SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended December 31, 1997
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 No. 0-13150
_____________
CONCURRENT COMPUTER CORPORATION
Delaware 04-2735766
(State of Incorporation) (I.R.S. Employer Identification No.)
2101 West Cypress Creek Road, Ft. Lauderdale, FL 33309
Telephone: (954) 974-1700
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___
---
Number of shares of the Registrant's Common Stock, par value $0.01 per share,
outstanding as of February 6, 1998 were 47,301,531.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 28, DECEMBER 31, DECEMBER 28,
1997 1996 1997 1996
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Net sales
Computer systems . . . . . . . . . . $ 9,759 $ 12,870 $ 18,625 $ 26,244
Service and other. . . . . . . . . . 11,257 13,755 22,996 28,138
-------------- -------------- -------------- --------------
Total. . . . . . . . . . . . . . . 21,016 26,625 41,621 54,382
Cost of sales
Computer systems . . . . . . . . . . 4,516 6,796 8,793 13,905
Service and other. . . . . . . . . . 5,737 7,156 12,182 14,914
Transition . . . . . . . . . . . . . - 64 - 802
-------------- -------------- -------------- --------------
Total. . . . . . . . . . . . . . . 10,253 14,016 20,975 29,621
-------------- -------------- -------------- --------------
Gross margin . . . . . . . . . . . . . 10,763 12,609 20,646 24,761
Operating expenses:
Research and development . . . . . . 2,694 3,443 5,514 6,799
Selling, general and administrative. 5,870 7,797 11,894 15,028
Transition/restructuring . . . . . . - 872 (607) 2,106
Post-retirement benefit reversal . . - (1,200) - (2,181)
-------------- -------------- -------------- --------------
Total operating expenses . . . . . . . 8,564 10,912 16,801 21,752
Operating income . . . . . . . . . . . 2,199 1,697 3,845 3,009
Interest expense . . . . . . . . . . . (188) (532) (450) (1,191)
Interest income. . . . . . . . . . . . 36 29 58 81
Other non-recurring charge . . . . . . - 2,192 420 (1,876)
Other income (expense) - net . . . . . (41) (161) (242) (420)
-------------- -------------- -------------- --------------
Income (loss) before provision . . . . 2,006 3,225 3,631 (397)
for income taxes
Provision for income taxes . . . . . . 583 530 908 970
-------------- -------------- -------------- --------------
Net income (loss). . . . . . . . . . . $ 1,423 $ 2,695 $ 2,723 $ (1,367)
Preferred stock dividends and
accretion of preferred shares. . . . - - (18) -
-------------- -------------- -------------- --------------
Net income (loss) available to . . . . $ 1,423 $ 2,695 $ 2,705 $ (1,367)
============== ============== ============== ==============
common shareholders
Basic income (loss) per share. . . . . $ 0.03 $ 0.06 $ 0.06 $ (0.03)
============== ============== ============== ==============
Diluted income per share . . . . . . . $ 0.03 $ 0.06 $ 0.06
============== ============== ==============
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1997
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ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 4,992 $ 4,024
Trading securities . . . . . . . . . . . . . . . . . . . . . - 2,718
Accounts receivable - net. . . . . . . . . . . . . . . . . . 19,665 25,720
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . 7,262 8,399
Prepaid expenses and other current assets. . . . . . . . . . 1,705 2,286
-------------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . 33,624 43,147
Property, plant and equipment - net. . . . . . . . . . . . . . 13,032 14,207
Facilities held for disposal . . . . . . . . . . . . . . . . . - 4,700
Other long-term assets . . . . . . . . . . . . . . . . . . . . 1,377 1,474
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,033 $ 63,528
============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . $ 4,478 $ 5,399
Current portion of long-term debt. . . . . . . . . . . . . . 1,529 1,668
Revolving credit facility. . . . . . . . . . . . . . . . . . - 3,118
Accounts payable and accrued expenses. . . . . . . . . . . . 14,123 23,866
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 3,100 4,402
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Total current liabilities. . . . . . . . . . . . . . . . . 23,230 38,453
Long term debt . . . . . . . . . . . . . . . . . . . . . . . . 434 4,493
