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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________________ to _____________________
Commission File Number 1-7352
Data General Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
04-2436397
(I.R.S. Employer Identification Number)
4400 Computer Drive, Westboro, Massachusetts 01580
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 898-5000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
London Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
London Stock Exchange
7-3/4% Convertible Subordinated New York Stock Exchange
Debentures Due 2001
8-3/8% Sinking Fund Debentures Due 2002 New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [ X ].
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 such filing requirements for the past 90 days.
Yes X No
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Aggregate market value of common stock held by non-affiliates of the
registrant, as of December 1, 1995: $467,470,731
Number of shares outstanding of each of the issuer's classes of common
stock, as of December 1, 1995:
Common Stock, par value $.01 38,160,876
(Title of each class) (Number of Shares)
Documents incorporated by reference:
Parts I and II - Portions of registrant's Annual Report to Stockholders
for the year ended September 30, 1995.
Part III - Portions of registrant's Proxy Statement dated December 20, 1995.
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AViiON, CEO, CLARiiON, DASHER, DESKTOP GENERATION, DG/ViiSION, ECLIPSE,
microNOVA, NOVA, and WALKABOUT are registered trademarks, and CEO Connection,
CEO Object Office, DG/UX, ECLIPSE MV/3200, ECLIPSE MV/3600, ECLIPSE MV/9800,
ECLIPSE MV/25000, ECLIPSE MV/35000 and ECLIPSE MV/60000 are trademarks of
Data General Corporation.
All other brand and product names appearing in this publication are
trademarks or registered trademarks of their respective holders.
PART I
Item 1. Business.
Data General Corporation, incorporated in Delaware on April 15, 1968,
designs, manufactures, sells, and supports a broad range of multi-user
computer systems, servers, and mass storage devices. The company's range
of products and services includes database servers, communications and
networking servers, workstation, desktop, and portable systems, mass
storage devices, more than 15,000 application solutions offered in
conjunction with various third-party firms, and a worldwide service and
support network. As used herein, the terms "Data General" and the "company"
mean Data General Corporation, and, unless otherwise indicated, its
consolidated subsidiaries.
There is a wide and expanding variety of applications for the products
manufactured by Data General. The company's products are used for database
management, integrated information processing, distributed data processing,
document imaging, office automation and financial applications, transaction
processing, communications, decision support, computer-aided engineering,
manufacturing planning and control, human resources management, educational
administration, healthcare, testing, process control, and environmental
monitoring. Other areas of use include scientific and laboratory
research, medical instrumentation and imaging, signal analysis, data
acquisition, instrumentation, monitoring, and control. The company's
products are used in networks, at the enterprise level, and in stand-alone
applications.
Data General's AViiON(R) family of computer systems includes two series: one
series, available since 1989, based on Reduced Instruction Set Computing
(RISC) microprocessors from Motorola; and a new series of AViiON servers,
introduced in 1995, based on Intel technology. All AViiON systems run the
DG/UX(R) operating system, Data General's commercial implementation of the
standard UNIX System V Release 4 operating system, and also run various
other open operating systems. The company's CLARiiON(R) mass storage devices
are open systems disk arrays and tape arrays for computers that run
the UNIX operating system and selected other operating systems. Data
General's ECLIPSE(R) MV family of minicomputers uses the company's proprietary
hardware architecture and operating system. The company provides products
and services needed for networking and interoperability, which enable
computing systems from many vendors to function together in multi-platform
environments. Data General also offers a broad line of personal computers.
During the last decade, advances in microprocessor technology and the
increasing availability of standards-based hardware and software
significantly eroded the competitive advantage of proprietary minicomputer
systems. These trends resulted in the introduction of networked computer
systems, consisting of servers hosting PCs, terminals, and other workstations,
which offer customers significant price/performance advantages over
traditional minicomputers. In fiscal 1988, as a response to these
developments, Data General management implemented a strategy that focused
the company's resources on developing the AViiON family of open computer
systems and the DG/UX operating system while continuing to enhance and
upgrade the performance of its ECLIPSE MV family of minicomputers and
related software. In fiscal 1995, revenues from the AViiON family were
approximately $421 million. Since AViiON shipments began in fiscal 1989,
AViiON has progressed through several product generations and now has an
installed base approaching 30,000 systems and approximately $2.0 billion
in value.
In June of 1995, Data General announced that it had chosen the Intel
architecture for a new generation of AViiON servers. At the same time,
the company outlined its technology direction for providing high-performance
systems based on Intel processors, Standard High Volume (SHV) servers and
Cache Coherent Non-Uniform Memory Access (ccNUMA) architecture. This
announcement was the result of a two-year process to prepare the company,
the DG/UX operating system, and the company's software partners for this
advanced computing technology. The new Intel based AViiON computers will
begin to ship in volume during the second half of fiscal 1996.
In 1991, Data General introduced its first RAID (Redundant Array of
Independent Disks) storage systems for AViiON servers. In 1992, the
company expanded that product family, named it CLARiiON, and made it
available for use on other computer systems. With the addition of low-end
products introduced in the past year, CLARiiON now supports virtually all
open systems computing platforms with a broad family of storage products
ranging from disk arrays for the PC and local area network (LAN) market,
to high-capacity, high-availability disk arrays for enterprise storage
applications.
"Open CLARiiON" products are available for use with systems from IBM,
Digital Equipment Corporation, Sun Microsystems, and other systems vendors,
as well as with systems running Novell NetWare, Microsoft NT, IBM OS/2, and
SCO UNIX. Open CLARiiON products are sold through systems integrators and
distributors. However, the majority of the company's CLARiiON revenues are
derived through OEM (Original Equipment Manufacturer) relationships with
major systems vendors and storage suppliers.
Products and Services.
The company's computer systems can be grouped into the following product
families: AViiON systems, CLARiiON mass storage subsystems; ECLIPSE MV
family systems, DG/ViiSION(R) and DASHER(R) family personal computers and LAN
servers, and WALKABOUT(R) notebook computer systems. AViiON servers and
CLARiiON storage products are the core of the company's current business.
The company also continues to sell and support the following earlier product
families: 16-bit ECLIPSE systems; DESKTOP GENERATION(R) systems; NOVA(R)
systems; and microNOVA(R) microproducts.
AViiON computers function as servers or as multi-user systems for a wide
range of applications, from departmental and Value Added Reseller (VAR)
solutions, to large commercial enterprises that need high-availability
systems to support large numbers of users, handle large volumes of
transactions, and support large databases.
The Intel based AViiON product family, including the AV 4700, AV 4800,
and AV 5800 enterprise servers, combines high-performance with extensive
reliability, availability, and serviceability features typically found
only on larger computers. Together with a highly scaleable and expandable
design that leverages industry technology trends, these features make
AViiON servers based on Intel Pentium processors highly suitable platforms
for business-critical commercial applications. The family also includes
the AV 2000 and AV 3000, deskside servers that are ideal for VAR
applications as well as for use in departmental applications running
UNIX, NetWare, or Microsoft Windows NT Server.
The Motorola based AViiON product family ranges from high-performance,
general-purpose systems and servers to entry-level workstations. AViiON
AV 9500 servers include models with up to sixteen processors. The AV 8500
server series is a mid-range line which offers from two- to eight-processor
systems. These office-packaged systems can be used to integrate networks
of personal computers, providing users with services such as communications,
resource sharing, office and imaging applications, and databases. The AV
5500 and AV 4500 systems are flexible and expandable enterprise servers
in deskside packaging. The AV 450 and AV 550 workstations are designed
for commercial applications, such as Geographical Information Systems and
software development.
All AViiON systems run the DG/UX operating system, Data General's version
of the UNIX operating system. DG/UX is a sophisticated, commercial
implementation of the UNIX System V Release 4 operating system. Data
General has been enhancing DG/UX for over a decade to provide a state-of-
the-art platform for running core business applications. DG/UX provides
a robust file system, open connectivity, comprehensive systems and storage
management, standards compliance, and high levels of application scalability.
Recent improvements to DG/UX include clustering of up to eight AViiON
systems enabling resource sharing, higher levels of availability, and
easier system administration. DG/UX is also the first UNIX based operating
system to meet the United States Government's B2 level security requirements,
the most demanding security code within the U.S. military/intelligence
community. Data General plans to make this same capability available for
security conscious commercial customers.
The CLARiiON family of mass storage subsystems is based on RAID technology,
providing an architecture that speeds access to data while safeguarding it.
CLARiiON subsystems employ up to 20 disk drives. Currently, CLARiiON
systems utilize SCSI 3.5 inch disk drives, each with a capacity of up to
4.0 GB (billions of characters), allowing a subsystem to store up to 80 GB
of information. Higher capacity disk drives can be accommodated as they
become available in the marketplace. Up to three subsystems can be
combined in rackmount configurations. The drives are combined with an
intelligent input/output processor, which manages the array subsystem's
operations, and cache which provides improved performance. By utilizing
RAID technology, a portion of CLARiiON disk resources is dedicated to data
redundancy. While individual drives may occasionally fail, the array
system remains operational while the failed disk is repaired or replaced.
CLARiiON subsystems can be repaired while under power. Each disk module
comes in a specially designed carrier that can be removed from its array
group without disturbing data access.
Data General's ECLIPSE MV systems are 32-bit computers using custom-designed
very large scale integration chips which utilize a more powerful instruction
set than did the earlier 16-bit ECLIPSE and NOVA systems, enabling the
execution of most programs that operate on the earlier systems. The range
of products includes: the low-end ECLIPSE MV/3200(TM) and ECLIPSE MV/3600(TM)
computers; the mid-range ECLIPSE MV/98000(TM), MV/25000(TM) and
MV/35000(TM), systems; and the high-end ECLIPSE MV/60000(TM) HA series of
multi-process computers.
The Data General family of personal computers includes DG/ViiSION entry-
level systems, DASHER II mid-range through multi-user systems and LAN
servers, and the WALKABOUT full-function notebook computer. These systems
use the latest available microprocessors, including Intel Pentium
processors. Connectivity to AViiON and ECLIPSE MV systems and other
computers can be achieved using various communication products offered
by Data General.
All of the company's computer systems differ in speed, memory, and storage
capacity; are available with certain processor features; and are available
with a number of subassembly slots that may be used to accommodate
peripheral controllers.
Data General also sells a wide variety of peripheral equipment for use
with its computers. Peripheral equipment sold by the company includes
video display terminals, printers, plotters, communication controllers,
multiplexors, disk storage, memory, magnetic tape equipment, analog-to-
digital converters, and digital-to-analog converters. The company also
manufactures peripheral controller subassemblies and related electronics
for connecting its computers to standard data communication equipment and
computer systems manufactured by others. Data General also designs and
manufactures peripheral controller subassemblies for use with electro-
mechanical peripheral equipment it purchases from third parties.
The company has developed and offers an extensive library of systems
software products for use with its computer systems, including database
management and communications software for industry-standard mainframe
protocols. This library includes operating systems with compilers,
assemblers, and general utility programs. The company's operating systems
provide compatibility within product families. The company's proprietary
operating systems include the AOS/VS (Advanced Operating System/Virtual
Storage) and AOS/VS II multi-programming systems, the AOS/RT32 real-time
subset of AOS/VS, and DG/RDOS (Real-time Disk Operating System) for
32-bit systems.
More than 40 programming languages are available with the company's
systems, including common versions of BASIC, Business BASIC, COBOL 74,
ICOBOL, Fortran IV, Fortran V, Fortran 77, ALGOL, DG/L, PL/1, APL, Pascal,
"C", and Common Lisp. Data General's Ada compiler and Ada development
environment software allow customers to program in Ada, a standard
programming language used in military applications.
Data General also offers its customers a wide range of applications
software solutions for both open and proprietary systems. Computer
programs are furnished pursuant to non-exclusive licenses. The company's
relationships with systems integrators, software suppliers, and industry-
specific VARs provide a growing worldwide presence in many specialized
markets. The company's new Intel based AViiON systems are capable of
running more than 15,000 applications from leading suppliers of databases,
computer languages, office automation, and industry application packages.
This collection of software includes many products that can be used by
customers who are migrating data processing or data management tasks from
mainframe computers. This represents an important application area for
the company's AViiON servers.
The company continues to support its CEO(R) integrated office automation
software for ECLIPSE MV systems. This software allows users to perform
routine office tasks, such as electronic mail, word processing, filing,
and maintaining electronic calendars, while also having access to
spreadsheets, graphics, a centralized database, or specialized applications
developed by customers or purchased from Data General or third parties.
The company also offers CEO Connection(TM) communications software, which
allows CEO system functions to be used with products using the MS-DOS and
Windows operating systems. In addition, CEO Object Office(TM) brings
CEO office automation software to an icon-style graphics interface on a
personal computer.
Data General's communications architecture is based upon the implementation
of both international and de facto standards in the data communications and
networking field. Data General supports de facto standards such as TCP/IP
(Transmission Control Protocol/Internet Protocol), SNA (IBM's Systems Network
Architecture), Novell IPX/SPX, DECnet, AppleTalk, async and bisync protocols,
among others. Formal standards support includes OSI (Open Systems
Interconnection), GOSIP (Government Open Systems Interconnection Profile),
ISDN (Integrated Services Digital Network), CMIP/CMIS for network
management, and numerous others. Data General is able to integrate
mainframes, minicomputers, and various desktops (UNIX workstations, Apple
Macintosh, async terminals, X-terminals, MS-Windows, and DOS PCs) using a
wide range of communications products and services. Data General can help
customers integrate their filing systems (Novell, LAN Manager, and Sun
NFS), take advantage of UNIX print services, run UNIX applications, and
unify their offices using network products such as mail, electronic
data interchange, and the like. Further, customers can create cooperative
program environments (client/server) through the use of various open
communications interfaces provided by Data General such as API LU 6.2,
0, 1, 2, 3, (for IBM environments), SPX (for Novell), and TLI (for
TCP/IP, OSI, and LAN Manager environments). This set of communications
capabilities enables Data General systems to be incorporated in a variety
of networks that include systems and equipment manufactured by the company
and by many other vendors.
The total purchase price of any computer system varies depending upon
the processing power, size of main memory, and storage capacity, and upon
the types and quantities of accessory, peripheral controller subassembly,
and peripheral equipment ordered. Prices of the company's various products
range from less than $2,000 to over $1,000,000. Dollar volume discounts are
offered on most products sold by the company. New products and revisions
to existing products have resulted in improved price/performance ratios.
The company extends a limited service and/or parts warranty on
substantially all equipment it sells and offers several types of
maintenance services and contracts at additional charges. Warranty and
other maintenance services are generally performed by service employees
located in various offices throughout the world. The company offers a
mail-in parts exchange and repair service and a cooperative maintenance
program for qualified organizations, resellers, and other customers capable
of performing maintenance services. The cooperative program includes
spare parts, back-up support, depot service, diagnostics, training,
documentation, tools and test equipment, and service planning and support.
Data General supports over 3,000 products made by other vendors. The
company also offers an on-line information service, which provides
customers with immediate access to support information and personnel.
Data General provides various services related to the installation and
operation of its computer systems and software. Systems engineers provide
systems and software installation support. The company's Professional
Services organization provides a broad array of systems design,
applications development, and consulting services. The company's
Special Systems group designs custom hardware products under contract
to individual customers. Customer training related to systems and
software sold by the company is provided at company training facilities
in various locations throughout the world or at the customer's own
facilities.
For the fiscal years ended September 30, 1995, and September 24, 1994,
product revenues were 65% of consolidated total revenues and service
revenues were 35% of consolidated total revenues. For the fiscal year
ended September 25, 1993, product revenues were 62% of consolidated
total revenues and service revenues were 38% of consolidated total revenues.
Marketing and Distribution.
The company uses multiple channels of distribution to sell its products.
Sales representatives, in company offices located throughout the world,
sell products to end user customers and resellers. A mass merchandising
organization, called "Data General Plus", is primarily responsible for
meeting the needs of existing customers with a product range that includes
replacement systems, system upgrades, and a full range of supplies and
accessories sold through catalogs. The company also sells refurbished
Data General equipment.
Data General uses several third-party distribution channels, including
OEMs, resellers, and distributors. OEMs include companies that incorporate
Data General computers into other products, such as air traffic control
systems, for resale to the final user. Resellers add applications software
to the computer systems purchased from the company before reselling them,
and may provide assistance in installing and maintaining the systems.
Distributors meet customer needs by stocking Data General products,
including systems, servers, workstations, personal computers, and storage
systems products for immediate off-the-shelf delivery.
The company provides lease financing through various leasing and financing
programs arranged with third parties. Data General provides flexible
financing programs for all Data General products, as well as third-party
hardware, software, and services. These programs are available worldwide
for resellers, distributors, and end users.
Open CLARiiON is sold primarily through the company's Original Equipment
Manufacturer ("OEM") and distributor channels. Revenues have been
concentrated with a limited number of customers. For the current fiscal
year, no single government agency, or any other single customer has
accounted for more than 9% of consolidated total revenues. In fiscal
1995, sales made directly to various agencies of the United States
Government represented approximately 5% of the company's consolidated
total revenues. The company's business is not subject to any unusual
seasonal fluctuations.
The company generally attempts to minimize the time from receipt of a
customer's order to shipment, and virtually no orders are booked with
shipment dates in excess of one year from the date of order. As the
company's product mix shifts more toward industry-standard systems, it
is anticipated that the average time from order date to shipment date
will continue to decrease. In addition, a substantial portion of the
orders received by the company are subject to cancellation without
significant penalty, at the option of the customer, at any time prior
to shipment. Therefore, the company believes that discussions of its
backlog would not contribute to an understanding of the company's business.
Organization and Structure.
The company's Worldwide Sales and Marketing operations are responsible
for direct sales, mass merchandising, reseller channels, and related
marketing activities. Sales divisions are structured to cover the
following major geographic areas: the United States; General International
Area (including Canada and Latin America); Europe; and Asia/Pacific.
Marketing activities are focused primarily on the AViiON family of
computer systems and related software solutions, and on specific market
opportunities, such as multi-dimensional RDBMS (Relational Database
Management System).
The CLARiiON Business Unit is responsible for development of the company's
CLARiiON family of open mass storage products, and for developing channels
and partnerships for sales of Open CLARiiON systems.
The company also has several targeted business units which are responsible
for specific product families. These business units are: the ECLIPSE
Business Unit, responsible for development and marketing of the company's
ECLIPSE MV family of systems and related software; the Personal Computer
Business Unit, which supplies customers with a full range of personal
computers and related products; and the Imaging Business Unit, which
markets a set of document imaging and management products.
The Data General Services organization encompasses Customer Service
(field engineering and other technical services) and Professional
Services, which provides customers worldwide with complete services to
design, implement, and support commercial computing environments.
Manufacturing and Corporate Quality is responsible for producing Data
General systems; for procuring associated components, subassemblies,
peripherals, and various other products that are incorporated into Data
General systems or sold under the Data General label; and for overall
corporate quality assurance.
The company's Finance organization includes the Controller, the Treasurer,
Information Management, Legal, Investor Relations, Property Management,
and Human Resources functions.
Raw Materials.
Data General's manufacturing operations employ a wide variety of
mechanical and electronic components, raw materials, and other supplies.
In the design of its products, the company routinely attempts to utilize
multiple-sourced components. However, in some instances, the company
selectively uses sole-sourced components, such as custom microprocessors
and gate arrays, in order to achieve desired system performance; these
components are typically based on the manufacturer's proprietary underlying
process technology. In many cases, the manufacturers will execute cross-
license agreements with other manufacturers, and it may be possible for
Data General to access such technology through cross-license agreements.
However, it has been the company's experience to date that the investment
necessary to execute such cross-license agreements and to re-engineer the
component is not warranted.
With respect to sole-sourced materials, the company has not experienced
significant problems relative to the timeliness of product availability or
quality matters. To protect against such problems, however, the company
has sought to implement special inventory plans for these components.
These plans are designed to ensure that, if the sole-sourced supplier
were unable to meet the company's requirements, there would be sufficient
inventory available to cover the time required to re-engineer the product
or develop an alternative source of supply. The company has not
experienced any significant problems resulting from the inability to
procure necessary raw materials.
Patents.
