<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 No. 0-9134
TANDEM COMPUTERS INCORPORATED
<TABLE>
<S> <C>
Delaware 94-2266618
-------- ----------
(State of incorporation) (IRS Employer Id. No.)
</TABLE>
19333 Vallco Parkway, Cupertino, California
95014-2599
(408)285-6000
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 _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class: Common Stock, Outstanding at February 10, 1994
$.025 par value 114,046,278 shares
</TABLE>
<PAGE> 2
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES - FORM 10-Q
PART I -- ITEM 1. FINANCIAL INFORMATION
(Unaudited)
The following consolidated financial statements have been prepared by
the Company without audit by independent public accountants, but in accordance
with the rules and regulations of the Securities and Exchange Commission.
Although certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to Securities and Exchange
Commission rules and regulations, the Company believes the financial
disclosures made are sufficient to make the information presented not
misleading. In addition, the consolidated financial statements reflect, in the
opinion of management, all adjustments (limited to normal, recurring
adjustments) necessary to present fairly the consolidated financial position,
results of operations, and cash flows for the periods indicated.
It is suggested that these consolidated financial statements be read
in conjunction with the consolidated financial statements and related notes
included in the Company's 1993 Annual Report to Stockholders and Annual Report
on Form 10-K for the year ended September 30, 1993. Such consolidated
financial statements and related notes are filed with the Securities and
Exchange Commission.
The results of operations for the three-month period ended December
31, 1993, are not necessarily indicative of results to be expected in the
future.
[STATEMENTS ON FOLLOWING PAGES]
<PAGE> 3
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the three months ended
-------------------------------
December 31, December 31,
(In thousands except per share amounts) 1993 1992
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Product revenues $386,196 $389,107
Service and other revenues 89,357 94,771
- -----------------------------------------------------------------------------------------------
Total revenues 475,553 483,878
- -----------------------------------------------------------------------------------------------
COSTS AND EXPENSES
Cost of product revenues 156,567 132,119
Cost of service and other revenues 64,324 59,655
Research and development 65,702 73,038
Marketing, general, and administrative 184,889 211,628
- -----------------------------------------------------------------------------------------------
Total costs and expenses 471,482 476,440
- -----------------------------------------------------------------------------------------------
OPERATING INCOME 4,071 7,438
Gain on sale of subsidiaries 23,000 -
Net interest income 433 696
- -----------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES 27,504 8,134
Provision for income taxes 2,600 2,993
- -----------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 24,904 5,141
Cumulative effect as of October 1, 1992
of change in accounting for income taxes - 12,371
- -----------------------------------------------------------------------------------------------
NET INCOME $ 24,904 $ 17,512
- -----------------------------------------------------------------------------------------------
EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $ .22 $ . 05
Per share cumulative effect of
accounting change - .11
- -----------------------------------------------------------------------------------------------
EARNINGS PER SHARE $ .22 $ .16
- -----------------------------------------------------------------------------------------------
Weighted average shares outstanding 111,798 112,715
- -----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 4
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
December 31, September 30,
1993 1993
(In thousands except per share amount) (Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and equivalents $ 122,745 $ 106,179
Short-term investments 18,588 18,588
Accounts receivable, net 406,406 458,122
Current portion of lease receivables 55,568 60,376
Inventories 180,561 163,706
Prepaid and deferred income taxes 14,212 9,493
Prepaid expenses and other 47,940 34,966
- ----------------------------------------------------------------------------------------------------
Total current assets 846,020 851,430
- ----------------------------------------------------------------------------------------------------
PROPERTY, PLANT, AND EQUIPMENT, at cost 1,112,210 1,149,611
Accumulated depreciation and amortization (584,130) (583,043)
- ----------------------------------------------------------------------------------------------------
Net property, plant, and equipment 528,080 566,568
- ----------------------------------------------------------------------------------------------------
COST IN EXCESS OF NET ASSETS ACQUIRED, NET 13,960 25,168
