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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 28, 1996
-----------------
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
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Data General Corporation
------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2436397
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4400 Computer Drive, Westboro, Massachusetts 01580
- -------------------------------------------- -----
(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
--- ---
Number of shares outstanding of each of the registrant's classes of common
stock, as of January 24, 1997:
Common Stock, par value $.01 39,942,680
---------------------------- ----------
(Title of each class) (Number of shares)
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<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Quarter Ended
----------------------------
Dec. 28, Dec. 30,
in thousands, except net income per share 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product ........................................ $249,800 $227,654
Service ........................................ 98,653 99,955
-------- --------
Total revenues ........................... 348,453 327,609
-------- --------
Costs and expenses:
Cost of product revenues ....................... 165,062 156,712
Cost of service revenues ....................... 64,408 64,992
Research and development ....................... 26,238 21,723
Selling, general, and administrative ........... 80,509 77,167
-------- --------
Total costs and expenses ................. 336,217 320,594
-------- --------
Income from operations .............................. 12,236 7,015
Interest income ..................................... 1,982 2,144
Interest expense .................................... 3,203 3,450
-------- --------
Income before income taxes .......................... 11,015 5,709
Income tax provisions ............................... 600 1,000
-------- --------
Net income .......................................... $ 10,415 $4,709
======== ========
Net income per share ................................ $ 0.25 $ 0.12
======== ========
Weighted average shares outstanding, including common
stock equivalents, where applicable ............ 42,054 40,308
<FN>
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
</FN>
</TABLE>
<PAGE>
<TABLE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
(Unaudited)
Dec. 28, Sept. 28,
dollars in thousands 1996 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments .................... $ 95,891 $ 178,997
Marketable securities .................................. 88,453 25,624
Receivables, net ....................................... 276,880 257,815
Inventories ............................................ 127,993 129,783
Other current assets ................................... 27,682 24,593
--------- ---------
Total current assets ............................ 616,899 616,812
Property, plant, and equipment, net ........................ 168,742 167,672
Other assets ............................................... 78,736 75,959
--------- ---------
$ 864,377 $ 860,443
========= =========
Liabilities and stockholders' equity
Current liabilities:
Notes payable .......................................... $ 1,902 $ 1,943
Accounts payable ....................................... 132,958 121,625
Other current liabilities .............................. 226,393 242,616
--------- ---------
Total current liabilities ....................... 361,253 366,184
--------- ---------
Long-term debt ............................................. 147,998 149,971
--------- ---------
Other liabilities .......................................... 13,890 15,224
--------- ---------
Stockholders' equity:
Common stock:
Outstanding - 39,794,000 shares at Dec. 28, 1996
and 39,601,000 shares at Sept. 28, 1996 (net of
deferred compensation of $10,485 at Dec. 28, 1996
and $7,812 at Sept. 28, 1996) .................. 462,126 460,312
Accumulated deficit .................................... (125,066) (135,481)
Unrealized gains on marketable securities .............. 9,086 9,708
Cumulative translation adjustment ...................... (4,910) (5,475)
--------- ---------
Total stockholders' equity ...................... 341,236 329,064
--------- ---------
$ 864,377 $ 860,443
========= =========
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended
----------------------------
Dec. 28, Dec. 30,
in thousands 1996 1995
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 10,415 $ 4,709
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation .......................................... 19,560 20,924
Amortization of capitalized software development costs 5,057 3,375
Other non-cash items, net ............................. 4,255 3,905
Change in operating assets and liabilities ............ (23,429) (16,939)
--------- ---------
Net cash provided from operating activities ........... 15,858 15,974
--------- ---------
Cash flows from investing activities:
Expenditures for property, plant, and equipment ........................ (23,994) (23,497)
Net proceeds from the sales (purchases) of marketable securities ....... (63,450) 10,626
Capitalized software development costs ................................. (8,160) (8,033)
Other .................................................................. -- 4,250
--------- ---------
Net cash used by investing activities ................. (95,604) (16,654)
--------- ---------
Cash flows from financing activities:
Cash provided from stock plans ......................................... 623 1,271
Repayment of long-term debt ............................................ (3,900) (3,000)
--------- ---------
Net cash used by financing activities ................. (3,277) (1,729)
--------- ---------
Effect of foreign currency rate fluctuations on cash and temporary cash
investments ............................................................ (83) (457)
--------- ---------
Decrease in cash and temporary cash investments ................................ (83,106) (2,866)
Cash and temporary cash investments - beginning of period ...................... 178,997 117,201
--------- ---------
Cash and temporary cash investments - end of period ............................ $ 95,891 $ 114,335
========= =========
Supplemental disclosure of cash flow information:
Interest paid .......................................................... $ 4,961 $ 4,944
Income taxes paid ...................................................... $ 246 $ 379
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
DATA GENERAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Consolidated Balance Sheet Details
Dec. 28, Sept. 28,
in thousands 1996 1996
- -----------------------------------------------------------
Inventories:
Raw materials ............ $ 6,114 $ 4,560
Work in process .......... 44,392 50,769
Finished systems ......... 47,339 43,710
Field engineering parts
and components ......... 30,148 30,744
--------- ---------
$ 127,993 $ 129,783
========= =========
Property, plant, and equipment:
Property, plant, and
equipment .............. $ 640,825 $ 638,972
Accumulated
depreciation .......... (472,083) (471,300)
--------- ---------
$ 168,742 $ 167,672
========= =========
Note 2. Basis of Presentation and
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
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 1996 Annual Report. The results of operations for
the quarter ended December 28, 1996 are not necessarily indicative of the
results of the entire fiscal year.
