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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
(Mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 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
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(Exact name of registrant as specified in its charter)
Delaware 04-2436397
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization)
4400 Computer Drive, Westboro, Massachusetts 01580
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 898-5000
Former name, former address and former fiscal year if changed since last
report: Not Applicable
______________________________
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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Number of shares outstanding of each of the registrant's classes of common
stock, as of January 26, 1996:
Common Stock, par value $.01 38,281,880
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(Title of each class) (Number of Shares)
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed consolidated financial statements of Data General
Corporation (the "company"), consisting of condensed consolidated
statements of operations for the quarters ended December 30, 1995 and
December 24, 1994, condensed consolidated balance sheets as of
December 30, 1995 and September 30, 1995, condensed consolidated
statement of cash flows for quarters ended December 30, 1995 and December
24, 1994, and related notes to condensed consolidated financial statements,
are incorporated herein by reference to pages 3 through 6 of the company's
First Quarter 1996 Interim Report. The First Quarter 1996 Interim Report
has been included as Exhibit 19 to copies of this Report filed with the
Securities and Exchange Commission. Copies of the Interim Report may be
obtained by written request to the company, Attn: Investor Relations,
MS 9S, 3400 Computer Drive, Westboro, MA 01580.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition.
Cash and temporary cash investments as of December 30, 1995 were $114.3
million, a decrease of $2.9 million from the end of fiscal 1995. In
addition, the company holds $61.0 million in marketable securities, a net
decrease of $10.6 million during the current three-month period. These
securities, which supplement cash and temporary cash investments,
are primarily invested in United States treasury bills and notes. Net cash
provided from operations for the quarter ended December 30, 1995 totaled
$16.0 million, expenditures for property, plant, and equipment were $23.5
million, capitalized software development costs totaled $8.0 million, and
cash provided from stock plans totaled $1.3 million. The company repaid
$3.0 million of long-term debt during the current three-month period.
The effect of foreign currency rate fluctuations on cash and temporary
cash investments was a decrease of $0.5 million.
Net receivables for the current quarter were $250.2 million, relatively
unchanged from $251.1 million from fiscal year-end 1995. Total inventories
at December 30, 1995 increased $19.9 million, to $144.0 million, from
fiscal year-end 1995 levels due to an increase in domestic work in process
inventory, primarily related to orders for the company's Open CLARiiON
product line. Open CLARiiON sales cycles require inventory purchasing
patterns to be earlier than those of the traditional server
procurement cycles. Fixed asset dispositions for the current quarter
totaled $2.5 million, primarily due to the sale of demonstration
equipment to end users. Management expects that sales of demonstration
equipment will continue in the future. Fewer than 15% of the company's
total net fixed assets relate to the company's proprietary ECLIPSE MV
("MV") family of products; these assets are primarily comprised of spare
parts required to support the MV service base of over 19,000 installed
units worldwide as well as those MVs which are serviced by third parties.
The increase of $18.9 million in accounts payable from fiscal year-end 1995
levels was mainly attributed to the increase in end of quarter inventory
procurements and the timing of payments relating to this activity. Other
current liabilities decreased $15.9 million from fiscal year-end 1995. This
decrease was primarily as a result of reduced employee related accruals
and the payments made relating to the previously recorded restructuring
accruals. Long-term debt, including the current portion of long-term debt,
decreased a total of $3.0 million during the current quarter as a result of
the company reacquiring a portion of the 8 3/8% Sinking Fund Debentures due
in 2002.
On October 5, 1995, the company's $30 million unsecured letter of credit
facility with a group of banks was amended. This facility is available to
secure issuance of letters of credit. The current agreement has a duration
of 364 days. 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. At December 30, 1995 there
were $11.0 million in letters of credit secured by this facility.
During fiscal years 1995 and 1994, the company recorded restructuring
charges of $43 million and $35 million, respectively. No additional
charges or material changes in estimates to prior provisions were recorded
during the first quarter of fiscal 1996. The following table sets forth
the company's restructuring activities for the current quarter ended
December 30, 1995. All charges, excluding asset writedowns and certain
other charges, are cash in nature and funded from operations.
