<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarter ended: Commission file number:
MARCH 31, 1996 1-8028
CRAY RESEARCH, INC.
(Exact name of Registrant as specified in its charter)
Delaware 39-1161138
(State of Incorporation) (I.R.S Employer Identification No.)
655A Lone Oak Drive
Eagan, MN 55121
(Address of principal executive offices)
Telephone Number: (612) 452-6650
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to the
filing requirements for at least the past 90 days. YES-X NO
As of April 30, 1996, 26,034,888 shares of the Registrant's Common Stock
were outstanding.
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1996
INDEX
Page
------
PART I - FINANCIAL INFORMATION:
Consolidated Statements of Operations-
Three months ended March 31, 1996 and 1995. . . . . . . . . . . . 1
Consolidated Balance Sheets -
March 31, 1996 and December 31, 1995. . . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and 1995. . . . . . . . . . . . 3
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . 4
Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------
1996 1995
---------- ----------
(In thousands, except
per share data)
<S> <C> <C>
Revenue:
Sales and lease $ 72,542 $ 77,494
Service fees 48,175 53,569
- ---------------------------- ------- -------
Total revenue 120,717 131,063
- ---------------------------- ------- -------
Cost of revenue:
Cost of sales and lease 54,755 45,949
Cost of services 34,102 38,291
- ---------------------------- ------- -------
Total cost of revenue 88,857 84,240
- ---------------------------- ------- -------
Gross profit 31,860 46,823
- ---------------------------- ------- -------
Operating expenses:
Development and engineering 28,832 34,954
Sales, marketing and G&A 39,817 41,080
Restructure & one-time charges 1,452 40,723
- ---------------------------- ------- -------
Total operating expenses 70,101 116,757
- ---------------------------- ------- -------
Operating loss (38,241) (69,934)
Other income, net 6,069 718
- ---------------------------- ------- -------
Loss before taxes (32,172) (69,216)
Income tax benefit 8,043 20,924
- ---------------------------- ------- -------
Net loss $(24,129) $(48,292)
- ---------------------------- ------- -------
------- -------
Loss per common and common
equivalent share $ (.94) $ (1.90)
- ---------------------------- ------- -------
------- -------
Average number of common and
common equivalent shares
outstanding 25,570 25,376
- ---------------------------- ------- -------
------- -------
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
1
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Assets
- -------------------------------------------
Current assets:
Cash and equivalents $ 82,205 $104,425
Receivables 195,263 156,039
Inventories 217,051 177,359
Other current assets 72,257 60,082
- ------------------------------------------- ------- -------
Total current assets 566,776 497,905
Long-term receivables 21,885 22,165
Leased systems and spares, net 55,747 69,671
Property, plant and equipment, net 169,250 200,875
Long-term cash investments 100,000 150,000
Other assets 34,942 37,438
- ------------------------------------------- ------- -------
$948,600 $978,054
------- -------
------- -------
Liabilities and Stockholders' Equity
- -------------------------------------------
Current liabilities:
Current installments of long-term debt $ 15,577 $ 5,679
Accounts payable 56,916 42,924
Accrued expenses 83,710 99,314
Deferred income and customer advances 117,182 124,255
- ------------------------------------------- ------- -------
Total current liabilities 273,385 272,172
- ------------------------------------------- ------- -------
Long-term debt, excluding
current installments 82,709 92,682
Other long-term obligations 9,075 10,772
Stockholders' equity:
Common stock 31,511 31,511
Additional paid-in capital 65,859 70,697
Retained earnings 672,067 696,196
Foreign currency translation adjustments 4,665 5,773
Unearned compensation - restricted stock (6,439) (5,339)
Treasury stock, at cost (184,232) (196,410)
- ------------------------------------------- ------- -------
Total stockholders' equity 583,431 602,428
- ------------------------------------------- ------- -------
$948,600 $978,054
------- -------
------- -------
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
2
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31
--------------------
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Cash flows used in operations $(69,235) $ (1,976)
- ----------------------------------------------------- ------- -------
Cash flows provided by (used in) investing:
Transfers from long-term investments 50,000 25,000
Expenditures for leased systems and spares (1,079) (1,801)
Expenditures for property, plant and equipment (6,824) (12,918)
Other, net (453) 2,288
- ----------------------------------------------------- ------- -------
Total cash flows provided by investing 41,644 12,569
- ----------------------------------------------------- ------- -------
