<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, 1996
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
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
600 Technology Park Drive
Billerica, Massachusetts 01821-4130
------------------------ ----------
(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, 1996):
Common stock, par value $0.01 per share 36,401,437 shares
<PAGE> 2
2
WANG LABORATORIES, INC. AND SUBSIDIARIES
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - 3
September 30, 1996 and June 30, 1996
Condensed Consolidated Statements of Operations - 4
Three months ended September 30, 1996 and
Three months ended September 30, 1995
Condensed Consolidated Statements of Cash Flows - 5
Three months ended September 30, 1996 and
Three months ended September 30, 1995
Notes to Condensed Consolidated Financial Statements - 6
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURE 23
<PAGE> 3
3
PART I - FINANCIAL INFORMATION
WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
September 30, June 30,
1996 1996
------------- --------
(Dollars in millions)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 71.5 $175.3
Accounts receivable, net 295.1 194.1
Inventories 26.2 19.9
Other current assets 50.7 48.7
-------- ------
Total current assets 443.5 438.0
Depreciable assets, net 142.3 137.3
Intangible assets, net 402.4 211.2
Other 65.4 77.6
-------- ------
Total assets $1,053.6 $864.1
======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Amounts due under revolving credit facility $ 68.0 $ --
Borrowings due within one year 77.0 21.9
Accounts payable, accrued expenses and other 342.1 257.6
Deferred service revenue 76.6 75.7
-------- ------
Total current liabilities 563.7 355.2
Long-term liabilities 84.3 77.4
Series A preferred stock 84.9 84.8
STOCKHOLDERS' EQUITY
Series B preferred stock, $0.01 par value,
143,750 shares authorized and
outstanding, liquidation preference of $143.8
million 138.3 138.3
Common stock, $0.01 par value, 100,000,000
shares authorized; outstanding shares:
36,401,437 at September 30, 1996 and
36,302,737 at June 30, 1996
0.4 0.4
Capital in excess of par value 269.0 268.6
Cumulative translation adjustment (0.8) (0.8)
Accumulated deficit (86.2) (59.8)
-------- ------
Total stockholders' equity 320.7 346.7
-------- ------
Total liabilities and stockholders' equity $1,053.6 $864.1
======== ======
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE> 4
4
WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
(Dollars in millions, except per share data)
<S> <C> <C>
REVENUES
Product sales $ 82.9 $ 82.9
Service and other 207.8 181.3
------ ------
290.7 264.2
COSTS AND EXPENSES
Cost of product sales 54.7 54.7
Cost of service and other 149.4 124.1
Research and development 7.9 9.0
Selling, general and administrative 64.1 59.5
Amortization of intangibles -
acquisition and fresh-start 11.1 10.4
Integration-related costs and other charges
29.1 27.2
------ ------
Total costs and expenses 316.3 284.9
OPERATING LOSS (25.6) (20.7)
OTHER (INCOME) EXPENSE
Interest expense 1.2 1.0
Other income - net (1.2) (3.0)
------ ------
Total other income -- (2.0)
LOSS BEFORE INCOME TAXES (25.6) (18.7)
Provision for income taxes 0.8 2.0
------ ------
NET LOSS (26.4) (20.7)
Dividends and accretion on preferred stock (3.5) (3.4)
------ ------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(29.9) $(24.1)
====== ======
Weighted average shares outstanding
(in millions) 36.6 35.5
====== ======
NET LOSS PER SHARE $(0.82) $(0.68)
====== ======
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE> 5
5
WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
(Dollars in millions)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (26.4) $(20.7)
Depreciation 14.9 14.6
Amortization 12.6 11.7
Non-cash provision for income taxes 0.7 1.8
Provision for integration-related costs and other
charges 29.1 27.2
Payments of integration-related costs, restructuring
and other charges (9.6) (14.8)
CHANGES IN OTHER ACCOUNTS AFFECTING OPERATIONS
Accounts receivable (20.0) (16.0)
Inventories (3.0) (0.9)
Other current assets (0.9) 0.3
Accounts payable and other current liabilities (9.2) (11.6)
Other (1.7) --
------- ------
Net changes in other accounts affecting operations
(34.8) (28.2)
------- ------
Net cash used in operations (13.5) (8.4)
------- ------
INVESTING ACTIVITIES
Investment in depreciable assets (10.3) (9.9)
Investment in capitalized software (0.3) (0.5)
Proceeds from asset sales 5.6 --
Business acquisitions, net of cash acquired (148.6) (7.6)
Other (2.4) (1.6)
------- ------
Net cash used in investing activities (156.0) (19.6)
------- ------
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings
68.2 (0.8)
Proceeds from sale of common stock 0.1 0.6
Dividends paid on preferred stock (3.3) --
------- ------
Net cash provided by (used in) financing
activities 65.0 (0.2)
------- ------
Effect of changes in foreign exchange rates on cash
0.7 (0.1)
------- ------
DECREASE IN CASH AND EQUIVALENTS (103.8) (28.3)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 175.3 182.4
------- ------
CASH AND EQUIVALENTS AT END OF PERIOD $ 71.5 $154.1
======= ======
</TABLE>
See notes to the condensed consolidated financial statements.
