Evans & Sutherland Computer Corporation (E&S) (OTCPK: ESCC)
today reported financial results in its Form 10-K filing for the year
ended December 31, 2015.
Sales were $35.3 million, compared to sales of $26.5 million for 2014.
The net loss for 2015 was $1.3 million or $0.11 per share, compared to a
net loss of $1.3 million or $0.12 per share for 2014. Revenue backlog as
of December 31, 2015 was $26.3 million compared to backlog of $28.2
million as of December 31, 2014.
Comments from David H. Bateman, President and Chief Executive Officer:
“On April 21, 2015, the Company executed agreements ('Pension Settlement
Agreements') to terminate its Pension Plan and to settle the underlying
pension liabilities. As a result of the Pension Plan termination, the
plan’s trust assets and benefit obligations have been transferred to the
Pension Benefit Guaranty Corporation ('PBGC') thereby eliminating an
underfunded pension plan liability on the Company’s balance sheet which
had a carrying value of approximately $36 million. In return, the
Company issued to the PBGC shares of its common stock held in treasury
valued at $71 thousand and agreed to pay the PBGC a series of cash
installments over twelve years totaling $10.5 million (the 'Pension
Settlement Obligation'). The Pension Settlement Obligation is secured by
all of the Company’s assets subject to subordination agreements with the
Company’s senior lenders. This is a major milestone and completes a
process that began over two years ago. It relieves the Company from the
burden of a variable obligation to fund the Pension Plan benefits, which
it clearly was unable to fulfill, and replaces it with a manageable
fixed payment obligation. The Company’s goal in seeking a distress
termination of the Pension Plan was to ensure that the pension benefits
of all Pension Plan participants are paid up to federally guaranteed
limits and that the Company continues to operate as a going concern
while avoiding the costly damage and disruption to the business which
would result from bankruptcy reorganization. We believe that the Pension
Settlement Agreements have achieved that goal.
"The year ended December 31, 2015, produced significantly improved sales
and gross profit compared to 2014. The stronger sales and improved gross
profit in 2015 were attributable to strong sales bookings in 2014 and
2015. The sales backlog remained healthy at the end of 2015 which
supports an encouraging outlook for 2016. Operating expenses, except for
a $3.6 million charge for the settlement of the pension liabilities,
were lower in 2015 as compared to 2014 primarily due to decreased
pension expense in the period. The charge for the settlement of the
pension liabilities is not a recurring expense item. Absent this charge,
results would have been profitable for 2015. The 2015 results illustrate
the profit potential of our business without the burden of the Pension
Plan. With the healthy backlog and sales prospects, we anticipate sales
at levels that should continue to yield profitable results in 2016.
"We expect variable but reasonably consistent future sales and gross
profits from our current product line at annual levels sufficient to
cover or exceed operating expenses and meet our obligations including
the new Pension Settlement Obligation. Although we reported a net loss
for 2015 due to the pension settlement charge of $3.6 million, the
pension settlement contributed $31.8 million to comprehensive income
bringing 2015 total comprehensive income to $29.9 million, which reduced
of our stockholders deficit to $0.6 million as of December 31, 2015
compared to $30.7 million as of December 31, 2014. With the settlement
of the Pension Plan liabilities, we expect our improved financial
position to present opportunities for better results through the
availability of credit and stronger qualification for customer projects.”
Statements in this press release which are not historical, including
statements regarding E&S’ or management’s intentions, hopes, beliefs,
expectations, representations, projections, plans, or predictions of the
future are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company assumes no
obligation except as required by law to update the forward-looking
statements contained in this press release as a result of new
information or future events or developments. You can identify these
statements by the fact that they use words such as “anticipate,”
“estimate,” “expect,” “project,” “intend,” “should,” “plan,” “goal,”
“believe,” “confident” and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance together with the negative of such expressions. Among the
factors that could cause actual results to differ materially are the
following: the Company’s ability to successfully market both new and
existing products domestically and internationally; difficulties or
delays in manufacturing; results of the Board's evaluation of
alternatives available to enhance value for shareholders; and market and
general economic conditions. A further list and description of these
risks, uncertainties and other matters can be found in the Company’s
reports filed with the Securities and Exchange Commission.
E&S is a registered trademark of Evans & Sutherland Computer Corporation.
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS) INFORMATION
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(In thousands, except share and per share data)
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(Unaudited)
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Years Ended
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December 31, 2015
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December 31, 2014
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Sales
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$
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35,298
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$
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26,466
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Cost of sales
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(22,956
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)
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(16,989
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)
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Gross profit
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12,342
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9,477
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Operating expenses:
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Selling, general and administrative
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(6,633
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(6,873
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Research and development
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(2,262
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)
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(2,187
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Pension
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(522
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)
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(1,147
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Pension settlement
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(3,620
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)
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-
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Total operating expenses
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(13,037
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)
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(10,207
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)
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Operating loss
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(695
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)
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(730
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Other expense, net
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(592
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)
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(552
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)
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Loss before income tax provision
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(1,287
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)
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(1,282
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Income tax provision
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12
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(23
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Net loss
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$
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(1,275
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$
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(1,305
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)
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Net loss per common share - basic and diluted
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$
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(0.11
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$
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(0.12
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)
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Comprehensive income (loss), net of tax:
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Net loss
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$
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(1,275
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)
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$
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(1,305
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)
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Reclassification of pension expense to net loss
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-
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406
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Pension settlement
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31,776
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-
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Increase in minimum pension liability
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(555
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)
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(16,422
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Other comprehensive income (loss)
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31,221
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(16,016
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Total comprehensive income (loss)
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$
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29,946
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$
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(17,321
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CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
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(In thousands)
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(Unaudited)
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December 31, 2015
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December 31, 2014
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Assets
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Cash and restricted cash
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$
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4,335
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$
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7,749
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Net receivables, billed and unbilled
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7,520
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6,285
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Inventories, net
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4,072
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4,163
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Prepaid expenses and deposits
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1,038
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635
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Property, plant and equipment, net
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4,735
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4,803
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Intangibles and other assets
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1,744
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1,821
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Total assets
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$
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23,444
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$
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25,456
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Liabilities and stockholders' deficit
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Accounts payable and accrued expenses
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$
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2,093
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$
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1,852
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Customer advances and deposits
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7,227
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9,257
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Pension and retirement obligations
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5,319
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40,611
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Pension settlement obligation
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5,624
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-
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Debt obligations
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2,174
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2,362
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Other liabilities
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1,653
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2,077
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Stockholders' deficit
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(646
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(30,703
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Total liabilities and stockholders' deficit
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$
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23,444
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$
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25,456
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BACKLOG
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(In thousands)
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Unaudited
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December 31, 2015
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December 31, 2014
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$
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26,298
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$
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28,173
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