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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
For Annual and Transition Reports Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934
For the Fiscal Year ended June 30, 1997
COMMISSION FILE NUMBER 1-5677
WANG LABORATORIES, INC.
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(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
incorporation or organization) Identification No.)
600 Technology Park Drive, Billerica, Massachusetts 01821
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 967-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
Common Stock Purchase Warrants
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
- --- --- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
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Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 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
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On August 29, 1997, the aggregate market value of voting stock held by
non-affiliates of the Registrant was $976,080,368 based on the closing price of
Common Stock on the Nasdaq National Market on August 29, 1997 and assuming a
market value of $50.00 per share for the Depositary Shares (each representing a
1/20 interest in a share of the 6-1/2% Cumulative Convertible Preferred Stock)
and assuming a market value of $1,000.00 per share for the 4-1/2% Series A
Cumulative Convertible Preferred Stock.
The number of shares of Common Stock outstanding as of August 29, 1997 was
38,068,224.
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Documents Incorporated By Reference
Document Form 10-K Part
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Definitive Proxy Statement with respect to the Annual Part III
Meeting of Stockholders to be held on November 25, 1997
to be filed with the Securities and Exchange Commission
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PART I
ITEM 1. BUSINESS
Wang Laboratories, Inc., a Delaware corporation (together with its
subsidiaries, "Wang" or the "Company") provides worldwide information technology
("IT") services, including electronic commerce, software application
integration, network architecture/design and security management, help desk
support, maintenance and installation, warranty and procurement. The Company
provides life cycle services that enable its customers to plan, deploy, manage
and maintain their network and desktop computing environments on an outtasking
or outsourcing basis. The Company's customers include businesses, institutions
and governments that operate in heterogeneous technology environments at
multiple locations.
The Company is focused on the network integration and consulting,
outsourcing and multi-vendor services elements of the IT services industry in
which the Company enjoys substantial technological expertise and a global reach
and which, in the Company's judgment, offer significant growth and market
opportunities. The Company intends, by internal development and acquisition, to
build on its position as a worldwide provider of value-added network
integration, outsourcing and desktop support services. The Company believes that
this approach will utilize its existing technology strengths and customer base,
while allowing the Company to respond to evolving changes in the worldwide
market for IT services. The Company will continue to service the needs of its
traditional VS minicomputer customers by offering upgrade products, service and
open system coexistence and migration products.
In January 1995, the Company completed a transaction with Compagnie des
Machines Bull and certain of its affiliates (collectively, "Bull") in which the
Company purchased Bull's U.S. customer services business, U.S. federal systems
subsidiary and its sales and service subsidiaries in Canada, Mexico, Australia
and New Zealand. The acquired customer services business included multivendor
products and the Bull GCOS mainframe systems.
In April 1995, Wang and Microsoft Corporation entered into a worldwide
multi-year technical, service and marketing alliance pursuant to which Wang
continues to be an authorized provider of end-user support services for
Microsoft products. As one of Microsoft's Authorized Support Centers, Wang
provides end-user support and training for Microsoft products. This support
includes on-site system and integration design and installation, consulting,
network integration, migration support, and end-user help desk services. As part
of this agreement, Microsoft purchased $90.0 million face amount of 4-1/2%
Series A Cumulative Convertible Preferred Stock of Wang due in 2003 (the
"4-1/2% Preferred Stock") for $84.0 million.
In October 1995, the Company acquired BISS Limited ("BISS"), a United
Kingdom company which specializes in the design, implementation and support of
network computing solutions. This organization develops network infrastructure
solutions, including local area network ("LAN") and wide area network ("WAN")
interconnection, client/server architecture and network management systems.
In May 1996, the Company acquired Dataserv Computer Maintenance, Inc.
("Dataserv"), a provider of computer maintenance and support services for
point-of-sale retail scanners and registers and popular industry-standard
servers and desktop products, as well as application help desk and network
integration services. Dataserv services companies in the banking and financial
services, insurance, retail and manufacturing industries. On June 27, 1997,
Dataserv was merged into the Company.
In August 1996, the Company acquired I-NET, Inc. ("I-NET"), a
vendor-independent provider of outsourced client/server, network and desktop
management services for the commercial and federal sectors. These services
include enterprise network integration and operations, on-site and remote
network management, help desk services, LAN/WAN communications, document
management services and IT outsourcing.
In November 1996, the Company acquired Advanced Paradigms, Inc. ("API"), a
provider of enterprise-wide Microsoft specific LAN/WAN solutions including
network architecture and design installation.
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In March 1997, the Company completed the sale of its software business
unit to Eastman Kodak Company ("Kodak") for $260 million in cash. The business
sold to Kodak included the Company's software business unit management,
employees, products, technology, customers and business partners, as well as its
sales, marketing and research and development organizations worldwide. The
results of operations of the Company's software business unit have been reported
as discontinued operations and the financial statements of the Company have been
restated accordingly.
In May 1997, the Company entered into a worldwide arrangement that
expanded its relationship with Cisco Systems, Inc. ("Cisco"). As a global
partner of Cisco, the Company will be able to supply and service Cisco products
to Wang customers in specified countries around the world.
The Company is the successor to Wang Laboratories, Inc., a Massachusetts
corporation founded in 1955, which implemented a reorganization plan under
Chapter 11 of the U.S. Bankruptcy Code that was approved by the bankruptcy court
on September 20, 1993 (the "Reorganization Plan"). The predecessor company had
filed for reorganization in August 1992. The Reorganization Plan was consummated
on December 16, 1993, at which time the reorganized company was reincorporated
as a Delaware corporation.
INDUSTRY BACKGROUND
Open Systems Technology. The Company built its success in the 1980s
largely on its line of VS minicomputers with a proprietary operating system
running office software applications. In recent years, however, the computer and
information technology industry has moved from primarily proprietary hardware
systems and software products to an emphasis on "open" systems, which are based
on industry-wide standards, particularly the UNIX and NT operating systems. This
transition is allowing customers to buy hardware and software and services from
a variety of vendors and to combine components into one integrated system to a
greater degree than had been possible with proprietary systems.
Until recent years, the personal computer was the primary open system in
the marketplace. Today, however, open system technology is available on a range
of higher performance processors, which are being used as servers to support
networks of personal computers. The availability of open systems, which provide
customers with increased flexibility in addressing their productivity
requirements, has dramatically reduced the opportunity for sales of hardware and
software systems based on proprietary technologies, such as Wang's VS
minicomputer systems.
The use of open systems has dramatically increased the complexity of
deploying computer networks and information technology systems. Unlike an open
system, most proprietary systems are fully integrated "turn key" solutions that
provide all the requisite interfaces and have extensive compatibility testing
performed prior to customer installation. In contrast, open systems can involve
multiple interconnections and interfaces. Such complexity has led to
opportunities for companies that are able to offer cost-effective sophisticated
computer services to manage the open systems technology.
Client/Server Systems. Concurrently with the adoption of open systems
solutions, an increasing number of computer users have moved to a client/server
architecture, which enables an organization to realize both the convenience of
desktop systems and the power of shared processing. As users exploit the
benefits of open systems, many conclude that by linking multiple personal
computers (i.e., clients) and servers into client/server systems, they can
achieve the functionality of traditional minicomputers or mainframes at a lower
initial cost. Client/server applications combine the power and ease of use of
the client with the price/performance of the server. Users of client/server
systems often find that such systems are also easier to use and have added
functionality, such as decision-support capabilities, graphical applications and
imaging.
The transition from centralized mainframe or host-based systems to
client/server systems is time consuming and costly and requires highly trained
network designers and application developers. These critical resources are not
typically resident at a company undergoing the transition. Consequently, the
Company believes system transitions will generate a demand for computer
networking and integration services.
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The Company believes that the ongoing change from centralized to network
and desktop computing remains a major challenge across all sectors of industry
and government. The market drivers, including telecommunication deregulation,
the growth of the internet and electronic communication and the growth of
collaborative computing, are resulting in significant investments in
information technology. These investments in turn have increased the demand for
network and desktop services which are the Company's core competencies.
BUSINESS STRATEGY
Wang's business strategy is:
- - to continue to build a global IT services business which provides life
cycle services for network-centric and desktop computing, including
integration, support and outsourcing services for desktops and networks.
- - to continue to sell and provide support for multi-vendor products.
- - to continue to provide support for current VS and GCOS customers and offer
upgrades and interoperability options for such customers.
The Company is taking advantage of the opportunities created by recent
developments in the IT industry by focusing on particular segments in which it
has the technological, professional and marketing expertise to offer life cycle
services, including integration support and outsourcing services, that will
permit its customers and clients to increase the performance and reliability of
their computing networks. In addition, the Company will continue to support its
significant base of existing VS and GCOS customers in maintaining and enhancing
their systems or in transitioning their systems to the open client/server model
of computing. The key elements of this business strategy are as follows:
-- Focus on Network and Desktop Computer Services. Wang offers a
comprehensive range of network and desktop services on a worldwide basis. At
the desktop, the Company offers services including product procurement, computer
maintenance and warranty support, help desk and desktop administration
(including moves, adds, changes and upgrades). Network services include LAN and
WAN design, implementation and administration, as well as the associated
applications for LANs, WANs and internet/intranet configurations. In addition
the Company offers enhanced and cost effective service delivery and remote
network management through its Enterprise Service Centers. These services are
offered individually or as a suite of service offerings. By offering customers a
full suite of services from the desktop through the WAN, the Company believes
that it can offer customers an attractive comprehensive outsourcing arrangement
for providing desktop and network products and services.
-- Complement Internal Growth With Strategic Acquisitions and Alliances.
The Company believes that opportunities exist to extend and enhance its current
line of business and distribution capabilities through investments in or
acquisitions of businesses in the information processing industry such as the
Bull, BISS, Dataserv, I-NET and API acquisitions or the creation of key
strategic alliances. Such acquisitions or alliances complement the Company's
existing core competencies, leverage its existing strengths, such as its
customer services business, and enhance cost efficiencies across the entire
organization. The Company's management intends to continue to analyze additional
acquisition opportunities and opportunities to form additional strategic
alliances and to pursue those opportunities that further its overall business
strategy. The Company evaluates such transactions from time to time, and one or
more such transactions could occur at any time.
-- Leverage VS and GCOS Customer Base. The Company believes that its
existing base of customers is an available and important market for its
client/server and open systems services. The Company will continue to offer to
its VS and GCOS customers support services, hardware and software to expand and
upgrade their systems. Wang's strategy allows those customers to continue to
gain value from their investments, and for Wang to help them to transition to
client/server computing when, or if, they desire to do so. For these customers,
Wang has developed software and services that allow them to incorporate
client/server computing in a coexistence or interoperability strategy, which
allows new client/server systems
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and proprietary systems to work together. The Company plans to continue to
invest in developing new software, hardware and service options for its existing
customer base.
PRINCIPAL PRODUCTS AND SERVICES
Wang has a long history of providing office automation and systems
integration services, including the design, project management, application
design, installation, ongoing support and administration of a network or
interconnected networks. Additionally, the Company is a leading independent
provider of maintenance and support services, network integration, installation,
training and other value-added services to customers worldwide. With the
acquisition and integration of BISS, I-NET and API, Wang believes that it now
has the resources and capabilities to provide a full range of services at the
desktop, as well as at the LAN and WAN level for network computing, including
product sourcing, throughout the world.
Wang focuses on assisting customers in maximizing the effectiveness of
their organizations by using client/server technologies. Wang has on a global
basis designed, integrated and installed a substantial number of LANs (since the
mid-1980s) and 35,000 VS systems, including 10,000 electronic mail systems
(since the late 1970s), and 8,000 seats of Microsoft Exchange. Wang also helps
customers procure and integrate client/server solution components. Through a
number of relationships with major technology providers, including IBM, Dell,
Hewlett-Packard, Novell, Packard Bell and Compaq, Wang offers customers leading
hardware and software on a "one-stop" basis. The Company has extensive LAN and
office network design and implementation expertise and designs and manages the
installation, maintenance and administration of complex, heterogeneous,
multi-site interconnected office networks. Additionally, the Company provides
specialty services to its desktop customers, offering both local or remote help
desk support for hardware and software.
In fiscal 1996, Wang built upon its strength in the solutions integration
business through the acquisition of BISS. At the time of acquisition, BISS, a
United Kingdom company, was a leading independent network integrator in the
United Kingdom. BISS specializes in the design, implementation and support
of network computing solutions. Through the integration of BISS with the
Company's existing network integrating operations in the United Kingdom and
Ireland, Wang is focusing on developing network infrastructure solutions,
including LAN and wide area network interconnection, client/server architecture
and network management solutions.
In fiscal 1997, Wang added substantially to its networking expertise and
market position by acquiring I-NET and API. The Company believes that I-NET
possesses excellent LAN and WAN design, implementation and operations skills,
and provides services that include enterprise network integration and
operations, network management, LAN and WAN communications, document management
services and IT outsourcing. With the addition of API, which possesses Microsoft
expertise, Wang strengthened its ability to provide complex services, including
network architecture and design installation. The Company believes that as a
result of the combination of Wang, I-NET, BISS and API, the Company is
positioned as a leading provider of IT services including computer networking
and outsourcing services.
Wang Government Services, Inc., a wholly-owned Wang subsidiary formerly
known as Wang Federal, Inc., is a leading provider of systems integration
products and services to the United States federal government and to state and
local governments. Wang Government Services has a long history of delivering to
United States government departments and agencies a wide range of information
technology products and services, from large centralized systems to distributed
information networks. It is involved with numerous civilian and military
organizations in developing, installing and maintaining their mission critical
systems. Major customers of Wang Government Services include the Department of
Defense and each of the military services; the Department of State; the General
Services Administration; and the Department of Commerce and Transportation.
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In addition to its networking and integration services, the Company sells
and supports third-party hardware and software products, provides maintenance
services to the Company's VS customers and for the Bull GCOS customers and
installs and supports products developed by a number of other manufacturers. As
part of its strategy in the multi-vendor services market, the Company targets
growth segments of the market, including services for desktop systems, help desk
and service and support for high-end UNIX systems. To implement this strategy,
the Company is continuing to support VS and GCOS customer transition strategies
from existing proprietary systems to client/server applications and to service
the needs of its VS minicomputer customers by offering upgrade software, service
and open system coexistence and migration software. In fiscal 1996, the Company
acquired Dataserv, a leading provider of computer maintenance and support
services for point-of-sale retail scanners and registers and popular
industry-standard servers and desktop products, as well as application help desk
and network integration services. Dataserv services companies in the banking and
financial services, insurance, retail and manufacturing industries.
The Company offers a full range of services and support for major
information technology manufacturers and suppliers in the client/server
marketplace. The Company provides on-site and logistics and distribution
services for numerous server/desktop systems and peripherals manufacturers
(Dell, Canon, NEC, Packard Bell, Printronix and Zenith Data Systems) and
manufacturers of networking products (Cisco and Novell), help desk services
(NEC, Packard Bell and Hughes Network Systems), and professional services (GE
Capital and Hughes Network Systems). In addition, the Company offers end user
service and support on more than 3,500 third party products from more than 300
manufacturers through its worldwide network of high quality, well-trained
customer engineers, telephone support centers and logistics operations. The
Company employs more than 8,000 technical support professionals worldwide, and
offers support through subsidiaries and affiliates from approximately 130
countries throughout the world.
The Wang-Microsoft alliance announced in April 1995 and the acquisition of
API (an award-winning supplier of Microsoft services) expanded Wang's role as an
authorized provider of end-user support services for Microsoft products. This
support includes on-site architectural and system network design and
installation consulting, network integration and migration support.
A significant source of the Company's revenue continues to be derived from
the servicing, upgrading and enhancement of its installed base of its VS and
GCOS systems. The introduction of several new processors, such as the VS16000
Model 850 in 1996 as well as enhanced peripherals, an improved operating system
and expanded support services is evidence of Wang's continuing commitment to its
VS customers. The Company's support for its VS line not only allows customers
to continue to benefit from their VS investments, but also facilitates their
transition to open systems when, or if, they desire. The Company has addressed
the calendar year 2000 issue (the inability of software to properly recognize
dates after the year 1999) by announcing products such as hardware platforms
and operating systems software releases together with inventory, assessment and
remediation services, to enable VS customers to continue their deployment of VS
systems after the year 2000. Wang maintains an electronic gateway between
Microsoft's Exchange communication server product and Wang's VS Office, the
Company's internally developed electronic mail system. This allows the large
installed base of VS Office users to coexist with Microsoft Mail and Exchange
users. Wang provides service and support on an exclusive basis to users of Bull
GCOS platforms in the United States (including the United States government),
Canada, Mexico and Australia. While the Company fully intends to continue
supporting and servicing these important customer groups, the Company expects
that revenues from servicing and enhancing its installed base of VS systems and
Bull GCOS platforms, will continue to decline at a rate of approximately 25%
per year over the next several years. From one period to the next, the decline
rate could be highly variable.
MARKETING
The Company sells its services offerings predominantly through its direct
sales effort to both end-user customers, including governmental agencies as well
as large OEMs. The Company markets its products and services in the United
States through its nationwide sales and customer service offices. At June 30,
1997, United States operations included approximately 330 sales, sales support
and sales administration personnel and approximately 5,450 people in its service
and support organization (compared to approximately 415 and 3,425, respectively,
at June 30, 1996).
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The Company's products and services are marketed and serviced in Canada,
areas of Europe, and Latin America, Asia and the South Pacific regions through
subsidiaries that generally are wholly-owned. At June 30, 1997, these
subsidiaries employed approximately 190 sales, sales support and administrative
personnel and approximately 1,600 service personnel (compared to approximately
255 and 1,760, respectively, at June 30, 1996). In addition, the Company reaches
customers through independent distributors in approximately 100 other countries.
BACKLOG
A majority of the Company's revenues are derived from services and to a
lesser extent, products stocked for immediate delivery, meaning that a
relatively small number of product orders are unfulfilled at any time. In
addition, customers generally have the ability to change, reschedule or cancel
orders prior to shipment without penalty. Accordingly, the Company believes that
backlog information is neither necessarily indicative of future sales levels or
material to an understanding of the Company's business.
CUSTOMERS
The Company's customers include commercial customers, businesses,
institutions and governments of varying sizes around the world. The Company's
sales, marketing and professional services groups focus on customers with
network and desktop productivity needs in selected markets. The United States
government, together with its various agencies, is a significant customer of
the Company, and provided revenues to the Company of approximately $385 million
in fiscal 1997, $228 million in fiscal 1996 and $145 million in fiscal 1995,
which represented approximately 30%, 22%, and 16% of consolidated revenues,
respectively, in each of those periods. No other customer accounted for more
than 10% of the Company's consolidated revenues in any of those periods.
COMPETITION
Competition is vigorous in all parts of the worldwide market for network
computing services. The Company's competitors are numerous and vary widely in
size and resources. Some have substantially greater resources, stronger
reference accounts, larger research and engineering staffs and larger marketing
organizations than the Company. Competitors differ significantly depending upon
the market, customer and geographic area involved. In many of the Company's
markets, traditional computer hardware companies provide the most significant
competition. In other areas, systems integrators, consulting organizations and
telecommunications companies are significant competitors. The Company competes
primarily on the basis of service delivery quality, the ability to offer a
range of services at a competitive price, and the geographic breadth and scope
of its service and support organizations.
RESEARCH AND DEVELOPMENT
The Company has a research and development program that is primarily
focused on continuing support of its proprietary VS products. The Company's
research and development expenses for fiscal 1997 were $3.7 million. In fiscal
1996, the Company spent $5.0 million on research and development in support of
its continuing operations. These figures include direct labor costs and some
allowances for material and overhead expenses. Approximately $8.0 million was
spent in fiscal 1995 in the same operations. The decrease was due primarily to
the elimination of projects no longer relevant to the Company's strategy, and
the consolidation of certain projects.
PATENTS, TRADEMARKS AND LICENSES
The Company owns a number of patents and patent applications. The
Company has an ongoing program to sell certain of these patents. In addition
the Company receives license royalties from some of these patents, and takes
measures to enforce its rights when it deems such action appropriate. The
results of such enforcement measures and future awards or royalties, if any,
related thereto cannot be predicted with any certainty at this time, but, if
successful, one or more of these
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actions could result in a significant recovery for or other relief granted the
Company. The Company also owns certain copyrights, trademarks and proprietary
information, and licenses certain other intellectual property from others for
amounts that are not material to the Company's business as a whole. In the event
that products of the Company may be covered in whole or in part by patents owned
by others, the Company may find it necessary or desirable to obtain one or more
additional licenses.
Certain software licensed from third parties is important to certain
services provided by the Company. Where applicable, such software is typically
licensed to other parties on terms similar to those obtained by the Company. The
Company does not anticipate any difficulty in maintaining its licenses on such
terms. The Company believes it will continue to maintain adequate software
license rights for the conduct of its business.
MANUFACTURING
At June 30, 1997, the Company employed approximately 125 personnel in its
manufacturing and related distribution operations (compared to approximately 150
at June 30, 1996). The continuing decline in demand for the Company's
proprietary computer hardware products, the decision to discontinue the
manufacture of PCs, increased reliance on third-party manufacturing sources and
contract fabricators of subassemblies and components, and increasing reliance on
direct shipment by suppliers to the Company's customers have allowed the Company
to scale back its own manufacturing operations. These measures are consistent
with the Company's orientation toward services.
Over the past several years, the Company, in implementing its strategy,
downsized, sold or vacated a substantial portion of its manufacturing
facilities. Certain subsidiaries continue to have some limited manufacturing
operations, which are principally used for VS manufacturing and spare parts
repair and refurbishment.
The Company is experiencing no substantial difficulties in obtaining
necessary components, subassemblies and products, although delays have been
experienced from time to time due to temporary shortages of certain components.
The Company maintains multiple sources of supply for most items and believes
alternative sources could be developed for most existing single sources of
supply, if required.
ENVIRONMENTAL COMPLIANCE
The Company does not believe that compliance with federal, state and local
laws and regulations that have been enacted or adopted regarding the discharge
of materials into the environment, or otherwise relating to the protection of
the environment, will have a material effect on the capital expenditures,
earnings or competitive position of the Company.
EMPLOYEES
At June 30, 1997, the Company employed approximately 9,300 people in its
worldwide continuing operations, compared to approximately 7,200 at June 30,
1996. The Company has not experienced any strikes or work stoppages and
considers its relations with its employees to be good.
ITEM 2. PROPERTIES
At June 30, 1997, the Company owned and leased a total of 3.1 million
square feet of building space around the world, approximately 0.3 million square
feet of which is leased out. In the U.S. the Company utilizes 1.9 million
square feet of which approximately 0.3 million is used for administration,
customer services and training, 1.1 million is used for field sales and service
offices including regional administration and training operations and
0.5 million is used for distribution warehousing, manufacturing and associated
administrative operations. Internationally, the Company owns and leases
approximately 0.9 million square feet of which approximately 0.8 million is
used for subsidiaries' administrative sales and service operations and
approximately 0.1 million is used for distribution warehousing, manufacturing
and associated administrative operations.
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The Company has excess space in certain operations. Such excess space will
continue to be vacated as a result of ongoing restructuring actions. Amounts
realized from dispositions of excess facilities and space have been, in general,
less than sufficient to retire the Company's obligations with respect to such
space. The Company anticipates that this experience will continue in general for
any facilities restructuring.
The Company has commenced construction of a new 150,000 square foot
corporate headquarters in Billerica, Massachusetts which is scheduled for
completion in the summer of 1998.
