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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 June 26, 1999
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
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(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
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Number of shares outstanding of each of the registrant's classes of common
stock, as of July 23, 1999:
Common Stock, par value $.01 50,705,171
- ---------------------------- ------------------
(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 Nine Months Ended
---------------------- ----------------------
June 26, June 27, June 26, June 27,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Product................................................. $259,630 $ 253,802 $ 786,145 $ 784,723
Service................................................. 96,189 97,468 290,613 293,632
-------- --------- ---------- ----------
Total revenues..................................... 355,819 351,270 1,076,758 1,078,355
-------- --------- ---------- ----------
COSTS AND EXPENSES:
Cost of product revenues (Note A)....................... 180,329 244,270 541,662 624,139
Cost of service revenues................................ 60,286 59,881 182,483 183,171
Research and development................................ 28,802 31,655 86,321 88,048
Selling, general, and administrative.................... 90,904 84,736 263,696 254,190
Restructuring charge.................................... -- 82,400 -- 82,400
-------- --------- ---------- ----------
Total costs and expenses........................... 360,321 502,942 1,074,162 1,231,948
-------- --------- ---------- ----------
Income (loss) from operations............................... (4,502) (151,672) 2,596 (153,593)
Interest income............................................. 2,675 3,181 8,720 10,072
Interest expense............................................ 3,555 3,599 10,855 10,814
Other income (expense)...................................... 2,965 (2,000) 8,979 240
-------- --------- ---------- ----------
Income (loss) before income taxes........................... (2,417) (154,090) 9,440 (154,095)
Provision (benefit) for income taxes........................ 600 1,000 (5,700) 2,000
-------- --------- ---------- ----------
Net income (loss)........................................... $ (3,017) $(155,090) $ 15,140 $ (156,095)
======== ========= ========== ==========
BASIC NET INCOME (LOSS) PER SHARE:
Net income (loss) per share............................. $(0.06) $(3.15) $0.30 $(3.19)
====== ====== ===== ======
Weighted average shares outstanding..................... 50,622 49,159 50,249 48,895
====== ====== ====== ======
DILUTED NET INCOME (LOSS) PER SHARE:
Net income (loss) per share............................. $(0.06) $(3.15) $0.30 $(3.19)
====== ====== ===== ======
Weighted average shares outstanding, including
common stock equivalents, where applicable.............. 50,622 49,159 51,163 48,895
====== ====== ====== ======
<FN>
Note A: Included in the quarter and nine-month period ended June 27, 1998, is a
charge of $52,600 for capitalized software and inventory write-downs.
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>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
(Unaudited)
June 26, Sept. 26,
DOLLARS IN THOUSANDS, EXCEPT PAR VALUE 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and temporary cash investments............................................ $133,600 $158,220
Marketable securities.......................................................... 135,486 160,354
Receivables, net............................................................... 292,611 307,428
Inventories.................................................................... 126,667 141,639
Other current assets........................................................... 30,441 28,320
---------- ----------
Total current assets...................................................... 718,805 795,961
Property, plant, and equipment, net................................................ 198,856 180,454
Other assets....................................................................... 100,405 88,649
---------- ----------
Total assets.............................................................. $1,018,066 $1,065,064
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable............................................................... $120,341 $160,940
Other current liabilities...................................................... 249,188 269,774
---------- ----------
Total current liabilities................................................. 369,529 430,714
---------- ----------
Long-term debt..................................................................... 212,750 212,750
---------- ----------
Other liabilities.................................................................. 24,831 36,645
---------- ----------
Stockholders' equity
Common stock, $0.01 par value
Outstanding - 50,653,000 shares at June 26, 1999 and 49,689,000 shares
at Sept. 26, 1998 (net of deferred compensation of $16,570 at June 26,
1999 and $15,444 at Sept. 26, 1998)....................................... 639,149 626,137
Accumulated deficit................................................................ (216,836) (231,976)
Unrealized gains on marketable securities.......................................... 9,770 8,513
Equity adjustment for minimum pension liability.................................... (6,252) (6,252)
Cumulative translation adjustment.................................................. (14,875) (11,467)
---------- ----------
Total stockholders' equity................................................ 410,956 384,955
---------- ----------
Total liabilities and stockholders' equity................................ $1,018,066 $1,065,064
========== ==========
<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>
Nine Months Ended
-----------------------------
June 26, June 27,
IN THOUSANDS 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).................................................................. $15,140 $(156,095)
Adjustments to reconcile net income (loss) to
net cash provided from operating activities
Depreciation.................................................................. 58,082 75,583
Amortization of capitalized software development costs........................ 13,221 56,498
Gain on sale of marketable securities......................................... (8,979) (2,239)
Other non-cash items, net..................................................... 106 16,903
Change in operating assets and liabilities.................................... (22,818) 39,451
--------- ---------
Net cash provided from operating activities................................... 54,752 30,101
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant, and equipment.................................... (93,106) (94,326)
Net proceeds from the purchases and sales of marketable securities................. 35,104 (15,916)
Capitalized software development costs............................................. (26,146) (28,709)
--------- ---------
Net cash used by investing activities......................................... (84,148) (138,951)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided from stock plans..................................................... 7,771 5,853
--------- ---------
Net cash provided from financing activities................................... 7,771 5,853
---------- ---------
Effect of foreign currency rate fluctuations
on cash and temporary cash investments................................................ (2,995) (1,671)
---------- ---------
Decrease in cash and temporary cash investments........................................ (24,620) (104,668)
Cash and temporary cash investments - beginning of period.............................. 158,220 216,814
---------- ---------
Cash and temporary cash investments - end of period.................................... $133,600 $112,146
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid...................................................................... $13,272 $13,502
Income taxes paid.................................................................. $5,741 $1,194
<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)
<TABLE>
Note 1. Consolidated Balance Sheet Details
June 26, Sept. 26,
in thousands 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Inventories
Raw materials...................................................................... $ 5,506 $ 1,420
Work in process.................................................................... 60,730 64,200
Finished systems................................................................... 38,109 50,632
Field engineering parts and components............................................. 22,322 25,387
-------- --------
$126,667 $141,639
======== ========
Property, plant, and equipment
Property, plant, and equipment..................................................... $660,952 $641,612
Accumulated depreciation........................................................... (462,096) (461,158)
-------- --------
$198,856 $180,454
======== ========
</TABLE>
Note 2. Earnings Per Share
The following data show the amounts used in computing earnings per
share and the effect on income and the weighted average number of shares of
potentially dilutive common stock.