- ----------------------------------------------------------------------------------------------------
LEASE RECEIVABLES 72,483 79,832
- ----------------------------------------------------------------------------------------------------
OTHER ASSETS 169,249 162,211
- ----------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,629,792 $1,685,209
- ----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 896 $ 15,080
Accounts payable 126,564 145,378
Accrued liabilities 595,281 648,380
Current maturities of long-term obligations 56,225 53,384
- ----------------------------------------------------------------------------------------------------
Total current liabilities 778,966 862,222
- ----------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 85,702 86,162
- ----------------------------------------------------------------------------------------------------
STOCKHOLDERS' INVESTMENT
Common stock $.025 par value, authorized
400,000 shares, outstanding 114,068 shares at
December 31 and 113,666 shares at September 30 2,885 2,842
Additional paid-in capital 624,079 620,297
Retained earnings 187,164 162,260
Accumulated translation adjustments 2,777 3,207
Treasury stock, at cost (8,871) (8,871)
Deferred ESOP compensation (42,910) (42,910)
- ----------------------------------------------------------------------------------------------------
Total stockholders' investment 765,124 736,825
- ----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $1,629,792 $1,685,209
- ----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 5
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
For the three months ended
---------------------------------
December 31, December 31,
(In thousands) 1993 1992
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 24,904 $17,512
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 43,317 44,083
Gain on sale of subsidiaries (23,000) -
Cumulative effect of accounting change - (12,371)
Deferred income taxes (5,740) (17,373)
ESOP compensation - 1,486
Gain on dispositions of property, plant, and
equipment (1,483) (39)
Changes in :
Accounts receivable 22,763 16,800
Inventories (17,977) (5,772)
Lease receivables 11,588 (5,376)
Non-debt current liabilities and other (59,792) (5,425)
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (5,420) 33,525
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in property, plant, and equipment (21,160) (34,278)
Proceeds from dispositions of property, plant,
and equipment 19,318 1,081
Sale of subsidiaries, net of cash disposed 53,600 -
Increase in other assets (22,864) (13,004)
- ---------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 28,894 (46,201)
- ---------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings 24,369 26,894
Repayments (33,717) (30,218)
Acquisitions of treasury stock - (3,055)
Proceeds from sale of stock by a subsidiary, net
of Company's participation - 13,690
Issuance of Common Stock to ESOP and under
other stock plans, including tax benefits 3,825 15,228
- ---------------------------------------------------------------------------------------------
Net cash (used in) provided by
financing activities (5,523) 22,539
- ---------------------------------------------------------------------------------------------
Effect of exchange rate fluctuations on cash
and equivalents (1,385) (3,524)
- ---------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 16,566 6,339
Cash and equivalents at beginning of period 106,179 148,984
- ---------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $122,745 $155,323
- ---------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
<PAGE> 6
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market.
The components of inventories were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
December 31, September 30,
(In thousands) 1993 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Purchased parts and subassemblies $ 78,351 $ 60,302
Work in process 24,762 27,076
Finished goods 77,448 76,328
- ----------------------------------------------------------------------------------------
Total $180,561 $163,706
- ----------------------------------------------------------------------------------------
</TABLE>
2. EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common and
common equivalent shares outstanding. Common equivalent shares result from the
assumed exercise of outstanding stock options, which have a dilutive effect
when applying the treasury stock method.
As a result of terminating the Employee Stock Ownership Plan (ESOP) during the
first quarter of fiscal 1994, approximately 2.4 million unallocated common
shares presently held by the ESOP trust, which will be returned to Tandem in
fiscal 1994, have been excluded from the weighted average shares outstanding
calculation for the first quarter of fiscal 1994.
3. CASH DIVIDENDS
The Company has not declared or paid any cash dividends and has no plans to do
so in the foreseeable future.
4. BUSINESS COMBINATIONS
The consolidated results of operations for the first quarter of 1993 include
the accounts of MPACT, EDI Systems, Inc., a wholly-owned subsidiary of Tandem,
which was sold to Immedia Infomatic Corporation on June 30, 1993.