ITEM 3. LEGAL PROCEEDINGS
The Chapter 11 proceedings were initiated by the predecessor corporation
on August 18, 1992, and on September 30, 1993 a formal confirmation order with
respect to the Company's Reorganization Plan became effective. On December 16,
1993, the Company was reincorporated as a Delaware corporation. The new
corporation issued 30,000,000 shares of the new Common Stock to a Disbursing
Agent (American Stock Transfer & Trust Company), which began distribution of
these shares to holders of allowed general unsecured claims in the Chapter 11
case. To date 27,320,679 shares have been issued. All shares of capital stock
(Class B and Class C Common Stock) of the predecessor Massachusetts corporation
were cancelled. Under the Reorganization Plan, 7,500,000 warrants, each to
purchase one share of new Common Stock at $21.45 per share, are available to be
issued to the record stockholders of the former Massachusetts corporation and
the holders of certain securities claims. The warrant distribution began in
March 1995 and to date 7,186,768 warrants have been issued. Holders of stock in
the predecessor corporation have until December 16, 1998, to redeem such stock
for warrants.
Disputed claims against the predecessor Massachusetts corporation in the
Chapter 11 case continue to be litigated and settled. As they are resolved,
holders of allowed claims are receiving shares of Common Stock of the Company
out of the reserve held by the disbursing agent.
The Company is a defendant in several so-called "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' RSI. The Company believes that all RSI claims arising before the
confirmation of the Reorganization Plan will be discharged. 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. All but three of these claims have been filed as part of the
Company's Chapter 11 proceeding. The Company has settled over 30 claims and
continues to resolve the remaining claims through the bankruptcy. The Company
believes that all of these actions, including those commenced after the
completion of the Chapter 11 proceeding, will be resolved under the
Reorganization Plan. The Company intends to defend itself vigorously against any
liability asserted.
The Company is also a defendant in a number of other routine lawsuits
incidental to the conduct of its business. Although it is impossible to predict
the results of specific matters, the Company believes that its aggregate
liability, if any, for all litigation, in excess of insurance coverage and
financial statement provisions, will not be material to the Company's
consolidated financial position or its results of operation.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security-holders
during the fourth quarter of the fiscal year ended June 30, 1997.
The following table sets forth the names, ages as of August 29, 1997 and
positions of all executive officers of the Company:
<TABLE>
<CAPTION>
OFFICER
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NAME POSITION(S) AGE SINCE
---- ----------- --- -----
<S> <C> <C> <C>
Joseph M. Tucci Chairman of the Board and 50 1990
Chief Executive Officer
Ken Bajaj Vice Chairman 55 1997
Jose Ofman President and Chief Operating 54 1997
Officer, Americas
Jeremiah J.J. van Vuuren President and Chief Operating 54 1993
Officer, International
Paul F. Brauneis Vice President and Controller 52 1997
Richard L. Buckingham Vice President and Treasurer 51 1990
Franklyn A. Caine Executive Vice President 47 1994
and Chief Financial Officer
Donald P. Casey Chief Technology Officer 51 1991
Lucy A. Flynn Senior Vice President 44 1996
Corporate/Marketing Communications
David I. Goulden Senior Vice President 38 1994
Marketing and Business Development
James J. Hogan Senior Vice President 55 1990
President, Wang Government Services
Stephen G. Jerritts Senior Vice President 71 1995
President, Wang Latin America
Albert A. Notini Senior Vice President, Law and 40 1994
Human Resources, General Counsel
and Secretary
</TABLE>
Mr. Tucci joined the Company in August 1990 as Executive Vice President,
Operations, was elected President and Chief Executive Officer in January 1993,
and Chairman of the Board and Chief Executive Officer in October 1993.
Previously, he had served as an executive with Unisys Corporation, a computer
company, from 1983 to August 1990, most recently as President, U.S. Information
Systems.
Mr. Bajaj joined the Company as President of I-NET, Inc., a provider of
outsourced network and desktop services, acquired by Wang in August 1996. He was
appointed Vice Chairman of the Company in April, 1997. Prior to joining I-NET in
1988, Mr. Bajaj served as Vice President at both Electronic Data Systems and
Perot Systems, each a provider of information technology services.
11
<PAGE> 12
Mr. Ofman Joined the Company in March, 1997 as President and Chief Operating
Officer, Americas. Prior to that, he held several senior positions at Electronic
Data Systems Co., an information technology services company, the most recent of
which was Corporate Vice President and Group Executive.
Mr. van Vuuren joined the Company in September 1993 as General Manager, Europe,
Africa and the Middle East and Senior Vice President of the Company. He served
as President of the Company's International Business from July 1994 until March
1997 and has been President and Chief Operating Officer, International since
that time. Previously, he served as Vice President of marketing operations for
Europe, Africa and the Middle East from 1986 to 1989 for Unisys Corporation, a
computer manufacturer and was appointed Vice President and Group Manager Europe
in 1990.
Mr. Brauneis joined the Company in August, 1997 as Vice President and
Controller. He had served from 1995 to 1997 as Vice President and Corporate
Controller of BBN Corporation, an internet services and network management
company. From 1993 to 1995 he was Vice President and Chief Financial Officer at
Softkey International, a consumer software products company. Prior to that he
spent 12 years at M/A Com, Inc., an electronic equipment manufacturer, most
recently as Vice President, Finance.
Mr. Buckingham joined the Company as Vice President and Treasurer in
1990. From 1988 to 1990, he served as Vice President-Treasurer of Prime
Computer, Inc., a computer company.
Mr. Caine joined the Company as Executive Vice President and Chief Financial
Officer in August 1994. Prior to joining the Company, Mr. Caine was employed by
United Technologies Corporation, a diversified manufacturing company, serving as
Senior Vice President, Planning and Corporate Development, from 1993 to July
1994, as Senior Vice President and Controller from 1991 to 1993, as Senior Vice
President, Human Resources, from 1989 to 1991 and as Vice President and
Treasurer from 1987 to 1989.
Mr. Casey joined the Company as Executive Vice President and Chief Development
Officer in September 1991, and was elected President and Chief Technology
Officer in January 1993. He served as President of the Software Business until
December 1995 and since then as Chief Technology Officer. He had served as Vice
President, Networking and Communications at Apple Computer Inc., a personal
computer company, from 1988 to 1990, and as Vice President, Spreadsheet Division
at Lotus Development Corporation, a software company, from 1990 to 1991.
Ms. Flynn joined the Company in June 1996 as Senior Vice President,
Corporate/Marketing Communications. From 1992 through 1996, she served
as Senior Vice President and Director of Corporate Affairs at Shawmut
National Corporation. Previously she served as Vice President of Public
Affairs at Shawmut Bank N.A. from 1989 to 1992.
Mr. Goulden joined the Company in 1990 as Director of Marketing Strategies. From
1991 to 1992 he served as Vice President, Marketing and Development and from
1992 to 1993 he served as Vice President, Marketing. Mr. Goulden served the
Company as Vice President, Marketing and Business Development from 1993 to June
1994, as Senior Vice President, Business Development from June 1994 to December
1995 and as Senior Vice President, Software Products Division from December 1995
until March 1997. Since that time he has held the position of Senior Vice
President, Marketing and Business Development. He previously served as Director
of Corporate Strategy and Business Development from 1989 to 1990 at Unisys
Corporation, a computer manufacturer.
Mr. Hogan joined the Company as Senior Vice President, Personal Computer Systems
in October 1990, and became Senior Vice President Human Resources and Operations
Support in June 1993. From July 1994 to March 1995 he served as President,
Federal Systems Division Business and from March 1995 to December 1996 as Senior
Vice President of the Company at which time he was also elected as President of
Wang Government Services, Inc. He had served as Vice President-Audio and
Communications Division, Americas for Thomson Consumer Electronics when that
company acquired General Electric's consumer electronics business in 1988.
Previously he served as Product General Manger of Audio/Video Systems for
General Electric's consumer electronics business from 1985 through 1987.
12
<PAGE> 13
Mr. Jerritts joined the Company as Senior Vice President and President of Latin
American Operations in April 1995. He had served on the Company's Board of
Directors from 1993 until 1995. Prior to joining the Company he managed the
Company's Latin American operations as a consultant since November 1993.
Previously, he was President and Chief Executive Officer of NBI, Inc., a
computer company, from 1988 through 1992.
Mr. Notini joined the Company in February 1994 as Senior Vice President, General
Counsel and Secretary and is responsible for all of the Company's legal, real
estate, human resources and intellectual property matters. Previously, he had
served as a Junior Partner from 1989 to 1992, and Senior Partner from 1992 to
1994 at the Boston law firm of Hale and Dorr, LLP, which he joined in 1984.
13
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is quoted on the Nasdaq National Market under the
symbol "WANG."
The following table sets forth, for the periods indicated, the high and
low sales prices per share of the Common Stock as reported on the Nasdaq
National Market during fiscal years 1996 and 1997.
<TABLE>
<CAPTION>
Quarter Ended High Low
- ------------- ---- ---
<S> <C> <C>
September 30, 1995 $19 1/2 $14 1/2
December 31, 1995 $18 $14 3/4
March 31, 1996 $25 3/8 $15 1/2
June 30, 1996 $26 1/8 $18 1/2
September 30, 1996 $20 1/8 $15 3/8
December 31, 1996 $24 1/16 $18 7/8
March 31, 1997 $23 3/4 $17 1/4
June 30, 1997 $21 1/2 $16
</TABLE>
The number of stockholders of record on August 29, 1997 was approximately
9,700.
The Company has paid no cash dividends on the Common Stock since its
original issuance in December 1993. Its predecessor Massachusetts corporation
had not paid any dividends on its capital stock for several years. The Company
currently intends to retain any earnings for future growth, and, therefore, does
not anticipate paying any cash dividends on the Common Stock in the foreseeable
future. Moreover, the Company's $225,000,000 credit facility with Bankers Trust
Company and certain other financial institutions prohibits the payment of cash
dividends other than regularly scheduled dividends to the holders of the
Company's 6-1/2% Preferred Stock and 4-1/2% Preferred Stock.
ITEM 6. SELECTED FINANCIAL DATA
See EXHIBIT A attached hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
See EXHIBIT B attached hereto.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See EXHIBIT C attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
14
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is contained in part under the caption
"Executive Officers of the Company" in Part I of this Annual Report on Form
10-K, and in part in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on November 25, 1997 (the "1997 Proxy Statement") in the
sections "Election of Directors - Directors of the Company," and "Section 16(a)
Beneficial Ownership Reporting Compliance," which sections are incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is contained in the 1997 Proxy Statement in the
sections "Election of Directors - Compensation of Directors," "Compensation
Committee Interlocks and Insider Participation," "Executive Compensation," and
"- Employment Contracts and Change-in-Control Arrangements," which sections are
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is contained in the 1997 Proxy Statement in the
section "Beneficial Ownership of Voting Stock," which section is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is contained in the 1997 Proxy Statement in the
section "Election of Directors - Certain Transactions," which section is
incorporated herein by reference.
15
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Index to Consolidated Financial Statements.
1. The following documents are filed as Exhibit C hereto and are
included as part of this Annual Report on Form 10-K.
Financial Statements:
Consolidated Statements of Operations for the fiscal years ended
June 30, 1997, 1996 and 1995.
Consolidated Balance Sheets as of June 30, 1997 and 1996.
Consolidated Statements of Cash Flows for the fiscal years ended
June 30, 1997, 1996 and 1995.
Consolidated Statements of Stockholders' Equity for the fiscal
years ended June 30, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
2. The following documents are filed as Exhibit D hereto and are
included as part of this Annual Report on Form 10-K.
Financial Statement Schedule:
Schedule II- Valuation and Qualifying Accounts
3. The list of Exhibits filed as a part of this Annual Report on Form
10-K is set forth in the Exhibit Index immediately preceding such
Exhibits, and is incorporated herein by reference.
(b) No reports on Form 8-K were filed during the last quarter of the
Company's fiscal year ended June 30, 1997.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WANG LABORATORIES, INC.
BY: /s/ Franklyn A. Caine
----------------------------
Franklyn A. Caine
Executive Vice President and
Chief Financial Officer
September 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Joseph M. Tucci Chairman of the Board, Chief September 26, 1997
- -------------------------- Executive Officer and Director
Joseph M. Tucci (Principal Executive Officer)
/s/ Franklyn A. Caine Executive Vice President and September 26, 1997
- -------------------------- Chief Financial Officer
Franklyn A. Caine (Principal Financial Officer)
/s/ Paul F. Brauneis Vice President and Controller September 26, 1997
- -------------------------- (Principal Accounting Officer)
Paul F. Brauneis
/s/ David A. Boucher Director September 26, 1997
- --------------------------
David A. Boucher
/s/ Michael W. Brown Director September 26, 1997
- --------------------------
Michael W. Brown
/s/ Marcia A. Hooper Director September 26, 1997
- --------------------------
Marcia A. Hooper
/s/ Joseph J. Kroger Director September 26, 1997
- --------------------------
Joseph J. Kroger
<PAGE> 18
/s/ Raymond C. Kurzweil Director September 26, 1997
- --------------------------
Raymond C. Kurzweil
/s/ Axel J. Leblois Director September 26, 1997
- --------------------------
Axel J. Leblois
/s/ Frederick A. Wang Director September 26, 1997
- --------------------------
Frederick A. Wang
<PAGE> 19
(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) By-Laws 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
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 Employees' 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
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
10.36(18) 1995 Employees' Stock Purchase Plan, as Amended
10.37(18) Employees' Stock Incentive Plan, as Amended
10.38(18) 1995 Director Stock Option Plan, as Amended
10.39(18) Employment Agreement of Joseph M. Tucci, as Amended
10.40(19) Asset Purchase Agreement, as amended, with respect
to the Registrant's sale of its software business
unit to Eastman Kodak Company
10.41(20) Amended and Restated Employment Agreement of
Joseph M. Tucci
10.42(20) Restricted Stock Agreement of Joseph M. Tucci
10.43(20) Non-Qualified Long Term Incentive Stock Option
Agreement of Joseph M. Tucci
10.44(20) Second Amendment to the Change in Control
Severance Agreement of Joseph M. Tucci
<PAGE> 22
Exhibit No. Description
- ----------- -------------------------------------------------
10.45(20) Form of Non-Qualified Long Term Incentive Stock
Option Agreement with Messrs. Caine, Goulden and
Notini, each an executive officer of the
Registrant
10.46(20) Form of Restricted Stock Agreement with Messrs.
Caine, Goulden and Notini, each an executive
officer of the Registrant
10.47(20) Amended and Restated Employment Agreement of Ken
S. Bajaj
10.48(20) Letter Agreement of Employment of Jose Ofman
10.49(20) Amendment Number 1 to Letter Agreement of
Employment of Jose Ofman
10.50(20) Non-Qualified Long Term Stock Option Agreement
with Jeremiah J. J. Van Vuuren
10.51(20) Letter Agreement for Special Bonus of Franklyn A.
Caine
10.52(20) Change in Control Severance Agreement, as amended
of Franklyn A. Caine
10.53(20) Letter Agreement for Special Bonus of Albert A.
Notini
10.54(20) Change in Control Severance Agreement, as amended
of Albert A. Notini
10.55(20) Letter Agreement for Special Bonus of David I.
Goulden
10.56(20) Change in Control Severance Agreement, as amended
of David I. Goulden
10.57(20) Amendment Number 1 to the 1993 Directors' Stock
Option Plan
10.58(20) Amendment Number 2 to the Stock Incentive Plan
10.59(20) Amendment Number 3 to the Employees' Stock
Incentive Plan
10.60(20) Letter Agreement for 1996 Bonus for Ken S. Bajaj
10.61 Restricted Stock Agreement of Jeremiah J. J. Van
Vuuren
10.62 Employment Agreement of Jeremiah J. J. Van Vuuren with
Registrant
10.63 Employment Agreement of Jeremiah J. J. Van Vuuren with Wang
Laboratories Ireland B.V.
<PAGE> 23
Exhibit No. Description
- ----------- -------------------------------------------------
10.64 Change in Control Severance Agreement, as amended
of Jeremiah J. J. Van Vuuren
11.1 Statements re Computation of Per Share Earnings
12.1 Calculation of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP
27.1 Financial Data Schedule
27.2 Financial Data Schedule Restated
(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, 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.
<PAGE> 24
(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.
(18) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
(19) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
March 17, 1997.
(20) Filed as an Exhibit to the Registrant's quarterly report a Form 10-Q for
the quarter ended March 31, 1997.
<PAGE> 25
Exhibit A
WANG LABORATORIES, INC. AND SUBSIDIARIES
FIVE-YEAR COMPARISON OF SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Predecessor Company
----------------------------
Year Ended Year Ended Year Ended Nine Months Three Months Year Ended
June 30, June 30, June 30, June 30, Ended June 30,
1997 1996 1995 1994 Sept 30, 1993 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,268.4 $ 1,013.9 $ 901.9 $ 644.4 | $ 210.9 $ 1,247.0
|
Income (loss) from continuing |
operations before reorganization |
expenses and discontinued |
operations $ (6.7) $ 63.5 $ (14.2) $ 8.6 | $ 11.9 $ (69.9)
|
Reorganization expenses -- -- -- -- | (20.8) (127.3)
|
Income (loss) from discontinued |
operations 76.6 (69.0) (53.9) -- | -- --
|
Fresh-start reporting adjustment |
-- -- -- -- | 193.6 --
|
Gain on debt discharge -- -- -- -- | 329.3 --
--------- --------- --------- --------- | --------- ---------
|
Net income (loss) 69.9 (5.5) (68.1) 8.6 | 514.0 (197.2)
|
Dividends and accretion on |
preferred stock (14.1) (22.6) (8.7) (4.2) | -- --
--------- --------- --------- --------- | --------- ---------
|
Net income (loss) applicable to |
common stockholders $ 55.8 $ (28.1) $ (76.8) $ 4.4 | $ 514.0 $ (197.2)
========= ========= ========= ========= | ========= =========
|
Net income (loss) per share |
$ 1.44 $ (0.77) $ (2.24) $ 0.13 | * *
========= ========= ========= ========= | ========= =========
|
Average number of employees 9,300 6,200 5,200 5,900 | 6,700 9,500
</TABLE>
<TABLE>
<CAPTION>
At June 30, 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 1,034.8 $ 856.6 $ 852.5 $ 677.1 | $ 588.8
|
Depreciable assets, net $ 123.0 $ 137.3 $ 134.4 $ 79.6 | $ 137.4
|
Working capital $ 126.1 $ 86.7 $ 34.1 $ 95.1 | $ 26.3
|
Long-term debt, excluding |
liabilities subject to |
compromise $ -- $ -- $ 23.0 $ 2.0 | $ 13.8
|
Series A preferred stock $ 85.5 $ 84.8 $ 84.1 $ -- | $ --
|
Exchangeable preferred stock |
$ -- $ -- $ 61.5 $ 53.2 | $ --
|
Stockholders' equity (deficit) |
$ 422.8 $ 343.1 $ 220.8 $ 272.3 | $ (501.4)
|
Number of employees 9,300 7,200 6,200 5,300 | 6,900
</TABLE>
Certain prior years' amounts have been reclassified to conform to the
presentation for fiscal 1997. Employee data excludes discontinued
operations and businesses held for sale.
* Per share data are not presented for periods prior to September 30, 1993,
the Confirmation Date of the Company's Reorganization Plan, due to the
general lack of comparability as a result of the revised capital structure
of the Company. See notes to the consolidated financial statements.
<PAGE> 26
Exhibit B
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This discussion includes certain forward-looking statements about the Company's
revenue, including the need for additional investment, expected expenses,
operating results and possible capital needs. Any such statements are subject to
risk that could cause the actual results or needs to vary materially. For a
further discussion of the various risks affecting the business, refer to "Risks
and Uncertainties" appearing at the end of the Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Basis of Presentation
On March 17, 1997, the Company completed the sale of its software business unit
to Eastman Kodak Company ("Kodak") for $260.0 million in cash. The business sold
to Kodak included Wang's software business unit management, employees, products,
technology, customers and partners, as well as its sales, marketing and research
and development organizations worldwide. Cash proceeds, net of transaction costs
paid to date, were $249.2 million. Approximately $14.0 million of cash is
estimated to be required in the future for payment of transaction costs and
guarantees. As a result of the sale, the results of operations of the software
business unit for all periods presented and the gain on the sale realized in the
third quarter of fiscal 1997 have been reported as discontinued operations in
the accompanying Statements of Operations and of Cash Flows. The following
discussion addresses the results of operations on a continuing operations basis.
On November 13, 1996, the Company acquired Advanced Paradigms, Inc. ("API"), a
privately held Virginia-based provider of enterprise-wide Microsoft-specific
LAN/WAN solutions, for approximately $6.0 million in cash and notes. API's
Microsoft-centric expertise complements the Company's network and desktop
services business, and enhances its position as a Microsoft Authorized Support
Center. The acquisition was accounted for using the purchase method of
accounting. Accordingly, the accompanying financial statements include API's
results of operations from the date of acquisition.
On August 29, 1996, the Company completed the acquisition of I-NET, Inc.
("I-NET") for approximately $165.0 million in cash and notes. Prior to the
transaction, the Company had an investment in I-NET of approximately $12.0
million. I-NET 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 acquisition was accounted for
using the purchase method of accounting. Accordingly, the accompanying financial
statements include I-NET's results of operations from the date of acquisition.
On May 3, 1996, the Company acquired Dataserv Computer Maintenance, Inc.
("Dataserv") from BellSouth Corporation for $28.5 million in cash. Dataserv
provides customers with computer maintenance and support services for
point-of-sale retail scanners and registers and popular industry-standard
servers and desktop products, as well as application helpdesk and network
integration services. Dataserv services companies in the banking and financial
services, insurance, retail and manufacturing industries. The acquisition was
accounted for using the purchase method of accounting. Accordingly, the
accompanying financial statements include Dataserv's results of operations from
the date of acquisition.
1
<PAGE> 27
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
On October 18, 1995, the Company acquired BISS Limited ("BISS") for $16.1
million in cash. BISS operates in the United Kingdom and designs, installs,
integrates and supports network and client/server computing solutions. This
acquisition advanced the Company's objective to be a major worldwide provider of
network integration services. The acquisition was accounted for using the
purchase method of accounting. Accordingly, the accompanying financial
statements include BISS's results of operations from the date of acquisition.
On January 31, 1995, the Company purchased from Bull HN Information Systems Inc.
its U.S. federal systems subsidiary, its U.S. customer services business, and
its sales and service subsidiaries in Canada, Mexico, Australia and New Zealand.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the accompanying financial statements include the results of the
operations of the acquired Bull businesses from the date of acquisition.
For the time periods presented, the focus of the Company's continuing operations
was on providing services to the office productivity portion of the information
processing industry, a market where the Company has name recognition and
established technological, professional and marketing expertise. The addition of
the Dataserv service business 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
areas of the information technology services market. With the sale of the
Company's software business unit, the Company will be able to focus its entire
resources on its network and desktop integration and services business.
Results of Continuing Operations
Year ended June 30, 1997 compared to year ended June 30, 1996
For the year ended June 30, 1997, the Company reported revenues of $1,268.4
million, a 25.1% increase compared to revenues of $1,013.9 million for the prior
year. Substantially all of the increase in revenues is attributable to
acquisitions and internal growth.
In connection with the sale of the software business, the Company has organized
its ongoing services business around four global service delivery units. The
nonrecurring costs associated with these changes were provided for in the three
months ended March 31, 1997 and amounted to $52.5 million. Of that total, $13.3
million was related to the sale of the software business, $15.2 million for
organizational realignment and reductions in the G&A infrastructure, $19.0
million for reductions in the carrying value of certain assets (including $14.4
million of intangible assets determined to be impaired) and $5.0 million for
other charges. The writedown of the impaired intangible assets is reported with
"Amortization of intangibles - acquisition and fresh-start".