<TABLE>
Quarter Ended
-------------------------------------------------------------------------------
June 26, 1999 June 27, 1998
------------------------------------- ----------------------------------------
Loss Shares Per-Share Loss Shares Per-Share
in thousands, except per share amounts (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Net loss available to
common stockholders $(3,017) 50,622 $(0.06) $(155,090) 49,159 $(3.15)
======= ====== ====== ========= ====== ======
Diluted Earnings Per Share
Net loss available to
common stockholders and
assumed conversions $(3,017) 50,622 $(0.06) $(155,090) 49,159 $(3.15)
======= ====== ====== ========= ====== ======
</TABLE>
<TABLE>
Nine Months Ended
-------------------------------------------------------------------------------
June 26, 1999 June 27, 1998
------------------------------------- ---------------------------------------
Income Shares Per-Share Loss Shares Per-Share
in thousands, except per share amounts (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Net income (loss) available to
common stockholders $15,140 50,249 $0.30 $(156,095) 48,895 $(3.19)
===== ======
Effect of Dilutive Securities
Stock options -- 914 -- --
------- ------ --------- ------
Diluted Earnings Per Share
Net income (loss) available to
common stockholders and
assumed conversions $15,140 51,163 $0.30 $(156,095) 48,895 $(3.19)
======= ====== ===== ========= ====== ======
<FN>
<PAGE>
For the quarter and nine-month periods ended June 26, 1999 and June 27,
1998, the assumed conversion of the convertible debentures, giving effect to the
incremental shares and the adjustment to reduce interest expense, is
anti-dilutive and has therefore been excluded from the computation. For the
quarter ended June 26, 1999 and for the quarter and nine-month period ended June
27, 1998, the assumed exercise of stock options, giving effect to the
incremental shares, is anti-dilutive and has therefore been excluded from the
computation.
</FN>
</TABLE>
Note 3. 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 1998 Annual Report. The results of operations for
the interim periods are not necessarily indicative of the results of the entire
fiscal year.
Note 4. Restructuring Charge
During fiscal year 1998, the Company approved and implemented a
restructuring program designed to strengthen the Company's focus on storage and
enterprise computing solutions and reduce costs in non-strategic areas. The
restructuring was adopted in response to the increasing price competition within
the computer hardware industry. Accordingly, during fiscal year 1998, the
Company recorded a charge of approximately $135 million related to the
restructuring program and certain asset write-downs resulting from the program.
The charge included $82.4 million related to employee termination benefits,
asset write-downs, and other exit costs which the Company recorded in operating
expenses, and $52.6 million for capitalized software and inventory write-downs
which were included in product cost of revenues. A summary of the accrued
liability balance related to the $82.4 million charged to operating expenses is
as follows:
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
Less: Fiscal Year 1999
Sept. 26, 1998 Cash Payments and June 26, 1999
in millions Balance Asset Write-downs Balance
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee termination benefits $ 27.0 $ 12.7 $ 14.3
Asset write-downs 6.7 5.7 1.0
Lease abandonments 10.6 1.7 8.9
Other exit costs 3.7 2.6 1.1
------ ------ ------
Total $ 48.0 $ 22.7 $ 25.3
====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision included severance benefits for approximately 480
employees, of which approximately 65% were based in the United States and the
remainder in Europe and Asia/Pacific. Of the 480 employees identified, 451 were
terminated as of June 26, 1999. The remaining terminations are expected to be
complete by the end of the fiscal year. Asset write-downs are composed primarily
of fixed assets, including leasehold improvements and demonstration equipment
which are being disposed of in connection with the restructuring program. There
were no material changes in estimates to prior provisions or additional charges
recorded during the nine-month period ended June 26, 1999.
<PAGE>
Note 5. Comprehensive Income
In the first quarter of fiscal 1999, the Company adopted SFAS Number
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general purpose financial statements. This statement requires the
classification of items of comprehensive income by their nature in a financial
statement and the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
the balance sheet. The Company's total comprehensive income is as follows:
<TABLE>
Quarter Ended Nine Months Ended
-------------------------- ---------------------------
June 26, June 27, June 26, June 27,
in thousands 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income (loss)...................................... $(3,017) $(155,090) $15,140 $(156,095)
Other comprehensive income (expense):
Unrealized gains (losses) on
marketable securities........................... 2,252 (3,019) 1,257 5,183
Cumulative translation adjustment.................. (1,195) (1,157) (3,408) (1,606)
------- --------- ------- ---------
Total other comprehensive income (loss).............. 1,057 (4,176) (2,151) 3,577
------- --------- ------- ---------
Total comprehensive income (loss)....................... $(1,960) $(159,266) $12,989 $(152,518)
======= ========= ======= =========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company reported a net loss of $3.0 million for the current quarter
ended June 26, 1999, compared with a net loss of $155.1 million for the same
period of the prior year. The net income was $15.1 million for the nine months
ended June 26, 1999, compared with a net loss of $156.1 million for the
comparable nine-month period ended June 27, 1998. The net loss for the quarter
and nine-month periods ended June 27, 1998 includes certain charges of
approximately $135.0 million related to the Company's restructuring program and
asset write-downs resulting from the restructuring program. The net income for
the current nine-month period includes a gain of $7.5 million resulting from a
settlement with the Internal Revenue Service related to taxes paid during the
Company's 1983 through 1991 fiscal years and additional gains of $9.0 million
resulting from sales of investments.
