<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 17, 1998
Wang Laboratories, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
1-5677 04-2192707
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(Commission File Number) (IRS Employer Identification No.)
600 Technology Park Drive, Billerica, Massachusetts 01821
- --------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 967-5000
--------------
<PAGE> 2
The undersigned Registrant hereby amends Item 7 of its Current Report on
Form 8-K dated March 17, 1998 to read in its entirety as follows:
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Accountants
Olivetti Solutions Combined Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996
Olivetti Solutions Combined Consolidated Statements of
Operations for the nine months ended September 30, 1997 and the
year ended December 31, 1996
Olivetti Solutions Combined Consolidated Statements of Changes
in Net Assets (Liabilities) for the nine months ended September
30, 1997 and the year ended December 31, 1996
Olivetti Solutions Combined Consolidated Statements of Cash
Flows for the nine months ended September 30, 1997 and the year
ended December 31, 1996
Olivetti Solutions Notes to Combined Consolidated Financial
Statements
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Balance Sheet as of March 31, 1998
Pro Forma Combined Condensed Statement of Operations for the
year ended June 30, 1997
Pro Forma Combined Condensed Statement of Operations for the
nine months ended March 31, 1998
Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 3
(c) EXHIBITS
Item No. Description
-------- -----------
* 2. Stock Purchase Agreement by and among Wang Laboratories,
Inc. Wang Nederland BV, Ing. C. Olivetti & C. S.p.A.,
Olivetti Sistemas e Servicios Limitada and Olivetti do
Brasil S.A.
23.1 Consent of Coopers & Lybrand S.p.A.
23.2 Consent of Arthur Andersen
23.3 Consent of Arthur Andersen
23.4 Consent of Arthur Andersen
23.5 Consent of Arthur Andersen
23.6 Consent of Price Waterhouse
23.7 Consent of Price Waterhouse
23.8 Consent of Price Waterhouse
* 99. Credit Agreement among Wang Laboratories, Inc., Various
Subsidiary Borrowers, Various Lending Institutions, Bankers
Trust Company, As Administrative Agent and Arranger and
National Westminster Bank Plc, as Syndication Agent and
Arranger and Lehman Commercial Paper Inc., as Documentation
Agent and Co-Arranger
- -------------------------
* Previously filed
<PAGE> 4
OLIVETTI SOLUTIONS
COMBINED CONSOLIDATED
FINANCIAL STATEMENTS
US GAAP
As of September 30, 1997 and December 31, 1996
February 24, 1998
<PAGE> 5
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Olivetti S.p.A.
Ivrea
We have audited the combined consolidated balance sheets of Olivetti Solutions
("Olsy"), an integrated business unit of the Olivetti Group, as of September 30,
1997 and December 31, 1996 and the related combined consolidated statements of
income, changes in net assets (liabilities) and cash flows for the nine month
and one year periods, respectively then ended. These financial statements are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of certain combined and/or consolidated
companies, whose statements as of and for the nine months ended September 30,
1997 and the year ended December 31, 1996 reflect total assets and revenues
constituting 22% and 22% and 15% and 16% respectively, of the related combined
consolidated totals. Those statements were audited by other auditors whose
reports have been furnished to us and our opinion, in so far as it relates to
the amounts included for those companies, is based solely on the reports of the
other auditors.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. 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 and reports of the
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the
combined consolidated financial statements referred to above present fairly, in
all material respects, the financial position of Olsy as of September 30, 1997
and December 31, 1996 and the results of its operations and its cash flows for
the nine month and one year periods respectively then ended, in conformity with
generally accepted accounting principles in the United States of America.
Coopers & Lybrand S.p.A.
Turin, Italy
February 24, 1998 except with respect to
notes 29 c) and 29 d) for which the dates are
April 7, 1998 and May 12, 1998 respectively.
<PAGE> 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Olsy Belgium S.A.:
We have audited the accompanying consolidated carved out balance sheet of OLSY
BELGIUM S.A. AND SUBSIDIARIES as of December 31, 1996 and the related
consolidated statements of income, cash flows, and stockholders' equity for the
year then ended and the accompanying consolidated balance sheet of Olsy Belgium
S.A. and subsidiaries as of September 30, 1997 and the related consolidated
statements of income, cash flows, and stockholders' equity for the nine months
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated 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 (not
presented separately herein) present fairly, in all material respects, the
consolidated carved out financial position of Olsy Belgium S.A. and subsidiaries
as of December 31, 1996, and the consolidated results of their carved out
operations and the consolidated carved out cash flows for the year then ended
and the consolidated financial position of Olsy Belgium S.A. and subsidiaries as
of September 30, 1997, and the consolidated results of the their operations and
the consolidated cash flows for the nine months period then ended in conformity
with accounting principles generally accepted in the United States of America.
ARTHUR ANDERSEN
Reviseurs d'Entreprises
/s/ Guy Wygaerts
- ---------------------------------
Guy Wygaerts
February 24, 1998
<PAGE> 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Olivetti Espana, S.A.:
We have audited the accompanying carved-out balance sheet of Olivetti Espana,
S.A. as of December 31, 1996, and the accompanying balance sheet as of
September 30, 1997, and the related statements of income, cash flows and
changes in stockholders' equity for the year ended December 31, 1996 and for
the nine-month period ended September 30, 1997. There financial statements are
the responsibility of Olivetti Espana, S.A.'s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audits 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 the 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 financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Espana, S.A. as of December 31, 1996 and September 30,
1997, and the results of its operations and its cash flows for the year ended
December 31, 1996 and the nine-month period ended September 30, 1997, in
accordance with generally accepted accounting principles in the United States of
America.
ARTHUR ANDERSEN
/s/ Koro Usarraga
- -----------------
Koro Usarraga
February 23, 1998
<PAGE> 8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Olivetti Corporation of Japan:
We have audited the accompanying balance sheet of Olivetti Corporation of Japan
(a Japanese corporation, 80%-owned by Olivetti Systems Technology Corporation
and 20%-owned by Toshiba Corporation) as of December 31, 1996 and the related
statements of loss and accumulated deficit, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatment. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Corporation of Japan as of December 31, 1996 and the
results of its operations and its cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Arthur Andersen
Tokyo, Japan,
November 7, 1997
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Olivetti Corporation of Japan:
We have audited the accompanying balance sheet of Olivetti Corporation of Japan
(a Japanese corporation, 80%-owned by Olivetti Systems Technology Corporation
and 20%-owned by Toshiba Corporation) as of September 30, 1997 and the related
statements of loss and accumulated deficit, and cash flows for the nine-month
period then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatment. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the financial
position of Olivetti Corporation of Japan as of September 30, 1997 and the
results of its operations and its cash flows for the nine-month period then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/ Arthur Andersen
Tokyo, Japan,
November 7, 1997
<PAGE> 10
To the shareholders of
Olsy Austria Information Systems GmbH
Vienna
Olsy Austria Information Systems GmbH (Olsy Austria)
Audit Opinion on the Consolidated Financial Statements
as of December 31, 1996 and September 30, 1997
We have audited the accompanying consolidated balance sheet of Olsy Austria and
its subsidiaries as of December 31, 1996 and September 30, 1997 and the
related consolidated profit and loss account and statements of cash flows for
the year ended December 31, 1996 and the nine months period ended September 30,
1997, all expressed in thousands of Austrian Schillings. These consolidated
financial statements are the responsibility of the Company's Management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits of the above financial statements in accordance with
auditing standards generally accepted in the United States of America. 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 after
the restatement described in Note 11, present fairly, in all material respects,
the financial position of Olsy Austria as of December 31, 1996 and September 30,
1997, and the results of its operations and its cash flows for the year ended
December 31, 1996 and the nine months period ended September 30, 1997 in
conformity with generally accepted accounting principles in the United States of
America.
PRICE WATERHOUSE AG
/s/ WOLFRAM STEINER /s/ JOHANNES MORTL
------------------- -------------------
WOLFRAM STEINER JOHANNES MORTL
February 24, 1998, except as to
Note 11, which is as of May 12, 1998
<PAGE> 11
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE DIRECTORS AND SHAREHOLDERS OF OLIVETTI (HONG KONG) LIMITED
We have audited the accompanying consolidated financial statements of Olivetti
(Hong Kong) Limited and its subsidiary as of September 30, 1997 and December
31, 1996 and the related consolidated statements of income, of cash flows and
of changes in shareholders' equity for the nine months period ended
September 30, 1997 and the year ended December 31, 1996, all expressed in Hong
Kong dollars. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards in the United States of America. 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 present fairly, in all
material respects, the financial position of Olivetti (Hong Kong) Limited and
its subsidiary at September 30, 1997, and December 31, 1996 and the
consolidated results of their operations and their cash flows for the period
from January 1, 1997 to September 30, 1997 and the year ended December 31, 1996,
in conformity with generally accepted accounting principles in the United
States of America.
PRICE WATERHOUSE
Price Waterhouse
Certified Public Accountants
HONG KONG, January 10, 1998
<PAGE> 12
REPORT OF THE INDEPENDENT AUDITORS
To the Board of Directors of
Olsy Africa (Proprietary) Limited
We have audited the accompanying consolidated balance sheets of Olsy Africa
(Proprietary) Limited as of September 30, 1997 and December 31, 1996 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the two periods ended September 30, 1997 and December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. 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 the 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Olsy Africa
(Proprietary) Limited as at September 30, 1997 and December 31, 1996 and the
consolidated results of its operations and its cash flows for each of the
periods ended September 30, 1997 and December 31, 1996 in conformity with
generally accepted accounting principles in the United States of America.