Cash flows provided by (used in) financing:
Proceeds from borrowings 6,365 6,489
Proceeds from the sale of common stock to employees 6,240 3,803
Repayments of debt (6,440) (1,243)
Repurchases of common stock - (11,282)
- ----------------------------------------------------- ------- -------
Total cash flows provided by (used in) financing 6,165 (2,233)
- ----------------------------------------------------- ------- -------
Effect of exchange rate changes (794) 1,918
- ----------------------------------------------------- ------- -------
Increase (decrease) in cash and equivalents (22,220) 10,278
Cash and equivalents at beginning of period 104,425 55,543
- ----------------------------------------------------- ------- -------
Cash and equivalents at end of period $ 82,205 $ 65,821
- ----------------------------------------------------- ------- -------
------- -------
<FN>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
3
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) In the opinion of management, the accompanying consolidated financial
statements reflect all adjustments considered necessary for a fair
presentation. These adjustments consist only of normal recurring items
with the exception of restructuring and one-time charges. For further
information, refer to the financial statements and footnotes included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(2) Operating results for the three months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1996.
(3) Subsequent to March 31, 1996, the Company paid, from available cash, the
remaining amounts owed, including accrued interest, on its term loan
agreement. As a result, the entire debt has been classified as a current
installment of long-term debt on the March 31, 1996 balance sheet.
(4) In March 1996, the Company completed the sale of its primary printed
circuit board manufacturing facility in Chippewa Falls, Wisconsin for
approximately $36,000,000. As a result of the sale, the Company recorded
a gain of approximately $6,900,000, which is included in other income on
the consolidated statements of operations, for the three months ended
March 31, 1996. In accordance with the sale agreement, $22,500,000 was
received in April 1996 with the remainder to be received in December 1996.
At the time of sale, a supply agreement with the buyer went into effect.
(5) On February 25, 1996, the Company entered into an Agreement and Plan of
Merger with Silicon Graphics, Inc. ("SGI") and C Acquisition Corporation
("Merger Sub"), a wholly owned subsidiary of SGI. On April 2, 1996,
pursuant to the terms of the agreement, the Merger Sub acquired
approximately 75% of the Company's common stock for $30.00 per share
through a tender offer. The second step of the merger will be to convert
the remaining outstanding shares of the Company's common stock to shares
of SGI common stock on a one for one basis. The merger will be
consummated as soon as practicable after such approval by the Company's
stockholders and the satisfaction of the other conditions to the merger
set forth in the Agreement and Plan of Merger, which is anticipated to
occur by the end of June 1996. The Company's Form 10-K dated December
31, 1995 and Form 8-K's dated February 29, 1996 and April 2, 1996 provide
additional information about the transactions.
4
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(6) Selected consolidated financial statement details (in thousands):
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
------------ ------------
<S> <C> <C>
Inventories:
Components and subassemblies $ 117,262 $ 90,891
Systems in process 38,334 47,403
Finished goods 61,455 39,065
------- -------
$ 217,051 $ 177,359
------- -------
------- -------
Leased systems and spares:
Cost $ 284,214 $ 296,659
Accumulated depreciation and amortization (228,467) (226,988)
------- -------
$ 55,747 $ 69,671
------- -------
------- -------
Property, plant and equipment:
Cost $ 485,023 $ 551,611
Accumulated depreciation and amortization (315,773) (350,736)
------- -------
$ 169,250 $ 200,875
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
1996 1995
------- -------
<S> <C> <C>
Other income (expense), net:
Interest income $ 3,116 $ 3,475
Interest expense (2,160) (2,570)
Other, net 5,113 (187)
----- -----
$ 6,069 $ 718
------- ------
------- ------
</TABLE>
5
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
FINANCIAL REVIEW
OVERVIEW AND OUTLOOK
On February 25, 1996, the Company entered into an Agreement and Plan of Merger
with Silicon Graphics, Inc. ("SGI") and C Acquisition Corporation ("Merger
Sub"), a wholly owned subsidiary of SGI. On April 2, 1996, pursuant to the
terms of the agreement, the Merger Sub acquired approximately 75% of the
Company's common stock for $30.00 per share through a tender offer. The second
step of the merger will be to convert the remaining outstanding shares of the
Company's common stock to shares of SGI common stock on a one for one basis.
