<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): January 31, 1995
WANG LABORATORIES, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
----------------------------------------------
(State or Other Jurisdiction of Incorporation)
1-5677 04-2192707
- - ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
One Industrial Avenue, Lowell, Massachusetts 01851
-----------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
(508) 459-5000
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
The undersigned Registrant hereby amends Item 7 of its Current Report
on Form 8-K dated January 31, 1995 to read in its entirety as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Report of Deloitte & Touche LLP
Combined Balance Sheets of CS Business, W/I Business
and Subsidiaries of Bull HN Information Systems Inc.
as of October 2, 1994 and December 31, 1993
Combined Statements of Operations of CS Business, W/I
Business and Subsidiaries of Bull HN Information
Systems Inc. for the nine months ended October 2, 1994
and the years ended December 31, 1993 and 1992
Combined Statements of Cash Flows of CS Business, W/I
Business and Subsidiaries of Bull HN Information
Systems Inc. for the nine months ended October 2, 1994
and the year ended December 31, 1993
Notes to Combined Financial Statements
(b) Pro Forma Combined Condensed Financial Statements
Pro Forma Combined Condensed Balance Sheet as of
September 30, 1994
Pro Forma Combined Condensed Statements of Operations
for the three months ended September 30, 1994 and
the nine months ended June 30, 1994
Notes to Pro Forma Combined Condensed Financial
Statements
<PAGE> 3
(c) Exhibits
Item No. Description
*2. Asset and Stock Purchase Agreement
among Wang Laboratories, Inc.,
Compagnie des Machines Bull, Bull S.A.
and Bull HN Information Systems Inc.
dated as of December 30, 1994
*4. Credit Agreement among Wang
Laboratories, Inc., HFS, Inc.,
certain Lenders and Agents named
therein and Bankers Trust Company
dated January 30, 1995.
23. Consent of Deloitte & Touche LLP
- - ---------------------------
*Previously filed
<PAGE> 4
SIGNATURE
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: April 14, 1995 WANG LABORATORIES, INC.
(Registrant)
/s/ FRANKLYN A. CAINE
-------------------------------
Franklyn A. Caine
Executive Vice President
and Chief Financial Officer
<PAGE> 5
EXHIBIT INDEX
Item No. Description Page No.
*2. Asset and Stock Purchase
Agreement among Wang
Laboratories, Inc., Compagnie
des Machines Bull, Bull S.A. and
Bull HN Information Systems
Inc. dated as of December 30, 1994
*4. Credit Agreement among Wang
Laboratories, Inc., HFS, Inc.,
certain Lenders and Agents
named therein and Bankers
Trust Company dated January 30,
1995.
23. Consent of Deloitte & Touche LLP
- - --------------------------------
*Previously filed
<PAGE> 6
PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
The following Pro Forma Combined Condensed Balance Sheet as of
September 30, 1994, and the Pro Forma Combined Condensed Statements of
Operations for the three months ended September 30, 1994 and the nine months
ended June 30, 1994 (the period since reorganization), give effect to the
acquisition by Wang Laboratories, Inc. (the Company) of certain assets and
liabilities of Compagnie des Machines Bull and its affiliates (collectively
"Bull") as if the acquisition had occurred on September 30, 1994 for purposes of
the balance sheet and at October 1, 1993 for purposes of the statements of
operations. The pro forma information is based on the historical financial
statements of the Company and Bull, giving effect to the transaction under the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the pro forma financial information.
The pro forma information does not purport to be indicative of the
financial position or results of operations that would have been attained had
the combination been in effect on the dates indicated nor of future results of
operations of the Company. The pro forma combined condensed financial statements
should be read in conjunction with the separate audited financial statements and
notes thereto of Wang Laboratories, Inc. included in its Form 10-K for the year
ended June 30, 1994 and the audited financial statements and notes thereto of
Bull contained elsewhere herein.
<PAGE> 7
PRO FORMA COMBINED CONDENSED BALANCE SHEET (1)
SEPTEMBER 30, 1994
(Unaudited)
(Dollars in millions)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang Bull Adjustments(2) Combined
---------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and equivalents $ 184.2 $ 27.6 $(109.9) $ 101.9
Accounts receivable, net 129.1 65.0 (2.6) 191.5
Inventories 26.4 7.6 -- 34.0
Other current assets 37.6 7.5 (3.1) 42.0
------- ------- ------- -------
Total current assets 377.3 107.7 (115.6) 369.4
Depreciable assets, net 78.8 92.9 4.9 176.6
Other 25.6 15.1 (9.5) 31.2
Intangible assets, net 193.2 22.2 78.4 293.8
------- ------- ------- -------
Total assets $ 674.9 $ 237.9 $ (41.8) $ 871.0
======= ======= ======= =======
Liabilities and stockholders' equity
Current Liabilities
Borrowings due within one year $ 9.4 $ 10.4 $ 9.6 $ 29.4
Accounts payable, accrued
expenses and other 215.1 98.7 50.1 363.9
Deferred service revenue 57.7 37.3 -- 95.0
------- ------- ------- -------
Total current liabilities 282.2 146.4 59.7 488.3
Long-term liabilities 72.2 9.1 23.0 104.3
Redeemable preferred stock 55.2 -- -- 55.2
Stockholders' equity 265.3 82.4 (124.5) 223.2
------- ------- ------- -------
Total liabilities and stockholders'
equity $ 674.9 $ 237.9 $ (41.8) $ 871.0
======= ======= ======= =======
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 8
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (1)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
(Unaudited)
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang Bull Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net Revenue $192.2 $110.2 $ (0.8)(9) $301.6
Costs and Expenses
Cost of revenues 126.2 79.8 -- 206.0
Research and development 7.6 2.4 -- 10.0
Selling, general, and
administrative 49.4 23.7 (5.1)(6)(8)(9) 68.0
Amortization of intangibles 6.6 0.5 2.9 (3) 10.0
------ ------ ------ -----
Total costs and expenses 189.8 106.4 (2.2) 294.0
------ ------ ------ -----
Operating Income 2.4 3.8 1.4 7.6
Other (income) expense (3.1) 0.2 0.8 (4) (2.1)
------ ------ ------ -----
Income before income taxes 5.5 3.6 0.6 9.7
Provision for income taxes 2.7 1.2 0.8 (10) 4.7
------ ------ ------ -----
NET INCOME 2.8 2.4 (0.2) 5.0
Dividends and accretion on