In November, 1994 the company commenced patent infringement litigation
against International Business Machines Corporation charging infringement
of certain of the company's patents (See "Item 3. Legal Proceedings",
below). Although the company believes its claims are valid, it cannot
predict the outcome of the litigation. Should the company prevail in
the litigation, such patents could play a significant role in the conduct
of its business and accordingly would be material. The company believes
that most of its remaining patents do not presently play a significant
role in the conduct of its business or in its industry in general and
most patents, granted or which may be granted to it, while anticipated
to be of value, are not expected to be of material significance. The
company also owns certain copyrights, trademarks and proprietary information.
From time to time, companies in the industry have claimed that products
and components similar to those manufactured by the company are covered
by valid patents held by others. It may be necessary or desirable to
obtain further patent licenses in addition to those which the company
now holds. Although there is no assurance that such additional patent
licenses could be obtained, the company is of the opinion, based on
industry practice and information presently available, that such licenses
could be obtained on terms which would not have a material effect on the
company's consolidated financial position or results of operations.
Competition.
The computer industry has been characterized by rapid technological change,
product improvement, and price reductions. During fiscal 1995, the company
experienced slight revenue growth from both the European marketplace and
from other international product revenues, primarily from growth in the
Open CLARiiON line of mass storage devices. Although revenues increased
in Open CLARiiON, the results in the domestic market were negatively
impacted by a combination of sales force and product transition issues.
While the company believes that the effects of the sales force transition
are now complete, the company expects to continue to see an impact from
the product transition to the new Intel based AViiON products until these
new products begin to ship in volume during the second half of fiscal year
1996. Data General's revenues may be adversely affected by new technology
developed by others or by price reductions initiated by competitors. Some
of the company's competitors are larger companies with substantially
greater resources than the company. The company also competes with a
number of smaller manufacturers. The company believes that it is a
significant manufacturer of multi-user computer systems, servers, and
mass storage devices for commercial applications. According to reports
from International Data Corporation (IDC), Data General ranked among the
leading suppliers of commercial medium-scale, UNIX-based systems in 1992,
1993 and 1994.
The company's AViiON systems have become increasingly competitive since
they were introduced in fiscal 1989, as more applications were ported to
the platform and product introductions added to the depth of the family.
AViiON systems compete favorably with standards-based systems from other
industry-leading vendors based upon a wide range of features and
performance, the company's DG/UX operating system, and the availability
of an extensive range of applications software.
Based on price/performance and other measures that demonstrate computer
speed, throughput, and ability to run applications effectively, the
company's current 32-bit ECLIPSE MV family of proprietary systems,
using primarily the AOS/VS and AOS/VS II operating systems, competes
favorably against 32-bit systems from other leading minicomputer vendors.
Data General's primary market for proprietary systems is its existing
customer base.
AViiON and ECLIPSE systems also compete favorably as a result of their
ability to connect with a variety of desktop systems manufactured by the
company and by other vendors. The company's worldwide service and support
capability, which includes service for certain products (such as PCs and
workstations) manufactured by other vendors, also enhances the competitive
strength of the company's product families.
The company believes that its CLARiiON product was the first open, RAID-
based mass storage product. This product supports UNIX-based computers
from IBM, Digital Equipment Corporation, Sun Microsystems, and other
systems vendors, and systems running on Novell NetWare, Microsoft NT,
as well as Data General systems. NetWare is the dominant server
operating system for PC LANs (local area networks). CLARiiON products
continue to offer customers leading fault-tolerant data access features
and performance characteristics. The company believes the potential
market for Open CLARiiON is significant.
Research and Development.
The company believes that if it is to compete successfully in the
industry, it will require a continuing commitment to research and
development. Research and development expenses were $85.9 million
in fiscal 1995, $90.8 million in fiscal 1994, and $100.2 million in
fiscal 1993. Research and development work contracted to third parties
during these years was insignificant. The net decrease in research and
development expenses in these years is a result of the company dedicating
a higher proportion of its resources to software development that requires
capitalization. As in the prior two years, during fiscal 1995, the company
focused its research and development efforts on its core business
technology -- multi-user computer systems, servers, and mass storage
devices, including related software and services.
Continued emphasis on applied research and development programs is
anticipated in order to improve existing products and to expand product
line capabilities. Research and development work is done primarily in the
following areas: general-purpose computer systems; open mass storage
devices; systems and applications software; integrated circuit technology;
microprocessor design; network services and products; and contracted special
product design.
Environmental Conditions.
The company's various manufacturing facilities are subject to numerous
laws and regulations designed to protect the environment, particularly
from plant wastes and emissions. In the company's opinion, it is complying
with such laws and regulations. Compliance has not had, and is not
expected to have, a material effect upon the company's capital expenditures,
results of operations, or competitive position.
Employees.
The company had approximately 5,000 employees as of September 30, 1995,
compared to 5,800 employees as of September 24, 1994, and 6,500 employees
as of the end of fiscal 1993. The decrease in employees resulted from
various restructuring programs undertaken to reduce the company's
infrastructure. Additional information on the company's restructuring
programs is included in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 2 of "Notes
to Consolidated Financial Statements" in the company's Annual Report to
Stockholders for the fiscal year ended September 30, 1995. The
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" has been incorporated by reference into Item 7
of Part II of this Report. The "Notes to Consolidated Financial
Statements" have been incorporated by reference into Item 8 of Part II
of this Report.
The company's employees are not covered under any collective bargaining
agreements, and the company has not experienced any significant labor
problems. The company believes that it has a good relationship with its
employees.
International Operations.
Foreign business is conducted through subsidiaries, representatives, and
distributors, and to a lesser extent by direct sales. International
revenues, including U.S. direct export sales, amounted to approximately
49% of consolidated total revenues in fiscal 1995, and 45% and 46% of
consolidated total revenues in fiscal 1994 and 1993, respectively. The
majority of Data General's international revenues are derived from western
Europe, Asia and Canada. In view of the locations and diversification of its
international activities, the company does not believe that there are any
special risks beyond the normal business risks attendant to activities
abroad. The company maintains a hedging program to minimize its exposure
to foreign currency fluctuations. Additional information relating to the
company's international operations, including financial information by
major geographic area, is included in Note 11 "Geographic Segment Data"
on page 25 of the company's Annual Report to Stockholders for the fiscal
year ended September 30, 1995.
Item 2. Properties.
The company's executive offices are located in Westboro, Massachusetts.
Manufacturing, research and development, service, marketing, and
administrative support facilities are located in various states and
countries throughout the world. All buildings owned are modern, air
conditioned, and suitable and adequate for the present activities of
the company. The company also leases space in 48 states and 28 countries,
primarily for sales and service offices, the corporate headquarters, and
certain manufacturing operations. Substantially all manufacturing
equipment is owned by the company and is well maintained.
In September 1994, the company sold its Westboro, Massachusetts, land
and facilities, and entered into a 10-year leaseback arrangement for a
portion of the property. During fiscal 1993, the company sold its
facilities in Westbrook, Maine, and Portsmouth, New Hampshire, as well as
a portion of its facility in Woodstock, Connecticut. The company is
currently holding two facilities for future sale: Milford, Massachusetts,
and the remaining portion of Woodstock, Connecticut. Additional
information regarding the company's principal plants and properties is
included under the heading "Facilities" on page 27 of the company's
Annual Report to Stockholders for the fiscal year ended September 30, 1995.
Item 3. Legal Proceedings.
In fiscal 1995, Data General settled with Northrop Grumman Corporation
its six-year software copyright infringement and trade secrets litigation
against Grumman Systems Support Corporation ("Grumman"). Under the terms
of this settlement, which was approved by the U.S. District Court, Grumman
has paid to the company $53 million, and the parties have dismissed all
pending litigation.
The company's patent infringement suit against IBM Corporation, and IBM's
counterclaim against the company remains in the discovery stage in the
United States District Court for the District of Massachusetts (Worcester).
See also "Item 1. Patents" to the company's Annual Report on Form 10-K for
the year ended September 30, 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
Frederick R. Adler(1), Age 69, Chairman of the Executive Committee of the
Board of Directors since July 1982; Secretary of the company from 1968 to
July 1982; retiring Senior Partner in the law firm of Fulbright & Jaworski
L.L.P.; and Senior Partner of such firm or Senior Partner or Chief
Executive Officer of a professional corporation which was a Senior
Partner in the predecessor firm of Reavis & McGrath, New York City, for
more than five years; managing director of Adler & Company, a venture
capital invest ment firm, and a general partner of its related investment
funds for more than five years.
Ronald L. Skates(1), Age 54, President and Chief Executive Officer of
the company since November 1989; Executive Vice President and Chief
Operating Officer of the company from August 1988 to November 1989;
Senior Vice President of the company from November 1986 to August 1988;
Chief Financial Officer of the company from November 1986 to August 1987;
Partner, Price Waterhouse from July 1976 to November 1986.
J. Thomas West, Age 56, Senior Vice President of the company since
November 1988; Vice President of the company from September 1983 to
November 1988.
William J. Cunningham, Age 57, Vice President of the company since
August 1989; prior positions at Apollo Computer Inc. included Vice
President and General Manager, Manufacturing and Research and Development,
from October 1988 to June 1989; and Vice President and General Manager,
Manufacturing and Distribution, from September 1987 to September 1988;
Vice President, U.S. Manufacturing, for Honeywell Bull from March 1986
to September 1987.
Arthur W. DeMelle, Age 55, Vice President and Chief Financial Officer
of the company since March 1992; prior positions included Senior Vice
President of Finance and Administration at Chep USA from November 1989
to March 1992; Executive Vice President and Chief Financial Officer at
Emery Air Freight Corporation from April 1987 to May 1989; and Executive
Vice President and Chief Financial Officer at Purolator Courier Corporation
from July 1980 to April 1987.
Joel Schwartz, Age 53, Vice President of the company since February 1989;
President and Chief Operating Officer of Polygen Corp. from August 1986
to February 1989.
William L. Wilson, Age 51, Vice President of the company since March 1994;
prior positions with International Business Machines Corporation including
Assistant General Manager for Marketing - Enterprise Systems from 1992 to
1993, General Manager of IBM's Integrated Systems Solutions Corporation
(ISSC) from 1990 to 1992, and Marketing and Sales Director for U.S.
Marketing Services from 1987 to 1990.
Executive officers of the company are elected annually and hold office
until the first meeting of the Board of Directors following the Annual
Meeting of Stockholders or until their successors have been elected and
have duly qualified.
(1) Member of Board of Directors and Executive Committee thereof.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
The information contained under the headings "Stock Price Range" on page
26; and "Number of Stockholders", "Dividend Policy", and "Stock Exchange
Listing" on page 29 of the company's Annual Report to Stockholders for
the fiscal year ended September 30, 1995 is incorporated herein by
reference.
Item 6. Selected Financial Data.
The information contained under the heading "Five Year Summary of
Selected Financial Data" on page 9 of the company's Annual Report to
Stockholders for the fiscal year ended September 30, 1995 is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The information contained under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 10
through 12 of the company's Annual Report to Stockholders for the fiscal
year ended September 30, 1995 is incorporated herein by reference. This
information should be read in conjunction with the related consolidated
financial statements incorporated by reference under Item 8.
Item 8. Financial Statements and Supplementary Data.
The information contained in the consolidated financial statements,
notes to consolidated financial statements, and report of independent
accountants, under the heading "Quarterly Financial Data (Unaudited)",
and "Facilities", on pages 13 through 27 of the company's Annual Report
to Stockholders for the fiscal year ended September 30, 1995 is
incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information contained under the heading "Proposal No. 1 --
Election of Seven Directors" on pages 3 through 5 of the company's
Proxy Statement dated December 20, 1995 is incorporated herein by
reference. See also "Executive Officers of the Registrant" appearing
in Part I hereof.
Item 11. Executive Compensation.
The information contained under the headings "Summary Compensation
Table", "Option Grants in the 1995 Fiscal Year", "Option Exercises
in the 1995 Fiscal Year and 1995 Fiscal Year-End Values", "Compensation
Pursuant to Plans", "Employment Agreements", "Compensation of
Directors" and "Directors' Retirement Program" on pages 6 through
18 of the company's Proxy Statement dated December 20, 1995 is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information contained under the heading "Beneficial Ownership
of Common Stock" and in the second paragraph and related table under
the heading "Proposal No. 1 -- Election of Seven Directors" on pages
2 through 4 of the company's Proxy Statement dated December 20, 1995
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Not applicable
PART IV
Item 14.
Exhibits, Financial Statement Schedule, and Reports on Form 8-K.
(a) 1 and 2. Index to financial statements and related schedule:
Page
Five year summary of selected
financial data . .. . . . . . . . . . . . . . . . . . . . . . . 9*
Management's discussion and analysis
of financial condition and results of operations . . . . . . . . 10-12*
Consolidated balance sheets at
September 30, 1995 and September 24, 1994 . . . . . . . . . . . 14*
For fiscal years ended September 30, 1995,
September 24, 1994, and September 25, 1993:
Consolidated statements of operations . . . . . . . . . . . 13*
Consolidated statements of cash flows . . . . . . . . . . . 15*
Consolidated statements of stockholders' equity. . . . . . . 16*
Notes to consolidated financial statements . . . . . . . . . . . 17-25*
Report of independent accountants. . . . . . . . . . . . . . . . 26*
Supplemental financial information . . . . . . . . . . . . . . 26*
Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . 27*
Report of independent accountants on
financial statement schedules . . . . . . . . . . . . . . . . . 19
Financial statement schedule:
Schedule II Valuation and qualifying accounts . . . . . . . 20
The financial statement schedule should be read in conjunction with the
financial statements in the 1995 Annual Report to Stockholders. All other
schedules have been omitted as they are not applicable, not required, or
the information is included in the consolidated financial statements or
notes thereto.
* Page references are to the 1995 Annual Report to Stockholders. The 1995
Annual Report to Stockholders is not to be deemed filed as part of
this Report except for those parts thereof specifically incorporated by
reference into this Report.
EXHIBITS
3. (a) Restated Certificate of Incorporation of the company, as amended,
including the company's Certificate of Designation dated October 17, 1986,
previously filed as Exhibit 3(a) to the company's Annual Report on
Form 10-K for the fiscal year ended September 27, 1986, which is
incorporated herein by reference.
(b) Amendment to Certificate of Incorporation of the company, filed
January 29, 1987, previously filed as Exhibit 3 to the company's
Quarterly Report on Form 10-Q for the quarter ended March 28, 1987,
which is incorporated herein by reference.
(c) By-Laws of the company, as amended.
4. (a) Indenture dated as of September 15, 1977 between the company
and State Street Bank and Trust Company (purchased from Fleet
Bank of Massachusetts, formerly Bank of New England and formerly
New England Merchants National Bank), as Trustee, which relates
to the company's 8-3/8% Sinking Fund Debentures due 2002,
previously filed as Exhibit 2.2 to the company's Registration
Statement on Form S-7, Registration Number 2-59710, which is
incorporated herein by reference.
(b) Amended and Restated Rights Agreement dated as of May 19, 1988
between the company and Morgan Shareholders Services Trust Company,
as Rights Agent, previously filed as Exhibit 4 to the company's
Quarterly Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(c) Indenture, dated as of June 1, 1991, between the company and Fleet
National Bank, as Trustee, which relates to the company's 7-3/4%
Convertible Subordinated Debentures due 2001, previously filed as
Exhibit 4(d) to Amendment No. 2 to the company's Registration Statement
on Form S-3 (No. 33-40817), which is incorporated herein by reference.
10. (a) Restricted Stock Option Plan, Appendix A to the prospectus
included in the company's Registration Statement on Form S-8,
Registration Number 33-19759, which is incorporated herein by
reference.
(b) Forms of Restricted Stock Option Agreement, previously filed as
Exhibit 10(b) to the company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1990, which is incorporated herein
by reference.
(c) Form of Amendment to Restricted Stock Option Agreement, previously
filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q
for the quarter ended June 25, 1988, which is incorporated herein by
reference.
(d) Form of Amendments to Key Executive Restricted Stock Option
Agreements, previously filed as Exhibit 10(b) to the company's
Quarterly Report on Form 10-Q for the quarter ended March 25,
1989, which is incorporated herein by reference.
(e) Form of Amended and Restated Restricted Stock Option Agreement,
between the company and Ronald L. Skates, previously filed as Exhibit
10(f) to the company's Quarterly Report on Form 10-Q for the quarter
ended March 25, 1989, which is incorporated herein by reference.
(f) Form of Amendment to Restricted Stock Option Agreements, between
the company and Frederick R. Adler, previously filed as Exhibit 10(g)
to the company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(g) Amendment to Restricted and Employee Incentive Stock Option
Agreements, between the company and Ronald L. Skates, dated
November 14, 1988, previously filed as Exhibit 10(e) to the
company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1988, which is incorporated herein by reference.
(h) Forms of Incentive Stock Option Agreement, previously filed as
Exhibit 10(d) to the company's Annual Report on Form 10-K for the
fiscal year ended September 26, 1987, which is incorporated herein
by reference.
(i) Form of Amendment to Employee Stock Option Agreement, previously
filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q
for the quarter ended June 25, 1988, which is incorporated herein by
reference.
(j) Form of Amended and Restated Employee Stock Option Agreement,
between the company and Ronald L. Skates, previously filed as Exhibit
10(e) to the company's Quarterly Report on Form 10-Q for the quarter
ended March 25, 1989, which is incorporated herein by reference.
(k) Form of Amendments to Key Executive Stock Option Agreements,
previously filed as Exhibit 10(c) to the company's Quarterly Report
on Form 10-Q for the quarter ended March 25, 1989, which is incorporated
herein by reference.
(l) Non-Employee Director Restricted Stock Option Plan, Appendix A to
the prospectus included in the company's Registration Statement on Form
S-8, Registration Number 2-91481, which is incorporated herein by
reference.
(m) Form of Non-Employee Director Restricted Stock Option Agreement,
previously filed as Exhibit 10(n) to the company's Annual Report on
Form 10-K for the fiscal year ended September 29, 1990, which is
incorporated herein by reference.
(n) Form of Employment Agreement between the company and its full-time
officers, previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 25, 1989, which is
incorporated herein by reference.
(o) Form of Indemnity Agreement between the company and its officers
and directors, previously filed as Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended March 28,
1987, which is incorporated herein by reference.
(p) Form of Revolving Credit Agreement dated as of November 22,
1991, previously filed as Exhibit 10(aa) to the company's Annual
Report on Form 10-K for the fiscal year ended September 28, 1991,
which is incorporated herein by reference.
(q) Form of Amendment to Revolving Credit Agreement, previously
filed as Exhibit 10(a) to the company's Quarterly Report on Form
10-Q for the quarter ended March 28, 1992, which is incorporated
herein by reference.
(r) Form of Amendments dated April 12, 1993 and September 23, 1993
to Revolving Credit Agreement dated November 22, 1991, previously
filed as Exhibit 10(t) to the company's Annual Report on Form 10-K
for the fiscal year ended September 25, 1993, which is incorporated
herein by reference.
(s) Form of Amendment dated September 1, 1993, to various Employment
Agreements between the company and its full-time officers, previously
filed as Exhibit 10(u) to the company's Annual Report on Form 10-K
for the fiscal year ended September 25, 1993, which is incorporated
herein by reference.
(t) Form of Amendment dated December 30, 1993, amending and restating
Revolving Credit Agreement and Letter of Credit Agreement, previously
filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for
the quarter ended December 25, 1993, which is incorporated herein by
reference.
(u) Form of Amendment dated September 16, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
previously filed as Exhibit 10(w) to the company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994, which is
incorporated herein by reference.
(v) Data General Corporation Supplemental Retirement Benefit Plan
dated as of October 1, 1989, between the company and its highly
compensated employees, previously filed as Exhibit 10(x) to the
company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1994, which is incorporated herein by reference.
(w) Form of Supplemental Pension and Retiree Medical Agreement dated
as of December 7, 1994, between the company and it's current president
and Chief Executive Officer, previously filed as Exhibit 10(y) to the
company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1994, which is incorporated herein by reference.
(x) Form of Amendments dated April 18, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
previously filed as Exhibit 10(z) to the company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994, which is
incorporated herein by reference.
(y) 1994 Non-Employee Director Stock Option Plan, Appendix A to the
prospectus included in the company's Registration Statement on Form
S-8, Registration Number 33-53039, which is incorporated herein by
reference.
(z) Form of 1994 Non-Employee Director Stock Option Agreement, previously
filed as Exhibit 10(bb) to the company's Annual Report on Form 10-K for
the fiscal year ended September 24, 1994, which is incorporated herein
by reference.