<PAGE> 6
6
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
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.
As a result of the acquisition of I-NET, Inc. ("I-NET") on August 29, 1996, the
Company's Statement of Operations and Statement of Cash Flows for the current
period include the results of the acquired business for the one month ended
September 30, 1996. Prior period financial statements have been restated to
include the financial results of Avail Systems Corporation, which was
acquired in December 1995 in a transaction accounted for using the pooling of
interests method.
Certain amounts in previously issued financial statements were reclassified to
conform to current presentations.
NOTE B - BUSINESS ACQUISITION AND INTEGRATION-RELATED COSTS AND OTHER CHARGES
- -----------------------------------------------------------------------------
I-NET ACQUISITION
On August 29, 1996, the Company completed the acquisition pursuant to the Stock
Purchase Agreement between the Company and the other stockholders of I-NET dated
as of July 24, 1996, as amended on August 29, 1996, of all of the outstanding
shares of I-NET. I-NET, previously privately held, is a vendor-independent
provider of outsourced network and desktop management services. These services
include enterprise network integration and operations, network management,
client/server technologies, local area network and wide area network
communications and IT outsourcing. In consideration for the shares of I-NET the
Company paid the stockholders of I-NET $100.2 million in cash and issued a $64.5
million one-year, interest-free note. The Company has discounted the note
payable at 8.0%, to $59.7 million, for accounting purposes and will increase the
principal balance through charges to interest expense to the maturity date. The
final settlement of the note issued to the selling stockholders is subject to a
reduction should the Company incur indemnified costs as
<PAGE> 7
7
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE B (Continued)
- ------
defined by the Stock Purchase Agreement. The Company has the option to pay, at
maturity, up to fifty percent of the principal amount of the note in Common
Stock of the Company based upon an agreed-upon formula.
The Company paid $44.2 million of existing I-NET debt and incurred $6.6 million
in transaction fees. The Company also assumed certain other liabilities. The
Company converted existing I-NET options to Wang options and canceled vested
I-NET stock options valued at $4.9 million which were recorded as part of the
purchase price. The Company had previously purchased a minority interest in
I-NET for $12.4 million.
In connection with the acquisition, the Company entered into an Amended and
Restated Revolving Credit Facility (the "Revolving Credit Facility") with
Bankers Trust Company ("BT") and certain other financial institutions. The
three-year reducing facility provides for borrowings of up to $225.0 million,
including up to $70.0 million of letters of credit, limited to the lesser of the
facility maximum or a formula based on the Company's accounts receivable and a
supplemental amount. The Revolving Credit Facility reduces to $200.0 million on
March 31, 1998, $175.0 million on September 30, 1998 and $150.0 million on March
31, 1999. Interest on any borrowings is based on the BT's prime rate plus 0.25%
to 1.25% or the LIBOR rate plus 1.25% to 2.25%. The Revolving Credit Facility
contains various financial covenants, including covenants relating to the
Company's operating results, working capital, net worth, and indebtedness.
Besides providing financing for the acquisition, the Revolving Credit Facility
will be used for general corporate purposes. As of September 30, 1996, the
Company had $68.0 million of outstanding borrowings under the Revolving Credit
Facility. Additionally, as of September 30, 1996, letters of credit aggregating
$11.7 million were outstanding under the Revolving Credit Facility. Although
financial accounting rules require the amounts due under the Revolving Credit
Facility to be classified as a current liability, the terms of the Revolving
Credit Facility do not require the Company to pay the amounts due within the
next twelve months.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion 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 the purchase price over the net liabilities assumed of
$205.3 million has been recorded based on these preliminary purchase price
allocations. Finalization of the allocation of the purchase price to assets
acquired and liabilities assumed, is subject to appraisals, evaluations and
other studies of the fair values of I-NET's assets and liabilities. The excess
of purchase price over the net liabilities assumed will be amortized using the
straight line method over a period of twenty-five years.
<PAGE> 8
8
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE B (Continued)
- ------
<TABLE>
A summary of the acquisition follows (in millions):
<S> <C>
Cash $100.2
Note to selling stockholders 59.7
Original investment in I-NET 12.4
Transaction costs 6.6
Stock options 4.9
------
Consideration, excluding assumed liabilities 183.8
Estimated fair value of net liabilities assumed 21.5
------
Excess of purchase price over net liabilities assumed $205.3
======
</TABLE>
<TABLE>
The following pro forma results of operations have been prepared as though the
I-NET acquisition had occurred as of the beginning of the periods presented. The
pro forma information does not purport to be indicative of the 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 (in
millions, except per share data).
