<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---- to ----
Commission file number 1-5677
WANG LABORATORIES, INC.
-----------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2192707
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
600 Technology Park Drive
Billerica, Massachusetts 01821-4130
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(Address of principal executive offices) (Zip Code)
(508) 967-5000
--------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
l934 during the preceding twelve months, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
----- -----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practical date (September 30, 1995):
Common stock, par value $.01 per share 34,036,851 shares
<PAGE> 2
2
<TABLE>
WANG LABORATORIES, INC. AND SUBSIDIARIES
INDEX
<CAPTION>
Part I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet - 3
September 30, 1995 and June 30, 1995
Condensed Consolidated Statement of Operations - 5
Three months ended September 30, 1995 and
Three months ended September 30, 1994
Condensed Consolidated Statement of Cash Flows - 6
Three months ended September 30, 1995 and
Three months ended September 30, 1994
Notes to Condensed Consolidated Financial Statements - 7
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE 19
</TABLE>
<PAGE> 3
3
WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
PART I - FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
September 30, June 30,
1995 1995
------------- --------
ASSETS (Dollars in millions)
- ------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 153.9 $ 181.3
Accounts receivable, net of allowances of
$12.0 million at September 30, 1995 and
$10.7 million at June 30, 1995 198.4 182.4
Inventories 28.1 24.4
Other current assets 36.0 37.2
-------- --------
Total current assets 416.4 425.3
Depreciable assets, net of accumulated
depreciation of $73.7 million at September
30, 1995 and $60.9 million at June 30, 1995 124.3 134.0
Intangible assets, net 262.3 274.0
Other 25.1 25.7
-------- --------
Total assets $ 828.1 $ 859.0
======== ========
</TABLE>
See notes to the condensed consolidated financial statements.
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WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET - (Continued)
(UNAUDITED)
<CAPTION>
September 30, June 30,
1995 1995
------------- -------
(Dollars in millions)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
CURRENT LIABILITIES
Borrowings due within one year $ 2.0 $ 3.0
Accounts payable, accrued expenses and other 263.5 275.0
Income taxes 9.9 10.1
Deferred service revenue 91.1 93.1
------ ------
Total current liabilities 366.5 381.2
LONG-TERM LIABILITIES
Debt 22.8 22.8
Restructuring 8.0 9.0
Other liabilities 85.3 80.8
------ ------
Total long-term liabilities 116.1 112.6
4 1/2% Series A cumulative convertible
preferred stock, $.01 par value, 90,000
shares issued at September 30, 1995 and
June 30, 1995; redemption and liquidation
preference of $90.0 million 84.2 84.1
11% Exchangeable preferred stock, $.01 par value,
3,660,000 shares authorized, 2,914,325 issued
at September 30, 1995 and 2,836,326 at
June 30, 1995; redemption and liquidation
preference of $72.8 million 63.7 61.5
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 100,000,000
shares authorized; outstanding shares:
34,036,851 at September 30, 1995 and
33,907,759 at June 30, 1995 0.3 0.3
Capital in excess of par value 281.4 280.8
Cumulative translation adjustment 0.2 (0.5)
Accumulated deficit (84.3) (61.0)
------ ------
Total stockholders' equity 197.6 219.6
------ ------
Total liabilities and stockholders' equity $828.1 $859.0
====== ======
</TABLE>
See notes to the condensed consolidated financial statements.
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5
<TABLE>
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1995 1994
------------- -------------
(Dollars in millions, except per share data)
<S> <C> <C>
REVENUES
Product sales $ 82.8 $ 78.7
Service and other 181.3 113.5
------ ------
264.1 192.2
COSTS AND EXPENSES
Cost of product sales 54.7 54.8
Cost of service and other 124.1 71.4
Research and development 8.7 7.6
Selling, general and
administrative 58.9 49.4
Amortization of intangibles -
acquisition and fresh-start 10.4 6.6
Acquisition-related charges 27.2 --
------ ------
Total costs and expenses 284.0 189.8
------ ------
OPERATING INCOME (LOSS) (19.9) 2.4
OTHER (INCOME) EXPENSE
Interest expense 1.0 0.8
Other income - net (3.0) (3.9)
------ ------
Total other income (2.0) (3.1)
------ ------
INCOME (LOSS) BEFORE INCOME TAXES (17.9) 5.5
Provision for income taxes 2.0 2.7
------ -------
NET INCOME (LOSS) (19.9) 2.8
Dividends and accretion on
preferred stock (3.4) (2.0)
------ ------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $(23.3) $ 0.8
====== ======
Weighted average shares and common
share equivalents outstanding
(in millions) 34.0 32.8
NET INCOME (LOSS) PER SHARE $(0.68) $ 0.02
====== ======
</TABLE>
See notes to the condensed consolidated financial statements.