<TABLE>
Revenues (in millions)
- ------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
--------------------------------------------------------------------------------------
6/26/99 Change 6/27/98 6/26/99 Change 6/27/98
------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Product $259.6 2% $253.8 $786.2 -- $784.7
% of Total Revenues 73% 72% 73% 73%
Service 96.2 (1%) 97.5 290.6 (1%) 293.7
% of Total Revenues 27% 28% 27% 27%
Total $355.8 1% $351.3 $1,076.8 -- $1,078.4
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the fiscal quarter ended June 26, 1999, product revenues from the
Company's AViiON family of open systems server products were $138.3 million
compared with $131.5 million in the comparable period of the prior year. In the
current quarter, revenues from the Company's Intel processor-based AViiON
systems increased 10% to $129.8 million while revenues from the Motorola
processor-based AViiON systems declined by 39% compared with the same period of
the prior year. The Company anticipates that the percentage of server product
revenues generated by the Intel processor-based AViiON products will continue to
increase, while the Motorola processor-based AViiON system revenues are expected
to continue to decline.
Product revenues from the Company's CLARiiON storage systems increased
10% in the current quarter to $105.7 million despite a decline in revenues from
CLARiiON's largest original equipment manufacturer (OEM) customer by nearly 53%.
Excluding revenues from this customer, CLARiiON revenues grew approximately 47%
from the same period of the prior year. CLARiiON revenues from direct end-user
sales increased significantly from the same period of the prior year and
currently represent approximately 13% of total CLARiiON product revenues. The
Company anticipates that revenues from direct end-user sales will continue to
increase in future periods as a result of the on-going investment in the
CLARiiON direct sales force. CLARiiON has been sold primarily through OEM and
distributor channels; thus sales in any given period are subject to sales cycles
and inventory levels of the Company's customers. CLARiiON revenues accounted for
41% of total product revenues in the current quarter.
Within the CLARiiON family of storage systems, full fibre channel
product revenues represented approximately 62% of total CLARiiON product
revenues in the current quarter. The Company anticipates that the percentage of
revenues from full fibre channel products will continue to increase while the
percentage of revenues from SCSI-based products will decline.
Product revenues from personal computers and other equipment decreased
3% in the current quarter as compared to the same period in the prior year and
represent 6% of total product revenues for the quarter ended June 26, 1999.
Product revenues from VALiiANT, the Company's contract manufacturing operation,
decreased by approximately $10.4 million from the comparable quarter in fiscal
1998 to $0.1 million as certain contracts have expired. VALiiANT revenues
represent less than 1% of total product revenues for the quarter ended June 26,
1999.
For the nine months ended June 26, 1999, product revenues from the
Company's AViiON family of open systems server products were $411.0 million
compared with $398.3 million in the comparable period of the prior year. In the
current nine-month period, revenues from the Company's Intel processor-based
AViiON systems increased 13% to $382.4 million while revenues from the Motorola
processor-based AViiON systems declined by 52% compared with the same nine-month
period of the prior year. Revenues from AViiON systems running the Microsoft NT
operating system increased by approximately 14% from the comparable nine-month
period of the prior year.
Product revenues from the Company's CLARiiON storage systems increased
10% to $322.4 million from the comparable prior-year period and accounted for
41% of total product revenues in the current nine-month period. Within the
CLARiiON family of storage systems, full fibre channel product revenues
increased nearly four times from the comparable nine-month period of the prior
year and represented approximately 56% of total CLARiiON product revenues in the
current nine-month period. Product revenues from personal computers and other
equipment decreased 24% from the same nine-month period in the prior year and
represented 6% of total product revenues compared to 8% for the comparable
prior-year period.
<TABLE>
Revenues by Geographic Marketplace
- -------------------------------------------------------------------------------------------------------------------------------
Percentage of Percentage Change of
Consolidated Revenues $ of Revenues
--------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended 6/26/99 - 6/27/98
--------------------------------------------------------------------------------------------------
6/26/99 6/27/98 6/26/99 6/27/98 Quarter Ended Nine Months Ended
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic
Product 61% 65% 61% 61% (4%) (1%)
Service 60% 60% 59% 60% (2%) (3%)
Total 61% 64% 60% 61% (4%) (1%)
Europe
Product 23% 22% 24% 24% 8% 2%
Service 31% 31% 32% 31% (3%) 2%
Total 25% 24% 26% 26% 4% 2%
Other International
Product 16% 13% 15% 15% 26% 2%
Service 9% 9% 9% 9% 8% (2%)
Total 14% 12% 14% 13% 22% 1%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The decrease in domestic product revenues for the current quarter and
nine-month period ended June 26, 1999 was primarily a result of decreased
shipments of Motorola processor-based AViiON systems and VALiiANT products,
which was partially offset by increased shipments of CLARiiON products and Intel
processor-based AViiON systems.