December 24, 1997
/s/ Price Waterhouse
<PAGE> 13
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1997 DECEMBER 31, 1996
- ------ ------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents 179 329
Restricted cash 13 10
Marketable securities 19 10
Accounts receivable trade,
net of allowance for doubtful accounts 1,263 1,617
Advances to related parties 744 538
Inventories 405 405
Accrued income, prepaid expenses
and other current assets 294 343
Deferred tax assets 2 3
----- -----
Total current assets 2,919 3,255
----- -----
Property, plant and equipment, net 364 359
Investments 16 16
Prepaid pension costs 22 21
Intangible assets, net 29 29
Other assets 66 54
Deferred tax assets 13 17
----- -----
TOTAL ASSETS 3,429 3,751
===== =====
LIABILITIES
- -----------
Current liabilities:
Due to related parties 533 1,026
Current portion of long-term debt and
obligations under capital leases 341 518
Accounts payable and accrued liabilities 1,595 1,585
Other current liabilities 103 166
Income taxes payable 10 21
----- -----
Total current liabilities 2,582 3,316
----- -----
Long-term debt 76 89
Obligations under capital leases 85 96
Other liabilities 429 402
Deferred tax liabilities 3 4
Minority interests 22 31
----- -----
TOTAL LIABILITIES 3,197 3,938
----- -----
Commitments and contingencies (Note 20)
Net assets (liabilities) 232 (187)
----- -----
TOTAL LIABILITIES AND NET ASSETS 3,429 3,751
===== =====
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
1
<PAGE> 14
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Revenues:
Product sales 1,590 2,218
Services 1,280 2,263
Other 68 14
------ ------
TOTAL NET REVENUES 2,938 4,495
Operating costs and expenses:
Cost of product sales (1,309) (1,828)
Cost of services (994) (1,785)
Selling, general and administrative (702) (1,048)
Restructuring costs (1) (82)
------ ------
TOTAL OPERATING COSTS AND EXPENSES (3,006) (4,743)
------ ------
Loss before interest expense,
provision for income taxes, minority interests
and extraordinary item (68) (248)
Interest expense, net (35) (76)
------ ------
Loss before provision for income taxes,
minority interests, and extraordinary item (103) (324)
Provision for income taxes (15) (29)
Minority interests in net loss (earnings) of subsidiaries 5 (3)
------ ------
NET LOSS BEFORE EXTRAORDINARY ITEM (113) (356)
Loss on early extinguishment of debt, net of tax -- (30)
------ ------
NET LOSS (113) (386)
====== ======
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
2
<PAGE> 15
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS
OF CHANGES IN NET ASSETS (LIABILITIES)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
BALANCE, JANUARY 1, 1996 297
Adjustment for the initial adoption of FASB 87, net of tax (Note 18) (25)
Capital contribution (Note 18) 13
Net capital distribution (Note 1) (84)
Net loss (386)
Foreign currency translation adjustment (2)
----
BALANCE, DECEMBER 31, 1996 (187)
Forgiveness of amounts due to Olivetti Group (Notes 1 and 11) 515
Capital increase, Olivetti Espana S.A. (Note 27) 15
Net loss (113)
Foreign currency translation adjustment 2
----
BALANCE, SEPTEMBER 30, 1997 232
====
The accompanying notes are an integral part of the combined consolidated
financial statements.
3
<PAGE> 16
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(ITALIAN LIRE IN BILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss (113) (386)
Adjustments to reconcile net loss to cash flows provided
by operating activities:
Gain on sale of property, plant and equipment and shareholdings (31) (7)
Loss on disposition of assets -- 23
Loss on early extinguishment of debt -- 30
Allowance for doubtful accounts 11 25
Depreciation and amortization of property, plant and equipment
and intangible assets 101 161
Restructuring costs 1 33
Tax deferrals 5 8
Allocated costs, not paid 26 --
Pension expense 21 25
Other (3) (12)
Changes in assets and liabilities:
Decrease in accounts receivable 343 922
Decrease in inventories -- 161
(Increase) decrease in other current and noncurrent assets 24 (67)
Increase (decrease) in accounts payable and accrued liabilities 10 (566)
Increase (decrease) in other current and noncurrent liabilities (68) (191)
---- ----
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES 327 159
Cash flows from investing activities:
Advances to related parties (206) 21
Additions to property, plant and equipment (96) (118)
Proceeds from the sale of property, plant and equipment and shareholdings 46 28
Acquisition of businesses, net of cash acquired (9) (24)
Other, principally marketable securities (10) 206
---- ----
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (275) 113
Cash flows from financing activities:
Due to related parties 4 (53)
Capital contribution from Olivetti Group 15 13
Cash distribution to Olivetti Group -- (159)
Proceeds from long-term debt -- 55
Retirement of long-term debt (205) (217)
---- ----
NET CASH USED IN FINANCING ACTIVITIES (186) (361)
Effect of exchange rate changes on cash and cash equivalents
and restricted cash (13) (31)
Decrease in cash and cash equivalents and restricted cash (147) (120)
Cash and cash equivalents and restricted cash, beginning of year 339 459
---- ----
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR 192 339
==== ====
Income taxes paid 21 14
Interest paid 20 76
</TABLE>
The accompanying notes are an integral part of the combined consolidated
financial statements.
4
<PAGE> 17
OLIVETTI SOLUTIONS
(AN INTEGRATED BUSINESS UNIT OF THE OLIVETTI GROUP)
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
THE COMPANY
Olivetti Solutions "OLSY", an integrated business unit of the Olivetti
Group, includes the combined systems and services businesses of Olivetti
Solutions S.p.A. ("Olsy S.p.A.") and its legally owned companies, O. Group
Technology S.p.A., Regulus S.p.A., O.R.E.& L s.r.l., the systems and
services business of Olivetti do Brasil, 40% interest in Olivetti Espana
and Olivetti Corporation of Japan and their predecessor operations
(collectively the "Company" or the "Business"). These financial statements
have been prepared pursuant to the requirements of the draft Sale and
Purchase Agreement by and among Wang Laboratories, Inc., Wang Netherland
B.V., Olivetti S.p.A., Olivetti Holding B.V. and Olivetti do Brasil S.A.
for inclusion in filings with the United States of America Securities and
Exchange Commission under Rule 3.05 of Regulation SX.
DESCRIPTION OF BUSINESS
The Company is a provider of information technology ("IT") solutions and
services to the Italian, European and global market. The Company's primary
geographical markets outside of Italy are: Great Britain, Netherlands,
France, Belgium, North America and Japan. The Company delivers solutions
and services based on open computing standards, distributed client server
architectures and network infrastructures to customers, pricipally in the
banking, public authority, utility and retail sectors. The solutions range
from development of the initial computing environment to systems
integration and include analysis, design, validation, procurement and
production through to delivery and roll out of complete solutions. The
services provided by the Company, include hardware, software and network
maintenance and support, outsourcing of distributed desktop computing
environments and consultancy all of which are provided under contractual
arrangements with customers.
FORMATION
Prior to 1996, the business of the Company was conducted by Olivetti
S.p.A., several other Olivetti Group corporations located in Italy and in
various other countries, some of which conducted other operations through
several business lines (the "Non-Olsy Business"). Beginning in 1995, the
Olivetti Group began a series of transactions to formally separate the
business of the Company from the Non-Olsy Business. At the end of 1995 and
during the first months of 1996, certain international subsidiaries of the
Olivetti Group transferred certain Non-Olsy Business assets and
liabilities, consisting primarily of inventories and
5
<PAGE> 18
severance pay reserves, to other newly created Olivetti Group companies.
The remaining assets and liabilities of the Non-Olsy Business including
cash, tangible and intangible assets, trade receivables, payables, and
provisions were transferred to the Company. These transfers have been
recorded as a net capital distribution in the combined consolidated
statement of changes in net assets (liabilities). Accordingly, the
statements of income and cash flows subsequent to the transfer reflect the
activity relating to the transferred assets and liabilities.
On January 1, 1997, substantially all of the systems and services assets
and liabilities of Olivetti S.p.A. were transferred to Olivetti Solutions
S.p.A. (formerly Sixcom S.p.A.), an Olivetti Group company, which prior to
that date, had nominal activity and nominal assets and liabilities. As part
of the transaction several minor companies involved in the systems and
services business' and certain other assets and liabilities mainly
including cash, intangibles and debt were retained by Olivetti S.p.A. For
the purpose of these financial statements these transactions have been
accounted for as part of the net capital distribution described above, in
the combined consolidated statement of changes in net assets (liabilities)
as of December 31, 1996.
During 1997, substantially all of the shareholdings in certain
international subsidiaries of the Olivetti Group, except for the
shareholdings in Olivetti do Brasil, Olivetti Corporation of Japan, 40% of
Olivetti Espana S.A., O.Group Technology S.p.A., Regulus S.p.A. and O.R.E.&
L. s.r.l., and some other minor Italian entities were transferred to
Olivetti Solutions S.p.A. In conjunction with the transfer certain amounts
including debt, interest and allocated costs owed by the Company to other
Olivetti Group Companies of approximately Lire 515 billion was forgiven.
The forgiveness has been recorded as a net capital contribution in the
combined consolidated statement of changes in net assets (liabilities).
As a result of the above changes in legal structure and share ownership
certain previously combined entities were consolidated in 1997.
BASIS OF PRESENTATION
These financial statements present the combined consolidated assets and
liabilities and results of operations of the Company. Because the Company
did not previously prepare separate financial statements, these financial
statements were derived by extracting the assets and liabilities and
results of operations of the Company from the consolidated assets,
liabilities and results of operations of the Olivetti Group. Accordingly,
the combined consolidated financial statements contain necessary
allocations of assets, liabilities, revenues and expenses attributable to
the Company as deemed reasonable by management to present the Company on a
stand alone basis. Although management is unable to estimate the actual
costs that would have been incurred had the services been purchased from
independent third parties, the allocation methodologies described below and
within the respective notes to financial statements, where appropriate, are
6
<PAGE> 19
considered reasonable by management. However, the financial position and
results of operations of the Company may differ from the results that may
have been achieved had the Company operated as an independent entity.
Additionally, future expenses incurred as an independent entity may not be
comparable to the historical levels.
The combined consolidated financial statements are presented in accordance
with generally accepted accounting principles of the United States of
America.
The reporting currency of the Company is the Italian lira. All amounts in
these financial statements have been prepared in billions of Italian lira
unless otherwise stated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ALLOCATIONS
The financial statements reflect the assets, liabilities, revenue and
expenses that were directly related to the Company as they were operated
within the Olivetti Group. In cases involving assets and liabilities not
specifically identifiable to any particular business line, a portion of
such items were allocated to the Company based on assumptions that
management considers reasonable in the circumstances.
The Olivetti Group uses a centralized approach to cash management and the
financing of its operations, except for certain specific cash, marketable
securities, and debt recorded by the operating companies. Cash and cash
equivalents, marketable securities and debt not specifically identifiable
to the operations of the Company were allocated to the Company based on the
historical debt to equity ratio of each individual operating company within
Olsy as of the beginning of 1996. The balances of these accounts at the end
of 1996 reflect the beginning allocated balance plus the net cash inflow
and outflow during the year. Interest expense on attributed debt was
allocated to the Company by applying the average interest rates applicable
to each operating company to which the debt related to.