redeemable preferred stock (2.0) -- -- (2.0)
------ ------ ------ ------
NET INCOME APPLICABLE TO
COMMON STOCKHOLDERS $ 0.8 $ 2.4 $ (0.2) $ 3.0
====== ====== ====== ======
Weighted Average Shares
Outstanding 32.8 34.4 (5)
NET INCOME PER SHARE $ 0.02 $ 0.09
====== ======
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 9
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (1)
FOR THE NINE MONTHS ENDED JUNE 30, 1994
(Unaudited)
(Amounts in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang Bull Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net Revenue $644.4 $321.6 $ (2.4)(9) $963.6
Costs and Expenses
Cost of sales 407.8 241.3 -- 649.1
Research and development 29.7 7.4 -- 37.1
Selling, general, and
administrative 174.6 72.6 (15.9)(6)(8)(9) 231.3
Amortization of intangibles 20.7 1.4 8.7 (3) 30.8
------ ------ ------ ------
Total costs and expenses 632.8 322.7 (7.2) 948.3
------ ------ ------ ------
Operating Income (Loss) 11.6 (1.1) 4.8 15.3
Other (income) expense (8.8) 2.3 2.5 (4) (4.0)
------ ------ ------ ------
Income (Loss) before income taxes
and cumulative effect of
accounting change 20.4 (3.4) 2.3 19.3
Provision for income taxes 9.8 2.2 (2.7) (10) 9.3
------ ------ ------ ------
Income (Loss) before cumulative
effect of accounting change 10.6 (5.6) 5.0 10.0
Cumulative effect of adopting
FAS 112 -- 1.0 (1.0)(7) --
------ ------ ------ ------
NET INCOME (LOSS) 10.6 (6.6) 6.0 10.0
Dividends and accretion on
redeemable preferred stock (4.2) -- -- (4.2)
------ ------ ------ ------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ 6.4 $ (6.6) $ 6.0 $ 5.8
====== ====== ====== ======
Weighted Average Shares
Outstanding 32.7 34.3 (5)
NET INCOME PER SHARE $ 0.20 $ 0.17
====== ======
</TABLE>
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 10
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(1) On January 31, 1995, Wang Laboratories, Inc. (the Company) completed a
transaction with Compagnie des Machines Bull and its affiliates
(collectively "Bull") in which the Company purchased from Bull S.A., its
worldwide workflow and imaging business, and from Bull HN Information
Systems Inc., its U.S. federal systems subsidiary, its U.S. customer
services business, and its sales and service subsidiaries in Canada,
Mexico, Australia and New Zealand. The Pro Forma Combined Condensed
Balance Sheet has been prepared based on the Company's September 30, 1994
unaudited consolidated balance sheet and the October 2, 1994 combined
balance sheet of Bull, which was derived from an audited balance sheet
contained elsewhere herein. Wang has a fiscal year end of June 30 while
Bull has a fiscal year end of December 31. Therefore, the pro forma
statement of operations for the three months ended September 30, 1994,
includes Wang's historical results for the three months ended September
30, 1994, and the Bull results for the three months ended October 2, 1994.
The pro forma statement of operations for the nine months ended June 30,
1994, includes Wang's historical operations for the nine months ended June
30, 1994 (the period since reorganization) and the operations of Bull for
the nine months ended October 2, 1994. As a result, operating results for
Bull for the three months ended October 2, 1994, have been included twice.
(2) The following table summarizes the pro forma balance sheet adjustments:
<TABLE>
<CAPTION>
Adjustments to Purchase Price and Cost of Integration
Bull Historical Purchase Accounting and Other Initiatives
(a) (b) (c) Total
<S> <C> <C> <C> <C>
ASSETS
Cash and equivalents $(27.6) $(82.3) $ 0.0 $(109.9)
Accounts receivable (2.6) 0.0 0.0 (2.6)
Other current assets (2.8) 0.0 (0.3) (3.1)
Depreciable assets 12.1 (4.1) (3.1) 4.9
Other (0.1) 0.2 (9.6) (9.5)
Intangible assets (22.2) 100.6 0.0 78.4
------ ------- ------ -------
Total Assets $(43.2) $ 14.4 $(13.0) $ (41.8)
====== ======= ====== =======
LIABILITIES &
STOCKHOLDERS' EQUITY
Borrowings due within
one year $(10.4) $ 20.0 $ 0.0 $ 9.6
Accounts payable, accrued
expenses and other (35.8) 41.7 44.2 50.1
Long-term liabilities (5.7) 20.9 7.8 23.0
Stockholders' equity 8.7 (68.2) (65.0) (124.5)
Total Liabilities ------ ------- ------ -------
& Stockholders' Equity $(43.2) $ 14.4 $(13.0) $ (41.8)
====== ======= ====== =======
</TABLE>
<PAGE> 11
(a) To adjust the historical balance sheet of Bull to equal the assets acquired
and liabilities assumed.
(b) The following purchase price and purchase accounting adjustments were made
to the historical balance sheet:
* Pro forma consideration of $125.2 million paid for Bull, consisting
of $82.3 million in cash, proceeds from borrowing under a revolving
credit facility of $20.0 million, and issuance of 1,650,000 shares
of Wang Common Stock valued at $22.9 million. The determination of
purchase price was dependent on the net asset values of the
businesses acquired at December 31, 1994. For purposes of preparing
the pro forma financial statements, the net asset values at October
2, 1994 for Bull were used to calculate a "pro forma purchase
price" reflected in the accompanying pro forma financial
statements.
* Accrual of transaction costs of $6.5 million, unfavorable lease
obligations of $37.7 million and benefit plan and other obligations
totaling $18.4 million.
* Preliminary allocation of purchase price and to eliminate from
stockholders' equity the net asset value ($91.1 million) of Bull.
(c) The Company expects to incur charges to operations, currently estimated at
$65 million, in the quarter ended March 31, 1995 (the quarter in which the
acquisition was consummated) to reflect principally the costs associated
with combining the operations of the Company and Bull. These costs will
consist primarily of workforce-related charges of $43 million, $9 million
for the elimination of redundant facilities and other charges, and $13
million for the write down of certain assets. Approximately $10 million,
representing relocation costs, system integration costs and other related
charges, will be reported as incurred in future periods. Due to the
non-recurring nature of these expenses, these charges are not included in
the Pro Forma Statement of Operations, but rather are only considered on the
Pro Forma Balance Sheet as a charge to retained earnings. The Company
believes that the actions related to these charges will result in cost
savings; however, no anticipated cost savings have been reflected in the
accompanying Pro Forma Statement of Operations. Cash requirements for the
integration and consolidation actions will total approximately $60 million.