The merger will be consummated as soon as practicable after such approval by the
Company's stockholders and the satisfaction of the other conditions to the
merger set forth in the Agreement and Plan of Merger, which is anticipated to
occur by the end of June 1996. The Company's Form 10-K dated December 31, 1995
and Form 8-K's dated February 29, 1996 and April 2, 1996 provide additional
information about the transactions.
See "FACTORS THAT MAY AFFECT FUTURE RESULTS" for a discussion of risks that may
cause actual results in 1996 to differ materially from expected results.
REVENUE
<TABLE>
<CAPTION>
Percent of total revenue
- -------------------------- Change from
1996 1995 prior year
- ------ ----- Revenue: -----------
<C> <C> <S> <C>
60.1% 59.1% Sales and lease (6.4)%
39.9 40.9 Service fees (10.1)
- ----- ----- -------------- ------
100.0% 100.0% Total revenue (7.9)%
- ----- ----- -------------- ------
- ----- ----- -------------- ------
</TABLE>
Revenues decreased 7.9% in 1996 due to decreases in lease and service revenues.
Lease revenue declined as a result of purchase conversions during 1995 that
reduced the lease installed base. Service revenue declined 10.1%. This
reflects a continuation of the trend toward lower average service revenue per
installation caused by changes in product mix and service options offered to
customers. Smaller systems generate lower monthly service fees than traditional
high-end systems. Also, new high-end systems are generally more reliable than
the older systems they replace, allowing the Company to offer lower priced
service options.
Backlog at March 31, 1996 was $438 million, compared to $282 million a year
earlier, primarily due to orders for the T-90 and T3E product lines, which won't
be in full production until the second half of 1996. The Company believes
backlog information provides only a limited indication of its expected future
revenue.
6
<PAGE>
GROSS PROFIT
<TABLE>
<CAPTION>
Percent of related revenue
- -------------------------- Change in percentages
1996 1995 from prior year
----- ----- Gross Profit %: ---------------------
<C> <C> <S> <C>
24.5% 40.7% Sales and lease (16.2)%
29.2 28.5 Service fees .7
----- ----- --------------------- -----
26.4% 35.7% Total gross profit % ( 9.3)%
----- ----- --------------------- -----
----- ----- --------------------- -----
</TABLE>
The total gross profit percent declined 9.3 percentage points in 1996 from 1995.
Sales and lease gross margin declined 16.2 percentage points, while service was
up slightly from 1995. The decline in the sales and lease percentage was due to
a change in product mix to smaller configured systems, with lower gross margins,
and additional costs incurred from the production ramp of new product lines.
EXPENSES
<TABLE>
<CAPTION>
Percent of total revenue
- -------------------------- Change from
1996 1995 prior year
------ ------ Operating Expenses: -----------------
<C> <C> <S> <C>
23.9% 26.7% Development & Engr (17.5)%
33.0 31.3 Sales, Mktg., & G & A (3.1)
1.2 31.1 Restructure & one-time (96.4)
----- ----- ------------------------ -----
58.1% 89.1% Total operating expenses (40.0)%
----- ----- ------------------------ -----
----- ----- ------------------------ -----
</TABLE>
Total operating expenses for 1996 decreased 40% from 1995. The majority of this
decrease is due to restructuring and one-time charges, which were $39.3 million
higher in 1995. Excluding these charges, operating expenses declined 9.7% in
1996, primarily in development and engineering.