The increase in European product revenues, including U.S direct export
sales, for the current quarter ended June 26, 1999 was due to increased
shipments of Intel and Motorola processor-based AViiON systems as well as
CLARiiON storage systems, offset, in part, by decreases in personal computers
and other equipment.
The increase in other international product revenues, including U.S.
direct export sales, for the current quarter and nine-month period ended June
26, 1999 is attributable to increased shipments of Intel processor-based AViiON
systems and personal computers and other equipment, offset, in part, by
decreased shipments of CLARiiON storage products.
In the service business, the Company experienced an 8% decrease in
contract maintenance revenues in the current quarter ended June 26, 1999 as
compared with the same period in fiscal 1998 due to a decline in the contract
maintenance service base. This decrease was offset, in part, by a 21% increase
in professional services revenues in the current quarter ended June 26, 1999 as
compared with the quarter ended June 27, 1998. Professional services revenues
represent approximately 28% of total service revenues in the current quarter.
For the nine-month period ended June 26, 1999 the Company experienced a 5%
decrease in contract maintenance revenues offset, in part, by an 11% increase in
professional services revenue. Professional services revenues represented 27% of
total service revenues in the current nine-month period.
Foreign exchange negatively impacted total international revenue by
approximately 2% in the current quarter.
<PAGE>
Cost of Revenues (in millions)
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
-----------------------------------------------------------------------------------------------
6/26/99 Change 6/27/98 6/26/99 Change 6/27/98
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Product $180.3 (26%) $244.3 $541.7 (13%) $624.2
% of Product Revenues 69% 96% 69% 80%
Service 60.3 1% 59.9 182.4 -- 183.2
% of Service Revenues 63% 61% 63% 62%
Total Cost of Revenues $240.6 (21%) $304.2 $724.1 (10%) $807.4
% of Total Revenues 68% 87% 67% 75%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
During the quarter ended June 27, 1998, certain charges of $52.6
million related to the Company's restructuring program were included in the cost
of product revenues. Without the charges, the pro forma cost of product revenues
was 76% and 73% for the quarter and nine-month period ended June 27, 1998. The
decrease in the product cost as a percentage of product revenues from the pro
forma product cost as a percentage of product revenues during the comparable
prior year periods was a result of the shift in product mix to high-end NUMA
technology based AViiON systems which have lower product cost. During the
quarter ended June 26, 1999, an increased percentage of direct end-user CLARiiON
sales also contributed to the decrease in product cost as a percentage of
product revenues. The increase in the service cost as a percentage of service
revenues for the current quarter ended June 26, 1999 as compared to the same
period of the prior year is a result of the shift in service revenue mix from
contract maintenance revenues to professional services revenues.
Operating Expenses (in millions)
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended Nine Months Ended
-------------------------------------------------------------------------------
6/26/99 Change 6/27/98 6/26/99 Change 6/27/98
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Research & Development $28.8 (9%) $31.7 $86.3 (2%) $88.1
% of Total Revenues 8% 9% 8% 8%
Selling, general & administrative $90.9 7% $84.7 $263.7 4% $254.2
% of Total Revenues 26% 24% 24% 24%
Restructuring charge -- -- $82.4 -- -- $82.4
% of Total Revenues -- 23% -- 8%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company continues to focus its research and development efforts on
its core business technology: multi-user computer systems and mass storage
devices. In the current nine-month period, gross expenditures on research and
development and software development before capitalization were $112.4 million,
a decrease of 4% from $116.8 million for the comparable prior-year period. Gross
expenditures on research and development before capitalization for the quarter
ended June 26, 1999 were $38.4 million, a decrease of 2% from $39.1 million
expended during the quarter ended June 27, 1998. For both the three-month and
nine-month periods ended June 26, 1999, continued increases in research and
development expenditures in CLARiiON fibre channel products and NUMA technology,
were offset by savings associated with the Company's restructuring program
implemented in fiscal year 1998.
For the current quarter and nine-month period ended June 26, 1999,
selling, general, and administrative expenses increased by 7% and 4%,
respectively, from the comparable prior-year periods. In the current quarter,
the Company announced plans to significantly increase its sales and marketing
investments in its CLARiiON storage business. This investment, which will be
implemented over the next eighteen months, is expected to result in an increase
of approximately 450 people, of which the majority will be direct sales people.
This expense, and related marketing efforts, is expected to cost more than $100
million over the eighteen-month period. The increase in selling, general and
administrative expenses in the current quarter and nine-month period ended June
26, 1999 from the comparable prior-year periods is primarily the result of
marketing efforts associated with this investment, partially offset by savings
in the server business resulting from the Company's fiscal 1998 restructuring
program.
<PAGE>
During fiscal year 1998, the Company approved and implemented a
restructuring program designed to strengthen the Company's focus on storage and
enterprise computing solutions and reduce costs in non-strategic areas. The
restructuring was adopted in response to the increasing price competition within
the computer hardware industry. Accordingly, during fiscal year 1998, the
Company recorded a charge of approximately $135 million related to the
restructuring program and certain asset write-downs resulting from the program.
