<PAGE> 1
10-K/A
Amendment No. 1 to Form 10-K
(X) Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended July 3, 1993
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 1-5296
Digital Equipment Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-2226590
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
146 Main Street, Maynard, Massachusetts 01754-2571
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 493-5111
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered (a)
<S> <C>
Common Stock, par value $1 New York Stock Exchange
Pacific Stock Exchange
Midwest Stock Exchange
<FN>
(a) In addition, shares of Common Stock of the registrant are listed on
the Montreal Exchange and certain stock exchanges in Switzerland and
Germany.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (a) 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
Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. []
As of September 7, 1993, 135,009,330 shares of the registrant's Common Stock,
par value $1, were issued and outstanding. The aggregate market value of
the registrant's voting stock held by non-affiliates of the registrant as of
September 7, 1993 was approximately $5.6 billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 1993 Annual Report to Stockholders are
incorporated by reference in Part II hereof.
<PAGE> 2
Portions of the registrant's Proxy Statement for its 1993 Annual
Meeting of Stockholders, scheduled to be held on November 4, 1993, are
incorporated by reference in Part III hereof.
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K as set
forth on the pages attached hereto:
Part II
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
Page 28
<TABLE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Income and Expense Items as a
Percentage of Total Operating Revenues (a) Percentage Changes
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1991 1992 1993 Income and Expense Items 1992-93 1991-92 1990-91
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
59.7% 55.2% 52.8% Product sales (1)% (7)% 2%
40.3% 44.8% 47.2% Service and other revenues 9% 11% 17%
- -------------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0% Total operating revenues 3% - 7%
- -------------------------------------------------------------------------------------------------------
47.1% 55.2% 58.8% Cost of product sales (b) 5% 9% 2%
60.1% 62.3% 61.4% Service expense and cost of other revenues(b) 7% 15% 14%
- -------------------------------------------------------------------------------------------------------
52.3% 58.4% 60.1% Total cost of operating revenues 6% 12% 7%
11.9% 12.6% 10.6% Research and engineering expenses (13)% 6% 2%
32.1% 33.6% 30.9% Selling, general and administrative expenses (5)% 5% 13%
7.9% 10.8% - Restructuring charges (100)% 36% 100%
- -------------------------------------------------------------------------------------------------------
(4.2)% (15.3)% (1.7)% Operating loss 89% (100+)% (100+)%
- -------------------------------------------------------------------------------------------------------
0.8% 0.7% .4% Interest income (34)% (15)% (20)%
0.3% 0.3% .4% Interest expense 32% (14)% 45%
- -------------------------------------------------------------------------------------------------------
Loss before income taxes and cumulative
(3.7)% (14.9)% (1.6)% effect of change in accounting principle 89% (100+)% (100+)%
- -------------------------------------------------------------------------------------------------------
0.7% 1.7% .2% Provision for income taxes (88)% 100+% 97%
- -------------------------------------------------------------------------------------------------------
Loss before cumulative effect of change
(4.4)% (16.6)% (1.7)% in accounting principle 89% (100+)% (100+)%
- -------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
- 3.5% - principle, net of tax benefits (100)% - -
- -------------------------------------------------------------------------------------------------------
(4.4)% (20.1)% (1.7)% Net loss 91% (100+)% (100+)%
- -------------------------------------------------------------------------------------------------------
<FN>
Note (a) Percentages of operating revenues may not be additive due to rounding.
Note (b) Cost of product sales and service expense and cost of other revenues
are shown as percentages of their related revenues.
</TABLE>
<PAGE> 3
Overview
Fiscal 1993 marked a year of significant change for the Corporation, as it
responded to the changing environment in the information technology industry.
The Corporation's operating results for fiscal 1993 reflect the effects of
restructuring actions taken during the past several years. Although the
Corporation reported a net loss of $251 million for the year, it demonstrated
consistent year over year improvement in operating results for the last three
quarters of the year, posting a net profit of $113 million for the fourth
quarter.
Service revenues have continued to grow, and represent a larger percentage of
total operating revenues than ever before. In addition, the mix of products
and services which make up the Corporation's total operating revenues has
changed dramatically over the last several years.
At the beginning of fiscal 1993, the Corporation introduced new models of its
traditional VAX systems which are designed to upgrade easily to Alpha AXP
systems. The Alpha AXP architecture, announced during fiscal 1992, is designed
to run multiple operating systems and to be the foundation for a leading high-
performance computer family. During the year, the Corporation introduced
personal computers, workstations and client-server computer systems based on
the Alpha AXP architecture, as well as DEC OSF/1 V1.2, the Corporation's
unified UNIX operating system for the Alpha AXP family of systems. Sales of
Alpha AXP computer systems and components represent a significant future
revenue opportunity. For fiscal 1993, the sale of Alpha AXP computer systems
did not have a significant impact on operating results.
As the price/performance of computer systems has improved, the profitable sale
and service of these products have become increasingly dependent on low-cost
product design and manufacture, and on efficient delivery in high volumes. At
the same time, customer needs for solutions, which integrate hardware and
software products from multiple vendors, present an opportunity to the
Corporation to provide, in addition to its broad product and maintenance
service offerings, consulting, planning and integration expertise through
direct sales channels focused on specific industries.
The Corporation has implemented organizational changes which it believes will
enable it to respond to these changing business models. The effectiveness of
these newly implemented changes cannot yet be measured, but the Corporation
believes they are necessary for it to compete successfully in the various
businesses in which it participates.
Page 29
Revenues
In fiscal 1993, total operating revenues, which were $14.4 billion, grew by
$440 million or 3%, following an increase of $20 million, or less than 1% in
fiscal 1992 and $1 billion or 7% in fiscal 1991.
Non-U.S. revenues accounted for 64% of total operating revenues in fiscal 1993,
up from 63% in fiscal 1992 and 60% in fiscal 1991. European revenues increased
to $7 billion in fiscal 1993, up from $6.8 billion and $6.3 billion in fiscal
1992 and 1991, respectively. The increase in fiscal 1993 European revenues, as
reported in U.S. dollars, was principally attributable to favorable foreign
currency fluctuations. Over the last several years, the Corporation has
increased its presence in European markets primarily through two acquisitions
completed in fiscal 1992 and 1991 (see Note J).
Product sales for fiscal 1993 were $7.6 billion, or 53% of total operating
revenues, compared with $7.7 billion or 55% of revenues in fiscal 1992 and $8.3
billion or 60% of revenues in fiscal 1991. While the Corporation shipped
substantially more computer systems in fiscal 1993 than in fiscal 1992, product
sales for fiscal 1993 were essentially unchanged compared with the prior year,
due primarily to a continued shift in the mix of product sales toward low-end,
lower-priced computer systems and away from the Corporation's traditional
proprietary mid-range products.
In fiscal 1993, service and other revenues totaled $6.8 billion or 47% of total
operating revenues. Service revenues grew by $549 million or 9%, following
increases of 11% and 17% in fiscal 1992 and 1991, respectively. The
Corporation's service revenues are derived principally from hardware and
software product services and systems integration services. The growth in
service revenues for fiscal 1993 was due to increased demand for systems
integration and other professional and consulting services and the service of
non-Digital products. In response to customer demand for a worldwide integrated
services provider, the Corporation is focusing on multivendor customer service
opportunities.
<PAGE> 4
<TABLE>
TOTAL OPERATING REVENUES
<CAPTION>
Year $ Millions
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
93 ************************************************************************************* 14371
++++++++++++++++++++++++++++++++++++++++++ 6783
92 ************************************************************************************ 13931
+++++++++++++++++++++++++++++++++++++++ 6235
91 *********************************************************************************** 13911
+++++++++++++++++++++++++++++++++++ 5612
90 ****************************************************************************** 12943
++++++++++++++++++++++++++++++ 4797
89 ***************************************************************************** 12742
+++++++++++++++++++++++++++++ 4552
88 ************************************************************************ 11475
++++++++++++++++++++++++ 3934
87 ********************************************************* 9389
+++++++++++++++++++++ 3135
86 ********************************************** 7590
++++++++++++++++ 2487
85 **************************************** 6686
+++++++++++++++ 2156
84 ********************************** 5584
++++++++++++ 1780
83 ************************** 4272
++++++++++ 1444
- -----------------------------------------------------------------------------------------------------
<FN>
++++ Service and Other Revenues
**** Total Operating Revenues
</TABLE>
<TABLE>
<CAPTION>
NON-UNITED STATES REVENUES
- --------------------------
Year $ Millions
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
93 ****************************************************************************************** 9164
92 **************************************************************************************** 8799
91 ************************************************************************************ 8380
90 ************************************************************************** 7281
89 *********************************************************************** 7017
88 ********************************************************** 5730
87 ********************************************* 4413
86 ******************************** 3179
85 *************************** 2642
84 ******************** 1978
83 **************** 1543
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
Page 30
Expenses and Profit Margins
The Corporation's total gross margin for fiscal 1993 was $5.7 billion (40% of
total operating revenues), compared with $5.8 billion in fiscal 1992 (42% of
total operating revenues) and $6.6 billion in fiscal 1991 (48% of total
operating revenues).