Approximately $25 million will be expended during the current fiscal year
ending June 30, 1995; the remainder will be expended during the next fiscal
year ending June 30, 1996.
<PAGE> 12
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(3) To record expense of $3.4 million and $10.1 million for the three and nine
month periods, respectively, for amortization of the excess of purchase
price over the net assets acquired of $100.6 million, net of the elimination
of goodwill amortization of $0.5 million and $1.4 million for the three and
nine month periods, respectively, included in the Bull historical financial
statements. The final allocation of the excess of purchase price over net
assets acquired will be made to goodwill, installed base and other
intangible assets with related amortization periods ranging from 5-15 years
and is subject to appraisals, evaluations and other studies of the fair
value of Bull's assets and liabilities.
(4) To reflect the estimated increase in net interest expense of $0.8 million
and $2.5 million for the three and nine month periods, respectively,
relating to (i) $20.0 million of estimated borrowings outstanding during
the period on the revolving credit facility, bearing interest at 9% per
annum; (ii) reversal of interest income on $82.3 million of cash used to
finance the acquisition at an assumed rate of interest of 5.5% per annum;
and (iii) to record interest for a note receivable assigned to Wang of
$26.0 million which bears interest at a variable rate.
(5) Pro forma average number of shares outstanding reflects the issuance of
1,650,000 shares of Wang common stock in connection with the acquisition
of Bull.
(6) To eliminate approximately $1.4 million and $4.3 million of expense for the
three and nine month periods, respectively, recognized by Bull for discounts
on the sale of accounts receivable to Bull Finance Corporation.
(7) To eliminate the cumulative effect of adopting FAS 112, "Employers
Accounting for Post Employment Benefits".
(8) To reflect reduced facilities expenses and lower corporate allocations
totaling $2.1 million and $6.8 million for the three and nine month periods,
respectively.
(9) To reflect the reduction in revenues as certain French government grants
will not remain with the acquired business and a reduction in various
selling, general and administrative expenses of $1.6 million and $4.8
million for the three and nine month periods, respectively, of the
Workflow/Imaging business, for certain activities that were not acquired by
the Company.
(10) To record pro forma tax provisions, for the periods presented, at an
effective rate approximating the Company's historical effective rate.
<PAGE> 13
CS BUSINESS, W/I BUSINESS AND SUBSIDIARIES OF
BULL HN INFORMATION SYSTEMS INC.
---------------------------------------------
Combined Financial Statements for the
Nine Months Ended October 2, 1994 and
the Years Ended December 31, 1993 and 1992
and Independent Auditors' Report
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors:
We have audited the accompanying combined balance sheets of the CS
Business, W/I Business and Subsidiaries of Bull HN Information Systems
Inc., as described in Note 1 to the combined financial statements, as
of October 2, 1994 and December 31, 1993, the combined statements of
operations for the nine months ended October 2, 1994 and for each of
the two years in the period ended December 31, 1993, and the
combined statements of cash flows for the nine months ended October
2, 1994 and for the year ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overallfinancial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the combined financial position of the CS
Business, W/I Business and Subsidiaries of Bull HN Information
Systems Inc. as of October 2, 1994 and December 31, 1993, the
combined results of their operations for the nine months ended
October 2, 1994 and for each of the two years in the period ended
December 31, 1993, and their combined cash flows for the nine months
ended October 2, 1994 and for the year ended December 31, 1993 in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the combined financial statements, in 1993
the Subsidiaries changed their method of accounting for income taxes
and the CS Business and HFS Inc. changed their method of accounting
for other postretirement benefits; in 1994 the CS Business and HFS
Inc. changed their method of accounting for other postemployment
benefits.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
December 28, 1994
<PAGE> 15
CS BUSINESS, W/I BUSINESS AND SUBSIDIARIES OF
BULL HN INFORMATION SYSTEMS INC.
---------------------------------------------
<TABLE>
COMBINED BALANCE SHEETS
(In thousands of dollars)
---------------------------------------------------------------------------------------------------------
<CAPTION>
October 2, December 31,
ASSETS 1994 1993
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 27,565 $ 13,213
Accounts receivable (net of allowances of
$5,373 in 1994 and $6,974 in 1993) 62,628 71,459
Accounts receivable from affiliates 2,389 3,082
Inventories 7,562 5,801
Prepaid and other assets 3,735 596
Deferred tax asset 3,783 3,373
-------- --------
Total current assets 107,662 97,524
SPARE PARTS, PROPERTY AND OTHER EQUIPMENT, Net 92,851 107,584
EXCESS OF PURCHASE PRICE OVER NET
ASSETS ACQUIRED, Net 22,208 24,416
OTHER ASSETS 15,128 9,137
-------- --------
TOTAL ASSETS $237,849 $238,661
======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable $ 10,362 $ 14,884
Accounts payable 13,421 10,021
Accounts payable to affiliates 16,970 23,792
Accrued compensation and benefit costs 16,478 13,298
Accrued expenses 23,193 21,932
Advances from Bull HN 26,068 25,981
Deferred revenue 37,304 26,993
Restructure reserve - short-term portion 2,580 5,964
-------- --------
Total current liabilities 146,376 142,865
LONG-TERM DEBT 1,159 1,212
RESTRUCTURE RESERVE 2,154 2,500
OTHER LIABILITIES 5,771 3,459
-------- --------
Total liabilities 155,460 150,036
CONTINGENCIES - -
EQUITY 82,389 88,625
-------- --------
TOTAL LIABILITIES AND EQUITY $237,849 $238,661
======== ========
</TABLE>
See accompanying notes to the combined financial statements.
- 2 -
<PAGE> 16
CS BUSINESS, W/I BUSINESS AND SUBSIDIARIES OF
BULL HN INFORMATION SYSTEMS INC.
