<PAGE> 1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 1-5677
WANG LABORATORIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 04-2192707
------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
600 Technology Park Drive
Billerica, Massachusetts 01821-4130
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(978) 967-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of l934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date (September 30, 1997):
Common stock, par value $0.01 per share 38,165,352 shares
<PAGE> 2
2
WANG LABORATORIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets -
September 30, 1997 and June 30, 1997 3
Consolidated Statements of Operations -
Three months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Three months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements -
September 30, 1997 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURE 25
</TABLE>
<PAGE> 3
3
PART I - FINANCIAL INFORMATION
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- --------
(Dollars in millions)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $177.8 $ 242.2
Accounts receivable, net 260.2 244.3
Inventories 21.4 14.5
Other current assets 62.4 53.6
------ --------
Total current assets 521.8 554.6
Depreciable assets, net 115.9 123.0
Intangible assets, net 308.0 311.6
Other 40.3 45.6
------ --------
Total assets $986.0 $1,034.8
====== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings due within one year $ 29.2 $ 63.3
Accounts payable, accrued expenses and other 282.2 295.7
Deferred service revenue 69.8 69.5
------ --------
Total current liabilities 381.2 428.5
------ --------
Long-term liabilities 88.0 98.0
------ --------
Commitments and contingencies
Series A preferred stock 85.6 85.5
------ --------
STOCKHOLDERS' EQUITY
Series B preferred stock, $0.01 par value,
143,750 shares authorized and outstanding,
liquidation preference of $143.8 million 138.3 138.3
Common stock, $0.01 par value, 100,000,000
shares authorized; outstanding shares: 38,165,352 at
September 30, 1997 and 38,008,004 at June 30, 1997 0.4 0.4
Capital in excess of par value 289.8 291.4
Cumulative translation adjustment (5.1) (3.7)
Retained earnings (deficit) 7.8 (3.6)
------ --------
Total stockholders' equity 431.2 422.8
------ --------
Total liabilities and stockholders' equity $986.0 $1,034.8
====== ========
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 4
4
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------ ------
(Dollars in millions, except per share data)
<S> <C> <C>
REVENUES
Services $244.5 $201.5
Products 67.7 71.2
------ ------
312.2 272.7
------ ------
COSTS AND EXPENSES
Cost of services 193.1 144.6
Cost of products 52.9 51.5
Research and development 0.7 0.8
Selling, general and administrative 49.1 50.0
Amortization of intangibles -
acquisition and fresh-start 6.3 9.0
Acquisition-related charges -- 27.4
------ ------
Total costs and expenses 302.1 283.3
------ ------
OPERATING INCOME (LOSS) 10.1 (10.6)
------ ------
OTHER (INCOME) EXPENSE
Interest expense 1.7 1.2
Other income - net (9.4) (1.2)
------ ------
Total other (income) expense (7.7) --
------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 17.8 (10.6)
Income taxes 6.4 1.7
------ ------
INCOME (LOSS) FROM CONTINUING OPERATIONS 11.4 (12.3)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES -- (14.1)
------ ------
NET INCOME (LOSS) 11.4 (26.4)
Dividends and accretion on preferred stock (3.5) (3.5)
------ ------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS $ 7.9 $(29.9)
====== ======
PER SHARE AMOUNTS
Primary
Continuing operations $ 0.21 $(0.43)
Discontinued operations -- (0.39)
------ ------
Net income (loss) per share $ 0.21 $(0.82)
====== ======
Fully diluted
Continuing operations $ 0.21 $(0.43)
Discontinued operations -- (0.39)
------ ------
Net income (loss) per share $ 0.21 $(0.82)
====== ======
SHARES USED TO COMPUTE PER SHARE AMOUNTS
(in millions) 38.1 36.6
====== ======
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 5
5
WANG LABORATORIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------ -------
(Dollars in millions)
<S> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations $ 11.4 $ (12.3)
Depreciation 15.3 12.4
Amortization 7.0 11.6
Gain on asset sales (6.5) --
Non-cash provision for income taxes 5.6 0.7
Acquisition-related charges -- 27.4
Payments for acquisition-related charges (6.4) (7.6)
Payments for restructuring charges (0.6) (1.6)
------ -------
25.8 30.6
------ -------
CHANGES IN OTHER ACCOUNTS AFFECTING OPERATIONS
Accounts receivable (10.1) (21.2)
Inventories (1.4) (3.0)
Other current assets (2.9) (0.7)
Accounts payable and other current liabilities (23.4) (8.2)
Other (1.1) (1.1)
------ -------
Net changes in other accounts affecting operations
(38.9) (34.2)
------ -------
Cash used in continuing operations (13.1) (3.6)
Cash used in discontinued operations (3.8) (11.3)
------ -------
Cash used in operations (16.9) (14.9)
------ -------
INVESTING ACTIVITIES
Depreciable assets (15.3) (9.8)
Proceeds from asset sales 9.9 5.6
Business acquisitions, net of cash acquired (0.3) (148.6)
Other (4.2) (1.4)
------ -------
Cash used in investing activities (9.9) (154.2)
------ -------
FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings (34.7) 67.8
Proceeds from stock plans 1.8 0.1
Dividends paid on preferred stock (3.3) (3.3)
------ -------
Cash provided by (used in) financing activities
(36.2) 64.6
------ -------
Effect of changes in foreign exchange rates on cash (1.4) 0.7
------ -------
DECREASE IN CASH AND EQUIVALENTS (64.4) (103.8)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 242.2 175.3
------ -------
CASH AND EQUIVALENTS AT END OF PERIOD $177.8 $ 71.5
====== =======
</TABLE>
See notes to the consolidated financial statements.