The Company reported an operating loss of $22.8 million for its fiscal year
ended June 30, 1997, compared to an operating profit of $86.3 million for the
fiscal year ended June 30, 1996. Charges (credits) associated with the
amortization of acquisition-related intangible assets and fresh-start reporting
and acquisition-related, Chapter 11-related and other restructuring charges
(credits) were $83.3 million and $33.4 million in fiscal 1997 and 1996,
respectively. Excluding these
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WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
charges, operating income for the year ended June 30, 1997 was $60.5 million
compared to $119.7 million in the prior fiscal year. The decline in operating
profit in fiscal 1997 is primarily attributable to the previously anticipated
decline in higher margin proprietary product and service revenues and the
increase in lower margin desktop and management services revenues resulting from
the acquisition of I-NET. The Company anticipates that this shift in revenue mix
will continue and proprietary revenues will continue to decline, both absolutely
and as a percentage of total revenues.
EBITDA (earnings before interest, income taxes, depreciation and amortization)
from continuing operations was $160.9 million and $183.8 million in the years
ended June 30, 1997 and 1996, respectively. EBITDA, which some investors
believe to be a meaningful measure for assessing a company's ability to meet
its cash requirements, is calculated by excluding from the net income (loss):
acquisition-related, Chapter 11-related and restructuring costs and other
nonrecurring charges; income taxes; interest expense; interest income;
depreciation and amortization.
Revenues
Revenues from proprietary sources (i.e., sales and service of proprietary VS
and GCOS products) declined at a rate of 24.8% compared to the prior year. The
Company expects these revenues to continue to decline at a rate approximating
25% per year over the next several years. From one period to the next, the rate
of decline could be highly variable.
Services revenues increased by 37.9%, to $963.9 million, compared to $699.0
million in the prior year. The increase in services revenues was primarily
attributable to the acquisitions of Dataserv and I-NET. Proprietary services
revenues decreased by 27.8%, to $245.2 million. This decrease was more than
offset by the increase in network services revenues, which doubled to $718.7
million, compared to the prior year. This increase was primarily due to the
acquisitions of I-NET, Dataserv and BISS, and includes approximately $14.0
million derived from the sale and licensing of intellectual property.
Product revenues decreased by 3.3%, to $304.5 million. Proprietary product sales
totaled $67.6 million, a decline of 11.0%. Network product and other product
sales remained stable at $236.9 million, compared to $238.9 million in the prior
year.
Gross margin
Services gross margin decreased to 23.8% compared to 31.2% in the prior year.
Margins were negatively affected by the increase in mix of maintenance revenues
from lower-margin MVS products, the acquisition of I-NET (which has
historically lower margins than the Company's existing business) and $3.4
million of the previously discussed nonrecurring charges recorded in the third
quarter of fiscal 1997, offset by the favorable margin impact from the sale of
and licensing of intellectual property. Excluding these nonrecurring costs and
the impact of the $14.0 million revenue from certain intellectual property,
services gross margin in the year ended June 30, 1997 would have been 23.1%.
The services 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 Company's services gross margin as a result
of
3
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WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
increased lower-margin network maintenance revenues, which have historically
lower margins than the Company's proprietary business, coupled with the
inclusion of I-NET's lower margin structure going forward. It is expected that
these margin reductions will be partially offset in the future by the effects of
the implementation of certain integration initiatives in subsequent periods.
Product gross margin was 25.6%, compared to 31.2% in the prior year. The
decrease in gross margin is primarily a result of the I-NET acquisition, which
has historically lower margins than the Company's proprietary business, as well
as $2.2 million of the previously discussed nonrecurring charges recorded in the
third quarter of fiscal 1997. Excluding these nonrecurring charges, product
gross margin would have been 26.2%.
Research and development
Research and development costs decreased by $1.3 million, or 26.0%, from $5.0
million during the prior year, representing 0.3% and 0.5% of revenues in fiscal
1997 and 1996, respectively. The Company's modest level of research and
development spending is primarily related to continuing support of its
proprietary VS products. The Company expects these costs to continue to decline
as its installed base of proprietary systems declines.
Selling, general and administrative
Selling, general and administrative expenses increased $51.2 million, compared
to the prior year, and also increased slightly as a percentage of revenues, to
19.2% in fiscal 1997, compared to 18.9% in fiscal 1996. The increase includes
$23.1 million of the previously discussed nonrecurring charges which were
recorded in the third quarter of fiscal 1997 and pension plan-related credits
associated with the termination of an international plan approximating $1.3
million. Excluding these nonrecurring costs, selling, general and administrative
expenses for the year ended June 30, 1997 would have been $221.4 million, an
increase of 15.3% compared to a 25.1% increase in revenues, and relate primarily
to the inclusion of Dataserv and I-NET expenses in fiscal 1997. Excluding these
nonrecurring amounts, fiscal 1997 selling, general and administrative expenses
decreased as a percentage of revenues to 17.5%. Selling, general and
administrative expenses were reduced as a result of integration activities
initiated in connection with the acquisitions. The Company expects that ongoing
integration activities will continue to contribute to the elimination of
unnecessary or redundant selling, general and administrative costs going
forward.
Other costs and expenses
Amortization of fresh-start and acquired intangible assets totaled $47.0 million
in the year ended June 30, 1997, and is comprised of $12.0 million related to
the implementation of fresh-start reporting, $20.6 million for intangible assets
established in connection with business acquisitions and $14.4 million for the
writedown of impaired acquired intangible assets. Amortization of fresh-start
and acquired intangible assets in the year ended June 30, 1996 was $34.5
million, of which $18.4 million relates to the implementation of fresh-start
reporting and $16.1 million relates to intangible assets established in
connection with business acquisitions.
Acquisition-related charges of $35.0 million in the year ended June 30, 1997,
primarily reflect the costs associated with combining the operations of the
Company and I-NET and the writedown of legacy information systems being
replaced. There were no acquisition-related charges recorded in continuing
operations in the year ended June 30, 1996.
4
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WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Periodically, the accruals related to reorganization-related and restructuring
charges are reviewed and compared to their respective requirements. As a result
of those reviews, the accruals are adjusted for changes in cost and timing
assumptions of previously approved and recorded initiatives. In fiscal 1997,
additional costs of $1.3 million were incurred and charged to expense. Review of
the reorganization-related accruals in fiscal 1996 identified $1.1 million of
excess reorganization reserves and $2.2 million of excess Chapter 11 accounts
payable accruals, which were reversed. These items are reported as "Chapter
11-related charges (credits)" in the Consolidated Statements of Operations.
Review of the restructuring accruals in fiscal 1997 determined that no
adjustments were required, while the fiscal 1996 review identified net
additional requirements of $2.2 million related to previously approved and
recorded initiatives. This adjustment is reported as "Other restructuring
charges (credits)" in the Consolidated Statements of Operations.
Other income and expense
Interest expense increased to $10.9 million for the year ended June 30, 1997,
compared to $5.1 million in the prior year. The increase in interest expense is
principally the result of amounts outstanding under the Revolving Credit
Facility with Bankers Trust Company and imputed interest on the note issued to
the selling stockholders of I-NET. Interest income was $7.0 million, compared
to $9.0 million in the prior year. The reduction in interest income is
primarily due to the decrease in cash available for investment during most of
fiscal 1997 primarily as a result of the cash paid to acquire I-NET.
Income taxes
The benefit for income taxes for the year ended June 30, 1997, was 70%,
compared to the provision for the prior year, which was 33%. The higher benefit
in fiscal 1997 relates to the utilization of certain foreign net operating loss
carryforwards incurred subsequent to the Company's emergence from Chapter 11.
The provision for income taxes of $31.4 million in the prior year included
$30.7 million of non-cash expense.
The Company has a deferred tax asset balance at June 30, 1997 of $40.1 million,
which is included in other assets, and relates to the expected utilization of
tax net operating loss carryforwards which existed at September 30, 1993.
During fiscal 1997, $21.0 million of deferred tax asset was realized as a
result of the Company's sale of the software business, and the Company recorded
an additional deferred tax asset of $13.5 million reducing reorganization value
in excess of identifiable intangible assets. Although realization is not
assured, management believes that the deferred tax asset will be realized. The
estimate of future taxable income relates to the Company's operations outside
the United States which have, in the past, consistently generated a level of
taxable income similar to the amounts of future taxable income necessary to
realize the net deferred tax asset. In addition, the Company has tax planning
strategies to prevent the tax net operating loss carryforwards from expiring
unused. The amount of the net deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable
income during the carryforward period are reduced.
Employees
At June 30, 1997 and 1996, the Company's continuing operations had approximately
9,300 employees and 7,200 employees, respectively. The increase is a result of
acquisitions, net of reductions resulting from integration activities.
5
<PAGE> 31
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Year ended June 30, 1996 compared to year ended June 30, 1995
The Company reported operating income of $86.3 million for the year ended June
30, 1996, after net acquisition-related, Chapter 11-related and restructuring
credits of $1.1 million and amortization of fresh-start and acquired intangible
assets of $34.5 million. This compares to an operating loss of $3.3 million for
the prior year, after net acquisition-related, Chapter 11-related and
restructuring charges of $62.1 million and amortization of fresh-start and
acquired intangible assets of $23.8 million.
EBITDA from continuing operations in the years ended June 30, 1996 and 1995,
was $183.8 million and $135.7 million, respectively.
Revenues
Services revenues increased by 21.7%, to $699.0 million, compared to $574.5
million in the prior year. Proprietary services revenues decreased by 1.5%, to
$339.8 million. This decrease was the net result of a decline in Wang
proprietary services revenue and an increase in Bull proprietary services
revenues due to twelve months of Bull revenue included in 1996, compared to
five months of Bull revenue in 1995. Network services revenues increased 56.4%,
to $359.2 million, compared to $229.7 million in the prior year. This increase
was mainly due to higher levels of revenues due to the Bull, Dataserv and BISS
acquisitions and newer service offerings.
Product revenues decreased by 3.8%, to $314.9 million. Proprietary product sales
remained constant at $76.0 million and $75.1 million in the years ended June 30,
1996 and 1995, respectively. Network product and other product sales declined
5.3%, to $238.9 million, compared to $252.3 million in the prior year, as the
Company continued to de-emphasize the sale of OEM hardware products.
Gross margin
Services gross margin increased slightly to 31.2%, compared to 31.0% in the
prior year. This increase was principally the result of cost reductions attained
from the integration-related efforts related to the acquired Bull businesses.
Service margins continue to be negatively affected by the increase in
lower-margin maintenance on multi-vendor service products and the decline in
revenues from the Company's proprietary maintenance contracts along with
consolidation in the industry, resulting in competitive and technological
pressures. Pressure will continue to be exerted on the Company's services 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.
Product gross margin increased to 31.2%, compared to 28.7% in the prior year.
This increase was due to changes in product mix attributable to the addition of
Bull product offerings.
Research and development
Research and development costs decreased by $3.0 million, or 37.5%, from the
prior year, representing 0.5% and 0.9% of revenues in fiscal 1996 and 1995,
respectively. The Company's modest level of research and development spending
was primarily related to continuing support of its proprietary VS products. The
Company expects these costs to continue to decline as its installed base of
proprietary systems declines.
6
<PAGE> 32
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Selling, general and administrative
Selling, general and administrative expenses increased $10.1 million, or 5.5%,
compared to the prior year, but decreased as a percentage of revenues, to 18.9%
in fiscal 1996, compared to 20.2% in fiscal 1995. The decrease is primarily a
result of acquisition-related initiatives and restructuring programs which
contributed significantly to the elimination of redundant facilities, personnel,
support costs and other related expenses.
Other costs and expenses
Amortization of fresh-start and acquired intangible assets totaled $34.5 million
in the year ended June 30, 1996, and is comprised of $18.4 million related to
the implementation of fresh-start reporting and $16.1 million for intangible
assets established in connection with business acquisitions. Amortization of
fresh-start and acquired intangible assets in the year ended June 30, 1995 was
$23.8 million, of which $18.2 million relates to the implementation of
fresh-start reporting and $5.6 million relates to intangible assets established
in connection with business acquisitions.
There were no acquisition-related charges recorded in continuing operations in
the year ended June 30, 1996. Acquisition-related charges of $72.5 million
recorded in the year ended June 30, 1995, reflect the cost of integrating the
acquired Bull businesses into the Company.
Periodically, the accruals related to reorganization-related and restructuring
charges are reviewed and compared to their respective requirements. As a result
of those reviews, the accruals are adjusted for changes in cost and timing
assumptions of previously approved and recorded initiatives. Review of the
reorganization-related accruals in fiscal 1996 identified $1.1 million of excess
reorganization reserves and $2.2 million of excess Chapter 11 accounts payable
accruals, which were reversed. The fiscal 1995 review of the
reorganization-related accruals identified $2.3 million of excess Chapter 11
accounts payable accruals, which were reversed. These reversals are reported as
"Chapter 11-related charges (credits)" in the Consolidated Statements of
Operations. Review of the restructuring accruals identified net additional
requirements of $2.2 million in 1996 and excess reserves of $8.1 million in 1995
related to previously approved and recorded initiatives. These adjustments are
reported as "Other restructuring charges (credits)" in the Consolidated
Statements of Operations.
Other income and expense
Interest expense increased to $5.1 million, compared to $3.7 million for the
prior year. This increase is principally a result of interest on the acquisition
note payable to Bull. Other income was primarily comprised of interest income,
which totaled $9.1 million and $7.2 million for the years ended June 30, 1996
and 1995, respectively.
Income taxes
The continuing operations provision for income taxes of $31.4 million was offset
by a tax benefit of $20.4 million reported in discontinued operations. The net
tax provision of $11.0 million includes a non-cash expense of $10.3 million as a
result of the Company's ability to utilize its tax net operating loss
carryforwards. The continuing operations income tax provision of $21.1 million
for the prior year was offset by $17.5 million of tax benefit reported in
discontinued operations. The net tax provision of $3.6 million includes $3.4
million of such non-cash expense.
7
<PAGE> 33
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
At June 30, 1996, the Company had recorded a deferred tax asset of $47.6
million, of which $43.4 million was attributable to the expected utilization of
tax net operating loss carryforwards which existed at September 30, 1993,
reducing reorganization value in excess of amounts allocated to identifiable
intangible assets. Of the remainder, $1.7 million was attributable to acquired
tax benefits, reducing goodwill related to the Bull acquisition and $2.5 million
was attributable to the expected utilization of tax net operating loss
carryforwards generated subsequent to September 30, 1994, reducing the provision
for income taxes. Although realization is not assured, management believes that
the net deferred tax asset will be realized. The estimate of future taxable
income relates to the Company's operations outside the United States which have,
in the past, consistently generated a level of taxable income similar to the
amounts of future taxable income necessary to realize the net deferred tax
asset. In addition, the Company has tax planning strategies to prevent the tax
net operating loss carryforwards from expiring unused. The amount of the net
deferred tax asset considered realizable, however, could be reduced in the near
term if estimates of future taxable income during the carryforward period are
reduced.
Employees
At June 30, 1996, the Company employed approximately 7,200 people in continuing
operations, compared to 6,200 at June 30, 1995. The increase in employees as a
result of acquisitions was partially offset by restructuring and integration
activities.
Liquidity and sources of capital
Cash and equivalents increased by $66.9 million, to $242.2 million, during the
year ended June 30, 1997, primarily due to cash received from the sale of the
Company's software business to Kodak, offset by cash used in connection with the
acquisition of I-NET.
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 June 30, 1997, the Company had available to it the
unused portion of the Revolving Credit Facility, providing for additional
borrowings and/or the issuance of additional letters of credit of up to $204.1
million.
Cash provided by operations for the year ended June 30, 1997 was $287.9 million,
including $74.5 million from current operating activities and $249.2 million of
net proceeds from the sale of the software business to Kodak less $35.8 million
of cash used in discontinued operations prior to the sale.
Cash used in investing activities for the year ended June 30, 1997 was $214.9
million, and includes $170.1 million used for business acquisitions, net of
acquired cash, and capital additions of $55.0 million, including $28.4 million
for purchases of non-consumable spares. Proceeds from other asset sales were
$10.4 million.
Cash used in financing activities was $4.0 million in the year ended June 30,
1997, and includes cash dividends paid of $13.4 million less proceeds of $9.7
million from the sale of common stock.
8
<PAGE> 34
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Free cash flow from operations, which is defined as cash provided from
continuing operations, less cash used for purchases of depreciable assets net
of disposals, and dividends paid on preferred stock was $16.5 million.
In addition to normal operating activities, capital expenditures and payment of
preferred dividends, expected cash requirements over the next twelve months
include approximately $32 million for both new and previously recorded
integration-related, restructuring and business realignment initiatives, as
well as approximately $15 million for the construction of the Company's new
corporate headquarters in Billerica, Massachusetts, scheduled for completion in
the summer of 1998. However, it is anticipated that the building costs will be
offset by the expected net proceeds from the sale of a building and parcel of
land located at the Company's Billerica, Massachusetts corporate headquarters
complex.
The note payable to I-NET shareholders at June 30, 1997 was $63.3 million, and
is subject to certain adjustments. On August 25, 1997, the Company made a
partial payment of approximately $31 million.
The Company believes that existing cash balances, cash generated from
operations, and borrowing availability under its Revolving Credit Facility will
be sufficient to meet the Company's operational cash requirements for the next
twelve months, and for pursuing potential investments, acquisitions and other
expansion opportunities. As part of furthering its business strategy, the
Company explores the acquisition of, or the opportunity for, strategic
relationships with other businesses on an on-going basis. 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.
Risks and uncertainties
Except for historical matters, the matters discussed in this Form 10-K are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Act"). The Company desires to take advantage
of the safe harbor provisions of the Act and is including this statement for the
express purpose of availing itself of the protection of the safe harbor with
respect to all forward-looking statements that involve risks and uncertainties.
Such forward-looking statements may relate to various matters, including,
without limitation, the Company's business, revenue, expenses, profitability,
acquisitions, dispositions, products, services, intellectual property, expenses,
labor matters, effective tax rate and operating and capital requirements. In
addition, forward-looking statements may be included in other Company documents
including, without limitation, registration statements, Annual Report to
Shareholders, the Form 10-K, Form 10-Q and Form 8-K 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:
9
<PAGE> 35
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Implementation of Business Strategy. The Company's business strategy is
to increase the revenues and margins it realizes from providing network services
to customers and clients and to build upon that growth through appropriate
strategic alliances and acquisitions designed to complement Wang's core
competencies. The Company's ability to implement this strategy fully over the
long term, and the ultimate success of this strategy, are subject to a broad
range of uncertainties and contingencies, many of which are beyond the Company's
control. The Company may not be able to achieve the revenue growth it is seeking
as a result of an inability to obtain new customer contracts or the inability to
deliver the required services in a timely manner under such contracts. In
addition, there can be no assurance that the Company will be able to implement
strategic relationships or acquisitions, or, if entered into, that such
strategic relationships or acquisitions will in fact further the implementation
of the Company's business strategy. The Company's existing strategic
relationships with Microsoft and Cisco are subject to a variety of
uncertainties, including possible evolutions in technology, business
relationships or strategic plans of the parties which may, in the future, result
in the termination of, or a change in the nature of or in the expectations with
respect to, such strategic relationships. The Company's relationship with
Microsoft also includes certain contractual obligations, which, if not
satisfied, could allow Microsoft to terminate all or a portion of the
relationship. 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 that the Company and its management will be able to effectively
assimilate and manage the business of any acquired companies. The Company
evaluates such transactions regularly, and one or more such transactions could
occur at any time.
Currently, a significant portion of the Company's revenues and gross
margins 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, including the acquired
Bull proprietary product and service revenue streams (i.e., sales and service of
proprietary VS and GCOS products) to continue to decline at a rate of 25% per
year over the next several years. From one period to the next, the decline rate
could be highly variable. As the Company's proprietary revenues decline, the
loss of individual customers will have an increasingly significant effect on the
rate of decline for any particular measurement period. The Company's continued
growth is predicated on the business strategy described above (including the
acquisition of new customer service and network integration businesses) more
than offsetting the decline in revenues from traditional proprietary sources.
There can be no assurance that delays or difficulties in the implementation of
the Company's strategy, or a higher than anticipated decline in revenues from
proprietary sources will not adversely impact the Company's results of
operations or the price of its equity.
Dependence on Key Personnel. The Company depends to a significant
extent on key management and technical personnel. The Company's growth and
future success will depend in large part on its ability to attract, motivate and
retain highly qualified personnel, particularly, trained and experienced
technical professionals capable of providing sophisticated network and
outsourcing services. Competition for such personnel is intense and there can be
no assurances that the Company will be successful in hiring, motivating or
retaining such qualified personnel. The loss of key personnel or the inability
to hire or retain qualified personnel could have a material adverse effect on
the Company's business, financial condition or results of operations.
10
<PAGE> 36
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Competition. The information technology ("IT") services industry,
including the network and outsourcing service and support markets, is intensely
competitive and undergoing rapid change. Worldwide competition is vigorous in
all of the markets in which the Company does business. The Company's competitors
are numerous and vary widely in market position, size and resources. Competitors
differ significantly depending upon the market, customer and geographic area
involved. In many of the Company's markets, traditional computer hardware
manufacturing, communications and consulting companies provide the most
significant competition. The Company must also compete, particularly in the
network services market, with other IT services businesses with more limited
resources, but which have, in a number of cases, been able to develop a strong
local or regional customer base. Many of the Company's competitors have
substantially greater resources, including larger research and engineering
staffs and larger marketing organizations, than those of the Company. There can
be no assurance that the Company will be able to compete successfully against
other companies that provide similar IT services.
Year 2000 Liability. The Company supplies computer systems to large
organizations in the commercial and government markets, which include federal,
state and local customers. Any failure of the Company's products to perform,
including system malfunctions due to the onset of the calendar year 2000 (caused
by a data structure problem that will prevent software from properly recognizing
dates after the year 1999), could result in claims against the Company. Although
the Company maintains computer software and services, errors and omissions
insurance, a claim brought against the Company could have a material adverse
effect on the Company's business, financial condition or results of operations.
Moreover, an increasing number of the Company's installed base of VS and other
traditional proprietary systems could choose to convert to other calendar year
2000 compliant systems in order to avoid such malfunctions. An increasing rate
of conversion would result in an increasing rate of decline of revenue
associated with such proprietary systems, and could have a material adverse
effect on the Company's business, financial condition or results of operations.
Possible Volatility of Price of Common Stock. The market price of the
Company's Common Stock has fluctuated significantly in the past and may continue
to fluctuate in the future. Factors such as announcements of technological
innovations or other developments concerning the Company, its competitors or
other third parties, quarterly variations in the Company's results of
operations, and changes in overall industry and economic conditions may all
affect the market prices of the Common Stock and cause it to fluctuate
significantly. Moreover, the Company's expense levels are based in part on
expectations of future revenue levels, and a shortfall in expected revenue could
therefore have a disproportionate adverse effect on the Company's net income.
Furthermore, the market price of the stocks of many high technology companies
has experienced wide fluctuations that have not necessarily been related to the
operating performance of the individual companies.
Dependence on Government Revenue. In fiscal 1997 the Company derived
approximately 30% of its revenues from branches or agencies of the United States
government, and derived significant additional revenues from agencies of various
foreign governments. A significant portion of the Company's United States
federal 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 or services under an awarded contract, could
have a material adverse effect on the financial performance of the Company for
the period in question. Other risks
11
<PAGE> 37
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
involved 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 United States government and
government agencies are received under a number of different contracts and from
a number of different government agencies and departments.
International Operations. International revenues in recent years have
accounted for a substantial portion 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, compliance costs associated with International Standards
Organization (ISO) 9000 quality control standards, special standards
requirements, exposure to currency fluctuations, exchange rates, tariffs and
other barriers, difficulties in staffing and managing international subsidiary
operations, potentially adverse tax consequences and country-specific product
requirements. While the Company attempts to reduce its currency exposure, there
can be no assurance that it will not experience significant losses on
international currency fluctuations. In addition, effective intellectual
property protection may not be available in every foreign country in which the
Company distributes its own and other products and the loss of such protection
could have a material adverse effect on the business of the Company.
Nature of Contracts. 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 materially
from such estimates. In addition, IT outsourcing contracts in particular, often
contain provisions that allow for termination for convenience, service level
agreement compliance, liquidated damages, penalties and are awarded based on a
competitive procurement process. Such contracts often require high expenditures
and long lead times with no assurance of success.
