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 June 30, 1995
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
August 4: 118,875,083.
<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
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 1994 Annual Report to
Stockholders, not to be misleading.
The results of operations for the six months ended June 30, 1995,
are not necessarily indicative of results for the entire year
ending December 29, 1995.
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<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND DECEMBER 30, 1994
---------------------------------------
(Dollars in thousands)
1995 1994
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 194,250 $ 358,006
Short-term investments 572,843 340,600
Receivables, net of allowances 255,143 309,927
Inventories -
Purchased materials 34,692 45,561
Systems in process 155,270 135,408
Finished goods 97,208 102,112
Prepaid expenses and deferred tax benefit 69,571 54,874
----------- -----------
Total current assets 1,378,977 1,346,488
----------- -----------
Long-term receivables and other assets 28,326 34,908
----------- -----------
Property and equipment, at cost:
Leased systems 26,040 30,238
System spares 391,311 384,685
Production and data processing equipment 364,171 410,557
Office furniture, equipment, and improvements 155,159 156,195
Land and buildings 126,619 137,429
----------- -----------
1,063,300 1,119,104
Less - Accumulated depreciation and amortization (770,475) (781,465)
----------- -----------
Property and equipment, net 292,825 337,639
----------- -----------
$ 1,700,128 $ 1,719,035
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Notes payable and short-term debt $ 18,472 $ 8,816
Accounts payable 64,603 69,603
Accounts payable - stockholder (Fujitsu Limited) 51,222 71,214
Accrued liabilities 439,155 511,706
----------- -----------
Total current liabilities 573,452 661,339
----------- -----------
Long-term debt - stockholder (Fujitsu Limited) 80,000 80,000
----------- -----------
Long-term liabilities 45,215 49,674
----------- -----------
Deferred income taxes 57,635 51,767
----------- -----------
Stockholders' equity:
Common stock, $.05 par value -
Authorized - 200,000,000 shares
Outstanding - 118,552,000 shares in 1995
and 116,636,000 shares in 1994 5,928 5,832
Additional paid-in capital 536,311 519,856
Retained earnings 389,304 342,468
Cumulative translation adjustments 9,555 8,861
Unrealized holding gains (losses) on securities 2,728 (762)
----------- -----------
Total stockholders' equity 943,826 876,255
----------- -----------
$ 1,700,128 $ 1,719,035
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In thousands, except per common share amounts)
FOR THE THREE MONTHS ENDED
JUNE 30, 1995 JULY 1, 1994
------------- ------------
<S> <C> <C>
REVENUES
Equipment sales $ 215,845 $ 253,722
Service, software and other 162,821 143,187
-------------- --------------
378,666 396,909
-------------- --------------
COST OF REVENUES
Equipment sales 138,509 173,084
Service, software and other 91,886 83,311
-------------- --------------
230,395 256,395
-------------- --------------
Gross margin 148,271 140,514
-------------- --------------
OPERATING EXPENSES
Engineering and development 35,727 51,302
Marketing, general and administrative 90,116 78,675
-------------- --------------
125,843 129,977
-------------- --------------
Income from operations 22,428 10,537
-------------- --------------
INTEREST
Income 13,740 4,847
Expense (2,526) (2,218)
-------------- --------------
11,214 2,629
-------------- --------------
Income before provision for income taxes 33,642 13,166
PROVISION FOR INCOME TAXES 7,400 650
-------------- --------------
NET INCOME $ 26,242 $ 12,516
============== ==============
PER COMMON SHARE AMOUNTS:
Net income $ .22 $ .11
============== ==============
Average outstanding shares 120,540 117,409
============== ==============
</TABLE>
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<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(In thousands, except per common share amounts)
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 JULY 1, 1994
--------------- ---------------
<S> <C> <C>
REVENUES
Equipment sales $ 432,620 $ 489,438
Service, software and other 317,572 286,262
------------- -------------
750,192 775,700
------------- -------------
COST OF REVENUES
Equipment sales 283,472 344,061
Service, software and other 173,134 162,056
------------- -------------
456,606 506,117
------------- -------------