<PAGE> 6
6
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
NOTE A - BASIS OF PRESENTATION
The financial information included herein has not been audited. However, in the
opinion of management, all material adjustments necessary for a fair
presentation of the results for the periods presented have been reflected and
consist only of normal recurring accruals, except for acquisition-related
charges recorded in the three-month period ended September 30, 1996.
The accompanying financial information should be read in conjunction with the
consolidated financial statements and notes thereto contained in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission for
the fiscal year ended June 30, 1997.
The Company completed the sale of its software business unit to Eastman Kodak
Company ("Kodak") on March 17, 1997. The historical results of this business
unit have been reported as discontinued operations in the Company's Consolidated
Statements of Operations and of Cash Flows for the quarter ended September 30,
1996.
The Company completed the purchase of I-NET, Inc. ("I-NET") on August 29, 1996.
The Company's Consolidated Statements of Operations and of Cash Flows for the
three-month period ended September 30, 1996 include the results of I-NET since
acquisition.
Certain amounts in the prior year period have been reclassified to conform to
current presentations.
Earnings per share is calculated based on the weighted average number of common
shares outstanding, including those yet to be distributed by the Disbursing
Agent appointed under the Company's Reorganization Plan, and the effect, when
dilutive, of stock options and warrants. Income (loss) from continuing
operations, for purposes of calculating earnings per share, has been adjusted by
cumulative dividends and accretion related to the Company's preferred stock.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share", which is required to be adopted for financial
statements issued for periods ending after December 15, 1997. At that time, the
Company will be required to change the method currently used to compute earnings
per share and restate prior periods. Under the new standard, diluted net income
(loss) per share would be $0.20 and $(0.82) for the three month periods ended
September 30, 1997 and 1996, respectively, compared to $0.21 and $(0.82) as
currently reported. Basic net income (loss) per share would be $0.21 and $(0.82)
for the three month periods ended September 30, 1997 and 1996, respectively,
unchanged from per share amounts reported.
<PAGE> 7
7
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
NOTE B - BUSINESS ACQUISITION
I-NET ACQUISITION
On August 29, 1996, the Company completed its purchase of all of the outstanding
shares of I-NET. In consideration for the shares of I-NET the Company paid
$100.2 million in cash and issued one-year, interest-free notes in the total
amount of $64.5 million. The Company discounted the notes at a rate of 8.0%, to
$59.7 million for accounting purposes, and increased the principal balance
through charges to interest expense to the maturity date. The Company has paid
$36.3 million to the holders of the notes, including $2.2 million of interest,
as of September 30, 1997. Final settlement of the notes is pending resolution of
claims made by the Company against the note holders in accordance with the Stock
Purchase Agreement.
<PAGE> 8
8
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
NOTE C - OTHER BALANCE SHEET INFORMATION
Components of selected captions in the Consolidated Balance Sheet follow (in
millions):
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------- --------
(Dollars in millions)
<S> <C> <C>
Accounts receivable
Billed $217.9 $226.2
Unbilled 60.5 36.0
------ ------
278.4 262.2
Less allowances 18.2 17.9
------ ------
$260.2 $244.3
====== ======
Inventories
Finished products $ 11.1 $ 5.6
Raw materials and work-in-process 8.0 7.8
Service parts and supplies 2.3 1.1
------ ------
$ 21.4 $ 14.5
====== ======
Depreciable assets
Land $ 4.1 $ 4.5
Buildings and improvements 20.2 25.0
Machinery and equipment 89.4 84.9
Spare parts 146.2 140.3
------ ------
259.9 254.7
Less accumulated depreciation 144.0 131.7
------ ------
$115.9 $123.0
====== ======
Intangible assets
Trademarks and patents $ 4.5 $ 4.1
Computer software 0.3 0.3
Installed base - service 61.6 61.6
License agreements 24.9 24.9
Assembled workforce 13.8 13.9
Goodwill 272.1 271.0
------ ------
377.2 375.8
Less accumulated amortization 69.2 64.2
------ ------
$308.0 $311.6
====== ======
Accounts payable, accrued expenses and other
Accounts payable $ 66.9 $ 64.4
Accrued expenses 120.8 121.3
Compensation and benefits 49.7 57.9
Restructuring, reorganization and acquisition-related 26.1 33.9
Other 18.7 18.2
------ ------
$282.2 $295.7
====== ======
Long-term liabilities
Postretirement $ 16.7 $ 16.8
Pension 6.6 7.1
Facilities 9.1 9.2
Restructuring, reorganization and acquisition-related 6.8 7.8
Insurance 6.4 5.6
Other 42.4 51.5
------ ------
$ 88.0 $ 98.0
====== ======
</TABLE>
<PAGE> 9
9
WANG LABORATORIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1997
NOTE D - CONTINGENCIES
The Company is a defendant in a number of lawsuits arising from the conduct 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 litigation will be material to the Company's
consolidated financial position or its results of operations.
<PAGE> 10
10
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, expected expenses, operating results and the need for additional
investment. Any such statements are subject to normal business risks and
uncertainties that could cause the actual results or needs to differ from those
described herein. For a further discussion of the various risks affecting the
business, refer to "Risks and Uncertainties" appearing at the end of this
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"). The historical results of the software
business have been reported as discontinued operations in the Company's
Consolidated Statements of Operations and of Cash Flows for the three-month
period ended September 30, 1996. The following discussion addresses the results
of the Company's continuing operations. The results of operations for the
periods reported are not necessarily indicative of those that may be expected
for the full fiscal year.