---------------------------------------------
<TABLE>
COMBINED STATEMENTS OF OPERATIONS
(In thousands of dollars)
------------------------------------------------------------------------------
<CAPTION>
Nine months
ended Year ended Year ended
October 2, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
REVENUE:
Maintenance and other
services $277,730 $387,352 $458,640
Sales 43,882 92,225 152,864
-------- -------- --------
Total revenue 321,612 479,577 611,504
-------- -------- --------
COSTS AND EXPENSES:
Cost of maintenance and other
services 202,515 280,301 313,599
Cost of sales 38,792 71,257 120,676
Selling, general and
administrative expenses 68,427 118,364 159,057
Research and development 7,357 16,549 7,600
Amortization of goodwill 1,407 1,907 1,920
Discount on sale of accounts
receivable 4,259 3,109 -
Interest expense 2,284 3,330 5,067
Restructuring costs - 7,710 23,000
-------- -------- --------
Total costs
and expenses 325,041 502,527 630,919
-------- -------- --------
LOSS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE (3,429) (22,950) (19,415)
PROVISION FOR INCOME TAXES 2,189 4,000 4,157
-------- -------- --------
LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (5,618) (26,950) (23,572)
CUMULATIVE EFFECT OF ADOPTING
SFAS 112, Net of tax 950 - -
--------- --------- ---------
NET LOSS $ (6,568) $ (26,950) $ (23,572)
========= ========= =========
</TABLE>
See accompanying notes to the combined financial statements.
- 3 -
<PAGE> 17
CS BUSINESS, W/I BUSINESS AND SUBSIDIARIES OF
BULL HN INFORMATION SYSTEMS INC.
- - ---------------------------------------------
<TABLE>
COMBINED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
- - ---------------------------------------------------------------------------
<CAPTION>
Nine months
ended Year ended
October 2, December 31,
1994 1993
---------- ------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss ($ 6,568) ($26,950)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 34,556 52,511
Provision for restructuring costs - 7,710
Changes in:
Accounts receivable 9,551 4,699
Inventories (1,776) 15,955
Prepaid and other assets (3,985) 10,113
Accounts payable (3,415) (931)
Accrued compensation and benefits 3,180 (2,592)
Accrued expenses 1,276 3,449
Accrued income taxes (166) (2,977)
Deferred revenue 10,145 (3,748)
Other liabilities 2,312 790
Deferred taxes (410) (1,149)
Payments for restructuring costs (3,730) (20,611)
-------- --------
Net cash provided by
operating activities 40,970 36,269
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures (19,240) (21,057)
Increase in other assets (6,116) (3,270)
Disposals of property and other equipment 2,476 -
-------- --------
Net cash used in investing
activities (22,880) (24,327)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Payments on borrowings (4,028) (25,940)
Net amount received from Bull HN/CMB 55 18,037
-------- --------
Net cash used in
financing activities (3,973) (7,903)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 235 (117)
-------- --------
NET INCREASE IN CASH 14,352 3,922
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 13,213 9,291
-------- --------
CASH AND EQUIVALENTS, END OF PERIOD $ 27,565 $ 13,213
======== ========
</TABLE>
See accompanying notes to the combined financial statements.
- 4 -
<PAGE> 18
CS BUSINESS, W/I BUSINESS AND SUBSIDIARIES OF
BULL HN INFORMATION SYSTEMS INC.
- - ---------------------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
NINE MONTHS ENDED OCTOBER 2, 1994 AND
YEARS ENDED DECEMBER 31, 1993 AND 1992
(In thousands of dollars)
- - -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
Bull HN Information Systems Inc. (Bull HN) is a wholly owned subsidiary
of Bull Data Systems Inc. (BDS), which is a wholly owned subsidiary,
through direct and indirect investment, of Compagnie des Machines Bull
(CMB), a French corporation. On or about December 30, 1994, Bull HN, CMB
and Wang Laboratories, Inc. (Wang) are expected to enter into a series of
agreements, including an Asset and Stock Purchase Agreement (the
Agreement), whereby Wang will agree to acquire the United States Customer
Service Operation of Bull HN (the CS Business), the Workflow and Imaging
Business of CMB (the W/I Business) and the following wholly owned
subsidiaries of Bull HN (the Subsidiaries):
HFS Inc., a company principally engaged in the business of providing
information processing products, maintenance, and services to the U.S.
Government;
Bull HN Information Systems Limited (Bull HN Canada),
Bull HN Information Systems Australia Pty. Limited (Bull HN Australia),
Bull HN Information Systems Wholesale Pty. Ltd. (a subsidiary of Bull
HN Australia),
Bull HN Information Systems New Zealand Limited, and
Bull HN Sistemas de Informacion S.A. de C.V. (Bull HN Mexico);
companies representing Bull HN's entire operations in Canada,
Australia, New Zealand, and Mexico.
The accompanying combined financial statements include the accounts of
the CS Business, the W/I Business and the Subsidiaries. The CS Business
has been operated as a component of Bull HN, sharing facilities and
corporate services with other Bull HN components. The accompanying
combined financial statements include the CS Business as if it had
existed as a stand-alone entity separate from Bull HN for the periods
presented and include the historical assets, liabilities, revenues and
expenses that are related to the CS Business. The W/I Business has been
primarily engaged in development of workflow/imaging software, which has
been made available to other Bull-related entities on a royalty-free
basis. The W/I Business is operated primarily as a cost center by CMB.
The accompanying combined financial statements include the assets,
liabilities, revenues (grants) and expenses of the W/I Business. The
Subsidiaries have generally operated as separate stand-alone entities and
the accompanying combined financial statements include the separate
financial statements of those entities for the periods presented.
Transactions between entities included in the combined financial
statements have been eliminated.
- 5 -
<PAGE> 19
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation (Continued)
---------------------------------
For the periods presented, cost of revenue, selling, general and
administrative expenses and research and development reflected in the
combined financial statements include allocations to the CS Business, the
W/I Business and HFS Inc. of certain expenses which were determined based
on personnel, space, estimates of time spent to provide services, or
other appropriate bases. These allocations include amounts for facilities,
marketing, general management, treasury, audit, legal, financial reporting,
benefits administration, insurance, communication, public affairs,
information management, and other miscellaneous services. Bull HN Canada
and Bull HN Australia are charged management fees by Bull HN.
Management believes that the foregoing allocations and management fees
were made on a reasonable basis; however, they do not necessarily equal
the costs which would have been incurred on a stand-alone basis.
The financial information included herein does not necessarily reflect
the financial position and results of operations in the future or what
the financial position and results of operations would have been had the
CS Business, the W/I Business and the Subsidiaries been a separate,
stand-alone entity during the periods presented.
Wang is also expected to acquire and lease back certain real estate owned
by Bull HN and used by other operating components of Bull HN pursuant to
a sale/leaseback agreement. This real estate was not used by the CS
Business, the W/I Business or the Subsidiaries and, accordingly, is not
included in the accompanying combined financial statements.