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6
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
September 30, September 30,
1995 1994
------------- -------------
(Dollars in millions)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(19.9) $ 2.8
Depreciation 14.6 6.8
Amortization 11.7 7.6
Non-cash provision for income taxes 1.8 2.4
Provision for acquisition-related charges 27.2 --
Payments of acquisition- and integration-
related costs and other charges (10.7) --
CHANGES IN OTHER ACCOUNTS AFFECTING OPERATIONS
Accounts receivable (16.0) 1.2
Inventories (0.9) 1.4
Other current assets 0.3 (0.4)
Accounts payable and other current liabilities (11.5) (4.1)
Other -- (1.2)
------ ------
Net changes in other accounts affecting
operations (28.1) (3.1)
------ ------
Net cash provided by (used in) operations
before restructuring payments and
reorganization-related items (3.4) 16.5
Restructuring payments and reorganization-
related items (4.1) (20.1)
------ ------
Net cash used in operations (7.5) (3.6)
------ ------
INVESTING ACTIVITIES
Investment in depreciable assets (9.9) (5.7)
Investment in capitalized software (0.5) (1.4)
Business acquisitions, net of cash acquired (7.6) (1.5)
Other (1.6) (0.6)
------ ------
Net cash used in investing activities (19.6) (9.2)
------ ------
FINANCING ACTIVITIES
Payments of long-term debt -- (0.4)
Increase (decrease) in short-term borrowings (0.8) 6.2
Other 0.6 --
------ ------
Net cash provided by (used in)
financing activities (0.2) 5.8
------ ------
Effect of changes in foreign exchange rates
on cash (0.1) 1.8
------ ------
DECREASE IN CASH AND EQUIVALENTS (27.4) (5.2)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 181.3 189.4
------ ------
CASH AND EQUIVALENTS AT END OF PERIOD $153.9 $184.2
====== ======
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE> 7
7
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
NOTE A - BASIS OF PRESENTATION
- ------------------------------
During interim periods, the Company follows the accounting policies set forth
in its most recent Annual Report on Form 10-K, filed with the Securities and
Exchange Commission. Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in the most recent
Annual Report on Form 10-K when reviewing interim financial statements.
The results of operations for the periods reported are not necessarily
indicative of those that may be expected for the full year. However, in the
opinion of management, the accompanying interim financial statements contain
all material adjustments, consisting principally of normal recurring
adjustments necessary to present fairly the financial condition, the results of
operations and cash flows of Wang Laboratories, Inc. and its consolidated
subsidiaries for the interim periods presented.
Earnings per share is based on the weighted average number of common shares
outstanding, including those yet to be distributed by the Disbursing Agent
appointed under the Company's Reorganization Plan, and the effect, when
dilutive, of stock options and warrants. Net income(loss), for purposes of
calculating earnings per share, has been reduced by cumulative dividends and
accretion related to the Company's preferred stock.
Certain amounts in previously issued financial statements were reclassified to
conform to current presentations.
NOTE B - BUSINESS ACQUISITION
- -----------------------------
On July 21, 1995 ("Closing Date"), the Company acquired Sigma Imaging Systems,
Inc. ("Sigma"), a privately held company that designs and markets workflow and
imaging software for paper-intensive businesses, including insurance, banking,
finance, utilities and government. The purchase price of $20.0 million
consists of $15.0 million in cash and $5.0 million in common stock of the
Company. A cash payment of $9.0 million was made on July 21, 1995 and $6.0
million is due to former Sigma stockholders in February 1996. The common stock
will be distributed to former Sigma stockholders on January 3, 1997. The
299,176 shares of the Company's common stock to be issued in connection with
the acquisition of Sigma was determined by dividing $5.0 million by $16.71,
which was the average closing sale price per share of the Company's common
stock on the 20 consecutive trading days ending on the trading day prior to the
closing date.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board No. 16, "Business Combinations"
("APB 16"). Under APB 16, purchase price allocations were made to the assets
acquired and the liabilities assumed based on their respective fair values. The
excess of costs over the fair value of the net assets acquired totaled $5.9
million and is included in intangible assets.