Note 3. Letter of Credit and
Reimbursement Agreement
On December 11, 1996, the company's $30 million unsecured letter of
credit facility with a group of banks was amended. This facility is available to
secure issuances 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 28, 1996 there were $8 million letters of
credit secured by this facility.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Condition
Cash and temporary cash investments as of December 28, 1996 were
$95.9 million, a decrease of $83.1 million from the end of fiscal 1996. At the
same date, the company held $88.5 million in marketable securities, a net
increase of $62.9 million during the current three-month period. In total, cash,
temporary cash investments and marketable securities decreased $20.2 million for
the current three-month period. The securities held, which supplement cash and
temporary cash investments, include United States treasury bills and notes, as
well as an equity security of $10.3 million recorded at fair market value and
classified as available-for-sale. The unrealized gain on marketable securities
of $9.1 million is recorded as a separate component of stockholders' equity. Net
cash provided from operations for the quarter ended December 28, 1996 totaled
$15.9 million; expenditures for property, plant, and equipment were $24 million;
capitalized software development costs totaled $8.2 million; and cash provided
from stock plans totaled $.6 million. The effect of foreign currency exchange
rate fluctuations on cash and temporary cash investments for the quarter ended
December 28, 1996 was a decrease of less than $.1 million.
Net receivables were $276.9 million, an increase of $19.1 million
from $257.8 million at fiscal year-end 1996 due primarily to increased revenues.
Total inventories at December 28, 1996 were $128 million, a decrease of $1.8
million from fiscal year-end 1996 levels. Fixed asset dispositions for the
current three-month period totaled $3.9 million, primarily due to the sale of
demonstration equipment. Management expects that sales of demonstration
equipment will continue.
The increase of $11.3 million in accounts payable from fiscal
year-end 1996 levels was attributed mainly to the timing of payments related to
material purchases. Other current liabilities, excluding the current portion of
long-term debt, decreased $14.3 million from fiscal year-end 1996. This decrease
was primarily 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 $3.9
million from fiscal 1996 year-end as a result of the company reacquiring a
portion of its 8 3/8% Sinking Fund Debentures due in 2002.
On December 11, 1996, the company's $30 million unsecured letter of
credit facility with a group of banks was amended. This facility is available to
secure issuances 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 28, 1996 there were $8 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 material changes in
estimates to prior provisions or additional charges were recorded during fiscal
1996 or the first three-month period of fiscal 1997. The following table sets
forth the company's restructuring activities for the three-month period ended
December 28, 1996. All charges, excluding asset writedowns and certain other
charges, are cash in nature and funded from operations.
THREE MONTHS ENDED
SEPT. 28, DEC.28, DEC. 28,
1996 1996 1996
(in millions) BALANCE CHARGES BALANCE
- ------------------------------------------------------------------------------
Provisions related to terminated employees $ 2.5 $ .5 $ 2.0
Provisions for leases .................... 10.0 1.1 8.9
Writedown of assets to be sold
or discarded and other .................. 2.0 .5 1.5
------- ------ -------
Total .......................... $ 14.5 $ 2.1 $ 12.4
======= ====== =======
The employee terminations related to the 1995 restructuring charges
were substantially completed during fiscal 1996. The remaining reserves at
December 28, 1996 are for the remaining severance payments due to employees
impacted by the restructuring actions. The charges and remaining provisions for
leases are for the closure of various domestic branch sales offices and excess
vacant rental properties, primarily located in Europe.