The charge included $82.4 million related to employee termination benefits,
asset write-downs, and other exit costs which the Company recorded in operating
expenses, and $52.6 million for capitalized software and inventory write-downs
which were included in product cost of revenues. A summary of the accrued
liability balance related to the $82.4 million charged to operating expenses is
as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
Less: Fiscal Year 1999
Sept. 26, 1998 Cash Payments and June 26, 1999
in millions Balance Asset Write-downs Balance
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee termination benefits $ 27.0 $ 12.7 $ 14.3
Asset write-downs 6.7 5.7 1.0
Lease abandonments 10.6 1.7 8.9
Other exit costs 3.7 2.6 1.1
------ ------ ------
Total $ 48.0 $ 22.7 $ 25.3
====== ====== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision included severance benefits for approximately 480 employees, of
which approximately 65% were based in the United States and the remainder in
Europe and Asia/Pacific. Of the 480 employees identified, 451 were terminated as
of June 26, 1999. The remaining terminations are expected to be complete by the
end of the fiscal year. Asset write-downs are composed primarily of fixed
assets, including leasehold improvements and demonstration equipment which are
being disposed of in connection with the restructuring program. There were no
material changes in estimates to prior provisions or additional charges recorded
during the nine-month period ended June 26, 1999.
At June 26, 1999, the number of employees totaled approximately 4,950,
which are a net increase of approximately 250 and 150 employees from September
26, 1998 and June 27, 1998, respectively.
Interest income for the current quarter was $2.7 million, a 16%
decrease from $3.2 million for the comparable period of fiscal 1998, due to
lower interest yields and levels of invested cash. Interest expense was $3.6
million for both the current quarter and the same quarter of the prior year.
Interest expense relates primarily to interest on the Company's 6% Convertible
Subordinated Notes due 2004. Other income for the current quarter includes a
gain of $3.0 million from the sales of equity investments. Interest income,
interest expense and other income were $8.7 million, $10.9 million and $9.0
million, respectively, for the nine-month period ended June 26, 1999 as compared
to $10.1 million, $10.8 million and $0.2 million, respectively, for the
comparable period of the prior year. Other income for the current nine-month
period relates to gains on sales of equity investments. Other income for the
nine-month period ended June 27, 1998 relates to gains of $2.2 million on sales
of equity investments offset, in part, by a loss of $2.0 million from the
write-off of an investment in a non-affiliated company.
The current quarter income tax expense of $0.6 million relates
primarily to foreign and state income tax, as well as, federal alternative
minimum taxes. The Company has a valuation allowance which offsets substantially
all deferred tax assets as of June 26, 1999 and September 26, 1998. The amount
of the deferred tax assets considered realizable is subject to change based on
estimates of future income during the carryforward period. The Company will
assess the need for the valuation allowance at each balance sheet date based on
all available evidence and may adjust the level of the valuation allowance, if
appropriate. The income tax benefit for the nine-month period ended June 26,
1999 of $5.7 million includes a gain of $7.5 million resulting from a settlement
with the Internal Revenue Service for taxes paid during the Company's 1983
through 1991 fiscal years.
<PAGE>
Financial Condition
Cash and temporary cash investments as of June 26, 1999 were $133.6
million, a decrease of $24.6 million from the end of fiscal 1998. At the same
date, the Company held $135.5 million in marketable securities, a net decrease
of $24.9 million from the end of fiscal 1998. In total, cash and temporary cash
investments along with marketable securities decreased $49.5 million for the
current nine-month period. The decrease was mainly attributable to the purchases
of equipment required for the Company's server and storage businesses, payments
reducing employee and vendor related accruals, payments related to the Company's
investment in the CLARiiON storage business, and payments related to the
restructuring program implemented in June 1998. The marketable securities held,
which supplement cash and temporary cash investments, include United States
treasury bills and notes, notes issued by U.S. government agencies, commercial
paper and certificates of deposit, as well as equity securities recorded at
their fair market value of $11.0 million which are classified as
available-for-sale. The unrealized gain on marketable securities of $9.8 million
as of June 26, 1999 is recorded as a separate component of stockholders' equity.
During the current three-month and nine-month periods ended June 26, 1999, the
Company recorded gains of $3.0 million and $9.0 million, respectively, on the
sales of investments in marketable securities. Net cash provided from operations
for the nine months ended June 26, 1999 totaled $54.8 million; expenditures for
property, plant, and equipment totaled $93.1 million; capitalized software
development costs totaled $26.1 million. Cash provided from stock plans totaled
$7.8 million during the current nine-month period ended June 26, 1999. The
effect of foreign currency exchange rate fluctuations on cash and temporary cash
investments was a decrease of $3.0 million.
Net receivables as of June 26, 1999 were $292.6 million compared with
$307.4 million as of September 26, 1998. This decrease in net receivables of
$14.8 million from September 26, 1998 is primarily attributable to higher
revenues in the quarter ended September 26, 1998 as compared to the current
quarter ended June 26, 1998. Inventories as of June 26, 1999 were $126.7
million, a decrease of $15.0 million from September 26, 1998, primarily as a
result of reduced inventory levels related to improved supply management. Net
property, plant, and equipment increased $18.4 million from September 26, 1998
to $198.9 million primarily due to the purchases of equipment and capital
expenditures for developing both operating and financial systems and to support
the new product initiatives in the server and storage businesses. Fixed asset
dispositions related to the sale of demonstration equipment totaled $5.4 million
for the current nine-month period. Management expects that sales of
demonstration equipment will continue.
The increase of $11.8 million in other assets from September 26, 1998
to $100.4 million at June 26, 1999 was attributed mainly to the capitalization
of software development costs net of related amortization.
The decrease of $40.6 million in accounts payable from September 26,
1998 levels was attributed mainly to the timing of payments related to purchases
of material. Other current and other liabilities decreased by approximately
$32.4 million from September 26, 1998 to $274.0 million. This decrease was
primarily related to funding of the Company's domestic pension plan and payments
related to the Company's restructuring program. Long-term debt of $212.8 million
remained unchanged from September 26, 1998.