THREE MONTHS ENDED
SEPT. 30, 1995 DEC. 30, 1995 DEC. 30, 1995
(in millions) BALANCE CHARGES BALANCE
Provision related to
terminated employees $ 13.9 $(5.0) $ 8.9
Provisions for leases 17.4 (2.7) 14.7
Writedown of assets
to be sold or discarded
and other 5.6 (2.7) 2.9
----- ------- -----
Total $36.9 $(10.4) $26.5
===== ======= =====
During the first quarter of the current year there were approximately 75
employee terminations, primarily relating to the 1995 restructuring charges.
The remaining reserves at December 30, 1995 are for the future termination
of approximately 135 employees as part of the continuing realignment of
the company's worldwide sales, service, and other operations. The number
of employee terminations noted above refer only to those impacted by
restructuring actions. They are not indicative of the change in total
worldwide headcount which also reflects attrition and new hires. The
charges and remaining provisions for leases are for the closure of
various domestic branch sales offices and excess vacant rental properties,
primarily located throughout Europe.
Results of Operations
Total revenues for the quarter ended December 30, 1995 increased 16% to
$327.6 million from the same quarter of the previous year. Domestic
revenues, excluding U.S. direct export sales, were $188.7 million for the
current quarter, an 18% increase from $160.0 million for the comparable
period of fiscal 1995. Domestic revenues were 58% of total revenues for
the current quarter and 57% of total revenues for the first quarter
of fiscal 1995. European revenues, including U.S. direct export sales
into the European marketplace, were $97.5 million, an increase of 18% from
$82.3 million for the comparable period in fiscal 1995. This increase is
primarily a result of increased U.S. direct export sales. European
revenues represented 30% and 29% of total revenues in the current and
prior-year periods, respectively. Other international revenues, including
U.S. direct export sales, were $41.4 million for the current quarter, a 4%
increase from $39.9 million for the comparable period in fiscal 1995.
Other international revenues represented 12% of total revenues for both
the current quarter and the 14% for the comparable prior-year period.
Product revenues of $227.6 million for the current quarter ended December
30, 1995 increased 26% from the comparable prior-year period. Revenues
from the company's AViiON family of open systems server products decreased
8% from the comparable period of the prior year. Although, the company
began shipping its new Intel-based AViiON systems, the company expects to
continue to see an impact from the product transition to the Intel-based
AViiON products until these new products begin to ship in volume during
the second half of the fiscal 1996. Revenues from the company's Open
CLARiiON storage systems more than quadrupled from the comparable prior-
year period and accounted for 43% of total product revenues in the current
quarter. Open CLARiiON is sold primarily through the company's Original
Equipment Manufacturer ("OEM") and distributor channels, thus sales in
any given period are subject to customer sales cycles and inventory levels.
Revenues have been concentrated in a limited number of customers. For
the current quarter, a significant portion of the company's Open CLARiiON
revenues were to a single OEM. Open CLARiiON revenue in any quarter may
not be indicative of future Open CLARiiON revenues. Proprietary MV
system revenues declined $7.6 million from the same period in the prior
year and currently represent 4% of total product revenues compared to 9%
for the comparable prior-year period. The company will continue to see
a decline in its proprietary MV product line as it completes its transition
to Open systems. Revenues from personal computers and peripheral equipment
declined $12.7 million from the same period in the prior year and currently
represent 7% of total product revenues compared to 15% for the comparable
prior-year period.
Domestic product revenues, which were $131.9 million for the current
quarter, increased 27% from $103.6 million for the comparable period in
fiscal 1995. Domestic product revenues were 58% of total product revenues
and 57% of total product revenues in the comparable prior-year period.
European product revenues were $65.1 million for the current quarter, a 30%
increase from $49.7 million in the comparable prior-year period. European
product revenues represented 29% of total product revenues for the
current quarter and 28% for the comparable prior-year period. Other
international product revenues were $30.6 million for the current quarter,
an increase of 10% from $27.9 million for the comparable period in fiscal
1995. Other international product revenues represented 13% of total product
revenues in the current quarter and 15% of total product revenues in the
comparable prior-year period. The increase in Domestic and European
product revenues is primarily a result of Open CLARiiON shipments to these
marketplaces.
Service revenues for the current quarter were $100.0 million, a slight
decrease from $101.0 million in the comparable period of fiscal 1995.