On August 29, 1996, the Company completed the acquisition of I-NET, Inc.
("I-NET"). The Company's Consolidated Statements of Operations and of Cash Flows
for the three-month period ended September 30, 1996 include the results of I-NET
since its acquisition.
The Company has recently confirmed that it is in discussions with Olivetti, SpA,
to merge Olivetti's information technology solutions and services subsidiary
("Olsy"), with Wang's operations. There can be no assurance that the discussions
will lead to a transaction. However, should a transaction be consummated, it
could have a significant impact on the Company's revenues, cash flows, results
of operations and financial position.
RESULTS OF CONTINUING OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
OVERVIEW
For the three months ended September 30, 1997, the Company reported revenues of
$312.2 million, a 14.5% increase compared to revenues of $272.7 million for the
same prior year period, attributable to acquisitions and internal growth.
<PAGE> 11
11
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company reported operating income of $10.1 million for the three months
ended September 30, 1997, compared to an operating loss of $10.6 million for the
three months ended September 30, 1996. Charges associated with the amortization
of acquisition-related intangible assets were $6.3 million and $5.4 million for
the three-month periods ended September 30, 1997 and 1996, respectively. The
operating loss for the three months ended September 30, 1996, includes $27.4
million of acquisition-related charges which primarily reflect the costs
associated with combining the operations of the Company and I-NET and other
business consolidation activities.
The decline in operating income is primarily attributable to the previously
anticipated decline in higher-margin revenues from proprietary products and
services and the increase in lower-margin revenues from desktop and network
services resulting principally from the acquisition of I-NET. The Company
anticipates that the shift in revenue mix and the decline in proprietary
revenues will continue.
EBITDA (earnings before interest, income taxes, depreciation and amortization)
from continuing operations was $39.2 million and $38.6 million in the three
month periods ended September 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 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 27.0% compared to the same prior year
period, including approximately 2.0% attributable to foreign exchange rate
fluctuations. The Company expects that revenues from proprietary sources will
continue to decline at a rate approximating 25% per year on a constant dollar
basis. However, from one period to the next, the rate of decline could be highly
variable.
<PAGE> 12
12
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Services revenues increased by 21.3%, to $244.5 million, compared to $201.5
million in the same prior year period. The increase in network services revenues
was $62.9 million, or 47.2%, to $196.3 million, and was primarily attributable
to the acquisition of I-NET. Proprietary services revenues decreased by 29.2%,
to $48.2 million, including 2.9% due to foreign exchange rate fluctuations.
Product revenues decreased by 4.9%, to $67.7 million. Proprietary product sales
declined by $2.9 million, or 17.9%, to $13.3 million. Network product and other
product sales remained stable at $54.4 million, compared to $55.0 million in the
same period of the prior year.
GROSS MARGIN
Services gross margin decreased to 21.0%, from 28.2% in the comparable prior
year period. Services gross margin continues to be adversely affected by the
increase in lower-margin maintenance revenues on multi-vendor services products,
the decline in higher-margin revenues from proprietary maintenance contracts and
the inclusion of I-NET's lower-margin business, along with the effects of
ongoing consolidation in the industry, resulting in competitive and
technological pressures. Although it is anticipated that these factors will
continue to exert pressure on services gross margin, the Company believes that
the effects will be partially offset by the implementation of certain cost
reduction, integration and consolidation initiatives currently underway.
Product gross margin was 21.9%, compared to 27.7% in the comparable prior year
period. The decrease in product gross margin is primarily a result of the
decline in proprietary product sales, which have historically higher margins
than the margins on resold client-server products.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs decreased by $0.1 million, from $0.8 million in
the comparable prior year period. 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 EXPENSES
Selling, general and administrative expenses decreased by $0.9 million, compared
to the prior year period, and also decreased as a percentage of revenues, to
15.7% in the three months ended September 30, 1997, compared to 18.3% in the
three months ended September 30, 1996. The reduction in selling, general and
administrative expenses reflects the results of integration activities initiated
in connection with the Company's recent acquisitions. The three-month period
ended September 30, 1996 included one month of selling, general and
administrative expense for I-NET attributable to the post-acquisition period.
The Company expects that ongoing integration activities will continue to
contribute to the management of selling, general and administrative costs going
forward.
<PAGE> 13
13
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OTHER COSTS AND EXPENSES
Amortization of acquired intangible assets totaled $6.3 million in the three
months ended September 30, 1997. During the prior fiscal year, the Company
eliminated its remaining fresh-start intangible assets through the recognition
of a deferred tax asset attributable to the expected utilization of tax net
operating loss carryforwards which existed at September 30, 1993. Amortization
of fresh-start and acquired intangible assets in the three months ended
September 30, 1996 was $9.0 million, of which $3.6 million relates to the
implementation of fresh-start reporting and $5.4 million relates to intangible
assets established in connection with business acquisitions.
Acquisition-related charges of $27.4 million in the three months ended
September 30, 1996, primarily reflect the costs associated with combining the
operations of the Company and I-NET and other business consolidation activities.