<PAGE>
Year 2000 Information and Readiness Disclosure
The "Year 2000 issue" arises because many computer hardware systems and
software programs use only two digits to represent the year. As a result, these
systems and programs may not correctly handle dates beyond 1999, resulting in
errors in information or program or systems failures. Assessments of the
potential effects of the Year 2000 issues vary markedly among different
companies, governments, consultants, economists, and commentators. It is not
possible to accurately predict what the actual impact may be. In this context,
the Company offers the following statements concerning the Year 2000 issues. All
statements made and referred to here are Year 2000 readiness disclosures under
the U.S. Year 2000 Information and Readiness Disclosure Act. Except as otherwise
noted, all statements in this Year 2000 Information and Readiness Disclosure are
stated as of June 26, 1999.
To better address the Year 2000 issue in a comprehensive and
coordinated manner, across all of Data General's operations worldwide, the
Company has created a cross-functional corporate Year 2000 project team,
reporting and responsible to the senior management of the Company. A project
plan has been adopted and is guiding the Company's efforts to assess and address
Year 2000 issues pertaining to each of the identified functional areas of the
company's operations.
1. Product Readiness and Customer Communications
The Company is communicating with its customers concerning the Year
2000 issue. The primary means of communication are the Data General and
CLARiiON Year 2000 Internet web sites at http://www.dg.com/year2000 and
http://www.clariion.com/year2000/index.html, where Year 2000 readiness
disclosures concerning various products and the Company's Year 2000 program are
made available to customers and the general public.
The Company has assessed the Year 2000 readiness of Data General's
AViiON computer systems and CLARiiON storage products, as well as of Data
General Pentium processor-based and later generation personal computers. Based
on these efforts, the Company has determined that Data General's AViiON computer
systems and CLARiiON storage products are either Year 2000 Ready or may be made
so by means of Year 2000 updates or patches available from the Company. As well,
the Company offers a Year 2000 support strategy for the current releases of Data
General's DG/UX operating system software, the details of which are available
on the Data General Year 2000 web site. Most other active Data General and
CLARiiON-branded products, including many 32-bit ECLIPSE MV computer systems,
have also been evaluated for Year 2000 readiness. Consistent with industry
practices, inquiries concerning Year 2000 readiness of third-party products
resold by Data General are being referred to the third-party suppliers of such
products. The Company has determined not to test certain products for Year 2000
Readiness. As well, some Data General products have been determined to not be
Year 2000 Ready. For the most current information concerning products' Year 2000
readiness, customers are directed to the Data General Year 2000 web sites, since
the Company is making no statement regarding Year 2000 readiness for any product
except as noted on the Company's Year 2000 web sites.
2. Data General's Internal Systems, Manufacturing Processes and Facilities
Data General has been preparing for Year 2000 since mid-1996, and has
established teams to coordinate solutions to the Year 2000 issue for its own
internal information systems and applications across the Company's operations
worldwide. Generally, the Company has structured the Year 2000 project in four
phases: inventory and assessment; remediation and/or avoidance; compliance
confirmation; and (as and when appropriate) contingency planning. As of December
31, 1998, Data General had substantially completed the assessment and inventory
phase of its Year 2000 project relative to the Company's key information system
and applications. As of June 26, 1999, approximately 80% of the Company's key
business systems have been qualified by the Company as Year 2000 Ready. Data
General continues to address known Year 2000 issues, and is committed to making
its key internal information systems Year 2000 Ready in time to meet the
Company's critical business requirements. Based on existing plans and schedules,
and subject to the possibility of delays, the Company plans to have
substantially all of its key business systems Year 2000 Ready by September 30,
1999. Although Data General's Year 2000 project relative to its critical
information management systems is still in process, the Company believes that
the impact of the Year 2000 issues on its core business systems and applications
should not have a material adverse impact on future results.
The Company has assessed the Year 2000 issue as related to its
manufacturing facilities and processes. Projects are underway to address those
Year 2000 issues which have been identified. The Company is not aware at June
26, 1999, of any material Year 2000 concerns with respect to its manufacturing
facilities and processes.
The Company is also continuing its assessment of the possible impact of
Year 2000 issues on the operations of its offices and facilities (including such
matters as security systems, PBX and voicemail systems, and heating and
air-conditioning systems). Projects are underway to address those Year 2000
issues that have been identified. The Company is not aware at June 26, 1999, of
any material Year 2000 concerns with respect to the operation of its offices and
facilities.
The Company has sought to assess the Year 2000 risks arising from
external factors, such as potential interruptions of telecommunications or
transportation services or utilities, for the Company's key geographical
locations based on currently available data. However, the likelihood and extent
of widespread or persistent interruptions to such infrastructure services is
generally difficult to predict. As more accurate information becomes available,
the Company will be completing and tuning its contingency plans intended to
support the continued operation of the Company's critical functions in the event
of interruptions to infrastructure services.
3. Data General's Suppliers
The Company's procurement organizations are seeking to monitor the Year
2000 readiness of the Company's key suppliers. The Company is assessing the
responses to Year 2000 readiness questionnaires sent in December 1998, to an
extensive list of suppliers, including those suppliers which the Company
considers most critical to its operations. Each of 124 suppliers considered most
critical to the Company's manufacturing operations has provided satisfactory
assurances concerning the supplier's Year 2000 readiness. In addition, as of
June 26, 1999, more than 80% of the Company's 253 largest suppliers (excluding
those mentioned above) have also given the Company satisfactory Year 2000
assurances. The Company is following up with these and other suppliers where
appropriate. Since the Company's suppliers' Year 2000 preparations and
assessments are ongoing, Data General's efforts to monitor the Year 2000
readiness of key suppliers will be continuing. If Year 2000 readiness issues are
identified, the Company intends to take reasonable actions as needed to address
the Company's business requirements.