<PAGE> 8
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WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
NOTE B (Continued)
- ------
<TABLE>
Acquisition-related charges have been recorded as of September 30, 1995, and
consist of the following:
<S> <C>
Sigma in-process research and
development $16.0
Capitalized software 6.6
Workforce-related and other 4.6
-----
Total $27.2
=====
</TABLE>
The in-process research and development charge consists of that portion of the
purchase price allocated to Sigma which was charged to operations because, in
management's opinion, technological feasibility for this purchased research and
development had not been established. Capitalized software write-offs pertain
to overlapping workflow software development efforts. Workforce-related
charges, consisting principally of Wang severance costs, were established based
on specific identification of employees to be terminated, along with their job
classifications or functions and their locations. Other charges relate to
customer transition commitments for discontinued Wang product offerings.
Cash outlays to complete the acquisition-related initiatives are estimated at
$3.9 million, and are anticipated to be generally completed during fiscal 1996.
Pro forma results of operations are not presented as the amounts do not differ
significantly from the Company's historical results.
<TABLE>
NOTE C - OTHER BALANCE SHEET INFORMATION
- ----------------------------------------
Components of selected captions in the Condensed Consolidated Balance Sheet
follow (in millions):
<CAPTION>
September 30, June 30,
1995 1995
------------- --------
<S> <C> <C>
Inventories
Finished products $15.8 $14.5
Raw materials and work-in-process 8.3 8.7
Service parts and supplies 4.0 1.2
----- -----
$28.1 $24.4
===== =====
</TABLE>
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WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
SEPTEMBER 30, 1995
<TABLE>
NOTE C - (Continued)
- ------
<CAPTION>
September 30, June 30,
1995 1995
------------- --------
<S> <C> <C>
Intangible assets
Trademarks and patents $ 21.8 $ 21.3
Computer software 34.2 42.2
Installed base - service 124.0 123.5
License agreements 29.9 29.9
Assembled workforce 13.8 11.7
Goodwill 21.4 18.9
Reorganization value in excess of amounts
allocated to identifiable assets 85.4 86.6
------ ------
330.5 334.1
Less accumulated amortization 68.2 60.1
------ ------
$262.3 $274.0
====== ======
Accounts payable, accrued expenses and other
Accounts payable $ 48.9 $ 62.2
Accrued expenses 97.2 91.8
Compensation and benefits 48.5 50.1
Restructuring and acquisition-
and integration-related accruals 47.7 56.6
Other 21.2 14.3
------ ------
$263.5 $275.0
====== ======
Other long-term liabilities
Postretirement benefits accrual $ 18.6 $ 18.5
Pension liability 7.0 8.2
Bull facilities accrual 16.0 16.5
Reorganization-related accruals 8.0 8.4
Insurance accruals 7.2 6.5
Deferred income taxes 15.2 15.3
Other 13.3 7.4
------ ------
$ 85.3 $ 80.8
====== ======
</TABLE>
NOTE D - CONTINGENCIES
- ----------------------
On October 27, 1994, Wang filed suit against FileNet Corporation alleging the
infringement of five Wang patents covering a wide range of imaging and workflow
technologies. A sixth imaging patent was subsequently added. Wang is seeking
damages and injunctive relief. The parties are currently engaged in the
discovery process. The trial is currently scheduled for calendar 1996.
<PAGE> 10
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WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
SEPTEMBER 30, 1995
NOTE D (Continued)
- ------
The Company is a defendant in several "repetitive stress injury" ("RSI") cases.
Such cases, which have been filed against a large number of computer
manufacturers, allege that the various defendants' keyboards caused the
plaintiffs' injuries. The Company believes that all RSI claims brought against
the Company arising before the confirmation of the Reorganization Plan will be
discharged pursuant to the Reorganization Plan. In addition, the Company has
maintained comprehensive general liability insurance policies with several
insurers. These policies indemnify the Company for bodily injury damages
arising out of its operations and products. Nevertheless, high deductibles,
retrospective premium adjustments, and other issues relating to insurance
coverage of RSI claims may significantly limit the amount of insurance coverage
available to the Company for such claims. Given the lack of legal precedent
with respect to RSI claims, the Company can predict neither the number of cases
nor the associated claims for damages that may be filed against the Company.