Gross margin 293,586 269,583
------------- -------------
OPERATING EXPENSES
Engineering and development 78,647 106,783
Marketing, general and administrative 174,641 147,881
------------- -------------
253,288 254,664
------------- -------------
Income from operations 40,298 14,919
------------- -------------
INTEREST
Income 25,038 9,883
Expense (5,300) (4,526)
------------- -------------
19,738 5,357
------------- -------------
Income before provision for income taxes 60,036 20,276
PROVISION FOR INCOME TAXES 13,200 650
------------- -------------
NET INCOME $ 46,836 $ 19,626
============= =============
PER COMMON SHARE AMOUNTS:
Net income $ .39 $ .17
============= =============
Average outstanding shares 120,100 117,301
============= =============
</TABLE>
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<TABLE>
<CAPTION>
AMDAHL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(In thousands)
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 JULY 1, 1994
-------------- -------------
<S> <C> <C>
Cash and cash equivalents at beginning of period $358,006 $149,484
-------------- -------------
Cash flows from operating activities:
Net income 46,836 19,626
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 60,876 71,128
Deferred income tax provision 5,860 (2,317)
Gain on dispositions of assets (127) (4,669)
Decrease in receivables 59,437 29,075
Decrease in inventories 6,099 184,094
Increase in prepaid expenses and
deferred tax benefit (17,056) (1,084)
(Increase) decrease in long-term receivables
and other assets 6,274 (998)
Increase (decrease) in accounts payable (23,499) 16,570
Decrease in accrued liabilities (79,836) (39,456)
Decrease in long-term liabilities (4,202) (6,760)
-------------- -------------
Net cash provided by operating activities 60,662 265,209
-------------- -------------
Cash flows from investing activities:
Purchases of available-for-sale
short-term investments (185,835) (7,510)
Purchases of held-to-maturity
short-term investments (277,009) (54,211)
Proceeds from sales and maturities of
available-for-sale short-term investments 6,491 2,048
Proceeds from maturities of held-to maturity
short-term investments 229,299 69,793
Capital expenditures:
Leased systems (7,995) (10,924)
System spares (10,184) (2,669)
Other property and equipment (28,972) (25,135)
Proceeds from property and equipment sales 19,296 32,886
-------------- -------------
Net cash provided by (used for)
investing activities (254,909) 4,278
-------------- -------------
Cash flows from financing activities:
Increase (decrease) in notes payable
and short-term debt 10,473 (333)
Repayments of borrowings under revolving
credit agreement - (130,000)
Long-term borrowings - 80,000
Sale of common stock and exercise of options 16,551 5,162
-------------- -------------
Net cash provided by (used for)
financing activities 27,024 (45,171)
-------------- -------------
Effect of exchange rate changes on cash 3,467 1,811
-------------- -------------
Net increase (decrease) in cash
and cash equivalents (163,756) 226,127
-------------- -------------
Cash and cash equivalents at end of period $194,250 $375,611
============== =============
</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 1994 Annual Report to
Stockholders.
RELATIONSHIP WITH FUJITSU LIMITED
During the second quarter of 1995 the Company recognized
equipment sales to Fujitsu Limited (Fujitsu) under
distributorship arrangements which contributed $1,155,000 and
$482,000 to equipment sales and gross margin, respectively,
compared to $6,529,000 and $2,455,000 in the second quarter of
1994 ($21,121,000 and $8,225,000 for the first six months of 1995
and $18,526,000 and $6,677,000 for the first six months of 1994).
In the second quarter of 1995 the Company entered into a contract
manufacturing agreement with HaL Computer Systems, Inc. (HaL), a
wholly-owned subsidiary of Fujitsu, whereby Amdahl agreed to
manufacture high end open system workstations for HaL. This
agreement contributed $4,322,000 to equipment sales in the first
six months of 1995.
Amounts due from Fujitsu and HaL included in receivables were
$15,666,000 and $21,097,000 as of June 30, 1995 and December 30,
1994, respectively.
At June 30, 1995 and December 30, 1994, $80,000,000 was
outstanding under the loan agreement with Fujitsu. Interest
expense associated with the loan was $1,581,000 and $794,000 in
the second quarters of 1995 and 1994, respectively ($2,999,000
and $1,604,000 for the first six months of 1995 and 1994,
respectively).