Since determining the Year 2000 readiness of suppliers depends upon
their cooperation and upon their disclosure of often imprecise or estimated
information, it is likely that the Company's inquiries will not be entirely
successful, and it remains possible that the actual outcomes may deviate from
the suppliers' assurances to the Company. It is possible that notwithstanding
the Company's efforts, interruptions of key components or services could have an
adverse impact on the Company's operations and future results.
The Company is evaluating contingency plans to mitigate or avoid
potential interruptions to normal business operations. It is likely, however,
that not every potential Year 2000 exposure will be avoided; for example
alternative sources of supply for single-sourced components may not always be
readily available. A measure of reasonable business risk will be undertaken
relative to the Year 2000 problem, both by Data General and by other companies.
4. Risks of Claims
There may be a potential for claims against the Company arising from
products and services that were not Year 2000 Ready. Because the Company is in
the business of selling computer system products, the Company's risk of being
subjected to lawsuits relating to Year 2000 issues with its products is likely
to be greater than that of companies in other industries. Although the Company
believes that it has valid defenses to Year 2000 claims which may be brought
against it by its customers, the outcomes of Year 2000 claims and the impact of
such claims on the Company cannot be determined at this time. The actual
outcomes will depend on the facts and circumstances of each situation and on an
evolving state of law as Year 2000 claims are addressed by legal systems
worldwide.
5. Costs Associated with the Year 2000 Project
The cost of addressing Year 2000 issues is funded through operating
cash flows. The Company does not expect the amounts to have a material effect on
its financial position or results of operations. The Company has incurred costs
of approximately $10.5 million directly associated with Year 2000 projects to
date as of June 26, 1999.
6. Certain Additional Risk Factors
It is unknown how the Company's sales may be impacted by Year 2000
issues. As the Company's customers focus on preparing their businesses for Year
2000, capital budgets in the near term may be redirected toward remediation
efforts, potentially delaying the purchase or implementation of new systems,
thereby creating less demand for the Company's products and services. As well,
customers' procurement efforts may be temporarily delayed as a result of Year
2000 readiness testing within customers' operations. Alternatively, sales of
Year 2000 Ready Data General products could be increased, as Year 2000 Ready
products are purchased to replace older products. Service revenues could be
reduced if customers discontinue support of products which are not Year 2000
Ready, or perhaps increased as customers purchase new, Year 2000 Ready systems.
As well, the Company's sales during 1999 could be affected by the customers'
perceptions of Data General's own state of Year 2000 readiness. All these
factors could affect the Company's future revenues.
Overriding any preparations taken by the Company, the Year 2000
issue presents risks and uncertainties that could affect the Company; these
include unexpected Year 2000 issues, or unexpected problems arising from plans
implemented to anticipate Year 2000 problems; interruptions to power, water or
telecommunications utility services; potential unavailability of skilled or
critical personnel; delays or interruptions in transportation systems; and
potential governments' responses to Year 2000 emergencies, among others.
Further, there can be no assurance that there will not be delays in, or
increased costs associated with, the Company's Year 2000 readiness efforts, or
that the Company's suppliers and other parties will adequately prepare for the
Year 2000. Notwithstanding the Company's diligent efforts, one can anticipate
that Data General will not be able in all cases to identify and avoid every
possible Year 2000 impact.
The Company is working to assess and evaluate likely Year 2000 problem
scenarios and to evaluate Year 2000 contingency plans in appropriate cases. The
Company expects that this contingency planning effort will continue throughout
1999 as the Company completes its preparations for the Year 2000 and learns more
about the Year 2000 preparations and vulnerabilities of third parties.
The nature of the uncertainties surrounding the Year 2000 issue is such
that it remains possible that Year 2000 issues could have a material adverse
impact on the Company's operations and financial results. While the Company does
not currently expect that this will be the case and continues to aggressively
pursue its preparations for Year 2000, the Company can offer no assurance
whether or to what extent the Company may be affected by matters which it has
not anticipated or by matters outside of the Company's control. The Company
recognizes the need to continue its analysis, assessment, monitoring, and
planning for the various Year 2000 issues, across its businesses worldwide, and
to address Year 2000 issues as they are identified. Within that uncertain
context, however, and subject to the various factors discussed above, the
Company believes as of June 26, 1999, that the impact of Year 2000 issues on its
business should not have a material adverse effect on the Company's financial
position or results of operations.
Market Risk
The Company is exposed to market risk primarily in its cash and foreign
currency transactions. Because a substantial portion of the Company's operations
and revenue occur outside the United States, the Company's results can be
significantly impacted by changes in foreign currency exchange rates. The
Company manages its foreign currency risk through the use of forward foreign
currency contracts. The Company does not hold or enter into derivative financial
instruments for trading purposes. At inception, the forward foreign currency
contracts are designated as hedges of intercompany accounts receivable and
foreign sales which are firmly committed or forecasted. These contracts
generally mature within three-months. Market value gains and losses on these
contracts are included in the cost of product revenues and generally offset
exchange gains or losses on the related transactions.