To date, approximately 60 claims have been made against the Company alleging
damages for RSI injuries. Claims for all but three of these have been filed as
part of the Company's Chapter 11 proceeding (the Company filed for Chapter 11
protection in August 1992 and effectively emerged from Chapter 11 on September
30, 1993). The Company intends to defend itself vigorously against any
liability asserted.
Prior to its filing for Chapter 11 protection, the Company was also a defendant
in a number of other lawsuits arising from the conduct of its business.
Substantially all such suits were stayed while the Company operated under
Chapter 11. Claims in such suits relating to periods prior to the Company's
filing under Chapter 11 are being extinguished and, to the extent allowed, have
been provided for under the Reorganization Plan. Although the Company is not
in a position to predict accurately the results of specific matters, the
Company does not currently believe that its liability, if any, for all
litigation will be material to the Company's consolidated financial position or
its results of operations.
On September 5, 1995, the Company filed suit in the United States District
Court for the Eastern District of Virginia against Decision Servcom, Inc.
("DSI"), alleging infringement by DSI of copyrights held by the Company on the
operating system software for the Company's VS line of minicomputers. The
Company is seeking damages and injunctive relief.
NOTE E - SUBSEQUENT EVENT
- -------------------------
On October 18, 1995, the Company acquired BISS Limited, a privately held
company operating in the United Kingdom that designs, installs, integrates and
supports network and client/server computing solutions. Approximately $14
million of the $16 million purchase price was paid in cash in October, with the
additional $2 million to be paid in March 1997.
<PAGE> 11
11
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
The Company reported revenues of $264.1 million for the three months ended
September 30, 1995, a 37.4% increase compared to revenues of $192.2 million for
the same period of the prior year. After acquisition-related charges of $27.2
million relating to the acquisition of Sigma Imaging Systems, Inc. ("Sigma")
and $10.4 million of amortization of fresh-start and acquired intangible
assets, the Company reported an operating loss of $19.9 million. This compares
to operating income of $2.4 million for the quarter ended September 30, 1994,
which included $6.6 million of amortization of intangible assets.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")
amounted to $33.9 million for the first quarter, compared to $18.5 million for
the quarter ended September 30, 1994, an increase of 83.2%. EBITDA was
determined by excluding from the net income(loss): acquisition-related charges;
income taxes; interest expense; interest income (interest income of $2.7 million
and $2.1 million for the quarter ended September 30, 1995 and 1994,
respectively, was reported in the caption Other income); depreciation and
amortization.
On July 21, 1995, the Company completed the acquisition of Sigma. Sigma
designs and markets workflow and imaging software for paper-intensive
businesses. These products provide customers the scaleable, enterprise-wide
processing power required for high-volume, image-enabled transaction processing
applications. Sigma's products are used in some of the largest multi-site
imaging and workflow systems in operation today. The Sigma products running on
Microsoft Corporation's Windows NT operating systems will allow Wang to benefit
from revenue growth opportunities made possible by its alliance with Microsoft
Corporation.
The Company has begun shipment of its workflow and imaging software designed to
run on Microsoft Corporation's Windows NT server and BackOffice software. As
part of the Company's alliance with Microsoft, the Company was designated as
the preferred vendor of imaging and workflow systems, and is working closely
with Microsoft in the definition of the standards which would enable
interoperability between production workflow systems and electronic messaging
systems. In the first half of fiscal 1996, the Company expects to provide
connections between its document imaging software for Windows and the Company's
family of imaging server products.
Product revenues for the first quarter increased by 14.1% to $42.3 million in
the United States, while international product revenues decreased slightly to
$40.5 million, compared to $37.1 million and $41.6 million, respectively, for
the same period of the prior year. Proprietary product sales totaled $18.3
million for the first quarter, 1995 as compared to $18.8 million in the prior
year first quarter. Network product and other product sales totaled $56.0
million and $56.6 million for the first quarter of 1995 and 1994, respectively.
Open software product sales more than doubled to $8.5 million for the three
months ended September 30, 1995, from $3.3 million during the three months
ended September 30, 1994.