The Corporation's gross margin on fiscal 1993 product sales was $3.1 billion
(41% of product sales), compared with $3.4 billion (45% of product sales) for
fiscal 1992 and $4.4 billion (53% of product sales) for fiscal 1991. The
continued decline in product gross margin was due to several factors, including
a continued shift in the Corporation's mix of product sales from larger systems
toward low-end systems which typically carry lower margins. In addition,
competitive pricing actions taken by the Corporation in the period also
contributed to the decline in product gross margins. The Corporation is
addressing the industry trend toward lower product gross margins by continuing
to reduce manufacturing costs, eliminating excess capacity, streamlining its
product offerings and using externally supplied components and subsystems,
where appropriate.
Gross margin on service revenues for fiscal 1993 was $2.6 billion (39% of
service revenues), compared with $2.4 billion in fiscal 1992 (38% of service
revenues) and $2.2 billion (40% of service revenues) in fiscal 1991. The
improvement in service gross margin for fiscal 1993 was due to a higher volume
of service revenues and to greater efficiencies in service delivery. The
decline in service gross margin as a percentage of service revenues in fiscal
1992 compared with fiscal 1991 was due in part to slow growth in the
higher-margin hardware maintenance business and substantially higher growth in
newer service offerings such as systems integration, which have relatively
lower margins.
Demonstrating the Corporation's efforts to bring research and engineering (R&E)
spending in line with industry norms, R&E expenses declined 13% to $1.5 billion,
or 10.6% of total operating revenues in fiscal 1993. This compares with $1.8
billion or 12.6% of total operating revenues in fiscal 1992, and $1.6 billion or
11.9% of total operating revenues in fiscal 1991. The decrease in R&E expenses
was due to several factors, including the elimination of redundant
engineering efforts and streamlined product offerings, which resulted in a
reduction in employee population. The Corporation's R&E investment program is
focused on maintaining a strong, consistently market-driven product set and on
attaining and sustaining technology leadership in selected areas.
<PAGE> 6
<TABLE>
RESEARCH AND ENGINEERING
<CAPTION>
Year $ Millions
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
93 ****************************************************************************** 1530
92 **************************************************************************************** 1754
91 *********************************************************************************** 1649
90 ********************************************************************************* 1614
89 ***************************************************************************** 1525
88 ****************************************************************** 1306
87 *************************************************** 1010
86 ****************************************** 814
85 ************************************* 717
84 ******************************** 631
83 ************************* 472
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
TOTAL EMPLOYEE POPULATION
- -------------------------
Year Thousands
- -----------------------------------------------------------------------------------
<S> <C> <C>
93 *********************************************** 94
92 ******************************************************* 114
91 ************************************************************ 121
90 ************************************************************** 124
89 *************************************************************** 126
88 ************************************************************* 122
87 ******************************************************* 111
86 *********************************************** 95
85 ******************************************** 89
84 ******************************************* 86
83 ************************************ 73
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
Page 31
Fiscal 1993 selling, general and administrative (SG&A) expenses were $4.4
billion (30.9% of total operating revenues), compared with $4.7 billion (33.6%
of total operating revenues) in fiscal 1992 and $4.5 billion (32.1% of total
operating revenues) in fiscal 1991. The 5% decrease in SG&A expenses in fiscal
1993 was primarily the result of reductions in employee population,
complemented by reductions in other overhead costs, and a reduction in expense
derived from the repurchase and cancellation of certain outstanding stock
options.
At the time the repurchase of the options was approved, the Corporation's
stock price was substantially below the exercise price of the options.
The Corporation believed that the options were providing limited, if any,
incentive value to optionholders and no longer enhanced the Corporation's
ability to retain their services over the remaining option period, yet the
Corporation was required to continue recognizing annual compensation
expense associated with the options. After evaluating various
alternatives, the Corporation concluded that the repurchase and
cancellation of the options was in the best interests of the Corporation
and the optionholders (see Note K).
The Corporation has and will continue its efforts to streamline selling and
administrative practices, reduce costs and increase productivity. As part of
this effort, the Corporation is emphasizing and continues to derive an
increasing portion of product sales from indirect and telemarketing channels.
In addition, during fiscal 1993, the Corporation implemented competitive
incentive compensation programs for its sales force in selected countries and is
expanding these programs to include essentially all countries by the end of
fiscal 1994. Fiscal 1992 SG&A expenses increased $209 million compared with
fiscal 1991, due principally to the acquisitions of Digital-Kienzle and the
Philips Information Systems Division (see Note J).
In order to implement plans designed to achieve a competitive cost structure,
the Corporation absorbed restructuring charges of $1.5 billion, $1.1 billion and
$550 million in fiscal years 1992, 1991 and 1990, respectively, to cover costs
of employee separations, facilities consolidations, asset retirements,
relocation and related costs (see Note E). The Corporation has reduced employee
population significantly, as noted below, closed or sold a number of businesses,
plants and other facilities (approximately 11.4 million square feet) and plans
to take further restructuring actions.
During fiscal 1993, the Corporation took a number of actions consistent with the
restructuring reserve established at the end of fiscal 1992, discussed below.
These actions, totaling $808 million, utilized approximately $630 million of
cash, $455 million for employee-related activities and $175 million for
facility-related actions, and included a noncash write-off related to property,
plant and equipment ($139 million) and other actions for the balance of the
amount.
At the end of fiscal 1992, having fully utilized the 1991 restructuring reserve
and in response to an unanticipated drop in product sales during the second half
of fiscal 1992 and resulting operating losses, additional restructuring plans
were formulated. These plans resulted in the establishment of approximately
$1.0 billion of reserves related to employee separations and $500 million of
reserves related to facilities associated with these employees.
During fiscal 1992, $990 million of restructuring reserves was utilized. Of
that amount, cash expenditures were approximately $760 million for
employee-related activities and $110 million for facility-related actions; the
Corporation also recorded a noncash write-off of $58 million related to
property, plant and equipment and the balance covered other actions.
<PAGE> 9
In fiscal 1991, despite the introduction of new products, the Corporation
continued to experience essentially flat product sales, unforeseen and
persistent weakness in the U.S. market, the commencement of slowing economic
activity in overseas markets and the intensification of the pervasive change in
industry demand to low-end products. As the shift to low-end products further
accelerated, price competition intensified. The Corporation's operating income,
before restructuring, declined as Selling, General and Administrative costs
increased at a rate greater than product sales. Therefore, in the fourth
quarter of fiscal 1991, a restructuring reserve of $1.1 billion was provided, of
which $550 million was for employee separations and the balance for facility
consolidations and equipment retirements and other programs. The reserve
included reductions in office space related to employee separations throughout
the Corporation.
During fiscal 1991, restructuring actions utilized cash of approximately $385
million for employee-related activities and $60 million for facility-related
actions. In addition, a noncash write-off of approximately $59 million
related to property, plant and equipment was recorded against the reserve.
Other adjustments to income on the statement of cash flows includes a noncash
write-off for property, plant and equipment, related to restructuring, of $139
million, $58 million and $59 million for fiscal 1993, 1992 and 1991,
respectively.
As a result of the restructuring activities to date, the Corporation has
eliminated an estimated $2 billion of annual operating costs, including
approximately $1.8 billion of annual cash expenses related to employee
separations, and $200 million of facility operating costs of which approximately
one-half is annual cash expense. The Corporation believes that the reserve
remaining at the end of fiscal 1993 of $739 million is adequate for presently
planned restructuring actions, which will eliminate additional operating costs
in fiscal 1994 and beyond.
Of the reserve remaining at the end of fiscal 1993 ($739 million), the
Corporation estimates that approximately $600 million of cash will be utilized
in fiscal 1994 and beyond. The Corporation further believes its cash
balance of $1.6 billion is sufficient for all presently planned restructuring
actions.
Total employee population decreased by 19,600 during fiscal 1993. The
Corporation had approximately 89,900, 107,900 and 115,100 regular employees at
the end of fiscal 1993, 1992 and 1991, respectively, and an additional
4,300, 5,900 and 5,900 temporary and contract workers at the end of fiscal 1993,
1992 and 1991, respectively.
Interest income in fiscal 1993 decreased to $64 million from $96 million in
fiscal 1992 and $113 million in fiscal 1991, reflecting lower interest rates and
lower average cash balances. Interest expense increased to $51 million in fiscal
1993 from $39 million and $45 million in fiscal 1992 and 1991, respectively.
The increase in fiscal 1993 interest expense resulted principally from the
issuance of $1 billion of long-term debt during the year.
In fiscal 1993, the Corporation's income tax expense was $27 million on a
pre-tax loss of $224 million (see Note C). In fiscal 1992, the Corporation's
income tax expense was $232 million on a pre-tax loss of $2.1 billion. The
tax expense reflects several factors, including taxes provided for profitable
non-U.S. operations and an inability to recognize currently U.S. tax benefits
from operating losses.