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
Revenues $343.5 $348.1
Net loss $ 33.7 $ 24.0
Net loss applicable to
common stockholders $ 37.2 $ 27.4
Net loss per share
applicable to common stockholders $ 1.02 $ 0.77
</TABLE>
BULL ACQUISITION
The Company and Bull have negotiated a settlement of the objection proceedings
which the Company had initiated to challenge the net asset value of the assets
it had acquired from Bull on January 31, 1995. As a result, the Company has
recorded, in the accompanying financial statements, a reduction to Borrowings
due within one year of $5.4 million, with a corresponding reduction to Goodwill.
INTEGRATION-RELATED COSTS AND OTHER CHARGES
<TABLE>
The Company recorded a charge to operations of $29.1 million in the quarter
ended September 30, 1996, of which $12.3 million reflects the costs associated
with combining the operations of the Company and I-NET. An additional $5.7
million has been recorded as a purchase accounting adjustment related to the
cost of integrating I-NET with the Company. Integration-related costs and other
cost reduction initiatives consist of the following (in millions):
<S> <C>
Workforce-related $13.4
Depreciable assets and other 8.2
Facilities 7.5
-----
Total $29.1
=====
</TABLE>
<PAGE> 9
9
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
NOTE B (Continued)
- ------
The formal plan was recorded as of September 30, 1996 based upon the best
information available at the time. Workforce-related reserves, consisting
principally of severance costs, were established based on specific
identification of the number of employees to be terminated, their job
classifications or functions and their locations. As a result of the acquisition
and other cost reduction initiatives, certain sales, technical support and
administrative functions are being combined and reduced. The Company plans to
release approximately 500 employees as part of these initiatives. The
facilities-related reserves were established to recognize the lower of the
amount of the remaining lease obligations, net of any sublease rentals, or the
expected lease settlement costs. These reserves will be utilized only when the
excess space has been vacated and there are no plans to utilize the facility in
the future. Depreciable assets-related reserves were established to recognize,
at net realizable value, the write-down and disposal value of existing assets,
including information systems, leasehold improvements and other productive
assets no longer required.
Cash outlays to complete the initiatives recorded as a charge to operations
are estimated to approximate $16 million for the remainder of fiscal 1997 and
$7 million thereafter. Cash outlays to complete the initiatives recorded as
part of purchase accounting are estimated to approximate $6 million for the
remainder of fiscal 1997. Substantially all workforce-related actions are
expected to be complete in calendar 1997.
NOTE C - OTHER BALANCE SHEET INFORMATION
- ----------------------------------------
<TABLE>
Components of selected captions in the Condensed Consolidated Balance Sheet
follow (in millions):
<CAPTION>
September 30, June 30,
1996 1996
------------- --------
<S> <C> <C>
Accounts receivable $306.6 $204.9
Less allowances 11.5 10.8
------ ------
$295.1 $194.1
====== ======
Inventories
Finished products $ 10.7 $ 9.5
Raw materials and work-in-process 10.2 8.8
Service parts and supplies 5.3 1.6
------ ------
$ 26.2 $ 19.9
====== ======
Depreciable assets
Land $ 5.4 $ 5.4
Buildings and improvements 20.6 19.7
Machinery and equipment 81.7 62.9
Spare parts 137.2 140.9
------ ------
244.9 228.9
Less accumulated depreciation 102.6 91.6
------ ------
$142.3 $137.3
====== ======
</TABLE>
<PAGE> 10
10
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
SEPTEMBER 30, 1996
<TABLE>
NOTE C (Continued)
- ------
<CAPTION>
September 30, June 30,
1996 1996
------------- --------
<S> <C> <C>
Intangible assets
Trademarks and patents $ 25.7 $ 24.8
Computer software 37.3 37.1
Installed base - service 128.5 128.5
License agreements 29.9 29.9
Assembled workforce 16.2 16.2
Goodwill 252.1 50.7
Reorganization value in excess of amounts
allocated to identifiable assets 30.6 30.6
------ ------
520.3 317.8
Less accumulated amortization 117.9 106.6
------ ------
$402.4 $211.2
====== ======
Accounts payable, accrued expenses and other
Accounts payable $ 85.9 $ 54.3
Accrued expenses 135.6 98.7
Compensation and benefits 56.2 49.1
Restructuring, reorganization and
integration-related 45.8 33.9
Other 18.6 21.6
------ ------
$342.1 $257.6
====== ======
Long-term liabilities
Postretirement $ 17.1 $ 17.3
Pension 8.2 8.0
Facilities 15.0 15.0
Restructuring, reorganization and
integration-related 12.0 5.2
Insurance 5.8 7.4
Other 26.2 24.5
------ ------
$ 84.3 $ 77.4
====== ======
</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 1997.
On July 2, 1996, Wang filed suit against Watermark, a subsidiary of FileNet
Corporation, alleging the infringement of four Wang patents covering workflow
and imaging technologies. Wang is seeking damages and injunctive relief.
<PAGE> 11
11
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - (Continued)
SEPTEMBER 30, 1996
NOTE D (Continued)
- ------
Prior to its filing for Chapter 11 protection in August of 1992, from which it
successfully emerged in September of 1993, the Company was 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.