(aa) Form of Letter of Credit and Reimbursement Agreement dated as of
December 21, 1994, previously filed as Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended December 24, 1994,
which is incorporated herein by reference.
(bb) Employee Qualified Stock Purchase Plan, Appendix A to the prospectus
included in the company's Registration Statement on Form S-8, Registration
Number 33-53041, which is incorporated herein by reference.
(cc) Employee Stock Option Plan, Appendix A to the prospectus included in
the company's Registration Statement on Form S-8, Registration Number
33-58237, which is incorporated herein by reference.
(dd) Amendment dated October 9, 1995 to Letter of Credit and Reimbursement
Agreement, changing the Consolidated Tangible Net Worth limitation.
(ee) 1996 Fiscal Year Bonus Opportunity for Chief Executive Officer.
11. Computation of primary and fully diluted earnings per share.
13. Annual report to stockholders for the fiscal year ended September
30, 1995, certain portions of which have been incorporated herein by
reference.
21. Subsidiaries of the registrant.
23. Consent of independent accountants.
Exhibits, other than those incorporated by reference, have been
included in copies of this Report filed with the Securities and Exchange
Commission. Stockholders of the company will be provided with copies
of these exhibits upon written request to the company.
(b) There were no reports on Form 8-K filed during the last thirteen
weeks of the period covered by this Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATA GENERAL CORPORATION
(Registrant)
By:_____________________
Ronald L. Skates
President and Chief Executive Officer
December 20, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
Ronald L. Skates
------------------- President and Chief
Ronald L. Skates Executive Officer; December 20, 1995
Director
Frederick R. Adler
------------------- Chairman of Executive
Frederick R. Adler Committee of Board of December 20, 1995
Directors; Director
Arthur W. DeMelle
--------------------- Vice President
Arthur W. DeMelle Chief Financial Officer; December 20, 1995
Chief Accounting Officer
Ferdinand Colloredo-Mansfeld
- ----------------------------
Ferdinand Colloredo-Mansfeld Director December 20, 1995
John G. McElwee
---------------------
John G. McElwee Director December 20, 1995
Donald H. Trautlein
----------------------
Donald H. Trautlein Director December 20, 1995
Richard L. Tucker
-------------------
Richard L. Tucker Director December 20, 1995
W. Nicholas Thorndike
---------------------
W. Nicholas Thorndike Director December 20, 1995
DATA GENERAL CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Data General Corporation
Our audits of the consolidated financial statements referred to in our
report dated October 20, 1995 appearing in the 1995 Annual Report to
Stockholders of Data General Corporation (which report and consolidated
financial statements are incorporated by reference in this Annual Report
on Form 10-K) also include an audit of the Financial Statement Schedule
listed in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 20, 1995
SCHEDULE II
DATA GENERAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at
Previous Balance at
End of Year Additions Deductions End of Year
Description
SEPTEMBER 30, 1995:
Allowance for doubtful
accounts . . . . . . . . .$ 13,752 $ 10,197(a) $(9,870)(b) $ 14,079
Valuation allowance on
deferred tax asset (c) . 209,936 1,008 9,689 201,255
SEPTEMBER 24, 1994:
Allowance for doubtful
accounts . . . . . . . . . 12,992 9,919(a) (9,159)(b) 13,752
Valuation allowance on
deferred tax asset (c) . 0 209,936 0 209,936
SEPTEMBER 25, 1993:
Allowance for doubtful
accounts . . . . . . . . . .19,934 11,379(a) (18,321)(b) 12,992
(a) Charged to costs and expenses.
(b) Accounts deemed uncollectable.
(c) SFAS 109 Accounting for Income Taxes adopted September 26, 1993.
EXHIBITS
Index to Exhibits.
3. (a) Restated Certificate of Incorporation of the company, as amended,
including the company's Certificate of Designation dated October 17,
1986, previously filed as Exhibit 3(a) to the company's Annual Report
on Form 10-K for the fiscal year ended September 27, 1986, which is
incorporated herein by reference.
(b) Amendment to Certificate of Incorporation of the company, filed
January 29, 1987, previously filed as Exhibit 3 to the company's
Quarterly Report on Form 10-Q for the quarter ended March 28, 1987,
which is incorporated herein by reference.
(c) By-Laws of the company, as amended.
4. (a) Indenture dated as of September 15, 1977 between the
company and State Street Bank and Trust Company (purchased from
Fleet Bank of Massachusetts, formerly Bank of New England and formerly
New England Merchants National Bank), as Trustee, which relates to the
company's 8-3/8% Sinking Fund Debentures due 2002, previously filed as
Exhibit 2.2 to the company's Registration Statement on Form S-7,
Registration Number 2-59710, which is incorporated herein by reference.
(b) Amended and Restated Rights Agreement dated as of May 19, 1988
between the company and Morgan Shareholders Services Trust Company,
as Rights Agent, previously filed as Exhibit 4 to the company's
Quarterly Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(c) Indenture, dated as of June 1, 1991, between the company and Fleet
National Bank, as Trustee, which relates to the company's 7-3/4%
Convertible Subordinated Debentures due 2001, previously filed as
Exhibit 4(d) to Amendment No. 2 to the company's Registration Statement
on Form S-3 (No. 33-40817), which is incorporated herein by reference.
10. (a) Restricted Stock Option Plan, Appendix A to the prospectus
included in the company's Registration Statement on Form S-8,
Registration Number 33-19759, which is incorporated herein by reference.
(b) Forms of Restricted Stock Option Agreement, previously filed as
Exhibit 10(b) to the company's Annual Report on Form 10-K for the
fiscal year ended September 29, 1990, which is incorporated herein
by reference.
(c) Form of Amendment to Restricted Stock Option Agreement, previously
filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q
for the quarter ended June 25, 1988, which is incorporated herein by
reference.
(d) Form of Amendments to Key Executive Restricted Stock Option
Agreements, previously filed as Exhibit 10(b) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 25, 1989, which is
incorporated herein by reference.
(e) Form of Amended and Restated Restricted Stock Option Agreement,
between the company and Ronald L. Skates, previously filed as Exhibit
10(f) to the company's Quarterly Report on Form 10-Q for the quarter
ended March 25, 1989, which is incorporated herein by reference.
(f) Form of Amendment to Restricted Stock Option Agreements, between
the company and Frederick R. Adler, previously filed as Exhibit 10(g)
to the company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(g) Amendment to Restricted and Employee Incentive Stock Option
Agreements, between the company and Ronald L. Skates, dated November
14, 1988, previously filed as Exhibit 10(e) to the company's Annual
Report on Form 10-K for the fiscal year ended September 24, 1988, which
is incorporated herein by reference.
(h) Forms of Incentive Stock Option Agreement, previously filed as
Exhibit 10(d) to the company's Annual Report on Form 10-K for the
fiscal year ended September 26, 1987, which is incorporated herein by
reference.
(i) Form of Amendment to Employee Stock Option Agreement, previously
filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q
for the quarter ended June 25, 1988, which is incorporated herein by
reference.
(j) Form of Amended and Restated Employee Stock Option Agreement,
between the company and Ronald L. Skates, previously filed as Exhibit
10(e) to the company's Quarterly Report on Form 10-Q for the quarter
ended March 25, 1989, which is incorporated herein by reference.
(k) Form of Amendments to Key Executive Stock Option Agreements,
previously filed as Exhibit 10(c) to the company's Quarterly Report on
Form 10-Q for the quarter ended March 25, 1989, which is incorporated
herein by reference.
(l) Non-Employee Director Restricted Stock Option Plan, Appendix A to
the prospectus included in the company's Registration Statement on Form
S-8, Registration Number 2-91481, which is incorporated herein by
reference.
(m) Form of Non-Employee Director Restricted Stock Option Agreement,
previously filed as Exhibit 10(n) to the company's Annual Report on
Form 10-K for the fiscal year ended September 29, 1990, which is
incorporated herein by reference.
(n) Form of Employment Agreement between the company and its full-time
officers, previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 25, 1989, which is
incorporated herein by reference.
(o) Form of Indemnity Agreement between the company and its officers
and directors, previously filed as Exhibit 10 to the company's Quarterly
Report on Form 10-Q for the quarter ended March 28, 1987, which is
incorporated herein by reference.
(p) Form of Revolving Credit Agreement dated as of November 22, 1991,
previously filed as Exhibit 10(aa) to the company's Annual Report on
Form 10-K for the fiscal year ended September 28, 1991, which is
incorporated herein by reference.
(q) Form of Amendment to Revolving Credit Agreement, previously filed
as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for
the quarter ended March 28, 1992, which is incorporated herein by
reference.
(r) Form of Amendments dated April 12, 1993 and September 23, 1993 to
Revolving Credit Agreement dated November 22, 1991, previously filed
as Exhibit 10(t) to the company's Annual Report on Form 10-K for the
fiscal year ended September 25, 1993, which is incorporated herein by
reference.
(s) Form of Amendment dated September 1, 1993, to various Employment
Agreements between the company and its full-time officers, previously
filed as Exhibit 10(u) to the company's Annual Report on Form 10-K for
the fiscal year ended September 25, 1993, which is incorporated herein
by reference.
(t) Form of Amendment dated December 30, 1993, amending and restating
Revolving Credit Agreement and Letter of Credit Agreement, previously
filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for
the quarter ended December 25, 1993, which is incorporated herein by
reference.
(u) Form of Amendment dated September 16, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
previously filed as Exhibit 10(w) to the company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994, which is
incorporated herein by reference.
(v) Data General Corporation Supplemental Retirement Benefit Plan
dated as of October 1, 1989, between the company and its highly
compensated employees, previously filed as Exhibit 10(x) to the
company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1994, which is incorporated herein by reference.
(w) Form of Supplemental Pension and Retiree Medical Agreement dated
as of December 7, 1994, between the company and it's current president
and Chief Executive Officer, previously filed as Exhibit 10(y) to the
company's Annual Report on Form 10-K for the fiscal year ended
September 24, 1994, which is incorporated herein by reference.
(x) Form of Amendments dated April 18, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
previously filed as Exhibit 10(z) to the company's Annual Report on
Form 10-K for the fiscal year ended September 24, 1994, which is
incorporated herein by reference.
(y) 1994 Non-Employee Director Stock Option Plan, Appendix A to
the prospectus included in the company's Registration Statement
on Form S-8, Registration Number 33-53039, which is incorporated
herein by reference.
(z) Form of 1994 Non-Employee Director Stock Option Agreement,
previously filed as Exhibit 10(bb) to the company's Annual Report
on Form 10-K for the fiscal year ended September 24, 1994, which
is incorporated herein by reference.
(aa) Form of Letter of Credit and Reimbursement Agreement dated as
of December 21, 1994, previously filed as Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended December 24, 1994,
which is incorporated herein by reference.
(bb) Employee Qualified Stock Purchase Plan, Appendix A to the
prospectus included in the company's Registration Statement on Form
S-8, Registration Number 33-53041, which is incorporated herein by
reference
(cc) Employee Stock Option Plan, Appendix A to the prospectus included
in the company's Registration Statement on Form S-8, Registration
Number 33-58237, which is incorporated herein by reference.
(dd) Amendment dated October 9, 1995 to Letter of Credit and
Reimbursement Agreement, changing the Consolidated Tangible Net
Worth limitation.
(ee) 1996 Fiscal Year Bonus Opportunity for Chief Executive Officer.
11. Computation of primary and fully diluted earnings per share.
13. Annual report to stockholders for the fiscal year ended
September 30, 1995, certain portions of which have been incorporated
herein by reference.
21. Subsidiaries of the registrant.
23. Consent of independent accountants.
Exhibits, other than those incorporated by reference, have been
included in copies of this Report filed with the Securities and Exchange
Commission. Stockholders of the company will be provided with copies of
these exhibits upon written request to the company.
EXHIBIT 10 (dd)
AMENDMENT NO. 1 TO LETTER OF CREDIT
AND REIMBURSEMENT AGREEMENT
THIS AGREEMENT NO. 1 TO LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
(this "Agreement") is made and entered into as of the 5th day of October,
1995 amount;
DATA GENERAL CORPORATION, a Delaware corporation ("Borrower"), NATIONSBANK
OF TEXAS, NATIONAL ASSOCIATION, a banking association, THE BANK OF NEW
YORK and FLEET BANK OF MASSACHUSETTS, N.A. (each individually, a "Lender"
and collectively, the "Lenders"); and
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association,
in its capacity as agent for the Lenders (in such capacity, the "Agent");
W I T N E S S E T H:
---------------------------------
WHEREAS, the Borrower, the Lenders and the Agent have entered into a Letter
of Credit and Reimbursement Agreement dated as of December 21, 1994, as
amended hereby (the "Credit Agreement"), pursuant to which the Lenders
agreed to issue certain letters of credit on behalf of the Borrower; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended
in the manner set forth herein and the Agent and the Lenders are willing
to agree to such amendment; and
NOW, THEREFORE, in consideration of the mutual covenants and the fulfillment
of the conditions set forth herein, the parties hereto do hereby agree as
follows:
1. Definitions. Any capitalized terms used herein without definitions
shall have the meaning set forth in the Credit Agreement.
2. Amendment. Subject to the terms and conditions set forth herein, the
Credit Agreement is hereby amended as follows:
(a) Section 7.03 of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
7.03 Consolidated Tangible New Worth. Permit at any Determination
Date Consolidated Tangible Net Worth to be less than $340,000,000.
3. Amendment Fee. The Borrower shall pay to the Agent for the pro
rata benefit of the Lenders an amendment fee (the "Amendment Fee") in
an amount equal to $30,000.
4. Effectiveness. This Agreement shall become effective as of the date
hereof upon receipt by the Agent of (a) seven fully executed copies of the
Agreement (which may be signed in counterparts) and (b) payment in full of
the Amendment Fee to be held by the Agent for the pro rata benefit of the
Lenders.
5. Representations and Warranties. In order to induce the Agent and the
Lenders to enter into this Agreement, the Borrower represents and warrants
to the Agent and the Lenders as follows:
(a) The representations and warranties made by Borrower in Article
V of the Credit Agreement are true and correct on and as of the
date hereof, except to the extent that such representations and
warranties expressly relate to an earlier date and except that the
financial statements referred to in Section 5.01(e) (i) of the
Credit Agreement shall be deemed to be those financial statements
most recently delivered to the Agent and the Lenders pursuant to
Section 6.01 if the Credit Agreement.
(b) There has been no material adverse change in the condition,
financial or otherwise, of the Borrower and its Subsidiaries,
taken as a whole, since the date of the most recent financial
reports of the Borrower received by the Agent and the Lenders
under Section 6.01 (a) of the Credit Agreement, other than changes
in the ordinary course of business;
(c) The business and properties of the Borrower and its Subsidiaries,
taken as a whole, are not, and since the date of the most recent
financial report of the Borrower and its Subsidiaries received by
the Agent and the Lenders under Section 6.01 (a) of the Credit
Agreement, have not been, adversely affected in any substantial way
as the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities
of the armed forces, war or acts of God or the public enemy, or
cancellations or loss of any major contracts; and
(d) No event has occurred and is continuing which constitutes,
and no condition exists which upon the consummation of the
transaction contemplated hereby would constitute, a Default or
an Event of Default on part of the Borrower under the Credit
Agreement, either immediately or with the lapse of time or
giving of notice, or both.
6. Entire Agreement. This Agreement sets forth the entire
understanding and agreement of parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter.
7. Full Force and Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other
Letter of Credit Documents are hereby confirmed and ratified in all
respects and shall remain in full force and effect according to their
respective terms.
8. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
9. Governing Law. This Agreement shall in all respects be governed by
laws and judicial decisions of the State of New York.
10. Enforceability. Should any one or more of the provisions of this
Agreement be determined to be illegal or unenforceable as to one or more
of the parties hereto, all other provisions nevertheless shall remain
effective and binding on the parties hereto.
11. Credit Agreement. All references in any of the Letter of Credit
Documents to the Credit Agreement shall mean the Credit Agreement as
amended hereby
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by there duly authorized officers, all as of the day and
year first above written.
BORROWER:
DATA GENERAL CORPORATION
By:
Name:
Title:
LENDERS:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION
By:
Name:
Title:
THE BANK OF NEW YORK
By:
Name:
Title:
FLEET BANK OF MASSACHUSETTS, N.A.
By:
Name:
Title:
AGENT:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION
as Agent for the Lenders
By:
Name:
Title:
1996 President & Chief Executive Bonus
Exhibit 10 (ee)
December 6,1995
Mr. Ronald L. Skates
Data General Corporation
3400 Computer Drive
Westboro, MA 01580
Dear Mr. Skates:
The purpose of this letter is to memorialize the bonus
opportunity granted to you by the Corporation's Board of Directors at
its meeting on December 6, 1995. The terms of the opportunity are:
You will be entitled to earn as a cash bonus for the 1996 Fiscal
Year the greater of (a) $200,000 for each $.10 of earnings per share,
with a maximum payment of 250% of salary, which earnings per share
would be based on primary reported net income per share as of the close
of the 1996 fiscal year or (b) 1.5% of the increase in market
capitalization based on the following formula: the difference between
(i) the product of the average daily closing market price of the
Corporation's Common Stock on the New York Stock Exchange for 30
trading days prior to the close of the 1996 fiscal year times the
number of shares actually outstanding as of the close of the 1996
fiscal year and (ii) the product of the average daily closing market
price of the Corporation's Common Stock on the New York Stock Exchange
from October 2, 1995 through December 6, 1995 times the number of
shares actually outstanding as of the close of business of the 1995
fiscal year. In the event of a change of control, the change of
control price will be used to determine the bonus and the bonus would
be payable upon the change of control. The Board would have the power
to modify the award in the event of extraordinary transactions,
excluding change of control. The Board would retain the right to award
discretionary bonuses to you.
For your information, the "starting" calculation for purposes of
that portion of the bonus opportunity relating to market capitalization
is: $11.67 (average daily closing market price on the NYSE from 10/2 -
12/6/95) X 37,932,730 (the number of shares actually outstanding as of
the close of business on 9/30/95) = $442,674,959.10.
Very truly yours,
DATA GENERAL CORPORATION
By_____________________
ACCEPTED AND AGREED:
Ronald L. Skates
EXHIBIT 11
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(in thousands except per share amounts)
Fiscal Year Ended
Sept. 30, Sept. 24, Sept. 25, Sept. 26, Sept. 28,
1995 1994 1993 1992 1991
Primary earnings per share:
Net income (loss) . . $(46,703) $(87,693) $(60,479) $(62,512) $85,641
Weighted average
shares outstanding . . . 37,059 35,774 34,453 32,788 31,160
Incremental shares from
use of treasury stock
method for stock options. 807 -- 423 -- 1,508
Common and common
equivalent shares,
where applicable . . . 37,866 35,774 34,876 32,788 32,668
Net income (loss) per
share . . . . . . . $(1.23) $(2.45) $(1.73) $(1.91) $2.62
Earnings per share
assuming full dilution:
Net income (loss) . . . $(46,703) $(87,693) $(60,479) $(62,512) $85,641
Interest on convertible
debentures, net of
income taxes . . . . . . --(a) --(a) --(a) --(a) 2,634
Net income (loss) for
purposes of
calculating earnings
per share assuming
full dilution . . . .$(46,703) $(87,693) $(60,479) $(62,512) $88,275
Weighted average
shares outstanding. . 37,059 35,774 34,453 32,788 31,247
Incremental shares
from use of treasury
stock method for
stock options . . . . . . 807 -- 423 -- 3,022
Incremental shares
from assumed
conversion of
convertible debentures. . -- -- -- -- 1,807
Common and common
equivalent shares,
where applicable . . . 37,866(a) 35,774(a) 34,876(a) 32,788(a) 36,076
Net income (loss) per
share. . . . . . . . . . .$(1.23) $(2.45) $(1.73) $(1.91) $2.45
- ----------------------
(a) For the years ended September 30, 1995, September 24, 1994 ,
September 25, 1993 and September 26, 1992, the assumed conversion of
convertible debentures, giving effect to the incremental shares and the
adjustment to reduce interest expense, results in anti-dilution and has
therefore been excluded from the computation.