Significant Accounting Policies
-------------------------------
REVENUE RECOGNITION - Maintenance revenue is recognized ratably over the
terms of the contracts (generally one year). Revenue from sales of
information processing products and software license fees are generally
recorded as products are shipped to commercial customers and as products
are accepted by the U.S. Government. Revenue from fixed-price service
contracts is recorded using the percentage-of-completion method of
accounting. Revenue from time and materials contracts is recorded at
contractual rates as labor hours and expenses are incurred. Provisions
for contract losses are recognized when such losses are known. Grant
revenue is recognized in the period in which the grant is approved.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of the foreign
subsidiaries, except Bull HN Mexico, and the W/I Business are translated
into U.S. dollars at the exchange rate in effect at the balance sheet
date; income and expenses and cash flows are translated at the average
exchange rates prevailing during the year. For these entities,
translation adjustments are accumulated in equity. The functional
currency for Bull HN Mexico is the U.S. dollar. Therefore, certain
assets of this entity are translated at historical exchange rates and
translation adjustments are reflected in the combined statements of
operations. Foreign exchange transaction gains (losses) recognized in
the accompanying combined statements of operations were ($424), $245 and
($882) for the nine months ended October 2, 1994 and for the years ended
December 31, 1993 and 1992, respectively.
- 6 -
<PAGE> 20
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND EQUIVALENTS - Cash and equivalents includes highly liquid,
short-term cash investments purchased with remaining maturities of three
months or less. The CS Business and the W/I Business are included in
centralized cash management systems whereby all cash collections and cash
payments are made on their behalf and are charged or credited to them
through the equity account (Note 5).
INVENTORIES - Inventories, which are primarily finished goods, are stated
at the lower of cost or market, using average cost and the specific-
identification methods.
<TABLE>
SPARE PARTS, PROPERTY, AND OTHER EQUIPMENT - Spare parts, property and
other equipment are recorded at cost and depreciated or amortized using
the straight-line method over their estimated useful lives as follows:
<CAPTION>
Years
-----
<S> <C>
Spare parts 3-5
Leasehold improvements 10 (lease term, if shorter)
Equipment 3-15
Furniture and fixtures 6-15
</TABLE>
Effective January 1, 1994, the CS Business and the Subsidiaries began
depreciating newly-acquired spare parts to be used in their multi-vendor
(non Bull proprietary equipment) services business over three years.
Previously-acquired spares are continuing to be depreciated over five
years. The effect of this change was to increase depreciation expense in
the nine months ended October 2, 1994 by $1,500.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED - In 1991, CMB acquired
the remaining minority interests in Bull HN. The portion of the excess
of purchase price over net assets acquired allocated to the CS Business
and Subsidiaries, $28,800, is included in the accompanying combined
balance sheets and is being amortized on a straight-line basis over 15
years. Accumulated amortization at October 2, 1994 and December 31, 1993
was $6,035 and $4,627, respectively.
OTHER ASSETS - Other assets consist primarily of prepaid pension cost,
purchased customer portfolios, capitalized software and deposits.
Capitalized software and customer portfolios are being amortized over
their estimated useful life of two and three years, respectively.
Accumulated amortization was $5,420 and $2,909 at October 2, 1994 and
December 31, 1993, respectively.
- 7 -
<PAGE> 21
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER POSTRETIREMENT BENEFITS - Effective January 1, 1993, the CS
Business and HFS Inc. adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106), which requires that the cost of these benefits be
accrued over the employees' period of service to the date employees
become eligible for benefits. The adoption of SFAS 106 had the effect of
increasing expenses in 1993 by $1,400. The CS Business and HFS Inc.
elected to amortize the transition obligation of $7,200 over 20 years.
Prior to 1993, these benefits were expensed as incurred. The W/I
Business and the Subsidiaries, other than HFS Inc., are not required to,
and will not adopt, SFAS 106 until 1995. Management believes that the
effect of adoption of SFAS 106 on these Subsidiaries will not be material.
POSTEMPLOYMENT BENEFITS - Effective January 1, 1994, the CS Business and
HFS Inc. adopted Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS 112). SFAS 112
requires that a liability be accrued for benefits, such as short-term
disability, equal to the estimated cost of providing such benefits to
former and inactive employees prior to retirement. The cumulative effect
of adopting SFAS 112 was to increase the liability for postemployment
benefits by $950, net of taxes at January 1, 1994. Prior to 1994,
certain of these benefits had been recorded on a pay-as-you-go basis.
RESEARCH AND DEVELOPMENT - Research and development costs are expensed as
incurred. Certain software costs (included in other assets) are
capitalized after technological feasibility has been established.
INCOME TAXES - The CS Business and HFS Inc. are included in the
consolidated federal income tax return of Bull HN which is included in
the consolidated return of BDS. CMB and Bull HN do not allocate income
taxes on a component basis and, accordingly, income taxes have not been
included in the accompanying combined financial statements for the CS
Business or the W/I Business; federal income taxes for HFS Inc. are
included in the accompanying combined financial statements on a separate
return basis.
Effective January 1, 1993, the Subsidiaries adopted, prospectively, the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). SFAS 109 requires, among other
things, a change from the deferred to the liability method of computing
deferred income taxes. The effect on operations and financial position
of this change in accounting was not material.
- 8 -
<PAGE> 22
2. ACCOUNTS RECEIVABLE
<TABLE>
Accounts receivable, including amounts due under long-term contracts
(contract receivables) directly from the U.S. Government unless otherwise
indicated, are as follows:
<CAPTION>
October 2, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Commercial/grant receivables $36,021 $36,239
Contract receivables:
Billed 24,397 24,990
Unbilled 7,583 17,204
------- -------
68,001 78,433
Less allowances (5,373) (6,974)
------- -------
Total accounts receivable $62,628 $71,459
======= =======
</TABLE>
Unbilled receivables represent recoverable costs and accrued profit not
billed and are comprised principally of revenue recognized on contracts
for which billings have not been presented to the customer because the
amounts were not billable as of the balance sheet date under the
contractual terms. Substantially all contract receivables are expected
to be collected within one year.
During 1993 and 1994 the CS Business sold certain accounts receivable
without recourse to a finance subsidiary of BDS at a discount. Amounts
sold during the nine months ended October 2, 1994 and the year ended
December 31, 1993 were $116,781 and $82,947, and the corresponding
discounts on such sales included in operating expenses were $4,259 and
$3,109, respectively. The CS Business has no future obligation to sell
accounts receivable.