SUPPLEMENTARY CASH FLOW DISCLOSURE
Income taxes of $23,626,000 were paid by the Company in the first
six months of 1995, and income taxes of $30,005,000 were refunded
to the Company in the first six months of 1994. Interest paid on
all borrowings was $5,255,000 and $3,836,000 for the first six
months of 1995 and 1994, respectively.
NONCASH INVESTING ACTIVITIES
Transfers of Amdahl-manufactured systems from net property, plant
and equipment to inventories were $12,935,000 in the first six
months of 1995 and $31,070,000 in the first six months of 1994.
<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 1994 Annual Report to Stockholders.
RESULTS OF OPERATIONS
SECOND QUARTER AND FIRST HALF OF 1995 COMPARED TO SECOND QUARTER
AND FIRST HALF OF 1994:
Revenues decreased 5% to $378,666,000 in the second quarter of
1995 from $396,909,000 in the second quarter of 1994, and
decreased 3% in the first half of 1995 as compared to the first
half of 1994. Equipment sales revenues decreased 15% in the
second quarter of 1995 from the second quarter of 1994 and
decreased 12% in the first half of 1995 from the first half of
1994. Revenues from storage product equipment sales decreased
56% in the second quarter of 1995 when compared to the same
period of 1994 as a result of pricing and volume declines
associated with delays in the introduction of new storage
products. Revenues from equipment sales of 5995M mainframe
systems increased slightly in the second quarter of 1995 due to
higher volumes. Equipment sales of the older lines of mainframe
computers decreased. Equipment sales of high performance servers
acquired under OEM arrangements with Sun Microsystems increased
significantly from the second quarter of 1994 to the second
quarter of 1995.
Service, software and other revenues increased 14% in the second
quarter of 1995 from the second quarter of 1994 and increased 11%
in the first half of 1995 from the first half of 1994, reflecting
increased maintenance revenues from a larger customer installed
base as well as increased consulting services and software
revenues.
Second quarter and first half 1995 revenues were also favorably
impacted by approximately $14 million and $26 million,
respectively, by a weakened U.S. dollar, as international
revenues denominated in foreign currencies translated into more
dollars in 1995, when compared to the same periods of 1994.
The gross margin was 39% of revenues in the second quarter and
first half of 1995 and 35% in the second quarter and first half
of 1994. Gross margin on equipment sales as a percentage of
revenues increased from 32% in the second quarter of 1994 to 36%
in the second quarter of 1995 and increased from 30% in the first
half of 1994 to 34% in the first half of 1995, reflecting lower
manufacturing costs and a higher percentage of sales of 5995M
processor upgrades, which yield better gross margins than sales
of complete new systems. Gross margins on service, software and
other revenues as a percentage of revenues increased from 42% in
the second quarter of 1994 to 44% in the second quarter of 1995
and increased from 43% in the first half of 1994 to 45% in the
first half of 1995.
Operating expenses decreased 3% from the second quarter of 1994
to the second quarter of 1995 and were 33% of revenues in the
second quarters of 1995 and 1994. 1995 year-to-date operating
expenses were essentially flat with year-to-date 1994 operating
expenses and were 34% and 33% of revenues in 1995 and 1994,
respectively. Second quarter 1995 engineering and development
expenses decreased $16 million or 30% when compared to the second
quarter of 1994 primarily due to the agreement with Fujitsu for
the joint development of the next generation of IBM compatible
systems. Second quarter 1995 marketing, general and
administrative expenses increased $11 million or 15%, due to
increased marketing efforts directed toward the Company's newer
lines of business.
Second quarter 1995 net interest income increased $8,585,000 from
the second quarter of 1994 and increased $14,381,000 from the
first half of 1994 to the first half of 1995 due primarily to
increased interest income from higher average cash levels.
The effective income tax rate was 22% in the second quarter and
first six months of 1995. The rate was lower than the statutory
federal rate because the Company utilized domestic reserves. In
the first half of 1994 the Company utilized domestic and foreign
net operating loss carryforwards, which resulted in an effective
income tax rate of 5% in the second quarter of 1994 and 3% in the
first six months of 1994.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
As indicated in its Annual Report, market conditions for the
Company's existing storage products have become increasingly
difficult because of increased competition in the storage
marketplace. The Company has new product offerings under
development which will not be available in volume until early
1996. Should any delays in current development schedules occur,
the Company's future operating results would be further adversely
affected.
