SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
Commission file no. 1-7713
AMDAHL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-1728548
(State of incorporation) (I.R.S. Employer
Identification No.)
1250 East Arques Avenue
Sunnyvale, California 94088-3470
(Address of principal executive offices)(Zip code)
Registrant's telephone number: (408) 746-6000
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
Number of shares of common stock, $.05 par value, outstanding at
November 9, 1994: 116,480,633.
<PAGE>
PART I. FINANCIAL INFORMATION
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited consolidated financial statements reflect,
in the opinion of management, all adjustments (which, other than
the restructuring charges described in Management's Discussion and
Analysis of Financial Condition and Results of Operations, include
only normal recurring adjustments) necessary to present fairly the
financial position as of the dates and results of operations for
the periods indicated.
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
the Securities and Exchange Commission rules and regulations.
Amdahl Corporation (the Company) believes the information included
in the following report on Form 10-Q, when read in conjunction with
the financial statements and related notes included in the
Company's 1993 Annual Report to Stockholders, not to be misleading.
The results of operations for the nine months ended September 30,
1994, are not necessarily indicative of results for the entire year
ending December 30, 1994.
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1994 AND DECEMBER 31, 1993
----------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 425,007 $ 149,484
Short-term investments 169,700 103,585
Receivables, net of allowances 251,377 307,747
Inventories -
Purchased materials 71,271 134,615
Systems in process 167,890 233,560
Finished goods 98,054 142,527
Prepaid expenses and deferred tax benefit 40,623 53,629
----------- -----------
Total current assets 1,223,922 1,125,147
----------- -----------
Long-term receivables and other assets 38,687 45,620
----------- -----------
Property and equipment, at cost
Leased systems 47,088 60,229
System spares 387,541 418,057
Production and data processing equipment 464,750 667,137
Office furniture, equipment, and improvements 148,315 158,062
Land and buildings 129,755 177,791
----------- -----------
1,177,449 1,481,276
Less - Accumulated depreciation and amortization (814,428) (979,856)
----------- -----------
Property and equipment, net 363,021 501,420
----------- -----------
$ 1,625,630 $ 1,672,187
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Notes payable and short-term debt $ 18,148 $ 137,056
Accounts payable 58,323 54,331
Accounts payable - stockholder (Fujitsu Limited) 55,787 18,092
Accrued liabilities 497,331 561,281
----------- -----------
Total current liabilities 629,589 770,760
----------- -----------
Long-term debt - stockholder (Fujitsu Limited) 80,000 -
----------- -----------
Long-term liabilities 45,923 52,208
----------- -----------
Deferred income taxes 39,192 59,013
----------- -----------
Stockholders' equity:
Common stock, $.05 par value -
Authorized - 200,000,000 shares
Outstanding - 115,990,000 at September 30, 1994
and 114,578,000 shares at December 31, 1993 5,800 5,729
Additional paid-in capital 515,901 507,895
Retained earnings 301,583 267,664
Cumulative translation adjustments 9,375 8,918
Unrealized holding losses on securities (1,733) -
----------- -----------
Total stockholders' equity 830,926 790,206
----------- -----------
$ 1,625,630 $ 1,672,187
=========== ===========
</TABLE>
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In thousands, except per common share amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPT. 30, 1994 SEPT. 24, 1993
--------------- ---------------
<S> <C> <C>
REVENUES
Equipment sales $ 218,941 $ 256,822
Equipment lease, maintenance and other 145,269 136,851
-------------- --------------
364,210 393,673
-------------- --------------
COST OF REVENUES
Equipment sales 149,604 206,301
Equipment lease, maintenance and other 76,461 82,108
-------------- --------------
226,065 288,409
-------------- --------------
Gross margin 138,145 105,264
-------------- --------------
OPERATING EXPENSES
Engineering and development 49,068 84,449
Marketing, general and administrative 77,943 84,596
Restructuring charges - 235,000
-------------- --------------
127,011 404,045
-------------- --------------
Income (loss) from operations 11,134 (298,781)
-------------- --------------
INTEREST
Income 7,032 5,983
Expense (2,673) (4,132)
-------------- --------------
4,359 1,851
-------------- --------------
<PAGE>
Income (loss) before provision for
(benefit from) income taxes 15,493 (296,930)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,200 (21,200)
-------------- --------------