Domestic service revenues for the current quarter were $56.8 million,
relatively unchanged from $56.5 million in the comparable prior-year period.
European service revenues were $32.4 million, a slight decrease from $32.6
million for the comparable prior-year period. Other international service
revenues for the current quarter were $10.8 million, compared to $11.9
million for the comparable prior-year period.
Cost of revenues increased to 68% of total revenues for the current
quarter, compared with 65% for the comparable period in fiscal 1995. Cost
of product revenues increased to 69% of product revenues for the current
quarter, compared with 66% of product revenues, for the same periods of the
prior year. The increase in the cost of product revenues was the result of
increased sales volume of Open CLARiiON storage systems, which have lower
relative gross margins because of the distribution channels in which
they are sold, and continued price competition in the commercial server
marketplace. Cost of service revenues was 65% and 64% of service revenues
for the current quarter and first quarter of fiscal 1995, respectively.
The company continues to see a shift in service revenues towards increased
Professional Service sales, which yield a lower margin than traditional
maintenance contract revenues.
Research and development expenses remained relatively unchanged at $21.7
million for both the current quarter and the comparable quarter of fiscal
1995, respectively. Research and development expenses represented 7% of
total revenues in the current quarter and 8% of total revenues for the
same prior-year period, respectively. The company continued to focus its
research and development efforts on its core business technology,
multi-user computer systems, servers, and mass storage devices. In the
current quarter, gross expenditures on research and development and
software development, before capitalization, were $29.7 million, an
increase of 10% from $27.0 million for the comparable quarter of fiscal
1995. 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 for the current quarter
were $77.2 million, a decrease of 10% from $86.0 million for the comparable
quarter of fiscal 1995. Selling, general, and administrative expenses
represented 24% and 31% of total revenues in the current quarter and in
comparable prior-year period, respectively. The company has responded to
increasingly competitive preconditions through ongoing cost reductions.
At December 30, 1995 the number of employees totaled 4,930, a reduction of
approximately 100 employees from September 30,1995.
Interest income of $2.2 million remained relatively unchanged from the
comparable period of fiscal 1995. Interest expense for the current quarter
was $3.5 million, a slight decrease from $3.6 million for the comparable
period of fiscal 1995.
The income tax provisions for the current quarter was $1.0 million and
$7.0 million for the comparable prior-year periods. The current year
provision relates primarily to foreign and state taxes. The provision in
the first quarter of the prior year resulted primarily from the settlement
of the Grumman lawsuit, deferred tax on undistributed earnings for
certain foreign subsidiaries, and foreign and state taxes.
In March 1995, the Financial Accounting Standards Boards ("FASB") issued
SFAS 121, "Accounting for Impairment for 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". The company will implement
SFAS 123 using the proforma disclosure method described in the
pronouncement. 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 121 and 123 is not expected to
have a material effect on the company's consolidated financial position
or results of operations.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The company's patent infringement suit against IBM Corporation, and IBM's
counterclaim against the company, remain in the discovery stage in the
United States District Court in Worcester, Massachusetts. See Part II,
Item 1, "Legal Proceedings" to the company's Quarterly Report on form
10-Q for the quarter ended December 24, 1994.
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Annual Meeting of Stockholders of Data General Corporation was
held January 31, 1996.
(b) During the meeting, stockholders elected the following as directors
of Data General:
Frederick R. Adler
Ferdinand Colloredo-Mansfeld
John G. McElwee
Ronald L. Skates
W. Nicholas Thorndike
Donald H. Trautlein
Richard L. Tucker
The directors were elected by the following voting breakdowns:
Director Votes For Votes Withheld
Adler 32,484,315 201,578
Colloredo-Mansfeld 32,513,889 172,004
McElwee 32,498,593 187,300
Skates 32,476,218 209,675
Thorndike 32,515,801 170,092
Trautlein 32,502,107 183,786
Tucker 32,505,949 179,944
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11. Computation of primary and fully diluted earnings per share.
19. First Quarter 1996 Interim Report of Data General Corporation.
(b) No reports on Form 8-K were filed during the current quarter
ended December 30, 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATA GENERAL CORPORATION
(Registrant)
/s/ Arthur W. DeMelle
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Arthur W. DeMelle
Vice President
Chief Financial Officer
Chief Accounting Officer
Dated: February 8, 1996
EXHIBITS
Index to Exhibits.