Development and engineering expenses declined 17.5% in 1996 as a result of
efforts during 1995 to improve the Company's cost structure, reduce the number
of future system architectures and better focus the development and engineering
investments. Sales, marketing and G&A expenses are down 3.1%, primarily due to
reductions in management layers as part of the focus to reduce costs during
1995.
Restructure and one-time charges were incurred in 1995 as the Company made
operational changes to better align its resources with its strategy, improve its
efficiency and achieve a more competitive cost structure. In 1995, the $40.7
million charge included $14.3 million for workforce reductions, $21.1 million
for facilities writedowns and closings, $3.5 million for equipment write-downs
and disposals, and $1.8 million of other charges. In 1996, the $1.5 million
charge is costs related to the merger of the Company with Silicon Graphics, Inc.
Other income increased to $6.1 million in first quarter 1996 from $.7 million in
first quarter 1995 primarily as the result of a $6.9 million gain on the sale of
the Company's primary printed ciruit board manufacturing facility in March 1996.
7
<PAGE>
INCOME TAXES
The effective tax rate for the 1996 quarter was 25%, compared to 30.2% in 1995.
The decrease is due to tax benefits generated from restructuring and one-time
charges incurred in 1995 that will be utilized in 1996 and future periods.
FINANCIAL CONDITION
Total cash and long-term cash investments declined $72.2 million during the
first three months of 1996 to $182.2 million.
Operations used $69.2 million of cash during the first quarter 1996, compared to
a use of $2.0 million in 1995. The large decrease is primarily due to a
decrease in receipts from customers and an increase in payments to suppliers.
Investing activities, net of transfers of cash from long-term cash investments,
used $8.4 million in 1996, compared to a use of $12.4 million in 1995, caused
primarily by a reduction in capital expenditures.
Financing activities provided $6.2 million in 1996, compared to a use of $2.2
million in 1995. The increase is due to common stock repurchases of $11.3
million in 1995, partially offset by an increase in debt repayments in 1996 of
$5.2 million.
Subsequent to March 31, 1996, the Company paid, from available cash, the entire
amount owed, including accrued interest, on its term loan agreement. The entire
debt outstanding at March 31, 1996 has been classified as current installments
of long-term debt.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Several statements in this document are forward looking statements about
expected future results. Actual results could differ materially from expected
results.
The Company operates in a highly competitive environment that is rapidly
changing and that involves a number of risks, many of which are beyond the
Company's control. These risks could result in situations that would adversely
impact the Company's performance. The following list highlights some of these
risk factors:
Government agencies/research institutions represent a major customer
group. Governmental spending reductions could adversely affect results.
International sales comprise nearly half of sales revenues. Trade
protection measures, export licensing regulations, changes in political
conditions, or changes in foreign currency exchange rates could adversely
affect results.
8
<PAGE>
A small number of large system sales comprise a significant portion of the
sales revenue. The timing of equipment acceptance dates on these large
systems can significantly affect results for any particular period.
Customer decisions to lease rather than purchase systems can significantly
affect results.
Recently introduced products comprise a substantial portion of the revenue
in any particular period. Development or manufacturing delays could
adversely affect results in a particular period.
Due to the high technology nature of the Company's products, component
availability is a critical factor. Delays in the availability of compo-
nents could adversely affect results in any period by impacting the ability
to manufacture and deliver products. For some components, the Company has
only one supply source.
Third party applications software is a key requirement for many of the
Company's customers. There can be no assurance that all competitively
important applications will be available for the Company's systems on a
timely basis.
The computer industry is highly competitive with rapid technological
advances constantly improving price/performance. Many of the Company's
competitors have substantially greater technical, marketing and financial
resources and a wider range of available applications software.
Competition can result in significant discounting and lower gross margins.
Completion of the contemplated merger with Silicon Graphics, Inc. may also
affect actual results in 1996. Issues relative to integrating the
operations and management of the Company with those of SGI and operational
changes following the proposed merger may affect results in 1996. Customer
and market reactions to the proposed merger may also have an impact. These
and other uncertainties relating to the merger may lead to actual results
in 1996 which materially differ from expected results.