OTHER INCOME AND EXPENSE
Interest expense increased to $1.7 million in the three months ended September
30, 1997, compared to $1.2 million in the same prior year period. Interest
expense in the current year quarter is principally the result of imputed
interest recorded on the notes issued to the selling stockholders of I-NET,
while the prior year expense primarily resulted from amounts outstanding under
the Revolving Credit Facility with Bankers Trust Company. Other income primarily
consisted of a $6.5 million gain realized on the sale of certain land and
facilities owned by the Company in Billerica, Massachusetts and $2.6 million of
interest income. The increase in interest income, compared to $1.8 million in
the same period in the prior year, was primarily due to higher cash balances
resulting from the sale of the Company's software business to Eastman Kodak
Company in the third quarter of fiscal 1997.
INCOME TAXES
The provision rate for income taxes in the three months ended September 30,
1997 was 36%, or $6.4 million. This compares to a provision of $1.7 million in
the three months ended September 30, 1996. The lower provision in the prior
year period relates to the utilization of certain foreign net operating loss
carryforwards. The provision for the three months ended September 30, 1997
included $5.6 million of non-cash expense.
EMPLOYEES
At September 30, 1997, the Company had approximately 9,600 employees.
<PAGE> 14
14
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
LIQUIDITY AND SOURCES OF CAPITAL
Cash and equivalents were $177.8 million, a decrease of $64.4 million during the
three months ended September 30, 1997.
Cash used in operations during the three months ended September 30, 1997 was
$16.9 million, including $13.1 million from current operating activities and
$3.8 million used for transaction costs associated with discontinued operations.
Cash used in investing activities during the three months ended September 30,
1997 is primarily comprised of $15.3 million for capital additions, including
$7.5 million for purchases of non-consumable spares, less proceeds of $9.9
million realized from the sale of land and facilities owned by the Company in
Billerica, Massachusetts.
Cash used in financing activities was $36.2 million during the three months
ended September 30, 1997, and includes principal payments of $34.1 million paid
in connection with the notes to the selling stockholders of I-NET, $0.6 million
of net payments of other short-term borrowings and cash dividends paid of $3.3
million, less proceeds of $1.8 million from stock plans. The notes payable to
I-NET shareholders at September 30, 1997 totaled $27.8 million. Final
settlement of the notes is pending resolution of claims made by the Company
against the note holders in accordance with the Stock Purchase Agreement.
In addition to normal operating activities, capital expenditures and payment of
preferred dividends, expected cash requirements over the next twelve months
include approximately $20 million for both new and previously recorded
integration-related, restructuring and business realignment initiatives, as well
as approximately $18 million for the construction and fit-up of the Company's
new corporate headquarters in Billerica, Massachusetts, scheduled for completion
in late calendar 1998.
The Company believes that existing cash balances, cash generated from
operations, and borrowing availability under its Revolving Credit Facility with
Bankers Trust Company and certain other financial institutions will be
sufficient to meet the Company's operational cash requirements for the next
twelve months, and for pursuing certain 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. In particular, should the
<PAGE> 15
15
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
Olsy transaction be consummated, additional financing would be required.
Although the Company believes that such financing would be available, there can
be no assurance that any such funding would be available in a timely manner or
on terms acceptable to the Company.
RISKS AND UNCERTAINTIES
Except for statements of historical matters, the statements contained in this
Form 10-Q may be deemed "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:
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 Corporation and Cisco Systems, Inc. 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
<PAGE> 16
16
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
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 foregoing risk factors apply to any significant acquisitions or
strategic alliances contemplated by the Company, including any possible
transaction with Olsy. 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 approximating
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.
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
<PAGE> 17
17
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
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, non-recurring transactions 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 the three months ended
September 30, 1997 and the year ended June 30, 1997, the Company derived
approximately 31% and 30%, respectively, 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
<PAGE> 18
18
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
awarded contract, could have a material adverse effect on the financial
performance of the Company for the period in question. Other risks 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
<PAGE> 19
19
WANG LABORATORIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (Continued)
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.
AVAILABILITY OF FINANCING. The Company may need to raise additional
funds through public or private debt or equity offerings in order to make
acquisitions and otherwise 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.
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.
<PAGE> 20
20
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1(1) The Amended and Restated Reorganization Plan of Wang
Laboratories, Inc. and Official Committee of Unsecured Creditors
dated September 30, 1993
3.1(2) Certificate of Incorporation
3.2(8) Certificate of Incorporation, as Amended
3.3(10) Certificate of Stock Designation with respect to the 4 1/2%
Series A Cumulative Convertible Preferred Stock
3.4(13) Certificate of Elimination of the Registrant's 11% Exchangeable
Preferred Stock
3.5(13) Certificate of Stock Designation with respect to the 6 1/2%
Series B Cumulative Convertible Preferred Stock
3.6(12) 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 James J. Hogan
10.5(3) Consulting Agreement of Raymond C. Kurzweil
10.6(5) Employee Retention Agreement with James J. Hogan
10.7(7) Stock Incentive Plan, as Amended
10.8(8) Contingent Severance Compensation, as Amended with Franklyn A.
Caine (Employment Agreement)
10.9(8) Employees' Stock Incentive Plan
10.10(8) 1995 Director Stock Option Plan
</TABLE>
<PAGE> 21
21
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.11(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
10.12(10) Employment Agreement with Donald P. Casey, as Amended
10.13(10) Employment Agreement with Stephen G. Jerritts
10.14(11) Form of Contingent Severance Compensation Agreements with
Stephen G. Jerritts and Ronald E. Cuneo
10.15(11) 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
10.16(12) 1994 Employees' Stock Incentive Plan, as Amended
10.17(12) Form of Amendment to Employment Letter Agreement for David I.