FINANCIAL CONDITION
JUNE 30, 1995, COMPARED TO DECEMBER 30, 1994:
The Company's net cash and investment position (cash and short-
term investments minus total debt, excluding capitalized lease
obligations) improved by $59 million, from $611 million at
December 30, 1994 to $670 million at June 30, 1995, primarily due
to an increase in cash, cash equivalents and short-term
investments of $68 million.
Receivables decreased $55 million primarily due to decreased
revenues from the fourth quarter of 1994 to the second quarter of
1995.
Net property and equipment decreased $45 million due in part to
retirements of production and data processing equipment and
because depreciation exceeded capital spending in the first half
of 1995.
Accrued liabilities decreased $73 million due to decreased
payroll-related and other accruals, and decreased income taxes
payable, deferred revenues, and reserves for future engineering
changes. Charges against accrued restructuring costs resulted in
a decrease in the balance from $88 million at December 30, 1994
to $77 million at June 30, 1995.
At June 30, 1995 and at December 30, 1994, $80,000,000 was
outstanding under the Fujitsu loan agreement and was classified
as long-term debt (see Notes to the Consolidated Financial
Statements).
LIQUIDITY
The nature of the computer industry, combined with the current
economic environment, make 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 and investments in property and equipment,
inventories and spare parts at least through the end of 1996.
<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:
(a) Annual Meeting of Stockholders was held on May 4,
1995.
(b) The vote for the nominated Directors was as
follows:
NOMINEE IN FAVOR WITHHELD
------- -------- --------
John C. Lewis 107,486,048 854,259
E. Joseph Zemke 107,464,710 875,597
Keizo Fukagawa 107,496,008 844,299
Michael R. Hallman 106,827,465 1,512,842
E. F. Heizer, Jr. 107,513,274 827,033
Kazuto Kojima 107,495,129 845,178
Burton G. Malkiel 107,523,900 816,407
George R. Packard 107,523,552 816,755
Walter B. Reinhold 107,508,575 831,732
Takamitsu Tsuchimoto 107,492,204 848,103
J. Sidney Webb 107,510,561 829,746
(c) Other matters voted upon at the meeting were as
follows:
1. Approval of the Employee Stock Purchase Plan
Restatement was as follows:
% of votes cast
---------------
For 104,503,366 96.46%
Against 3,585,701 3.31%
Abstain 251,240 0.23%
-----------
Total shares voted 108,340,307
===========
2. Approval of the 1994 Stock Incentive Plan
Amendments was as follows:
% of votes cast
---------------
For 95,432,468 88.09%
Against 12,622,163 11.65%
Abstain 285,676 0.26%
-----------
Total shares voted 108,340,307
===========
3. Approval of the Short-Term Executive
Incentive Performance Plan was as follows:
% of votes cast
---------------
For 105,128,165 97.04%
Against 2,928,031 2.70%
Abstain 284,111 0.26%
-----------
Total shares voted 108,340,307
===========
4. Ratification of the selection of Arthur
Andersen LLP as independent public
accountants for 1995 was approved as follows:
% of votes cast
---------------
For 107,990,531 99.68%
Against 183,590 0.17%
Abstain 166,186 0.15%
-----------
Total shares voted 108,340,307
===========
5. Rejection of the Stockholder Proposal on
Nominating Committee was as follows:
% of votes cast
---------------
For 17,257,307 17.99%
Against 78,162,513 81.47%
Abstain 523,612 0.54%
-----------
Total shares voted 95,943,432
===========
Broker Non-votes 12,396,875
6. Rejection of the Stockholder Proposal on
"High-Performance Workplace" was as follows:
% of votes cast
---------------
For 4,390,786 4.58%
Against 88,382,517 92.12%
Abstain 3,170,129 3.30%
-----------
Total shares voted 95,943,432
===========
Broker Non-votes 12,396,875
Item 5. OTHER INFORMATION:
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits:
10(a) Amdahl Corporation Deferral Election
Plan, as amended.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the
quarter ended June 30, 1995.