The consolidated results of operations for the quarters ended December 31, 1993
and December 31, 1992 include the operating results of two wholly-owned
subsidiaries, Applied Communications Inc. (ACI), and Applied Communications,
Inc., Limited (ACI. Ltd.), both of which were sold effective December 31, 1993
for approximately $53.6 million net cash. The sales of these subsidiaries
resulted in a gain for financial accounting purposes of $23 million.
In December 1992, NetWorth Inc. (NetWorth), an approximately 51% owned
subsidiary, completed an initial public offering of its common stock in which
NetWorth received net proceeds of $26.9 million. Tandem participated in the
offering in approximate proportion to its then ownership.
<PAGE> 7
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FINANCING ARRANGEMENTS
In December 1993, Tandem secured a three-year Financing Facility (the Financing
Facility) to replace the multiple option financing facility (MOFF) which was
canceled in the fourth quarter of fiscal 1993. A ninety-day bridge facility,
which supported the Company during the period between cancellation of the MOFF
and completion of the Financing Facility, expired in January, 1994.
Under the Financing Facility, the Company can sell up to $150 million of
qualified domestic receivables on a limited recourse basis. One component of
the Financing Facility, which allows for sales of accounts receivable up to $75
million, will expire in fiscal 1997. A second component of the Financing
Facility, which also allows for sales of accounts receivable up to $75 million,
will expire in fiscal 1995, but will be renewable annually at no cost with the
consent of both parties.
6. INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109) effective October 1, 1992. As a
result of adopting SFAS No. 109, the net income for the three months ended
December 31, 1992 was increased by the cumulative effect of the change, or
$12.4 million ($.11 per share), and a valuation allowance of approximately $53
million was established for certain deferred tax assets related to foreign
losses and stock option deductions. The provision for income taxes for the
three month period ended December 31, 1992 included $3 million for
currently payable foreign income taxes.
The provision for income taxes for the three months ended December 31, 1993
arose principally from taxes currently payable in foreign jurisdictions.
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SELECTED OPERATING STATISTICS
The following table summarizes the changes in selected operating
statistics. The percentages in the left two columns show the relationship of
revenue and expense items to total revenues. The percentages in the right
columns measure changes from the same quarter a year ago.
The Company's fiscal year ends on September 30. References to 1994,
1993, and 1992 in this section represent the Company's fiscal years.
<TABLE>
<CAPTION>
Percent Increase
Percent of Total Revenues (Decrease)
- --------------------------------- -------------------------------
3 Months 3 Months 3 Months 3 Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1993 1992 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
81 80 Product revenues (1) 5
Service and other
19 20 revenues (6) 12
- ---------------------------------------------------------------------------------------------------
100 100 Total revenues (2) 6
- ---------------------------------------------------------------------------------------------------
33 27 Cost of product revenues 19 6
Cost of service and other
13 12 revenues 8 (2)
- ---------------------------------------------------------------------------------------------------
46 39 Total cost of revenues 15 3
- ---------------------------------------------------------------------------------------------------
14 15 Research and development (10) 2
Marketing, general, and
39 44 administrative (13) (1)
- ---------------------------------------------------------------------------------------------------
1 2 Operating income (45) NM
5 NA Gain on sale of subsidiaries NM NA
- - Net interest income (38) (44)
- ---------------------------------------------------------------------------------------------------
Income before income
taxes and cumulative effect
of change in accounting
6 2 for income taxes 238 NM
1 1 Provision for income taxes (13) NM
- ---------------------------------------------------------------------------------------------------
Income before
cumulative effect of
5 1 accounting change 384 NM
Cumulative effect as of
October 1, 1992 of
change in accounting
NA 3 for income taxes NM NM
- ---------------------------------------------------------------------------------------------------
5 4 Net income 42 NM
===================================================================================================
</TABLE>
NA - Not applicable
NM - Not meaningful
<PAGE> 9
OPERATING RESULTS
REVENUES
Total revenues decreased slightly during the first quarter of 1994
compared to the first quarter of 1993, mostly due to a $5 million decrease in
service and other revenues. The decrease in service and other revenues
resulted primarily from reductions in hardware service revenues due to the
continuing improvement in hardware reliability which reduced the demand for
services as well as the prices received for services.