NET INCOME (LOSS) $ 14,293 $ (275,730)
============== ==============
PER COMMON SHARE AMOUNTS:
Net income (loss) $ .12 $ (2.41)
============== ==============
Average outstanding shares 119,234 114,219
============== ==============
DIVIDENDS PER COMMON SHARE - -
============== ==============
</TABLE>
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In thousands, except per common share amounts)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPT. 30, 1994 SEPT. 24, 1993
--------------- ---------------
<S> <C> <C>
REVENUES
Equipment sales $ 708,379 $ 831,476
Equipment lease, maintenance and other 431,531 406,116
------------- -------------
1,139,910 1,237,592
------------- -------------
COST OF REVENUES
Equipment sales 493,665 655,200
Equipment lease, maintenance and other 238,517 255,017
------------- -------------
732,182 910,217
------------- -------------
Gross margin 407,728 327,375
------------- -------------
OPERATING EXPENSES
Engineering and development 155,851 259,200
Marketing, general and administrative 225,824 260,475
Restructuring charges - 478,000
------------- -------------
381,675 997,675
------------- -------------
Income (loss) from operations 26,053 (670,300)
------------- -------------
INTEREST
Income 16,915 18,824
Expense (7,199) (15,406)
------------- -------------
9,716 3,418
------------- -------------
Income (loss) before provision for
(benefit from) income taxes 35,769 (666,882)
PROVISION FOR (BENEFIT FROM) INCOME TAXES 1,850 (119,000)
------------- -------------
Income (loss) before change in accounting principle 33,919 (547,882)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE - 8,746
------------- -------------
NET INCOME (LOSS) $ 33,919 $ (539,136)
============= =============
PER COMMON SHARE AMOUNTS:
Income (loss) before change in accounting principle $ .29 $ (4.82)
Effect of change in accounting principle - .08
------------- -------------
Net income (loss) $ .29 $ (4.74)
============= =============
Average outstanding shares 118,851 113,729
============= =============
DIVIDENDS PER COMMON SHARE $ - $ .0250
============= =============
</TABLE>
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPT. 30, 1994 SEPT. 24, 1993
--------------- ---------------
<S> <C> <C>
Cash and cash equivalents at beginning of period $ 149,484 $ 173,012
------------ ------------
Cash flows from operating activities:
Net income (loss) 33,919 (539,136)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 106,204 161,238
Restructuring charges - 478,000
Deferred income tax provision (19,652) (66,087)
(Gain) loss on dispositions of property, plant
and equipment (4,688) 1,895
Decrease in receivables 54,673 306,369
Decrease in inventories 211,859 48,196
Decrease in prepaid expenses and deferred
tax benefit 12,389 1,144
Decrease in long-term receivables
and other assets 6,157 16,090
Increase (decrease) in accounts payable 42,624 (97,332)
Decrease in accrued liabilities (62,605) (132,159)
Decrease in long-term liabilities (5,999) (2,738)
-------------- --------------
Net cash provided by operating activities 374,881 175,480
-------------- --------------
Cash flows from investing activities:
Increase in short-term investments (67,848) (33,524)
Capital expenditures:
Leased systems (15,091) (12,943)
System spares (2,804) (50,100)
Other property and equipment (34,556) (31,311)
Proceeds from dispositions of property,
plant and equipment 47,944 37,650
-------------- -------------
Net cash used for investing activities (72,355) (90,228)
-------------- --------------
Cash flows from financing activities:
Increase (decrease) in notes payable and
short-term debt 11,958 (80,005)
Repayments of borrowings under revolving
credit agreement (130,000) (120,000)
Long-term borrowings 80,000 -
Sale of common stock and exercise of options 8,076 7,207
Dividends paid - (5,676)
-------------- --------------
Net cash used for financing activities (29,966) (198,474)
-------------- --------------
Effect of exchange rate changes on cash 2,963 (463)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 275,523 (113,685)
-------------- --------------
Cash and cash equivalents at end of period $ 425,007 $ 59,327
============== ==============
</TABLE>
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying interim financial statements and related notes
should be read in conjunction with the financial statements and
related notes included in the Company's 1993 Annual Report to
Stockholders.
RELATIONSHIP WITH FUJITSU LIMITED
During the third quarter of 1994 the Company recognized equipment
sales to Fujitsu Limited (Fujitsu) under distributorship
arrangements which contributed $6,049,000 and $2,602,000 to
equipment sales and gross margin, respectively, compared to
$5,575,000 and $2,871,000 in the third quarter of 1993 ($24,575,000
and $9,279,000 for the first nine months of 1994 and $7,844,000 and
$4,104,000 for the first nine months of 1993).