<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: August 11, 1995 By: /s/ E. Joseph Zemke
--------------- -------------------
E. Joseph Zemke
President and
Chief Executive Officer
Date: August 11, 1995 By: /s/ Ernest B. Thompson
--------------- ----------------------
Ernest B. Thompson
Vice President and
Controller
(Principal Accounting
Officer)
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- ------------
10(a) Amdahl Corporation Deferral Election Plan, as
amended
27 Financial Data Schedule
Exhibit 10(a)
AMDAHL CORPORATION
DEFERRAL ELECTION PLAN
(As Restated and Amended through January 28, 1988
and Updated January 1, 1995)
I. PURPOSE OF THE PLAN
This Deferral Election Plan ("Plan") is intended to
promote the interests of Amdahl Corporation ("Company") and its
subsidiaries by providing a select group of employees of the
Company and its subsidiaries who are primarily responsible for
the management, growth and success of the business, or who are
otherwise highly-compensated because of their technical expertise
or sales performance, with the opportunity to participate in a
deferred compensation program which will allow them to tailor the
receipt of their compensation to their own personal needs and
thereby provide them with an incentive to continue in the employ
of the Company and its subsidiaries.
II. ADMINISTRATION OF THE PLAN
(A) The Plan shall be administered by the Company's
Board of Directors ("Board") or by a committee of three or more
persons ("Committee") selected by the Board. The Plan
Administrator (whether the Board or the Committee) shall have
full authority to administer the Plan, including the authority to
interpret and construe the provisions of the Plan and to adopt
rules and regulations for administering the Plan. Decisions of
the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan.
(B) For purposes of administration and interpretation,
the following definitions shall apply:
Base Salary: The base rate of compensation payable to
an individual for services rendered while a participant in the
Plan, exclusive of all bonuses, commissions and other incentive-
type payments.
Bonus/Commissions: Any and all current cash bonuses,
commissions, premiums and other incentive-type payments (other
than the Incentive Award) to which an individual becomes entitled
by reason of services rendered while a participant in the Plan,
exclusive of all contributions or benefits payable under any
pension, deferred profit-sharing, capital accumulation, welfare
benefit or other similar employee benefit program now or
hereafter maintained by the Company.
Disability: The permanent incapacity of a participant,
by reason of physical or mental illness or injury expected to
continue for a period of at least twenty-four (24) months, to
perform his/her usual duties for the Company. Disability shall
be determined by the Plan Administrator after consideration of
such medical evidence as it may require.
Employee: An individual who continues in the employ of
the Company or any one or more of its subsidiaries.
Financial Hardship: Any extraordinary and
unanticipated expense (arising from one or more events beyond the
participant's control) which the participant lacks sufficient
financial resources of his/her own to satisfy. Financial
Hardship shall be determined by the Plan Administrator on the
basis of such information concerning the assets, liabilities and
anticipated expenses of the participant as the Plan Administrator
shall reasonably request.
Incentive Award: The individual amount allocated to
the participant as an incentive award under the Company's Short-
Term Executive Incentive Performance Plan for services rendered
during a Year of Service hereunder, such award to be normally
payable in four (4) equal annual installments beginning one year
after the award date, provided the individual continues in
Employee status.
Normal Retirement Date: The latest to occur of (i) the
first date on which the participant's age and years of service
total at least seventy (70) years; (ii) the date on which the
participant attains age fifty five (55); or (iii) the date on
which the participant completes ten (10) years of service.
Solely for purposes of this definition, the term "years of
service" shall have the meaning assigned to such term in the
Short-Term Executive Incentive Performance Plan.
Year of Service: Each calendar year beginning on or
after January 1, 1986 during which the participant renders
services to the Company or its subsidiaries for which he/she
receives compensation eligible for deferral hereunder.
III. DETERMINATION OF PARTICIPANTS; DEFERRAL ELECTION
(A) The individuals eligible for participation in the
Plan shall be limited to (i) those key employees of the Company
and its subsidiaries who are primarily responsible for the
management, growth and success of the business and (ii) those
other key employees who are highly compensated by reason of their
technical skills and expertise or their sales and marketing
performance. The Plan Administrator shall from time to time
select the employees who are eligible to participate in the Plan.
A selected employee shall commence participation on the date of
his/her selection and shall continue to participate throughout
the period such individual remains an eligible employee under
clause (i) or (ii) above.