Goulden, William P. Ferry, Albert A. Notini and Franklyn A.
Caine
10.18(13) 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
10.19(13) Registration Rights Agreement 6 1/2% Cumulative Convertible
Preferred Stock
10.20(14) 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
10.21(15) Stock Purchase Agreement with respect to the Registrant's
acquisition of I-NET, Inc.
10.22(15) 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
10.23(16) Employment Agreement of Joseph M. Tucci, as Amended
</TABLE>
<PAGE> 22
22
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.24(16) Employment Agreement of Lucy A. Flynn
10.25(17) 1995 Employees' Stock Purchase Plan, as Amended
10.26(17) Employees' Stock Incentive Plan, as Amended
10.27(17) 1995 Director Stock Option Plan, as Amended
10.28(18) Asset Purchase Agreement, as amended, with respect to the
Registrant's sale of its software business unit to Eastman Kodak
Company
10.29(19) Amended and Restated Employment Agreement of Joseph M. Tucci
10.30(19) Restricted Stock Agreement of Joseph M. Tucci
10.31(19) Non-Qualified Long Term Incentive Stock Option Agreement of
Joseph M. Tucci
10.32(19) Second Amendment to the Change in Control Severance Agreement of
Joseph M. Tucci
10.33(19) Form of Non-Qualified Long Term Incentive Stock Option Agreement
with Messrs. Caine, Goulden and Notini, each an executive
officer of the Registrant
10.34(19) Form of Restricted Stock Agreement with Messrs. Caine, Goulden
and Notini, each an executive officer of the Registrant
10.35(19) Amended and Restated Employment Agreement of Ken S. Bajaj
10.36(19) Letter Agreement of Employment of Jose Ofman
10.37(19) Amendment Number 1 to Letter Agreement of Employment of
Jose Ofman
10.38(19) Non-Qualified Long Term Stock Option Agreement with
Jeremiah J. J. Van Vuuren
10.39(19) Letter Agreement for Special Bonus of Franklyn A. Caine
10.40(19) Change in Control Severance Agreement, as amended of
Franklyn A. Caine
10.41(19) Letter Agreement for Special Bonus of Albert A. Notini
10.42(19) Change in Control Severance Agreement, as amended of
Albert A. Notini
</TABLE>
<PAGE> 23
23
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.43(19) Letter Agreement for Special Bonus of David I. Goulden
10.44(19) Change in Control Severance Agreement, as amended of David I.
Goulden
10.45(19) Amendment Number 1 to the 1993 Directors' Stock Option Plan
10.46(19) Amendment Number 2 to the Stock Incentive Plan
10.47(19) Amendment Number 3 to the Employees' Stock Incentive Plan
10.48(19) Letter Agreement for 1996 Bonus for Ken S. Bajaj
10.49(20) Restricted Stock Agreement of Jeremiah J. J. Van Vuuren with
Registrant
10.50(20) Employment Agreement of Jeremiah J. J. Van Vuuren with Wang
Laboratories Ireland B.V.
10.51(20) Employment Agreement of Jeremiah J. J. Van Vuuren
10.52(20) Change in Control Severance Agreement, as amended of
Jeremiah J. J. Van Vuuren
10.53 Form of Change in Control Severance Agreement with
Messrs. Buckingham and Brauneis
11.1 Statements re Computation of Per Share Earnings
12.1 Calculation of Ratio of Earnings to Fixed Charges
27.1 Financial Data Schedule
</TABLE>
(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.
<PAGE> 24
24
(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, 1994.
(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 annual report on Form 10-K for the
fiscal year ending June 30, 1995.
(11) Filed as an Exhibit to the Registrant's report on Form 10-Q/A for the
quarter ended September 30, 1995.
(12) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1995.
(13) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended March 31, 1996.
(14) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
May 3, 1996.
(15) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
August 29, 1996.
(16) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1996.
(17) Filed as an Exhibit to the Registrant's quarterly report on Form 10-Q for
the quarter ended December 31, 1996.
(18) Filed as an Exhibit to the Registrant's Current Report on Form 8-K dated
March 17, 1997.
(19) Filed as an Exhibit to the Registrant's quarterly report a Form 10-Q for
the quarter ended March 31, 1997.
(20) Filed as an Exhibit to the Registrant's annual report on Form 10-K for the
fiscal year ended June 30, 1997.
(b) During the quarter ended September 30, 1997, the Registrant filed no
Current Reports on Form 8-K.
<PAGE> 25
25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATE: November 10, 1997
WANG LABORATORIES, INC.
/s/ Franklyn A. Caine
----------------------------
Franklyn A. Caine,
Executive Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10.53
AGREEMENT
THIS AGREEMENT, effective as of ______________,1997 (the "Effective
Date"), is made by and between Wang Laboratories, Inc., a Delaware corporation
(the "Company"), and [name] (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to foster the continuous employment of key management
personnel;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly-held corporations, the possibility of a
Change in Control (as defined below in Section 16) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders;
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. DEFINED TERMS. Capitalized terms, not elsewhere defined in this
Agreement, are defined in Section 16 hereof.