The six percent increase in revenues from the first quarter of 1992 to
the first quarter of 1993 was due principally to revenue increases at
Ungermann-Bass and growth in revenues from shipments of Integrity systems which
were introduced in the first quarter of 1992. Service and other revenues in
the first quarter of 1993 also grew over the same quarter in 1992 due to the
growth in sales of professional services to customers.
Historically, the second half of the Company's fiscal year is stronger
than the first. Management believes that this pattern will continue in fiscal
1994.
The revenues and operating results for the first quarter of 1993 and
the first quarter of 1994 include the operations of Applied Communications,
Inc. (ACI) and Applied Communications, Inc., Ltd. (ACI, Ltd.) both of which
were sold effective December 31, 1993. During both periods, ACI and ACI, Ltd.
combined to contribute approximately 3 percent of total revenues.
Geographic
The table below summarizes revenues derived from Tandem's domestic and
international operations and the percentage of revenue contributed by
geographic location during the quarter.
<TABLE>
<CAPTION>
Q1 1994 Q1 1993
-------------- -------------
(Dollars in millions) $ % $ %
----- --- ----- ---
<S> <C> <C> <C> <C>
United States 251.0 52 246.0 51
Europe
United Kingdom 34.4 7 31.2 6
Germany 22.3 5 25.5 5
Other Europe 64.9 14 87.4 18
----- --- ----- ---
Total Europe 121.6 26 144.1 29
Japan 57.9 12 52.8 11
Asia/Pacific 26.7 6 22.0 5
Americas Division (excluding the U.S.) 18.4 4 19.0 4
----- --- ----- ---
Total revenues 475.6 100 483.9 100
===== === ===== ===
</TABLE>
Revenues in Europe declined 16 percent from $144 million in the first
quarter of 1993 to $122 million in the same quarter of 1994 primarily as a
result of a generally stronger U.S. dollar. In addition, management believes
the overall weak economic environment in Europe has hindered investment in
capital equipment. The increase in revenue from Japan was due to exchange rate
changes partially offset by lower unit sales between the first quarters of 1993
and 1994.
<PAGE> 10
Product lines
The table shown below shows total revenue by product lines (which
includes both product revenues and service and other revenues) and the
percentage of total revenue each product line contributed during the first
quarter of 1993 and the first quarter of 1994.
<TABLE>
<CAPTION>
($ in millions)
Q1 1994 Q1 1993
------------- --------------
$ % $ %
----- --- ----- ---
<S> <C> <C> <C> <C>
Computer systems 383.3 81 391.2 81
Networking 92.3 19 92.7 19
----- --- ----- ---
Total revenues 475.6 100 483.9 100
===== === ===== ===
</TABLE>
Overall, the decrease in computer systems revenues from the same
period a year ago results from the transition to the lower-priced Himalaya
product line and a corresponding decline in per unit revenues. This decrease
was partially offset by increased unit shipments and an increase in Integrity
sales.
COST OF REVENUES
During the first quarter of 1994, product margins decreased to 59
percent, compared to 66 percent recorded a year ago. The decrease in product
margins was due to the introduction of Himalaya systems during the first
quarter of 1994 (which have lower prices and lower margins than previous
generations of Tandem systems), lower margins at Ungermann-Bass, and an
increased proportion of revenues from OEM sales of the Integrity product line,
which has lower product margins. Margins on service and other revenues
decreased to 28 percent in the first quarter of 1994 versus 37 percent recorded
a year ago. The decrease in service and other margins relates mostly to higher
than anticipated costs associated with certain projects in the integration
services business. Tandem believes the integration business will generate
improved margins in the future as new management and process changes improve
the Company's ability to deliver these services.