Other long-term liabilities. . . . . . . . . . . . . . . . . . 1,574 1,219
Total liabilities. . . . . . . . . . . . . . . . . . . . . 25,238 44,165
-------------- ----------
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . - 1,243
Stockholders' equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . 472 461
Capital in excess of par value . . . . . . . . . . . . . . . 94,728 92,650
Accumulated deficit after eliminating accumulated deficit of
$81,826 at December 31, 1991, date of quasi-reorganization (71,882) (74,587)
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (58) (58)
Cumulative translation adjustment. . . . . . . . . . . . . . (465) (346)
Total stockholders' equity . . . . . . . . . . . . . . . . 22,795 18,120
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Total liabilities and stockholders' equity . . . . . . . . . . $ 48,033 $ 63,528
============== ==========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
CONCURRENT COMPUTER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED
DECEMBER 31, DECEMBER 28,
1997 1996
------------------ --------------
Cash flows provided by (used by) operating activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . $ 2,723 $ (1,367)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Unrealized loss on CyberGuard Stock. . . . . . . . . . . . . - 2,666
Realized loss on CyberGuard Stock. . . . . . . . . . . . . . (420) (735)
Gain on sale of facility . . . . . . . . . . . . . . . . . . (706) -
Depreciation, amortization and other . . . . . . . . . . . . 2,962 2,409
Other non-cash expenses. . . . . . . . . . . . . . . . . . . 857 2,025
Decrease (increase) in current assets:
Accounts receivable. . . . . . . . . . . . . . . . . . . . 6,055 775
Inventories. . . . . . . . . . . . . . . . . . . . . . . . 1,137 (2,215)
Prepaid expenses and other current assets. . . . . . . . . (65) 318
Decrease in current liabilities other than debt obligations. (11,061) (5,957)
Decrease in other long-term assets . . . . . . . . . . . . . 69 1,745
Increase (decrease) in other long-term liabilities . . . . . 355 (2,360)
------------------ --------------
Total adjustments to net income (loss) . . . . . . . . . . . . (817) (1,329)
------------------ --------------
Net cash provided by (used by) operating activities. . . . . . . 1,906 (2,696)
------------------ --------------
Cash flows provided by investing activities:
Net additions to property, plant and equipment . . . . . . . . (1,470) (2,435)
Net proceeds from sale of trading securities . . . . . . . . . 2,668 4,308
Proceeds from sale of facility . . . . . . . . . . . . . . . . 5,406 -
Net cash provided by investing activities. . . . . . . . . . . . 6,604 1,873
------------------ --------------
Cash flow used by financing activities:
Net proceeds (payments) of notes payable . . . . . . . . . . . (292) 410
Net payments of revolving credit facility. . . . . . . . . . . (3,118) (970)
Repayment of long-term debt. . . . . . . . . . . . . . . . . . (4,194) (612)
Net proceeds from sale and
issuance of common stock . . . . . . . . . . . . . . . . . . 457 1,161
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Net cash used by financing activities. . . . . . . . . . . . . . (7,147) (11)
------------------ --------------
Effect of exchange rates on cash
and cash equivalents . . . . . . . . . . . . . . . . . . . . . (395) (56)
------------------ --------------
Increase (decrease) in cash and cash equivalents . . . . . . . . $ 968 $ (890)
================== ==============
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 422 $ 961
================== ==============
Income taxes (net of refunds). . . . . . . . . . . . . . . . $ 668 $ 615
================== ==============
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS.
CONCURRENT COMPUTER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. The foregoing financial information
reflects all adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the periods presented. All such
adjustments are of a normal recurring nature.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, it is suggested that these consolidated
financial statements be read in conjunction with the audited consolidated
financial statements and the notes included in the Annual Report on Form 10-K
as filed with the Securities and Exchange Commission.