<PAGE> 12
12
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
- ---------------------
Service and other revenues for the three months ended September 30, 1995 in the
United States increased $52.2 million to $100.9 million, while international
service and other revenues increased by $15.6 million to $80.4 million,
compared to the same period of the prior year. Increased service and other
revenues are due to the acquisition of the U.S. customer services business of
Bull HN Information Systems, Inc. and certain of its sales and service
subsidiaries ("Bull") in the third quarter of fiscal 1995. Proprietary
services increased $19.8 million as a result of a $38.0 million increase in
Bull proprietary product services revenue, and an $18.2 million decrease in
Wang proprietary product services revenue. Wang proprietary maintenance
revenues declined at approximately the same rate as they had in recent periods.
Network services increased $47.3 million compared to the same period of the
prior year. This increase was mainly due to increased third party maintenance
contracts acquired from Bull. Open software services totaled $0.7 million for
the quarter.
Product gross margin for the three months ended September 30, 1995 increased to
33.9% from 30.4% in the comparable period of the prior year. The increase was
due to changes in product mix, particularly the increased volume of open
software and the addition of high-margin Bull products.
Gross margin for service and other revenues for the three months ended
September 30, 1995 decreased to 31.6% from 37.1% in the comparable period of
the prior year. Margins were negatively affected by the increase in
maintenance on lower-margin multi-vendor service products. The service gross
margin continued to be adversely affected by competitive and technological
pressures. Additionally, the Bull acquisition has reduced the gross margin
because of its historically lower margins on its proprietary maintenance
contracts as compared to margins on the Company's proprietary maintenance
contracts.
Research and development costs increased by $1.1 million, or 14.5%,
representing 3.3% and 4.0% of revenues for the three months ended September 30,
1995 and 1994, respectively. The increase is due to the Bull and Sigma
acquisitions. The Company's development efforts are now focused on developing
software for open systems platforms and to continuing support of its
proprietary VS products.
Selling, general and administrative expenses increased $9.5 million, or 19.2%
for the period due to the Bull and Sigma acquisitions, and represented 22.3%
and 25.7% of revenues for the three months ended September 30, 1995 and 1994,
respectively. Offsetting these increases were acquisition- and
integration-related initiatives and restructuring programs which continued to
contribute significantly to the elimination of unnecessary or redundant
programs, personnel, support costs and other related expenses.
Amortization of fresh-start and acquired intangible assets totaled $10.4
million and $6.6 million for the three months ended September 30, 1995 and
1994, respectively. Amortization of $3.5 million was recorded for the three
months ended September 30, 1995 for intangible assets established in connection
with the Bull acquisition. Amortization of $6.5 million and $6.6 million for
the three months ended September 30, 1995 and 1994, respectively, relates to
the implementation of fresh-start reporting as of September 30, 1993.
<PAGE> 13
13
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
- ---------------------
Interest expense increased to $1.0 million, principally as the result of
interest on the acquisition note payable to Bull HN Information Systems, Inc.
Other income was primarily comprised of interest income, which totaled $2.7
million and $2.1 million for the three months ended September 30, 1995 and
1994, respectively, and which resulted primarily from investments in time
deposits.
The provision for income taxes of $2.0 million and $2.7 million included $1.8
million and $2.4 million of non-cash expense for the three months ended
September 30, 1995 and 1994, respectively, relating to the utilization of the
Company's net operating loss carryforwards. Under fresh-start reporting,
realization of these net operating loss carryforwards is recognized as a
reduction of Reorganization value in excess of amounts allocated to
identifiable intangible assets.
At September 30, 1995, the Company employed approximately 6,800 people in
continuing operations, compared to 5,000 at September 30, 1994. The Bull
acquisition resulted in increased personnel levels of approximately 1,800.
Liquidity and Sources of Capital
- --------------------------------
Cash and equivalents decreased $27.4 million to $153.9 million, primarily due
to working capital needs, payments of restructuring, reorganization and
acquisition- and integration-related items and cash used for the Sigma
acquisition. This compares to a $5.2 million decrease in the same period of
the prior year.
Cash used in operations before reorganization-related items of $3.4 million and
for reorganization- related items of $4.1 million, resulted in net cash used in
operations of $7.5 million for the three months ended September 30, 1995. This
compares to cash provided by operations before reorganization-related items of
$16.5 million, offset by payments of reorganization-related items of $20.1
million, resulting in $3.6 million net cash used in operations in the three
months ended September 30, 1994. Higher levels of receivables and inventories
utilized $16.9 million of cash in the current quarter, compared to cash
generated of $2.6 million in the same quarter of the prior year. Lower
accounts payable and other current liabilities resulted in reductions of $11.5
million and $4.1 million for the three months ended September 30, 1995 and
1994, respectively. Receivable days sales outstanding increased to 62 days at
September 30, 1995 compared to 49 days at September 30, 1994, and relates
primarily to the inclusion of the acquired Bull businesses along with the
implementation of new financial systems. Inventory turnover rate was 7.8
times at September 30, 1995, compared to 8.0 times at September 30, 1994.