<PAGE> 12
12
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 $290.7 million for the three months ended
September 30, 1996, a 10.0% increase compared to revenues of $264.2 million in
the same period of the prior year. Substantially all of the increase in revenues
is attributable to the I-NET, Inc. ("I-NET") and Dataserv acquisitions. After
integration-related charges of $29.1 million and $11.1 million of amortization
of fresh-start and acquired intangible assets, the Company reported an operating
loss of $25.6 million. This compares to an operating loss of $20.7 million for
the quarter ended September 30, 1995, which included integration-related charges
of $27.2 million relating to the acquisition of Sigma and $10.4 million of
amortization of intangible assets.
Earnings before interest, income taxes, depreciation and amortization ("EBITDA")
were $30.3 million for the three months ended September 30, 1996, compared to
$33.1 million in the same period of the prior year. As previously disclosed,
EBITDA for the current period includes a loss of $8.5 million related to the
Software Business, before consideration of related general and administrative
expenses. EBITDA, which some investors believe to be a meaningful measure for
assessing a company's ability to meet its cash requirements, is determined by
excluding from the net income (loss): integration-related charges; income
taxes; interest expense; interest income; depreciation and amortization.
On August 29, 1996, the Company completed the acquisition of I-NET, for
approximately $165 million in cash and notes, plus assumed liabilities. Prior to
the transaction, the Company had an investment in I-NET of approximately $12
million. I-NET, previously privately-held, is a vendor-independent provider of
outsourced network and desktop management services. These services include
enterprise network integration and operations, network management, client/server
technologies, LAN/WAN communications, and IT outsourcing. The Company is
integrating I-NET with its existing businesses. The acquisition was accounted
for using the purchase method of accounting. Accordingly, the results of
operations of the Company in the accompanying financial statements include
I-NET's results of operations from the date of acquisition.
The Company continues to focus on providing software and services to the office
productivity segment of the information processing industry, a market where the
Company has name recognition and established technological, professional and
marketing expertise. The addition of the Bull and Dataserv service businesses
added a significant portion of multi-vendor service ("MVS") contracts to the
Company's existing MVS revenues. The Company has directed additional resources
to the MVS business with the goal of continuing to increase this revenue stream
in the future. In addition, the recent acquisition of I-NET positions the
Company in one of the fastest growing segments of the information technology
services market.
<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)
- ---------------------
The Company expects the decline in revenues from traditional sources, including
the acquired Bull proprietary product and service revenue streams (i.e., sales
and service of proprietary VS and GCOS products) to continue during the current
fiscal year at the rate of 20 to 25 percent per annum. As the Company's
proprietary revenues decline, the loss of individual customers may have a
significant effect on the rate of decline from one period to the next. The
changes in business mix are expected to result in increased volatility of
quarterly revenues.
Product revenues for the three months ended September 30, 1996 increased by
24.4%, to $52.8 million in the United States, while product revenues outside the
United States decreased by 25.6%, to $30.1 million, compared to the same period
of the prior year. Proprietary product sales were $16.2 million, compared to
$18.3 million in the prior year first quarter, a decline of 11.0%. Network
product and other product sales were $56.5 million and $56.0 million for the
three months ended September 30, 1996 and 1995, respectively. Open software
product sales increased by 18.1%, to $10.2 million, compared to $8.6 million
during the three months ended September 30, 1995.
Service and other revenues for the three months ended September 30, 1996 in the
United States increased by 34.0%, or $34.3 million, to $135.2 million, while
service and other revenues outside the United States decreased by 9.7%, or $7.8
million, to $72.6 million, compared to the same period of the prior year.
Proprietary services revenue decreased by 26.1%, or $24.0 million, to $68.1
million, compared to the same period of the prior year. This decrease is
attributable to declines in both VS and GCOS maintenance revenues. Network
services revenues increased by 55.7%, or $49.3 million, to $137.8 million,
compared to the same period of the prior year. This increase was primarily due
to the acquisitions of I-NET, Dataserv and BISS. Open software services more
than doubled to $1.9 million for the quarter, compared to $0.7 million in the
prior year period.
Product gross margin remained at 34.0% compared to the same period of the prior
year, calculated on revenues of $82.9 million and cost of product sales of $54.7
for each of the three month periods ended September 30, 1996 and 1995.
Gross margin for service and other revenues for the three months ended September
30, 1996 decreased to 28.1% from 31.5% in the comparable period of the prior
year. Margins were negatively affected by the increase in maintenance on
lower-margin multi-vendor service products as well as lower margins on I-NET
services.
<PAGE> 14
14
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
- ---------------------
The service gross margin continues to be adversely affected by consolidation in
the industry, resulting in competitive and technological pressures. Pressure
will continue to be exerted on the service gross margin as a result of increased
lower-margin MVS maintenance revenues, coupled with the inclusion of I-NET's
lower gross margin structure going forward. It is expected that these margin
reductions will be partially offset by the implementation of integration
initiatives in subsequent periods.