Results of Operations
Total revenues for the quarter ended December 28, 1996 increased 6%
to $348.5 million from the same quarter of the previous year. Domestic revenues,
excluding U.S. direct export sales, were $207.3 million for the current quarter,
a 10% increase from $188.7 million for the comparable period of fiscal 1996.
Domestic revenues represented 59% of total revenues for the current quarter and
58% of total revenues for the first quarter of fiscal 1996. European revenues,
including U.S. direct export sales into the European marketplace, were $92.7
million, a decrease from $97.5 million for the comparable period in fiscal 1996.
European revenues represented 27% and 30% of total revenues in the current and
prior-year periods, respectively. Other international revenues, including U.S.
direct export sales, were $48.5 million for the current quarter, a 17% increase
from $41.4 million for the comparable period in fiscal 1996. Other international
revenues represented 14% of total revenues for the current quarter and 12% for
the comparable prior-year period.
Product revenues of $249.8 million for the current quarter ended
December 28, 1996 increased 10% from the comparable prior-year period. Revenues
of $121.8 million from the company's AViiON family of open systems server
products increased 15% from the comparable period of the prior year. In the
current quarter, revenues from the company's Intel-based AViiON systems more
than tripled, while revenues from the Motorola-based AViiON systems declined by
35% as compared with the comparable period of the prior year. The company
expects the Motorola-based AViiON systems revenue will continue to decline.
Product revenues from the company's Open CLARiiON storage systems increased 5%
from the comparable prior-year period and accounted for 42% 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 sales cycles and inventory levels of
the company's customers. Open CLARiiON product revenues have been concentrated
in a limited number of customers, with a significant portion of the company's
Open CLARiiON product revenues to a single OEM. Proprietary MV system revenues
declined $1.8 million from the same period in the prior-year and currently
represent 3% of total product revenues compared to 4% for the comparable
prior-year period. The company expects to see a continued decline in its
proprietary MV product line revenues. Product revenues from personal computers
and peripheral equipment increased $3.2 million from the same period in the
prior-year and represent 7% of total product revenues for both the current and
comparable prior-year periods.
Domestic product revenues, which were $150.5 million for the current
quarter, increased 14% from $131.9 million for the comparable period in fiscal
1996. Domestic product revenues were 60% of total product revenues for the
current quarter and 58% of total product revenues in the comparable prior-year
period. The increase in domestic product revenues was primarily a result of
increased shipments of the company's Intel-based AViiON systems, increased Open
CLARiiON shipments, as well as increased personal computers and peripheral
equipment shipments. European product revenues were $61.3 million for the
current quarter, a 6% decrease from $65.1 million in the comparable prior-year
period. European product revenues represented 25% of total product revenues for
the current quarter and 29% for the comparable prior-year period. Other
international product revenues were $38 million for the current quarter, an
increase of 24% from $30.6 million for the comparable period in fiscal 1996.
Other international product revenues represented 15% of total product revenues
in the current quarter and 13% of total product revenues in the comparable
prior-year period.
Service revenues for the current quarter were $98.7 million, a slight
decrease from $100.0 million in the comparable period of fiscal 1996. Domestic
service revenues for the current quarter were $56.7 million, relatively
unchanged from $56.8 million in the comparable prior-year period. European
service revenues were $31.4 million, a 3% decrease from $32.4 million for the
comparable prior-year period. Other international service revenues for the
current quarter were $10.5 million, a slight decrease from $10.8 million for the
comparable prior-year period.
Cost of revenues decreased to 66% of total revenues for the current
quarter compared with 68% for the comparable period in fiscal 1996. For the
current three-month period ended December 28, 1996, cost of product revenues
decreased to 66% of product revenues compared with 69% for the comparable
prior-year period. The decrease in the cost as a percentage of product revenues
was the result of increasing volumes of higher margin Intel-based AViiON
systems, manufacturing cost reductions and higher overall production volume.
Cost of service revenues was 65% of service revenues for both the current
quarter and the first quarter of fiscal 1996.
Research and development expenses for the current quarter were $26.2
million, a 21% increase from $21.7 million for the first quarter of fiscal 1996.
Research and development expenses represented 8% of total revenues in the
current quarter and 7% of total revenues for the comparable prior-year period.
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 three-month period, gross expenditures on research and
development and software development before capitalization, were $34.4 million,
an increase of 16% from $29.7 million for the comparable prior-year period. The
increase in research and development expenditures is being driven by investment
in the next generation of CLARiiON products, in the company's Non Uniform Memory
Access (NUMA) architecture for high-end servers and in THiiN Line products for
the internet.