The statements of income include all of the costs of doing business
including specific corporate costs of the Company and certain allocated
costs incurred by the Olivetti Group on the Company's behalf including
finance, human resources,
7
<PAGE> 20
investor relations, strategic planning, legal and the tax department. These
allocations were based on a variety of factors including, for example, the
number of employees, estimates of usage and revenues.
Prior to December 31, 1996, the Company participated in certain Olivetti
Group centralized foreign currency and risk management functions. As part
of these activities, derivative financial instruments were utilized to
manage risks generally associated with foreign currency and interest rate
volatility. The statement of income for 1996 reflects both specific and
allocated benefits and costs from these functions.
PRINCIPLES OF COMBINATION AND CONSOLIDATION
The combined consolidated financial statements of the Company include the
consolidated accounts of Olsy S.p.A. and its subsidiaries and the combined
accounts of O.Group Technology S.p.A., Regulus S.p.A., O.R.E.& L. s.r.l.,
40% of Olivetti Espana S.A., and Olivetti Corporation of Japan, and their
respective predecessor entities. All significant intercompany accounts and
transactions have been eliminated.
USE OF 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
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. The most significant estimates and assumptions
relate to revenue and cost allocations, income tax allocations, allowance
for uncollectable accounts receivable, employee benefit plans and the
reserve for restructuring costs. Actual results could differ from these
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand and cash in bank current
accounts, with original maturities of three months or less. Included in
cash and cash equivalents as of September 30, 1997 and December 31, 1996 is
approximately Lire 69 billion and Lire 119 billion, respectively of cash
collected in connection with the securitization program (Note 4) that must
be transferred to the program administrator as repayment of financing under
the securitization program.
8
<PAGE> 21
INVENTORIES
Inventories are valued at the lower of purchase or production cost,
determined on an average cost basis, or net realizable value. Inventories
also include work-in-process recorded using the percentage of completion
(cost to cost) method. Any losses on such contracts are charged to the
combined consolidated statement of income in the period in which they are
first identified.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is provided primarily using the straight-line
method over the estimated useful lives of the related assets. Leasehold
improvements are amortized over the shorter of the lease term or the
estimated useful life of the improvements. Upon retirement or other
disposal of fixed assets, the costs and related accumulated depreciation or
amortization are eliminated from the accounts, and any resulting gain or
loss is reflected in income for the period. Repairs and maintenance costs
are charged to expense as incurred.
The yearly rates are the following:
Buildings 3-5%
Plant and machinery 10-20%
Industrial and commercial equipment 20-40%
Electronic office machines 20-33%
Office furniture and fixture 12-25%
Vehicles 14-25%
INTANGIBLE ASSETS
The excess of cost over the fair value of net assets acquired is recorded
as goodwill and is amortized on a straight-line basis over periods of 5 to
10 years. The cost of other acquired intangibles is amortized on a
straight-line basis over their estimated useful lives. The Company
evaluates the carrying value of intangible assets if the facts and
circumstances indicate a potential impairment of their carrying value. Any
impairments are recognized when the expected future undiscounted operating
cash flows related to such intangible assets are less than their carrying
values.
RECOGNITION OF REVENUES
Revenues from the sale of products are recognized on the transfer of
ownership. Revenues from rental and maintenance contracts are recognized as
earned. Revenues from long-term contracts are recorded using the percentage
of completion (cost to cost) method.
9
<PAGE> 22
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred. The Company
receives under the terms of specific legislation assisted loans for
research and development purposes. Interest-relief grants that reduce the
financial charges applied to the research loans received are recognized on
an accrual basis. The costs incurred for research and development were Lire
33 billion and Lire 90 billion for the nine months ended September 30, 1997
and the year ended December 31, 1996, respectively.
INCOME TAXES
The Company is not a separate taxable entity for Italian or international
tax purposes. Accordingly, income tax expense in the combined consolidated
financial statements has been calculated on a separate tax return basis by
tax jurisdiction.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". SFAS 109 requires an asset and liability approach for financial
accounting and reporting for income tax purposes. Under the asset and
liability method, deferred income taxes are recognized for the tax
consequences of temporary differences and net operating loss carryforwards
by applying enacted statutory tax rates applicable to future years.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
FOREIGN CURRENCY TRANSLATION
The Company has determined that the local currencies of its international
subsidiaries are their functional currencies. In consolidating
international subsidiaries, 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 as an
adjustment to net assets (liabilities).
FOREIGN CURRENCY TRANSACTIONS
Currency gains and losses resulting from transactions denominated in
currencies other than the local currency are included in results of
operations. Net currency transaction losses included in other expense were
Lire 5 billion and Lire 32 billion for the nine months ended September 30,
1997 and the year ended December 31, 1996, respectively.
10
<PAGE> 23
CONCENTRATION OF CREDIT RISKS
The Company deposits its cash with major banks throughout the world and
invests in high-quality, short-term liquid money market instruments. The
Company has a policy of making investments only with commercial
institutions that have at least an "A" (or equivalent) credit rating. The
Company's practice has been to advance its excess cash to other Olivetti
Group companies. Although the Company does not currently foresee a credit
risk associated with these amounts, the Company may suffer a significant
loss in the case of non performance by these affiliates.
The Company sells a broad range of products in the information technology
sector in most countries of the world. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. Ongoing credit
evaluations of customers' financial condition are performed and, generally,
no collateral is required. The Company maintains reserves for potential
credit losses.
3. RESTRICTED CASH
Restricted cash as of September 30, 1997 and December 31, 1996 consists of
Lire 13 billion and Lire 10 billion respectively, held in deposit by a bank
which has provided financing to another Olivetti Group company. This
financing was repaid on October 11, 1997 and consequently the restriction
was removed.
4. ACCOUNTS RECEIVABLE TRADE, NET
Accounts receivable, net, consists of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Amounts due from third parties 1,283 1,534
Amounts due from:
Olivetti Group companies 108 214
----- -----
Total 1,391 1,748
Less: allowance for doubtful accounts 128 131
----- -----
TOTAL 1,263 1,617
===== =====
</TABLE>
Receivables from related parties mainly comprise amounts due for goods and
services provided in the ordinary course of business.
Within the normal course of business, the Company operates a securitization
program whereby trade accounts receivable are transferred to Global
Accounts Receivable Backed Offerings Ltd. ("Garbo"). At the time of
transfer the Company receives cash equal to approximately 70% of the total
nominal value of
11
<PAGE> 24
the receivables transferred or the advance purchase price ("APP"). The
remaining purchase price, less applicable fees, or the deferred purchase
price ("DPP"), is received on collection of the transferred receivables. In
accordance with generally accepted accounting principles in the United
States of America, the transfers have been accounted for as secured
borrowings. In this regard, the receivables transferred under the program
have been retained in the accounts of the Company until collected and the
APP is recorded as short term debt (See Note 14). As of September 30, 1997
and December 31, 1996, approximately Lire 173 billion and Lire 191 billion,
respectively were transferred and remained uncollected as of the balance
sheet dates, under the program. The Company provides for potential bad
debts on transferred receivables consistent with its policy on receivables
that are not transferred as part of the program. Included in interest
expense for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 is approximately Lire 12 billion and Lire 29 billion,
respectively in interest charges for the program.
As part of the securitization program, the Company granted a subordinated
start up loan of Lire 2 billion and subordinated revolving loans equal to
the APP received for ineligible receivables (as defined), to Garbo of Lire
7 billion and Lire 17 billion as of September 30, 1997 and December 31,
1996, respectively, all of which are included in other current receivables.
The Company is the collection agent for the transferred receivables. Cash
collected on transferred receivables that has not been forwarded to Garbo
as of the balance sheet date, is recorded as cash with a corresponding
liability of the same amount in debt from factors and other financial
institutions (Note 14).
According to the terms of the contract the securitization program expires
unless renewed. Subsequent to the balance sheet date the Company chose to
discontinue the program. The program is currently in wind up.
5. ADVANCES TO RELATED PARTIES
Advances to related parties consist of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Due from Olivetti International S.A. 191 124
Due from Olivetti S.p.A. 535 404
Other:
- due from Olivetti Finanziaria Industriale 8 6
- due from Rapida SA 7 --
- due from Olivetti Supplies 1 1
- due from Olivetti Africa Lexikon 2 3
--- ---
TOTAL 744 538
=== ===
</TABLE>
12
<PAGE> 25
The amounts due from Olivetti International S.A. consist of excess cash of
the foreign operating companies deposited with this related party, bearing
interest at LIBOR for the various currencies plus 0.125%. The amounts due
from Olivetti S.p.A. consist of an interest bearing current account,
bearing interest at rates established from time to time. On January 1, 1997
the Company entered into a formal agreement with Olivetti S.p.A. for the
interest bearing current account and the amounts payable to it. In
accordance with the terms of the agreement, the Company may terminate the
arrangement with one months notice and in the event the Company is no
longer an Olivetti Group Company.
6. INVENTORIES
Inventories consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Spare parts 53 30
Raw materials 15 44
Work in process 20 20
Finished goods 185 225
Contract work-in-process 132 86
--- ---
TOTAL 405 405
=== ===
Recorded in contract work-in-process are cost and unbilled margin of
approximately Lire 32 billion as of September 30, 1997 and December 31,
1996, respectively, relating to a contract on which work has been
suspended. Management anticipates a favorable resolution in the matter. The
Olivetti Group has committed to reimburse the Company for any potential
losses under the contract on or before December 31, 1999.