(B) Each participant shall have the right to make one
or more of the following deferral elections under the Plan with
respect to the compensation earned for his/her Years of Service
hereunder:
1. 1986 Bonus/1986 Incentive Award: The
participant shall have the right to defer up to 100% (in 10%
multiples) of any and all Bonuses, and one or more annual
installments of the Incentive Award, to which he/she becomes
entitled for the 1986 Year of Service, provided he/she files the
appropriate deferral election with the Plan Administrator before
December 1, 1986.
2. Base Salary: The participant shall have the
right to defer up to 50% (in 5% multiples) of the Base Salary
earned in each post-1986 Year of Service for which an appropriate
deferral election is made. The deferral election will be
effective for a particular Year of Service, provided and only if
it is filed with the Plan Administrator prior to the start of
that Year of Service.
3. Bonus/Commissions/Incentive Awards. The
participant shall have the right to defer up to 100% (in 10%
multiples) of any and all Bonuses/Commissions, and/or one or more
annual installments of the Incentive Award, to which he/she
becomes entitled for services rendered in any post-1986 Year of
Service, provided and only if the appropriate deferral election
for that Year of Service is filed with the Plan Administrator
prior to the start thereof.
All amounts deferred for a particular Year of Service
shall be paid solely in accordance with the provisions of this
Plan, notwithstanding any provision to the contrary in any other
document governing the payment of such amounts.
(C) Any deferral election filed by a participant
hereunder shall be effective only if the participant shall have
compiled with all of the following requirements:
(i) The election must be exercised by means
of a written instrument filed with the Plan Administrator or its
designate. The election shall be in the form prescribed by the
Plan Administrator and must be filed in accordance with the due
dates specified in paragraph (B) above. An individual who
becomes a participant during the course of a Year of Service may
file a deferral election within thirty (30) days after his/her
selection into the Plan. The election shall be effective with
respect to compensation to be earned for services rendered during
the balance of the Year of Service in which such participation
commences.
(ii) The election, once made, shall be
irrevocable with respect to the Year of Service for which it is
made.
(iii) By completing the appropriate
section of the election form, the participant may choose to have
the deferral election continue in effect automatically from year
to year with respect to one or more components of his/her
compensation. In such event, the deferral election filed for any
Year of Service shall continue to be effective for such component
or components in each subsequent Year of Service, unless and
until the participant files a new deferral election not later
than the December 31 immediately preceding the start of the first
Year of Service for which the changes specified in the new
election are to become effective.
IV. DEFERRED COMPENSATION ACCOUNT; VESTING SCHEDULE;
PAYMENT OF DEFERRED COMPENSATION
A. The Company shall establish on its books a special
deferred compensation account for each participant who properly
exercises a deferral election under the Plan. This account shall
in turn be divided into a series of separate sub-accounts, one
for each component of compensation (Base Salary,
Bonus/Commissions or Incentive Award) earned for a particular
Year of Service and deferred pursuant to the deferral election in
effect for the participant hereunder. Each component of
compensation deferred by a participant shall be credited to the
appropriate sub-account as of the date it would otherwise become
payable in the absence of the participant's deferral election.
B. The interest of the participant in each sub-
account to which his/her Base Salary, Bonuses or Commissions are
credited hereunder, together with the interest earnings thereon,
shall at all times be fully vested and non-forfeitable. The
interest of the participant in each sub-account to which one or
more installments of an Incentive Award for a particular Year of
Service are credited hereunder shall vest and become non-
forfeitable in accordance with the following provisions:
(i) For purposes of applying the 25% per
year vesting schedule in effect for each Incentive Award to which
the participant becomes entitled under the Short-Term Executive
Incentive Performance Plan, any installment or installments of
the Incentive Award which are deferred under this Plan shall be
deemed to be the first annual installment or installments which
vest in accordance with such schedule. Accordingly, any
installments of the Incentive Award which are not deferred under
this Plan shall be the last annual installments to vest under the
Short-Term Executive Incentive Performance Plan.
(ii) As a particular installment of an
Incentive Award deferred hereunder vests in accordance with
subparagraph (i) above, the interest earnings accrued to date
hereunder on such installment shall concurrently vest, and all
future earnings on that installment shall be fully vested upon
accrual. Interest earnings accrued hereunder on any deferred
installment which is not vested at the time the participant
ceases Employee status shall be forfeited immediately upon such
cessation of employment, and the participant shall have no vested
right to be paid such interest accruals.