9
<PAGE>
CRAY RESEARCH, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(10) Deferred Compensation Agreement with J. Phillip Samper dated
April 3, 1996.
(11) Computation of Earnings (Loss) Per Share.
(27) Financial Data Schedule.
(b) The Company did file Current Reports on Form 8-K on February 29, 1996 and
April 11, 1996.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRAY RESEARCH, INC.
Date May 15, 1996 by /s/ ROBERT H. EWALD
-------------------- -------------------------------------
Robert H. Ewald
President and Chief Operating Officer
(Principal Executive Officer)
Date May 15, 1996 by /s/ STEVEN E. SNYDER
-------------------- -------------------------------------
Steven E. Snyder
Corporate Controller
(Principal Accounting Officer)
11
<PAGE>
EXHIBIT INDEX
EXHIBITS FILED AS ITEM 6 TO THE QUARTERLY REPORT OF CRAY RESEARCH, INC. AND
SUBSIDIARIES ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
(10) Deferred Compensation Agreement with J. Phillip Samper dated April 3,
1996.
(11) Computation of Earnings (Loss) Per Share.
(27) Financial Data Schedule.
12
<PAGE>
EXHIBIT 10
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, dated as of 3rd day of April, 1996, by and between
Cray Research, Inc., a Delaware corporation having its principal office at 655A
Lone Oak Drive, Eagan, Minnesota 55121 (the "Company") and J. Phillip Samper,
residing at 1225 LaSalle Avenue, #2207, Minneapolis, MN 55403 (the
"Executive").
WITNESSETH
WHEREAS, the Company and Executive agree that Executive's employment
has terminated for Good Reason as such term is defined in the Employment
Agreement dated May 17, 1995 between Cray and the Executive (the "Employment
Agreement") as of April 3, 1996 (the "Effective Date"); and
WHEREAS, the Company wishes to provide deferred compensation for the
Executive in accordance with the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the agreements hereinafter
contained, the parties agree as follows:
1. PAYMENTS TO THE EXECUTIVE.
(a) The Company shall pay to the Executive $431,000 per annum over a
period of eight (8) years (the "Payment Period") in the form of equal monthly
payments of $35,916.67. The first and second payment shall be paid on May 1,
1996. Each subsequent payment shall be paid on the first day of the month.
(b) In addition to the amounts set forth Section 1(a) above, the Company
shall pay the Executive (i) as soon as practicable following the execution of
this Agreement, but in no event more than seven (7) days after the Effective
Date, any unpaid base salary and accrued vacation incurred up to and including
the Effective Date, and (ii) as soon as practicable following the Executive's
request for reimbursement, any business or travel expenses incurred up to and
including the Effective Date.
1. MOVING AND RELOCATION EXPENSES. The Company shall pay to the Executive (i)
amounts relating to moving and relocation expenses described under Section
6(d)(ii) of the Employment Agreement, which shall be paid on the Effective Date
and (ii) amounts relating to residence costs described under Section 6(d)(i) of
the Employment Agreement, which shall be paid as soon as practicable following
the actual date the Executive sells
<PAGE>
his residence, but in no event later than fifteen (15) days after the date the
Executive notifies the Company of the actual sale of his residence.
2. DEATH. In the event of the Executive's death prior to his receipt of any
or all amounts payable hereunder, the Company shall make payments of any unpaid
amounts due hereunder to his spouse or, if he is not married on the date of
death, to his estate in accordance with the provisions of Section 1 hereof.
3. WAIVER OF CERTAIN PAYMENTS. The Executive agrees to waive all rights to
any payments that are payable to the Executive pursuant to Section 6(b) of the
Employment Agreement.
4. INALIENABILITY OF BENEFITS. Neither the Executive nor any beneficiary
shall have any power to transfer, assign, hypothecate, or otherwise encumber in
advance any of the deferred compensation benefits payable hereunder, nor shall
any deferred compensation benefits be subject to seizure for the payment of any
debts or judgments or be transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. Notwithstanding the foregoing, the
Executive shall have the power to transfer, assign, hypothecate, or otherwise
encumber in advance any of the deferred compensation benefits payable hereunder
in favor of any company which is wholly owned by the Executive.
