SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JULY 21, 1994
CONTROL DATA SYSTEMS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-20252 41-1718075
(Commission File Number) (I.R.S. Employer Identification Number)
4201 LEXINGTON AVENUE NORTH
ARDEN HILLS, MINNESOTA 55126-6198
(Address of Principal Executive Offices) (Zip Code)
(612) 482-2100
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
Control Data Systems, Inc. (the "Registrant" or the "Company") has
announced results of its second quarter for fiscal 1994. The Company reported
1994 second quarter net earnings of $0.7 million, or $0.05 per share, on
revenues of $131.3 million. This compares to net earnings of $4.3 million, or
$.32 per share, on revenues of $114.9 million for the second quarter of 1993.
While revenues were 14 percent greater than the second quarter of 1993, the
profit levels reached in the second quarter fell below the company's internal
plan.
"We are pleased that we have been able to once again report a profitable
quarter," said Jim Ousley, president and chief executive officer of Control Data
Systems, "but we must continue to stabilize the operating profit margins
required for success in our systems integration business model."
The company's second quarter profit levels were influenced by difficulties
in certain European countries, the continuing deferral of application
development and systems integration projects in Asia, and the redirection of a
few commercial integration projects in the United States.
"In light of these second quarter factors, and the projected weakness we
customarily experience in the third quarter, our current expectations for 1994
now appear to be below our previous expectations," said Ousley. "Gross margins,
while slightly improved over the first quarter, will continue to be
significantly lower than the previous year when proprietary hardware sales were
a much more significant part of the revenue stream.
"Our experience in the second quarter also suggests that additional steps
need to be taken to sustain acceptable profitability, which is a function both
of continued revenue growth in our new business and effective controls on
expenses and resources," said Ousley.
"When we embarked on our strategy to transition the business, we knew it
would be difficult," said Ousley. "We are very encouraged, however, by the
significant orders received during the second quarter from new customers in the
Fortune 500 and major international organizations. Prospect activity remains
extremely strong and demand for large scale network and application integration,
particularly in the area of electronic commerce, appears promising. Although the
realignment of our resources to support these efforts remains a major challenge,
we are confident in the viability and size of this market opportunity as well as
our ability to address it."
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Control Data Systems, Inc.
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
------- -------- -------- --------
Total Revenues $131,274 $114,901 $276,904 $217,646
Total Cost of Revenues 92,115 71,095 197,729 132,697
Gross Profit 39,159 43,806 79,175 84,949
Operating Expenses:
Selling, General and
Administrative 34,745 34,394 69,916 67,940
Technical 3,649 7,296 7,230 14,715
Total Operating Expenses 38,394 41,690 77,146 82,655
Earnings from Operations 765 2,116 2,029 2,294
Other Income (Expenses):
Interest Expense (386) (445) (663) (1,133)
Interest Income 1,088 1,595 2,293 3,389
Other Income (Expenses), Net (283) 2,280 (686) 3,584
Total Other Income, Net 419 3,430 944 5,840
Earnings Before Income Taxes 1,184 5,546 2,973 8,134
Provision for Income Taxes 501 1,229 931 2,479
Net Earnings $ 683 $ 4,317 $ 2,042 $ 5,655
Net Earnings per
Common Share and
Common Share Equivalents $ 0.05 $ 0.32 $ 0.15 $ 0.43
Weighted Average
Common Shares
Outstanding(in thousands) 13,904 13,290 13,862 13,299
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
Control Data Systems, Inc.
July 2, January 1,
1994 1994
------- ---------
ASSETS
Current Assets:
Cash and Short-term Investments $ 73,931 $ 81,635
Trade and Other Receivables 126,767 125,470
Inventories 56,832 56,222
Prepaid Expenses and Other Current Assets 7,243 7,898
Total Current Assets 264,773 271,225
Property and Equipment, Net 29,357 28,058
Leased and Data Center Equipment, Net 3,142 4,779
Other Noncurrent Assets 56,023 48,861
Total Assets $353,295 $352,923
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-Term Debt $ 10,421 $ 1,891
Restructure Reserves, Current Portion 13,469 21,722
Other Accrued Expenses 106,439 113,744
Total Current Liabilities 130,329 137,357
Deferred Income Taxes 1,025 1,123
Restructure Reserves, less Current Portion 9,501 10,554
Pension Liabilities 29,782 27,870
Other Noncurrent Liabilities 5,077 843
Total Liabilities 175,714 177,747
Stockholders' Equity 177,581 175,176
Total Liabilities and Stockholders' Equity $353,295 $352,923
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Control Data Systems, Inc.
Six Months Ended
July 2, July 3,
1994 1993
------- --------
Cash Flows from Operating Activities:
Net earnings $ 2,042 $ 5,655
Adjustments to reconcile net earnings to net
cash used in operating activities:
Depreciation 7,686 8,223
Amortization 2,130 595
Restructure reserves utilized (9,786) (14,450)
Net change in working capital items (8,303) (1,186)
Other (757) (5,783)
Net cash used in operating activities (6,988) (6,946)
Cash Flows from Investing Activities:
Expended for property and equipment (4,569) (6,862)
Proceeds from sales of property and equipment 242 1,787
Proceeds from sale of Silicon Graphics, Inc.
common stock -- 3,244
Acquisitions of businesses, net of cash provided (3,844) (10,687)
Change in short-term investments 3,651 28,166
Net cash (used in) provided by investing
activities (4,520) 15,648
Cash Flows from Financing Activities:
Borrowings under short-term financing
arrangements, net 6,070 5,705
Repayment of long-term obligations -- (7,125)
Proceeds from issuance of common stock,
net of issuance costs 1,295 635
Proceeds from issuance of a nonrefundable
equity option -- 2,813
Net cash provided by financing activities 7,365 2,028
Effect of Exchange Rate Changes on Cash 90 (581)
Net change in cash and cash equivalents (4,053) 10,149
Cash and cash equivalents, beginning of period 19,164 5,142
Cash and cash equivalents, end of period 15,111 15,291
Short-term investments 58,820 101,115
Cash and short-term investments, end of period $73,931 $116,406
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 hereunto duly authorized.
Date: July 21, 1994.
CONTROL DATA SYSTEMS, INC.
By /s/ James E. Ousley
--------------------------------
James E. Ousley, President and
Chief Executive Officer