(iii) The participant's interest in all
Incentive Award installments deferred hereunder (together with
the interest earnings thereon) shall immediately vest upon the
participant's cessation of Employee status by reason of
Disability or death or after his/her Normal Retirement Date.
Except as otherwise provided in subparagraph (iv) below, should
the participant cease Employee status for any reason other than
Disability or death prior to his/her Normal Retirement Date, then
each Incentive Award installment deferred hereunder (together
with the interest earnings thereon) in which he/she is not at the
time vested shall be immediately forfeited, and the participant
shall cease to have any further rights or interests in the
particular sub-account or sub-accounts to which such forfeited
amounts are credited.
(iv) The Plan Administrator shall have full
power and authority, exercisable in its sole discretion at any
time, to accelerate the vesting of one or more Incentive Award
installments deferred by a participant under the Plan, but any
such installment as to which vesting is so accelerated shall
remain subject to payout solely in accordance with the
participant's deferral election in effect for that installment.
(v) Except as otherwise provided in
subparagraph (iii) or (iv) above, the participant shall not be
entitled to the payment of any Incentive Award installment
deferred hereunder (or the interest earnings thereon) in which
he/she is not vested at the time of cessation of Employee status.
(C) The portion of each sub-account in which the
participant is at the time vested hereunder shall become payable
in accordance with the following provisions:
(i) The vested portion of each sub-account
shall become payable upon the occurrence of the event of
distribution designated by the participant in the deferral
election form filed with respect to the component of compensation
to be credited to that sub-account. A participant may designate
one or more of the following as an event or alternative event
triggering distribution of a sub-account;
(a) cessation of Employee status at any
time;
(b) cessation of Employee status following
the attainment of a specified age (not to exceed age 70);
(c) the expiration of a designated period of
years (not to exceed ten years); or
(d) the participant's attainment of a
specified age (not to exceed age 70).
A participant may not subsequently revoke or modify the
event or events designated as the payment trigger for a
particular sub-account.
(ii) Should a participant die or incur a
Disability while there is a vested balance credited to one or
more of his/her sub-accounts, then such vested balance shall be
distributed in a lump sum, payable at the time selected by the
Plan Administrator, but not later than the end of the calendar
year following the calendar year in which the participant dies or
incurs such Disability.
(D) Interest shall accrue on the balance outstanding
in each sub-account in accordance with the following provisions:
(i) Pre-1988 Deferrals. The outstanding
balance in each sub-account, to the extent attributable to
amounts deferred for calendar years ending on or before December
31, 1987 ("Pre-1988 Deferrals"), shall accrue interest each
calendar year at the average blended rate at which interest is
earned for the same period on the assets of Company's Employee
Savings Plan invested in one or more guaranteed interest
contracts thereunder ("Blended Rate"). Pre-1988 Deferrals will
earn interest at the Blended Rate until paid to the participant.
(ii) Post-1987 Deferrals. The outstanding
balance in each sub-account, to the extent attributable to
amounts deferred for calendar years commencing after December 31,
1987, shall accrue interest during each calendar year at the
weighted average rate at which interest is earned for such year
on the assets of the Employee Savings Plan invested in one or
more guaranteed interest contracts thereunder during such year
("Applicable Rate"). The Applicable Rate shall be calculated at
the end of each calendar year, and interest earned on each
outstanding sub-account for such year shall be credited to the
sub-account at that time.
(iii) Pro-Rated Interest. To the extent
the final payment from a particular sub-account is made prior to
the last day of a calendar year, the interest accruable on such
payment for the portion of such calendar year preceding the
payment date shall, in accordance with subparagraph (i) or (ii)
above (whichever is applicable), be calculated and credited at
the end of such year, and payment of such accrued interest shall
be made within 90 days after the close of that year.
(E) The vested portion of each sub-account which
becomes due and payable in acc
ordance with paragraph (C)(i) shall be distributed either in one
lump sum payment or in a series of substantially equal annual
installments (calculated on the basis of the vested balance
credited to the sub-account at the time of the triggering event)
paid over a designated period of years (not in excess of ten
years). The method of distribution for a particular sub-account
shall be irrevocably designated by the participant in the
deferral election filed with respect to the compensation to be
credited to that sub-account.