5. NO RIGHT TO EMPLOYMENT. This Agreement does not in any manner constitute
an employment agreement, and creates neither the right in the Executive to
employment by the Company nor any other rights in the Executive or his designee,
or obligations on the part of the Company, except for those which are
specifically set forth in this Agreement.
6. NOTICES. All notices provided for herein to be given to any party shall be
in writing and signed by the party giving the notice and shall be deemed to have
been duly given if mailed, by registered or certified mail, return receipt
requested as follows:
(i) If to Executive:
Mr. J. Phillip Samper
1225 LaSalle Avenue, #2207
Minneapolis, MN 55403
With a copy to:
Daniel R. Kaplan, Esq.
Proskauer Rose Goetz & Mendelsohn LLP
<PAGE>
1585 Broadway
New York, NY 10036-8299
(ii) If to the Company:
Cray Research, Inc.
655A Lone Oak Drive
Eagan, MN 55121
Attention: President
Either party may change the address to which notices, requests, demands and
other communications hereunder shall be sent by sending written notice of such
change of address to the other party.
1. AMENDMENT, MODIFICATION AND WAIVER. The terms, covenants, representations,
warranties or conditions of this Agreement may be amended, modified or waived
only by a written instrument executed by the parties hereto. No waiver by any
party of any condition, or of the breach of any term, covenant, representation
or warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a waiver of any
other condition or breach of any other term, covenant, representation or
warranty of this Agreement.
2. SEVERABILITY. All provisions of this Agreement shall be considered as
separate terms and conditions, and in the event any provision shall be held
illegal, invalid or unenforceable, all other provisions hereof shall remain in
full force and effect as if the illegal, invalid or unenforceable provision were
not a part hereof.
3. UNFUNDED OBLIGATION/CONSTRUCTION OF AGREEMENT. Nothing contained in this
Agreement and no action taken pursuant to the provisions of this Agreement shall
create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company and the Executive, his designated beneficiary
or any other person. Any funds which may be invested under the provisions of
this Agreement shall continue for all purposes to be part of the general funds
of the Company and no person other than the Company shall by virtue of the
provisions of this Agreement have any interest in such funds.
<PAGE>
4. PAYMENTS NOT SALARY. Any deferred compensation payable under this
Agreement shall not be deemed salary or other compensation to the Executive for
the purposes of computing benefits to which he may be entitled under any pension
plan or other arrangement of the Company for the benefit of its employees.
5. SUCCESSOR AND ASSIGNS. This Agreement shall be binding upon and inure to
the benefit of the Company, its successors and assigns and the Executive and his
heirs, executors, administrators and legal representatives.
6. SECURITIES LAW EXEMPTION. To the extent required by applicable law, this
Agreement is intended to comply with, and shall be subject to the exemption from
registration set forth in Section 4(2) of the Securities Act of 1933.
7. GOVERNING LAW. To the extent not governed by ERISA, this Agreement shall
be construed in accordance with the laws of the State of Minnesota applicable to
agreements made and to be performed therein.
8. HEADINGS. The section headings appearing in this Agreement are for
purposes of easy reference and shall not be considered a part of this Agreement
or in any way modify, amend or affect its provisions.
9. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties relating to the subject matter herein contained and supersedes all prior
contracts, agreements, or understandings between the parties, except as set
forth herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CRAY RESEARCH, INC.