Net cash used in investing activities totaled $19.6 million for the quarter
ended September 30, 1995 compared to $9.2 million for the same period of the
prior year. Investment in depreciable assets increased by $4.2 million,
primarily due to the acquisition of the Bull businesses. Cash paid for
business acquisitions of $7.6 million relates to the Sigma acquisition, and
consists of a $9.0 million payment and $0.1 million of transaction costs, net
of $1.5 million of cash acquired (see Note B, "Business Acquisition").
<PAGE> 14
14
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Sources of Capital (Continued)
- --------------------------------
Net cash used in financing activities totaled $0.2 million for the period
compared to net cash provided by financing activities of $5.8 million in the
same period of the prior year. Short-term borrowings resulted in cash used of
$0.8 million for the three months ended September 30, 1995 compared to cash
provided of $6.2 million for the same period of the prior year.
At September 30, 1995, in addition to the cash balance on hand, the parent
company had available to it the unused portions of the BTCC financing
arrangement, providing for borrowings and/or the issuance of additional letters
of credit of up to $74.1 million.
In addition to normal operating activities, expected cash requirements over the
next twelve months include approximately $50 million for acquisition- and
integration-related costs and other charges and previously recorded
restructuring and reorganization-related items.
Dividend requirements of the Company's outstanding 11% Exchangeable Preferred
Stock can be satisfied in either cash or payment-in-kind, at the option of the
Company, through September 30, 1996. Dividends after September 30, 1996 must
be paid in cash. Payment of cash dividends on 4 1/2% Series A Cumulative
Convertible Preferred Stock is currently prohibited by the terms of the 11%
Exchangeable Preferred Stock and the BTCC financing agreement.
The Company believes that existing cash balances, cash generated from
operations, and borrowing availability under the BTCC facility will be
sufficient to meet the parent company's and subsidiaries' cash requirements
from operations for at least the next twelve months, and to complete the
planned acquisition- and integration-related and restructuring efforts. As
part of furthering its business strategy, the Company continually explores the
acquisition of or the opportunity for strategic relationships with other
businesses. One or more of these opportunities could have an impact on the
Company's liquidity through the use of cash or the issuance of debt, or result
in the issuance of additional equity securities of the Company.
<PAGE> 15
15
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
During the quarter ended September 30, 1995 a lawsuit filed by a
shareholder in December 1992 alleging certain violations of federal securities
laws and other laws was settled within the limits of the Registrant's
applicable insurance policies.
<TABLE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
<CAPTION>
Exhibit No. Description
- ----------- -----------------------------------------
<S> <C>
2.1(1) The Amended and Restated Reorganization Plan of Wang Laboratories, Inc.
and Official Committee of Unsecured Creditors dated September 30, 1993
3.1(2) Certificate of Incorporation
3.2(12) Amended and Restated Certificate of Stock Designation with respect to the
11% Preferred Stock
3.3(1) By-laws of the Registrant
3.4(9) Certificate of Incorporation, as amended
3.5(13) Certificate of Stock Designation with respect to the 4 1/2% Series A
Cumulative Convertible Preferred Stock
10.1(3) Stock Incentive Plan
10.2(3) 1993 Directors' Stock Option Plan
10.3(4) Form of Contingent Severance Compensation Agreements with Donald P.
Casey, J.J. Van Vuuren, Albert A. Notini, William P. Ferry, David I.