For fiscal 1993, the Corporation reported a net loss of $251 million, compared
with a loss of $2.8 billion and $617 million for fiscal 1992 and 1991,
respectively. The fiscal 1992 loss included a $1.5 billion restructuring charge
and a one-time charge of $485 million for the cumulative effect of an accounting
change.
<PAGE> 10
In November 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 112 - Employers'
Accounting for Postemployment Benefits. SFAS No. 112 requires employers to
recognize an obligation for benefits provided to employees after employment but
before retirement. The Corporation must adopt SFAS No. 112 no later than the end
of fiscal 1995. The Corporation has not adopted SFAS No. 112, and has not yet
determined the impact of such adoption on the Corporation's consolidated
financial position or results of operations. Adoption of SFAS No. 112 will have
no cash flow impact on the Corporation.
In February 1992, the FASB issued SFAS No. 109 - Accounting for Income Taxes.
The Corporation will adopt SFAS No. 109 in the first quarter of fiscal 1994.
SFAS No. 109 requires, among other things, the recognition of a deferred tax
asset or liability for estimated future tax effects attributable to temporary
differences and carryforwards. Upon adoption, the Corporation expects to
recognize additional gross deferred tax assets of approximately $1.9 billion,
which will consist primarily of tax benefits associated with net operating loss
carryforwards, postretirement benefits and restructuring charges of
approximately $1 billion, $360 million and $230 million, respectively. The
additional gross assets will be almost entirely offset by valuation allowances,
resulting in a one-time benefit of approximately $20 million to the
consolidated statement of operations. The adoption of SFAS No. 109 will have no
cash flow impact on the Corporation (see Note C).
On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 was signed
into law. This act, among other things, raises the U.S. corporate statutory tax
rate from 34% to 35%. Due to the net operating loss carryforwards, the
Corporation does not expect the change in the statutory tax rate to have a
material impact on the Corporation's consolidated financial position or results
of operations for the foreseeable future.
<PAGE> 11
Page 32
Availability of Funds to Support Current and Future Operations and Spending for
Operations
Cash and cash equivalents totaled $1.6 billion, $1.3 billion and $1.9 billion
at the end of fiscal 1993, 1992 and 1991, respectively.
Net cash flows from operating activities were $47 million in fiscal 1993
compared with $431 million and $1 billion in fiscal 1992 and 1991,
respectively. Fiscal 1993 cash flows from operating activities were primarily
the result of improved accounts receivable, offset by restructuring activities,
the net loss for the year and decreased accounts payable.
Net cash used for investing activities was $884 million, $981 million and $1
billion in fiscal 1993, 1992 and 1991 respectively. In fiscal 1993, the
Corporation completed its purchase of a minority interest in Ing. Olivetti & C.
S.p.A. for $288 million (see Note J). Capital expenditures totaled $529 million
in fiscal 1993 (including approximately $117 million for the construction of a
semiconductor fabrication plant and purchase of equipment in Hudson,
Massachusetts), compared with $710 million and $738 million in fiscal 1992 and
1991, respectively. The Corporation intends to continue making investments in
support of its objective of sustaining technology leadership in selected areas.
As a result, the Corporation expects that its capital expenditures for fiscal
1994 will be somewhat greater than for fiscal 1993, including an estimated $175
million for the Hudson project. This project has an anticipated total cost of
$425 million, with a remaining $123 million to be expended in fiscal 1995 and
1996.
The Corporation disposed of property, plant and equipment and other assets in
fiscal 1993, generating approximately $68 million in cash proceeds compared
with $15 million in fiscal 1992.
Cash flows from financing activities were $1.1 billion, ($36) million and ($99)
million in fiscal 1993, 1992 and 1991, respectively. The principal financing
activity in fiscal 1993 was the issuance of $1 billion in aggregate principal
amount of notes and debentures under the Corporation's $1 billion shelf
registration statement filed during the first quarter of fiscal 1993 (see note
F). The Corporation also received $196 million during fiscal 1993 from the
issuance of common stock under the Corporation's stock purchase plans compared
with $232 million and $240 million in fiscal 1992 and 1991, respectively.
Total debt was $1.04 billion, $91 million and $173 million at the end of fiscal
1993, 1992 and 1991, respectively. At the end of fiscal 1993, substantially all
of the available lines of credit were unused, including a three-year $750
million committed credit facility, entered into by the Corporation with a
syndicate of banks in May 1993.
The Corporation historically has maintained a conservative capital structure,
and believes that its current cash position and debt capacity are adequate to
support current and future operations.
<PAGE> 12
<TABLE>
Investments in Property, Plant and Equipment
Depreciation Expense
<CAPTION>
Year $ Millions
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
93 ********************************** 529
+++++++++++++++++++++++++++++++++++++++++++ 699
92 ******************************************** 710
+++++++++++++++++++++++++++++++++++++++++++++ 733
91 ********************************************** 738
++++++++++++++++++++++++++++++++++++++++++++++++ 772
90 ************************************************************** 1028
+++++++++++++++++++++++++++++++++++++++++++++++ 759
89 **************************************************************************** 1223
+++++++++++++++++++++++++++++++++++++++++ 659
88 ***************************************************************************************** 1518
+++++++++++++++++++++++++++++++++ 516
87 ********************************************** 748
++++++++++++++++++++++++++++ 435
86 ************************************ 564
+++++++++++++++++++++++++ 384
85 ************************************* 572
+++++++++++++++++++++ 315
84 ***************************** 452
+++++++++++++++++ 253
83 *************************** 419
++++++++++++++ 203
- ------------------------------------------------------------------------------------------------------------
<FN>
++++ Depreciation
**** Investments
</TABLE>
<PAGE> 13
Page 33
Report of Management
The Corporation's management is responsible for the preparation of the financial
statements in accordance with generally accepted accounting principles and for
the integrity of all the financial data included in this annual report.
In preparing the financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions that are currently
being reported.
Management maintains a system of internal accounting controls that is designed
to provide reasonable assurance that assets are safeguarded and that
transactions are executed and recorded in accordance with management's policies
for conducting its business. This system includes policies which require
adherence to ethical business standards and compliance with all laws to which
the Corporation is subject. The internal controls process is continuously
monitored by direct management review and an internal audit program under which
periodic independent reviews are made.
The Corporation's independent public accountants annually review the accounting
and control systems of the Corporation. Their audit includes a review of the
internal control structure to the extent they consider necessary and selective
tests of transactions to support their report.
The Board of Directors, through its Audit Committee, which is composed of three
Board members who are independent of management, is responsible for determining
that management fulfills its responsibility with respect to the Corporation's
financial statements and the system of internal accounting controls.
The Audit Committee meets regularly with representatives of management, the
independent accountants and the Corporation's internal auditors to review
audits, financial reporting, and internal control matters, and when
appropriate, meets with the Corporation's outside counsel on relevant matters.
The independent accountants and the internal auditors have full and free access
to the Audit Committee and regularly meet privately with the Audit Committee.
Coopers & Lybrand, independent accountants, have been engaged by the Audit
Committee of the Board of Directors, with the approval of the stockholders, to
audit the Corporation's financial statements. Their report follows.
/a/ Robert B. Palmer
President and Chief Executive Officer
/a/ William M. Steul
Vice President, Finance and Chief Financial Officer
<PAGE> 14
Item 8. Financial Statements and Supplementary Data
Page 34
Report of Independent Accountants
To The Stockholders and Directors,
Digital Equipment Corporation
We have audited the accompanying consolidated balance sheets of Digital
Equipment Corporation as of July 3, 1993 and June 27, 1992, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the three fiscal years in the period ended July 3, 1993. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Digital Equipment
Corporation as of July 3, 1993 and June 27, 1992, and the consolidated results
of its operations and cash flows for each of the three fiscal years in the
period ended July 3, 1993, in conformity with generally accepted accounting
principles.
As discussed in Note G to the consolidated financial statements, the
Corporation changed its method of accounting for postretirement benefits other
than pensions in fiscal 1992.
