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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2 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)
1-56771 04-2192707
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(Commission File Number) (IRS Employer Identification No.)
290 CONCORD ROAD, BILLERICA, MASSACHUSETTS 01821
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (978) 625-5000
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The undersigned Registrant hereby amends Item 7 of its Current Report on
Form 8-K dated March 17, 1998, as amended by Form 8-K/A Amendment No. 1 to
current report 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 (restated)
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
This Amendment No. 2 to Form 8-K of Wang Laboratories, Inc., ("Wang" or the
"Company") gives effect to certain changes resulting from informal discussions
with the staff of the Securities and Exchange Commission which were concluded in
March 1999 concerning the accounting treatment relating to certain aspects of
the Olsy acquisition as more fully discussed in Pro Forma Combined Condensed
Financial Statements beginning on page 4 of this amended filing.
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(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
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PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
Subsequent to the filing of its Form-8K/A in connection with the purchase of
Olivetti Solutions ("Olsy"), the Company and the staff of the Securities and
Exchange Commission ("SEC") have had discussions with regard to the
determination and allocation of the purchase price in connection with the
accounting for the acquisition of Olsy. As a result of these discussions, which
concluded March 1999, the Company has modified the valuation of the acquisition
related consideration and the allocation of the related intangible assets. In
addition, the Company has reclassified an extraordinary loss on the discharge of
debt in the pro forma financial statements for the year ending June 30, 1997 to
conform to the presentation in the audited financial statements for Olsy.
Restatement Related to Valuation of Olsy Consideration - Common Stock and Stock
Appreciation Rights:
The Company revised the values of the 8.75 million shares of common stock (of
which 1.5 million are to be delivered upon shareholder approval) and the 5.0
million Stock Appreciation Rights ("SARs") issued to Olivetti as part of the
consideration for Olsy. The value of the shares previously recorded was based on
the market value of the Company's common stock, discounted by 35% to reflect the
restrictions contained in the Stock Purchase Agreement between the Company and
Olivetti. The Company has adjusted this value to reflect a discount of 20% to a
revised calculation of market value. The value of the common stock used to
calculate the value of the SARs has been revised consistent with the new value
per share of the common stock described above. Accordingly, the value of the
consideration was adjusted by $41.0 million and additional paid-in capital
increased, with a corresponding increase to intangible assets.
Restatement Related to the estimated excess of purchase price over the net
tangible assets acquired:
The Company has modified the methods used to value acquired in-process research
and development ("IPR&D") and other intangible assets in connection with the
Company's acquisition of Olsy. Initial estimates of value of the acquired IPR&D
were based on the cost required to complete each project, the cash flows
attributable to each project, and the selection of an appropriate rate of return
to reflect the risk associated with the state of completion of each project.
Revised calculations are based on adjusted after-tax cash flows that give
explicit consideration to the Staff's views on IPR&D as set forth in its
September 15, 1998 letter to the American Institute of Certified Public
Accountants including consideration of the stage of completion of the IPR&D at
the acquisition date and the view that IPR&D be valued on a fair market value
basis versus a fair value basis in arriving at the valuation amount. As a result
of these modifications the Company has decreased the estimated amount of the
purchase price allocated to acquired in-process research and development in this
amended Form 8-K/A from $75.0 to $18.1 million. Additionally, the amounts of
purchase price allocated to developed software has been reduced to $43.2 million
from $60.0 million and amounts allocated to trademarks increased from $30.0
million to $57.0 million. The net effect of these changes and the adjustment of
$41.0 million to the consideration was to increase estimated goodwill by $87.7
million in the accompanying pro forma financial statements.
The following discussion and pro forma statements have been amended to reflect
the changes previously discussed as though the Staff's views had been known and
applied at the original filing date.
On March 17, 1998 (the "Closing Date"), the Company completed the purchase of
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 to be delivered upon
shareholder approval) with a value of $197.2 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.
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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 20% 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.