In 1993, cost of product revenues grew over the first quarter of 1992
principally due to higher sales of lower margin products offered by
Ungermann-Bass and the Company's other subsidiaries. In the first quarter of
1993, cost of service and other revenues declined as a percentage of service
and other revenues from the prior year due to the Company's emphasis on
retraining customer engineers to provide software support.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased $7 million from the same
quarter a year ago, mostly as a result of the restructuring actions taken in
the third quarter of 1993. Additionally, in the first quarter of 1994,
higher levels of software capitalization contributed to the decrease as certain
projects moved into the development phase. The Company expects that the level
of spending incurred in the first quarter will rise modestly for the remainder
of 1994.
<PAGE> 11
MARKETING, GENERAL, AND ADMINISTRATIVE EXPENSES
Marketing, general, and administrative expenses were also down sharply
($27 million) in the quarter compared to the same period a year ago primarily
as a result of the restructuring actions initiated in the third quarter of
1993. The primary restructuring actions included headcount and salary
reductions. The Company plans to reduce marketing, general, and administrative
expenses during the remainder of the year.
IMPACT OF CURRENCY AND INFLATION
During the first quarter of 1994, the currencies in foreign countries
where Tandem has significant operations generally weakened against the U.S.
dollar, particularly in Europe. As a result, there was a negative impact from
translating revenues and operating results. In the first quarter of 1993, the
strength of the U.S. dollar against international currencies also had a
negative influence on international revenues and operating results, although
the negative effect on revenues and operating results in the first quarter of
1993 was not as significant as the first quarter of 1994.
NET INCOME AND EARNINGS PER SHARE
In addition to the factors discussed above, net income in the first
quarter of 1994 was impacted by a $23 million pretax non-operating gain from
the sales of ACI and ACI, Ltd. In the first quarter of 1993, net income
included a $12 million positive adjustment representing the cumulative effect
as of October 1, 1992 of adopting Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (SFAS No. 109).
The effective tax rate for the first quarter of 1994 was 9 percent.
The tax provision for the first quarter of 1994 principally arose from taxes
currently payable in foreign jurisdictions. Tandem expects to continue to
report income for the remainder of 1994 in certain foreign jurisdictions, which
will result in tax provisions despite loss carryforwards which are available
primarily to offset U.S. income. The effective tax rate under SFAS No. 109 for
the first quarter of 1993 was 37 percent.
Weighted average shares outstanding decreased from the first quarter of
1993 because of the termination of Tandem's Employee Stock Ownership Plan
(ESOP) in the first quarter of 1994. The effect on the weighted average shares
calculation of excluding the unallocated ESOP shares was partially offset by
increases from sales of stock to employees under stock plans.
FINANCIAL CONDITION
During the first quarter of 1994, cash and cash equivalents increased
by $17 million. Operations consumed $5 million in cash, principally because
expenditures associated with the Company's restructuring actions in 1993
required cash during the quarter, but did not affect net income. Investing
activities in the first quarter, included $44 million of investment in capital
equipment, software, and strategic investments in new technology. Cash used in
investing activities was more than offset by $54 million received from the sale
of ACI and ACI, Ltd. and approximately $19 million from the sale of land and
equipment. Financing activities, consisting of net debt repayments net of
stock sales, used $6 million. The Company anticipates that overall cash flows
will be modestly negative through the third quarter of 1994 and turn positive
in the fourth quarter of 1994.
<PAGE> 12
Accounts receivable days, excluding ACI and ACI, Ltd., increased from
74 days at September 30, 1993 to 81 days at December 31, 1993. The increase in
receivable days is consistent with the seasonal increase historically
experienced during the first quarter each year. Inventory days, excluding ACI
and ACI, Ltd., increased from 60 days at September 30, 1993 to 78 days at
December 31, 1993. The increase arose in part due to the ramp-up of operations
at the new manufacturing facility in Stirling, Scotland and one-time purchases
of materials necessary to manage the transition from Cyclone products to
Himalaya products.