3. SPARE PARTS, PROPERTY AND OTHER EQUIPMENT
<TABLE>
Spare parts, property and other equipment consist of the following:
<CAPTION>
October 2, December 31,
1994 1993
---------- ------------
<S> <C> <C>
Spare parts $161,725 $153,206
Equipment 81,743 75,300
Furniture and fixtures 6,197 6,325
Leasehold improvements 5,556 5,737
-------- --------
255,221 240,568
Less accumulated depreciation and
amortization (162,370) (132,984)
-------- --------
Spare parts, property and other
equipment, net $ 92,851 $107,584
======== ========
</TABLE>
- 9 -
<PAGE> 23
4. FINANCING ARRANGEMENTS
Lines of Credit
---------------
HFS INC. - HFS Inc. has a $25 million revolving credit agreement (the
Credit Agreement) with a bank syndicate which expires April 30, 1996.
The Credit Agreement permits borrowings up to a maximum of $25 million
based on certain accounts receivable and inventory. At October 2, 1994,
there were no outstanding borrowings and borrowing availability under the
Credit Agreement was approximately $21 million. Borrowings bear interest
at either the prime rate plus 1/2 of 1% or the Eurodollar rate plus 2%
per annum at the option of HFS Inc. The Credit Agreement is renewable
annually.
All assets of HFS Inc. are pledged as collateral and HFS Inc. is required
to comply with certain financial covenants, including the maintenance of
a minimum level of tangible net worth.
BULL HN AUSTRALIA - Bull HN Australia has lines of credit with two banks
that provide for borrowings up to A$10,000 and A$14,000 (US$7,365 and
US$10,311) at October 2, 1994, respectively. The first line bears
interest at the bank's prime rate plus .6% and expires in September 1995.
The second line bears interest at a fixed rate of 7.55% until
December 2, 1994 and varies with money market rates thereafter.
Borrowings under the second line are guaranteed by CMB. At October 2,
1994, outstanding borrowings were A$6,000 and A$8,000 (US$4,419 and
US$5,892), respectively, under the lines.
Long-Term Debt
--------------
Bull HN Canada has a note payable that bears interest at 11.44% and is
due in installments through 2006. Annual repayments of principal are
approximately $75.
Interest paid for the nine months ended October 2, 1994 and for the year
ended December 31, 1993 was $3,542 and $2,222, respectively.
5. EQUITY
<TABLE>
The changes in equity for the year ended December 31, 1993 and the nine
months ended October 2, 1994 were as follows:
<S> <C>
Balance at January 1, 1993 $97,838
Net loss (26,950)
Net cash received from Bull HN/CMB 18,037
Translation adjustment (300)
-------
Balance at December 31, 1993 88,625
Net loss (6,568)
Net cash received from Bull HN/CMB 55
Translation adjustment 277
-------
Balance at October 2, 1994 $82,389
=======
</TABLE>
- 10 -
<PAGE> 24
6. RESTRUCTURING ACTIONS
The CS Business and the Subsidiaries took restructuring actions in 1993
and 1992 consisting primarily of workforce reductions and costs to vacate
facilities and provided $5,010 and $2,700 in 1993 and $21,000 and $2,000
in 1992, respectively, for such actions. Included in the 1993 amount is
$3,700 allocated to the CS Business from Bull HN for its proportionate
share of pension and medical plan curtailments based on the number of
employees terminated. The restructure liability related to the
curtailments, which will be retained by Bull HN, has not been reflected
in the combined balance sheets.
7. RELATED-PARTY TRANSACTIONS
<TABLE>
Related-party transactions with other Bull related entities were as
follows:
<CAPTION>
Nine Months Year Ended
Ended ---------------------------
October 2, December 31, December 31,
1994 1993 1992
---------- ------------ ------------
<S> <C> <C> <C>
Maintenance and other
services $ 3,767 $ 6,774 $ 132
Purchases of products 13,657 29,513 56,790
Royalties 2,492 3,641 4,300
Interest expense 1,251 1,689 1,951
Cost of sales allocated 23,229 31,557 38,400
Selling, general and
administrative costs
allocated 11,909 23,436 31,201
Management fees 1,535 4,599 6,581
Costs allocated to other
Bull components 12,423 10,110 7,000
Advances from Bull HN 26,068 21,076 27,197
Dividends paid 1,700 3,000 1,500
</TABLE>
Under Bull HN's cash management program, certain of the Subsidiaries may
borrow from Bull HN on an as-needed basis. At October 2, 1994, advances
from Bull HN represent borrowings by Bull HN Canada, which bear interest
at the prime rate.
8. INCOME TAXES
<TABLE>
Income (loss) before income taxes and cumulative effect of change in
accounting was comprised of the following:
<CAPTION>
Nine Months Year Ended
Ended ---------------------------
October 2, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
U.S. operations $ 6,547 $ 7,024 $ 10,116
Foreign operations (9,976) (29,974) (29,531)
------- -------- --------
Loss before income taxes
and cumulative effect of
change in accounting $(3,429) $(22,950) $(19,415)
======= ======== ========
</TABLE>
-11 -
<PAGE> 25
8. INCOME TAXES (CONTINUED)
<TABLE>
The provisions for income taxes on the loss before income taxes and
cumulative effect of change in accounting, computed in accordance with
SFAS 109 in 1994 and 1993 and in accordance with APB Opinion No. 11 in
1992, were comprised of the following:
<CAPTION>
Nine Months Year Ended
Ended ---------------------------
October 2, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Currently payable:
U.S. federal $2,199 $3,904 $4,042
State 400 733 759
Foreign - 512 579
------ ------ ------
Total 2,599 5,149 5,380
Deferred:
U.S. federal (345) (968) (1,030)
State (65) (181) (193)
Foreign - - -
------ ------ ------
Total (410) (1,149) (1,223)
------ ------ ------
Provision for income
taxes $2,189 $4,000 $4,157
====== ====== ======
</TABLE>
<TABLE>
Items giving rise to deferred income taxes were comprised of the following:
<CAPTION>
Nine Months Year Ended
Ended ---------------------------
October 2, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Depreciation $(332) $ (836) $ (376)
Restructure reserve and
other (78) (313) (847)
----- ------- -------
Total deferred income
taxes $(410) $(1,149) $(1,223)
===== ======= =======
</TABLE>
- 12 -
<PAGE> 26
8. INCOME TAXES (CONTINUED)
<TABLE>
A reconciliation of income taxes determined using the U.S. statutory rate
of 34% to actual income taxes provided is as follows:
<CAPTION>
Nine Months Year Ended
Ended ---------------------------
October 2, December 31, December 31,
1994 1993 1992
----------- ------------ ------------
<S> <C> <C> <C>
Tax (benefit) at U.S.