11. Computation of primary and fully diluted earnings per share.
19. First Quarter 1996 Interim Report of Data General Corporation.
EXHIBIT 11
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands except per share amounts)
Quarter Ended
--------------------
Dec. 30, Dec. 24
1995 1994
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Primary earnings per share:
Net income . . . . . . . . . . . . . . . . . . $ 4,709 $24,206
======= =======
Weighted average shares outstanding . . . . . . 38,081 36,550
Incremental Shares from use of treasury
stock method for stock options . . . . . . . . 2,227 1,663
------ ------
Common and common equivalent shares, where
applicable. . . . . . . . . . . . . . . . . . 40,308 38,213
====== ======
Net income per share . . . . . . . . . . . . . $.12 $.63
==== ====
Earnings per share assuming full dilution:
Net income . . . . . . . . . . . . . . . . . . . $4,709 $24,206
Interest on convertible debentures,
net of income taxes . . . . . . . . . . . . . --(a) 2,422
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Net income for purposes of calculating
earnings per share assuming full
dilution . . . . . . . . . . . . . . . . . . $4,709 $26,628
====== =======
Weighted average shares outstanding . . . . . . 38,081 36,550
Incremental shares from use of treasury
stock method for stock options . . . . . . . . 2,227 1,735
Incremental shares from assumed conversion
of convertible debentures . . . . . . . . . . --(a) 6,510
----- ------
Common shares, assuming issuance of all dilutive
contingent shares, were applicable . . . . . . 43,308 44,795
====== ======
Net income per share . . . . . . . . . . . . . . $.12 $.59
==== ====
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(a) For the quarter ended December 30, 1995, the assumed conversion of
convertible debentures and the use of treasury stock method for stock
options, giving effect to the incremental shares and the adjustment
to reduce interest expense, results in anti-dilution and have
therefore been excluded from the computation.
TO OUR STOCKHOLDERS, CUSTOMERS, AND EMPLOYEES:
Data General Corporation reported net income of $4.7 million, or $.12 per
share, on revenues of $327.6 million for its first quarter of fiscal 1996,
which ended December 30, 1995. The first quarter revenues were 16 percent
higher than last year's first quarter revenues of $282.2 million. Income
from operations was $7.0 million, compared to a loss from operations of
$9.4 million for the first quarter of 1995.
For the first quarter last year, the company reported net income of $24.2
million, or $.63 per share ($.59 per share assuming full dilution). The
1995 first quarter net income included a one-time, pre-tax gain of $44.5
million resulting from the settlement of litigation with Northrop Grumman
Corporation.
We are encouraged by the results as the first quarter traditionally is
not a strong period for us. Both our AViiON(R) server and CLARiiON(R)
storage businesses turned in solid performances and our operating expenses
were in line with our targeted goals. Operating expenses during the first
quarter were 8 percent below those of last year's first quarter.
While the majority of our AViiON sales this quarter were from our
Motorola based server line, we are very pleased with the reception by
our customers to the first systems in our Intel based AViiON server line,
which were introduced and began shipping during the quarter. With the
confidence being shown in our AViiON product family by our customer base,
we believe we are well positioned to see AViiON revenues grow as we
continue to roll out new products during the year.
The new Intel based AViiON servers range from a powerful, eight-processor
enterprise server, the AV 5800; to single- and dual-processor VAR and
application workgroup servers, the AV 2000 and AV 3000.
In a recent test of its enterprise computing capabilities, an AV 5800
running Oracle7 Release 7.3, produced the best Transaction Processing
Council Benchmark C (TPC-C) performance and price/performance results
ever achieved on an Intel Processor based system.
To date, CLARiiON has been extrememly successful, growing from less than
$10 million per quarter to more than $90 million in the quarter just ended.
The results again strongly confirm our focus on providing leading-edge
high availability and data integrity storage capabilities to the open
enterprise. CLARiiON growth came from all our reseller channels:
Original Equipment Manufacturers (OEMs), private labelers and distributors.
We do not expect that this extraordinary growth rate can be maintained.
Moreover, since the bulk of this business is through OEM relationships,
sales in any given period are very much subject to our customer's sales
cycles and their inventory levels.