The estimated excess of the acquisition cost over the net tangible assets
acquired was determined as follows:
<TABLE>
<CAPTION>
UNAUDITED
-----------------------------------------------
AS RESTATED 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 197.2 197.2
Stock Appreciation Rights 32.5 32.5
------- ----- ------ -------
TOTAL CONSIDERATION 276.7 39.6 316.3
Estimated Olsy Restructuring Liability 245.0 245.0
------- ----- ------ -------
TOTAL ESTIMATED ACQUISITION COST 276.7 39.6 245.0 561.3
Estimated Fair Value of Net
Tangible (Assets) Liabilities Acquired (130.3) 7.6 (25.2) (147.9)
------- ----- ------ -------
Estimated Excess of Purchase Price over
Net Tangible Assets Acquired $ 146.4 $47.2 $219.8 $ 413.4
======= ===== ====== =======
</TABLE>
The estimated excess of the purchase price over the fair value of the net assets
acquired of $413.4 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 $ 43.2
Trademarks 57.0
Goodwill 295.1
------
Olsy related intangible assets 395.3
In process research and development 18.1
------
Total $413.4
======
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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 $53.4 million, $44.2 million, $21.2 million, $19.0
million and $18.0 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.
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 $18.1 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.
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 $18.1 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
million and $32.2 million, 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 amended 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.
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PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
(Dollars in millions)
<TABLE>
<CAPTION>
(as restated)
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 146.4 -- 248.9(2,3,4) 395.3
Other 117.8 -- (14.4)(2) 103.4
-------- -------- -------- --------
Total assets $2,279.6 $ 97.8 $ 234.5 $2,611.9
======== ======== ======== ========
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 25.1 -- 316.4
-------- -------- -------- --------
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 525.0 52.1 (52.1)(2) 525.0
Cumulative translation adjustment (8.6) -- -- (8.6)
Retained earnings (accumulated deficit) (31.8) (59.7) 41.6 (2,4) (49.9)
-------- -------- -------- --------
Total stockholders' equity 623.4 (7.6) (10.5) 605.3
-------- -------- -------- --------
Total liabilities and stockholders' equity $2,279.6 $ 97.8 $ 234.5 $2,611.9
======== ======== ======== ========
</TABLE>
(A) As filed on Form 10-Q/A 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
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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
---------- ---------- ----------- --------
Net revenue $1,053.7 $1,640.7 $ -- $2,694.4
-------- -------- ------ --------
<S> <C> <C> <C> <C>
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 33.2 (6) 76.7
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 33.2 2,784.7
-------- -------- ------- --------
Operating loss (14.0) (43.1) (33.2) (90.3)
Other (income) expense (6.3) 9.8 3.7 (7) 7.2
-------- -------- ------- --------
Income (loss) before income taxes (7.7) (52.9) (36.9) (97.5)
Provision (benefit) for income taxes 13.4 6.7 -- 20.1
-------- -------- ------ --------
Income (loss) from continuing operations $ (21.1) $ (59.6) $ (36.9) $ (117.6)
======== ======== ======= ========
Income (loss) from continuing operations
applicable to common stockholders $ (31.7) $ (59.6) $ (36.9) $ (128.2)
======== ======== ======= ========
Earnings per share
Basic $ (1.22) $ (2.72)
Diluted $ (1.22) $ (2.72)
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/A 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
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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 243.2 583.7 -- 826.9
Amortization of intangibles -
acquisition and fresh-start 47.0 15.6 53.4(6) 116.0
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 2,752.4 53.4 4,097.0
-------- -------- ------- ---------
Operating income (loss) (22.8) (99.1) (53.4) (175.3)
Other (income) expense (0.5) 30.8 4.9(7) 35.2
-------- -------- ------- ---------
Loss from continuing Operations before income
taxes and extraordinary item (22.3) (129.9) (58.3) (210.5)
Provision (benefit) for income taxes (15.6) 13.3 -- (2.3)
-------- -------- ------- ---------
Loss from continuing Operations before extraordinary item $ (6.7) $ (143.2) $ (58.3) $ (208.2)
Loss on debt discharge, net of tax -- (19.8) -- (19.8)
-------- -------- ------- ---------
Net Loss (6.7) (263.0 (58.3) (228.0)
-------- -------- ------- ---------
Income (loss) from continuing operations applicable
to common stockholders $ (20.8) $ (163.0) $ (58.3) $ (242.1)
======== ======== ======= ========
Earnings per share
Basic $ (0.56) -- -- $ (5.26)
Diluted $ (0.56) -- -- $ (5.26)
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
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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 Lire 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%.
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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.
April 5, 1999 By: /s/ Paul A. Brauneis
------------------------------
Paul A. Brauneis
Vice President and Corporate
Controller
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