The results of interim periods are not necessarily indicative of the
results to be expected for the full fiscal year.
2. CHANGES IN ACCOUNTING POLICY
Post-retirement Benefits Other Than Pensions
On July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Post-retirement Benefits Other Than Pensions" ("FAS No. 106"). This standard
requires companies to accrue post-retirement benefits throughout the
employees' active service periods until they attain full eligibility for those
benefits. The transition obligation (the accumulated post-retirement benefit
obligation at the date of adoption) may be recognized either immediately or by
amortization over the longer of the average remaining service period of active
employees or 20 years.
In connection with the adoption of this standard in fiscal year 1994, the
Company recorded a non-cash charge of $3.0 million representing the immediate
recognition of the accumulated post-retirement benefit obligation at the date
of the adoption.
As a result of the Acquisition as defined in Management's Discussion and
Analysis, the Company terminated the retirement benefits of current employees
and former employees who are not yet retired. In the quarter and six months
ended December 28, 1996, curtailment gains of $1.2 million and $2.2 million,
respectively, were recognized. The total year-to-date curtailment gain during
fiscal year 1997 was $2.5 million. The Company believes there will be no
material expenses in connection with this Plan.
Stock-Based Compensation
Prior to July 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. During fiscal year 1997, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"), which permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date
of grant. Alternatively, SFAS No. 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net income
and pro forma earnings per share disclosures (which for the Company would
include employee stock option grants made in fiscal year 1996 and future
years) as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
3. EARNINGS (LOSS) PER SHARE
In the quarter ended December 31, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS No. 128"),
which supersedes APB Opinion No. 15, "Earnings Per Share", and specifies the
computation, presentation, and disclosure requirements for earnings per share
("EPS") for entities with publicly held common stock or potential common
stock. FAS No. 128 replaces primary and fully diluted EPS with basic and
diluted EPS, respectively. It also requires dual presentation of Basic EPS
and Diluted EPS on the face of the income statement and requires a
reconciliation of the numerator and denominator of the Basic EPS computation
to the numerator and denominator of the Diluted EPS computation.
Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS,
like Fully Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the entity.
The number of shares used in computing basic and fully diluted earnings
per share for the three months ended December 31, 1997 was 47,022,000 and
48,100,000, respectively. The number of shares used in computing basic and
diluted earnings per share for the three months ended December 28, 1996 was
44,466,000 and 45,317,000, respectively. The number of shares used in
computing basic and fully diluted earnings per share for the six months ended
December 31, 1997 was 46,598,000 and 47,364,000, respectively. The number of
shares used on computing net loss per share for the six months ended December
28, 1996 was 43,417,000.
4. TRADING SECURITIES
As of June 30, 1996, the Company held 683,173 shares of CyberGuard stock
with a market value of $14.75 per share. During the quarter ended September
30, 1996 the Company sold 91,500 shares at $10.645 per share, resulting in a
realized loss of $376 thousand. The value of the stock as of September 30,
1996 was $8.50 per share, resulting in an unrealized loss of $3.7 million for
the quarter then ended. During the quarter ended December 28, 1996, the
Company sold 261,500 shares at an average price of $12.748 per share resulting
in a realized gain of $1.1 million, and sold a call option on an additional
300,000 shares. As of December 28, 1996, the value of the stock was $11.625,
resulting in an unrealized gain for the quarter of $1.0 million. During the
remainder of fiscal year 1997, the Company sold 24,995 shares leaving 305,178
shares at June 30, 1997, valued at $2.7 million or $8.91 per share.
During the quarter ended September 30, 1997, 259,352 shares of CyberGuard
stock were sold, resulting in a realized gain for the period of $358 thousand.
On September 4, 1997, the remaining 45,826 shares valued at $10.25 per share
were issued as bonuses to Company employees. This resulted in a realized gain
of $62 thousand.
5. INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by using the first-in, first-out ("FIFO") method. The components
of inventories are as follows:
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1997
------------- ---------
Raw Materials . $ 5,012 $ 5,823
Work-in-process 1,458 2,191
Finished Goods. 792 385
------------- ---------
$ 7,262 $ 8,399
============= =========
6. ACCUMULATED DEPRECIATION
Accumulated depreciation for property, plant and equipment at December
31, 1997 and June 30, 1997 was $22,371,000 and $23,062,000 respectively. The
decrease primarily reflects exchange rate fluctuations.
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
(DOLLARS IN THOUSANDS)
DECEMBER 31, JUNE 30,
1997 1997
------------- ---------
Accounts payable, trade . . . $ 4,535 $ 7,451
Accrued payroll, vacation and
other employee expenses . . 4,332 5,891
Restructuring reserve . . . . 736 2,876
Other accrued expenses. . . . 4,520 7,648
------------- ---------
$ 14,123 $ 23,866
============= =========
8. SALE OF FACILITY
During fiscal year 1996, in connection with the Acquisition (as
hereinafter defined) and the resulted planned disposition of the Company's
Oceanport, New Jersey facility, the book value of land and building related to
this facility was written down by $6.8 million to its estimated fair value of
$4.7 million, based on a valuation by independent appraisers, and classified
as a facility held for sale. In the quarter ended September 30, 1997, the
sale of this facility was finalized. $5.5 million less closing costs of $0.1
million was received by the Company and applied against the Company's debt.
The Company realized a gain of $0.7 million that is reflected in the statement
of operations in the six months ended December 31, 1997.
9. PROVISION FOR RESTRUCTURING
The Company recorded a restructuring provision of $24.5 million during
the year ended June 30, 1996. This charge included the estimated costs
related to the rationalization of facilities, workforce reductions, asset
writedowns and other costs. The balance of the restructuring reserve at June
30, 1996 was $13.0 million. During fiscal year 1997, expenditures related to
this restructuring amounted to approximately $10.1 million leaving a balance
$2.9 million at June 30, 1997.
During the quarter and six months ended December 31, 1997, restructuring
expenditures amounted to $0.7 million and $2.1 million, respectively,
representing workforce reductions and lease terminations. The balance of the
restructuring reserve at December 31, 1997 was $0.7 million.
On May 5, 1992, the Company had entered into an agreement with the
Industrial Development Authority (the "IDA") to maintain a presence in Ireland
through April 30, 1998. In connection with the Acquisition, the Company
closed its Ireland operations in December 1996. As a result of the closing,
the Company may be required to repay grants to the IDA. Current negotiations
with the IDA indicate that the potential liability is approximately $150,000
(100,000 Irish Pounds).
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
On June 27, 1996, the Company acquired the Real-Time Division of Harris
Computer Systems Corporation ("HCSC"), along with 683,178 shares of newly
issued shares of HCSC, which was renamed CyberGuard Corporation, in exchange
for 10,000,000 shares of Concurrent common stock, 1,000,000 shares of
convertible exchangeable preferred stock of Concurrent with a 9% cumulative
annual dividend payable quarterly in arrears and a mandatory redemption value
of $6,263,000 and the assumption of certain liabilities related to the HCSC
Real-Time Division ("Acquisition"). The aggregate purchase price of the
Acquisition was approximately $18.7 million. The Acquisition has been
accounted for as a purchase effective June 30, 1996.
RESULTS OF OPERATIONS
THE QUARTER ENDED DECEMBER 31, 1997 COMPARED WITH THE QUARTER ENDED DECEMBER
28, 1996.
Net Sales. Net sales decreased to $21.0 million for the quarter ended
December 31, 1997 from $26.6 million in the comparable period a year ago. The
Company considers its computer systems and service business to be one class of
products.
Net product sales were $9.8 million for the quarter ended December 31, 1997 as
compared with $12.9 million for the quarter ended December 28, 1996. Sales of
proprietary systems continue to decline, and the selling price of open systems
is significantly lower than that of proprietary products. Maintenance sales
decreased from $13.8 million in the quarter ended December 28, 1996 to $11.3
million in the quarter ended December 31, 1997 continuing the decline
experienced over the past years as customers move from proprietary systems to
open systems which require less maintenance.