In January, our CLARiiON Business Unit and one of its key partners,
Hewlett-Packard Company, announced the signing of an expanded agreement
whereby HP will continue to OEM the CLARiiON line. During the past two
years, several thousand CLARiiON systems have been shipped to Hewlett-
Packard.
In addition, the CLARiiON unit has joined with Oracle Corporation and
NEC Corporation to support a world-record-size commercial data warehouse.
The three companies combined to demonstrate a 2.5-terabyte decision
support solution at Oracle Open World, which was held in Japan.
Data General's financial position continues to be strong with cash
and marketable securities of $175.3 million at the end of the first
quarter.
The first quarter results are a solid reinforcement of our marketplace
strategy. We believe we are well positioned with our AViiON line to
capitalize on the industry's move to Intel as the dominant platform for
mission-critical enterprise servers. As with any major product transition,
we remain cautious for the short-term. However, with the steps we are
taking to generate AViiON and CLARiiON revenues while controlling our
costs, we are making progress toward our goal of sustained profitability.
Respectfully submitted,
Ronald L. Skates
President and Chief Executive Officer
February 9, 1996
ANNUAL MEETING HIGHLIGHTS
The Annual Meeting of Stockholders of Data General Corporation was held
in Boston on January 31, 1996. Stockholders elected the following as
directors:
Frederick R. Adler, Retired Senior Partner, Fulbright & Jaworski L.L.P.,
Attorneys at Law; Ferdinand Colloredo-Mansfeld, Chairman and Chief
Executive Officer, Cabot Partners Limited Partnership; John G. McElwee,
Retired Chairman and Chief Executive Officer, John Hancock Mutual Life
Insurance Company; Ronald L. Skates, President and Chief Executive
Officer, Data General Corporation; W. Nicholas Thorndike, Corporate
Director and Trustee; Donald H. Trautlein, Retired, Chairman and Chief
Executive Officer, Bethlehem Steel Corporation; and Richard L. Tucker,
Managing Director, Trinity Investment Management Corporation.
In remarks to stockholders, Data General President and CEO Ronald L.
Skates said, "Technology decisions we made in the late 1980s set the
direction for our business today. We focused on designing servers for
commercial business computing. We chose UNIX as the operating system
that would be capable of handling high-end commercial applications for
our customers. We specifically targeted the commercial market, not the
technical market which characterized most UNIX vendors. We utilized
symmetric multiprocessing to provide customers with highly efficient
systems for running commercial applications. We made high availability
a major differentiator in our systems and a key element of our marketing
efforts. And we incorporated RAID storage technology to offer our
customers the best option for managing their data.
"The open systems business model dictated an entirely different structure
for Data General", said Skates as he described the changes that re-shaped
Data General over the past several years. "Fundamentally, it meant changing
our business model on the fly, and we think we have done that. In 1989,
more than 90 percent of our product revenues came from our ECLIPSE MV
family of proprietary minicomputers. In our most recent quarter, more
than 95 percent of product revenues came from AViiON servers, CLARiiON
storage systems, and PCs attached to open systems."
"To date, CLARiiON has been extremely successful, growing from less than
$10 million per quarter to more than $90 million in the quarter just ended.
We do not expect that this extraordinary growth rate can be maintained.
Moreover, since the bulk of this business is through OEM relationships,
sales in any given period are very much subject to our customers' sales
cycles and their inventory levels. With this in mind, our focus today is
not on quarterly sales but on year-to-year growth."
"The mission for Data General in 1996 is clear: we must grow AViiON
revenues with our new Intel processor based servers; we must transition
from the Motorola 88000 to Intel successfully; we must continue to grow our
CLARiiON business; and we must keep costs in line. The challenge for
Data General is to be consistently profitable in a fast changing and
highly competitive industry. We believe that our strategy is on target
and we are confident that Data General can implement this strategy in
1996."
The full text of remarks made by Mr. Skates is being sent to all
stockholders and is also available electronically on the worldwide web
(www.dg.com) or by calling 1-800-941-2382.
AMENDMENT TO SHAREHOLDER RIGHTS PLAN
The Corporation's Shareholder Rights Plan has been amended, in
conjunction with the appointment of The Bank of New York as transfer
agent for Data General's common stock, to appoint The Bank of New York
as "Rights Agent" under and for the Plan, replacing Morgan Shareholder
Services Trust Company in that capacity.