/a/ Coopers & Lybrand
Boston, Massachusetts
July 28, 1993
<PAGE> 15
Page 35
<TABLE>
Consolidated Statements of Operations
<CAPTION>
(in thousands except per share data)
Year Ended
- -----------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues (Notes A and B)
Product sales $ 7,587,994 $ 7,696,029 $ 8,298,515
Service and other revenues 6,783,375 6,234,843 5,612,489
------------------------------------------
Total operating revenues 14,371,369 13,930,872 13,911,004
------------------------------------------
Costs and Expenses (Notes A, G and K)
Cost of product sales 4,464,445 4,248,118 3,905,355
Service expense and cost of
other revenues 4,166,946 3,883,705 3,373,025
Research and engineering
expenses 1,530,119 1,753,898 1,649,380
Selling, general and
administrative expenses 4,447,160 4,680,822 4,471,629
Restructuring charges (Note E) - 1,500,000 1,100,000
------------------------------------------
Operating loss (237,301) (2,135,671) (588,385)
------------------------------------------
Interest Income 63,831 96,176 113,221
Interest expense 50,837 38,517 44,556
------------------------------------------
Loss before income taxes and
cumulative effect of change
in accounting principle (224,307) (2,078,012) (519,720)
Provision for income taxes
(Notes A and C) 27,023 232,000 97,707
------------------------------------------
Loss before cumulative effect of
change in accounting
principle (251,330) (2,310,012) (617,427)
Cumulative effect of change in
accounting principle,
net of tax (Note G) - 485,495 -
------------------------------------------
Net Loss $ (251,330) $(2,795,507) $ (617,427)
------------------------------------------
Per Share (Note A)
Loss before cumulative effect of
change in accounting
principle $ (1.93) $ (18.50) $ (5.08)
Cumulative effect of change
in accounting principle - (3.89) -
------------------------------------------
Net Loss per Share (Note A) $ (1.93) $ (22.39) $ (5.08)
------------------------------------------
Weighted average shares
outstanding (Note A) 130,409 124,864 121,558
- -----------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 16
Page 36
<TABLE>
Consolidated Balance Sheets
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------
July 3, 1993 June 27,1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents (Note A) $ 1,643,195 $ 1,337,172
Accounts receivable, net of allowance of
$110,764 and $129,686 3,020,252 3,594,268
Inventories (Note A)
Raw materials 331,506 264,871
Work-in-process 502,200 495,632
Finished goods 921,434 853,531
---------------------------
Total inventories 1,755,140 1,614,034
Prepaid expenses and deferred income
taxes (Note C) 463,928 575,364
---------------------------
Total current assets 6,882,515 7,120,838
---------------------------
Property, Plant and Equipment (Note A)
Land 363,264 372,989
Buildings 1,887,211 1,871,710
Leasehold improvements 532,369 592,971
Machinery and equipment 4,410,586 4,835,454
---------------------------
Total property, plant and equipment 7,193,430 7,673,124
Less accumulated depreciation 4,015,139 4,103,422
---------------------------
Net property, plant and equipment 3,178,291 3,569,702
---------------------------
Other assets (Notes A, C, D and J) 889,537 593,769
---------------------------
Total assets $10,950,343 $11,284,309
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Bank loans and current portion of
long-term debt (Note F) $ 21,335 $ 49,061
Accounts payable 822,434 1,041,300
Income taxes payable (Note C) 57,614 63,725
Salaries, wages and related items 556,151 551,727
Deferred revenues and customer advances
(Note A) 1,138,323 1,208,635
Restructuring reserve (Note E) 738,989 1,546,904
Other current liabilities 583,868 644,696
--------------------------------------
Total current liabilities 3,918,714 5,106,048
Deferred income taxes (Note C) - 23,033
Long-term debt (Note F) 1,017,577 41,636
Postretirement benefits (Note G) 1,128,653 1,182,658
--------------------------------------
Total liabilities 6,064,944 6,353,375
Commitments (Note H)
Stockholders' Equity (Notes K, L and M)
Common stock, $1.00 par value;
authorized 450,000,000 shares;
issued 135,489,805 shares and
130,008,231 shares 135,490 130,008
Additional paid-in capital 2,851,960 2,692,444
Retained earnings 1,937,627 2,282,688
Treasury stock at cost; 497,551 shares and
2,193,014 shares (39,678) (174,206)
--------------------------------------
Total stockholders' equity 4,885,399 4,930,934
--------------------------------------
Total liabilities and stockholders' equity $10,950,343 $11,284,309
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 17
Page 37
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
(in thousands)
Year Ended
- -----------------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss $ (251,330) $(2,795,507) $ (617,427)
--------------------------------------------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 698,631 732,536 772,310
Amortization 139,552 100,292 56,250
Other adjustments to income 185,617 269,095 189,077
(Increase)/decrease in accounts receivable 574,016 (86,163) 105,977
(Increase)/decrease in inventories (141,106) 155,881 18,616
(Increase)/decrease in prepaid expenses (26,552) 42,908 (47,239)
Increase/(decrease) in accounts payable (218,866) 277,918 (17,694)
Increase/(decrease) in taxes 75,590 55,142 (105,614)
Increase/(decrease) in salaries, wages,
benefits and related items (49,581) 1,115,240 74,982
Increase/(decrease) in deferred revenues
and customer advances (70,312) 101,421 92,222
Increase/(decrease) in restructuring reserve (807,915) 510,200 593,160
Decrease in other current liabilities (60,828) (48,259) (73,719)
--------------------------------------------
Total adjustments 298,246 3,226,211 1,658,328
--------------------------------------------
Net cash flows from operating activities 46,916 430,704 1,040,901
--------------------------------------------
Cash Flows from Investing Activities
Investment in property, plant, and equipment (528,691) (710,436) (737,548)
Proceeds from the disposition of
property, plant, and equipment 46,049 15,141 -
Investment in other assets (Note J) (423,573) (139,459) (55,782)
Proceeds from the disposition of other assets 22,100 - -
Business acquisitions, net of cash
acquired (Note J) - (146,387) (233,261)
--------------------------------------------
Net cash flows from investing activities. (884,115) (981,141) (1,026,591)
--------------------------------------------
Net cash flows from operating and
investing activities (837,199) (550,437) 14,310
--------------------------------------------
Cash Flows from Financing Activities
Proceeds from issuance of debt 984,482 25,821 14,249
Payments to retire debt (36,860) (108,472) (112,426)
Purchase of treasury shares - (185,292) (240,719)
Issuance of common shares and treasury shares,
including tax benefits 195,600 231,502 239,653
--------------------------------------------
Net cash flows from financing activities 1,143,222 (36,441) (99,243)
--------------------------------------------
Net increase/(decrease) in cash and cash
equivalents 306,023 (586,878) (84,933)
Cash and cash equivalents at beginning
of year 1,337,172 1,924,050 2,008,983
--------------------------------------------
Cash and cash equivalents at end of year $1,643,195 $ 1,337,172 $1,924,050
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 18
Page 38
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional Total
Common Paid-in Retained Treasury Stockholders'
(in thousands) Stock Capital Earnings Stock Equity
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 30, 1990 $130,008 $2,565,487 $6,257,199 $(770,780) $8,181,914
- ----------------------------------------------------------------------------------------------------------------------------
Purchase of 3,700,000 shares of treasury stock (240,719) (240,719)
Shares issued under stock plans (294,917) 524,334 229,417
Restricted stock plans, charge to operations 60,419 60,419
Tax benefits related to stock plans 10,235 10,235
Net loss-1991 (617,427) (617,427)
- ----------------------------------------------------------------------------------------------------------------------------
June 29, 1991 $130,008 $2,636,141 $5,344,855 $(487,165) $7,623,839
- ----------------------------------------------------------------------------------------------------------------------------
Purchase of 3,014,083 shares of treasury stock (185,292) (185,292)
Shares issued under stock plans (266,660) 498,251 231,591
Restricted stock plans, charge to operations 56,303 56,303
Net loss-1992 (2,795,507) (2,795,507)
- ----------------------------------------------------------------------------------------------------------------------------
June 27, 1992 $130,008 $2,692,444 $2,282,688 $(174,206) $4,930,934
- ----------------------------------------------------------------------------------------------------------------------------
Shares issued under stock plans 5,482 149,321 (93,731) 134,528 195,600
Restricted stock plans, charge to operations 42,038 42,038
Repurchase unexercised option shares (31,843) (31,843)
Net loss-1993 (251,330) (251,330)
- ----------------------------------------------------------------------------------------------------------------------------
July 3, 1993 $135,490 $2,851,960 $1,937,627 $ (39,678) $4,885,399
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes K, L and M in the Notes to Consolidated Financial Statements. Cash
dividends have never been paid by the Corporation.
The accompanying notes are an integral part of these financial statements.
<PAGE> 19
Page 39
Notes to Consolidated Financial Statements
Note A - Significant Accounting Policies
Principles of Consolidation - The consolidated financial statements of the
Corporation include the financial statements of the parent and its U.S. and
non-U.S. subsidiaries. All intercompany accounts and profits have been
eliminated. Certain prior years' amounts have been reclassified to conform with
current year presentation.
Fiscal Year - The fiscal year of the Corporation is the fifty-two/fifty-three
week period ending the Saturday nearest the last day of June. The fiscal year
ended July 3, 1993 includes 53 weeks. The fiscal years ended June 27, 1992 and
June 29, 1991 include 52 weeks.
Translation of Foreign Currencies - For non-U.S. operations, the U.S. dollar is
the functional currency. Monetary assets and liabilities of foreign subsidiaries
are translated into U.S. dollars at current exchange rates. Nonmonetary assets
such as inventories and property, plant and equipment are translated at
historical rates. Income and expense items are translated at average exchange
rates prevailing during the year, except that inventories and depreciation
charged to operations are translated at historical rates. Exchange gains and
losses arising from translation are included in current income.