Superior Rights of Preferred Stock. The Board of Directors of the
Company is authorized under the Company's Certificate of Incorporation, without
stockholder approval, to issue from time to time up to an aggregate of 5,000,000
shares of preferred stock, $0.01 par value per share (the "Preferred Stock"), in
one or more series. Of the 5,000,000 authorized shares of Preferred Stock,
90,000 shares have been designated as 4-1/2% Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"), all of which shares have been
issued, and 143,750 shares have been designated as 6-1/2% Series B Cumulative
Convertible Preferred Stock ("Series B Preferred Stock"), all of which shares
have been issued. The rights of holders of Common Stock are subject to, and may
be adversely affected by, the rights of holders of the Series A Preferred Stock
and the Series B Preferred Stock and any other series of Preferred Stock that
the Company may designate and issue in the future. In particular, before any
payment or distribution is made to holders of Common Stock upon the liquidation,
dissolution or winding-up of the Company, holders of both the Series A Preferred
Stock and the Series B Preferred Stock are entitled to receive a liquidation
preference of $1,000.00 per share, plus accrued and unpaid dividends. The
holders of the Series A Preferred Stock and the Series B Preferred Stock also
have various rights, preferences and privileges with respect to dividends,
redemption, voting, conversion and registration under the Securities Act.
12
<PAGE> 38
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (CONTINUED)
Anti-takeover Provisions. The Company's Certificate of Incorporation
and By-Laws and the Delaware General Corporation Law contain certain provisions
which could have the effect of delaying or preventing transactions that might
result in a change in control of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over the
then-current market price, and may limit the ability of stockholders to approve
transactions that they deem to be in their best interests.
Availability of Financing. The Company may need to raise additional
funds through public or private debt or equity financings in order to implement
its strategy. There can be no assurance that any such funding will be available,
in a timely manner or on terms acceptable to the Company.
13
<PAGE> 39
EXHIBIT C
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Wang Laboratories, Inc.
We have audited the accompanying consolidated balance sheets of Wang
Laboratories, Inc. and subsidiaries (the "Company") as of June 30, 1997 and
1996, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended June 30,
1997. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wang
Laboratories, Inc. and subsidiaries at June 30, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Boston, Massachusetts
August 13, 1997
<PAGE> 40
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Services $ 963.9 $ 699.0 $ 574.5
Products 304.5 314.9 327.4
--------- --------- ---------
1,268.4 1,013.9 901.9
--------- --------- ---------
Costs and expenses
Cost of services 734.4 480.7 396.1
Cost of products 226.6 216.5 233.3
Research and development 3.7 5.0 8.0
Selling, general and administrative 243.2 192.0 181.9
Amortization of intangibles -
acquisition and fresh-start 47.0 34.5 23.8
Acquisition-related charges 35.0 -- 72.5
Chapter 11-related charges (credits) 1.3 (3.3) (2.3)
Other restructuring charges (credits) -- 2.2 (8.1)
--------- --------- ---------
Total costs and expenses 1,291.2 927.6 905.2
--------- --------- ---------
Operating income (loss) (22.8) 86.3 (3.3)
Other (income) expense
Interest expense 10.9 5.1 3.7
Other income - net (11.4) (13.7) (13.9)
--------- --------- ---------
Total other income (0.5) (8.6) (10.2)
--------- --------- ---------
Income (loss) from continuing operations before income
taxes (22.3) 94.9 6.9
Provision (benefit) for income taxes (15.6) 31.4 21.1
--------- --------- ---------
Income (loss) from continuing operations (6.7) 63.5 (14.2)
Income (loss) from discontinued operations, net of taxes 76.6 (69.0) (53.9)
--------- --------- ---------
Net income (loss) 69.9 (5.5) (68.1)
Dividends and accretion on preferred stock (14.1) (22.6) (8.7)
--------- --------- ---------
Net income (loss) applicable to common stockholders $ 55.8 $ (28.1) $ (76.8)
========= ========= =========
Per share amounts
Primary
Continuing operations $ (0.30) $ 1.13 $ (0.67)
Discontinued operations 1.77 (1.90) (1.57)
--------- --------- ---------
Net income (loss) $ 1.47 $ (0.77) $ (2.24)
========= ========= =========
Fully diluted
Continuing operations $ (0.18) $ 1.13 $ (0.67)
Discontinued operations 1.62 (1.90) (1.57)
--------- --------- ---------
Net income (loss) $ 1.44 $ (0.77) $ (2.24)
========= ========= =========
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 41
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
(Dollars in millions) 1997 1996
-------- --------
<S> <C> <C>
Assets
Current assets
Cash and equivalents $ 242.2 $ 175.3
Accounts receivable, net 244.3 194.1
Inventories 14.5 19.9
Other current assets 53.6 48.7
-------- --------
Total current assets 554.6 438.0
Depreciable assets, net 123.0 137.3
Intangible assets, net 311.6 203.7
Other assets 45.6 77.6
-------- --------
Total assets $1,034.8 $ 856.6
======== ========
Liabilities and stockholders' equity
Current liabilities
Borrowings due within one year $ 63.3 $ 21.9
Accounts payable, accrued expenses
and other 295.7 253.7
Deferred service revenue 69.5 75.7
-------- --------
Total current liabilities 428.5 351.3
-------- --------
Long-term liabilities 98.0 77.4
-------- --------
Commitments and contingencies
Series A preferred stock 85.5 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; 38,008,004 and
36,302,737 shares outstanding,
respectively 0.4 0.4
Capital in excess of par value 291.4 278.7
Cumulative translation adjustment (3.7) (0.8)
Accumulated deficit (3.6) (73.5)
-------- --------
Total stockholders' equity 422.8 343.1
-------- --------
Total liabilities and stockholders' equity
$1,034.8 $ 856.6
======== ========
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 42
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations $ (6.7) $ 63.5 $ (14.2)
Depreciation 67.6 45.9 35.5
Amortization 49.8 44.7 29.0
Gain on asset sales (2.9) (2.3) (1.6)
Non-cash provision (benefit) for income taxes (22.8) 30.7 20.9
Non-cash compensation expense 5.6 -- --
Acquisition-related charges 35.0 -- 72.5
Chapter 11-related charges (credits) 1.3 (3.3) (2.3)
Other restructuring charges (credits) -- 2.2 (8.1)
Payments for acquisition-related charges (22.8) (32.4) (19.9)
Payments for Chapter 11-related and restructuring
charges (7.3) (12.1) (54.7)
------- ------- -------
96.8 136.9 57.1
------- ------- -------
Changes in other accounts affecting operations
Accounts receivable 6.4 10.8 49.5
Inventories 6.6 7.1 11.9
Other current assets 3.7 3.6 (0.4)
Accounts payable and other current liabilities (43.1) (48.1) (41.8)
Other 4.1 3.0 (0.4)
------- ------- -------
Net changes in other accounts affecting operations (22.3) (23.6) 18.8
------- ------- -------
Cash provided by continuing operations 74.5 113.3 75.9
------- ------- -------
Proceeds from sale of discontinued operation, net 249.2 -- --
Cash used in discontinued operations (35.8) (76.8) (61.7)
------- ------- -------
Cash provided by (used in) discontinued operations 213.4 (76.8) (61.7)
------- ------- -------
Cash provided by operations 287.9 36.5 14.2
------- ------- -------
INVESTING ACTIVITIES
Depreciable assets (55.0) (43.4) (33.0)
Capitalized software -- (0.4) (0.7)
Proceeds from asset sales 10.4 5.0 26.4
Business acquisitions, net of cash acquired (170.1) (49.8) (104.8)
Other (0.2) (9.9) (5.1)
------- ------- -------
Cash used in investing activities (214.9) (98.5) (117.2)
------- ------- -------
FINANCING ACTIVITIES
Proceeds from long-term debt -- -- 1.1
Payments of long-term debt (0.1) (3.7) (1.8)
Net increase (decrease) in short-term borrowings (0.3) (2.5) 0.9
Proceeds from sale of preferred stock -- 138.3 84.0
Retirement of preferred stock -- (72.9) --
Proceeds from sale of common stock 9.7 5.2 2.3
Dividends paid on preferred stock (13.4) (8.3) --
Other 0.1 (0.8) 3.8
------- ------- -------
Cash provided by (used in) financing activities (4.0) 55.3 90.3
------- ------- -------
Effect of changes in foreign exchange rates on cash (2.1) (0.4) 5.5
------- ------- -------
INCREASE (DECREASE) IN CASH AND EQUIVALENTS 66.9 (7.1) (7.2)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 175.3 182.4 189.6
------- ------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $ 242.2 $ 175.3 $ 182.4
======= ======= =======
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 43
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Retained
Convertible Capital in Cumulative Earnings
Preferred Common Excess of Translation (Accumulated
(Dollars in millions) Stock Stock Par Value Adjustment Deficit) Total
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 1994 $ -- $ 0.3 $ 263.9 $ 3.0 $ 5.1 $ 272.3
Effect of pooling of interests -
business combination (1,790,971
shares) 7.7 (4.1) 3.6
Net loss (68.1) (68.1)
Stock issued in business acquisition
(1,650,000 shares) 22.9 22.9
Stock plans (277,993 shares) 2.3 2.3
Dividends and accretion on
preferred stock (5.6) (3.1) (8.7)
Currency translation (3.5) (3.5)
------- ------- ------- ------- ------- -------
Balance June 30, 1995 -- 0.3 291.2 (0.5) (70.2) 220.8
Net loss (5.5) (5.5)
Stock to be issued in business 5.0 5.0
acquisition
Stock plans (604,007 shares) 0.1 5.1 5.2
Dividends and accretion on
preferred stock (22.6) (22.6)
Issuance of cumulative convertible
preferred stock, net of issuance
costs 138.3 138.3
Currency translation (0.3) (0.3)
Other 2.2 2.2
------- ------- ------- ------- ------- -------
Balance June 30, 1996 138.3 0.4 278.7 (0.8) (73.5) 343.1
Net income 69.9 69.9
Warrant issued in relation to divestiture 5.0 5.0
Currency translation (2.9) (2.9)
Dividends and accretion on
preferred stock (14.1) (14.1)
Stock plans (1,322,638 shares) 21.8 21.8
------- ------- ------- ------- ------- -------
Balance June 30, 1997 $ 138.3 $ 0.4 $ 291.4 $ (3.7) $ (3.6) $ 422.8
======= ======= ======= ======= ======= =======
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 44
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of the Company and all subsidiaries. All significant intercompany
accounts and transactions are eliminated. Investments in affiliated companies,
owned more than 20% but not in excess of 50%, are recorded on the equity method.
The Company completed the sale of its software business unit to Eastman Kodak
Company ("Kodak") on March 17, 1997. The historical results of the software
business and the resultant gain on its sale have been reclassified and reported
as discontinued operations in the Company's Consolidated Statements of
Operations and of Cash Flows for all periods presented.
During the fiscal year, the Company completed the purchases of I-NET, Inc.
("I-NET") on August 29, 1996 and Advanced Paradigms, Inc. ("API") on November
13, 1996. During fiscal 1996, the Company completed the acquisitions of BISS
Limited ("BISS") on October 18, 1995 and Dataserv Computer Maintenance, Inc.
("Dataserv") on May 3, 1996. On January 31, 1995 the Company acquired certain
sales and service subsidiaries and the U.S. customer service business from Bull
HN Information Systems, Inc. ("Bull"). The Company's Consolidated Statements of
Operations and of Cash Flows for the years ended June 30, 1997, 1996 and 1995
include the results of the acquired businesses since acquisition.
Certain amounts in previously issued financial statements have been reclassified
to conform to current presentations.
REVENUE RECOGNITION: The Company provides services under level-of-effort and
fixed-price contracts. Under level-of-effort types of contracts, revenue is
earned and billed as services are provided. For fixed-price contracts, revenue
is recognized on the percentage-of-completion method. Anticipated contract
losses are recognized in the period they are determined. Deferred revenue is
recorded to the extent that billings exceed revenue recognized under service
contracts and contracts accounted for under the percentage-of-completion method.
Revenues from royalty agreements are recognized as earned over the contract
term. Hardware and software revenues are recognized at time of shipment or
delivery, provided collection is probable and there are no significant
post-contract support obligations. If significant post-contract support
obligations exist, then revenue is recognized over the period of such support
arrangements. Service revenues in fiscal 1997 include approximately $14.0
million from the sale and licensing of intellectual property.
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include revenues and costs under
long-term contracts, collectibility of accounts receivable, recoverability of
depreciable assets, intangibles and deferred tax assets and the adequacy of
acquisition-related, Chapter 11-related and restructuring reserves. Although the
Company regularly assesses these estimates, actual results could differ from
those estimates.
CASH AND EQUIVALENTS: Cash and equivalents include time deposits, certificates
of deposit and repurchase agreements with original maturities of three months or
less. Also included is restricted cash, totaling $12.7 million and $17.8 million
at June 30, 1997 and 1996, respectively. Restrictions relate primarily to
statutory reserves for the Company's insurance subsidiaries.
<PAGE> 45
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- (CONTINUED)
CURRENCY TRANSLATION: For most non-U.S. subsidiaries, which operate in a local
currency environment, assets and liabilities are translated at period-end
exchange rates, and income statement items are translated at the average
exchange rates for the period. Translation adjustments are reported in a
separate component of stockholders' equity, which also includes exchange gains
and losses on certain intercompany balances of a long-term investment nature.
For those non-U.S. subsidiaries operating in U.S. dollars or in a highly
inflationary economy, net nonmonetary assets are translated at historical
exchange rates, and net monetary assets are translated at current exchange
rates. Translation adjustments are included in the determination of income.
CONCENTRATION OF CREDIT RISK: Financial instruments that potentially subject the
Company to concentration of credit risk consist primarily of temporary cash
investments and trade receivables. The Company restricts investment of temporary
cash investments to financial institutions with investment grade credit ratings.
Credit risk on trade receivables is minimized as a result of the large and
diverse nature of the Company's worldwide customer base. Trade receivables
include $77.0 million and $52.1 million at June 30, 1997 and 1996, respectively,
due from the United States government and its agencies.
FORWARD EXCHANGE CONTRACTS: The Company enters into forward exchange contracts
as a hedge against certain intercompany balances denominated in foreign
currency. These financial instruments are designed to minimize exposure and
reduce risk from exchange rate fluctuations in the regular course of business.
Market value gains and losses are included in income as incurred and offset
gains and losses on foreign currency assets or liabilities that are hedged.
INVENTORIES: Inventories are stated at the lower of first-in, first-out cost or
market.
INTANGIBLE ASSETS: Intangible assets, including those identified as a result of
fresh-start reporting and purchase accounting, and the related depreciable lives
are as follows:
Trademarks and patents 15 years
Computer software 3-7 years
Installed base - service 5-8 years
License agreements 3-5 years
Assembled workforce 7-10 years
Goodwill 15-25 years
Reorganization value in excess of
amounts allocated to identifiable
intangible assets 15 years
The Company periodically evaluates the carrying value of intangible assets to
determine if impairment exists based upon estimated undiscounted future cash
flows. The impairment, if any, is measured by the difference between carrying
value and estimated discounted future cash flows and is charged to expense in
the period identified.
<PAGE> 46
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- (CONTINUED)
Trademarks and patents include legal costs related to successfully defending
certain patents, and expenditures to maintain licenses and register new patents.
The capitalized costs of patent defense are charged to expense in the period in
which the patent defense is determined to be unsuccessful or the capitalized
amount has no future value.
DEPRECIABLE ASSETS: Property, plant and equipment, and spare parts and rental
equipment are stated at cost less accumulated depreciation. Depreciation is
computed principally by use of the straight-line method.
Depreciable lives are summarized as follows:
Buildings and improvements 5 - 40 years
Machinery and equipment 3 - 10 years
Spare parts and rental equipment 3 - 5 years
INCOME TAXES: The Company does not provide for U.S. federal income taxes on the
undistributed earnings of its foreign subsidiaries since it intends to
permanently reinvest these earnings in the growth of the business outside of the
United States.
EARNINGS PER SHARE: Earnings per share for fiscal 1997 is calculated using the
Modified Treasury Stock Method. Earnings per share for fiscal 1996 and 1995 are
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 in connection with its emergence from Chapter 11
in fiscal 1994, and the effect, when dilutive, of stock options and warrants.
For purposes of calculating earnings per share, income (loss) from continuing
operations and net income (loss) have been reduced by dividends and accretion
related to the Company's preferred stock. Weighted average shares and common
share equivalents totaled 43,429,243 for the year ended June 30, 1997,
36,306,461 for the year ended June 30, 1996 and 34,234,814 for the year ended
June 30, 1995. Dividends and accretion totaled $14.1 million for the year ended
June 30, 1997, $22.6 million for the year ended June 30, 1996 and $8.7 million
for the year ended June 30, 1995.
POSTRETIREMENT BENEFITS: U.S. employees, exclusive of certain employees that are
covered by defined contribution plans of acquired businesses, are included in
the Wang Retirement Savings Plan. The Wang Retirement Savings Plan provides that
the Company will make a basic annual contribution equal to 2%, 3%, or 4% of an
employee's pay, based on length of service, with an additional transition
contribution of 1% or 2% for employees who were 55 or older as of June 30, 1992.
In addition, the Company will match employees' voluntary contributions to the
plan in an amount equal to 50% of the first 4% of an employee's pay contributed
to the plan. The Company may make an additional contribution based on its
operating income as a percentage of revenue each year. This additional
contribution is a percentage of the basic contribution that the Company makes,
and ranges from 15% of the basic contribution for operating income that is 4% of
revenue, to 100% of the basic contribution for operating income that is 9% or
more of revenue. No additional contribution was made by the Company in any of
the years ended June 30, 1997, 1996 or 1995.
Non-U.S. employees are covered by defined contribution and/or defined benefit
pension plans in several countries, in accordance with applicable government
regulations and local practices.
<PAGE> 47
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- (CONTINUED)
Certain postretirement health care and life insurance benefits are provided for
current U.S. and non-U.S. retirees and employees.
RECENT ACCOUNTING PRONOUNCEMENTS: In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement No. 128, "Earnings Per Share" ("FAS
128"), which is required to be adopted beginning with the Company's second
fiscal quarter of 1998. At that time, the Company will be required to change
the method currently used to compute primary and fully diluted earnings per
share ("EPS") and restate all prior periods. Under FAS 128, for calculating
fully diluted EPS, the Modified Treasury Stock Method is eliminated. Under FAS
128, diluted earnings (loss) per share would be $1.48, $(0.61), and $(2.24) for
the years ended June 30, 1997, 1996, and 1995, respectively. Basic earnings
(loss) per share would be $1.51, $(0.64), and $(2.24) for the years ended June
30, 1997, 1996 and 1995 respectively.
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income," ("FAS 130") and Statement No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("FAS 131"). FAS 130 establishes standards
for reporting and displaying comprehensive income and its components. FAS 131
establishes standards for the way public companies report information about
operating segments in financial statements, and supersedes FAS 14, "Financial
Reporting for Segments of a Business Enterprise," but retains the requirements
to report information about major customers. FAS 130 and FAS 131 are effective
for the Company in fiscal 1998. The Company does not believe the adoption of
these Statements will have a material effect on the Company's financial
statements.
<PAGE> 48
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B -- DISCONTINUED OPERATIONS
On March 17, 1997, the Company completed the sale of its software business unit
to Kodak for $260.0 million in cash. The business sold to Kodak included Wang's
software business unit management, employees, products, technology, customers
and partners, as well as its sales, marketing and research and development
organizations worldwide. As a result of the sale, the operations of the software
business unit for all periods presented have been reclassified and reported as
discontinued operations in the Consolidated Statements of Operations and of Cash
Flows.
Revenues, related income (loss) and income tax benefits associated with the
software business unit for the years ended June 30, 1997, 1996 and 1995 were as
follows (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenues $ 47.0 $ 75.9 $ 45.3
======= ======= =======
Operating loss, net of applicable tax
benefits of $9.3 million, $20.4
million and $17.5 million in 1997,
1996 and 1995, respectively $ (36.2) $ (69.0) $ (53.9)
Gain on sale, net of income tax
expense of $75.2 million 112.8 -- --
------- ------- -------
Income (loss) from discontinued
operations $ 76.6 $ (69.0) $ (53.9)
======= ======= =======
</TABLE>
NOTE C -- BUSINESS ACQUISITIONS AND ACQUISITION-RELATED CHARGES
BUSINESS ACQUISITIONS: On November 13, 1996, the Company acquired API, a
privately-held Virginia-based provider of enterprise-wide Microsoft-specific
LAN/WAN solutions, for approximately $6.0 million in cash and notes, plus
assumed liabilites. API's Microsoft-centric expertise complements the Company's
network and desktop services business, and enhances its position as a Microsoft
Authorized Support Center. 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 $6.2 million has been recorded based on these purchase
price allocations. Pro forma results of operations are not presented for API,
as the amounts do not differ significantly from the Company's historical
results.
On August 29, 1996, the Company acquired all of the outstanding shares of I-NET,
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.
<PAGE> 49
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C -- (CONTINUED)
I-NET 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 is increasing the principal balance through charges to interest expense to
the maturity date. The final settlement of the note is subject to a reduction
should the Company incur indemnified costs as 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 on an
agreed-upon formula.
The Company paid $44.2 million of existing I-NET debt and incurred $7.9 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.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16. The excess of the purchase price over the net
liabilities assumed was $225.9 million and will be amortized using the straight
line method over a period of twenty-five years.
A summary of the acquisition follows (in millions):
<TABLE>
<S> <C>
Cash $100.2
Note to selling stockholders 59.7
Original investment in I-NET 12.4
Transaction costs 7.9
Stock options 4.9
------
Total consideration 185.1
Estimated fair value of net (assets) liabilities assumed 40.8
------
Excess of purchase price over net liabilities assumed $225.9
======
</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).
<TABLE>
<CAPTION>
Year Ended
June 30,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Revenues $ 1,325.8 $ 1,356.7
Income (loss) from continuing
operations $ (14.1) $ 9.7
Net income (loss) attributable to
common stockholders $ 48.4 $ (81.9)
Net income (loss) per share applicable to common
stockholders $ 1.32 $ (2.28)
</TABLE>
<PAGE> 50
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
On May 3, 1996, the Company acquired Dataserv Computer Maintenance, Inc.
("Dataserv") from BellSouth Corporation for $28.5 million in cash. Dataserv
provides customers with computer maintenance and support services for
industry-standard servers, desktop products, point-of-sale retail scanners and
registers, as well as application helpdesk and network integration services.
Dataserv services companies in the banking and financial services, insurance,
retail and manufacturing industries. The acquisition was accounted for using the
purchase method of accounting in accordance with APB 16. The excess of purchase
price over the fair value of the net assets acquired totaled $12.0 million and
is included in intangible assets.
The following pro forma results of operations have been prepared as though the
Dataserv 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).
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995
--------- ---------
<S> <C> <C>
Revenues $ 1,109.5 $ 1,026.3
Income (loss) from
continuing operations $ 57.4 $ (2.0)
Net income (loss) applicable
to common stockholders $ 34.8 $ (10.7)
Net income (loss) per share applicable
to common stockholders $ 1.06 $ (0.34)
</TABLE>
On October 18, 1995, the Company acquired BISS Limited ("BISS"), a privately
held company operating in the United Kingdom that designs, installs, integrates
and supports network and client/server computing solutions. Of the $16.1 million
cash purchase price, $12.6 million was paid at closing, with the remainder of
$3.5 million paid in March 1997. The acquisition was accounted for using the
purchase method of accounting in accordance with APB 16. The excess of purchase
price over the fair value of the net assets acquired totaled $11.9 million and
is included in intangible assets. Pro forma results of operations are not
presented for the BISS acquisition as the amounts do not differ significantly
from the Company's historical results.