2. TERMS OF AGREEMENT. This Agreement shall commence as of the
Effective Date and shall continue in effect while the Executive is employed by
the Company for a period of three years, provided, however, that commencing on
the third anniversary of the commencement of the term of this Agreement and on
each anniversary thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than ninety days prior to any
such anniversary date either party shall have given notice that it does not wish
to extend this Agreement (provided that no such notice may be given by the
Company during the pendency of or within one year following a Potential Change
in Control); provided, further, if a Change in Control shall have occurred
during the original or extended term of this Agreement, this Agreement shall
continue in effect for a period of thirty-six months beyond the month in which
such Change in Control occurred. It is
<PAGE> 2
intended, and the parties hereto agree, that (i) the benefit, if any, payable to
the Executive under any other severance or termination pay plan, arrangement or
agreement of or with the Company shall be reduced by the amount of any payment
actually provided under Section 6.1 hereof and (ii) any option to acquire shares
of the Company's common stock awarded to the Executive under any stock option or
other long-term incentive plan of the Company shall become fully exercisable
upon the occurrence of a Change in Control during the term of this Agreement,
provided that nothing herein shall otherwise affect or modify the terms of any
such option or the Executive's rights or obligations with respect thereto.
3. COMPANY'S COVENANTS SUMMARIZED. In order to induce the Executive to
become employed by or remain in the employ of the Company as the case may be,
and in consideration of the Executive's covenant set forth in Section 4 hereof,
the Company agrees, under the conditions described herein, to pay the Executive
the "Severance Payment" described herein in the event the Executive's employment
with the Company is terminated under the circumstances described below following
a Change in Control and during the term of this Agreement. No amount or benefit
shall be payable under this Agreement unless there shall have been (or under the
terms hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control.
4. THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change in Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), or by
reason of Death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENT.
5.1 Following a Change in Control during the term of this Agreement,
during any period that the Executive fails to perform the Executive's full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Company shall continue to pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
2
<PAGE> 3
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall, except as provided in Section 2 above, pay the Executive's normal
post-termination compensation and benefits to the Executive as such payments
become due. Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company's retirement, insurance and
other compensation or benefit plans, programs, agreements or arrangements.
6. SEVERANCE PAYMENT.
6.1 Subject to Section 6.2 hereof, following a (i) Change in Control
during the term of this Agreement, and (ii) termination of the Executive's
employment on or before the first anniversary of such Change in Control, the
Company shall pay the Executive the payment described in this Section 6.1 (the
"Severance Payment") , in addition to the payments and benefits described in
Section 5 hereof, unless such termination is (i) by the Company for Cause,
(ii) by reason of the Executive's Death or Disability or (iii) by the Executive
without Good Reason. Moreover, the Executive's employment shall be deemed to
have been terminated following a Change in Control by the Company without Cause
or by the Executive with Good Reason if the Executive's employment is terminated
without Cause prior to a Change in Control at the direction of a Person who has
entered into an agreement with the Company the consummation of which will
constitute a Change in Control or if the Executive terminates his employment
with Good Reason prior to a Change in Control (determined by treating a
Potential Change in Control as a Change in Control in applying the definition in
Good Reason) if the circumstance or event which constitutes Good Reason occurs
at the direction of such Person. In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company shall pay to
the Executive a lump sum severance payment, in cash, equal to the Executive's
then base salary plus the target bonus contained in the
3
<PAGE> 4
Executive's performance bonus plan for the fiscal year in which occurs the Date
of Termination.
6.2 Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment, whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person (all
such payments and benefits, including the Severance Payments, being hereinafter
called "Total Payments"), would be subject (in whole or part), to the excise tax
imposed under section 4999 of the Code (the "Excise Tax"), then the Severance
Payments shall be reduced to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax (after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement) if (A) the net amount of such
Total Payments, as so reduced, (and after deduction of the net amount of
federal, state and local income tax on such reduced Total Payments) is greater
than (B) the excess of (i) the net amount of such Total Payments, without
reduction (but after deduction of the net amount of federal, state and local
income tax on such Total Payments), over (ii) the amount of Excise Tax to which
the Executive would be subject in respect of such Total Payments. For purposes
of determining whether and the extent to which the Total Payments will be
subject to the Excise Tax, (i) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively waived in writing prior
to the Date of Termination shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which in the opinion of tax counsel
selected by the Company does not constitute a "parachute payment" within the
meaning of section 280G(b)(2) of the Code, (including by reason of section
280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of
such Total Payments shall be taken into account which constitutes reasonable
compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the Base Amount allocable to such
reasonable compensation, and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the Company in accordance with the principles of sections 280G(d)(3) and
(4) of the Code. Prior to the payment date set forth in Section 6.3 hereof, the
Company shall provide the Executive with its calculation of the amounts referred
to in this Section and such supporting materials as are reasonably necessary for
the Executive to evaluate the Company's calculations.
4
<PAGE> 5
6.3 The payment provided for in Section 6.1 hereof shall be made not
later than the fifth day following the Date of Termination, provided, however,
that if the amount of such payment, and the limitation on such payment set forth
in Section 6.2 hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Company, of the minimum amount of such payment to which the
Executive is clearly entitled and shall pay the remainder of such payment
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payment exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of or in connection with a
termination of employment following a Change in Control and during the term of
this Agreement (including all such fees and expenses, if any, incurred in good
faith in disputing any such termination or in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder). Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances
5
<PAGE> 6
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Executive was guilty
of conduct set forth in the definition of Cause herein, and specifying the
particulars thereof in detail.