7. ACCRUED INCOME, PREPAID EXPENSES AND OTHER CURRENT ASSETS
Accrued income, prepaid expenses and other current assets consist of the
following:
13
<PAGE> 26
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Accrued income - third parties 68 28
Prepaid expenses - third parties 71 40
Accrued income and prepaid expenses:
- Olivetti Group companies 23 6
Financial receivables from third parties 23 40
Other receivables:
- third parties 107 201
- other Olivetti Group Companies 2 28
--- ---
TOTAL 294 343
=== ===
</TABLE>
14
<PAGE> 27
8. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------- -----
HELD UNDER LEASED TO TOTAL
(in billions of lire) OWNED CAPITAL LEASE THIRD PARTIES
- --------------------- ----- ------------- ------------- -----
<S> <C> <C> <C> <C>
Land and buildings 202 83 285
Plant and machinery 167 4 24 195
Industrial and commercial equipment 391 391
Other assets 251 5 256
Assets under construction 42 42
----- -- -- -----
Total 1,053 92 24 1,169
Less:accumulated depreciation and amortization 753 33 19 805
----- -- -- -----
TOTAL 300 59 5 364
===== == == =====
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------- -----
HELD UNDER LEASED TO TOTAL
(in billions of lire) OWNED CAPITAL LEASE THIRD PARTIES
- --------------------- ----- ------------- ------------- -----
<S> <C> <C> <C> <C>
Land and buildings 205 87 292
Plant and machinery 111 17 128
Industrial and commercial equipment 360 360
Other assets 175 6 181
Assets under construction 43 43
----- -- -- -----
Total 894 93 17 1,004
----- -- -- -----
Less:accumulated depreciation and amortization 617 26 2 645
----- -- -- -----
TOTAL 277 67 15 359
===== == == =====
</TABLE>
Depreciation and amortization expense for property, plant and equipment was
Lire 97 billion and Lire 133 billion, for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively.
9. INVESTMENTS
Investments consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
- --------------------- ------------------ -----------------
Investments in associated companies 14 13
Investments in other companies 2 3
-- --
TOTAL 16 16
== ==
15
<PAGE> 28
INVESTMENTS IN ASSOCIATED COMPANIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
% %
(In billions of lire) BOOK VALUE OWNED BOOK VALUE OWNED
- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Investments accounted using the equity method:
- Caridata S.p.A. 2 40.00 --
- Datitalia Processing S.p.A. 4 30.00 4 30.00
- ISC Bunker Ramo de Mexico 1 25.00 --
- ISC Argentina SA 2 49.00 2 49.00
- Olicredit -- 2 49.00
-- --
Total 9 8
Investments carried at cost:
- Infogroup 1 20.00 1 40.00
- Consorzio Narita 1 50.00 1 50.00
- Zhongshan Bank Autom. 1 40.00 --
- Others (1996 includes 40% of Caridata) 2 3
-- --
TOTAL INVESTMENTS IN ASSOCIATED COMPANIES 14 13
== ==
</TABLE>
INVESTMENTS IN OTHER COMPANIES
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
% %
(In billions of lire) BOOK VALUE OWNED BOOK VALUE OWNED
- --------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Investments stated at cost:
- Olivetti Ricerca S.C.p.A. 2 3.70 2 3.70
- Others -- 1
-- --
TOTAL INVESTMENTS IN OTHER COMPANIES 2 3
== ==
</TABLE>
16
<PAGE> 29
10. INTANGIBLE ASSETS, NET
Intangible assets, net consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Goodwill 25 23
Patents and copyrights 15 13
Intangible asset, pension 7 10
-- --
Total 47 46
Less: accumulated amortization 18 17
-- --
NET INTANGIBLE ASSETS 29 29
== ==
Amortization expense for intangible assets was Lire 4 billion and Lire 28
Billion for the nine months ended September 30, 1997 and the year ended
December 31, 1996, respectively.
During the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company acquired all or a majority of the shares in several
entities. The acquisitions have been accounted for using the purchase
business combination method. Supplemental pro forma information on the
results of operations as though the entities had combined at the beginning
of the period in which acquired and for the proceding period, if required,
have not been presented as the pro forma results of operations were not
material in the aggregate.
11. OTHER ASSETS
Other assets consist of the following:
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Financial receivables 37 27
Deposits 29 27
-- --
TOTAL 66 54
== ==
12. DUE TO RELATED PARTIES
Due to related parties consists of the following:
17
<PAGE> 30
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Due to Olivetti Finanziaria Industriale 11 --
Due to Olivetti International S.A. 476 406
Due to Olivetti S.p.A. 45 611
Other Olivetti Group Companies 1 9
--- -----
TOTAL 533 1,026
=== =====
</TABLE>
The amount due to Olivetti S.p.A. at December 31, 1996 of Lire 611 billion
reflects the allocation of debt to the Company determined based on the
historical debt to equity ratio of Olivetti S.p.A. as of the beginning of
the year. During 1997 approximately Lire 497 billion of the amount due was
forgiven. The forgiveness of debt has been recorded as a capital
contribution in the statement of net assets (liabilities).
During the nine months ended September 30, 1997 and the year ended December
31, 1996, the Company recorded interest expense of Lire 25 billion and Lire
55 billion, respectively on borrowings from related parties. The amounts
due to Olivetti International S.A. bear interest at LIBOR plus 2.50% for
the various currencies. The amounts due to Olivetti S.p.A. bear interest at
rates established from time to time in accordance with the agreement
described in note 5.
13. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Trade payables:
- to third parties 744 633
- to Olivetti Group 136 323
Deferred income 177 148
Accrued liabilities and customer advances 267 262
Taxes (other than income) and social
security authorities 113 125
Other payables:
- to Olivetti Group 48 12
- to third parties 110 82
----- -----
TOTAL 1,595 1,585
===== =====
</TABLE>
14. OTHER CURRENT LIABILITIES
Other current liabilities consist of the following:
18
<PAGE> 31
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Reserve for restructuring costs 33 74
Warranty reserve 21 27
Other provisions 49 65
--- ---
TOTAL 103 166
=== ===
</TABLE>
The reserve for restructuring costs as of September 30, 1997 and December
31, 1996 total Lire 33 billion and Lire 74 billion, respectively and are
comprised of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Work force reduction costs 12 39
Abandoned space 15 24
Other provisions 6 11
-- --
TOTAL 33 74
== ==
</TABLE>
15. DEBT
Debt consists of the following:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
IMI loans for research, repayable by 1998
yearly interest rates of 4.5% 1 1
IMI loans for research, pursuant to Law
no. 346/1998 (interest relief grants)
repayable by 2003. Yearly interest rate of 2.265% 6 7
Assisted loans for technological innovation
(FIT) repayable by 2007 yearly
interest rates of 8.76% 2 2
Other loans of foreign subsidiaries
repayable by 2003 79 231
Short term bank borrowings 117 125
Factors or other financial institutions 199 231
--- ---
404 597
Less: Current debt and current portion
of long term debt 328 508
--- ---
LONG TERM DEBT 76 89
=== ===
</TABLE>
Prior to 1996, the Company entered into a sale-leaseback transaction
involving the Company's office buildings in Germany. The transaction was
accounted for as a
19
<PAGE> 32
financing. Included in other loans of foreign subsidiaries as of September
30, 1997 and December 31, 1996 is approximately Lire 66 billion and Lire 69
billion, respectively for this arrangement. Approximately Lire 26 billion
of the above mentioned financing was retained by the purchaser subject to
the successful completion of certain ongoing renovations to the buildings.
The retained amount has been recorded as a financial receivable by the
Company and included in other assets.
The weighted average interest rate on outstanding short term borrowings was
5.82% for the nine months ended September 30, 1997, which was substantially
the same for the year ended December 31, 1996.
Included in debt from factors or other financial institutions as of
September 30, 1997 and December 31, 1996 is approximately Lire 94 billion
and Lire 72 billion, respectively of APP.
Aggregate maturities of debt are as follows:
YEAR ENDING AMOUNTS
SEPTEMBER 30, (in billions of lire)
------------- ---------------------
1998 328
1999 4
2000 5
2001 5
2002 5
Thereafter 57
---
TOTAL 404
===
As of September 30, 1997 the Company had unused lines of credit, primarily
for short term borrowings, of Lire 254 billion. Prior to 1997 the Company
did not have all of its own lines of credit but was able to benefit from
the lines maintained by other Olivetti Group companies.
Certain credit lines or borrowings obtained by the Company have been
guaranteed by other Olivetti Group companies. These guarantees as of
September 30, 1997 and December 31, 1996 amounted to Lire 269 billion and
Lire 194 billion, respectively.
Approximately Lire 34 billion and Lire 170 billion as of September 30, 1997
and December 31, 1996, respectively of lines credit and or borrowings were
collateralized by the Company's inventory, trade receivables and fixed
assets.
20
<PAGE> 33
16. CAPITALIZED LEASE OBLIGATIONS
The minimum future lease payments and present values of the net minimum
lease payments are as follows:
YEAR ENDING AMOUNTS
SEPTEMBER 30, (in billions of lire)
------------- ---------------------
1998 20
1999 17
2000 15
2001 16
2002 11
After 2002 68
---
Total minimum lease payments 147
Less: Amount representing interest 49
---
Present value of net minimum lease payments 98
Less: current portion 13
---
TOTAL 85
===
17. INCOME TAXES
The provision for income taxes consists of the following:
FOR THE NINE MONTHS FOR THE YEAR
ENDED ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------- -----------------
CURRENTLY PAYABLE:
Italian taxes 1 1
International taxes 8 20
Italian state and local taxes 1 --
--- ---
10 21
DEFERRED:
Italian taxes -- --
International taxes 5 8
Italian state and local taxes -- --
--- ---
TOTAL 15 29
=== ===
21
<PAGE> 34
Temporary differencies and carryforwards as of September 30, 1997 and
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(In billions of lire) SEPTEMBER 30 ,1997 DECEMBER 31, 1996
- --------------------- ------------------ -----------------
<S> <C> <C>
Current deferred tax assets:
Net operating loss carryforwards 34 23
Account Receivable 16 6
Inventories 20 29
Accrued income and prepaid expenses and
other current assets 7 5
Property, plant and equipment, net 3 10
Accounts payable and accrued liabilities 2 5
Other current liabilities 15 15
Other 5 4
---- ----
Net deferred tax assets 102 97
Valuation allowance (100) (94)
---- ----
Total current deferred tax assets 2 3
==== ====
Non-current deferred tax assets:
Net operating loss carryforwards 622 585
Accounts payable and accrued liabilities 82 91
Other non-current liabilities 47 35
Intangible assets 51 50
Accounts receivable -- 8
Other 13 11
---- ----
Total 815 780
Non-current deferred tax liabilities:
Accounts receivable 2 --
Property, plant and equipment 37 44
---- ----
Total 39 44
Net non-current deferred tax assets 776 736
Valuation allowance (766) (723)
---- ----
TOTAL NON CURRENT DEFERRED TAX ASSETS 10 13
==== ====
</TABLE>
For financial reporting purposes, a valuation allowance was recognized for
the amount of the deferred tax assets as of September 30, 1997 and December
31, 1996, that more likely than not will not be realized on a separate
company basis by tax jurisdiction.