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Ended
---------------------
Dec. 30, Dec. 24,
in thousands, except net income per share 1995 1994
- ---------------------------------------------------------------------------
Revenue:
Product . . . . . . . . . . . . . . . . . . . $227,654 $181,193
Service . . . . . . . . . . . . . . . . . . . 99,955 101,012
-------- --------
Total revenue . . . . . . . . . . . . . . . . 327,609 282,205
-------- --------
Costs and expenses:
Costs of product revenues . . . . . . . . . . . 156,712 119,458
Costs of service revenues . . . . . . . . . . . 64,992 64,495
Research and development . . . . . . . . . . . 21,723 21,664
Selling, general, and administrative. . . . . . 77,167 85,990
-------- --------
Total costs and expenses . . . . . . . . . . 320,594 291,607
-------- --------
Income (loss) from operations . . . . . . . . . . 7,015 (9,402)
Interest income. . . . . . . . . . . . . . . . . . 2,144 2,192
Interest expense . . . . . . . . . . . . . . . . . 3,450 3,556
Other income, net . . . . . . . . . . . . . . . . -- 41,972
------- --------
Income before income taxes . . . . . . . . . . . . 5,709 31,206
Income tax provision . . . . . . . . . . . . . . . 1,000 7,000
-------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 4,709 $ 24,206
======== ========
Primary net income per share:
Net income per share . . . . . . . . . . . . . . . $0.12 $0.63
===== =====
Weighted average shares outstanding . . . . . . . 40,308 38,213
Net income per share assuming full dilution:
Net income per share . . . . . . . . . . . . . . . $0.12 $0.59
===== =====
Weighted average shares outstanding . . . . . . . 40,308 44,795
No cash dividends have been declared or paid since inception.
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these financial statements.
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
Dec. 30, Sept. 30,
dollars in thousands 1995 1995
- ---------------------------------------------------------------------------
Assets
Current Assets:
Cash and temporary cash investments . . . . . . . $114,335 $117,201
Marketable securities . . . . . . . . . . . . . . 60,991 71,617
Receivables, net. . . . . . . . . . . . . . . . . 250,194 251,123
Inventories . . . . . . . . . . . . . . . . . . . 144,012 124,145
Other current assets . . . . . . . . . . . . . . 25,246 27,399
-------- --------
Total current assets . . . . . . . . . . . . . 594,778 591,485
Property, plant, and equipment, net. . . . . . . . . 174,637 174,914
Other assets . . . . . . . . . . . . . . . . . . . . 69,899 65,619
-------- --------
$839,314 $832,018
======== ========
Liabilities and stockholders' equity
Current liabilities:
Notes payable . . . . . . . . . . . . . . . . . . 2,040 2,033
Accounts payable . . . . . . . . . . . . . . . . 135,233 116,313
Other current liabilities . . . . . . . . . . . . 236,021 251,880
------- -------
Total current liabilities. . . . . . . . . . . 373,294 370,226
------- -------
Long-term debt . . . . . . . . . . . . . . . . . . . 152,034 153,457
------- -------
Other liabilities. . . . . . . . . . . . . . . . . . 27,969 28,791
------- -------
Stockholders' equity:
Common stock:
Outstanding - 38,185,000 shares at Dec.
30, 1995 and 37,933,000 shares at Sept.
30, 1995 (net of deferred compensation
of $10,464 at Dec. 30, 1995
and $9,588 at Sept. 30, 1995) . . . . . . . . 449,011 446,762
Accumulated deficit. . . . . . . . . . . . . . . . . (158,917) (163,626)
Cumulative translation adjustment. . . . . . . . . . (4,077) (3,592)
------- -------
Total stockholders' equity . . . . . . . . . . 286,017 279,544
------- -------
$839,314 $832,018
======== ========
The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these financial statements.