7.2 DATE OF TERMINATION. "Date of Termination", with respect to any
termination of the Executive's employment after a Change in Control and during
the term of this Agreement, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive, shall
not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. Notwithstanding any provision of
Section 7.2 hereof to the contrary, if within fifteen (15) days after any Notice
of Termination is received, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7.3), the party receiving such Notice
of Termination notifies the other party in writing that a dispute exists
concerning the termination, the Date of Termination shall be the date on which
the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence. For the purposes of the
preceding sentence, a dispute concerning termination shall be deemed finally
resolved if neither party commences an action in any court within thirty (30)
days of an arbitration award concerning such dispute seeking the modification of
or other relief from such award.
7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
6
<PAGE> 7
termination is disputed in accordance with Section 7.3 hereof, the Company shall
continue to pay the Executive the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. NO MITIGATION. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to this
Agreement. Further, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.
9. SUCCESSORS.
9.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United Stated
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished
7
<PAGE> 8
to the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon actual receipt:
TO THE COMPANY:
Wang Laboratories, Inc.
600 Technology Park Drive
Billerica, Massachusetts 01821
Attention: Chief Executive Officer
Copy to: General Counsel
TO THE EXECUTIVE:
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 5, 6 and 7 shall survive the expiration of the term of this Agreement.
12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
8
<PAGE> 9
14. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in Boston, Massachusetts in
accordance with the commercial rules of the American Arbitration Association
("AAA") then in effect. Unless the panel of arbitrators shall have been selected
by agreement of the parties within thirty (30) days of the initiation of
arbitration proceedings, each party shall be entitled to select one arbitrator
within ten (10) business days of the lapse of such thirty (30) day period and
the third arbitrator shall be selected by agreement of the two arbitrators so
selected within seven (7) business days after the selection of the two
arbitrators. In the event that either party does not timely designate an
arbitrator or that the two arbitrators do not timely select a third arbitrator
in accordance with the preceding sentence, then upon application of either party
to the Boston office of the AAA, the AAA shall designate such arbitrator.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction, provided, however, that the Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive shall keep
secret and confidential and shall not disclose to any third party in any fashion
or for any purpose whatsoever, any information regarding this Agreement, or any
other information regarding the Company which is (i) not available to the
general public, and/or (ii) not generally known outside the Company, to which he
has or will have had access at any time during the course of his employment by
the Company, including, without limitation, any information relating to: the
Company's business or operations; its plans, strategies, prospects or
objectives; its products, technology, processes or specifications; its research
and development operations or plans; its customers and customer lists; its
manufacturing, distribution, sales, service, support and marketing practices and
operations; its financial condition and results of operations; its operational
strengths and weaknesses; and, its personnel and compensation policies and
procedures. Notwithstanding the foregoing provisions of this Section 15, the
Executive may discuss this Agreement with the members of his immediate family
and with his personal legal and tax advisors, provided that, prior to disclosing
any term or condition of this Agreement to any person, the Executive shall
obtain from such person for the benefit of the Company his or her agreement to
observe the foregoing provisions.
16. DEFINITIONS. For purposes of this Agreement, the following shall
have the meanings indicated below:
9
<PAGE> 10
(A) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" and "Beneficial Ownership" shall have the
meaning defined in, and shall be determined pursuant to, Rule 13d-3 under the
Securities Exchange Act of 1934, as amended.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean the willful and continued
failure by the Executive to substantially perform the Executive's duties with
the Company, a substantial, and not DE MINIMIS, violation of the Company's
Standards of Ethics and Business Conduct or its Rules of Employee Conduct (and
any successor documents, however titled), as the same are in effect from time to
time, the Executive's conviction of a felony or engaging in conduct that
constitutes a violation of Section 15 hereof.
(E) A "Change in Control" shall have the meaning defined in
Section 2.3 of Wang Laboratories, Inc. Employees' Stock Incentive Plan.:
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time. All references to the Code shall be deemed also to
refer to any successor provisions to such sections.
(G) "Company" shall mean Wang Laboratories, Inc., and any
successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise (except in determining, under
Section 16(E) hereof, whether or not any Change in Control of the Company has
occurred in connection with such succession).
(H) "Date of Termination" shall have the meaning stated in
Sections 7.2 and 7.3 hereof.
(I) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
10
<PAGE> 11
(J) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(K) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi), (vii), or (viii) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(i) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior officer of the
Company;
(ii) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the Company and
all senior executives of any Person in control of the Company;
(iv) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any Person in
control of the Company, or to pay to the Executive any portion of an
installment of deferred compensation under any deferred compensation
program of the Company, within fourteen (14) days of the date such
compensation is due;
(v) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior
to the Change in Control which is material to the Executive's total
compensation, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the Executive's
participation therein (or in a substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's participation
relative to other participants, as existed at the time of the Change in
Control;
11
<PAGE> 12
(vi) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the Change in
Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled on
the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in
Control;
(vii) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1; for purposes of this Agreement, no
such purported termination shall be effective; or
(viii) the failure by the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 9 hereof.
The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(L) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(M) "Person" shall have the meaning defined in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended.
(N) "Potential Change in Control" shall be deemed to have occurred
if any one of the conditions set forth in any one of the following paragraphs
shall have been satisfied:
12
<PAGE> 13
(i) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(ii) the Company or any other Person publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(iii) any Person (other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company) who
is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined
voting power of the Company's then outstanding securities, increases
such Person's Beneficial Ownership of such securities by 5% or more
over the percentage so owned by such Person on the date hereof; or
(iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(O) "Retirement" shall mean retirement after attaining "normal
retirement age" under any pension or retirement plan maintained by the Company
in which the Executive participates.