In the third quarters of 1994 and 1993 the Company charged
engineering and development expense $241,000 and $3,974,000
($2,279,000 and $5,696,000 for the first nine months of 1994 and
1993), respectively, for services and materials supplied by
Fujitsu.
Amounts due from Fujitsu included in receivables were $17,127,000
and $35,931,000 as of September 30, 1994 and December 31, 1993,
respectively.
In January 1994 the Company and Fujitsu entered into an agreement
under which Fujitsu would provide loans to the Company in an
aggregate amount not to exceed $100,000,000. Such loans bear
interest at a rate based upon the London Interbank Offered Rate.
Any outstanding loan balance is payable to Fujitsu on January 28,
1997. At September 30, 1994, $80,000,000 was outstanding under
this agreement. Interest expense associated with the loan was
$1,284,000 and $2,888,000 in the third quarter and first nine
months of 1994, respectively.
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income taxes of $585,000 were paid by the Company in the first nine
months of 1994, and income taxes of $13,278,000 were refunded to
the Company in the first nine months of 1993. Interest paid on all
borrowings was $6,394,000 and $15,169,000 for the first nine months
of 1994 and 1993, respectively.
<PAGE>
AMDAHL CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis should be read
in conjunction with the Management's Discussion and Analysis
included in the Company's 1993 Annual Report to Stockholders.
Results of Operations
Third quarter of 1994 compared to third quarter of 1993:
Revenues decreased 7% to $364,210,000 in the third quarter of 1994
from $393,673,000 in the third quarter of 1993, and decreased 8% in
the first nine months of 1994 as compared to the first nine months
of 1993. Equipment sales decreased 15% in the third quarter of 1994
from the third quarter of 1993 as well as in the first nine months
of 1994 from the first nine months of 1993. Equipment sales of the
5995M mainframe computers increased in the third quarter of 1994 as
increased revenues from higher shipment volumes more than offset
the impact of pricing declines when compared to the third quarter
of 1993. The rate of price declines in 1994 was less severe than
the declines experienced in 1992 and 1993, which the Company
believes indicates an improved balance between supply and demand in
the mainframe marketplace. Storage product equipment sales
decreased as customers awaited shipments of the Company's new
storage products, which will begin shipping in the fourth quarter
of 1994. Equipment sales of the older lines of mainframe computers
also decreased. Equipment lease, maintenance and other revenues
increased 6% in the third quarter of 1994 from the third quarter of
1993 as well as in the first nine months of 1994 as compared to the
first nine months of 1993, reflecting increased maintenance
revenues from a larger customer installed base as well as increased
sales of Huron software licenses.
The gross margin was 38% of revenues in the third quarter of 1994
and 27% in the third quarter of 1993 and was 36% of revenues in the
first nine months of 1994 and 26% in the first nine months of 1993.
The improvement in margins was primarily due to lower production
costs resulting from reductions in excess manufacturing capacity.
Also, gross margins on maintenance service revenues improved,
reflecting benefits from the cost reduction actions taken in the
field service organization in 1993 and 1994.
Operating expenses, excluding third quarter 1993 restructuring
charges of $235,000,000, declined $42 million or 25% from the third
quarter of 1993 to the third quarter of 1994 and were 35% and 43%
of revenues in the third quarters of 1994 and 1993 respectively.
Year-to-date operating expenses in 1994 and 1993, excluding first
and third quarter 1993 restructuring charges of $478,000,000,
declined $138 million or 27% and were 33% and 42% of revenues in
1994 and 1993 respectively. Third quarter 1994 engineering and
development expenses decreased $35 million or 42% when compared to
the third quarter of 1993, primarily due to cancellation of certain
of the Company's product development activities and a reduction in
the scope of other development projects. Engineering and
development expenses also decreased due to the November 1993
agreement with Fujitsu for the joint development of the next
generation of IBM compatible systems.
Third quarter 1994 net interest income increased $2,508,000 from
the third quarter of 1993 due primarily to an increase in average
net cash.
Although the Company's financial performance improved during the
third quarter of 1994, near-term profitability will depend on
sustained favorable economic conditions in the Company's primary
markets, continued stabilization of pricing for large mainframe
systems, and the ability of the market for mainframe systems to
grow in the face of competition from smaller, less costly computer
systems. Also, stabilization of pricing is dependent on continued
balance between the supply of mainframe systems and customer
demand.