At September 30, 1997, the Company had operating loss carryforwards
totalling approximately Lire 1,541 billion, the tax effect of which is
approximately Lire 656 billion.
22
<PAGE> 35
These carryforwards will expire as follows:
(In billions of lire) AMOUNTS
--------------------- -------
as at 1997 34
1998 39
1999 37
2000 47
2001 44
After 2001 162
Without expiration 293
---
TOTAL 656
===
As a result of changes in the Company's legal structure during 1996, as
described in note 1, the Company lost the use of certain net operating loss
carryforwards and acquired the use of certain other net operating loss
carryforwards the net tax effect of which is a decrease in net operating
loss carryforwards of approximately Lire 704 billion. The net reduction in
net operating loss carryforwards resulted in a corresponding decrease in
valuation allowance.
The reconciliation from the statutory taxes and tax rate to the effective
taxes and tax rate for each of the periods is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
(In billions of lire) AMOUNT % AMOUNT %
- --------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Taxes at Italian statutory tax rate 55 53 189 53
Non deductible losses (15) (15) (61) (17)
Changes in valuation allowance (49) (47) (153) (43)
Impact of foreign tax rates 3 3 -- --
Other (9) (9) (4) (1)
--------------- ---------------
EFFECTIVE INCOME TAX RATE (15) (15) (29) (8)
=============== ===============
</TABLE>
23
<PAGE> 36
18. EMPLOYEE BENEFIT PLANS
The Company sponsors various employee benefit plans, including defined
benefit and defined contribution pension plans, which cover substantially
all employees worldwide and the Company also participates in multiemployer
postretirement benefit plans which cover certain employees in Italy.
DEFINED BENEFIT PENSION PLANS
The Company's international subsidiaries maintain defined benefit pension
plans that provide plan benefits primarily based on the employee's
compensation during the last years before retirement and the number of
years of service. The Company has plans under which funds are deposited
with trustees, annuities are purchased under group contracts, or reserves
are provided. In certain countries the funding of pension plans is not a
common practice, consequently, the Company has pension plans which are
underfunded. Several of these plans including plans in the Company's
Subsidiaries in Germany, Canada and South Africa have been frozen whereby
employees in these locations are no longer accruing additional benefits.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 87 "Employers' Accounting for Pensions"
for its defined benefit plans located outside the United States. The
initial adoption of SFAS No. 87 resulted in Lire 25 billion increase in net
liabilities representing the amount of the net transition obligation that
would have been amortized, net of tax, had SFAS No. 87 been adopted as of
January 1, 1989. The Company did not obtain SFAS No. 87 actuarial
valuations of immaterial defined benefit arrangements.
Net pension expense for the Company's defined benefit plans for the nine
months ended September 30, 1997, and for the year ended December 31, 1996
included the following components:
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
Service cost 17 22
Interest cost 22 27
Actual return on plan assets (25) (24)
Net amortization and deferral 7 --
--- ---
NET PERIODIC PENSION COST 21 25
=== ===
During 1996, the Company instituted a workforce reduction program in its
Japanese subsidiary resulting in a net curtailment gain of Lire 2 billion
and work force reduction costs of Lire 17 billion. The Company received
Lire 13 billion from the Olivetti Group as reimbursement for these costs.
The reimbursement has been recorded as an increase in net assets.
24
<PAGE> 37
The following table sets forth the actuarial present value of the benefit
obligations and funded status for the Company's defined benefit plans:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
PLANS HAVING PLANS HAVING PLANS HAVING PLANS HAVING
ASSETS IN EXCESS ACCUMULATED ASSETS IN EXCESS ACCUMULATED
OF ACCUMULATED BENEFITS IN OF ACCUMULATED BENEFITS IN
(In billions of lire) BENEFITS EXCESS OF ASSETS BENEFITS EXCESS OF ASSETS
--------------------- ------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested Benefit Obligations 267 232 186 234
Non vested benefits 1 3 -- 4
--- ---- --- ----
Accumulated Benefit Obligation ("ABO") 268 235 186 238
Effect of further salary increases 20 29 10 33
--- ---- --- ----
Projected Benefit Obligation ("PBO") 288 264 196 271
Plan assets at fair market value 325 99 235 102
--- ---- --- ----
Plan assets in excess of (less than) PBO 37 (165) 39 (169)
Unrecognized net (gain) loss -- (9) (2) --
Unrecognized transition (asset) obligation (15) 39 (16) 42
Unrecognized Prior Service cost -- -- -- --
Additional minimum liability -- (7) -- (10)
--- ---- --- ----
ACCRUED PENSION COST 22 (142) 21 (137)
=== ==== === ====
</TABLE>
Pursuant to SFAS No. 87, intangible assets of Lire 7 billion and Lire 10
billion were recorded as of September 30, 1997 and December 31, 1996,
respectively, in order to recognize the required minimum liability.
The following table provides the range of assumptions, which are based on
the economic environment of each applicable country, used to develop net
periodic pension cost and the actuarial present value of projected benefit
obligations:
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
Rate of return on assets 3.30% - 8.50% 3.30% - 9.50%
Discount rate 3.50% - 7.50% 3.50% - 8.50%
Salary growth 3.00% - 5.50% 3.00% - 6.50%
ITALIAN TFR
Under Italian law, deferred compensation accrues in favour of employees and
agents which they (or in the case of their death, their heirs) are entitled
to collect upon termination of employment or under certain other
circumstances. The amount payable related to each year's service is
calculated on the basis of the remuneration for that year and will be
subject to annual revaluations based on increases in the Italian
cost-of-living index (ISTAT). Provision for the effect of such revaluations
is made as increases in the cost-of-living index are realized. Included in
other liabilities as of September 30, 1997 and December 31, 1996 is
approximately Lire 181 billion and Lire 171 billion, respectively for this
liability, which is unfunded.
25
<PAGE> 38
DEFINED CONTRIBUTION PENSION PLANS
In addition to the defined benefit plans described above, the Company also
sponsors defined contribution plans in various countries. The Company's
expense for the defined contribution plans totaled approximately Lire 4
billion and Lire 5 billion for the nine months ended September 30, 1997 and
the year ended December 31, 1996, respectively.
MULTIEMPLOYER POSTRETIREMENT PLANS
The Company, as part of the Olivetti Group, sponsors contributory retiree
health benefit plans for managers and employees for its Italian operations
which provide medical and dental benefits to employees who meet age and
years of service requirements prior to retirement and who agree to
contribute to a portion of the cost. The amounts charged to expense for the
nine months ended September 30, 1997 and the year ended December 31, 1996,
were not significant.
19. POSTEMPLOYMENT AND TERMINATION BENEFITS
The Company provides certain postemployment and termination benefits to
certain qualified former or inactive employees. The benefits are paid in
either lump sum amounts or during the period following employment but
before retirement. Postemployment and termination benefit expense totaled
Lire 0 (nil) billion and Lire 2 billion for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively. Included in
other liabilities are accruals of Lire 5 billion and Lire 7 billion as of
September 30, 1997 and December 31, 1996, respectively for these benefits.
In prior years the Olivetti Group shut down the manufacturing business in
its subsidiary in Spain. This business was part of the Non-Olsy Business.
As part of the shut down, the Olivetti Group granted termination benefits
to the affected employees. The benefits consist of direct payments to the
employee, social security contributions and supplements to retirement
income. The Olivetti Group recorded a provision for this liability. During
1996 this liability was transferred to the Company and recorded as part of
the net capital distribution. Included in other liabilities as of
September 30, 1997 and December 31, 1996 is approximately Lire 72 billion
and Lire 71 billion, respectively for this liability. On December 31, 1997,
the liability was assumed by Promociones Actividades Comerciales RAP S.A.
("Rapida"), another Olivetti Group company, in exchange for a payment equal
to the recorded book value of the liability. Pursuant to the agreement,
Rapida will reimburse the Company for the future benefit payments to the
terminated employees. Such assignment, however does not discharge the
Company, which remains primarily liable, from its obligation to the
terminated employees.
26
<PAGE> 39
20. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is involved in various legal disputes in the ordinary course of
its business. These disputes relate to claims for damages mainly in
connection with the sale of goods and services and recourses against
adjudication of contracts. In some of these disputes the Company has filed
counter-claims. Based on advice from the Company's legal advisors,
management does not believe that the outcome of such disputes will
materially affect the Company's results of operations, cash flows, or
financial position.
Operating Leases
EXPENSE
Costs of office space, vehicles, manufacturing equipment, and office and
data processing equipment held under operating leases amounted to
approximately Lire 50 billion for the nine months ended September 30, 1997
and Lire 65 billion for the year ended December 31, 1996.
The approximate future minimum rental payments required under operating
leases that have initial or remaining noncancellable lease terms are as
follows:
(In billions of lire) YEAR ENDING SEPTEMBER 30
--------------------- ------------------------
1998 54
1999 35
2000 23
2001 22
2002 20
Thereafter 58
---
TOTAL 212
===
RENTAL INCOME
Certain rentals of the Company's commercial equipment are accounted for as
operating leases. The minimum future revenues to be received on commercial
equipment as of September 30, 1997 are as follows:
(In billions of lire) YEAR ENDING SEPTEMBER 30
--------------------- ------------------------
1998 8
1999 4
2000 4
2001 3
2002 2
Thereafter 10
--
TOTAL 31
==
27
<PAGE> 40
Guarantees
From time to time, the Company guarantees the financing for product
purchases by customers. The Company seeks to limit its exposure to credit
risks in any single country or region. Certain financial guarantees are
backed by amounts held in trust for the Company.
"Year 2000"
The Company has commenced an evaluation of its potential commitments
regarding the "Year 2000" date recognition issue in computer systems. The
evaluation will consider the Company's responsibilities concerning the
systems installed in the past with customers, the situation of its internal
systems, those of its key suppliers and the opportunities to transact new
business. At this time it is not possible to quantify the economic effect
that may result from the issue.
Purchase Commitment
With reference to the agreement for the sale of Syntax Processing
("Syntax") from the Olivetti Group, the Company is committed to purchase a
minimum level of certain services from Syntax for approximately five years
for a minimum total amount of Lire 339 billion. The costs for the services
are determined based on rates established in the agreement. During the nine
months ended September 30, 1997 and the year ended December 31, 1996,
purchased services exceeded the required minimums.