DATA GENERAL CORPORATION
1995 ANNUAL REPORT
(photo of SHV server)
Advancing the Evolution of Commodity Computing
Data General Corporation
4400 Computer Drive
Westboro, Massachusetts, USA 01580
http://www.dg.com
email: [email protected]
1968 Founded, built the NOVA, the first minicomputer based on
integrated circuit technology
1968-1980 Successive generations of 16-bit minicomputers; known for
high performance and excellent price/performance
1980-1988 Successive generations of 32-bit minicomputers; first
machine chronicled in Pulitzer Prize winning book by Tracy
Kidder, "The Soul of A New Machine"
1988 Announced open systems strategy based on industry-standard
microprocessors, operating systems, and storage components
1989 Delivered first AViiON(R) computer systems and UNIX for
commercial applications
1991 Delivered first RAID storage systems
1992 Introduced CLARiiON(R) disk arrays as second generation
of RAID systems for AViiON, ECLIPSE(R), and other computing
platforms
June 1995 Announced new direction for AViiON product family; systems
to use Intel(R) processors and standard SMP (symmetric
multiprocessing motherboards
Oct 1995 Introduced first AViiON systems that use Intel Pentium(R)
architecture; more than 15,000 applications available for
customer use
Nov 1995 Announced general specifications for advanced family of
AViiON servers using Pentium(R) Pro processors
Data General designs advanced systems using the best commodity technologies;
builds software alliances to deliver leading solutions; and provides
comprehensive integration services to design, implement, and support
total computing solutions.
TO OUR STOCKHOLDERS, CUSTOMERS AND EMPLOYEES:
In fiscal 1995, Data General made significant progress in our two major
businesses -- AViiON servers and CLARiiON storage systems -- and maintained
our revenue base in related services. We also reduced our operating costs
and ended the year with revenue growth and a profitable fourth quarter.
AViiON Server Business
We launched the AViiON family of servers and our DG/UX(R) operating system for
the commercial market in 1989. Our AViiON product family has progressed through
several generations and now has an installed base approaching 30,000 systems
and $2 billion in value, and DG/UX has received the highest overall ratings
in the industry from leading research firms.
In June, we announced that we had chosen the Intel architecture for our new
generation of AViiON servers. At the same time, we outlined our technology
direction for providing high-performance systems based on Intel processors,
Standard High Volume (SHV) servers, and Cache Coherent Non-Uniform Memory
Access (ccNUMA) architecture. This announcement was the result of a two-year
process to prepare ourselves, our operating system, and our software partners
for this advanced computing technology.
In October, as we entered fiscal 1996, we introduced our first Intel based
AViiON servers. These servers run our DG/UX operating system to deliver the
performance needed in a broad range of applications, for departments or
throughout an entire enterprise. They also run Microsoft Windows NT Server, one
of the industrys fastest-growing operating systems. This ensures that our
customers have the widest range of applications available to them.
Long before we announced our new AViiON line, we began working with the
industry's leading software developers. We also expanded the capabilities of
DG/UX to run on both the Intel based AViiON systems and on existing Motorola
based AViiON systems. This greatly simplified the porting and recompiling of
applications. As a result, all of the major database vendors and many leading
enterprise application developers completed the porting of their software to
our Intel based AViiON platform, and the new generation of AViiON is already
capable of running more than 15,000 applications.
In addition, the new AViiON servers outstanding price/performance and unique
ability to run a true enterprise UNIX operating system or Windows NT Server
make them particularly appealing to resellers.
CLARiiON Storage Business
In 1991, we introduced our RAID storage systems for our AViiON servers. In
1992, we expanded that product family, named it CLARiiON, and made it available
for use on other computer systems. With the addition of low-end products
introduced in the past year, CLARiiON now supports virtually all open systems
computing platforms with a broad family of storage products ranging from disk
arrays for the PC/local area network (LAN) market, to high-capacity, high-
availability arrays for enterprise storage applications.
CLARiiON products are sold through systems integrators and distributors.
However, the majority of CLARiiON revenues are derived through OEM
relationships with major systems vendors and storage suppliers.
We experienced exceptional growth in our CLARiiON storage systems business in
fiscal 1995 with revenues tripling from the prior year. We believe this growth
in CLARiiON sales demonstrates the increasing importance of disk array
technology in the marketplace. It also reaffirms our focus on data integrity
and providing high availability in the open enterprise.
Services
Our strategy recognizes the critical role of our worldwide services operations.
Revenues from services, including Customer Service and Professional Services,
totaled $402 million in fiscal 1995.
A strong Customer Service operation is a prerequisite for enterprise customers
who need 24-hour/365-day support. Data General provides customers with a single
point of contact to ensure integrated hardware and software support and
maintenance. We are focusing our service resources on system and network
expertise, and establishing alliances with leading service specialists for
comprehensive customer support.
Our Professional Services organizations provide AViiON customers worldwide with
complete services to design, implement, and support commercial computing
environments. To make it easier for customers to install and integrate our
products, we now offer nearly 100 packaged professional services that implement
standard statements of work at defined prices.
We are also offering a complete set of services to ease the incorporation of
new Intel based AViiON systems into our customers' existing Motorola based
AViiON environments.
Fiscal 1995 Results
Revenues for the fiscal 1995 year were $1.16 billion, compared with $1.12
billion for the previous year. We reported a fiscal 1995 net loss of $46.7
million, or $1.23 per share, which included a restructuring charge of $43.0
million for a workforce reduction, and other cost reduction activities related
primarily to real estate. The fiscal 1995 figures also include a pre-tax gain
of $44.5 million resulting from the settlement of a software copyright and
trade secret lawsuit against Northrop Grumman Corporation. In fiscal 1994,
Data General reported a net loss of $87.7 million, or $2.45 per share, which
included a restructuring charge of $35 million.
Financial Strength
Data General's financial position continues to be strong. Cash as a percentage
of revenues is among the highest in our industry. Our inventory turn rate is
among the best in the industry. At year end, cash and marketable securities
totaled $188.8 million. Our cash position was helped early in the fiscal year
by $53 million received from settlement of the Northrop Grumman suit.
Business Strategy and Outlook
Since we began our move to open systems in 1988, we have changed virtually
every aspect of our business. We made tough cultural and organizational
changes. We focused on what we do best - hardware and systems software
development - and leveraged our core technological strengths.
Fiscal 1995 Product Revenue Distribution
AViiON Servers 56%
CLARiiON Storage 25%
Personal Computers 12%
ECLIPSE MV Systems 7%
This strategy has transformed Data General from a proprietary to an open
systems business. Today we are a company with leading-edge technology and a
strong financial position.
Data General is positioned for growth. Our strength is our ability to take
advantage of constantly changing technologies to deliver value for our
customers. Our new generation of AViiON servers is based on what is clearly the
industry's most durable architecture -- the Intel architecture. Intel
technology is the standard on which the PC market is based, and we believe it
will soon become the standard for the server market.
The long transition from proprietary to open systems has been a challenging
time for employees, customers, and stockholders. The short transition of our
AViiON systems to the Intel architecture has been carefully planned. We are
confident that the steps we are taking to generate AViiON and CLARiiON revenue
growth will enable us to achieve our goal of sustained profitability.
Respectfully submitted,
Ronald L. Skates
President and Chief Executive Officer
ADVANCING THE EVOLUTION OF BUSINESS COMPUTING
More than anything else, component integration is responsible for the
extraordinary success of today's computer industry. From transistors to
integrated circuits to microprocessors, increasingly greater degrees of
component integration have allowed designers to package ever more power into
ever smaller spaces.
Moore's Law
With the advent of semiconductor technology came the modern computing era,
framed by Intel co-founder Gordon Moore's observation that chip capacity and
performance could be expected to double every couple of years.
Moore's Law has held true for the past 30 years. It fuels the computer industry
and makes it unique. Most of the traditional business world, in contrast,
changes in a linear fashion. The combination of these trends suggests why
momentous shifts in market dynamics can occur at times of profound technology
change.
Put simply, the exponential curve charted by Moore's Law means that today's
high-value-added product is likely to become tomorrow's low-margin commodity.
Further, jarring technological changes, or discontinuities, can actually
accelerate this phenomenon. Markets may be restructured -- and new competitive
opportunities may appear -- virtually overnight.
For example, Data General and the minicomputer industry were born during the
discontinuity created when integrated circuits replaced transistors.
Another discontinuity occurred in the early 1980s when engineers first built
computers using 16-bit microprocessors. This spawned the PC industry, hastened
acceptance of related design standards, and led to even greater economies and
incentives for further integration.
Today, component integration occurs not just on the chip but at the motherboard
level, where complex, system-level functions are carried out. Soon this dynamic
will shift again, with companies building systems around pre-packaged commodity
SMP (symmetric multiprocessing) subsystems.
AViiON Server Technology
Our new generation of AViiON servers is based on Intel processor technology. At
the same time, we will continue to manufacture and support our Motorola based
family of AViiON servers.
Intel has a history of delivering continuing generations of processors with
increasing speed and performance. This technology enables Data General to build
a scalable range of systems that preserves customer investments in applications
while taking advantage of the breadth and performance growth of the Intel
architecture -- from the current Pentium processor family, to systems based on
Pentium Pro processors and Standard High Volume (SHV) server motherboards
starting in 1996.
SHV boards combine up to four Pentium Pro processors with cache, main memory,
and input/output logic in economical, off-the-shelf packaging. They are becoming
the industry's newest commodity building blocks.
AViiON enterprise servers based on Intel's SHV boards will run current SMP
applications without modification. For flexibility and availability, they will
permit multi-system clustering and resource sharing, and will be complemented by
inexpensive, single or dual Pentium Pro deskside servers.
But to function optimally in higher processor-count implementations, SHV boards
will have to be interconnected within a large-scale system architecture. Data
General is now building critical SHV-interconnect technology which will
implement the industry-standard Scalable Coherent Interface (SCI) protocol, and
will enable development of highly optimized enterprise servers based on the
architecture design known as ccNUMA, or Cache Coherent Non-Uniform Memory
Access. ccNUMA is regarded as the most effective system architecture for
higher-end SMP designs.
DG/UX Operating System
These very powerful, commodity-based technologies require enabling software --
high functionality, high-value software like our DG/UX operating system. With
DG/UX, AViiON enterprise servers will be able to handle the most demanding
applications used by business, from data warehousing and data mining to
transaction processing and decision support.
DG/UX is a sophisticated, commercial implementation of the UNIX system V Release
4 operating system. Data General has been enhancing DG/UX for over a decade to
provide a state-of-the-art platform for running core business applications.
DG/UX provides a robust file system, open connectivity, comprehensive systems
and storage management, standards compliance, and high levels of applications
scalability. Recent improvements to DG/UX include clustering of up to eight
AViiON systems enabling resource sharing, higher levels of availability, and
easier system administration. DG/UX is also the first UNIX based operating
system to meet federal B2 level security requirements, the most demanding
security within the military/intelligence community. Data General plans to make
this same capability available for security-conscious commercial customers.
In addition to DG/UX, AViiON systems run Windows NT Server and a variety of
shrink-wrapped operating systems. This provides customers with a choice of
environments for running more than 15,000 applications, including all the
leading enterprise and database software. The list includes UNIX software from
such leading companies as Computer Associates, Informix, Oracle, PeopleSoft,
Pick Systems, Progress, SAP, Sybase, Tivoli, Unidata and VMark; as well as
approximately 7,000 shrink-wrapped applications available with Windows NT
Server.
CLARiiON Disk Arrays
Complementing Data Generals focus on enterprise servers is our focus on
large-scale enterprise storage products.
CLARiiON disk arrays are built from leading-edge, off-the-shelf components.
Today, they pack up to 80 gigabytes of fault-tolerant data storage in deskside
modules that are economical, small, fast, and open. CLARiiON products are fully
compatible with Data Generals and other leading vendors UNIX systems, as well as
with NetWare, Windows NT, and major legacy platforms.
The CLARiiON family is important for another reason. CLARiiON demonstrates how
Data General invests intellectual resources in systems architectures and
software to deliver powerful data-center products built around commodity
components.
Leveraging Commodity Economics
Today, we are on the brink of a major technological discontinuity. It is caused
by the shift to commodity SMP building blocks, and it presents serious
challenges as well as tremendous opportunities to system vendors, resellers, and
information technology executives.
For systems vendors, the issue is no longer how to build the fastest chip, disk,
or box, but how to make the most of commoditization; in other words, how to cut
time and cost while bringing to market new product designs based on SHV server
technologies.
For resellers, rapid technology advancements provide continual opportunities for
new applications and new markets for their solutions.
For information technology executives, Moore's Law requires adopting strategies
for taking advantage of technological discontinuities without disrupting
end-user services.
For Data General, the opportunity is clear. The company will serve as a
strategic supplier and partner to system vendors, resellers, and information
technology executives, supporting their efforts to evolve business computing in
the months and years ahead.
Financial Review 1995
Five Year Summary of Selected Financial Data. . . . . . . . . . . . . . . . . 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . .10
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . .13
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . .14
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . .15
Consolidated Statements of Stockholders' Equity . . . . . . . . . . . . . . .16
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . .17
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . .26
Supplemental Financial Information. . . . . . . . . . . . . . . . . . . . . .26
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Officers, Directors, and Senior Management. . . . . . . . . . . . . . . . . .28
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28,
IN THOUSANDS, 1995 1994 1993 1992 1991
EXCEPT PER
SHARE AMOUNTS
Total revenues . . .$1,159,316 $1,120,505 $1,077,869 $1,115,947 $1,228,854
Total cost of
revenues . . . . . 772,047 733,114 654,718 655,047 659,559
Research and
development. . . . 85,886 90,826 100,172 111,336 101,986
Selling, general,
and
administrative . . 334,337 341,343 346,740 357,528 384,317
Restructuring
charge . . . . . . 43,000 35,000 25,000 48,000 --
Total costs and
expenses . . . . 1,235,270 1,200,283 1,126,630 1,171,911 1,145,862
Income (loss) from
operations . . . . (75,954) (79,778) (48,761) (55,964) 82,992
Interest expense,
net. . . . . . . . 4,116 8,168 6,734 3,448 4,451
Other income, net. . 41,972 2,353 416 -- 13,000
Income (loss)
before income
taxes. . . . . . . (38,098) (85,593) (55,079) (59,412) 91,541
Income tax
provision. . . . . 8,605 2,100 5,400 3,100 5,900
Net income (loss). .$ (46,703) $ (87,693) $ (60,479) $ (62,512) $ 85,641
Primary net
income (loss)
per share. . . . . ($1.23) ($2.45) ($1.73) ($1.91) $2.62
Net income (loss)
per share assuming
full dilution. . . ($1.23) ($2.45) ($1.73) ($1.91) $2.45
AS OF
SEPT. 30, SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28,
DOLLARS IN THOUSANDS 1995 1994 1993 1992 1991
Current assets . . . $ 591,485 $ 598,076 $ 611,660 $ 671,307 $ 684,480
Current liabilities. 370,226 326,865 302,908 307,172 265,816
Working capital. . . $ 221,259 $ 271,211 $ 308,752 $ 364,135 $ 418,664
Total assets . . . . $ 832,018 $ 821,864 $ 866,329 $ 940,454 $ 944,046
Annual expenditures
for property,
plant, and
equipment. . . . . $ 96,471 $ 92,955 $ 94,968 $ 93,607 $ 82,766
Long-term debt . . . $ 153,457 $ 156,942 $ 158,352 $ 162,258 $ 164,911
Other liabilities. . $ 28,791 $ 29,445 $ 27,992 $ 20,988 $ 18,878
Stockholders' equity $ 279,544 $ 308,612 $ 377,077 $ 450,036 $ 494,441
Employees. . . . . . 5,000 5,800 6,500 7,100 8,500
Results of operations are for 52-week periods except for 1995 which is a 53-week
period.
The company has not declared or paid cash dividends since inception.
RESULTS OF OPERATIONS
The company reported a net loss of $47 million for fiscal 1995
compared with a net loss of $88 million for fiscal 1994 and a net loss
of $60 million for fiscal 1993. Included in these fiscal year losses
are restructuring charges of $43 million, $35 million, and $25 million,
respectively.
Total revenues were $1.16 billion in fiscal 1995, compared with
$1.12 billion in fiscal 1994 and $1.08 billion in fiscal 1993. Revenues
in three of four quarters of the 1995 fiscal year showed revenue growth
compared to the same quarters of the prior fiscal year. The growth in
fiscal 1995 came from both the European marketplace and from other
international product revenues. The increases in these two marketplaces
resulted from growth in the Open CLARiiON line of mass storage devices
during this fiscal year and the impact of the weakening of the U.S.
dollar in relation to European currencies. The domestic marketplace,
while experiencing growth in Open CLARiiON, was negatively impacted by a
combination of sales force and product transition issues. While the
company believes that the effects of the sales force transition are now
complete, the company expects to continue to see an impact from the
product transition to the new Intel-based AViiON products until these
new products begin to ship in volume during the second half of fiscal
year 1996.
Product revenues, which accounted for 65% of total revenues in
fiscal 1995 and 1994, and 62% in fiscal 1993, increased 5% to $757
million in fiscal 1995 from $722 million in fiscal 1994, following a 7%
increase from $673 million in fiscal 1993. In fiscal 1995, revenues
from the AViiON family were approximately $421 million, a 10% decrease
from fiscal 1994 as a result of sales force and production transition
issues. The company remains cautious for the short term, while
transitioning to the new Intel-based AViiON systems. Fiscal 1994 showed
a 20% increase in AViiON systems revenues when compared with fiscal
1993. ECLIPSE MV ("MV") revenues decreased 43% during fiscal 1995
compared to a 48% decline in fiscal 1994. MV revenues currently
represent only 7% of the company's total product revenues. In only its
third year of shipments, the Open CLARiiON line of mass storage systems
grew considerably, representing 25% of the overall product revenues in
the current fiscal year, compared to 7% of total product revenues in the
previous fiscal year. The company is encouraged by the growth of its
Open CLARiiON storage line and its acceptance in the worldwide
marketplace. Open CLARiiON is sold primarily through the company's
Original Equipment Manufacturer ("OEM") and distributor channels.
Revenues have been concentrated with a limited number of customers. For
the current fiscal year, a significant portion of the company's Open
CLARiiON revenues were to a single OEM. The recent growth in Open
CLARiiON revenues may not be indicative of future Open CLARiiON
revenue trends.
The domestic market represented 51% of total product revenues in
fiscal 1995, 55% and 52% in fiscal years 1994 and 1993, respectively.
Domestic product revenues for fiscal 1995 decreased 3% from fiscal 1994,
following a 17% increase from fiscal 1993. The CLARiiON product line
more than doubled in this marketplace in fiscal 1995, offset by a 13%
decrease in AViiON revenues, a 41% decrease in ECLIPSE MV revenues, and
a small decrease in PC revenues. Almost 60% of the prior year growth
was attributable to increases from sales of Open CLARiiON mass storage
systems. European product revenues, including U.S. direct export sales,
increased 12% to $215 million in fiscal 1995 from $192 million in fiscal
1994. The increase in fiscal year 1995 was attributable to significant
growth in the Open CLARiiON product line offset by a 43% decline in
ECLIPSE MV revenues. AViiON and PC revenues were flat in this
marketplace. The weakening of the U.S. dollar in relation to European
currencies accounted for 2% of the total 12% increase in this
marketplace. Fiscal 1994 European product revenues represented a 12%
decrease from $219 million in fiscal 1993. Other international product
revenues, including U.S. direct export sales, increased 19% to $154
million in fiscal 1995 from $130 million in the previous year. Open
CLARiiON increased significantly, offset by a 48% decrease in MV
revenues and a 9% decrease in AViiON revenues. Fiscal 1994 revenues
represented a 16% increase from fiscal 1993 revenues of $112 million.
The fiscal 1994 increase in other international product revenues was
largely due to stronger revenues from the South Pacific area and an
increase in U.S. direct export sales to Japan.
Total service revenues of $402 million in fiscal 1995 remained
relatively constant compared to $398 million in fiscal 1994. Fiscal
1994 service revenues reflected a 2% decrease from $405 million for
fiscal 1993. Domestic service revenues remained relatively unchanged
at $227 million in fiscal 1995 compared to $230 and $229 million in
fiscal 1994 and fiscal 1993, respectively. European service revenues
increased 7% to $130 million in fiscal 1995 following a drop of 7% in
fiscal 1994 to $122 million from $131 million in fiscal year 1993.