Research and development costs decreased by $1.1 million, or 12.2%, from the
same period of the prior year, and represented 2.7% and 3.4% of revenues for the
three months ended September 30, 1996 and 1995, respectively. The decrease is
due to a combination of reductions in support of the Company's proprietary VS
and secured systems products and a more tightly-focused research and development
scope, partially offset by increased development costs for core software
products. The Company's development efforts are largely focused on developing
software for open systems platforms, supplemented with a modest level of
spending directed to continuing support of its proprietary VS products.
Selling, general and administrative expenses increased by $4.6 million, or 7.7%,
compared to the prior year period, but decreased as a percentage of total
revenues to 22.1% for the three months ended September 30, 1996, compared to
22.5% for the same period of the prior year. The increase in selling, general
and administrative expense is primarily due to the I-NET acquisition. Partially
offsetting these increases were acquisition-related initiatives which will
continue 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 $11.1 million
and $10.4 million for the three months ended September 30, 1996 and 1995,
respectively. Amortization of $5.8 million was recorded for the three months
ended September 30, 1996 for intangible assets established in connection with
acquisitions. Amortization of $5.3 million and $6.5 million for the three months
ended September 30, 1996 and 1995, respectively, relates to the implementation
of fresh-start reporting.
Interest expense increased to $1.2 million, principally as the result of amounts
outstanding under the Revolving Credit Facility and interest on the note issued
to the selling stockholders of I-NET. Interest income was $1.8 million and $2.8
million for the three months ended September 30, 1996 and 1995, respectively.
The reduction in interest income is primarily due to the decrease in cash
available for investing as a result of the cash paid to acquire I-NET.
<PAGE> 15
15
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
- ---------------------
The provision for income taxes of $0.8 million and $2.0 million included $0.7
million and $1.8 million of non-cash expense for the three months ended
September 30, 1996 and 1995, respectively, relating to the utilization of the
Company's net operating loss carryforwards.
At September 30, 1996, the Company employed approximately 10,700 people in
continuing operations, compared to 6,800 at September 30, 1995. Acquisitions
resulted in approximately 3,900 additional employees.
Liquidity and Sources of Capital
- --------------------------------
Cash and equivalents decreased by $103.8 million, to $71.5 million, primarily
due to cash payments related to the acquisition of I-NET. This compares to a
$28.3 million decrease in the same period of the prior year.
Cash used in operations totaled $13.5 million for the three months ended
September 30, 1996, compared to $8.4 million of cash used in operations for the
same prior year period. Higher levels of receivables and inventories utilized
$23.0 million of cash in the current quarter, compared to cash utilized of $16.9
million in the same quarter of the prior year. This increase is primarily the
result of the acquisition of I-NET. Lower accounts payable and other current
liabilities resulted in reductions in cash of $9.2 million and $11.6 million for
the three months ended September 30, 1996 and 1995, respectively. The liability
reductions primarily relate to the acquisition of I-NET, combined with a shift
from a more product-related business to a more service-related business.
Net cash used in investing activities totaled $156.0 million for the quarter
ended September 30, 1996 compared to $19.6 million for the same period of the
prior year. The $148.6 million of cash paid for business acquisitions during the
three months ended September 30, 1996 principally relates to the I-NET
acquisition. Cash payments of $7.6 million for the prior year comparable period
relate to the Sigma acquisition. Investment in depreciable assets was $10.3
million for the three months ended September 30, 1996, compared to $9.9 million
for the same period of the prior year. Acquisitions accounted for $4.2 million
of investments in depreciable assets during the current period. Cash proceeds of
$5.6 million were received as payment for the June 1996 sale of two-thirds of
the Company's remaining 30% equity investment in its New Zealand subsidiary.
<PAGE> 16
16
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 provided by financing activities totaled $65.0 million for the period,
compared to net cash used by financing activities of $0.2 million in the same
period of the prior year. Net short-term borrowings provided $68.2 million of
cash for the three months ended September 30, 1996, compared to net payment of
short-term borrowings of $0.8 million in the same prior year period. Cash
dividends of $3.3 million were paid on the Company's preferred stock in the
three months ended September 30, 1996; no dividends were paid during the three
months ended September 30, 1995.
In connection with the acquisition of I-NET, the Company entered into an Amended
and Restated Revolving Credit Facility (the "Revolving Credit Facility") with
Bankers Trust Company and certain other financial institutions. The three-year
reducing facility provides for borrowings of up to $225.0 million, including up
to $70.0 million of letters of credit, limited to the lesser of the facility
maximum or a formula based on the Company's accounts receivable and a
supplemental amount. At September 30, 1996, in addition to the cash balance on
hand, the Company had available to it the unused portions of the Revolving
Credit Facility, providing for additional borrowings and/or the issuance of
additional letters of credit of up to $145.3 million. Although financial
accounting rules require the amounts due under the Revolving Credit Facility to
be classified as a current liability, the terms of the Revolving Credit Facility
do not require the Company to pay the amounts due within the next twelve months.
In addition to normal operating activities, expected cash requirements over the
next twelve months include approximately $43 million for both new and previously
recorded integration-related initiatives.