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Ended
--------------------------
Dec. 30, Dec. 24,
in thousands 1995 1994
- --------------------------------------------------------------------------
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . $ 4,709 $ 24,206
Adjustments to reconcile net
income to net cash provided from
operating activities:
Depreciation . . . . . . . . . . . . . . 20,924 18,530
Amortization of capitalized software
development costs. . . . . . . . . . . 3,375 4,201
Other non-cash items, net . . . . . . . 3,905 5,834
Change in operating assets and
liabilities. . . . . . . . . . . . . . (16,939) 205
Net cash provided from ------- -------
operating activities . . . . . . . . 15,974 52,976
------- -------
Cash flows from investing activities:
Expenditures for property, plant,
and equipment . . . . . . . . . . . . . (23,497) (23,680)
Net proceeds from the sales of (purchases
of) marketable securities . . . . . . . . 10,626 (43,595)
Capitalized software development
costs . . . . . . . . . . . . . . . . . . (8,033) (5,350)
Other . . . . . . . . . . . . . . . . . . . 4,250 (600)
Net cash used by investing ------- -------
activities . . . . . . . . . . . . (16,654) (73,225)
Cash flows from financing activities:
Cash provided from stock plans . . . . . . 1,271 751
Repayment of long-term debt . . . . . . . (3,000) (2,700)
Net cash used by financing ------ ------
activities . . . . . . . . . . . . . (1,729) (1,949)
------ ------
Effect of foreign currency rate fluctuations
on cash and temporary cash investments. . . (457) (1,077)
------ -------
Decrease in cash and temporary cash
investments . . . . . . . . . . . . . . . . (2,866) (23,275)
Cash and temporary cash investments -
beginning of period . . . . . . . . . . . . 117,201 142,448
Cash and temporary cash investments - -------- --------
end of period . . . . . . . . . . . . . . . $114,335 $119,173
======== ========
Supplemental disclosure of cash flow
information:
Interest paid . . . . . . . . . . . . . . . $ 4,944 $ 5,054
Income taxes paid . . . . . . . . . . . . . $ 379 $ 883
The accompanying Notes to Condensed Consolidated Financial Statements are
an integral part of these financial statements.
DATA GENERAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Consolidated Balance Sheet Details
Dec. 30, Sept. 30,
in thousands 1995 1995
- ----------------------------------------------------------------------------
Inventories:
Raw materials. . . . . . . . . . . . . . . . . . $ 12,688 $ 9,173
Work in process . . . . . . . . . . . . . . . . 45,235 28,309
Finished systems . . . . . . . . . . . . . . . . 50,703 51,199
Field engineering parts and components . . . . . 35,386 35,464
-------- --------
$144,012 $124,145
======== ========
Property, plant, and equipment:
Property, plant, and equipment . . . . . . . . . $638,666 $635,000
Accumulated depreciation . . . . . . . . . . . . (464,029) (460,086)
-------- --------
$174,637 $174,914
======== ========
Note 2. Letter of Credit and Reimbursement Agreement
On October 5, 1995, the company's $30 million unsecured letter of
unsecured letter of credit facility with a group of banks was amended.
This facility is available to secure issuance of letters of credit.
The current agreement has a duration of 364 days. The facility
contains certain covenants including restriction on the sale or
pledge of certain assets, the declaration of dividends, and the
incurrence of other debt. At December 30, 1995 there were $11.0 million
letters of credit secured by this facility.
Note 3. Basis of Presentation
In March 1995, the Financial Accounting Standards Boards ("FASB") issued
SFAS 121, "Accounting for Impairment for 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". The company will implement
SFAS 123 using the proforma disclosure method described in the
pronouncement. SFAS 121 and 123 are effective for fiscal years beginning
December 15, 1995. The company will implement these statements as
required. The future adoption of SFAS 121 and 123 is not expected to have
a material effect on the company's consolidated financial position or
results of operations.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation.
The company's accounting policies are described in the Notes to Consolidated
Financial Statements in the company's 1995 Annual Report. The results of
operations for the quarter ended December 30, 1995 are not necessarily
indicative of the results for the entire fiscal year.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> DEC-30-1995
<CASH> 114,335
<SECURITIES> 60,991
<RECEIVABLES> 250,194
<ALLOWANCES> 14,481
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<PP&E> 638,666
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<TOTAL-ASSETS> 839,314
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<COMMON> 444,935
0
0
<OTHER-SE> (130,949)
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<TOTAL-REVENUES> 327,609
<CGS> 156,712
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<INCOME-TAX> 1,000
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