As of June 26, 1999, the Company had entered into forward foreign
currency contracts to purchase $26.0 million and sell $71.9 million in various
foreign currencies with maturity dates of July 26 and July 27, 1999. The
potential gain or loss from a hypothetical 10% beneficial or adverse change in
foreign currency exchange rates on the forward foreign currency contracts
maturing after June 26, 1999 would result in a gain or loss of approximately
$4.6 million. The Company expects that exchange gains or losses on the related
hedged transactions would offset this gain or loss.
Euro Conversion
On January 1, 1999, 11 of the 15 members of the European Union
established fixed conversion rates between their existing currencies and the
"Euro." The Euro will trade on currency exchanges and the legacy currencies will
remain legal tender for a transition period between January 1, 1999 and January
1, 2002. During the transition period, public and private companies may pay for
goods and services using the Euro or the participating country's legacy
currency. The participating countries will issue sovereign debt exclusively in
Euros, and will redenominate outstanding sovereign debt. Participating countries
no longer control their own monetary policies by directing independent interest
rates for their legacy currencies. Instead, the authority to direct monetary
policy, including money supply and official interest rates will be exercised by
the new European Central Bank.
The Company has established plans and has begun developing the
necessary modifications for the technical adaptation of its internal information
technology and other systems to accommodate Euro-denominated transactions. The
Company is also assessing the business implications of the conversion to the
Euro, including long-term competitive implications and the effect of market risk
with respect to financial instruments. The Company is currently unable to
determine the ultimate financial impact of these matters, if any, on its results
of operations, financial condition or cash flows. However, the Company will
continue to assess the impact of Euro conversion issues as the applicable
accounting, tax, legal, and regulatory guidance evolves.
Statements concerning the Company's business outlook or future economic
performance; Year 2000 readiness; currency market risk; Euro conversion issues;
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 Data General's Report on Form 10-K for the 1998
fiscal year-ended September 26, 1998 and this Quarterly Report on Form 10-Q for
the third fiscal quarter of 1999, which ended June 26, 1999.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has been engaged in patent infringement litigation against
IBM Corporation since November 1994. Two lawsuits, both in the discovery stages,
are pending in the United States District Court for the District of
Massachusetts in Worcester. The Company alleges that several IBM products
including the AS/400 midrange systems and the AS/400 RISC-based computer product
line infringe various Company patents. Both suits seek compensatory damages and,
where appropriate, injunctive relief. IBM has answered both complaints, has
denied the Company's infringement claims and has interposed counterclaims
alleging that the Company's AViiON and CLARiiON computer systems infringe IBM
patents.
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 counterclaims 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 results of operations or the financial position 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.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3. (c) By-Laws of the Company, as amended through November 4, 1998,
previously filed as Exhibit 3(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
3. (e) Amendment to Certificate of Incorporation of the Company,
filed January 28, 1999, previously filed as Exhibit 3(e) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 26, 1998, which is incorporated herein by
reference.
10. (w) Employee Qualified Stock Purchase Plan, as amended, previously
filed as Exhibit 10(w) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 27, 1999 which is
incorporated herein by reference.
10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8,
Registration Number 333-69559, which is incorporated herein by
reference.
10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement,
previously filed as Exhibit 10(kk) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
10. (ll) Form of Amendment to Employment Agreements between the Company
and its key executives previously filed as Exhibit 10(ll) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December, 26, 1998, which is incorporated herein by
reference.
10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed
as Exhibit 4.2 to the Company's Registration Statement on Form
S-8, Registration Number 333-69559, which is incorporated
herein by reference.
10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement,
previously filed as Exhibit 10(nn) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief
Executive Officer, previously filed as Exhibit 10(oo) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 26, 1998, which is incorporated herein by
reference.
10. (pp) Amendment to Supplemental Pension and Retiree Medical
Agreement dated December 2, 1998, between the Company and its
President and Chief Executive Officer, previously filed as
Exhibit 10(pp) to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 26, 1998, which is incorporated
herein by reference.
(b) No reports on Form 8-K were filed during the current quarter ended June 26,
1999.
<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/ John J. Gavin Jr.
--------------------------------------------
John J. Gavin Jr.
Chief Financial Officer, Vice President, and
Corporate Controller
Dated: August 5, 1999
<PAGE>
EXHIBITS
Index to Exhibits.
3. (c) By-Laws of the Company, as amended through November 4, 1998,
previously filed as Exhibit 3(c) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
3. (e) Amendment to Certificate of Incorporation of the Company,
filed January 28, 1999, previously filed as Exhibit 3(e) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December 26, 1998, which is incorporated herein by
reference.
10. (w) Employee Qualified Stock Purchase Plan, as amended, previously
filed as Exhibit 10(w) to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 27, 1999, which is
incorporated herein by reference.
10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8,
Registration Number 333-69559, which is incorporated herein by
reference.
10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement,
previously filed as Exhibit 10(kk) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
10. (ll) Form of Amendment to Employment Agreements between the Company
and its key executives previously filed as Exhibit 10(ll) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended December, 26, 1998, which is incorporated herein by
reference.
10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed
as Exhibit 4.2 to the Company's Registration Statement on Form
S-8, Registration Number 333-69559, which is incorporated
herein by reference.
10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement,
previously filed as Exhibit 10(nn) to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 26, 1998,
which is incorporated herein by reference.
10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief
Executive Officer, previously filed as Exhibit 10(oo) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended December 26, 1998, which is incorporated herein by
reference.
10. (pp) Amendment to Supplemental Pension and Retiree Medical
Agreement dated December 2, 1998, between the Company and its
President and Chief Executive Officer, previously filed as
Exhibit 10(pp) to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 26, 1998, which is incorporated
herein by reference.
<TABLE> <S> <C>
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<S> <C>
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