The Company believes that existing cash balances, cash generated from
operations, and borrowing availability under the Revolving Credit Facility, will
be sufficient to meet the Company's cash requirements for operations for the
next twelve months, and to complete the planned integration-related activities.
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.
Forward-Looking Statements
- --------------------------
Except for historical matters, the matters discussed in this Form 10-Q are
forward-looking statements that involve risks and uncertainties. Such
forward-looking statements relate to the Company's business, acquisitions,
products, services, software, expenses, effective tax rate and operating and
capital requirements. In addition, forward-looking statements may be included in
various Company documents to be issued in the future and in various oral
statements by Company representatives to security analysts, investors and others
from time to time. There are a number of important factors that could cause the
Company's actual results of operations and financial condition in the future to
vary from that indicated by such forward-looking statements. Such factors
include, without limitation, the following:
<PAGE> 17
17
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Forward-Looking Statements (Continued)
- --------------------------
* The Company's ability to implement its strategy of building upon
internal growth in the office productivity segment of the information
processing industry with acquisitions and strategic alliances
designed to complement Wang's core competencies. There can be no
assurance that the Company will be able to implement acquisitions or
strategic relationships, or, if entered into, that such acquisitions
or strategic relationships will in fact further the implementation of
the Company's business strategy. In addition, there can be no
assurance that any of the Company's acquisitions or strategic
alliances will result in long-term benefits to the Company, or, with
respect to one or more significant acquisitions, that the Company and
its management will be able to effectively assimilate and manage the
resulting business.
* Currently, a significant portion of the Company's revenues are
attributable to the servicing, upgrading and enhancement of its
installed base of VS and other traditional proprietary systems. The
Company expects the decline in revenues from traditional sources to
continue during fiscal 1997 at the rate of 20 to 25 percent per annum.
As the Company's proprietary revenues decline, individual customer
losses may have a significant effect on the rate of decline. The
Company's continued growth is predicated on the business strategy
described above (including the acquisition of new customer service and
network integration businesses and continued expansion of its software
business) more than offsetting the decline in revenues from
traditional sources. To the extent that there are delays and
difficulties in the implementation of the Company's strategy, or if
the decline in revenues from traditional sources is more rapid than
anticipated, the Company's results of operations could be adversely
affected.
* There can be no assurance that the Company will have the technical
resources to be able to introduce competitive software products on a
timely basis, invest in research and development activity on the same
basis as its competitors, or otherwise be able to develop new software
and enhancements to current software on a timely basis. In addition,
the third-party maintenance and support market is extremely
competitive with low barriers to entry, and many other organizations,
including hardware-independent service organizations, compete for the
provision of maintenance and service to users. In addition, firms not
now in direct competition with the Company, including large software
development and sales companies, may in the future introduce competing
products or services.
* International revenues in recent years have accounted for
approximately 50 percent of the Company's total revenues. The
Company's international operations are subject to all of the risks
normally associated with international sales, including changes in
regulatory compliance requirements, costs associated with labor laws
and local workers' councils, special standards requirements, exposure
to currency fluctuations, tariffs and other barriers, difficulties in
staffing and managing international subsidiary operations, potentially
adverse tax consequences and country-specific product requirements.
<PAGE> 18
18
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Forward-Looking Statements (Continued)
- --------------------------
* Revenues from branches and agencies of the United States government in
recent years have approximated 18 percent of total revenues. In
addition, significant additional revenues have been derived from
agencies of various foreign governments. A significant portion of the
Company's U.S. government revenues comes from orders under government
contract or subcontract awards, which involves the risk that the
failure to obtain an award, or a delay on the part of the government
agency in making the award or of ordering or paying for products under
an awarded contract, could have an impact on the financial performance
of the Company for the period in question. Other risks in government
sales are the larger discounts (and thus lower margins) often involved
in government sales, the unpredictability of funding for various
government programs and the ability of the government agency to
unilaterally terminate the contract. Revenues from the U.S. government
and government agencies are received under a number of different
contracts and from a number of different government agencies and
departments. Most sources of government revenues are independent of
each other, although occasionally orders from one contract or from one
government agency may be linked with orders under another contract or
from another agency (so that if one order or contract were canceled,
it is likely that the other would also be canceled).
* Changes in the marketplace may significantly affect management's
estimates and the Company's financial performance. Many of the
Company's commercial contracts are for a fixed price and are long-term
in duration, which subjects the Company to substantial risks relating
to unexpected cost increases and other factors outside the control of
the Company. Revenues and profits on such contracts are recognized
using estimates and actual results, when known, may differ from such
estimates.
<PAGE> 19
19
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit No. Description
- ----------- -----------------------------------------------------------
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(8) Certificate of Incorporation, as Amended
3.3(11) Certificate of Stock Designation with respect to the 4 1/2%
Series A Cumulative Convertible Preferred Stock
3.4(14) Certificate of Elimination of the Registrant's 11%
Exchangeable Preferred Stock
3.5(14) Certificate of Stock Designation with respect to the 6 1/2%
Series B Cumulative Convertible Preferred Stock
3.6(13) ByLaws of the Registrant
10.1(3) 1993 Directors' Stock Option Plan
10.2(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 and James J.