Selling, general, and administrative expenses for the current quarter
were $80.5 million, an increase of 4% from $77.2 million for the comparable
quarter of fiscal 1996. Selling, general, and administrative expenses
represented 23% and 24% of total revenues in the current quarter and in the
comparable prior-year period, respectively. The moderate increase in expenses
was the result of increased sales and marketing efforts in the server and
storage businesses. At December 28, 1996 the number of employees totaled 4,884,
a net increase of 21 employees from September 28, 1996.
Interest income for the current quarter was $2 million, a slight
decrease from $2.2 million for the comparable period of fiscal 1996, due
primarily to lower levels of invested cash. Interest expense for the current
quarter was $3.2 million, a decrease from $3.5 million for the comparable period
of fiscal 1996.
The income tax provision for the current quarter was $.6 million
compared to $1.0 million for the comparable prior-year period. The current year
provision relates primarily to foreign, state and federal alternative minimum
taxes.
<PAGE>
Statements concerning the company's business outlook or future economic
performance; anticipated profitability, revenues, expenses or other financial
items; product or service line growth, plans or objectives; and statements
concerning assumptions made or expectations as to any future events, conditions,
performance or other matters, are "forward-looking statements", as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, fluctuations in
customer demand, order patterns and inventory levels, changes and delays in
product development plans and schedules, customer acceptance of new products,
changes in pricing or other actions by competitors, general economic conditions,
as well as other risks detailed in the company's filings with the Securities and
Exchange Commission, including this Quarterly Report on Form 10-Q for the first
fiscal quarter of 1997, which ended December 28, 1996.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The company's patent infringement suit against IBM Corporation
commenced in 1994, and IBM's countersuit against the company, are 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. The company alleges, among
other matters, that IBM's AS/400 CISC-based and System/390 computer product
lines infringe certain of the company's patents, and seeks, among other relief,
compensatory damages. IBM's countersuit alleges that certain of the company's
AViiON and CLARiiON products infringe various IBM patents.
The company's second patent infringement suit against IBM Corporation
which commenced in May 1996, is 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 June 29, 1996. The company alleges, among other matters, that several IBM
products, including IBM's AS/400 RISC-based computer product line, infringe
certain of the company's patents and seeks, among other relief, injunctive and
compensatory damages.
The company believes its claims are valid, but it cannot predict the
outcome of either litigation.
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The Annual Meeting of Stockholders of Data General Corporation was held
January 29, 1997.
(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 34,090,343 932,441
Colloredo-Mansfeld 34,289,104 733,680
McElwee 34,281,645 741,139
Skates 34,296,731 726,053
Thorndike 34,298,152 724,632
Trautlein 34,281,409 741,375
Tucker 34,301,671 721,113
<PAGE>
(c) During the meeting, stockholders also voted to approve an amendment
to the company's Employee Qualified Stock Purchase Plan to increase
the number of shares that may be issued thereunder from 8,600,000
shares to 11,100,000 shares. The numbers of votes cast were as
follows:
Votes For: 26,210,498
Votes Against: 2,033,370
Abstentions: 79,669
Broker Non-Votes: 6,699,247
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10. (aa) Summary of 1997 Fiscal Year Bonus Opportunity for Chief
Executive Officer.
10. (bb) Amendment dated December 11, 1996 to Letter of Credit
and Reimbursement Agreement.
11. Computation of primary and fully diluted earnings per share.
(b) No reports on Form 8-K were filed during the current quarter
ended December 28, 1996.
<PAGE>
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
---------------------------
Arthur W. DeMelle
Vice President
Chief Financial Officer
Chief Accounting Officer
Dated: February 6, 1997
<PAGE>
EXHIBITS
Index to Exhibits.
10.(aa) Summary of 1997 Fiscal Year Bonus Opportunity for Chief Executive
Officer.
10.(bb) Amendment dated December 11, 1996 to Letter of Credit and
Reimbursement Agreement.
11. Computation of primary and fully diluted earnings per share.
EXHIBIT 10 (aa)
Summary of Cash Bonus Opportunity
---------------------------------
for the President and Chief Executive Officer
---------------------------------------------
The Company provided Ronald L. Skates, President and Chief Executive Officer of
the Company, a bonus opportunity by which Mr. Skates would be entitled to earn a
cash bonus for the 1997 fiscal year based on the Company's performance, as
measured against goals relating to earnings-per-share, with a maximum of 250% of
base salary, or, if greater, a cash bonus equal to 1.5% of the increase in the
Company's market capitalization during the fiscal year. The Board reserved the
right to award other bonuses and to adjust the bonus opportunity in the event of
extraordinary corporate transactions.