The Corporation enters into forward foreign exchange contracts to delay the
short-term impact of foreign currency fluctuations on operations and the asset
and liability positions of non-U.S. subsidiaries. The gains and losses on these
contracts are included in income when the operating revenues and expenses are
recognized and, for assets and liabilities, in the period in which the exchange
rates change. The cash flows related to these gains and losses are classified
in the statement of cash flows, as part of cash flows from operating activities.
See Note I for information on the Corporation's other financial instruments.
Revenue Recognition - Revenues from product sales are recognized at the time
the product is shipped. Service and other revenues are recognized ratably over
the contractual period or as the services are performed.
Warranty - Warranty revenues are recognized ratably over the warranty period;
warranty related costs are recognized as service expense as incurred. The
Corporation also provides warranty coverage as a product attribute on certain
products. Estimated costs to repair such products are accrued as product cost
when the product is shipped.
Net Income/(Loss) per Share - Per share amounts are calculated based on the
weighted average number of common shares and common share equivalents
outstanding during periods of net income. Common share equivalents are
attributable to stock options. Per share amounts are calculated based only on
the weighted average number of common shares during periods of net loss.
<PAGE> 20
Cash Equivalents - The Corporation considers all highly liquid temporary cash
investments with maturities of three months or less at date of acquisition to be
cash equivalents. Cash equivalents are valued at cost plus accrued interest,
which approximates market.
Taxes - In general, the Corporation's practice is to reinvest the earnings of
its foreign subsidiaries in those operations
and repatriation of retained earnings is done only when it is advantageous to
do so. Applicable taxes are provided only on amounts planned to be remitted.
Inventories - Inventories are stated at the lower of cost (first-in, first-out)
or market.
<TABLE>
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Depreciation expense is computed principally on the following bases:
<CAPTION>
Classification Depreciation Lives
and Methods
- ------------------------------------------------------------------------------
<S> <C>
Buildings 33 years (straight-line)
Leasehold Life of assets or term of lease,
Improvements whichever is shorter (straight-line)
Machinery and
Equipment 3 to 10 years (accelerated methods)
- ------------------------------------------------------------------------------
</TABLE>
Other Assets - Other assets includes equity investments, capitalized software
development costs, goodwill, deferred taxes and other intangible assets.
Goodwill and other intangible assets are amortized on the straight-line method
over their estimated lives, but not in excess of 15 years.
Software development costs are capitalized beginning at the time that technical
feasibility is established. These costs are amortized over three years from the
date the products are available for general use.
<PAGE> 21
Page 40
<TABLE>
Note B - Geographic Operations
<CAPTION>
(in thousands)
Year Ended
- -----------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Revenues
United States:
Unaffiliated customer sales $ 5,219,276 $ 5,154,159 $ 5,586,492
Inter-area transfers 1,793,832 1,900,455 2,200,684
----------------------------------------------
7,013,108 7,054,614 7,787,176
----------------------------------------------
Europe:
Unaffiliated customer sales 6,973,709 6,751,222 6,216,746
Inter-area transfers 633,935 520,953 278,544
----------------------------------------------
7,607,644 7,272,175 6,495,290
----------------------------------------------
Canada, Asia, Americas, Pacific Rim:
Unaffiliated customer sales 2,178,384 2,025,491 2,107,766
Inter-area transfers 1,378,870 1,168,956 1,269,327
----------------------------------------------
3,557,254 3,194,447 3,377,093
----------------------------------------------
Eliminations (3,806,637) (3,590,364) (3,748,555)
----------------------------------------------
Net revenues $14,371,369 $13,930,872 $13,911,004
- --------------------------------------------------------------------------------
Income/(Loss)
United States $ (363,454) $(1,971,032) $ (976,651)
Europe 12,446 (184,951) 474,180
Canada, Asia, Americas, Pacific Rim 115,091 68,313 142,622
Eliminations (1,384) (48,001) (228,536)
----------------------------------------------
Operating loss (237,301) (2,135,671) (588,385)
----------------------------------------------
Interest income 63,831 96,176 113,221
Interest expense 50,837 38,517 44,556
----------------------------------------------
Loss before income taxes and
cumulative effect of
change in accounting principle $ (224,307) $(2,078,012) $ (519,720)
- --------------------------------------------------------------------------------
Assets
United States $ 4,202,395 $ 4,766,206 $ 5,124,445
Europe 4,910,165 5,195,715 4,706,122
Canada, Asia, Americas, Pacific Rim 1,730,754 1,854,167 1,576,413
Corporate assets 1,444,259 1,183,387 1,728,959
Eliminations (1,337,230) (1,715,166) (1,261,236)
----------------------------------------------
Total assets $10,950,343 $11,284,309 $11,874,703
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 22
Page 41
Note B - Geographic Operations (continued)
Industry - The Corporation operates in one business segment: the design,
manufacture, and service of networked computer systems.
Non-U.S. Operations - Sales and marketing operations outside the United States
are conducted principally through sales subsidiaries in Canada, Europe, Central
and South America, Asia and the Pacific Rim; by direct sales from the parent
corporation and through various representative distributorship arrangements and
value-added resellers. The Corporation's non-U.S. manufacturing operations
include plants in the Americas, Europe and the Pacific Rim. The products of
these manufacturing plants are sold to the Corporation's sales subsidiaries, the
parent corporation or other manufacturing plants for further processing.
Intercompany transfers between geographic areas are accounted for at prices
which are intended to be representative of unaffiliated party transactions.
Sales to unaffiliated customers outside the United States, including U.S.
export sales, were $9.2 billion, $8.8 billion and $8.4 billion for the years
ended July 3, 1993, June 27, 1992 and June 29, 1991, respectively, which
represented 64%, 63% and 60%, respectively, of total operating revenues. The
retained earnings of substantially all of the Corporation's international
subsidiaries have been reinvested to support operations. These accumulated
retained earnings, before elimination of intercompany transactions, aggregated
$4.0 billion, $3.6 billion and $4.3 billion at July 3, 1993, June 27, 1992 and
June 29, 1991, respectively.
<TABLE>
Note C - Income Taxes
- --------------------------------------------------------------------------------
Income/(loss) before income taxes for U.S. and non-U.S. operations (in thousands)
<CAPTION>
- --------------------------------------------------------------------------------
Year Ended July 3,1993 June 27, 1992 June 29, 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $(383,808) $(1,934,186) $(803,205)
Non-U.S. 159,501 (143,826) 283,485
Total $(224,307) $(2,078,012) $(519,720)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
Reconciliation of U.S. federal statutory rate to actual tax rate
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Ended July 3,1993 June 27, 1992 June 29, 1991
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory tax (benefit) rate (34.0)% (34.0)% (34.0)%
Tax benefit of manufacturing operations in:(a)
Puerto Rico (8.1) 1.7 (2.6)
Ireland (16.0) (3.4) (15.6)
Singapore (7.8) 0.0 (2.9)
Taiwan (0.1) (0.1) (0.8)
Benefit not recorded due to net loss
carryforward position 60.5 31.5 60.4
Non-U.S. tax rates, net of foreign tax credits 20.8 16.7 19.3
Other (3.3) (1.2) (5.0)
- ----------------------------------------------------------------------------------------
Effective tax rate 12.0% 11.2% 18.8%
- ----------------------------------------------------------------------------------------
<FN>
Note (a) The income from products manufactured for export by the Corporation's manufacturing
subsidiary in Ireland is subject to a 10% tax rate through December 2010. The income from
certain products manufactured by the Corporation's manufacturing subsidiary in Singapore is
taxed at approximately 3% through December 1993 and then at 13.5% through December 1995. The
income from certain products manufactured by the Corporation's subsidiary operating in Taiwan
is subject to a reduced tax rate of 20% through June 1997. During fiscal year 1993, the
Corporation discontinued its manufacturing operation in Puerto Rico.
</TABLE>
<PAGE> 23
Page 42
Note C - Income Taxes (continued)
At July 3, 1993, the Corporation had net operating loss carryforwards of
approximately $4.8 billion for financial reporting purposes which generally
will begin to expire in 2007. In addition, the Corporation has not recognized
income tax credits of approximately $100,000,000 which will begin to expire in
2001.
Included in prepaid expenses and deferred income taxes on the consolidated
balance sheets are current net deferred tax assets of $84,806,000 and
$222,794,000 for fiscal years 1993 and 1992, respectively. Included in other
assets on the consolidated balance sheet for fiscal 1993 are long-term net
deferred tax assets of $33,254,000.
