximately $1,100,000 and an
operating loss of approximately $11,000,000. In FY1994, prior to the
formation of LightStream, the company's ATM activities were conducted by
its then Communications Division.
BOLT BERANEK AND NEWMAN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
D.Other Income
In December 1994, the company settled a claim with the U.S. government
for approximately $700,000. This settlement resulted in an
approximately $2,550,000 reduction in liabilities and is included in
other income for the nine months ended March 31, 1995.
Other income for the nine months ended March 31, 1995 and 1994 also
includes approximately $900,000 resulting from lower than expected costs
associated with a previously divested contract.
E.Commitments and Contingencies
The company, like other companies doing business with the U.S.
government, is subject to routine audit, and in certain circumstances to
inquiry, review, or investigation, by U.S. government agencies, of its
compliance with government procurement policies and practices. In April
1991, the company was informed that it was the subject of an
investigation by U.S. government agencies of its compliance with certain
government procurement policies and practices. No allegations have been
made by the government agencies. Based upon government procurement
regulations, under certain circumstances a contractor violating or not
complying with procurement regulations can be subject to legal or
administrative proceedings, including fines and penalties, as well as be
suspended or debarred from contracting with the government. The
company's policy has been and continues to be to conduct its activities
in compliance with all applicable rules and regulations.
The company is subject to other legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management,
the results of these other legal proceedings and claims will not have a
material effect on the company's consolidated financial position and
results of operations.
BOLT BERANEK AND NEWMAN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
F.Segment Information
The company conducts its business in three business segments:
"Internetworking" which consists of its BBN Planet subsidiary; the
networking activities of its Systems and Technologies Division,
including network services, defense communications, X.25 network systems
and the T/10 Integrated Access Device business activities; and the
former activities of its LightStream subsidiary; "Data analysis
software" which consists primarily of its BBN Software Products
subsidiary; and "Collaborative systems and acoustic technologies" which
includes the Systems and Technologies Division's services in distributed
computing, education technology, speech processing and sensor systems
and acoustic engineering; and the activities of its BBN HARK Systems
subsidiary. The following is a summary of business segments information
for the three and nine months ended March 31, 1995 and 1994,
respectively. All data is shown net of intersegment transactions.
Three Months Ended Nine Months Ended
March 31 March 31
____________________ ____________________
Dollars in Thousands 1995 1994 1995 1994
_________ _________ _________ _________
Revenue:
Internetworking $ 19,326 $ 18,616 $ 65,612 $ 57,264
Data analysis software 10,609 8,774 27,000 26,383
Collaborative systems and
acoustic technologies 22,022 21,135 62,260 63,215
_________ _________ _________ _________
$ 51,957 $ 48,525 $ 154,872 $ 146,862
========= ========= ========= =========
Income (loss) from operations:
Internetworking $ (1,847) $ (2,912) $ (4,806) $ (7,647)
Data analysis software (1,322) 223 (3,602) 633
Collaborative systems and
acoustic technologies (1,363) 424 (1,315) 1,694
Unallocated corporate expenses (1,065) (91) (2,472) (1,088)
_________ _________ _________ _________
$ (5,597) $ (2,356) $ (12,195) $ (6,408)
========= ========= ========= =========
Certain amounts reported for the prior periods presented have been
reclassified to be consistent with the current year's presentation.
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Summary
- -------
For the three months ended March 31, 1995, the company reported net
income of $74.5 million, or $4.11 per share, on revenue of $52.0 million.
These results include a pre-tax gain of approximately $105.0 million from
the previously announced sale of substantially all of the assets of
LightStream Corporation to Cisco Systems, Inc. For the same period a year
ago, the company reported a net loss of $2.3 million, or $.14 per share, on
revenue of $48.5 million. The company's loss from operations in the third
quarter of FY1995 was $5.6 million compared to $2.4 million in the
comparable prior year period.
For the nine months ended March 31, 1995, the company reported a loss
from operations of $12.2 million, compared to a $6.4 million loss from
operations for the same period a year earlier. Including the $105.0
million pre-tax gain from the LightStream sale, the company reported net
income of $70.7 million, or $3.96 per share, on revenue of $154.9 million,
compared with a net loss of $5.9 million, or $.36 per share, on revenue of
$146.9 million for the same period a year earlier.
Primarily as a result of the LightStream sale, the company's cash
position as of March 31, 1995 improved to $130.6 million and the company's
equity position improved to $84.5 million.