In the latter part of 1993 the Company reorganized along lines of
business consisting of its compatible processors, storage products,
maintenance and consulting services, open systems and Huron
software businesses, in order to enable the Company to more
effectively enhance and expand its product offerings. Because of
the factors noted above affecting its traditional mainframe
business, the Company intends to rely increasingly on its ability
to utilize lower cost technologies in future compatible processor
products and on the ability of its other lines of business to
contribute a higher percentage of revenues and profits to overall
operations. Successful implementation of this strategy is,
however, subject to the inherent risks associated with the
introduction of new technologies and with the entry into new
markets not related to the Company's traditional compatible
processor business.
In July 1994 International Business Machines Corporation (IBM) gave
the European Commission one year's advance notice of IBM's
intention to terminate the Undertaking which it entered into with
the Commission in 1984. The Undertaking called upon IBM to
disclose interface specifications related to its System 370/390
mainframes to qualified competitors, including Amdahl. Since 1986
the Company has utilized specifications made available pursuant to
the Undertaking in maintaining compatibility with new features and
functions which IBM has announced from time to time.
At the present time the Company has no reason to believe that, upon
termination of the Undertaking, IBM will depart from its past
practice of disclosing interface specifications. However, a
failure by IBM to continue to disclose required information on a
timely basis would require Amdahl to rely extensively on
technically difficult reverse engineering procedures. In such a
case, should IBM continue to introduce significant architectural
changes to its System 390 mainframes, the ability of the Company's
products to remain compatible in the future on a timely basis could
be adversely impacted. The Company is unable to predict what
effect this would have on future operating results.
Financial Condition
September 30, 1994, compared to December 31, 1993:
The Company's net cash and investment position (cash and short-term
investments net of short-term and long-term borrowings) improved by
$381 million, from $117 million at December 31, 1993 to $498
million at September 30, 1994. Cash, cash equivalents and short-
term investments increased $342 million and borrowings decreased
$39 million.
Receivables decreased $56 million primarily due to the collection
of income tax refunds and a decrease in amounts due from Fujitsu.
The Company's continued efforts to reduce inventory levels resulted
in a decline of $173 million. Net property and equipment decreased
$138 million due primarily to the downsizing of internal data
centers as well as ongoing depreciation charges.
Accrued liabilities decreased $64 million due primarily to charges
against accrued restructuring costs, which decreased from $146
million at December 31, 1993 to $92 million at September 30, 1994.
At December 31, 1993, $130,000,000 classified as short-term debt
was outstanding under the Company's revolving credit agreement with
a group of banks. This amount was repaid by the Company upon
expiration of the facility on January 31, 1994. At September 30,
1994, $80,000,000 was outstanding under the Fujitsu loan agreement
(see Notes to the Consolidated Financial Statements).
Liquidity
The nature of the computer industry, combined with the current
economic environment, makes it very difficult for the Company to
predict future liquidity requirements with certainty. However, the
Company believes that existing cash and borrowings under its loan
agreement with Fujitsu will be adequate to finance continuing
operations, investments in plant and equipment, inventories and
spare parts, and expenditures for the development of new products
at least through the next twelve months. The Company also expects
that other sources of capital will be available to meet any
additional financing requirements during and beyond 1994.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
Not applicable.
Item 3. Defaults upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other information:
Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Not applicable.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended
September 30, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMDAHL CORPORATION
Date: November 11, 1994 By: /s/ E. Joseph Zemke
E. Joseph Zemke
President and
Chief Executive Officer
Date: November 11, 1994 By: /s/ Ernest B. Thompson
Ernest B. Thompson
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 425,007
<SECURITIES> 169,700
<RECEIVABLES> 251,377
<ALLOWANCES> 0
<INVENTORY> 337,215
<CURRENT-ASSETS> 1,223,922
<PP&E> 1,177,449
<DEPRECIATION> 814,428
<TOTAL-ASSETS> 1,625,630
<CURRENT-LIABILITIES> 629,589
<BONDS> 80,000
<COMMON> 5,800
0
0
<OTHER-SE> 825,126
<TOTAL-LIABILITY-AND-EQUITY> 1,625,630
<SALES> 708,379
<TOTAL-REVENUES> 1,139,910
<CGS> 493,665
<TOTAL-COSTS> 732,182
<OTHER-EXPENSES> 381,675
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,199
<INCOME-PRETAX> 35,769
<INCOME-TAX> 1,850
<INCOME-CONTINUING> 33,919
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,919
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