Gross Margin. Gross margin decreased $1.8 million during the current
quarter to $10.8 million (51.2% as a percentage of sales) compared with $12.6
million (47.4%) for the three months ended September 30, 1996. The improved
margin resulted from increased efficiencies and economies of scale brought
about by combining the Company's manufacturing and maintenance facilities with
those of HCSC. The overall decrease in gross margin reflects the Company's
lower sales this quarter.
Operating Income. Operating income increased $0.5 million to $2.2
million in the current quarter compared with an income of $1.7 million in the
quarter ended December 28, 1996. Expenses decreased $2.3 million in the
current quarter compared with the quarter ended December 28, 1996, which is
primarily due to continued cost reduction efforts and the reduction of
transition costs as the transition process relating to the Acquisition has
been completed. This was partially offset by an increase resulting from the
reversal of a $1.2 million post-retirement benefit accrual that occurred in
the quarter ended December 28, 1996.
Net Income. Net income decreased from $2.7 million in the quarter ended
December 28, 1996 to $1.4 million in the current quarter. The decrease of
$1.3 million is due to the $2.2 million gain on CyberGuard stock in the prior
quarter. This was offset by the increase in operating income discussed above
and a reduction in interest expense due to decreased borrowings.
THE SIX MONTHS ENDED DECEMBER 31, 1997 COMPARED WITH THE SIX MONTHS ENDED
DECEMBER 28, 1996.
Net Sales. Net sales decreased to $41.6 million for the six months ended
December 31, 1997 from $54.4 million in the comparable period a year ago. The
Company considers its computer systems and service business to be one class of
products.
Net product sales were $18.6 million for the six months ended December 31,
1997 as compared with $26.2 million for the six months ended December 28,
1996. Sales of proprietary systems continue to decline, while open system
products are increasing. Maintenance sales decreased from $28.1 million in
the six months ended December 28, 1996 to $23.0 million for the comparable six
months of 1997, continuing the decline experienced over the past years as
customers move from proprietary to open systems which require less
maintenance.
Gross Margin. Gross margin as a percentage of sales increased to 49.6%
in the current six month period from 45.5% for the six months ended December
28, 1996. This increase reflects the Company's increased efficiencies and
cost improvement efforts.
Operating Income. Operating income increased $0.8 million to a profit of
$3.8 million compared with an income of $3.0 million in the six months ended
December 28, 1996. Expenses decreased $5.0 million in the current six months
compared with the six months ended December 28, 1996 which is primarily due to
continued cost reduction efforts, the reduction of transition costs as the
transition process relating to the Acquisition has been completed and a gain
on the sale of the building recorded as an offset to restructuring expense in
the current six months. This was partially offset by an increase resulting
from the reversal of a $2.2 million post-retirement benefit accrual that
occurred in the six months ended December 28, 1996.
Net Income. Net income increased from a loss of $1.4 million in the six
months ended December 28, 1996 to an income of $2.7 million in the current six
months. This increase of $4.1 million is due to the $0.8 million increase in
operating income discussed above, the $0.4 million gain on CyberGuard stock in
the current six months as compared to the $1.9 million loss on CyberGuard
stock in the prior year, and a significant decrease in interest expense
resulting from decreased borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company sold its Oceanport, New Jersey facility in July 1997 for $5.5
million. The net proceeds for the sale ($5.4 million) were used to reduce
debt. During the first quarter of fiscal year 1998, the Company sold 259,352
shares of CyberGuard stock for $2.7 million which was used in operations. The
Company's liquidity is dependent on many factors, including sales volume,
operating profit ratio, debt service and the efficiency of asset use and
turnover. The future liquidity of the Company depends to a significant extent
on (i) the actual versus anticipated decline in sales of proprietary systems
and service maintenance revenue; (ii) revenue growth from open systems; and
(iii) ongoing cost control actions. Liquidity will also be affected by: (i)
timing of shipments which predominately occur during the last month of the
quarter; (ii) the percentage of sales derived from outside the United States
where there are generally longer accounts receivable collection cycles and
which receivables are not included in the Company's borrowing base under its
revolving credit facility; (iii) the sales level in the United States where
related accounts receivable are included in the borrowing base of the
Company's revolving credit facility; (iv) the number of countries in which the
Company will operate, which may require maintenance of minimum cash levels in
each country and, in certain cases, may restrict the repatriation of cash,
such as cash held on deposit to secure office leases. The Company believes
that it will be able to fund fiscal year 1998 operations through its operating
results and existing financing facilities. There is no assurance that the
Company's plans will be achieved.