<TABLE>
Components of provisions for (benefits from) U.S. federal and non-U.S. income
taxes (in thousands)
<CAPTION>
Year Ended
- -----------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal:
Current $ (5,023) $(155,883) $(234,968)
Deferred (19,871) 107,249 205,905
-------------------------------------------------
Total (24,894) (48,634) (29,063)
-------------------------------------------------
Non-U.S.:
Current (57,525) 92,794 262,803
Deferred 103,497 183,998 (124,642)
-------------------------------------------------
Total 45,972 276,792 138,161
-------------------------------------------------
State income taxes 5,945 3,842 (11,391)
-------------------------------------------------
Total income taxes $ 27,023 $232,000 $ 97,707
- -----------------------------------------------------------------------------------
</TABLE>
<TABLE>
Deferred tax expense - sources of timing differences and their tax effect
<CAPTION>
(in thousands)
Year Ended
- -----------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Inventory related transactions $ 211,972 $ 81,840 $ (39,004)
Deferred warranty revenue 3,438 12,882 1,966
Depreciation (151,722) 90,269 7,014
Postretirement benefits (122,633) (26,151) 19,977
Restructuring 320,337 (193,834) (233,539)
Benefit not recorded due to net loss
carryforward position (130,550) 246,872 347,080
Other (47,216) 79,369 (22,231)
--------------------------------------------
Total deferred tax expense $ 83,626 $291,247 $ 81,263
- -----------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
In connection with its normal examination of the Corporation's 1989, 1990 and
1991 tax returns, the Internal Revenue Service has proposed adjustments. The
Corporation believes its judgments in these matters have been appropriate and
any adjustments which might result would not have a material effect on the
financial statements.
In fiscal years 1993, 1992 and 1991, income taxes paid were $53,889,000,
$144,620,000 and $186,090,000, respectively.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 109 - Accounting for Income Taxes. The
Corporation will adopt SFAS No. 109 in the first quarter of fiscal 1994.
SFAS No. 109 requires, among other things, the recognition of a deferred tax
asset or liability for estimated future tax effects attributable to temporary
differences and carryforwards. Upon adoption, the Corporation expects to
recognize additional gross deferred tax assets of approximately $1.9 billion,
which will consist primarily of tax benefits associated with net operating loss
carryforwards, postretirement benefits and restructuring charges of
approximately $1 billion, $360,000,000 and $230,000,000, respectively. The
additional gross assets will be almost entirely offset by valuation allowances,
resulting in a one-time benefit of approximately $20,000,000 to the consolidated
statement of operations. The adoption of SFAS No. 109 will have no cash flow
impact on the Corporation.
See Note A for further explanation of the Corporation's income tax accounting
policies.
<PAGE> 25
Page 43
Note D - Capitalized Computer Software Development Costs
Unamortized computer software development costs were $138,024,000 and
$133,800,000 at July 3, 1993 and June 27, 1992, respectively. Amortization
expense was $68,978,000, $63,956,000 and $44,424,000 for the years ended July 3,
1993, June 27, 1992 and June 29, 1991, respectively. Accumulated amortization
was $168,845,000 and $186,051,000 at July 3, 1993 and June 27, 1992,
respectively.
Note E - Restructuring Actions
Since fiscal year 1990, the Corporation has recorded restructuring charges of
$3.15 billion.
During fiscal year 1993, the Corporation took a number of actions consistent
with the previously recorded reserves, including employee separations,
and the sale or closing of facilities. Other operations continue to be moved
from leased to owned facilities, and consolidated where appropriate.
<TABLE>
Note F - Debt
Long-term debt, exclusive of current maturities (in thousands):
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Maturity Date
(Calendar Year) Interest Rate July 3, 1993 June 27, 1992
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Lease obligations 1994-2002 6.81%-19% (a) $ 24,578 $27,405
Notes (b) 1997 7% 250,000 -
Notes (b) 2002 7 1/8% 250,000 -
Debentures (b) 2012 8 5/8% 250,000 -
Debentures (b) 2023 7 3/4% 250,000 -
Unamortized discount and commissions (b) (16,183) -
Other debt obligations 9,182 14,231
-------------------------------------------------------------
Total long-term debt,
exclusive of current maturities. $1,017,577 $41,636
- -------------------------------------------------------------------------------------------------------------
<FN>
Note (a) Weighted average interest rate at July 3, 1993 and June 27, 1992 of 8.7% and 10.7%, respectively.
Note (b) The Notes and Debentures are not redeemable prior to maturity and are not entitled to any sinking fund.
The unamortized discount and commissions relate to these Notes and Debentures.
</TABLE>
Principal payments during the next five fiscal years are as follows: 1994 -
$4,764,000; 1995 - $6,046,000; 1996 - $6,376,000; 1997 - $6,446,000; 1998 -
$257,004,000.
In fiscal years 1993, 1992 and 1991, interest paid was $37,123,000, $43,494,000
and $42,605,000, respectively.
Based primarily on dealer quotes, the fair value of long-term borrowings was
approximately $1.1 billion at July 3, 1993.
The Corporation had lines of credit available for short-term and medium-term
financing totaling $1.2 billion and $.9 billion at fiscal years ended July 3,
1993 and June 27, 1992, respectively. Substantially all of these lines of
credits were unused at the end of fiscal 1993 and 1992.
Included in the above lines of credit is a three-year $750,000,000 committed
credit facility, entered into by the Corporation with a syndicate of banks in
May 1993. The facility may be used for general corporate purposes and is subject
to satisfaction of certain financial covenants and annual facility fees of
0.175%. The commitment fees on the remaining unused lines are neither material
nor significant.
In connection with the long-term debt issued in fiscal year 1993, the
Corporation, on occasion, may enter into interest rate swap agreements. As a
result of these agreements, the effective interest rate on the Notes and
Debentures would differ from the stated interest rates. There were no interest
rate swaps in effect at July 3, 1993.
<PAGE> 26
Page 44
Note G - Postretirement Benefits
Pension Plans - The Corporation and its subsidiaries have defined benefit and
defined contribution pension plans covering substantially all employees. The
benefits are based on years of service and compensation during the
employee's career. Pension cost is based on estimated benefit payment formulas.
It has been the Corporation's policy to make tax-deductible contributions to the
plans in accordance with local laws. Contributions are intended to provide not
only for benefits attributed to service to date but also for those expected to
be earned in the future. For the U.S. pension plan, there were no
contributions in the fiscal years 1993, 1992 or 1991 due to the full funding
limit of the Omnibus Budget Reconciliation Act of 1987. The assets of the plans
include corporate equity and debt securities, government securities and real
estate.
The Corporation's fiscal year 1993 pension cost, before curtailment gains,
declined reflecting the positive effects of restructuring activities. The
Corporation recognized a one-time charge of $161,658,000 in fiscal 1992 for
special early retirement pension benefits as a component of restructuring costs.
The net periodic pension cost for defined contribution pension plans was
$7,944,000, $11,202,000, and $11,398,000 for the fiscal years ended July 3,
1993, June 27, 1992 and June 29, 1991, respectively. The measurement dates for
all plans were within 90 days of year-end.
<TABLE>
<CAPTION>
Components of net periodic pension cost (in thousands)
Year Ended
- -------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned
during the period $ 192,546 $ 234,842 $ 239,238
Interest cost on projected benefit
obligations 201,203 180,898 163,007
Actual return on plan assets (291,127) (166,055) (38,524)
Net amortization and deferral 79,421 (47,927) (160,731)
Curtailment gains - (138,100) (157,000)
-------------------------------------------
Net periodic pension cost for
defined benefit pension plans $ 182,043 $ 63,658 $ 45,990
-------------------------------------------
Total net periodic pension
cost for all pension plans $ 189,293 $ 87,833 $ 67,102
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
Significant actuarial assumptions for pension plans
<CAPTION>
Year Ended
- -------------------------------------------------------------------------------
July 3, 1993 June 27, 1992 June 29, 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. pension plan:
Discount rate 8.0% 8.5% 9.0%
Expected long-term rate of return
on plan assets 9.0% 9.0% 9.5%
Rate of increase in future
compensation levels 6.0% 6.5% 6.8%
Non-U.S. pension plans:
Discount rate 5.0- 9.0% 5.0- 9.0% 5.0- 9.5%
Expected long-term rate of return
on plan assets 6.0-10.0% 6.0-10.0% 6.0-10.0%
Rate of increase in future
compensation levels 3.5- 7.5% 4.8- 8.0% 5.0- 8.0%
</TABLE>
<PAGE> 27
Page 45
<TABLE>
Note G - Postretirement Benefits (continued)
Funded status of pension plans as of the year-end measurement date
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------------------
Year Ended July 3, 1993 June 27, 1992
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(1,321,322) $(1,397,318)
-----------------------------
Accumulated benefit obligation $(1,497,035) $(1,582,385)
-----------------------------
Projected benefit obligation $(2,606,673) $(2,761,783)
Plan assets at fair value 2,536,614 2,671,657
-----------------------------
Plan assets less than projected benefit obligation (70,059) (90,126)
Contributions made after measurement
date but before end of fiscal year 2,916 3,811
Unrecognized net gain (275,390) (130,372)
Unrecognized prior service cost 67,427 47,842
Unrecognized net transition asset (78,597) (107,443)
-----------------------------
Pension liability recognized on the balance sheet $ (353,703) $ (276,288)
- -------------------------------------------------------------------------------------
</TABLE>
Postretirement Benefits Other Than Pensions - The Corporation has defined
benefit postretirement plans that provide medical, dental, and life insurance
benefits for U.S. retirees and their eligible dependents. Substantially all of
the Corporation's U.S. employees may become eligible for postretirement
benefits if they reach retirement age while working for the Corporation. The
majority of the Corporation's non-U.S. subsidiaries do not offer postretirement
benefits other than pensions to retirees.