Foreign exchange accounted for 3% of the total 7% increase in fiscal
1995 and 3% of the total 7% decrease in fiscal 1994. Other International
service revenues of $44 million in fiscal 1995 decreased 2% from $46
million in fiscal 1994. Fiscal 1994 other international service
revenues remained constant compared to fiscal 1993.
Cost of revenues accounted for 67% of total revenues in fiscal
1995 as compared to 65% in fiscal 1994. For the year ended September
25, 1993, total cost of revenues amounted to 61% of total revenues.
Cost of product revenues increased to 68% of product revenues in
fiscal 1995, compared with 67% and 62% in fiscal years 1994 and 1993,
respectively. The primary reason for the increase in cost as a
percentage of product revenues is due to shipments of the lower gross
margin CLARiiON family of mass storage systems. This is partially
offset by benefits resulting from the company's cost reduction and
restructuring programs.
Cost of service revenues was 64% of service revenues in fiscal
year 1995, an increase from 63% and 59% in fiscal years 1994 and 1993,
respectively. The increase in cost of service revenues as a percentage
of total service revenues was primarily a result of increases in
revenues from systems integration activities which yield a lower margin
than traditional service contract revenues.
In fiscal 1995, research and development expenses were $86 million
or 7% of total revenues, compared to $91 million and $100 million or 8%
and 9% of total revenues for fiscal years 1994 and 1993, respectively.
The net decrease in research and development expenses during this fiscal
year was primarily caused by the company dedicating a higher proportion
of its resources to software development that requires capitalization.
The company continues to focus its research and development efforts on
its core business technology, multi-user computer systems, servers, and
mass storage devices. In fiscal 1995, gross expenditures on research
and development and software development, before capitalization,
increased 5% compared to fiscal 1994. The increase in expenditures was
primarily a result of material purchases relating to the prototyping of
the new Intel-based product line and the porting of DG/UX (Data
General's UNIX Operating System) to the new architecture.
Selling, general and administrative expenses continue to decrease
due to the company's worldwide cost reduction and containment programs.
Selling, general and administrative costs decreased 2% to $334 million
in fiscal 1995 when compared to fiscal 1994. Fiscal 1994 costs
represented a 2% decrease from fiscal year 1993. The company has
responded to increasingly competitive industry conditions through
ongoing cost reduction and containment programs from fiscal 1990 to
fiscal 1995 which have been the primary factor in reducing the current
year's selling, general, and administrative expenses by more than
$110 million compared to fiscal 1990.
While the company has made the transition to a supplier of open
systems products and services, in the first half of fiscal 1995, the
company continued to have a cost structure which exceeded that of an
open systems business model. Early in the third quarter of the
current fiscal year, the company identified additional cost reduction
steps which include further worldwide sales and service workforce
reductions. Consequently, results of operations for fiscal 1995 include
a charge of $43 million for estimated costs associated with a worldwide
workforce reduction along with other cost reduction programs, primarily
related to real estate. The provision relating to the workforce
reduction is primarily for salary and benefit continuation and
outplacement service. Fiscal 1994 and 1993 included charges of $35
million and $25 million, respectively, for estimated costs associated
with the worldwide workforce reduction, real estate, and other costs
associated with the company's restructuring actions. At the close of
fiscal 1995, the number of employees was approximately 5,000, a
reduction of 800 employees from September 24, 1994. Fiscal year 1994
saw a reduction of 700 employees from the 6,500 employed as of September
25, 1993. Peak employment was 17,700 in fiscal 1984. There have been
no material changes in the company's previously announced restructuring
actions or the estimates accrued at September 30, 1995.
During fiscal 1993, the company sold three of the facilities that
it had previously closed as a result of cost reduction programs. The
company sold its Westbrook, Maine, its Portsmouth, New Hampshire, and a
portion of its Woodstock, Connecticut facilities for proceeds of $8.7
million, $5.1 million and $1.9 million, respectively.
Loss from operations for fiscal 1995 of $76 million was comprised
of $45 million from the domestic marketplace, $15 million from Europe
and $16 million from other international. These losses include
restructuring charges of $19 million for each of domestic and Europe,
and $5 million for other international. These losses from operations
compare with $45 million, $18 million, and $17 million in fiscal 1994,
for the domestic marketplace, Europe and other international,
respectively. Restructuring charges were $21 million, $12 million,
and $2 million in each of these areas, respectively.
Interest income for fiscal 1995 increased 65% from fiscal 1994,
following a 27% decrease from fiscal 1993 to fiscal 1994. The current
year increase was primarily due to higher levels of invested cash and
higher market interest rates. The prior year decrease was primarily due
to lower average levels of invested funds and an overall reduction in
market interest rates. Interest expense for fiscal 1995 remained
relatively unchanged from both fiscal 1994 and 1993.
Included in other income, net, in the fiscal 1995 Statement of
Operations is a pretax gain, net of related legal fees and other
expenses, of $44.5 million from the settlement with Northrop Grumman
Corporation of the six-year software copyright infringement and
trade secrets litigation against Grumman Systems Support Corporation
("Grumman"). Under the terms of the settlement, Grumman paid the
company $53 million and the parties have dismissed all pending
litigation.
The income tax provision for the current year was $8.6 million,
compared to $2.1 million in fiscal 1994 and $5.4 million in fiscal 1993.
The current year provision resulted primarily from deferred tax on
undistributed earnings for certain foreign subsidiaries and foreign and
state taxes. The 1994 and 1993 provisions primarily resulted from
foreign and state taxes. The company continues to have significant
operating loss carryforwards and unused tax credits available to
minimize future tax liabilities. During the first quarter of fiscal
1994, the company adopted Statement of Financial Accounting Standard
("SFAS") 109, "Accounting for Income Taxes". SFAS 109 is an asset and
liability approach that requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been recognized in the company's financial statements or tax
returns. Previously, the company used the SFAS 96 asset and liability
approach that gave no recognition to future events other than the
recovery of assets and settlement of liabilities at their carrying
amounts. The implementation of SFAS 109 did not have a material effect
on either the company's consolidated financial position or results of
operations. Under SFAS 109, the benefit associated with future
deductible temporary differences is recognized if it is more likely than
not that a benefit will be realized. Based on historical evidence, the
company has recorded a valuation allowance which offsets substantially
all net deferred tax assets existing as of September 30, 1995 and
September 24, 1994.
In the first quarter of fiscal 1995, the company adopted SFAS 112,
"Employers' Accounting for Post-Employment Benefits" and SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities".
SFAS 112 requires the accrual of liabilities for the estimated cost of
benefits provided by the employer to former or inactive employees.
SFAS 115 addresses accounting and reporting for investments in certain
debt and equity securities. Under this standard, the company is
required to classify its marketable securities into one or more of the
following categories: held-to-maturity, trading, or available for
sale. All of the company's marketable securities at September 30, 1995
and September 24, 1994 have maturities of less than one year, and have
been classified as being 'held-to-maturity'. The implementation of
SFAS 112 and SFAS 115 did not have a material effect on the company's
consolidated financial position or results of operations. In the fourth
quarter of fiscal 1995, the company adopted SFAS 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial
Instruments". The adoption of this statement requires certain
additional disclosure regarding the amounts, nature, terms, purpose, and
fair values of the company's derivative financial instruments.
In May 1993, the Financial Accounting Standards Boards ("FASB")
issued SFAS 114, "Accounting by Creditors for Impairment of a Loan".
In March 1995, the FASB issued SFAS 121, "Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". In
October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based
Compensation". SFAS 114 is effective for fiscal years commencing after
December 15, 1994. SFAS 121 and 123 are effective for fiscal years
beginning after December 15, 1995. The company will implement these
statements as required. The future adoption of SFAS 114, 121, and 123
is not expected to have a material effect on the company's consolidated
financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The company's financial position remains strong. Cash and
temporary cash investments as of September 30, 1995 were $117 million, a
decrease of $25 million from fiscal 1994. However, at September 30,
1995, the company held $72 million in marketable securities, a net
increase of $24 million from the prior fiscal year, which supplemented
cash and temporary cash investments. These securities are primarily
invested in United States Treasury bills and notes. Net cash provided
from operations in fiscal 1995 was $117 million, which included $53
million received in the first quarter of this year from the settlement
of the Grumman software copyright infringement and trade secrets
litigation. Expenditures for property, plant and equipment were $96
million and capitalized software development costs totaled $27 million.
Cash provided from stock plans was approximately $8 million. The
company disbursed $1 million in connection with an investment in an
unaffiliated entity and in repayment of notes payable. Repayment of
long-term debt during the current fiscal year was $4 million, including
a $3 million repurchase of the company's 8 3/8% debentures due in 2002
to satisfy future sinking fund requirements. The effect of currency
fluctuations on cash and temporary cash investments was an increase of
$2 million for fiscal year 1995.
Net receivables decreased $8 million to $251 million at September
30, 1995, primarily as a result of improved collections worldwide,
partially offset by the increase in fourth quarter fiscal 1995 revenues
when compared to the same prior year period. The company's worldwide
days sales outstanding decreased 7 days when compared to the prior
fiscal year as a result of the increased collection activity, primarily
relating to the Open CLARiiON line of mass storage systems. This
product line is sold primarily through the company's OEM and distributor
channels where receivable cycles are generally shorter than the computer
systems product line. Inventory levels increased $6 million during
fiscal 1995, primarily as a result of increased end of quarter
procurement and manufacture of finished goods. Net property, plant, and
equipment increased $10 million principally due to increased capital
expenditures in the areas of leasehold improvements and internal
equipment and the investment in recently implemented core financial
enterprise systems and associated hardware. Accounts payable increased
$24 million primarily attributable to the increase in end of quarter
inventory procurements and the timing of payments related to this
activity. Other current liabilities and other liabilities increased $20
million to $281 million at September 30, 1995, primarily as a result of
increased income tax accruals and an increase in employee related
accruals, primarily for the company's pension benefits.
Operations have generally been the primary source of the company's
cash. Cash provided from operations has been augmented by proceeds from
sales of stock under the company's stock plans, from sales of facilities
and other non-operating assets, and the settlement of the Grumman
litigation. The company has not paid cash dividends since its inception
in order to reinvest available cash in operations. The company is
currently offering two facilities for sale: Milford, Massachusetts and
the remaining portion of Woodstock, Connecticut. As sales of these
facilities occur, the net proceeds will continue to supplement the net
cash generated from operating activities.
For the three year period ending September 30, 1995, cash and
temporary cash investments decreased $22 million. Net cash provided
from operations was $266 million, including $53 million from the Grumman
litigation settlement. The sale of facilities and other net investments
provided $47 million. Sales pursuant to the company's employee stock
plans provided $24 million. Long-term debt decreased $9 million,
primarily due to repayment of Industrial Revenue Bonds in connection
with the sales of the company's Portsmouth, New Hampshire and a portion
of the Woodstock, Connecticut facilities and the repurchase of a
portion of the company's 8 3/8% debentures due in 2002. Net proceeds
from maturity of marketable securities were $5 million. Expenditures
for property, plant and equipment totaled $284 million and the company's
investment in capitalized software development costs was $68 million.
Notes payable were paid in the amount of $2 million during this three
year period. The effect of foreign exchange on this three year period
was insignificant.
At September 30, 1995, the company has a $30 million unsecured
letter of credit and reimbursement facility with a group of banks. This
agreement is available to secure the issuance of letters of credit. The
facility contains certain covenants, including restrictions on the sale
or pledge of certain assets, the declaration of dividends and the
incurrence of other debt. The interest rate for borrowings under the
current letter of credit facility is 2.0% per annum above a base rate.
The base rate is equal to the greater of prime rate or the Federal
Funds Effective Rate plus .5%. Commitment fees paid on available funds
are not material and there were $8.3 million of letters of credit
secured by this facility at September 30, 1995. At September 24, 1994,
there were $11.6 million of letters of credit secured by the previous
letter of credit facility. The current facility has a duration of 364
days and expires on December 20, 1995. The company is currently in the
process of establishing a replacement letter of credit facility.
The company believes it is important to maintain a conservative
capital structure and a strong cash position. Cash is invested in
liquid temporary investments pending its utilization. The company's
investment policy is to minimize risk while maximizing return on cash,
and to keep uninvested cash at a minimum. Cash is generally centralized
domestically, although some cash is also held at various subsidiaries
around the world to meet local operating funding requirements. All cash
is freely remittable to the United States.
Although the actual level of spending will be influenced by many
factors, the company anticipates that expenditures for property, plant
and equipment will continue to be the primary non-operating use of cash
during fiscal year 1996. Most of the expenditures will be for capital
assets directly related to the company's open systems product sales,
marketing, support and development. Net fixed assets associated with
the company's proprietary ECLIPSE MV family of products represent less
than 15% of the company's total net fixed assets. Such assets are
primarily spare parts employed to support the company's MV service base
of over 19,000 installed units worldwide, as well as those MVs which are
serviced by third parties. The caption "writedown of net book value of
property, plant, and equipment" in the Consolidated Statements of Cash
Flows includes the net book value of demonstration equipment sold to
customers which was charged to cost of product revenues. The proceeds
from these sales are recorded in product revenues. Management expects
that sales of demonstration equipment will continue. Also during fiscal
1996, cash sourced from operations totaling $23 million is expected to
be utilized in relation to the company's restructuring programs.
The company believes it has sufficient resources to provide for
its current operations and to continue to invest in the future.
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1995 1994 1993
REVENUES
Product. . . . . . . . . . . . . . . . . . $ 757,338 $ 722,423 $ 672,965
Service. . . . . . . . . . . . . . . . . . 401,978 398,082 404,904
Total revenues . . . . . . . . . . . . 1,159,316 1,120,505 1,077,869
COSTS AND EXPENSES
Cost of product revenues . . . . . . . . . 514,049 483,808 415,128
Cost of service revenues . . . . . . . . . 257,998 249,306 239,590
Research and development . . . . . . . . . 85,886 90,826 100,172
Selling, general, and administrative . . . 334,337 341,343 346,740
Restructuring charge . . . . . . . . . . . 43,000 35,000 25,000
Total costs and expenses. . . . . . . 1,235,270 1,200,283 1,126,630
Loss from operations . . . . . . . . . . . (75,954) (79,778) (48,761)
Interest income. . . . . . . . . . . . . . 9,710 5,881 8,032
Interest expense . . . . . . . . . . . . . 13,826 14,049 14,766
Other income, net. . . . . . . . . . . . . 41,972 2,353 416
Loss before income taxes . . . . . . . . . (38,098) (85,593) (55,079)
Income tax provision . . . . . . . . . . . 8,605 2,100 5,400
Net loss . . . . . . . . . . . . . . . . . $ (46,703) $ (87,693) $ (60,479)
PRIMARY NET LOSS PER SHARE:
Net loss per share . . . . . . . . . . . ($1.23) ($2.45) ($1.73)
Weighted average shares outstanding. . . 37,866 35,774 34,876
NET LOSS PER SHARE ASSUMING FULL DILUTION:
Net loss per share . . . . . . . . . . . ($1.23) ($2.45) ($1.73)
Weighted average shares outstanding. . . 37,866 35,774 34,876
Results of operations are for 52-week periods except for 1995 which is a 53-week
period.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
CONSOLIDATED BALANCE SHEETS
DATA GENERAL CORPORATION
SEPT. 30, SEPT. 24,
DOLLARS IN THOUSANDS, EXCEPT PAR VALUE 1995 1994
ASSETS
Current assets:
Cash and temporary cash investments. . . . . . $ 117,201 $ 142,448
Marketable securities. . . . . . . . . . . . . 71,617 47,865
Receivables, less allowances of $14,079 at
Sept. 30, 1995 and $13,752 at Sept. 24, 1994 251,123 258,709
Inventories. . . . . . . . . . . . . . . . . . 124,145 118,412
Other current assets . . . . . . . . . . . . . 27,399 30,642
Total current assets . . . . . . . . . . . . 591,485 598,076
Property, plant, and equipment, net. . . . . . . 174,914 164,777
Other assets . . . . . . . . . . . . . . . . . . 65,619 59,011
$ 832,018 $ 821,864
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . . $ 2,033 $ 2,461
Accounts payable . . . . . . . . . . . . . . . 116,313 92,338
Other current liabilities. . . . . . . . . . . 251,880 232,066
Total current liabilities. . . . . . . . . . 370,226 326,865
Long-term debt . . . . . . . . . . . . . . . . . 153,457 156,942
Other liabilities. . . . . . . . . . . . . . . . 28,791 29,445
Commitments and Contingencies
Stockholders' equity:
Common stock, $.01 par value:
Outstanding -- 37,933,000 shares at Sept.
30, 1995 and 36,457,000 shares at Sept.
24, 1994 (net of deferred compensation of
$9,588 at Sept. 30, 1995 and $9,348
at Sept. 24, 1994) . . . . . . . . . . . . 446,762 434,757
Accumulated deficit. . . . . . . . . . . . . (163,626) (116,923)
Cumulative translation adjustment. . . . . . (3,592) (9,222)
Total stockholders' equity . . . . . . . . 279,544 308,612
$ 832,018 $ 821,864
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
IN THOUSANDS 1995 1994 1993
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss. . . . . . . . . . . . . . . . $ (46,703) $ (87,693) $ (60,479)
Adjustments to reconcile net
loss to net cash provided
from operating activities:
Depreciation. . . . . . . . . . . . . 74,804 76,957 78,756
Amortization of capitalized
software development costs. . . . . 17,545 21,448 17,768
Amortization of deferred
compensation. . . . . . . . . . . . 4,265 5,329 5,344
Increase (decrease) in other
liabilities . . . . . . . . . . . . (656) 1,453 7,004
Writedown of net book value
of property, plant, and
equipment . . . . . . . . . . . . . 9,626 15,233 20,917
Gain on sale of investment. . . . . . -- (4,653) (3,216)
Other non-cash items, net . . . . . . 7,232 11,714 6,157
Changes in operating assets and
liabilities, net of effects
from sale of facilities and
other assets:
(Increase) decrease in
receivables . . . . . . . . . . . 11,267 31,757 (12,171)
(Increase) decrease in
inventories . . . . . . . . . . . (5,743) (15,735) 15,895
(Increase) decrease in
other current assets. . . . . . . 3,761 3,727 (255)
Increase in accounts payable. . . . 23,897 3,837 1,812
Increase (decrease) in other
current liabilities,
excluding debt. . . . . . . . . . 17,810 10,753 (2,901)
Net cash provided from operating
activities. . . . . . . . . . . . . 117,105 74,127 74,631
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant,
and equipment . . . . . . . . . . . . (96,471) (92,955) (94,968)
Purchase of marketable securities . . . (240,507) (90,788) (110,470)
Proceeds from maturity of
marketable securities . . . . . . . . 216,755 115,318 114,953
Capitalized software development
costs . . . . . . . . . . . . . . . . (27,493) (17,582) (23,078)
Net proceeds from sale of
facilities and other assets . . . . . -- 28,314 21,284
Investment in equity securities . . . . (600) (2,000) --
Net cash used by investing
activities. . . . . . . . . . . . . (148,316) (59,693) (92,279)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided from stock plans, net . . 7,740 6,901 9,575
Repayment of notes payable. . . . . . . (607) -- (1,234)
Repayment of long-term debt . . . . . . (3,500) (2,034) (3,599)
Net cash provided from
financing activities. . . . . . . . 3,633 4,867 4,742
Effect of foreign currency rate
fluctuations on cash and
temporary cash investments. . . . . . . 2,331 3,587 (6,979)
Increase (decrease) in cash
and temporary cash
investments . . . . . . . . . . . . . . (25,247) 22,888 (19,885)
Cash and temporary cash
investments -- beginning
of the period . . . . . . . . . . . . . 142,448 119,560 139,445
Cash and temporary cash
investments -- end
of the period . . . . . . . . . . . . . $ 117,201 $ 142,448 $ 119,560
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid . . . . . . . . . . . . $ 12,762 $ 13,422 $ 13,983
Income taxes paid . . . . . . . . . . $ 1,696 $ 3,444 $ 3,098
Results of operations are for 52-week periods except for 1995 which is a 53-week
period.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
IN THOUSANDS 1995 1994 1993
COMMON STOCK:
Beginning balance. . . . . . . . . . . $ 434,757 $ 422,589 $ 407,798
Shares issued under stock plans, net . 7,740 6,839 9,447
Amortization of deferred compensation. 4,265 5,329 5,344
Ending balance . . . . . . . . . . . . 446,762 434,757 422,589
ACCUMULATED EARNINGS (DEFICIT):
Beginning balance. . . . . . . . . . . (116,923) (29,230) 31,249
Net loss for year. . . . . . . . . . . (46,703) (87,693) (60,479)
Ending balance . . . . . . . . . . . . (163,626) (116,923) (29,230)
CUMULATIVE TRANSLATION ADJUSTMENT:
Beginning balance. . . . . . . . . . . (9,222) (16,282) 10,989
Net translation adjustment for year. . 5,630 7,060 (27,271)
Ending balance . . . . . . . . . . . . (3,592) (9,222) (16,282)
Total stockholders' equity. . . . . . . . $ 279,544 $ 308,612 $ 377,077
Results of operations are for 52-week periods except for 1995 which is a 53-week
period.