On January 31, 1995, the Company completed a transaction with Compagnie des
Machines Bull and certain of its affiliates (collectively, "Bull") in which the
Company purchased from Bull S.A. its worldwide workflow and imaging business and
from Bull HN Information Systems, Inc., its U.S. federal systems subsidiary, its
U.S. customer services business, and its sales and service subsidiaries in
Canada, Mexico, Australia and New Zealand. In consideration for these
businesses, the Company paid Bull $110.0
<PAGE> 51
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
million in cash, delivered a promissory note in the principal amount of $27.2
million, subject to post-closing adjustments, and issued to Bull 1,650,000
shares of Wang Common Stock with a fair market value at the time of issuance of
$22.9 million. During fiscal 1995, the promissory note was reduced by $5.3
million to reflect a reduced net asset value based upon the financial
statements submitted by Bull management and an agreed-upon adjustment. During
fiscal 1997 the Company and Bull negotiated a settlement of the objection
proceedings which the Company initiated to challenge the net asset value of the
assets it had acquired from Bull on January 31, 1995. As a result, the Company
recorded in the financial statements for the quarter ended September 30, 1996,
an additional reduction to Borrowings due within one year of $5.4 million, with
a corresponding reduction to Goodwill. The remaining obligation, totaling $16.5
million, plus accrued interest of $2.8 million, was paid to Bull on December
30, 1996.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16. Under APB 16, purchase price allocations were made to
the assets acquired and the liabilities assumed based on their respective fair
values.
A summary of the acquisition follows (in millions):
<TABLE>
<S> <C>
Cash $110.0
Note to Bull HN 16.5
Company common stock (1,650,000 shares) 22.9
------
Total consideration 149.4
Estimated fair value of net tangible assets acquired 43.4
------
Excess of purchase price over net tangible
assets acquired $106.0
======
</TABLE>
The excess of purchase price over net assets acquired of $106.0 million was
allocated to specific intangible asset categories as follows (in millions):
<TABLE>
<S> <C>
Software licenses $ 24.9
Installed base - service 56.5
Assembled workforce 11.7
Goodwill 12.9
------
$106.0
======
</TABLE>
The value attributable to the acquired assets was allocated in conformity with
the procedures specified by APB 16. Current assets and liabilities were recorded
at book value, which approximated fair value.
All long-term liabilities, including liabilities established for over-market and
excess space leases totaling approximately $28.0 million, were stated at the
present value of amounts to be paid, determined at appropriate current interest
rates. Discount rates of approximately 8.0% to 12.0% were used to determine
present value. Software licenses and the installed base were valued using an
income approach. This approach discounted an estimate of the total monetary
benefits expected to be realized, to its present worth, adjusted for the
Company's effective tax rate. The discount rate of 20.0% used in this
determination considered the degree of risk associated with the realization of
the projected monetary benefits. The value of the assembled workforce was
established based on replacement cost. The excess of purchase price over the
fair value of the assets acquired not attributable to specific tangible or
identifiable intangible assets of the Company was reported as goodwill.
<PAGE> 52
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
The following pro forma results of operations have been prepared as though the
Bull acquisition had occurred as of the beginning of the period 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 date indicated, nor of future results of operations of the Company (in
millions, except per share data).
<TABLE>
<CAPTION>
Year Ended
June 30, 1995
-------------
<S> <C>
Revenues $ 1,164.4
Loss from continuing operations $ (2.0)
Net loss applicable to common stockholders $ (10.7)
Net loss per share applicable to common
stockholders $ (0.34)
</TABLE>
ACQUISITION-RELATED CHARGES: The Company recorded a charge to operations of
$27.4 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. Integration-related costs and other cost reduction initiatives consist
of the following (in millions):
<TABLE>
<S> <C>
Workforce-related $13.4
Depreciable assets 3.1
Facilities 7.5
Other 5.1
-----
29.1
Less amount included in
discontinued operations (1.7)
-----
Amount related to continuing
operations $27.4
=====
</TABLE>
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's plan
includes the release of 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.
<PAGE> 53
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
During the quarter ended March 31, 1997, the Company recorded a charge to
operations of $8.6 million which primarily reflects the additional costs
associated with integrating its recent acquisitions and for the writedown of
legacy information systems being replaced. These charges consist of the
following (in millions):
<TABLE>
<S> <C>
Workforce-related $5.9
Depreciable assets 0.2
Facilities 0.1
Other 2.4
----
$8.6
====
</TABLE>
The formal plan was recorded as of March 31, 1997 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. The Company's plan includes
the release of approximately 200 employees.
On March 29, 1995, the Company's Board of Directors approved a plan to proceed
with integration and consolidation initiatives principally related to the Bull
acquisition. Acquisition-related charges were recorded as of March 31, 1995, and
consisted of the following (in millions):
<TABLE>
<S> <C>
Facilities $ 6.1
Depreciable assets 15.8
Workforce-related 46.0
Other 13.2
-----
81.1
Less amount included
in discontinued
operations (8.6)
-----
Amount related to
continuing
operations $72.5
=====
</TABLE>
The formal plan was recorded as of March 31, 1995, based upon the best
information available at the time. The facilities-related reserves for the
Company's excess sales and service and other support facilities 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 assets no longer required. As a result of the
acquisition, certain technical support, customer service, distribution, research
and development, and administrative functions are being combined and reduced.
Workforce-related reserves, consisting principally of severance costs, were
established based on specific identification of employees to be terminated,
along with their job classifications or functions and their locations.
<PAGE> 54
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
Cash outlays to complete these and earlier initiatives as well as initiatives
which have been recorded as part of purchase accounting are estimated to
approximate $29.0 million during fiscal 1998 and $7.0 million thereafter.
During fiscal 1997, employment was reduced by approximately 850 employees
related to these initiatives.
Periodically, the accruals related to the acquisition-related charges are
reviewed and compared to their respective cash requirements. As a result of
those reviews, the accruals are adjusted for changes in cost and timing
assumptions of previously approved and recorded initiatives. During fiscal 1997,
review of these accruals identified $1.0 million of excess reserves, which were
reversed in June 1997. During the fiscal 1996 review of the acquisition-related
accruals, the Company identified excess reserves of $2.8 million, primarily
related to facilities and depreciable assets, as well as $2.8 million of
additional severance requirements relative to the workflow and imaging R&D
workforce acquired from Bull in Paris. Shortly after the Bull acquisition, the
Company's attempts to release these employees were met with resistance by the
Works Council, which was supported by the trade unions. The Company entered
protracted negotiations and litigation with the Works Council, resulting in the
additional charge recorded to settle the matter. These adjustments are recorded
with "Acquisition-related charges" in the Consolidated Statements of Operations.
The activity related to these charges during fiscal years 1997, 1996 and 1995 is
summarized in the following table (in millions):
<TABLE>
<CAPTION>
Fiscal 1995 Activity
----------------------------------------------------------------
Balance Balance
June 30, New Purchase Currency June 30,
1994 Initiatives Accounting Utilization Translation Other 1995
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Facilities $ -- $ 6.1 $ 2.5 $ (3.4) $ -- $ -- $ 5.2
Depreciable assets -- 15.8 4.1 (11.1) -- -- 8.8
Workforce-related -- 46.0 -- (9.6) 1.0 -- 37.4
Other -- 13.2 -- (7.8) -- (1.6) 3.8
----- ----- ----- ------ ----- ----- -----
$ -- 81.1(A) 6.6 (31.9) 1.0 (1.6) 55.2
=====
Less amounts
included in
discontinued
operations (8.6) -- 6.6 -- -- (2.0)
----- ----- ------ ----- ----- -----
Acquisition-related
charges-continuing
operations $72.5 $ 6.6 $(25.3) $ 1.0 $(1.6) $53.2
===== ===== ====== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1996 Activity
-----------------------------------------------------------------------------
Charges/
(reversals) -
changes in
estimates and Balance
new Purchase Currency June 30,
initiatives Accounting Utilization Other Translation 1996
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facilities $(0.9) $ -- $(3.2) $ -- $(0.1) $ 1.0
Depreciable assets 22.0 -- (30.0) -- -- 0.8
Workforce-related 3.7 2.4 (26.6) -- (0.5) 16.4
Other 6.0 -- (4.5) 0.4 0.1 5.8
----- ----- ----- ----- ----- -----
30.8(A) 2.4 (64.3) 0.4 (0.5) 24.0
Less amounts included
in discontinued
operations (30.8) -- 30.8 -- -- (2.0)
----- ----- ----- ----- ----- -----
Acquisition-related
charges-continuing
operations $ -- $ 2.4 $(33.5) $ 0.4 $(0.5) $22.0
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE> 55
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE C - - (CONTINUED)
<TABLE>
<CAPTION>
Fiscal 1997 Activity
-------------------------------------------------------------------------
Charges/
(reversals)
changes in
estimates and Balance
new Purchase Currency June 30,
initiatives Accounting Utilization Other Translation 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facilities $ 7.1 $ -- $(1.4) $(0.1) $ -- $ 6.6
Depreciable assets 3.2 4.6 (4.4) (0.1) -- 4.1
Workforce-related 20.0 4.8 (18.1) 0.1 (0.6) 22.6
Other 6.4 1.0 (8.9) 0.3 -- 4.6
----- ----- ------ ----- ----- -----
36.7(A) 10.4 (32.8) 0.2 (0.6) 37.9
Less amounts
included in
discontinued
operations (1.7) -- 3.7 -- -- --
----- ----- ------ ----- ----- -----
Acquisition-related
charges-continuing
operations $35.0 $10.4 $(29.1) $ 0.2 $(0.6) $37.9
===== ===== ====== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
(A) Comprised of:
Decreases in initial purchase price adjusted
pursuant to FAS 38 $ -- $ -- $ --
Initial charges 81.1 30.8 37.7
Increases and overages of estimated integration
accruals recognized in income -- 2.8 --
Reversals of estimated integration accruals
recognized in income -- (2.8) (1.0)
------- ------- -------
$ 81.1 $ 30.8 $ 36.7
======= ======= =======
</TABLE>
The June 30, 1997 and 1996 balances of acquisition-related reserves are
classified as follows (in millions):
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Depreciable assets $ 4.1 $ 0.8
Accounts payable, accrued expenses and other 26.0 22.0
Non-current liabilities 7.8 1.2
------- -------
$ 37.9 $ 24.0
======= =======
</TABLE>
<PAGE> 56
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D--OTHER BALANCE SHEET INFORMATION
Components of other selected captions in the Consolidated Balance Sheet follow
(in millions):
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Accounts receivable
Billed $ 226.2 $ 176.9
Unbilled 36.0 28.0
------- -------
262.2 204.9
Less allowances 17.9 10.8
------- -------
$ 244.3 $ 194.1
======= =======
Inventories
Finished products $ 5.6 $ 9.5
Raw materials and work-in-process 7.8 8.8
Service parts and supplies 1.1 1.6
------- -------
$ 14.5 $ 19.9
======= =======
Depreciable assets
Land $ 4.5 $ 5.4
Buildings and improvements 25.0 19.7
Machinery and equipment 84.9 62.9
Spare parts 140.3 140.9
------- -------
254.7 228.9
Less accumulated depreciation 131.7 91.6
------- -------
$ 123.0 $ 137.3
======= =======
</TABLE>
<PAGE> 57
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D -- (CONTINUED)
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Intangible assets
Trademarks and patents $ 4.1 $ 24.8
Computer software 0.3 37.1
Installed base - service 61.6 128.5
License agreements 24.9 29.9
Assembled workforce 13.9 16.2
Goodwill 271.0 50.7
Reorganization value in excess of
amounts allocated to identifiable
intangible assets -- 21.2
------- -------
375.8 308.4
Less accumulated amortization 64.2 104.7
------- -------
$ 311.6 $ 203.7
======= =======
Accounts payable, accrued expenses
and other
Accounts payable $ 64.4 $ 54.3
Accrued expenses 121.3 95.4
Compensation and benefits 57.9 49.1
Restructuring, reorganization and
acquisition-related 33.9 34.9
Other 18.2 20.0
------- -------
$ 295.7 $ 253.7
======= =======
Other long-term liabilities
Postretirement benefits $ 16.8 $ 17.3
Pension 7.1 8.2
Facilities 9.2 14.4
Restructuring, reorganization and
acquisition-related 7.8 2.5
Insurance 5.6 7.4
Other 51.5 27.6
------- -------
$ 98.0 $ 77.4
======= =======
</TABLE>
NOTE E -- IMPAIRMENT LOSSES ON LONG-LIVED ASSETS
In the first quarter of fiscal 1997, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and of Long-Lived Assets to be Disposed Of" ("FAS 121"). FAS 121 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. FAS
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. In accordance with FAS 121, the Company periodically evaluates the
carrying value of long-lived assets in relation to the operating performance and
future undiscounted cash flows of the underlying business.
<PAGE> 58
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE E -- (CONTINUED)
Due to accelerated conversion by a major client to other systems which became
evident in February 1997, the Company evaluated the ongoing value of certain
software licenses and the related goodwill that were the result of the Bull
acquisition, and determined that assets with a carrying amount of $21.3 million
were impaired and wrote them down by $14.4 million to their estimated fair value
of $6.9 million. In order to determine the estimated fair value of these assets,
the Company relied upon the present value of estimated discounted future cash
flows. The writedown of these assets is included with "Amortization of
intangibles - acquisition and fresh-start" in the Consolidated Statements of
Operations for the year ended June 30, 1997.
The Company's analysis indicates that assets associated with the sales and
service of proprietary GCOS products are not currently impaired. The Company's
current estimate of undiscounted cash flows indicated that the carrying amount
of these assets is expected to be recovered. Nonetheless, it is reasonably
possible that the estimate of undiscounted cash flows may change in the near
term should there be an accelerated revenue decline from these sources or the
loss of a major customer, resulting in a future requirement to reduce the
carrying value of those assets to fair value.
NOTE F--FINANCING ARRANGEMENTS
SERIES A PREFERRED STOCK: On May 30, 1995, the Company issued to Microsoft
Corporation 90,000 shares ($90.0 million face amount) of 4 1/2% Series A
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock"),
redeemable on October 1, 2003 or within 180 days of a written request of the
holders thereof received by the Company at any time on or after May 30, 2002 at
$1,000.00 per share plus accrued and unpaid dividends. Redemption and
liquidation preference of the preferred stock is $90.0 million. The excess of
the redemption value over the initial carrying value of $84.0 million is being
accreted by periodic charges to retained earnings over the life of the issue,
or, in the absence of retained earnings, to capital in excess of par value.
The Series A Preferred Stock is convertible into Common Stock of the Company at
$23.00 per share, subject to adjustment in the event of a subdivision or
combination of the Common Stock. The stockholders of the Series A Preferred
Stock are entitled to one vote per share. Cash dividends of $45.00 per annum per
share are payable quarterly in arrears. The Company may redeem the Series A
Preferred Stock with cash or with Common Stock.
BORROWING ARRANGEMENTS:
Borrowings due within one year consisted of (in millions):
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Notes payable to former shareholders
of I-NET, non-interest bearing,
due August 24, 1997 $ 63.3 $ --
Note payable to Bull - 9.25% at June
30, 1996, payable in 1997 -- 21.9
------- -------
$ 63.3 $ 21.9
======= =======
</TABLE>
Notes payable to former shareholders of I-NET includes inputed interest of $3.6
million using an interest rate of 8.0%, which represents Wang's effective
borrowing rate under its Revolving Credit Facility.
<PAGE> 59
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE F -- (CONTINUED)
Interest paid amounted to $2.9 million, $2.4 million, $3.7 million for the years
ended June 30, 1997, 1996 and 1995 and is primarily related to the note payable
to Bull and the revolving credit facility described below.
On January 31, 1995, the Company entered into a revolving credit facility with
BT Commercial Corporation ("BTCC") and certain other financial institutions. The
three-year facility provided for borrowings of up to $125.0 million, reduced to
$115.0 million for the period from January 30, 1996 to March 31, 1996, and to
$100.0 million thereafter. 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 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. Interest on any borrowings is based on
BTCC's prime rate plus 0.25% to 1.25%, depending on the Company's performance.
The BTCC agreement contains various financial covenants, including covenants
relating to the Company's operating results, working capital, net worth and
indebtedness, as well as restrictions on the payment of cash dividends on the
Common Stock. The Company was in compliance with these covenants as of both June
30, 1997 and 1996. As of June 30, 1997, letters of credit aggregating $11.5
million were outstanding under the agreement, and $204.1 million was available
for use by the Company for either additional letters of credit or borrowing. The
financing is collateralized by substantially all of the Company's domestic
assets.
<PAGE> 60
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G--INCOME TAXES
Pretax income (loss) from continuing operations is as follows (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Domestic $ (49.8) $ 56.0 $ 22.8
Foreign 27.5 38.9 (15.9)
------- ------- -------
Total $ (22.3) $ 94.9 $ 6.9
======= ======= =======
</TABLE>
The provision for income taxes consisted of (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Continuing operations $ (15.6) $ 31.4 $ 21.1
Discontinued operations 65.9 (20.4) (17.5)
------- ------- -------
Net income tax provision $ 50.3 $ 11.0 $ 3.6
======= ======= =======
</TABLE>
The income tax provision (benefit) from continuing operations consists of the
following:
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 3.5 $ -- $ --
Non-U.S. 2.2 0.7 0.2
State 1.5 -- --
Deferred:
Federal (23.3) 20.4 18.0
Non-U.S. 4.6 -- --
State (4.1) -- --
Change in valuation allowance -- (2.5) --
Tax benefit applied to reduce
reorganization value in
excess of amounts allocated
to identifiable intangible
assets and goodwill -- 12.8 2.9
------- ------- -------
$ (15.6) $ 31.4 $ 21.1
======= ======= =======
</TABLE>
The provisions (benefit) for income taxes from continuing operations differed
from the amount computed by applying the U.S. federal statutory rate as follows
(in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Taxes at statutory rate of 35% $ (7.8) $ 33.2 $ 2.4
Amortization of excess
reorganization value 0.9 2.4 1.9
Non-deductible expenses 1.8 2.0 1.3
Foreign tax differential (0.6) 0.7 2.0
State taxes (2.6) -- --
Loss carryforwards not currently
utilizable 1.7 3.7 16.2
Loss carryforwards utilized (6.7) (5.3) (8.7)
Change in Valuation allowance -- (2.5) --
Other, net (2.3) (2.8) 6.0
------- ------- -------
$ (15.6) $ 31.4 $ 21.1
======= ======= =======
</TABLE>
<PAGE> 61
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G - (CONTINUED)
The significant components of deferred tax assets and liabilities are as follows
(in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Net operating loss and credit
carryforwards $ 477.2 $ 561.8
Accrued restructuring expenses 43.7 11.4
Capitalized research and
development expenses 8.3 --
Depreciation 17.8 18.0
Other 52.1 44.2
------- -------
Gross deferred tax assets 599.1 635.4
------- -------
Fresh start intangibles -- (20.6)
Goodwill and other acquired
intangibles (12.7) (15.7)
Other (57.8) (28.8)
------- -------
Gross deferred tax liabilities (70.5) (65.1)
------- -------
Valuation allowance (488.5) (522.7)
------- -------
Net deferred tax asset $ 40.1 $ 47.6
======= =======
</TABLE>
The Company has a deferred tax asset balance at June 30, 1997 of $40.1 million
included in its other assets. A net deferred tax asset of $47.6 million was
originally recorded at June 30, 1996. Of the original deferred tax asset, $43.4
million was attributable to the expected utilization of net operating loss
carryforwards which existed at September 30, 1993, reducing reorganization value
in excess of identifiable intangible assets. Of the remainder, $1.7 million was
attributable to tax benefits acquired from Bull, reducing goodwill related to
the Bull acquisition, and $2.5 million was attributable to the expected
utilization of tax net operating loss carryforwards generated subsequent to
September 30, 1993, reducing the provision for income taxes. During fiscal 1997,
the deferred tax asset decreased by $7.5 million from $47.6 million to $40.1
million at June 30, 1997. The decrease was due to the utilization of net
operating loss carryforwards in connection with the gain on sale of the software
business unit, offset by an increase attributable to the expected utilization of
tax net operating loss carryforwards which existed at September 30, 1993. The
increase eliminated the remaining reorganization value in excess of identifiable
intangible assets at June 30, 1997. Although realization is not assured,
management believes that the deferred tax asset will be realized. The estimate
of future taxable income relates to the Company's operations outside the United
States which have, in the past, consistently generated a level of taxable income
similar to the amounts of future taxable income necessary to realize the
deferred tax asset. In addition, the Company has tax planning strategies to
prevent the tax operating loss carryforwards from expiring unused. The amount of
the deferred tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during the carryforward period
are reduced.
Under fresh-start reporting, any tax benefits recognized for cumulative
temporary differences and tax basis net operating loss carryforwards existing at
September 30, 1993 (the date of the Company's emergence from Chapter 11), will
not reduce the tax provision for income taxes, but instead, have reduced
reorganization value in excess of amounts allocated to identifiable intangible
assets to zero, have reduced other intangible assets related to the
reorganization to zero, and thereafter will increase capital in excess of par
value. Tax benefits which are substantially recognized through a reduction in
the valuation allowance will be recorded as follows (in millions):
<PAGE> 62
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE G -- (CONTINUED)
<TABLE>
<CAPTION>
Year Ended June 30,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Reorganization value in excess of
amounts allocated to identifiable
assets $ -- $ 13.7 $ 75.9
Goodwill and other non-current
intangible assets -- 65.5 87.9
Capital in excess of par value 325.4 298.3 261.5
Income tax benefit to be reported in the
Statement of Operations 163.1 145.2 123.7
------- ------- -------
$ 488.5 $ 522.7 $ 549.0
======= ======= =======
</TABLE>
If the Company experiences another change in ownership within the meaning of
Section 382 of the Internal Revenue Code, an annual limitation will be placed
upon the Company's ability to realize the benefit of its U.S. net operating loss
carryforwards.
U.S. federal income taxes have not been provided on approximately $125.0
million, $119.4 million and $113.4 million of earnings on non-U.S. subsidiaries
at June 30, 1997, 1996 and 1995, respectively, since such amounts are considered
to be permanently reinvested.
At June 30, 1997, the Company and its subsidiaries have tax basis net operating
loss carryforwards of approximately $1.2 billion and tax credit carryforwards of
approximately $89.0 million that are available to offset future taxable income.
Tax basis loss carryforwards and tax credit carryforwards expire as follows (in
millions):
<TABLE>
<CAPTION>
2003 &
1998 1999 2000 2001 2002 Beyond
----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. tax basis loss
carryforwards $ -- $ -- $ -- $ -- $199.8 $506.1
Non-U.S. tax loss
carryforwards $ 8.9 $ 14.5 $ 11.7 $ 4.5 $ 1.4 $447.0
Investment tax credits and
R&D tax credit
carryforwards $ 17.5 $ 26.2 $ 20.7 $ 13.8 $ 3.3 $ 7.5
</TABLE>
NOTE H -- STOCKHOLDERS' EQUITY
SERIES B PREFERRED STOCK: On February 27, 1996, the Company completed a private
placement of 2,875,000 Depositary Shares, each representing a 1/20 interest in a
share of 6 1/2% Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock"), $0.01 par value per share, for $138.3 million, net of
issuance costs. Each Depositary Share is convertible at the option of the holder
into Common Stock of the Company at a conversion price of $26.5625 per share of
Common Stock subject to adjustment for dividends payable in Common Stock, the
issuance of rights or warrants to purchase Common Stock, the subdivision,
combination or reclassification of Common Stock and the distribution of other
assets to all the holders of Common Stock. The Series B Preferred Stock may not
be redeemed before March 1, 1999. Thereafter, the Series B Preferred Stock may
be redeemed at the option of the Company, in whole or in part, at specified
redemption prices plus accrued and unpaid dividends. Each Depositary Share
entitles the holder to 1/20th of one vote. Cash dividends are cumulative at the
rate of $65.00 per annum per share ($3.25 per annum per Depositary Share)
payable quarterly in arrears.