(P) "Severance Payment" shall mean the payment described in
Section 6.1 hereof.
(Q) "Total Payment" shall mean those payments described in
Section 6.2 hereof.
WANG LABORATORIES, INC.
By: ___________________________
Franklyn A. Caine
Executive Vice President
and Chief Financial Officer
Accepted and Agreed to:
_______________________
[name]
13
<PAGE> 1
Wang Laboratories, Inc. and Subsidiaries
EXHIBIT 11.1 - COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
September 30, 1997 September 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 38,070 38,070 36,611 36,611
Common equivalent shares for stock options -- -- -- --
------- ------- -------- --------
38,070 38,070 36,611 36,611
======= ======= ======== ========
Net Income $11,391 $11,391 $(26,438) $(26,438)
Accretion and dividends of Preferred Stock (3,525) (3,525) (3,524) (3,524)
------- ------- -------- --------
Net income applicable to Common
Stockholders $ 7,866 $ 7,866 $(29,962) $(29,962)
======= ======= ======== ========
Per Share Amounts:
From Continuing Operations $ 0.21 $ 0.21 $ (0.43) $ (0.43)
From Discontinued Operations -- -- (0.39) (0.39)
------- ------- -------- --------
Net income (loss) per share $ 0.21 $ 0.21 $ (0.82) (0.82)
======= ======= ======== ========
</TABLE>
<PAGE> 1
WANG LABORATORIES, INC. AND SUBSIDIARIES
EXHIBIT 12.1 - CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions except ratios)
<TABLE>
<CAPTION>
Predecessor
Company
-------------------
Three months Year Year Year Nine months Three months
ended September 30, ended June 30, ended June 30, ended June 30, ended June 30, Ended September 30,
1997 1997 1996 1995 1994 1993
------------------- -------------- -------------- -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
FIXED CHARGES
Interest expense $ 1.7 $ 10.9 $ 5.1 $ 3.7 $ 3.5 $ 1.2
Portion of rent expense
representative of interest 2.8 9.4 9.4 5.9 5.6 2.7
----- ------ ------ ----- ----- -----
4.5 20.3 14.5 9.6 9.1 3.9
Preferred dividend requirement 5.8 23.5 37.7 14.5 8.7 --
----- ------ ------ ----- ----- -----
Combined fixed charges and
preferred dividend $10.3 $ 43.8 $ 52.2 $24.1 $17.8 $ 3.9
===== ====== ====== ===== ===== =====
EARNINGS
Income (loss) from continuing
operations before income taxes,
discontinued operations,
fresh-start reporting adjustment
and extraordinary item $17.8 $(22.3) (1) $ 94.9 (2) $ 6.9 (3) $18.4 $(8.5)
Fixed charges per above 4.5 20.3 14.5 9.6 9.1 3.9
----- ------ ------ ----- ----- -----
$22.3 $ (2.0) $109.4 $16.5 $27.5 $(4.6)
===== ====== ====== ===== ===== =====
Ratio of earnings to combined fixed
charges and preferred dividends 2.2 -- 2.1 -- 1.5 --
===== ====== ====== ===== ===== =====
Coverage deficiency -- $(45.8) -- $(7.6) -- $(8.5)
===== ====== ====== ===== ===== =====
</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 charges
(3) Includes $62.1 million of acquisition-related, restructuring and
Chapter 11-related charges
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, Consolidated Statements of Operations and Note C -
Other Balance Sheet Information and is qualified in its entirety by reference to
such Form 10-Q's for the quarterly periods ended September 30, 1997 and 1996.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997
<PERIOD-START> JUL-01-1997 JUL-01-1996
<PERIOD-END> SEP-30-1997 SEP-01-1996
<EXCHANGE-RATE> 1 1
<CASH> 177,800 71,500
<SECURITIES> 0 0
<RECEIVABLES> 278,400 306,600
<ALLOWANCES> 18,200 11,500
<INVENTORY> 21,400 26,200
<CURRENT-ASSETS> 521,800 443,500
<PP&E> 259,900 <F1> 244,900 <F1>
<DEPRECIATION> 144,000 <F1> 102,600 <F1>
<TOTAL-ASSETS> 986,000 1,053,600
<CURRENT-LIABILITIES> 381,200 563,700
<BONDS> 29,200 68,000
85,600 84,900
138,300 138,300
<COMMON> 400 400
<OTHER-SE> 292,500 182,000
<TOTAL-LIABILITY-AND-EQUITY> 986,000 1,053,600
<SALES> 67,700 71,200
<TOTAL-REVENUES> 312,200 272,700
<CGS> 52,900 51,500
<TOTAL-COSTS> 246,000 196,100
<OTHER-EXPENSES> 7,000 37,200 <F2>
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,700 1,200
<INCOME-PRETAX> 17,800 (10,600)
<INCOME-TAX> 6,400 1,700
<INCOME-CONTINUING> 11,400 (12,300)
<DISCONTINUED> 0 (14,100)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,400 (26,400)
<EPS-PRIMARY> 0.21 (0.82)
<EPS-DILUTED> 0.21 (0.82)
<FN>
<F1> PP&E cost and Accumulated depreciation include capitalized non-consumable
spares inventory.
<F2> Other costs and expenses for the restated quarter ended September 30,
1996 includes $27.4 million of acquisition-related charges.
</FN>
</TABLE>