statutory rate $(1,166) $ (7,803) $ (6,601)
Effect of changes in
valuation allowance on
foreign deferred tax
assets (1,540) (55) -
Losses without federal/
foreign tax benefit 5,109 10,500 10,278
Income without provision
for taxes (939) - -
Nondeductible goodwill 835 1,557 892
Foreign tax differential (369) (533) (812)
State taxes, net of federal
tax benefit 259 334 400
------ ------- -------
Provision for income taxes $2,189 $ 4,000 $ 4,157
====== ======= =======
</TABLE>
<TABLE>
The effects of significant items comprising the components of deferred
tax balances were as follows:
<CAPTION>
October 2, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $28,552 $29,870
Reserves 12,541 12,465
------- -------
Total 41,093 42,335
------- -------
Deferred tax liabilities:
Depreciation (2,887) (3,219)
Other (1,361) (1,361)
------- -------
Total (4,248) (4,580)
------- -------
Valuation allowance (33,062) (34,382)
------- -------
Net deferred tax asset $ 3,783 $ 3,373
======= =======
</TABLE>
- 13 -
<PAGE> 27
8. INCOME TAXES (CONTINUED)
Total income taxes paid were $2,755, $6,629, and $3,206 for the nine
months ended October 2, 1994 and for the years ended December 31, 1993
and 1992, respectively. Certain taxes are paid to Bull HN because the
component or subsidiary is included in a consolidated return filed by
Bull HN. The deferred tax asset at October 2, 1994 and December 31,
1993 relates to HFS Inc. Management believes that it is more likely
than not that the asset will be realized through future reduced income
tax payments to Bull HN. Valuation allowances are provided against all
other temporary deductible differences and loss carryforwards which are
not more likely than not to be realized. At October 2, 1994 and
December 31, 1993, a full valuation allowance has been provided on all
other net deferred tax assets. The net reduction in the valuation
allowance in 1994 and 1993 includes $1,540 and $55, respectively,
recorded as a reduction of the income tax provision.
<TABLE>
At December 31, 1993, net operating loss carryforwards were comprised of
the following:
<CAPTION>
Year of
Amount Expiration
------ ----------
<S> <C> <C>
Canada $49,000 1996-2001
Australia 23,200 None
New Zealand 6,200 None
Mexico - -
</TABLE>
9. LEASES
<TABLE>
Lease obligations at October 2, 1994 for facilities and equipment under
noncancelable operating leases are as follows:
<CAPTION>
Total Sublease Net
----- -------- ---
<S> <C> <C> <C>
1994 (Remainder of year) $ 2,355 $ 96 $ 2,259
1995 11,404 313 11,091
1996 11,150 313 10,837
1997 10,686 313 10,373
1998 9,474 316 9,158
1999 9,274 327 8,947
Thereafter 37,927 1,872 36,055
------- ------ -------
Total $92,270 $3,550 $88,720
======= ====== =======
</TABLE>
The table above includes lease obligations and sublease income of $3,700
and $1,000, respectively, which are included in the restructure reserve
in the accompanying combined balance sheet.
Many of the leases include renewal options and certain of the leases
contained rent holidays and/or other incentives which are being
recognized ratably over the lease terms. Total rent expense included in
the combined statements of operations, net of amounts allocated to other
components of Bull HN, was $19,229, $26,995 and $30,023 for the nine
months ended October 2, 1994 and the years ended December 31, 1993 and
1992, respectively.
- 14 -
<PAGE> 28
10. PENSION AND RETIREMENT PLANS
All employees in the U.S. are covered by noncontributory defined benefit
retirement plans. Additionally, the Subsidiaries have employees in
various foreign countries that are covered by postemployment benefit
arrangements, one of which is considered to be a defined benefit plan
for accounting purposes. HFS Inc. also sponsors a Supplemental
Executive Retirement Plan (SERP). In general, the plans provide
benefits based primarily on years of credited service, average
compensation levels, and age at retirement. The funding policy is to
accumulate assets which, over time, will approximate the present value
of the projected benefit obligation.
The employees of the CS Business were historically included in the
defined benefit plan sponsored by Bull HN, which will be retained by
Bull HN. The costs related to the employees of the CS Business have
been allocated from Bull HN. Such costs are included in the table below.
<TABLE>
Pension cost for defined benefit plans was comprised of the following:
<CAPTION>
Nine Months Year Ended
Ended -------------------------
October 2, December 31, December 31,
1994 1993 1992
---------- ------------ ------------
<S> <C> <C> <C>
Allocated from Bull HN $ 2,539 $ 2,681 $2,482
Service cost - benefits
earned 2,897 5,146 3,265
Interest cost on projected
benefit obligation 3,881 6,452 4,616
Actual return on plan assets (2,054) (16,317) (4,903)
Net amortization and deferral (2,760) 8,766 (179)
------ ------- ------
Net periodic pension cost $4,503 $ 6,728 $5,281
====== ======= ======
</TABLE>
HFS Inc. also sponsors a defined contribution investment plan in the
U.S., which allows for employee contributions of up to 15% of salary
plus a sponsor match equal to 50% of the first 6% of an employee's
contribution. Employees of the CS Business participated in the defined
contribution investment plan sponsored by Bull HN. The expense for all
defined contribution plans was $2,998, $5,070 and $4,595 for the nine
months ended October 2, 1994, and the years ended December 31, 1993 and
1992, including amounts allocated from Bull HN of $988, $1,375 and
$1,715, respectively.
- 15 -
<PAGE> 29
10. PENSION AND RETIREMENT PLANS (CONTINUED)
<TABLE>
The following tables set forth the status of the defined benefit and
supplemental executive retirement plans and the significant assumptions
used for calculating the net periodic pension expense and accrued and
prepaid pension liabilities and assets recognized in the combined
financial statements:
<CAPTION> HFS Inc.