The Corporation's postretirement benefits plans other than pensions are funded
as costs are incurred. Fiscal 1993 expense reflects a reduction from the prior
year resulting from cost sharing changes. Retiree contributions for the U.S.
medical plan will be based on length of service for employees retiring after
fiscal 1993.
The Corporation adopted Statement of Financial Accounting Standards No. 106 -
Employers' Accounting for Postretirement Benefits Other Than Pensions in fiscal
year 1992 and elected to recognize the cumulative effect immediately for its
U.S. and material non- U.S. plans, which resulted in a charge of $485,495,000,
net of tax benefits of $4,188,000, to fiscal 1992 results. Postretirement
benefits costs totaled $6,400,000 for the year ended June 29, 1991 and were
recognized as expense as claims were paid.
The Corporation also recognized a one-time charge of $142,985,000 in fiscal
year 1992 for special early postretirement benefits other than pensions as a
component of restructuring costs.
<TABLE>
<CAPTION>
Components of net periodic postretirement benefits costs (in thousands)
- --------------------------------------------------------------------------------
Year Ended July 3, 1993 June 27, 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
Service cost for benefit earned during
the period $ 25,560 $37,543
Interest cost on accumulated postretirement
benefits obligations 50,915 42,525
Actual return on plan assets - -
Net amortization and deferral (8,538) -
Curtailment gains (30,000) -
----------------------------------
Net periodic postretirement benefits cost$ 37,937 $80,068
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 28
Page 46
<TABLE>
Note G - Postretirement Benefits (continued)
Significant actuarial assumptions for other postretirement benefits plans
<CAPTION>
(dollars in thousands)
- ------------------------------------------------------------------------------------------------
Year Ended July 3, 1993 June 27, 1992
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. plans:
Discount rate 8.0% 8.5%
Health care cost trend rate, current year 10.6% 13.8%
Health care cost trend rate, ultimate year 6.0% 6.0%
Trend rate decreases to the ultimate rate in the year 2005 2005
Effect of a 1% increase in the trend rate:
Increase in accumulated postretirement
benefits obligation $137,913 $148,386
Increase in net periodic postretirement benefits cost $ 17,598 $ 19,674
Non-U.S. plans:
Discount rate 5.0- 8.5% 5.0- 8.5%
Health care cost trend rate, current year 5.0-13.0% 5.0-14.0%
Health care cost trend rate, ultimate year 5.0- 7.0% 5.0- 7.0%
Trend rates decrease to the ultimate rates in the years 1993-2050 1992-2050
Effect of a 1% increase in the trend rate:
Increase in accumulated postretirement
benefit obligation $ 5,861 $ 4,280
Increase in net periodic postretirement benefit cost $ 564 $ 578
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
Funded status of other postretirement benefits plans as of the year-end measurement date
<CAPTION>
(in thousands)
- ---------------------------------------------------------------------------------
Year Ended July 3, 1993 June 27, 1992
- ---------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $(413,887) $(351,489)
Fully eligible plan participants (20,572) (25,383)
Other active plan participants (298,154) (371,956)
------------------------
Unfunded accumulated postretirement benefit obligation (732,613) (748,828)
Unrecognized actuarial net loss 149,482 46,311
Unrecognized prior service credit (139,610) -
------------------------
Other postretirement benefits liability recognized
on the balance sheet $(722,741) $(702,517)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
Note H - Commitments
Minimum annual rentals under noncancelable leases (which are principally for
leased real estate, vehicles and equipment) for the fiscal years listed are as
follows:
<CAPTION>
Fiscal Years (in thousands)
- ----------------------------------------------------
<S> <C>
1994 $ 334,642
1995 272,909
1996 230,166
1997 170,578
1998 164,397
Later years 618,274
- ---------------------------------------------------
Total minimum lease payments $1,790,966
- ----------------------------------------------------
</TABLE>
Total rental expense for the years ended July 3, 1993, June 27, 1992 and June
29, 1991 amounted to $503,094,000, $544,811,000 and $535,159,000,
respectively.
<PAGE> 29
Page 47
Note I - Other Financial Instruments
Off-Balance-Sheet Risk - The Corporation enters into forward foreign exchange
contracts to hedge foreign currency transactions on a continuing basis for
periods consistent with its committed exposures. It does not engage in
speculation. The foreign exchange contracts generally have maturities which do
not exceed six months. Gains and losses on foreign exchange contracts offset
losses and gains on assets, liabilities, and transactions being hedged;
therefore, the Corporation does not anticipate any material adverse effect due
to exchange rate movements over the short-term period covered by these
contracts. See Note A for information on the Corporation's accounting policy on
foreign exchange contracts.
As of July 3, 1993 and June 27, 1992, the net face amount of foreign exchange
contracts outstanding, substantially all of which were in European currencies,
was $1.1 billion and $1.3 billion, respectively. The fair value of such
contracts which represents the replacement value, is a net gain of $14,400,000
as of July 3, 1993, based on dealer quotes.
Concentration of Credit Risk - Financial instruments which potentially subject
the Corporation to concentrations of credit risk consist principally of
temporary cash investments and trade receivables.
The Corporation places its temporary cash investments with high credit
qualified financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
comprising the Corporation's customer base, and their dispersion across many
different industries and geographies.
As of July 3, 1993, the Corporation had no significant concentrations of credit
risk.
Fair Value - In fiscal year 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 107 - Disclosures about Fair Value of Financial
Instruments. The fair value of cash equivalents, debt, and foreign exchange
contracts is disclosed in relevant notes to the financial statements. For all
other financial instruments, the carrying amount approximates fair value.
Note J - Investing Activities
In June 1992, the Corporation entered into agreements to purchase common stock
of Ing. Olivetti & C. S.p.A. ("Olivetti") and to form a strategic alliance with
Olivetti. Pursuant to these agreements, as amended, the Corporation purchased a
total of 98,533,000 shares of Olivetti common stock in fiscal year 1993 for a
total investment of approximately $287,800,000. As part of the alliance
agreement, as amended, Olivetti has agreed to purchase a minimum level of Alpha
AXP products from the Corporation over a specified period of time.
The Olivetti stock is recorded at $83,800,000. The remainder of the purchase
price is recorded as an intangible asset which is being amortized over a period
not to exceed ten years.
On November 11, 1991, the Corporation signed an agreement with Philips
Electronics N.V. of The Netherlands to acquire most of the Philips Information
Systems Division ("Division"). The purchase price for the acquired business was
equal to the net asset value of the business as at October 27, 1991, and was
$146,387,000, net of cash acquired in the purchase. The fiscal year 1992
operating results and statement of financial position reflect the full
consolidation of the acquired business as from October 28, 1991, including
purchase price adjustments made in the fourth quarter of fiscal 1992.
The acquisition included the Division's activities for financial institutions,
small and medium enterprises, image and document management systems, and all
related customer service activities. The acquisition has been accounted for as
a purchase, and accordingly, the assets and liabilities have been recorded at
their estimated fair value at the date of acquisition.
As of January 1, 1991, the Corporation's results reflect the full consolidation
of Digital-Kienzle Computersysteme GmbH & Co. KG ("Digital-Kienzle"), a German
entity in which Digital acquired a 65% interest from Mannesmann AG for
$233,261,000. On December 20, 1991, the Corporation acquired the remaining 35%
interest in Digital-Kienzle through the exercise of rights related to an
obligation payable to Mannesmann AG. The acquisition has been accounted for as a
purchase.
The acquisitions had no material effect on the total operating results for the
fiscal years in which they were acquired, fiscal 1992 and 1991.
<PAGE> 30
Page 48
Note K - Stock Plans
Stock Options and Awards - Under its Equity Plan, the Corporation has awarded
restricted stock to certain officers and key employees. Under such Equity Plan
and its Restricted Stock Option Plans, the Corporation has granted options to
certain officers and key employees which are exercisable upon grant, to purchase
common stock at a price determined by the Board of Directors. Shares purchased
under the plans are generally subject to repurchase options and restrictions on
sales which lapse over an extended time period not exceeding 10 years. In
fiscal year 1992, certain options were granted under such Equity Plan which
become exercisable ratably over five years, but only if the common stock
achieves certain price performance criteria.