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
DATA GENERAL CORPORATION
NOTE 1. ACCOUNTING POLICIES
FISCAL YEAR. The company's fiscal year ends on the last Saturday in
September. Fiscal year 1995 consisted of 53 weeks. Fiscal years 1994 and 1993
consisted of 52 weeks.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of Data General Corporation and its domestic and foreign
subsidiaries (the "company"). All significant intercompany transactions have
been eliminated.
TRANSLATION OF FOREIGN CURRENCIES. The functional currencies for the
company's operations in Australia, Canada, Europe, Japan, and New Zealand are
the local currencies. Assets and liabilities of these operations are translated
into U.S. dollars at exchange rates in effect at the balance sheet date. Income
and expense items are translated at average exchange rates for the period.
Translation adjustments are reported as a separate component of stockholders'
equity.
For the company's other foreign operations, the U.S. dollar is the functional
currency. Assets and liabilities of these operations are remeasured into U.S.
dollars at exchange rates in effect at the balance sheet date, except for
inventories and property, plant, and equipment, which are remeasured at
historical exchange rates. Income and expense items are remeasured at average
rates for the period, except for cost of sales and depreciation, which are
remeasured at historical exchange rates. Gains and losses resulting from
remeasurement, not material in amount, are included in the results of
operations.
The company enters into foreign exchange contracts as a hedge against
exposure to fluctuations in exchange rates associated with certain transactions
denominated in foreign currencies, principally intercompany accounts
receivable. Market value gains or losses on these contracts are included in the
cost of product revenues and generally offset exchange gains or losses on the
related transactions. During fiscal 1995, the company adopted Statement of
Financial Accounting Standards ("SFAS") 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments". The adoption of
this statement requires certain additional disclosure regarding the amounts,
nature, terms, purpose, and fair values of the company's derivative financial
instruments.
Foreign exchange transaction gains and losses, not material in amount for the
periods ending September 30, 1995 and September 24, 1994, are included in the
cost of product revenues.
CONSOLIDATED STATEMENTS OF CASH FLOWS. Temporary cash investments consist of
highly liquid time deposits and commercial paper with original maturities of 90
days or less. Marketable securities consist primarily of U.S. Treasury bills
and notes with original maturities of 91 to 360 days. These investments are
recorded at amortized cost, which approximates market value.
In the first quarter of fiscal 1995, the company adopted SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities". SFAS 115
addresses accounting and reporting for investments in certain debt and equity
securities. Under this standard, the company is required to classify its
marketable securities into one or more of the following categories:
held-to-maturity, trading, or available for sale. All of the company's
marketable securities at September 30, 1995 and September 24, 1994 have
maturities of less than one year, and have been classified as being
'held-to-maturity'. The implementation of SFAS 115 did not have an effect on
the company's consolidated financial position or results of operations.
Cash flows from foreign exchange contracts that are accounted for as hedges
of identifiable foreign exchange transactions are classified as cash flows from
operating activities in accordance with the nature of the transactions being
hedged.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated at
cost, less accumulated depreciation. Depreciation is computed using the
straight-line method, based on the following estimated useful lives: land
improvements, 10-12 years; buildings and building improvements, 3-25 years;
equipment, 3-10 years. Included in property, plant, and equipment are computer
equipment spares which are not available for resale. These spares are used to
support systems the company has sold or is using internally. Spares are
depreciated over a 3 year estimated useful life.
REVENUE RECOGNITION. Product revenues are recognized at the time of
shipment. Service revenues, including postcontract customer support, are
recognized ratably over applicable contractual periods or as services are
performed. The costs of these service revenues are charged to expense when
incurred.
RESEARCH, DEVELOPMENT, AND WARRANTY COSTS. Research, engineering, and
product development costs are expensed as incurred. Software development costs
incurred after reaching technological feasibility are capitalized and amortized
to cost of product revenues over a period not to exceed 4 years for operating
system software and 3 years for application software, which approximates the
estimated economic lives of these software products.
Unamortized software development costs were $49.1 million at September 30,
1995 and $39.2 million at September 24, 1994. Amortization of capitalized
software development costs for fiscal 1995 and fiscal 1994 included
approximately $1.3 million and $2.7 million, respectively, related to the
writedown of certain capitalized software costs to net realizable value.
Estimated direct on-line diagnostic support and warranty costs are accrued at
the time of product shipment.
ADVERTISING. Advertising costs are charged to operations when incurred. The
company has not incurred any costs associated with direct-response advertising
during fiscal years 1995, 1994, or 1993 and there were no capitalized
advertising costs at September 30, 1995 and September 24, 1994. Advertising
expenses for fiscal 1995, 1994, and 1993 were $21.0 million, $18.1 million, and
$17.1 million, respectively.
RETIREMENT/POST-EMPLOYMENT BENEFITS. Net pension cost for the company's
domestic defined benefit pension plan is funded as accrued, to the extent that
current pension cost is deductible for U.S. Federal tax purposes. The plan's
transition surplus is amortized over 19 years. Net pension cost for the
company's international defined benefit pension plans is generally funded as
accrued. The net transition surplus or obligation for these plans is amortized
over periods ranging from 15 to 21 years.
Net postretirement benefit costs for the company's domestic postretirement
benefits plan are generally funded as accrued, to the extent that current cost
is deductible for U.S. Federal tax purposes. The net transition obligation for
the plan is amortized over 20 years.
In the first quarter of fiscal 1995, the company adopted SFAS 112,
"Employers' Accounting for Post-Employment Benefits". SFAS 112 requires that
the cost of benefits to be provided by the employer to former or inactive
employees after employment, but before retirement, be accrued when it is
probable that a benefit will be provided. The implementation of SFAS 112 did
not have a material effect on the company's consolidated financial position or
results of operations.
INCOME TAXES. In fiscal 1994, the company adopted SFAS 109, "Accounting for
Income Taxes". SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the company's financial
statements or tax returns. Deferred tax expense represents the change in the
net deferred tax asset or liability balance. In estimating future tax
consequences, SFAS 109 generally considers all expected future events other than
enactments of changes in the tax law or rates. Previously, the company used the
SFAS 96 asset and liability approach that gave no recognition to future events
other than the recovery of assets and settlement of liabilities at their
carrying amounts. The implementation of SFAS 109 did not have a material effect
on either the company's consolidated financial position or results of
operations.
EARNINGS PER SHARE. Primary net income (loss) per share is based upon the
weighted average number of common shares outstanding, including dilutive common
stock equivalents. Common stock equivalents represent the net additional shares
resulting from the assumed exercise of options outstanding under the company's
stock option plans, using the "treasury stock" method. Net income (loss) per
share assuming full dilution is based upon the weighted average number of common
shares outstanding, including dilutive common stock equivalents and assumed
conversion of the company's 7-3/4% Convertible Subordinated Debentures, if
dilutive. For fiscal 1995, 1994 and 1993, these debentures are anti-dilutive
and have been excluded from the calculation.
OTHER RECENT PRONOUNCEMENTS. In May 1993, the Financial Accounting Standards
Board ("FASB") issued SFAS 114, "Accounting by Creditors for Impairment of a
Loan". In March 1995, the FASB issued SFAS 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". In October
1995, the FASB issued SFAS 123, "Accounting for Stock-Based Compensation". SFAS
114 is effective for fiscal years commencing after December 15, 1994. SFAS 121
and 123 are effective for fiscal years beginning after December 15, 1995. The
company will implement these statements as required. The future adoption of
SFAS 114, 121, and 123 is not expected to have a material effect on the
company's consolidated financial position or results of operations.
NOTE 2. RESTRUCTURING
During fiscal years 1995, 1994, and 1993, the company recorded restructuring
provisions of $43 million, $35 million, and $25 million, respectively. The
amounts accrued and charged against the established provisions were as follows:
CURRENT CURRENT
BEGINNING YEAR YEAR ENDING
IN MILLIONS BALANCE PROVISION CHARGES BALANCE
FISCAL 1995 ACTIVITY
Provisions related to terminated employees:
Termination payments . . . . . . . . . . . $15.2 $21.8 $(28.9) $ 8.1
Pension and OPEB costs (curtailment loss). 1.5 -- (.8) .7
Other costs. . . . . . . . . . . . . . . . 1.1 1.2 (.6) 1.7
Provisions related to employees not terminated 1.9 -- -- 1.9
Provisions for leases. . . . . . . . . . . . 14.0 12.9 (9.5) 17.4
Writedowns of assets to be sold or discarded .7 2.2 (1.0) 1.9
Other. . . . . . . . . . . . . . . . . . . . 2.3 4.9 (2.0) 5.2
Total. . . . . . . . . . . . . . . . . . $36.7 $43.0 $(42.8) $36.9
FISCAL 1994 ACTIVITY
Provisions related to terminated employees:
Termination payments . . . . . . . . . . . $15.4 $18.9 $(19.1) $15.2
Pension and OPEB costs (curtailment loss). .7 1.5 (.7) 1.5
Other costs. . . . . . . . . . . . . . . . .8 1.0 (.7) 1.1
Provisions related to employees not terminated -- 2.1 (.2) 1.9
Provisions for leases. . . . . . . . . . . . 19.1 4.2 (9.3) 14.0
Writedowns of assets to be sold or discarded 1.3 4.3 (4.9) .7
Other. . . . . . . . . . . . . . . . . . . . 2.1 3.0 (2.8) 2.3
Total. . . . . . . . . . . . . . . . . . $39.4 $35.0 $(37.7) $36.7
The 1995 restructuring charge included provisions for the termination of
approximately 520 employees as part of the company's continuing cost reduction
programs and realignment of the company's various sales, manufacturing, and
administrative operations. The fiscal 1995 provision for leases is primarily
for costs associated with newly vacated leased properties, mainly in Western
Europe and Australia, as a result of the company's ongoing centralization and
downsizing of its international operations. At September 30, 1995 approximately
350 terminations related to the fiscal 1995 restructuring charge had occurred
with the remaining separations scheduled to be substantially completed during
fiscal 1996.
The 1994 restructuring charge included provisions for the termination of
approximately 570 employees as part of the realignment of the company's
worldwide sales and service organizations. At September 30, 1995, approximately
530 terminations related to this charge had occurred with the remaining
separations scheduled to be completed during the first half of fiscal 1996. The
1994 provision for leases relates primarily to the closure of various domestic
branch sales offices and excess vacant properties, located primarily in the
United Kingdom. The writedown of fixed assets was primarily associated with
consolidating certain activities in the European marketplace. The fiscal 1993
restructuring actions were substantially concluded prior to fiscal 1995. All
charges, excluding asset writedowns, are principally cash in nature. There have
been no material changes in the company's previously announced restructuring
actions or the estimates accrued at September 30, 1995.
NOTE 3. CONSOLIDATED BALANCE SHEET DETAILS
IN THOUSANDS
SEPT. 30, SEPT. 24,
1995 1994
INVENTORIES:
Raw materials. . . . . . . . . . . . . . . . . . . . . $ 9,173 $ 11,791
Work in process. . . . . . . . . . . . . . . . . . . . 28,309 36,282
Finished systems . . . . . . . . . . . . . . . . . . . 51,199 35,521
Field engineering parts and components . . . . . . . . 35,464 34,818
Total inventories. . . . . . . . . . . . . . . . . . $124,145 $118,412
PROPERTY, PLANT, AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,433 $ 3,433
Buildings and improvements . . . . . . . . . . . . . . 84,416 78,685
Manufacturing and design equipment . . . . . . . . . . 95,005 103,537
Data processing, office, and other equipment . . . . . 356,563 331,100
Computer equipment spares. . . . . . . . . . . . . . . 95,583 126,169
Total property, plant, and equipment . . . . . . . . 635,000 642,924
Accumulated depreciation . . . . . . . . . . . . . . . (460,086) (478,147)
Total property, plant, and equipment, net. . . . . . $174,914 $164,777
OTHER CURRENT LIABILITIES:
Accrued employee compensation and benefits . . . . . . $ 68,247 $ 59,857
Deferred revenues. . . . . . . . . . . . . . . . . . . 43,185 43,260
Accrued restructuring charges. . . . . . . . . . . . . 36,863 36,696
Income taxes payable . . . . . . . . . . . . . . . . . 15,253 8,086
Other accrued expenses . . . . . . . . . . . . . . . . 86,912 82,747
Current portion of long-term debt. . . . . . . . . . . 1,420 1,420
Total other current liabilities. . . . . . . . . . . $251,880 $232,066
Property, plant, and equipment at September 30, 1995 includes assets which
are held for sale as a result of the company's corporate-wide restructuring
programs. The original cost and net book value of these assets is $12,243 and
$4,837, respectively.
In fiscal 1994, the company sold its Westboro, Massachusetts land and
facilities for net proceeds of $16.7 million and subsequently has entered into a
10-year lease arrangement for a portion of the property. This arrangement has
been accounted for as an operating lease. No gain was recognized on this
transaction.
During the current fiscal year, the company retired fully depreciated
computer equipment spares with an original cost of $49,498.
NOTE 4. NOTES PAYABLE
Notes payable at September 30, 1995 and September 24, 1994 consisted of
borrowings by Data General SARL (France) of $2.0 million and $2.5 million,
respectively. The borrowings are from various banks, are unsecured, and involve
no commitment fees or compensating balances. The interest rate on the
borrowings is .5% per annum above the Paris Interbank Offered Rate (PIBOR), and
was 6.9% and 6.2% at September 30, 1995 and September 24, 1994, respectively.
The weighted average interest rate on outstanding funds was 7.1% and 6.8% during
the years ended September 30, 1995 and September 24, 1994, respectively. The
weighted average interest rate during the period is based on borrowings
outstanding at the end of each of the company's twelve fiscal periods.
At September 30, 1995, the company has a $30 million unsecured letter of
credit and reimbursement facility with a group of banks. This agreement is
available to secure issuance of letters of credit. The facility contains
certain covenants, including restrictions on the sale or pledge of certain
assets, the declaration of dividends and the incurrence of other debt. The
interest rate for borrowings under the current letter of credit facility is 2.0%
per annum above a base rate. The base rate is equal to the greater of prime
rate or the Federal Funds Effective Rate plus .5%. Commitment fees paid on
available funds during fiscal year 1995 and 1994 were not material and there
were $8.3 million of letters of credit secured by this facility at September 30,
1995. At September 24, 1994, there were $11.6 million of letters of credit
secured by the previous letter of credit facility. The current facility has a
duration of 364 days and expires on December 20, 1995. The company is currently
in the process of establishing a replacement letter of credit facility.
NOTE 5. INCOME TAXES
Domestic and foreign loss before taxes, and details of the income tax
provision (benefit) are as follows:
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
IN THOUSANDS 1995 1994 1993
LOSS BEFORE TAXES:
Domestic. . . . . . . . . . . . . . $(13,336) $(54,201) $(15,119)
Foreign . . . . . . . . . . . . . . (24,762) (31,392) (39,960)
$(38,098) $(85,593) $(55,079)
INCOME TAX PROVISION (BENEFIT):
Current:
Federal . . . . . . . . . . . . . $ 1,000 $ -- $ --
Foreign . . . . . . . . . . . . . 1,175 1,896 2,955
State . . . . . . . . . . . . . . 2,000 700 850
Total current . . . . . . . . . 4,175 2,596 3,805
Deferred:
Federal . . . . . . . . . . . . . 2,500 -- 919
Foreign . . . . . . . . . . . . . 1,930 (496) 676
Total deferred. . . . . . . . . 4,430 (496) 1,595
$ 8,605 $ 2,100 $ 5,400
Deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Under SFAS 109, the benefit
associated with future deductible temporary differences is recognized if it
is more likely than not that a benefit will be realized. Based on historical
evidence, the company has recorded a valuation allowance that offsets
substantially all net deferred tax assets. Principal components of the deferred
tax assets and liabilities included on the balance sheet at September 30, 1995
and September 24, 1994 were as follows:
SEPT. 30, SEPT. 24,
IN THOUSANDS 1995 1994
DEFERRED TAX ASSETS:
Inventory . . . . . . . . . . . . . . . . . . . . . .$ 8,428 $ 10,881
Operating expenses. . . . . . . . . . . . . . . . . . 44,922 44,750
Intercompany profit in inventory and fixed assets . . 6,666 9,574
Depreciation. . . . . . . . . . . . . . . . . . . . . 8,922 8,086
Restructuring . . . . . . . . . . . . . . . . . . . . 15,129 15,414
Stock option plans. . . . . . . . . . . . . . . . . . 5,425 7,548
Interest on convertible debentures. . . . . . . . . . 1,292 1,293
Net operating losses. . . . . . . . . . . . . . . . . 119,579 119,809
Tax credits . . . . . . . . . . . . . . . . . . . . . 9,765 11,230
Gross deferred tax assets . . . . . . . . . . . . . 220,128 228,585
Less: Valuation allowance . . . . . . . . . . . . . . 201,255 209,936
Total deferred tax assets . . . . . . . . . . . . . 18,873 18,649
DEFERRED TAX LIABILITIES:
Capitalized software development costs. . . . . . . . (18,437) (16,449)
Other . . . . . . . . . . . . . . . . . . . . . . . . (4,604) (1,938)
Total deferred tax liabilities. . . . . . . . . . . (23,041) (18,387)
Net deferred tax asset (liability). . . . . . . . . $(4,168) $ 262
Reconciliation of the U.S. Federal statutory rate to the company's effective
tax rate is as follows:
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
1995 1994 1993
U.S. Federal statutory rate . . . . . . . . . . . . .(35.0)% (35.0)% (34.7)%
State income taxes. . . . . . . . . . . . . . . . . . 5.2 .8 1.5
Net domestic and foreign losses without tax benefits. 51.0 38.2 42.3
Net operating loss carryforwards utilized . . . . . . (5.7) (2.2) (1.4)
Foreign income taxed at different rates . . . . . . . 4.4 .1 .7
Alternative minimum tax . . . . . . . . . . . . . . . 2.6 -- --
Other . . . . . . . . . . . . . . . . . . . . . . . . .1 .6 1.4
Effective tax rate. . . . . . . . . . . . . . . . . . 22.6% 2.5% 9.8%
The company has U.S. Federal and foreign operating loss carryforwards of
approximately $327 million and tax credit carryforwards of approximately $10
million. The operating loss carryforwards expire in the years 1996 through
2010. The tax credit carryforwards expire in the years 2000 through 2005.
Provision has not been made for U.S. or additional foreign taxes on
approximately $75 million of undistributed earnings of foreign subsidiaries, as
those earnings are considered to be permanently reinvested. Such earnings would
become taxable upon the sale or liquidation of these foreign subsidiaries
or upon the remittance of dividends. It is not practicable to estimate the
amount of the deferred tax liability on such earnings. Upon remittance, certain
foreign countries impose withholding taxes that are then available, subject to
certain limitations, for use as credits against the company's U.S. tax
liability, if any. The amount of withholding tax that would be payable upon
remittance of the entire amount of undistributed earnings would approximate
$.7 million.
NOTE 6. LONG-TERM DEBT
SEPT. 30, SEPT. 24,
IN THOUSANDS 1995 1994
7-3/4% Convertible Subordinated Debentures due 2001. . . $125,000 $125,000
8-3/8% Sinking Fund Debentures due 2002. . . . . . . . . 29,877 32,562
Industrial revenue bonds . . . . . . . . . . . . . . . . -- 800
154,877 158,362
Less current portion . . . . . . . . . . . . . . . . . . (1,420) (1,420)
$153,457 $156,942
Maturities and sinking fund requirements for the next five fiscal years are
as follows: 1996 -- $1,420; 1997 -- $3,500; 1998 -- $3,500; 1999 -- $3,500;
2000 -- $3,500.