The company's loss from operations for both the third quarter and the
nine months of FY1995 reflects increased spending on sales, marketing and
new product development, particularly at BBN Planet Corporation and BBN
Software Products Corporation. The loss also includes a $0.7 million
charge related to the purchase by BBN Software Products of IBM's Process
Analysis Navigation System software which will be used in the development
of a new manufacturing methodology software system.
The company's increased spending represents an accelerated investment in
building the infrastructure necessary to capitalize on opportunities in the
commercial marketplace. The company's FY1995 third quarter revenue
increase results primarily from higher sales at BBN Planet Corporation and
BBN Software Products Corporation. For the nine months ended March 31,
1995, the revenue increase reflects higher sales primarily at LightStream
Corporation and at BBN Planet Corporation, partially offset by declines in
the company's acoustic and defense communications businesses. The
company's Systems and Technologies Division, which is primarily focused on
contract research and development for the U.S. government, continued to be
profitable in the third quarter of FY1995.
Over the next several quarters, the company anticipates continued increased
spending related primarily to its commercial activities and its return to
profitability is highly dependent upon revenue growth principally at BBN
Planet Corporation and BBN Software Products Corporation.
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Revenue
- -------
Revenue for the three and nine months ended March 31, 1995 increased
$3.4 million and $8.0 million, respectively, from the prior year periods.
The increase for the three-month period reflects higher revenue at BBN
Planet Corporation and BBN Software Products Corporation. The nine-month
increase reflects higher revenue at LightStream Corporation and at BBN
Planet Corporation, partially offset by continued declines in the company's
acoustic and defense communications activities. Services revenue from
LightStream Corporation for the nine months ended March 31, 1995 of $3.6
million included up-front technology license and initial development fees
from previously announced strategic partnering agreements with Tellabs
Operations, Inc. and NEC Corporation.
The company, like other companies doing business with the Department of
Defense, has been adversely affected by reduced defense spending and
expects this general decline and attendant increased competition within the
defense industry to continue over the next several years. Uncertainty
continues to exist on the size and scope of reductions in future defense
budgets and their impact on the company's defense-related business.
Further, there is the possibility that funding limitations could result in
a reduction, delay, or cancellation of existing or emerging programs.
These factors have reduced the company's U.S. government revenue and
operating margins in recent fiscal years, and this trend is continuing in
FY1995, particularly in the acoustic and defense communications systems
areas.
The Department of Defense's stated intention is to reduce its
procurements but to maintain a strong defense technology base and to fund
research and development in key areas of science and technology at near
current levels. The company has strong capabilities in certain of these
areas but anticipates that competition in all defense-related areas will
continue to be intense. Accordingly, the company is experiencing
competitive pressure which is reducing profitability and decreasing
government revenue particularly in the acoustic area. In addition, the
company expects that the consolidation of large defense contractors into a
smaller number of very large, diverse organizations will continue, and that
this will place additional downward pressure on prices.
In FY1991, the Defense Information Systems Agency awarded the company a
one-year contract in support of the Defense Data Network, with up to four
one-year optional extensions. In September 1994, the company completed the
third option year of the contract, valued at approximately $20 million. In
October 1994, the company was awarded the fourth and last option year of
the contract, valued at approximately $15 million, which will continue
these activities through October 1995. There can be no assurance that this
activity will continue beyond October 1995, and if there is additional
activity related to this contract, the value of any such award, even if
received by the company, would be expected to be lower than the value of
the current year's option award. The company is not aware of any other
defense communications procurements or requests for proposals for which the
company could compete to replace the company's activities under this
contract. Approximately $13.9 million and $15.0 million of revenue has
been recorded under the contract in the nine months ended March 31, 1995
and 1994, respectively.
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
The company conducts its commercial businesses in environments
characterized by intense competition, shortened product cycles and rapid
technological change, which require significant research and development
expenditures to develop new products and services which address emerging market
requirements and to improve existing products. In recent years, the
company's traditional commercial businesses, consisting principally of
RS/Series(TM) data analysis and visualization software products and X.25
network systems, has been experiencing substantially lower revenue.
During that period, the company invested heavily in the development of
commercial products, primarily the LightStream(TM) Asynchronous Transfer
Mode ("ATM") switch, BBN/Cornerstone(TM) data analysis and visualization
software and the T/10(TM) Integrated Access Device and recently in Internet
services.