Goulden, Bruce A. Ryan, James J. Hogan and Franklyn A. Caine, each an
executive officer of the Company
10.4(5) Contingent Severance Compensation Agreement with Joseph M. Tucci
10.5(7) Employment Agreement with Joseph M. Tucci, as amended
</TABLE>
<PAGE> 16
16
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------------------------------------
<S> <C>
10.6(6) Employment Agreement with Donald P. Casey
10.7(7) Employment Agreement with William P. Ferry
10.8(7) Employment Agreement with James J. Hogan
10.9(3) Loan and Security Agreement with Congress Financial Corporation, dated
December 15, 1993
10.10(5) Termination Agreement between the Registrant and Michael Mee
10.11(5) Form of Stock and Warrant Subscription Agreement, dated September 20,
1993
10.12(3) Form of Registration Rights Agreement for Securities, dated December 17,
1993
10.13(5) Consulting Employment Agreement of Stephen G. Jerritts
10.14(3) Consulting Agreement of Raymond C. Kurzweil
10.15(5) Employee Retention Agreement with William P. Ferry
10.16(5) Employee Retention Agreement with James J. Hogan
10.17(5) Employment Agreement with Bruce A. Ryan
10.18(7) Form of Non-Negotiable Security Promissory Note from Joseph M. Tucci to
the Registrant
10.19(7) Form of Pledge Agreement with Joseph M. Tucci
10.20(7) Form of Non-Negotiable Secured Promissory Note from Donald P. Casey to
the Registrant
10.21(7) Form of Pledge Agreement with Donald P. Casey
</TABLE>
<PAGE> 17
17
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------------------------------------
<S> <C>
10.22(8) Stock Incentive Plan, as Amended
10.23(9) Contingent Severance Compensation, as Amended with Franklyn A. Caine
10.24(9) Employees' Stock Incentive Plan
10.25(9) 1995 Director Stock Option Plan
10.26(10) The Asset and Stock Purchase Agreement among Wang Laboratories, Inc.,
Bull HN Information Systems, Inc., Bull S.A. and, for certain purposes,
Compagnie de Machines Bull dated as of December 30, 1994 and a Credit
Agreement among Wang Laboratories, Inc., HFS, Inc. and certain lenders
and agents named therein and Banker's Trust Company dated January 30,
1995
10.27(11) Employment Agreement with Ronald A. Cuneo
10.28(13) Employment Agreement with Joseph M. Tucci, as Amended
10.29(13) Employment Agreement with Donald P. Casey, as Amended
10.30(13) Employment Agreement with Stephen G. Jerritts
11.1 Statement of Computation of Earnings per Share
12.1 Statement of Computation of Earnings to Fixed Charges
<FN>
(b) During the quarter ended September 30, 1995, the Registrant filed a
current report on Form 8-K dated July 27, 1995 relating to the
acquisition by the Registrant of all the issued and outstanding stock of
Sigma Imaging Systems, Inc.
(1) Filed as an Exhibit to the Registrant's Registration Statement on Form 8-A
(File No. 0-22470), filed on September 27, 1993.
(2) Filed as an Exhibit to the Registrant's Registration Statement on Form S-8
(File No. 33-73210), filed on December 21, 1993.
(3) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1993.
(4) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1994.
(5) Filed as an Exhibit to the Registrant's Registration Statement on Form S-1,
as amended (File No. 33-81526) filed September 13, 1994.
(6) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1993.
(7) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1994.
</TABLE>
<PAGE> 18
18
(8) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1994.
(9) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(10) Filed as an Exhibit to the Registrant's Current Report of Form 8-K dated
January 31, 1995.
(11) Filed as an Exhibit to the Registrant's quarter report on Form 10-Q for the
quarter ended March 31, 1995.
(12) Filed as an Exhibit to the Registration Statement on Form S-3 (File No.
33-58717), filed April 19, 1995.
(13) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ending June 30, 1995.
<PAGE> 19
19
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, thereunto duly authorized.
DATE: November 14, 1995
WANG LABORATORIES, INC.
/s/ Franklyn A. Caine
-------------------------------
Franklyn A. Caine,
Executive Vice President and
Chief Financial Officer
<PAGE> 1
<TABLE>
WANG LABORATORIES, INC. AND SUBSIDIARIES
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1995 September 30, 1994
---------------------- ----------------------
Primary Fully Diluted Primary Fully Diluted
------- ------------- ------- -------------
(In millions except per share data)
<S> <C> <C> <C> <C>
Average shares of common
stock outstanding 34.0(1) 34.0(1) 32.0(1) 32.0(1)
Common equivalent shares for
stock options -- -- 0.8 0.9
------ ------ ------ ------
34.0 34.0 32.8 32.9
====== ====== ====== ======
Net income (loss) $(19.9) $(19.9) $ 2.8 $ 2.8
Accretion and dividends on
preferred stock (3.4) (3.4) (2.0) (2.0)
------ ------ ------ ------
Net income (loss) applicable
to common stockholders $(23.3) $(23.3) $ 0.8 $ 0.8
====== ====== ====== ======
Net income (loss) per share $(0.68) $(0.68) $ 0.02 $ 0.02
====== ====== ====== ======
<FN>
(1) Includes shares distributed as well as those held in a disputed claim
reserve to be distributed when claims are resolved.