<PAGE> 63
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - - (CONTINUED)
COMMON STOCK: The Company's authorized Common Stock consists of 100 million
shares, $0.01 par value per share. Holders of the Common Stock are entitled to
one vote for each share held on all matters submitted to a vote of stockholders
and do not have cumulative voting rights. The common stockholders are entitled
to receive ratably such dividends, if any, as may be declared by the Board of
Directors. No dividends have been paid to date. The rights, preferences and
privileges of holders of the Common Stock are subject to, and may be adversely
affected by, the rights of holders of shares of the outstanding Series B
Preferred Stock, as well as any other series of preferred stock that the Company
may designate and issue in the future.
STOCK WARRANTS: In satisfaction of the interests of the Class B and C common
stockholders of the Predecessor Company, 7.5 million warrants, less an amount
allocated for certain disputed claims, were made available for issuance to
stockholders of the Predecessor Company as of September 29, 1993. The Company
began issuance of these warrants on March 17, 1995. Each warrant entitles its
holder to purchase one share of Common Stock for an exercise price of $21.45 per
share, and expires on June 30, 2001. The exercise price was set in such a manner
as to allow the creditors who are issued Common Stock in the reorganization to
recover an estimated 95 percent of the value of their allowed claims before the
exercise price of the warrants equals the trading price of the Common Stock.
Holders of the Class B and C Common Stock received one warrant for each 24
shares of stock of the Predecessor Company.
In connection with the sale of its software business to Kodak, the Company
issued to Microsoft a warrant to purchase 1,000,000 shares of Common Stock at an
exercise price of $23.00 per share. The warrant became exercisable 90 days after
the closing and expires on the redemption date of the Series A Preferred Stock.
If and when exercised, the warrant will be closed out on a net share basis. The
value of the warrant established upon issuance was recorded as a reduction of
the gain on the sale of the software business.
STOCK OPTIONS:
1993 STOCK INCENTIVE PLAN: On September 30, 1993, the Company commenced the
granting of non-qualified options to certain employees to purchase Common Stock
of the Company at $7.35 per share under the Stock Incentive Plan. The maximum
number of shares issuable under this plan was 2,283,650. At June 30, 1997, all
options available under this plan had been granted and were fully vested.
1993 DIRECTORS' STOCK OPTION PLAN: The Company provided for the issuance of up
to 80,000 shares of Common Stock under the 1993 Directors' Stock Option Plan.
Under this plan, each initial director of the Company (other than Mr. Tucci,
Chairman of the Board and Chief Executive Officer), received a one-time grant of
a non-qualified option to purchase 10,000 shares of the Common Stock of the
Company at an exercise price of $7.35 per share. At June 30, 1997, all options
available under this plan had been granted and were fully vested.
1994 EMPLOYEES' STOCK INCENTIVE PLAN: On January 25, 1995, the Company's
stockholders approved the Employees' Stock Incentive Plan. The Employees' Stock
Incentive Plan provides for the issuance of up to 4,817,153 shares of Common
Stock of the Company as either Incentive Stock Options, Non-Qualified Stock
Options or Restricted Stock awards, on terms and vesting schedules as may be set
from time to time by the Organization, Compensation and Nominating Committee of
the Board of Directors. Both the Incentive
<PAGE> 64
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - - (CONTINUED)
Stock Options and Non-Qualified Stock Options granted to date under the
Employees' Stock Incentive Plan vest ratably over three or four years from the
date of grant provided the employee continues to be employed by the Company, and
expire ten years after the date of the grant. The restrictions on the Restricted
Stock awards lapse within three years from the date of the grant.
1995 DIRECTORS' STOCK OPTION PLAN: On January 25, 1995, the Company's
stockholders approved the 1995 Director Stock Option Plan (the "1995 Director
Plan"). A total of up to 180,000 shares of Common Stock of the Company may be
issued upon the exercise of options granted under the 1995 Director Plan. All
options granted under the 1995 Director Plan are non-qualified stock options.
The 1995 Director Plan provides for the automatic grant of an option for 6,500
shares of Common Stock under the following circumstances: (i) an option was
granted to each outside Director on January 25, 1995, the date the 1995 Director
Plan was approved by the stockholders of the Company; (ii) an option will
automatically be granted to each additional outside Director who is initially
elected to the Board of Directors after the approval of the 1995 Director Plan
by the stockholders of the Company, upon his or her initial election to the
Board of Directors; and (iii) on September 30 of each year, an option will
automatically be granted to each outside Director who attended, in the fiscal
year ending the preceding June 30, at least 75% of the aggregate of the number
of Board of Directors meetings held and the number of meetings held by
committees of the Board on which he or she then served. The exercise price of
each option granted under the 1995 Director Plan will be equal to the current
market value of the Common Stock on the date of grant (which will be determined
based upon the average closing price of the Common Stock over the
30-business-day period beginning 45 business days before the date of grant of
the option) and will vest as to 34%, 33% and 33% of the shares covered thereby
on the first, second and third anniversaries of the date of grant, respectively,
provided the optionee continues to serve as a Director on such dates.
EMPLOYEES' STOCK PURCHASE PLAN: The Employees' Stock Purchase Plan (the "Stock
Purchase Plan") permits purchases on a voluntary basis by eligible employees of
up to 685,715 shares of Common Stock of the Company. Under this plan, a total of
76,108 shares were issued in two offerings, the second of which terminated on
April 30, 1995. The remainder of the shares rolled over to the 1995 Employees'
Stock Purchase Plan (the "1995 Stock Purchase Plan") described below. Employees
of the U.S. parent company and designated subsidiaries, but excluding any
officers with the rank of vice president or above, were eligible to participate
in the Stock Purchase Plan. Shares of Common Stock were offered under the Stock
Purchase Plan in six-month payment periods commencing May 1, 1994. The purchase
price was 85% of the market price of the Common Stock on the first business day
or the last business day of that payment period, whichever was lower. Purchases
were deemed to be made on the last day of each payment period and could only be
made by participants who were employees on that day. The purchase price was paid
with payroll deductions in an amount specified by each employee (which could not
exceed a specified percentage of his or her salary), accumulated during the
payment period.
1995 EMPLOYEES' STOCK PURCHASE PLAN: On January 25, 1995, the Company's
stockholders approved the 1995 Employees' Stock Purchase Plan permitting
purchases on a voluntary basis by eligible employees of up to 609,607 shares of
Common Stock of the Company. Employees of the U.S. parent company and designated
subsidiaries, but excluding any officers with the rank of vice president or
above of the parent company, are eligible to participate in the 1995 Stock
Purchase Plan. The six-month payment periods of the 1995 Stock Purchase Plan run
consecutively, commencing on each November 1 and May 1. Purchases are deemed to
be made on the last day of each payment period and can only be
<PAGE> 65
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - - (CONTINUED)
made by payroll deductions in an amount specified by each employee (which may
not exceed a specified percentage of an employee's salary), accumulated during
the payment period. The purchase price is 85% of the market price of the Common
Stock on the first business day or the last business day of that payment period,
whichever is lower. Purchases were deemed to be made on the last day of each
payment period and could only be made by participants who were employees on that
day. The purchase price was paid with payroll deductions in an amount specified
by each employee (which could not exceed a specified percentage of his or her
salary), accumulated during the payment period.
PRO FORMA ACCOUNTING FOR STOCK-BASED COMPENSATION: In the first quarter of
fiscal 1997, the Company adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123 encourages
companies to adopt the fair value method of accounting for employee stock
options. Under this method, compensation expense for stock-based compensation
plans is measured at the grant date based on the fair value of the award and is
recognized over the service period.
In accordance with FAS 123, the Company has elected to continue to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB 25") and related interpretations in accounting for its
employee stock options. Under APB 25, no compensation expense is recognized as
long as the exercise price equals the market price of the underlying stock on
the date of grant.
Pro forma information regarding net income and earnings per share is required by
FAS 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options and other stock-based
compensation granted subsequent to June 30, 1995 under the fair value method of
that statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997 and 1996: risk-free interest rates ranging
from 5.14% to 6.65%; dividend yield of 0%; volatility factor of the expected
market price of the Company's common stock of 42%; and a 3 year and 5 year
expected life for options granted to non-executives and executives,
respectively.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period.
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996
---------------------
<S> <C> <C>
Pro forma income (loss) (in millions):
Continuing operations $ (13.4) $ 60.8
Net income $ 63.3 $ (8.2)
Pro forma earnings (loss) per share
Primary
Continuing operations $ (0.45) $ 1.05
Net income $ 1.31 $ (0.85)
Fully diluted
Continuing operations $ (0.32) $ 1.05
Net income $ 1.30 $ (0.85)
Weighted average fair value of options
granted during the period $ 8.56 $ 6.36
</TABLE>
During the initial phase-in period, the effects of applying FAS 123 for
recognizing compensation expense may not be representative of the effects on
reported net income or loss for future years because the options granted by the
Company vest over several years and additional awards may be made in future
years.
<PAGE> 66
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE H - - (CONTINUED)
Presented below is a summary of the status of the stock option plans and the
related transactions:
<TABLE>
<CAPTION>
Year Ended June 30,
1997 1996 1995
-----------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Shares Price Shares Price Shares Price
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 4,601,997 $12.45 3,453,001 $ 9.73 2,058,877 $ 7.67
Granted 2,820,143 $17.62 2,175,750 $15.66 1,826,600 $ 12.11
Exercised 773,033 $11.28 598,472 $ 8.41 218,364 $ 7.55
Canceled 662,052 $15.97 428,282 $12.20 214,112 $ 8.55
--------- --------- ---------
Options outstanding
at end of year 5,987,055 $14.68 4,601,997 $12.45 3,453,001 $ 9.73
========= ========= =========
Options exercisable
at end of year 1,958,781 1,039,665 526,060
========= ========= =========
</TABLE>
Options granted in fiscal 1997 include approximately 750,000 options granted
outside of the employee stock option plans. There was no compensation expense
associated with these grants.
At June 30, 1997 and 1996, 373,930 and 1,942,421 shares, respectively, were
available for future grants under stock option plans.
The following table summarizes information about stock options outstanding at
June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- ----------------------
Weighted-
Average
Remaining Weighted- Weighted-
Contractual Average Average
Range of Exercise Life Exercise Exercise
Prices Shares (Years) Price Shares Price
- ----------------- ------------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
$ 0.07 102,425 9.2 $ 0.07 49,770 $ 0.07
$ 7.35 - $11.15 1,082,480 6.9 $ 8.11 873,175 $ 7.40
$12.06 - $17.88 2,283,827 7.9 $13.84 962,753 $13.20
$18.05 - $23.25 2,511,323 9.5 $18.85 70,703 $18.87
$24.13 7,000 8.7 $24.13 2,380 $24.13
========= =========
$ 0.07 - $24.13 5,987,055 8.4 $14.68 1,958,781 $10.50
========= =========
</TABLE>
<PAGE> 67
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I -- POSTRETIREMENT BENEFITS
DEFINED BENEFIT PLANS: The Company has two frozen defined benefit plans in the
United States. As a result of freezing all future benefits under both U.S.
plans, no increase in compensation is assumed for either plan subsequent to the
dates that the plans were frozen.
U.S. pension cost consisted of (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost $ -- $ 0.6 $ 0.5
Interest cost 7.7 7.0 4.1
Actual return on assets (8.7) (10.3) (4.8)
Other, net (0.1) 3.0 0.7
------- ------- -------
Net U.S. pension cost (credit) $ (1.1) $ 0.3 $ 0.5
======= ======= =======
</TABLE>
The funded status of the U.S. plans was (in millions):
<TABLE>
<CAPTION>
June 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Fair value of plan assets $ 114.4 $ 99.6
Projected benefit obligation (99.3) (93.9)
------- -------
Plan assets greater than projected benefit obligation 15.1 5.7
Unrecognized net gain (13.8) (5.7)
Unrecognized net transition asset (0.5) (0.5)
------- -------
Prepaid (accrued) pension costs $ 0.8 $ (0.5)
======= =======
Accumulated benefits $ 99.3 $ 93.9
======= =======
Vested benefits $ 99.3 $ 93.5
======= =======
</TABLE>
Non-U.S. pension cost consisted of (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost $ 0.4 $ 1.9 $ 1.3
Interest cost 1.2 2.4 1.9
Actual return on assets (3.5) (3.7) (2.6)
Other, net 2.3 0.4 0.3
------- ------- -------
Net non-U.S. pension cost $ 0.4 $ 1.0 $ 0.9
======= ======= =======
</TABLE>
The funded status of non-U.S. plans was (in millions):
<TABLE>
<CAPTION>
June 30,
-------------------
1997 1996
------- -------
<S> <C> <C>
Fair value of plan assets $ 16.7 $ 58.8
Projected benefit obligation (16.5) (51.5)
------- -------
Plan assets in excess of projected benefit obligation 0.2 7.3
Unrecognized net (gain) loss 3.3 (1.6)
------- -------
Prepaid (accrued) pension costs $ (3.1) $ 8.9
======= =======
Accumulated benefits $ 15.9 $ 46.4
======= =======
Vested benefits $ 12.7 $ 41.6
======= =======
</TABLE>
<PAGE> 68
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I -- (CONTINUED)
During 1997, the Company converted four of its defined benefit pension plans
related to its Australian and Canadian subsidiaries to defined contribution
plans. The accrued benefits for plan members were transferred to the defined
contribution plans. Settlement and curtailment gains amounted to $1.1 million.
The following assumptions were used to measure the projected benefit obligation
for the defined benefit pension plans:
<TABLE>
<CAPTION>
June 30, 1997 June 30, 1996
------------------ ------------------
U.S. Non-U.S. U.S. Non-U.S.
Plans Plans Plans Plans
----- --------- ----- ---------
<S> <C> <C> <C> <C>
Discount rate 8.25% 6.3%-12.0% 8.0% 6.8%-12.0%
Average increase in
compensation levels 0.0% 3.0%-9.0% 0.0% 7.5%-12.0%
Expected long-term rate of
return for plan assets 9.0% 8.0%-12.0% 8.0% 7.5%-12.0%
</TABLE>
Plan assets consist principally of equity and fixed income investments. Annual
cost is determined using the projected unit credit actuarial method.
DEFINED CONTRIBUTION PLANS: The Company has several defined contribution plans
which cover substantially all employees in the United States and certain
non-U.S. subsidiaries. Contributions are generally based on fixed amounts of
eligible compensation. The Company's expense for U.S. and non-U.S. plans totaled
$13.8 million for the year ended June 30, 1997, and $9.6 million for each of the
years ended June 30, 1996 and 1995.
NOTE J -- INDUSTRY, GEOGRAPHIC AND SIGNIFICANT CUSTOMER INFORMATION
INDUSTRY SEGMENT INFORMATION: The Company operates primarily in one industry
segment, which includes providing customers in approximately 130 countries with
worldwide information technology services, including electronic commerce,
software application integration, network architecture/design and security
management, help desk support, maintenance and installation, warranty and
procurement.
GEOGRAPHIC INFORMATION: Transfer prices to non-U.S. sales subsidiaries, combined
with supplemental commission and expense reimbursement arrangements, are
intended to produce profit margins commensurate with the sales and service
effort associated with the products sold, and are comparable to prices charged
to unaffiliated distributors. Sales and transfers between manufacturing
subsidiaries are made with reference to prevailing market prices.
SIGNIFICANT CUSTOMER: The Company had revenues from the U.S. government and its
agencies of approximately $385 million for the year ended June 30, 1997, $228
million for the year ended June 30, 1996, and $145 million for the year ended
June 30, 1995. The majority of these revenues were in the United States
geographic area.
<PAGE> 69
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J -- (CONTINUED)
Certain information on a geographic basis follows (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenues from unaffiliated
customers:
United States, including
direct export sales $ 858.9 $ 537.6 $ 429.0
Other Americas 69.4 63.8 48.7
Europe 216.5 251.1 295.4
Asia/Pacific 123.6 161.4 128.8
-------- -------- --------
$1,268.4 $1,013.9 $ 901.9
======== ======== ========
Interarea transfers:
United States $ 14.8 $ 13.9 $ 20.9
Other Americas -- -- 0.2
Europe 0.3 0.1 0.3
Asia/Pacific 0.1 -- --
-------- -------- --------
$ 15.2 $ 14.0 $ 21.4
======== ======== ========
Income (loss) from
continuing operations
before income taxes:
United States $ (52.2) $ 46.8 $ 27.3
Other Americas 6.1 10.0 (12.5)
Europe 17.4 18.3 9.2
Asia/Pacific 6.4 19.8 (17.1)
-------- -------- --------
$ (22.3) $ 94.9 $ 6.9
======== ======== ========
</TABLE>
The income (loss) from continuing operations before income taxes for the years
ended June 30, 1997, 1996 and 1995 included $36.3 million, $(1.1) million, and
$62.1 million, respectively, of net acquisition-related, Chapter 11-related and
restructuring charges (credits).
<TABLE>
<CAPTION>
June 30,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Identifiable assets (excluding intercompany):
United States $ 732.3 $ 527.8
Other Americas 44.1 51.6
Europe 204.5 184.8
Asia/Pacific 53.9 93.5
Eliminations and other -- (1.1)
-------- --------
$1,034.8 $ 856.6
======== ========
</TABLE>
NOTE K -- COMMITMENTS AND CONTINGENCIES
LEASES: Rental expense for the three fiscal years ended June 30, 1997, 1996 and
1995 was $33.8 million, $28.2 million and $17.6 million, respectively.
Future minimum lease commitments on noncancelable operating leases and sublease
income are as follows (in millions):
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------
1998 1999 2000 2001 2002 Thereafter
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Future minimum lease
commitments on
noncancelable leases $ 39.7 $ 31.1 $ 25.2 $ 16.5 $ 9.1 $ 23.7
Future minimum
sublease income $ 7.6 $ 5.4 $ 1.5 $ 1.3 $ 1.3 $ 4.5
</TABLE>
<PAGE> 70
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE K -- (CONTINUED)
These future minimum lease commitments include approximately $30.0 million, net
of sublease income, related to facilities the Company has elected to abandon in
connection with the restructuring and acquisition-related initiatives.
FOREIGN CURRENCY GAINS(LOSSES): Foreign currency exchange and translation gains
or losses were insignificant for the years ended June 30, 1997 and 1996. Foreign
currency exchange and translation gains or losses included in operations
amounted to a $0.7 million loss for the year ended June 30, 1995.
FORWARD EXCHANGE CONTRACTS: At June 30, 1996, the Company had forward exchange
contracts with maturities of less than one year, to exchange predominantly
European currencies for U.S. dollars in the amounts of $1.2 million in foreign
currency. No contracts were held at June 30, 1997. Market risk arises from
fluctuation of currency rates during the period that contracts are outstanding.
LITIGATION: 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. The Company also
is subject to other legal proceedings and claims which arise in the ordinary
course of its business. 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 existing matters will be material to
the Company's consolidated financial position, results of operations, or cash
flows.
NOTE L -- REORGANIZATION AND RESTRUCTURING EXPENSES
Reorganization expenses relate to the reorganization and restructuring of the
Company in connection with its emergence from Chapter 11 and the implementation
of its Reorganization Plan.
In conjunction with its emergence from Chapter 11, an accrual of $17.8 million
was recorded, representing the estimated amount of the Predecessor Company's
liabilities that would be settled in cash.
The activity related to the reorganization accruals is summarized in the
following table (in millions):
<TABLE>
<CAPTION>
Fiscal 1995 Activity
------------------------------------------------
Balance Charges/(reversals) - Balance
June 30, changes in estimates June 30,
1994 and new initiatives Utilization 1995
------------------------------------------------------------
<S> <C> <C> <C> <C>
Accrued reorganization $ 2.9 $ -- $(1.5) $ 1.4
Chapter 11 accounts payable 7.9 (2.3) (3.2) 2.4
----- ----- ----- -----
$10.8 $(2.3)(A) $(4.7) $ 3.8
===== ===== ===== =====
</TABLE>
<PAGE> 71
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - (CONTINUED)
<TABLE>
<CAPTION>
Fiscal 1996 Activity
-----------------------------------------------
Charges/(reversals) - Balance
changes in estimates June 30,
and new initiatives Utilization 1996
-----------------------------------------------
<S> <C> <C> <C>
Accrued reorganization $(1.1) $(0.3) $ --
Chapter 11 accounts payable (2.2) -- 0.2
----- ----- ----
$(3.3)(A) $(0.3) $0.2
===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997 Activity
--------------------------------------------------
Charges/(reversals) - Balance
changes in estimates June 30,
and new initiatives Utilization 1997
--------------------------------------------------
<S> <C> <C> <C>
Accrued reorganization $1.3 $(1.3) $ --
Chapter 11 accounts payable -- -- 0.2
---- ----- ----
$1.3(A) $(1.3) $0.2
==== ===== ====
</TABLE>
(A) Comprised of:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Increases due to changes to Chapter 11-related actions $ -- $ -- $ --
Decreases due to changes to Chapter 11-related actions (2.3) (2.2) --
Incremental costs related to ongoing Chapter 11
administration -- -- 1.3
Reversals of estimated costs of plans -- (1.1) --
------- ------- -------
$ (2.3) $ (3.3) $ 1.3
======= ======= =======
</TABLE>
Periodically, the accruals related to the reorganization-related charges are
reviewed and compared to their respective requirements. As a result of those
reviews, the accruals are adjusted for changes in cost and timing assumptions of
previously approved and recorded initiatives. A charge of $1.3 million for
incurred incremental Chapter 11-related expense was recorded in fiscal 1997.
During fiscal 1996, a review of the Chapter 11-related accruals identified $1.1
million of excess reorganization reserves and $2.2 million of excess Chapter 11
accounts payable accruals which were reversed and reported as Chapter 11-related
charges (credits) in the Consolidated Statements of Operations. The Company
determined the amount of excess reorganization reserves to be reversed by
reviewing its requirements for reserve utilization, primarily related to
litigation and bankruptcy administration, and reversing the balance of the
reserve identified as excess as a result of this analysis. The Chapter 11
accounts payable excess reserves related primarily to trade vendor liabilities
discharged with lower cash payment requirements than originally anticipated. The
fiscal 1995 review resulted in reversals of $2.3 million of Chapter 11 accounts
payable accruals for settlement accruals originally established as cash,
subsequently settled for lower cash amounts and in stock as approved by the
Bankruptcy Court.
<PAGE> 72
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - (CONTINUED)
The activity related to accruals for restructuring activities is summarized in
the following table (in millions):
<TABLE>
<CAPTION>
Fiscal 1995 Activity
-------------------------------------------------------------
Balance Charges/(reversals) -
June 30, changes in estimates Currency
1994 and new initiatives Utilization translation Other
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facilities $33.7 $(1.1) $(24.7) $ 2.3 $ --
Depreciable assets 14.9 (3.2) (9.1) 0.8 0.3
Workforce-related 25.4 (2.4) (21.3) 1.3 0.6
Other 13.4 (1.4) (6.2) 0.3 0.3
----- ----- ----- ----- -----
$87.4 $(8.1)(A) $(61.3) $ 4.7 $ 1.2
===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1996 Activity
---------------------------------------------------------------------
Balance Charges/(reversals) - Balance
June 30, changes in estimates Currency June 30,
1995 and new initiatives Utilization Other translation 1996
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Facilities $10.2 $ 3.3 $(7.0) $ -- $ -- $ 6.5
Depreciable assets 3.7 0.1 (3.0) -- (0.2) 0.6
Workforce-related 3.6 (0.2) (2.2) -- (0.1) 1.1
Other 6.4 (1.0) (3.5) -- -- 1.9
----- ----- ----- ----- ----- -----
$23.9 $ 2.2(A) $(15.7) $ -- $(0.3) $10.1
===== ===== ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1997 Activity
------------------------------------------------------------
Charges/(reversals)-
changes in Balance
estimates and new Currency June 30,
initiatives Utilization Other translation 1997
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facilities $ -- $(4.0) $ -- $ -- $2.5
Depreciable assets -- (0.6) -- -- --
Workforce-related -- (1.1) -- -- --
Other -- (1.5) -- -- 0.4
---- ----- ---- ---- ----
$ --(A) $(7.2) $ -- $ -- $2.9
==== ===== ==== ==== ====
</TABLE>
(A) Comprised of:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Increases due to changes to restructuring plans $ -- $ -- $ --
Increases and overages of estimated costs of plans 1.2 3.4 --
Reversals of estimated costs of plans (9.3) (1.2) --
------- ------- -------
$ (8.1) $ 2.2 $ --
======= ======= =======
</TABLE>
Periodically, the accruals related to the restructure activities are reviewed
and compared to their respective requirements. As a result of those reviews, the
accruals are adjusted for changes in cost and timing assumptions of previously
approved and recorded initiatives. Upon review of these accruals during fiscal
1997, it was determined that no adjustments were required.