(F) Except as otherwise provided in paragraph (C)(ii)
above, any lump sum payment or the first installment of any
installment payout from a particular sub-account shall be made
within thirty (30) days after the occurrence of the event
triggering the distribution from such sub-account. If the
distribution is to be made in installments over a period of
years, the unpaid vested balance (as it shall exist from time to
time) shall continue to accrue interest at the applicable per
annum rate in effect for such sub-account under paragraph (D)
above, and the additional interest so accrued shall be payable to
the participant at least once a year.
(G) The obligation of the Company to pay the
compensation deferred hereunder and the interest earned thereon
shall at all times be an unfunded and unsecured obligation of the
Company. The Company shall not establish any trust, escrow
arrangement or other fiduciary relationship for the purpose of
segregating funds for the payment of such deferred compensation
and interest, nor shall the Company be under any obligation to
invest any portion of its general assets in mutual funds, stocks,
bonds, securities or other similar investments in order to
accumulate funds for the satisfaction of its obligations under
the Plan. The participant and his/her beneficiaries shall look
solely and exclusively to the general assets of the Company for
the payment of the participant's deferred compensation account
(including each sub-account thereof) and shall at all times
remain general creditors of the Company with respect to such
payment.
(H) In the event of a Financial Hardship, the
participant may apply to the Plan Administrator for a withdrawal
from the vested balance of one or more of his/her sub-accounts.
The Plan Administrator shall have absolute discretion to accept
or reject the withdrawal request, but in no event shall the
amount authorized for withdrawal exceed the sum reasonably
necessary to satisfy the Financial Hardship.
V. GENERAL PROVISIONS
(A) The Plan shall become effective on the date of
adoption by the Board. The Board may at any time thereafter
amend, suspend or terminate the Plan; provided, however, that no
such action shall adversely affect rights previously vested and
non-forfeitable under the Plan.
(B) The participant shall have no right to alienate,
pledge or encumber his/her interest in the amounts credited to
his/her deferred compensation account. Except as otherwise
provided by law, such account shall not be subject to the claims
of the participant's creditors or to attachment, execution or
other process of law. In the event of the participant's death,
payment of the vested balance of each of his/her deferred
compensation sub-accounts (if any) shall be made to the
participant's designated beneficiary or beneficiaries, or, in the
absence of such designation, in accordance with the participant's
will or the laws of descent and distribution. A participant may
from time to time revoke his beneficiary designation in effect
under the Plan and file a new beneficiary designation with the
Plan Administrator.
(C) No provision in the Plan shall be deemed to
constitute a commitment by the Company to pay, or to confer any
contractual or other right upon an Employee to receive, bonus
awards or other incentive payments for one or more Years of
Service such person may render the Company.
(D) Neither the action of the Company in establishing
the Plan, nor any action taken by the Plan Administrator under
the Plan, nor any provision of the Plan itself, shall be
construed so as to grant any person the right to remain in the
Company's employ for any period of specific duration, and the
Company shall have the right to discharge the participant at any
time, with or without cause.
(E) The provisions of the Plan shall be governed by
the laws of the State of California without resort to the
conflict-of-laws rules of such State.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> JUN-30-1995
<CASH> 194,250
<SECURITIES> 572,843
<RECEIVABLES> 255,143
<ALLOWANCES> 0
<INVENTORY> 287,170
<CURRENT-ASSETS> 1,378,977
<PP&E> 1,063,300
<DEPRECIATION> 770,475
<TOTAL-ASSETS> 1,700,128
<CURRENT-LIABILITIES> 573,452
<BONDS> 80,000
<COMMON> 5,928
0
0
<OTHER-SE> 937,898
<TOTAL-LIABILITY-AND-EQUITY> 1,700,128
<SALES> 432,620
<TOTAL-REVENUES> 750,192
<CGS> 283,472
<TOTAL-COSTS> 456,606
<OTHER-EXPENSES> 253,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,300
<INCOME-PRETAX> 60,036
<INCOME-TAX> 13,200
<INCOME-CONTINUING> 46,836
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,836
<EPS-PRIMARY> 0
<EPS-DILUTED> .39
</TABLE>