The sale, which took place on January 11, 1995, of substantially all of the
assets of LightStream Corporation to Cisco Systems, Inc., is reflected in the
company's third quarter results. Reference is made to footnote C to the
consolidated financial statements for further discussion of this transaction.
The company's T/10 activities are now being primarily focused on a limited
number of reseller and strategic opportunities, and the future success of
the T/10 is highly dependent on these opportunities. To date revenue from
the T/10 has not been financially significant.
The company's data analysis software products business has been affected
by the growth of distributed processing and the associated use of personal
computers, workstations, and other desktop computers. The company's mature
data analysis software products, primarily the RS/Series software,
currently operate primarily on minicomputer systems. As demand for
minicomputer-based software continues to decline, the company is
experiencing substantially lower RS/Series software revenue and downward
pressure on prices. During the fourth quarter of FY1993, BBN Software
Products Corporation introduced its BBN/Cornerstone data analysis and
visualization software specifically designed for use on desktop computers
in a client/server environment. The initial release of BBN/Cornerstone
software operates on Unix-based workstations, utilizing a number of
established graphical user interfaces. Sales of BBN/Cornerstone to date in
FY1995 have not been financially significant. The company is more tightly
integrating its BBN/Cornerstone software with its RS/Series products to
provide platform migration and ease of use for its existing RS/Series
customer base, and to provide greater capabilities and flexibility in
client/server computing environments. During the third quarter of FY1995,
BBN Software Products began shipment of BBN/Cornerstone for Windows. In
March 1995, for $0.7 million BBN Software Products Corporation acquired the
exclusive rights to IBM's Process Analysis Navigation System ("PANS"), a
manufacturing methodology and software system developed by IBM's
Manufacturing Technology Center. BBN Software Products Corporation will
integrate and significantly enhance PANS methodology and technology with
its data analysis software. As part of these efforts, the company is
increasing its research and development expenditures in its software business
and is investing in additional sales and marketing personnel. The company is
focusing its software application solutions primarily on the manufacturing and
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
health industries. BBN Software Products Corporation health industry offerings
include applications for clinical data management (BBN/Clintrial(TM)) and
adverse events tracking (BBN/ClinTRACE(TM)). The company believes that the
future success of its data analysis and visualization software will depend
primarily upon the development and marketing of software applications that
permit operation on personal computers, continued market acceptance of health
industry software products, and development and timely integration of its
BBN/Cornerstone and RS/Series software.
The company is significantly increasing its investment in the emerging
market for Internet services. Such investment includes a substantial
increase in engineering and sales personnel to support expansion of its
Internet services for business and organizations, including managed access,
security, training and consulting. These investments are expected to
adversely affect the company's financial results for FY1995 and FY1996.
The company's strategy is to provide managed connectivity services and
value-added services to businesses and other organizations. The market for
Internet services is rapidly expanding, and there are considerable
uncertainties as to how the market will develop. Further, the Internet
services business is intensely competitive, and competition is expected to
increase. Competitors and companies announcing plans to enter the market
currently include, in addition to regional and national Internet access
providers and on-line service providers, large communications and software
companies, such as MCI, AT&T, IBM and Microsoft, and there are no substantial
barriers to entry. In March 1995, BBN Planet Corporation expanded its service
offerings from regional to nationwide availability. The company's success in
the Internet services market will depend heavily upon its ability to capitalize
on this recently expanded geographic coverage and related support capabilities
and to provide high quality managed Internet connectivity and functional,
unique, value-added services for organizational users of the Internet at a
competitive cost. The company needs to continue to rapidly attract
additional experienced personnel in order to continue to expand the
existing customer base and grow the business.
In March 1995, BBN Planet Corporation acquired substantially all of the
assets of the Southeastern Universities Research Association Internet
service ("SURAnet"), a leading provider of Internet services in the
Southeast, for approximately $13.0 million in cash and the assumption of
certain operating liabilities of approximately $5.1 million.
In March 1995, the company announced an agreement under which it will
build, maintain and operate a limited portion of the America Online ("AOL")
nationwide, high-speed, dial-in network. The five-year contract for
building and operating the network is expected to be valued at
approximately $11.0 million a year which includes substantial pass-through
costs to the company for telecommunications and other services. As part of
the agreement, the company will have limited access to business use of the
network's excess dial-in capacity, which the company plans to resell.
In support of its Internet business strategy, the company may make additional
acquisitions or enter into strategic alliances.