-------------- Foreign
October 2, 1994 Plan SERP Plan
--------------- ---- ---- -------
<S> <C> <C> <C>
Funded status:
Actuarial present value of benefit
obligations:
Vested benefit obligation $41,639 $ 350 $ 7,640
======= ====== =======
Accumulated benefit obligation $45,757 $ 350 $ 9,033
======= ====== =======
Projected benefit obligation for
service rendered to date $49,127 $1,340 $11,035
Plan assets at fair value, primarily
listed stocks and bonds 51,460 - 18,681
------- ------ -------
Projected benefit obligation greater
(less) than plan assets (2,333) 1,340 (7,646)
Unrecognized net gain 5,466 51 1,883
Unrecognized prior service cost (108) (710) -
Unrecognized net asset - - 731
------- ------ -------
Combined balance sheet accrual
(prepayment) $ 3,025 $ 681 $(5,032)
======= ====== =======
Significant assumptions:
Discount rate 8.5% 8.5% 9.0%
Rate of increase in compensation
levels 4.0 4.0 6.0
Rate of return on plan assets 8.5 8.5 9.0
</TABLE>
- 16 -
<PAGE> 30
10. PENSION AND RETIREMENT PLANS (CONTINUED)
<TABLE>
<CAPTION> HFS Inc.
-------------- Foreign
December 31, 1993 Plan SERP Plan
--------------- ---- ---- -------
<S> <C> <C> <C>
Funded status:
Actuarial present value of benefit
obligations:
Vested benefit obligation $42,123 $ 269 $ 8,262
======= ====== =======
Accumulated benefit obligation $46,882 $ 269 $ 8,910
======= ====== =======
Projected benefit obligation for
service rendered to date $57,222 $1,083 $12,885
------- ------ -------
Plan assets at fair value, primarily
listed stocks and bonds 52,434 - 19,517
Projected benefit obligation greater
(less) than plan assets 4,788 1,083 (6,632)
Unrecognized net (loss) gain (1,235) (126) 1,723
Unrecognized prior service cost (424) (483) -
Unrecognized net asset - - 728
------- ------ -------
Combined balance sheet accrual
(prepayment) $ 3,129 $ 474 ($4,181)
======= ====== =======
Significant assumptions:
Discount rate 7.5% 7.5% 6.0%
Rate of increase in compensation
levels 4.0 4.0 5.0
Rate of return on plan assets 8.5 8.5 9.0
</TABLE>
11. OTHER POSTRETIREMENT BENEFITS
Postretirement health care coverage is generally provided to employees
retiring on or after attaining age 55, who have rendered at least 10
years of service, until the age of 65. These benefit costs are funded
on a pay-as-you-go basis, and for 1994 and 1993 payments amounted to
$587 and $470, respectively, for employees of HFS Inc.
The employees of the CS Business were historically included in the
postretirement health care plan of Bull HN. The costs related to such
employees have been allocated by Bull HN and are included in the table
below.
- 17 -
<PAGE> 31
11. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
<TABLE>
Net periodic postretirement benefit costs included the following components:
<CAPTION>
Nine
Months Ended Year Ended
October 2, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Allocated from Bull HN $1,513 $2,163
Service cost - benefits attributed to
service during the period 116 170
Interest cost on APBO 374 596
Amortization of unrecognized loss (gain) (18) -
Amortization of transition obligation 270 360
One-time adjustment for 1993 early
retirement program - 370
------ ------
Net periodic postretirement benefit
expense $2,255 $3,659
====== ======
</TABLE>
<TABLE>
The following tables set forth the funded status, reconciled with
amounts recognized in the HFS Inc. statements of financial position:
<CAPTION>
October 2, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation
(APBO):
Retirees $3,812 $4,006
Fully eligible active plan participants 795 638
Other active plan participants 1,457 2,173
------ ------
6,064 6,817
Plan assets at fair value - -
------ ------
APBO in excess of plan assets 6,064 6,817
Prior service cost not yet recognized
in periodic postretirement benefit
cost 1,767 -
Unrecognized net (gain) loss from past
experience different from that
assumed and from changes in assumptions (82) 1,045
Unrecognized transition obligation (6,567) (6,836)
------ ------
Accrued postretirement benefit obligation $1,182 $1,026
====== ======
</TABLE>
- 18 -
<PAGE> 32
11. OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The discount rate used in determining the accumulated postretirement
benefit obligation was 8.5% in 1994 and 7.5% in 1993. The assumed
health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 11.5% in 1995, gradually declining
1.5% annually to 5.5% in 1999.
If the health care cost trend rate assumptions were increased by one
percent, the accumulated postretirement benefit obligation as of
October 2, 1994 would be increased by $470. The effect of this change
on the sum of the service and interest cost would be an increase of $50.
12. CONTINGENCIES
The CS Business and Subsidiaries are a party to certain litigation. It
is the opinion of management that losses in connection with these
matters in excess of the amounts provided in the combined balance sheets
and applicable insurance coverage will not have a material adverse
effect on the combined financial statements.
13. CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
CONCENTRATIONS OF CREDIT RISK - There is no significant concentration
risk due to the large number of customers dispersed over many different
industries and geographic locations, except for receivables from the
U.S. Government which were approximately 50% of accounts receivable at
October 2, 1994.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of cash and
equivalents, accounts receivable, accounts payable and borrowings are
assumed to approximate fair value due to the short-term nature of these
instruments.
- 19 -
<PAGE> 33
14. BUSINESS SEGMENTS
The operations of the entities included in the combined financial
statements comprise one industry segment - the service and sale of
computer systems.
<TABLE>
Financial information, summarized by geographic area, is as follows:
<CAPTION>
United
States Canada Australia Mexico France Total
------ ------ --------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Nine months ended
October 2, 1994:
Total revenue $218,048 $36,305 $57,527 $ 7,332 $ 2,400 $321,612
Income (loss) from
operations 6,547 (3,443) 4,047 (2,280) (8,300) (3,429)
Identifiable assets 147,467 28,769 47,759 10,154 3,700 237,849
Year ended December 31,
1993:
Total revenue $329,713 $61,929 $68,499 $14,736 $ 4,700 $479,577
Income (loss) from
operations 6,862 (9,009) (5,734) 131 (15,200) (22,950)
Identifiable assets 144,952 34,832 39,733 12,644 6,500 238,661
Year ended December 31,
1992:
Total revenue $424,363 $74,227 $84,891 $23,323 $ 4,700 $611,504
Income (loss) from
operations 10,116 (21,661) (1,213) 143 (6,800) (19,415)
</TABLE>
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<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITOR'S CONSENT
- - -----------------------------
We consent to incorporation by reference in Registration Statements (Nos.
33-89910, 33-89912, and 33-89914) of Wang Laboratories Inc., on Forms S-8 of
our report dated December 28, 1994, appearing in this Amendment No. 1 to
Current Report of Wang Laboratories Inc. on Form 8-K/A dated January 31, 1995.
/s/ Deloitte and Touche LLP
Boston, Massachusetts
April 12, 1995