Pending Acquisition
The Company is committed to purchase the remaining 2000 shares (40%) of
Datrac AG, at a price to be determined based on the profits realized during
the three year period 1995-1997. The purchase price may range between Lire
16 billion and Lire 21 billion.
Purchase Price Adjustment
In connection with the acquisition in 1997 of an equity investment in Open
Access Ltd., the Company is committed to pay to the seller a price
adjustment to be determined based on earnings (as defined) in the next
three years.
Guarantees and Commitments Received
Olivetti S.p.A. has made the following commitments to the Company: 1) to
hold Olivetti Corporation of Japan harmless for any possible funding
deficit in the local pension plan; 2) to assume the capital lease agreement
entered into in respect of the office building located in Paris, France; 3)
to purchase from the Company some minor shareholdings at their Italian GAAP
book values; 4) to reimburse the
28
<PAGE> 41
Company for any possible shortfalls in the workforce reduction provisions
recorded in the Italian GAAP financial statements as of September 30, 1997;
and 5) to hold the Company harmless for the renovation costs of the German
office buildings in excess of the amounts accrued in the Italian GAAP
financial statements as of September 30, 1997.
Olivetti S.p.A. has pledged to financially support certain of the operating
subsidiaries of the Company that have incurred substantial losses in the
past.
As of September 30, 1997, Olivetti S.p.A. granted approximately Lire 19
billion in performance guarantees to third party suppliers on behalf of the
Company.
21. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, accounts receivable,
advances to related parties, due to related parties, accounts payable,
other loans of foreign subsidiaries, short term bank borrowings and debt
from factors or other financial institutions are not materially different
than fair value due to the short-term maturities of these instruments.
The fair values of marketable securities classified as available-for-sale,
were based on quoted market prices of these or similar instruments where
available. The fair value of available-for-sale securities totaled Lire 9
billion at September 30, 1997, and Lire 6 billion at December 31, 1996
which corresponds to the carrying amounts recorded in current marketable
securities. All other marketable securities are classified as
held-to-maturity and carried at amortized cost.
For the research and assisted loans provided by the Italian government, the
Company is unable to quantify the fair value of these instruments due to
their nature.
22. GEOGRAPHIC AREAS AND SEGMENT INFORMATION
The Company operates entirely in one industry segment, information
technology (IT). As previously reported, the Company is a provider of IT
solutions and services to the Italian, European and global market.
29
<PAGE> 42
The following is a summary of operations by geographic region at September
30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Sales:
Italy 942 1,515
Europe 1,242 1,954
United States 240 279
Other 446 733
----- -----
Total 2,870 4,481
===== =====
Earnings (losses) before interest expense,
provision for income taxes, minority
interest and extraordinary item:
Italy (89) (231)
Europe 19 8
United States 6 (10)
Other (4) (15)
----- -----
Total (68) (248)
===== =====
Identifiable assets:
Italy 1,675 1,932
Europe 1,251 1,251
United States 150 165
Other 353 403
----- -----
Total 3,429 3,751
===== =====
</TABLE>
Europe includes operations located primarily in United Kingdom,
Netherlands, Belgium, Spain and France.
30
<PAGE> 43
23. RESTRUCTURING COSTS
In 1995 the Company approved a restructuring plan (the "1995 Plan") which
at December 31, 1995 concerned 1,230 employees, which decreased to 356 at
December 31, 1996, after the termination of 874 employees during the year.
An additional 173 employees were terminated during the nine months ended
September 30, 1997. In 1996 the Company approved a new plan (the "1996
Plan") for the termination of 157 employees, to be terminated in the first
nine months of 1997. In 1997 and additional plan was approved for the
termination of an additional 10 employees to be terminated by the end of
1997.
The relevant costs incurred are as follows:
(In billions of lire) AMOUNT
--------------------- ------
Year ended December 31, 1996 82
Nine months ended September 30, 1997 1
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
TO BE TERMINATED IN IN THE NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
------------------- -----------------------------------------------------------
<S> <C> <C> <C>
December 31, 1996 356 157 --
September 30, 1997 183 77 10
</TABLE>
<TABLE>
<CAPTION>
AMOUNTS PAID PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
IN IN THE NINE MONTHS ENDED
(In billions of lire) 1995 1996 SEPTEMBER 30, 1997
--------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1996 77 -- --
Nine months ended September 30, 1997 14 14 --
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES PLAN APPROVED PLAN APPROVED PLAN APPROVED IN
ACTUALLY TERMINATED IN IN THE NINE MONTHS ENDED
1995 1996 SEPTEMBER 30, 1997
------------------- -----------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1996 874 -- --
Nine months ended September 30, 1997 173 80 --
</TABLE>
31
<PAGE> 44
24. RELATED PARTY TRANSACTIONS
Sales to related parties and purchases from related parties are estimated
as Lire 150 billion and Lire 300 billion for the nine months ended
September 30, 1997 and as Lire 350 billion and Lire 800 billion for the
year ended December 31, 1996, respectively.
25. OTHER REVENUES
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Net gain on sales of fixed assets 20 4
Net gain on sales of shareholding 11 3
Equity in earnings 1 1
Other 36 6
--- ---
TOTAL 68 14
=== ===
</TABLE>
Net gain on sales of fixed assets for the nine months ended September 30,
1997, relates primarily to the sale of a building in Spain for proceeds of
Lire 26 billion resulting in a gain of Lire 19 billion.
26. INTEREST EXPENSE, NET
Interest expense, net consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
(In billions of lire) SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------- ------------------ -----------------
<S> <C> <C>
Net interest (charged by) income from
other Olivetti Group companies (4) 13
Interest expense, third party borrowings (19) (60)
Securitization charges (12) (29)
--- ---
TOTAL (35) (76)
=== ===
</TABLE>
27. CAPITAL INCREASE
During the nine months ended September 30, 1997, the Company and another
Olivetti Group company contributed Lire 22 billion and Lire 15 billion,
respectively to Olivetti Espana S.A. The contribution of Lire 15 billion
from the other Olivetti Group company has been recorded in the statement of
net assets (liabilities). The remaining amount eliminates in consolidation.
32
<PAGE> 45
28. EXTRAORDINARY ITEM
During 1996 the Company repurchased from a related party equipment for
approximately Lire 83 billion held under several sale-leaseback agreements.
The sale-leaseback agreements were accounted for as financing arrangements
by the Company. The repurchase has been accounted for as an early
extinguishment of the financing arrangements resulting in an extraordinary
loss of approximately Lire 30 billion. The loss results in a deferred tax
asset with a corresponding full valuation allowance.
29. SUBSEQUENT EVENTS
a) On December 31, 1997, net receivables included in trade receivables as
of September 30, 1997 and December 31, 1996 of Lire 82 billion were sold to
another Olivetti Group company for proceeds of Lire 102 billion. The
transaction has been accounted for as a sale of receivables for Lire 82
billion and a capital contribution of Lire 20 billion.
b) Subsequent to September 30, 1997, a change in Italian tax legislation
was enacted which becomes effective on January 1, 1998. The change in the
tax law includes a repeal of certain local taxes on income and adjusts
taxable income for certain expense and income items. The Company has not
yet estimated the impact of the new legislation on its financial position
and its results of operations.
c) On March 17, 1998, the Olivetti Group sold almost all of its ownership
interests in Olsy, except for its interest in Olivetti Corporation of
Japan, which was sold on April 7, 1998, to Wang Laboratories, Inc. pursuant
to the terms of the Stock Purchase Agreement by and among Wang
Laboratories, Inc., Wang Nederland BV, Ing. C. Olivetti & C. S.p.A.,
Olivetti Sistemas e Servicious Limitada and Olivetti do Brasil S.A. dated
February 28, 1998. The Stock Purchase Agreement together with certain other
ancillary agreements contain provisions which required the consummation of
certain pre-closing transactions and other actions by the Company and/or
the Olivetti Group, some of which have been previously described in other
sections of these notes to the combined consolidated financial statements.
Under the terms of the agreements, the Olivetti Group (1) settled or
extinguished all amounts due from/to the Company under certain related
party borrowing/funding arrangements; (2) and the Company, subject to
normal trade practice, agreed on the amounts immediately due on the
outstanding trade receivables and payables between the companies; (3)
caused the assignment of the Company's termination liability for the
terminated employees of the Spanish subsidiary to another Olivetti Group
company, as previously stated in note 19; (4) made cash contributions of
Lire 40 billion to the Company; (5) purchased certain receivables of the
Company for approximately Lire 102 billion; and (6) purchased from the
Company certain real property located in Spain for consideration equal to
the net book value of Lire 10 billion. The Company (1) repaid or
extinguished all amounts owed under third party credit facilities and loan
arrangements, except for certain borrowings of the Company's subsidiary in
Japan, and caused all relevant liens on the assets of the Company to be
released; (2) terminated all securitization and factoring arrangements and
settled all amounts due to or from third parties as a result of the
arrangements and caused all relevant liens on the assets of the Company to
be released; (3) purchased additional shares in Olivetti Ricerca, another
Olivetti Group company, for approximately Lire 8 billion, increasing its
interest to 19.9%, and (4) recorded in its Italian GAAP financial
statements certain additional provisions for abandoned space, vacation,
work force reduction and costs to complete the renovation of the office
buildings in Germany.
Pursuant to the terms of the Stock Purchase Agreement and certain other
ancillary agreements, the Olivetti Group provided the Company with certain
additional guarantees and commitments. In this regard, the Olivetti Group
will (1) assume the capital lease of the office building located in Paris,
France at a date no later than the closing date or June 30, 1998; (2)
reimburse/charge the Company 75% of any shortfall/excess in the work force
reduction provision recorded in the Italian GAAP accounts and for certain
wages incurred after July 1, 1998; (3) purchase from the Company any trade
receivables recorded in the closing financial statements in excess of the
allowance for doubtful accounts which will not be collected within a
certain period of time; (4) purchase any unbilled trade receivable of the
company, not collected within a certain period of time; (5) reimburse the
Company for the minimum amounts due under the Syntax agreement for which
services were not purchased, except Olsy is committed to purchase services
amounting to at least Lire 43 billion in 1998 and Lire 18 billion in 1999;
and (6) will reimburse the Company for all benefits paid during the period
commencing on the closing date and ending on December 31, 2000, from the
Olivetti Corporation of Japan pension plan for benefits accrued to
employees as of the closing date and will reimburse/charge the Company for
80% of the benefit deficit/surplus, as defined, of the plan as determined
on December 31, 2000, net of applicable taxes.