At December 31, 1993, total debt was $143 million compared with $155
million at September 30, 1993, of which, $119 million and $114 million,
respectively, represent nonrecourse borrowings against lease receivables.
Total debt as a percentage of capital decreased from 17 percent at September
30, 1993 to 16 percent at December 31, 1993.
In December, 1993, Tandem secured a three-year Financing Facility
(Financing Facility) to replace the multiple option financing facility, which
was cancelled in the fourth quarter of 1993. Under the Financing
Facility, the Company can sell up to $150 million of qualified domestic
receivables on a limited recourse basis. One component of the Financing
Facility, which allows for sales of accounts receivable up to $75 million,
expires in 1995, but is renewable annually at no cost with the consent
of both parties. A second component of the Financing Facility, which allows
for sales of accounts receivable up to $75 million, expires in 1997. The total
financing available under the Financing Facility is limited to a pool of
qualified domestic receivables.
In addition to the Financing Facility, other possible sources of
working capital include other financing arrangements and sales of noncritical
assets such as land and buildings. Management believes that the financing
sources available at December 31, 1993 can adequately meet Tandem's financing
needs.
As of December 31, 1993, the Company had approximately 9,500 full-time
equivalent employees. Headcount decreased approximately 450 during the quarter
and is down approximately 1,200 since the Company initiated its restructuring
actions during the third quarter of fiscal 1993.
OUTLOOK AND RISKS
Management expects the shift to lower-priced, lower-margin Himalaya
servers will mean a continuing decline in product margins, although the rate of
decline may slow over the next few quarters. A key challenge in meeting the
Company's 1994 operating plan includes shipping increased volumes of new
lower-priced products and concurrently controlling the cost structure of the
Company. Management is encouraged by the results in the fourth quarter of 1993
and the first quarter of 1994, but key challenges remain in meeting the
Company's goals.
The Company recognizes that if the U.S. dollar continues to
strengthen, international revenues and international operating results will be
negatively impacted.
Tandem, Cyclone, Himalaya, NonStop, and the Tandem logo are trademarks
of Tandem Computers Incorporated.
<PAGE> 13
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES - FORM 10-Q
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on January
25, 1994, in Cupertino, California. Two matters were voted upon:
(a) Proposal 1. The election of four Class II Directors to hold
office until 1997; and,
(b) Proposal 2. The ratification of the appointment of Ernst & Young
as the Company's independent auditors.
Both matters were passed, as follows:
PROPOSAL 1 - ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
For Instructed Authority Withheld from All Nominees
--- ---------- ------------------------------------
<S> <C> <C>
94,585,808 73,446 1,427,523
</TABLE>
- SCHEDULE OF VOTES CAST FOR EACH DIRECTOR
<TABLE>
<CAPTION>
Total Vote For Total Vote Withheld
Each Director From Each Director
-------------- -------------------
<S> <C> <C>
Jack F. Bennett 94,633,898 1,452,879
Franklin P. Johnson, Jr. 94,659,254 1,427,523
Thomas J. Perkins 94,585,808 1,500,969
Thomas I. Unterberg 94,651,102 1,435,675
</TABLE>
PROPOSAL 2 - APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITOR
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
95,339,589 413,957 333,231
</TABLE>
There were no Broker Non-votes on either Proposal.
<PAGE> 14
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES - FORM 10-Q
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K:
None
(b) Reports on Form 8-K: No reports on Form 8-K were
filed during the first fiscal quarter.
<PAGE> 15
TANDEM COMPUTERS INCORPORATED AND SUBSIDIARIES - FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Cupertino, State of
California.
TANDEM COMPUTERS INCORPORATED
(Registrant)
Date: February 14, 1994 By: /s/ David J. Rynne
------------------------------
David J. Rynne
Senior Vice President and
Chief Financial Officer
Date: February 14, 1994 By: /s/ Anthony H. Lewis, Jr.
------------------------------
Anthony H. Lewis, Jr.
Vice President and
Corporate Controller