EXHIBIT 10 (bb)
AMENDMENT NO. 3 TO LETTER OF CREDIT
AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT NO. 3 TO LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT (this "Agreement") is made and entered into as of this 11th day of
December, 1996 among:
DATA GENERAL CORPORATION, a Delaware corporation ("Borrower"),
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a national banking association, THE
BANK OF NEW YORK and FLEET NATIONAL BANK, formerly known as 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 by Amendment No. 1 to Letter of Credit and Reimbursement Agreement dated
as of October 5, 1995, as further amended by Amendment No. 2 to Letter of Credit
and Reimbursement Agreement dated as of December 10, 1995 among the Borrower,
the Lenders and the Agent and as hereby amended (as amended, 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;
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 definition 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) The definitions of "Commitment Termination Date" shall
be amended and restated in its entirety to read as follows:
"Commitment Termination Date" means the earliest
to occur of (i) December 17, 1997 (364 days after the
Commitment Termination Date established pursuant to
Amendment No. 2 to Letter of Credit and Reimbursement
Agreement dated as of December 10, 1995 among all parties
hereto), or (ii) the date of termination of Lenders'
obligations pursuant to Section 8.01 hereof upon the
occurrence of an Event of Default, or (iii) such date as
the Borrower may voluntarily and permanently terminate the
Letter of Credit Facility by causing all Obligations of the
Borrower to NationsBank and the Lenders to be Fully
Satisfied and terminating all obligations of NationsBank
and the Lenders with respect to Letters of Credit and
Participations;
3. Amendment Fee. The Borrower shall pay to the Agent for the pro rata
benefit of the Lenders based on their Applicable Commitment Percentages, a fee
(the "Facility Fee") equal to the product of the Total Letter of Credit
Commitment multiplied by 1/8 of 1% (.125%).
4. Effectiveness. This Agreement shall become effective as of the date
hereof upon receipt by the Agent of (a) seven fully executed copies of this
Agreement (which may be signed in counterparts) and (b) payment in full of the
Facility 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
Lender 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 of 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 armed forces, war or acts of God or the public
enemy, or cancellation 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 the part of the Borrower under the Credit
Agreement, either immediately or with the lapse of time or the giving
of notice, or both.
6. Entire Agreement. This Agreement sets forth the entire understanding and
agreement of the 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 the
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.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their 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 NATIONAL BANK
By:
Name:
Title:
AGENT:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION
as Agent for the Lenders
By:
Name:
Title:
EXHIBIT 11
<TABLE>
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands except per share amounts)
<CAPTION>
Quarter Ended
--------------------
Dec. 28, Dec. 30,
1996 1995
-------- --------
<S> <C> <C>
Primary earnings per share:
Net income ............................................. $10,415 $ 4,709
======= =======
Weighted average shares outstanding .................... 39,694 38,081
Incremental shares from use of treasury
stock method for stock options ....................... 2,360 2,227
------- -------
Common and common equivalent
shares, where applicable ............................. 42,054 40,308
======= =======
Net income per share ................................... $ 0.25 $ 0.12
======= =======
Earnings per share assuming full dilution: (a)
Net income ............................................. $10,415 $ 4,709
======= =======
Weighted average shares outstanding .................... 39,694 38,081
Incremental shares from use of treasury
stock method for stock options ....................... 2,493 2,639
------- -------
Common and common equivalent shares
assuming full dilution, where applicable ............. 42,187 40,720
======= =======
Net income per share ................................... $ 0.25 $ 0.12
======= =======
- --------------------------------------------------------------------------------
<FN>
(a) For the quarters ended December 28, 1996 and December 30, 1995, 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.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE Q1 FY97 CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> DEC-28-1996
<CASH> 95,891
<SECURITIES> 88,453
<RECEIVABLES> 276,880
<ALLOWANCES> 0
<INVENTORY> 127,993
<CURRENT-ASSETS> 616,899
<PP&E> 640,825
<DEPRECIATION> 472,083
<TOTAL-ASSETS> 864,377
<CURRENT-LIABILITIES> 361,253
<BONDS> 147,998
0
0
<COMMON> 462,126
<OTHER-SE> (120,890)
<TOTAL-LIABILITY-AND-EQUITY> 864,377
<SALES> 249,800
<TOTAL-REVENUES> 348,453
<CGS> 165,062
<TOTAL-COSTS> 229,470
<OTHER-EXPENSES> 106,747
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,203
<INCOME-PRETAX> 11,015
<INCOME-TAX> 600
<INCOME-CONTINUING> 10,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,415
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