</TABLE>
<PAGE> 1
WANG LABORATORIES, INC. AND SUBSIDIARIES
EXHIBIT 12.1 - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions except ratios)
<TABLE>
<CAPTION>
Reorganized
Company
-------------------------------------------------------
Three months Year Nine months
ended September 30, ended June 30, ended June 30,
1995 1995 1994
------------------- -------------- --------------
<S> <C> <C> <C>
FIXED CHARGES
Interest expense $ 1.0 $ 3.7 $ 3.5
Portion of rent expense
representative of interest 1.9 5.9 5.6
------ ------ -----
2.9 9.6 9.1
Preferred dividend requirement 4.8 12.7 7.5
------ ------ -----
Combined fixed charges and
preferred dividend $ 7.7 $ 22.3 $16.6
====== ====== =====
EARNINGS
Income (loss) from continuing
operations before income
taxes, discontinued operations,
fresh-start reporting adjustment
and extraordinary item $(17.9) (1) $(54.0) (2) $20.4
Fixed charges per above 2.9 9.6 9.1
------ ------ -----
$(15.0) $(44.4) $29.5
====== ====== =====
Ratio of earnings to combined
fixed charges and preferred dividends -- -- 1.8
====== ====== =====
Coverage deficiency $(15.0) (1) $(44.4) (2) --
====== ====== =====
<CAPTION>
Predecessor Company
---------------------------------------------------
Three months For the year ended June 30,
ended September 30, -----------------------------
1993 1993 1992 1991
------------------- -----------------------------
<S> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $ 1.2 $ 15.0 $ 44.6 $ 44.0
Portion of rent expense
representative of interest 2.7 9.7 19.1 33.5
------ ---------------------------
3.9 24.7 63.7 77.5
Preferred dividend requirement -- -- -- --
------ ---------------------------
Combined fixed charges and
preferred dividend $ 3.9 $ 24.7 $ 63.7 $ 77.5
====== ============================
EARNINGS
Income (loss) from continuing
operations before income
taxes, discontinued operations,
fresh-start reporting adjustment
and extraordinary item $(22.6) $(197.2) $(346.5) $(368.8)
Fixed charges per above 3.9 24.7 63.7 77.5
------ ---------------------------
$(18.7) $(172.5) $(282.8) $(291.3)
====== ============================
Ratio of earnings to combined
fixed charges and preferred dividends -- -- -- --
====== ============================
Coverage deficiency $(18.7) $(172.5) $(282.8) $(291.3)
====== ============================
<FN>
(1) Includes $27.2 million of acquisition-related charges.
(2) Includes $64.2 million provision for integration-related costs and other charges.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET, CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS AND EXHIBIT 11.1-COMPUTATION OF EARNINGS PER SHARE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1995.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 153,900
<SECURITIES> 0
<RECEIVABLES> 210,400
<ALLOWANCES> 12,000
<INVENTORY> 28,100
<CURRENT-ASSETS> 416,400
<PP&E> 198,000<F1>
<DEPRECIATION> 73,700
<TOTAL-ASSETS> 828,100
<CURRENT-LIABILITIES> 366,500
<BONDS> 24,800<F2>
<COMMON> 300
63,700
84,200
<OTHER-SE> 197,300
<TOTAL-LIABILITY-AND-EQUITY> 828,100
<SALES> 82,800
<TOTAL-REVENUES> 264,100
<CGS> 54,700
<TOTAL-COSTS> 178,800
<OTHER-EXPENSES> 105,200<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (17,900)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (19,900)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,900)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
<FN>
<F1>PP&E cost and accumulated depreciation include capitalized non-consumable
spares inventory. <F2>Bonds, mortgages and similar debt is comprised
of borrowings due within one year and long-term debt. <F3>Other costs and
expenses includes $27.2 million of acquisition-related charges related to the
July 21, 1995 acquisition of Sigma Imaging Systems, Inc.
</FN>
</TABLE>