Hogan, each an executive officer of the Company
10.3(5) Contingent Severance Compensation Agreement with Joseph M.
Tucci
10.4(6) Employment Agreement with William P. Ferry
10.5(6) Employment Agreement with James J. Hogan
10.6(3) Consulting Agreement of Raymond C. Kurzweil
10.7(5) Employee Retention Agreement with William P. Ferry
10.8(5) Employee Retention Agreement with James J. Hogan
10.9(5) Employment Agreement with Bruce A. Ryan
10.10(7) Stock Incentive Plan, as Amended
<PAGE> 20
20
Exhibit No. Description
- ----------- -----------------------------------------------------------
10.11(8) Contingent Severance Compensation, as Amended with Franklyn
A. Caine (Employment Agreement)
10.12(8) Employees' Stock Incentive Plan
10.13(8) 1995 Director Stock Option Plan
10.14(9) 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
10.15(10) Employment Agreement with Ronald A. Cuneo
10.16(11) Employment Agreement with Donald P. Casey, as Amended
10.17(11) Employment Agreement with Stephen G. Jerritts
10.18(12) Form of Contingent Severance Compensation Agreements with
Stephen G. Jerritts and Ronald E. Cuneo
10.19(12) Form of Amendment to Contingent Severance Compensation
Agreements with Joseph M. Tucci, Donald P. Casey, Albert A.
Notini, William P. Ferry, David I. Goulden, James J. Hogan,
Stephen G. Jerritts and Franklyn A. Caine, each an executive
officer of the Company
10.20(13) Non-Negotiable Secured Promissory Note, as Amended from
Joseph M. Tucci to the Registrant
10.21(13) Pledge Agreement, as Amended, from Joseph M. Tucci to the
Registrant
10.22(13) 1994 Employee's Stock Incentive Plan, as Amended
10.23(13) Employment Agreement with Robert K. Weiler
10.24(13) Contingent Severance Compensation Agreement with Robert K.
Weiler
10.25(13) Form of Amendment to Employment Letter Agreement for David
I. Goulden, William P. Ferry, Albert A. Notini and Franklyn
A. Caine
10.26(14) Form of Non-Qualified Long Term Incentive Option to Purchase
Shares of Common Stock for Messrs. Tucci, Caine, Casey,
Cuneo, Ferry, Goulden, Hogan, Jerritts, Notini, and Van
Vuuren
<PAGE> 21
21
Exhibit No. Description
- ----------- -----------------------------------------------------------
10.27(14) Registration Rights Agreement 6 1/2% Cumulative Convertible
Preferred Stock
10.28(14) Employment Agreement of Jean M. Edwards
10.29(14) Contingent Severance Compensation Agreement with Jean M.
Edwards
10.30(15) Stock Purchase Agreement with respect to the Registrant's
acquisition of Dataserv Computer Maintenance, Inc. from
Dataserv, Inc., an indirect wholly-owned subsidiary of
BellSouth Corporation
10.31(16) Stock Purchase Agreement with respect to the Registrant's
acquisition of I-NET, Inc.
10.32(16) Amended and Restated Credit Agreement among the Company,
Wang Federal, Inc., Wang Canada Limited, I-NET, Inc.,
Dataserv Computer Maintenance, Inc., certain Lenders,
Co-Agents and a Collateral Agent named therein, and Bankers
Trust Company as Agent and Issuing Bank dated as of August
29, 1996
10.33(17) Non-Qualified Option Agreement to Purchase Shares of Common
Stock for Robert K. Weiler
10.34(17) Employment Agreement of Joseph M. Tucci, as Amended
10.35(17) Employment Agreement of Lucy A. Flynn
11.1 Statements re Computation of Per Share Earnings
12.1 Calculation of Ratio of Earnings to Fixed Charges
(b) During the quarter ended September 30, 1996, the Registrant filed a
current report on Form 8-K dated July 24, 1996 containing the Q4 and FY'96 Press
Release, and a current report on Form 8-K dated August 29, 1996 containing the
Stock Purchase Agreement with respect to the Registrant's acquisition of I-NET,
Inc. and the Amended and Restated Credit Agreement among the Company, Wang
Federal, Inc., Wang Canada Limited, I-NET, Inc., Dataserv Computer Maintenance,
Inc., certain Lenders, Co-Agents and a Collateral Agent named therein, and
Bankers Trust Company as Agent and Issuing Bank dated as of August 29, 1996.
(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.
<PAGE> 22
22
(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, 1994.
(7) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended September 30, 1994.
(8) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(9) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
January 31, 1995.
(10) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1995.
(11) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ending June 30, 1995.
(12) Filed as an Exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended September 30, 1995.
(13) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(14) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1996.
(15) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
May 3, 1996.