By: /s/ Robert H. Ewald
----------------------------------------------------
/s/ J. Phillip Samper
-------------------------------------------------------
J. Phillip Samper
<PAGE>
April 3, 1996
J. Phillip Samper
1225 LaSalle Avenue, #2207
Minneapolis, Minnesota 55403
Dear Mr. Samper:
Reference is made to the Deferred Compensation Agreement, dated
April 3, 1996, by and between Cray Research, Inc. ("Cray") and J. Phillip Samper
(the "Executive") (the "Agreement"). Further to the Agreement, the parties also
agree that solely to the extent required by law, Cray shall have the right to
withhold federal, state or local income or employment taxes incurred by reason
of payments made pursuant to the Agreement. Notwithstanding the foregoing, Cray
agrees that, based on existing law, it will not withhold federal excise taxes
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") with respect to any amounts paid to you under the Agreement, other than
those payments which would otherwise be made to you pursuant to Section 6(b)(A)
of your Employment Agreement with Cray dated May 17, 1995 and which are
determined to be contingent on a change in ownership of Cray; and further that,
based on existing law, the amount withheld for excise taxes under Section 4999
of the Code for such amounts paid will not exceed $35,000 per annum. In the
event there is a change in the law subsequent to execution of the Agreement and
this letter, such amount shall be adjusted.
The terms of this letter shall be read in conjunction with, and
as a supplement to, the Agreement. All other provisions of the Agreement shall
remain in full force and effect.
CRAY RESEARCH, INC.
/s/ Robert H. Ewald
-------------------------
By:
AGREED AND ACCEPTED:
/s/ J. Phillip Samper
- ---------------------------------------------
J. Phillip Samper
Dated: April 3, 1996
<PAGE>
Exhibit 11
----------
CRAY RESEARCH, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------
1996 1995
---------- ----------
PRIMARY LOSS PER SHARE (In thousands, except per share data)
- ------------------------------------------
<S> <C> <C>
(Computation for Consolidated Statements
of Operations)
Net loss $ (24,129) $ (48,292)
Net loss effect of interest on 6 1/8%
Convertible Debentures - (1) - (1)
- ------------------------------------------ ------ ------
Net loss applicable to common and
common equivalent shares $ (24,129) $ (48,292)
- ------------------------------------------ ------ ------
Weighted average number of common shares
outstanding during the period 25,570 25,376
Common stock equivalents-stock options - -
Common stock equivalents-
convertible debentures - (1) - (1)
- ------------------------------------------ ------ ------
Total weighted average number of common
and common equivalent shares outstanding 25,570 25,376
- ------------------------------------------ ------ ------
Loss per common and common
equivalent share $ (.94) $ (1.90)
- ------------------------------------------ ------ ------
------ ------
FULLY DILUTED LOSS PER SHARE
- ------------------------------------------
Net loss per primary computation above $ (24,129) $ (48,292)
- ------------------------------------------ ------ ------
Weighted average number of common shares
outstanding, as adjusted per primary
computation above 25,570 25,376
Additional dilutive effect of outstanding
stock options - -
- ------------------------------------------ ------ ------
Total weighted average number of common
and common equivalent shares outstanding 25,570 25,376
- ------------------------------------------ ------ ------
Loss per common and common equivalent
share, assuming full dilution $ (.94) $ (1.90)
- ------------------------------------------ ------ ------
- ------------------------------------------ ------ ------
<FN>
(1) The effect of the convertible debentures on loss per share is anti-dilutive
as of March 31, 1996 and 1995 and is excluded from the calculation.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 82,205
<SECURITIES> 100,000
<RECEIVABLES> 144,426
<ALLOWANCES> 0
<INVENTORY> 217,051
<CURRENT-ASSETS> 566,776
<PP&E> 485,023
<DEPRECIATION> 315,773
<TOTAL-ASSETS> 948,600
<CURRENT-LIABILITIES> 273,385
<BONDS> 82,709
0
0
<COMMON> 31,511
<OTHER-SE> 551,920
<TOTAL-LIABILITY-AND-EQUITY> 948,600
<SALES> 72,542
<TOTAL-REVENUES> 120,717
<CGS> 54,755
<TOTAL-COSTS> 88,857
<OTHER-EXPENSES> 28,832
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,160
<INCOME-PRETAX> (32,172)
<INCOME-TAX> (8,043)
<INCOME-CONTINUING> (24,129)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,129)
<EPS-PRIMARY> (0.94)
<EPS-DILUTED> (0.94)
</TABLE>