The 7-3/4% Convertible Subordinated Debentures are convertible at the option
of the holder, at any time prior to redemption or repurchase, into shares of
Common Stock of the company at a conversion price of $19.20 per share, subject
to adjustment for certain events. The debentures are subordinated to all Senior
Indebtedness (as defined in the indenture under which the bonds were issued).
At the option of the company, the bonds may be redeemed at any time after June
1, 1994 at decreasing redemption prices, and may be redeemed at the option of
the holder if there is a Fundamental Change (as defined in the indenture) in the
company's operations. The indenture does not contain any financial covenants or
any restrictions on the payment of dividends or the repurchase of the company's
securities. Deferred debt issuance costs at September 30, 1995 of $2.3 million
are being amortized to interest expense over the life of the debentures.
The 8-3/8% Sinking Fund Debentures are subject to mandatory sinking fund
payments which provide for annual principal retirements of $3.5 million through
2001. The company has the option, under certain conditions, to increase the
sinking fund payments or to redeem the debentures prior to maturity. Through
fiscal 1995, the company reacquired a total of $30.1 million principal amount of
the debentures. Of all acquired debentures, $28.0 million principal amount was
used to satisfy sinking fund requirements through fiscal 1995. Subsequent to
September 30, 1995, the company reacquired an additional $3.0 million principal
amount of the debentures. The remainder of all acquired debentures may be used
to satisfy future sinking fund requirements. The debentures are subject to
covenants which include certain limitations on the incurrence of additional
debt, and the payment of dividends.
The industrial revenue bonds have been paid in full at September 30, 1995.
During fiscal 1994, the company repaid the Woodstock and Milford Industrial
Revenue Bonds. All payments were made according to their scheduled repayment
dates.
NOTE 7. FINANCIAL INSTRUMENTS, COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS. The company enters into various types of financial
instruments in the normal course of business. Fair values for certain financial
instruments are based on quoted market prices. For other financial instruments,
fair values are estimated based on assumptions concerning the amount and timing
of estimated future cash flows and assumed discount rates reflecting varying
degrees of perceived risk. Accordingly, the fair values may not represent
actual values of the financial instruments that could have been realized as of
year end or that will be realized in the future.
Fair values for cash and temporary cash investments, marketable securities,
accounts receivable, notes payable, and accounts payable approximate carrying
value at September 30, 1995 and September 24, 1994, due to the relatively short
maturity of these financial instruments. The fair value of investments and
notes receivable, included in other assets, was $4.6 million and $4.0 million
at September 30, 1995 and September 24, 1994, respectively, which is equal to
their carrying values in both years. The fair value of long-term debt,
including debt due within one year, at September 30, 1995 and September 24, 1994
was $142.9 million and $134.9 million, respectively, compared to carrying values
of $154.9 million and $158.4 million, respectively.
The company enters into various forward contracts to limit its exposure to
fluctuations in foreign currency exchange rates. As of September 30, 1995, in
connection with the company's foreign exchange hedging programs, the company had
entered into forward exchange contracts to purchase $61.2 million and to sell
$119.9 million in various foreign currencies. The company's exposure to credit
risk is believed to be minimal since the counterparties are major financial
institutions. The market risk exposure is limited to risk related to currency
rate movements. As substantially all of these contracts were entered into
shortly before year end, the fair value of outstanding contracts at September
30, 1995, not material in amount, approximates the original value of the forward
contracts. Between the end of this fiscal year and October 4, 1995, forward
exchange contracts to purchase $61.2 million and to sell $72.8 million in
various foreign currencies matured and were settled. The remaining contracts
mature at various dates through January 30, 1996.
The company's temporary cash investments, marketable securities and accounts
receivable are subject to potential concentrations of credit risk. The
company's investment policies limit the amount of investments in a single
institution and restrict investments to low-risk, highly liquid securities.
Portions of the company's trade receivables are concentrated in the U.S.
government and in the health care industry. Management does not believe that
the company is subject to any unusual risk beyond the normal credit risk
attendant to operating its business. Ongoing credit evaluations of customers'
financial condition are performed and generally, collateral is not required.
The company maintains reserves for potential credit losses and such
losses, in the aggregate, have not exceeded management's expectations.
In the normal course of business, the company enters into certain sales-type
lease arrangements with customers. These leases are generally sold to third
party financing institutions. A portion of these arrangements contain certain
recourse provisions under which the company remains liable. The company's
maximum exposure under the recourse provisions was approximately $13.1 million,
net of related reserves. A portion of this contingent obligation
is collateralized by security interests in the related equipment. The fair
value of the recourse obligation at September 30, 1995 was not determinable as
no market exists for these obligations.
LEASE COMMITMENTS. Lease agreements are primarily for sales and service
offices and the company's corporate headquarters. The leases expire at various
dates through 2014 and some contain options for renewal. Rental expense,
including amounts charged against previously established restructuring reserves
for vacant properties, was $32.3 million, $32.5 million, and $34.4 million for
fiscal years 1995, 1994, and 1993, respectively.
Future minimum rental payments under existing non-cancelable operating leases
as of September 30, 1995 are as follows:
FISCAL YEAR IN MILLIONS
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33.3
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.0
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.6
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.7
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Subsequent to 2000 . . . . . . . . . . . . . . . . . . . . . 54.7
$158.5
A majority of the leases contain escalation clauses which provide for
increases in base rentals to recover increases in future operating costs. The
future minimum rental payments shown above include base rentals, exclusive of
any future escalation. Approximately $62 million, prior to amounts expected to
be recovered through subleases, of the future minimum rental payments shown
above relate to facilities which have been closed or are expected to be closed
as the result of the company's restructuring and cost reduction program. A
portion of the future rental obligations for these facilities, net of amounts
expected to be recovered through existing and future subleases, has been
accrued as part of the restructuring charges.
LITIGATION. In the first quarter of fiscal 1995, the company settled with
Northrop Grumman Corporation its six-year copyright infringement and trade
secrets litigation against Grumman Support Systems Corporation ("Grumman").
Under the terms of this settlement, Grumman paid the company $53 million and
the parties have dismissed all pending litigation. The company recognized a
pre-tax gain, net of related legal fees and other expenses, of $44.5 million
resulting from the settlement, which is included in other income, net, in the
Consolidated Statement of Operations.
In November, 1994, the company commenced an action against IBM Corporation
in the United States District Court in Worcester, Massachusetts claiming several
IBM products including the AS/400 mid-range systems and System/390 mainframe
line, infringed various company patents. The suit seeks, among other relief,
compensatory damages. In January, 1995, IBM answered the complaint, denied the
company's infringement claims and counterclaimed against the company,
alleging that the company's AViiON and CLARiiON products infringed various IBM
patents. This action is in the discovery stage.
Although the company believes its claims are valid, it cannot predict the
outcome of the litigation. In the opinion of management, based on preliminary
evaluation of the IBM patents covered in the counterclaim, and subject to the
risks of litigation, the counterclaims are without merit, the company will
prevail thereon and the counterclaims will not have a material adverse impact
on the business or financial condition of the company.
The company and certain of its subsidiaries are involved in various other
patent infringement, contractual, and proprietary rights suits. In the opinion
of management, the conclusion of these suits will not have a material adverse
effect on the financial position or results of operations and cash flows of the
company and its subsidiaries.
NOTE 8. STOCKHOLDERS' EQUITY
The company has 100,000,000 authorized shares of common stock. As of
September 30, 1995, 38,153,000 shares of common stock have been issued, of
which 220,000 shares with a cost of $6.5 million are held by the company as
treasury shares. During fiscal 1995, 1,476,000 additional shares were issued.
As of September 24, 1994, 36,677,000 shares of common stock had been issued,
of which 220,000 shares with a cost of $6.5 million were held by the company as
treasury shares.
The company has 1,000,000 authorized shares of $.01 par value preferred
stock. The company's Board of Directors (the "Board") is authorized to issue
shares of preferred stock in such series and with such terms and conditions as
the Board may determine. In connection with the adoption of the company's
Stockholder Rights Plan (see below), 400,000 shares of preferred stock have
been designated as Series A Junior Participating Preferred Stock. No shares of
preferred stock have been issued as of September 30, 1995.
Under the Stockholder Rights Plan adopted in 1986, as amended, a dividend of
Stock Purchase Rights (the "Rights") was paid. The Rights enable common
stockholders to purchase from the company shares of Series A Junior
Participating Preferred Stock under certain circumstances following the
acquisition of, or attempt to acquire, 20% or more of the company's common
stock or a determination that an "adverse person" has purchased 15% or more of
the common stock. The Rights also entitle common stockholders to purchase
shares of the company's or an acquiror's common stock at one-half of market
value under circumstances which include certain transactions by or with a
potential acquiror, including "adverse persons", and mergers and certain asset
sales. The Rights may be redeemed by the company under certain circumstances.
The Rights will expire in October 2001.
NOTE 9. STOCK PLANS
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN. This plan covers substantially all
employees and authorizes the issuance of a maximum of 8,600,000 shares of
common stock upon exercise of nontransferable options granted semiannually.
The options are exercisable six months after grant, at the lower of 85% of
market value at the beginning or end of the six-month period, through
accumulation of payroll deductions of up to 10% of each participating employee's
regular base pay during such period. During fiscal 1995, options were exercised
to purchase 799,000 shares at an average price of $6.45 per share. Unissued
shares of common stock reserved for future issuance under this plan were
1,065,000 shares at September 30, 1995 and 1,864,000 shares at September 24,
1994.
EMPLOYEE STOCK OPTION PLAN. This plan authorized the grant of either
incentive stock options or non-qualified stock options to key employees,
including officers and directors, to purchase up to 7,000,000 shares of common
stock. For incentive options, the purchase price is equal to the fair
market value on the date of grant. For non-qualified options the purchase price
is determined by the Employee Stock Option Plan Committee within limits as set
forth in the plan. Options granted under the plan generally are immediately
exercisable and include restrictions against disposition of the shares and a
requirement, upon termination of employment, to offer unvested shares for resale
to the company at their original purchase price. The periods over which
restrictions lapse are determined by the Employee Stock Option Plan Committee.
Options may expire up to ten years after date of grant. During fiscal 1995,
3,000,000 additional shares of common stock were authorized for issuance under
the plan and the termination date of the plan was extended to November 2, 2004.
Effective fiscal 1995, the Employee Stock Option Plan Committee has discretion
to designate options as transferable.
Additional information concerning activity during fiscal 1995 is as follows:
SHARES
RESERVED FOR OPTIONS AVERAGE
FUTURE GRANTS OUTSTANDING PRICE
(000's) (000's) PER SHARE
September 24, 1994. . . . 597 2,319 $ 7.03
Options authorized. . . 3,000 -- --
Options granted . . . . (1,371) 1,371 5.57
Options exercised . . . -- (164) 4.07
Options cancelled . . . 314 (314) 8.85
September 30, 1995. . . . 2,540 3,212 $ 6.38
RESTRICTED STOCK OPTION PLAN. This plan authorized the grant of options to
key employees, including officers, directors, and consultants, to purchase up
to 11,000,000 shares of the company's common stock. Option prices are
determined by the Restricted Stock Option Plan Committee within limits as set
forth in the plan. Options granted are immediately exercisable and include
restrictions against disposition of the shares and a requirement, upon
termination of employment, to offer unvested shares for resale to the company
at their original purchase price. The periods over which restrictions lapse
are determined by the Restricted Stock Option Plan Committee. Employees may
use previously acquired shares of the company's common stock to pay the exercise
price of shares purchased. Company policy requires that shares tendered by an
employee to exercise an option be held by the employee for a minimum period of
three months prior to the exercise date.
Additional information concerning activity during fiscal 1995 is as follows:
SHARES
RESERVED FOR OPTIONS AVERAGE
FUTURE GRANTS OUTSTANDING PRICE
(000's) (000's) PER SHARE
September 24, 1994. . . . . 421 2,631 $ 4.17
Options granted . . . . . (261) 261 4.34
Options exercised . . . . -- (511) 3.74
Options cancelled . . . . 151 (151) 5.18
September 30, 1995. . . . . 311 2,230 $ 4.22
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. This plan authorizes the grant
of an option to purchase 4,000 shares of common stock to each non-employee
director on the date of the director's annual election(s) to the Board of
Directors. The exercise price of options granted is 100% of the closing price
per share of common stock on the date of grant. An aggregate of 150,000 shares
of common stock may be issued under the plan. Options granted are immediately
exercisable and include restrictions against disposition of the shares. Should
the optionee cease to serve as a director, except under certain circumstances,
any restricted shares must be offered to the company at their original purchase
price. Restrictions lapse cumulatively to the extent of 25% of the grant on
each anniversary of the date of grant. During fiscal 1995, 24,000 options were
granted at an average price of $8.38 per share. At September 30, 1995, options
to purchase 40,000 shares at an average price of $8.43 per share were
outstanding and 110,000 shares were reserved for future grants.
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK OPTION PLAN. This plan authorized
the grant of an option to purchase 4,000 shares of common stock to each
non-employee director upon his initial election to the Board of Directors. The
exercise price of options granted is the lesser of 50% of the book value per
share of common stock at the end of the fiscal year preceding the date of
grant or 25% of the fair market value per share on the date of grant. An
aggregate of 32,000 shares of common stock may be issued under the plan.
Options granted are immediately exercisable and include restrictions against
disposition of the shares. Should the optionee cease to serve as a director,
except under certain circumstances, any restricted shares must be offered
to the company at their original purchase price. Restrictions lapse
cumulatively to the extent of 25% of the grant on each anniversary of the date
of grant. During fiscal 1995, options to purchase 4,000 shares at an average
price of $2.66 per share were issued and options were exercised to purchase
2,000 shares at an average price of $4.38 per share. At September 30, 1995,
options to purchase 14,000 shares at an average purchase price of $4.90 per
share were outstanding. This plan terminated on December 31, 1994. Outstanding
options can be exercised until their expiration date. No new options can be
issued.
In connection with the Restricted Stock Option Plan, the Non-Employee
Director Restricted Stock Option Plan, and non-qualified options issued under
the Employee Stock Option Plan, the aggregate excess of fair market value over
option price on the dates of grant is treated as deferred compensation. Such
deferred compensation is amortized to expense over the period of the
restrictions and is credited to additional paid-in capital.
NOTE 10. BENEFIT PLANS IN THOUSANDS
The company has a noncontributory defined benefit pension plan which covers
substantially all U.S. employees. The company also has a supplemental
retirement benefit plan, which covers certain U.S. employees. Benefits under
the plans are based on an employee's regular base pay and creditable years of
service, as defined in the plans. Certain of the company's foreign subsidiaries
also have retirement plans covering substantially all of their employees.
Benefits under these plans are generally based on either career average or final
average salaries and creditable years of service, as defined in the plans.
Prior service cost is amortized over the average remaining service period of
employees expected to receive benefits under the plan. Funds contributed to the
plans are invested primarily in common stocks, mutual funds, global bond funds
and cash equivalent securities.
The components of net pension expense are as follows:
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
1995 1994 1993
Service cost . . . . . . . . . . . . . . . .$ 7,806 $ 8,608 $ 7,835
Interest on projected benefit obligation . . 11,504 10,506 9,380
Actual return on plan assets . . . . . . . .(17,460) (3,286) (12,629)
Deferral of net actuarial gains
(losses) and amortization of transition
surplus and prior service cost. . . . . . 7,850 (6,083) 5,636
Curtailment loss, net of settlement gain . . 817 533 --
Net pension expense . . . . . . . . . . .$10,517 $10,278 $10,222
The funded status of the plans is as follows:
SEPT. 30, SEPT. 24,
1995 1994
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Vested benefit obligation . . . . . . . . . . . $134,251 $116,057
Accumulated benefit obligation. . . . . . . . . $141,950 $121,602
Projected benefit obligation. . . . . . . . . . $157,666 $137,777
Market value of plan assets. . . . . . . . . . . . 125,257 104,449
Excess of projected benefit
obligation over plan assets. . . . . . . . . . . 32,409 33,328
Unrecognized actuarial gain. . . . . . . . . . . . 7,769 1,370
Unrecognized prior service cost. . . . . . . . . . (18,166) (17,072)
Unrecognized transition surplus, net . . . . . . . 7,893 9,125
Net pension liability included in current
and other liabilities . . . . . . . . . . . . . $ 29,905 $ 26,751
ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLANS:
Weighted average discount rate. . . . . . . . . 8.00% 8.04%
Expected long-term weighted average
rate of return on assets. . . . . . . . . . . 9.57% 9.57%
Weighted average rate of increase in
compensation levels . . . . . . . . . . . . . 4.34% 4.49%
On October 1, 1994, the U.S. plan was amended to provide pension benefits
during the first year of service for present and future employees and to
eliminate the eligibility year of service. In addition, pensionable
compensation was limited to $150 per year, subject to IRS indexing in future
years. The net effect of these amendments was an increase of approximately
$9,500, $9,800, and $10,800 in the fiscal 1995 vested benefit obligation,
accumulated benefit obligation, and projected benefit obligation, respectively.
As a result of the company's restructuring and cost containment programs,
pension curtailment losses of $910 and $652 were recognized in fiscal 1995 and
1994, respectively. These amounts were previously reserved as part of the
fiscal 1994 and 1993 restructuring charges, respectively.
The company also has foreign defined contribution pension plans. Total
pension cost charged to expense for these plans was $1,685 in fiscal 1995,
$1,464 in fiscal 1994, and $2,288 in fiscal 1993.
The company's postretirement benefit plan provides certain medical and life
insurance benefits for retired employees. Substantially all U.S. employees of
the company may become eligible for these benefits if they remain employed until
normal retirement age and fulfill other eligibility requirements as specified by
the plan. With the exception of certain participants who retired prior to 1986,
the medical benefit plan requires monthly contributions by retired participants
in amounts equal to insured equivalent costs less a fixed company contribution
which is dependent on the participant's length of service and Medicare
eligibility. Benefits are continued to dependents of eligible retiree
participants for 39 weeks after the death of the retiree. The life insurance
benefit plan is noncontributory. Funds contributed to the plan are invested
primarily in common stocks, mutual funds and cash equivalent securities.
The components of net periodic postretirement benefit cost are as follows:
YEAR ENDED
SEPT. 30, SEPT. 24, SEPT. 25,
1995 1994 1993
Service cost . . . . . . . . . . . . . . . . $ 308 $ 345 $ 316
Interest on accumulated benefit obligation . 657 676 680
Actual return on plan assets . . . . . . . . (150) (339) (212)
Deferral of net actuarial gains and
amortization of transition
obligation and prior service costs. . . . . 344 482 407
Net periodic postretirement benefit cost. $1,159 $1,164 $1,191
The funded status of the plan is as follows:
SEPT. 30, SEPT. 24,
1995 1994
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees. . . . . . . . . . . . . . . . . . . . . . $3,995 $4,217
Fully eligible active plan participants . . . . . . 1,031 1,194
Other active plan participants. . . . . . . . . . . 3,490 3,229
Total accumulated postretirement benefit obligation. . 8,516 8,640
Market value of plan assets. . . . . . . . . . . . . . 389 955
Excess of accumulated benefit postretirement benefit
obligation over plan assets . . . . . . . . . . . . . 8,127 7,685
Unrecognized transition obligation . . . . . . . . . . (2,645) (2,821)
Unrecognized prior service cost. . . . . . . . . . . . (862) (934)
Unrecognized actuarial gain. . . . . . . . . . . . . . 924 454
Net postretirement benefit liability included
in current and other liabilities. . . . . . . . . . . $5,544 $4,384
ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLAN:
Discount rate . . . . . . . . . . . . . . . . . . . . 8.0% 8.0%
Expected long-term rate of return on assets . . . . . 10.0% 10.0%
Prior service cost results from a plan amendment effective October 1, 1991,
which increased amounts payable for employees who retire after December 31,
1985. Prior service cost is amortized over the average remaining service period
of the employees expected to receive benefits under the plan.
For participants who receive full retiree medical benefits, the medical
premium rates were assumed to increase at the following rates: fiscal year 1995
- -- 7%; thereafter -- 7%. A 1% increase in the medical trend rate would not have
a significant impact on the accumulated postretirement benefit obligation as of
October 1, 1995.