These combined consolidated financial statements do not reflect the affect
of these transactions or any adjustment resulting from the acquisition of
the Company by Wang.
d) On May 12, 1998, the Company's subsidiary in Germany filed a petition in
local court to initiate bankruptcy proceedings. At September 30, 1997 and
December 31, 1996, the subsidiary's net liabilities reflected in these
combined consolidated financial statements approximated Lire 24 billion
and Lire 35 billion, respectively. The subsidiary's revenues and net loss
for the nine months ended September 30, 1997 and the year ended December
31, 1996, were approximately Lire 79 billion and Lire 8 billion and Lire
192 billion and Lire 28 billion, respectively.
33
<PAGE> 46
PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
On March 17, 1998 (the "Closing Date"), the Company completed the purchase of
Olivetti Solutions ("Olsy"), a wholly-owned information technology ("IT")
solutions and service subsidiary of The Olivetti Group ("Olivetti"), except for
Olivetti Corporation of Japan ("OCJ"), the purchase of which was not completed
until April 7, 1998. Olsy's revenues for the calendar year ended December 31,
1997 were approximately $2.4 billion.
In consideration for Olsy, the Company paid Olivetti $68.6 million in cash;
8,750,000 shares of common stock (of which 1,500,000 are expected to be
delivered before the end of calendar year 1998, subject to shareholder approval)
with a value of $146.8 million at the time of issuance; 5,000,000 stock
appreciation rights ("SARs") which give Olivetti value for the increase in the
market price of the Company's common stock above $30.00 per share at any time
from March 2001 to March 2005 and are redeemable in cash or common stock at the
Company's election; and the potential for an additional amount (an "earnout") of
up to $56.0 million payable in the year 2000, subject to meeting mutually-agreed
performance targets for the calendar years 1998 and 1999. The earnout will be
recorded at the time it becomes probable that a payment will be required and the
amount can be reasonably estimated.
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 are made to
the assets acquired and the liabilities assumed based on their respective fair
values. The value of the shares was recorded at a discount of 35% of the market
value of the Company's common stock in part because the shares are not
registered and are subject to a three-year restriction period. The value of the
SARs was recorded based on the historical and implied volatility of the common
stock, considering both the minimum guaranteed price and the restrictions on
exercise inherent in the SARs. The stock and SAR values were supported by an
independent valuation.
The Company estimates that expenditures of as much as $380 million will be
required over the next 24 to 36 months in connection with the integration and
rightsizing of both Olsy and Wang. The Company currently estimates that
approximately $290 million of the $380 million will be related to severance and
redundant facilities related to Olsy. Of the $290 million, $45 million was
recorded by Wang as part of purchase accounting at March 31, 1998. An additional
$90 million will relate to integration-related costs, systems and other costs,
of which $23.2 million was recorded at March 31, 1998. Under certain conditions,
costs related to the acquired Olsy business will be accounted for as an
additional cost of the acquisition at the time the formal plan of restructuring
is completed. The accompanying unaudited pro forma financial statements assume
that the remaining Olsy-related costs will be accounted for as additional costs
of the acquisition. Integration-related costs attributable to Wang will be
accounted for as charges to operations in the periods they are determined.
<PAGE> 47
The estimated excess of the acquisition cost over the net tangible assets
acquired was determined as follows:
<TABLE>
<CAPTION>
Unaudited
-----------------------------------------------------------------
AS REPORTED PRO
MARCH 31, 1998 OCJ ADJUSTMENTS FORMA
-------------- ------ ----------- -------
<S> <C> <C> <C> <C>
Cash (including $18.0 million of
transaction costs) $ 47.0 $ 39.6 $ 86.6
Common Stock 146.9 146.9
Stock Appreciation Rights 41.8 41.8
------- ------ ------ -------
TOTAL CONSIDERATION 235.7 39.6 275.3
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Estimated Olsy Restructuring
Liability 245.0 245.0
------- ------- ------ -------
TOTAL ESTIMATED ACQUISITION
COST 235.7 39.6 245.0 520.3
Estimated Fair Value of Net
Tangible Assets Acquired (130.3) 7.6 (25.2) (147.9)
------- ------ ------ -------
Estimated Excess of Purchase
Price over Net Tangible Assets
Acquired $ 105.4 $ 47.2 $219.8 $ 372.4
======= ====== ====== =======
</TABLE>
<PAGE> 48
The estimated excess of the purchase price over the fair value of the net assets
acquired of $372.4 million has been reflected in the unaudited pro forma
financial statements based on a preliminary purchase price allocation.
Finalization of the allocation of the purchase price to assets acquired and
liabilities assumed is subject to appraisals, valuations, evaluations and other
analyses of the fair value of assets acquired and liabilities assumed, including
the anticipated valuation of certain purchased research and development
activities and the finalization of the formal Olsy restructuring plans.
The estimated excess of purchase price over the net tangible assets acquired has
been allocated on a preliminary basis as follows:
Estimated
Values (in millions)
--------------------
Developed software $ 60.0
Trademarks 30.0
Goodwill 207.4
------
Olsy related intangible assets 297.4
In process research and development 75.0
------
Total $372.4
======
In process research and development is to be expensed upon finalization of the
pending valuation, expected in the fourth quarter of fiscal 1998; developed
software is amortized based upon the ratio of anticipated annual revenues to
total anticipated revenues over the life of the developed software, primarily
within three years; trademarks - two to five years and goodwill - twenty-five
years.
Based upon these estimates, the pro forma impact of amortization expense for the
succeeding five years is $45.0 million, $34.0 million, $20.0 million, $15.0
million and $14.0 million, respectively. These estimates of amortization expense
are highly dependent upon the amounts of Olsy related restructuring costs which
still have not been finalized or approved, as well as the allocation of the
excess of purchase price over identifiable tangible assets to various
intangible asset categories. Management anticipates that the purchase price
allocation will be finalized by June 30, 1998.
The unaudited consolidated balance sheet at March 31, 1998 included in the
Company's report on Form 10-Q for the quarterly period ended March 31, 1998
reflects both the balance sheet of the acquired company and certain preliminary
purchase accounting adjustments recorded as of that date by the Company. In
addition, the accompanying unaudited pro forma combined condensed balance sheet
includes the effect of the nonrecurring charge to operations for the fair value
of certain technology under research and development estimated at $75 million
and is reflected as a direct reduction to equity; the estimated incremental
liability associated with restructuring the Olsy business of $245 million; the
preliminary allocation of excess purchase price to identifiable intangible
assets; and the acquisition of OCJ which was completed April 7, 1998. In
connection with the acquisition of OCJ, Olivetti has agreed to reimburse the
Company for the unfunded pension liability at the acquisition date. The unfunded
pension liability at March 31, 1998 was $25.2 million and has been reflected as
a reduction of purchase price in the accompanying pro forma financial
statements.
<PAGE> 49
The accompanying unaudited pro forma combined condensed statements of operations
for the Company's nine months ended March 31, 1998 and its fiscal year ended
June 30, 1997 have been prepared to give effect to the acquisition of Olsy by
the Company. The unaudited pro forma combined statements of operations do not
include the nonrecurring charge to operations for the fair value of certain
purchased technology under research and development of $75 million, nor other
nonrecurring charges which may result from the transaction and the integration
of Olsy into the Company.
On May 12, 1998, the Company's Olsy subsidiary in Germany filed a petition in
local court to initiate bankruptcy proceedings. The pro forma financial
statements presented herein include the results of operations and financial
position of this subsidiary.
The unaudited pro forma information has been prepared assuming that the
acquisition, including OCJ, occurred at the beginning of the Company's most
recently completed fiscal year which began July 1, 1996. The pro forma
information is based on the historical financial statements of the company and
Olsy, giving effect to the transaction under the purchase method of accounting
and the assumptions and adjustments described in the accompanying notes to the
pro forma financial information. The pro forma information for the nine months
ended March 31, 1998 includes the unaudited historical results of Wang and Olsy
for the nine months then ended. The pro forma information for the fiscal year
ended June 30, 1997 includes the historical results of Wang plus the unaudited
historical results of Olsy for the four quarters ended September 30, 1997.
Accordingly, the unaudited results of operations for the Olsy quarter ended
September 30, 1997 are included in both the nine month and fiscal year periods.
Revenues and loss from continuing operations for that quarter were $509.2 and
$32.2, respectively.
The pro forma information is unaudited and does not purport to be indicative of
the financial position or results of operations that would have been attained
had the combination been in effect on the dates indicated, nor of future results
of operations of the combined Company. The unaudited pro forma financial
statements should be read in conjunction with the separate audited financial
statements and notes thereto of Wang Laboratories, Inc. included in its Annual
Report on Form 10-K for the year ended June 30, 1997, the unaudited financial
information included in Wang's Form 10-Q for the three and nine month periods
ended March 31, 1998, and the audited financial statements and notes thereto of
Olsy for the year ended December 31, 1996 and the nine months ended September
30, 1997 included as part of this Form 8-K/A.
<PAGE> 50
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) OCJ (B)(1) Adjustments Combined
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and equivalents $ 238.7 $ 23.2 $ -- $ 261.9
Accounts receivable, net 790.8 50.6 -- 841.4
Inventories 188.7 9.0 -- 197.7
Other current assets 200.9 4.6 -- 205.5
-------- ------ ------ --------
1,419.1 87.4 -- 1,506.5
Depreciable assets, net 292.1 9.9 -- 302.0
Intangible assets, net 304.2 0.5 -- 304.7
Olsy-related intangible assets 105.4 -- 192.0 (2,3,4) 297.4
Other 117.8 -- (14.4)(2) 103.4
-------- ------ ------ --------
Total assets $2,238.6 $ 97.8 $177.6 $2,514.0
======== ====== ====== ========
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
- --------------------
CURRENT LIABILITIES
Borrowings due within one year $ 120.3 $ 27.7 $ -- $ 148.0
Accounts payable 381.5 17.3 -- 398.8
Accrued expenses 242.1 34.4 -- 276.5
Other current liabilities 372.2 -- 245.0 (3) 617.2
Deferred service revenue 156.1 0.9 -- 157.0
-------- ------ ------ --------
Total current liabilities 1,272.2 80.3 245.0 1,597.5
-------- ------ ------ --------
Long-term liabilities 291.3 25.2 -- 316.5
-------- ------ ------ --------
Minority interest 6.7 -- -- 6.7
-------- ------ ------ --------
Series A Preferred Stock 86.0 -- -- 86.0
-------- ------ ------ --------
STOCKHOLDERS' EQUITY
Series B Preferred Stock 138.3 138.3
Common stock 0.5 -- -- 0.5
Capital in excess of par value 484.0 52.1 (52.1)(2) 484.0
Cumulative translation
adjustment (8.6) -- -- (8.6)
Retained earnings
(accumulated deficit) (31.8) (59.7) (15.3)(2,4) (106.8)
-------- ------ ------ --------
Total stockholders' equity 582.4 (7.6) (67.4) 507.4
-------- ------ ------ --------
Total liabilities and
stockholders' equity $2,238.6 $ 97.8 $177.6 $2,514.0
======== ====== ====== ========
</TABLE>
(A) As filed on Form 10-Q for the quarter ended March 31, 1998.