(16) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
August 29, 1996.
(17) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1996.
<PAGE> 23
23
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, 1996
WANG LABORATORIES, INC.
/s/ Franklyn A. Caine
-------------------------------
Franklyn A. Caine,
Executive Vice President and
Chief Financial Officer
<PAGE> 1
Wang Laboratories, Inc. and Subsidiaries
<TABLE>
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1996 September 30, 1995 (1)
------------------------ --------------------------
Primary Fully Diluted Primary Fully Diluted
------- ------------- ------- -------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Average shares of Common
Stock outstanding 36,611 36,611 35,464 35,464
Common equivalent shares for
stock options -- -- -- --
-------- -------- -------- --------
36,611 36,611 35,464 35,464
======== ======== ======== ========
Net loss $(26,438) $(26,438) $(20,709) $(20,709)
Accretion and dividends on
Preferred Stock (3,524) (3,524) (3,383) (3,383)
-------- -------- -------- --------
$(29,962) $(29,962) $(24,092) $(24,092)
======== ======== ======== ========
Net loss per share $ (0.82) $ (0.82) $ (0.68) $ (0.68)
======== ======== ======== ========
<FN>
(1) Restated to include Avail Systems Corporation, which was acquired on
December 18, 1995, and accounted for using the pooling of interests method.
</TABLE>
<PAGE> 1
WANG LABORATORIES, INC. AND SUBSIDIARIES
<TABLE>
EXHIBIT 12.1 - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions except ratios)
<CAPTION>
Predecessor Company
-------------------------------------
Three months Year Year Nine months Three months For the year ended
ended ended ended ended ended June 30,
September 30, June 30, June 30, June 30, September 30, ----------------------
1996 1996 1995 1994 1993 1993 1992
------------ -------- -------- ---------- ----------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $ 1.2 $ 5.1 $ 3.7 $ 3.5 $ 1.2 $ 15.0 $ 44.6
Portion of rent expense
representative of interest 2.5 9.4 5.9 5.6 2.7 9.7 19.1
------ ------ ------ ----- ------ ------- -------
3.7 14.5 9.6 9.1 3.9 24.7 63.7
Preferred dividend requirement 5.8 37.7 14.5 8.7 -- -- --
------ ------ ------ ----- ------ ------- -------
Combined fixed charges and
preferred dividend $9.5 $ 52.2 $ 24.1 $17.8 $ 3.9 $ 24.7 $ 63.7
====== ====== ====== ====== ====== ======= =======
EARNINGS
Income (loss) from continuing
operations before income
taxes, discontinued operations,
fresh-start reporting adjustment
and extraordinary item $(26.4)(1) $ 10.4(2) $(57.7)(3) $20.4 $(22.6) $(197.2) $(346.5)
Fixed charges per above 3.7 14.5 9.6 9.1 3.9 24.7 63.7
------ ------ ------ ----- ------ ------- -------
$(22.7) $24.9 $(48.1) $29.5 $(18.7) $(172.5) $(282.8)
====== ====== ====== ===== ====== ======= =======
Ratio of earnings to combined
fixed charges and preferred dividends -- -- -- 1.7 -- -- --
====== ====== ====== ===== ====== ======= =======
Coverage deficiency $(22.7) $(27.3) $(48.1) -- $(18.7) $(172.5) $(282.8)
====== ====== ====== ===== ====== ======= =======
<FN>
(1) Includes $29.1 million of integration-related costs and other charges.
(2) Includes $27.2 million of integration-related costs.
(3) Includes $64.2 million of integration-related costs and other charges.
Restated to include Avail Systems Corporation which was acquired December
18, 1995 and accounted for using the pooling of interests method.
</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, NOTE C - OTHER BALANCE SHEET INFORMATION AND EXHIBIT
11.1-COMPUTATION OF EARNINGS PER SHARE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 71,500
<SECURITIES> 0
<RECEIVABLES> 306,600
<ALLOWANCES> 11,500
<INVENTORY> 26,200
<CURRENT-ASSETS> 443,500
<PP&E> 244,900 <F1>
<DEPRECIATION> 102,600 <F1>
<TOTAL-ASSETS> 1,053,600
<CURRENT-LIABILITIES> 563,700
<BONDS> 0
<COMMON> 400
84,900
138,300
<OTHER-SE> 182,000
<TOTAL-LIABILITY-AND-EQUITY> 1,053,600
<SALES> 82,900
<TOTAL-REVENUES> 290,700
<CGS> 54,700
<TOTAL-COSTS> 204,100
<OTHER-EXPENSES> 48,100 <F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,200
<INCOME-PRETAX> (25,600)
<INCOME-TAX> 800
<INCOME-CONTINUING> (26,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,900)
<EPS-PRIMARY> (0.82)
<EPS-DILUTED> (0.82)
<FN>
<F1> PP&E cost and accumulated depreciation include
capitalized non-consumable spares inventory.
<F2> Other costs and expenses includes $29.1 million
of integration-related costs and other charges.
</FN>
</TABLE>