<PAGE> 73
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L - (CONTINUED)
Review of the restructure accruals during fiscal 1996 identified net additional
requirements of $2.2 million for previously approved and recorded initiatives.
The facilities change in estimate charge of $3.3 million was required due to the
Company's lack of success in subleasing certain properties or otherwise
terminating its leases in Europe. This charge is included in the line "Other
restructuring charges (credits)" in the Consolidated Statements of Operations.
During fiscal 1995 the review of the restructure accruals relative to previously
approved and recorded actions identified $8.1 million of excess reserves,
primarily related to depreciable assets and workforce reduction actions. This
reversal is reflected as a credit in the line "Other restructuring charges
(credits)" in the Consolidated Statements of Operations.
The June 30, 1997 and 1996 balances of the restructuring accruals are classified
as follows (in millions):
<TABLE>
<CAPTION>
June 30,
------------------
1997 1996
------- -------
<S> <C> <C>
Depreciable assets $ -- $ 0.6
Accounts payable, accrued expenses and other 2.5 8.1
Liabilities of businesses held for sale 0.4 0.2
Non-current liabilities -- 1.2
------- -------
$ 2.9 $ 10.1
======= =======
</TABLE>
Cash outlays to complete the balance of the Company's restructuring initiatives
are estimated to approximate $3.0 million in fiscal 1998.
NOTE M--FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
forward exchange contracts, long and short-term debt, warrants and preferred
stock. The carrying amounts reported in the balance sheets for cash and cash
equivalents, forward exchange contracts and long and short-term debt approximate
their fair value. The fair value of the Company's publicly traded warrants is
determined by the closing price on a nationally recognized exchange. The fair
value of the warrants was approximately $45.1 million and $53.6 million at June
30, 1997 and 1996, respectively.
The carrying value of the Company's Series A Preferred Stock approximates fair
value at June 30, 1997 and 1996.
<PAGE> 74
WANG LABORATORIES, INC. AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three months ended September 30 December 31 March 31 June 30
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1997
Revenues $ 272.7 $ 342.4 $ 315.1 $ 338.2
Costs 196.1 261.0 242.9 261.0
Expenses 50.8 52.9 81.2 62.0
Amortization of intangibles - acquisition 9.0 10.5 22.7 4.8
and fresh-start
Acquisition-related charges (credits) 27.4 -- 8.6 (1.0)
Chapter 11-related charges (credits) -- -- -- 1.3
------- ------- ------- -------
Operating income (loss) (10.6) 18.0 (40.3) 10.1
Interest and other (income) expense - net -- 1.6 2.7 (4.8)
Income taxes 1.7 1.3 (21.1) 2.5
------- ------- ------- -------
Income (loss) from continuing operations (12.3) 15.1 (21.9) 12.4
Income (loss) from discontinued operations (14.1) (10.6) 101.3 --
------- ------- ------- -------
Net income (loss) (26.4) 4.5 79.4 12.4
Dividends and accretion - preferred stock (3.5) (3.5) (3.6) (3.5)
------- ------- ------- -------
Net income (loss) applicable to common
stockholders $ (29.9) $ 1.0 $ 75.8 $ 8.9
======= ======= ======= =======
Net income (loss) per share $ (0.82) $ 0.03 $ 2.07 $ 0.24
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Three months ended September 30 December 31 March 31 June 30
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1996
Revenues $ 246.2 $ 271.3 $ 248.3 $ 248.1
Costs 169.6 183.2 169.7 174.7
Expenses 47.7 52.3 49.3 47.7
Amortization of intangibles - acquisition and
fresh-start 8.2 8.8 8.4 9.1
Chapter 11-related charges (credits) -- -- -- (3.3)
Other restructuring charges (credits) -- -- -- 2.2
------- ------- ------- -------
Operating income (loss) 20.7 27.0 20.9 17.7
Interest and other(income) expense - net (2.0) (2.1) (1.9) (2.6)
Income taxes 11.9 9.3 7.3 2.9
------- ------- ------- -------
Income from continuing operations 10.8 19.8 15.5 17.4
Loss from discontinued operations (32.0) (13.0) (12.3) (11.7)
------- ------- ------- -------
Net income (loss) (21.2) 6.8 3.2 5.7
Dividends and accretion - preferred stock (3.4) (3.4) (3.4) (3.6)
Special dividend -- -- (8.8) --
------- ------- ------- -------
Net income (loss) applicable to common
stockholders $ (24.6) $ 3.4 $ (9.0) $ 2.1
======= ======= ======= =======
Net income (loss) per share $ (0.72) $ 0.09 $ (0.25) $ 0.06
======= ======= ======= =======
</TABLE>
<PAGE> 75
EXHIBIT D
Wang Laboratories, Inc. and Subsidiaries
SCHEDULE II - Valuation and Qualifying Accounts (in millions)
<TABLE>
<CAPTION>
Additions
----------------------
Charged to
Balance at Charged to Other Balance at
Beginning Costs and Accounts- Deductions- End
DESCRIPTION of Period Expenses Describe Describe of Period
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1997:
Allowances for doubtful
accounts and sale credits $10.8 $10.3 $ -- $(3.1) (A) $17.9
Year ended June 30, 1996:
Allowances for doubtful
accounts and sale credits $10.8 $ 0.6 $ -- $(0.6) (A) $10.8
Year ended June 30, 1995:
Allowances for doubtful
accounts and sale credits $ 4.4 $ 6.4 $ -- $ -- $10.8
</TABLE>
(A) Accounts charged off, net of recoveries.
<PAGE> 1
Exhibit 10.61
RESTRICTED STOCK AGREEMENT
WANG LABORATORIES, INC.
EMPLOYEES' STOCK INCENTIVE PLAN
Name of Grantee: Jeremiah J. J. van Vuuren
No. of Shares: 25,000
Grant Date: March 26, 1997
Purchase Price: $.01 per share
Pursuant to the Wang Laboratories, Inc. Employees' Stock Incentive Plan
(the "Plan") as amended through the date hereof, Wang Laboratories, Inc. (the
"Company") hereby grants a Restricted Stock Award (an "Award") to the Grantee
named above. Upon acceptance of this Award, the Grantee shall receive the number
of shares of Common Stock, par value $0.01 per share (the "Stock"), of the
Company specified above, subject to the restrictions and conditions set forth
herein and in the Plan.
1. ACCEPTANCE OF AWARD. The Grantee shall have no rights with respect to
this Award unless he or she shall have accepted this Award by signing and
delivering to the Company a copy of this Agreement. Upon acceptance of this
Award by the Grantee, and payment of the Purchase Price as specified herein,
certificates evidencing the Stock so accepted shall be issued and delivered to
the Company to be held for the Grantee, and the Grantee's name shall be entered
as the stockholder of record on the books of the Company. Thereupon, the Grantee
shall have all the rights of a shareholder with respect to such Stock, including
voting and dividend rights, subject, however, to the restrictions and conditions
specified in Section 2 below.
2. RESTRICTIONS AND CONDITIONS.
(a) Certificates evidencing the Restricted Stock granted hereby shall
bear an appropriate legend, as set forth in the Plan.
(b) Subject to Section 3(b) below, if the Grantee ceases to be an
employee of the Company or any of its subsidiaries prior to the expiration or
other termination of the applicable restrictions, any Restricted Stock granted
to the Grantee which is still subject to restriction shall (i) if no purchase
price had been paid for such Restricted Stock, be forfeited and all rights of
the Grantee to such Restricted Stock shall terminate without further obligation
on the part of the Company; or (ii) if a purchase price
<PAGE> 2
had been paid for such Restricted Stock, be deemed to be offered for sale by the
Grantee to the Company for a period of thirty (30) days after the date of such
cessation of employment at a price (the "Option Price") equal to the lesser of
(x) the fair market price of the stock at such time or (y) the purchase price
set forth on the first page of this agreement (the "Purchase Option").
3. VESTING OF RESTRICTED STOCK.
(a) The restrictions and conditions in Section 2 above shall terminate
as to all of the shares of Restricted Stock subject hereto on March 26, 1999
(the "Vesting Date"). Subsequent to the Vesting Date, the shares of Restricted
Stock on which such restrictions and conditions terminated on such date shall no
longer be deemed Restricted Stock. The Organization, Compensation and Nominating
Committee of the Company's Board of Directors (the "Committee") may accelerate
the vesting schedule specified in this Section 3(a) in accordance with the terms
of the Plan.
(b) If, prior to the Vesting Date, the Grantee ceases to be an
employee of the Company or any of its subsidiaries by reason of death, Permanent
Disability or Retirement all restrictions and conditions set forth herein shall
terminate as to all of the shares of Restricted Stock subject hereto. If a
Change in Control occurs prior to March 26, 1998, all restrictions and
conditions set forth herein shall terminate as to 50% of the total number of
shares of Restricted Stock subject hereto; if a Change in Control occurs on or
after March 26, 1998, all restrictions and conditions set forth herein shall
terminate as to all of the shares of Restricted Stock subject hereto.
4. EXERCISE OF PURCHASE OPTION AND CLOSING.
(a) The Company may exercise the Purchase Option by delivering or
mailing to the Grantee (or his permitted transferees), in accordance with notice
provisions of Section 11, within 30 days after the cessation of the employment
of the Grantee, a written notice of exercise of the Purchase Option. Such notice
shall specify the number of shares of Restricted Stock to be purchased. If and
to the extent the Purchase Option is not so exercised by the giving of such a
notice within such 30-day period, the Purchase Option shall automatically expire
and terminate effective upon the expiration of such 30-day period.
(b) After the time the Company exercises the Purchase Option, the
Company shall not pay any dividend to the Grantee on account of such shares of
Restricted Stock (other than any dividend the record date for which is prior to
such exercise) or permit the Grantee to exercise any of the privileges or rights
of a stockholder with respect to such shares of Restricted Stock, but shall, in
so far as permitted by law, treat the Company as the owner of such shares of
Restricted Stock.
2
<PAGE> 3
(c) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any outstanding indebtedness of the Grantee
to the Company or in cash (by check) or both.
(d) The Company shall not purchase any fraction of a share of
Restricted Stock upon exercise of the Purchase Option, and any fraction of a
share resulting from a computation made pursuant to Section 3 of this Agreement
shall be rounded to the nearest whole share (with any one-half share being
rounded upward).
5. EFFECT OF PROHIBITED TRANSFER. The Company shall not be required to (a)
transfer on its books any of the shares of Restricted Stock which shall have
been sold or transferred in violation of any of the provisions set forth in this
Agreement, or (b) treat as owner of any of the shares of Restricted Stock or pay
dividends to any transferee to whom any of the shares of Restricted Stock shall
have been sold or transferred in violation of any of the provisions of this
Agreement.
6. DIVIDENDS AND VOTING RIGHTS. During the Restricted Period, the Grantee
shall have the right to receive all dividends payable with respect to the
Restricted Stock and to exercise the voting rights attaching to the Restricted
Stock.
7. INCORPORATION OF PLAN. Notwithstanding anything herein to the contrary,
this Agreement shall be subject to and governed by all the terms and conditions
of the Plan. In the event of any inconsistency between the provisions of the
Plan and this instrument, the terms of the Plan shall prevail. Capitalized terms
in this Agreement shall have the meaning specified in the Plan, unless a
different meaning is specified herein.
8. TRANSFERABILITY. Except as otherwise provided in this Section 8, the
Restricted Stock and this Agreement and all rights granted hereunder may not be
transferred, assigned, pledged or hypothecated (whether by operation of law or
otherwise), except by will or by the laws of descent and distribution. The
Grantee may name one or more beneficiaries, to receive, in the event of the
Grantee's death, any right to which the Grantee would be entitled under the
Plan, by setting forth their names and addresses at the end of this Agreement.
In addition, the Grantee may transfer the Restricted Stock and this Agreement
and the rights granted hereunder, without consideration therefor, to a member or
members of his or her immediate family, including, without limitation, to his or
her children, grandchildren or spouse, a trust or trusts the only beneficiaries
of which are members of his or her immediate family or a partnership the only
partners of which are members of his or her immediate family, provided that the
Grantee gives written notice of such transfer to the Company's General Counsel
not less than 15 days prior to such transfer. The Restricted Stock shall not be
subject to execution, attachment or other process.
3
<PAGE> 4
9. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The shares of Stock subject
to this Award are shares of Common Stock, par value $.01 per share, of the
Company. If the shares of the Company's Common Stock are increased or decreased,
changed into, or exchanged for a different number or kind of share or
securities, whether through merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or the like, an
appropriate and proportionate adjustment shall be made in the number and kind of
shares, and the Purchase Price per share, if any, of shares subject to this
Award. Adjustments under this Section 9 shall be made by the Committee, whose
determination as to what adjustment shall be made, and the extent thereof, shall
be conclusive.
10. TAX WITHHOLDING. The Grantee shall, not later than the date as of which
the receipt of this Award becomes a taxable event for Federal income tax
purposes, pay to the Company or make arrangements satisfactory to the Committee
for payment of any Federal, state, and local taxes required by law to be
withheld on account of such taxable event. The Grantee may elect to (i) tender
back to the Company vested shares of Stock received pursuant to a grant, (ii)
deliver to the Company previously acquired Stock, or (iii) reimburse the Company
in cash, in order to satisfy part or all of the obligation for any taxes
required to be withheld or otherwise deducted and paid by the Company or any
such subsidiary in respect of the Stock subject to this Award. If the Grantee
fails to make an election fully satisfying the Grantee's obligations, the
Grantee shall be deemed to have made an election pursuant to clause (i) of the
immediately preceding sentence to the extent of such unsatisfied obligation.
11. MISCELLANEOUS.
(a) Notice hereunder shall be given to the Company at its principal
place of business, and shall be given to the Grantee at the address set forth
below, or in either case at such other address as one party may subsequently
furnish to the other party in writing.
(b) This Agreement does not confer upon the Grantee any rights with
respect to continuance of employment by the Company or any subsidiary.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, and each other provision of this Agreement shall be severable
and enforceable to the extent permitted by law.
(d) Any provision contained in this Agreement may be waived, either
generally or in any particular instance, by the Committee.
(e) This Agreement shall be binding upon and inure to the benefit of
the Company and the Grantee and their respective heirs, executors,
administrators, legal
4
<PAGE> 5
representatives, successors, assigns and transferees, subject to the
restrictions on transfer set forth in Section 8 of this Agreement.
(f) Whenever the context may require, any pronouns used in this
Agreement shall include all corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa.
(g) This Agreement constitutes the entire agreement between the
parties, and supersedes all prior agreements and understandings, relating to the
subject matter of this Agreement.
(h) This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Grantee.
(i) This Agreement shall be construed, interpreted and enforced in
accordance with the law of the Commonwealth of Massachusetts.
WANG LABORATORIES, INC.
By: /s/ Albert A. Notini, SVP
-----------------------------
Name: Albert A. Notini
Title: Senior Vice President
the foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the undersigned.
Date: /s/ J.J.J. van Vuuren
------------------------- -----------------------------
Grantee's Signature
Grantee's Name and Address:
Jeremiah J. J. van Vuuren
Harewood Downs House
Amersham Road
Chalfont St. Giles
England HP8 4RS
Name of Grantee's Beneficiary: Beneficiary's Address:
- ------------------------------ -----------------------------
-----------------------------
5
<PAGE> 6
WANG LABORATORIES, INC. RESTRICTED STOCK PLAN
TAX WITHHOLDING PROCEDURES
Name
Address
On [____________________], you were granted a Restricted Stock Award under
the Wang Laboratories, Inc. Employees Stock Incentive Plan. The restrictions and
conditions with respect to xxxx of shares of Restricted Stock will lapse on
[________________], and the value of such shares, based upon the closing price
of the Stock on [__________________]will be taxable to you in [___]. As
described in Section 10 of the Restricted Stock Agreement, applicable Federal,
state and local tax withholding requirements will be satisfied by withholding
vested shares of Stock otherwise issuable under your grant unless you elect to
(i) deliver to the Company previously acquired shares, or (ii) reimburse the
Company in cash or by check.
The exact dollar amount of required tax withholding cannot be calculated
until after [_____________], when the value of the shares issuable under your
Award becomes determinable. If you elect to pay the withholding taxes in cash or
by check, or by delivery of shares of Stock you already own, Benefits
Administration will advise you by letter in [_________]of the exact dollar
amount due. Otherwise, the Company will use [xxxx] vested shares of Stock held
by the Company in satisfaction of tax withholding requirements based upon
applicable Social Security (FICA) tax and Federal, state, and local income tax
withholding tables.
- ------------------------------------------------------------------------
____ I elect to pay withholding taxes on the shares in cash or by check.
____ I elect to sell to the Company shares of Stock I already own. (Share
certificates must be delivered to Benefits Administration by [__________].)
____ Please pay withholding taxes with vested shares held by the Company under
my grant. (If you are electing this option, it is not necessary to return
this election form.)
______________________________ _________________________________
Employee Signature Date
<PAGE> 1
Exhibit 10.62
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made on the 28th day of August, 1997, by and between Wang
Laboratories Ireland B.V. ("Wang" or the "Company"), a Netherlands corporation
with its principal place of business in Ireland, and Jeremiah J. J. van Vuuren
("you," "your" or the "Executive") sets forth the details of your employment
with the Company and/or its affiliates.
WHEREAS, you and Wang Laboratories, Inc. ("WLI") entered into that certain
agreement dated May 19, 1993 regarding your employment as a Senior Vice
President of WLI (the "1993 Employment Agreement");
WHEREAS, on or about March 26, 1997, you were named as a President of WLI
and Chief Operating Officer, International ("International COO");
WHEREAS, as the International COO, you are responsible for operations in
the countries that WLI and its subsidiaries do business in (other than in such
countries which are in North and South America) including, without limitation,
the Netherlands, Ireland and the United Kingdom;
WHEREAS, the Company is a wholly owned subsidiary of WLI, a Delaware
corporation with its headquarters located in the Commonwealth of Massachusetts;
and
WHEREAS, with respect to your duties as International COO performed outside
the United Kingdom, the Company desires to employ you, and you desire to accept
employment, pursuant to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants, agreements and
representations contained herein, the adequacy of which is hereby acknowledged,
the parties hereto expressly and intentionally bind themselves as follows:
1. APPOINTMENT
-----------
You shall perform the duties and have the responsibilities commensurate
with the position of International COO, provided that no such (i) duties shall
or may be performed in the United Kingdom, or (ii) responsibilities shall or may
be fulfilled in the United Kingdom.
2. TERM
----
The terms and conditions of this Agreement will cover a three (3)-year
period beginning as of March 26, 1997 (the "Effective Date").
<PAGE> 2
3. COMPENSATION AND INCENTIVES; EMPLOYMENT STATUS
----------------------------------------------
(a) YEARLY PAYMENTS
---------------
Your annual base salary, commencing as of the Effective Date, will be
(pound)64,620 pounds sterling (payable monthly), and you will be eligible to
participate in a yearly bonus plan targeted at 60% of your base salary for 100%
performance against your financial and other goals. You will also have an
over-achievement opportunity of up to an additional 40% of your base salary for
exceeding such performance targets, at the discretion of the Organization,
Compensation and Nominating Committee of the Board of Directors of WLI.
(b) STOCK INCENTIVES
----------------
As of the Effective Date, you will be granted certain additional
options to purchase shares of WLI Common Stock and certain restricted shares of
WLI Common Stock in the amounts and on the terms agreed to by you and the
Chairman of the Board of Directors of WLI.
(c) LONG-TERM INCENTIVE
-------------------
As a further long-term incentive, and in addition to such other
compensation to which you may be entitled hereunder, the Company shall make lump
sum payments to you of (pound)258,428 pounds sterling when, and only if, the
Average Trading Price, as defined herein, of WLI's Common Stock reaches
thirty-four ($34), thirty-nine ($39) and forty-four ($44) dollars per share,
respectively, during the term of this agreement, for a total maximum payout
potential of (pound)775,445 pounds sterling. Average Trading Price means the
average closing price of WLI Common Stock over twenty (20) consecutive trading
days on NASDAQ, or such national exchange on which it may later be listed and
traded.
(d) OTHER STOCK AWARD
-----------------
Any other share awards or grants made by WLI will be deemed to be made
pursuant to this Agreement.
(e) OTHER PROVISIONS
----------------
Prior to the third anniversary of the Effective Date the Company will
engage in negotiations with you regarding an extension of this Agreement. In the
event that an extension of this Agreement, or a new agreement, is not entered,
at the end of the three-year term of this Agreement, your employment status will
be at-will. Therefore, the terms and conditions contained in the first two
paragraphs of section 4 of this Agreement will expire at the end of this three
(3)-year period and the original, unmodified terms of paragraph 6 of the
enclosed,
2
<PAGE> 3
presently modified, standard Wang Employment Agreement will be in full force and
effect. All other terms and conditions of this Agreement will remain in effect
after the three (3)-year period.
4. TERMINATION/SEVERANCE COMPENSATION AND BENEFITS
-----------------------------------------------
In the event that your employment with the Company is involuntarily
terminated other than for cause (a term which includes but is not limited to a
material violation of the standards set forth in WLI "Standards of Ethics and
Business Conduct" booklet) or is terminated because of your death or substantial
inability to work or if your position, referred to in paragraph 1 hereof, is
reduced without your consent, other than a mere change in title, the Company
will pay to you over a period of eighteen (18) months, eighteen (18) salary
continuation payments, one each month, each of which shall be equal to one
twelfth of your then base salary plus the target bonus at 100% performance as
set forth in your then applicable bonus plan.
In the event you become employed at any time during the eighteen (18)-month
salary continuance period, all remaining salary continuation payments shall
terminate as of your date of hire by your new employer, except to the extent
that the total annual compensation for your new employment is less than the
total of your remaining salary continuation payments and, in such event, the
Company shall only pay that amount equal to the difference.
During the eighteen-month period following a termination by (i) you of your
employment with the Company, or (ii) the Company or its affiliates of your
employment with the Company, with or without cause, you agree that you will not,
without the prior written consent of WLI, directly or indirectly engage in any
business or activity, whether as an employee, consultant, shareholder, partner
or otherwise, or render services or advice to any person, entity or business
that competes anywhere in the geographic regions where WLI does business
(including, without limitation, such countries in North and South America) in
any material manner with any service or product offered, in development or sold
by the Company, WLI and/or any other of WLI's subsidiaries or solicit, or assist
others in recruiting or hiring, employees of the Company, WLI and/or any other
of WLI's subsidiaries for employment or hire elsewhere. Nothing herein shall be
construed as preventing the Executive from purchasing and/or holding less than
five percent (5%) of the shares of any company.
Each of the above provisions regarding non-competition and
non-solicitation/non-hire are considered reasonable by the parties, however, if
any such provision shall be found to be invalid by a court having jurisdiction
pursuant to section 9 below, such provision shall be modified as may be
necessary to make such provision valid and effective.