During fiscal 1994, the company dissolved the Voluntary Employees'
Beneficiary Association trust which funded the cost of employee medical, life,
long-term disability, and dental insurance benefits for the company's full-time
permanent U.S. employees. Administration and funding of these benefit plans is
now handled directly by the company with no changes in the coverages provided to
employees. Amounts charged to expense are based on projected benefit levels
determined on an annual basis.
NOTE 11. GEOGRAPHIC SEGMENT DATA
IN THOUSANDS
The company's operations involve a single industry segment -- the design,
manufacture, sale and support of multi-user computer systems, servers, and mass
storage devices.
Financial information, summarized by geographic area, is presented below.
OTHER
UNITED INTER- ELIMINA- CONSOLI-
STATES EUROPE NATIONAL TIONS DATED
YEAR ENDED SEPTEMBER 30, 1995:
Total revenues:
Unaffiliated customers. .$744,762 $295,357 $119,197 $1,159,316
Interarea transfers . . . 117,811 -- 20,416 $(138,227) --
Total . . . . . . . . .$862,573 $295,357 $139,613 $(138,227) $1,159,316
Restructuring charge. . . .$ 19,168 $ 18,901 $ 4,931 $ 43,000
Income (loss) from
operations. . . . . . . .$(51,686) $(15,108) $(16,050) $ 6,890 $ (75,954)
Identifiable assets . . . .$548,503 $193,971 $ 87,746 $(104,248) $ 725,972
Corporate assets. . . . . . 106,046
Total assets. . . . . . . $ 832,018
YEAR ENDED SEPTEMBER 24, 1994:
Total revenues:
Unaffiliated customers. .$691,516 $303,754 $125,235 $1,120,505
Interarea transfers . . . 149,008 -- 18,084 $(167,092) --
Total . . . . . . . . .$840,524 $303,754 $143,319 $(167,092) $1,120,505
Restructuring charge. . . .$ 20,800 $ 12,000 $ 2,200 $ 35,000
Income (loss) from
operations. . . . . . . .$(48,555) $(18,282) $(16,951) $ 4,010 $ (79,778)
Identifiable assets . . . .$559,893 $239,669 $101,110 $(179,389) $ 721,283
Corporate assets. . . . . . 100,581
Total assets. . . . . . . $ 821,864
YEAR ENDED SEPTEMBER 25, 1993:
Total revenues:
Unaffiliated customers. .$614,823 $342,945 $120,101 $1,077,869
Interarea transfers . . . 208,675 -- 20,859 $(229,534) --
Total . . . . . . . . .$823,498 $342,945 $140,960 $(229,534) $1,077,869
Restructuring charge. . . .$ 7,300 $ 15,300 $ 2,400 $ 25,000
Income (loss) from
operations. . . . . . . .$(11,213) $(22,760) $(21,148) $ 6,360 $ (48,761)
Identifiable assets . . . .$561,921 $297,923 $ 96,602 $(194,630) $ 761,816
Corporate assets. . . . . . 104,513
Total assets. . . . . . . $ 866,329
United States interarea transfers primarily represent shipments of equipment
and parts to international subsidiaries. Other international interarea
transfers primarily represent shipments of work in process and finished goods
inventory from manufacturing facilities to domestic operations. These interarea
shipments are made at transfer prices which approximate prices charged to
unaffiliated customers and have been eliminated from consolidated net revenues.
United States revenues from unaffiliated customers include direct export sales.
Corporate assets consist primarily of temporary cash investments and marketable
securities.
Total liabilities of international subsidiaries, before intercompany
eliminations, were $237,405 at September 30, 1995 and $295,651 at September 24,
1994. Cumulative retained earnings of international subsidiaries were $84,363
at September 30, 1995 and $109,541 at September 24, 1994.
REPORT OF INDEPENDENT ACCOUNTANTS
DATA GENERAL CORPORATION
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF DATA GENERAL CORPORATION
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows, and of stockholders'
equity present fairly, in all material respects, the financial position of
Data General Corporation and its subsidiaries at September 30, 1995 and
September 24, 1994, and the results of their operations and their cash flows for
each of the three years in the period ended September 30, 1995, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Boston, Massachusetts
October 20, 1995
SUPPLEMENTAL FINANCIAL INFORMATION
DATA GENERAL CORPORATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
IN MILLIONS, EXCEPT FIRST SECOND THIRD FOURTH FISCAL
PER SHARE AMOUNTS QUARTER QUARTER QUARTER QUARTER YEAR
FISCAL 1995:
Total revenues . . . . . . . $282.2 $283.8 $280.5 $312.8 $1,159.3
Total cost of revenues . . . 183.9 186.7 190.7 210.7 772.0
Net income (loss). . . . . . 24.2 (b) (11.1) (61.3)(a) 1.5 (46.7)
Net income (loss) per share. $ .63 $ (.30) $(1.65) $ .04 $ (1.23)
Net income (loss) per share
assuming full dilution. . . $ .59 $ (.30) $(1.65) $ .04 $ (1.23)
FISCAL 1994:
Total revenues . . . . . . . $261.2 $282.9 $283.8 $292.6 $1,120.5
Total cost of revenues . . . 169.2 185.8 187.8 190.3 733.1
Net loss . . . . . . . . . . (21.1) (48.0)(a) (12.4) (6.2) (87.7)
Net loss per share . . . . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45)
Net loss per share
assuming full dilution. . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45)
(a) Includes $43.0 million and $35.0 million provision in fiscal years 1995
and 1994, respectively, for estimated expenses resulting from corporate-
wide restructuring and cost reduction programs (see Note 2 of Notes to
Consolidated Financial Statements).
(b) Includes $44.5 million gain resulting from the settlement of litigation
with Northrop Grumman Corporation (see Note 7 of Notes to Consolidated
Financial Statements).
STOCK PRICE RANGE
FISCAL 1995 FISCAL 1994
HIGH LOW HIGH LOW
First quarter . . . . . . . . . . 11-1/2 9-1/8 10-3/4 8-3/4
Second quarter. . . . . . . . . . 10-7/8 7-1/8 10 7-3/8
Third quarter . . . . . . . . . . 10-1/8 7 8 6-3/4
Fourth quarter. . . . . . . . . . 10-5/8 8-1/4 10 7-3/8
FACILITIES
DATA GENERAL CORPORATION
Data General does business in more than 70 countries through direct sales,
subsidiaries, distributors and representatives. The company has 32 subsidiaries
and approximately 250 sales and service offices. Major administrative,
development, manufacturing and support facilities, and subsidiaries'
headquarter locations are listed below.
FACILITY LOCATION
(Approximate Square Feet)
Westboro, Massachusetts corporate headquarters;
(490,000/Leased) administration; product development; special
systems
Southboro, Massachusetts manufacturing service division;
(545,000)* software reproduction; distribution center;
equipment refurbishment; major unit repair; custom
product manufacturing; field engineering services
and logistics
Apex, North Carolina assembly, test and systems
(300,000) integration facility
Research Triangle Park, advanced systems research
North Carolina and development
(174,000)
Norcross, Georgia customer support center
(105,000/Leased)
Mississauga, Ontario sales; field engineering;
Canada administration
(37,000/Leased)
Etobicoke, Ontario, Canada product repair center
(25,000/Leased)
Chihuahua, Mexico product repair center
(67,000/Leased)
Schwalbach, Germany sales; customer education;
(71,600/Leased) services
Brentford, England sales; services;
(120,000/Leased)** administration; customer education
Manila, Philippines power supply and transformer
(68,000) manufacturing; communications products assembly
and test
Melbourne, Australia product repair center;
(31,000/Leased) logistics and equipment refurbishment
SUBSIDIARY HEADQUARTERS
Canada Toronto/Mississauga
ASIA/PACIFIC
Australia Sydney
Hong Kong
Japan Tokyo
Korea Seoul
Malaysia
New Zealand Wellington
Singapore
Thailand Bangkok
EUROPE
Austria Vienna
Belgium Brussels
Denmark Copenhagen/Glostrup
Finland Helsinki/Espoo
France Paris/Velizy
Germany Frankfurt/Schwalbach
Hungary Budapest
Italy Milan
Netherlands Amsterdam
Norway Olso/Voyenenga
Portugal Lisbon/Amadora
Spain Madrid
Sweden Stockholm/Kista
Switzerland Zurich
United Kingdom
and Ireland London/Brentford
LATIN AMERICA
Argentina Buenos Aires
Brazil Rio de Janeiro
Chile Santiago
Mexico Monterrey
Peru Lima
Puerto Rico San Juan
Venezuela Caracas
* Includes 50,000 square-feet of space leased to a third party, and 200,000
square feet available for lease.
** Includes 26,000 square-feet of sub-leased space.
As part of its consolidation efforts, Data General has for sale, facilities in
Woodstock, Connecticut and Milford, Massachusetts.
<PAGE>
OFFICERS, DIRECTORS AND SENIOR MANAGEMENT
DATA GENERAL CORPORATION
Frederick R. Adler Director, Chairman of the Executive Committee;
Retiring Senior Partner, Fulbright & Jaworski
L.L.P., Attorneys at Law, New York, New York
Ethan Allen Jr. Vice President, Customer Services
Stephen P. Baxter Vice President, General International
Ferdinand Colloredo-Mansfeld Director; Chairman of the Board, Cabot Partners
Limited Partnership, Boston, Massachusetts
William J. Cunningham Vice President, Manufacturing
Arthur W. DeMelle Vice President; Chief Financial Officer
Jacob Frank Vice President and General Counsel
John J. Gavin Jr. Treasurer
Angelo Guadagno Vice President, U.S. Sales
Larry D. Hemmerich* Vice President, CLARiiON Business Unit
Carl E. Kaplan Secretary; Senior Partner, Fulbright & Jaworski
L.L.P., Attorneys at Law, New York, New York
Robert C. McBride Vice President; Controller
John G. McElwee Director; Retired Chairman, John Hancock Mutual
Life Insurance Company, Boston, Massachusetts
Anthony C. Nicoletti Vice President, Asia/Pacific
Claes L. Nordwall Vice President, Europe
Edward F. Pensel* Vice President, Manufacturing Operations
James J. Ryan Vice President, Information Management Group
Joel Schwartz Vice President, Worldwide Sales and Marketing
Ronald L. Skates President and Chief Executive Officer; Director
W. Nicholas Thorndike Director; Corporate Director and Trustee
Donald H. Trautlein Director; Retired Chairman, Bethlehem Steel
Corporation, Bethlehem, Pennsylvania
Richard L. Tucker Director; Managing Director, Trinity Investment
Management Corporation, Boston, Massachusetts
J. Thomas West Senior Vice President, Advanced Development
William L. Wilson Vice President, Services and Strategic Business
Opportunities
* Elected during 1995
DIVISION VICE PRESIDENTS
Dennis P. Balch** Software Development
Anthony P. DiBona U.S. Sales - Eastern Operations
David J. Ellenberger Corporate Marketing
Jonathan W. Lane** Human Resources
Raymond J. Massey** U.S. Sales - Western Operations
Michael I. Schneider Special Systems
Robert Van Steenberg AViiON Systems Development
William L. Zastrow Imaging Business Unit
AREA VICE PRESIDENTS
John T. Anderson** U.S. Channel Sales
William Cadogan European Services
Ronald A. Edlin Professional Services
Robert C. Mara Personal Computer Business Unit
Thomas P. Rizk Customer Support
Daniel Sapir** Strategic Alliances
Suzanne G. Sweeney** Strategic Alliances
John Winter Latin America
Michael S. Worhach Healthcare Business
** Appointed during 1995
CORPORATE INFORMATION
DATA GENERAL CORPORATION
CORPORATE HEADQUARTERS Data General Corporation
4400 Computer Drive
Westboro, Mass. 01580
(508) 898-5000
LEGAL COUNSEL Fulbright & Jaworski L.L.P.
New York, New York
INDEPENDENT ACCOUNTANTS Price Waterhouse LLP
Boston, Mass.
DEBENTURE TRUSTEES First National Bank
63 Wall Street
New York, New York 10005
State Street Bank and Trust
225 Franklin Street
Boston, Mass. 02110
TRANSFER AGENT AND REGISTRAR
The Bank of New York
800-524-4458
Address Shareholder Inquiries to:
The Bank of New York
Shareholder Relations Department - 11E
Post Office Box 11258
Church Street Station
New York, NY 10286
Send Certificates For Transfer and Address Changes
to:
The Bank of New York
Receive and Deliver Department - 11W
Post Office Box 11002
Church Street Station
New York, NY 10286
STOCK EXCHANGE LISTING New York Stock Exchange
London Stock Exchange
Unlisted trading privileges on Boston, Midwest,
Philadelphia, Pacific and Cincinnati exchanges
TRADING SYMBOL DGN
ANNUAL MEETING The Annual Meeting of Stockholders will be held at
11:00 a.m., Wednesday, January 31, 1996 in the
Enterprise Room, State Street Bank Building, 225
Franklin Street, Boston, Mass.
NUMBER OF STOCKHOLDERS As of September 30, 1995 there were approximately
12,500 stockholders of record. This number
excludes individual stockholders holding stock
under nominee security position listings.
DIVIDEND POLICY No cash dividends have been declared or paid by
the company since its inception. It is the policy
of the company to retain any cash flow for future
business expansion. The company anticipates no
changes in this policy in the forseeable future.
PUBLISHED INFORMATION The company's Annual Report, Interim Reports, Form
10-K, and Quarterly Reports on Form 10-Q as filed
with the Securities and Exchange Commission, and
other published information is available on
request to:
Investor Relations Department
Data General Corporation
4400 Computer Drive
Mail Stop 9S
Westboro, Massachusetts 01580
Published information, as well as mailed or faxed
copies of quarterly financial press releases, can
be obtained by calling 1-800-941-2382.
All information is available on Data General's
internet website at http://www.dg.com. In the
section titled "About Data General," select
"Financial Information for Investors."
Investors may also choose to:
o Request information using e-mail to
[email protected]
o Dial our FAX-back system at 1-800-99-DGFAX
(North America only) and press 411 to receive
a faxed menu of publications
o Call Data General Corporation at
1-800-DATAGEN
Data General
An Equal Opportunity / Affirmative Action Employer
Making a Commitment to Workforce Diversity
AViiON, CLARiiON, DG/UX, and ECLIPSE are registered trademarks of Data General
Corporation. Intel, the Intel Inside logo, Pentium, and Pentium Pro are
registered trademarks of Intel Corporation. All other brand and product names
are trademarks or registered trademarks of their respective holders.
The materials contained herein are summary in nature, subject to change, and
intended for general information only. Details and specifications regarding
Data General equipment and software are included in the applicable technical
manuals, available from local sales representatives.
EXHIBIT 21
Subsidiaries of Registrant.
The following are the company's subsidiaries as of the close of the
fiscal year ended September 30, 1995. All beneficial interests are
wholly-owned, directly or indirectly, by the company, with the exception
of Data General Technology (1990) Limited which is 45% owned. All
subsidiaries are included in the company's consolidated
financial statements.
State or
Jurisdiction of
Name Organization
Asia Data General Corporation . . . . . . . . . . . . . . . . . Delaware
China Data General Corporation . . . . . . . . . . . . . . . . Delaware
CLARiiON Storage Systems, Inc. . . . . . . . . . . . . . . . . Delaware
Data General (Canada) Company . . . . . . . . . . . . . . . . . Nova Scotia
Data General A.G. . . . . . . . . . . . . . . . . . . . . . . . Switzerland
Data General A/S. . . . . . . . . . . . . . . . . . . . . . . . Norway
Data General A/S. . . . . . . . . . . . . . . . . . . . . . . . Denmark
Data General AB . . . . . . . . . . . . . . . . . . . . . . . . Sweden
Data General Africa SARL . . . . . . . . . . . . . . . . . . . France
Data General Australia Pty., Ltd. . . . . . . . . . . . . . . . Australia
Data General Bahamas, Ltd. . . . . . . . . . . . . . . . . . . Bahamas
Data General Chile S.A. . . . . . . . . . . . . . . . . . . . . Chile
Data General Computers Sdn, Bhd. . . . . . . . . . . . . . . . Malaysia
Data General Corporation . . . . . . . . . . . . . . . . . . . Greece
Data General Costa Rica, S.A. . . . . . . . . . . . . . . . . Costa Rica
Data General de Mexico, S.A. de C.V. . . . . . . . . . . . . . Mexico
Data General del Peru, S.A. . . . . . . . . . . . . . . . . . Peru
Data General France SARL . . . . . . . . . . . . . . . . . . . France
Data General Gesellschaft mbH . . . . . . . . . . . . . . . . Austria
Data General Gmbh . . . . . . . . . . . . . . . . . . . . . . Germany
Data General Graphics, Inc. . . . . . . . . . . . . . . . . . . Delaware
Data General Hong Kong Sales and Service, Ltd. . . . . . . . . Hong Kong
Data General Hong Kong, Ltd. . . . . . . . . . . . . . . . . . Hong Kong
Data General Hungary . . . . . . . . . . . . . . . . . . . . . Hungary
Data General International Manufacturing Pte., Ltd. . . . . . . Singapore
Data General International Sales Corporation . . . . . . . . . Delaware
Data General International, Inc. . . . . . . . . . . . . . . Delaware
Data General Investment Corporation . . . . . . . . . . . . . . Delaware
Data General Ireland, Ltd. . . . . . . . . . . . . . . . . . . Ireland
Data General Israel, Ltd. . . . . . . . . . . . . . . . . . . . Israel
Data General Japan YK . . . . . . . . . . . . . . . . . . . . Japan
Data General Korea, Ltd. . . . . . . . . . . . . . . . . . . . Korea
Data General Latin America, Inc. . . . . . . . . . . . . . . . Delaware
Data General Limited . . . . . . . . . . . . . . . . . . . . . United Kingdom
Data General Ltda. . . . . . . . . . . . . . . . . . . . . . . Brazil
Data General Manufacturing, Inc. . . . . . . . . . . . . . . . Delaware
Data General Nederland BV . . . . . . . . . . . . . . . . . . The Netherlands
Data General New Zealand, Limited . . . . . . . . . . . . . . . New Zealand
Data General OY . . . . . . . . . . . . . . . . . . . . . . . . Finland
Data General Philippines, Inc. . . . . . . . . . . . . . . . . Philippines
Data General (Portugal) Sociedade de Computadores Lda. . . . . Portugal
Data General Puerto Rico, Inc. . . . . . . . . . . . . . . . . Delaware
Data General S.A. . . . . . . . . . . . . . . . . . . . . . . . Belgium
Data General S.A. . . . . . . . . . . . . . . . . . . . . . . . Spain
Data General S.p.A. . . . . . . . . . . . . . . . . . . . . . . Italy
Data General Singapore Pte., Ltd. . . . . . . . . . . . . . . Singapore
Data General Systems (Thailand) Limited . . . . . . . . . . . . Thailand
Data General Technology (1990) Limited. . . . . . . . . . . . . Israel
Data General Telecommunications, Inc. . . . . . . . . . . . . Delaware
Data General Venezula C.A. . . . . . . . . . . . . . . . . . . Venezuela
Data General Wholesale Pty., Ltd. . . . . . . . . . . . . . . . Australia
Datagen Investment Trust. . . . . . . . . . . . . . . . . . . . Delaware
Datagen, Inc. . . . . . . . . . . . . . . . . . . . . . . . . Delaware
DG Argentina S.A. . . . . . . . . . . . . . . . . . . . . . . . Argentina
DG Foreign Sales Corp., Inc. . . . . . . . . . . . . . . . . . Virgin Islands
Digicom . . . . . . . . . . . . . . . . . . . . . . . . . . . Delaware
Digital Computer Controls, Inc. . . . . . . . . . . . . . . . Delaware
Digital Computer Controls International, Inc. . . . . . . . . . Delaware
General Risk Insurance Company Ltd. . . . . . . . . . . . . . . Bermuda
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 2-91481,
33-11527, 33-19759, 33-33300, 33-53039, and 33-53041) of Data General
Corporation of our report dated October 20,1995 appearing in the 1995
Annual Report to Stockholders which is incorporated by reference in this
Annual Report on Form 10-K. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears
on page 19 of this Form 10-K.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 20, 1995
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