<TABLE>
Information concerning activity during the three years ended July 3, 1993 was as
follows:
<CAPTION>
Options Outstanding
- --------------------------------------------------------------------------------
Shares
Reserved for Average
Future Price
Grants Shares per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
June 30, 1990 5,483,685 18,611,006 $ 70.24
Options Granted (2,130,860) 2,130,860 $ 77.62
Shares Awarded (316,830) - -
Options Exercised - (838,391) $ 29.71
Options Cancelled 597,652 (597,652) $ 83.11
Options Terminated (351,837) - -
- --------------------------------------------------------------------------------
June 29, 1991 3,281,810 19,305,823 $ 72.42
Additional Shares
Available for Grant 1,950,123 - -
Options Granted (2,901,830) 2,901,830 $ 58.00
Shares Awarded (623,490) - -
Options Exercised - (795,879) $ 29.73
Options Cancelled 493,879 (493,879) $ 82.47
Options Terminated (428,994) - -
- --------------------------------------------------------------------------------
June 27, 1992 1,771,498 20,917,895 $ 71.81
Additional Shares
Available for Grant 1,950,123 - -
Options Granted (3,737,045) 3,737,045 $ 41.41
Shares Awarded (277,650) - $ -
Options Exercised - (553,486) $ 38.49
Options Cancelled 1,623,333 (1,623,333) $ 66.42
Options Cancelled under
Repurchase Program 2,653,570 (2,653,570) $ 153.00
Options Terminated (3,362,938) - $ -
- --------------------------------------------------------------------------------
July 3, 1993 620,891 19,824,551 $ 56.58
- --------------------------------------------------------------------------------
</TABLE>
The excess, if any, of the fair market value of shares on the measurement date
over the exercise price is charged to operations each year as the
restrictions lapse.
<PAGE> 31
In April 1993, the Board of Directors approved the repurchase of outstanding
options to purchase up to 2.8 million shares of common stock granted to certain
employees in fiscal 1988 at an exercise price of $153.00 per share, which
represented a discount of $30.00 per share from the fair market value of the
common stock on the date of grant. The original options to purchase 3.2 million
shares were subject to restrictions lapsing and amortizing ratably over ten
years. Optionholders were offered $3.00 per unexercised option share in return
for the cancellation of the option. The repurchase price was determined after
taking into account option pricing models, the opinion of an independent
financial advisor and the financial and compensation objectives of the program.
The Corporation repurchased approximately 2.7 million shares at a cost of
approximately $8,000,000 which was charged to operations in fiscal year 1993. In
addition, in the current year, the Corporation reversed compensation expense
recorded in previous years of $31,843,000, with a corresponding reduction of
additional paid-in capital.
Employee Stock Purchase Plans - Under the Corporation's Employee Stock Purchase
Plans, all U.S. and certain non-U.S. employees may be granted the opportunity to
purchase common stock at 85% of market value on the first or last business day
of the six-month payment period, whichever is lower. Common stock reserved for
future employee purchases aggregated 2,571,786 shares at July 3, 1993. There
were 6,404,574 shares issued at an average price of $28.38 per share during the
year ended July 3, 1993; 4,788,819 shares issued at an average price of $43.21
per share during the year ended June 27, 1992; and 4,619,793 shares at $44.34
per share during the year ended June 29, 1991. There have been no charges to
income in connection with these Plans other than incidental expenses related to
the issuance of the shares. Federal income tax benefits relating to such Plans,
if any, have been credited to additional paid-in capital.
Stock Option Plan for Non-Employee Directors - The Stock Option Plan for
Non-Employee Directors provides for a one-time grant of an option to purchase
5,000 shares of the Corporation's Common Stock to non-employee directors. The
exercise price of an option is 100% of the fair market value per share of Common
Stock of the Corporation on the date the option is granted. An aggregate of
100,000 shares of common stock are authorized for issuance under the Plan, of
which 45,000 have been granted at an average purchase price of $50.18 per share.
The options become exercisable at the rate of 20% per year, with credit given
for past service. None of these options had been exercised as of July 3, 1993.
Page 49
Note L - Treasury Stock
The Corporation did not purchase any shares of its own common stock during
fiscal year 1993. The Corporation purchased on the open market 3,014,083 shares
of its common stock at an aggregate purchase price of $185,292,000, or $61.48
per share, during the year ended June 27, 1992, and 3,700,000 shares at an
aggregate purchase price of $240,719,000, or $65.06 per share, during the
year ended June 29, 1991. All of the acquired shares are held as common stock in
treasury, less shares issued to employees under the Stock Plans. The difference
between the average acquisition cost of the shares and the proceeds from
issuance is charged to retained earnings.
Note M - Stockholder Rights Plan
The Corporation adopted a Stockholder Rights Plan in December 1989 pursuant to
which the Corporation authorized the distribution of one Common Stock Purchase
Right for each share of outstanding Common Stock. Under certain conditions, each
Right may be exercised for one share of Common Stock at an exercise price of
$400, subject to adjustment. Under circumstances defined in the Plan, the Rights
entitle holders to purchase stock having a value of twice the exercise price of
the Rights. Until they become exercisable, the Rights are not transferable
apart from the Common Stock. The Rights may be redeemed by the Corporation at
any time prior to the occurrence of certain events at $.01 per Right. The Plan
will expire on December 21, 1999, unless the Rights are earlier redeemed by the
Corporation.
<PAGE> 32
Page 50
<TABLE>
Supplementary Information
Quarterly Financial Data (unaudited)
<CAPTION>
Income/ Income/
(Loss) (Loss)
Total Before After Net Income/
Operating Gross Income Income Income/ (Loss)
(in millions except per share data) Revenues Profit Taxes Taxes1 (Loss) per Share2
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the year ended July 3, 1993
Fourth Quarter $ 3,914 $1,576 $ 120 $ 113 $ 113 $ .85
Third Quarter 3,454 1,373 (28) (30) (30) (.23)
Second Quarter 3,689 1,514 (66) (74) (74) (.57)
First Quarter 3,314 1,277 (250) (260) (260) (2.04)
- ------------------------------------------------------------------------------------------------
Total Year $14,371 $5,740 $ (224) $ (251) $ (251) $(1.93)
- ------------------------------------------------------------------------------------------------
For the year ended June 27, 1992
Fourth Quarter3 $ 3,906 $1,600 $(1,674) $(1,855) $(1,855) $(14.76)
Third Quarter4 3,253 1,268 (291) (312) (312) (2.50)
Second Quarter4 3,479 1,441 (153) (155) (155) (1.25)
First Quarter4 3,293 1,490 40 12 (474) (3.80)
- ------------------------------------------------------------------------------------------------
Total Year $13,931 $5,799 $(2,078) $(2,310) $(2,796) $(22.39)
- ------------------------------------------------------------------------------------------------
<FN>
1 Before cumulative effect of change in accounting principle.
2 Income/(loss) per share is computed independently for each of the quarters presented and
therefore does not sum to the total for the year.
3 Includes restructuring charges of $1,500 million in fiscal year 1992.
4 Restated to reflect the adoption of SFAS No. 106 - Employers' Accounting for
Postretirement Benefits Other Than Pensions.
</TABLE>
<PAGE> 33
<TABLE>
Common Stock Information
The Corporation's common stock is listed and traded on the Midwest Stock
Exchange, New York Stock Exchange, Pacific Stock Exchange, Montreal Exchange
and several European stock exchanges. There were 86,611 shareholders of record
as of July 3, 1993. The high and low quarterly sales prices for the past three
fiscal years are presented below:
<CAPTION>
1993
- ---------------------------------------------------------------
Fiscal Quarter High Low
- ---------------------------------------------------------------
<S> <C> <C>
Fourth $ 48 1/4 $ 38 1/4
Third 49 1/4 32 3/4
Second 40 5/8 30 3/8
First 44 33 1/4
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1992
- ---------------------------------------------------------------
Fiscal Quarter High Low
- ---------------------------------------------------------------
<S> <C> <C>
Fourth $ 54 7/8 $ 33 1/4
Third 65 1/2 49 1/4
Second 65 48 1/2
First 71 3/4 53 7/8
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1991
- ---------------------------------------------------------------
Fiscal Quarter High Low
- ---------------------------------------------------------------
<S> <C> <C>
Fourth $ 74 1/4 $ 58 3/4
Third 83 50 3/8
Second 59 1/2 45 1/2
First 86 7/8 49 7/8
</TABLE>
<PAGE> 34
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a)(3) Exhibits:
24 - Consent of Independent Accountants.
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
DIGITAL EQUIPMENT CORPORATION
(Registrant)
Date: March 10, 1994 By: /s/ William M. Steul
William M. Steul
Vice President, Finance and Chief
Financial Officer (Principal
Financial Officer)
<PAGE> 1
EXHIBIT 24
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Form 10-K/A of our reports dated July
28, 1993, on our audits of the financial statements and financial statement
schedules of Digital Equipment Corporation.
/s/ Coopers & Lybrand
Coopers & Lybrand
Boston, Massachusetts
March 10, 1994