On June 28, 1996, the Company entered into a new agreement providing for
a $19.9 million credit facility which matures August 1, 1999. The facility
includes a $7.2 million term loan (the "Term Loan") and a $12.7 million
revolving credit facility (the "Revolver"). The Revolver represents a $4.7
million increase to the maximum revolver amount, subject to certain
restrictions.
At December 31, 1997, the outstanding balances under the Term Loan and
the Revolver were $1.8 million and $0, respectively. Both the Term Loan and
the Revolver bear interest at the prime rate plus 2.0%. The Term Loan is
payable in 28 monthly installments of approximately $139,000 each, commencing
October 1, 1996 and ending January 1, 1999, with the final balance payable
August 1, 1999. The Revolver may be repaid and reborrowed, subject to certain
collateral requirements, at any time during the term ending August 1, 1999.
The Company has pledged substantially all of its domestic assets as collateral
for the Term Loan and the Revolver. The Company may repay the Term Loan at
any time without penalty. Certain early termination fees apply if the Company
terminates the facility in its entirety prior to August 1, 1999.
The Company's joint venture agreement regarding its Japanese subsidiary
has been renewed through June 1998. In the event such agreement is not
further extended, the Company could be required to satisfy the then
outstanding amount of demand notes which are guaranteed by the Company ($2.5
million at December 31, 1997). There can be no assurance that the agreement
will be extended or, in the event the agreement is not extended, that the
Company will be able to fully satisfy its demand note requirements.
The Company had cash and cash equivalents on hand of $5.0 million
representing an increase from $4.0 million as of June 30, 1997 primarily due
to the sale of the Oceanport building and the sale of the remaining CyberGuard
stock. Accounts receivable decreased by $6.1 million due to improved
collections. Accounts payable and accrued expenses decreased by $9.7 million
primarily due to reductions in spending, timely vendor payments, and a
reduction of the restructure reserve.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This Form 10-Q contains forward-looking statements that are subject to
risks and uncertainties. Statements indicating that the Company "expects,"
"estimates" or "believes" are forward-looking as are all other statements
concerning future financial results, product offerings or other events that
have not yet occurred. There are several important factors that could cause
actual results or events to differ materially from those anticipated by the
forward-looking statements contained herein. Such factors include, but are
not limited to: the growth rates of the Company's market segments; the
positioning of the Company's products in those segments; the Company's ability
to effectively manage its business, and the growth of its business, in a
rapidly changing environment; the timing of new product introductions;
inventory risks due to changes in market conditions; the competitive
environment in the computer industry; the Company's ability to establish
successful strategic relationships; and general economic conditions.
SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 28, DECEMBER 31, DECEMBER 28,
1997 1996 1997 1996
------------- ------------- ------------- -------------
Net sales
Computer systems . . . . . . . . . . 46.4% 48.3% 44.7% 48.3%
Service and other. . . . . . . . . . 53.6% 51.7% 55.3% 51.7%
------------- ------------- ------------- -------------
Total. . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of sales
Computer systems . . . . . . . . . . 46.3% 52.8% 47.2% 53.0%
Service and other. . . . . . . . . . 51.0% 52.0% 53.0% 53.0%
Transition . . . . . . . . . . . . . 0.0% 0.5% 0.0% 3.1%
------------- ------------- ------------- -------------
Total. . . . . . . . . . . . . . . 48.8% 52.6% 50.4% 54.5%
------------- ------------- ------------- -------------
Gross margin . . . . . . . . . . . . . 51.2% 47.4% 49.6% 45.5%
Operating expenses:
Research and development . . . . . . 12.8% 12.9% 13.2% 12.5%
Selling, general and administrative. 27.9% 29.3% 28.6% 27.6%
Transition/restructuring . . . . . . 0.0% 3.3% (1.5%) 3.9%
Post-retirement benefit reversal . . 0.0% (4.5%) 0.0% (4.0%)
------------- ------------- ------------- -------------
Total operating expenses . . . . . . . 40.7% 41.0% 40.4% 40.0%
Operating income (loss). . . . . . . . 10.5% 6.4% 9.2% 5.5%
Interest expense . . . . . . . . . . . (0.9%) (2.0%) (1.1%) (2.2%)
Interest income. . . . . . . . . . . . 0.2% 0.1% 0.1% 0.1%
Other non-recurring charge . . . . . . 0.0% 8.2% 1.0% (3.4%)
Other income (expense) - net . . . . . (0.2%) (0.6%) (0.6%) (0.8%)
------------- ------------- ------------- -------------
Income (loss) before provision . . . . 9.5% 12.1% 8.7% (0.7%)
for income taxes
Provision for income taxes . . . . . . 2.8% 2.0% 2.2% 1.8%
------------- ------------- ------------- -------------
Net income (loss). . . . . . . . . . . 6.8% 10.1% 6.5% (2.5%)
============= ============= ============= =============
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On December 19, 1997, the United States filed suit against the Company in
the United States District Court for the Eastern District of Virginia,
alleging that the Company filed false and/or fraudulent claims in connection
with the pricing of the Company's spare parts in 1991 under the Company's
subcontract to Unisys Corporation as prime contractor for the U.S. Department
of Commerce's Next Generation Weather Radar (NEXRAD) program. The government
is seeking treble its unspecified damages, all allowable civil penalties,
fees, and costs. The Company denies these allegations and intends to
vigorously defend against these claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Matters as specified in the Company's Proxy Statement dated October 1,
1997 were considered and approved by the Company's stockholders at the Annual
Meeting of Stockholders held on October 30, 1997. The results of such matters
were as follows:
Proposal 1: Election of Directors.
Total Votes
---------------
Total Votes For Against or Withheld
--------------- -------------------
Michael A. Brunner. . 41,357,476 286,243
Morton E. Handel. . . 41,327,688 316,051
C. Shelton James. . . 41,353,526 290,193
Michael F. Maguire. . 41,382,134 261,585
Richard P. Rifenburgh 41,312,969 330,750
E. Courtney Siegel. . 41,270,440 373,279
Proposal 2: Ratification of the selection by the Board of Directors of
KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal
year ending June 30, 1998.
Total Votes Number of
Total Votes For Against or Withheld Abstentions
- --------------- ------------------- -----------
41,343,021. . . 160,869 139,829
Proposal 3: Amendment of the Concurrent Computer Corporation 1991 Restated
Stock Option Plan.
Total Votes Number of
Total Votes For Against or Withheld Abstentions
- --------------- ------------------- -----------
34,951,374. . . 5,813,134 442,134
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) Exhibits:
(10) 1991 Restated Stock Option Plan
(12) Statement on computation of per share earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K.
On January 6, 1998, the Company filed a Current Report on Form 8-K with
respect to the lawsuit described in Part II, Item 1 of this Report on Form
10-Q.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report for the quarter ended
December 31, 1997 to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: February 9, 1998 CONCURRENT COMPUTER CORPORATION
By: /s/ E. Courtney Siegel
-----------------------------
E. COURTNEY SIEGEL
Chairman of the Board, President
and Chief Executive Officer
By: /s/ Daniel S. Dunleavy
-----------------------------
DANIEL S. DUNLEAVY
Executive Vice President, Chief Operating
Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)