(B) Olivetti Corporation of Japan balance sheet, the purchase of which was not
completed by the Company until April 7, 1998. Accordingly, it was not
reported in the Company's March 31, 1998 balance sheet.
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 51
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) Olsy (B)(5) Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue $1,053.7 $1,640.7 $ -- $2,694.4
-------- -------- ------ --------
Costs and expenses
Cost of revenues 825.2 1,289.7 -- 2,114.9
Research and development 3.7 16.2 -- 19.9
Selling, general and
administrative 194.5 324.6 -- 519.1
Amortization of intangibles -
acquisition and fresh-start 21.1 22.4 25.6 (6) 69.1
Acquisition-related charges 12.5 -- -- 12.5
Restructuring charges 10.7 30.9 -- 41.6
-------- -------- ------ --------
Total costs and expenses 1,067.7 1,683.8 25.6 2,777.1
-------- -------- ------ --------
Operating loss (14.0) (43.1) (25.6) (82.7)
Other (income) expense (6.3) 9.8 3.7 (7) 7.2
-------- -------- ------ --------
Income (loss) before income taxes (7.7) (52.9) (29.3) (89.9)
Provision (benefit) for
income taxes 13.4 6.7 -- 20.1
-------- -------- ------ --------
Income (loss) from continuing
operations $ (21.1) $ (59.6) $(29.3) $ (110.0)
======== ======== ====== ========
Income (loss) from continuing
operations applicable to
common stockholders $ (31.7) $ (59.6) $(29.3) $ (120.6)
======== ======== ====== ========
Earnings per share
Basic $ (1.22) $ (2.56)
Diluted $ (1.22) $ (2.56)
Shares used to compute per
share amounts
Basic 39.8 47.1
Diluted 39.8 47.1
</TABLE>
(A) As filed on Form 10-Q for the quarter ended March 31, 1998.
(B) Includes Olsy and Olivetti Corporation of Japan historical data for the nine
months ended March 31, 1998.
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 52
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1997
(Unaudited)
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Wang (A) Olsy (B)(5) Adjustments Combined
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenue $1,268.4 $2,653.3 $ -- $3,921.7
-------- -------- ------ --------
Costs and expenses
Cost of revenues 961.0 2,074.1 -- 3,035.1
Research and development 3.7 32.9 -- 36.6
Selling, general and
administrative 243.2 603.5 -- 846.7
Amortization of intangibles -
acquisition and fresh-start 47.0 15.6 44.9 (6) 107.5
Acquisition-related charges 35.0 -- -- 35.0
Chapter 11-related charges 1.3 -- -- 1.3
Restructuring charges -- 46.1 -- 46.1
-------- -------- ------ --------
Total costs and expenses 1,291.2 2,772.2 44.9 4,108.3
-------- -------- ------ --------
Operating income (loss) (22.8) (118.9) (44.9) (186.6)
Other (income) expense (0.5) 30.8 4.9 (7) 35.2
-------- -------- ------ --------
Loss from continuing
Operations before income taxes (22.3) (149.7) (49.8) (221.8)
Provision (benefit) for
Income taxes (15.6) 13.3 -- (2.3)
-------- -------- ------ --------
Loss from continuing
Operations $ (6.7) $ (163.0) $(49.8) $ (219.5)
======== ======== ====== ========
Income (loss) from continuing
operations applicable to
common stockholders $ (20.8) $ (163.0) $(49.8) $ (233.6)
======== ======== ====== ========
Earnings per share
Basic $ (0.56) $ (5.08)
Diluted $ (0.56) $ (5.08)
Shares used to compute per
share amounts
Basic 37.2 46.0
Diluted 37.2 46.0
</TABLE>
(A) As filed on Form 10-K for the year ended June 30, 1997.
(B) For the twelve months ending September 30, 1997 (unaudited).
See Notes to Pro Forma Combined Condensed Financial Statements
<PAGE> 53
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Historical balance sheet amounts for Olsy are presented in accordance with
U.S. generally accepted accounting principles and have been converted from
Italian Lira to U.S. Dollars using the exchange rate in effect for the
Company at March 31, 1998.
(2) To reclassify the $39.6 million of escrow related to the purchase of OCJ
included in Other Assets to Olsy-related intangible assets, net of $25.2
million for pension liabilities reimbursable by Olivetti, and to reclassify
net liabilities assumed of $7.6 million to Olsy intangible assets.
(3) To record estimated amounts relating to Olsy to be incurred as part of the
Company's restructuring plan.
(4) To write off the estimated value of in process research and development.
(5) Historical amounts reported in the statement of operations for Olsy are
presented in accordance with U.S. generally accepted accounting principles
and have been converted from Italian Lira to U.S. Dollars using the average
exchange rate for the period.
(6) To record amortization expense for the intangible assets represented by the
excess of purchase price over net assets acquired, established in
connection with the Company's acquisition of Olsy. The amortization expense
has been calculated based on preliminary estimates of the allocation of
purchase price to identifiable intangible assets. An independent valuation
is being performed and is expected to be complete at June 30, 1998.
(7) To record interest expense of $3.7 million and $4.9 million for the nine
months ended March 31, 1998 and the year ended June 30, 1997, respectively,
on the Company's credit facility, assuming an average daily outstanding
balance of $68.6 million, calculated at an interest rate of 7.125%.
<PAGE> 54
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WANG LABORATORIES, INC.
June 1, 1998 By: /s/ Franklyn A. Caine
-------------------------------
Franklyn A. Caine
Executive Vice President and
Chief Financial Officer
<PAGE> 55
EXHIBIT INDEX
23.1 Consent of Coopers & Lybrand S.p.A.
23.2 Consent of Arthur Andersen
23.3 Consent of Arthur Andersen
23.4 Consent of Arthur Andersen
23.5 Consent of Arthur Andersen
23.6 Consent of Price Waterhouse
23.7 Consent of Price Waterhouse
23.8 Consent of Price Waterhouse
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Wang Laboratories Inc. on Forms S-3 (File Nos. 333-06611, 333-19789, 333-27969
and 333-27971) of our report dated February 24, 1998, except with respect to
notes 29(c) and 29(d), for which the dates are April 7, 1998 and May 12, 1998,
respectively, on our audits (which, as stated in our report, are based in part
on the reports of other auditors) of the combined consolidated financial
statements of Olivetti Solutions (an Integrated Business Unit of the Olivetti
Group) as of September 30, 1997 and December 31, 1996 and for the nine month and
one year periods then ended, which report is included in this Form 8-K/A.
Coopers & Lybrand, S.p.A.
Turin, Italy
May 27, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries on Form S-3 (File No. 333-06611) and on Form S-3/A (File
Nos. 333-19789, 333-27971 and 333-27969) of our report dated February 24, 1998
on the audited financial statements of Olsy Belgium S.A. and subsidiaries as of
September 30, 1997 and December 31, 1996, and for the nine months and year then
ended, respectively, which reports are included in this Form 8-K/A.
ARTHUR ANDERSEN
/s/ GUY WYGAERTS
- ----------------
GUY WYGAERTS
May 27, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated February 23, 1998 on the audited financial statements of Olivetti Espana,
S.A. as of September 30, 1997 and December 31, 1996, and for the nine-month and
year then ended, respectively, which reports are included in this Form 8-K/A.
ARTHUR ANDERSEN
/s/ Koro Usarraga
- -----------------
Koro Usarraga
May 26, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated November 7, 1997 on the audited financial statements of Olivetti
Corporation of Japan as of September 30, 1997, and for the nine months then
ended which report is included in this Form 8-K/A.
ARTHUR ANDERSEN
Tokyo, Japan
May 26, 1998
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
incorporated by reference in the registration statements of WANG Laboratories,
Inc. and subsidiaries registration statements on Form S-3 (File No. 333-06611)
and on Form S-3/A (File Nos. 333-19789, 333-27971 and 333-27969) of our report
dated November 7, 1997 on the audited financial statements of Olivetti
Corporation of Japan as of December 31, 1996, and for the year then ended,
which report is included in this Form 8-K/A.
ARTHUR ANDERSEN
Tokyo, Japan
May 26, 1998
<PAGE> 1
EXHIBIT 23.6
Vienna, May 27, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated February 24, 1998, except as to note 11 which is as of May 12, 1998,
relating to the consolidated financial statements of Olsy Austria Information
Systems GmbH, Vienna, Austria, which appears in the Current Report on Form 8-K/A
of Wang Laboratories, Inc. dated June 1, 1998.
PRICE WATERHOUSE AG
/s/ JOHANNES MORTL /s/ WOLFRAM STEINER
-------------------- -------------------
JOHANNES MORTL WOLFRAM STEINER
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated January 10, 1998 relating to the consolidated financial statements of
Olivetti (Hong Kong) Limited, which appears in the Current Report on Form 8-K/A
of Wang Laboratories, Inc. dated June 1, 1998.
/s/ Price Waterhouse
Price Waterhouse
Hong Kong
May 27, 1998
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (No. 06611,
No. 19789, No. 27971 and No. 27969) of Wang Laboratories, Inc. of our report
dated December 24, 1997 relating to the consolidated financial statements of
Olsy Africa (Proprietary) Limited, which appears in the Current Report on
Form 8-K/A of Wang Laboratories, Inc. dated June 1, 1998.
/s/ Price Waterhouse
May 27, 1998