3
<PAGE> 4
5. NO CONFLICTS OF INTEREST
------------------------
By signing this Agreement, you represent that you are not subject to any
restrictions, particularly, but without limitation, in connection with any
previous employment, which prevent you from entering into and performing your
obligations under this Agreement or which materially and adversely affect (or
may in the future, so far as you can reasonably foresee, materially and
adversely affect), your right to participate in the affairs of the Company.
6. STANDARDS OF ETHICS AND BUSINESS CONDUCT AND STANDARD EMPLOYMENT AGREEMENT
--------------------------------------------------------------------------
During your continued employment, you will be required to comply with WLI's
Standards of Ethics and Business Conduct and sign WLI's Standard Employment
Agreement as presently modified (copy attached hereto).
7. CONFIDENTIALITY
---------------
By our signatures below, we agree to treat the details of this Agreement
with utmost confidentiality and that we will not disclose them to any third
parties except your immediate family, our respective financial and/or legal
advisors, any applicable trustees, and such Company and WLI personnel and/or
agents as have a need to know this information for business purposes or as may
be required by law.
8. ENTIRE AGREEMENT
----------------
The terms and conditions of (i) this Agreement, (ii) that certain agreement
between you and Wang Laboratories, Inc., entered into contemporaneously with
this Agreement, regarding your employment within the United Kingdom, (iii) that
certain Agreement between you and WLI, dated as of February 23, 1994, as amended
by Exhibit A to the Agreement referenced in (ii) of section 8 of this Agreement,
set forth the entire understanding of the parties in connection with your
employment by the Company and its affiliates and, by your signature below, you
expressly acknowledge that such terms and conditions supersede and restate the
terms and conditions set forth in the 1993 Employment Agreement.
4
<PAGE> 5
9. GOVERNING LAW; JURISDICTION
---------------------------
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to such Commonwealth's
choice of law provisions, and the courts of such Commonwealth shall have
exclusive jurisdiction to settle any and all disputes, claims, actions,
proceedings and/or suits which may arise out of or in connection with this
Agreement.
Wang Laboratories Ireland B.V.,
/s/ Albert A. Notini
--------------------------
Albert A. Notini
Director
encls. Standard Employment Agreement
(as presently modified)
Accepted and Agreed to:
/s/ J.J.J. van Vuuren
- -------------------------------- --------------------------------
Jeremiah J.J. van Vuuren Date
5
<PAGE> 1
Exhibit 10.63
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made on the 28th day of August, 1997, by and between Wang
Laboratories, Inc. ("WLI" or the "Company"), a Delaware corporation with its
headquarters located in the Commonwealth of Massachusetts, and Jeremiah J. J.
van Vuuren ("you," "your" or the "Executive") sets forth the details of your
continuing employment with the Company and/or its affiliates.
WHEREAS, you and WLI entered into that certain agreement dated May 19, 1993
regarding your employment as a Senior Vice President of WLI (the "1993
Employment Agreement");
WHEREAS, on or about March 26, 1997, you were named as a President of WLI
and Chief Operating Officer, International ("International COO");
WHEREAS, as the International COO of WLI, you are responsible for
operations in the countries that WLI and its subsidiaries do business in (other
than in such countries which are in North and South America) including, without
limitation, the Netherlands, Ireland and the United Kingdom; and
WHEREAS, with respect to your duties as International COO performed wholly
or mostly in the United Kingdom, the Company desires to employ you, and you
desire to accept employment pursuant to the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the mutual covenants, agreements and
representations contained herein, the adequacy of which is hereby acknowledged,
the parties hereto expressly and intentionally bind themselves as follows:
1. APPOINTMENT
-----------
You shall perform the duties and have the responsibilities commensurate
with the position of International COO.
2. TERM
----
The terms and conditions of this offer letter will cover a three (3)-year
period beginning as of March 26, 1997 (the "Effective Date").
<PAGE> 2
3. COMPENSATION AND BENEFITS; EMPLOYMENT STATUS
--------------------------------------------
(a) YEARLY PAYMENTS
---------------
Your annual salary, commencing as of the Effective Date, will comprise of
the following three parts:
(i) an annual base salary of (pound)145,396 pounds sterling, payable
monthly ("Base Salary");
(ii) a supplemental annual salary of (pound)32,310 pounds sterling, payable
quarterly ((pound)8,078 pounds sterling per quarter) in arrears ("Supplemental
Salary") subject to (a) a period of deferral as the Company's Chairman of the
Board and Chief Executive Officer (the "Chairman") may determine, and (b) you
being in the employment of the Company, or its subsidiaries at the end of the
period of deferral referenced in (a) above. If the Chairman elects to defer a
quarterly Supplemental Salary payment, the Company will notify the Executive of
the amount of appropriate compensation for such deferral prior to the relevant
quarter date. The Company will seek the Executive's preferences regarding
payment of each quarterly Supplemental Salary payment at least fourteen business
days prior to the relevant due date for such payment, however, the Company is
not bound to take into account the Executive's preference in exercising its
discretion on whether to defer such payments. The Company will make such
determinations at least seven business days prior to the relevant quarter date
and will notify the Executive accordingly before such date; and
(iii) subject to the discretion of the Organization, Compensation and
Nominating Committee of WLI's Board of Directors, you will (a) be eligible to
participate in a yearly bonus plan targeted at 60% of your combined Base Salary
and Supplemental Salary as if the supplemental salary was paid at the end of
each quarter (hereby defined as your Eligible Salary) for 100% performance
against your financial and other goals, and (b) have an over-achievement
opportunity of up to an additional 40% of your Eligible Salary for exceeding
such performance targets.
(b) BENEFITS
--------
(i) You will be eligible to participate in such existing health plans of
Wang (U.K.) Limited as are available to all of its employees generally. The
Company will also provide term life insurance to you based on your insurability
in the amount of seven (7) times your Eligible Salary. You will also receive
Wang (U.K.) Limited's standard sick time and personal holiday benefits and up to
five weeks vacation per year. You will continue to participate in Wang (U.K.)
Limited's Supplementary Death Benefit Scheme and all such other similar plans as
are available to senior officers of Wang (U.K.) Limited;
2
<PAGE> 3
(ii) During your employment, the Company will pay you a monthly automobile
allowance of (pound)1,590 pounds sterling per month and (pound)1,450 pounds
sterling per year for auto insurance and petrol reimbursement; and
(iii) During your employment, the Company will also reimburse you, at
regular intervals and in accordance with Company policy, for all business
travel, telephone and out-of-pocket expenses incurred by you in the performance
of your duties as an officer of the Company.
(c) OTHER PROVISIONS
----------------
(i) That certain Agreement between you and the Company, dated as of
February 23, 1994, shall be amended as of the Effective Date, as set forth on
Exhibit A hereto, and otherwise shall remain unchanged; and
(ii) Prior to the third anniversary of the Effective Date the Company
will engage in negotiations with you regarding an extension of this Agreement.
In the event that an extension of this Agreement, or a new agreement, is not
entered, at the end of the three-year term of this Agreement, your employment
status will be at-will. Therefore, the terms and conditions contained in the
first two paragraphs of section 4 of this Agreement will expire at the end of
this three (3)-year period and the terms of paragraph 6 of the enclosed,
presently modified, standard WLI Employment Agreement will be in full force and
effect. All other terms and conditions of this offer letter will remain in
effect after the three (3)-year period.
4. TERMINATION/SEVERANCE COMPENSATION AND BENEFITS
-----------------------------------------------
In the event that your employment with the Company is involuntarily
terminated other than for cause (a term which includes but is not limited to a
material violation of the standards set forth in WLI's "Standards of Ethics and
Business Conduct" booklet) or is terminated because of your death or substantial
inability to work or if your position, referred to in paragraph 1 hereof, is
reduced without your consent, other than a mere change in title, WLI will pay to
you over a period of eighteen (18) months, eighteen (18) salary continuation
payments, one each month, each of which shall be equal to one twelfth of your
then Eligible Salary plus, in the Company's sole discretion, the target bonus at
100% performance as set forth in your then applicable, if any, bonus plan.
During this salary continuance period, the Company will also continue to make
available health (but no other) benefits to you at no cost.
In the event you become employed at any time during the eighteen (18)-month
salary continuance period, all remaining salary continuation payments (and
health insurance coverage premium payments) shall terminate as of your date of
hire by your new employer, except to the extent that the total annual
compensation for your new employment is less than the total of your remaining
salary continuation payments and, in such event, the Company shall only pay that
amount equal to the difference for the remainder of the salary continuance
period.
3
<PAGE> 4
During the eighteen-month period immediately following a termination of
your employment with the Company by (i) you, or (ii) the Company, with or
without cause, you agree that you will not, without the prior written consent of
WLI, directly or indirectly engage in any business or activity, whether as an
employee, consultant, shareholder, partner or otherwise, or render services or
advice to any person, entity or business that competes anywhere in the
geographic regions where WLI does business, (including, without limitation, such
countries in North and South America) in any material manner with any service or
product offered, in development or sold by the Company and/or any of its
subsidiaries or solicit, or assist others in recruiting or hiring, employees of
the Company and/or any of its subsidiaries for employment or hire elsewhere.
Nothing herein shall be construed as preventing the Executive from purchasing
and/or holding less than five percent (5%) of the shares of any company.
Each of the above provisions regarding non-competition and
non-solicitation/non-hire are considered reasonable by the parties, however, if
any such provision shall be found to be invalid by a court having jurisdiction
pursuant to section 9 below, such provision shall be modified as may be
necessary to make such provision valid and effective.
5. NO CONFLICTS OF INTEREST
------------------------
By signing this Agreement, you represent that you are not subject to any
restrictions, particularly, but without limitation, in connection with any
previous employment, which prevent you from entering into and performing your
obligations under this Agreement or which materially and adversely affect (or
may in the future, so far as you can reasonably foresee, materially and
adversely affect), your right to participate in the affairs of the Company.
6. STANDARDS OF ETHICS AND BUSINESS CONDUCT AND STANDARD EMPLOYMENT AGREEMENT
--------------------------------------------------------------------------
During your continued employment, you will be required to comply with WLI's
Standards of Ethics and Business Conduct and sign WLI's Standard Employment
Agreement as presently modified (copy enclosed).
7. CONFIDENTIALITY
---------------
By our signatures below, we agree to treat the details of this Agreement
with utmost confidentiality and that we will not disclose them to any third
parties except your immediate family, our respective financial and/or legal
advisors, any applicable trustees, and such WLI personnel and/or agents as have
a need to know this information for business purposes or as may be required by
law.
4
<PAGE> 5
8. ENTIRE AGREEMENT
----------------
The terms and conditions of (i) this Agreement, (ii) that certain agreement
between you and Wang Laboratories Ireland B.V., entered into contemporaneously
with this Agreement, regarding your employment outside of the United Kingdom,
and (iii) that certain Agreement between you and the Company, dated as of
February 23, 1994, as amended by the agreement referenced in (ii) above, set
forth the entire understanding of the parties in connection with your employment
by the Company and its subsidiaries and, by your signature below, you expressly
acknowledge that such terms and conditions supersede and restate the terms and
conditions set forth the 1993 Employment Agreement.
9. GOVERNING LAW; JURISDICTION
---------------------------
This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to such Commonwealth's
choice of law provisions, and the courts of such Commonwealth shall have
exclusive jurisdiction to settle any and all disputes, claims, actions,
proceedings and/or suits which may arise out of or in connection with this
Agreement.
Wang Laboratories, Inc.,
/s/ Joseph M. Tucci
-------------------------------------
Joseph M. Tucci
Chairman of the Board and
Chief Executive Officer
Agreed:
/s/ J.J.J. van Vuuren
- ----------------------------------
Jeremiah J.J. van Vuuren
5
<PAGE> 1
Exhibit 10.64
FIRST AMENDMENT TO CHANGE OF CONTROL SEVERANCE AGREEMENT
Reference is made to that certain Agreement dated February 23, 1994 between
the undersigned, Jeremiah J. J. van Vuuren, as "Executive" and Wang
Laboratories, Inc. as the "Company."
Based on good and valid consideration, the receipt and sufficiency of which
is hereby acknowledged, and with the intent to be bound hereby, the parties
agree that:
(1) The second sentence of Section 2 of the Agreement is hereby amended to
insert in subpart (ii) of such sentence:
(a) immediately after the words "any option to acquire shares of the
Company's Common Stock" and immediately before the word "awarded" the
following words: "(other than the Non-Qualified Long-Term Incentive
granted March 26, 1997) or any restricted shares"; and
(b) immediately after the word "option" and before the word "or," the
following: ", or restricted shares"; and
(c) immediately after the words "fully exercisable" and before the words
"upon the occurrence," the following: "or all restrictions thereon
shall terminated, as the case may be,".
(2) The following sentence shall be added as the third and last sentence in
Section 2 of the Agreement:
"Notwithstanding the immediately preceding sentence of this Section 2,
in the event of a Change of Control occurring prior to March 27, 1998,
the restrictions shall terminate on only twelve thousand five hundred
(12,500) restricted shares of the Company's common stock granted to
the Executive pursuant to that certain Restricted Stock Agreement,
dated as of March 26, 1997, upon the occurrence of such Change of
Control."
<PAGE> 2
The parties hereby ratify the Agreement as amended hereby without further
changes. This Amendment to the Agreement is executed as a document under seal
this 28th day of August, 1997.
WANG LABORATORIES, INC.
By: /s/ Joseph M. Tucci
--------------------------------
Joseph M. Tucci
Chairman of the Board and
Chief Executive Officer
AGREED:
By: /s/ J.J.J. van Vuuren
-------------------------------
Jeremiah J.J. van Vuuren
<PAGE> 1
Wang Laboratories, Inc. and Subsidiaries
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended Year Ended
June 30, 1997(A) June 30, 1996
----------------------------- -------------------------
Primary Fully Diluted Primary Fully Diluted
------- ------------- ------- -------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Average shares of Common Stock
outstanding 36,939 36,939 36,606 36,306
Common equivalent shares for stock options -- -- -- --
Net shares issuable under Modified Treasury Stock Method 6,490 6,490
Incremental shares from 4 1/2% Convertible
Preferred stock -- 3,913 -- --
------------------------ ---------------------
43,429 47,342 36,306 36,306
======================== =====================
Net Income $ 69,907 $69,907 $ (5,482) $ (5,482)
Accretion and dividends of Preferred Stock (14,098) (9,344) (22,648) (22,648)
Interest Savings and Investment Income as a
result of Modified Treasury Stock Method 7,885 7,591 -- --
------------------------ ---------------------
Net income applicable to Common
Stockholders $ 63,694 $68,154 $(28,130) $(28,130)
======================== =====================
Per Share Amounts:
From Continuing Operations $ (0.30) $ (0.18) $ 1.13 $ 1.13
From Discontinued Operations 1.77 1.62 (1.90) (1.90)
------------------------ ---------------------
Net income (loss) per share $ 1.47 $ 1.44 $ (0.77) $ (0.77)
======================== =====================
</TABLE>
(A) Calculated using the Modified Treasury Stock method
<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>
Year Year Year Nine months
ended June 30, ended June 30, ended June 30, ended June 30,
1997 1996 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $ 10.9 $ 5.1 $ 3.7 $ 3.5
Portion of rent expense
representative of interest 9.4 9.4 5.9 5.6
------- ------- ------- -------
20.3 14.5 9.6 9.1
Preferred dividend requirement 23.5 37.7 14.5 8.7
------- ------- ------- -------
Combined fixed charges and
preferred dividend $ 43.8 $ 52.2 $ 24.1 $ 17.8
======= ======= ======= =======
EARNINGS
Income (loss) from continuing
operations before income
taxes, discontinued operations,
fresh-start reporting adjustment
and extraordinary item ($ 22.3)(1) $ 94.9(2) $ 6.9(3) $ 18.4
Fixed charges per above 20.3 14.5 9.6 9.1
------- ------- ------- -------
($ 2.0) $ 109.4 $ 16.5 $ 27.5
======= ======= ======= =======
Ratio of earnings to combined
fixed charges and preferred dividends -- 2.1 -- 1.5
======= ======= ======= =======
Coverage deficiency $ (45.8) -- $ (7.6) --
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company
-------------------------------------
Three months Year
ended September 30, ended June 30,
1993 1993
------------------- --------------
<S> <C> <C>
FIXED CHARGES
Interest expense $ 1.2 $ 15.0
Portion of rent expense
representative of interest 2.7 9.7
------- -------
3.9 24.7
Preferred dividend requirement -- --
------- -------
Combined fixed charges and
preferred dividend $ 3.9 $ 24.7
======= =======
EARNINGS
Income (loss) from continuing
operations before income
taxes, discontinued operations,
fresh-start reporting adjustment
and extraordinary item ($ 8.5) ($197.2)
Fixed charges per above 3.9 24.7
------- -------
($ 4.6) ($172.5)
======= =======
Ratio of earnings to combined
fixed charges and preferred dividends -- --
======= =======
Coverage deficiency $ (8.5) $(197.2)
======= =======
</TABLE>
(1) Includes $36.3 million of acquisition-related, restructuring and Chapter
11-related charges
(2) Includes $1.1 million of acquisition-related, restructuring and Chapter
11-related credits
(3) Includes $62.1 million of acquisition-related, restructuring and Chapter
11-related charges
<PAGE> 1
EXHIBIT 21.1
WANG LABORATORIES, INC.
-----------------------
SUBSIDIARIES
------------
Wang Australia Pty. Limited - Australia
Wang Europe S.A./N.V. - Belgium
Wang Canada Limited - Canada
Financial Service International, Inc. - Delaware
Wang Government Services, Inc. - Delaware
Wang Laboratories Puerto Rico, Inc. - Delaware
Wang France S.A. - France
Wang Deutschland GmbH - Germany
Wang Pacific Limited - Hong Kong
Wang Ireland Limited - Ireland
Wang Italia S.p.A. - Italy
Wang Computer Korea, Ltd. - Korea
I-NET, Inc. - Maryland
Wang International Holding, Inc. - Massachusetts
Wang de Mexico, S. A. de C. V. - Mexico
Wang Nederland B.V. - Netherlands
Wang Laboratories Ireland B.V. - Netherlands
Wang Computadoras, Inc. - Puerto Rico
Wang Computers (Private) Limited - Singapore
Wang Espana, S.A. - Spain
Wang (Schweiz) AG - Switzerland
Recordskill Limited - United Kingdom
Wang (UK) Limited - United Kingdom
Wang Holdings Limited - United Kingdom
Wang I-NET Limited - United Kingdom
Advanced Paradigms, Inc. - Virginia
<PAGE> 1
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-73210), pertaining to the Company's Stock Incentive Plan, 1993
Employees' Stock Grant Plan, Employees' Stock Purchase Plan and Senior
Management Stock Distribution Plan, the Registration Statement (Form S-8 No.
33-75350), pertaining to the Company's 1993 Directors' Stock Option Plan, the
Registration Statement (Form S-8 No. 33-89910), pertaining to the Company's 1995
Director Stock Option Plan, the Registration Statement (Form S-8 33-88912),
pertaining to the Company's Employees' Stock Incentive Plan, the Registration
Statement (Form S-8 No. 33-89914), pertaining to the Company's 1995 Employees'
Stock Purchase Plan, the Registration Statement (Form S-8 No. 333-01333),
pertaining to the Company's Employees' Stock Incentive Plan, the Registration
Statement (Form S-8 No. 333-01335), pertaining to the Avail Systems Corporation
1991 Incentive Stock Plan, the Registration Statement (Form S-3 No. 333-03879)
of Wang Laboratories, Inc. and the related Prospectus, the Registration
Statement (Form S-3 and Form S-3/A No. 333-06611) of Wang Laboratories, Inc.
and the related Prospectus, the Registration Statement (Form S-8 No. 333-12963),
pertaining to the I-Net, Inc. Key Employee Stock Option Plan, the Registration
Statement (Form S-8 No. 333-12943), pertaining to the I-Net, Inc. 1996 Stock
Incentive Plan, the Registration Statement (Form S-3 and Form S-3/A No.
333-19789), of Wang Laboratories, Inc. Common Stock, the Registration Statement
(Form S-8 No. 333-26661), pertaining to Wang Laboratories, Inc. Common Stock,
the Registration Statement (Form S-8 No. 333-26635), pertaining to the I-Net,
Inc. Key Employee Stock Option Plan, the Registration Statement (Form S-8 No.
333-26637), pertaining to the I-Net, Inc. 1996 Stock Incentive Plan, the
Registration Statement (Form S-3 No. 333-27969), of Wang Laboratories, Inc.
pertaining to a warrant for Common Stock, and the Registration Statement (Form
S-3 No. 333-27971), of Wang Laboratories, Inc. Common Stock of our report dated
August 13, 1997, with respect to the consolidated financial statements and
schedule of Wang Laboratories, Inc. included in the Annual Report (Form 10-K)
for the year ended June 30, 1997.
ERNST & YOUNG LLP
Boston, Massachusetts
September 24, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet, Consolidated Statement of Operations, Note D - Other
Balance Sheet Information and Schedule II - Valuation and Qualifying Accounts
and is qualified in its entirety by reference to such Form 10-K for the fiscal
year ended June 30, 1997.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 242.2
<SECURITIES> 0
<RECEIVABLES> 262.2
<ALLOWANCES> 17.9
<INVENTORY> 14.5
<CURRENT-ASSETS> 554.6
<PP&E> 254.7 <F1>
<DEPRECIATION> 131.7 <F1>
<TOTAL-ASSETS> 1,034.8
<CURRENT-LIABILITIES> 428.5
<BONDS> 63.3
85.5
138.3
<COMMON> 0.4
<OTHER-SE> 284.1
<TOTAL-LIABILITY-AND-EQUITY> 1,034.8
<SALES> 304.5
<TOTAL-REVENUES> 1,268.4
<CGS> 226.6
<TOTAL-COSTS> 961.0
<OTHER-EXPENSES> 87.0 <F2>
<LOSS-PROVISION> 10.3
<INTEREST-EXPENSE> 10.9
<INCOME-PRETAX> (22.3)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6.7)
<DISCONTINUED> 76.6
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69.9
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.44
<FN>
<F1> PP&E Cost and Accumulated depreciation include capitalzied non-consumable
spares inventory.
<F2> Other costs and expenses includes $36.3 million of net
acquisition-related, Chapter 11-related and other restructuring charges.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet, Consolidated Statement of Operations, Note D -
Other Balance Sheet Information and Schedule II - Valuation and Qualifying
Accounts and is qualified in its entirety by reference to such Form 10-K for
the fiscal year ended June 30, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 175.3
<SECURITIES> 0
<RECEIVABLES> 204.9
<ALLOWANCES> 10.6
<INVENTORY> 19.9
<CURRENT-ASSETS> 438.0
<PP&E> 228.9 <F1>
<DEPRECIATION> 91.6 <F1>
<TOTAL-ASSETS> 856.6
<CURRENT-LIABILITIES> 351.3
<BONDS> 21.9
84.8
138.3
<COMMON> 0.4
<OTHER-SE> 204.4
<TOTAL-LIABILITY-AND-EQUITY> 856.6
<SALES> 314.9
<TOTAL-REVENUES> 1,013.9
<CGS> 216.5
<TOTAL-COSTS> 697.2
<OTHER-EXPENSES> 38.4 <F2>
<LOSS-PROVISION> 0.6
<INTEREST-EXPENSE> 5.1
<INCOME-PRETAX> 94.9
<INCOME-TAX> 0
<INCOME-CONTINUING> 63.5
<DISCONTINUED> (69.0)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5.5)
<EPS-PRIMARY> (0.77)
<EPS-DILUTED> (0.77)
<FN>
<F1> PP&E Cost and Accumulated depreciation include capitalized non-consumable
spares inventory.
<F2> Other costs and expenses includes $1.1 million of net acquisition-related,
Chapter 11-related and other restructuring credits.
</FN>
</TABLE>