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
Cost of Sales
- -------------
Cost of services and products as a percentage of revenue for the three
and nine months ended March 31, 1995 was 65% and 62%, respectively,
compared to 66% and 65%, respectively, for the corresponding prior year
periods. The decrease in the cost of sales percentages is principally due
to a mix of higher margin software product sales in the third quarter and,
for the nine-month period, both the higher margin software product sales and
technology license and initial development fees from strategic partnering
agreements at LightStream Corporation concentrated in the earlier periods
of FY1995.
Research and Development Expenses
- ---------------------------------
Research and development expenses for the three and nine months ended
March 31, 1995 were $6.7 million and $19.0 million, respectively, compared
to $6.0 million and $17.2 million, respectively, for the comparable prior
year periods. The majority of the company's internally funded research and
development spending is currently directed principally toward data analysis
and visualization software products. The increases in the FY1995 periods
relate primarily to such software products, including the $0.7 million
charge for the purchase by BBN Software Products Corporation of the PANS
technology, partially offset by decreased spending on the ATM switch and the
T/10 Integrated Access Device. Research and development expenses for the
ATM switch for the nine months ended March 31, 1995 were $3.9 million compared
to $6.5 million for the comparable prior year period; such expenses were $2.2
million for the three months ended March 31, 1994.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative expenses for the three and nine
months ended March 31, 1995 increased $4.7 million and $11.3 million,
respectively, from the prior year periods reflecting the investment the
company is making primarily in the sales and marketing of its new services
and products at BBN Planet Corporation, BBN Software Products Corporation
and BBN Hark Systems Corporation. The company anticipates continued increased
spending related to its commercial activities for the next several quarters.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1995, the company's cash and temporary investments,
which consisted primarily of money market funds and short term U.S.
government securities, were $118.6 million, an increase of $51.5 million
from June 30, 1994. The third quarter increase is primarily attributable to
the LightStream sale which, as of March 31, 1995, has provided $98.2 million
of cash proceeds to the company after payment of certain expenses associated
with the sale and initial amounts due to the minority shareholder. Additional
cash payments, currently estimated to be $18.3 million, remain to be paid by
the company for income taxes, amounts due the minority shareholder, and final
expenses of sale.
BOLT BERANEK AND NEWMAN INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(continued)
On a year-to-date basis, the $98.2 million of cash proceeds from the
LightStream sale and $2.9 million of cash generated from employee stock
purchase and option plans have been offset by $15.0 million expended for the
SURAnet and BARRnet acquisitions, $12.1 million in restricted cash, $11.3
million for capital expenditures, and $11.2 million of cash used by
operations. The restricted cash of $12.1 million will become available to the
company in varying amounts, net of any claims, within two years of the closing
of the LightStream sale.
The increase in the company's accounts receivable balance is primarily due to
the increase in revenue.
The company's accrued restructuring balance relates to excess facilities
costs, under long-term leases, which were associated with the company's
FY1993 downsizing. The company has sublet or assigned the majority of its
excess facilities under agreements with terms expiring between 1998 and 2001.
The company anticipates a continued high level of capital expenditures for
the near-term in support of the accelerated investment in commercial
activities. In addition, the company may use a portion of its cash resources
for acquisitions of or investments in businesses, products or technologies or
through the formation of strategic partnerships with other companies.
The company believes that its liquidity in the form of existing cash
resources is adequate to meet its operating requirements through FY1996.
At present, the company does not have any formal bank lines of credit.
PART II. OTHER INFORMATION
BOLT BERANEK AND NEWMAN INC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Deferred Compensation Plan
11.1 Computation of Net Income (Loss) Per Share
27.1 Financial Data Schedule
(b) The company filed a Current Report on Form 8-K dated January 11,
1995 with the Commission on January 26, 1995, reporting on the
sale of the assets of LightStream Corporation to Cisco Systems,
Inc. and filing pro forma financial information consisting of a
pro forma balance sheet as of December 31, 1994, and pro forma
statements of operations for the year ended June 30, 1994 and
for the six months ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOLT BERANEK AND NEWMAN INC.
By Ralph A. Goldwasser
----------------------------------
Ralph A. Goldwasser
Senior Vice President and Chief Financial Officer
Date: May 15, 1995
BOLT BERANEK AND NEWMAN INC.
LIST OF EXHIBITS
10.1 Deferred Compensation Plan
11.1 Computation of Net Income (Loss) Per Share
27.1 Financial Data Schedule